Interim Results - Part 1
Konami Corporation
15 November 2001
Part 1
Summary of Consolidated Financial Results
for the Six Months Ended September 30, 2001
KONAMI CORPORATION
Address: 3-1, Toranomon 4-chome, Minato-ku, Tokyo, Japan
Stock Code Number: 9766
Shares Listed: Tokyo Stock Exchange, Osaka Securities Exchange, London Stock
Exchange and Singapore Exchange
Contact; Noriaki Yamaguchi, Representative Director and CFO
(Phone: 03-3578-0573)
Date of Board Meeting on the financial results: November 15, 2001
1. Consolidated Financial Results for the Six Months Ended September 30, 2001
(1) Consolidated Results of Operations
(Figures truncated)
Net Year-on-Year Operating Year-on-year Ordinary Year-on-year
Sales Change Income Change Income Change
(Y (Y (Y (%)
million) (%) million) (%) million)
Six months
ended
September
30, 2001 89,146 19.9 9,526 (44.4) 9,540 (40.2)
Six months
ended
September
30, 2000 74,374 (4.9) 17,136 (14.1) 15,940 (20.1)
Year ended
March
31, 2001 171,480 38,645 36,427
Diluted
Year-on-year Net income Net Income
Net Income Change per share per Share
(Y million) (%) (Y) (Y)
Six months ended
September 30, 2001 2,522 (78.3) 19.60 -
Six months ended
September 30, 2000 11,634 (16.9) 102.31 -
Year ended
March 31, 2001 21,781 190.91 -
Notes:
1. Equity in net income (losses) of affiliated companies
Six months ended September 30, 2001: Y260 million
Six months ended September 30, 2000: Y(706) million
Year ended March 31, 2001: Y(583) million
2. Average number of shares issued and outstanding
Six months ended September 30, 2001: 128,737,479 shares
Six months ended September 30, 2000: 113,737,566 shares
Year ended March 31, 2001: 114,093,518 shares
3. There is no change in accounting policies,
4. Change (%) of net sales, operating income, ordinary income and net income
represents the increase or decrease ratio in relation with the same period of
the previous year.
(2) Consolidated Financial Position
Total Total Equity-Assets Total
Assets Shareholders' Ratio Shareholders'
(Y million) Equity Equity per
(Y million) (%) Share (Y)
September 30, 2001 259,404 148,107 57.1 1,150.46
September 30, 2000 145,321 78,782 54.2 692.76
March 31, 2001 250,023 149,875 59.9 1,164.19
Note:
Number of shares issued and outstanding
September 30, 2001: 128,737,431 shares
September 30, 2000: 113,737,566 shares
March 31, 2001: 128,737,538 shares
(3) Consolidated Cash Flows
Net Cash Provided by (Used in) Cash and
Operating Investing Financing Cash
Activities Activities Activities Equivalents
(Y million) (Y million) (Y million) at the End
(Y million)
Six months ended
September 30, 2001 (12,249) (9,068) 27,399 72,841
Six months ended
September 30, 2000 (3,260) (4,156) 3,076 52,998
Year ended
March 31, 2001 21,116 (72,686) 60,440 66,812
(4) Consolidation Scope and Application of Equity Method
Consolidated subsidiaries: 33 companies
Affiliated companies applicable under equity method: 3 companies
(5) Changes in Consolidation Scope and Application of Equity Method
Increase in the number of consolidated subsidiaries: 2 companies
Increase in the number of affiliates applicable under equity method: 1 company
2. Consolidated Financial Forecast for the Year Ended March 31- 2002
Net Sales Ordinary Income Net Income
(Y million) (Y million) (Y million)
Year ended March 31, 2002 233,000 31,000 17,500
Note:
Estimated net income per share for the year ended March 31, 2002 is Y135.94.
Cautionary Statement:
These statements are based on information currently available to the management
but subject to changes. Actual financial results might differ due to a number of
factors, not limited to but, general global economy, foreign exchange rates in
which Konami Group trades and Konami Group's capability to come up with
innovative and attractive products in highly competitive markets of which we
have solid confidence.
1. Organization Structure of Konami Group
Konami Group specifies its business domain as the global entertainment
industry by providing a wide range of entertainment, and is structured by
KONAMI CORPORATION (the 'Company'), 33 consolidated subsidiaries and 3
affiliated companies applicable under equity method.
The Company, the subsidiaries and the affiliated companies are categorized
into each business segment according to their operations as follows:
Business Segments Major Companies
Consumer-use Software Domestic The Company, Konami Marketing,
Inc. Konami Computer
Entertainment Osaka, Inc, (*4)
Konami Computer Entertainment
Tokyo, Inc. (*8) Konami
Computer Entertainment Japan,
Inc. Konami Computer
Entertainment Studios, Inc.
Konami Computer Entertainment
School, Inc. Konami Style.com
Japan, Inc. HUDSON SOFT CO.,
LTD. (*10,11), Mobile21 Co.,
Ltd. (*11) 3 other companies
Overseas Konami of America, Inc., Konami
of Europe GmbH, Konami Marketing
(Asia) Ltd, (*1), Konami
Software Shanghai, Inc.,
3 other companies
Amusement Machines Domestic The Company, Konami Marketing,
Inc., 1 other company
Konami of America. Inc.
Overseas Konami Amusement of Europe Ltd.,
Konami Marketing (Asia) Ltd.
(*1) 2 other companies
Gaming Machines Domestic The Company, Konami Marketing,
Inc.
Overseas Konami Gaming, Inc. (*9),
Konami Marketing (Asia) Ltd.(*1)
4 other companies
Pachinko Systems Domestic The Company Konami Parlor
Entertainment, Inc. 1 other
company (*7)
Creative Products Domestic The Company, Konami Marketing,
Inc. Konami Music
Entertainment, Inc., Konami
Style.com Japan, Inc.
Overseas Konami Marketing (Asia) Ltd.
(*1), 2 other companies
Health Entertainment Domestic The Company, Konami Sports
Corporation (*2)
Konami Sports Life Corporation
(*3 *6) 2 other companies (*5)
Other Domestic Konami Capital, Inc,, Konami
Service, Inc. Konami Amusement
Operation, Inc. TAKARA CO.,
LTD. (*11). 1 other company
Overseas 3 other companies
Notes:
1. The companies that have multiple business segments are included in each
segment respectively.
2. Changes in major companies for the six months ended September 30, 2001 are
as follows:
(*1)Konami (Hong Kong) Ltd. changed its company name to Konami Marketing
(Asia) Ltd. on June 1, 2001.
(*2)PEOPLE CO., LTD. changed its company name to Konami Sports Corporation on
June 1, 2001.
(*3)NAPS CORPORATION changed its company name to Konami Sports Life Corporation
on June 1,2001.
(*4)KCEO. Inc changed its company name to Konami Computer Entertainment Osaka,
Inc on June 28, 2001.
(*5)NISSAN SPORTS PLAZA, CO., LTD. became a wholly owned subsidiary of Konami
Sports Corporation on June 22, 2001 and changed its company name to Konami
Sports Plaza, Inc. on June 29, 200).
(*6)Konami Sports Life Corporation merged with KCE Planning, Inc. on July 12,
2001,
(*7)DELUCADERUYO, Inc. became a wholly owned subsidiary of Konami Parlor
Entertainment, Inc. on July 31, 2001 and changed its company name to Konami
Parlor Research, Inc. on August 1, 2001.
(*8)KCE Tokyo, Inc. changed its company name to Konami Computer Entertainment
Tokyo, Inc. on August 1, 2001.
(*9)Konami Gaming, Inc. acquired and merged with Paradigm Gaming Systems, Inc.
on August 3, 2001, and integrated it as a systems division.
(*10)HUDSON SOFT CO., LTD. became an affiliated company applicable under equity
method on August 22, 2001.
(*11)These are affiliated companies applicable under equity method.
3. Konami Marketing, Inc. merged with 11 domestic sales dealers (TOKYO KONAMI
CO., LTD., OSAKA KONAMI CO., LTD., CHUBU KONAMI CO., LTD., CHUO KONAMI CO.,
LTD.. HOKKAIDO KONAMI CO., LTD., KITAKANTO KONAMI CO., LTD., HIGASHIKANTO
KONAMI CO., LTD., MINAMIKANTO KONAMI CO., LTD., CHUGOKU KONAMI CO.. LTD.,
KYUSHU KONAMI CO., LTD., NISHINIHON KONAMI CO., LTD.) for the purpose of the
reinforcement and efficiency of domestic sales network on October 1, 2001.
4. Konami Mobile & Online, Inc. was established on October 1, 2001.
5. Konami Australia Pty Ltd. became a wholly owned subsidiary on October 1,
2001.
6. HUDSON SOFT CO., LTD. will succeed a portion of the business in Sapporo of
a consolidated subsidiary, Konami Computer Entertainment Studios, Inc, by the
method of absorption following a spin-off on December 1,2001.
2. Management Policy
1. Management Policy
Our management policy is to aim at realization of 'maximization of shareholders'
value', a major obligation of public company, by optimum allocation and
effective utilization of management resources. To realize this aim and our
target of consolidated Return on Equity of 15% or more, we keenly watch the
trend of the era and implement aggressive management innovation based on the
primary keywords of 'Global Standards, Fair Competition and High Profit'. To
build a good relationship with stakeholders such as end-users, shareholders,
investors, suppliers, local communities and employees, we acknowledge the
importance of compliance and promotion of farther disclosure to attain
management with higher transparency. We also recognize the importance of social
contribution to be 'a good corporate citizen'. We are serving as a sponsor for
various sports and cultural organizations and providing supports for promotion
of IT and multi-media education.
2. Profit Appropriation Policy
We regard the provision of stable dividends and improvement of corporate
value, or shareholders' value, as important means of returning profits to
shareholders. In other words, we set the target for total dividends at 30% or
more of consolidated net income and strive to increase dividends per share.
3. Medium to Long-term Strategies
In the entertainment industry, boarders among games, movies, music, sports,
toys, publishing and communication are disappearing and consumers are getting
more and more selective. The critical factor for the growth is combination of
creativity and profitability with timely and speedy business deployment to
respond consumers' tastes.
We have diversified the businesses centering on 'entertainment' and pursued
synergistic effects among divisions. As a result, we build up the structure
capable of generating profits from various fields one step ahead of competitors.
We are to further work on to improve product value, strengthen marketing
function and create new market with eyes open for business alliances with strong
potentiality.
Following Singapore and London, we plan to list our shares on New York Stock
Exchange in the next fiscal term. We wish to obtain confidence and trust from
investors as a truly global company by adopting the strictest accounting
standard and refining our disclosure.
4. Company Priorities
To build a good relationship with 'stakeholders', we have recognized importance
of compliance. But further solidify corporate and individual integrity, we
established 'compliance Committee' in September 2001. The committee provides
support and advice for employees by sorting out various information and
requirements pertinent to respective department and division. Especially latest
information on revision of laws and regulations and very particular stipulations
of Stock Exchanges and Gaming authorities are quite instrumental to prevent
anyone from unwitting misunderstanding. We intend to further enhance the role of
the committee to enlighten employees both on complicated and minute issues.
3. Business Performance
1. Business Review
Overview
The general economy of our country during this interim period has regressed
further due to the global IT recession originated in the U.S. in the latter
half of the previous term and tragic terrorist attacks in the U.S. in
September 2001. In the entertainment industry, merging and fusion with other
industries are accelerated and consumers are getting more and more selective.
In such environment, we are working on improvement of product quality and
reinforcement of marketing function. We have continuously released our
original branded titles such as 'Powerful Pro Baseball' series and soccer
games and also actively introduced outside content such as popular comic
characters 'Hunter Hunter' and 'Get Backers'.
Konami Marketing, Inc., a subsidiary established in the last fiscal year,
enhanced 'customer Support' function and introduced 'one to one' market
research method by interviewing users at event sights and enclosing
postcard-questionnaires in product packages. The feedback from users are
analyzed to grasp market needs and swiftly reflected on product development.
'Konami Card Game Center' was opened in July 2001 in Tokyo as a customer
service base for card game business. As for the overseas marketing, to
strengthen sales system and improve administrative efficiency in Asian
market, Konami Marketing (Asia) Ltd. was established in Hong Kong integrating
three separate sales companies in Hong Kong, Singapore and Korea.
We have been very active in M&A and setting up business alliances to create new
market and increase competitiveness in existing businesses. Following TAKARA
CO., LTD and Konami Sports Corporation, strategic business alliance was
established with HUDSON SOFT CO., LTD. in August 2001 to collaborate in
production of mobile and on-line game and share management resources and
know-how. To evolve gaming business into one of the major overseas operation,
Paradigm Gaming Systems, Inc., a casino management system developing company,
was acquired and absorbed by Konami Gaming, Inc., a wholly owned subsidiary in
Las Vegas, U.S., in August 2001. To secure sufficient fund to make timely
business deployment, the 3rd, 4th and 5th unsecured bonds were issued in
September 2001 and total of Y45 billion was raised.
Consolidated sales for the six months ended September 30, 2001 was Y89,146
million (119.9%). Consolidated ordinary income was Y9,540 million, consolidated
net income was Y2,522 million.
Interim dividend will be Y27 per share (consolidated payout ratio 137.8%:
dividend at the fiscal year-end will be Y27).
Performance by Division
CS Div. (Consumer-use Software) has gone through industrial transition to the
next generation platforms. Following the release of handheld GameBoy Advance
at the end of the previous term, high functional new platform Nintendo Game
Cube with equal graphic capability to that of PlayStation 2 was released in
September 2001. Microsoft is planning to introduce Xbox in February next year
and users' expectation is mounting. Overseas market is also activated with
the release of GameBoy Advance and strong penetration of Playstation 2. The
division made strong sales of 'YU-GI-OH! DUEL MONSTERS 5 EXPERT 1' (AGB) the
latest version of 'YU-GI-OH! DUEL MONSTERS' series which is very popular among
kids, branded sports titles 'powerful Pro Baseball 8' (PS2) and 'Powerful Pro
Baseball 2001' (PS) in the domestic market. In the overseas market, 'Silent
Hill 2' (PS2) received high acclaim following its predecessor and made good
initial sales. The titles for GameBoy Advance such as 'Castlevania Circle of
the Moon', 'Jurassic Park III: THE DNA FACTOR' and 'KONAMI KRAZY RACERS' made
big contribution for total sales. Consolidated sales of the division was Y25,991
million (105.9%).
AM Div. (Amusement Machines) made solid sales of variation kits of music
simulation games 'DRUM MANIA', 'GUITAR FREAKS', 'beatmania' and 'pop'n music'
series, dance simulation game 'Dance Dance Revolution' series and globally
popular 'SILENT SCOPE' series. Several innovative machines have been
aggressively introduced to create new genre like music simulation game-
'cooling Penta' is the first in the industry prize machine with freezing
function offering ice cream for prizes. 'celebrity studio' is a photo machine
with professional photographer's angle technique. 'Boxing Mania' is a
punching game machine with motion sensor for player' movement. Those new
products were highly welcomed by the market but sales did not reach the level
of that of epoch making boom of music game. Consolidated sales of the division
was Y5,426 million (61.3%).
GM Div. (Gaming Machines) has introduced the token-operated game machines of
new genre 'monster Gate' with interactive fighting function of players and
'ROBOT FACTORY' which players can develop robots' capabilities to be
formidable fighters. They have been well accepted by the market and
middle-size machine 'CYCLONE FEVER' with variety of dramatic effects
continued solid sales following the previous term. Consolidated sales of the
division was Y2,557 million (60.2%).
As for the overseas gaming business, Paradigm Gaming Systems, Inc., a company
developing casino management system was acquired in August 2001. Expansion of
sales and improvement of service are expected by offering of integrated
solution of gaming machines and management systems. Export of knockdown
machines from Japan was switched to completely local production in the U.S.
from September 2001.
PS Div. (Pachinko Systems) marked solid sales of LCD units for pachinko machines
owing to the continuous production of attractive content with outstanding
playability and immense appeal to the players. Consolidated sales of the
division was Y6,622 million (105.6%).
CP Div. (Creative Products) released new series of 'YU-GI-OH! OFFICIAL CARD
GAME DUEL MONSTERS'. New series made solid sales but repeat order for titles
released in the past decreased. New version of baseball card game 'FIELD OF
NINE' was introduced in July 2001 at the time of professional baseball season
opening. Publishing, character goods and others marked steady sales.
Consolidated sales of the division was Y12,559 million (46.5%).
HE Div. (Health Entertainment) achieved strong sales of sports club operation
by Konami Sports Corporation with active expansion program including the
stock acquisition of Nissan Sports Plaza Co., Ltd, (currently Konami Sports
Plaza, Inc.) in June 2001. Konami Sports Life Corporation marked solid sales
of fitness equipment and engineering department. Under the theme of 'FUN and
Active, Fun and Healthy', new products 'Dance Dance Revolution-FAMIMAT' and
'FITNESS OECHESTRA SERIES' were released in August and September 2001
respectively. Consolidated sales of the division was Y32,621 million.
Consolidated sales of others was Y3,366 million.
Notes:
Percentage in parentheses represents the proportion to the amount of the six
months ended September 30, 2000.
Cash Flows
For the six months ended September 30 2001, cash and cash equivalents increased
by Y6,028 million on consolidated basis compared with the previous fiscal year
mainly due to the issuance of unsecured bonds (total amount: Y45 billion)
although net income before income taxes and minority interest amounted to Y8,196
million (40.8% of the amount for the same period in the previous year) and there
were such disbursement incurred as income tax payments and capital tie-up with
HUDSON SOFT CO., LTD. As a result, cash and cash equivalents as of September 30,
2001 amounted to Y72,841 million (137.4% of the amount for the same period in
the previous year).
Net cash used by operating activities amounted to Y12,249 million. This is
mainly due to income tax payment of Y13,990 million for the previous fiscal
year although sales of products with high profit margins such as the
YU-GI-OH! DUEL MONSTERS and JIKKYO POWERFUL PRO BASEBALL series by CS Div.
contributed to net income before income taxes and minority interest amounted
to Y8,196 million.
Net cash used by investing activities amounted to Y9,068 million, primarily
comprised of Y5,000 million used in acquiring shares of HUDSON SOFT CO., LTD.
as a third-party allotment for the purpose of strategic capital alliance.
Net cash provided by financing activities was Y27,399 million primarily due
to Y44,757 million raised by the 3rd, 4th and 5th unsecured bonds issued for
the purpose of efficient business expansion. On the other hand, the Company
redeemed unsecured bonds of Y10,000 million and paid cash dividend of Y3,567
million for the previous fiscal year.
2. Outlook for Year Ended March 31, 2002
CS Div. (Consumer-use Software) will release branded big titles like 'METAL
GEAR SOLID 2/ 'SUIKODEN III and 'Tokimeki Memorial 3'.
AM Div. (Amusement Machines) aims to expand sales of current products and to
create innovative new game genre. Also collaboration with Konami Sports Life
Corporation will be enhanced to pursue synergistic effects in design and
production of products.
GM Div. (Gaming Machines) obtained 100% share of Konami Australia Pty Ltd., a
company doing design, production, sales and servicing of gaming machines with
gaming licenses from many Australian states, and made it a consolidating
company from October 2001. Konami started the gaming machine; business in the
U.S. after receiving license from the State of Nevada in January 2000. The
operation will be globally deployed with the addition of business in Australian
market, the second largest next to that of the U.S.
CP Div. (Creative Products) will promote the introduction of new toy 'MICRO
IR'(Note 1) series on top of current business deployment. The first product
'DEGI Q', a fusion of Takara brand 'Choro Q' and 'MICRO IR' was released in
October 2001 on Takara distribution network. Entry into candy with give-away
toy market which is expanding and now almost a social phenomenon was realized
with the release of 'Super Heroes Legend' in October 2001.
HE Div, (Health Entertainment) plans the release of music fitness game
'MARTIAL BEAT' (PS) which enable players to do enjoyable physical exercise at
home. The product was developed with the cooperation of Konami Sports
Corporation.
As for the domestic sales network, Konami Marketing, Inc, integrated 11 Konami
dealers in October 2001. The new organization will take care of marketing,
advertising, sales promotion, events and direct sales to retailers and be more
close to 'customers' than ever to meet the expectations of 'customers'.
Consolidated sales for the year ended March 31, 2002 will be Y233,000 million
(135.9%), consolidated ordinary income and net income will be Y31,000 million
(85.1%) and Y17,500 million (80.3%) respectively.
Notes:
1. IR stands for Infrared Rays. It is an extra small high performance toy
with remote controlling system using infra-red rays.
2. Percentage in parentheses represents the proportion to the amount of the
year ended March 31, 2001.
4. Consolidated Financial Statements
(1) Consolidated Balance Sheets (Unaudited) (Millions of yen)
September 30, 2000 September 30, 2001 March 31, 2001
Component Component Component
Ratio Ratio Ratio
ASSETS:
I. Current Assets Y111,415 76.7% Y130,105 50.2% Y125,278 50.1%
Cash and cash 54,383 72,841 66,812
equivalents
Trade notes 36,807 27,166 33,870
and accounts
receivable
Inventories 13,545 18,917 13,997
Other 6,882 11,827 11,127
Allowance for bad debts (204) (646) (528)
II. Fixed Assets 33,906 23.3 129,299 49.8 124,744 49.9%
1.Tangible fixed assets 22,399 31,597 31,865
Buildings and structures 10,772 18,707 19,137
Land 8,345 8,224 8,225
Other 3,281 4,665 4,503
2. Intangible 1,667 62,658 62,736
fixed assets
Goodwill - 56,404 57,857
Other 1,667 6,253 4,878
3. Investments and 9,838 35,043 30,143
other assets
Lease deposits 3,976 22,225 21,696
Other 5,862 14,697 8,446
Allowance for bad debts - (1,880) -
TOTAL ASSETS Y145,321 100.0% Y259,404 100.0% Y250,023 100.0%
(Millions of yen)
September 30, 2000 September, 30,2001 March 31, 2001
Component Component Component
Ratio Ratio Ratio
LIABILITIES:
I Current Liabilities Y56,893 39.2% Y43,402 16.7% Y77,570 31.0%
Trade notes and 21,985 15,632 24,651
accounts payable
Short-term borrowings 3,869 2,368 5,686
Current portion of
long-term loans payable 2,015 2,911 2,001
Current portion of 10,000 - 10,000
straight bonds
Income taxes payable 7,795 4,984 14,880
Allowance for bonuses 1,175 - 1,964
Other 10,052 17,505 18,386
II Long-term Liabilities 4,984 3.4 53,407 20.6 8,553 3.5%
Straight bonds - 45,000 -
Long-term loans payable 3,366 2,964 3,262
Liability for employees'
retirement benefits - 1,154 1,818
Liability for 1,542 1,478 1,738
directors' retirement
benefits
Other 75 2,809 1,733
TOTAL LIABILITIES 61,877 42.6 96,809 37.3 86,124 34.5
MINORITY INTEREST 4,662 3.2 14,487 5.6 14,023 5.6
SHAREHOLDERS' EQUITY:
I Common Stock 15,793 10.9 47,398 18.2 47,398 19.0
II Additional Paid-in 15,516 10.7 47,106 18.2 47,106 18.8
Capital
III Retained Earnings 48,062 33.0 53,730 20.7 55,253 22.1
IV Unrealized Holding
Gains (Losses) on
Other Investment
Securities (47) (0.0) 101 0.0 115 0.0
V Foreign Currency
Translation Adjustment (527) (0.4) (229) (0.0) 1 0.0
78,798 148,107 149,875
VI Treasury Stock (15) (0.0) (0) (0.0) (0) (0.0)
TOTAL SHAREHOLDERS'
EQUITY 78,782 54.2 148,107 57.1 149,875 59.9
TOTAL LIABILITIES,
MINORITY INTEREST AND
SHAREHOLDERS' EQUITY Y145,321 100.0% Y259,404 100.0% Y250,023 100.0%
(2) Consolidated Statements of Income (Unaudited)
(Million of yen)
Six months Six months Year ended
ended ended
September 30, September 30, March 31, 2001
2000 2001
Share of Share of Share of
net sales net sales net sales
I Net Sales Y74,374 100.0% Y89,146 100.0% Y171,480 100.0%
II Cost of Sales 44,007 59.2 60,588 68.0 103,209 60.2
Gross Profit 30,366 40.8 28,557 32.0 68,270 39.8
III Selling, General
and Administrative 13,230 17.8 19,030 21.3 29,624 17.3
Expenses
Operating Income 17,136 23.0 9,526 10.7 38,645 22.5
IV Non-operating Income 517 0.7 779 0.9 897 0.5
Interest income 218 125 468
Rental income - 128 20
Equity in net income
of affiliated companies - 260 -
Other 298 265 409
V Non-operating Expenses 1,714 2.3 765 0.9 3,115 1.8
Interest expenses 396 258 810
Foreign exchange - 103 220
losses-net
Bond issue expenses - 242 -
Equity in net losses
of affiliated companies 706 - 583
Loss on impairment of 204 - -
membership
Other 405 160 1,501
Ordinary Income 15,940 21.4 9,540 10.7 36,427 21.2
VI Extraordinary Income 4,177 5.6 1,052 1.2 4,072 2.4
Gain on reversal of
allowance for bad debts 194 - -
Gain on sale of fixed 35 15 124
assets
Gain on sale of - 416 -
investment securities
Gain on sale of
investments in
subsidiaries 3 - 3
Gain on sale of
minority interest in
a subsidiary 3,944 - 3,944
Gain on reversal of
liability for employees' - 621 -
retirement benefits
VII Extraordinary Losses 50 0.1 2,396 2.7 908 0.5
Loss on sale and 50 565 516
disposal of fixed assets
Loss on sale of - - 7
investment securities
Loss on cancellation - - 384
of leasing contracts
Addition to allowance - 1,830 -
for bad debts
Net Income before
Income Taxes
and Minority Interest 20,067 26.9 8,196 9.2 39,591 23.1
Income taxes - Current 7,706 10.3 4,092 4.6 20,902 12.2
Income taxes - Deferred 334 0.5 550 0.6 (3,595) (2.1)
Minority interest 391 0.5 1,030 1.2 503 0.3
Net Income Y11,634 15.6% Y2,522 2.8% Y21,781 12.7%
(3) Consolidated Statements of Retained Earnings (Millions of yen)
(Unaudited)
Six months ended Six months ended Year ended
September 30, 2000 September 30, 2001 March 31, 2001
I Retained Earnings
at Beginning Y39,565 Y55,253 Y39,565
II Decrease in Retained Earnings 3,137 4,046 6,094
Cash dividends 2,956 3,604 5,913
Directors' bonuses 170 442 170
Decrease by consolidated 10 - 10
subsidiary's merger with
unconsolidated subsidiary
III Net Income 11,634 2,522 21,781
IV Retained Earnings at End of Period Y48,062 Y53,730 Y55,253
(4) Consolidated Statements of Cash Flows
(Unaudited) (Millions of Yen)
Six months ended Six months ended Year ended
September 30, 2000 September 30, 2001 March 31, 2001
I OPERATING ACTIVITIES:
Income before income Y20,067 Y8,196 Y39,591
taxes and minority
interest
Depreciation and amortization 1,363 2,653 3,123
Amortization of goodwill - 1,425 274
Increase (decrease) in
liability for directors'
retirement benefits 56 (260) 61
Increase (decrease) (282) 2,008 35
in allowance for bad debts
Interest and dividend income (219) (130) (469)
Interest expenses 396 258 810
Bond issue expenses - 242 -
Loss on sale or 50 565 516
disposal of fixed assets
Equity in net losses (income) of 706 (233) 583
affiliated companies
Gain on sale of (3,947) - (3,947)
investments in subsidiaries
Gain on sale of investment - (416) -
securities
Gain on sale of treasury stock (8) - (16)
Decrease (increase) (9,566) 4,595 (7,551)
in trade receivables
Increase in inventories (2,190) (5,320) (1,052)
Increase (decrease) in trade
payables 2,654 (8,260) 6,442
Increase (decrease) 377 - (230)
in consumption tax payable
Other-net (1,189) (3,473) 2,162
Sub-total 8,269 1,852 40,334
Interests and dividends received 173 143 435
Interests paid (352) (255) (777)
Income taxes paid (11,351) (13,990) (18,875)
Net cash provided by (3,260) (12,249) 21,116
(used in) operating activities
II INVESTING ACTIVITIES:
Decrease in time deposits 30 - 1,415
Acquisition of tangible fixed (1,015) (2,861) (2,822)
assets
Proceeds from sale of tangible 343 337 1,274
fixed assets
Acquisition of intangible fixed (314) (523) (1,488)
fixed assets
Acquisition of investment
securities (3,568) (5,084) (3,887)
Proceeds from sale 16 516 28
of investment securities
Acquisition of investments - (347) (68,285)
in subsidiaries
Decrease (increase) in short-term 38 - (69)
loans receivable-net
Decrease in deposits received - net - (545) -
Repayment of deposits received (456) - (3,054)
Increase in deposits received 771 - 3,448
Other-net (2) (559) 754
Net cash used in investing
activities (4,156) (9,068) (72,686)
III FINANCING ACTIVITIES:
Increase (decrease) 1,042 (3,178) (1,220)
in short-term borrowings
Proceeds from 3 469 720
long-term loans
Repayment of (1,016) (514) (1,983)
long-term loans
Proceeds from - 44,757 -
issuance of straight bonds
Redemption of straight bonds - (10,000) -
Proceeds from issuance - - 62,562
of common stock
Proceeds from issuance of
common stock to minority 6,060 - 6,060
shareholders
Proceeds from sale of treasury 20 - 62
stock
Dividends paid (2,956) (3,567) (5,913)
Dividends paid to minority (78) (330) (78)
shareholders
Other-net - (235) 229
Net cash provided by 3,076 27,399 60,440
financing activities
IV FOREIGN CURRENCY TRANSLATION
ADJUSTMENTS ON CASH AND CASH (26) (62) 575
EQUIVALENTS
V NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (4,367) 6,018 9,446
VI CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 57,365 66,812 57,365
VII CASH AND CASH EQUIVALENTS
OF NEWLY CONSOLIDATED COMPANIES - 10 -
VIII CASH AND CASH EQUIVALENTS,
END OF PERIOD Y52,998 Y72,841 Y66,812
Summary of Significant Accounting Policies
1. Scope of Consolidation
(1) The consolidated financial statements include the accounts of KONAMI
CORPORATION (the 'Company') and its 33 consolidated subsidiaries (See '1.
Organization Structure of Konami Group', which shows major subsidiaries),
NISSAN SPORTS PLAZA, CO., LTD. (currently named Konami Sports Plaza, Inc.),
which was acquired and wholly owned by Konami Sports Corporation, and
DELUCADERUYO, Inc. (currently named Konami Parlor Research, Inc.), which was
acquired and wholly owned by Konami Parlor Entertainment, Inc., were newly
consolidated.
Konami Sports Life Corporation merged with KCE Planning, Inc.
Konami Gaming, Inc. acquired and merged with Paradigm Gaining Systems, Inc.
(2) Four subsidiaries are excluded from the scope of consolidation since each
of their net assets, net sales, net income, and retained earnings is immaterial,
and has no significant effect as a whole on the consolidated financial
statements.
2. Application of Equity Method
(1) Three affiliated companies, TAKARA CO., LTD., Mobile 21 Co., Ltd. and
HUDSON SOFT CO., LTD. are accounted for by the equity method.
(2) The equity method is not applied to unconsolidated subsidiaries as they
have no significant effect on the consolidated net income and retained earnings,
and are immaterial as a whole.
3. Balance Sheet Date of Consolidated Subsidiaries
Two consolidated subsidiaries. Konami Sports Corporation and THE CLUB AT
YEBISU GARDEN CO., LTD. use a fiscal year-end at September 30. All the other
consolidated subsidiaries use the same balance sheet date as that of the
Company for the six-month period.
4. Accounting Standards
a. Valuation of Assets
(1) Marketable and Investment Securities
'Other investment securities' for which the market value is readily determinable
are stated at fair value as of the balance sheet date. Unrealized holding gain
or loss is reported as a separate component of shareholders' equity. The cost of
securities sold is determined primarily by the moving average method. 'other
investment securities' for which the market value is not readily determinable
are stated at cost based on the moving average method.
(2) Derivative financial instruments
Derivative financial instruments are stated at fair value.
(3) Inventories
Inventories other than merchandise and work in process are stated at cost
determined by the moving average method.
Merchandise is stated at the lower of cost or market, cost being determined
mainly by the first-in, first-out method.
Work in process consisting of hardware products is stated at cost determined
by the moving average method while work in process consisting of software
products is stated at cost determined by the specific identification method.
b. Depreciation Methods
Tangible fixed assets are depreciated mainly using the declining balance
method while intangible fixed assets are amortized mainly using the straight-
line method. For in-house software, amortization is computed using the straight-
line method based on the estimated useful life of 5 years.
C. Provisions
(1) Allowance for bad debts
Generally, the allowance for bad debts is calculated based on the actual ratio
of bad debt losses incurred. For specific accounts with higher possibility of
bad debt loss, the allowance is determined by independent judgment.
(2) Liability for employees' retirement benefits (Prepaid pension costs)
Liability for retirement benefits to be paid to employees is calculated based
on the estimated amount of the projected benefit obligation and the plan assets
at the fiscal year-end.
Generally, unrecognized net transition asset or obligation is amortized over
13 years.
Unrecognized actuarial net gain or loss will be amortized from the following
fiscal year within the average remaining service period of 13 years on a
straight-line basis.
(3) Liability for directors' retirement benefits
Required amount for retirement benefits to be paid to directors of the Company,
Konami Sports Corporation and Konami Sports Life Corporation as of the balance
sheet date is reserved as liability.
d. Foreign Currency Translation
Monetary assets and liabilities denominated in foreign currencies are translated
into Japanese yen at the current exchange rates at each balance sheet date, and
the translation gains and losses are credited or charged to income. Assets and
liabilities of foreign subsidiaries are translated into Japanese yen at the
current exchange rates at each balance sheet date while revenue and expenses are
translated at the average exchange rates for the period. Differences arising
from such translation are included in minority interest and shareholders' equity
as foreign currency translation adjustments.
e. Leases
Finance leases other than those that deem to transfer ownership of the leased
property to the lessee are accounted for as operating lease transactions.
f. Consumption Tax
Consumption tax is excluded from the stated amount of revenue and expenses.
g. Income Taxes
Current and deferred income taxes for the six months ended September 30, 2001
are calculated on the assumption of the reversal of reserve for advanced
depreciation in appropriations of retained earnings planned at the fiscal
year-end.
5. Cash and Cash Equivalents
The cash and cash equivalents stated in the Consolidated Statements of Cash
Flows consist of cash on band, deposits which can be withdrawn on demand and
short-term investments which have original maturities of three months or less
with insignificant risk of changes in value of principal.
Changes in Presentation of Consolidated Financial Statements
(Consolidated Statements of income)
1. 'Rental income', which amounted to Y2 million and was included in 'other'
of non-operating income for the six months ended September 30, 2000, is
stated separately.
2. 'Loss on impairment of membership' (Y62 million) is included in 'other' of
non-operating expenses for the six months ended September 30, 2001 although
it had been stated separately.
(Consolidated Statements of Cash Flows)
1. In operating activities, 'Increase (decrease) in consumption taxes
payable' (Y35 million) is included in 'Other-net' for the six months ended
September 30, 2001 although it had been stated separately.
2. In investing activities, 'Decrease (increase) in short-term loans
receivable-net' (Y13 million) is included in 'Other-net' for the six months
ended September 30,2001 although it had been stated separately.
The amount of 'Repayment of deposits received' (Y563 million) and 'increase in
deposits received' (Y17 million) are netted as stated in 'Decrease in deposits
received-net' for the six months ended September 30, 2001 although they had
not been netted.
3. In financing activities, 'Proceeds from sale of treasury stock' (Y7 million)
is included in 'Other-net' for the six months ended September 30, 2001 although
it had been stated separately.
Additional Information
(Allowance for Bonuses)
'Allowance For bonuses' (Y1,551 million) is included in 'Other' of current
liabilities based on the release on February 14, 2001 regarding presentation
of allowance for bonuses by the Japanese Institute of Certified Public
Accountant although it had been stated separately as part of estimated bonus
payment to employees in the following period.
Notes to Consolidated Financial Statements
(Notes to Balance Sheets)
1. Accumulated depreciation of tangible fixed assets is as follows:
(Millions of yen)
September 30, 2000 September 30, 2001 March 31, 2001
Accumulated depreciation
of tangible fixed assets Y12,302 Y32,078 Y31,209
2. Trade notes matured on the balance sheet date are settled on the exchange
date of the notes. Since each balance sheet date was a holiday for financial
institutions, the following matured trade notes are included in each ending
balance.
(Millions of yen)
September 30, 2000 September 30, 2001 March 31, 2001
Trade notes receivable Y27 Y18 Y98
Trade notes payable 2,218 1,496 3,049
3. Konami Group contracted with four banks for committed revolving credit
agreements for the purpose of efficient financing of working capital. The
total amount of the committed revolving credit agreements and the balance of
loans payable based on the agreements as of each balance sheet date are as
follows:
(Millions of yen)
September 30, 2000 September 30, 2001 March 31, 2001
Total amount of
committed revolving credit agreements - Y12,000 Y12,000
Loans payable based
on committed revolving credit agreements - - -
(Notes to Statements of Income)
Selling, general and administrative expenses include the following:
Six months ended September 30, 2000: Compensation to directors and salaries
expenses :Y3,523 million. Advertising
expenses: Y3,287 million. Addition to
allowance for bonuses: Y396 million,
Addition to liability for directors'
retirement benefits: Y75 million
Six months ended September 30, 2001: Compensation to directors and salaries
expenses: Y5,751 million. Advertising
expenses: Y3,055 million. Addition to
liability for directors' retirement
benefits: Y3 million
Year ended March 31,2001: Compensation to directors and salaries
expenses: Y8,102 million, Advertising
expenses: Y6,572 million, Addition to
allowance for bonuses: Y569 million,
Addition to liability for directors'
retirement benefits: Y78 million. Addition
to allowance for bad debts: Y16
(Notes to Statements of Cash Flows)
For the ending balance of cash and cash equivalents, there are differences
between statements of cash flows and balance sheets as follows:
(Millions of yen)
September 30, 2000 September 30, 2001 March 31, 2001
Cash and cash equivalents on
balance sheets Y54,383 Y72,841 Y66,812
Less: Time deposits with original
maturities of more than three months (1,385) - -
Cash and cash equivalents on
statements of cash flows Y52,998 Y72,841 Y66,812
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