Interim Results
Konami Corporation
09 November 2004
Consolidated Financial Results
for the Six Months Ended September 30, 2004
(Prepared in Accordance with U.S. GAAP)
November 9, 2004
KONAMI CORPORATION
Address: 4-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo, Japan
Stock code number: 9766
URL: http://www.konami.com
Shares listed: Tokyo Stock Exchange,
New York Stock Exchange, London Stock Exchange and Singapore Exchange
Representative: Kagemasa Kozuki, Chairman of the Board and Chief Executive Officer
Contact: Noriaki Yamaguchi, Executive Vice President and Chief Financial Officer
(Phone: +81-3-5220-0163)
Date of Board Meeting to
approve the financial November 9, 2004
results:
Adoption of U.S. GAAP: Yes
Note: Financial information presented herein was not audited by independent public accountants.
1. Consolidated Financial Results for the Six Months Ended September 30, 2004
(Amounts are rounded to the nearest million)
(1) Consolidated Results of Operations
(Millions of Yen, except per share
data)
Net revenues Change Operating income Change Income before Change
income taxes
Six months ended Y 114,009 (12.3)% Y 11,851 (45.4)% Y 11,586 (48.3)%
September 30, 2004
Six months ended 129,976 14.8 21,698 113.5 22,408 120.8
September 30, 2003
Year ended 273,412 40,713 40,107
March 31, 2004
Net income Change Net income Diluted net income
per share (Yen) per share (Yen)
Six months ended Y 1,626 (85.0)% Y 13.51 Y 13.51
September 30, 2004
Six months ended 10,859 148.6 90.13 90.13
September 30, 2003
Year ended 20,104 166.86 166.86
March 31, 2003
Notes:
1. Equity in net income (loss) of affiliated companies
Six months ended September 30, 2004: Y (2,551) million
Six months ended September 30, 2003: 230 million
Year ended March 31, 2004: 252 million
2. Weighted-average common shares outstanding
Six months ended September 30, 2004: 120,388,556 shares
Six months ended September 30, 2003: 120,484,155 shares
Year ended March 31, 2004: 120,483,869 shares
3. Change in accounting policies: None
4. Change (%) of net revenues, operating income, income before income taxes and net income represents the
increase or decrease relative to the same period of the previous year.
(2) Consolidated Financial Position
(Millions of Yen, except per share amounts)
Total stockholders' Equity-assets Total stockholders'
Total assets equity ratio equity per share
(Yen)
September 30, 2004 Y 294,274 Y 99,847 33.9% Y 833.28
September 30, 2003 290,642 96,626 33.2% 801.99
March 31, 2004 294,497 102,129 34.7% 847.66
Note:
Number of shares outstanding
September 30, 2004: 119,823,294 shares
September 30, 2003: 120,483,851 shares
March 31, 2004: 120,483,252 shares
(3) Consolidated Cash Flows
(Millions of Yen)
Net cash provided by (used in) Cash and
Operating Investing Financing cash equivalents
activities activities activities at end of period
Six months ended September 30, 2004 Y 6,547 Y (7,891) Y (6,814) Y 79,779
Six months ended September 30, 2003 16,079 (1,254) (6,654) 82,282
Year ended March 31, 2004 34,326 (7,001) (14,141) 86,885
(4) Number of Consolidated Subsidiaries and Companies Accounted for by the
Equity Method
Number of consolidated subsidiaries: 28
Number of affiliated companies accounted for by the equity method: 3
(5) Changes in Reporting Entities
Number of consolidated subsidiaries added: 0
Number of consolidated subsidiaries removed: 0
Number of affiliated companies accounted for by the equity method added: 0
Number of affiliated companies accounted for by the equity method removed: 0
2. Consolidated Financial Forecast for the Year Ending March 31, 2005
(Millions of Yen)
Net revenues Operating income Income before Net income
income taxes
Year ending March 31, 2005 Y275,000 Y28,000 Y27,000 Y11,000
(Reference)
Expected net income per share for the year ending March 31, 2005 is Y91.80.
Cautionary Statement with Respect to Forward-Looking Statements:
Statements made in this document with respect to our current plans, estimates, strategies and beliefs,
including the above forecasts, are forward-looking statements about our future performance. These
statements are based on management's assumptions and beliefs in light of information currently
available to it and, therefore, you should not place undue reliance on them. A number of important
factors could cause actual results to be materially different from and worse than those discussed in
forward-looking statements. Such factors include, but are not limited to: (i) changes in economic
conditions affecting our operations; (ii) fluctuations in currency exchange rates, particularly with
respect to the value of the Japanese yen, the U.S. dollar and the Euro; (iii) our ability to continue
to win acceptance of our products, which are offered in highly competitive markets characterized by
the continuous introduction of new products, rapid developments in technology and subjective and
changing consumer preferences; (iv) our ability to successfully expand internationally with a focus on
our video game software business, card game business and gaming machine business; (v) our ability to
successfully expand the scope of our business and broaden our customer base through our exercise
entertainment business; (vi) regulatory developments and changes and our ability to respond and adapt
to those changes; (vii) our expectations with regard to further acquisitions and the integration of
any companies we may acquire; and (viii) the outcome of contingencies.
Please refer to page 13 of the attached material for information regarding the assumptions and other
related items used in the preparation of these forecasts.
1. Organizational Structure of the Konami Group
The Konami Group is a conglomerate engaged in the
amusement and health industry providing customers with
''High Quality Life'' and is comprised of KONAMI
CORPORATION (the ''Company''), its 28 consolidated
subsidiaries and 3 equity method affiliates. Each of the
Company, its subsidiaries and affiliated companies is
categorized into business segments based on its
operations as stated below. Business segment
categorization is based on the same criteria explained
below under ''5. Segment Information (Unaudited).''
Business Segments Major Companies
Computer & Video Games Domestic The Company
Konami Marketing Japan, Inc.
Konami Computer Entertainment Studios, Inc.
Konami Computer Entertainment Tokyo, Inc.
Konami Computer Entertainment Japan, Inc.
Konami Online, Inc., TAKARA CO., LTD. (*2)
HUDSON SOFT CO., LTD. (*2), Genki Co., Ltd. (*2)
Overseas Konami Digital Entertainment, Inc.
Konami of Europe GmbH
Konami Marketing (Asia) Ltd.
Konami Software Shanghai, Inc., One other company
Toy & Hobby Domestic The Company
Konami Marketing Japan, Inc.
Konami Media Entertainment, Inc.
Konami Traumer, Inc., Konami Online, Inc.
Overseas Konami Marketing, Inc.
Konami Corporation of Europe B.V.
Konami Marketing (Asia) Ltd.
Amusement Domestic The Company
Konami Marketing Japan, Inc.
KPE, Inc., Konami Online, Inc., One other company
Overseas Konami Marketing, Inc.
Konami Corporation of Europe B.V.
Konami Marketing (Asia) Ltd.
Gaming Domestic The Company
Overseas Konami Gaming, Inc.
Konami Australia Pty Ltd, One other company
Health & Fitness Domestic Konami Sports Corporation
Konami Sports Life Corporation
Konami Online, Inc., One other company
Other Domestic Konami Marketing Japan, Inc., Konami School, Inc.
Konami Computer Entertainment School, Inc.
Konami Real Estate, Inc., One other company
Overseas Konami Corporation of America
Konami Corporation of Europe B.V., One other company
Notes:
*1. Companies that have operations categorized in more than one segment are included in each segment
in which they operate.
*2. These are equity method affiliates.
2. Management Policy
1. Management Policy
Our management policy places priority on our shareholders, sound relationships with all stakeholders, including
shareholders, and a wide range of social contributions as a good corporate citizen. We aim to make optimum use of
our group's management resources, taking into account the three keywords of our management policy: ''Adaptation to
Global Standards'', ''Maintaining Fair Competition'' and ''Pursuit of High Profits''.
In order to maximize our shareholders' values, we strive to continuously increase and improve our market
capitalization and provide stable dividends as a means to return profits to shareholders. Retained earnings will
be used for investment focused on business fields with good future prospects and profitability to increase our
corporate value and source for dividends.
We are working on maintaining sound relationships with our stakeholders, including investors, end-users,
suppliers, employees and the community in general, as well as contributing to the society by supporting a wide
range of activities that promote education, sports and culture. In January 2004, we entered into an agreement of
Japanese Olympic Committee ''JOC'' official partnership with JOC. As the Olympic Games were held this year, we
supported athletes by offering our Konami Sports Club facilities to athletes nominated by JOC and the Japanese
national team for the Athens Olympics.
Pursuant to this basic management policy, we aim to create ''High Quality Life'' full of ''dream'' ''surprise''
and ''fascination'' in everyday life of people all over the world by offering entertainment and health products
and services with universal appeal.
2. Profit Appropriation Policy
We consider stable cash dividends and an increase in corporate value as important means for returning our profits
to shareholders. Retained earnings will be used for investment focused on business fields with good future
prospects and profitability to strengthen our growth potential and competitiveness.
3. Medium to Long-term Strategies and Objectives
Establishment of Strong Business Portfolio
We believe that competition among entertainment companies will be intensified, thus an innovative and diversified
corporate strategy and further reinforcement of the corporate structure supporting such strategy are inevitable
for the continuous growth of an entertainment company. Starting from the Amusement business, we have been
expanding our businesses to include such ''hit-businesses'' as Computer & Video Games business, Toy & Hobby
business and Gaming business in entertainment industries for many years. In recent years, we have been making an
effort to enhance the Health & Fitness business as a new business. Since the Health & Fitness business is getting
on the track, we are establishing a solid business portfolio with good profit balance by adding a ''stable profit
business'' to traditional ''hit businesses''.
With a view to broadening profit, we will put strong emphasis on the online business which is expanding on a
global basis.
Strengthening Our Corporate Structure by Enhancing Our Brand Value, Production, Marketing and Financial Resources
To enhance our brand value, from April 2003 we have developed a new logo as the symbol for our new branding
initiative that we are promoting under the tagline from ''Time Consumption'' to ''Valuable Time Creation''. Our
goal is to promote high quality life full of surprise and fascination for our stakeholders.
Strengthening our corporate structure is essential in setting the groundwork for our future growth. We continue to
strengthen our corporate structure in a variety of ways, such as enhancing our production, marketing and financial
resources, building a stronger group management system and establishing a fair and timely disclosure system.
4. Corporate Governance Development
It is necessary for us to develop a strong corporate governance in order to maintain and develop our basic
management policy of placing priority on our shareholders, sound relationship with all stakeholders including
shareholders, and a wide range of social contributions as a good corporate citizen.
The first and most important agenda in our corporate governance development program is the reform of the board of
directors. We employed an outside corporate officer in May 1992 and introduced an executive officer system in June
1999. In June 2001, we reduced the size of our board of directors to nine directors, four of which were from
outside. We now have eight directors, three of which are from outside. We endeavored to accelerate the managerial
decision-making process, separate oversight and executive functions, strengthen the managerial monitoring system,
revitalize the board of directors, and pursue management transparency. The directors from outside are independent
from us.
We are working to implement and activate committees in response to the changing environment in which we operate.
We established Risk Management Committee in April 2000 in order to enhance our ability to prevent and respond
quickly to internal and external risks. We established Compliance Committee in September 2001 to reinforce our
entire system for monitoring and encouraging compliance with applicable laws, rules and regulations. We
established Disclosure Committee in April 2003 in the wake of listing our stock on the New York Stock Exchange.
The Disclosure Committee is working on the establishment of inner management system and development of group
company reporting procedures that facilitates timely and accurate disclosure.
We also established Konami Group Code of Business Conduct and Ethics and Konami Group Officers and Employees
Conduct Guideline in order to integrate direction and improve its standard at all group levels.
3. Business Performance and Cash Flows
1. Business Performance
Overview
In this interim consolidated accounting period, Japanese economy has been in recovery trend resulting from the
recovery of corporate performance with strong export, the growth of capital investment and the gradual increase
in individual consumption. Also the world economy has been in restoration as the U.S. economy and Chinese
economy continue to grow.
In the entertainment industry in which we operated, sales of software continued steadily in the global home
video game market. Both Nintendo and SONY will introduce a new mobile style game machine in the second half of
this year and are expected to vitalize the market.
In the health industry, with the arrival of graying society, there was a health conscious trend and especially
the middle-aged and senior groups seemed to have increased concern about exercise. We can develop the market in
the future as the proportion of people participating in sports clubs is still low in Japan compared with the U.S
and Europe.
In these circumstances, in the Computer & Video Games segments, sales of WORLD SOCCER WINNING ELEVEN 8 for
PlayStation2, a popular soccer game, achieved one million copies at the same time of its release in August 2004
and the WINNING ELEVEN series thereby recorded a million-sales for the recent three consecutive years. At TOKYO
GAME SHOW 2004 held in September 2004, our products such as METAL GEAR SOLID 3 SNAKE EATER, the latest title of
the METAL GEAR series, attracted enormous attention from many guests.
The Toy & Hobby segment maintained its solid sales of the Yu-Gi-Oh! trading card game in the U.S. and Europe. We
held Yu-Gi-Oh! World Championship Tournament in Los Angeles in the U.S. in July 2004 and the finalists who won
the preliminary hard matches among 10 million people played exciting game match aiming at the position as the
world number one.
In the Amusement segment, e-AMUSEMENT products such as BATTLE CLIMAXX!, the first online professional wrestling
battle video game machine in the industry and MAH-JONG FIGHT CLUB3, generated solid achievement.
In the Gaming segment, the business started to grow rapidly in North America by acquisition of gaming license
and diversifying its product line-up. In Australia, we exhibited many of our latest products at Australasian
Gaming Expo 2004 which is the biggest gaming show in Australia.
In the Health & Fitness segment, we installed AED, Automated External Defibrillator, in all Konami Sports Clubs
for safety improvement for our customers offering high quality services continuously. We also released
Refreshmentbike, a home use fitness machine, and FLAVANGENOL UP50, our original supplement, and made a proposal
to sustain healthy condition at various life scenes.
As a result, consolidated net revenues for the six months ended September 30, 2004, amounted to Y 114,009
million, and consolidated operating income, consolidated net income before income taxes and consolidated net
income were Y 11,851 million, Y 11,586 million and Y 1,626 million, respectively.
The interim dividend payout is Y 27 per share.
Performance by business segment
Summary of net revenues by business segment:
Millions of Yen
Six months Six months
ended ended
September 30, September 30,
2003 2004
Computer & Video Games Y 38,545 Y 32,665
Toy & Hobby 31,455 17,997
Amusement 15,959 18,992
Gaming 5,165 5,898
Health & Fitness 39,679 39,778
Other, Corporate and Eliminations (827) (1,321)
Consolidated net revenues Y 129,976 Y 114,009
Note: The Exercise Entertainment segment changed its name to the Health & Fitness segment on March 29, 2004.
In the Computer & Video Games segment, sales of WORLD SOCCER WINNING ELEVEN 8 for PlayStation2 achieved one million
copies at the same time of its release in August 2004 and the WINNING ELEVEN series thereby made a million-seller
for the recent three consecutive years. In addition we provided powerful titles such as JIKKYOU PAWAFULPUROYAKYU 11
and Suikoden IV and both generated favorable sales.
In overseas market, popular titles received high review. In Europe, SILENT HILL 4 -The Room- for PlayStation 2 and
Xbox recorded favorable sales. In North America and Europe, Yu-Gi-Oh! Reshef of Destruction, one of the Yu-Gi-Oh!
series, maintained its strong sales and in North America DDR EXTREME, the Dance Dance Revolution series also marked
good sales.
As a result, the consolidated net revenue of the Computer & Video Games segment was Y32,665 million for the six
months ended September 30, 2004 (84.7 % of the six months ended September 30, 2003).
In the Toy & Hobby segment, we have been developing our business presence mainly in boy's toy field since last year.
We paid our attention to the continuously growing animation market further to explore the boy's toy field, and we
fully participated in a planning and development of the Get Ride! AMDRIVER, a TV originated animation, which has
been broadcasted on Japanese TV since April 2004, with which we have started a big media-mix project by tying up
with the multimedia. We also introduced a new product of the GRANSAZERS series which we have been facilitating the
commercialization in line with a TV program broadcasted since October 2003 and we increased sales as a result of
this. In other categories, although sales of the Yu-Gi-Oh! card game has decreased compared to the same period in
the previous year in Japan, the U.S and Europe, their sales continued steadily relative to the card games market as
a whole.
As a result, consolidated net revenue of the Toy & Hobby segment for the six months ended was Y 17,997 million (57.2
% of consolidated revenues for the six months ended September 30, 2003).
In the Amusement segment, in the video game, e-AMUSEMENT products for amusement arcades, such as BATTLE CLIMAXX!, a
professional wrestling trading card game, and the MAH-JONG FIGHT CLUB series, which allow online match-up among
remote players nation-wide, received favorable reviews. Music simulation game series, such as drummania and
GUITARFREAKS, remained strong. In the token-operated products, WingFantasia, which allows players to enjoy
atmosphere of last-minute game with throwing dice and offers them unique experience which they have never had,
GI-TURFWILD 2, a large scale token operated horse racing game, which makes players feel as though they are in the
race track and has more advanced features than GI-WINNING SIRE, and GIGADRAKE, a new style battle game with a
combination of card game and slot contributed to favorable performance.
As a result, consolidated net revenue of the Amusement segment for the six months ended September 30, 2004 was Y
18,992 million (119.0 % of consolidated revenues for the six months ended September 30, 2003).
As for the Gaming segment, we expanded our business mainly in North America and Australia. In North America, our main
video slot machines continued to mark solid sales, especially in Nevada, California and Michigan. We introduced
ADVANTAGE SERIES, a Mechanical Slot Machines product in December 2003 which increased our sales.
Although Australian market leveled off, we secured our sales with export of video slot machines. As to the status of
the acquisition of gaming licenses, we have obtained licenses in the total of 25 states, of which 20 states in the
United States, four states in Canada and one dominion of the United States after we acquire licenses in New Jersey and
Connecticut in the U.S. in August 2004. We own gaming licenses in every state in Australia.
As a results, consolidated net revenue of the Gaming segment for the six months ended September 30, 2004 was Y 5,898
million (114.2 % of consolidated revenue for the six months ended September 30, 2003).
With regard to the Health & Fitness segment, in the business to operate sports club facilities, we opened the
Fukuokatenjin branch in Fukuoka in April 2004 and the Oitaakino branch in Oita in May 2004 to expand the Konami
Sports Club's facility networks. As to new products and services, we introduced ''Undo-Jyuku'', to foster young
gymnasts in Gymnastic club, gymnastic school to contribute to the development of the firmament of Japanese sports.
We also installed AED, Automated External Defibrillator, in all Konami Sports Clubs nationwide to offer safe
facilities and high quality services.
As to the fitness products business, for commercial use, we utilize our knowledge in entertainment business and our
network technologies to promote expansion of our fitness machine products line-up such as the EZ series and
introduced them into our sports club facilities and received highly favorable reviews from our members. As for home
use, we entered into the market of home use fitness products and released Refreshmentbike, a home use fitness
machine which features a function to generate the highly concentrated oxygen and negative ions, and Kenshin-Keikaku,
a PC software to display and manage exercise data stored in e-walkeylife, a pedometer with multi-functions. And also
we introduced FLAVANGENOL UP50, our original supplement, Diet Channel for PlayStation 2, a game software which
emulates contents concerning diet, and we also made efforts to increase sales of the existing products such as
MARTIALBEAT2.
As a result, the consolidated net revenue of the Health & Fitness segment for the six months ended September 30,
2004 was Y 39,778 million (100.2 % of consolidated revenues for the six months ended September 30, 2003).
2. Cash Flows
Cash flow summary for the six months ended September 30, 2004:
Millions of Yen
Six months Six months Change
ended ended
September 30, September 30,
2003 2004
Net cash provided by operating activities Y 16,079 Y 6,547 Y (9,532)
Net cash used in investing activities (1,254) (7,891) (6,637)
Net cash used in financing activities (6,654) (6,814) (160)
Effect of exchange rate changes on cash and cash (569) 1,052 1,621
equivalents
Net increase (decrease) in cash and cash equivalents 7,602 (7,106) (14,708)
Cash and cash equivalents, end of the period 82,282 79,779 (2,503)
Cash flows from operating activities:
Net cash provided by operating activities amounted to Y 6,547 million for the six months ended September 30, 2004,
compared to Y 16,079 million for the six months ended September 30, 2003. This resulted primarily from operating
income of Y 11,851 million, offset by an increase in inventories of Y 5,246 million.
Cash flows from investing activities:
Net cash used in investing activities amounted to Y 7,891 million for the six months ended September 30, 2004,
compared to Y 1,254 million for the six months ended September 30, 2003. This resulted primarily from capital
expenditure of Y 7,764 million.
Cash flows from financing activities:
Net cash used in financing activities amounted to Y 6,814 million for the six months ended September 30, 2004,
compared to Y 6,654 million for the six months ended September 30, 2003. This was primarily due to an increase in
short-term borrowings of Y 4,485 million while payments of dividends of Y 4,217 million and purchases of treasury
stock by a parent company and subsidiaries of Y 5,279 million.
The following table represents certain cash flow indexes for the six months ended September 30, 2004:
Six months Six months Year ended March
31, 2004
ended ended
September 30, September 30,
2003 2004
Equity-assets ratio (%) 33.2 33.9 34.7
Equity-assets ratio at fair value (%) 148.0 99.4 124.4
Years of debt redemption (years) 4.7 11.8 2.1
Interest coverage ratio (times) 37.8 13.8 39.7
Equity-assets ratio = Stockholders ' equity / Total assets
Equity-assets ratio at fair value = Market capitalization / Total assets
Years of debt redemption = Interest-bearing debts / Cash flows from operating activities
Interest coverage ratio = Cash flows from operating activities / Interest expense
Notes:
1. Each index is calculated from figures prepared in accordance with accounting principles
generally accepted in the United States of America (U.S. GAAP).
2. Cash flows from operating activities are from the consolidated statements of cash flow.
3. Interest-bearing debt covers all liabilities with interest in the consolidated balance sheets.
3. Activities for the Future
In the Computer & Video Games segment, Metal Gear Solid 3: The Snake Eater, a new title of the Metal Gear series,
will be rolled out globally. Furthermore we will release powerful titles such as ENTHUSIA PROFESSIONAL RACING, a
racing game, and Rumble Roses, a women professional wrestling game, and reinforce our original products lineup. As
for popular sports series, we will provide the soccer game titles such as EUROPEAN CLUB SOCCER Winning Eleven
Tactics, and J.LEAGUE Winning Eleven 8 Asia Championship for domestic market, and Pro Evolution Soccer 4 for
European market. In addition we will enhance popular titles such as JIKKYOU PAWAFULPUROYAKYU 11 CHO-KETTEIBAN. We
will continuously provide the new title of the Yu-Gi-Oh! series which receives persistent popularity.
The Toy & Hobby segment will continue to expand products line-up mainly for toys for boys. We started sales of THE
JUSTIRISERS in September 2004 as the second series of GRANSAZERS, and will introduce them gradually along with TV
program broadcasted on Japanese TV from October 2004. We will also introduce the PLAY-POEMS series, a new style of
virtual game with POEMS, a high-performance semiconductor chip, in November 2004 and develop the new market.
Furthermore in Japan, Europe and the U.S. we will provide the new title of the Yu-Gi-Oh! card game which is well
known globally.
In the Amusement segment, as for video games, we will provide new titles such as LETHAL ENFORCERS 3, the latest
product of the POLICE 911 series, and THRILLDRIVE3, the latest product of the THRILLDRIVE series which received high
evaluation from many users. As for token operated games, we will also provide FantasicFever2, the successor of
FantasicFever, a new style of 'penny-falls' game machine, which decorates amusement facilities by medals flowing in
the air and electric spectaculars like a parade.
As for the Gaming segment, we introduced Forcise, our first casino control system, at Global Gaming
Expo held in Las Vegas in the U.S. in October 2004 and received favorable review. We will expand the business range
with slot machines and casino control system.
With regard to the Health & Fitness segment, in the sports club business, we aim to promote the expansion of high
quality facilities, and to satisfy customers' various needs by offering safe, clean and comfortable facilities and
personal services, as well as by improving contents and qualities of services.
In the health & fitness products business, under the concept of ''offering enjoyable exercises and relaxation'' we
will create new services for health by introducing next generation fitness machines such as EZ series into Konami
Sports Clubs actively and by expanding the range of home health related products.
We did not revise consolidated net revenue, consolidated operating income, consolidated net income before income
taxes in our earnings forecast for the year ending March 31, 2005, as announced on May 12, 2004. We revised
consolidated net income in our earnings forecast for the year ending March 31, 2005 from Y 15,000 million to Y
11,000 million.
Year-end dividend payout for the consolidated fiscal year ending March 31, 2005 is expected to be Y 27 per share.
(Dividend for the year: Y 54 per share including an interim dividend of Y 27 per share).
Cautionary Statements with Respect to Outlook
Statements made in this document with respect to our current plans, estimates, strategies and beliefs,
including the above forecasts, are forward-looking statements about our future performance. These
statements are based on management's assumptions and beliefs in light of information currently available
to it and, therefore, you should not place undue reliance on them. A number of important factors could
cause actual results to be materially different from and worse than those discussed in forward-looking
statements. Such factors include, but are not limited to: (i) changes in economic conditions affecting our
operations; (ii) fluctuations in currency exchange rates, particularly with respect to the value of the
Japanese yen, the U.S. dollar and the Euro; (iii) our ability to continue to win acceptance of our
products, which are offered in highly competitive markets characterized by the continuous introduction of
new products, rapid developments in technology and subjective and changing consumer preferences; (iv) our
ability to successfully expand internationally with a focus on our video game software business, card game
business and gaming machine business; (v) our ability to successfully expand the scope of our business and
broaden our customer base through our exercise entertainment business; (vi) regulatory developments and
changes and our ability to respond and adapt to those changes; (vii) our expectations with regard to
further acquisitions and the integration of any companies we may acquire; and (viii) the outcome of
contingencies.
4. Consolidated Financial Statements
(1) Consolidated Balance Sheets (Unaudited)
Millions of Yen Thousands of
U.S. Dollars
September 30, September 30, March 31, 2004 September 30,
2003 2004 2004
% % %
ASSETS
CURRENT ASSETS:
Cash and cash equivalents Y 82,282 Y 79,779 Y 86,885 $718,406
Trade notes and accounts 23,722 25,017 25,438 225,277
receivable, net of allowance for
doubtful accounts of Y659 million,
Y754 million ($6,790 thousand) and
Y709 million at September 30,
2003, September 30, 2004 and March
31, 2004, respectively
Inventories 20,291 23,826 17,821 214,552
Deferred income taxes, net 12,193 13,798 13,895 124,250
Prepaid expenses and other current 10,173 8,045 8,727 72,445
assets
Total current assets 148,661 51.1 150,465 51.1 152,766 51.9 1,354,930
PROPERTY AND EQUIPMENT, net 47,338 16.3 47,394 16.1 46,700 15.8 426,780
INVESTMENTS AND OTHER ASSETS:
Investments in marketable 113 130 124 1,171
securities
Investments in affiliates 12,472 9,419 12,514 84,818
Identifiable intangible assets 46,168 46,389 45,984 417,731
Goodwill 463 463 463 4,169
Lease deposits 24,217 23,684 23,967 213,273
Other assets 11,210 16,330 11,979 147,051
Total investments and other assets 94,643 32.6 96,415 32.8 95,031 32.3 868,213
TOTAL ASSETS Y 290,642 100.0 Y 294,274 100.0 Y 294,497 100.0 $2,649,923
See accompanying notes to consolidated financial statements
Millions of Yen Thousands of
U.S. Dollars
September 30, September 30, March 31, 2004 September 30,
2003 2004 2004
% % %
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Short-term borrowings Y 3,108 Y 7,073 Y 2,585 $63,692
Current portion of long-term debt 2,977 17,591 2,900 158,406
and capital lease obligations
Trade notes and accounts payable 18,231 16,477 15,998 148,375
Accrued income taxes 17,926 21,960 23,318 197,749
Accrued expenses 18,089 18,173 18,651 163,647
Deferred revenue 6,739 6,088 6,036 54,822
Other current liabilities 4,500 4,139 3,311 37,271
Total current liabilities 71,570 24.6 91,501 31.1 72,799 24.7 823,962
LONG-TERM LIABILITIES:
Long-term debt and capital lease 69,026 52,572 68,195 473,408
obligations, less current portion
Accrued pension and severance 2,508 2,357 2,350 21,225
costs
Deferred income taxes, net 19,389 20,731 19,195 186,682
Other long-term liabilities 3,402 2,307 2,420 20,774
Total long-term liabilities 94,325 32.5 77,967 26.5 92,160 31.3 702,089
TOTAL LIABILITIES 165,895 57.1 169,468 57.6 164,959 56.0 1,526,051
MINORITY INTEREST IN 28,121 9.7 24,959 8.5 27,409 9.3 224,755
CONSOLIDATED SUBSIDIARIES
COMMITMENTS AND CONTINGENCIES - - - - - - -
STOCKHOLDERS' EQUITY:
Common stock, no par value-
Authorized 450,000,000 shares; 47,399 16.3 47,399 16.1 47,399 16.1 426,826
issued 128,737,566 shares at
September 30, 2003, September 30,
2004 and March 31, 2004;
outstanding 120,483,851 shares at
September 30, 2003, 119,823,294
shares at September 30, 2004 and
120,483,252 shares at March 31,
2004
Additional paid-in capital 46,736 16.1 46,736 15.9 46,736 15.9 420,855
Legal reserve - - - - - - -
Retained earnings 27,787 9.6 32,152 10.9 33,779 11.4 289,527
Accumulated other comprehensive 368 0.1 950 0.3 (119) (0.0) 8,555
income (loss)
Total 122,290 42.1 127,237 43.2 127,795 43.4 1,145,763
Treasury stock, at cost-
8,253,715 shares, 8,914,272 shares (25,664) (8.9) (27,390) (9.3) (25,666) (8.7) (246,646)
and 8,254,314 shares at September
30, 2003, September 30, 2004 and
March 31, 2004, respectively
Total stockholders' equity 96,626 33.2 99,847 33.9 102,129 34.7 899,117
TOTAL LIABILITIES AND Y 290,642 100.0 Y 294,274 100.0 Y 294,497 100.0 $2,649,923
STOCKHOLDERS' EQUITY
See accompanying notes to consolidated financial statements
(2) Consolidated Statements of Operations (Unaudited)
Millions of Yen Thousands of
U.S. Dollars
Six months ended Six months ended Year ended Six months
September 30, September 30, ended
2003 2004 March 31, 2004 September 30,
2004
% % %
NET REVENUES:
Product sales revenue Y 91,261 Y 74,933 Y196,136 $ 674,768
Service revenue 38,715 39,076 77,276 351,878
Total net revenues 129,976 100.0 114,009 100.0 273,412 100.0 1,026,646
COSTS AND EXPENSES:
Costs of products sold 50,618 45,409 115,229 408,906
Costs of services rendered 31,798 33,205 63,953 299,009
Selling, general and administrative 25,862 23,544 53,517 212,013
Total costs and expenses 108,278 83.3 102,158 89.6 232,699 85.1 919,928
Operating income 21,698 16.7 11,851 10.4 40,713 14.9 106,718
OTHER INCOME (EXPENSES):
Interest income 228 239 488 2,152
Interest expense (425) (475) (865) (4,277)
Other, net 907 (29) (229) (261)
Other income (expenses), net 710 0.5 (265) (0.2) (606) (0.2) (2,386)
INCOME BEFORE INCOME TAXES, 22,408 17.2 11,586 10.2 40,107 14.7 104,332
MINORITY INTEREST AND EQUITY IN NET
INCOME(LOSS) OF AFFILIATED
COMPANIES
INCOME TAXES: 10,669 8.2 5,819 5.1 18,035 6.6 52,400
INCOME BEFORE MINORITY INTEREST AND 11,739 9.0 5,767 5.1 22,072 8.1 51,932
EQUITY IN NET INCOME(LOSS) OF
AFFILIATED COMPANIES
MINORITY INTEREST IN INCOME OF 1,110 0.8 1,590 1.4 2,220 0.8 14,318
CONSOLIDATED SUBSIDIARIES
EQUITY IN NET INCOME(LOSS) OF 230 0.2 (2,551) (2.3) 252 0.1 (22,972)
AFFILIATED COMPANIES
NET INCOME Y 10,859 8.4 Y 1,626 1.4 Y20,104 7.4 $14,642
See accompanying notes to consolidated financial statements
PER SHARE DATA: Yen U.S. Dollars
Six months Six months Year ended Six months
ended ended ended
September 30, September 30, March 31, September 30,
2003 2004 2004 2004
Basic and diluted net income per Y 90.13 Y13.51 Y 166.86 $ 0.12
share
Weighted-average common shares
outstanding 120,484,155 120,388,556 120,483,869
See accompanying notes to consolidated financial statements
Consolidated Statements of Stockholders' Equity (Unaudited)
(3)
For the six months ended September 30, 2003
Millions of Yen
Common Additional Legal Retained Accumulated Treasury Total
Stock Paid-in Earnings Other Stockholders'
Capital Reserve Comprehensive Stock, Equity
Income (Loss)
at Cost
Balance at Y47,399 Y46,736 Y2,163 Y18,981 Y790 Y Y90,406
(25,663)
March 31, 2003
Net income 10,859 10,859
Cash dividends, Y (4,216) (4,216)
35.0 per share
Foreign currency (582) (582)
translation
adjustments
Net unrealized 160 160
gains on
available-for-sale
securities
Repurchase of (1) (1)
treasury stock
Transfer from (2,163) 2,163 -
legal reserve
Balance at Y47,399 Y46,736 Y - Y 27,787 Y368 Y Y96,626
(25,664)
September 30,
2003
For the six months ended September 30,
2004
Millions of Yen
Common Additional Legal Retained Accumulated Treasury Total
Stock Paid-in Earnings Other Stockholders'
Capital Reserve Comprehensive Stock, Equity
Income (Loss)
at Cost
Balance at Y47,399 Y46,736 Y - Y33,779 Y(119) Y Y102,129
(25,666)
March 31, 2004
Net income 1,626 1,626
Cash dividends, Y (3,253) (3,253)
27.0 per share
Foreign currency 1,322 1,322
translation
adjustments
Net unrealized (253) (253)
losses on
available-for-sale
securities
Repurchase of (1,724) (1,724)
treasury stock
Balance at Y47,399 Y46,736 Y - Y32,152 Y950 Y Y99,847
(27,390)
September 30,
2004
See accompanying notes to consolidated financial statements
For the year ended March 31, 2004
Millions of Yen
Common Additional Legal Retained Accumulated Treasury Total
Stock Paid-in Earnings Other Stock, Stockholders'
Capital Reserve Comprehensive Equity
Income (Loss) at Cost
Balance at Y Y 46,736 Y 2,163 Y 18,981 Y 790 Y Y90,406
47,399 (25,663)
March 31, 2003
Net income 20,104 20,104
Cash dividends, (7,469) (7,469)
Y62.0 per
share
Foreign currency (1,108) (1,108)
translation
adjustments
Net unrealized 270 270
gains on
available-for-sale
securities
Adjustment for (71) (71)
minimum pension
liability
Repurchase of (3) (3)
treasury stock
Transfer from (2,163) 2,163 -
legal reserve
Balance at Y47,399 Y46,736 Y - Y33,779 Y(119) Y(25,666) Y102,129
March 31, 2004
For the six months ended September 30,
2004
Thousands of U.S. Dollars
Common Additional Legal Retained Accumulated Treasury Total
Stock Paid-in Earnings Other Stockholders'
Capital Reserve Comprehensive Stock, Equity
Income (Loss)
at Cost
Balance at $426,826 $420,855 $- $304,178 $(1,072) $ $919,666
(231,121)
March 31, 2004
Net income 14,642 14,642
Cash dividends, (29,293) (29,293)
$0.24 per share
Foreign currency 11,905 11,905
translation
adjustments
Net unrealized (2,278) (2,278)
losses on
available-for-sale
securities
Repurchase of (15,525) (15,525)
treasury stock
Balance at $426,826 $420,855 $- $289,527 $8,555 $ $899,117
(246,646)
September 30, 2004
See accompanying notes to consolidated financial statements
(4) Consolidated Statements of Cash Flows (Unaudited)
Millions of Yen Thousands
of U.S.
Dollars
Six months Six months Year ended Six months
ended
ended ended March 31, September
30, 2004
September September 2004
30, 2003 30, 2004
Cash flows from operating activities:
Net income Y 10,859 Y 1,626 Y 20,104 $ 14,642
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 3,972 4,224 8,528 38,037
Reversal for doubtful receivables (253) (455) (170) (4,097)
Loss on sale or disposal of property and 652 635 1,231 5,718
equipment, net
Loss (gain) on sale of marketable securities (1,303) 46 (1,303) 414
Equity in net loss (income) of affiliated (230) 2,551 (252) 22,972
companies
Minority interest 1,110 1,590 2,220 14,318
Deferred income taxes 1,159 1,616 (651) 14,552
Change in assets and liabilities, net of
business acquired:
Decrease in trade notes and accounts receivable 5,136 955 3,033 8,600
Increase in inventories (7,238) (5,246) (4,791) (47,240)
Increase (decrease) in trade notes and accounts 439 (23) (1,724) (207)
payable
Increase (decrease) in accrued income taxes 4,083 (1,418) 9,456 (12,769)
Decrease in accrued expenses (758) (718) (293) (6,466)
Increase in deferred revenue 1,204 52 501 468
Other, net (2,753) 1,112 10,013
(1,563)
Net cash provided by operating activities 16,079 6,547 34,326 58,955
Cash flows from investing activities:
Capital expenditures (2,832) (7,764) (8,788) (69,914)
Proceeds from sales of property and equipment 73 333 281 2,999
Proceeds from sales of investments in marketable 1,593 22 1,596 198
securities
Acquisition of new subsidiaries, net of cash (206) -
acquired (206)
-
Decrease in time deposits, net 63 - 63 -
Decrease in lease deposits, net 272 165 121 1,486
Other, net (217) (647) (68) (5,827)
Net cash used in investing activities (1,254) (7,891) (7,001) (71,058)
Cash flows from financing activities:
Net increase (decrease) in short-term borrowings (5,268) 4,485 (5,789) 40,387
Proceeds from long-term debt 6,400 - 6,400 -
Repayments of long-term debt (315) (588) (896) (5,295)
Principal payments under capital lease (1,177) (1,176) (2,355) (10,590)
obligations
Dividends paid (5,544) (4,217) (8,970) (37,974)
Purchases of treasury stock by parent company (3) (15,525)
(1) (1,724)
Purchases of treasury stock by subsidiaries (633) (3,555) (2,456) (32,013)
Other, net (116) (39) (72) (350)
Net cash used in financing activities (6,654) (6,814) (14,141) (61,360)
Effect of exchange rate changes on cash and cash (569) 1,052 (979) 9,474
equivalents
Net increase (decrease) in cash and cash 7,602 (7,106) 12,205 (63,989)
equivalents
Cash and cash equivalents, beginning of the 74,680 86,885 74,680 782,395
period
Cash and cash equivalents, end of the period Y 82,282 Y 79,779 Y 86,885 $ 718,406
See accompanying notes to consolidated financial statements
5. Segment Information (Unaudited)
(1) Operations in Different Industries
Six months Computer & Toy & Amusement Gaming Health & Other, Consolidated
ended Video Hobby Fitness
Games Corporate and
September 30, Eliminations
2003
(Millions of Yen)
Net revenue:
Customers Y 37,195 Y 31,420 Y 15,654 Y 5,165 Y 39,676 Y 866 Y 129,976
Intersegment 1,350 35 305 - 3 (1,693) -
Total 38,545 31,455 15,959 5,165 39,679 (827) 129,976
Operating 30,605 19,527 11,049 4,824 38,675 3,598 108,278
expenses
Operating Y 7,940 Y 11,928 Y 4,910 Y 341 Y 1,004 Y (4,425) Y 21,698
income (loss)
Six months Computer & Toy & Amusement Gaming Health & Other, Consolidated
ended Video Hobby Fitness
Games Corporate and
September 30, Eliminations
2004
(Millions of Yen)
Net revenue:
Customers Y 31,927 Y 17,874 Y 18,494 Y 5,898 Y 39,718 Y 98 Y 114,009
Intersegment 738 123 498 - 60 (1,419) -
Total 32,665 17,997 18,992 5,898 39,778 (1,321) 114,009
Operating 28,504 14,397 13,694 5,141 38,039 2,383 102,158
expenses
Operating Y 4,161 Y 3,600 Y 5,298 Y 757 Y 1,739 Y (3,704) Y 11,851
income (loss)
Year ended Computer & Toy & Amusement Gaming Health & Other, Consolidated
Video Hobby Fitness
March 31, 2004 Games Corporate
and
Eliminations
(Millions of Yen)
Net revenue:
Customers Y 90,105 Y 57,335 Y 34,547 Y 10,947 Y 78,875 Y 1,603 Y 273,412
Intersegment 2,415 133 880 - 24 (3,452) -
Total 92,520 57,468 35,427 10,947 78,899 (1,849) 273,412
Operating 76,436 37,889 23,630 10,255 76,127 8,362 232,699
expenses
Operating Y 16,084 Y 19,579 Y 11,797 Y 692 Y 2,772 Y (10,211) Y 40,713
income (loss)
Six months ended Computer & Toy & Amusement Gaming Health & Other, Consolidated
Video Hobby Fitness
September 30, Games Corporate and
2004 Eliminations
(Thousands of U.S. Dollars)
Net revenue:
Customers $ 287,501 $ 160,955 $ 166,538 $ 53,111 $ 357,659 $ 882 $ 1,026,646
Intersegment 6,646 1,108 4,484 - 540 (12,778) -
Total 294,147 162,063 171,022 53,111 358,199 (11,896) 1,026,646
Operating 256,677 129,644 123,314 46,295 342,539 21,459 919,928
expenses
Operating income $ 37,470 $ 32,419 $ 47,708 $ 6,816 $ 15,660 $ (33,355) $ 106,718
(loss)
Notes: 1. Primary businesses of each segment are as follows:
Computer & Video Games: Production and sale of home-use video game software
Toy & Hobby: Production and sale of character related products
Amusement: Manufacture and sale of amusement arcade games and LCD
units for pachinko machines
Gaming: Manufacture and sale of gaming machines for
overseas market
Health & Fitness: Operation of health and fitness clubs, production and
sale of health and fitness related goods.
2. 'Other' consists of segments which do not meet the quantitative criteria for separate
presentation under SFAS No. 131 'Disclosures about Segments of an Enterprise and Related
Information.'
3. 'Corporate' primarily consists of administrative expenses of the Company.
4. 'Eliminations' primarily consist of eliminations of intercompany sales and of intercompany
profits on inventories.
5. Intersegment revenues primarily consist of sub-licensing of intellectual property rights from
Computer & Video Games and Toy & Hobby to Amusement and Gaming and sales of hardware and
components from Amusement to Computer & Video Games and Health & Fitness.
6. Segment name of Exercise Entertainment was changed to Health & Fitness in the fourth quarter
ended March 31, 2004.
(2) Operations in Geographic Areas
Six months ended Japan Americas Europe Asia Total Eliminations Consolidated
September 30, 2003 /Oceania
(Millions of Yen)
Net revenue:
Customers Y 84,812 Y 27,026 Y 14,090 Y 4,048 Y 129,976 - Y 129,976
Intersegment 37,666 154 88 179 38,087 Y (38,087) -
Total 122,478 27,180 14,178 4,227 168,063 (38,087) 129,976
Operating expenses 101,142 26,978 13,264 3,352 144,736 (36,458) 108,278
Operating income Y 21,336 Y 202 Y 914 Y 875 Y 23,327 Y (1,629) Y 21,698
Six months ended Japan Americas Europe Asia Total Eliminations Consolidated
September 30, 2004 /Oceania
(Millions of Yen)
Net revenue:
Customers Y 85,676 Y 14,422 Y 10,099 Y 3,812 Y 114,009 - Y 114,009
Intersegment 21,709 852 51 43 22,655 Y (22,655) -
Total 107,385 15,274 10,150 3,855 136,664 (22,655) 114,009
Operating expenses 94,885 15,097 9,915 3,188 123,085 (20,927) 102,158
Operating income Y 12,500 Y 177 Y 235 Y 667 Y 13,579 Y (1,728) Y 11,851
Year ended Japan Americas Europe Asia Total Eliminations Consolidated
March 31, 2004 /Oceania
(Millions of Yen)
Net revenue:
Customers Y 176,401 Y 53,670 Y 35,551 Y 7,790 Y 273,412 - Y 273,412
Intersegment 68,757 1,516 305 260 70,838 Y (70,838) -
Total 245,158 55,186 35,856 8,050 344,250 (70,838) 273,412
Operating expenses 213,419 51,806 30,915 6,904 303,044 (70,345) 232,699
Operating income Y 31,739 Y 3,380 Y 4,941 Y 1,146 Y 41,206 Y (493) Y 40,713
Six months ended Japan Americas Europe Asia Total Eliminations Consolidated
September 30, 2004 /Oceania
(Thousands of U.S. Dollars)
Net revenue:
Customers $ 771,508 $ 129,870 $ 90,941 $ 34,327 $ 1,026,646 - $ 1,026,646
Intersegment 195,489 7,672 459 387 204,007 $ (204,007) -
Total 966,997 137,542 91,400 34,714 1,230,653 (204,007) 1,026,646
Operating expenses 854,435 135,948 89,284 28,708 1,108,375 (188,447) 919,928
Operating income $ 112,562 $ 1,594 $ 2,116 $ 6,006 $ 122,278 $ (15,560) $ 106,718
Note: 1. For the purpose of presenting its operations in geographic areas above, the Company and its
subsidiaries attribute revenues from external customers to individual countries in each area based
on where products are sold and services are provided.
Notes (Unaudited)
1. The U.S. dollar amounts included herein represent a
translation using the mid price for telegraphic
transfer of U.S. dollars as of September 30, 2004 of
Y111.05 to $1 and are included solely for the
convenience of the reader. The translation should not
be construed as a representation that the yen amounts
have been, could have been, or could in the future be
converted into U.S. dollars at the above or any other
rate.
2. The consolidated financial statements presented herein
were prepared in accordance with accounting principles
generally accepted in the United States of America
(U.S. GAAP).
6. Summary of Non-consolidated Financial Results
for the Six Months Ended September 30, 2004
(Prepared in Accordance with Japanese GAAP)
November 9, 2004
KONAMI CORPORATION
Address: 4-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo, Japan
Stock code number: 9766
URL: http://www.konami.com
Shares listed: Tokyo Stock Exchange,
New York Stock Exchange, London Stock Exchange and Singapore Exchange
Representative: Kagemasa Kozuki, Chairman of the Board and Chief Executive Officer
Contact: Noriaki Yamaguchi, Executive Vice President and Chief Financial Officer
(Phone: +81-3-5220-0163)
Date of Board Meeting to
approve the financial November 9, 2004
results:
Date of commencement of
interim dividend payment: November 30, 2004
Adoption of
interim dividend system: Yes
Adoption of
unit trading system: Yes (1 unit: 100 shares)
1. Financial Results for the Six Months Ended September 30, 2004
(1) Results of Operations
(Figures truncated)
Net Operating Ordinary
revenues income income
(Y million) Change (Y million) Change (Y million) Change
Six months ended Y58,350 (21.4)% Y 640 (95.3)% Y 3,685 (78.6)%
September 30, 2004
Six months ended 74,240 36.4 13,572 186.3 17,215 201.9
September 30, 2003
Year ended 146,654 13,303 16,910
March 31, 2004
Net Net income
income per share
(Y million) Change (Y)
Six months ended Y 2,766 (75.1)% Y22.98
September 30, 2004
Six months ended 11,107 184.1 92.19
September 30, 2003
Year ended 10,381 83.71
March 31, 2004
Notes:
1. Weighted-average common shares outstanding
Six months ended September 30, 2004: 120,388,556 shares
Six months ended September 30, 2003: 120,484,155 shares
Year ended March 31, 2004: 120,483,869 shares
2. Change in accounting policies: None
3. Change (%) of net revenues, operating income, ordinary income and net income represents the
percentage change of the increase or decrease compared to the same period of the previous year.
(2) Dividends
Cash dividends per share
Interim Annual
(Y) (Y)
Six months ended September 30, 2004 Y27.00 -
Six months ended September 30, 2003 27.00 -
Year ended March 31, 2004 - Y54.00
(3) Financial Position
Total stockholders' Equity-assets Total stockholders'
Total assets equity ratio equity per share
(Y million) (Y million) (%) (Y)
September 30, 2004 Y179,580 Y105,512 58.8 Y880.57
September 30, 2003 193,669 111,997 57.8 929.56
March 31, 2004 183,031 108,016 59.0 894.08
Notes:
Number of shares outstanding
September 30, 2004: 119,823,294 shares
September 30, 2003: 120,483,851 shares
March 31, 2004: 120,483,252 shares
Number of treasury stock
September 30, 2004: 8,914,272 shares
September 30, 2003: 8,253,715 shares
March 31, 2004: 8,254,314 shares
2. Financial Forecast for the Year Ending March 31, 2005
Net Ordinary Net Cash dividends per share
revenues income income Year-end Annual
(Y million) (Y million) (Y million) (Y) (Y)
Year ending March 31, 2005 Y27.00 Y54.00
Notes:
1. Non-consolidated financial forecast for the year ending March 31, 2005 is not disclosed.
7. Non-consolidated Financial Statements
(1) Non-consolidated Balance Sheets (Unaudited)
(Millions of Yen)
September 30, 2003 September 30, 2004 March 31, 2004
% % %
ASSETS
CURRENT ASSETS:
Cash and cash equivalents Y40,926 Y32,470 Y40,216
Trade notes receivable 13 - -
Trade accounts receivable 30,666 15,195 12,673
Inventories 6,920 6,592 7,960
Other (Note 1) 22,746 20,474 20,650
Allowance for doubtful accounts (279 ) (167) (139 )
Total current assets 100,993 52.1 74,566 41.5 81,362 44.5
FIXED ASSETS :
Tangible fixed assets (Note 2) 1,533 2,392 2,087
Intangible fixed assets 1,071 6,830 3,112
Investments and other assets 90,070 95,791 96,469
Investment securities 83,448 89,231 88,718
Other 6,722 6,685 7,858
Allowance for doubtful accounts (99 ) (125 ) (106 )
Total fixed assets 92,675 47.9 105,013 58.5 101,669 55.5
TOTAL ASSETS Y193,669 100.0 Y179,580 100.0 Y183,031 100.0
See accompanying notes to non-consolidated financial statements
(Millions of Yen)
September 30, 2003 September 30, 2004 March 31, 2004
% % %
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade notes payable Y5,696 Y5,887 Y6,235
Trade accounts payable 8,666 8,721 7,829
Short-term borrowings 7,418 - -
Current portion of long-term 912 912 912
debt
Current portion of long-term - 15,000 -
bonds
Income taxes payable 4 134 190
Other (Note 4) 5,783 6,157 7,138
Total current liabilities 28,480 14.7 36,814 20.5 22,306 12.2
LONG-TERM LIABILITIES:
Straight bonds 45,000 30,000 45,000
Long-term debt 5,340 4,428 4,884
Allowance for directors' 1,354 1,354
retirement
1,354
Benefits
Long-term deposits received 67 41 41
Allowance for loss incurred 1,430 1,430
by subsidiaries 1,430
Total long-term liabilities 53,192 27.5 37,253 20.7 52,709 28.8
Total liabilities 81,672 42.2 74,067 41.2 75,015 41.0
STOCKHOLDERS' EQUITY:
Common Stock 47,398 24.5 47,398 26.4 47,398 25.9
Additional paid-in capital 47,106 24.3 47,106 26.2 47,106 25.7
Retained earnings 43,155 22.3 38,395 21.4 39,176 21.4
Voluntary earned surplus 24,301 29,094 24,301
Unappropriated earned surplus 18,854 9,300 14,875
Net unrealized gains on - - 1 0.0 - -
available-for-sale securities
Treasury Stock (25,663 ) (13.3 ) (27,389 ) (15.2 ) (25,665 ) (14.0 )
Total stockholders' equity 111,997 57.8 105,512 58.8 108,016 59.0
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY Y193,669 100.0 Y179,580 100.0 Y183,031 100.0
See accompanying notes to non-consolidated financial statements
(2) Non-consolidated Statements of Operations (Unaudited)
(Millions of Yen)
Six months ended Six months ended Year ended
September 30, 2003 September 30, 2004 March 31, 2004
% % %
Net revenues Y74,240 100.0 Y58,350 100.0 Y146,654 100.0
Cost of revenues 50,629 68.2 46,423 79.6 111,073 75.7
Gross profit 23,611 31.8 11,927 20.4 35,580 24.3
Selling, general and administrative 10,039 13.5 11,286 22,277 15.2
expenses 19.3
Operating income 13,572 18.3 640 1.1 13,303 9.1
Non-operating income (Note 1) 4,067 5.5 3,339 5.7 4,227 2.8
Non-operating expenses (Note 2) 423 0.6 295 0.5 620 0.4
Ordinary income 17,215 23.2 3,685 6.3 16,910 11.5
Extraordinary income (Note 3) 1,541 2.1 0 0.0 1,468 1.0
Extraordinary losses (Note 4) 2,135 2.9 12 0.0 2,383 1.6
Income before income taxes 16,622 22.4 3,673 6.3 15,996 10.9
Income taxes:
Current 4 672 711
Deferred 5,511 234 4,903
Total income taxes 5,515 7.4 906 1.6 5,614 3.8
Net income 11,107 15.0 2,766 4.7 10,381 7.1
Unappropriated earned surplus 5,583 6,534 5,583
carried forward
Reversal of legal reserve 2,163 - 2,163
Interim cash dividends - - 3,253
Unappropriated earned surplus Y18,854 Y9,300 Y14,875
See accompanying notes to non-consolidated financial statements
Basis of Presentation
The accompanying interim non-consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in Japan.
Summary of Significant Accounting Policies
1. Marketable and Investment Securities
Investments in subsidiaries and affiliated companies and other securities for which the market value is
not readily determinable are stated at cost based on the moving average method.
Other securities for which the market value is determinable are stated at market value as of the balance
sheet date. Unrealized gains and losses on those securities are reported in the stockholders' equity and
the cost of securities sold is determined by the moving average method.
2. Derivative Financial Instruments
Derivative financial instruments are stated at market value.
3. Inventories
Inventories other than work in process are stated at cost determined by the moving average 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.
4. Depreciation Methods
Tangible fixed assets are depreciated 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.
5. Provisions
(a) Allowance for doubtful accounts
Generally, allowance for doubtful accounts 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.
(b) Allowance for employees' retirement benefits (Prepaid pension expense)
Allowance for retirement benefits to be paid to employees as of balance sheet date is
calculated based on the estimated amount of the projected benefit obligation and the
plan assets at the fiscal year-end. 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.
(c) Allowance for directors' retirement benefits
Required amount for retirement benefits to be paid to directors as of balance sheet
date is reserved as liability.
(d) Allowance for loss incurred by subsidiaries
Allowance for loss incurred by subsidiaries is provided at the amount determined based
on its financial condition.
6. Foreign Currency Translation
Monetary assets and liabilities denominated in foreign currencies are translated at the current
exchange rates as of the balance sheet date, and the translation gains and losses are credited or
charged to income.
7. 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.
8. Other significant matters
(a) Consumption Tax
Consumption tax is excluded from the stated amount of revenue and expenses.
(b) Income Taxes
Current and deferred income taxes for the six months ended September 30, 2003 are calculated on the
assumption of the reversal of reserve for advanced depreciation in appropriations of retained
earnings planned at the fiscal year-end.
Change in Presentation of Non-consolidated Financial Statements
Non-consolidated Balance Sheets
1. Short-term loans receivable is stated in other of current assets while it had been represented
independently on the previous statements. It was Y 4,041 million as of balance sheet date, September
30, 2003.
2. Buildings and Other which had been represented separately on the previous statements is stated as
Tangible fixed assets. Those were Y 205 million and Y 1,328 million as of balance sheet date,
September 30, 2003 respectively.
Notes to Non-consolidated Financial Statements
Notes to Balance Sheets
1. Net amount of consumption tax payable and consumption tax to be
refunded at September 30, 2004 is included in 'Other' of current assets.
2. Accumulated depreciation of tangible fixed assets is as follows:
(Millions of Yen)
September 30, 2003 September 30, 2004 March 31, 2004
Accumulated depreciation of
tangible fixed assets Y2,927 Y3,306 Y3,017
3. The Company guarantees subsidiaries' loans payable to financial institutions
as follows:
(Millions of Yen)
September 30, 2003 September 30, 2004 March 31, 2004
Konami Software Shanghai, Inc. - Y87 Y57
(US$ 785 thousand) (US$ 543 thousand)
Total - Y87 Y57
4. Net amount of consumption tax payable and consumption tax to be refunded at
September 30, 2003 is included in 'Other' of current liabilities.
Notes to Statements of Operations
1. Non-operating income mainly consists of the following:
Six months ended September 30, 2003: Interest income: Y 41 million, Dividend income: Y 3,744 million,
Foreign exchange gains: Y 56 million
Six months ended September 30, 2004: Interest income: Y 35 million, Dividend income: Y 3,199 million,
Foreign exchange gains: Y 57 million
Year ended March 31, 2004: Interest income: Y 86 million, Dividend income: Y 3,805 million,
Foreign exchange gains: Y 23 million
2. Non-operating expenses mainly consist of the following:
Six months ended September 30, 2003: Bond interest expenses: Y 200 million
Six months ended September 30, 2004: Bond interest expenses: Y 200 million
Year ended March 31, 2004: Bond interest expenses: Y 400 million
3. Extraordinary income mainly consists of the following:
Six months ended September 30, 2003: Gain on sale of marketable securities: Y 1,300 million
Six months ended September 30, 2004: None
Year ended March 31, 2004: Gain on sale of marketable securities: Y 1,300 million
4. Extraordinary losses mainly consist of the following:
Six months ended September 30, 2003: Loss on sale of land and buildings: Y 2,111 million
Six months ended September 30, 2004: Loss on sale and disposal of fixed assets: Y 12 million
Year ended March 31, 2004: Loss on sale and disposal of fixed assets: Y 2,212 million
5. Depreciation expense for each period is as follows:
(Millions of Yen)
September 30, 2003 September 30, 2004 March 31, 2004
Tangible fixed assets Y436 Y464 Y885
Intangible fixed assets 220 285 455
Leases
Finance leases other than those deemed to transfer ownership of leased property
to the lessee:
1. Acquisition cost, accumulated depreciation, and ending balance of leased
assets
(Millions of Yen)
September 30, 2003
Acquisition Accumulated Ending
cost depreciation balance
Tangible Y1,629 Y1,069 Y559
fixed assets
Y1,629 Y1,069 Y559
(Millions of Yen)
September 30, 2004 March 31, 2004
Acquisition Accumulated Ending Acquisition Accumulated Ending
depreciation depreciation
cost balance cost balance
Tangible Y811 Y361 Y449 Y701 Y253 Y448
fixed assets
Intangible 10 3 7 10 2 8
fixed assets
Total Y821 Y364 Y456 Y711 Y255 Y456
2. Obligations under finance leases
(Millions of Yen)
September 30, 2003 September 30, 2004 March 31, 2004
Due within one year Y251 Y188 Y175
Due after one year 334 288 303
Total Y586 Y476 Y478
3. Lease payments, depreciation expense and interest expense
(Millions of Yen)
Six month ended Six month ended Year ended
September 30, 2003 September 30, 2004 March 31, 2004
Lease payments Y232 Y110 Y414
Depreciation expense 222 105 396
Interest expense 7 2 13
4. Depreciation expense is computed according to the straight-line method with lease term as useful life and
salvage value of zero.
5. Interest expense is defined as the difference between total lease payment and acquisition cost, and
allocated using the effective interest method to each period.
Investments in Subsidiaries and Affiliated Companies
Investments in subsidiaries and affiliated companies as of each balance sheet
date are as follows:
(Millions of Yen)
September 30, 2003 September 30, 2004 March 31, 2004
Balance Balance Balance
sheet sheet sheet
amount Market amount Market amount Market
value value value
Differences Differences Differences
Investments Y1,312 Y38,517 Y37,205 Y1,312 Y46,073 Y44,761
in Y1,312 Y45,032 Y43,720
subsidiaries
Investments 12,194 21,225 9,030 12,194 15,005 2,810 12,194 9,031
in affiliated 21,225
companies
Total Y13,506 Y59,742 Y46,235 Y13,506 Y61,078 Y47,571 Y13,506 Y66,258 Y52,751
This information is provided by RNS
The company news service from the London Stock Exchange
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