Annual Report 2006

Transcription

Annual Report 2006

TV Asahi Annual Report 2006
This annual report was produced using recycled paper.
Printed in Japan.
Annual Report 2006
Consolidated Financial Highlights
TV Asahi Corporation and Consolidated Subsidiaries
Board of Directors
Investor Information
Years ended March 31, 2006 and 2005
As of June 28, 2006
As of March 31, 2006
Millions of yen
Net sales
TV broadcasting
Percentage
change
Thousands of
U.S. dollars
2006/2005
2006
2006
2005
¥249,384
¥242,037
3.0%
$2,122,959
218,813
213,640
2.4%
1,862,714
Network time
93,384
91,299
2.3%
794,960
100,563
98,125
2.5%
856,074
Sales of programs
11,303
11,310
–0.1%
96,220
Other
13,563
12,905
5.1%
115,459
Spot
Music publication
10,759
9,071
18.6%
91,589
Other businesses
19,812
19,326
2.5%
168,656
Operating income
17,076
13,606
25.5%
145,365
Net income
9,467
7,383
28.2%
80,591
Capital expenditures
5,042
6,176
–18.4%
42,922
Depreciation and amortization
8,560
8,389
2.0%
72,870
Total assets
316,080
297,544
6.2%
2,690,730
Total stockholders’ equity
242,849
226,729
7.1%
2,067,328
Percentage
change
Yen
U.S. dollars
Per share of common stock:
Net income—basic
¥
9,226
¥
241,216
7,199
28.2%
225,237
7.1%
Percent
Equity ratio
2,053
76.2%
—%
4.0%
3.3%
—%
Notes: 1. For convenience only, U.S. dollar amounts have been translated from Japanese yen at the rate of ¥117.47 to US$1, the rate of exchange prevailing on the Tokyo
Foreign Exchange Market on March 31, 2006.
Notes: 2. For the calculation of per share of common stock, see Note 8 of Notes to Consolidated Financial Statements.
Notes: 3. Return on equity (ROE) = 100 x (Net income ÷ Average total stockholders’ equity at the beginning and the end of the fiscal year).
01
To Our Stakeholders
02
TV Asahi at a Glance
04
ACT 1 : Progress Report on Phase Two of the Companywide Reform Campaign
09
ACT 2 : Overview of Japan’s TV Industry
12
ACT 3 : Endeavors in the Digital Era
15
Protecting the Environment, Contributing to Society
16
Corporate Governance
17
Financial Section
39
TV Asahi Network
40
Principal Subsidiaries and Affiliates
41
Board of Directors
41
Corporate Data
Authorized Number of Shares
3,000,000
Corporate Name
TV Asahi Corporation
President
Masao Kimiwada *
Issued Number of Shares
1,006,000
Abbreviation
TV Asahi
Senior Executive Director
Hiroshi Hayakawa *
Number of Stockholders
39,755
Executive Directors
Kenji Kazama
Ikuo Kamiyama
Hidekazu Kitamura
Hiroaki Takada
Keiji Takano
Toshio Fukuda
Number of Shares Held by Foreign
Investors
113,505 (11.28%)
Head Office
9-1 Roppongi 6-chome, Minato-ku,
Tokyo 106-8001, Japan
Tel. +81-3-6406-1111
http://www.company.tv-asahi.co.jp/e/
Listing
Tokyo Stock Exchange
Stockholder Information
Members of the Board
Toru Takeda
Tomoo Tama
Mutsuko Horikoshi
Takahiro Otsuka
Seishi Fukuda
Kojiro Watanabe
Kotaro Akiyama
Tsuyoshi Okada
Yoshitoshi Kitajima
Mitsuru Gondo
Yoshio Nishimura
Tetsuzo Hori
Standing Corporate Auditors
Sachio Arikura
Yasuharu Murase
Contents
Stock Information
Chairman
Michisada Hirose *
79
Change
76.8%
Return on equity
$
Board of Directors
Corporate Auditors
Koichi Kobayashi
Sawako Noma
Takahisa Hamamoto
* Representative Directors
Date of Establishment
November 1, 1957
Date of Service Start
February 1, 1959
Fiscal Year-End
March 31
Paid-in Capital
¥36,642,800,000
General Meeting of Stockholders
June
Number of Employees
1,234
Transfer Agent
The Sumitomo Trust & Banking Co.,
Ltd.
Underwriter
Daiwa Securities SMBC Co. Ltd.
Sub-Underwriter
Nomura Securities Co., Ltd.
Nikko Citigroup Limited
41
Major Stockholders
Name
Shares
Percent of
voting rights
Asahi Shimbun Publishing Company
340,495
33.85
Toei Co., Ltd.
161,842
16.09
Dai Nippon Printing Co., Ltd.
40,300
4.01
Kyusyu Asahi Broadcasting Co., Ltd.
32,147
3.20
The Master Trust Bank of Japan, Ltd. (Trust Account)
22,799
2.27
Satellite Channels Incorporated
20,854
2.07
State Street Bank & Trust Company 505025
16,422
1.63
The Trustee Services Bank, Ltd. (Trust Account)
16,171
1.61
Forward-Looking Statements
Kodansha Ltd.
13,640
1.36
This report contains forward-looking statements that are
based on management’s assumptions and beliefs in light
of the information currently available to it. These
statements are subject to risks and uncertainties that
could cause actual results to differ materially from those
discussed in this report. Such risks include but are not
limited to market trends and economic conditions.
Dentsu Inc.
12,710
1.26
To Our Stakeholders
Michisada Hirose
Masao Kimiwada
Chairman
President
First of all, we would like to take this opportunity to offer our sincerest gratitude to you, our stakeholders, for your
support of TV Asahi.
We are pleased to report that in fiscal 2006, ended March 31, 2006, TV Asahi continued to perform well, posting
higher sales and income. Improvement in corporate earnings and an optimistic shift in the business environment
brought on positive economic conditions, which led to favorable demand for TV advertising.
At TV Asahi, fiscal 2006 was the first year of Phase Two of the Companywide Reform Campaign. We embarked on
this two-year campaign as a stronger broadcaster, due to successes achieved in Phase One: a huge improvement in
viewer ratings, a rapid increase in advertising revenues and growing nonadvertising revenues from such operations as
TV shopping, a relatively new area for us.
Our Phase Two goal is to achieve staying power, i.e., to consistently capture high ratings, and then utilize the
high-ratings status to generate stable profits. We have set concrete targets for ratings and for non-consolidated
revenues, and we are making steady progress toward them.
In fiscal 2006, TV Asahi’s ratings continued to improve. Our rating in prime time (7 p.m. to 11 p.m.) recorded an
average of 13.2%, placing us in the No. 2 spot for the first time in our corporate history. We secured a rating of 12.6%
in golden time (7 p.m. to 10 p.m.), showing a steady ascent on the ratings chart. Our all-day (6 a.m. to midnight) rating
held firm at 7.8%, which in fiscal 2005 represented a corporate all-time high. The prime time 2 (11 p.m. to 1 a.m.) rating
increased to 8.5%, putting TV Asahi in the No. 1 position.
TV Asahi’s higher viewer ratings have translated into higher advertising revenues. Our nonadvertising revenues
remain strong as well, reflecting our solid efforts in TV shopping and the special events business.
In regard to terrestrial digital broadcasting, our coverage area is steadily expanding. We have also launched OneSeg, a service that delivers terrestrial digital broadcasting content to mobile devices including cellular phones.
Fiscal 2007 will be the last year of Phase Two of the Companywide Reform Campaign and we believe our
performance will secure our rising stature in the industry. For fiscal 2007, we aim for consolidated net sales of ¥254
billion, operating income of ¥17.4 billion, and net income of ¥10 billion. These results and our ongoing reform will
provide a great foundation for the celebration of TV Asahi’s 50th anniversary in 2009.
On behalf of the Board of Directors and all the employees at TV Asahi, we thank you for your continued
understanding and support as we strive to achieve our goals.
June 2006
Michisada Hirose
Masao Kimiwada
Chairman
President
1
TV
Broadcasting
Business
Sales
(Millions of Yen)
250,000
200,000
150,000
100,000
50,000
0
02 03 04 05 06
Special Programming
TV broadcasting, the mainstay segment of the TV
Asahi Group, comprises operations related to the
production and transmission of TV programs aired on
the TV Asahi network. These activities are undertaken
% of 2006 Net Sales primarily by TV Asahi and subsidiary TV Asahi
87.8%
Productions Co., Ltd., and account for about 90% of
consolidated net sales.
TV Asahi has earned high praise from viewers for news and information programs, such as Hodo Station — the network’s most recognized daily
news show — and Takeshi’s TV Tackle, in which Takeshi Kitano, a worldrenowned director, leads weekly discussions on newsworthy topics.
In the entertainment genre, popular late-night entertainment shows
have been promoted to prime time, where the shows continue to gain
ratings.
In the drama genre, TV Asahi has gained a reputation for producing
high-quality special drama programs. Regular drama series have also
secured strong ratings.
Sports programming is another important genre. TV Asahi has exclusive broadcasting rights for major events, such as the 2006 FIFA World
Cup TM Asian Qualifiers, the 2005 FINA World Championships held in
Montreal, and the Grand Prix of Figure Skating Final 2005 in Tokyo.
In the animation genre, TV Asahi has continued to focus on
programs, such as Doraemon and Crayon Shin-chan, which appeal to
overseas audiences.
Regular Programming
2
Grand Prix of Figure Skating Final
2005/2006
Hodo Station
Takeshi’s TV Tackle
Montreal 2005 FINA World
Championships
Animal Trail
Golden Legend
Couples
London Hearts
Music
Publication
Business
Sales
(Millions of Yen)
12,500
TV Asahi Music Co., Ltd., the core subsidiary of the
Company’s music production business, administers
copyrights for music compositions, manages artists
and markets merchandise of popular artists, and scouts
% of 2006 Net Sales for promising new talent through tie-ups with television
4.3%
programs.
TV Asahi Music is also the exclusive agent for a
number of artists particularly well liked by young adults. HY, KETSUMEISHI,
Shonan no Kaze and Sasuke are artists who continue to grow in popularity.
10,000
7,500
5,000
2,500
KETSUMEISHI
HY
0
02 03 04 05 06
Other
Businesses
Sales
Shonan no Kaze
Complementing its TV broadcasting business, TV Asahi is
involved in such activities as special events production,
TV shopping, video and DVD sales, motion picture investment, as well as content distribution on the Internet and
% of 2006 Net Sales to mobile phones.
In the special events business, TV Asahi sponsors
7.9%
Summer Sonic and Fuji Rock Festival, concerts that
have become summer traditions.
In the TV shopping business, many of our products have become hit
products.
In video and DVD sales, we distribute a steady
stream of new content, particularly series of popular
TV dramas and entertainment shows.
In motion picture investment, the release of
YAMATO, a movie set during World War II, drew in a
large audience.
In the Internet and mobile content distribution
business, “Tele Asa com·plete!,” a subscriptionbased information site for mobile phone users,
remains popular.
Doraemon Nobita's
Dinosaur 2006
(Millions of Yen)
©Fujiko-Pro, Shogakukan, TVAsahi, Shin-ei, ADK 2006
20,000
16,000
12,000
8,000
4,000
0
02 03 04 05 06
YAMATO
©2005 YAMATO Production Committee
Summer Sonic
My Little Brother
3
Act 1: Progress Report on Phase Two of the Companywide Reform Campaign
TOWARD
SUSTAINABLE
GROWTH
tv asahi
4
TV Asahi is currently engaged in Phase Two of the Companywide Reform Campaign. Phase One of this campaign,
which ran from June 2002 through March 2005, delivered a dramatic improvement in viewer ratings and advertising
revenues. Nonadvertising revenues also expanded, buoyed by TV shopping in particular, and contributed
handsomely to earnings and profits. In Phase Two, TV Asahi will build on these achievements to ensure consistently
high viewer ratings and a solid profit structure.
Achieving Breakthrough Results
Review of Phase One of the Companywide Reform Campaign
The main goal of Phase One, which ended in March 2005, was to achieve the top
prime time rating in Japan. Our efforts resulted in an average prime time rating of
12.3% in fiscal 2005 — the highest level in seven years — and an average all-day
rating of 7.8% that placed us third in this time period for the first time in 34 years.
In fiscal 2005, non-consolidated net sales amounted to ¥218.2 billion, a
record high, while non-consolidated net income reached ¥6.4 billion, more than
three times the level recorded in fiscal 2003. These results reflect our transformation into a company with a high-profit structure.
In our effort to boost ratings, we prioritized a rejuvenation of the executive team in the programming production section, the
most important area of broadcasting operations. This has created clearer lines of responsibility and smoother communication
among the production staff. We also channeled more personnel into the production sections to reinforce creative capabilities.
Moreover, we established the practice of promoting popular late-night shows to prime time. This practice was useful not only
in securing a supply of popular entertainment shows but also in enhancing the quality of such shows. The biggest benefit, however, was the development of stronger bonds of trust among production staff and entertainers/actors.
We also enthusiastically applied new approaches to advertise programs and were rewarded as one program after another
captured mainstream interest.
Through these efforts, TV Asahi has acquired an excellent reputation not only among viewers but also among program sponsors and advertising agencies.
What is Phase Two of the Companywide Reform Campaign?
Phase One made higher viewer ratings the top management priority. It has also propelled us to become a leader in the media
industry.
In Phase Two, the two-year follow-up launched in April 2006, we will establish our staying power. Our goal is to achieve
consistently high ratings and generate stable income. Towards this end, we have set concrete targets for ratings and non-consolidated revenues.
For ratings, our goal is to maintain levels of 13% or more in golden time and prime time, and 8% or more in the all-day time
slot and prime time 2. The key word is “maintain.” It is much more of a challenge to hold ratings at high levels than it is to reach a
high level for a short period of time.
For non-consolidated net sales, we seek to achieve advertising revenues of ¥200 billion and maintain nonadvertising
revenues at a minimum of ¥28 billion.
Advertising revenues should grow, as more and more program sponsors and advertising agencies regard TV Asahi as a
reliable network against the backdrop of consistently high ratings.
We will also capitalize on growth opportunities in our nonadvertising businesses, such as the increasingly popular TV
shopping business as well as Internet-based services, special events management and video and DVD sales.
Securing second spot in prime time
TV Asahi realized brisk improvement in average ratings in fiscal
2006. The most notable achievement was the jump in average
prime time rating, from 12.3% in fiscal 2005 to 13.2% in fiscal 2006,
which put us in the No. 2 spot for the first time in our history. Another
commendable achievement was the prime time 2 rating, which
shifted from 7.9% to 8.5%, and made TV Asahi No. 1 in this time
slot for the first time ever.
With these achievements, we have cleared two of the four ratings targets we are aiming for in Phase Two.
Our prime time strategy was to focus on strengthening our
drama and sports content while continuing our commitment to popular entertainment programs. This focus has proven successful,
exemplified by the fact that four of our special dramas captured ratings above 20%, while several of our regular drama series drew
average ratings above 15%. These results demonstrate our commitment to the drama genre.
TV Asahi’s Viewer Ratings by Rating Time Periods
(%)
14
12
10
8
6
1st Half 2nd Half
2004
1st Half 2nd Half
2005
Source: Video Research Ltd.
All-Day (6 a.m. — midnight)
Golden Time (7 p.m. — 10 p.m.)
Prime Time (7 p.m. — 11 p.m.)
Prime Time 2 (11 p.m. — 1 a.m.)
1st Half 2nd Half
2006
5
Meanwhile, in sports, the final match of the 2006 FIFA World CupTM Asian Qualifiers, North Korea vs. Japan, was an exclusive to TV Asahi obtained from the Asian Football Confederation. This broadcast generated a rating of 43.4% and drew the largest
audience for any program aired by any broadcaster in Japan in fiscal 2006. We also captured an average rating of 19.9% for the
broadcast of three men’s matches of the East Asian Football Championship 2005. In addition, our broadcast of the 2005 FINA
World Championships, a world swimming event held in Montreal, was also received well.
New to our sports programming in fiscal 2006 was the Grand Prix of Figure Skating Final, for which we had exclusive broadcasting rights in Japan. The three consecutive nights of world-caliber performances drew an average rating of 23.2%.
Overall, consistently high ratings on sports events have reinforced TV Asahi’s image as a broadcaster with a strong
sports lineup.
In news and information, Hodo Station, a news program that airs every weekday evening, has become a viewer favorite for
its reliability and casual style. The enthusiasm for this program resulted in a high average rating of 14.5%.
Entertainment shows round out our prime time programming lineup. The enduring appeal of our shows is another factor that
continues to support our high average prime time rating.
In prime time 2, TV Asahi continues to battle for top ratings. The audience for this time slot is predominantly young adults,
and our entertainment shows aimed at this demographic are extremely popular.
In the all-day time slot, our average rating reached 7.8%, tying a previous record high.
In golden time, our average rating jumped from 11.9% to 12.6%, and marked the highest level since 1985.
With our strong lineup of dramas, sports events, entertainment shows and news and information programs, we have a firm
foothold in the competition for ratings and are moving ever closer to the targets stated for Phase Two.
Viewer Ratings for Japan’s Top Four Commercial Broadcasters
(%)
11
(%)
16
(%)
16
(%)
11
10
15
15
10
9
14
14
9
8
13
13
8
7
12
12
7
6
11
11
6
5
10
10
2004
2005
2006
All-day (6:00 a.m. – midnight)
2004
2005
2006
Golden Time (7:00 p.m. – 10:00 p.m.)
2004
2005
2006
5
Prime Time (7:00 p.m. – 11:00 p.m.)
2004
2005
2006
Prime Time 2 (11:00 p.m. – 1:00 a.m.)
Source: Video Research Ltd.
TV Asahi
Company A
Company B
Company C
Favorable Advertising and Nonadvertising Revenues (Non-Consolidated)
6
Time sales expand 2.6%
As a rule, network time is sold in six-month blocks under program sponsorship contracts. Since higher time sales are closely linked to a broadcaster’s ability to sustain
consistently high ratings on regular programming, TV Asahi directs considerable
energy toward maintaining stable high ratings for each program in prime time.
Major one-time programs, such as sports events and special dramas, influence
time sales as well. We therefore strive to secure rights to major sports events and to
develop special programs that will lead to higher time sales.
In fiscal 2006, time sales reached ¥94.2 billion, up ¥2.4 billion on a year-on-year
basis. The increase reflects the improved reputation of TV Asahi among program
sponsors and advertising agencies for capturing high ratings for regular programming
in prime time and for sports events and drama specials.
High ratings underpin larger share of spot sales
TV Asahi’s Time Sales Revenues
(Non-Consolidated)
(Billions of yen)
100
10
80
8
60
6
40
4
20
2
(%)
0
0
2004
2005
2006
-2
Time sales
Year-on-year growth
Our spot ads target the Kanto region, the area surrounding Tokyo. In fiscal 2006, spot
sales shot up by ¥2.5 billion, to ¥100.8 billion, and contributed considerably to net sales. We experienced good demand from the
finance/insurance and services/entertainment industries, followed by the publishing, wholesaling and housing/building materials
industries.
TV Asahi’s high ratings have fueled
TV Asahi’s Spot Sales Revenues
TV Asahi’s Share of Spot Sales
growth in spot sales at a rate that outpaces
(Non-Consolidated)
the industry average. In fiscal 2003, when
(%)
(%)
25
21.0
(Billions of yen)
(%)
120
18
we launched Phase One of the
20
20.5
Companywide Reform Campaign, our
100
15
share of the Kanto spot ad market was
15
20.0
80
12
18.4%. By fiscal 2005, we broke into the 20
10
19.5
60
9
percentile mark, at 20.1%, and in fiscal
5
19.0
40
6
2006, our share expanded to 20.8%.
20
3
0
18.5
We have also been working with our
sponsors and advertising agencies to
0
0
-5
18.0
2004
2005
2006
2004
2005
2006
develop new commercial formats. In fiscal
Sources: Data from respective companies
2005, this effort led to the “dramercial,” a
Left scale
Spot sales
Total spot sales of the five commercial
Year-on-year growth
string of four commercials evolving into one
broadcasters in Tokyo (year-on-year growth)
TV Asahi’s spot sales (year-on-year growth)
story. Following on this success, in fiscal
Right scale
TV Asahi’s share of spot sales
2006 we created the “promercial,” which
combines music promotional videos and
commercials. This strategy was well
received by our sponsors.
We also worked together with a major cosmetics company aimed at strengthening their brand power, and aired 54 versions
of ads for a single brand over a six-hour period, from 6 p.m. to midnight. We are now applying to have this feat entered into the
Guinness World Book of Records.
Ongoing cost-control efforts
TV Asahi’s efforts to maintain profitability consist of expanding advertising revenues through higher ratings while curbing costs
through efficient use of funds and streamlined expenses. The biggest component of operating costs is program production
expenses. Compared with the top broadcasters in Japan, we have been able to control production costs as we do not recklessly
increase our budget in pursuit of higher ratings.
TV Asahi also makes efficient use of its production budget. While we allocate funds to the production of special programs
and sports events that have the potential for high ratings, we also eliminate programs no longer in tune with viewers’ needs and
programs with low ratings.
Popularity of TV shopping buoys nonadvertising revenues
Advertising revenues are prone to considerable fluctuation, depending on the economy. To
create a financial structure more resilient to changes in the domestic economy, TV Asahi has
made achieving a fixed level of revenues from activities other than advertising a target of the
Companywide Reform Campaign. We are actively engaged in businesses that utilize the
infrastructure and content we have as a TV broadcaster.
A key source of nonadvertising revenue for TV Asahi is TV shopping, a business that
was started in April 2003. We are deeply involved in the production of our TV shopping programs, from the selection of quality items to the development of efficient marketing techniques. The TV shopping segment of Imatoku!, a lifestyle information program, has come out
with numerous hit products.
7
Imatoku!
Major Nonadvertising Revenues (Non-Consolidated)
(Billions of yen)
6.0
4.7
5.0
4.3
4.0
3.3
3.6
3.0
2.4
2.0
2.2
1.2
1.0
2.1
1.8
1.7
1.5
1.8
2.1
1.5
0.8
0.3
0
2004 2005 2006
Special Events
2004 2005 2006
Motion Pictures
2004 2005 2006
Video and DVD
2004 2005 2006
TV Shopping
2004 2005 2006
Internet-based Operations
0.5
0.3
2004 2005 2006
Merchandise Sales
Our special events business covers a variety of events, the number of which has
increased over the years. Of note, Fuji Rock Festival and Summer Sonic, concerts that have
become annual summer traditions, were supported by huge crowds of music enthusiasts
again in fiscal 2006. Other major events that successfully attracted large audiences include
Dinosaur Expo 2005, and tours in Japan by the
French Equestrian Theater Zingaro and the American
Ballet Theater.
The motion picture investment business is genFuji Rock Festival
erating steady returns, as well. Feature film versions of
animated TV programs, such as Crayon Shin-chan
and Doraemon, drew many movie fans to theaters. In addition, we invested in various motion
pictures, including the megahit YAMATO. This movie, set during World War II, generated
nearly ¥5 billion in box office receipts.
Crayon Shinchan Densetsu wo Yobu
Rounding out our nonadvertising operations is the distribution of popular TV programBuriburi 3-pun Pokkiri Daishingeki
©Yoshito Usui/Futabasha Publishers, Ltd., Shin-ei
ming content in secondary forms, such as DVD and video. In fiscal 2006, we recorded brisk
Animation Company, Ltd., TV Asahi
sales of My Little Brother, a drama special in fiscal 2005 that ran over five consecutive nights
and captured high ratings. Trick Special, a special drama based on the hit series Trick, also contributed to sales.
Reaching Phase Two targets
With continued recovery in corporate earnings and consumer spending, we look forward to a steady economic environment.
Fiscal 2007 is the year that wraps up Phase Two. We will direct our energy toward building on the results of Phase One and
establish a corporate structure that guarantees success in the digital era.
To secure high ratings, we will continue to focus on strengthening our content lineup. Specifically, we will boost our content
creation capabilities, reinforce our morning information programs and secure broadcast rights to major sports events.
In the drama genre, we will create a new drama slot which will be jointly produced with Asahi Broadcasting Corporation, our
affiliate in Osaka. This will not only increase the number of our regular drama slots, but also further build up our production capabilities.
For morning information programs, we will start our broadcast at an earlier hour, which will create a five-and-a-half hour block
in which to offer information pertinent to the day.
TV Asahi also has broadcasting rights to an exciting selection of major sports events. In June 2006, we will deliver 2006 FIFA
World CupTM match, Japan vs. Croatia. In addition to our usual golf coverage of the U.S. Open and the British Open championships,
we will broadcast the FINA Synchronized Swimming World Cup, taking place in Yokohama, Japan, in September 2006.
With such appealing content, we are confident of maintaining high ratings, which will certainly underpin expansion of our
advertising revenue. Moreover, we will pursue growth in our nonadvertising revenues, as well as continue our cost-control measures and aim for further growth.
8
Consistently solid results from music publication business
TV Asahi Music Co., Ltd., a member of the TV Asahi Group, scouts for promising new talent and manages artists.
KETSUMEISHI, one of the company’s exclusive artists, delivered a hit with the single Sakura and achieved megahit
status with the album Ketsunopolice 4 with sales exceeding two million copies in fiscal 2006. The band had a successful concert tour with tickets selling out at every venue all over Japan. Artist merchandise sold at performances brought
in steady revenue as well, contributing nicely to sales.
Shonan no Kaze, another exclusive artist under management, is also gaining in popularity. Their single release
Junrenka recorded high sales,
increasing expectation of a hit
album release.
TV Asahi Music will continue
to scout for and develop promising
new talent and will strive to create a
business structure that consistently
delivers hit artists and hit songs.
Ketsunopolice 4
(KETSUMEISHI)
Sakura
(KETSUMEISHI)
Junrenka
(Shonan no Kaze)
Act 2: Overview of Japan’s TV Industry
THE
DIGITAL
CHALLENGE
Japan’s TV industry has made considerable progress since the first broadcast went on air, and today, as a
nationwide media outlet, TV has an enormous impact on society. The industry has evolved through technological
breakthroughs, such as color broadcast, communication satellite broadcast and broadcast satellite digital
broadcast. The next challenge is to smoothly complete the transition to terrestrial digital broadcasting.
9
tv asahi
Japan’s TV Industry
The regulated TV industry
Japan Broadcasting Corporation — the publicly funded broadcaster more familiarly
known as NHK — and five key commercial broadcasters in Tokyo are the leaders in
the national TV industry. The industry is regulated by the Radio Law and the Broadcast
Law. Radio waves are deemed to be a public good, and thus, a company must attain
a license from the government in order to engage in broadcasting operations.
Broadcasters have a duty to serve the public. They must abide by various rules
and regulations in their broadcasting business, such as providing emergency reporting
in times of natural disasters, upholding public order and standards of decency in broadcast content and taking a politically impartial stand.
Commercial broadcasters transmit programs to viewers free of charge, and each broadcaster relies primarily on its
advertising revenues for funding. A voluntary limit is set on the amount of advertising a network can run by The National Association
of Commercial Broadcasters in Japan, to which all commercial broadcasters belong.
Relationship between key stations and affiliate stations
There are 127 commercial broadcasters in Japan. Commercial broadcasting licenses are issued for each district and are valid for
a specific zone therein. In addition, to enable as many people as possible to engage in free speech through broadcasting, the
Radio Law limits ownership of local stations by the five key commercial broadcasters in Tokyo.
The five key commercial broadcasters in Tokyo have built national affiliate networks with local stations to ensure comprehensive news coverage. Another important feature of having a national network is the nationwide reach of commercials, which
makes time sales possible.
Thus, affiliate stations are not subsidiaries or affiliates in the corporate sense, but they are valuable partners in the execution
of broadcasting operations.
Toward national terrestrial digital broadcasting
In line with government policy, terrestrial digital broadcasting started in December 2003 in three regions: Kanto, centering on Tokyo;
Chukyo, surrounding Nagoya; and Kinki, covering Kyoto, Osaka, Kobe and Nara. The current schedule is for terrestrial digital
broadcasting to gradually roll out on a national level starting in 2006, and for analog broadcasting to terminate in July 2011.
The digitization of terrestrial broadcasting is part of the national government’s strategy to promote information technology,
and its implementation will serve not only to make more effective use of airwaves but also to raise the level of broadcasting
quality. Terrestrial digital broadcasting affords the advantages of high-definition picture and high-fidelity sound quality, but the
technology also offers electronic program guides, interactive services, data broadcasting and other features that benefit the elderly
and the disabled.
10
TV Asahi History
1957
1959
1960
1967
1973
July
Granted provisional license
January
Officially licensed as JOEX-TV
April
Started color broadcasting
November
Founded as Nippon Educational
Television Co., Ltd.
February
Began full-scale broadcasting
operations
December
Unified corporate name and
abbreviation to NET TV
November
Switched from specialized
broadcaster of educational
programs to general content
broadcaster
Act 2: Overview of Japan’s TV Industry
In April 2006, One-Seg, a service that delivers terrestrial digital broadcast to mobile devices, started up, making digital
broadcasting more accessible to the public.
With terrestrial digital broadcasting starting on a national level in 2006, TV Asahi is working with affiliate stations across the
country to guarantee a smooth start of services.
TV Asahi is also making steady progress in preparations for the full transfer to digital broadcasting in 2011. As of April 30,
2006, the high-definition rate of our programs was 66.2%. TV Asahi will continue to provide broadcasting services, such as
program-related data broadcasting and Dolby Digital 5.1ch surround for regular programs, that incorporate the benefits of digital
technology.
Terrestrial Digital Broadcasting Schedule
2003
2006
2011
Terrestrial broadcasts
Current analog broadcast
Broadcasting begins in Kanto,
Chukyo and Kinki regions
Digital broadcast
Broadcasting begins
in other regions
Switch to digital
broadcasting complete
(Analog broadcasting
terminates July 2011)
The Domestic Ad Market
Advertising spending in Japan
According to research by Dentsu Inc., total spending on advertising in calendar 2005 grew 1.8% over the previous year, to ¥5,962.5
billion, reflecting economic recovery and marking the second consecutive year of improvement. TV advertising accounted for
¥2,041.1 billion of total spending on advertising, down 0.1% but essentially on par with the level recorded in 2004, despite the
absence of a major televised event comparable to the 2004 Summer Olympics in Athens.
Spending on advertising in the domestic market should rise in 2006, sustained by favorable business results among corporations, increased capital spending, and a number of worldwide sports events, such as the 2006 FIFA World CupTM.
11
1977
1996
2000
2003
2005
April
Changed corporate name to
Asahi National Broadcasting
Co., Ltd., and abbreviation to TV
Asahi
October
Completed TV Asahi Network
October
Listed on First Section of Tokyo
Stock Exchange
July
Relocated corporate headquarters to Roppongi Hills
December
Began BS digital broadcasting
(BS Asahi)
October
Adopted new corporate logo
and changed name to TV Asahi
Corporation
February
Captured rating of 47.2%, the
highest in the Company’s
history with the final match of
the 2006 FIFA World CupTM
Asian Qualifiers, Japan vs. North
Korea
December
Began terrestrial digital broadcasting
Act 3: Endeavors in the Digital Era
WELCOMING
THE DIGITAL
REVOLUTION
tv asahi
12
tv asahi
Seeking to raise content value and profits, TV Asahi has embarked on several broadband businesses and has launched
new services, including content distribution. Here is a look at our broadband businesses, all of which complement
existing TV broadcasting operations and underpin efforts to capitalize on new possibilities.
TV Asahi’s Broadband Businesses
Broadcasting and broadband
Strong content on TV not only leads to higher ratings and an increase in advertising revenues, it also leads to a competitive advantage in the distribution of content across different media forms.
TV Asahi’s content distribution business has grown to include sales of popular dramas and other shows on video and DVD,
movie productions of popular TV series, and delivery of program-related content to mobile phones.
Greater penetration of broadband technology has cast a spotlight on the provision of content distribution on broadband.
Broadcasters are seeking ways in which to maximize the use of this new infrastructure. TV Asahi, too, is exploring ways in which
broadband businesses can complement our broadcasting business.
The following are leading examples of our endeavors in diversifying our content distribution business on broadband.
Attracting Internet users to subscription-based content
TV Asahi is strengthening broadband-oriented activities, such as online sales
and content distribution.
Visitors to our home page — http://www.tv-asahi.co.jp/ — can view
content related to our programs and link to “TV Asahi bb,” a video distribution site, which bundles content from TV Asahi in one place. “TV Asahi bb”
is a subscription-based web site with content such as news, animation,
professional wrestling and children’s programs.
We have also enriched our shopping site, which allows consumers to
purchase items presented on TV shopping programs as well as merchandise
related to programs, and have introduced an easy-to-use ordering format to
facilitate the buying process. With our excellent list of items and many customers returning to repurchase, our online sales are growing.
We will continue to improve content distribution and enhance our
selection of TV/Internet shopping items in order to expand nonadvertising
revenues.
Mobile phone content on “Tele Asa com·plete!”
In 2002, TV Asahi launched “Tele Asa com·plete!,” a subscription-based
information distribution service for mobile phone users. This service offers
news and information as well as downloadable content related to dramas,
animation and entertainment shows. Users are also able to send in comments
to programs. Our efforts to provide unique content that can only be obtained
on “Tele Asa com·plete!” has made the site one of the most popular mobile
sites run by television broadcasters.
In addition to “Tele Asa com·plete!,” we have also launched a mobile site
of our animation series Crayon Shinchan. This site provides downloadable
content and games related to the animation series and is popular among
children.
13
Act 3: Endeavors in the Digital Era
Using broadband technology in live shows
In the past years, TV Asahi has aired Test the Nation, an
annual special program that gauges the IQ of viewers.
This program is broadcast live, and we provide an interactive service that enables viewers to participate by computer, mobile phone and terrestrial digital data
broadcasting.
Since Test the Nation debuted in 2003, the program
has been popular. In fiscal 2006, the program included an
IQ test aimed at matching individuals with their suitable
occupations. This test drew hits from more than 1.1 milTest the Nation digital data broadcasting
lion people. This use of broadband in a live show
attracted considerable interest from members of the TV
industry as an example of how broadband can complement terrestrial
digital broadcasting.
TV Asahi will continue to explore ways which data broadcasting is able
to enhance the television viewing experience.
Tie-up with KDDI on One-Seg
14
In April 2006, TV Asahi launched One-Seg, a terrestrial digital broadcasting
service for portable devices, such as mobile phones. One-Seg is a free service using airwaves. It enables users to watch programs and receive data
broadcasting. Data broadcasting, which delivers news and program information, allows users to link to fee-based mobile sites as well.
To research the effectiveness of a new business model that integrates
TV broadcasting and next-generation mobile communications on One-Seg,
TV Asahi has tied up with KDDI, a major telecommunications company, and
has launched an experimental service. Together, TV Asahi and KDDI will
research and develop new advertising for One-Seg, create an online shopping model, and produce online content related to TV programs.
Currently, the programs available for viewing on One-Seg are the same
as those delivered to the home. We consider One-Seg to be a promising area
for us. We will continue development, with a firm eye on the market penetration of One-Seg-compatible devices and on the potential for independent
programming in 2008.
While TV Asahi fulfills its public duty and mission through its TV broadcasting business, the Company is also actively
involved in protecting the environment and in contributing to the wellbeing of society.
Ongoing Environmental Management
To date, TV Asahi has produced programs, such as Spaceship Earth and Naturing Special, emphasizing the importance of
protecting the earth’s natural environment. Moreover, we also practice environment-friendly measures throughout our business
activities.
The Archive Operation & Reengineering Department has implemented various procedures that lessen our burden on the
environment. In July 2002, these efforts were recognized by the International Standards Organization with ISO 14001 certification,
the international standard for environmental management systems.
Since acquiring ISO 14001, TV Asahi has continued to enhance environmental management practices. We review routine
practices in detail in order to identify ways to reduce the impact our daily operations have on the environment. For example, we
collect and recycle videotapes and employ advanced energy- and resource-conservation methods at our new headquarters.
Social Welfare and Support for Victims of Natural Disasters
TV Asahi Social Welfare Organization, established in 1977, promotes social welfare programs for children, the elderly and the
disabled.
The organization is engaged in a myriad of social welfare activities, including therapy support for seniors, music-based
rehabilitation programs for mentally challenged individuals, ski competitions and marathon races for physically challenged persons,
and a national speech contest in sign language for high school students, and also makes grants to facilities that assist the physically and mentally challenged.
The organization also holds charity concerts at TV Asahi Headquarters and sponsors sumo wrestling charity events, in
cooperation with the Nihon Sumo Kyokai, with the intention of raising awareness of social issues such as traffic safety. The
proceeds from such events are donated to organizations involved in relevant social welfare programs.
In 1999, TV Asahi set up the Doraemon Charity Fund. Doraemon is one of the most popular animation characters in Japan
and the animation series has been broadcast on the TV Asahi network since 1979. The fund provides assistance to victims of
natural disasters both in Japan and abroad. To date, TV Asahi has undertaken nine fundraising campaigns to help the victims of
large natural disasters such as the earthquake in Turkey (August 1999), the earthquake in Taiwan (September 1999), the volcanic
eruptions and earthquakes that hit the Izu
Islands off the coast of Tokyo (summer 2000),
the Niigata Chuetsu earthquake (October
2004), the earthquakes and tsunamis in the
Indian Ocean (December 2004) and the
Northern Pakistan earthquake (October
2005). The collected funds were delivered to
the affected regions through the TV Asahi
Social Welfare Organization.
(Photograph by Kazuji Shimizu)
Selected for FTSE4Good Index Series
In September 2004, TV Asahi was selected for inclusion in the FTSE4Good Index Series, a measure of corporate social responsibility developed by FTSE, an independent U.K.-based company that provides equity and bond
indices to investors.
The FTSE4Good Index Series is designed to measure the performance of companies that
meet globally recognized corporate responsibility standards and is applied widely throughout the
world. Companies are selected according to the following criteria:
1) their work towards environmental sustainability
2) their development of positive relationships with stakeholders
3) their championing of and support for universal human rights.
TV Asahi’s inclusion in the FTSE4Good Index Series substantiates the solid reputation we have
earned through various socially responsible activities we are engaged in, including our environmentfriendly endeavors, the Doraemon Charity Fund, and diverse financial contributions through the TV
Asahi Social Welfare Organization.
We are grateful that our commitment to the public, as reflected in our social activities, has been
FTSE4Good Index Series
recognized internationally and we will continue to reinforce our efforts.
Certificate of Membership
15
TV Asahi has a management supervision system that hinges on compliance-based internal controls
Basic policy on corporate governance
TV Asahi regards the implementation of corporate governance measures to be one of the most essential tasks of management.
The Company’s management supervision system relies on the practice of ethics and corporate compliance.
Moreover, without forfeiting its fundamental duty to serve the public, TV Asahi aims to pursue profits in an equitable manner.
This philosophy is the basis of TV Asahi’s corporate governance policy and underlies all our operations. Thus, it is both crucial and
strategic for TV Asahi to continue to contribute to society, to provide vital information and entertainment to viewers, and to maintain reliable broadcast facilities.
Corporate governance structure
Of the Company’s 20 Board members, five are from outside the Company. In addition, of our five corporate auditors, two are external auditors.
Business activities are carried out by executive officers who are appointed by the Board and also by full-time internal
members of the Board who assist the executive officers. The meetings of the Board of Directors are attended by the five
corporate auditors.
Full-time internal directors form the Council of Executive Directors, which as a rule holds weekly meetings. Business activities are reported and discussions are held concerning the operation of the business sections for which the respective directors are
responsible. The Council effectively acts as the checking mechanism for the execution of each business activity.
Routine business activities by employees are covered by internal control mechanisms. Powers and responsibilities are set
out by written regulations, and whenever necessary, are checked by a number of internal departments such as the Compliance
Audit Department, the Legal Affairs Department and the Broadcast Standards and Practices Department. Reports on the status
of activities are submitted to the Council of Executive Directors and other pertinent councils.
Executive Officers also present detailed reports on the progress of business activities to the Board of Directors. As a rule, the
Board meets once a month.
It is the Board of Directors’ duty to ensure that management decisions determined at Board meetings and execution of business activities are undertaken in accordance with prevailing laws, the Company’s Articles of Incorporation and other regulations,
and to make certain that business activities are executed in an appropriate and responsible manner.
It is the corporate auditors’ task to examine the execution of business activities by the Board of Directors from the perspective of legality and appropriateness to the Company’s entire scope of operations.
16
Internal controls are the cornerstone of compliance
At TV Asahi, the establishment and implementation of internal controls are of the utmost importance to management.
The Company has developed a “Compliance Manual” and “Compliance Program” in order to reinforce the importance of
abiding by the law. Within this structure, overall responsibility lies with the President, and under his direction TV Asahi provides
training sessions based on compliance measures. The Company has also established systems and structures for instances in
which laws and rules are violated. These involve immediate investigation of the matter, taking necessary remedial measures, and
taking appropriate steps for limiting damage and preventing recurrence.
To enhance the internal control mechanism still further, TV Asahi has introduced training systems to promote corporate compliance and an in-house hotline for anonymously reporting concerns. In addition, the Company has created the “Compliance
Handbook,” which contains a variety of case studies, and has distributed copies to all senior executives and employees in order
to advance the understanding and importance of internal control mechanisms.
Financial Section
Contents
18
Five-Year Summary
19
Management’s Discussion and Analysis
24
Consolidated Balance Sheets
26
Consolidated Statements of Income
27
Consolidated Statements of Stockholders’ Equity
28
Consolidated Statements of Cash Flows
29
Notes to Consolidated Financial Statements
38
Independent Auditors’ Report
17
Five-Year Summary
Years ended March 31, 2006, 2005, 2004, 2003 and 2002
Thousands of
U.S. dollars
Millions of yen
2006
2005
2004
2003
2002
2006
¥249,384
¥242,037
¥218,079
¥209,035
¥219,926
$2,122,959
218,813
213,640
195,081
194,329
207,273
1,862,714
93,384
91,299
88,146
89,040
94,851
794,960
100,563
98,125
84,606
83,330
89,341
856,074
11,303
11,310
11,220
11,062
11,105
96,220
13,563
12,905
11,109
10,897
11,976
115,459
10,759
9,071
7,227
4,061
4,115
91,589
For the year:
Net sales
TV broadcasting business
Network time
Spot
Sales of programs
Other
Music publication business
Other businesses
19,812
19,326
15,771
10,645
8,538
168,656
172,179
165,775
156,125
147,007
149,733
1,465,727
Selling, general and administrative
expenses
60,129
62,656
55,433
54,598
56,715
511,867
Operating income
17,076
13,606
6,521
7,430
13,478
145,365
Income before income taxes and
minority interests
17,229
12,932
3,797
5,069
11,982
146,667
Cost of sales
Net income
9,467
7,383
1,687
1,908
5,939
80,591
5,042
6,176
30,701
23,232
6,827
42,922
8,560
8,389
7,832
6,365
5,727
72,870
¥316,080
¥297,544
¥288,967
¥294,047
¥291,133
$2,690,730
150,177
146,060
139,416
171,558
182,915
1,278,429
Net property, plant and equipment
63,061
65,898
68,808
67,844
52,217
536,826
Total current liabilities
50,655
51,921
48,660
57,990
54,081
431,217
At year-end:
Total assets
Total current assets
Interest-bearing debt
—
—
862
3,212
10,699
—
242,849
226,729
220,508
215,842
216,515
2,067,328
¥009,226
¥007,199
¥001,560
¥001,780
¥005,904
$0,000,079
1,500
1,300
700
700
1,000
13
241,216
225,237
219,193
214,555
215,224
2,053
Number of shares outstanding
(Thousands)
1,006
1,006
1,006
1,006
1,006
—
Number of employees
(Non-consolidated)
1,234
1,250
1,262
1,278
1,289
—
Return on sales
3.8
3.1
0.8
0.9
2.7
—
Return on equity
4.0
3.3
0.8
0.9
2.8
—
Return on assets
3.0
2.5
0.6
0.7
2.0
—
76.8
76.2
76.3
73.4
74.4
—
Per share of common stock (Yen and U.S. dollars):
Net income—basic
Cash dividends
18
Stockholders’ equity
Other data:
Key ratio (%):
Equity ratio
Management’s Discussion and Analysis
Major Accounting Method Transactions and Changes
The consolidated financial statements of the TV Asahi Group (the “Group”) are
prepared in accordance with accounting standards generally accepted in Japan as
fair and appropriate. Some assets and liabilities, as well as some income and
expenses, are based on estimates and management interpretations established at
the time these consolidated financial statements were prepared.
Operating Environment for TV Broadcasting Industry
During the fiscal year under review, the Japanese economy was affected by the
increase in oil prices. However, the economy continued to show strong recovery
due to a rise in capital spending as a result of improvements in corporate earnings,
an increase in consumer spending arising from a reduction in the unemployment
rate, and a positive trend in stock prices.
In the broadcasting industry, demand for TV advertising seemed to falter,
following the boom experienced in calendar 2004, but total advertising spending
was favorable due to the recovering economy.
Operating Results
Net Sales
Net Sales
Against this economic backdrop, the TV Asahi Group secured higher profits not
(Millions of yen)
(%)
280,000
12
210,000
6
140,000
0
70,000
-6
only from its mainstay TV broadcasting business but also from its music publication
business and other businesses. Total net sales, which include intersegment sales,
reached ¥257,702 million, up 3.5%, with intersegment sales accounting for ¥8,318
million, or 20.9% more than in fiscal 2005. Excluding intersegment transactions,
the Group showed net sales of ¥249,384 million, up 3.0% year-on-year.
0
-12
02 03 04 05 06
A breakdown of sales by operating segment is presented below. Figures for
each segment are those before eliminating inter-segment sales (except for those
used in graphs).
Net Sales
Percentage Growth
TV Broadcasting Business
Sales from TV Broadcasting
Business
(Millions of yen)
Network time sales rose 2.4%, to ¥93,933 million. This increase is a reflection of high ratings captured in popular entertainment shows such as
Takeshi’s TV Tackle and Golden Legend in regular programming, as well
240,000
as aggressive marketing of one-time sports events, such as the 2005 FINA
World Championships in Montreal, the 2005 Grand Prix of Figure Skating
180,000
Final in Tokyo and the 2006 Winter Olympics in Turin, and major drama
120,000
presentations, such as Face Love and Death.
60,000
Spot sales surpassed the ¥100 billion mark for the first time in the
history of TV Asahi (the “Company”), gaining 2.5% year-on-year, to reach
0
02 03 04 05 06
¥100,825 million, despite the high growth hurdle from fiscal 2005. By client
sector, demand was noticeably sluggish from the pharmaceutical and
food/beverage industries but quite favorable from the finance/insurance,
service/entertainment and housing/building materials industries as well as
the publishing industry, which includes sales from music publishers.
19
Program sales edged up 0.1%, to ¥11,878 million, while other
revenues climbed 6.9%, to ¥14,271 million, due to higher broadcastingrelated revenues from several subsidiaries, including Take Systems Co.,
Ltd., Trust Network Inc., and TV Asahi Productions Co., Ltd.
As a result, TV broadcasting sales reached ¥220,907 million in fiscal
2006, up 2.6% from the previous year.
Sales from Music Publication
Business
(Millions of yen)
12,000
Music Publication Business
The music publication and copyright management businesses delivered
favorable results, owing to the redevelopment and reapplication of music
titles for which TV Asahi Music Co., Ltd., retains management rights.
KETSUMEISHI, one of the company’s exclusive artists, achieved an
9,000
outstanding hit with the single Sakura and achieved megahit status for the
6,000
album Ketsunopolice 4. The band also had a successful national concert
3,000
tour with tickets for performances at arenas and other large-scale venues
selling out on the first day of sales. In addition, sales of artist merchandise
0
02 03 04 05 06
at these performances soared to an all-time high.
Other exclusive artists also posted solid results.
As a result, segment sales jumped 19.9%, to ¥10,939 million.
Other Businesses
Sales from Other Businesses
In the motion picture business, domestic productions, including animation
Crayon Shin-chan Densetsu wo Yobu Buriburi 3-pun Pokkiri Daishingeki,
(Millions of yen)
20,000
live-action Masked Rider Hibiki/Magic Rangers The Movie, Japanese
samurai drama Semi Shigure and the psycho-thriller Siren drew lots of
movie fans to theaters. In addition, YAMATO, a big-screen production
15,000
released for the 2006 New Year break in Japan, reached megahit status,
10,000
with nearly ¥5 billion in box office receipts. Closing out the fiscal year, in
5,000
March 2006, Doraemon Nobita’s Dinosaur 2006 — the first new
Doraemon production in two years — opened in theaters. The popularity of
0
02 03 04 05 06
this animated character had in no way diminished during his absence from
the big screen in 2005 and the production became a megahit.
In the special events business, TV Asahi undertook numerous events,
including the French Equestrian Theater Zingaro, Dinosaur Expo 2005,
20
rock concert SUMMER SONIC 2005 and the Pushkin Museum Exhibition.
The Company’s TV shopping business continues to post good results,
mainly from TV shopping program Selection X and Ima Toku!, a lifestyle
information program which features a telemarketing segment.
The TV Asahi Group also continued to focus on strengthening its
content distribution business, which includes publishing, DVD and video
repackaging of popular TV programs, and subscription-based information
and download services for mobile phone users.
With especially good results from TV shopping and Internet-based
businesses, sales from other businesses expanded 5.6%, to ¥25,856
million.
Income and Expenses
Cost of sales grew 3.9%, to ¥172,179 million, while selling, general and administraOperating Income
tive expenses declined 4.0%, to ¥60,129 million. Total operating expenses inched
up 1.7%, to ¥232,308 million, largely because of an increase in agency commis-
(Millions of yen)
(%)
20,000
10
15,000
7.5
10,000
5
sions from higher time sales and spot sales, and an increase in music publication
costs, which accompanied the improvement in sales in the music publication
business.
2.5
5,000
Operating income surged 25.5%, to ¥17,076 million.
Non-operating revenue rose 11.5%, to ¥1,127 million, primarily owing to higher
interest and dividend income. Non-operating expenses shrank 13.3%, to ¥888
0
0
million, reflecting a ¥212 million year-on-year reduction in equity of losses of
02 03 04 05 06
Operating Income
Ratio of Operating Income to Net Sales
affiliates due to a decrease in losses of Asahi Satellite Broadcasting Limited (BS
Asahi), an affiliate accounted for under the equity method.
No extraordinary gain was recorded in fiscal 2006, while extraordinary losses
Net Income
decreased 91.1%, to ¥86 million. This decline is attributable to the absence of
(Millions of yen)
(%)
10,000
4.0
7,500
3.0
5,000
2.0
2,500
1.0
losses related to the Roppongi redevelopment project and the subsequent
relocation of subsidiaries’ offices to the Ark Broadcasting Center. Such losses were
recorded in fiscal 2005 but not in fiscal 2006.
As a result, net income climbed 28.2%, to ¥9,467 million. Net income per
0
share also improved 28.2%, rising from ¥7,198.89 in fiscal 2005 to ¥9,225.56 in
fiscal 2006.
0
02 03 04 05 06
Net Income
Return on Sales
Financial Position
Assets
Total Assets
Current assets reached ¥150,177 million, up ¥4,117 million from the previous year.
Cash and cash equivalents fell by ¥3,795 million, but short-term investments grew
(Millions of yen)
by ¥7,261 million, which led to a year-on-year increase of ¥3,466 million in cash
320,000
and cash equivalents and short-term investments at March 31, 2006.
240,000
Fixed assets expanded by ¥14,418 million, to ¥165,902 million.
160,000
In regard to tangible and intangible assets, the Company purchased a new
high-definition satellite news gathering truck, but with depreciation and amortiza-
80,000
tion amounting to ¥8,560 million, there was a total decrease of ¥3,714 million.
0
02 03 04 05 06
Total investments and other assets grew by ¥18,132 million, to ¥96,586
million, as investment in securities increased by ¥21,722 million due to an increase
in market value of shareholdings in other companies.
Return on Equity and
Return on Assets
Consequently, total assets stood at ¥316,080 million, up ¥18,535, at March
31, 2006.
(%)
4.0
Liabilities
3.0
Current liabilities reached ¥50,655 million, down ¥1,266 million, mainly because of a
large balance in accrued consumption taxes at the end of the previous fiscal year.
2.0
Non-current liabilities increased ¥3,427 million, to ¥20,911 million, as a rise in
1.0
the market value of shareholdings increased deferred income taxes.
0
02 03 04 05 06
Return on Equity
Return on Assets
Consequently, total liabilities stood at ¥71,566 million, up ¥2,161 million, at
March 31, 2006.
21
Stockholders’ Equity
Net unrealized gain on other securities increased by ¥8,224 million, to ¥16,186
(Millions of Yen)
(%)
280,000
80
210,000
60
140,000
40
70,000
20
0
million, owing to higher market value on shareholdings.
Total stockholders’ equity thus climbed by ¥16,119 million, to ¥242,849
million.
Liquidity and Capital Resources
0
02 03 04 05 06
Equity Ratio
Cash Flow Analysis
During the period under review, cash and cash equivalents on a consolidated basis
decreased by ¥3,295 million from the previous year, to ¥53,953 million.
Cash Flow from Operating Activities
Operating Cash Flows
(Millions of yen)
28,000
Cash flow from operating activities showed an increase of ¥19,519 million,
which is ¥5,290 million less than in the previous year, despite net income
before income taxes and minority interests rising by ¥4,297 million from the
previous year to ¥17,229 million.
The main reason for the decrease was a reduction of ¥4,701 million in
21,000
cash related to consumption taxes due to TV Asahi receiving refund of
14,000
consumption taxes the previous year and paying such taxes this fiscal
7,000
year. In addition, as a result of an increase in taxable income, income tax
increased by ¥5,231 million compared to the previous year.
0
02 03 04 05 06
Cash Flow from Investing Activities
Cash flow from investing activities showed a year-on-year increase of
Investing Cash Flows
¥1,917 million, to ¥21,354 million, compared to the total of ¥19,438 million
from the previous year, despite a year-on-year decrease of ¥3,818 million
(Millions of yen)
in payments for the purchase of broadcasting equipment. The principal
0
reason for this is an increase of ¥3,271 million in expenses related to
-7,500
investing activities compared to the previous year. In addition, despite the
-15,000
maturity of investments bringing in ¥2,505 million, purchase of securities
increased by ¥5,709 million on a year-on-year basis, to ¥12,996 million.
-22,500
-30,000
22
02 03 04 05 06
Cash Flow from Financing Activities
Cash flow from financing activities decreased by ¥661 million to ¥1,521
million due to the repayment of long-term debt in the previous year.
Use of Funds and Financial Policy
TV Asahi will use its own funds to develop and promote terrestrial digital broadcasting and to finance capital expenditures and other investments pertinent to
strengthening content production capabilities.
Moreover, in April 2004, TV Asahi implemented a cash management system
whereby TV Asahi, the Group leader, oversees the procurement and management
of funds for the entire Group.
Risk Information
Dependence on TV Broadcasting Business
TV Asahi’s revenue is derived largely from its TV broadcasting business, which is
dependent on the advertising spending of companies that are in turn greatly
influenced by the state of the Japanese economy.
Moreover, within the TV broadcasting business, viewer ratings play an essential
role in the determination of price in the sale of advertising time.
Thus, in the event the Japanese economy experiences a downturn and/or the
Company is not able to produce and broadcast programs that are widely popular
among the viewers, the operating results of the Company may be influenced.
Competition, Capital Expenditures and Investments
Terrestrial digital broadcasting commenced on December 1, 2003. With its move
to its new headquarter building in the previous fiscal year, TV Asahi invested in
broadcasting equipment necessary for terrestrial digital broadcasting.
The Company will continue to position digital broadcasting as an important management issue until the full transition to digital broadcasting is completed in 2011.
In addition, terrestrial digital broadcasting may bring about further
competition with other media services other than terrestrial broadcasting, such as
BS digital broadcasting, CS digital broadcasting, cable television and content
broadcasting on broadband.
Thus, the Company will continue to allocate appropriate capital expenditure
and make other investments in order to maintain technical standards, improve its
content production competency, acquire popular content and strengthen its media
strategy. In the event sufficient profits cannot be attained to balance such investments, the operating results of the Company may be influenced.
Regulations (License and Foreign Ownership)
The main business of the Company is its TV broadcasting business, which is
administered under various regulations such as the Radio Law and Broadcasting
Law of Japan.
For the launch of its TV broadcasting business, TV Asahi was granted its
broadcasting license on January 9, 1959, in accordance with the Radio Law, and
started broadcasting service on February 1, 1959. As stipulated in the Law, the
license period is five years, and thus, the Company has continued to apply for
license renewal.
According to the Radio Law, there exists a foreign ownership restriction that
prohibits a foreign national to be an executive director. There is also a restriction
that states that one-fifth of voting rights of a free-to-air radio or television broadcaster cannot be owned by foreign entities or by foreign entities and Japanese
companies that are controlled by a foreign entity. In effect, under certain
conditions, it is possible to reject the transfer of stock registration to a foreign entity
or Japanese companies controlled by a foreign entity. Moreover, when the amount
of voting rights held by a foreign entity (including Japanese companies controlled
by a foreign entity) reaches 15%, the Company is required to disclose the fact, in
accordance with the Broadcast Law.
23
Consolidated Balance Sheets
March 31, 2006 and 2005
Thousands of
U.S. dollars (note 2)
Millions of yen
2006
2005
2006
¥027,972
63,182
37,883
14,294
1,907
5,013
74
¥031,767
63,686
30,622
14,542
1,985
3,565
107
$0,238,120
537,857
322,491
121,682
16,234
42,675
630
150,177
146,060
1,278,429
22,643
21,419
16,694
297
2,008
23,419
23,484
16,694
215
2,086
192,755
182,336
142,113
2,528
17,094
63,061
65,898
536,826
Intangible assets, net:
Software
Other
5,930
326
6,791
342
50,481
2,775
Net intangible assets
6,256
7,133
53,256
74,473
1,110
21,368
365
52,752
3,029
23,147
475
633,975
9,449
181,902
3,107
96,586
78,453
822,219
¥316,080
¥297,544
$2,690,730
Assets
Current assets:
Cash (note 12)
Trade notes and accounts receivable
Short-term investments (notes 3 and 12)
Inventories
Deferred income taxes (note 10)
Other current assets
Less allowance for doubtful receivables
Total current assets
Property and equipment, net of accumulated depreciation;
¥43,900 million ($373,712 thousand) in 2006 and
¥39,142 million in 2005:
Buildings and structures
Machinery and vehicles
Land
Construction in progress
Other
Net property and equipment
24
Investments and other assets:
Investments in securities (notes 3 and 4)
Other investments and other assets
Less allowance for doubtful receivables
Total investments and other assets
Total assets
See accompanying notes to consolidated financial statements.
Thousands of
Millions of yen
2006
2005
2006
¥015,341
12,715
15,317
4,740
2,542
¥013,904
14,008
15,337
4,885
3,787
$0,130,595
108,240
130,391
40,351
21,640
50,655
51,921
431,217
17,235
3,498
178
17,306
—
178
146,718
29,778
1,515
Total non-current liabilities
20,911
17,484
178,011
Total liabilities
71,566
69,405
609,228
Minority interests
1,665
1,410
14,174
36,643
36,643
311,935
55,343
134,650
16,186
27
55,343
126,828
7,961
(46)
471,125
1,146,250
137,788
230
242,849
226,729
2,067,328
¥316,080
¥297,544
$2,690,730
Liabilities and Stockholders’ Equity
Current liabilities:
Trade notes and accounts payable
Other payables
Accrued expenses
Accrued income taxes (note 10)
Other current liabilities
Total current liabilities
Non-current liabilities:
Liabilities for retirement and severance benefits (note 5)
Other non-current liabilities
Stockholders’ equity:
Common stock (note 6):
Authorized 3,000,000 shares; issued and outstanding
1,006,000 shares in 2006 and 2005
Additional paid-in capital (notes 6 and 7)
Retained earnings (note 7)
Net unrealized gain on other securities (note 3)
Foreign currency translation adjustments
Commitments and contingencies (note 9)
Total liabilities and stockholders’ equity
25
Consolidated Statements of Income
Thousands of
Millions of yen
Net sales
Cost of sales (note 5)
Gross profit
Selling, general and administrative expenses (notes 5 and 11)
Operating income
Other income (deductions):
Interest income
Dividend income
Interest expenses
Equity in losses of affiliates
Loss on devaluation of investments in securities
and other investments
Provision for allowance for doubtful receivables
Other, net
Income before income taxes and minority interests
Income taxes (note 10):
Current
Deferred
Income before minority interests
Minority interests
Net income
26
2006
2005
2006
¥249,384
172,179
¥242,037
165,775
$2,122,959
1,465,727
77,205
60,129
76,262
62,656
657,232
511,867
17,076
13,606
145,365
246
395
(1)
(689)
126
291
(3)
(901)
2,094
3,362
(9)
(5,865)
(55)
—
257
(133)
(11)
(43)
(468)
—
2,188
153
(674)
1,302
17,229
12,932
146,667
7,640
(156)
5,886
(440)
65,038
(1,328)
7,484
5,446
63,710
9,745
7,486
82,957
278
103
2,366
¥009,467
¥007,383
$0,080,591
Yen
Net income—basic (note 8)
Cash dividends applicable to the year (note 7)
2006
2005
¥9,225.56
1,500.00
¥7,198.89
1,300.00
2006
$78.54
12.77
Consolidated Statements of Stockholders’ Equity
Thousands of
Millions of yen
Common stock (note 6):
Balance at beginning of year
Balance at end of year
Additional paid-in capital (notes 6 and 7):
Retained earnings (note 7):
Increase resulting from an affiliate newly accounted
for by the equity method
Cash dividends
Bonuses to directors and corporate auditors
Net income
Net unrealized gain on other securities at end of year (note 3)
Foreign currency translation adjustments at end of year
Total stockholders’ equity at end of year
2006
2005
2006
¥036,643
¥036,643
$0,311,935
36,643
36,643
311,935
55,343
55,343
471,125
55,343
55,343
471,125
126,828
120,870
1,079,663
5
(1,509)
(141)
9,467
—
(1,308)
(117)
7,383
42
(12,846)
(1,200)
80,591
134,650
126,828
1,146,250
16,186
7,961
137,788
27
(46)
230
¥242,849
¥226,729
$2,067,328
27
Consolidated Statements of Cash Flows
Thousands of
Millions of yen
2006
Cash flows from operating activities:
Income before income taxes and minority interests
¥17,229
Adjustments to reconcile income before income taxes and minority
interests to net cash provided by operating activities:
8,560
Loss on devaluation of investments in securities and other investments
55
689
Allowance for doubtful receivables
(142)
Decrease in liabilities for retirement and severance benefits
(26)
Interest and dividend income
(641)
Interest expenses
1
(Increase) decrease in trade notes and accounts receivable
501
Decrease in inventories
248
Increase in trade notes and accounts payable
852
Other, net
(619)
Sub total
Interest and dividend received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Increase in short-term investments
Proceeds from sale of property and equipment
Purchase of intangible assets
Purchase of investments in securities and investments in subsidiaries
Other, net
Net cash used in investing activities
28
Cash flows from financing activities:
Decrease in short-term debt
Payments on long-term debt
Dividends paid to stockholders
Dividends paid to minority stockholders of subsidiaries
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (note 12)
2005
2006
¥12,932
$146,667
8,389
133
901
(11)
(1,007)
(417)
3
(6,969)
2,760
3,213
7,034
72,870
468
5,865
(1,209)
(221)
(5,456)
9
4,265
2,111
7,253
(5,270)
26,707
598
(1)
(7,785)
26,961
405
(3)
(2,554)
227,352
5,091
(9)
(66,272)
19,519
24,809
166,162
(5,390)
(4,420)
11
(1,096)
(12,996)
2,537
(2,119)
(8,237)
31
(1,971)
(7,287)
145
(45,884)
(37,627)
94
(9,330)
(110,633)
21,597
(21,354)
(19,438)
(181,783)
—
—
(1,510)
(11)
(800)
(62)
(1,308)
(13)
—
—
(12,854)
(94)
(1,521)
(2,183)
(12,948)
62
(14)
528
(3,294)
57,247
3,174
54,073
(28,041)
487,333
¥53,953
¥57,247
$459,292
Notes to Consolidated Financial Statements
1. Basis of Presentation and Summary of Significant Accounting Policy
(a) Basis of Presentation
TV Asahi Corporation (the Company) and its domestic subsidiaries maintain their books of account in conformity with the financial
accounting standards of Japan, and its foreign subsidiaries in conformity with those of the countries of their domicile.
The accompanying consolidated financial statements have been compiled from the consolidated financial statements filed with the
Ministry of Finance as required by the Securities and Exchange Law of Japan and include certain reclassifications and additional financial
information for the convenience of readers outside Japan.
(b) Principles of Consolidation
The Japanese consolidation standards define the scope of consolidation of subsidiaries and affiliates under the control or influence
concept. Under the control or influence concept, a company in which the parent company or its consolidated subsidiaries are able to
exercise control over operations either directly or indirectly, is fully consolidated, and a company over which the parent company and/or
its consolidated subsidiaries have the ability to exercise significant influence is accounted for by the equity method.
In accordance with these standards, the accompanying consolidated financial statements include the accounts of the Company
and all of its subsidiaries, whether directly or indirectly controlled.
The investments in affiliates are accounted for by the equity method, with the exception of certain affiliates that have no material
effect on the accompanying consolidated financial statements.
All significant intercompany accounts and transactions have been eliminated in consolidation.
The cost in excess of net assets acquired by the Company is amortized using the straight-line method over five years.
(c) Cash and Cash Equivalents
For the purpose of the statements of cash flows, the Company considers cash equivalents to consist of all highly liquid investments that
have maturities of generally three months or less when purchased and that have insignificant risk of changes in value.
(d) Short-term Investments and Investments in Securities
Under the Accounting Standards for Financial Instruments, securities are classified into four categories—“trading securities,” “held-tomaturity securities,” “investment in affiliates” and “other securities.” Securities classified as “trading securities” are stated at fair value and
unrealized gains or losses are recorded in the consolidated statements of income. Securities classified as “held-to-maturity securities”
are stated at amortized cost. Securities classified as “other securities” with fair value are stated at fair value and unrealized gains or
losses, net of related taxes, are excluded from earnings and recorded in a separate component of stockholders’ equity. Realized gains
and losses on those other securities are determined by the moving average cost. Debt classified as “other securities” for which fair value
is not available are stated at amortized cost. Equity securities classified as “other securities” for which fair value is not available are stated
at moving average cost. Holding securities of the Company are classified as held-to-maturity securities and other securities.
(e) Inventories
Inventories are stated at cost. Cost is determined principally by the specific identification method.
( f ) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and equipment is calculated by the straight-line method, over the
estimated useful lives of the respective assets.
The estimated useful lives are as follows:
Buildings
15–50 years
Broadcasting equipment
6 years
(g) Intangible Assets
Intangible assets are carried at cost less amortization. Amortization of computer software for internal use is calculated by the straight-line
method, over the estimated useful life of five years. Amortization of other intangible assets is calculated by the straight-line method at
rates based on the estimated useful lives of the respective assets.
(h) Allowance for Doubtful Accounts
Allowance for doubtful receivables consists of the amount of uncollectible receivables based on historical loss ratios and the amount that
takes into account the possibility of certain liabilities.
29
( i ) Foreign Currency Translation
Under the Accounting Standards for Foreign Currency Transactions, receivables and payables denominated in foreign currencies are
translated into yen at the rate of exchange as of the balance sheet dates, and gains or losses resulting from the translation of foreign
currencies are credited or charged to income. Assets and liabilities, and revenues and expenses of overseas subsidiaries are translated
into yen at the rate of exchange as of the balance sheet dates. Thus, a comprehensive adjustment resulting from translation is presented
in a stockholders’ equity as “Foreign currency translation adjustments.”
( j ) Income Taxes
Income taxes in Japan applicable to the Company and its domestic consolidated subsidiaries consist of corporate tax, inhabitant tax
and business tax.
The Accounting Standards for Income Taxes require that deferred income taxes be accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled, and the effect on
deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
(k) Data per Common Share
Basic net income per share is computed by dividing net income available to common stockholders by the weighted average number of
shares of common stock outstanding during the respective year.
Cash dividends per share are computed based on dividends actually paid during the year.
( l ) Impairment of Long-lived Assets
Effective April 1, 2005, the Company and its domestic consolidated subsidiaries adopted a new accounting standard for the impairment
of fixed assets (“Opinion Concerning the Establishment of an Accounting Standard for the Impairment of Fixed Assets” issued by the
Business Accounting Deliberation Council on August 9, 2002) and the “Implementation Guidance on the Accounting Standard for the
Impairment of Fixed Assets” (Business Accounting Standard Implementation Guidance No. 6 issued on October 31, 2003). The effect of
adoption of the new standard was nil.
(m) Reclassifications
Certain reclassifications have been made to the prior years’ consolidated financial statements to conform to the presentation used as of
and for the year ended March 31, 2006.
2. Basis of Financial Statement Translation
The accompanying consolidated financial statements are expressed in yen and, solely for the convenience of the reader, have been
translated into United States dollars at the rate of ¥117.47 = US$1, the appropriate exchange rate prevailing on the Tokyo Foreign
Exchange Market as of March 31, 2006. The translation should not be construed as a representation that any amounts shown could be
converted to U.S. dollars.
3. Short-term Investments and Investments in Securities
Balance sheet amount, fair value and gross unrealized gain and gross unrealized loss of held-to-maturity securities with fair value as of
March 31, 2006 and 2005 are summarized as follows:
Millions of yen
2006
Balance sheet
amount
30
Government bond securities
Corporate bond securities
Other debt securities
2005
Gross
Gross
unrealized gain unrealized loss
Fair value
Gross
Gross
Fair value
¥15,099
9,905
—
¥1
4
—
¥0(17)
(272)
—
¥15,083
9,637
—
¥30,600
6,620
—
¥15
15
—
¥(1)
(3)
—
¥30,614
6,632
—
¥25,004
¥5
¥(289)
¥24,720
¥37,220
¥30
¥(4)
¥37,246
Thousands of U.S. dollars
2006
Balance sheet
amount
Government bond securities
Corporate bond securities
Other debt securities
Balance sheet
amount
Gross
Gross
Fair value
$128,535
84,319
—
$09
34
—
$0,(145)
(2,315)
—
$128,399
82,038
—
$212,854
$43
$(2,460)
$210,437
Acquisition cost, balance sheet amount and gross unrealized gain and gross unrealized loss of other securities with fair value as of
March 31, 2006 and 2005 is summarized as follows:
Millions of yen
2006
2005
Gross
Gross
Acquisition cost unrealized gain unrealized loss
Equity securities
Debt securities
Other securities
Balance sheet
Gross
Gross
amount
Balance sheet
amount
¥14,139
3,529
2,028
¥27,502
32
51
¥(320)
(35)
—
¥41,321
3,526
2,079
¥09,019
2,018
1,527
¥13,619
81
16
¥(356)
—
—
¥22,282
2,099
1,543
¥19,696
¥27,585
¥(355)
¥46,926
¥12,564
¥13,716
¥(356)
¥25,924
2006
Gross
Gross
Equity securities
Debt securities
Other securities
Balance sheet
amount
$120,362
30,042
17,264
$234,120
272
434
$(2,724)
(298)
—
$351,758
30,016
17,698
$167,668
$234,826
$(3,022)
$399,472
It is not practicable to estimate the fair value of the securities listed below as of March 31, 2006 and 2005 because of lack of market
price and difficulty in estimating fair value.
Thousands of
U.S. dollars
Millions of yen
2006
2005
2006
Held-to-maturity securities:
Commercial paper
¥13,500
¥12,500
$129,795
Other securities:
Unlisted equity securities
Certificates of deposit
Cash in trust
¥12,857
13,500
4,000
¥12,796
—
—
$109,449
114,923
34,051
¥30,357
¥12,796
$258,423
Projected future redemption of other securities with maturities and held-to-maturity securities at March 31, 2006 is summarized
as follows:
Due within one
year
Debt securities
Other securities
Due after ten
years
¥18,300
75
¥6,900
—
¥1,300
—
¥2,000
—
¥18,375
¥6,900
¥1,300
¥2,000
Due within one
year
Debt securities
Other securities
Millions of yen
Due after one year
Due after five years
through five years
through ten years
Due after one year
Due after five years
through five years
through ten years
Due after ten
years
$155,784
639
$58,738
—
$11,067
—
$17,026
—
$156,423
$58,738
$11,067
$17,026
31
4. Investments in Affiliates
The aggregate carrying amounts of investments in affiliates as of March 31, 2006 and 2005 are ¥6,565 million ($55,887 thousand) and
¥6,934 million, respectively.
5. Retirement and Severance Benefits
The Company and its consolidated subsidiaries have noncontributory pension plans to provide retirement and severance benefits to
substantially all employees.
The principal pension plans are unfunded defined benefit pension plans. Under the plans, employees are entitled to lump-sum
payments based on the current rate of pay and length of service upon retirement or termination of employment for reasons other
than dismissal for cause. In addition to the above plans, the Company and certain consolidated subsidiaries have tax qualified
noncontributory pension plans. The liability under these plans is funded by contributions to trusted pension funds.
Under the Accounting Standards for Retirement and Severance Benefits, provisions have been made in the accompanying
consolidated financial statements based on the present value of the projected future retirement and severance benefits attributable
to employee services rendered by the end of the year, less amounts funded under noncontributory pension plans.
The funded status of the pension plans at March 31, 2006 and 2005 is outlined as follows:
Thousands of
U.S. dollars
Millions of yen
2006
Projected benefit obligation
Plan assets at fair value
Funded status
Unrecognized actuarial loss
Unrecognized prior service cost
Amount recognized in the consolidated balance sheets
2005
2006
¥(24,478)
6,299
¥(24,074)
5,089
$(208,376)
53,622
(18,179)
1,710
169
(18,985)
2,473
186
(154,754)
14,557
1,438
¥(16,300)
¥(16,326)
$(138,759)
Net periodic pension cost for the years ended March 31, 2006 and 2005 consisted of the following components:
Thousands of
U.S. dollars
Millions of yen
Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized actuarial loss
Amortization of unrecognized prior service cost
Net periodic pension cost
2006
2005
¥1,176
558
(127)
202
17
¥1,191
559
(119)
169
17
$10,011
4,750
(1,081)
1,719
145
2006
¥1,826
¥1,817
$15,544
Significant assumptions of pension plans used to determine these amounts in fiscal 2006 and 2005 are as follows:
32
Periodic allocation method for projected benefit
Discount rate
Expected rate of return on plan assets
Period for amortization of unrecognized actuarial loss
Period for amortization of unrecognized prior service cost
2006
2005
Straight-line
2.5%
2.5%
15 years
15 years
Straight-line
2.5%
2.5%
15 years
15 years
Directors and corporate auditors are not covered by the plans described above. For such persons, the Company and certain
consolidated subsidiaries have defined benefit pension plans. Under the plans, directors and corporate auditors are entitled to lump-sum
payments based on the current rate of pay and length of service when they leave the Company. The plans are not funded; however,
provision has been made in the accompanying consolidated financial statements for the vested benefits to which directors and corporate auditors are entitled if they were to retire or sever immediately at the balance sheet dates. As of March 31, 2006 and 2005, the
liability for retirement and severance benefits related to these plans was ¥935 million ($7,959 thousand) and ¥980 million, respectively.
6. Common Stock
Under the Commercial Code of Japan, the entire amount of the issue price of shares is required to be designated as stated common
stock account although a company in Japan may, by resolution of its Board of Directors, account for an amount not exceeding 50%
of the issue price of new shares as additional paid-in capital. On October 1, 2001, the Commercial Code of Japan was amended to
eliminate the provision of common stock par value resulting in all common stock being recorded with no par value.
7. Legal Reserve and Cash Dividends
The Commercial Code of Japan provides that an amount equal to at least 10% of appropriations paid in cash be appropriated as a legal
reserve until an aggregated amount of such reserve and additional paid-in capital equal 25% of common stock. Either additional paid-in
capital or the legal reserve may be available for dividends by resolution of the stockholders to the extent that the amount of total
additional paid-in capital and legal reserve exceeds 25% of stated common stock. Balances of the legal reserve are included in retained
earnings in the accompanying consolidated balance sheets.
The amount available for dividends is based on the amount recorded in the Company’s non-consolidated books of account in
accordance with the Commercial Code of Japan.
In accordance with the Commercial Code of Japan, proposed appropriations of retained earnings have not been reflected in the
financial statements at the end of each fiscal year. The proposed appropriation of retained earnings at March 31, 2006 of cash dividends
of ¥700 ($5.96) per common share aggregating ¥704 million ($5,993 thousand) and bonuses to directors and corporate auditors was
approved at the Company’s general meeting of stockholders held on June 28, 2006.
8. Net Income per Share Information
Reconciliation of the numbers and the amounts used in the basic net income per share computations for the years ended March 31,
2006 and 2005 are as follows:
Thousands of
U.S. dollars
Millions of yen
2006
2005
Net income
Net income not applicable to common stockholders:
Directors’ and corporate auditors’ bonuses
¥9,467
¥7,383
2006
(186)
(141)
(1,584)
Net income applicable to common stockholders
¥9,281
¥7,242
$79,007
$80,591
Number of shares
Weighted average number of shares on which basic net income per share is calculated
2006
2005
1,006,000
1,006,000
9. Commitments and Contingencies
At March 31, 2006, the Company has guaranteed ¥2,519 million ($21,444 thousand) of employee mortgage loans to financial institutions,
and ¥1,538 million ($13,093 thousand) of third parties loans to financial institutions.
10. Income Taxes
The Company and its consolidated subsidiaries are subject to a number of taxes based on income. The aggregate normal tax rates for
domestic companies were approximately 40.7% in 2006 and 2005. Foreign consolidated subsidiaries are subject to income taxes of the
countries in which they are incorporated.
Reconciliation between the normal income tax rate and the effective income tax rate as a percentage of income before income
taxes and minority interests for the year ended March 31, 2006 was as follows:
2006
Normal income tax rate
Expenses not deductible for tax purposes
Income not credited for tax purposes
Tax credit for information technology investment
Other
40.7%
2.4
1.6
(0.6)
(0.8)
0.1
Effective income tax rate
43.4%
The reconciliation for the year ended March 31, 2005 was not subject to disclosure as the difference between the rates was less
than 5%.
33
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of March 31,
2006 and 2005 are presented below:
Thousands of
U.S. dollars
Millions of yen
2006
Total gross deferred tax assets:
Accrued bonuses
Accrued business tax
Liabilities for retirement and severance benefits
Inventories
Amortization of broadcasting rights fees
Other
Total gross deferred tax liabilities:
Net unrealized gain on other securities
Deferred profit on sale of property
Net deferred tax assets (liabilities)
2005
2006
¥0(1,190)
416
6,573
552
1,169
1,753
¥01,173
505
6,228
693
1,083
1,846
$0(10,130
3,541
55,955
4,699
9,952
14,923
11,653
11,528
99,200
(11,115)
(1,019)
(5,467)
(1,047)
(94,620)
(8,675)
(12,134)
(6,514)
(103,295)
¥00,(481)
¥05,014
$00(4,095)
11. Selling, General and Administrative Expenses
Significant components of selling, general and administrative expenses for the years ended March 31, 2006 and 2005 are as follows:
Thousands of
U.S. dollars
Millions of yen
Salaries and bonuses
Agency commissions
Advertising expense
2006
2005
¥09,990
38,699
2,187
¥12,380
37,954
2,508
2006
$085,043
329,437
18,618
12. Supplementary Cash Flow Information
Reconciliation between “Cash” in the accompanying consolidated balance sheets and “Cash and cash equivalents” in the accompanying
consolidated statements of cash flows as of March 31, 2006 and 2005 is as follows:
Thousands of
U.S. dollars
Millions of yen
34
2006
2005
Cash
Time deposits with maturities of over three months when acquired
Short-term investments with maturities of three months or less when acquired
¥27,972
(23)
26,004
¥31,767
(22)
25,502
$238,120
(195)
221,367
2006
Cash and cash equivalents
¥53,953
¥57,247
$459,292
13. Segment Information
Information about industry segment, geographic segment and overseas sales of the Company and its consolidated subsidiaries for the
years ended March 31, 2006 and 2005 is summarized as follows:
(a) Industry Segment Information
The Company and its subsidiaries’ major business categories are TV broadcasting business, music publication business and other
businesses.
Millions of yen
2006
TV
broadcasting
Sales to outside customers
Inter-segment sales
Operating expenses
Music
publication
Other
businesses
Total
¥218,813
2,094
¥10,759
180
¥19,812
6,044
¥249,384
8,318
220,907
207,995
10,939
7,675
25,856
24,854
257,702
240,524
Elimination/
corporate
¥
Consolidated
—
(8,318)
¥249,384
—
(8,318)
(8,216)
249,384
232,308
Operating income
¥012,912
¥03,264
¥01,002
¥017,178
¥
(102)
¥017,076
Assets
¥157,157
7,593
4,727
¥09,851
49
35
¥32,162
918
280
¥199,170
8,560
5,042
¥116,910
—
—
¥316,080
8,560
5,042
Elimination/
corporate
Consolidated
Millions of yen
2005
TV
broadcasting
Inter-segment sales
Music
publication
Other
businesses
Total
¥213,640
1,663
¥9,071
51
¥19,326
5,166
¥242,037
6,880
215,303
205,401
9,122
6,843
24,492
23,014
248,917
235,258
Operating income
¥009,902
¥2,279
¥01,478
¥013,659
¥
Assets
¥159,790
7,447
4,578
¥7,482
54
63
¥29,937
888
1,535
¥197,209
8,389
6,176
Operating expenses
¥
—
(6,880)
¥242,037
—
(6,880)
(6,827)
242,037
228,431
(53)
¥013,606
¥100,335
—
—
¥297,544
8,389
6,176
2006
TV
broadcasting
Inter-segment sales
Music
publication
Other
businesses
Total
Elimination/
corporate
$1,862,714
17,826
$91,589
1,532
$168,656
51,451
$2,122,959
70,809
1,880,540
1,770,622
93,121
65,336
220,107
211,577
2,193,768
2,047,535
Operating income
$0,109,918
$27,785
$008,530
$0,146,233
$
Assets
$1,337,848
64,638
40,240
$83,860
417
298
$273,789
7,815
2,384
$1,695,497
72,870
42,922
Operating expenses
$
Consolidated
—
(70,809)
$2,122,959
—
(70,809)
(69,941)
2,122,959
1,977,594
(868)
$0,145,365
$995,233
—
—
$2,690,730
72,870
42,922
Corporate assets of ¥124,749 million ($1,061,965 thousand) and ¥107,026 million as of March 31, 2006 and 2005 in the Elimination/
corporate line consist primarily of surplus funds (cash and deposits, and securities), long-term investments (investment securities) and
assets relating to the administrative operations.
35
(b) Geographic Segment Information
Both domestic sales and assets located in Japan are over 90% of those for all segments for the years ended March 31, 2006 and 2005.
(c) Overseas Sales
Overseas sales, which include export sales of the Company and its domestic subsidiaries, are less than 10% of consolidated sales for
the years ended March 31, 2006 and 2005.
14. Lease Information
(a) Finance Leases
Finance leases other than those that are deemed to transfer the ownership of the leased assets to lessees are generally accounted for
by the method that is applicable to ordinary operating leases under accounting principles generally accepted in Japan.
Certain key information about such lease contracts of the Company and its consolidated subsidiaries for the years ended March 31,
2006 and 2005 are as follows:
(1) Lessee
( i ) Acquisition cost, accumulated depreciation and net carrying amount of leased assets, if they had been capitalized:
Millions of yen
2006
Machinery
and
vehicles
2005
Machinery
and
vehicles
2006
Machinery
and
vehicles
Others
Total
Others
Total
Acquisition cost
Accumulated depreciation
¥1,011
508
¥2,021
1,105
¥3,032
1,613
¥1,007
468
¥2,361
1,292
¥3,368
1,760
$8,607
4,325
$17,204
9,406
Others
$25,811
13,731
Total
Net carrying amount
¥0,503
¥0,916
¥1,419
¥0,539
¥1,069
¥1,608
$4,282
$07,798
$12,080
( ii ) Lease expense and future minimum lease payments including interest expense:
Thousands of
U.S. dollars
Millions of yen
Lease expense
Future minimum lease payments:
Within one year
Thereafter
2006
2005
¥0,656
¥0,738
2006
$05,584
¥0,526
893
¥0,575
1,033
$04,478
7,602
¥1,419
¥1,608
$12,080
(2) Lessor
( i ) Acquisition cost, accumulated depreciation and net book value of leasing assets:
Millions of yen
2006
Machinery
and
vehicles
36
Others
2005
Total
Machinery
and
vehicles
Others
2006
Total
Machinery
and
vehicles
Others
Total
Acquisition cost
Accumulated depreciation
¥116
90
¥129
25
¥245
115
¥116
82
¥116
7
¥232
89
$988
766
$1,098
213
$2,086
979
Net carrying amount
¥026
¥104
¥130
¥034
¥109
¥143
$222
$0,885
$1,107
( ii ) Lease income, depreciation and future minimum lease payments including interest income:
Thousands of
U.S. dollars
Millions of yen
2006
Lease income
Depreciation
Within one year
Thereafter
2005
2006
¥066
26
¥044
26
$0,562
221
¥060
101
¥064
146
$0,511
860
¥161
¥210
$1,371
(b) Operating Leases
Future minimum lease payments required under noncancellable operating leases as of March 31, 2006 and 2005, are summarized
as follows:
Thousands of
U.S. dollars
Millions of yen
Within one year
Thereafter
2006
2005
2006
¥1,784
3,569
¥1,784
5,354
$15,187
30,382
¥5,353
¥7,138
$45,569
37
Independent Auditors’ Report
To the Board of Directors of
TV Asahi Corporation:
We have audited the accompanying consolidated balance sheets of TV Asahi Corporation and consolidated subsidiaries as of
March 31, 2006 and 2005, and related consolidated statements of income, stockholders’ equity and cash flows for the years
then ended, all expressed in Japanese yen. These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of TV Asahi Corporation and consolidated subsidiaries as of March 31, 2006 and 2005, and the results of their operations and
their cash flows for the years then ended in conformity with accounting principles generally accepted in Japan.
The accompanying consolidated financial statements as of and for the year ended March 31, 2006 have been translated into
United States dollars solely for the convenience of the reader. We have recomputed the translation and, in our opinion, the
consolidated financial statements expressed in yen have been translated into United States dollars on the basis described in
Note 2 to the consolidated financial statements.
38
Toyo & Co.
Tokyo, Japan
June 28, 2006
TV Asahi Network
1
2
Domestic Network
6
1 HTB
2 ABA
3 IAT
4 KHB
5 AAB
6 YTS
7 KFB
8 NT21
9 ABN
10 SATV
11 HAB
12 FBC
13 NBN
14 ABC
15 HOME
16 YAB
17 KSB
18 EAT
3
5
8
11
12
Hokkaido Television Broadcasting Co., Ltd.
Asahi Broadcasting Aomori Co., Ltd.
13
Iwate Asahi Television Co., Ltd.
16
TV Asahi
10
17
18
22
20 21
Akita Asahi Broadcasting Co., Ltd.
9
14
15
19
Higashinippon Broadcasting Co., Ltd.
4
7
23
24
Yamagata Television System Co., Ltd.
Fukushima Broadcasting Co., Ltd.
The Niigata Television Network 21, Inc.
Asahi Broadcasting Nagano Co., Ltd.
25
Shizuoka Asahi Television Co., Ltd.
Hokuriku Asahi Broadcasting Co., Ltd.
19 KBC
20 NCC
21 KAB
22 OAB
23 UMK
24 KKB
25 QAB
Fukui Broadcasting Corporation
Nagoya Broadcasting Network
Asahi Broadcasting Corporation
Hiroshima Home Television Co., Ltd.
Yamaguchi Asahi Broadcasting Co., Ltd.
Setonaikai Broadcasting Co., Ltd.
Ehime Asahi Television Co., Ltd.
Nagasaki Culture Telecasting Corporation
Kumamoto Asahi Broadcasting Co., Ltd.
Oita Asahi Broadcasting Co., Ltd.
Miyazaki Telecasting Co., Ltd.
Kagoshima Broadcasting Corporation
Ryukyu Asahi Broadcasting Corporation
5
International Network
4
1
7
2
10 12
Bureaus
14
11
6
8
America
3
9
13
1 New York (TV ASAHI America’s bureau)
2 Washington D.C. (TV ASAHI America’s bureau)
3 Los Angeles (TV ASAHI America’s bureau)
4 London
5 Moscow
6 Cairo
7 Paris (ABC’s bureau)
Asia/Oceania
8 Bangkok
9 Manila
10 China General (Beijing)
11 Taipei (ABC’s bureau)
12 Seoul
13 Singapore (NBN’s bureau)
14 Shanghai (ABC’s bureau)
ABC: Asahi Broadcasting Corporation
39
Cooperation
Europe/Africa
NBN: Nagoya Broadcasting Network
America
CNN
USA
Europe/Africa
TF1
RTL
TVP
France
Germany
Poland
Asia/Oceania
CCTV
Dalian TV Station
CTV
ETTV
GMA
RTM
CH7
China
China
Taiwan
Taiwan
Philippines
Malaysia
Australia
TV Broadcasting
Businesses Related to Program
Production
Consolidated Subsidiaries
Logical Solution & D Inc.
100.00 (100.00)
Other Businesses
Take Systems Co., Ltd.
85.00 (35.83)
TV Shopping Business
Consolidated Subsidiary
TV Asahi Productions Co., Ltd.
40.00
TV Asahi Living Co., Ltd.
100.00
TV Asahi Create Co., Ltd.
87.00 (37.83)
Businesses Related to Broadcasting
Facilities
Trust Network Inc.
90.00 (45.00)
Video Pack Nippon Company Ltd.
42.40
Music Publication
Housougijyutsusha Co., Ltd.
100.0 (52.50)
TV ASAHI America, Inc.
100.00
TV ASAHI Music Co., Ltd.
100.00
Affiliates — equity method applied
Affiliate — equity method applied
Japan Cable Television, Ltd.
41.74 (8.44)
BS Asahi Sounds, Ltd.
40.00 (20.00)
Flex Co., Ltd.
25.67
40
Television Asahi Service Co., Ltd.
70.00 (21.25)
Announcer Training School
TV Asahi ASK Co., Ltd.
100.00
Facilities Administration Business
TV Asahi BEST Co., Ltd.
100.00
Bunkakobo, Inc.
20.00
Media Mix Japan Co., Ltd.
23.56 (3.56)
JCTV-HQ
0.00 [100.00]
BS/CS Digital Broadcasting
Affiliates — equity method applied
Asahi Satellite Broadcasting Limited
29.96 (0.50)
CS One Ten, Ltd.
15.00
Multi Lingual & Multi Data
Broadcasting
Consolidated Subsidiaries
TV Asahi Data Vision Corporation
100.00
Note: Figure under each company name shows the
equity held by the Company, which equals
the total of direct and indirect holdings.
Figures in ( ) are indirect holdings.
The figure in [ ] corresponds to the holding
held by an affiliate. JCTV-HQ is 100% held by
Japan Cable Television, Ltd. and is counted
as an affiliate company of TV Asahi.
Consolidated Financial Highlights
Board of Directors
As of June 28, 2006
As of March 31, 2006
Millions of yen
Net sales
TV broadcasting
Percentage
change
Thousands of
U.S. dollars
2006/2005
2006
2006
2005
¥249,384
¥242,037
3.0%
$2,122,959
218,813
213,640
2.4%
1,862,714
Network time
93,384
91,299
2.3%
794,960
100,563
98,125
2.5%
856,074
Sales of programs
11,303
11,310
–0.1%
96,220
Other
13,563
12,905
5.1%
115,459
Spot
Music publication
10,759
9,071
18.6%
91,589
Other businesses
19,812
19,326
2.5%
168,656
Operating income
17,076
13,606
25.5%
145,365
Net income
9,467
7,383
28.2%
80,591
5,042
6,176
–18.4%
42,922
8,560
8,389
2.0%
72,870
Total assets
316,080
297,544
6.2%
2,690,730
242,849
226,729
7.1%
2,067,328
Percentage
change
Yen
U.S. dollars
Net income—basic
¥
9,226
¥
241,216
7,199
28.2%
225,237
7.1%
Percent
Equity ratio
2,053
76.2%
—%
4.0%
3.3%
—%
Notes: 3. Return on equity (ROE) = 100 x (Net income ÷ Average total stockholders’ equity at the beginning and the end of the fiscal year).
01
To Our Stakeholders
02
04
ACT 1 : Progress Report on Phase Two of the Companywide Reform Campaign
09
ACT 2 : Overview of Japan’s TV Industry
12
ACT 3 : Endeavors in the Digital Era
15
16
17
Financial Section
39
TV Asahi Network
40
41
Board of Directors
41
Corporate Data
Authorized Number of Shares
3,000,000
Corporate Name
President
Masao Kimiwada *
Issued Number of Shares
1,006,000
Abbreviation
TV Asahi
Senior Executive Director
Hiroshi Hayakawa *
Number of Stockholders
39,755
Executive Directors
Kenji Kazama
Ikuo Kamiyama
Hidekazu Kitamura
Hiroaki Takada
Keiji Takano
Toshio Fukuda
Number of Shares Held by Foreign
Investors
113,505 (11.28%)
Head Office
9-1 Roppongi 6-chome, Minato-ku,
Tokyo 106-8001, Japan
Tel. +81-3-6406-1111
http://www.company.tv-asahi.co.jp/e/
Listing
Tokyo Stock Exchange
Stockholder Information
Members of the Board
Toru Takeda
Tomoo Tama
Mutsuko Horikoshi
Takahiro Otsuka
Seishi Fukuda
Kojiro Watanabe
Kotaro Akiyama
Tsuyoshi Okada
Yoshitoshi Kitajima
Mitsuru Gondo
Yoshio Nishimura
Tetsuzo Hori
Standing Corporate Auditors
Sachio Arikura
Yasuharu Murase
Contents
Stock Information
Chairman
Michisada Hirose *
79
Change
76.8%
Return on equity
$
Board of Directors
Corporate Auditors
Koichi Kobayashi
Sawako Noma
Takahisa Hamamoto
* Representative Directors
Date of Establishment
November 1, 1957
Date of Service Start
February 1, 1959
Fiscal Year-End
March 31
Paid-in Capital
¥36,642,800,000
General Meeting of Stockholders
June
Number of Employees
1,234
Transfer Agent
The Sumitomo Trust & Banking Co.,
Ltd.
Underwriter
Daiwa Securities SMBC Co. Ltd.
Sub-Underwriter
Nomura Securities Co., Ltd.
Nikko Citigroup Limited
41
Major Stockholders
Name
Shares
Percent of
voting rights
Asahi Shimbun Publishing Company
340,495
33.85
Toei Co., Ltd.
161,842
16.09
Dai Nippon Printing Co., Ltd.
40,300
4.01
32,147
3.20
The Master Trust Bank of Japan, Ltd. (Trust Account)
22,799
2.27
Satellite Channels Incorporated
20,854
2.07
State Street Bank & Trust Company 505025
16,422
1.63
The Trustee Services Bank, Ltd. (Trust Account)
16,171
1.61
Forward-Looking Statements
Kodansha Ltd.
13,640
1.36
This report contains forward-looking statements that are
based on management’s assumptions and beliefs in light
of the information currently available to it. These
statements are subject to risks and uncertainties that
could cause actual results to differ materially from those
discussed in this report. Such risks include but are not
limited to market trends and economic conditions.
Dentsu Inc.
12,710
1.26
TV Asahi Annual Report 2006
This annual report was produced using recycled paper.
Printed in Japan.
Annual Report 2006

Annual Report 2006

Transcription

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