annual report 2010

Transcription

annual report 2010

ANNUAL REPORT 2010
Year ended March 31, 2010
Kadokawa Group Holdings, Inc.
Kadokawa Group Holdings, Inc. ANNUAL REPORT 2010
Dimension
Strategy
Printed in Japan
Profile
The foundation of Kadokawa Group Holdings, Inc. dates back to 1945 when literary scholar Genyoshi
Kadokawa established an independent publishing company with an ambition to revitalize Japanese
culture through publishing.
Initially engaged mainly in literary publications of Japan’s national history and literature, the
Company embarked upon the filmmaking business in the 1970s and succeeded in promoting media
mix marketing in which movie screenings coincide with paperback book fairs at bookstores. As a
result, the Company gradually expanded its corporate foundation.
In the 1980s, the Company began publishing TV program guides, town guides, and media information magazines and subsequently made inroads into the Movie/Visual business and IT businesses
via an effective merger and acquisition strategy, while also cultivating new segments and genres in
the publishing field. The Company was listed on the Tokyo Stock Exchange in 1998.
The Company is currently aiming to establish itself as a Mega Software Publisher based on its
three mainstays: Publishing, Movie/Visual, and Cross-Media business segments. Targeting business
expansion overseas as well, its unique array of comics, light novels, and animation content are representative of the “Cool Japan” concept that has attracted much attention worldwide in recent years.
Contents
1 Financial Highlights
14 Management’s Discussion
and Analysis
2 Chairman’s Message
4 Message from the President
6 Our Strategy
5 Dimension Strategy
8 The Kadokawa Group’s
60-Year History of Growth
9 Overview of the Kadokawa Group
10 At a Glance
17 Five-Year Summary of
Selected Financial Data
18 Consolidated Balance Sheets
20 Consolidated Statements
of Operations
21 Consolidated Statements of
Changes in Net Assets
22 Consolidated Statements of
Cash Flows
11 Overview of Businesses
11 Publishing Business
23 Notes to Consolidated
Financial Statements
12 Movie/Visual Business
40 Independent Auditors’ Report
13 Cross-Media Business
Development of
Social Applications
41 Corporate Data
Financial Highlights
Kadokawa Group Holdings, Inc. and Consolidated Subsidiaries
Years ended March 31
Operating Income
Net Sales
Millions of yen
Millions of yen
10,000
200,000
150,000
150,256
149,883
150,790
141,611
135,923
7,500
7,393
6,812
5,165
5,133
5,000
100,000
3,566
2,500
50,000
0
2006
2007
2008
2009
2010
0
2007
2009
2010
Millions of yen
Millions of yen
6,000
14,000
3,899
4,000
2008
Cash Flow
Net Income (Loss)
7,000
2,000
2006
1,430
1,323
6,507
3,298
2,394
5,692
10,958
4,821
167 130
1,990
1,010
0
0
(1,686)
-2,000
-7,000
(2,599)
(37)
(980)
2009
2010
(5,172)
-4,000
-8,000
-14,000
(5,206)
-6,000
(16,130)
2006
2007
2008
2009
2010
-21,000
2006
2007
2008
Cash flows from operating activities
Cash flows from investing activities
Free cash flow
(Combined total of cash flows from operating
and investing activities)
Net Assets
Total Assets
Millions of yen
Millions of yen
200,000
100,000
88,292
150,000
148,375
80,333
149,839
123,176
50,000
50,000
25,000
2006
2007
2008
2009
67,510
67,461
2009
2010
119,253
100,000
0
78,280
75,000
138,317
2010
0
2006
2007
2008
Note: Net assets as of March 31, 2006 have been reclassified using the new accounting standard, which was effective April 1, 2006.
1
Chairman’s Message
Targeting Dramatic Business Growth through Electronic Books
With the launch of Apple’s iPad following the Internet
bookstore Amazon’s Kindle, Kadokawa has recently
received many inquiries from television programs and
newspapers. What does Kadokawa think about this
new technology? How will we address the e-book
onslaught? Do we see this more as an opportunity or
a threat? Here, I answer these and other questions
that are on people’s minds.
Tsuguhiko Kadokawa
Chairman and Director
The Japanese are regarded as the world’s most prolific readers. I’ve heard that even overseas visitors to Japan
who come in contact with train commuters reading
paperbacks, everyone from students to company
employees, can sense their passion. Moreover, the
diversity of the reading matter available is amazing, covering everything from Western classics to genres
representing “Cool Japan,” such as comics and light
novels. For your information, the four companies of the
Kadokawa Group together account for 80% of the
domestic market for light novels incorporating Japanesestyle “anime” illustrations.
The domestic market for e-books totaled US$500
million in 2009, making Japan the world’s largest market, surpassing the United States. The impact of Kindle,
iPad, and Google Edition on our market is expected to
be huge.
Japan’s total content market is worth around ¥14
trillion, according to statistics from the Ministry of
Economy, Trade and Industry. Within this amount, the
text-based market, covering books, magazines, and
newspapers—the target niche for the e-book sector—is
worth ¥6 trillion. Although the music market is worth
only ¥1.8 trillion, a major innovation like the iPod has
made a tremendous difference. The reality is that the
majority of people in our industry do not know how to
address the impact that e-books will have on the printed publications market.
HINC OMNE PRINCIPIVM
Everything Starts from Here
2
However, I have used the new tablet computers, like
Kindle and iPad, and I am familiar with their respective
weights and user interfaces. From my perspective, the
emergence of e-books presents an excellent opportunity for a quantum leap for Kadokawa. This is because we
possess a diversity of contents and extensive archives.
As a corporate group that has been pursuing a media mix
that includes both publications and movies and aims to
become a “Mega Software Publisher,” our expectations
are running high thanks to these “magical” tablet computers. I firmly believe that the business methods that
we have developed since our foundation are perfectly
suited to responding to the recent technological innovations and the arrival of the networked society.
The public’s response to the new tablets has been
highly favorable. Our challenge is to use this response
to improve our own business performance while taking
full advantage of the tablet devices’ technological merits.
To this end, we will use the new tablets as a springboard
for formulating aggressive e-book strategies.
The problem here, however, is the difficulty in developing an appropriate business model for e-books. I have
yet to hear of any clear examples of a suitable profit
model even from the United States. Indeed, the creation of an effective business model is the most pressing
issue facing the e-book sector.
We have three choices here:
(1) Deploy our content-creation capabilities and
archives as a content provider;
(2) Make users aware of our capabilities as a platform provider; and
(3) Sell tablet computers.
Each of these choices offers major business opportunities, so there is value in considering all three.
editorial strengths to create market hits, both in novels
and comic books. Two large-scale M&As also contributed to our performance. For example, we welcomed
Chukei Publishing Company to the Group, which augmented our portfolio of economic and how-to books.
The Kadokawa Group now has 10 members, including
Kadokawa Shoten Publishing Co., Ltd. Another new
Group member is Maho i-Land Corporation, which operates Japan’s largest cell phone novel site (website where
people post novels written on their cell phones).
Accepting CGM (consumer-generated media, where
consumers use the Internet to generate their own content) postings from around 6 million people per month,
Maho i-Land promises to play a key role in the Kadokawa
Group’s advancement in the e-book market.
It has been said that hardware (like a video or CD player) and software (content) are “two wheels on the same
cart.” However, the success of Apple’s iPod illustrates
that the key to gaining power lies in platform-building.
Apple grew to dominance because it prepared winning
software for its own platform.
The Kadokawa Group plans to enter a new domain by
building its own platform, while leveraging the strengths
of its content portfolio. The hurdles are high, but if we
succeed we can realize major new growth for the Group,
and our innovative e-book business model will become
a powerful weapon in our arsenal. We have also established NTT Prime Square Inc. in collaboration with NTT,
which lead Japan’s push to proliferate fiber-optic networks in the broadband field. This attractive, new
challenge of building a platform is an extension of our
strategies for the e-book market.
On behalf of the Kadokawa Group, I ask for your
ongoing support in our quest to become a “Mega
Software Publisher” in this new age.
The Kadokawa Group reported a healthy financial
performance in fiscal 2010. This was because each company in the Group’s publishing business honed its own
Our creations will be seeds for people to cultivate a richness of spirit. Everything starts from that pride.
Our creations will build the future and remain in history. Everything starts from that foresight.
Our creations will constantly strive for novelty. Everything starts from that innovation.
Our creations will be the fulfillment of our ambitions. Everything starts from that passion.
Our creations will be the result of a steady accumulation of small steps. Everything starts from that constancy.
Our creations will promote culture and contribute to the development of society. Everything starts from
that commitment.
3
Message from the President
Kadokawa Group Targets Growth and Great Progress
Year in Review
In the fiscal year ended March 2010, the Kadokawa
Group achieved year-on-year increases in revenue and
earnings in its core Publishing business. The domestic
markets for advertising and DVD sales were weak, and
revenues in the Cross-Media business and Movie/ Visual
business were down. As a result, consolidated net sales
for the year declined ¥5.6 billion year on year, to ¥135.9
billion. However, we achieved a significant increase in
earnings, with operating income up ¥1.6 billion, to ¥5.2
billion. Net income totaled ¥1.4 billion, a substantial ¥6.6
billion improvement, highlighting a major return to profitability after losses in the two preceding fiscal years.
These results show that the Kadokawa Group has
transformed itself into a profitable organization thanks
to structural reforms backed by a united commitment.
Tatsuo Sato
President and Representative Director
Future Growth Vision
Despite these positive results, our industry is facing
various challenges. In order to target growth as a corporation in these circumstances, we cannot rely solely
on structural reforms. It is often said that, “Adversity
breeds success.” Now is the time, therefore, for the
Kadokawa Group to achieve great progress. It is my
responsibility to articulate a growth vision for the future.
In order to place the Group on a growth trajectory, I
have formed a vision based on three key “pyramids”:
(1) Maximize Group synergies as a
“Software Publisher”;
(2) Respond to the digitalization; and
(3) Expand operations in overseas markets.
Maximize Group Synergies as a
“Software Publisher”
The first pyramid envisages Kadokawa as a “software
publisher.” This entails extensively upgrading the
Group’s current business model. Using the Publishing
business as our base, we will forge synergies with the
Cross-Media and Movie/Visual businesses, or our other
businesses and thereby deliver unparalleled business
performances.
Undertaking structural reforms and business reorganization simultaneously is a difficult challenge. If we
succeed, however, we can look forward to significant
growth in the future.
4
The three pyramids supporting the growth of the Kadokawa Group
Service
Events and Live Performances
Merchandising
Character Merchandise and Product Development
Packaged Software
DVDs, Blu-ray, CDs, Game Software
Movie/Visual
Movies, Planning & Production, Distribution, Animation
Publishing
Magazines, Books,
Comics, Advertising
“Software Publisher” Kadokawa
Local Services
Dynamic Service
e-Commerce
Local Digital Distribution
Local Image Creation
Social Applications
Game Distribution
Local Development of
Original Content
Image Distribution
Publication of Translated
Works, Overseas Sales
“Overseas” Kadokawa
Respond to the Digitalization
The second pyramid envisages Kadokawa as a digital
business group. Motivated by the establishment of
Kadokawa Games, Ltd., we have substantially reinforced
the Group’s capabilities in product development and
marketing of packaged videogames and simultaneously undertaken aggressive overseas business expansion.
We hope to announce the results of these initiatives in
the current fiscal period. From the autumn of 2010, we
plan to begin offering more than 10 types of social application games using our popular light novel and comic
characters. This will provide a powerful force and deliver exciting synergies with our Publishing business.
In the much-talked-about e-book market, unique
platforms are currently being developed that are
unprecedented even in the publishing industry, and we
have great expectations in this area. In e-magazines as
well, we will do much more than simply create digital
versions of hardcopy magazines; rather, we will enrich
e-Books, e-Magazines
“Digital” Kadokawa
their content and deliver dynamic embedded services,
enabling us to overcome the traditional boundaries of
the paper magazine medium.
Expand Operations in Overseas Markets
The third pyramid focuses on overseas operations,
mainly targeting Asian markets. In addition to simply producing translated publications, we will develop original,
locally inspired content, develop movie versions, and
compile a host of other services, including digital distribution and event production. In these ways, we plan to
advance our business in a three-dimensional manner.
By interlocking the aforementioned three pyramids
and generating major synergistic benefits, the Kadokawa
Group will target future growth and progress as a “Mega
Software Publisher.” We look forward to your ongoing
support and understanding.
5
Our Strategy
5 Dimension Strategy
In addition to our “Single Source, Multi-Use” strategy,
we will target renewed growth by expanding our business
domains and advancing our overseas operations.
Publishing
Movie/Visual
Novels, comics
Animation, dramas,
movies, DVDs
In the Publishing business, we will
work to create exceptional content
that will become valuable future
media mix assets. Back in 1945 when our
business was founded, we concentrated
mainly on the publication and sales of literary novels, tanka and haiku (Japanese
poetry), dictionaries, and school textbooks. Since then, we have significantly
broadened our horizons to include light
novels, comics, animation and charactermotif magazines, game strategy guides,
children’s books, how-to books, and history-related books.
6
We entered the Movie/Visual business in 1976, with the production
of The Inugami Family. As embodied in the catchwords used at the
time—“Should I read the book first, or
watch the movie first?”—this marked the
beginning of the media mix technique of
releasing the book and the movie simultaneously. Since then, we have broadened
our business to include television animation productions of light novels and
comics, as well as sales of DVD packages.
©2006 Nagaru TANIGAWA·Noizi ITO/Member of SOS
©2007, 2008, 2009 Nagaru TANIGAWA·Noizi ITO/Member of SOS
The Kadokawa Group has created a multitude of unique content in the past. Our strength is our production
capabilities, whereby we arrange for the deployment of our vast collection of contents across a wide range of
media, which have enabled us to nurture long-running “hit” contents. Taking advantage of these strengths,
we are reinforcing our game business and developing new game software for core users. At the same time,
we are expanding our business domains to include the supply of applications for social networking services. As
a measure to achieve renewed growth, we will actively advance into the e-book field and expand operations in
overseas markets. Specifically, we will enter and maximize sales opportunities in Asia, where recognition of,
and demand for, our contents are high.
Information
Magazines • Web
Information magazines, web,
character merchandise
In the Cross-Media business, we
provide support for the Publishing
and Movie/ Visual businesses by
distributing related information via collaboration magazines mixing publications and
movies, mobile phones, and the Internet.
We are also actively involved in establishing communities using publications with
high Internet affinity, such as TV program
guides, town guides, and lifestyle information magazines. Our distribution of
content to YouTube, for example, has
become well-known.
Digital
e-Books
Social applications
The role of the Digital business
will become more and more
important as the Kadokawa Group
effectively utilizes its content portfolio
under its “single source, multi-use” strategy. In addition to character games, we
will also establish a solid presence in the
digital entertainment field by entering the
social applications business and develop
games for core gamers. Going forward,
we plan to aggressively enter the e-book
business, a market that is expected to
grow sharply.
Overseas
Development
Overseas, we made a full-scale
entry into mainland China in
2010. Specifically, we established
Guangzhou Tianwen Kadokawa Animation
& Comics Co. through a capital alliance with
the Hunan Group, a Chinese state-owned
conglomerate. The new joint venture will
start providing translation and publishing
services in the near future. We are also fostering local writers with the aim of
producing comics and light novels written
by Chinese writers, as well as animations
based on such works.
©Nagaru TANIGAWA·Noizi ITO/ESUOUESUDAN
©PUYO/ESUOUESUDAN ©ERETTO/ESUOUESUDAN
7
The Kadokawa Group’s 60-Year History of Growth
Phase 6
Phase 5
Phase 4
Phase 3
Phase 2
Phase 1
Book era
Established the foundation as a publisher
of literary works
through fresh publications focusing on
Japanese history and
literature
Movie era
Leveraged the successful coordination of
Kadokawa Bunko and
Kadokawa movies to
actively expand the
business base
Magazine era
Built on the successes of Weekly The
Television, Tokyo
Walker, and other
information magazines until the
Company is referred
to as “Kadokawa the
information magazine
publisher”
Internet business
commercialization
era
Aggressively developed
IT business operations,
including digital
content and
broadband operations
New Kadokawa
movie era
Toward becoming a
comprehensive
media company
Shifted to a corporate
New Kadokawa
structure based on the
movie’s box-office
three Publishing,
hits—Paradise Lost,
Movie/Visual, and
Ring, Rasen, etc.
Cross-Media business
segments to become a
comprehensive publishing and movie/visual
media corporation
Web 2.0 era begins
and achieving
further growth
Paradise Lost
Walkerplus
Weekly The Television
2003 ∼
The Inugami Family
1997 ∼
1994 ∼
Santaro no Nikki
(Santaro’s Diary)
1982 ∼
Ring
1976 ∼
1945 ∼
Rasen
Tokyo Walker
Paradise Lost
Ring
Rasen
G.I. Samurai
Crime and Punishment
Web-version TV guide,
“The Television”
Newtype
Hodo (Sidewalks)
Crime and Punishment
Santaro no Nikki
Showa Bungakuzenshu
(Showa Literary
Anthology)
1945
Founded
8
Sailor Suit and
Machine Gun
The Inugami Family
The Proof of the Man
G.I. Samurai
Sailor Suit and
Machine Gun
2003 Shifted to a holding
company structure
1997 New Kadokawa movie era began with
the release of Paradise Lost
1998 Listed on the Tokyo Stock Exchange
Walkerplus
Weekly The Television
Tokyo Walker
Comptiq
Newtype
ASUKA
1994 Walkerplus service started
1982 Magazine era began with the release of the first The Television magazine
1985 Full-fledged entry to the animation and comic book field with the launch of Newtype
1976 Kadokawa Pictures released its first feature movie, The Inugami Family
Overview of the Kadokawa Group
Publishing Business
Movie/Visual Business
Kadokawa Shoten Publishing Co., Ltd.
Publishing/editing,
animation creation
Kadokawa Pictures Inc.
Movie production, distribution, and import business,
DVD sales
ASCII Media Works Inc.
Publishing/editing
Kadokawa Cineplex, Inc.
Cinema complex operation
Enterbrain, Inc.
Publishing/editing, creation and sale of game
software
Glovision, Inc.
Production of Japanese language version
video products
Fujimi Shobo Co., Ltd.
Publishing/editing
Chukei Publishing Company
Publishing/editing
Cross-Media Business
Kadokawa Marketing Co., Ltd.
Publishing/editing
Shin-Jinbutsuoraisha Co., Ltd.
Publishing/editing
Kadokawa Gakugei Shuppan Publishing Co., Ltd.
Publishing/editing
Kadokawa Games, Ltd.
Creation and sale of game software
Maho i-Land Corporation
Homepage planning, development, and administration
Kadokawa Production Co., Ltd.
Use, development, and management of copyrights
Chara-Ani Corporation
e-Commerce and production and marketing of
character merchandise
Light novels
Games/PCs
Literature
K. Sense
Mail-order business
Kadokawa Magazines Co., Ltd.
Publishing/editing
Movie Time Co., Ltd.
Information digitalization
Kadokawa Digix, Inc.
Creation of a digital content database
Kadokawa Contents Gate Co.,Ltd.
Transmission of digital contents
Kadokawa Media House Inc.
Advertising agency business
Composition of sales by genre for each company
Comics
Kadokawa SSCommunications Inc.
Publishing/editing
History
How-to
Education,
Culture
Overseas Subsidiaries
Publishing Support Business
Kadokawa Group Publishing Co., Ltd.
Kadokawa Group Publishing Business marketing,
distribution, sales, advertising, and production
Building Book Center Co., Ltd.
Warehousing business, real estate rental and
management
Kadokawa Book Service Co., Ltd
Sales support for publications
Kadokawa Media (Taiwan) Co., Ltd.
Publishing/editing
Kadokawa Intercontinental Group Holdings Ltd.
Movie distribution and cinema complex operation,
game creation and sale
Kadokawa Intercontinental Publishing Asia Ltd.
Publishing/editing
Sun Wah Kadokawa (Hong Kong) Group Ltd.
Cinema complex operation in China
Guangzhou Tianwen Kadokawa Animation &
Comics, Co., Ltd.
Publishing/editing, animation creation in China
9
At a Glance
Other
Business
Publishing
Business
Net Sales
Net Sales
¥8,612 million
¥73,476 million
Operating Income
Operating Income
-¥207 million
¥7,704 million
Creation and sale of game software;
advertising agency services; real estate
leasing and management
Publication and sale of novels, business books, academic books, comics,
etc.; production of animation and
games; licensing of content
6.3%
54.1%
Composition of sales
Total net sales
¥135,923 million
(Fiscal year ended March 2010)
16.9%
22.7%
Cross-Media
Business
Movie/Visual
Business
Net Sales
Net Sales
¥23,032 million
¥30,803 million
Operating Income
Operating Income
¥190 million
-¥1,198 million
Publication and sale of TV program
guides, town guides and lifestyle information magazines, which have a strong
affinity for the Internet, and as well as
the transmission of information that
uses media platforms such as PCs and
mobile phones
10
Planning, production, distribution, and
cinema complex operation; cinema
operations; sale of movie and animation DVDs
Overview of Businesses
Publishing Business
In the Publishing business, we will work to create exceptional content that will become valuable future media mix
assets. Centered primarily on Kadokawa Bunko, our paperback book line with a 60-year history, we will work to expand
our operations with the aim of becoming No.1 in every field, including magazines, paperbacks, comics, light novels, and
gaming strategy guides.
Books
Literature
Light novels
The Lost Symbol Vol.1-2
Durarara!! Vol.7
Author: Dan Brown
Translation: Toshiya Echizen
Author: Ryogo Narita
Illustrations:
Suzuhito Yasuda
TV Animation
Comics
Baka and Test
—Summon the
Beasts— Vol.7.5
Author: Kenji Inoue
Illustrations: Yui Haga
Jan.
2010
Durarara!!
©Ryohgo Narita /
ASCII MEDIA WORKS /
Ikebukuro Dollars /MBS
Jan.
2010
Baka and Test
—Summon the
Beasts—
©2010 Kenji Inoue /
PUBLISHED BY
ENTERBRAIN, INC. /
Baka and Test Project
All rights reserved
Seitokai no
Nanahikari
Toarukagakuno
Railgun Vol.4
Neon Genesis
Evangelion Vol.12
Author: Sekina Aoi
Illustrations:
Kira Inugami
Illustrations: Motoi Fuyukawa
Original Author: Kazuma Kamachi
Character Designer:
Kiyotaka Haimura
Author:
Yoshiyuki Sadamoto
Original Author:
GAINAX·Khara
Oct.
2009
Seitokai no Ichizon
©2009
Sekina AOI·kira INUGAMI /
Fujimi Shobou /
Hekiyougakuen Seitokai
Oct.
2009
Toarukagakuno
Railgun
©KAZUMA KAMACHI /
MOTOI FUYUKAWA /
ASCII MEDIA WORKS /
PROJECT-RAILGUN
From Our Staff
Akiko Kaneko
Chief Editor
Shosetsuya sari-sari website
Editing Bureau No.3
Kadokawa Shoten Publishing Co., Ltd.
Tenchi Meisatsu
2010 Honya Taisho
(The Booksellers Prize)
The Honya Taisho award is an award
given by booksellers. Bookstore staff
vote for the book they would most
like to sell. Honya Taisho is a very
prestigious award, and past winners
of this award have been made available in various formats for different
types of media.
Author: Tow Ubukata
Tenchi Meisatsu wins the 2010 Honya Taisho award, marking a brilliant achievement!
The reason it became a hit is a sense of unity, like a school festival.
Initially, the idea of publishing Tenchi Meisatsu (Insights into Heaven
and Earth) as a medium-length novel was suggested by its author,
Tow Ubukata. However, while hearing its story line, I felt strongly
that it would be good as a long novel. Consequently, we proposed
that it be serialized in the monthly literary magazine Yasei Jidai over
a half-year period. Since Tow Ubukata had already drawn up the
story’s outline, I met a number of times with those in charge of
the magazine over several months to work out how to convey to
readers and make them empathize with various aspects of the
novel. These included the hero’s personality and his allure, the historical background, and the story’s theme of making a Japanese
calendar. Tenchi Meisatsu was serialized over seven episodes and
was put out as a single volume in November 2009. Ubukata won
the Eiji Yoshikawa Newcomer’s Prize in Literature and the Honya
Taisho (The Booksellers Prize)—which is a great honor—and by
June 2010, the book had sold 380,000 copies.
Because the relationship between the editor and writer is
much closer in Japan compared with overseas, it is quite common for the publisher to be involved in the process of a work’s
creation. In the case of Tenchi Meisatsu, the editing department
was not the only department involved. We worked very effectively
with the promotion and sales departments, and the sense of
togetherness was similar to organizing a school festival. In the
best possible way, the novel’s excellence percolated through the
entire company, which in turn spread to bookshops and then to
readers. Mr. Ubukata personally wrote hundreds of “thank you” letters to bookstores by hand, and actively visited bookstores in
person, which further galvanized the support of everyone engaged
on the sales front. It was a truly enjoyable assignment. I would
like to draw on this experience to help with Tow Ubukata’s future
works, and I hope to see an increase in works by authors who
publish under the Kadokawa imprint.
11
Movie/Visual Business
The Movie/Visual business conducts operations in all aspects, from upstream to downstream, in the movie and visual business field, including planning and production, cinema complex operation, package sales of DVDs and other
merchandise, and licensing of rights for television and other media. The Movie/ Visual business is working to enhance
its capabilities to launch high-quality contents provided by the Publishing business, strengthening the planning and
production departments to improve the quality of movies and other visual contents, and increasing cooperation with
its partners both inside and outside the Kadokawa Group.
Movie
The Unbroken
The Fallen Angel
©2009 “Shizumanu Taiyo” Film Partners
©2010 “Ningen Shikkaku” Film Partners
The Disappearance of
Haruhi Suzumiya
©2009 Nagaru Tanigawa·Noizi Ito/a member of SOS
DVD/BD
The Melancholy of Haruhi
Suzumiya Season 2
Drop
Transporter 3
Unlimited
New Moon
The Twilight Saga
CSI: Season 7
From Our Staff
Tsutomu Tsuchikawa
General Manager
Development & Production
Kadokawa Pictures Inc.
Japan Academy Prize
Photo: Japan Academy Prize Association
The Unbroken wins in three categories at the Japan Academy Prize! (Best Picture, Best Actor, and Best Film Editing)
I was determined to make this movie one whose value would still be recognized
20 or 30 years from now.
The movie The Unbroken is a film that addresses various social
issues based on the best-selling novel by popular Japanese writer
Toyoko Yamazaki. The journey to the making of the movie was a
long one and took a total of ten years, including one point when
the project was abandoned. As the producer, I was determined
to make this movie one whose value would still be recognized 20
or 30 years from now. Therefore, when selecting the cast I needed actors that empathized with the novel. When I watched the
finished movie, I felt that they had fulfilled their roles admirably.
Nonetheless, I felt a constant unease right up until the day of
the movie’s release, wondering whether the market would accept
this serious, socially conscious movie, and what sort of reactions
the viewers would have. On the day of its debut, however, the
cinema was packed with people. On my way home on the train, I
12
overheard a couple who had seen it talking enthusiastically about
the content. With that, I realized that our intended message had
been conveyed loudly and clearly. At the Japan Academy Prize
ceremony, the words The Unbroken rang through the hall when
the name of the winner of the Best Picture was announced. (It
won “best” awards in three categories.) This movie had meant
so much to all of us. Our immense joy showed on our faces, and
some people even cried.
However, a producer’s work does not end when the movie
hits the box office. I have remained busy with sales promotion
ever since, especially when the movie came out on Blu-ray Disc
and DVD in May 2010. In the near future, it will also be screened
on television. I will continue doing my utmost to make The
Unbroken profitable.
Cross-Media Business
The Cross-Media business is adapting and enhancing its advertising, distribution, and mail order business operations
for the Internet Age. It is constructing a next-generation business model for the emerging e-book and video distribution industries using the various content created by the Kadokawa Group and linking new technologies and peripheral
businesses to provide an expanding range of high value-added new services.
Magazines
TV program guides
Town guides
Lifestyle information
magazines
Music information
magazines
Web
Restaurant
information
magazines
Overseas town
guides
Mobile
Walkerplus
e-Book delivery site for
mobile phones, “Chokuyomi”
Mobile-version TV guide,
Development of Social Applications
Baka and Test —Summon the Beasts—
The popularity of Baka and Test—Summon the Beasts— soared with
its release as a TV animation program in January 2010. The original
comic books have sold some 3.8 million copies in Japan (as of
September 2010). The TV release was accompanied by the simultaneous launch of a social application service on mixi, Japan’s largest
social networking website. Following the successful launch of a feebased service in April, a service for mobile devices was added on
August 12. The Group’s first venture as a service provider via a social
application proved a success, and the Group actively began developing additional projects. In September, the Group launched the
mobile game service for The Legend of the Legendary Heroes animated TV series. We plan to continue adding social applications based
on the popular content of the Kadokawa Group as a new revenue
source for the Group.
Story
The progressive Fumizuki Academy is a school with high academic
standards where the students are strictly divided based on the results
of their academic year-end tests. The classroom for the lowest-level
F Class is a collection of rickety tables on rotting tatami mats, which is
a stark contrast to the facilities provided for the high-scoring A Class
students. F Class student Akihisa Yoshii vows to take on the system
for the sake of Mizuki Himeji, an admirable and intelligent girl wrongly
_
_
assigned to F Class, and starts a class-battle called the “War of Shokanju
(Summoned Beasts)” using the students’ special talents to summon
imaginary beasts. Will the F Class be victorious over the powerful higher classes?
mixi Applications
©2010 Kenji Inoue / PUBLISHED BY ENTERBRAIN, INC. / Baka and Test Project All rights reserved
TV Animation
13
Management’s Discussion and Analysis
Principle Accounting Policies and Estimates
The Kadokawa Group prepares its consolidated financial statements in
conformity with accounting principles generally accepted in Japan
(“Japanese GAAP”). In preparing the financial statements, with regard
to matters requiring estimates, the Kadokawa Group considers past
results and future plans and implements accounting procedures based
on reasonable criteria that include the Accounting Standards for
Measurement of Inventories, Accounting Standards for Financial
Instruments, Accounting Standards for Impairment of Fixed Assets,
Accounting Standards for Retirement Benefits, and Accounting
Standards on Tax-Effect Accounting.
Operational Results
During the fiscal year under review, consolidated net sales amounted
to ¥135,923 million, down ¥5,688 million from the previous fiscal year.
Net sales in the Publishing business increased 3.3% year on year, thanks
to healthy sales of media-mix products, comics, and business books.
Net sales in the Cross-Media declined 12.3% due to the continued difficult environment for magazine sales and advertising revenue. Net sales
in the Movie/Visual business decreased 9.2% due to a sluggish DVD
market and the fact that we did not reach our target box-office revenue
for movie releases.
Gross profit declined ¥18 million, to ¥34,866 million, and the gross
margin rose 1.1 percentage points, to 25.7%. This was mainly due to a
reduction in the cost of sales, which compensated for revenue declines
in the Publishing and Cross-Media businesses.
Operating income increased ¥1,599 million, to ¥5,165 million, and
the operating income margin climbed 1.3 percentage points, to 3.8%.
Major factors included cost-cutting efforts, especially with respect to
advertising expenditures in the Publishing and Cross-Media businesses, as well as a decline in amortization and impairment of goodwill.
Income before income taxes and minority interests amounted to
¥5,143 million, compared with a loss before income taxes and minority interests of ¥1,158 million in the previous fiscal year. Extraordinary
income, net of extraordinary losses, increased ¥4,987 million year on
year. This was mainly due to declines in the loss on valuation of investment securities and impairment losses.
The Company posted net income of ¥1,430 million, compared with a
net loss of ¥5,206 million in the previous fiscal year. Net income per share
was ¥56.68.
14
An Analysis of Financial Condition and Operational Results
Financial Condition
At March 31, 2010, the Company had total assets of ¥119,253 million,
down ¥3,923 million from a year earlier. Within this amount, current
assets increased ¥515 million, to ¥74,513 million, and fixed assets
declined ¥4,438 million, to ¥44,740 million.
Within current assets, cash and deposits and marketable securities
declined ¥2,673 million year on year, because of repayments of shortterm borrowings and the current portion of long-term debt, while notes
and accounts receivable and inventories rose ¥3,808 million, thanks to
increases in net sales in February and March 2010.
Regarding fixed assets, long-term time deposits, and the insurance
reserve declined ¥3,036 million owing to repayments of the current portion of long-term debt.
Total liabilities decreased ¥3,874 million, to ¥51,792 million. Current
liabilities declined ¥15,525 million, to ¥35,517 million, and long-term liabilities increased ¥11,651 million, to ¥16,275 million.
In current liabilities, short-term borrowings and the current portion
of long-term debt declined ¥15,346 million owing to repayments and
redemptions.
As for long-term liabilities, bonds with share subscription rights
increased ¥11,000 million, owing to the Company’s issuance of Japanese
yen convertible bonds—bonds with share subscription rights—due in
2014.
Net assets at the fiscal year-end totaled ¥67,461 million, down ¥49
million from a year earlier. Within this amount, shareholders’ equity
increased ¥673 million, to ¥70,509 million; valuation and translation
adjustments declined ¥756 million, to minus ¥3,781 million; and minority interests rose ¥34 million, to ¥733 million.
Shareholders’ equity increased ¥673 million, owing to a rise in
retained earnings stemming from the posting of net income and the
appropriation of surplus.
Regarding valuation and translation adjustments, the Company
recorded a ¥427 million increase in the net unrealized holding loss on
securities, due to a decline in the market valuation of listed stocks held,
as well as a ¥329 million deterioration in foreign currency translation
adjustments owing to the appreciation of the yen against the U.S. dollar.
The shareholders’ equity ratio increased 1.8 percentage points,
to 56.0%.
15
Management’s Discussion and Analysis
Cash Flows
Cash and cash equivalents at March 31, 2010, amounted to ¥21,748
million, down ¥4,830 million from a year earlier. Main factors were outflows that included redemption of bonds, repayments of short-term
borrowings, and payment for acquisition of interests in subsidiaries
newly consolidated.
Cash Flows from Operating Activities
Net cash provided by operating activities amounted to ¥1,990 million,
compared with ¥37 million in net cash used in operating activities in the
previous fiscal year. The primary factor was a substantial improvement
in income before income taxes and minority interests.
Cash Flows from Investing Activities
Net cash used in investing activities amounted to ¥980 million, compared with ¥167 million in net cash provided by investing activities in
the previous fiscal year. Major factors were purchases of investments in
subsidiaries and purchases of property, plant, and equipment.
Cash Flows from Financing Activities
Net cash used in financing activities amounted to ¥5,594 million, from
¥2,193 million in the previous fiscal year. This was mainly because of
redemption of bonds and repayments of short-term borrowings.
Trends in cash flow indicators are as follows:
Trends in cash flow indicators
Shareholders’ equity ratio (%)
Shareholders’ equity ratio at market value (%)
Interest-bearing debt to cash flow ratio (years)
Interest coverage ratio (times)
March 2006
March 2007
March 2008
March 2009
March 2010
53.0
64.4
1.2
42.6
57.9
68.8
1.8
26.7
55.3
44.9
0.5
90.0
54.2
42.8
—
—
56.0
44.7
6.1
13.7
Notes
1. The various indicators were calculated using the following calculation methods.
Shareholders’ equity ratio: Shareholders’ equity/total assets
Shareholders’ equity ratio at market value: Total market capitalization/total assets
Interest-bearing debt to cash flow ratio: Interest-bearing debt/operating cash flow
Interest coverage ratio: Operating cash flow/interest expense
2. All indicators were calculated using consolidated financial figures.
3. Total market capitalization is calculated by multiplying the fiscal year-end closing stock price by the total number of shares outstanding (excluding treasury shares) at the end of the fiscal year.
4. Interest-bearing debt includes all debt that pays interest as listed on the Consolidated Balance Sheets.
5. Operating cash flow refers to cash flows from operating activities on the Consolidated Statements of Cash Flows. Interest expense refers to
the amount of interest paid as listed on the Consolidated Statements of Cash Flows.
6. Interest-bearing debt to cash flow ratio and interest coverage ratio for the year ended March 2009 are omitted because operating cash flow
was negative.
16
Five-Year Summary of Selected Financial Data
Thousands of U.S.
dollars (Note 1)
Millions of yen
2010
2009
2008
2007
2006
2010
¥ 135,923
¥ 141,611
¥ 150,790
¥ 149,883
¥ 150,256
$ 1,460,909
73,476
30,803
23,032
8,612
71,158
33,919
26,266
10,268
72,033
41,712
29,036
8,009
70,942
41,658
30,613
6,670
62,908
44,863
36,961
5,524
789,725
331,073
247,549
92,562
Operating Income
5,165
3,566
5,133
7,393
6,812
55,514
Income (Loss) before Income
Taxes and Minority Interests
5,143
(1,158)
1,821
9,280
4,321
55,277
Net Income (Loss)
1,430
(5,206)
(2,599)
3,899
1,323
15,370
57.87%
2.61
4.50
53.01%
0.88
1.67
For the Year:
Net Sales
Sales by Segment:
Publishing
Movie/Visual
Cross Media
Others
Percent
55.96%
1.18
2.14
Shareholders’ Equity Ratio
Return on Assets
Return on Equity
54.24%
—
—
55.33%
—
—
Thousands of U.S.
dollars (Note 1)
Millions of yen
At Year-End:
Net Assets (Note 2)
Total Assets
¥
67,461
119,253
¥
67,510
123,176
¥
78,280
138,317
¥
88,292
149,839
¥
80,333
148,375
$
725,075
1,281,739
U.S. dollars
(Note 1)
Yen
Per Share:
Net Assets
Net Income (Loss)
-basic
-diluted
¥ 2,645.78
¥ 2,649.06
¥ 2,971.31
¥ 3,239.48
¥ 3,153.37
56.68
54.58
(203.94)
—
(99.59)
—
154.13
140.64
52.20
47.58
$
28.44
0.61
0.59
Notes 1: U.S.dollar amounts have been translated from yen, for convenience only, at the rate of ¥93.04=U.S.$1.00, the approximate exchange rate prevailing
on the Tokyo Foreign Exchange Market as of March 31, 2010.
2: Net assets as of March 31, 2006 have been reclassified using the new accounting standard, which was effective April 1, 2006.
17
Consolidated Balance Sheets
March 31, 2010, 2009 and 2008
Thousands of U.S.
dollars (Note 1)
Millions of yen
ASSETS
2010
2008
2009
2010
Current Assets:
Cash and cash equivalents (Notes 4 and 5)
¥
21,748
¥
26,578
¥
29,145
$
233,749
—
499
998
—
Notes and accounts receivable (Note 4)
34,830
33,119
33,448
374,355
Inventories (Note 6)
Marketable securities (Note 5)
11,279
9,182
9,214
121,227
Deferred tax assets (Note 9)
1,716
1,655
2,183
18,444
Others (Note 7)
5,103
3,149
3,014
54,847
(184)
(101)
74,513
73,998
77,901
800,870
Land (Notes 8 and 18)
10,532
10,509
10,911
113,199
Buildings and structures (Notes 7 and 8)
Less: Allowance for doubtful accounts
Total Current Assets
(163)
(1,752)
Property and Equipment:
15,384
15,350
17,482
165,348
Furniture and fixtures (Note 8)
4,287
4,410
4,305
46,077
Others
1,929
1,642
1,693
20,733
32,132
31,911
34,391
345,357
(13,094)
(12,387)
(11,978)
(140,735)
19,038
19,524
22,413
204,622
12,670
14,017
21,114
136,178
Goodwill (Notes 8 and 19)
1,078
602
1,739
11,586
Deferred tax assets (Note 9)
1,149
932
912
12,350
11,269
14,498
14,640
121,120
(395)
(402)
25,702
29,654
38,003
276,247
¥ 119,253
¥ 123,176
¥ 138,317
$ 1,281,739
Total
Less: Accumulated depreciation
Net Property and Equipment
Investments and Other Non-Current Assets:
Investment securities (Notes 4 and 5)
Others (Notes 7 and 8)
Less: Allowance for doubtful accounts
Total Investments and Other Non-Current Assets
Total Assets
The accompanying notes are an integral part of these balance sheets.
18
(464)
(4,987)
Thousands of U.S.
dollars (Note 1)
Millions of yen
LIABILITIES AND NET ASSETS
Current Liabilities:
Short-term borrowings (Notes 4 and 7)
Current portion of long-term debt (Notes 4 and 7)
Notes and accounts payable (Note 4)
Income taxes payable (Notes 4 and 9)
Allowance for employees’ bonuses
Allowance for sales returns
Others
Total Current Liabilities
Long-Term Liabilities:
Long-term debt (Notes 4 and 7)
Deferred tax liabilities (Note 9)
Employees’ severance and retirement benefits (Note 13)
Others
Total Long-Term Liabilities
Contingent Liabilities
Net Assets (Notes 10 and 11):
Shareholders’ Equity:
Common stock
Authorized:
100,000,000 shares
Issued:
27,260,800 shares
in 2010, 2009 and 2008
Capital surplus
Retained earnings
Treasury stock, at cost
Total Shareholders’ Equity
Valuation and Translation Adjustments:
Net unrealized holding gain (loss) on securities
Revaluation reserve for land (Note 18)
Foreign currency translation adjustments
Total Valuation and Translation Adjustments
Minority Interests
Total Net Assets
Total Liabilities and Net Assets
2010
¥
2008
2009
399
65
18,702
2,733
1,442
3,820
8,356
35,517
¥
4,150
11,660
19,285
2,230
1,178
3,305
9,234
51,042
¥
2010
4,021
378
22,325
3,114
1,240
3,202
9,602
43,882
$
4,288
699
201,010
29,374
15,499
41,058
89,811
381,739
11,613
660
2,461
1,541
16,275
939
677
2,008
1,000
4,624
12,754
803
1,828
770
16,155
124,817
7,094
26,451
16,563
174,925
—
—
—
—
26,331
27,704
22,353
(5,879)
70,509
26,331
27,705
21,680
(5,880)
69,836
26,331
27,705
28,013
(4,778)
77,271
283,007
297,764
240,252
(63,188)
757,835
(2,012)
(257)
(1,512)
(3,781)
(1,585)
(257)
(1,183)
(3,025)
269
(586)
(422)
(739)
(21,625)
(2,762)
(16,251)
(40,638)
699
67,510
¥ 123,176
1,748
78,280
¥ 138,317
733
67,461
¥ 119,253
7,878
725,075
$ 1,281,739
19
Consolidated Statements of Operations
Years ended March 31, 2010, 2009 and 2008
Thousands of U.S.
dollars (Note 1)
Millions of yen
Net Sales
2010
2009
2008
2010
¥ 135,923
¥ 141,611
¥ 150,790
$ 1,460,909
101,057
34,866
106,727
34,884
112,939
37,851
1,086,167
374,742
29,701
5,165
31,318
3,566
32,718
5,133
319,228
55,514
345
(137)
(230)
(22)
5,143
604
(104)
(5,224)
(4,724)
(1,158)
738
(112)
(3,938)
(3,312)
1,821
3,708
(1,472)
(2,473)
(237)
55,277
3,840
(184)
57
1,430
3,465
507
76
(5,206)
4,242
(83)
261
(2,599)
41,273
(1,979)
613
15,370
Cost of Sales
Gross Profit
Selling, General and Administrative Expenses
Operating Income
Other Income (Expenses)
Interest and dividend income
Interest expenses
Other-net (Notes 8 and 15)
Net other expenses
Income (Loss) before Income Taxes and Minority Interests
Income Taxes (Note 9)
Current
Deferred
Minority Interests in Consolidated Subsidiaries
Net Income (Loss)
¥
¥
¥
Yen
2010
Per Share of Common Stock (Note 2):
Net income (loss)-basic
-diluted
Cash dividends applicable to the year
The accompanying notes are an integral part of these statements.
20
¥
U.S.dollars (Note 1)
2009
56.68
54.58
¥ (203.94)
—
30.00
30.00
$
2010
2008
¥
(99.59)
—
31.00
$
0.61
0.59
0.32
Consolidated Statements of Changes in Net Assets
Millions of yen
Common
stock
Balance at March 31, 2007
Cash dividends paid
Net loss
Purchases of treasury stock
Disposal of treasury stock
Net changes
Cash dividends paid
Net loss
Reversal of reserve for land
Net changes
Cash dividends paid
Net income
Net changes
Capital
surplus
Retained
earnings
Treasury
stock
Net unrealized
Foreign
Revaluation
holding gain
currency
reserve for
(loss) on
translation
land
securities
adjustments
¥ 26,331 ¥ 27,747 ¥ 31,442 ¥ (1,870) ¥ 2,732 ¥
(830)
(2,599)
(3,007)
(42)
99
(2,463)
27,705
26,331
28,013
(4,778)
269
(798)
(5,206)
(1,102)
(0)
0
(329)
(1,854)
27,705
26,331
(5,880)
(1,585)
21,680
(757)
1,430
(0)
(1)
1
(427)
¥ 26,331 ¥ 27,704 ¥ 22,353 ¥ (5,879) ¥ (2,012) ¥
Minority
interests
Total
Net Assets
(586) ¥
(586)
329
(257)
(257)
919 ¥ 1,577 ¥ 88,292
(830)
(2,599)
(3,007)
57
(1,341)
171
(3,633)
(422)
1,748
78,280
(798)
(5,206)
(1,102)
0
(329)
(761)
(1,049)
(3,335)
(1,183)
699
67,510
(757)
1,430
(0)
0
(329)
34
(722)
¥ (1,512) ¥
733 ¥ 67,461
Thousands of U.S. dollars (Note 1)
Common
stock
Cash dividends paid
Net income
Net changes
Capital
surplus
Retained
earnings
Treasury
stock
Net unrealized Revaluation
holding loss reserve for
on securities
land
Foreign
currency
translation
adjustments
Minority
interests
Total
Net Assets
$283,007 $297,775 $233,018 $ (63,199) $ (17,036) $ (2,762) $ (12,715) $ 7,513 $725,601
(8,136)
(8,136)
15,370
15,370
(0)
(0)
(11)
11
0
(4,589)
(3,536)
365
(7,760)
$283,007 $297,764 $240,252 $(63,188) $(21,625) $ (2,762) $(16,251) $ 7,878 $725,075
21
Consolidated Statements of Cash Flows
Thousands of U.S.
dollars (Note 1)
Millions of yen
2010
Cash Flows from Operating Activities:
Income (loss) before income taxes and minority interests
Adjustments to reconcile income (loss) before income taxes
and minority interests to net cash provided by (used in)
operating activities:
Depreciation and amortization
Equity in losses of affiliated companies
Loss on devaluation of investment securities
Impairment loss of long-lived assets (Note 8)
Decrease (increase) in notes and accounts receivable
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable
Other—net
Subtotal
Interest and dividends received
Interest paid
Income taxes paid
Net Cash Provided by (Used in) Operating Activities
¥
Cash Flows from Investing Activities:
Net changes in time deposit
Purchases of marketable securities
Proceeds from sales of marketable securities
Purchases of investment securities
Proceeds from sales of investment securities
Payment for acquisition of interests in subsidiaries
newly consolidated (Note 3)
Purchases of property and equipment
Other—net
Net Cash Provided by (Used in) Investing Activities
Cash Flows from Financing Activities:
Net changes in short-term borrowings
Proceeds from issuance of long-term debt
Repayment of long-term debt
Cash dividends paid
Other—net
Net Cash Used in Financing Activities
Effect of Exchange Rate Changes
Net Decrease in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year
22
¥
5,143
2008
2009
¥
(1,158)
¥
1,821
2010
$
55,277
2,243
627
155
145
253
(1,505)
(1,190)
(1,037)
4,834
351
(145)
(3,050)
1,990
3,341
510
4,109
2,253
(226)
(78)
(2,858)
(1,967)
3,926
664
(95)
(4,532)
(37)
4,773
197
450
4,263
2,221
980
832
(2,160)
13,377
681
(122)
(2,978)
10,958
24,108
6,739
1,666
1,558
2,719
(16,176)
(12,790)
(11,145)
51,956
3,773
(1,558)
(32,782)
21,389
(355)
—
500
(412)
1,224
(1,922)
(56)
(1,998)
2,500
(265)
1,367
—
(3,698)
(1,993)
1,000
(8,967)
745
—
(3,816)
—
5,374
(4,428)
13,156
(20,658)
(752)
737
(980)
(1,506)
125
167
(1,525)
(1,692)
(16,130)
(8,083)
7,922
(10,533)
(3,833)
10,990
(12,015)
(0)
(757)
21
(5,594)
129
—
(368)
(1,075)
(798)
(81)
(2,193)
—
249
(563)
(3,007)
(830)
191
(3,960)
(41,197)
118,121
(129,138)
(0)
(8,136)
225
(60,125)
(246)
(4,830)
26,578
21,748
(504)
(2,567)
29,145
26,578
(1,329)
(10,461)
39,606
¥ 29,145
(2,644)
(51,913)
285,662
233,749
¥
$
Notes to Consolidated Financial Statements
1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements have
The accompanying consolidated financial statements of
been restructured and translated into English from the consoliKadokawa Group Holdings, Inc. (“the Company”) and its
dated financial statements of the Company prepared in accorconsolidated subsidiaries have been prepared in accordance
dance with Japanese GAAP and filed with the appropriate Local
with the provisions set forth in the Japanese Financial InstruFinance Bureau of the Ministry of Finance as required by the
ments and Exchange Law and its related accounting regulaJapanese Financial Instruments and Exchange Law and its related
tions, and in conformity with accounting principles generally
accounting regulations. Certain supplementary information
accepted in Japan (“Japanese GAAP”), which are different in
included in the statutory Japanese language consolidated financertain respects as to application and disclosure requirements
cial statements, but not required for fair presentation, is not
from International Financial Reporting Standards.
presented in the accompanying consolidated financial statements.
Prior to the year ended March 31, 2009, the accounts of
The translation of the Japanese yen amounts into U.S.
consolidated overseas subsidiaries are based on their accountdollars is included solely for the convenience of readers outside
ing records maintained in conformity with generally accepted
Japan, using the prevailing exchange rate at March 31, 2010,
accounting principles prevailing in the respective countries of
which was ¥93.04 to U.S. $1.00. The convenience translation
domicile. As discussed in Note 2. (s), the accounts of consolishould not be construed as representation that the Japanese
dated overseas subsidiaries for the years ended March 31,
yen amounts have been, could have been, or could in the
2010 and 2009 are prepared in accordance with either Interfuture be, converted into U.S. dollars at this or any other rate
national Financial Reporting Standards with adjustments for
of exchange.
the specified six items as applicable or Japanese GAAP.
2. Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and all of its subsidiaries. All significant intercompany transactions, balances and unrealized profits or
losses have been eliminated in consolidation.
The investments in affiliated companies (all 20% to 50%
owned and certain others 15% to 20% owned) are accounted
for by the equity method.
Certain subsidiaries have their fiscal year-end at December
31 and their operating results and financial position are consolidated by making appropriate adjustments of inter-company
transactions for a three-month period.
The excess cost of the Company’s investment in subsidiaries
over the underlying net assets of these companies at the date
of acquisition is recorded in goodwill, and amortized over five
years on a straight-line basis.
In the elimination of investments in subsidiaries, the assets
and liabilities of the subsidiaries, including the portion attributable to minority shareholders, are recorded based on the fair
value at the time the Company acquired control of the respective subsidiaries.
(b) Derivatives and Hedge Accounting
The accounting standard for financial instruments requires
companies to state derivative financial instruments at fair value
and to recognize changes in the fair value as gains or losses
unless derivative financial instruments are used for and qualify as hedges, in which case the instrument gains and losses
are deferred until the related losses or gains on the hedged
items are also recognized.
However, if interest rate swap contracts are used as
hedges and meet certain hedging criteria, the net amount to
be paid or received under the interest rate swap contract is
reported as part of net interest expense.
(c) Foreign Currency Translation
Assets and liabilities denominated in foreign currencies are
translated into Japanese yen at the rate prevailing at the
balance sheet date. Resulting exchange gains and losses are
included in other income (expenses).
The financial statements of overseas subsidiaries are translated into Japanese yen using the year-end rate except for
shareholders’ equity using the historical rate.
(d) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, readily available deposits and short-term highly liquid investments with
maturities not exceeding three months at the time of purchase.
(e) Marketable Securities and Investment Securities
Upon applying the accounting standard for financial instruments, all companies are required to examine the intent of
holding each security and classify those securities as (a) securities held for trading purposes (hereafter, “trading securities”),
(b) debt securities intended to be held to maturity (hereafter,
“held-to-maturity debt securities”), (c) equity securities issued
by subsidiaries and affiliated companies, and (d) for all other
securities that are not classified in any of the above categories
(hereafter, “available-for-sale securities”).
The Company and its subsidiaries (the “Companies”) don’t
have trading securities. Held-to-maturity debt securities are
stated at amortized cost.
The other securities with available fair market values are
stated at fair market value. Unrealized gains and unrealized
losses on these securities are reported, net of applicable
income taxes, as a separate component of net assets. Cost of
such securities for sales is computed using the moving-average method. Derivatives, which are embedded in hybrid financial instruments and cannot be accounted separately from the
23
host contracts, are stated at fair market value and their valuation gains (losses) are recorded as other income (expenses).
The other securities without available fair market values are
stated at cost determined by the moving-average method.
(l) Allowance for Sales Returns
For certain subsidiaries, an allowance for sales returns is
provided for estimated losses on sales returns subsequent to
the balance sheet date based on the historical sales returns.
(f) Inventories
Merchandise and raw materials are stated at cost determined
by the first-in first-out method. Finished products and supplies
are stated at cost determined by the weighted-average method.
Films and work-in-process are stated at cost determined by the
specific identification method. Costs of films are amortized using
the method prescribed by the Japanese tax laws.
Prior to April 1, 2008, inventories of the Company and
consolidated domestic subsidiaries were stated at cost. As
discussed in Note 2 (r), effective April 1, 2008, the Company
and consolidated domestic subsidiaries adopted a new
accounting standard for measurement of inventories and state
the inventories at the lower of cost or net realizable value.
(m) Employees’ Severance and Retirement Benefits
The Companies provide allowance for employees’ severance
and retirement benefits at the balance sheet date based on the
estimated amounts of the projected benefit obligation and the
fair value of the plan assets at that date.
Actuarial gains and losses are amortized using the straightline method over five years commencing with the succeeding period.
(g) Property and Equipment
Property and equipment are stated at cost. The Company and
its domestic subsidiaries compute depreciation using primarily
the declining-balance method. Buildings (excluding building
fixtures) acquired after March 31, 1998 are depreciated using
the straight-line method.
Some overseas subsidiaries compute depreciation using
the straight-line method based on the accounting standard
prevailing in the country of domicile.
Property and equipment capitalized under finance lease
arrangements is depreciated using the straight-line method
over the lease term of the respective assets.
The ranges of useful lives for computing depreciation are
generally as follows:
Buildings and structures
3 to 50 years
Furniture and fixtures
2 to 20 years
(h) Amortization
Software used by the Companies is amortized using the
straight-line method over the estimated useful lives (five years),
and other intangible assets are amortized using the straightline method. Amortization of long-term prepaid expenses is
computed using the straight-line method. Software, other
intangible assets and long-term prepaid expenses are included
in other non-current assets.
(i) Impairment Loss of Long-Lived Assets
Accumulated loss on impairment is deducted directly from the
acquisition costs of the related assets.
(j) Allowance for Doubtful Accounts
The allowance for doubtful accounts is provided in an amount
sufficient to cover possible losses on collection by estimating
individually uncollectible amounts and applying a percentage
based on the past credit loss experience to the remaining
accounts.
(k) Allowance for Employees’ Bonuses
The Companies provide allowance for employees’ bonuses
based on estimated amounts to be paid in the subsequent
period.
24
(Change in accounting policy)
Effective from the fiscal year ended March 31, 2010, the
Company and consolidated domestic subsidiaries adopted the
“Partial Amendments to Accounting Standard for Retirement
Benefits (Part 3)” (Accounting Standards Board of Japan
(“ASBJ”) Statement No.19 issued on July 31, 2008).
The new accounting standard requires domestic companies
to use the rate of return on long-term government or gilt-edged
bonds as of the end of the fiscal year for calculating the
projected benefit obligation of a defined-benefit plan.
Previously, domestic companies were allowed to use a
discount rate determined taking into consideration fluctuations
in the yield of long-term government or gilt-edged bonds over
a certain period.
The change had no effect on the consolidated statement
of income for the year ended March 31, 2010.
The difference in the projected benefit obligations at March
31, 2010 calculated pursuant to the new accounting standard
and the previous accounting standard amounted to ¥12 million
($129 thousand), which will be recognized as loss in the periods commencing after March 31, 2010.
(n) Bond Issue Costs
All bond issue costs are charged to income when incurred and
included in other expenses.
(o) Income Taxes
Income taxes comprise corporate, enterprise and inhabitant
taxes. Deferred income taxes are recognized for temporary
differences between the financial statement basis and the tax
basis of assets and liabilities.
(p) Net Income (Loss) Per Share
Net income (loss) per share of common stock is based on the
weighted average number of shares outstanding during the year.
Diluted net income per share is based on the weighted
average number of shares of common stock issued and dilutive common stock equivalents. The share subscription rights
are considered as common stock equivalents and are included
in the calculation of earnings per share when they are dilutive.
(q) Accounting for Leases
Prior to April 1, 2008, the Company and consolidated domestic
subsidiaries accounted for finance leases which do not transfer
the ownership of the leased property to the lessee as operating
leases with disclosures of certain “as if capitalized” information.
As discussed in Note 2 (t), the Company and consolidated
domestic subsidiaries adopted a new accounting standard and
capitalized finance leases which commenced after March 31,
2008, except for certain immaterial or short-term finance
leases, which are accounted for as operating leases.
(r) Accounting Standard for Inventories
On July 5, 2006, ASBJ issued ASBJ Statement No. 9, “Accounting Standard for Measurement of Inventories.” As permitted
under the superseded accounting standard, the Company and
consolidated domestic subsidiaries previously stated inventories at cost. The new accounting standard requires that inventories held for sale in the ordinary course of business be
measured at the lower of cost or net realizable value, which is
defined as selling price less estimated additional manufacturing
costs and estimated direct selling expenses. Replacement cost
may be used in lieu of the net realizable value, if appropriate.
There was no effect as a result of this change on the
consolidated financial statements for the year ended March
31, 2009.
(s) Unification of Accounting Policies Applied to Foreign
Subsidiaries for Consolidated Financial Statements
On March 17, 2006, ASBJ issued Practical Issues Task Force
No.18 “Practical Solution on Unification of Accounting Policies
Applied to Foreign Subsidiaries for Consolidated Financial
Statements” (“PITF No.18”).
PITF No.18 requires that accounting policies and procedures applied by a parent company and its subsidiaries to similar transactions and events under similar circumstances should,
in principle, be unified for the preparation of the consolidated
financial statements.
PITF No.18, however, as a tentative measure, allows a
parent company to prepare consolidated financial statements
using foreign subsidiaries’ financial statements prepared in
accordance with either International Financial Reporting Standards or U.S. generally accepted accounting principles.
In this case, adjustments for the following six items are
required in the consolidation process so that their effects on
net income are accounted for in accordance with Japanese
GAAP unless the effect is not material.
1. Goodwill not subject to amortization
2. Actuarial gains and losses of defined-benefit retirement
plans recognized outside profit or loss
3. Consolidated Statement of Cash Flows
For the year ended March 31, 2010, the Company newly
consolidated subsidiaries due to the acquisition of the shares.
The assets and liabilities at the beginning of the consolidation
3. Capitalized expenditures for research and development
activities
4. Fair value measurement of investment properties, and
revaluation of property, plant and equipment and intangible assets
5. Retrospective treatment of a change in accounting policies
6. Accounting for net income attributable to minority interests
There was no effect as a result of the adoption of PITF
No.18 on the consolidated financial statements.
(t) Accounting Standards for Lease Transactions as
Lessee
Prior to April 1, 2008, the Company and consolidated domestic
subsidiaries accounted for finance leases which do not transfer
ownership of the leased property to the lessee as operating
leases with disclosure of certain “as if capitalized” information
in the notes to the consolidated financial statements.
On March 30, 2007, ASBJ issued Statement No.13,
“Accounting Standard for Lease Transactions” and Guidance
No.16, “Guidance on Accounting Standard for Lease Transactions.” The new accounting standards require that all finance
lease transactions be treated as capital leases.
Effective April 1, 2008, the Company and consolidated
domestic subsidiaries adopted the new accounting standards
for finance leases commencing after March 31, 2008 and capitalized assets used under such leases, except for certain immaterial or short-term finance leases, which are accounted for as
operating leases.
As permitted, finance leases which commenced prior to
April 1, 2008 and have been accounted for as operating leases,
continue to be accounted for as operating leases with disclosure of certain “as if capitalized” information.
The effect of this change on the consolidated financial statements was insignificant.
(u) Reclassification and Restatement
Certain prior year amounts have been reclassified to conform
to the current year presentation.
The reclassifications had no effect on previously reported
results of operations or retained earnings.
period of newly consolidated subsidiaries utilized in the computation of consolidation for the year ended March 31, 2010 and
the net acquisition cost of investments are as follows:
Millions of yen
Current assets
Non-current assets
Goodwill
Current liabilities
Long-term liabilities
Negative goodwill
Acquisition costs
Cash and cash equivalents of the subsidiaries
Loan to subsidiaries until deemed date of acquisition
Net acquisition cost of investments
¥
¥
4,549
543
809
(1,567)
(578)
(408)
3,348
(1,486)
60
1,922
Thousands of
U.S. dollars
$
48,893
5,836
8,695
(16,842)
(6,212)
(4,385)
35,985
(15,972)
645
$ 20,658
25
4. Financial Instruments
Effective from the fiscal year ended March 31, 2010, the
Company and consolidated domestic subsidiaries adopted the
revised accounting standard, “Accounting Standard for Financial Instruments” (ASBJ Statement No.10 revised on March
10, 2008) and the “Guidance on Disclosures about Fair Value of
Financial Instruments” (ASBJ Guidance No.19 revised on
March 10, 2008).
Information on financial instruments for the year ended
March 31, 2010 required pursuant to the revised accounting
standards is as follows.
A. Qualitative Information on Financial Instruments
(a) Policies for using Financial Instruments
The Companies draw up projections for working capital and
investment in order to carry out Publishing, Movie/ Visual and
Cross-Media Business. The Companies raise the long-term
funds through bonds and stock issuances, the short-term
working capital through bank loans.
The Companies manage temporary surplus through financial instruments with low risk and have a policy not to conclude
any speculative transactions.
(b) Details of Financial Instruments and Associated Risk
Trade receivables—trade notes and accounts receivable—are
exposed to credit risk in relation to customers. Trade receivables for distributors which mediate bookstores account for
the large part in the Companies and their amounts are quite
high level even though the credit risk is recognized as low. The
Companies are exposed to decreasing risk of share value in
relation to investment securities which are owned in order to
keep good business relationships.
Almost all the trade payables—trade notes and accounts
payable—are settled within one year.
Loan and bonds for capital and business investment are
redeemed within five years after the fiscal year ended.
Derivative transactions are interest rate swap transactions
for hedging of interest rate fluctuation risk.
(c) Risk Management System Relating to
Financial Instruments
<Credit risk (risk in relation to default of trading partners)
management>
The Companies periodically monitor credit status of main business partners as to the trade receivables. The companies also
manage due dates and balances of the trade receivables as
well as attempt to grasp the doubtful accounts and to reduce
them if the financial situations of the business partners
become worse.
26
With regard to the held-to-maturity debt securities, the
credit risk is minimal because the Companies invest only
bonds with high credit ratings in accordance with the stipulation of fund management.
As for the derivative transactions, the Companies contract
with banks with high credit ratings so that the companies
recognize that there is little credit risk due to the default by the
contractors.
<Market risk (fluctuation risk in relation to interest and market
price) management>
The Companies use interest rate swaps to control fluctuation
risk of interest in relation to loans.
As for investment securities, the Companies periodically
grasp the market price and financial situation of the issuer (business partners). And also, for investment securities excluding
held-to-maturity debt securities, the Companies consecutively
reconsider shareholding status depending on the relationship
with the business partners.
With respect to the execution and managing of derivative
transactions, the finance division must obtain approval from
an authorized person in accordance with the rule of the
companies.
<Management of liquidity risk in relation to raising fund (default
risk at due dates)>
The Companies adopt a Cash-Management-System, and the
treasury division prepares and renews financial plans in a timely
manner based on the reports by the consolidated subsidiaries
which participate in this system as well as manages liquidity
risk by keeping liquidity adequately in hand.
Bonds payable are convertible-bonds with five-year-maturities and the Companies are exposed to liquidity risk of
redemption of bonds without being exercised. The Companies
manage the risk by keeping liquidity in hand with the method
stated above.
(d) Supplementary Explanation on Fair value of
Financial Instruments
Fair values of financial instruments are based on market price
and calculated reasonably when there is no market price. Since
fluctuating factors are incorporated in calculating the relevant
fair values, such fair values may fluctuate depending on the
different assumptions. The notional amounts and other information described in the Note 14 “Derivative Financial Instruments and Hedging Transactions” do not indicate the amounts
of market risk exposed to derivative transactions.
B. Fair Values of Financial Instruments
The book value on the consolidated balance sheet, fair values and its differences at March 31, 2010 are as follows. Financial instruments for which it is difficult to measure the fair value are not included in the following chart. Please see Note 3:
Millions of yen
Book value
March 31, 2010
Cash and cash equivalents
Notes and accounts receivable
Investment securities
Total
Notes and accounts payable
Short-term borrowings and current portion of long-term debt
Income taxes payable
Long-term debt
Total
¥
¥
21,748
34,830
8,149
64,727
18,702
464
2,733
11,613
33,512
Fair Value
¥
¥
21,748
34,830
7,853
64,431
18,702
464
2,733
11,618
33,517
Difference
¥
¥
—
—
(296)
(296)
—
—
—
5
5
Thousands of U.S. dollars
Book value
March 31, 2010
Notes and accounts receivable
Total
Notes and accounts payable
Short-term borrowings and current portion of long-term debt
Income taxes payable
Long-term debt
Total
$ 233,749
374,355
87,586
695,690
201,010
4,987
29,374
124,817
$ 360,188
Fair Value
$ 233,749
374,355
84,405
692,509
201,010
4,987
29,374
124,871
$ 360,242
Difference
$
$
—
—
(3,181)
(3,181)
—
—
—
54
54
Note 1: Fair value measurement of financial instruments
(a) Cash and cash equivalents and Notes and accounts receivables
The book value approximates fair value because of the short maturity of these instruments.
(b) Investment securities
The fair value of equity securities equals quoted market price, if available. The fair value of debt securities equals quoted
market price or provided price by financial institutions. Investment securities based on holding purpose are described in
Note 5 “Securities.”
(c) Notes and accounts payable, Short-term borrowings and current portion of long-term debt and Income taxes payable
The book value approximates fair value because of the short maturity of these instruments.
(d) Long-term debt
The fair value of bonds payable is based on the present value of the total amount of principal and interest discounted by an
interest rate determined taking into account the remaining term of each bond and current credit risk.
The fair value of long-term loans payable is based on the present value of the total amount of principal and interest
discounted by the interest rate to be applied if similar new loans are made.
Note 2: Derivative Financial Instruments
For information on derivative financial instruments, please see Note 14 “Derivative Financial Instruments and Hedging
Transactions.”
Note 3: Financial instruments for which the fair value is extremely difficult to measure.
March 31, 2010
Non-listed equity securities issued by affiliated companies
Non-listed equity securities other than the above
Total
Investments in business limited partnership
Millions of yen
¥
1,336
3,121
4,457
64
Thousands of
U.S. dollars
$
14,359
33,545
47,904
688
Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial instruments
are not included in the above table.
27
Note 4: Planned redemption amounts after the balance sheet date for monetary assets and investment securities are as follows:
Millions of yen
Due within
one year
Notes and accounts receivables
Held-to-maturity debt securities
Available-for-sale securities
Total
¥
¥
21,748
34,830
—
—
—
56,578
Due after one year
through five years
¥
¥
—
—
—
—
1,000
1,000
Due after
ten years
Due after five years
through ten years
¥
—
—
—
930
—
930
¥
¥
¥
—
—
—
930
—
930
Due within
one year
Notes and accounts receivables
Held-to-maturity debt securities
Available-for-sale securities
Total
$ 233,749
374,355
—
—
—
$ 608,104
Due after one year
through five years
$
$
—
—
—
—
10,748
10,748
Due after
ten years
Due after five years
through ten years
$
—
—
—
9,996
—
9,996
$
$
$
—
—
—
9,996
—
9,996
5. Securities
A. The following tables summarize acquisition costs, book values and fair values of securities with available fair values as of
March 31, 2010, 2009 and 2008:
(a) Held-to-Maturity Debt Securities:
Millions of yen
Book
value
March 31, 2010
Securities with available fair values:
Corporate bonds
Others
March 31, 2009
Corporate bonds
Others
March 31, 2008
Corporate bonds
Others
¥
—
1,861
Unrealized
gains
¥
—
—
Fair
value
Unrealized
losses
¥
—
296
¥
—
1,565
499
2,964
0
1
—
221
499
2,744
998
7,499
—
1
1
2,228
997
5,272
Book
value
March 31, 2010
Corporate bonds
Others
28
$
—
20,002
Unrealized
gains
$
—
—
Fair
value
Unrealized
losses
$
—
3,181
$
—
16,821
(b) Available-for-Sale Securities:
Millions of yen
Acquisition
cost
March 31, 2010
Equity securities
Bonds
March 31, 2009
Equity securities
Bonds
March 31, 2008
Equity securities
Bonds
¥
8,132
38
Unrealized
gains
¥
388
131
Book
value
Unrealized
losses
¥
2,401
—
¥
6,119
169
8,508
153
984
—
2,555
111
6,937
42
9,575
—
1,853
—
1,439
—
9,989
—
Acquisition
cost
March 31, 2010
Equity securities
Bonds
$
87,403
408
Unrealized
gains
$
4,170
1,408
Book
value
Unrealized
losses
$
25,806
—
$
65,767
1,816
The Company had devaluated book value of the bonds and
charged ¥2,345 million to income statement as “loss on devaluation of investment securities” with the change in the intent
of holding for the fiscal year.
(c) Change the Intent of Holding:
For the year ended March 31, 2009, the Company had changed
the intent of holding some three bonds held as “held-to-maturity debt securities” as of March 31, 2008 to “available-for-sale
securities” due to declining the credit rating of the bonds.
B. The following tables summarize book values of available-for-sale securities with no available fair values as of March 31,
2010, 2009 and 2008:
Thousands of
U.S. dollars
Millions of yen
2010
Negotiable deposit
Non-listed equity securities
Investments in business limited partnership
Total
¥
¥
—
3,121
64
3,185
2008
2009
¥
¥
—
2,812
102
2,914
¥
¥
450
2,835
171
3,456
2010
$
$
—
33,545
688
34,233
C. The proceeds and gross realized gains (losses) from sales of available-for-sale securities for the years ended March 31,
2010, 2009 and 2008 are as follows:
Thousands of
U.S. dollars
Millions of yen
2010
Proceeds
Gross realized gains
Gross realized losses
¥
963
596
(10)
2009
¥
1,453
898
(71)
2008
¥
724
334
(5)
2010
$
10,350
6,406
(107)
29
6. Inventories
Inventories at March 31, 2010, 2009 and 2008 are summarized as follows:
Thousands of
U.S. dollars
Millions of yen
2010
Merchandise
Finished products
Films
Raw materials and supplies
Work-in-process
Total
¥
¥
7. Short-Term Borrowings and Long-Term Debt
Short-term borrowings at March 31, 2010, 2009 and 2008
consist of notes to banks. The interest rates on short-term
borrowings at March 31, 2010, 2009 and 2008 ranged from
0.00% to 2.30%, from 1.07% to 3.43%, and from 1.16% to
1.16%, respectively.
519
4,127
727
50
5,856
11,279
2008
2009
¥
¥
661
3,434
385
47
4,655
9,182
¥
¥
863
2,753
746
105
4,747
9,214
2010
$
5,578
44,357
7,814
537
62,941
$ 121,227
The Company has commitment-line contract of ¥10,000
million ($107,481 thousand) with some financial institutions.
The contract includes restrictive financial covenants, so the
Company takes risks to repay all the debt at once if conflict
with the covenants. The Company does not utilize the commitment-line contract as of March 31, 2010 and 2009.
Long-term debt at March 31, 2010, 2009 and 2008 are summarized as follows:
Thousands of
U.S. dollars
Millions of yen
2010
Unsecured Japanese yen convertible bonds—bonds
with share subscription rights and with interest rate of
1% per annum—due in 2014, convertible at ¥2,802.00
for one common share, redeemable before due date
Unsecured zero coupon Japanese yen convertible
bonds—bonds with share subscription rights—due in
2009, convertible at ¥4,760.20 for one common share,
redeemable before due date
Loans from banks
Unsecured loans
2.00-5.50%, due 2010 to 2014
2.55-5.50%, due 2009 to 2012
2.55-5.50%, due 2008 to 2012
Total
Less current portion
Long-term debt, less current portion
¥
11,000
—
2008
2009
¥
—
¥
11,400
2010
—
$ 118,229
11,400
—
7,287
678
1,199
¥
11,678
(65)
11,613
12,599
(11,660)
¥
939
¥
1,732
13,132
(378)
12,754
125,516
(699)
$ 124,817
The aggregate annual maturities of long-term debt are as follows:
2011
2012
2013
2014
2015
Total
Millions of yen
¥
¥
65
539
53
19
11,002
11,678
Thousands of
U.S. dollars
$
699
5,793
570
204
118,250
$ 125,516
At March 31, 2010, the following assets were pledged as collateral for opening letters of guarantee and credit, and bank overdraft:
Millions of yen
Time deposits
Long-term prepaid expenses
Total
30
¥
¥
1
70
98
169
Thousands of
U.S. dollars
$
$
11
752
1,053
1,816
8. Impairment Loss of Long-Lived Assets
Breakdown of impairment loss of long-lived assets for the years ended March 31, 2010, 2009 and 2008 are as follows:
Use and location
Category
Assets used by visual business of Kadokawa Pictures, Inc.:
Chiyoda-ku, Tokyo, etc.
Land
Software
Finance lease assets
Others
Sub-total
Theater:
Shinjuku-ku, Tokyo
Sub-total
Total
Millions of yen
¥
¥
30
13
10
22
40
0
115
30
30
145
Thousands of
U.S.dollars
$
$
322
140
108
236
430
0
1,236
322
322
1,558
Use and location
Category
Assets used by visual business of Kadokawa Pictures, Inc.:
Chiyoda-ku, Tokyo, etc.
Land
Software
Others
Sub-total
Theater:
Shinjuku-ku, Tokyo
Others
Shibuya-ku, Tokyo
Others
Osaka-shi, Osaka
Others
Sub-total
Cinema complex:
Satte-shi, Saitama
Others
Okazaki-shi, Aichi
Others
Hirakata-shi, Osaka
Others
Kumamoto-shi, Kumamoto
Others
Sub-total
Assets owned by Kadokawa Mobile Corporation:
Software
Chiyoda-ku, Tokyo
Others
Sub-total
Assets owned by Kadokawa Magazines Co., Ltd.:
Others
Chiyoda-ku, Tokyo
Total
Millions of yen
¥
108
25
34
29
21
3
220
110
227
7
8
6
64
2
424
217
17
1
488
118
17
439
96
12
142
11
1
1,559
30
12
42
¥
8
2,253
31
Use and location
Cinema complex:
Asahikawa-shi, Hokkaido
Mito-shi, Ibaraki
Satte-shi, Saitama
Niiza-shi, Saitama
Kumamoto-shi, Kumamoto
Category
Millions of yen
¥
Others
Others
Others
Others
Others
Sub-total
Goodwill resulting from acquiring Kadokawa Cineplex, Inc.:
Goodwill
Chiyoda-ku, Tokyo
Assets owned by Ascii Corporation:
Chiyoda-ku, Tokyo
Others
Sub-total
Goodwill resulting from acquiring Ascii Corporation:
Goodwill
Chiyoda-ku, Tokyo
Total
19
2
521
96
15
654
72
6
410
67
11
343
59
3
2,278
1,330
65
29
10
104
¥
551
4,263
The Companies adopt accounting for impairment of long-lived
assets, namely property and equipment, goodwill and other
long-lived assets. The Companies, as a general rule, categorize operating assets by business unit based on whether their
cash flows can be estimated independently, whereas idle
assets are assigned to a particular asset group on an individual
basis. The Companies marked down the book value of asset
groups where there had been a significant decline in profitability, valued to the recoverable amount and recorded the
impairment loss on long lived assets of ¥145 million ($1,558
thousand), ¥2,253 million and ¥4,263 million for the years
ended March 31, 2010, 2009 and 2008 respectively, under the
other expenses section.
For assets used by visual business of Kadokawa Pictures,
Inc., the recoverable amount was computed by the net realizable value.
For the other assets in use, the recoverable amount was
computed by the net discounted cash flow with the
discounted rate of 4.62%, 5.61% and 7.25% for the years
ended March 31, 2010, 2009 and 2008, respectively.
9. Income Taxes
Taxes on income applicable to the Companies resulted in a
normal statutory tax rate of approximately 40.69% for the
years ended March 31, 2010, 2009 and 2008, respectively. The
actual effective tax rate in the accompanying consolidated
statements of operations differed from the normal statutory
tax rate due principally to certain expenses that are permanently non-deductible for tax purposes.
The following table summarizes the significant differences between the statutory tax rate and effective tax rate of the Companies for
financial statement purposes for the years ended March 31, 2010, 2009 and 2008:
2010
Statutory tax rate
Non-deductible expenses
Change in valuation allowance
Amortization and impairment of goodwill
Others
Effective tax rate
32
40.69%
3.09
20.72
1.99
4.96
(0.36)
71.09%
2009
2008
40.69%
(16.69)
(304.41)
(38.74)
(17.90)
(5.76)
(342.81)%
40.69%
11.63
72.08
97.66
4.39
1.92
228.37%
Significant components of the Companies’ deferred tax assets and liabilities as of March 31, 2010, 2009 and 2008 are as follows:
Thousands of
U.S. dollars
Millions of yen
2010
Deferred tax assets (Current assets):
Devaluation of inventories
Allowance for employees’ bonuses
Accrued enterprise taxes
Accrued expenses
Tax loss carry-forwards
Other temporary difference
Gross deferred tax assets (Current assets)
Less: Valuation allowance
Total deferred tax assets (Current assets)
¥
Deferred tax assets (Non-current assets):
Impairment loss
Loss on devaluation of investment securities
Loss on devaluation of memberships
Liability for severance and retirement benefits
Long-term accounts payable
Unrealized gain on fixed assets
Tax loss carry-forwards
Revaluation reserve for land
Net unrealized holding loss on securities
Gross deferred tax assets (Non-current assets)
Less: Valuation allowance
Total deferred tax assets (Non-current assets)
Deferred tax liabilities (Non-current liabilities):
Unrealized loss on fixed assets
Net unrealized holding gain on securities
Total deferred tax liabilities (Non-current liabilities)
10. Net Assets
Net assets comprise four sections, which are shareholders’
equity, accumulated gains (losses) from valuation and translation
adjustments, share subscription rights and minority interests.
Under the Japanese Corporate Laws (“the Law”) and regulations, the entire amount paid for new shares is required to
be designated as common stock. However, a company may,
by a resolution of the Board of Directors, designate an amount
not exceeding one-half of the price of the new shares as additional paid-in capital, which is included in capital surplus.
In cases where a dividend distribution of surplus is made,
the smaller of an amount equal to 10% of the dividend or the
excess, if any, of 25% of common stock over the total of additional paid-in capital and legal earnings reserve must be set
aside as additional paid-in capital or legal earnings reserve.
Legal earnings reserve is included in retained earnings in the
accompanying consolidated balance sheets.
¥
¥
723
456
180
316
235
348
2,258
(603)
1,655
¥
2010
743
485
256
376
766
461
3,087
(895)
2,192
$
7,051
6,019
2,289
4,783
—
4,740
24,882
(6,438)
18,444
17,670
11,425
2,515
10,813
3,472
2,182
89,241
1,129
8,835
3,954
151,236
(138,661)
12,575
1,760
1,698
233
817
178
199
5,225
105
660
278
11,153
(10,221)
932
1,000
719
232
744
186
196
3,492
239
2
325
7,135
(6,219)
916
—
—
—
—
9
9
—
—
654
—
27
681
656
21
—
677
658
149
—
807
7,029
—
290
7,319
1,644
1,063
234
1,006
323
203
8,303
105
822
368
14,071
(12,901)
1,170
Deferred tax liabilities (Current liabilities):
Temporary difference
Total deferred tax liabilities (Current liabilities)
Net deferred tax assets
656
560
213
445
—
441
2,315
(599)
1,716
2008
2009
2,205
¥
1,910
¥
2,292
$
23,700
Additional paid-in capital and legal earnings reserve may not
be distributed as dividends. However, all additional paid-in capital and all legal earnings reserve may be transferred to other
capital surplus and retained earnings, respectively, which are
potentially available for dividends.
The maximum amount that the Company can distribute as
dividends is calculated based on the non-consolidated financial
statements of the Company in accordance with the Laws.
At the annual shareholders’ meeting held on June 26, 2010,
the shareholders approved cash dividends amounting to ¥757
million ($8,136 thousand). Such appropriations have not been
accrued in the consolidated financial statements as of March
31, 2010. Such appropriations are recognized in the period in
which they are approved by the shareholders.
33
11. Consolidated Statements of Changes in Net Assets
Changes in number of shares issued and outstanding during the years ended March 31, 2010, 2009 and 2008 are as follows:
Common stock outstanding
2010
Balance at beginning of year
Balance at end of year
27,260,800
27,260,800
Treasury stock outstanding
Increases:
Purchases based on resolution of the board of directors
Purchases by affiliated company
Purchases of odd stock
Decreases:
Exercises of stock options
Sales of odd stock
2009
2008
27,260,800
27,260,800
27,260,800
27,260,800
2010
2009
2,040,248
1,504,002
492,528
—
—
74
523,700
12,173
601
1,039,900
—
272
—
(228)
2,040,248
(28,600)
(98)
1,504,002
—
(98)
2,040,224
2008
12. Stock Option Plan
There is no stock option plan for the years ended March 31, 2010 and 2009 due to expiring following stock options.
The following table summarizes contents of stock options during the year ended March 31, 2008:
Date of annual shareholders’ meeting
Position and number of grantee
Class and number of stock
Date of grant
Condition of vesting
Exercisable period
June 25, 2002
120 directors and employees
Common stock 345,400
March 28, 2003
Being the director or employee of the Companies at the exercising date
Due July 1, 2004 to June 30, 2007
The following table summarizes movement of such stock options during the year ended March 31, 2008:
2008
Number of shares
73,000
(28,600)
(44,400)
—
Stock options exercised
Stock options expired
The following table summarizes price information of such stock options during the year ended March 31, 2008:
Yen
2008
Paid-in value
Average market price of the stock at the time of exercise
¥
¥
1,956
3,240
13. Employees’ Severance and Retirement Benefits
The liabilities for severance and retirement benefits included in the liability section of the consolidated balance sheets as of March 31,
2010, 2009 and 2008 consist of the following:
Thousands of
U.S. dollars
Millions of yen
Projected benefit obligation
Unrecognized actuarial differences
Less fair value of pension assets
Liability for severance and retirement benefits
34
¥
¥
4,626
137
(2,302)
2,461
2008
2009
2010
¥
¥
4,470
(318)
(2,144)
2,008
¥
¥
4,197
(285)
(2,084)
1,828
2010
$
$
49,721
1,472
(24,742)
26,451
Severance and retirement benefit expenses included in the consolidated statements of operations for the years ended March 31, 2010,
2009 and 2008 comprise the following:
Thousands of
U.S. dollars
Millions of yen
2010
¥
Service costs—benefits earned during the year
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of actuarial differences
Contribution to welfare pension fund
Extra retirement benefits paid
Severance and retirement benefit expenses
¥
The discount rate and the rate of expected return on plan
assets are from 1.3% to 1.7% and 1.0%, respectively for the
year ended March 31, 2010, are 1.5% and 1.0%, respectively
for the year ended March 31, 2009 and are 2.0% and 0.5%,
respectively for the year ended March 31, 2008.
The estimated amount of all retirement benefits to be paid at
the future retirement date is allocated equally to each service
year using the estimated number of total service years. Actuarial gains and losses are recognized in the statement of operations using the straight-line method over the next five years.
428
53
(18)
85
337
31
916
2008
2009
¥
¥
¥
538
53
(8)
59
363
22
1,027
¥
430
48
(8)
24
364
3
861
2010
$
$
4,600
570
(193)
913
3,622
333
9,845
(Additional information)
Certain domestic subsidiary has changed computation method
of liability for severance and retirement benefits due to
increases in employees for the year ended March 31, 2010.
This change is to calculate the liabilities more accurately than
prior computation method.
As a result of change, differences of the liability for severance and retirement benefits computed by new method and
by prior method as of April 1, 2009 is ¥278 million ($2,988 thousand), and the subsidiary charges the differences to income
statement as “Retirement benefit expenses for prior periods”
in other income (expenses) section.
14. Derivative Financial Instruments and Hedging Transactions
The subsidiaries evaluate hedge effectiveness, however
Certain subsidiaries use interest rate swaps as derivative finanif an important condition of hedging instruments and hedged
cial instruments only for the purpose of mitigating future risks
items is the same, the verification of the effect of hedging
of fluctuation of interest rates.
is omitted.
The following table summarizes derivative transactions for which hedge accounting has been adopted for the year ended March 31, 2010:
<Interest-related transactions>
Millions of yen
Hedge accounting method
Type of transaction
Main hedge items
Special method for
interest rate swaps
Interest rate swap
pay fixed
Receive floating
Long-term loan
payable
Hedge accounting method
Type of transaction
Main hedge items
Special method for
interest rate swaps
Interest rate swap
pay fixed
Receive floating
Long-term loan
payable
Contracted amount
¥
475
Over 1 year
¥
475
Fair value (Note 1)
¥
—
Note 1: Items calculated by the special method for interest rate
swaps are treated together with long-term loan payable that
are taken to be hedged items, so their fair value is booked as
part of the appropriate long-term loan payable.
Contracted amount
$
5,105
Over 1 year
$
5,105
Fair value (Note 1)
$
—
Note 2: As discussed in Note 4, effective from the fiscal year
ended March 31, 2010, the revised accounting standard,
“Accounting Standard for Financial Instruments” had been
applied, so information for the year ended March 31, 2009 and
2008 are not listed.
35
15. Other Income (Expenses), Other—Net
Other income (expenses), other-net consisted of the following:
Thousands of
U.S. dollars
Millions of yen
Net gain on sales of investment securities
Net loss on valuation of investment securities
Net gain (loss) on changes holding ratio of subsidiaries
and affiliated companies
Gain on sales of used papers
Insurance received
Gain from settlement of beneficial interest in trust
Impairment loss of long-lived assets
Retirement benefit expenses for prior periods
Other—net
Total
¥
¥
510
(16)
(80)
(627)
131
187
—
(145)
(278)
88
(230)
2008
2009
2010
¥
¥
828
(4,064)
15
(510)
222
219
115
(2,253)
—
204
(5,224)
¥
¥
462
(378)
108
(197)
195
29
28
(4,263)
—
78
(3,938)
2010
$
$
5,482
(172)
(860)
(6,739)
1,408
2,010
—
(1,558)
(2,988)
944
(2,473)
16. Lease Transactions
As discussed in Note 2 (t), finance leases commenced prior to April 1, 2008 which do not transfer ownership of leased assets to
lessees are accounted for as operating leases.
Assumed amounts of such finance leases as of and for the years ended March 31, 2010, 2009 and 2008, are as follows:
(a) Finance Lease Assets:
Thousands of
U.S. dollars
Millions of yen
Acquisition cost:
Other property and equipment
Intangible fixed assets
Total
Accumulated depreciation:
Total
Accumulated impairment loss:
Total
Book value:
Total
36
¥
¥
¥
¥
¥
¥
¥
¥
2008
2009
2010
1,473
648
400
165
2,686
¥
405
357
230
130
1,122
¥
168
237
140
4
549
¥
900
54
30
31
1,015
¥
¥
¥
¥
¥
1,734
1,187
703
243
3,867
¥
387
822
483
188
1,880
¥
216
248
162
4
630
¥
1,131
117
58
51
1,357
¥
¥
¥
¥
¥
2010
1,734
1,337
706
272
4,049
$
293
704
346
160
1,503
$
—
200
93
3
296
$
1,441
433
267
109
2,250
$
$
$
$
$
15,832
6,965
4,299
1,773
28,869
4,353
3,837
2,472
1,397
12,059
1,806
2,547
1,505
43
5,901
9,673
581
322
333
10,909
(b) Finance Lease Obligations:
Thousands of
U.S. dollars
Millions of yen
¥
¥
¥
273
1,147
1,420
421
2008
2009
2010
Due within one year
Due after one year
Total
Accumulated impairment loss
¥
¥
¥
422
1,418
1,840
618
¥
¥
¥
522
1,891
2,413
296
2010
$
$
$
2,934
12,328
15,262
4,525
(c) Lease Expenses, Depreciation and Other Information under the Finance Leases:
Thousands of
U.S. dollars
Millions of yen
Lease expenses
Reversal of accumulated impairment loss
Depreciation
Interest expenses
Impairment loss
¥
469
197
217
33
—
2008
2009
2010
¥
395
132
360
55
454
¥
601
18
599
70
296
2010
$
5,041
2,117
2,332
355
—
Depreciation is computed by the straight-line method over the lease terms with no residual value.
The minimum rental commitments under non-cancelable operating leases as of March 31, 2010, 2009 and 2008, are as follows:
Thousands of
U.S. dollars
Millions of yen
¥
¥
500
2,077
2,577
2008
2009
2010
Due within one year
Due after one year
Total
¥
¥
529
2,531
3,060
¥
¥
439
2,683
3,122
2010
$
$
5,374
22,324
27,698
37
17. Segment Information
(a) Business Segment Information
The Companies operate primarily in the following business segments.
(1) Publishing ................. books, story magazines, life magazines, distribution and others
(2) Movie/Visual ............. films, DVD movies and others
(3) Cross Media ............. information magazines, web-site, digital content and others
(4) Others ...................... game software, ad agency, real estate rental and others
Millions of yen
Publishing
Sales
Outside customers
Intersegment
Total sales
Operating expenses
Operating income (loss)
Total assets
Impairment loss
Capital expenditures
¥
¥
¥
73,476 ¥
1,383
74,859
67,155
7,704 ¥
50,018 ¥
694
—
545
Movie/
Visual
30,803 ¥
177
30,980
32,178
(1,198) ¥
23,431 ¥
521
145
293
Cross
Media
Others
23,032 ¥
386
23,418
23,228
190 ¥
10,174 ¥
253
—
196
Total
8,612 ¥ 135,923 ¥
1,845
3,791
10,457
139,714
10,664
133,225
(207) ¥
6,489 ¥
5,468 ¥ 89,091 ¥
155
1,623
—
145
131
1,165
Elimination
and/or
Corporate
Consolidated
— ¥ 135,923
(3,791)
—
(3,791)
135,923
(2,467)
130,758
(1,324) ¥
5,165
30,162 ¥ 119,253
333
1,956
—
145
251
1,416
Thousands of U.S.dollars
Publishing
Sales
Outside customers
Intersegment
Total sales
Operating expenses
Total assets
Impairment loss
Movie/
Visual
Cross
Media
Others
Total
Elimination
and/or
Corporate
Consolidated
$ 789,725 $ 331,073 $ 247,549 $ 92,562 $1,460,909 $
— $1,460,909
14,864
1,902
4,149
19,831
40,746
(40,746)
—
804,589
332,975
251,698
112,393 1,501,655
(40,746) 1,460,909
721,786
345,851
249,656
114,618 1,431,911
(26,516) 1,405,395
$ 82,803 $ (12,876) $
2,042 $ (2,225) $ 69,744 $ (14,230) $ 55,514
$ 537,597 $ 251,838 $ 109,351 $ 58,770 $ 957,556 $ 324,183 $1,281,739
7,459
5,600
2,719
1,666
17,444
3,579
21,023
—
1,558
—
—
1,558
—
1,558
5,858
3,149
2,107
1,407
12,521
2,698
15,219
Millions of yen
Publishing
Sales
Outside customers
Intersegment
Total sales
Operating expenses
Total assets
Impairment loss
38
¥
¥
¥
71,158 ¥
1,074
72,232
66,621
5,611 ¥
44,938 ¥
833
—
697
Movie/
Visual
33,919 ¥
308
34,227
35,335
(1,108) ¥
25,782 ¥
697
2,203
869
Cross
Media
26,266 ¥
690
26,956
26,979
(23) ¥
12,450 ¥
268
50
524
Others
Total
10,268 ¥ 141,611 ¥
2,470
4,542
12,738
146,153
12,619
141,554
119 ¥
4,599 ¥
5,910 ¥ 89,080 ¥
144
1,942
—
2,253
112
2,202
Elimination
and/or
Corporate
Consolidated
— ¥ 141,611
(4,542)
—
(4,542)
141,611
(3,509)
138,045
(1,033) ¥
3,566
34,096 ¥ 123,176
280
2,222
—
2,253
164
2,366
Millions of yen
Publishing
Sales
Outside customers
Intersegment
Total sales
Operating expenses
Total assets
Impairment loss
¥
¥
¥
72,033 ¥
985
73,018
68,099
4,919 ¥
43,769 ¥
657
655
751
Movie/
Visual
41,712 ¥
280
41,992
43,160
(1,168) ¥
37,998 ¥
957
3,608
768
Not allocable operating expenses included in “Elimination
and/or Corporate” for the years ended March 31, 2010, 2009
and 2008 are ¥1,409 million ($15,144 thousand), ¥1,107 million
and ¥1,031 million, respectively, mainly consisting of costs for
the administrative departments.
Corporate assets included in “Elimination and/or Corporate”
Cross
Media
29,036 ¥
1,044
30,080
28,513
1,567 ¥
13,219 ¥
283
—
315
Others
Total
8,009 ¥ 150,790 ¥
2,898
5,207
10,907
155,997
10,109
149,881
798 ¥
6,116 ¥
3,679 ¥ 98,665 ¥
124
2,021
—
4,263
130
1,964
Elimination
and/or
Corporate
Consolidated
— ¥ 150,790
(5,207)
—
(5,207)
150,790
(4,224)
145,657
(983) ¥
5,133
39,652 ¥ 138,317
246
2,267
—
4,263
833
2,797
for the years ended March 31, 2010, 2009 and 2008 are
¥30,932 million ($332,459 thousand), ¥35,029 million and
¥41,226 million, respectively, mainly consisting of surplus
funds (cash and cash equivalents and others) and assets
belonging to the administrative departments.
(b) Geographic Segment Information
Geographic segment information is not presented as domestic sales and assets exceed 90% of consolidated net sales and assets.
(c) Overseas Sales
Overseas sales were less than 10% of total consolidated sales.
18. Revaluation Reserve for Land
Pursuant to Article 2, Paragraphs 3 Enforcement Ordinance for the Law concerning Revaluation Reserve for Land (the “Law”), the
Company recorded its owned land used for business at the fair value of ¥3,517 million (the original book value was ¥4,236 million) as
of March 31, 2002, and related net unrealized loss was debited to “Revaluation reserve for land,” in the net assets.
As of March 31, 2010, 2009 and 2008, the fair value of the land declined ¥159 million ($ 1,709 thousand), ¥661 million and ¥711,
respectively.
19. Business Combinations
Kadokawa The Television Co., Ltd. merged with Kadokawa Cross Media Co., Ltd., both of which are consolidated subsidiaries of the
Company, and changed the corporate name to Kadokawa Marketing Co., Ltd. on March 1, 2009.
Amount of goodwill that resulted from the merger was ¥2 million, and all the goodwill was charged to the income statements
for the year ended March 31, 2009.
20. Related Party Transactions
For the year ended March 31, 2009, the Company disposed of real estate property for ¥1,437 million to Kadokawa Culture Promotion
Foundation (“the Foundation”). Tsuguhiko Kadokawa is serving as director of the Company and the chairman of the Foundation,
who own 8.1% of the Company’s shares. The transaction amount was determined based on appraisal reports obtained from external real estate appraisers.
39
Independent Auditors’ Report
40
Corporate Data
Company Profile (as of March 31, 2010)
Board of Directors and Auditors
Company Name
Chairman and Director
Tsuguhiko Kadokawa
Head Office
President and Representative Director
2-13-3 Fujimi, Chiyoda-ku,
Tokyo 102-8177, Japan
Tatsuo Sato
(as of June 21, 2010)
Managing Director
Representative Director
Shinichiro Inoue
Tatsuo Sato
Directors
Founded
November 10, 1945
Established
April 2, 1954
Common Stock
Masataka Fukuda
Koichi Sekiya
Yasushi Shiina
Tsuneo Taniguchi
Takashi Yamaguchi
Yasuaki Takayama
Masaki Matsubara
¥26,331 million
Outside Directors
Major Corporate Shareholders
Nippon Life Insurance Company
Namco Bandai Holdings Inc.
Kadokawa Culture Promotion Foundation
Mizuho Bank, Ltd.
NTT Docomo, Inc.
Hideo Shimizu
Ken Kutaragi
Koji Funatsu
Corporate Auditors (Full-time)
Takeru Egawa
Shin Mizushima
Number of Employees
2,523 (consolidated)
46 (non-consolidated)
Outside Corporate Auditors
Yasushi Ikeda
Akira Watanabe
Main Banks
Mizuho Bank, Ltd.
Sumitomo Mitsui Banking Corporation
Resona Bank, Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
41
ANNUAL REPORT 2010
Kadokawa Group Holdings, Inc. ANNUAL REPORT 2010
Dimension
Strategy
Printed in Japan

annual report 2010

Transcription

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