6-K 1 d679636d6k.htm FORM 6-K Form 6-K
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FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

For the month of February 2014

Commission File Number: 1-31452

KONAMI CORPORATION

(Translation of registrant’s name into English)

 

 

7-2, Akasaka 9-chome

Minato-ku, Tokyo 107-8323

Japan

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F   x             Form 40-F  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ¨


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Information furnished in this form:

 

1. English translation of the Quarterly Securities Report (Shihanki Hokokusho) for the nine-month period ended December  31, 2013 pursuant to the Financial Instruments and Exchange Law of Japan


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  KONAMI CORPORATION
Date: February 18, 2014   By:  

/s/ Takuya Kozuki

  Name:   Takuya Kozuki
  Title:   Representative Director, President


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KONAMI CORPORATION filed its Quarterly Securities Report for the nine-month period ended December 31, 2013 with the Director of the Kanto Local Finance Bureau of the Ministry of Finance of Japan on February 13, 2014. The following is the summary of the Quarterly Securities Report.

 

I Corporate Information

 

  A. Corporate Overview

 

  1. Selected Financial Data

 

  2. Overview of Business

 

  B. Business

 

  1. Risks Relating to Our Business

 

  2. Significant Contracts

 

  3. Results of Operations and Financial position

 

  C. Information on Reporting Company

 

  1. Share Information

 

  a. Total Number of Shares

 

  b. Stock Acquisition Rights

 

  c. Convertible Bonds Exercise

 

  d. Rights Plan

 

  e. Common Stock and Additional Paid-in Capital

 

  f. Major Shareholders

 

  g. Voting Rights

 

  2. Directors and Corporate Auditors

 

  D. Financial Statements

 

  1. Quarterly Consolidated Financial Statements

 

  2. Others

 

II Information on Guarantors


Table of Contents

1. Consolidated Financial Statements

(1) Consolidated Balance Sheets (Unaudited)

 

     Millions of Yen  
     March 31, 2013      December 31, 2013  

ASSETS

     

CURRENT ASSETS:

     

Cash and cash equivalents

   ¥ 63,669       ¥ 47,734   

Trade notes and accounts receivable, net of allowance for doubtful accounts of ¥683 million at March 31, 2013 and ¥446 million at December 31, 2013

     33,066         25,090   

Inventories

     26,349         37,449   

Deferred income taxes, net

     20,749         19,791   

Prepaid expenses and other current assets

     9,650         13,057   
  

 

 

    

 

 

 

Total current assets

     153,483         143,121   
  

 

 

    

 

 

 

PROPERTY AND EQUIPMENT, net

     62,651         81,392   

INVESTMENTS AND OTHER ASSETS:

     

Investments in marketable securities

     440         526   

Investments in affiliate

     2,247         2,258   

Identifiable intangible assets

     42,225         41,990   

Goodwill

     21,934         21,990   

Lease deposits

     26,625         26,512   

Deferred income taxes, net

     1,875         1,369   

Other assets

     11,468         10,745   
  

 

 

    

 

 

 

Total investments and other assets

     106,814         105,390   
  

 

 

    

 

 

 

TOTAL ASSETS

   ¥ 322,948       ¥ 329,903   
  

 

 

    

 

 

 

See accompanying notes to consolidated financial statements.

 

– 1 –


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     Millions of Yen  
     March 31, 2013     December 31, 2013  

LIABILITIES

    

CURRENT LIABILITIES:

    

Short-term borrowings

   ¥ 4,681      ¥ 5,108   

Current portion of long-term debt

     5,000        —     

Current portion of capital lease and financing obligations

     2,166        2,089   

Trade notes and accounts payable

     14,443        11,150   

Accrued income taxes

     4,104        527   

Accrued expenses

     19,971        18,564   

Deferred revenue

     5,464        8,373   

Other current liabilities

     3,683        5,030   
  

 

 

   

 

 

 

Total current liabilities

     59,512        50,841   
  

 

 

   

 

 

 

LONG-TERM LIABILITIES:

    

Long-term debt, less current portion

     —          15,000   

Capital lease and financing obligations, less current portion

     22,588        21,024   

Accrued pension and severance costs

     1,531        1,429   

Deferred income taxes, net

     4,424        4,294   

Other long-term liabilities

     8,894        9,354   
  

 

 

   

 

 

 

Total long-term liabilities

     37,437        51,101   
  

 

 

   

 

 

 

TOTAL LIABILITIES

     96,949        101,942   
  

 

 

   

 

 

 

COMMITMENTS AND CONTINGENCIES (Note 12)

    

EQUITY

    

KONAMI CORPORATION stockholders’ equity:

    

Common stock, no par value-
Authorized 450,000,000 shares;
issued 143,500,000 shares at March 31, 2013 and December 31, 2013;
outstanding 138,618,060 shares at March 31, 2013 and 138,613,168 shares at December 31, 2013

     47,399        47,399   

Additional paid-in capital

     74,175        74,175   

Legal reserve

     284        284   

Retained earnings

     113,808        113,041   

Accumulated other comprehensive income

     1,009        3,682   

Treasury stock, at cost-
4,881,940 shares at March 31, 2013 and 4,886,832 shares at
December 31, 2013

     (11,250     (11,262
  

 

 

   

 

 

 

Total KONAMI CORPORATION stockholders’ equity

     225,425        227,319   
  

 

 

   

 

 

 

Noncontrolling interest

     574        642   
  

 

 

   

 

 

 

TOTAL EQUITY

     225,999        227,961   
  

 

 

   

 

 

 

TOTAL LIABILITIES AND EQUITY

   ¥ 322,948      ¥ 329,903   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

– 2 –


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(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Unaudited)

For the nine months ended December 31, 2012 and 2013

Consolidated Statements of Income

 

     Millions of Yen  
     Nine months  ended
December 31, 2012
    Nine months  ended
December 31, 2013
 

NET REVENUES:

    

Product sales revenue

   ¥ 68,399      ¥ 65,931   

Service and other revenue

     91,752        90,015   
  

 

 

   

 

 

 

Total net revenues

     160,151        155,946   
  

 

 

   

 

 

 

COSTS AND EXPENSES:

    

Costs of products sold

     40,625        39,982   

Costs of services rendered and others

     66,782        68,044   

Selling, general and administrative

     37,824        40,532   
  

 

 

   

 

 

 

Total costs and expenses

     145,231        148,558   
  

 

 

   

 

 

 

Operating income

     14,920        7,388   
  

 

 

   

 

 

 

OTHER INCOME (EXPENSES):

    

Interest income

     141        234   

Interest expense

     (991     (891

Foreign currency exchange gain, net

     725        2,457   

Other, net

     (123     (14
  

 

 

   

 

 

 

Other income (expenses), net

     (248     1,786   
  

 

 

   

 

 

 

INCOME BEFORE INCOME TAXES AND EQUITY IN NET INCOME OF AFFILIATED COMPANY

     14,672        9,174   

INCOME TAXES

     5,735        4,082   

EQUITY IN NET INCOME OF AFFILIATED COMPANY

     7        31   
  

 

 

   

 

 

 

NET INCOME

     8,944        5,123   

NET INCOME ATTRIBUTABLE TO THE NONCONTROLLING INTEREST

     123        68   
  

 

 

   

 

 

 

NET INCOME ATTRIBUTABLE TO KONAMI CORPORATION

   ¥ 8,821      ¥ 5,055   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

– 3 –


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Consolidated Statements of Comprehensive Income

 

     Millions of Yen  
     Nine months ended
December 31, 2012
     Nine months ended
December 31, 2013
 

Net income

   ¥ 8,944       ¥ 5,123   
  

 

 

    

 

 

 

Other comprehensive income, net of tax:

     

Foreign currency translation adjustments

     1,375         2,617   

Net unrealized gains on available-for-sale securities

     50         55   

Pension liability adjustment

     2         1   
  

 

 

    

 

 

 

Other comprehensive income

     1,427         2,673   
  

 

 

    

 

 

 

Comprehensive income

     10,371         7,796   
  

 

 

    

 

 

 

Comprehensive income attributable to the noncontrolling interest

     123         68   
  

 

 

    

 

 

 

Comprehensive income attributable to KONAMI CORPORATION

   ¥ 10,248       ¥ 7,728   
  

 

 

    

 

 

 

Per Share Data:

  
     Nine months  ended
December 31, 2012
     Nine months  ended
December 31, 2013
 

Net income attributable to KONAMI CORPORATION per share:

     

Basic

   ¥ 63.63       ¥ 36.47   

Diluted

     63.63         36.47   
  

 

 

    

 

 

 

Weighted-average common shares outstanding

     138,619,373         138,615,575   

Diluted weighted-average common shares outstanding

     138,619,373         138,615,575   

See accompanying notes to consolidated financial statements.

 

– 4 –


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For the three months ended December 31, 2012 and 2013

Consolidated Statements of Income

 

     Millions of Yen  
     Three months  ended
December 31, 2012
    Three months  ended
December 31, 2013
 

NET REVENUES:

    

Product sales revenue

   ¥ 22,434      ¥ 28,296   

Service and other revenue

     31,044        29,722   
  

 

 

   

 

 

 

Total net revenues

     53,478        58,018   
  

 

 

   

 

 

 

COSTS AND EXPENSES:

    

Costs of products sold

     14,142        17,987   

Costs of services rendered and others

     23,057        22,019   

Selling, general and administrative

     13,922        14,395   
  

 

 

   

 

 

 

Total costs and expenses

     51,121        54,401   
  

 

 

   

 

 

 

Operating income

     2,357        3,617   
  

 

 

   

 

 

 

OTHER INCOME (EXPENSES):

    

Interest income

     50        127   

Interest expense

     (313     (292

Foreign currency exchange gain, net

     1,094        1,510   

Other, net

     (4     (5
  

 

 

   

 

 

 

Other income, net

     827        1,340   
  

 

 

   

 

 

 

INCOME BEFORE INCOME TAXES AND EQUITY IN NET INCOME OF AFFILIATED COMPANY

     3,184        4,957   

INCOME TAXES

     1,270        1,898   

EQUITY IN NET INCOME (LOSS) OF AFFILIATED COMPANY

     (6     3   
  

 

 

   

 

 

 

NET INCOME

     1,908        3,062   

NET INCOME ATTRIBUTABLE TO THE NONCONTROLLING INTEREST

     42        23   
  

 

 

   

 

 

 

NET INCOME ATTRIBUTABLE TO KONAMI CORPORATION

   ¥ 1,866      ¥ 3,039   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

– 5 –


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Consolidated Statements of Comprehensive Income

 

     Millions of Yen  
     Three months ended
December 31, 2012
     Three months ended
December 31, 2013
 

Net income

   ¥ 1,908       ¥ 3,062   
  

 

 

    

 

 

 

Other comprehensive income, net of tax:

     

Foreign currency translation adjustments

     2,917         2,059   

Net unrealized gain on available-for-sale securities

     23         0   

Pension liability adjustment

     0         0   
  

 

 

    

 

 

 

Other comprehensive income

     2,940         2,059   
  

 

 

    

 

 

 

Comprehensive income

     4,848         5,121   
  

 

 

    

 

 

 

Comprehensive income attributable to the noncontrolling interest

     42         23   
  

 

 

    

 

 

 

Comprehensive income attributable to KONAMI CORPORATION

   ¥ 4,806       ¥ 5,098   
  

 

 

    

 

 

 

Per Share Data:

     
     Three months  ended
December 31, 2012
     Three months  ended
December 31, 2013
 

Net income attributable to KONAMI CORPORATION per share:

     

Basic

   ¥ 13.46       ¥ 21.92   

Diluted

     13.46         21.92   
  

 

 

    

 

 

 

Weighted-average common shares outstanding

     138,619,012         138,614,300   

Diluted weighted-average common shares outstanding

     138,619,012         138,614,300   

See accompanying notes to consolidated financial statements.

 

– 6 –


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(3) Consolidated Statements of Cash Flows (Unaudited)

 

     Millions of Yen  
     Nine months  ended
December 31, 2012
    Nine months  ended
December 31, 2013
 

Cash flows from operating activities:

    

Net income

   ¥ 8,944      ¥ 5,123   

Adjustments to reconcile net income to net cash provided by operating activities -

    

Depreciation and amortization

     7,732        8,035   

Provision for doubtful receivables

     (183     (128

Loss on sale or disposal of property and equipment, net

     108        52   

Equity in net income of affiliated company

     (7     (31

Deferred income taxes

     622        1,431   

Change in assets and liabilities, net of businesses acquired:

    

Decrease in trade notes and accounts receivable

     9,791        9,615   

Increase in inventories

     (7,611     (11,358

Increase in prepaid expenses

     (571     (313

Decrease in trade notes and accounts payable

     (4,539     (4,239

Decrease in accrued income taxes, net of tax refunds

     (9,934     (6,237

Decrease in accrued expenses

     (1,578     (1,985

Increase in deferred revenue

     638        2,515   

Other, net

     (651     1,700   
  

 

 

   

 

 

 

Net cash provided by operating activities

     2,761        4,180   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Capital expenditures, including interest capitalized

     (8,283     (23,774

Decrease (increase) in lease deposits, net

     (10     171   

Acquisition of business

     (1,245     —     

Other, net

     64        99   
  

 

 

   

 

 

 

Net cash used in investing activities

     (9,474     (23,504
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Increase in short-term borrowings, net

     1,782        200   

Proceeds from issuance of bonds

     —          15,000   

Redemption of bonds

     (5,000     (5,000

Principal payments under capital lease and financing obligations

     (1,933     (1,678

Dividends paid

     (6,774     (5,804

Other, net

     (3     (97
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (11,928     2,621   
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     336        768   
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (18,305     (15,935
  

 

 

   

 

 

 

Cash and cash equivalents, beginning of the period

     76,451        63,669   
  

 

 

   

 

 

 

Cash and cash equivalents, end of the period

   ¥ 58,146      ¥ 47,734   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

– 7 –


Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

KONAMI CORPORATION (the “Company”) and its subsidiaries (collectively “KONAMI”) prepared the accompanying consolidated financial statements in accordance with U.S. generally accepted accounting principles (“U.S.GAAP”). KONAMI became publicly traded on the New York Stock Exchange in September 2002, and prepares its consolidated financial statements pursuant to the terminology, forms and preparation methods required in order to issue American Depositary Shares, which are registered with the U.S. Securities and Exchange Commission.

2. Reclassifications

Certain reclassifications have been made to the prior periods’ consolidated financial statements to conform to the presentation used for the current period.

3. Changes in Accounting Policies

New Accounting Pronouncements Adopted

Effective April 1, 2013, KONAMI has adopted Accounting Standards Update (“ASU”) 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”. ASU 2013-02 requires the presentation of the amounts reclassified out of accumulated other comprehensive income by component, and to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. This ASU only updates disclosure requirements.

Change in Depreciation Method

Previously, the Company and its domestic subsidiaries had principally used the declining-balance method for computing depreciation expense of property and equipment. Effective April 1, 2013, the Company and its domestic subsidiaries changed their depreciation method to the straight-line method in order to appropriately reflect recent changes in the business environment. In the Health & Fitness Segment, management has decided to limit new capital expenditures for additional facilities and has begun implementing a new strategy to improve retention for longer-term membership. This will enable the Company to achieve a more stable utilization of the existing facilities. In addition, in other segments, the products and services have generally began generating consistent revenue and the centralization and enhancement of the production and manufacturing systems have resulted in a change in pattern of consumption, and it better reflects the future economic benefit from the usage of the property and equipment. The effect of the change in depreciation method is recognized prospectively as a change in accounting estimate in accordance with the FASB Accounting Standards Codification 250 “Accounting Changes and Error Corrections”.

As a result of the change in depreciation method, depreciation expense for the nine months and the three months ended December 31, 2013 decreased by approximately ¥590 million and ¥215 million, respectively, and net income attributable to KONAMI CORPORATION and basic net income attributable to KONAMI CORPORATION per common share increased by ¥366 million and ¥2.64, respectively, for the nine months ended December 31, 2013, and increased by ¥134 million and ¥0.96, respectively, for the three months ended December 31, 2013.

4. Inventories

Inventories at March 31, 2013 and December 31, 2013 consisted of the following:

 

     Millions of Yen  
     March 31, 2013      December 31, 2013  

Finished products

   ¥ 7,813       ¥ 11,116   

Work in process

     13,513         20,589   

Raw materials and supplies

     5,023         5,744   
  

 

 

    

 

 

 

Total

   ¥ 26,349       ¥ 37,449   
  

 

 

    

 

 

 

 

– 8 –


Table of Contents

5. Property and Equipment

Property and equipment at March 31, 2013 and December 31, 2013 consisted of the following:

 

     Millions of Yen  
     March 31, 2013     December 31, 2013  

Property and equipment, at cost:

    

Land

   ¥ 14,542      ¥ 33,542   

Buildings and structures

     77,796        79,540   

Tools, furniture and fixtures

     26,672        29,914   

Construction in progress

     2,050        603   
  

 

 

   

 

 

 

Total

     121,060        143,599   

Less-Accumulated depreciation and amortization

     (58,409     (62,207
  

 

 

   

 

 

 

Net property and equipment

   ¥ 62,651      ¥ 81,392   
  

 

 

   

 

 

 

6. Business Combinations

On July 2, 2012, 4K Media Inc. (formerly 4K Acquisition Corp.), a subsidiary of the Company, entered into an asset purchase agreement with 4Kids Entertainment, Inc., which was engaged in the business of production of television and movie programs and licensing-out its content. The purpose of this agreement was to upgrade and extend the content of the Digital Entertainment business. The assets including merchandising rights to its content were acquired for ¥1,164 million in cash. Costs related to the acquisition of these assets of ¥43 million were reported in the operating expense in the accompanying consolidated statements of income.

The following table summarizes the fair values of the assets acquired at the acquisition date:

 

     Millions of Yen  

Current assets

   ¥ 125   

Property and equipment

     7   

Identifiable intangible assets

     1,001   

Other assets

     31   
  

 

 

 

Total assets acquired

   ¥ 1,164   
  

 

 

 

The acquired identifiable intangible assets consist of distribution and merchandising rights of ¥985 million and libraries of ¥16 million, which will be amortized over their estimated useful lives of eight years.

The results of operations of 4K Media Inc. from the acquisition date to the period ended December 31, 2012 were not material. The pro forma condensed combined financial information is not disclosed because the effect of this acquisition on KONAMI’s consolidated financial statements is not material.

 

– 9 –


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7. Equity

The changes in the carrying amount of KONAMI CORPORATION stockholders’ equity, noncontrolling interest and total equity in the consolidated balance sheets for the nine months and the three months ended December 31, 2012 and 2013 were as follows:

 

     Millions of Yen  

For the nine months ended December 31, 2012

   KONAMI
CORPORATION
stockholders’ equity
    Noncontrolling
interest
     Total
equity
 

Balance at March 31, 2012

   ¥ 215,458      ¥ 262       ¥ 215,720   
  

 

 

   

 

 

    

 

 

 

Cash dividends attributable to KONAMI CORPORATION stockholders

     (6,931     —           (6,931

Purchase of treasury stock

     (3     —           (3

Comprehensive income:

       

Net income for the period

     8,821        123         8,944   

Other comprehensive loss, net of tax

     1,427        —           1,427   
  

 

 

   

 

 

    

 

 

 

Comprehensive income for the period

     10,248        123         10,371   
  

 

 

   

 

 

    

 

 

 

Balance at December 31, 2012

   ¥ 218,772      ¥ 385       ¥ 219,157   
  

 

 

   

 

 

    

 

 

 

 

     Millions of Yen  

For the nine months ended December 31, 2013

   KONAMI
CORPORATION
stockholders’ equity
    Noncontrolling
interest
     Total
equity
 

Balance at March 31, 2013

   ¥ 225,425      ¥ 574       ¥ 225,999   
  

 

 

   

 

 

    

 

 

 

Cash dividends attributable to KONAMI CORPORATION stockholders

     (5,822     —           (5,822

Purchase of treasury stock

     (12     —           (12

Comprehensive income:

       

Net income for the period

     5,055        68         5,123   

Other comprehensive income, net of tax

     2,673        —           2,673   
  

 

 

   

 

 

    

 

 

 

Comprehensive income for the period

     7,728        68         7,796   
  

 

 

   

 

 

    

 

 

 

Balance at December 31, 2013

   ¥ 227,319      ¥ 642       ¥ 227,961   
  

 

 

   

 

 

    

 

 

 

 

     Millions of Yen  

For the three months ended December 31, 2012

   KONAMI
CORPORATION
stockholders’ equity
    Noncontrolling
interest
     Total
equity
 

Balance at September 30, 2012

   ¥ 217,432      ¥ 343       ¥ 217,775   
  

 

 

   

 

 

    

 

 

 

Cash dividends attributable to KONAMI CORPORATION stockholders

     (3,465     —           (3,465

Purchase of treasury stock

     (1     —           (1

Comprehensive income:

       

Net income for the period

     1,866        42         1,908   

Other comprehensive loss, net of tax

     2,940        —           2,940   
  

 

 

   

 

 

    

 

 

 

Comprehensive income for the period

     4,806        42         4,848   
  

 

 

   

 

 

    

 

 

 

Balance at December 31, 2012

   ¥ 218,772      ¥ 385       ¥ 219,157   
  

 

 

   

 

 

    

 

 

 

 

     Millions of Yen  

For the three months ended December 31, 2013

   KONAMI
CORPORATION
stockholders’ equity
    Noncontrolling
interest
     Total
equity
 

Balance at September 30, 2013

   ¥ 224,583      ¥ 619       ¥ 225,202   
  

 

 

   

 

 

    

 

 

 

Cash dividends attributable to KONAMI CORPORATION stockholders

     (2,357     —           (2,357

Purchase of treasury stock

     (5     —           (5

Comprehensive income:

       

Net income for the period

     3,039        23         3,062   

Other comprehensive loss, net of tax

     2,059        —           2,059   
  

 

 

   

 

 

    

 

 

 

Comprehensive income for the period

     5,098        23         5,121   
  

 

 

   

 

 

    

 

 

 

Balance at December 31, 2013

   ¥ 227,319      ¥ 642       ¥ 227,961   
  

 

 

   

 

 

    

 

 

 

 

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Table of Contents

8. Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss), net of applicable taxes, for the nine months and the three months ended December 31, 2013 are as follows:

 

     Millions of Yen  
     Foreign currency
translation
adjustments
     Net unrealized gains
on available-for-sale
securities
     Pension liability
adjustment
    Total  

Balance at March 31, 2013

   ¥ 1,033       ¥ 25       ¥ (49   ¥ 1,009   
  

 

 

    

 

 

    

 

 

   

 

 

 

Other comprehensive income before reclassifications

     2,617         55         —          2,672   

Amounts reclassified from accumulated other comprehensive income

     —           —           1        1   
  

 

 

    

 

 

    

 

 

   

 

 

 

Changes in accumulated other comprehensive income, net

     2,617         55         1        2,673   
  

 

 

    

 

 

    

 

 

   

 

 

 

Balance at December 31, 2013

   ¥ 3,650       ¥ 80       ¥ (48   ¥ 3,682   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

     Millions of Yen  
     Foreign currency
translation
adjustments
     Net unrealized gains
on available-for-sale
securities
     Pension liability
adjustment
    Total  

Balance at September 30, 2013

   ¥ 1,591       ¥ 80       ¥ (48   ¥ 1,623   
  

 

 

    

 

 

    

 

 

   

 

 

 

Other comprehensive income before reclassifications

     2,059         0         —          2,059   

Amounts reclassified from accumulated other comprehensive income

     —           —           0        0   
  

 

 

    

 

 

    

 

 

   

 

 

 

Changes in accumulated other comprehensive income, net

     2,059         0         0        2,059   
  

 

 

    

 

 

    

 

 

   

 

 

 

Balance at December 31, 2013

   ¥ 3,650       ¥ 80       ¥ (48   ¥ 3,682   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

Note:

  Amounts reclassified from pension liability adjustment are included in the Selling, general and administrative expenses in the consolidated statements of income.

9. Fair Value of Financial Instruments

Cash and cash equivalents, Trade notes and accounts receivable, Trade notes and accounts payable, Accrued expenses, and Short-term borrowings

The carrying amount approximates fair value because of the short maturity of these instruments.

Investments in marketable securities

The fair values of the Company and its domestic subsidiaries’ investments in marketable securities are based on quoted market prices.

Investments in non-marketable securities

For investments in non-marketable securities for which there are no quoted market prices, a reasonable estimate of fair value could not be made without incurring excessive costs. It was not practicable to estimate the fair value of common stock representing certain untraded companies. These investments are carried at cost.

Long-term debt

The fair values of the Company and its domestic subsidiaries’ long-term debt instruments are based on the quoted price in the most active market or the present value of future cash flows associated with each instrument discounted using the Company’s current borrowing rate for similar debt instruments of comparable maturity.

Derivative financial instruments

The fair values of derivative financial instruments, consisting principally of foreign exchange forward contracts, all of which are used for purposes other than trading, are estimated by obtaining quotes from counterparties or third parties.

 

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Table of Contents

The estimated fair values of the Company and its domestic subsidiaries’ financial instruments at March 31, 2013 and December 31, 2013 are as follows:

 

     Millions of Yen  
     March 31, 2013     December 31, 2013  
     Carrying
amount
    Estimated
fair value
    Carrying
amount
    Estimated
fair value
 

Non-derivatives:

        

Investment in marketable securities

   ¥ 440      ¥ 440      ¥ 526      ¥ 526   

Long-term debt, including current portion

     (5,000     (5,014     (15,000     (14,582

Derivatives:

        

Foreign exchange forward contracts:

        

Assets

     —          —          —          —     

Liabilities

     —          —          —          —     

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

10. Fair Value Measurements

Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants and requires that assets and liabilities carried at fair value are classified and disclosed in the following three categories:

 

Level 1     Quoted prices for identical assets or liabilities in active markets
Level 2     Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets
Level 3     Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of March 31, 2013 and December 31, 2013, our assets and liabilities measured at fair value on a recurring basis are summarized in the following table by the type of inputs applicable to the fair value measurements.

 

     Millions of Yen  

March 31, 2013

   Level 1      Level 2      Level 3      Total  

Assets:

           

Marketable securities

   ¥ 440         —           —         ¥ 440   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   ¥ 440         —           —         ¥ 440   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Millions of Yen  

December 31, 2013

   Level 1      Level 2      Level 3      Total  

Assets:

           

Marketable securities

   ¥ 526         —           —         ¥ 526   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   ¥ 526         —           —         ¥ 526   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Level 1 investments are comprised solely of available-for-sale securities, which is valued using an unadjusted quoted market price in active markets with sufficient volume and frequency of transactions.

Derivative financial instruments are comprised of foreign exchange forward contracts. Level 2 derivatives are valued using quotes obtained from counterparties or third parties, which are periodically validated by pricing models using observable market inputs, such as foreign currency exchange rates and interest rates.

As of March 31, 2013 and December 31, 2013, KONAMI did not have any Level 3 financial instruments that were measured and recorded at fair value on a recurring basis.

 

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Table of Contents

11. Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The operating segments are managed separately as each segment represents a strategic business unit that offers different products and serves different markets.

KONAMI operates on a worldwide basis principally with the following four business segments:

 

1. Digital Entertainment:      Production, manufacture and sale of digital content and related products including Content for social networks, Online games, Computer & Video Games, Amusement and Card Games.
2. Health & Fitness:      Operation of health and fitness clubs, and production, manufacture and sale of health and fitness related goods.
3. Gaming & Systems:      Development, manufacture, sale and service of gaming machines and the Casino Management System for overseas markets.
4. Pachinko & Pachinko Slot Machines:      Production, manufacture and sale of pachinko slot machines and pachinko machines.

Notes:

1. “Corporate” primarily consists of administrative expenses of the Company.
2. “Eliminations” primarily consist of eliminations of intercompany sales and of intercompany profits on inventories.
3. Intersegment sales and revenues are generally recorded at values that represent arm’s-length fair value.

The following tables summarize revenue and operating income (loss) by operating segment which are the primary measures used by KONAMI’s chief operating decision maker to measure KONAMI’s operating results and to measure segment profitability and performance. This information is derived from KONAMI’s management reports which have been prepared based on U.S. GAAP.

a. Segment information

 

Nine months ended December 31, 2012

   Digital
Entertainment
     Health & Fitness      Gaming &
Systems
     Pachinko &
Pachinko Slot
Machines
    Corporate and
Eliminations
    Consolidated  
     (Millions of Yen)  

Net revenue:

  

External customers

   ¥ 80,102       ¥ 59,998       ¥ 16,599       ¥ 3,452        —        ¥ 160,151   

Intersegment

     466         24         —           2      ¥ (492     —     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total

     80,568         60,022         16,599         3,454        (492     160,151   

Operating expenses

     64,984         57,956         13,002         4,307        4,982        145,231   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Operating income (loss)

   ¥ 15,584       ¥ 2,066       ¥ 3,597       ¥ (853   ¥ (5,474   ¥ 14,920   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Nine months ended December 31, 2013

   Digital
Entertainment
     Health & Fitness      Gaming  &
Systems
     Pachinko &
Pachinko Slot
Machines
    Corporate and
Eliminations
    Consolidated  
     (Millions of Yen)  

Net revenue:

  

External customers

   ¥ 71,141       ¥ 57,472       ¥ 22,297       ¥ 5,036        —        ¥ 155,946   

Intersegment

     460         24         —           2      ¥ (486     —     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total

     71,601         57,496         22,297         5,038        (486     155,946   

Operating expenses

     65,678         56,579         16,772         5,648        3,881        148,558   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Operating income (loss)

   ¥ 5,923       ¥ 917       ¥ 5,525       ¥ (610   ¥ (4,367   ¥ 7,388   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

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Table of Contents

Three months ended December 31, 2012

   Digital
Entertainment
     Health & Fitness      Gaming &
Systems
     Pachinko &
Pachinko Slot
Machines
    Corporate and
Eliminations
    Consolidated  
     (Millions of Yen)  

Net revenue:

               

External customers

   ¥ 27,785       ¥ 19,677       ¥ 5,206       ¥ 810        —        ¥ 53,478   

Intersegment

     92         10         —           1      ¥ (103     —     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total

     27,877         19,687         5,206         811        (103     53,478   

Operating expenses

     23,992         18,985         4,459         1,874        1,811        51,121   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Operating income (loss)

   ¥ 3,885       ¥ 702       ¥ 747       ¥ (1,063   ¥ (1,914   ¥ 2,357   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Three months ended December 31, 2013

   Digital
Entertainment
     Health & Fitness      Gaming &
Systems
     Pachinko &
Pachinko Slot
Machines
    Corporate and
Eliminations
    Consolidated  
     (Millions of Yen)  

Net revenue:

               

External customers

   ¥ 26,845       ¥ 18,907       ¥ 8,674       ¥ 3,592        —        ¥ 58,018   

Intersegment

     136         6         —           1      ¥ (143     —     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total

     26,981         18,913         8,674         3,593        (143     58,018   

Operating expenses

     24,762         18,683         6,188         3,143        1,625        54,401   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Operating income (loss)

   ¥ 2,219       ¥ 230       ¥ 2,486       ¥ 450      ¥ (1,768   ¥ 3,617   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

b. Geographic information

 

Nine months ended December 31, 2012

   Japan      United States      Europe     Asia/Oceania     Total      Eliminations     Consolidated  
     (Millions of Yen)  

Net revenue:

                 

External customers

   ¥ 123,639       ¥ 24,164       ¥ 8,485      ¥ 3,863      ¥ 160,151         —        ¥ 160,151   

Intercompany

     8,088         2,061         103        462        10,714       ¥ (10,714     —     
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total

     131,727         26,225         8,588        4,325        170,865         (10,714     160,151   

Operating expenses

     120,298         22,588         8,853        4,330        156,069         (10,838     145,231   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Operating income (loss)

   ¥ 11,429       ¥ 3,637       ¥ (265   ¥ (5   ¥ 14,796       ¥ 124      ¥ 14,920   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Nine months ended December 31, 2013

   Japan      United States      Europe     Asia/Oceania     Total      Eliminations     Consolidated  
     (Millions of Yen)  

Net revenue:

                 

External customers

   ¥ 114,308       ¥ 28,137       ¥ 8,139      ¥ 5,362      ¥ 155,946         —        ¥ 155,946   

Intercompany

     7,597         3,246         160        635        11,638       ¥ (11,638     —     
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total

     121,905         31,383         8,299        5,997        167,584         (11,638     155,946   

Operating expenses

     119,265         26,772         8,802        5,460        160,299         (11,741     148,558   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Operating income (loss)

   ¥ 2,640       ¥ 4,611       ¥ (503   ¥ 537      ¥ 7,285       ¥ 103      ¥ 7,388   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Three months ended December 31, 2012

   Japan      United States      Europe     Asia/Oceania     Total      Eliminations     Consolidated  
     (Millions of Yen)  

Net revenue:

                 

External customers

   ¥ 42,161       ¥ 7,207       ¥ 2,830      ¥ 1,280      ¥ 53,478         —        ¥ 53,478   

Intercompany

     2,749         1,162         28        196        4,135       ¥ (4,135     —     
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total

     44,910         8,369         2,858        1,476        57,613         (4,135     53,478   

Operating expenses

     43,156         7,655         3,016        1,478        55,305         (4,184     51,121   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Operating income (loss)

   ¥ 1,754       ¥ 714       ¥ (158   ¥ (2   ¥ 2,308       ¥ 49      ¥ 2,357   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Three months ended December 31, 2013

   Japan      United States      Europe     Asia/Oceania     Total      Eliminations     Consolidated  
     (Millions of Yen)  

Net revenue:

                 

External customers

   ¥ 40,859       ¥ 11,237       ¥ 4,046      ¥ 1,876      ¥ 58,018         —        ¥ 58,018   

Intercompany

     3,066         1,149         46        121        4,382       ¥ (4,382     —     
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total

     43,925         12,386         4,092        1,997        62,400         (4,382     58,018   

Operating expenses

     43,334         9,824         3,914        1,755        58,827         (4,426     54,401   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Operating income

   ¥ 591       ¥ 2,562       ¥ 178      ¥ 242      ¥ 3,573       ¥ 44      ¥ 3,617   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

For the purpose of presenting its operations in geographic areas above, KONAMI attributes revenues from external customers to individual countries in each area based on where the Company and its subsidiaries sold products or rendered services.

 

– 14 –


Table of Contents

12. Commitments and Contingencies

KONAMI is subject to pending claims and litigation. After review and consultation with counsel, management considered that any liability that may result from the disposition of such lawsuits would not be material.

KONAMI has placed firm orders for purchases of property and equipment and other assets amounting to approximately ¥329 million as of December 31, 2013.

13. Subsequent Events

No reportable subsequent events occurred.

 

– 15 –