DAIICHIKOSHO

CO.,

LTD.

FY2007, the year ending March 31, 2008

Flash Report on the Consolidated Results for the Interim Period Ended
September 30, 2007
November 12, 2007

Company Name: DAIICHIKOSHO CO., LTD.
Code Number: 7458
(URL http://www.dkkaraoke.co.jp)
Stock Exchange Listing: JASDAQ

Representative: Yasutaka Wada, President
Contact: Eiji Hata, Managing Director and Senior Corporate Officer; and Executive Director, Administration
Headquarters

Phone: (03) 3280-2151
Scheduled Date to Submit the Semi-Annual Securities Report: December 20, 2007
(Amounts below one million yen are truncated.)

1. Consolidated Performance for the Interim Period Ended September 2007 (from April 1, 2007, toSeptember 30, 2007)(1) Consolidated operating results(Percentage figures indicate increase/decrease from a year earlier.)
Interim period ended
September 2007
Interim period ended
September 2006
Year ended March 2007

Net sales¥ Million
62,188%(1.6)

63,212(1.5)

Operating income¥ Million
%
7,895
18.5
6,662

124,65429.5

13,189Net income

Ordinary income¥ Million
%
7,989
16.5
6,855

32.1

12,937

Net income per share¥ Million%¥
Interim period ended
2,122(46.3)
30.49
September 2007
Interim period ended
3,955
400.4
56.82
September 2006
Year ended March 2007
4,801
68.99
(Reference) Equity in net income of unconsolidated subsidiaries and affiliates:
Interim period ended September 2007: (¥131 million)
Interim period ended September 2006: (¥20 million)
Year ended March 2007: (¥199 million)

Fully diluted net income
per share¥―――(2) Consolidated financial position
Total assets¥ Million
126,842

Net assets¥ Million
68,418Interim period ended
September 2007
Interim period ended
134,745
68,456
September 2006
Year ended March 2007
130,931
68,788(Reference) Shareholders’ equity
Interim period ended September 2007: ¥67,478 million
Interim period ended September 2006: ¥67,669 million
Year ended March 2007: ¥67,890 million

1

Equity ratio%
53.2

Net assets per share¥
969.5150.2

972.2651.9

975.44DAIICHIKOSHO

CO.,

LTD.

(3) Consolidated cash flows

Interim period ended
September 2007
Interim period ended
September 2006
Year ended March 2007

Cash flows fromoperating activities

Cash flows frominvesting activities

Cash flows fromfinancing activities¥ Million
10,675¥ Million(9,338)¥ Million(5,523)

Cash and cash
equivalents at endof period¥ Million
27,75916,572(12,058)(1,388)27,37232,509(18,059)(6,792)

31,918

2. Dividend(Reference dated)Year ended March 2007
Year ending March 2008
(forecast)

Dividend per share
Year-end

Interim
Yen
—
—

Yen
20.00
20.00

Annual
Yen
20.00
20.00

3. Forecast Consolidated Performance for FY2007, the Year Ending March 31, 2008 (from April 1,
2007, to March 31, 2008)(Percentage figures indicate increase/decrease from a year earlier: The percentages for full-year forecasts mean theincrease/decrease from the end of the previous year, and the half-year forecast percentages represent theincrease/decrease from the end of the previous interim term.)
Net income
Net sales
Operating income
Ordinary income
Net income
per share¥ Million%¥ Million%¥ Million%¥ Million%¥
Year ending
125,300
0.5
14,2007.7
14,200
9.8
4,600
(4.2)
66.09
March 31, 2008
(full year)

4. Other(1) Change in important subsidiaries during the period under review (Change in specific subsidiaries causing achange in the scope of consolidation): No(2) Change in accounting principals, procedure and presentation methods for preparation of consolidated interim
financial statements (Items set forth in “Changes in Important Matters in Preparing the Consolidated Interim
Financial Statements”)
1) Changes following a revision of accounting standards: Yes
2) Other changes: No(3) Number of common shares issued
1) Number of shares issued (including treasury stock):
Interim period ended September 2007: 73,242,596 sharesInterim period ended September 2006: 73,242,596 sharesYear ended March 2007: 73,242,596 shares
2) Number of shares of treasury stock
Interim period ended September 2007: 3,642,687 sharesInterim period ended September 2006: 3,642,494 sharesYear ended March 2007: 3,642,580 shares

2

DAIICHIKOSHO

CO.,

LTD.

(Reference) Outline of Nonconsolidated Financial Results
1. Nonconsolidated Performance for the Interim Period Ended September 2007 (from April 1, 2007, toSeptember 30, 2007)(1) Nonconsolidated operating results

Interim period ended
September 2007
Interim period ended
September 2006
Year ended March 2007

Interim period ended
September 2007
Interim period ended
September 2006
Year ended March 2007

(Percentage figures indicate increase/decrease from a year earlier.)
Net sales
Operating income
Ordinary income¥ Million¥ Million¥ Million%%%
42,408
(3.0)
5,186
20.8
5,988
18.1
43,715

(3.9)

4,293

83,382

5,072

7,888

Net income¥ Million%
1,725(39.6)
2,856

41.3

52.3

8,317

Net income per share
¥
24.79

211.4

41.04

2,310

33.20

(2) Nonconsolidated financial position
Total assets¥ Million
77,215

Net assets¥ Million
51,341

Interim period ended
September 2007
Interim period ended
83,54853,391
September 2006
Year ended March 2007
80,20052,189(Reference) Shareholders’ equity:
Interim period ended September 2007: ¥51,341 million
Interim period ended September 2007: ¥53,391 million
Year ended March 2007: ¥52,189 million

Equity ratio
66.5

Net assets per share¥
737.6763.9

767.1265.1

749.85%

2. Forecast Nonconsolidated Performance for FY2007, the Year Ending March 31, 2008 (from April 1,
2007, to March 31, 2008)(Percentage figures indicate increase/decrease from a year earlier: The percentages for full-year forecasts mean theincrease/decrease from the end of the previous year, and the half-year forecast percentages represent theincrease/decrease from the end of the previous interim term.)
Net income
Net sales
Operating income
Ordinary income
Net income
per share¥ Million%¥ Million%¥ Million%¥ Million%¥
Year ending
84,700
1.6
9,000
14.1
9,800
17.8
3,000
29.8
43.10
March 31, 2008
(full year)* Explanation for the appropriate use of performance forecasts and other special notes:
These projected performance figures are based on information available to the Company’s management at the timeof preparing this report. There are many uncertain factors inherent in forecasting, and there might be cases in which
actual results differ from forecast values.

3

DAIICHIKOSHO

CO.,

LTD.

(Attachment)

2. Corporate GroupThe Daiichikosho Group (“DKG”) consists of Daiichikosho Co., Ltd. (“DK” or “the Company”), 47
consolidated subsidiaries and five affiliates. The major group companies engage in the commercial
karaoke business, the karaoke cabin and restaurant business and the music software business.
In the interim period ended September 30, 2007, there was a change in business segmentation, thedetail of which is indicated in the Segment Information.
Business segment

Business line

Commercial
karaoke business

Sales and rental of commercial-use
karaoke equipment, supply of soundsource and video content forcommunication karaoke, and supply ofcontent services via the special “DAM
Station” information terminal

Karaoke cabin
and restaurant
business

Operation of karaoke cabins andrestaurants

Music software
business

Production and sales of music andvideo software products

Other business

Satellite broadcasting business, supply
of content services via mobile phones
and real estate lease and rental
business, etc.

Domestic

Overseas

Daiichikosho Co., Ltd.,
Hokkaido Daiichikosho Co., Ltd.,
Tohoku Daiichikosho Co., Ltd.,
Taito Daiichikosho Co., Ltd.,
Niigata Daiichikosho Co., Ltd.,
Tokai Daiichikosho Co., Ltd.,
Daiichikosho Kinki Co., Ltd.,
Kyushu Daiichikosho Co., Ltd.,and 19 other subsidiaries

DK KOREA
Co., Ltd.,
Daiichikosho(Shanghai), Ltd.,and two othersubsidiaries

Daiichikosho Co., Ltd.,
Nippon Crown Co., Ltd.,
Tokuma Japan Communications Co.,Ltd.,First Distribution Co., Ltd.,
Union Eiga Co., Ltd.,and four other subsidiaries
Daiichikosho Co., Ltd.,DK Finance Co., Ltd.,and Maruhagi Yoshu Kogyo Co., Ltd.

4

Saha Daiichi
Kosho Co., Ltd.,BIG ECHO(SHANGHAI)
Co., Ltd.,and three othersubsidiaries

D.K. Enterprises(Guam), Inc.,and one othersubsidiary

DAIICHIKOSHO

CO.,

LTD.

The following diagram schematically shows the relationships of the respective group companies and businesses.

(Intermediary services related to
installment sales and loans for
DK and group companies)
DK Finance Co., Ltd.
(Production and sales of music
software products)
Nippon Crown Co., Ltd.
Tokuma Japan Communications
Co., Ltd.
First Distribution Co., Ltd.
Tri-M, Inc.
DK Music Publishing Co., Ltd.
Union Eiga Co., Ltd.
Crown Music Enterprise Co.
Zoom Republic(Operation of karaoke cabins andrestaurants)
Saha Daiichi Kosho Co., Ltd.
BIG ECHO (SHANGHAI) Co., Ltd.
BIG ECHO (SHXG) CO., LTD.
BIG ECHO (SHSG) CO., LTD.
BEIJING BIG ECHORESTAURANT SERVICE CO.,LTD.

(Operation and management ofrecreation facilities)
D.K. Enterprises (Guam), Inc.

(Other overseas subsidiaries)
Daiichikosho (Beijing) Music &Culture Co., Ltd.
(Equity method affiliate)
Spice Records Co., Ltd.
Breezeway Corp.
JD Create
Shin Corporation
Bono Music(Production and sale of fruitwines)
Maruhagi Yoshu Kogyo Co., Ltd.

Sales and rentals of merchandise and products

DK KOREA Co., Ltd.
Daiichikosho (Shanghai), Ltd.
DAIICHI KOSHO (SHANGHAI)
TRADE CO., LTD.
Daiichi Kosho (Singapore), Pte
Ltd.

Overseas users(Domestic sales subsidiaries)
Hokkaido Daiichikosho Co., Ltd.
Tohoku Daiichikosho Co., Ltd.
Niigata Daiichikosho Co., Ltd.
Kyushu Daiichikosho Co., Ltd.
Taito Daiichikosho Co., Ltd.
Tokai Daiichikosho Co., Ltd.
Daiichikosho Kinki Co., Ltd.
19 other companies

DAIICHIKOSHO CO., LTD. (Reporting company)

Domestic users(Overseas subsidiaries)

Operation of karaoke cabins and restaurants

5

Provision of services

DAIICHIKOSHO

CO.,

LTD.

4. Consolidated Interim Financial Statements(1) Consolidated Interim Balance Sheets
Fiscal year

Account item

(Millions of yen)
FY2006
Year(As of March 31, 2007)
overCondensed
yearchangeComAmount
position
ratio(%)

Previous interim period(As of September 30,
2006)
AmountComposition
ratio
(%)

Current interim period(As of September 30,
2007)
AmountComposition
ratio
(%)

27,84011,40928,229
10,16532,4049,593(4,175)
571

5,779
1,241
5,059
(1,168)50,162

5,807
1,513
4,158
(473)
49,400

5,093
1,294
4,569
(745)
52,210

714
218
(411)
271
(2,810)(Assets)
I Current assets
1 Cash and bank deposits
2 Notes and accounts receivable―trade3 Inventories
4 Deferred tax assets
5 Other
Allowance for doubtful accounts
Total current assets
II Fixed assets
1 Tangible fixed assets(1) Buildings and structures(2) Karaoke equipment for rental(3) Karaoke cabin and restaurant
facilities(4) Land(5) Other
Total tangible fixed assets
2 Intangible assets
3 Investments and other assets(1) Investments in securities(2) Long-term loans receivable(3) Deferred tax assets(4) Leasehold deposits andguarantee money(5) Other
Allowance for doubtful accounts
Total investments and other assets
Total fixed assets
Total Assets

37.3

39.0

39.9

6,104
10,026
13,742

6,013
8,663
13,9896,122
8,949
12,644

(109)
(285)
1,345

14,554
4,085
48,512
7,456

15,6982,178
46,544
5,871

14,272
2,329
44,318
6,074

1,425
(150)
2,225
(202)

36.0
5.5

36.7
4.6

33.9
4.6

10,9601,071
1,870
13,073

6,722
967
2,573
13,156

9,820
1,220
2,624
13,151(3,098)
(252)
(51)
5

3,658
(2,020)28,614
84,583
134,7453,414(1,808)25,02677,442
126,8423,432(1,923)28,32778,720130,931(18)
115(3,300)(1,277)(4,088)

21.2
62.7
100.0

6

19.7
61.0
100.0

21.6
60.1
100.0

DAIICHIKOSHOFiscal year

Account item

(Liabilities)
I Current liabilities
1 Notes and accounts payable―trade2 Short-term borrowings
3 Accounts payable―other
4 Income taxes payable
5 Reserve for bonuses
6 Unrealized profit on installment
sales
7 Other
Total current liabilities
II Long-term liabilities
1 Long-term borrowings
2 Deferred tax liabilities
3 Reserve for employees’ retirement
benefits
4 Reserve for directors’ retirement
allowances
5 Consolidation adjustment account
6 Other
Total long-term liabilities
Total Liabilities(Net Assets)
I Shareholders’ equity
1 Capital stock
2 Capital surplus
3 Retained earnings
4 Treasury stock
Total Shareholders’ equity
II Valuation gains and losses andtranslation adjustment
1 Net unrealized gains or losses onavailable-for-sale securities
2 Land revaluation difference
3 Foreign currency translation
adjustments
Total valuation gains and losses andtranslation adjustment
III Minority interests
Total Net Assets
Total Liabilities and Net Assets

CO.,

LTD.

(Millions of yen)
FY2006
Year(As of March 31, 2007)
overCondensed
yearchangeAmountComposition
ratio
(%)

Previous interim period(As of September 30,
2006)
AmountComposition
ratio
(%)

Current interim period(As of September 30,
2007)
AmountComposition
ratio
(%)

5,525

5,070

4,646

423

19,495
6,088
1,892
1,341
328

13,291
6,545
3,368
1,434
274

17,162
6,959
3,386
1,074
267

(3,871)
(413)
(17)
360
7

3,371
38,04328.2

4,039
34,02426.8

3,446
36,94328.2

592(2,919)21,375216
2,629

18,060150
2,714

18,304
150
2,660

(243)

2,264

1,828

2,437

(608)

507
1,252
28,246
66,289

21.0
49.2

371
1,274
24,40058,424

19.3
46.1

409
1,235
25,19862,142

19.3
47.5

(38)
38
(798)
(3,717)

12,35024,00334,825(3,641)
67,537

9.2
17.8
25.8
(2.7)
50.1

12,35024,00336,402(3,641)
69,114

9.8
18.9
28.7
(2.9)
54.5

12,35024,00335,671(3,641)
68,384

9.4
18.3
27.2
(2.7)
52.2

730
(0)
729

782

0.6

(1,062)

(0.8)

123

0.1

(1,185)

(845)
194

(0.6)
0.1

(845)
271

(0.7)
0.2

(845)
229

(0.6)
0.2

—

131

0.1

(1,635)

(1.3)

(493)

(0.3)

(1,142)786
68,456
134,745

0.6
50.8
100.0

939
68,418
126,842

0.7
53.9
100.0

897
68,788130,931

0.6
52.5
100.0

42
(370)
(4,088)

7

—
53

—
—

42

DAIICHIKOSHO

CO.,

LTD.

(2) Consolidated Interim Statements of Income
Fiscal year

Account item
I Net sales
II Cost of sales
Gross profit before adjustment for
unrealized profit on installment sales
Unrealized profit on installment
sales─reversal (+)
Unrealized profit on installment
sales─deferred (–)
Gross profit on sales
III Selling, general and administrative
expenses
Operating income
IV Nonoperating income
1 Interest income
2 Dividend income
3 Fees and commissions received
4 Contributions received
5 Amortization of consolidation
adjustments account
6 Other
V Nonoperating expenses
1 Interest expense
2 Loss on devaluation of inventories
3 Equity in losses of affiliates
4 Foreign exchange losses
5 OtherOrdinary income
VI Extraordinary gains
1 Gain on sales of fixed assets
2 Reversal of allowance for doubtful
accounts
3 Gain on sales of investments insecurities
4 Reversal of reserve for directors’
retirement allowances
5 Indemnity of cancellation of leases
6 Gain on revisions to the past-year
copyright use fees
VII Extraordinary losses
1 Loss on sales and disposal of fixed
assets
2 Impairment loss on fixed assets
3 Loss on valuation of investments
in securities
4 Loss on cancellation of a new
business
5 Loss on irregularities
Income before income taxes andminority interests
Income taxes―current
Income taxes―deferred
Minority interests in income (loss) ofconsolidated subsidiaries
Net income

Previous interim period(From April 1, 2006,
to September 30, 2006)
AmountPercentage(%)
63,212 100.0
38,11360.3
25,099
39.7
52
6

45

0.0

98.4
93.3
106.1

25,144
18,481
6,662

12

(0.0)

(16.1)

106

0.1

39.7
29.2

26,626
18,731

42.8
30.1

105.9
101.4

49,93536,745

40.1
29.5

10.5

7,895

12.7

118.5

13,189

10.6

1,781

1.4

2,033
12,937

1.6
10.4

857

0.7

4,451
9,343

3.6
7.5

4,409
132

3.5
0.1

4,801

3.9

146
35
85
164
38
902

1.4

—
710
6,855

1.1
10.8

399
215
211
131
95
122

(Millions of yen)
FY 2006 (From April 1,
2006, to March 31, 2007)
Condensed
AmountPercentage(%)
124,654 100.0
74,82460.0
49,829
40.0
126

(7)

239
279
20
170

Yearoveryearchange
(%)

5

153
26
98
158
112
352

Current interim period(From April 1, 2007,
to September 30, 2007)
AmountPercentage(%)
62,188 100.0
35,554
57.2
26,634
42.8

19

333
54
172
265
210
870

1.4

96.4

744
475
854
199

—
776
7,989

1.2
12.9

109.3
116.5

502

15
97

5
179

199
186

—

—

105

2

36

2

—
—

85
115

0.2

—

307

0.5

265.8

249
112

444

183

1,420

38
5

55
1,899

2,850
180

—

234

—

—
1,776
722

488
6,483

0.7
10.3

2,499
28

4.0
0.0

3,955

6.3

8

652

3,195
(90)

3,025
5,271

4.9
8.5

619.7
81.3

3,105
44

5.0
0.1

124.2
154.3

2,122

3.4

53.7

—
4,171
238

DAIICHIKOSHO

CO.,

LTD.

(3) Consolidated Interim Statements of Changes in Net Assets
Previous interim period (From April 1, 2006, to September 30, 2006)(Millions of yen)
Shareholders’ equity

Balance as of March 31, 2006

Capital stock

Capital surplus

Retained earnings

12,35024,00332,029Total shareholders’equity(3,639)64,743(1,044)(1,044)

(115)

(115)

Change in first half of
FY2006
Cash dividends paid (Note)
Bonuses to directors and statutory
auditors (Note)
Net income

Treasury stock

3,955

Purchases of treasury stock
Disposal of treasury stock
Net change in items otherthan those in shareholders’equityTotal of changes in first half of
FY2006
Balance as of September 30, 2006

0

(1)

0

0

―

0

2,795

(1)

2,794

12,35024,00334,825(3,641)

67,537

Valuation gains and losses and translation adjustments

Minority
interests

Total net
assetsNet unrealized
gains or losses onavailable-for-salesecurities
Balance as of March 31, 2006

3,955
(1)

2,354

Land
revaluationdifference(845)

Foreigncurrencytranslation
adjustments
188

Total
valuation
gains andlosses andtranslation
adjustments
1,697

764

67,205

Change in first half of FY2006
Cash dividends paid(Note)(1,044)

Bonuses to directors andstatutory auditors (Note)
Net income

(115)
3,955

Purchases of treasury stock(1)

Disposal of treasury stock0

Net change in items other than
(1,571)―
6(1,565)21(1,544)
those in shareholders’ equity
Total of changes in first half of(1,571)―
6(1,565)21
1,250
FY2006
Balance as of September 30,
782
(845)
194
131
786
68,4562006
Note: These are items for which retained earnings were appropriated by resolution of the Ordinary General Meeting of Shareholders
held in June 2006.

9

DAIICHIKOSHO

CO.,

LTD.

Current interim period (From April 1, 2007, to September 30, 2007)(Millions of yen)
Shareholders’ equity
Capital stock

Capital surplus

Retained earnings

12,35024,00335,671

Total shareholders’equity(3,641)
68,384

Change in first half of
FY2007
Cash dividends paid

(1,391)(1,391)

Net income

2,122

Balance as of March 31, 2007

Treasury stock

2,122

Purchases of treasury stock
Net change in items otherthan those in shareholders’equityTotal of changes in first half of
FY2007
Balance as of September 30, 2007

(0)

—

—

730

(0)

729

12,35024,00336,402(3,641)

69,114

Valuation gains and losses and translation adjustments

Minority
interests

Total net
assetsNet unrealized
gains or losses onavailable-for-salesecurities
Balance as of March 31, 2007

(0)

123

Land
revaluationdifference(845)

Foreigncurrencytranslation
adjustments
229

Total
valuation
gains andlosses andtranslation
adjustments
(493)

897

68,788Change in first half of FY2007
Cash dividends paid

(1,391)

Net income

2,122

Purchases of treasury stock
Net change in items other thanthose in shareholders’ equity
Total of changes in first half of
FY2007
Balance as of September 30,
2007

(0)
(1,185)—42(1,142)42(1,100)(1,185)—42(1,142)42(370)(1,062)

(845)

271

(1,635)939

68,41810

DAIICHIKOSHO

CO.,

LTD.

FY2006 (From April 1, 2006, to March 31, 2007)(Millions of yen)
Capital stock
Balance as of March 31, 2006
Changes in the consolidated fiscal
year under review
Cash dividends paid (Note)
Bonuses to directors and statutory
auditors (Note)
Net income
Purchase of treasury stock
Disposal of treasury stock
Net change in items other thanthose in shareholders’ equity
Total of changes during theconsolidated fiscal year underreview
Balance as of March 31, 2007

12,350Shareholders’ equity
Capital surplus
Retained
Treasury stockearnings
24,00332,029(3,639)(1,044)(115)(1,044)
(115)

4,801
0

Total
shareholders’equity64,743

(1)
0

4,801
(1)
0

—

0

3,642

(1)

3,640

12,35024,00335,671(3,641)

68,384

Valuation gains and losses and translation adjustments
Net unrealizedLand
Foreign
Total
gains or losses onrevaluation
currency
valuation
available-for-saledifferencetranslation
gains andsacurities
adjustments
losses andtranslation
adjustments
2,354
(845)
188
1,697

Minority
interest

Total net
assetsBalance as of March 31, 2006
764
67,205
Changes in the consolidated
fiscal year under review
Cash dividends paid (Note)(1,044)
Bonuses to directors and(115)
statutory auditors (Note)
Net income
4,801
Purchase of treasury stock(1)
Disposal of treasury stock0
Net change in items other than
(2,231)40(2,191)132(2,058)—those in shareholders’ equity
Total of changes during the40(2,191)132
1,582(2,231)—
consolidated fiscal year underreview
Balance as of March 31, 2007
123
(845)
229
(493)
897
68,788
Note: These are items for which retained earnings were appropriated by resolution of the Ordinary General Meeting of Shareholders heldin June 2006.

11

DAIICHIKOSHO

CO.,

LTD.

(4) Consolidated Statements of Cash Flows(Millions of yen)
Fiscal year
Account item
I Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation expense
Impairment loss on fixed assets
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in reserve for directors’ retirement
allowances
Dividend and interest income
Loss on valuation of investments in securities
Interest expense
Equity in (earnings) losses of affiliates
Gain or loss on disposal of fixed assets
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Transfer of cost of sales on karaoke equipment forrentalIncrease in trade payables
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
II Cash flows from investing activities:
Increase in time and saving deposits
Proceeds from decrease in time and saving deposits
Payments for acquisition of tangible fixed assets
Proceeds from sales of tangible fixed assets
Payments for acquisition of intangible assets
Payments for acquisition of video licenses
Payments for purchase of investments in securities
Payments for loans
Proceeds from collection of loans receivable
Payments for leasehold deposits and guarantee money
Proceeds from repayment of leasehold deposits andguarantee money
Other
Net cash provided by (used in) investing
activities
III Cash flows from financing activities:
Net increase (decrease) in short-term borrowings
Increase in long-term borrowings
Payments for repayment of long-term borrowings
Cash dividends paid
Other
Net cash used in financing activities
IV Effect of exchange rate changes on cash and cash
equivalents
V Net increase (decrease) in cash and cash equivalents
VI Cash and cash equivalents at the beginning of theyear
VII Cash and cash equivalents at the end of the interim
periodPrevious interim
period (FromApril 1, 2006,
to September 30,
2006)
AmountCurrent interim
period (FromApril 1, 2007,
to September 30,
2007)
AmountYear-over-year change

FY 2006 (FromApril 1, 2006, to
March 31, 2007)
Condensed

Increase/Decrease

Amount

6,483
7,598
38
(95)
111

5,271
6,736
55
(380)
(608)

9,343
15,633
2,850
(390)
284

(180)
5
239
20
428
676
1,903
468

(182)
1,899
215
131
177
(571)
(714)
414

(387)
180
475
199
1,220
2,489
2,589
738

266
(39)
17,925172(246)(1,279)16,572423
1,059
13,925
183(219)(3,214)
10,675(612)
201
34,816377(491)(2,192)32,509(78)
121(6,613)122(2,179)(619)(2,909)
(390)
373
(246)
317

(129)
145
(6,587)63(2,038)
(664)
(200)
(183)
453
(446)
211

43
(12,058)37(9,338)

(412)
7,405
(7,328)(1,043)(10)(1,388)25(3,999)(5,896)(190)
214(10,442)626(4,076)(1,206)(3,249)
(509)
737
(769)
579
2,719

228
(18,059)(2,757)5,300(6,666)(1,388)(10)(5,523)27(4,134)2(1,667)
10,776(14,848)(1,043)(10)(6,792)38

3,150
24,222(4,158)31,918(7,308)
7,695

7,695
24,222

27,372

27,759387

31,91812

DAIICHIKOSHO

CO.,

LTD.

Important Matters in Preparing the Consolidated Interim Financial Statements
4. Summary of Significant Accounting Policies(1) Valuation basis and method for important assets① Marketable securities and investments in securities
Other securities primarily designated as available-for-sale securities for which the fair values are readily
determinable:
Carried at fair value as of the balance-sheet date with changes in net unrealized holding gain or loss, net ofthe applicable income taxes, included directly in net assets. The cost of securities sold is determined by themoving-average method.
Other securities primarily designated as available-for-sale securities for which the fair values are notreadily determinable:
Carried at cost determined by the moving-average method.
With regard to investments in the Investment Business Limited Liability Partnership and similarorganizations (which are regarded as “securities” in accordance with Article 2, Paragraph 2, of the Securities
Exchange Law), initial investments in such associations are recognized as receivables from associations andthe amount assumed to be held by the Company for fluctuations due to the financial situation of theassociations after such investment is recognized as receivables and payables related to such associations.

② Derivatives
Carried at fair value.
③ Inventories
Principally stated at cost determined by the moving-average method.
(2) Depreciation method of major depreciable assets① Tangible fixed assets
Depreciation is principally computed by the declining-balance method at rates based on the estimated useful
lives of the assets as shown below. However, the straight-line method is adopted for buildings (excluding
building improvements) acquired after March 31, 1998.
Buildings and structures: 3–50 years
Karaoke equipment for rental: 5–6 years
Karaoke cabin and restaurant facilities: 3–19 years(Change in accounting method)
Pursuant to the revisions to the Income Tax Law, DK and its consolidated subsidiaries changed the method ofdepreciation of tangible fixed assets and, effective in the interim period ended September 30, 2007, use a method
based on the revised Income Tax Law with regard to those assets acquired on and after April 1, 2007.
This change decreased operating income, ordinary income and income before income taxes and minority interests
each by ¥115 million for the interim period ended September 30, 2007.
The impact on segment information is stated at the relevant points in the Segment Information.
(Additional Information)
Pursuant to the revisions to the Income Tax Law, DK and its consolidated subsidiaries use a method of depreciationof tangible fixed assets acquired before April 1, 2007, based on the Income Tax Law before the revision. Specifically,
from the consolidated fiscal year following the consolidated fiscal year in which the depreciation amount reaches
5% of the acquisition cost, the difference between the assumed amount of 5% of the acquisition cost and thememorandum price is equally amortized over five years, included in Depreciation and amortization.
This change decreased operating income, ordinary income and income before income taxes and minority interests
each by ¥37 million for the interim period ended September 30, 2007.
The impact on segment information is stated at the relevant points in the Segment Information.

② Intangible assets
Amortization of intangible assets is computed by the straight-line method.
(3) Accounting standard for important reserves① Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amount of possible losses from uncollectible receivables
based on the actual rate of losses from bad debt for ordinary receivables, and on the estimated recoverability forspecific doubtful receivables.
② Reserve for bonuses
The reserve for bonuses is provided at an estimated amount based on the internal payment prediction standard.
③ Reserve for employees’ retirement benefits

13

DAIICHIKOSHO

CO.,

LTD.

The reserve for employees’ retirement benefits is provided at an amount recognized to have accrued as of theinterim balance-sheet date, based on the projected benefit obligations and plan assets as of September 30, 2007.
Actuarial differences are amortized on a pro rata basis by the straight-line method over a certain period (10years), which is shorter than the average remaining service years for employees at the time of their recognition,from the following fiscal year of recognition.
④ Reserve for directors’ retirement allowances
The reserve for directors’ retirement allowances of DK and its domestic consolidated subsidiaries is provided at
amounts that would be required to be paid in accordance with their respective internal rules concerning directors’
retirement allowances if all eligible directors and statutory auditors were to resign their positions as of therespective interim balance-sheet dates.
(4) Translation of important assets and liabilities denominated in foreign currencies into yen
Monetary receivables and payables denominated in foreign currencies are translated into yen at the spot exchange
rate in effect at the interim balance-sheet date. The resulting exchange differences are charged or credited to income.
The balance sheet accounts, as well as the revenue and expense accounts, of the overseas subsidiaries are translated
into yen at the spot exchange rate in effect at their respective balance-sheet dates. The resulting translationdifferences have been included in “Foreign currency translation adjustments” and “Minority interests” in Net
Assets.
(5) Accounting for important leases
Finance leases that do not transfer ownership of leased property to the lessee are accounted for as rental transactions.
(6) Hedge accounting
DKG hedges against risks of interest rate fluctuations for its variable-rate borrowings using interest rate swaps. The
preferential treatment is applied to these interest rate swaps.
(7) Other important matters in preparing the consolidated interim financial statements① Accounting for installment sales
Unrealized profit on installment sales is deferred for the amount corresponding to the portion of installment
receivables for which the due date has not expired based on DKG’s installment standards.
② Accounting for consumption taxes
Consumption taxes are accounted for using the tax exclusion method.

5. Cash and Cash Equivalents in the Consolidated Interim Statements of Cash Flows
Cash and cash equivalents in the consolidated interim statements of cash flows included cash on hand, demand
deposits and short-term investments due within three months from the acquired date, which are easily convertible
into cash with little risk of value fluctuation.

14

DAIICHIKOSHO

CO.,

LTD.

(Segment Information)
1. Business segments
Previous interim period (From April 1, 2006, to September 30, 2006)
Item
Sales and operating
incomeSales
Sales to third parties
Intersegment sales andtransfers
Total
Operating expenses
Operating income

Commercial Karaoke cabinkaraokeand restaurantMusic
software

Other

Total

(Millions of yen)
Eliminations Consolidated
and corporate

34,786113

17,046

5,834
86

5,545
365

63,212565—

63,212

—

(565)

—

34,89929,873
5,026

17,046
15,057
1,989

5,920
5,891
29

5,910
4,925
984

63,77755,747
8,029

(565)
801
(1,366)

63,21256,549
6,662

Current interim period (From April 1, 2007, to September 30, 2007)
Item
Sales and operating
incomeSales
Sales to third parties
Intersegment sales andtransfers
Total
Operating expenses
Operating income

Commercial Karaoke cabinkaraokeand restaurantMusic
software

Other

Total

(Millions of yen)
Eliminations Consolidated
and corporate

33,091
125

18,064

5,626
84

5,406
389

62,188599—

62,188

—

(599)

—

33,21627,201
6,014

18,064
15,769
2,294

5,711
5,519
192

5,795
4,852
942

62,78853,343
9,444

(599)
950
(1,549)62,18854,293
7,895

Music
software

Other

Total

FY 2006 (From April 1, 2006, to March 31, 2007)
Item
Sales and operating
incomeSales
Sales to third parties
Intersegment sales andtransfers
Total
Operating expenses
Operating income

Commercial Karaoke cabinkaraokeand restaurant(Millions of yen)
Eliminations Consolidated
and corporate

65,957228

35,681

11,982
178

11,032
750

124,654
1,158—

124,654—(1,158)—66,186
57,632
8,554

35,681
30,576
5,105

12,161
12,010150

11,7839,811
1,971

125,812110,030
15,781(1,158)1,433(2,591)

124,654
111,464
13,189Notes:
1. Segmentation method
According to DKG’s sales tabulation categories.
2. Major products and/or services of each business segment
Business segment
Commercial karaoke businessKaraoke cabin and restaurant
business
Music software business
Other business

Major products and/or services
Sales and rental of commercial-use karaoke equipment, supply of sound source andvideo content for communication karaoke, and supply of content services via thespecial “DAM Station” information terminal
Operation of karaoke cabins and restaurants
Production and sales of music and video software products
Satellite broadcasting business, supply of content services via mobile phones and realestate lease and rental business, etc.

15

DAIICHIKOSHO

CO.,

LTD.

3. Amounts and major items included in “Eliminations and corporate”

Amounts of unabsorbed
operating expenses included in“Eliminations and corporate”

Previousinterim period
1,366

Current
interim period
1,549

Last fiscal
year
2,591

(Millions of yen)
Major items
Expenses required for operations byadministrative departments such as
the General Affairs Dept.

4. Change in business segments
In the interim period ended September 30, 2007, DK and its consolidated subsidiaries reviewed business segments asfollows.
The “supply of content services via the special ‘DAM Station’ information terminal,” which had previously been
included in the Gateway business, has been included in the Commercial karaoke business since the interim period underreview. We decided to position this business as a value-added service in the commercial karaoke business, our mainstay
business, and develop this business by integrating it with the mainstay business.
Along with such a change in business segmentation, the monetary importance of e-business (the supply of content
services via mobile phones), which had been a component of the Gateway business, declined, thereby resulting in thisbusiness being included in “Other business” from the interim period under review.
The above segment information for the previous interim period and the last fiscal year has been prepared based on the
updated business segments after the change.
5. As described in the Important Maters in Presenting the Consolidated Interim Financial Statements 4. Summary of
Significant Accounting Policies (Change in accounting method), pursuant to the revisions to the Income Tax Law, DK
and its consolidated subsidiaries changed the method of depreciation of tangible fixed assets acquired on and after
April 1, 2007. This change increased operating expenses in the commercial karaoke business, the karaoke cabin andrestaurant business, the music software business, and other business by ¥75 million, ¥38 million, ¥0 million and ¥1
million, respectively, for the consolidated interim period under review. The operating income of each businessdecreased by the same respective amount.
6. As described in the Important Maters in Presenting the Consolidated Interim Financial Statements 4. Summary of
Significant Accounting Policies (Additional Information), pursuant to the revisions to the Income Tax Law, DK and its
consolidated subsidiaries changed the method of depreciation of tangible fixed assets acquired before April 1, 2007.
Specifically, from the consolidated fiscal year following the consolidated fiscal year in which the depreciation amountreaches 5% of the acquisition cost, the difference between the assumed amount of 5% of the acquisition cost and thememorandum price is equally amortized over five years, included in Depreciation and amortization.
This change increased operating expenses in the commercial karaoke business, the karaoke cabin and restaurant
business, the music software business, and other business by ¥27 million, ¥8 million, ¥0 million and ¥1 million,
respectively, and also increased operating expenses in “Eliminations and corporate” by ¥0 million for the consolidated
interim period under review. The operating income of each business decreased by the same respective amount.

2. Geographical segments
As sales in Japan account for more than 90% of the sum of sales in each region of the respective geographicalsegments, the segment information by geographical region is omitted.

3. Overseas sales
As sales overseas account for less than 10% of consolidated net sales, overseas sales-related information is omitted.

16