DAIICHIKOSHO

CO.,

LTD.

FY 2003 ending March 31, 2004
Flash Report on the Consolidated Results for the Interim Period Ended September 30, 2003

November 17, 2003
Company Name: DAIICHIKOSHO CO., LTD.
Code Number: 7458
(URL http://www.dkkaraoke.co.jp)
Registered Stock: JASDAQ Location of Head Office (Prefecture): Metropolis of Tokyo
Representative: Tatsuyoshi Yoneda, President and Senior Executive Corporate Officer
Contact:
Eiji Hata, Executive Director; Administration Headquarters and General Manager,
Finance Dept.
Phone: (03) 3280-2151
Date of the Board of Directors Meeting on the Closing of Accounts: November 17, 2003
Adoption of US GAAP: No
1. Consolidated Performance for the Current Interim Period (from April 1, 2003, to September 30,
2003)(1) Consolidated operating results
Note: Amounts below one million yen are truncated.
Net sales¥ Million

Current interim period
Previous interim period
Last fiscal year

%
(2.6)
34.9
18.7

56,91058,447
117,057¥ Million

1,398
2,325
6,938

Ordinary income¥ Million¥ Million

%
15.4
17.2
31.4

6,880
5,960
12,493

Net income
Current interim period
Previous interim period
Last fiscal year

Operating income

Net income per share%(39.9)
21.9
110.0

6,392
5,460
10,831

%
17.1
16.6
28.2

Fully diluted net income
per share

¥

¥

77.75
127.75375.8974.40
120.36354.25

Notes: 1. Equity in net income of unconsolidated subsidiaries and affiliates:
Current interim period: (¥ - million)
Previous interim period: (¥ - million)
Last fiscal year: (¥ - million)
2. Average number of shares outstanding during the respective periods (consolidated):
Current interim period: 17,982,827 shares Previous interim period: 18,203,156 shares
Last fiscal year: 18,097,192 shares
3. Change in accounting method: Yes
4. Percentages for net sales, operating income, ordinary income and net income show
year-over-year change from the corresponding previous period.
(2) Consolidated financial position

Current interim period
Previous interim period
Last fiscal year

Total assets

Shareholders’ equity

Equity ratio¥ Million¥ Million%

133,923
128,511
131,938

56,36650,85655,555

42.1
39.6
42.1

Shareholders’ equity
per share¥

3,134.99
2,825.74
3,081.34

Note: Number of shares outstanding at the end of the respective periods (consolidated):
17,979,846 shares at September 30, 2003
17,997,496 shares at September 30, 2002
17,985,551 shares at March 31, 2003

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DAIICHIKOSHO

CO.,

LTD.

(3) Consolidated cash flows

Current interim period
Previous interim period
Last fiscal year

Cash flows fromoperating activities

Cash flows frominvesting activities

Cash flows fromfinancing activities

Cash and cash
equivalents at theend of the period¥ Million¥ Million¥ Million¥ Million

11,918
8,623
19,876(11,348)(5,943)(14,286)(2,642)(2,978)(3,076)

20,74020,01922,831(4) Scope of consolidation and application of the equity method
Number of consolidated subsidiaries: 37
Number of unconsolidated subsidiaries accounted for by the equity method: Number of affiliates accounted for by the equity method: (5) Change in the scope of consolidation and application of the equity method
Consolidation (newly included): (Excluded): 1
Equity method (newly applied): (Excluded): 2. Forecast Consolidated Performance for FY 2003 (from April 1, 2003, to March 31, 2004)
FY 2003 (full year)

Net sales

Ordinary income

Net income¥ Million¥ Million¥ Million

118,800

13,2005,000(Reference) Forecast net income per share (full year): ¥270.51
Note: These projected performance figures are based on information available to the Company’s management at thetime of preparing this report. There are many uncertain factors inherent in forecasting, and there might becases in which actual results differ from forecast values. See page 10 of the Attachment for further information on forecasts.

2

DAIICHIKOSHO

CO.,

LTD.

(Attachment)

Corporate GroupThe Daiichikosho Group (“DKG”) consists of Daiichikosho Co., Ltd. (“DK”), and 37 subsidiaries.
The major group companies are engaged in the commercial karaoke business, the karaoke cabin
business, the content business and the music software business.
Business segment

Business line

Commercial
karaoke business

Sales and rental of commercial-use
karaoke equipment and software

Karaoke cabin
business

Operation of karaoke cabins, as well as
the supply of food and beverages in thecabinsContent business

Satellite broadcasting and supply ofmusic content, etc., via mobile phones

Music software
business

Production and sales of music andvideo software products

Other business

Real estate lease and rental business,
restaurant business, etc.

Domestic
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 15 other subsidiaries

Gauss Entertainment Co., Ltd.
Nippon Crown Co., Ltd.
Tokuma Japan Communications Co.,Ltd.
First Distribution Co., Ltd.
Daiichikosho Co., Ltd.
DK Finance, Co., Ltd.
DK Music Publishing Co., Ltd.
Maruhagi Yoshu Kogyo, Co., Ltd.

3

Overseas
DK KOREA
Co., Ltd.
Daiichikosho(Shanghai), Ltd.
and 2 other subsidiaries
ShanghaiZong-Yi Music& Entertainment
Co., Ltd.
Saha Daiichi
Kosho Co., Ltd.

D.K. Enterprises(Guam), Inc.
World Wide Top
Co., Ltd.

DAIICHIKOSHO

CO.,

LTD.

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

(Intermediary services related to
installment sales and loans for
DK and group companies)
DK Finance, Co., Ltd.
(Production and sales of music
and video software
products)
Gauss Entertainment Co., Ltd.
Nippon Crown Co., Ltd.
Tokuma Japan Communications
Co., Ltd.
First Distribution Co., Ltd.

DK KOREA Co., Ltd.
Daiichikosho (Shanghai), Ltd.
Daiichikosho (Hong Kong), Ltd.
Daiichi Kosho (Singapore), Pte
Ltd.*(Operation of karaoke cabins)
Shanghai Zong-Yi Music &Entertainment Co., Ltd.
Saha Daiichi Kosho Co., Ltd.

Overseas users(Related Party)
Wakahara Co., Ltd.

(Overseas subsidiaries)

DAIICHIKOSHO CO., LTD. (Reporting company)

Domestic 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.
and 15 other companies(Operation and management ofrecreation facilities)
D.K. Enterprises (Guam), Inc.

(Other overseas subsidiary)
World Wide Top Co., Ltd.
(Nonconsolidated subsidiaries)(Acquisition and management of
copyrights)

Daiichi Kosho Europe GmbH**
H. K. Electronik und Musik
GmbH**
Union Eiga Co., Ltd.
and 9 other companies

DK Music Publishing Co., Ltd.

(Production and sale of fruitwines)
Maruhagi Yoshu Kogyo, Co.,Ltd.
Sales and rentals of merchandise and products

Operation of karaoke cabins

Notes:
1. * indicates dormant company.
2. ** indicates companies that are under liquidation proceedings.

4

Provision of services

DAIICHIKOSHO

CO.,

LTD.

1. Management Policies(1) Basic management policy
Based on the corporate philosophy of “More music to the world, more service to the world,”
DKG’s basic management policy is “to promote music culture through karaoke and provide
people with many places of pleasant communications.”
To that end, DKG believes it must provide karaoke equipment and an attractive range of
karaoke software products that meet diversified users’ needs, as well as karaoke cabins where
people can easily gather to enjoy singing karaoke songs. DKG is proud of its role as a pioneer inthe karaoke business in Japan and overseas.
Building on the know-how and entertainment content it has accumulated to date, DKG aims tobecome a multinational corporate group that satisfies the expectations and trust not only ofinvestors but also of all the group’s stakeholders by ensuring continued business growth andhigher earnings around the core karaoke business.
(2) Basic policy on profit distribution
DK attaches a high priority to ensuring stable, long-term profit distribution to shareholders andfollows a policy of paying performance-based dividends with due regard for adequate earnings
retention. In the meanwhile, retained earnings not distributed to shareholders will be on purposeand effectively reinvested in the development of new products and operating assets to raise
DK’s market share in the industry and reinforce profit-enhancing foundations.
(3) Basic views on the reduction of the minimum investment lot of shares
DK intends to carefully examine this subject by taking into account the increasing liquidity of
DK’s shares in the market, past performance and market conditions while focusing on the interests of its shareholders.
(4) Medium- and long-term management strategies
DKG aims to establish an integrated music entertainment business, in which karaoke business iscentered as a core, to further expand its karaoke telecommunication network and create newcustomer-oriented and value-added services taking advantage of the latest information technology (IT).
(5) Basic views on corporate governance and the implementation of related measures① Basic views on corporate governance:
DK has restructured its management system for the purpose of realizing its basic management
policy and establishing more efficient group management in quick response to the vehemently-changing business environment. To that end, DK has introduced the corporate officer
system to reinforce the functions of the Board of Directors and achieve swifter managerial
decision making. At the same time, DK seeks to realize more proper execution of each corporate officer’s duties.
② Implementation of corporate governance related measures:
To ensure quicker managerial decision making, DK holds a weekly management council and amonthly Board of Directors’ meeting, both of which statutory auditors may attend. Extraordinary Board of Directors’ meetings are held as the need arises.

5

DAIICHIKOSHO

CO.,

LTD.

(6) DKG’s tasks ahead
DKG needs to proactively address the following groupwide issues: ① further extending its
karaoke telecommunication network, ② improving profitability in the karaoke cabin business,③ restoring profitability to the satellite broadcasting business from the current deficit situation,④ reinforcing the business foundations of the music software business and ⑤ raising theconsolidated return on equity (ROE).
① DKG has established the karaoke telecommunication network for the provision of a karaoke-streaming service and holds a very strong position in the commercial karaoke market.
DKG will make efforts to increase sales and rental of the “DAM” karaoke equipment to expand the network.
② As of September 30, 2003, DKG operated 195 “BIG ECHO” karaoke cabin stores. DKG aims
to raise its ratio of operating income to sales by improving overall management efficiency
through the closure of unprofitable stores and the opening of large-scale stores and differentiation-oriented stores that address current customer needs in the Tokyo metropolitan area andimportant regional cities.
③ With the multi-channel, direct broadcast satellite provider, Sky PerfecTV, as its platform,
DKG now offers two television channels and 100 radio channels. DKG intends to make thesatellite broadcasting business profitable on a single-year basis with an aggressive effort toincrease subscribers.
④ DKG will endeavor to strengthen the management foundations of each music software subsidiary in the highly competitive music industry, while increasing synergies with DKG’s
mainstay karaoke business.
⑤ DKG aims to raise its ROE as one of management’s most important indicators.
(7) Basic policies on relations with the related party
DK clarifies the scope of the related party and also strictly investigates the scope and details of
its transactions with the related party. In particular, it is DK’s basic policy to disclose alltransactions by its officers and principal individual shareholders regardless of the disclosure
criteria on the amount.
(8) Management’s target indicators
As a priority indicator, DK aims to achieve consolidated ROE of 12% or more for FY 2004
ending March 31, 2005.

2. Operating Results and Financial Position(1) Overview for the current interim period① Operating Results
During the current interim period ended September 30, 2003, the Japanese economy showedsigns of a slow upturn supported by an increase in exports and a rally in capital investments.
Furthermore, market sentiment turned favorable owing to improved corporate performanceand a rise in stock prices. Nevertheless, economic conditions during the interim period underreview remained unpredictable with the persistent deflationary trend and a lack of strong
momentum in a business recovery affected by the accelerated yen appreciation.

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DAIICHIKOSHO

CO.,

LTD.

In the karaoke industry, the business environment remained difficult for the nighttime market,
affected by the intensifying competition of low-priced product and service prices amid thelingering deflation. However, the daytime market saw several signs of recovery, such as anincrease in the number of operational karaoke cabins, which had bottomed in the last fiscal
year.
In these circumstances, DKG concentrated its promotional efforts on sales and rental of themainstay “New cyber DAM (DAM-G50II)” equipment and the “Denmoku” electronic music
selection remote control to raise its market share in the commercial karaoke business. Concurrently, DKG has proactively worked to integrate the karaoke cabin business, the content
business and the music software business facing a very difficult business environment, aroundthe core karaoke business.
Consequently, consolidated net sales for the interim period under review decreased 2.6% year
over year to ¥56,910 million, mainly due to a decline in sales for the music software businessdespite steady growth in revenues from merchandise sales, rental of karaoke equipment, feefrom the provision of karaoke-streaming service and karaoke cabin operations. Operating
income increased 15.4% year over year to ¥6,880 million and ordinary income rose 17.1% to¥6,392 million, owing principally to reductions in the cost of sales and selling, general andadministrative expenses. Consolidated net income for the interim period decreased 39.9% year
over year to ¥1,398 million, reflecting the provision for directors’ retirement allowances forprior years that were collectively recorded as an extraordinary loss item.
Operating results by business segment are summarized as follows (with year-over-year
percentage changes):
Commercial karaoke businessNet sales: ¥31,674 million (+7.9%)
Operating income: ¥5,758 million (+17.7%)
In this segment, DKG sells and rents karaoke equipment and software, and provides the
karaoke-streaming service. Amid the rising demand for low-priced products, the mainstay equipment “New cyber DAM,” which was first released in October 2002, continued
to effectively hold replacement demand, and the popularity of the “Denmoku” electronic
music selection remote control also pushed up shipments of DAM products, thereby
leading to a 10% improvement in shipments year over year. In line with this steady
growth, the fee revenue from the provision of the karaoke-streaming service grew alongwith an increase in the number of operating equipment. The decline in rental of karaokeequipment was more than offset by a considerable rise in the number of rental contracts,
leading to an increase in revenue from equipment rental. As a result, segment net sales
expanded 7.9% and operating income rose 17.7% year over year.
Karaoke cabin businessNet sales: ¥12,112 million (+8.4 %)Operating income: ¥1,295 million (+86.7%)
In this segment, DKG operates 193 karaoke cabin stores domestically and two overseas
with the “BIG ECHO” brand. Reflecting positive signs in the daytime market, thesegment performed well as sales from existing stores exceeded those in the same term ayear earlier. During the semiannual period under review, DKG opened four stores andclosed one unprofitable store. As a result, segment net sales increased 8.4% and operating
income jumped 86.7 % year over year.

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DAIICHIKOSHO

CO.,

LTD.

Content businessNet sales: ¥5,273 million (+4.3%)
Operating income: ¥1,028 million (+36.0%)
In this segment, DKG engages in two business fields: satellite broadcasting ande-business. Subscribers of commercial-use satellite broadcasting services increased
steadily despite a gradual decline in the number of household-use subscribers. In its
e-business, DKG improved its conventional customized ringtone service for mobile
phones to cope with the reduction of service fees and the saturation in the number ofsubscribers. In addition, DKG strove to increase earnings through the supply of a soundcontent delivery service for the karaoke software, “Karaoke Revolution,” for PlayStation
2 (PS2), which is furnished by Konami Co., Ltd. As a result, segment net sales increased
4.3% and operating income rose 36.0% year over year.
Music software businessNet sales: ¥5,306 million (–49.7%)
Operating loss: –¥44 million (–%)
In this segment, DKG produces and sells music and video software products. The business climate continued to be harsh during the semiannual period under review. Segment
net sales declined 49.7% year over year mainly due to fewer hit items than before. For
example, “Spirited Away” made a significant contribution to sales in the same term ayear earlier. Despite a strong effort to reduce operating expenses, a marginal operating
loss of ¥44 million was recorded.
Other businessNet sales: ¥2,542 million (+9.7%)
Operating income: ¥266 million (–8.1%)
This segment mainly consists of the restaurant business and the real estate lease andrental business. Although segment net sales increased 9.7%, largely supported by theprosperous restaurant business, operating income declined 8.1% due to an increase in
selling, general and administrative expenses.
② Financial position(Cash flows)
For the interim period ended September 30, 2003, income before income taxes and minority
interests decreased ¥1,239 million year over year to ¥3,115 million and proceeds fromlong-term borrowings decreased, whereas directors’ retirement allowances increased and income taxes paid decreased. As a result of these cash flows, consolidated cash and cash
equivalents at the end of the interim period totaled ¥20,740 million, up ¥721 million, compared with those at the end of the same term a year earlier. The following describes the consolidated cash flow conditions for the semiannual period ended September 30, 2003.
(Cash flows from operating activities)
Net cash provided by operating activities increased ¥3,294 million year over year to¥11,918 million. This increase was attributable to increases of ¥3,001 million in directors’
retirement allowances and ¥987 million in inventories, and a decrease of ¥1,419 million inincome taxes paid.

8

DAIICHIKOSHO

CO.,

LTD.

(Cash flows from investing activities)
Net cash used in investing activities increased ¥5,405 million year over year to ¥11,348
million. This rise was primarily the result of an increase of ¥6,280 million due to increase intime deposits and a decrease of ¥517 million in proceeds from collection of loans.
(Cash flows from financing activities)
Net cash used in financing activities decreased ¥335 million year over year to ¥2,642 million. The principal factors in this decline were decreases of ¥6,525 million in increase inlong-term borrowings and ¥1,368 million in payments from repayments of long-term borrowings and a net increase of ¥3,911 million in short-term borrowings.
The trends of several cash flow indicators are as follows:

Equity ratio (%)
Market value–based equity
ratio (%)
Debt redemption (years)
Interest coverage ratio (times)

FY 2001 ended March 31, 2002 FY 2002 ended March 31, 2003 FY 2003
ending March
31, 2004
Interim period
FiscalInterim period
FiscalInterim period
year-end
year-end
37.3
38.1
39.6
42.1
42.1
34.8
27.6
37.8
47.7
56.9
3.8
19.8

3.6
20.3

3.0
26.7

2.6
31.6

2.1
40.1

Note: Equity ratio: Shareholders’ equity/Total assets
Market value–based equity ratio: Total market capitalization/Total assets
Debt redemption: Interest-bearing debt/Operating cash flow
Interest coverage ratio: Operating cash flow/Interest payment
1. All of the above indicators are calculated for their respective values on a consolidated basis.
2. Total market capitalization is calculated by multiplying the closing stock price atthe end of the year (interim period) by the number of shares outstanding at theend of the year (interim period).
3. Operating cash flow is the value stated as “Cash flows from operating activities”
in the consolidated statements of cash flows.
4. Interest-bearing debt indicates the liabilities for which interest is paid on all theliabilities posted in the consolidated balance sheets. Interest payment corresponds to the amount of interest paid in the consolidated statements of cash
flows.
5. As for debt redemption, operating cash flow values for the interim period are
doubled to calculate them in annual amounts.

9

DAIICHIKOSHO

CO.,

LTD.

(2) Future outlook (on a full-year basis)
Despite several signs of recovery, concerns of future uncertainty persist, and a full-fledged
recovery of personal consumption and an improvement in the stringent employment situation
have yet to be achieved.
A distinct bipolar tendency has become apparent in the karaoke industry: a rally underlying thedaytime market and a lingering depression in the nighttime market.
Given this business environment, DKG plans aggressive efforts to improve and/or differentiate
product quality and reinforce service content to solidify its current top share in the karaoke
telecommunication market. In October 2003, DKG will release and ship a new product,“Broadband cyber DAM (DAM-G100),” which substantially leverages broadband technology.
Early in 2004, DKG will introduce a new information terminal, “DAM Station,” to promote
new services through which users can enjoy interactive music content such as the automatic
grade authorization system and an audition system by delivering and exchanging sound contents and picture images recorded by users themselves. DKG also strives to propose promisingbusinesses that could contribute to corporate earnings to quickly fix them in the core business.
In the karaoke cabin business, DKG will work to open new stores at carefully screened sites andincrease the number of guests through enhanced service quality, thereby improving the profitability and investment efficiency of each store. DKG will strive to increase commercial-use
subscriptions and reduce overall costs in the satellite broadcasting business, and expand thenumber of subscribers through effective and concentrated promotional measures and service
reinforcement in the e-business. In the music software business, DKG will endeavor to improve
profitability by quickly implementing various measures including the scouting, nurturing andpromotion of new artists through the group network.
By aggressively carrying out these measures, DKG expects to achieve net sales of ¥118.8 billion, ordinary income of ¥13.2 billion and net income of ¥5.0 billion for the year ending March
31, 2004, on a consolidated basis.
DAIICHIKOSHO received an advisory as of October 31, 2003, from the Japan Fair Trade
Commission to the effect that DK has infringed on regulations of the Anti-Monopoly Law.
However, as DK’s management cannot comply with this advisory, it has submitted a letter of
non-acceptance to the commission, and this issue will be referred to the adjudication procedure.
DK expresses its apologies for any anxiety or inconvenience this may have caused investors
and/or the parties concerned.

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DAIICHIKOSHO

CO.,

LTD.

Consolidated Balance Sheets
Fiscal period

Account item
(Assets)
Current assets
Cash and bank deposits
Notes and accounts receivable―
tradeMarketable securities
Inventories
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets

Current interim period(As of September 30,
2003)
AmountComposition ratio(%)(Millions of yen)
Year-overLast fiscal year (As ofyear
March 31, 2003)
changeAmountComposition ratio(%)

21,953
13,757

21,497
15,132

26,077
13,786(4,124)
(28)

117
7,319
3,744
3,995
(1,346)49,542

37.0

10
7,018
1,126
3,947
(1,313)47,419

36.9

9
6,689
3,852
4,021
(1,235)53,201

40.3

107
629
(107)
(25)
(110)
(3,659)35.2

11,1308,137
10,47817,042
1,802
48,59237.8

10,375
8,641
9,774
16,0852,090
46,967

35.6

(260)
692
(148)
(257)
182
209

5.7

900
7,085
7,986

6.2

7,709
7,709

5.9

(94)
(94)

Fixed assets
Tangible fixed assets
Buildings and structures
Karaoke equipment for rental
Karaoke cabin facilities
Land
Other
Total tangible fixed assets

10,115
9,333
9,626
15,8282,273
47,176

Intangible assets
Consolidation adjustments account
Other
Total intangible assets

7,615
7,615

Investments and other assets
Investments in securities
Long-term loans receivable
Deferred tax assets
Deferred tax assets arising from revaluation
Leasehold deposits and guaranteemoney
Long-term deposits
Other
Allowance for doubtful accounts
Total investments and other assets
Total fixed assets
Total Assets

Previous interim period(As of September 30,
2002)
AmountComposition ratio
(%)

3,422
3,571
3,116
-

2,878
3,631
2,011
2,251

3,084
3,719
3,930
-

337
(148)
(813)
-

11,67012,05911,824

(153)

6,300
4,793
(3,285)29,58884,381
133,923

5,159(3,479)24,51381,092
128,511

4,596(3,096)24,05978,736
131,938

6,300
196
(189)
5,528
5,644
1,984

22.1
63.0
100.0

11

19.1
63.1
100.0

18.2
59.7
100.0

DAIICHIKOSHOFiscal period

Account item
(Liabilities)
Current liabilities
Notes and accounts payable―trade
Short-term borrowings
Accounts payable―other
Income taxes payable
Reserve for bonuses
Unrealized profit on installment sales
Other
Total current liabilities
Long-term liabilities
Convertible bonds
Long-term borrowings
Deferred tax liabilities
Reserve for employees’ retirement
benefits
Reserve for directors’ retirement allowances
Consolidation adjustments account
Other
Total long-term liabilities
Total Liabilities(Minority Interests)
Minority interests(Shareholders’ Equity)
Capital stock
Capital surplus
Retained earnings
Land revaluation difference
Net unrealized gains or losses onavailable-for-sale securities
Foreign currency translation adjustments
Treasury stock
Total Shareholders’ Equity
Total Liabilities, Minority Interests
and Shareholders’ Equity

Current interim period(As of September 30,
2003)
AmountComposition ratio
(%)
7,069
19,219
5,714
1,157
1,139
708
2,425
37,435CO.,

LTD.

Previous interim period(As of September 30,
2002)
AmountComposition ratio
(%)
7,727
19,904
5,564
2,069
1,095
832
2,562
39,75628.0

30.9(Millions of yen)
Year-overLast fiscal year (As ofyear
March 31, 2003)
changeAmountComposition ratio
(%)
6,537
18,782
5,825
1,154
1,032
759
2,506
36,598

27.7

532
437
(110)
3
107
(51)
(81)
837

11,514
19,338226
2,748

12,65019,531249
2,640

12,16521,049
226
2,696

(651)
(1,711)
51

3,001

-

-

3,001

1,091
1,258
39,17976,615

29.2
57.2

1,267
36,33976,095

28.3
59.2

1,105
1,238
38,48275,080

29.2
56.9

(13)
19
697
1,534

941

0.7

1,559

1.2

1,301

1.0

(360)

12,34824,00130,436(9,981)
191

9.2
17.9
22.7
(7.5)
0.2

12,34824,00040,450(25,189)
(240)

9.6
18.7
31.5
(19.6)(0.2)

12,34824,00029,879(10,005)
(103)

9.4
18.2
22.6
(7.6)
(0.1)

0
556
23
294

91

0.1

155

0.1

135

0.1

(43)

(721)
56,366
133,923

(0.5)
42.1
100.0

(668)
50,856
128,511

(0.5)
39.6
100.0

(700)
55,555
131,938

(0.5)
42.1
100.0

(20)
810
1,984

12

DAIICHIKOSHO

CO.,

LTD.

Consolidated Statements of Income
Fiscal period

Account item
Net sales
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
Selling, general and administrative expenses
Operating income
Nonoperating income
Interest and dividend
incomeProfit on retirement of
convertible bonds
Amortization of consolidation adjustments
account
Other
Nonoperating expenses
Interest expenses
Loss on disposal of inventories
Loss on valuation of inventories
Provision for allowancefor doubtful accounts
Other
Ordinary income
Extraordinary gains
Gain on sales of fixed
assetsGain on sales of investments in securities
Reversal of allowancefor doubtful accounts
Gain on correction of
copyright use fees forprior years
Extraordinary losses
Loss on disposal of fixed
assetsLoss on valuation of investments in securities
Loss on valuation ofmemberships
Directors’ retirement
allowances

Current interim period (FromApril 1, 2003, to September
30, 2003)
AmountPercentage(%)
56,910100.0
31,79855.9
25,112
44.1

120
69

Previous interim period(From April 1, 2002, to September 30, 2002)
AmountPercentage(%)
58,447100.0
34,21558.5
24,231
41.5

Year-over-yearchange(%)

0.1

25,163
18,2836,880

92

Amount

97.4
92.9
103.6

129
51

(Millions of yen)
Last fiscal year (From April
1, 2002, to March 31, 2003)

0.0

137.4

132

44.2
32.1

24,26818,307

41.5
31.3

103.7
99.9

49,44736,954

42.2
31.6

12.1

5,960

10.2

115.4

12,493

10.6

1,798

1.6

3,460
10,831

2.9
9.3

492

0.4

619

-

36

42

139

-

-

1.5

668

1,035

1.8

83.1

1,136

290
256

345
182

658
475

429

606

1,140

12

149

19

360

1,348
6,392

2.4
11.2

252

1,536
5,460

2.6
9.4

87.8
117.1

1,165

-

16

15

2

13

87

118

20

126

-

121

0.1

37

331

860

110

243

295

425

117,057
67,72049,337

Percentage
(%)
100.0
57.9
42.1

0.2

-

49

0.1

244.2

262

400

201

1,626

76

65

507

-

-

7

-

119

156

13

DAIICHIKOSHOProvision for directors’
retirement allowances
for prior years
Loss on sales of investments in securities
Amortization of consolidation adjustments
account
Income before income
taxes and minority interests
Income taxes―current
Income taxes―deferred
Minority interests in income (loss) of consolidated subsidiaries
Net income for the period

CO.,

LTD.

2,921

-

-

-

767

767

-

1,081
706

3,398

5.9

3,115

5.5

1,787
(70)

3.1
(0.1)

1,398

2.5

-

1,966
14

14

1,155

2.0

294.2

4,354

7.5

71.5

1,980
48

3.4
0.1

90.2
(144.7)

2,325

4.0

60.1

1,742

1,999
(2,499)

4,808

4.1

6,516

5.6

(499)
76

(0.4)
0.1

6,938

5.9

DAIICHIKOSHO

CO.,

LTD.

Consolidated Statements of Retained Earnings
Fiscal period
Account item
(Capital surplus)
Capital surplus at beginning of
periodIncrease in capital surplus
Gain from purchase and redemption of treasury stock
Capital surplus at end of period(Retained earnings)
Retained earnings at beginningof period
Increase in retained earnings
Net income
Decrease in retained earnings
Cash dividends
Bonuses to directors andstatutory auditors
Transferred from land revaluation difference
Retained earnings at end of
periodCurrent interim period (FromApril 1, 2003, to September 30,
2003)
AmountPrevious interim period (FromApril 1, 2002, to September 30,
2002)
Amount24,0000

1,398

Amount24,0000--24,000--24,001

24,00024,00029,87938,88938,889

1,398

2,325

683
134
23

(Millions of yen)
Last fiscal year (From April 1,
2002, to March 31, 2003)

2,325

658
105
841

-

30,436

6,938

658
105
764
40,45015

6,938

15,184

15,94829,879DAIICHIKOSHO

CO.,

LTD.

Consolidated Statements of Cash Flows
Fiscal period
Account item
Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation expenses
Increase (decrease) in allowance for doubtful accounts
Increase in reserve for directors’ retirement allowances
Dividend and interest income
Gain or loss on sales of investments in securities
Interest expenses
Gain or loss on disposal of fixed assets
Loss on valuation of investments in securities
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Increase (decrease) in trade payables
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Income taxes refunded
Net cash provided by operating activities
Cash flows from investing activities:
Increase in time deposits
Proceeds from decrease in time deposits
Payments for acquisition of tangible fixed assets
Payments for acquisition of intangible assets
Payments for purchase of investments in securities
Payments for purchase of subsidiaries’ stocks
Payments for loans
Proceeds from collection of loans
Payments for leasehold deposits and guarantee
money
Proceeds from repayment of leasehold deposits andguarantee money
Other
Net cash used in investing activities
Cash flows from financing activities:
Net increase (decrease) in short-term borrowings
Increase in long-term borrowings
Payments for repayment of long-term borrowings
Payments for retirement of convertible bonds
Cash dividends paid
Payments for purchase of treasury stock
Other
Net cash used in financing activities
Effect of exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

Current interim period(From April 1, 2003, toSeptember 30, 2003)
AmountPrevious interim period(From April 1, 2002, toSeptember 30, 2002)
Amount(Millions of yen)
Last fiscal year (FromApril 1, 2002, to March
31, 2003)
Amount

3,115
5,892
299

4,354
5,203
34

6,516
11,312
(21)

3,001

-

-

(295)
290
400
76
(99)
(629)
489
(534)
12,006285(297)(1,078)
1,002
11,918

(331)
754
345
185
65
(408)
358
436
100
11,099337(322)(2,497)
6
8,623

(619)
680
658
1,610
515
835
686
(723)
1,873
23,325619(629)(3,445)
6
19,876(6,904)
2,638(4,668)(2,291)
(93)
(174)
(224)
499
(345)

(623)
937
(5,406)(2,120)
(381)
(306)
(688)
1,017
(215)

(3,213)
1,759(9,959)(4,610)(908)(442)(1,628)
1,846
(433)

162

579

808

53
(11,348)

1,264(5,943)

2,495(14,286)

745
3,777(5,796)
(654)
(683)
(21)
(9)
(2,642)(17)(3,166)
10,302(7,164)(1,613)
(658)
(653)
(24)
(2,978)(0)(4,655)
18,646(13,606)(2,091)
(660)
(685)
(24)
(3,076)(0)(2,090)22,831
20,740(298)
20,31720,0192,513
20,317
22,831

16

DAIICHIKOSHO

CO.,

LTD.

Basis of Presenting the Consolidated Interim Financial Statements

1. Scope of Consolidation(1) Consolidated subsidiaries: 37
The names of the consolidated subsidiaries are omitted as they are stated in the “Corporate
Group.”(2) Major unconsolidated subsidiaries
Major unconsolidated subsidiaries are Union Eiga Co., Ltd., Crown Music Enterprise Co., Ltd.,and Zoom Republic.
(Reason for exclusion from consolidation)
The unconsolidated subsidiaries are excluded from consolidation because they are small-scale
firms, for which the respective sums of total assets, net sales and net income (loss) (corresponding to their total equity) and retained earnings (corresponding to their total equity) haveno significant impact on the consolidated interim financial statements of the DKG.
2. Application of the Equity Method(1) Unconsolidated companies accounted for by the equity method: None
(2) Unconsolidated companies not accounted for by the equity method:
Unconsolidated subsidiaries that are not accounted for by the equity (e.g., Union Eiga Co., Ltd.,
Crown Music Enterprise Co., Ltd., and Zoom Republic) are excluded from the application of theequity method because the respective sums of net income (loss) (corresponding to their total
equity) and retained earnings (corresponding to their total equity) for the current interim period
have no significant impact on these account items in the consolidated interim financial statements even if they are excluded therefrom, and they are immaterial on the whole.
3. Closing Date for Settlement of Accounts of Consolidated Subsidiaries
Of the consolidated subsidiaries, the interim closing date of the following companies is different
from the consolidation closing date, which is September 30. In preparing the consolidated interim
financial statements, the financial statements for the respective interim periods are used for thosethat have an interim closing date that differs from the consolidated interim closing date, provided
that necessary adjustments are made for consolidation purposes with regard to material transactions
that might take place in the period between their respective interim closing dates and the consolidated interim closing date.
Interim closing date is June 30:
Shanghai Zong-Yi Music & Entertainment Co., Ltd., Saha Daiichi Kosho Co., Ltd., Daiichikosho (Shanghai), Ltd.
Interim closing date is September 20:
Nippon Crown Co., Ltd., Tokuma Japan Communications Co., Ltd.
4. Summary of Significant Accounting Policies(1) Valuation basis and method for important assets① Marketable securities and investments in securities
Held-to-maturity debt securities that are expected to be held to maturity: Carried at amortizedcost using the straight-line method.
Other securities primarily designated as available-for-sale securities for which the fair values
are readily determinable: Carried at fair value as of the interim balance-sheet date with

17

DAIICHIKOSHO

CO.,

LTD.

changes in net unrealized holding gain or loss, net of the applicable income taxes, included
directly in shareholders’ equity. The cost of securities sold is determined by the moving-average method.
Other securities primarily designated as available-for-sale securities for which the fair values
are not readily determinable: Carried at cost determined by the moving-average method.
② 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 theestimated useful lives of the assets as shown below. However, the straight-line method isadopted for buildings (excluding building improvements) acquired on or after April 1, 1998.
Building and structures: 3–50 years
Karaoke equipment for rental: 5–6 years
Karaoke cabin facilities: 3–19 years② 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 for specific 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:
The reserve for employees’ retirement benefits is provided at an amount recognized to haveaccrued as of the interim balance-sheet date, based on the projected benefit obligations andplan assets at the end of the year ending March 31, 2004.
Actuarial differences are amortized on a pro-rata basis by the straight-line method over acertain period (10 years), which is shorter than the average remaining service years for employees at the time of their occurrence, from the following fiscal period of recognition.
④ Reserve for directors’ retirement allowances:
The directors’ retirement allowances of DK and domestic consolidated subsidiaries are 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 the respective interim balance-sheet dates.
(Change in accounting method)
The directors’ retirement allowances have been previously charged to income as incurred
when disbursed. Effective from this interim period under review, the accounting method has
been changed to provide for possible payments at amounts that would be required to be paidin accordance with the respective internal rules concerning directors’ retirement allowances
if all eligible directors and statutory auditors were to resign their positions as of the interim
balance-sheet date. This change, which was implemented when the relevant internal rules

18

DAIICHIKOSHO

CO.,

LTD.

were reviewed, aims to regularize the periodic accounting of profit and loss and achieve asounder financial base by allocating the directors’ retirement allowances to the tenure of
directors and statutory auditors. Pursuant to this change, ¥182 million that occurred in thecurrent interim period was included in selling, general and administrative expenses, whereas¥2,921 million was collectively recorded as an extraordinary loss as the provision for prioryears. As a result, compared with the previous accounting method, operating income andordinary income each declined by ¥182 million, and income before income taxes and minority interest decreased by ¥3,001 million.
(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 foreign subsidiaries are translated into yen at the spot exchange ratein effect at their respective interim balance-sheet dates. The resulting translation differences havebeen recorded as a component of minority interests and presented as “Foreign currency translation adjustments” in shareholders’ equity.
(5) Accounting for leases
Finance leases that do not transfer ownership of leased property to the lessee are accounted for as
rental transactions.
(6) Hedge accounting
The 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 matters① Accounting for installment sales
Installment profit involved in installment sales is deferred for the amount corresponding to the
portion of installment receivables for which the due date has not expired based on the DKG’sinstallment 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 include 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.

19

DAIICHIKOSHO

CO.,

LTD.

Notes to Consolidated Financial Statements(Notes to Consolidated Balance Sheets)

1. Accumulated depreciation for tangible fixed assets

As of September 30,
2003
50,335

As of September 30,
2002
49,856(Millions of yen)
As of March 31,
2003
49,268

901

1,192

1,136

3,642
3,610
43
7,984
834
1,793
155
18,065

3,248
5,379
69
10,375
533
706
1,632
208
22,154

4,007
5,164
59
10,293
876
626
2,011
155
23,195

6,238
8,442
14,681

7,932
14,481
22,413

7,245
15,56322,809330,524 shares

312,781 shares

324,819 shares

2. Liabilities for guarantee
3. Assets pledged as collateral and secured debt
Notes and accounts receivable―trade
Buildings and structures
Karaoke equipment for rental
Land
Other tangible fixed assets
Investments in securities
Long-term loans receivable
Leasehold deposits and guarantee money
Total
Debt corresponding to the above:
Short-term borrowings
Long-term borrowings
Total
4. Treasury stock(Note to Consolidated Statements of Cash Flows)
Relations between the period-end balance of cash and cash equivalents and the accounts listed in the
consolidated balance sheets

Cash and bank deposits
Time deposits for which the deposit period exceeds threemonthsCash and cash equivalents

As of September 30,
2003
21,953(1,212)As of September 30,
2002
21,497(1,478)(Millions of yen)
As of March 31,
2003
26,077(3,246)

20,74020,01922,831

20

DAIICHIKOSHO

CO.,

LTD.

(Segment Information)
The business and geographical segments of DK and its consolidated subsidiaries for the interim periods ended September 30, 2003 and 2002, as well as the last fiscal year ended March 31, 2003, aresummarized as follows:
1. Business segments
Current interim period (From April 1, 2003, to September 30, 2003)
Item
Sales and operating
incomeSales
Sales to third parties
Intersegment sales
and transfers
Total
Operating expenses
Operating income

Other

Total

(Millions of yen)
ConsoliEliminadated
tions andcorporate

Commercial karaoke

Karaokecabin

ContentMusic
software

31,67476

12,112
-

5,273
-

5,306
158

2,542
174

56,910409(409)

56,910-31,751
25,992
5,758

12,112
10,817
1,295

5,273
4,245
1,028

5,464
5,509
(44)

2,717
2,450
266

57,31949,014
8,304

(409)
1,015
(1,424)56,91050,0306,880Previous interim period (From April 1, 2002, to September 30, 2002)
Item
Sales and operating
incomeSales
Sales to third parties
Intersegment sales
and transfers
Total
Operating expenses
Operating income(Millions of yen)
ConsoliEliminadated
tions andcorporate

Commercial karaoke

Karaokecabin

ContentMusic
software29,36173

11,170-5,054-

10,543
124

2,317
226

58,447424(424)

58,447-29,43524,541
4,893

11,17010,476
693

5,054
4,297
756

10,667
10,304
363

2,543
2,253
290

58,871
51,874
6,997

(424)
611
(1,036)58,44752,486
5,960

Other

Total

Last fiscal year (From April 1, 2002, to March 31, 2003)
Item
Sales and operating
incomeSales
Sales to third parties
Intersegment sales
and transfers
Total
Operating expenses
Operating income(loss)

Other

Karaokecabin

ContentMusic
software61,498143

23,722-

10,308-

16,648
234

4,879
449

117,057826(826)

117,057-

61,642
51,885
9,756

23,722
21,3642,358

10,308
8,375
1,932

16,882
16,964
(82)

5,328
4,701
627

117,884
103,291
14,593(826)
1,272(2,099)117,057
104,564
12,493

Notes: 1. Segmentation method
According to the DKG’s sales tabulation categories.

21

Total

(Millions of yen)
ConsoliEliminadated
tions andcorporate

Commercial karaoke

DAIICHIKOSHO

CO.,

LTD.

2. Major products and/or services of each business segment
Business segment
Commercial karaoke businessKaraoke cabin business
Content business
Music software business
Other business

Major products and/or services
Sales and rental of commercial-use karaoke equipment and software
Operation of karaoke cabins, as well as the supply of food and beverages in the cabins
Supply of music content, etc., via satellite broadcasting and mobile phones
Production and sales of music and video software products
Real estate lease and rental business, restaurant business, etc.

3. Amounts and major items included in “Elimination and corporate”
Amounts of unabsorbed operating expenses included in“Elimination and corporate”

Current interim
period (¥ Million)
1,424

Previous interim
period (¥ Million)
1,159

Last fiscal year(¥ Million)
2,346

Major items
Expenses required for
operations by administrative departments
such as General Affairs
Dept.

2. Geographical segments
As sales in Japan account for more than 90% of the sum of sales in each region of the respective
geographical segments, 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.
(Notes to Leases)
1. Finance lease contracts that do not transfer ownership of leased property to the lessee(1) Assumed data as to acquisition cost, accumulated depreciation and net book value at end of
periodKaraoke cabin facilities
Other tangible fixed
assets
Total

Current interim period(From April 1, 2003, to September
30, 2003)
AcquisiAccuNet booktion cost
mulatedvalue
depreciation
1,023
801
221

Previous interim period(From April 1, 2002, to September
30, 2002)
AcquisiAccuNet booktion cost
mulatedvalue
depreciation
1,504
990
513

(Millions of yen)
Last fiscal year
(From April 1, 2002, to March 31,
2003)
AcquisiAccuNet booktion cost
mulatedvalue
depreciation
1,188
841
346

1,624

990

634

4,519

3,541

977

1,844

1,145

698

2,647

1,791

855

6,023

4,532

1,490

3,032

1,986

1,045

(2) Assumed future lease payments at end of period under finance leases

Due within one year
Due after one year
Total

As of September 30,
2003
491
377
868

As of September 30,
2002
889
638
1,527

(Millions of yen)
As of March 31,
2003
588
474
1,063

(3) Lease payments, and assumed depreciation expense and interest expense

Lease payments
Assumed depreciation expense
Assumed interest expense

As of September 30,
2003
355
344
6

22

As of September 30,
2002
645
612
15

(Millions of yen)
As of March 31,
2003
1,171
1,114
23

DAIICHIKOSHO

CO.,

LTD.

(4) Computation method of assumed depreciation expense
Depreciation expense is computed by the straight-line method, assuming the lease period as theuseful life and no residual value.
(5) Computation method of assumed interest expense
The difference between the total lease contract amount and the assumed acquisition cost is
assumed to be interest, and interest expense is computed by the interest method.
2. Operating lease contracts
Assumed future lease payments at end of period under operating leases
As of September 30,
2003
424
2,599
3,024

Due within one year
Due after one year
Total

As of September 30,
2002
415
2,999
3,414

(Millions of yen)
As of March 31,
2003
432
2,807
3,239

(Notes to Securities)
1. Available-for-sale securities for which the fair value is readily determinable

StocksBonds and debentures
Government andmunicipal bonds
Corporate bonds
Other bonds anddebentures
Other
Total

Current interim period(As of September 30, 2003)
UnrealAcquisiBooktion costvalue per ized gain
consoli(loss)
datedbalancesheets
1,132
1,443
311

Previous interim period(As of September 30, 2002)
AcquisiBook
Unrealtion costvalue per ized gain
consoli(loss)
datedbalancesheets
905
715
(189)

(Millions of yen)
Last fiscal year
(As of March 31, 2003)
AcquisiBook
Unrealtion costvalue per ized gain
consoli(loss)
datedbalancesheets
1,138
1,154
15

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

944
2,077

971
2,415

26
338

1,083
1,988

880
1,595

(203)
(392)

944
2,083

772
1,926

(172)
(157)

2. Securities for which the fair value was not known at September 30, 2003 and 2002, and March 31,
2003(Millions of yen)Book value per consolidated balance sheets
Current interimPrevious interim
Last fiscal year
periodperiod(As of March 31,(As of September(As of September
2003)
30, 2003)
30, 2002)
Held-to-maturity debt securities
Discount bank debentures
Available-for-sale securities
Unlisted stocks (excluding OTC issues)

9

9

9

398

585

460

(Note to Derivative Transactions)
Relevant information is omitted as hedge accounting is applied.

23

DAIICHIKOSHO

CO.,

LTD.

(Production, Orders Received and Sales)
1. Production
Fiscal period

Segment
Commercial karaoke business:
Telecommunication-typekaraoke software
Disk-type karaoke software
SubtotalContent business:
Sound delivery/video software for satellite broadcastingMusic content business:
Music and video software
Total

Current interim period(From April 1, 2003, to September 30, 2003)
Year-over-yea
r change (%)(Millions of yen)
Last fiscal year
(From April 1, 2002, to March
31, 2003)
Year-over-yea
r change (%)

Previous interim period(From April 1, 2002, to September 30, 2002)
Year-over-yea
r change (%)

1,014

95.8

1,058

173.3

2,261

122.1

520
1,535

92.3
94.6

564
1,622

78.4
122.0

1,226
3,487

90.1
108.5

172

81.1

212

81.3

474

94.1

1,110
2,817

81.2
88.0

1,367
3,202

201.2

2,718
6,680

118.7
111.2

Note: The above amounts are indicated in terms of manufacturing cost.
2. Orders received
Inapplicable as the DKG follows a policy of project production.
3. SalesFiscal period

Segment
Commercial karaokebusiness:
Turnover of merchandise and products
Revenue from rental of karaokeequipment
Fee revenue fromthe provision of
karaoke-streaming
service
Subtotal
Karaoke cabin business:
Content business:
Satellite broadcasting
e-business
Subtotal
Music software business:
Other business:
Total

Current interim period(From April 1, 2003, to September
30, 2003)
CompoYear-oversition-year
ratio (%) change(%)

Previous interim period(From April 1, 2002, to September
30, 2002)
CompoYear-oversition-year
ratio (%) change(%)(Millions of yen)
Last fiscal year
(From April 1, 2002, to March 31,
2003)
CompoYear-oversition-year
ratio (%) change(%)

13,182

23.2

103.8

12,703

21.7

122.1

27,234

23.2

124.6

8,844

15.5

105.8

8,356

14.3

98.9

16,948

14.5

100.8

9,648

17.0

116.2

8,301

14.2

113.7

17,314

14.8

114.9

31,674
12,112

55.7
21.3

107.9
108.4

29,361
11,170

50.2
19.1

112.3
105.7

61,49823,722

52.5
20.3

114.4
107.9

2,293

4.0

99.7

2,299

4.0

102.1

4,583

3.9

101.0

2,980
5,273
5,306

5.2
9.2
9.3

108.2
104.3
50.3

2,754
5,054
10,543

4.7
8.7
18.0

141.9
120.6
-

5,724
10,308
16,648

4.9
8.8
14.2

125.6
113.3
182.8

2,542
56,910

4.5
100.0

109.7
97.4

2,317
58,447

4.0
100.0

96.5
134.9

4,879
117,057

4.2
100.0

104.8
118.7

24

DAIICHIKOSHO

CO.,

LTD.

FY 2003 ending March 31, 2004
Summary of Nonconsolidated Financial Statements for the Interim Period Ended September
30, 2003

November 17, 2003
Company Name: DAIICHIKOSHO CO., LTD.
Code Number: 7458
(URL http://www.dkkaraoke.co.jp)
Registered Stock: JASDAQ Location of Head Office (Prefecture): Metropolis of Tokyo
Representative: Tatsuyoshi Yoneda, President and Senior Executive Corporate Officer
Contact:
Eiji Hata, Executive Director; Administration Headquarters and General Manager,
Finance Dept.
Phone: (03) 3280-2151
Date of the Board of Directors Meeting on the Closing of Accounts: November 17, 2003
Interim Dividend System: Applied
Start Date for Payment of Interim Dividends:−
Unit (tangen) Stock System: Adopted (Unit (tangen) stock of shares: 100 shares)
1. Nonconsolidated Performance for the Current Interim Period (from April 1, 2003, to September 30,
2003)(1) Nonconsolidated operating results
Note: Amounts below one million yen are truncated.
Net sales¥ Million

Current interim period
Previous interim period
Last fiscal year

%
8.4
14.1
14.5

38,88835,87974,974Current interim period
Previous interim period
Last fiscal year

1,710
1,436
4,350

Ordinary income¥ Million

4,752
3,330
8,125

Net income¥ Million

Operating income¥ Million

%
42.7
3.4
37.9

4,498
3,709
7,510

%
21.3
30.9
40.9

Net income per share
¥

%
19.0
17.6
115.4

95.09
78.92
238.37

Notes: 1. Average number of shares outstanding during the respective periods:
Current interim period: 17,982,827 shares Previous interim period: 18,203,156 shares
Last fiscal year: 18,097,192 shares
2. Change in accounting method: Yes
3. Percentages for net sales, operating income, ordinary income and net income show increases (decreases) from the corresponding previous period.
(2) Dividends
Interim dividend per share¥

Current interim period
Previous interim period
Last fiscal year

Annual dividend per share
¥

0.0
0.0
-

25

38.00

DAIICHIKOSHO

CO.,

LTD.

(3) Nonconsolidated financial position
Total assets

Shareholders’ equity¥ Million¥ Million%

84,98680,35882,54646,801
42,52245,543

55.1
52.9
55.2

Current interim period
Previous interim period
Last fiscal year

Equity ratio

Shareholders’ equity
per share¥

2,602.98
2,362.69
2,530.19

Notes: 1. Number of shares outstanding at the end of the respective periods:
17,979,846 shares at September 30, 2003 17,997,496 shares at September 30, 2002;
17,985,551 shares at March 31, 2003
2. Number of treasury stocks at the end of the respective periods:
330,524 shares at September 30, 2003
312,781 shares at September 30, 2002;
324,819 shares at March 31, 2003
2. Forecast Nonconsolidated Performance for FY 2003 (from April 1, 2003, to March 31, 2004)

Full-year

Net sales

Ordinary income

Net income¥ Million¥ Million¥ Million

80,400

8,300

3,500

Annual dividend per share
Year-end
¥

¥

38.00

38.00

(Reference) Projected net income per share (full year): ¥192.63
Note: These projected performance figures are based on information available to the Company’s management at thetime of preparing this report. There are many uncertain factors inherent in forecasting, and there might becases in which actual results differ from forecast values. See page 10 of the Attachment for further information on forecasts.

26

DAIICHIKOSHO

CO.,

LTD.

(Attachment)
Nonconsolidated Balance Sheet
Fiscal period

Account item
(Assets)
Current assets
Cash and bank deposits
Notes receivable―trade
Accounts receivable―trade
Inventories
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Fixed assets
Tangible fixed assets
Buildings
Karaoke equipment for rental
Karaoke cabin facilities
Land
Other
Total tangible fixed assets
Intangible assets
Investments and other assets
Investments in securities
Investment in stocks of subsidiaries
and affiliates
Long-term loans receivable
Deferred tax assets
Deferred tax assets arising from revaluation
Leasehold deposits and guaranteemoney
Long-term deposits
Other
Allowance for doubtful accounts
Total investments and other assets
Total fixed assets
Total Assets

Current interim period(As of September 30,
2003)
AmountComposition ratio(%)
10,251
1,704
6,091
5,217
3,257
2,970
(446)
29,046
4,403
4,100
6,175
4,798
1,298
20,776
7,138

Previous interim period(As of September 30,
2002)
AmountComposition ratio
(%)

34.2

8,240
2,088
6,657
4,101
606
3,150
(545)
24,298

24.4
8.4

5,093
3,140
6,446
6,051
1,309
22,041
6,459(Millions of yen)
Last fiscal year (As of
Year-overMarch 31, 2003)
year
changeAmountComposition ratio
(%)

30.2

13,980
2,142
5,753
4,405
3,362
2,554
(437)
31,761

27.4
8.1

4,569
3,621
6,058
4,807
1,170
20,228
7,087

38.5(3,728)
(437)
337
811
(104)
416
(8)
(2,714)

24.5
8.6

(166)
478
117
(9)
128
548
50

2,559
5,134

1,921
8,112

2,252
5,178

306
(43)

5,801
930
-

6,249
523
2,251

5,717
2,438
-

84
(1,508)
-

8,914

9,141

9,069

(154)

6,300
3,743
(5,357)28,02655,94084,986

3,844(4,485)27,55856,06080,3583,501(4,687)23,46950,78582,546

6,300
241
(669)
4,556
5,155
2,440

33.0
65.8
100.0

27

34.3
69.8
100.0

28.4
61.5
100.0

DAIICHIKOSHOFiscal period

Account item
(Liabilities)
Current liabilities
Notes payable―trade
Accounts payable―trade
Short-term borrowings
Current portion of long-term borrowings
Accounts payable―other
Income taxes payable
Reserve for bonuses
Other
Total current liabilities
Long-term liabilities
Convertible bonds
Long-term borrowings
Reserve for employees’ retirement
benefits
Reserve for directors’ retirement allowances
Other
Total long-term liabilities
Total Liabilities(Shareholders’ Equity)
Capital stock
Capital surplus
Capital reserve
Other capital surplus
Total capital surplus
Retained earnings
Voluntary reserve
Unappropriated retained earnings forthe period
Total retained earnings
Land revaluation difference
Net unrealized gains or losses onavailable-for-sale securities
Treasury stock
Total Shareholders’ Equity
Total Liabilities and Shareholders’EquityCurrent interim period(As of September 30,
2003)
AmountComposition ratio
(%)

CO.,

LTD.

Previous interim period(As of September 30,
2002)
AmountComposition ratio(%)

Last fiscal year (As of
March 31, 2003)
AmountYear-overyearchangeComposition ratio
(%)

2,294
3,450
2,000
3,189

1,935
2,401
2,510
3,061

2,365
2,617
1,250
3,388

(71)
832
750
(198)

3,907
112
700
1,001
16,655

4,023
1,028
655
1,070
16,686

3,884
631
1,120
15,258

23
112
69
(119)
1,397

19.6

20.8

18.5

11,514
7,514
1,021

12,6507,135
953

12,165
8,179
1,002

(651)
(665)
18

1,070

-

-

1,070

410
21,53038,185

25.3
44.9

410
21,14937,836

26.3
47.1

397
21,74437,002

26.3
44.8

13
(214)
1,182

12,34814.5

12,34815.4

12,348

14.9

-

28.2

4,000
20,00024,00029.9

4,000
20,00024,000

29.1

0
0

4,000
20,00024,001
18,6002,365

29,7502,519

29,750(9,750)(11,150)
12,116

20,965(9,981)
188

24.7(11.7)
0.2

32,269(25,189)
(237)

40.1
(31.4)(0.3)

19,999(10,005)(99)

24.2(12.1)
(0.1)

966
23
288

(721)
46,801
84,986

(0.8)
55.1
100.0

(668)
42,52280,358

(0.8)
52.9
100.0

(700)
45,54382,546

(0.8)
55.2
100.0

(20)
1,257
2,440

28

DAIICHIKOSHO

CO.,

LTD.

Nonconsolidated Statement of Income
Fiscal period

Account item
Net sales
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
Selling, general and administrative expenses
Operating income
Nonoperating income
Interest and dividend income
Profit on retirement of
convertible bonds
Fees and commissions received
Other
Nonoperating expenses
Interest expenses
Provision for allowancefor doubtful accounts
Loss on disposal of inventories
Loss on valuation of inventories
Other
Ordinary income
Extraordinary gains
Reversal of allowance for
doubtful accounts
Gain on sales of investments in securities
Gain on correction of
copyright use fees for prior
years
Extraordinary losses
Loss on sales and disposalof fixed assets
Loss on sales of investments in securities
Loss on valuation of investments in securities
Loss on valuation of investment in stocks of subsidiaries and affiliates
Directors’ retirement allowances
Provision for directors’
retirement allowances forprior years

Current interim period (FromApril 1, 2003, to September
30, 2003)
AmountPercentage(%)
38,888100.0
23,70961.0
15,17939.0

Previous interim period (FromApril 1, 2002, to September
30, 2002)
AmountPercentage(%)
35,879100.0
22,70963.3
13,169
36.7

124
86

Year-over-yearchange(%)

0.1

15,216
10,4644,752

116

Amount

108.4
104.4
115.3

114
37

(Millions of yen)
Last fiscal year (From April 1,
2002, to March 31, 2003)(0.0)(1597.7)

189

39.1
26.9

13,167
9,837

36.7
27.4

115.6
106.4

28,452
20,326

37.9
27.1

12.2

3,330

9.3

142.7

8,125

10.8

1,066

1.4

1,681
7,510

2.2
10.0

482

0.7

5,984

8.0

485

-

36

42

79

67

126

2.0

214

724

2.0

106.5

411

103
476

121
7

235
712

192

32

93

94

37

144

158

1,025
4,498

2.6
11.6

146

345
3,709

1.0
10.3

297.1
121.3

495

118

20

206

2

13

13

-

121

0.3

-

33

0.1

363.3

262

64

83

1,278

-

767

767

76

64

483

218

300

3,370

-

83

83

1,097

1,455

0.0

(2)

406

771

7

196

504

188

74,974
46,52928,445Percentage
(%)
100.0
62.1
37.9

3.8

-

29

1,299

3.6

112.0

-

DAIICHIKOSHOIncome before income
taxes
Income taxes―current
Income taxes―deferred
Net income for the period
Surplus brought forwardfrom the previous period
Transferred from legal reserve
Transferred from land revaluation difference
Unappropriated retained
earnings

50
1,404

3,164

8.1

1,454
1,710
679

3.7
4.4

CO.,

929
77

LTD.

2,444

6.8

129.5

1,007
1,436
598

2.8
4.0

144.4
119.0

100
(2,441)

2,009

2.7

(2,341)
4,350
598

(3.1)
5.8

-

485

485

(23)

-

(15,184)

2,365

2,519

(9,750)30

DAIICHIKOSHO

CO.,

LTD.

Summary of Significant Accounting Policies

1. Valuation basis and method for assets(1) Marketable securities and investments in securities
Investment in stocks of subsidiaries and affiliates: Stated at cost determined by the moving-average method.
Other securities primarily designated as available-for-sale securities for which the fair values arereadily determinable: Carried at fair value as of the interim balance-sheet date with changes in
net unrealized holding gain or loss, net of the applicable income taxes, included directly inshareholders’ equity. The cost of securities sold is determined by the moving-average method.
Other securities primarily designated as available-for-sale securities for which the fair values are
not readily determinable: Carried at cost determined by the moving-average method.
(2) Inventories:
Merchandise and finished products: Carried at cost determined by the moving-average method.
Work in process: Carried at cost determined by the specific identification method.
2. Depreciation method of fixed assets(1) Tangible fixed assets:
Depreciation is 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 on or after April 1, 1998.
Building and structures: 3–50 years
Karaoke equipment for rental: 5–6 years
Karaoke cabin facilities: 3–19 years(2) Intangible assets:
Amortization of intangible assets is computed by the straight-line method. Computer software
for internal use is amortized by the straight-line method over the estimated useful life (5 years),and sound delivery and video software is amortized by the straight-line method over 2 years.
3. Accounting standards for reserves(1) 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, andon the estimated recoverability for specific 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:
The reserve for employees’ retirement benefits is provided at an amount recognized to haveaccrued as of the interim balance-sheet date, based on the projected benefit obligations and plan
assets at the end of the year ending March 31, 2004. Actuarial differences are amortized on a
pro-rata basis by the straight-line method over a certain period (10 years), which is shorter than
the average remaining service years for employees at the time of their occurrence, from the31

DAIICHIKOSHO

CO.,

LTD.

following fiscal period of recognition.
(4) Reserve for directors’ retirement allowances:
The directors’ retirement allowances are provided at an amount that would be required to be paidin accordance with the internal rules concerning directors’ retirement allowances if all eligible
directors and statutory auditors were to resign their positions as of the respective interim balance-sheet dates.
(Change in accounting method)
DK’s directors’ retirement allowances have been previously charged to income as incurred
when disbursed. Effective from this interim period under review, the accounting method has
been changed to provide for possible payments at an amount that would be required to be paidin accordance with its internal rules concerning directors’ retirement allowances if all eligible
directors and statutory auditors were to resign their positions as of the interim balance-sheet
date. This change, which was implemented when the relevant internal rules were reviewed,
aims to regularize the periodic accounting of profit and loss and achieve a sounder financial
structure by allocating the directors’ retirement allowances to the tenure of directors andstatutory auditors. Pursuant to this change, ¥62 million that occurred in the current interim
period was included in selling, general and administrative expenses, whereas ¥1,097 million
was collectively recorded in extraordinary loss as the provision for prior years. As a result,compared with the previous accounting method, operating income and ordinary income eachdeclined by ¥62 million, and income before income taxes decreased by ¥1,070 million.
4. Translation of 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 arecharged or credited to income.
5. Accounting for leases
Finance leases that do not transfer ownership of leased property to the lessee are accounted for as
rental transactions.
6. Other important matters(1) Accounting for installment sales
DK’s installment profit involved in installment sales is deferred for the amount corresponding to
the portion of installment receivables for which the due date has not expired.
(2) Accounting for consumption tax, etc.
Consumption taxes are accounted for using the tax exclusion method. Consumption taxes related
to installment sales are deferred for the amount corresponding to the portion of installment receivables for which the due date has not expired.

32

DAIICHIKOSHO

CO.,

LTD.

Notes to Nonconsolidated Financial Statements(Notes to Nonconsolidated Balance Sheet)

1. Accumulated depreciation for tangible fixed assets

As of September 30,
2003
23,911

As of September 30,
2002
23,401(Millions of yen)
As of March 31,
2003
23,098

2. Liabilities for guarantee
Liabilities for guarantee
Guarantee by subscription
Letter of undertaking on management services
Total

4,455
326
4,782

5,178
631
5,810

5,288
356
5,645

-

1,510
2,141
706
4,357

1,471
2,141
626
4,239

-

1,198
5,507
6,705

696
5,981
6,677

10,00010,00010,00010,00010,00010,0003. Assets pledged as collateral and secured debt
Buildings
Land
Investments in securities
Total
Debt corresponding to the above:
Current portion of long-term borrowings
Long-term borrowings
Total
4. Commitment line contract
Total amount of commitment line contracts
Residual amount of borrowed funds
On balance

33

DAIICHIKOSHO

CO.,

LTD.

(Notes to Leases)
1. Finance lease contracts that do not transfer ownership of leased property to the lessee(1) Assumed data as to acquisition cost, accumulated depreciation and net book value at end of
periodKaraoke cabin facilities
Other tangible fixed
assets
Total

Current interim period(From April 1, 2003, to September
30, 2003)
AcquisiAccuNet booktion cost
mulatedvalue
depreciation
815
681
134

Previous interim period(From April 1, 2002, to September
30, 2002)
AcquisiAccuNet booktion cost
mulatedvalue
depreciation
1,321
906
414

(Millions of yen)
Last fiscal year
(From April 1, 2002, to March 31,
2003)
AcquisiAccuNet booktion cost
mulatedvalue
depreciation
984
742
241

2,356

1,198

1,157

4,744

3,472

1,272

2,509

1,197

1,312

3,172

1,880

1,292

6,066

4,379

1,686

3,494

1,940

1,554

(2) Assumed future lease payments at end of period under finance leases
Due within one year
Due after one year
Total

As of September 30, 2003
734
572
1,306

As of September 30, 2002
931
790
1,722

(Millions of yen)
As of March 31, 2003
795
775
1,571

(3) Lease payments, and assumed depreciation expense and interest expense
Lease payments
Assumed depreciation expense
Assumed interest expense

As of September 30, 2003
466
454
8

As of September 30, 2002
650
619
15

(Millions of yen)
As of March 31, 2003
1,226
1,169
25

(4) Computation method of assumed depreciation expense
Depreciation expense is computed by the straight-line method, assuming the lease period as theuseful life and no residual value.
(5) Computation method of assumed interest expense
The difference between the total lease contract amount and the assumed acquisition cost is assumed to be interest, and interest expense is computed by the interest method.
2. Operating lease contracts
Assumed future lease payments at end of period under operating leases
Due within one year
Due after one year
Total

As of September 30, 2003
327
2,258
2,586

As of September 30, 2002
300
2,550
2,851

(Millions of yen)
As of March 31, 2003
324
2,400
2,725

(Note to Securities)
DK had no available-for-sale securities for which the fair value is readily determinable in its investment in stocks of subsidiaries and affiliates during the interim periods ended September 30, 2003
and 2002, and the last fiscal year ended March 31, 2003.
(Note to Derivative Transactions)
Relevant information is omitted as hedge accounting is applied.

34