DAIICHIKOSHO

CO.,

LTD.

FY 2005, the year ended March 31, 2006
Summary of Nonconsolidated Financial Statements for the Interim Period Ended
September 30, 2005
November 14, 2005

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

Location of Head Office (Prefecture): Metropolis of Tokyo
Representative: Tatsuyoshi Yoneda, President
Contact: Eiji Hata, Managing Director and Senior Corporate Officer; and Executive Director, Administration
Headquarters

Phone: (03) 3280-2151
Date of the Board of Directors Meeting on the Closing of Accounts: November 14, 2005
Interim Dividend System: Applied
Unit (tangen) Stock System: Adopted (Unit (tangen) stock of shares: 100 shares)
Start Date for Payment of Interim Dividends: –1. Nonconsolidated Performance for the Interim Period Ended September 2005 (from April 1, 2005, toSeptember 30, 2005)(1) Nonconsolidated operating results
Note: Amounts below one million yen are truncated.
Net sales

Operating income

Ordinary income¥ Million

3,038%(31.8)¥ Million

45,485

%
7.8

3,330

%
(29.1)

42,186

8.5

4,454

(6.3)

4,694

4.4

¥ Million

Interim period ended September 2005
Interim period ended September 2004
Year ended March 2005

Interim period ended September 2005
Interim period ended September 2004
Year ended March 2005

82,862

6,447

Net income¥ Million%
917(72.7)
3,359

96.4

6,490

Net income per share
¥
26.36
93.47

3,939

109.74

Notes: 1. Average number of shares outstanding at the end of the respective periods:
Interim period ended September 2005: 34,803,317
Interim period ended September 2004: 35,941,040
Year ended March 2005: 35,745,780 shares
2. Change in accounting method: Yes
3. Percentages for net sales, operating income, ordinary income and net income show respective
year-over-year changes from the interim period of the previous fiscal year.

33

DAIICHIKOSHO

CO.,

LTD.

(2) Dividends
Interim period ended September 2005
Interim period ended September 2004
Year ended March 2005

Interim dividend per share¥
0.00

Annual dividend per share
¥
—

0.00

—

—

40.00

(3) Nonconsolidated financial position
Total assets

Note: Amounts below one million yen are truncated.
Shareholders’ equity
Equity ratio
Shareholders’ equity
per share¥ Million%¥
50,77059.3
1,458.83¥ Million
Interim period ended
85,581
September 2005
Interim period ended
87,74153,19960.6
1,480.27
September 2005
Year ended March
80,11251,02163.7
1,465.47
2005
Notes: 1. Average number of shares outstanding at the end of the respective periods:
34,802,391 shares at September 30, 2005
35,938,948 shares at September 30, 2004
34,804,216 shares at March 31, 2005
2. Number of treasury stocks at the end of the respective periods:
1,818,907 shares at September 30, 2005
682,350 shares at September 30, 2004
1,817,082 shares at March 31, 2005

2. Forecast Nonconsolidated Performance for FY2005, the Year Ending March 31, 2006 (from April 1,
2005, to March 31, 2006)
Net sales

Ordinary income

Net income¥ Million¥ Million¥ Million

¥

¥

1,800

30.00

30.00

Year ending
91,0005,700March 31, 2006
(full year)(Reference) Forecast net income per share (full year): ¥51.25

Annual dividend per share
Year-end

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 11 of the Attachment for further information
on forecasts.

34

DAIICHIKOSHO

CO.,

LTD.

6. Nonconsolidated Interim Financial Statements(1) Nonconsolidated Interim Balance Sheet(Millions of yen)
Fiscal year

Account item

Previous interim period(As of September 30,
2004)
AmountComposition
ratio
(%)

Current interim period(As of September 30,
2005)
AmountComposition
ratio
(%)

Last fiscal year
(As of March 31, 2005)
Condensed
ComAmount
position
ratio(%)

Yearoveryearchange20,387
650
6,540
2,976
2,938
2,748
(383)
35,85913,933
626
9,573
4,661
2,868
3,956
(749)
34,86911,010
783
6,270
4,546
2,880
2,600
(489)
27,601

2,922
(157)
3,302
115
(12)
1,355
(259)
7,267

(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
Sound delivery/video software
Other
Total intangible assets
Investments and other assets
Investments in securities
Investment in stocks of subsidiaries
and affiliates
Long-term loans receivable
Deferred tax assets
Leasehold deposits and guarantee
money
Other
Allowance for doubtful accounts
Total investments and other assets
Total fixed assets
Total Assets

40.9

1,689
4,691
7,813
2,002
1,765
17,961
4,588
3,784
8,372

40.7

1,657
4,649
7,293
3,403

20.5

2,152
19,156

9.5

3,570
3,724
7,295

34.5

1,721
4,628
8,296
3,506

22.4

1,505
19,659

8.5

3,847
4,220
8,067

(64)
21
(1,003)
(103)

24.5

647
(502)

10.0

(276)
(495)
(771)

5,870
4,471

7,211
4,273

6,123
4,001

1,087
271

4,808
1,556
10,268

4,528
128
10,0934,860
1,242
10,365(332)(1,113)
(272)

3,696
(5,123)25,54851,88287,741

3,235(5,210)24,25950,711
85,581

3,373(5,183)24,78452,51080,112

(138)
(27)
(524)
(1,798)
5,468

29.1
59.1
100.0

35

28.4
59.3
100.0

31.0
65.5
100.0

DAIICHIKOSHOFiscal year
Account item

LTD.

Previous interim period
Current interim period(As of September 30, 2004) (As of September 30, 2005)
Amount(Liabilities)
Current liabilities
Notes payable―trade
Accounts payable―trade
Short-term borrowings
Convertible bonds redeemablewithin one year
Current portion of long-term borrowings
Accounts payable―other
Income taxes payable
Reserve for bonuses
Other
Total current liabilities
Long-term liabilities
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
General reserve
Unappropriated retained earnings
Total retained earnings
Land revaluation difference
Net unrealized gains or losses onavailable-for-sale securities
Treasury stock
Total Shareholders’ Equity
Total Liabilities and Shareholders’EquityCO.,

Composition
ratio
(%)

AmountComposition
ratio
(%)

Last fiscal year
(As of March 31, 2005)
Condensed
AmountComposition
ratio
(%)

Yearoveryearchange

3,204
2,865
600
9,955

3,311
4,103
600
―

2,538
3,547
600
―

772
555
―
―

3,188

5,503

4,130

1,373

3,823
213
723
777
25,351

5,377
217
704
1,000
20,817

5,169
343
633
704
17,667

208
(126)
71
296
3,150

28.9

24.3

22.0

6,486
1,090

12,017
1,041

8,616
1,115

3,401
(74)

1,172

364

1,252

(887)

442
9,191
34,542

10.5
39.4

568
13,99234,810

16.4
40.7

439
11,42429,091

14.3
36.3

129
2,568
5,719

12,35014.1

12,35014.4

12,350

15.4

―

29.9

―
―
―

4,002
20,000

4,002
20,00024,002

24,00227.4

18,602(66)

4,002
20,00028.1

24,002

18,535(1,927)
1,018

21.1
(2.2)
1.1

18,105(1,409)
1,355

21.2
(1.7)
1.6

18,982(1,794)
1,109

23.7
(2.2)

1.4

(2,000)
1,123
(876)
385
245

(780)
53,19987,741

(0.9)
60.6
100.0

(3,634)50,77085,581

(4.3)
59.3
100.0

(3,629)51,021
80,112

(4.5)
63.7
100.0

(4)
(250)
5,468

16,602
1,503

36

18,602380

DAIICHIKOSHO

CO.,

LTD.

(2) Nonconsolidated Interim Statement of Income
Fiscal year
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
Fees and commissions received
Insurance payment received
Other
Nonoperating expenses
Interest expense
Provision for allowance for doubtful
accounts
Loss on disposal of inventories
Loss on devaluation of inventories
Other
Ordinary income
Extraordinary gains
Gain on sales of investments in securities
Gain on sales of fixed assets
Reversal of allowance for doubtful
accounts
Indemnity on relocation of warehouse
Extraordinary losses
Loss on sales and disposal of fixed
assetsLoss on sales of investments in securities
Loss on valuation of investments insecurities
Loss on valuation of investment instocks of subsidiaries and affiliates
Impairment loss on fixed assets
Loss on arrangement of subsidiaries
and affiliates
Income before income taxes
Income taxes―current
Income taxes―deferred
Net income
Surplus brought forward from theprevious year
Reversal of land revaluation difference
Unappropriated retained earnings

Previous interim period(From April 1, 2004,
to September 30, 2004)
AmountPercentage(%)
42,186 100.0
27,30264.7
14,883
35.3
94
15

359
77
―
187

Current interim period(From April 1, 2005,
to September 30, 2005)
AmountPercentage(%)
45,485 100.0
30,436 66.9
15,048 33.1

(Millions of yen)
FY 2004 (From April 1,
2004, to March 31, 2005)
Condensed
AmountPercentage
(%)
107.8
82,862 100.0
111.5
54,874
66.2
101.1
27,98833.8

Yearoveryearchange
(%)

31
79

0.2

14,962
10,508
4,454

624

12

0.0

15.8

35.5
24.9

15,061
12,023

33.1
26.4

10.6

3,038

6.7

1.4

19

135

346
44
130
287

809

1.8

91

0.1

100.7
114.4

28,08021,632

33.9
26.1

68.2

6,447

7.8

1,074

1.3

1,031
6,490

1.3
7.8

1,164

1.4

3,308

4.0

4,345

5.2

406
3,939
408

0.5
4.7

129.6

44

553
140
―
380

90
124

76
230

189
451

39
29
100

27
52
130

56
101
232

384
4,694

0.9
11.1

517
3,330

1.2
7.3

134.6
70.9

553

370

748

146
33

91
63

189
97

―

733

1.7

―

525

1.2

71.6

128

1,354

394

2,149

6

―

6

―

7

27

655

85

1,124

―
―
69
(15)

2,015

4.7

3,413

8.1

54
3,359
408

0.1
8.0

1,228
201
63
959

1,916

4.2

95.1

1,939

4.3

56.8

1,022
917
971

2.3
2.0

1,889.4
27.3

―
―
112
294

(3,834)(385)(3,966)

(66)

1,503

380

37

DAIICHIKOSHO

CO.,

LTD.

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:
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 of theapplicable 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 notreadily determinable:
Carried at cost determined by the moving-average method.
Regarding investments in investment limited liabilities business associations or such similar associations (thoseregarded as securities according to Article 2, Paragraph 2, of the Securities and Exchange Law), initial investments in such associations are recognized as the association’s receivables. The Company’s assumed share of thefluctuated amount due to the subsequent financial situation of the association is recorded as receivables from orpayables to the association. The Company’s assumed share of the profit and loss of the association during thecurrent interim period is accounted for as profit and loss on investments in investment business associations.
(2) Derivatives
Stated at fair value.
(3) Inventories
Merchandise:Stated at cost determined by the moving-average 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.
Buildings and structures: 5–50 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 isamortized by the straight-line method over the estimated useful life (five years), and sound delivery and video
software is amortized by the straight-line method over two 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, and on the estimated recoverability forspecific doubtful receivables.
(2) Reserve for bonuses
The reserve for bonuses is provided at an estimated amount based on DK’s internal payment prediction standard.
(3) Reserve for employees’ retirement benefits:
The reserve for employees’ retirement benefits is provided at an amount recognized to have accrued as of the interim
balance-sheet date, based on the projected benefit obligations and plan assets as of September 30, 2005.
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 thefollowing fiscal year of recognition.
(Change of accounting policies)
From the current interim period, the Company adopted the “Partial Amendment to the Accounting Standard for
Retirement Benefits” (Financial Accounting Standard No. 3, March 16, 2005) and the “Implementation Guidance

38

DAIICHIKOSHO

CO.,

LTD.

for Partial Amendment to the Accounting Standard for Retirement Benefits” (Financial Accounting Standards Implementation Guidance No. 7, March 16, 2005). As a result, operating income, ordinary income and income before
income taxes each increased by ¥13 million.

(4) Reserve for directors’ retirement allowances:
The reserve for directors’ retirement allowances is provided at an amount that would be required to be paid in accordance with DK’s 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.

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 ratein effect at the interim balance-sheet date. The resulting exchange differences are charged 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 in preparing the nonconsolidated interim financial statements(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.

Change in Significant Accounting Policies
From the current interim period, the Company adopted the Accounting Standard on the Impairment of Fixed Assets(“Statement of Position on Accounting Standard on the Impairment of Fixed Assets”) (Business Accounting Council,
August 9, 2002) and the “Implementation Guidance on the Accounting Standard on the Impairment of Fixed Assets”(Financial Accounting Standards Implementation Guidance No. 6, October 31, 2003). The adoption of these accounting
standards decreased interim net income by ¥1,228 million. The accumulated impairment loss was directly deductedfrom the amount of each of the related assets.

39

DAIICHIKOSHO

CO.,

LTD.

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

1. Accumulated depreciation for tangible fixed assets

As of
September 30,
2004
21,352(Millions of yen)
As of
As of
September 30,
March 31,
2005
2005
22,39122,058

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

3,723
280
67
4,071

3,289
355
―
3,644

3,350
375
58
3,784

10,000―10,00010,000―10,00010,000―10,000

3 Commitment line contract
Total amount of commitment line contracts
Residual amount of borrowed funds
On balance(Notes to Nonconsolidated Interim Statement of Income)

1. Depreciation and amortization executed
Tangible fixed assets
Intangible fixed assets

Previous interim period(From April 1, 2004, toSeptember 30, 2004)

Current interim period(From April 1, 2005, toSeptember 30, 2005)(Millions of yen)
Last fiscal year
(From April 1, to March
31, 2005)

1,899
2,623

2,020
2,711

4,305
5,270

2. Contents of impairment loss
An impairment loss was recorded with regard to the following asset groups during the current interim period.
(1) An impairment loss was recognized for the following assets:
Place“Big Echo” Do-tonbori karaokecabin main store (Chuo-ku, Osaka)and 19 other stores
Asagiri Sky Gym (Fujinomiya,
Shizuoka) and 5 other places

Use
Karaoke cabins, restaurants

Classification
Karaoke cabin facilities, etc.

Lease and rental of real estateLand and buildings, etc.

(Millions of yen)
Impairment loss
927
300(2) Method of grouping assets
The Company determines asset groups, considering internal management segmentation. Asset groups of unused and rental realestate are determined by each property and those of karaoke cabins and restaurants mainly by each store.
(3) Background to the recording of an impairment loss
Due to a plunge in the market value of real estate for lease and rental and unused real estate, it was determined that recouping theinvested amount would be difficult. Therefore, the acquisition cost was reduced to the collectible amount and the reduced amount
was recorded as an impairment loss (¥300 million), which is included in extraordinary losses.
Due to the decreased profitability of “Big Echo” karaoke cabin stores and restaurants, it was determined that recouping the invested
amount would be difficult. Therefore, the acquisition cost was reduced to the collectible amount and the reduced amount was recorded as an impairment loss (¥927 million), which is included in extraordinary losses.
(4) Amount of impairment loss
(Millions of yen)
Karaoke cabin facilities
927
Land
103
Buildings, etc.
197
Total
1,228
(5) Method of computing the collectible amounts
The collectible amount was computed by the net sale value and the use value. The net sales value was computed based on the real40

DAIICHIKOSHO

CO.,

LTD.

estate appraisal value, and the use value was computed by discounting 3.6% from the future cash flow.
3. Components of loss on arrangement of subsidiaries and affiliates
The loss on arrangement of subsidiaries and affiliates consists of a loss of ¥144 million due to the cessation of music CD sales at “BigEcho” karaoke cabin stores and a loss of ¥56 million due to the cessation of the DAM cinema business.

41

DAIICHIKOSHO

CO.,

LTD.

(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 remaining book value of leased
assets at the end of the period

Karaokecabinfacilities
Other tangible fixed
assets
Total(Millions of yen)Previous interim period (From April 1, Current interim period (From April 1,
Last fiscal year
2004, to September 30, 2004)
2005, to September 30, 2005)(From April 1, 2004, to March 31, 2005)
Acquisition Accumulated Net book Acquisition Accumulated Net book Acquisition Accumulated Net bookcost
depreciation
value
cost depreciation
value
cost depreciation value
272
247
25
―
―
―
99
90
9
2,570

1,507

1,063

2,688

934

1,753

2,170

938

1,232

2,843

1,754

1,088

2,688

934

1,753

2,270

1,028

1,241

(2) Assumed future lease payments at the end of the period under finance leases
As of September 30, 2004

As of September 30, 2005

(Millions of yen)
As of March 31, 2005

580
517

638
1,122

501
747

1,098

1,761

1,248

Due within one year
Due after one year
Total(3) Lease payments, and assumed depreciation expense and interest expense
Lease payments
Assumed depreciation expense
Assumed interest expense

As of September 30, 2004
388
380
6

As of September 30, 2005
362
355
7

(Millions of yen)
As of March 31, 2005
722
706
11

(4) Computation method of assumed depreciation expense
Depreciation expense is computed by the straight-line method, assuming the lease period as the useful 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
Future lease payments under operating leases
Due within one year
Due after one year
Total

As of September 30, 2004
328
1,980
2,309

As of September 30, 2005
323
1,657
1,980

(Millions of yen)
As of March 31, 2005
324
1,817
2,142

(Securities)
DK had no available-for-sale securities for which the fair value was readily determinable in its investment in stocks ofsubsidiaries and affiliates for the interim periods ended September 30, 2004 and 2005, and the last fiscal year ended March
31, 2005.

42

DAIICHIKOSHO

CO.,

LTD.

(Significant Subsequent Events)
Previous interim period(From April 1, 2004, to September 30,
2004)
The meeting of the Board of Directors
held on December 13, 2004, adopted aresolution to the effect that the Company acquire treasury stock pursuant to
the provisions of Article 211-3, Paragraph 1, Item 2, of the Commercial
Code of Japan in the following manner:(1) Purpose:
To be able to implement a flexible
capital policy to address changes in
the management environment andimprove capital efficiency(2) Acquisition method:
Purchase at JASDAQ Securities
Exchange, Inc.
(3) Class of shares to be acquired:
Common shares(4) Number of shares to be acquired:
A maximum of 1,440,000 shares(5) Total stock acquisition price:
A maximum of ¥4,300 million(6) Period of acquiring treasury stock:
From December 17, 2004, toFebruary 28, 2005

Current interim period(From April 1, 2005, to September 30,
2005)

Last fiscal year
(From April 1, 2004, to March 31,
2005)

―

―

43