DAIICHIKOSHO

CO.,

LTD.

FY 2006, the year ending March 31, 2007

Flash Report on the Consolidated Results for the Interim Period Ended
September 30, 2006
November 13, 2006

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: Yasutaka Wada, 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 13, 2006
Adoption of U.S. GAAP: No
1. Consolidated Performance for the Interim Period Ended September 2006 (from April 1, 2006, toSeptember 30, 2006)(1) Consolidated operating results

Interim period ended
September 2006
Interim period ended
September 2005
Year ended March 2006

Net sales¥ Million
63,212%(1.5)

64,191

5.5

5,143

129,341(18.3)

11,286

Net income
Interim period ended
September 2006
Interim period ended
September 2005
Year ended March 2006

Note: Amounts below one million yen are truncated.
Operating income
Ordinary income¥ Million%¥ Million
%
6,662
29.5
6,855
32.1

%
400.4

790

(79.7)

56.82

Fully diluted net income
per share
¥
―

22.71

―

112.60

―

¥

4,009

(16.3)

11,618Net income per share¥ Million
3,955

5,188

Notes: 1. Equity in net income of unconsolidated subsidiaries and affiliates:
Interim period ended September 2006: ¥ (20) million
Interim period ended September 2005: ¥ ― million
Year ended March 2006: ¥ 0 million
2. Average number of shares outstanding during the respective periods (consolidated):
Interim period ended September 2006: 69,600,427 sharesInterim period ended September 2005: 34,803,317 sharesYear ended March 2006: 34,802,451 shares
The Company conducted a two-for-one stock split on July 1, 2006. For comparison, “Net income pershare” is stated in the table as if the stock split had occurred as of April 1, 2006.
“Fully diluted net income per share” for the Interim period ended September 2006 is not stated because
no residual securities existed as convertible bonds were redeemed at maturity as of September 30, 2006.
3. Change in accounting method: None
4. Percentages for net sales, operating income, ordinary income and net income show respective
year-over-year changes from the previous fiscal year.

1

DAIICHIKOSHO

CO.,

LTD.

(2) Consolidated financial position
Total assets¥ Million
134,745

Note: Amounts below one million yen are truncated.
Net assets
Equity ratio
Net assets per share¥ Million%¥
68,45650.2
972.26

Interim period ended
September 2006
Interim period ended
136,910
62,19145.4
1,787.00
September 2005
Year ended March 2006
133,524
66,44049.8
1,906.58
Note: Number of shares outstanding at the end of the period (consolidated):
69,600,102 shares at September 30, 2006
34,802,391 shares at September 30, 2005
34,800,491 shares at March 31, 2006
The Company conducted a two-for-one stock split on July 1, 2006. For comparison, “Net assets per share” isstated in the table as if the stock split had occurred as of April 1, 2006.

(3) Consolidated cash flows
Cash flows fromoperating activities
Interim period ended
September 2006
Interim period ended
September 2005
Year ended March 2006

¥ Million
16,572

Note: Amounts below one million yen are truncated.
Cash flows from
Cash flows from
Cash and cash
investing activities financing activities equivalents at endof period¥ Million¥ Million¥ Million(12,058)(1,388)27,372

10,119(10,816)

2,343

25,52024,081(21,808)(2,018)24,222(4) Scope of consolidation and application of the equity method
Number of consolidated subsidiaries: 47
Number of nonconsolidated subsidiaries accounted for by the equity method: ―Number of affiliates accounted for by the equity method: 4(5) Change in the scope of consolidation and application of the equity method
Consolidation (newly included): ― (Excluded): ―Equity method (newly applied): 2 (Excluded): ―2. Forecast Consolidated Performance for FY2006, the Year Ending March 31, 2007 (from April 1,
2006, to March 31, 2007)
Net sales¥ Million
127,400

Year ending March 31,
2007 (full year)(Reference) Forecast net income per share (full year): ¥86.21

Ordinary income¥ Million
12,000Net income¥ Million
6,000

Note: These projected performance figures are based on information available to the Company’s management at
the time of preparing this report. There are many uncertain factors inherent in forecasting, and there might becases in which actual results differ from forecast values.

2

DAIICHIKOSHO

CO.,

LTD.

(Attachment)

1. Corporate GroupThe Daiichikosho Group (“DKG”) consists of Daiichikosho Co., Ltd. (“DK” or “the Company”), 47
consolidated subsidiaries and four affiliates. The major group companies engage in the commercial
karaoke business, the karaoke cabin and restaurant business, the Gateway business and the music
software business.
Business segment

Business line

Commercial
karaoke business

Sales and rental of commercial-use
karaoke equipment

Karaoke cabin
and restaurant
business

Operation of karaoke cabins andrestaurants

Gateway businessSupply of content service via thespecial “DAM Station” information
terminal and mobile phones

Music software
business

Production and sales of music andvideo software products

Other business

Satellite broadcasting, real estate lease
and rental 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 19 other subsidiaries

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

3

Overseas
DK KOREA
Co., Ltd.
Daiichikosho(Shanghai), Ltd.
and one othersubsidiary
Saha Daiichi
Kosho Co., Ltd.
BIG ECHO(SHANGHAI)
Co., Ltd.
and four othersubsidiaries

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

DAIICHIKOSHO

CO.,

LTD.

(Intermediary services related to
installment sales and loans for
DK and group companies)
DK Finance, Co., Ltd.
(Production and sales of music
software products)
Nippon Crown Co., Ltd.
Tokuma Japan Communications
Co., Ltd.
First Distribution Co., Ltd.
Tri-M, Inc.
DK Music Publishing Co., Ltd.
Union motion picture Co., Ltd.
Crown Music Enterprise Co.
Zoom Republic(Overseas subsidiaries)(Operation of karaoke cabins andrestaurants)
Saha Daiichi Kosho Co., Ltd.
BIG ECHO (SHANGHAI) Co., Ltd.
BIG ECHO (SHXG) CO., LTD.
BIG ECHO (SHSG) CO., LTD.
Shanghai Daiichi Kosho F&B Co.,LTD.
BEIJING BIG ECHO RESTAURANTSERVICE CO.,LTD. *2(Operation and management ofrecreation facilities)
D.K. Enterprises (Guam), Inc.
(Other overseas subsidiaries)
Daiichikosho (Beijing) Music &Culture Co., Ltd.
(Equity method affiliate)
Spice Records Co., Ltd.
Breezeway Corp.
JD Create Co., Ltd.*3
Seal Music Co., Ltd.*3(Production and sale of fruitwines)
Maruhagi Yoshu Kogyo, Co.,Ltd.
Sales and rentals of merchandise and products

DK KOREA Co., Ltd.
Daiichikosho (Shanghai), Ltd.
Daiichi Kosho (Singapore), Pte
Ltd.*1

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

DAIICHIKOSHO CO., LTD. (Reporting company)

Domestic users

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

Operation of karaoke cabins and restaurants

4

Provision of services

DAIICHIKOSHO

CO.,

LTD.

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

Account item

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

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

FY2005(As of March 31, 2006)
Condensed
ComAmount
positionratio(%)

26,086
15,516

27,84011,40924,732
12,092

3,107
(682)

6,871
3,163
5,805
(1,349)56,092

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

7,683
2,254
4,376
(1,173)49,965(1,903)(1,012)682
5196

Yearoveryearchange(Assets)
I Current assets
1 Cash and bank deposits
2 Notes and accounts receivable―trade3 Inventories
4 Deferred tax assets
5 Other
Allowance for doubtful accounts
Total current assets
II Fixed assets
1 Tangible fixed assets(1) Buildings and structures(2) Karaoke equipment for rental

41.0

37.3

37.4

6,424
10,1596,104
10, 026

5,907
9,702

196
323

(3) Karaoke cabin and restaurant
facilities(4) Land

12,414

13,742

13,68457

14,79514, 554

14,284269(5) Other
Total tangible fixed assets
2 Intangible assets
3 Investments and other assets(1) Investments in securities(2) Long-term loans receivable(3) Deferred tax assets(4) Leasehold deposits andguarantee money(5) Other
Allowance for doubtful accounts
Total investments and other assets
Total fixed assets
Total Assets

4,131
47,925
7,920

35.0
5.8

4,085
48,512
7,456

36.0
5.5

4,058
47,638
7,950

35.7
5.9

26
873
(493)

7,479
1,215
1,375
13,113

10,9601,071
1,870
13,073

10,7191,086
1,111
13,373

241
(14)
759
(299)

4,017
(2,230)24,97180,817
136,9103,658(2,020)28,614
84,583
134,745

3,789(2,110)27,96983,558
133,524

(130)
90
644
1,024
1,221

18.2
59.0
100.0

5

21.2
62.7
100.0

21.0
62.6
100.0

DAIICHIKOSHOFiscal year

Account item

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

CO.,

LTD.

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

Current interim period(As of September 30, 2006)

8,818

5,525

5,262

262

22,190
7,095
1,253
1,139
422

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

20,109
6,466
1,407
1,044
373

(613)
(378)
485
297
(45)

2,883
43,802

Amount32.0

Composition
ratio
(%)

3,371
38,04328.2

FY2005(As of March 31, 2006)
Condensed
AmountComposition
ratio
(%)

3,151
37,815

28.3

Yearoveryearchange219
227

23,370257
2,616

21,375216
2,629

21,096
817
2,590

278
(600)
39

1,987

2,264

2,153

111

736
1,190
30,15973,961

22.0
54.0

507
1,252
28,246
66,289

21.0
49.2

620
1,224
28,502
66,318

21.3
49.6

(112)
28
(256)
(29)

756

0.6

―

―

764

0.6

(764)

12,35024,002
29,373(1,409)
1,364

9.0
17.5
21.5
(1.0)
1.0

―
―
―
―
―
―

―
―
―
―
―
―

12,35024,00332,029
(845)
2,354

144

0.1

―

―

188

(3,634)62,191
136,910

(2.7)
45.4
100.0

―
―
―

―
―
―

(3,639)66,440133,5246

9.2 (12,350)
18.0 (24,003)
24.0 (32,029)
(0.6)
845
1.8
(2,354)
0.1

(188)

(2.7)
3,639
49.8 (66,440)
100.0 (133,524)

DAIICHIKOSHOFiscal year

Account item

(Net Assets)
I Shareholders’ equity
1 Capital stock
2 Capital surplus
3 Retained earnings
4 Treasury stock
Total Shareholders’ equity
II Valuation gains and losses andtranslation adjustment
1 Net unrealized gains or losses onavailable-for-sale securities
2 Land revaluation difference
3 Foreign currency translation
adjustments
Total valuation gains and losses andtranslation adjustment
III Minority interests
Total Net Assets
Total Liabilities and Net Assets

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

CO.,

LTD.

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

FY2005(As of March 31, 2006)
Condensed
AmountComposition
ratio
(%)

Yearoveryearchange

―
―
―
―
―

―
―
―
―
―

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

9.2
17.8
25.8
(2.7)
50.1

―
―
―
―
―

―
―
―
―
―

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

―

―

782

0.6

―

―

782

―
―

―
―

(845)
194

(0.6)
0.1

―
―

―
―

(845)
194

―

―

131

0.1

―

―

131

―
―
―

―
―
―

786
68,456
134,745

0.6
50.8
100.0

―
―
―

―
786
― 68,456― 134,745

7

DAIICHIKOSHO

CO.,

LTD.

(2) Consolidated Interim Statements of Income
Fiscal year

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

Previous interim period(From April 1, 2005,
to September 30, 2005)
AmountPercentage(%)
64,191 100.0
39,27861.2
24,912
38.8
60
19

244
449
328

Yearoveryearchange
(%)
98.5
97.0
100.8

52
41

0.1

24,953
19,810
5,143

6

0.0

110.5

89

0.1

38.9
30.9

25,144
18,481

39.7
29.2

100.8
93.3

50,431
39,145

39.0
30.3

8.0

6,662

10.5

129.5

11,286

8.7

2,184

1.7

1,852
11,618

1.4
9.0

599

0.5

4,107

3.2

8,110

6.3

4,104
(3)

3.2
(0.0)

4,009

3.1

153
26
98
158
112
1,067

1,022
5,188

1.7

1.6
8.1

352
239
279
191

(Millions of yen)
FY 2005 (From April 1,
2005, to March 31, 2006)
Condensed
AmountPercentage(%)
129,341 100.0
78,99961.1
50,342
38.9
106

45

177
111
95
118
116
446

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

16

340
120
180
236
232
902

710
6,855

1.4

1.1
10.8

84.6

69.4
132.1

1,074
477
887
486

34

15

98

370

―

370

92

97

75

48

546

0.9

2

115

0.2

21.2

55

456

444

1,165

2,199
―

38
―

2,493
4

7

5

7

196

1,106
983

2,860

4.5

2,874

4.5

2,089
(6)

3.3
(0.0)

790

1.2

8

―

1,776
722

488

0.7

17.1

6,483

10.3

225.6

2,499
28

4.0
0.0

119.6
(463.0)

3,955

6.3

500.4

435

2,062
2,041

DAIICHIKOSHO

CO.,

LTD.

(3) Consolidated Interim Statements of Capital Surplus and Retained Earnings andConsolidated Interim Statement of Changes in Net Assets.

Consolidated Interim Statements of Capital Surplus and Retained Earnings
Fiscal year

Previous interim
period (From April
1, 2005,
to September 30,
2005)
AmountAccount item

(Millions of yen)
FY 2005 (FromApril 1, 2005, to
March 31, 2006)
Amount(Capital surplus)
I Capital surplus at the beginning of the year

24,002

24,002II Increase in capital surplus
Gain from purchase and redemption of treasury stock―

III Capital surplus at the end of the interim period

―

0

0

24,002

24,00330,05030,050(Retained earnings)
I Retained earnings at the beginning of the year
II Increase in retained earnings
1 Net income

790

2 Increase in retained earnings due to the increase in thenumber of consolidated subsidiaries
III Decrease in retained earnings

414

1 Cash dividends

4,009
1,204

414

1,392

1,392

2 Bonuses to directors and statutory auditors

104

104

3 Reversal of land revaluation difference

385

IV Retained earnings at the end of the interim period

1,881
29,373

9

948

4,424

2,445
32,029DAIICHIKOSHO

CO.,

LTD.

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

Balance as of March 31, 2006

Capital stock

Capital surplus

Retained earnings

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

(115)

(115)

3,955

3,955

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

Treasury stock

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

0

(1)

(1)

0

0

―

0

2,795

(1)

2,794

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

67,537

Minority
interests

Total net
assetsValuation, translation adjustments and others
Net unrealized
gains or losses onavailable-for-salesecurities
Balance as of March 31, 2006

2,354

Land
revaluationdifference(845)

Foreigncurrencytranslation
adjustments
188

Total
valuation,translation
adjustments
and others
1,697

764

67,205

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

Bonuses to directors andstatutory auditors (Note)
Interim net income

(115)
3,955

Purchases of treasury stock(1)

Disposal of treasury stock0

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

10

DAIICHIKOSHO

CO.,

LTD.

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

Previous interim
period (FromApril 1, 2005,
to September 30,
2005)
AmountCurrent interim
period (FromApril 1, 2006,
to September 30,
2006)
AmountYear-over-year change

FY 2005 (FromApril 1, 2005, to
March 31, 2006)
Condensed

Increase/Decrease

Amount

2,874
7,585
2,199
91
(1,009)

6,483
7,598
38
(95)
111

8,110
15,783
2,493
43
(842)

(289)
(370)
244
421
(2,920)
1
552

(180)
―
239
428
676
1,903
468

(460)
(365)
477
1,067
415
(928)
1,016

1,398
(25)
10,752
277
(233)
(675)
10,119266(14)17,925172(246)(1,279)16,572(1,980)841
25,672453(460)(1,583)24,081(216)
316(7,681)82(2,466)
(866)
(988)
524
(452)
425
(232)
498

(78)
121
(6,613)122(2,179)(619)(2,909)
―
(390)
373
(246)
317

240
(10,816)43(12,058)(448)
10,694(6,504)(1,389)
(6)
2,343
46

6,452

(358)
515
(14,628)605(4,766)(1,512)(2,598)
544
(996)
1,249
(908)
819
(1,242)

227(21,808)

(412)
7,405
(7,328)(1,043)(10)(1,388)25(3,732)(20)(2,606)15,322(13,330)(1,391)(12)(2,018)141

1,693
22,4283,150
24,222

1,456
1,794

395
22,428

1,398―(1,398)

1,398

25,52027,372

1,852

24,222

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DAIICHIKOSHO

CO.,

LTD.

1. Summary of Significant Accounting Policies(1) Valuation basis and method for important assets① Marketable securities and investments in securities
Held-to-maturity debt securities:
Carried at amortized cost 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 balance-sheet date with changes in net unrealized holding gain or loss, net ofthe applicable income taxes, included directly in shareholders’ equity. The cost of securities sold isdetermined 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.
With regard to investments in the Investment Business Limited Liability Partnership and similarorganizations (which are regarded as “securities” in accordance with Article 2, Paragraph 2, of the Securities
Exchange Law), initial investments in such associations are recognized as receivables from associations andthe amount assumed to be held by the Company for fluctuations due to the financial situation of theassociations after such investment is recognized as receivables and payables related to such associations.
The amount assumed to be held by the Company of profit and loss in such associations during the interim
period under review was treated as Gain (loss) on investments in associations.

② Derivatives
Carried at fair value.
③ Inventories
Principally stated at cost determined by the moving-average method.
(2) Depreciation method of major depreciable assets① Tangible fixed assets
Depreciation is principally computed by the declining-balance method at rates based on the estimated useful
lives of the assets as shown below. However, the straight-line method is adopted for buildings (excluding
building improvements) acquired on or after April 1, 1998.
Buildings and structures: 3–50 years
Karaoke equipment for rental: 5–6 years
Karaoke cabin and restaurant 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 forspecific doubtful receivables.
② Reserve for bonuses
The reserve for bonuses is provided at an estimated amount based on the internal payment prediction standard.
③ Reserve for employees’ retirement benefits
The reserve for employees’ retirement benefits is provided at an amount recognized to have accrued as of theinterim balance-sheet date, based on the projected benefit obligations and plan assets as of September 30, 2006.
Actuarial differences are amortized on a pro rata basis by the straight-line method over a certain period (10years), which is shorter than the average remaining service years for employees at the time of their recognition,from the following fiscal year of recognition.
④ Reserve for directors’ retirement allowances
The reserve for directors’ retirement allowances of DK and its domestic consolidated subsidiaries is provided at
amounts that would be required to be paid in accordance with their respective internal rules concerning directors’
retirement allowances if all eligible directors and statutory auditors were to resign their positions as of therespective interim balance-sheet dates.
(4) Translation of important assets and liabilities denominated in foreign currencies into yen

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DAIICHIKOSHO

CO.,

LTD.

Monetary receivables and payables denominated in foreign currencies are translated into yen at the spot exchange
rate in effect at the interim balance-sheet date. The resulting exchange differences are charged or credited to income.
The balance sheet accounts, as well as the revenue and expense accounts, of the overseas subsidiaries are translated
into yen at the spot exchange rate in effect at their respective interim balance-sheet dates. The resulting translationdifferences have been recorded and presented as a component of “Foreign currency translation adjustments” and“Minority interests” in “Net Assets.”(5) Accounting for important leases
Finance leases that do not transfer ownership of leased property to the lessee are accounted for as rental transactions.
(6) Hedge accounting
DKG hedges against risks of interest rate fluctuations for its variable-rate borrowings using interest rate swaps. The
preferential treatment is applied to these interest rate swaps.
(7) Other important matters in preparing the consolidated interim financial statements① Accounting for installment sales
Unrealized profit on installment sales is deferred for the amount corresponding to the portion of installment
receivables for which the due date has not expired based on DKG’s installment standards.
② Accounting for consumption taxes
Consumption taxes are accounted for using the tax exclusion method.

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

13

DAIICHIKOSHO

CO.,

LTD.

(Segment Information)
1. Business segments
Previous interim period (From April 1, 2005, to September 30, 2005)(Millions of yen)
Item
Sales and operating
incomeSales
Sales to third
partiesIntersegment sales
and transfers
Total
Operating expenses
Operating income(loss)

CommerKaraokecial karaoke cabin andrestaurant

GatewayMusic
software

Other

Total

Eliminations andcorporate

Consolidated

36,897

15,781

2,469

5,562

3,480

64,191―64,191

120

―

―

87

355

564

(564)

―

37,01830,627
6,391

15,781
14,853
927

2,469
3,824
(1,355)

5,650
5,597
52

3,836
2,963
872

64,75557,867
6,888

(564)
1,180
(1,744)64,191
59,047
5,143

Current interim period (From April 1, 2006, to September 30, 2006)(Millions of yen)
Item
Sales and operating
incomeSales
Sales to third
partiesIntersegment sales
and transfers
Total
Operating expenses
Operating income(loss)

CommerKaraokecial karaoke cabin andrestaurant

GatewayMusic
software

Other

Total

Eliminations andcorporate

Consolidated

34,06517,046

2,246

5,834

4,018

63,212―

63,212

113

―

―

86

365

565

(565)

―

34,17928,335
5,843

17,046
15,057
1,989

2,246
2,961
(715)

5,920
5,891
29

4,384
3,502
882

63,77755,747
8,029

(565)
801
(1,366)

63,21256,5496,662

FY2005 (From April 1, 2005, to March 31, 2006)(Millions of yen)
Item
Sales and operating
incomeSales
Sales to third
partiesIntersegment sales
and transfers
Total
Operating expenses
Operating income(loss)

CommerKaraokecial karaoke cabin andrestaurant

GatewayMusic
software

Other

Total

Eliminations andcorporate

Consolidated

129,341

69,67233,307

4,780

14,261

7,319

129,341

―

238

―

―

166

696

1,101

(1,101)―

69,91058,660
11,25033,30730,101
3,206

4,780
7,238
(2,457)

14,42813,988
439

8,015
6,118
1,896

130,442
116,106
14,336(1,101)
1,948(3,049)129,341
118,054
11,286

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

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DAIICHIKOSHO

CO.,

LTD.

2. Major products and/or services of each business segment
Business segment
Commercial karaoke businessKaraoke cabin and restaurant
business
Gateway 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 and restaurants
Supply of music content, etc., via “DAM Station” special information terminals andmobile phones
Production and sales of music and video software products
Satellite broadcasting business and real estate lease and rental business, etc.

3. Amounts and major items included in “Eliminations and corporate”
Previousinterim period
Amounts of unabsorbed operating
expenses included in“Eliminations and corporate”

Current interim
period¥1,744¥1,366

Last fiscal year

¥3,049(Millions of yen)
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 geographicalsegments, the segment information by geographical region is omitted.

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

15