DAIICHIKOSHO

CO.,

LTD.

Financial Results in the Six Months ended September 2002

November 18, 2002

DAIICHIKOSHO CO., LTD.
Company code number: 7458
(URL http://www.dkkaraoke.co.jp)
Shares traded: JASDAQ
Location of headquarters: Tokyo
Please address all communications to: Tomio Suzuki, Senior Managing Director
Administration Headquarters
Phone: (03) 3280-2151
Date of Board of Directors’ meeting for approval of financial results: November 18, 2002
Adoption of U.S. accounting standards : No

Financial highlights
Millions of yen

September 30, September 30, September 30,
2000
2001
2002

March 31,
2001

March 31,2002

Consolidated

Net sales

42,32843,31358,44786,73098,591

Ordinary income

4,183

4,681

5,460

8,430

8,447

714

1,908

2,325

3,079

3,304

Shareholders' equity

71,551

48,92850,856

48,67849,914

Total assets

153,790131,348

128,511

123,775

131,075

Shareholders' equity per share (Yen)

3,816.97

2,609.67

2,825.74

2,596.50

2,726.97

Net income per share (Yen)

38.10

101.79127.75164.28176.39Equity ratio (%)

46.5

37.3

39.6

39.3

38.1

Net sales

29,95531,43335,87961,20065,489Ordinary income

2,077

2,833

3,709

4,683

5,332

463

1,221

1,436

1,157

2,019

Shareholders' equity

65,72342,041

42,52242,011

42,314

Total assets

107,250

79,48380,35878,37681,459

Shareholders' equity per share (Yen)

3,505.20

2,242.38

2,362.69

2,240.57

2,311.78

24.71

65.16

78.92

61.71

107.82

61.3

52.9

52.9

53.6

52.0

Net income

Non consolidated

Net income

Net income per share (Yen)
Equity ratio (%)

△

△

1

DAIICHIKOSHO

CO.,

LTD.

Group organization
The Daiichikosho group consists of Daiichikosho CO., LTD. and 38 subsidiaries. Its main business
is: commercial karaoke operations (the sale and rental of karaoke products, and provision of
karaoke-streaming service); the operation of karaoke cabins; the provision of contents; and the
production and sale of music software.
The following is a graphic presentation of the group’s operations.

(Overseas subsidiaries)(Domestic sales subsidiaries)[Factoring of the Company’s andits subsidiaries’ installment salesreceivables; personal loans]
DK Finance, Co., Ltd.

(Production and sale of software
for music and video)
Gauss Entertainment Co., Ltd.
Nippon Crown Co., Ltd.
Tokuma Japan Communications
Co., Ltd.
First Distribution Co., Ltd.

Daiichikosho (Hong Kong), Ltd.
DK KOREA Co., Ltd
Daiichi Kosho (Shanghai), Ltd.
Daiichi Kosho (Singapore), Pte Ltd.

(Acquisition and management of
copyrights)*1(Operation of karaoke cabins)
Shanghai Zong-Yi Music &Entertainment Co., Ltd.
Saha Daiichi Kosho Co., Ltd.

Overseas users

DAIICHIKOSHO CO., LTD. (Reporting company)

Domestic users

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.
16 other companies(Operation and management of
employee leisure facility)
D.K. Enterprises (Guam), Inc.

(Other overseas subsidiaries)
World Wide Top Co., Ltd.

(Non consolidated subsidiaries)

DK Music Publishing Co., Ltd.

Daiichi Kosho Europe GmbH *2
H. K. Electronik und Musik GmbH *2(Manufacture and sale of fruit wines)

Union Eiga Co., Ltd.

Maruhagi Yoshu Kogyo, Co., Ltd.

9 other companies

Sale and rental of merchandise and products(Notes)Operation of karaoke cabins

1. *1 indicates companies in dormancy.
2. *2 indicates companies that are now being liquidated.
3. *3 indicates companies was established in this fiscal year.

2

Provision of services

DAIICHIKOSHO

CO.,

LTD.

1. Management policy(1) Basic management policy
The Daiichikosho group has adopted the corporate principle of “greater music and service to theworld.” In managing its operations, its basic policy is “to promote musical culture throughkaraoke, and to provide places of pleasant and enjoyable communication.”
Toward this end, the group will be required to provide both karaoke equipment that suits users’
needs and an abundant and attractive range of karaoke software; karaoke cabins, where people
gather to enjoy karaoke, will also have to be further developed.
Building on the “know-how” and entertainment-related contents that we have accumulated todate, the goal will be to create companies capable of responding to the expectations of all of ourpersons concerned. We will accomplish this through the continued expansion of businesscentering on karaoke and through the generation of high rates of return.
(2) Basic policy on the distribution of profits
Our basic policy will be to maintain the long-term stability of our pay out while increasing
dividends to match profit growth. Retained earnings will be invested systematically into productdevelopment and operating assets.
(3) Medium-to-long-term management strategy
The goal of the Daiichikosho group is to become a new kind of service enterprise involved inmusic and information. Toward this end, it is expanding and enriching its karaoke-streaming
network, and developing new customer-oriented services.
(4) Measures for improvement of corporate management organizations
In last fiscal year, the Company introduced the corporate executive officer system. The goal of
the new system is an ability to cope quickly with a continually and severely changing operating
environment.
(5) Issues requiring action{1} Expanding a telecommunications network
The group will invest maximal efforts into increasing sales and rental income from theCompany’s “DAM” telecommunications product, with the aim of expanding the businessmodel in which revenues of sound delivery services are derived from acommunications-based karaoke network.
{2} Improving the profitability of karaoke-cabin business
The Company will aim to achieve an operating-profit ratio of 15%, by opening large-scale
karaoke stores while closing unprofitable stores.
{3} Reducing loss on satellite-broadcasting business
The Company uses the direct-broadcast-satellite provider, Sky PerfecTV, as its platform forbroadcasting programs via over television channels and 100 radio channels. Its goal will beto achieve breakeven in these operations at the earliest possible date through a dedicatedeffort to increase subscribers.

3

DAIICHIKOSHO

CO.,

LTD.

{4} Strengthening the foundations of music software business
The Company has added Music Software business to its operations through the acquisitionof two music-recording companies as subsidiaries. Its goal will be to increase synergies
between this new business and its karaoke operations by quickly enacting measures torebuild management and strengthen the operating foundations of these two companies.
(6) Target performance indicators
The Company’s target is to achieve an ROE of over 12% in the year to March 2005.
2. Results of operations and financial condition(1) Summary of Consolidated Financial Results for the Six-Month Period Ended September 30,2002{1} Results of operations
During the six-month period to September 2002, there ware bright signs for a while due to
expectations of special demand that the World Cup Soccer caused and increase in exports.
Meanwhile, due to anxiety about the future which were caused by a bad debt problem which
Japanese financial institution had and low stock prices, etc., the Japanese economy
continued to be sluggish and severer compared with the previous fiscal year.
In the karaoke industry, the operating environments continued to be also severe due toprolonged business stagnation. Selection simultaneously, amalgamation and partnership in
this industry progressed. And price competition became more intense.
Under these conditions, the Daiichikosho Group actively advanced the business in order toexpand the market share due to endeavor to increase the sale and rental of chiefly “cyber
DAM (DAM-G50)” which was main house brand and “Denmoku” into which various
title-search function and remote-control function were united, aiming to establish a
combined music business, which include karaoke cabin business, contents business, andmusic software business, in which a karaoke business centered
As a result, net sales increased by 34.9 % to 58,447 million yen in this interim period
compared with the previous interim period, as a result of adding music software business,
which was new business segment, to the Daiichikosho Group, and operating income
increased by 17.2 % to 5,960 million yen, and ordinary income increased 16.6 % to 5,460
million yen in this interim period compared with the previous interim period due to increasein sales which exceeded increase in selling and administrative expense. Although loss on
sales of investment securities was accounted for in extraordinary loss, net income increased
by 21.9 % to 2,325 million yen in this interim period compared with the previous interim
period.
Segment-related information (percentage changes, year-on-year)
Commercial karaoke business
Sales: 29,361 million yen (+12.3%)
Operating income: 4,893 million yen (+10.4%)
In this segment, the Daiichikosho Group sells and rents karaoke equipment and software,and provides karaoke-streaming service. Although the number of rental increased, rental
sales decreased a little due to decline in rents of karaoke equipment. But revenues fromproviding karaoke-streaming service increased, with the result that the number of
shipment increased by 34.5 % in this interim period compared with the previous interim

4

DAIICHIKOSHO

CO.,

LTD.

period. Accordingly, sales and operating income resulted in increase in this segment.
Karaoke cabin business
Sales: 11,170 million yen (+5.7%)
Operating income: 693 million yen (+39.7%)
In this segment, the Daiichikosho Group rents karaoke rooms on an hourly basis andprovides food and drink. The number of guest that had continued to decrease changed
over to increase in this interim period due to endeavor to provide high quality service.
As a result of closing 3 unprofitable stores and opening 1 large new store and 4 storesthat the Daiichikosho Group had bought from fellow trader, and especially, the strong
sales efforts made by existing stores, Sales and operating income resulted in increase inthis segment
Contents business
Sales: 5,054 million yen (+20.6%)
Operating income: 756 million yen (+36.6%)
In this segment, the Daiichikosho Group provides programs over 2 television and 100
radio channels via the direct-broadcast-satellite provider Sky PerfecTV. Regarding
service for personal use, although the number of subscription increased for a while due
to broadcast of the World Cup Soccer, it tended toward gradual decrease due to making
alteration to the programming last year. Regarding service for commercial use, thenumber of subscription increased firmly. The Daiichikosho Group also provides
customized ring tones for cellular phones. Under the condition that price competition
continued, the number of subscription increased firmly. Accordingly, sales andoperating income resulted in increase in this segment.
Music software business
Sales: 10,543 million yen
Operating income: 363 million yen
In this segment, the Daiichikosho Group produces and sells music and video software.
The Daiichikosho Group restructured Tokuma Japan Communications Co., Ltd. andNippon Crown Co., Ltd. due to strengthen the foundations of management. Meanwhile,
sales of Gackt’s CD albums that belonged to Nippon Crown Co., Ltd. and DVD of
Miyazaki’s Spirited Away that belonged to Tokuma Japan Communications Co., Ltd.
contributed greatly to profit. As a result, operating income in this segment improved
exceedingly.
Other business
Sales: 2,317 million yen (-3.5%)
Operating income: 290 million yen (-51.5%)
This segment is involved in real estate rentals, restaurants and other operations. Sales
decreased by 3.5 %, operating income decreased 51.5 % in this interim period comparedwith the previous interim period, mainly due to increase in selling, general andadministrative expenses.

5DAIICHIKOSHO

CO.,

LTD.

{2} Cash flows
Cash and cash equivalents decreased by 3,668 million yen to 20,019 million yen at the endof this interim period compared with the previous interim period, concerning decrease in
cash, mainly due to payments for acquisition of property, plant, and equipment, anddecrease in proceeds form short-term borrowings. Meanwhile, main causes of increase in
cash were that income before income taxes increased by 9.3% to 4,354 million yen in thisinterim period compared with the previous interim period, and that proceeds from long-termborrowings increased.
(Cash flows from operating activities)
Cash flows from operating activities resulted in increase in cash by 8,623 million yen in thisinterim period. Net cash provided by operating activities increased by 1,408 million yen inthis interim period compared with the previous interim period, mainly due to increase inincome before income taxes by 369 million yen, or 9.3%, increase in depreciation expenses
by 635 million yen, and increase in trade payables by 409 million yen in this interim period
compared with the previous interim period.
(Cash flows from investing activities)
Cash flows from investing activities resulted in decrease in cash by 5,943 million yen in thisinterim period. Net cash used in investing activities decreased by 1,264 million yen in thisinterim period compared with the previous interim period. Main causes of decrease in cash
were that payments for acquisition of property, plant, and equipment decreased by 1,396
million yen, and that proceeds from sales of investment securities decreased by 900 million
yen in this interim period compared with the previous interim period.
(Cash flows from financing activities)
Cash flows from financing activities resulted in decrease in cash by 2,978 million yen in thisinterim period. Net cash used in financing activities decreased by 1,915 million yen in thisinterim period compared with the previous interim period. Main causes of decrease in cash
were that proceeds from long-term borrowings decreased by 3,805 million yen, and thatpayments for long-term borrowings decreased by 1,099 million yen and that payments forpurchase of treasury stock decreased by 635 million yen in this interim period comparedwith the previous interim period. Meanwhile, cause of increase in cash was that proceedsfrom long-term borrowings increased 4,298 million yen in this interim period comparedwith the previous interim period.

6

DAIICHIKOSHO

CO.,

LTD.

(2) Forecasts for the full year to March 2003
Prospect of increase in production that increase in exports caused are weak. And by reason ofsevere employment conditions, consumer spending will remain sluggish.
In the karaoke industry, the operating environments will be severe in the same way. Under thecondition that cannot be expected the market size to spread, selection in this industry will be
progressing.
Under these conditions, the Daiichikosho Group will advance improvement and differentiationof house brands, and enrichment of our service in order to strengthen the position of market
leader and to expand the Daiichikosho Group’s market share besides. Due to introduction of
new house brand “New cyber DAM (DAM-G50Ⅱ)” in October, 2002 that was enriched in
respect of visual contents and musical pieces and that was superior in sound, quality andpromise to the former. In the second half of the year, the Daiichikosho Group is aiming toachieve much the same shipment as the first half of the year.
The Daiichikosho Group will endeavor to improve the profitability in the karaoke cabin
business and especially in the satellite broadcasting operation that belongs to the contentsbusiness, and to expand sales and profits in the e-businesses operation that belongs to thecontents business due to effective sales promotion, and to strengthen force of sales and to
improve the efficiency of that work in the music software business due to transferring sales
departments of Tokuma Japan Communications Co., Ltd. and Nippon Crown Co., Ltd. that are
subsidiaries to First Distribution Co., Ltd. that was newly established.
Due to fulfilling the preceding measures, the Daiichikosho Group is aiming to achieve net salesof 114.0 billion yen, ordinary profit of 10.3 billion yen, and net income of 4.6 billion yen for the
fiscal year to March 2003.

7

DAIICHIKOSHO

CO.,

LTD.

Consolidated balance sheets
September30
2002

Millions of yen%

September30
2001%

March312002

38.8

22,11014,740
9
7,376
1,194
4,219
(1,400)48,25036.5

11,924
7,208
10,04017,054
1,849
48,077

4.4

1,336
6,811
8,148

%

Year-on-yearchange

36.8

(612)
392
0
(358)
( 67)
(271)
86
(830)

36.7

(793)
928
438
( 12)
( 46)
514

6.2

(435)
273
(161)

Current assets
Cash and deposits
Trade notes and accounts receivable - total
Marketable securities
Inventories
Deferred income taxes
Other current assets
Allowance for doubtful accounts

21,497
15,132
10
7,018
1,126
3,947
(1,313)47,41926,293
13,566
11
6,458
1,604
4,051
(1,042)
36.9

Fixed assets
Property, plant and equipment
Buildings and structures
Karaoke equipment for rental
Karaoke-cabin facilities
Land
Other property, plant and equipment

11,1308,137
10,47817,042
1,802
48,592Intangible fixed assets
Consolidation adjustments account
Other intangible fixed assets
Investments and other assets
Investments in securities
Long-term loans
Deferred income taxes
Deferred income taxes arisingrevaluation
Leasehold deposits
Other investments and other assets
Allowance for doubtful accounts
Total fixed assets
Total assets

900
7,085
7,986

from

37.8

12,1597,028
9,729
17,078
1,952
47,948

6.2

−
5,848
5,848

2,878
3,631
2,011

5,019
4,122
2,220

4,337
3,816
2,038

(1,459)
(185)
( 27)

2,251

2251

2,251

−

12,0595,159(3,479)19.1
24,513
63.1
81,092
128,511 100.0811,465
5,009(3,480)26,60820.3
80,40561.2
131.348 100.0

12,312
5,204(3,363)
26,599 20.3
82,825 63.2
131,075 100.0

(252)
( 44)
(116)
(2,086)(1,733)(2,564)DAIICHIKOSHOMillions of yen

September30
2002

CO.,

LTD.

%

September30
2001%

March31
2002

30.9

6,306
24,263
4,407
1,888
1,110
887
2,525
41,388%Year-on-yearchange31.5

7,697
23,135
5,871
2,593
1,080
869
2,966
44,21333.7

29(3,230)
(306)
(524)
15
(37)
(403)
(4,457)

15,79015,463
249
2,394
1,362
1,145
36.406
77,795

27.7
59.2

14,30016,404
249
2,642
−
1,182
34,77878,992

26.5
60.2(1,650)
3,127
−
(2)
−
85
1,560
(2,896)

Current liabilities
Trade notes and accounts payable - total
Short-term borrowings - total
Accounts payable - other
Income taxes payable
Allowance for bonuses
Unrealized profit on installment sales
Other current liabilities

7,727
19,904
5,564
2,069
1,095
832
2,562
39,756Long-term liabilities
Convertible bonds
Long-term borrowings
Deferred income taxes
Allowance for retirement benefits
Consolidation adjustments account
Other long-term liabilities
Total liabilities

Minority interest inconsolidated subsidiaries
Shareholders' equity

12,65019,531
249
2,640
−
1,267
36,33976,095

28.3

1,559

1.2

4.625

3.5

2,169

1.7

(609)

Common stock
Capital reserve
Unrealized gains or losses on land
revaluation
Consolidated earned surplus
Net unrealized gains on other securities
Translation adjustments
Less: treasury stock

−
−

−
−

12,34824,0009.4
18.3

12,34824,0009.4
18.3(12,348)(24,000)−−(25,419) (19.4)(25,189) (19.2)

25,189

−
−
−
−

−
−
−
−

38,558
(678)
121
(3)

29.4
(0.5)
0.1
(0.0)

38,889
(352)
233
(15)

29.7
(0.3)
0.2
(0.0)

(38,889)
352
(233)
15

Common stock
Capital surplus
Retained earnings
Unrealized gains or losses on land
revaluation
Net unrealized gains on other securities
Translation adjustments
Less: treasury stock
Total shareholders’ equity
Total liabilities, minority interests andshareholders' equity

12,34824,00040,450

9.6
18.7
31.5

−
−
−

−
−
−

−
−
−

−
−
−

12,34824,00040,450(25,189) (19.6)

−

−

−

−

(25,189)−−−
48,928

−
−
−
37.3

−
−
−
49,914

−
−
−
38.1

(240)
155
(668)
942

131,075 100.0(2,564)

(240)
155
(668)
50,856

(0.2)
0.1
(0.5)
39.6

128,511 100.0

9131,348 100.0

DAIICHIKOSHO

CO.,

LTD.

Consolidated statements of income
Millions of yen

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
Non operating income
Interest and dividend income
Profit on retirement of convertible bonds
Interest in profit of investment partnerships
Amortization of consolidated adjustments
Other non operating income
Non operating expenses
Interest expenses
Provision for allowance for doubtful
accounts
Loss on disposal of inventories
Loss on valuation of inventories
Equity in loss of affiliates
Other non operating expenses
Ordinary income
Extraordinary gain
Reversal of allowance for doubtful accounts
Gain on sales of investment securities
Gain on sales of fixed assets
Extraordinary loss
Loss on disposal of fixed assets
Loss on sales of investment securities
Loss on valuation of investment securities
Directors' retirement allowances
Loss on valuation of memberships in leisurefacilities
Income before income taxes and minority
interest
in consolidated subsidiaries
Income taxes - current
Income taxes - deferred
Minority interest in income(loss) ofconsolidated subsidiaries
Net income

September30
2002%

58,447 100.0
34,21558.5
24,231
41.5

September30
2001%

43,313 100.0
24,372
56.3
18,94043.7

March312002%

Year-on-yearchange98,591 100.0
55,71056.5
42,880
43.5

134.9
140.4
127.9

129

138

269

92

49

162

37
24,268

0.0
41.5

89
19,029

0.2
43.9

106
42,987

0.1
43.6

41.7
127.5

18,30731.3

13,94332.2

33,478

34.0

131.3

5,960

10.2

5,086

11.7

9,508

9.6

117.2

1.8

355
13
24
69
415
877

2.0

685
41
−
−
961
1,688

1.7

118.0

331
36
−
−
668
1,035
345

352

707

149

203

410

182
606
−
252
1,536
5,460

2.6
9.4

182
152
103
287
1,282
4,681

2.9
10.8

654
398
103
475
2,749
8,447

2.7
8.6

119.8
116.6

0.1

17
488
−
506

1.2

50
532
4
588

0.6

9.8

20
13
16
49
201
767
65
119

446
−
495
260

704
−
1,036
498

−

−

17

1,155

2.0

1,202

2.8

2,256

2.3

96.1

4,354

7.5

3,985

9.2

6,779

6.9

109.3

1,966
14
1,980

3.4

1,753
201
1,954

4.5

3,515
97
3,613

3.7

101.3

48

0.1

121

0.3

(138)

(0.1)

39.8

2,325

4.0

1,908

4.4

3,304

3.3

121.9

10

DAIICHIKOSHO

CO.,

LTD.

Consolidated statements of retained earnings
Millions of yen

Consolidated earned surplus at beginning of period
Decreases in consolidated earned surplus
Dividends
Bonuses to directors and corporate auditors
Disposition of unrealized gains or losses on
valuation
Retirement of treasury stock
Decrease due to merger of consolidated subsidiaries
Net income
Consolidated earned surplus at end of period

September30
2002

September30
2001

March312002−

37,78237,782

−
−

656
88

656
88

−

11

241

−
−
−
−
−

−
375
1,131
1,908
38,558

836
375
2,197
3,304
38,889(Capital surplus)
Capital surplus at beginning of period

24,000−−Capital surplus at end of period

24,000−−38,889

−

−

2,325

−

−

658
105

−
−

−
−

764

−

−

40,450−−(Retained earnings)
Retained earnings at beginning of period
Increases in retained earnings
Net income
Decreases in retained earnings
Dividends
Bonuses to directors and corporate auditors
Retained earnings at end of period

11

DAIICHIKOSHO

CO.,

LTD.

Consolidated statements of cash flows
Millions of yen
Cash flows from operating activities
Income before income taxes and minority interest inconsolidated subsidiaries
Depreciation expenses
Increase in allowance for doubtful accounts
Interest and dividend income
Profit (Loss) on retirement of convertible bonds
Gain (Loss) on sales of investment securities
Interest in profit (Loss) of investment partnerships
Interest expenses
Loss on disposal of fixed assets
Loss on valuation of investment securities
Increase (Decrease) in trade receivables
Increase (Decrease) in trade payables
OthersSubtotalInterest and dividends received
Interest paid
Income taxes paid

Net cash provided by operating activities

September30
2002

September30
2001

March31
2002

4,354

3,985

6,779

5,203
34
(331)
(36)
754
69
345
185
65
(408)
436
425
11,099337(322)(2,490)
8,623

4,568
233
(355)
(13)
(488)
(24)
352
446
495
80
27
(178)
9,128
365
(364)
(1,914)
7,215

10,262
926
(685)
(41)
(532)
31
707
699
1,053
412
(834)
(675)
18,103679(731)(3,241)
14,810(623)
937(1,590)
1,912−(5,406)482(2,120)
(381)
462
(306)
(688)
1,017
(215)
579
319
(5,943)100(4,009)27(1,984)(1,118)
1,362
(56)
(331)
441
(228)
1,021
(226)
(4,678)(1,787)2,823
101(8,774)388(4,235)(1,340)2,466(779)(1,125)
1,193(1,230)891
200(11,206)(3,166)
10,302(7,164)(1,613)
(658)
(653)
(24)
(2,978)639
6,004(6,065)(1,046)
(647)
(17)
71
(1,062)444
12,649(14,777)(2,508)
(652)
(865)
71
(5,638)

0

(17)

11

(298)
20,317

1,456
21,4990(2,022)
21,499

−

731

839

20,01923,687

20,317

Cash flows from investing activities
Increase in time deposits
Proceeds from decrease in time deposits
Payments for purchase of marketable securities
Proceeds from sales of marketable securities
Payments for acquisition of tangible fixed assets
Proceeds from sales of tangible fixed assets
Payments for acquisition of intangible fixed assets
Payments for purchase of investment securities
Proceeds from sales of investment securities
Payments for acquisition of subsidiary's capital
Payments for loans
Proceeds from collection of loans
Payments of leasehold deposits
Proceeds from repayments of leasehold deposits

OthersNet cash used in investing activities
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Proceeds from origination of long-term borrowings
Payments for repayment of long-term borrowings
Payments for retirement of convertible bonds
Dividends paid
Payments for purchase of treasury stock
OthersNet 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
Increase in cash and cash equivalents due to increase in
number of newly consolidated subsidiaries

Cash and cash equivalents at end of period

12

DAIICHIKOSHO

CO.,

LTD.

Assumptions underlying preparation of consolidated financial statements
Item

Assumptions underlying preparation of consolidated financial statements

1. Item relating to scope of
consolidation(1) Number of consolidated subsidiaries: 38(2) Names of major non consolidated subsidiaries:
Because of the small size of their operations, Union Eiga Co., Ltd., Crown MusicEnterprise Co., Ltd. and Zoom Republic have been excluded from consolidation on the
grounds of lack of materiality(1) Affiliate accounted for by the equity method: None
(2) Affiliate not accounted for by the equity method:
Because of its small impact on profits, Union Eiga Co., Ltd., Crown Music EnterpriseCo., Ltd. and Zoom Republic have not been consolidated under the equity method on
the grounds of lack of materiality

2. Item relating toapplication of the equity
method3. Item relating to the fiscal
years of subsidiaries

4. Items related toaccounting standards

The following consolidated subsidiaries have fiscal-year ends that differ from that of thereporting company. In preparing the consolidated financial statements, the Company used
the financial statements prepared by these subsidiaries as of their respective year-end
dates. In the event that an important transaction occurs between the year-end dates andthe date of consolidated closing, the Company makes the necessary adjustments forpurposes of consolidation.
Companies with December 31 year-ends: Shanghai Sogei Ongaku Goraku Co., Ltd.;
Saha Daiichi Kosho Co., Ltd.
Companies with March 20 year-ends: Nippon Crown Co., Ltd.; Tokuma Japan
Communications(1) Standards and methods of valuation for important assets{1} Marketable and investment securities
Bonds held to maturity: cost amortization method (straight line)
Other securities:
Quoted securities: market value method, based on market prices etc.
Unquoted securities: valued at cost using the moving average method{2} Inventories
Valued at cost, using the moving average method(2) Depreciable assets and methods of depreciation{1} Tangible fixed assets: declining-balance method (certain buildings, however, aredepreciated on a straight-line basis){2} Intangible fixed assets: straight-line method(3) Standards for important allowances{1} Allowance for doubtful accounts: allowance recognized on the basis of a statutory
deduction ratio{2} Reserve for bonuses: estimated-payment standard{3} Reserve for employees' retirement benefits: amounts based on retirement-benefit
liabilities and estimated pension assets as of the end of the fiscal year(4) Standard for converting foreign currency-denominated assets and liabilities
Foreign currency-denominated assets and liabilities are converted into yen at market
rates on the day of the closing of accounts, with any gains or losses from conversion
recognized on the income statement. Any gains or losses resulting from theconversion at current market rates of assets, liabilities, revenues or expenses ofoverseas subsidiaries etc. are debited or credited to the foreign currency adjustment
account of the shareholders’ equity section of the balance sheet.
(5) Accounting for significant lease transactions
Financing leases are treated as ordinary rental transactions(6) Hedge accounting methods
The Company hedges against risks of interest rate fluctuations by engaging in interest
rate swap transactions(7) Others{1} Accounting for installment sales: profits on installment sales are deferred{2} Accounting for consumption taxes: tax-exclusion method

13

DAIICHIKOSHO

CO.,

LTD.

Item

Assumptions underlying preparation of consolidated financial statements

5. Amortization of
consolidated adjustment
account
6. Scope of funds in the
consolidated statement ofcash flow

Amortized in equal installments over a 5 or 15 years period

Funds are defined as cash on hand, readily withdrawable deposits, and short-term
investments with maturities of less than three months from date of purchase

Notes(Consolidated balance sheet-related)
Millions of yen

1. Aggregate amount of depreciation on fixed assets
2. Guarantee liabilities
3. Assets provided as collateral
Secured liabilities

14

September30
2002

September30
2001

March31
2002

49,856
1,192
22,154
22,41350,484
1,684
22,49919,80350,716
1,329
22,55021,271DAIICHIKOSHO

CO.,

LTD.

Segment information
Segment information by business category
Commercial
karaokebusiness

Karaokecabin
business

Contents
businessMusicsoftwarebusiness

Otherbusiness

Total

Sales
External customer sales
Intersegment transactions
and eliminations

29,36173

11,170−5,054−

10,543
124

2,317
226

58,447
424

−
(424)

58,447−

Total
Operating expenses
Operating income

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

Commercial
karaokebusiness

Karaokecabin
business

Contents
business

Otherbusiness

Total

Eliminations

Consolidated

Sales
External customer sales
Intersegment transactions
and eliminations

26,14876

10,570
−

4,192
−

2,401
169

43,313
245

−
(245)

43,313−

Total
Operating expenses
Operating income

26,225
21,794
4,430

10,57010,073
496

4,192
3,638
553

2,571
1,972
598

43,55837,478
6,080

(245)
747
(993)

43,31338,226
5,086

Millions of yen
September 30, 2002

Millions of yen

Eliminations Consolidated

September 30, 2001

Commercial
karaokebusiness

Karaokecabin
business

Contents
businessMusicsoftwarebusiness

Otherbusiness

Total

Sales
External customer sales
Intersegment transactions
and eliminations

53,745
149

21,980
−

9,097
−

9,109
108

4,658
392

98,591
651

−
(651)

98,591−

Total
Operating expenses
Operating income

53,89545,4948,400

21,98020,557
1,423

9,097
7,835
1,262

9,218
9,550
(332)

5,051
4,355
696

99,242
87,792
11,449(651)
1,290(1,941)

98,591
89,082
9,508

Millions of yen
March 31, 2002

Eliminations Consolidated

Segment-related businesses
1. Commercial karaoke businessIn this segment the group sells and rents karaoke equipment and karaoke software, and provides
karaoke streaming services for telecommunications-based systems.
2. Karaoke cabin businessIn this segment the group rents karaoke cabins on an hourly basis and provides food and drink.
3. Contents businessIn the area of e-business division, the Company distributes customized ring tones to users ofcellular phones, while in the area of satellite broadcasting division, it uses the
direct-broadcast-satellite provider, Sky PerfecTV, as a platform for broadcasting programs over
two television channels and 100 radio channels.
4. Music software businessIn this segment, the Company produces and sells software for music and video.
5. Other business
Other operations include a real estate rental operation, restaurants and other activities.

15

DAIICHIKOSHO

CO.,

LTD.

Non consolidated balance sheets
Millions of yen

September30
2002%

September30
2001

30.2

14,878
1,819
6,049
3,725
728
2,022
(622)
28,600

27.4
8.1

5,462
2,614
5,987
6,039
1,328
21,432
5,243%

March31
2002

36.0

9,043
2,058
6,160
4,698
698
1,994
(525)
24,128

27.0
6.6

5,279
2,656
6,065
6,051
1,272
21,324
6,204%

Year-on-yearchange

29.6

(803)
30
497
(597)
(91)
1,155
(20)
170

26.2
7.6

(185)
484
381
−
37
717
254

Current assets
Cash and deposits
Trade notes receivable
Trade accounts receivable
Inventories
Deferred income taxes
Other current assets
Allowance for doubtful accounts

8,240
2,088
6,657
4,101
606
3,150
(545)
24,298Fixed assets
Property, plant and equipment
Buildings
Karaoke equipment for rental
Karaoke-cabin facilities
Land
Other property, plant and equipment
Intangible fixed assets
Investments and other assets
Investment in securities
Capital stock of affiliated companies
Long-term loans
Deferred income taxes
Deferred Income taxes arising fromrevaluation
Deposits and guarantee money
Other investments and other assets
Allowance for doubtful accounts
Total fixed assets
Total assets

5,093
3,140
6,446
6,051
1,309
22,041
6,459
1,921
8,112
6,249
523

4,385
3,143
5,832
789

3,376
7,857
7,067
592

(1,454)
255
(818)
(68)

2,251

2,251

2,251

−

9,141
3,844
(4,485)27,55834.3
56,06069.8
80,358 100.0

8,573
3,701
(4,471)
24,20730.4
50,88364.0
79,483 100.0

9,233
3,819
(4,395)29,802
36.6
57,331
70.4
81,459 100.0

16

(92)
25
(90)
(2,243)(1,271)(1,101)DAIICHIKOSHO

Years ended March 31; Millions of yen

September30
2002

CO.,

LTD.

%

September30
2001%

March312002%

Year-on-yearchange

20.8

3,104
2,422
2,923
2,878
3,192
1,177
661
792
17,153

21.9

3,152
1,938
4,321
2,467
4,530
1,423
665
819
19,31823.7(1,217)462(1,811)
594
(506)
(395)
(10)
251
(2,632)

12,650
7,135
953
410
21,14937,83626.3
47.1

15,790
3,198
914
386
20,28837,44125.5
47.1

14,300
4,176
959
390
19,82639,14524.3
48.0(1,650)
2,958
(5)
20
1,323
(1,308)

−
−
−

−
−
−

12,34824,000
485

15.5
30.2
0.6

12,34824,000
485

15.1
29.5
0.6

(12,348)(24,000)
(485)

−

−

(25,419) (32.0)(25,189) (30.9)

25,189−29,45029,450(29,450)

−

1,854

1,586

(1,586)

Current liabilities
Notes payable - trade
Accounts payable - trade
Short-term borrowings
Current portion of long-term borrowings
Accounts payable – other
Income taxes payable
Allowance for bonuses
Other current liabilities

1,935
2,401
2,510
3,061
4,023
1,028
655
1,070
16,686Long-term liabilities
Convertible bonds
Long-term borrowings
Allowance for retirement benefits
Other long-term liabilities
Total liabilities

Shareholders' equity
Common stock
Capital reserve
Legal reserves
Unrealized gains or losses on land
revaluation
Other surplus
Retained earnings
Unappropriated retained earnings at endof period
Other surplus subtotal
Net unrealized gains on other securities
Less: treasury stock
Common stock
Capital surplus
Capital reserve
Other capital surplus
Capital surplus subtotal
Earned surplus
Retained earnings
Unappropriated retained earnings at endof period
Earned surplus subtotal
Unrealized gains or losses on land
revaluation
Net unrealized gains on other securities
Less: treasury stock
Total shareholders’ equity
Total liabilities and shareholders' equity

−
−
−

−
−
−

31,304
(678)
(3)

39.4
(0.8)
(0.0)

31,036
(352)
(15)

38.1
(0.4)
(0.0)

(31,036)351
15

12,348

15.4

−

−

−

−

12,348

−

−
−
−

−

4,000
20,00024,0004,000
20,00024,000−−−29,750−−29,750

2,519

−

−

2,519

40.1

−

−

−

−

32,269(25,189) (31.4)

−

−

−

−

(25,189)−−−−
42,314 52.0
81,459 100.0

(237)
(668)
207
(1,101)

32,269(237) (0.3)(668) (0.8)
42,52252.9
80,358 100.0

17

−
−
−
−
42,041
52.9
79,483 100.0

DAIICHIKOSHO

CO.,

LTD.

Non consolidated statements of income
Millions of yen

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
Non operating income
Interest and dividend income
Profit on retirement of convertible bonds
Fee and commission received
Other non operating income
Non operating expenses
Interest expenses
Provision for allowance for doubtful
accounts
Loss on disposal of inventories
Loss on valuation of inventories
Other non operating expenses
Ordinary income
Extraordinary gain
Reversal of allowance for doubtful accounts
Gain on sales of investment securities
Gain on sales of fixed assets
Extraordinary loss
Loss on sales and disposal of fixed assets
Loss on sales of investment securities
Loss on valuation of investment securities
Valuation loss on shares in affiliates
Directors' retirement allowances
Loss on valuation of membership in leisurefacilities
Income before income taxes
Income taxes – current
Income taxes – deferred
Net income
Reversal of legal reserve
Unappropriated retained earnings brought
forward
Disposition of unrealized gains or losses on
valuation
Retirement of treasury stock

September30
2002%

35,879 100.0
22,70963.3
13,16936.7

September30
2001%

31,433 100.0
19,611
62.4
11,822
37.6

March312002%

Year-on-yearchange (%)

65,489 100.0
40,87762.4
24,611
37.6

114.1
115.8
111.4

114

63

108

116

113

243

(2)
13,167

(0.0)
36.7

(50)
11,772

(0.2)
37.4

(135)
24,475

(0.2)
37.4

4.7
111.9

9,837

27.4

8,553

27.2

18,583

28.4

115.0

3,330

9.3

3,219

10.2

5,892

9.0

103.4

2.0

172
13
62
197
445

1.4

277
41
148
406
873

1.3

162.8

406
36
67
214
724
121

104

215

7

196

404

32
37
146
345
3,709

1.0
10.3

175
152
201
830
2,833

2.6
9.0

202
280
331
1,434
5,332

2.2
8.1

41.5
130.9

0.1

31
488
−
520

1.7

53
488
4
546

0.9

6.4

2.5
6.5

139.3
100.9

3.4
3.1

84.0
117.6

20
13
−
33
83
767
64
300
83

303
－
491
－
137

467
－
1,018
－
137

－

－

10

1,299
2,444
929
77
1,007
1,436
485

3.6
6.8

2.8
4.0

932
2,421
1,006
193
1,200
1,221
－

3.0
7.7

3.8
3.9

1,634
4,244
2,036
188
2,224
2,019
－

598

644

644

－

(11)

(241)

－

－

836

18

DAIICHIKOSHOUnappropriated retained earnings

CO.,

LTD.

2,519

1,854

1,586

Important accounting policies
Item

Accounting policies

1. Methods of valuation formarketable and investment
securities(1) Shares in subsidiaries and affiliated companies: valued at cost using the moving
average method(2) Other securities:
Quoted securities: market value method, based on market prices etc.
Unquoted securities: valued at cost using the moving average method(1) Merchandise and finished goods: valued at cost, using the moving averagemethod(2) Work in process: valued at cost, using the specific identification method

2. Methods of valuation forInventories
3. Depreciable assets andmethods of depreciation(1) Tangible fixed assets: declining-balance method (certain buildings, however, aredepreciated on a straight-line basis)(2) Intangible fixed assets: straight-line method

4. Standards for important
allowances(1) Allowance for doubtful accounts: allowance recognized on the basis of a statutory
deduction ratio(2) Reserve for bonuses: estimated-payment standard(3) Reserve for employees' retirement benefits: amounts based on retirement-benefit
liabilities and estimated pension assets as of the end of the fiscal year

5. Accounting for significant
lease transactions
6. Accounting for installment
sales
7. Accounting for
consumption taxes

Financing leases are treated as ordinary rental transactions
Profits on installment sales are deferred
Tax-exclusion method

Notes(Non consolidated balance sheet-related)
Millions of yen

1. Aggregate amount of depreciation on fixed assets
2. Guarantee liabilities
3. Assets provided as collateral
Secured liabilities

19

September30
2002

September30
2001

March312002

23,401
5,810
4,357
6,705

23,221
8,563
4,602
5,513

23,520
6,624
4,505
5,482