ADK Annual Report 2012
Year ended December 31, 2012

ADK Profile

History

ASATSU-DK INC., commonly known by its initials ADK, was1956

founded in March 1956 by Masao Inagaki as a small, ambitious
firm focusing on magazine advertising. ASATSU INC., as it was
known at the time, quickly built up a solid client base, primarily

advertising agency operations
1987

Tokyo Stock Exchange (TSE)As Japan entered the high-growth years of the 1960s,
and production of animation programs for the then still-new
medium of television. In 1987, it was listed on the Second

1990

Elevated to First Section of the TSE

1998

Establishes strategic business alliance andcapital tie-up with WPP Group plc.

Section of the Tokyo Stock Exchange (TSE), becoming the first
advertising agency in Japan to make a public stock offering.
The company listed on the First Section of the TSE in 1990.
In 1998, it made another major move, signing a reciprocal
share agreement and strategic alliance with WPP, the world’s
largest marketing organization.*
The following year, the company merged with DaiIchi Kikaku Co., Ltd., another Top 10 Japanese agency,changed its name to ASATSU-DK INC. (ADK), and entered aperiod of renewed growth. Now it is Japan’s third largest
total communications service agency and 16th largest
communications service group in the world.*
Since its foundation, it has steadily expanded its
operations based on an unwavering commitment to the“Management by All” philosophy. This means every employee
in the ADK Group is expected to embrace a management-level
perspective and approach client needs proactively.
* Advertising Age, April, 2013

1

Becomes first advertising company to list
its shares on the Second Section of thein the financial sector, giving it a strong foundation for growth.
ASATSU Inc. broadened its creative reach to include planning

ASATSU (now ASATSU-DK) commenced

1999

ASATSU-DK Inc. formed through the mergerof ASATSU Inc. and Dai-ichi Kikaku Co.,Ltd.

Contents
Business at a Glance............................................................. 2
To Our Stakeholders ............................................................. 4
Top Interview: “New ADK Vision” ................................... 6
Corporate Social Responsibility......................................10
Corporate Governance ......................................................12
Board of Directors and Auditors ...................................18
Financial Section..................................................................19
Securities Holdings..............................................................66
Investor Information...........................................................67
ADK Group Network............................................................682

Business at a Glance
Consolidated Five-Year Summary
Thousands of
U.S. Dollars

Millions of Yen

2012

2011

2010

2009

2008

2012

Income Statement Data
Gross billings¥350,822¥347,112¥346,565¥350,211¥399,452$4,052,002

Gross profit

46,16945,83642,02841,36749,143533,254

Selling, generaland administrative expenses

42,993

41,98342,00642,12345,444

496,573

Operating income (loss)

3,176

3,853

22

(756)

3,699

36,681

Income (loss) before income taxes
and minority interests

4,069

5,028

(4,749)

343

3,775

46,999Net income (loss)

2,781

2,294

(4,656)73

2,125

32,124

EBITDA*

¥

4,517

¥

4,828

¥

810

¥

187

¥

4,502

$

52,172*EBITDA = Operating income + Depreciation/Amortization + Amortization of negative goodwill

Balance Sheet Data

Thousands of
U.S. Dollars

Millions of Yen

Total assets¥195,163¥184,188¥ 194,510¥190,024¥191,782$2,254,137

Total net assets*

109,559

96,800103,168

107,465

101,6171,265,415

Total long-term liabilities

10,055

5,278

7,467

4,765

2,611

116,137* Total net assets consists of Shareholder’s equity, valuation and translation adjustments, and minority interests.

Per Common Share Data (Yen and U.S. Dollars)
Net income (loss) per share (EPS)Dividend per share
Book value per share
No. of common shares outstanding*

¥

65.83

¥ 5 4.37¥ (110.28)

¥

1.73

¥

48.14

111

109

20

20

20

1.28

2,270.23

2,423.06

2,499.05

2,334.48

29.64

42,274,851

42,213,802 42,165,296 42,585,533 43,088,073

Financial Ratios
AS PERCENT OF GROSS BILLINGS
Gross profit

13.16%

13.21%

12.13%

11.81%

12.30%

SG&A expenses

12.25

12.10

12.12

12.03

11.38

Operating income (loss)

0.91

1.11

0.01

(0.22)

0.93

Income (loss) before income taxes
and minority interests

1.16

1.45

(1.37)

0.10

0.94

Net income (loss)

0.79

0.66

(1.34)

0.02

0.53

Operating income (loss)

6.9%

8.4%

AS PERCENT OF GROSS PROFIT
0.1%(1.8)%

7.5%

Staff cost

62.5

61.8

67.3

67.0

62.4

Return on equity

2.7

2.3

(4.5)

0.1

1.8

Return on assets

1.6

2.1

0.01

(0.4)

1.9

Equity ratio*

55.6

52.0

52.5

56.0

52.4

Current ratio

1.65×

1.55×

1.52×

1.57×

1.50 ×

Notes:
1. ROE = Net income ÷ Average total Shareholders' Equity based on Total Shareholders' Equity at the beginning and end of the fiscal year × 100
2. ROA = Operating Income ÷ Average Total Assets based on Total Assets at the beginning and end of the fiscal year × 100
3. Equity ratio, according to TSE formulas, equals book equity (excluding Minority interest and Subscription rights to shares) divided by book total assets.

*For convenience purposes, U.S. dollar amounts are converted from Japanese yen at the rate of ¥86.58=US$1, the approximate rate of exchange as of December 31, 2012.

Business at a Glance

0.76

2,567.03*Does not include treasury stock. In addition, ADK set up an Employee Stock ownership Plan(ESOP) trust in fiscal 2010 (see page 44). Shares owned by the ESOP trust
were included in treasury stock at fiscal year-end.

2$

ADK Group■Japan(as of December. 2012)■China• Kyowa Kikaku Ltd.
• ADK International Inc.
• ADK Dialog Inc.
• ADK Arts Inc.
• Boys Inc.
• Eiken Co., Ltd.
NIHONBUNGEISHA Co., Ltd.
• ADK Digital Communications Inc.

■Asia

• Guangdong Guangxu (ASATSU)
Advertising Co., Ltd.*• ASATSU-DK HONG KONG LTD.
• DK ADVERTISING (HK) LTD.
• Asatsu Century (Shanghai)
Advertising Co., Ltd.
• Shanghai Asatsu Advertising Co., Ltd.

Taiwan• ASATSU-DK SINGAPORE PTE. LTD.
• ADK Thai Holding Ltd.
• DAI-ICHI KIKAKU ( THAILAND) CO., LTD.
• ASDIK Ltd.
• ASATSU ( THAILAND) CO., LTD.
• ASATSU-DK Malaysia Sdn. Bhd.

■Europe• Asatsu Europe Holding BV• Asatsu Europe BV• Asatsu (Deutschland) GmbH

• United-Asatsu International Ltd.
• DIK-OCEAN Advertising Co., Ltd.
• Advertising
Other business* Affiliates accounted for by equity method■North America• ADK America Inc.

Performance of ADK Group Breakdown by Area
Millions of Yen
Year on Year

FY2012ADK
Japan
Subsidiaries

Gross Billings

Gross Profit¥303,422¥32,8120.5%
52,56424.8%

Subsidiaries in Greater China

16,385

Asia

9,303

Europe and North America

3,699(Shanghai, Hong Kong, Taipei)(Thailand, Malaysia)(Germany, Netherlands, USA)

5.6%
6.3%
15.1%

-1.0%
8,462
0.0%
2,962

Operating Income¥1,341Net Income (Loss)¥1,543-22.6%-33.0%

284(97)-68.8%
1,006

–%
981

20.8%

37.0%

37.4%

1,745

446

497
34.7%

4.2%

27.0%

417

5

47

-10.2%-84.9%-15.3%

Total before Adjustment

385,376

46,401

3,084

2,972

(Adjustment)(34,553)

(232)

91

(191)

¥350,822¥46,169¥3,176¥2,781Total

ADK Annual Report 20123

Shinichi Ueno
Representative Director,
President & Group CEO

4

To Our Stakeholders

To Our Stakeholders

After the 58th general shareholders' meeting

which was affected significantly by the Great Easton March 28, 2013, the Board of Directors

Japan Earthquake. Afterward, however, the growthheld a meeting and elected Shinichi Ueno asrate slowed, and gross billings in the two-monthRepresentative Director, President and Group CEO,period of September and October fell short of theeffective the same day. With a new-generation

previous corresponding period. We believe that the

management team and a new organization

situation will remain unstable.

conducive to swift decision making, we will work
hard to advance the operations of the entire ADKGroup while responding to changes surrounding
the advertising industry.

Under these circumstances, the ADK Group sought
to provide communications programs emphasizing
maximization of return on investment (ROI) for its
advertising clients. At the same time, we actively

It is our pleasure to report on the ADK Group’s

advanced our operations in emerging markets andperformance in fiscal 2012 (January 1–December 31,

China, as well as in the animation content business.

2012).

For the year, the ADK Group reported gross billings

In the first half of the year, the Japanese economyof ¥350,822 million, up 1.1% from fiscal 2011. Grossfollowed a recovery trend, albeit moderate, mainly

profit remained mostly unchanged, edging up

owing to disaster restoration-related demand and0.7% to ¥46,169 million as we continued efforts tovarious government policies. In the second half,

meticulously control costs while striving to reduce

however, the economy weakened due to several

selling, general, and administrative (SG&A) expenses.

factors. These include a decline in exports stemming

Operating income declined 17.6% to ¥3,176 million.

from the economic slowdown overseas, especially

Other income decreased 24% to ¥893 million, mainly

among emerging nations, as well as the dissipation

because of again smaller on sales of securities andof domestic policy benefits and a pause in personal¥824 million of additional retirement benefits paid

consumption. Finally, toward the end of the year,

to employees in the ADK parent company.

positive expectations about the fiscal and monetary
policies of the new government added impetus to
the trends of a weakening yen and higher stock
prices, and some bright signs appeared as a result.
According to the Current Survey of Selected Service
Industries by the Ministry of Economy, Tradeand Industry, total gross billings in the Japanese
advertising industry in the three-month period fromMarch through May 2012 grew at more than 10%
compared with the previous corresponding period,

As a result, income before income taxes andminority interests declined 19.1% to ¥4,069 million,
and net income increased 21.3% to ¥2,781 million
because of smaller taxes.
We, the executives and employees of the ADKGroup, stand united in our quest to further reinforce
our corporate foundation in order to achievesustained and renewed growth. We look forward to
your ongoing support.
June 2013

ADK Annual Report 20125

Top Interview“New ADK Vision”
Broadening our market through the“consumer activation business”

Shinichi Ueno

President & Group CEO

6

Top Interview: “New ADK Vision”

The market is growing.

Q

After declining for four consecutive years
from 2008, advertising expenditures in Japan
finally turned upward in 2012. However, theyremain more than ¥1 trillion below the peak ofWhat should advertising companies
aspire to become in the future?

Q

What will you need in order to address
the growing market and create a
new business model?

¥7 trillion recorded in 2007. Isn’t the Japanese
advertising market shrinking?

In the past, the job of an advertising agency was toprovide clients with creative messages and quality

For a start, the term “Japanese advertising market” inmedia space. As a result, performance indicators used toitself is already removed from reality, I believe. Withevaluate the effectiveness of an advertisement—such as

the advancement of digital technologies, the domain ofrecognition percentages and favorability ratings—were far

the communications business is expanding. Corporations

apart from the ultimate results of the client’s business.

across all sectors are using huge volumes of information,

Nowadays, clients are demanding realistic outcomes. We

known as “big data,” to promote their businesses. Analysis

must face up to these demands and give clients exactly

and deployment of large amounts of consumer-related

what they want. Contributing to the client’s businessdata is also becoming important in their communications

performance should be the advertising company’s

activities. So any barriers separating the advertising

foremost aspiration. To achieve this, we must establish

business and the information sector seem to have alreadykey performance indicators (KPIs) in collaboration

disappeared.

with the client and devise ways to measure our results

The communications environment surrounding

against such KPIs. In addition to consumer attitudeconsumers is also changing. In addition to one-transformation—how the consumer’s impression wasway information flows characterized by mass-media

changed—we also need to gauge behavior transformation,

advertising, we have a situation in which consumers

namely, how the consumer was motivated to take action.

themselves become information transmitters and thus

At present, the ADK Group is developing ways to establish

have a major impact on the communications environment.

and measures KPIs.

To capture the hearts of consumers in this context, wemust complement traditional advertising methods bycreating new techniques.
The entertainment industry is also playing an
increasingly important role in the activities of advertising
agencies. At the same time, companies in the IT andentertainment sectors are entering the communications
domain. So we need to modify our traditional view of the“advertising market” and create the next business model.
In this perspective, I believe that our market is growing.

ADK Annual Report 20127

Consumer activation.

Q

however, we are faced with huge volumes of information,
also known as “big data.” There is an overflow of realtime information available pertaining to consumers,

Specifically, what kind of value can ADK

such as which Web sites they access, which buzzwords

deliver to its clients?

are appearing on social networking sites and at whatfrequency, and which products are in fashion and how

More than anything, we need to motivate the consumer.

well they are selling. We need a system that can analyze

With this in mind, we formulated a new vision with thethese huge volumes of data. And such analysis cruciallyslogan, “The Power of Action.” The slogan’s words haverequires the expertise of marketing and communications

two meanings: First, we take action, and second, we

professionals. Simply staring at data does not reveal

prompt consumers to take action. For now, I will explain

anything. It takes a professional with a keen marketingthe second meaning.

mind to properly read the data. At ADK, we serve as

The rapid advancement of information technologies

such professionals, combining many years of marketinghas caused a structural transformation of the market, theexperience with the big data available, to produce strategic

driving force of which is shifting from the brand to theinsights aimed at solving the problems of our clients.

consumer. To achieve positive outcomes in this situation,
we must not only emphasize “communication” (how to(how to motivate the consumer). ADK is seeking to2

become a company involved in the “consumer activation

Getting consumers to take action requires ideas. Our job

business.”

at ADK is to offer “The power idea” that motivate people

convey the brand’s message) but also focus on “activation”

The power idea:
Ideas that motivate consumers to take action

to act.

Q

With traditional advertising communications,

What are the key factors in

the marketing manager would devise a strategy, andmotivating consumers?

the creative expert would conceive the advertising
expression. The ad would then flow to the media andConsumer activation requires three strengths: “Strategic

be followed up by promotional activities. It was like ainsights,” “The power idea,” and “The power of action”

relay team made up of specialists. What we at ADK are
proffering, however, is a communications team in which

18Strategic insights:
Data analysis and insights for achieving KPIs

all members demonstrate their creativity. “The poweridea” should be shared across all disciplines—including
strategic formulation, media, and creative—to deliver “realUpon reaching an understanding of the client’s issues,

experiences” that motive consumers to take action andwe then set objectives. This requires advanced data

make purchases. More than just delivering a message,

analysis. Traditionally, there were two methods ofit means creating multidirectional “real experiences”

measuring advertising effectiveness, one using media

that serve as touchpoints between brand and consumer.

data and the other using consumer data. Essentially, we

Perhaps a good example is the animation content

would simulate how often a consumer would view anbusiness, an ADK strength. Here, we motivate consumers

advertisement based on which media forms are used andto take action in a number of ways, ranging from

how they are deployed. The advertising agency would use

animation conception to broadcasting, complemented bythis information to propose an optimal scenario. Today,

the development and promotion of character goods.

Top Interview: “New ADK Vision”

3

The power of action:
Rigorous hands-on approach and swift responses

Even the most exceptional strategies and ideas aremeaningless unless they can be implemented. Thisrequires a “passion to implement,” together with the ability

Profile of Shinichi Ueno
Born February 17, 1954, in Tochigi Prefecture in
the northern part of Japan’s Kanto District. Tochigi
features an abundance of beautiful scenery and ishome to Nikko, a popular tourist destination. Ueno

to act and move with speed. Without such elements, thegrew up watching the scenic winter colors of thepromised outcomes are impossible to achieve. ADK’s

Nikko Mountain Range, one of the best views evenstrengths lie in its hands-on approach and its ability
to implement and act with speed. We look for ways toin scenery-rich Japan. In senior high school, he waspassionate about soccer.
In 1972, Ueno entered Doshisha University incommunicate with all people associated with the point

the ancient capital of Kyoto. Doshisha Universityof sale, where our priority lies, and use our findings totraces its root back to 1875, with the establishment

identify themes that we can share with the client.
In addition to Japan, we are able to undertake
communications and sales promotional activities overseas
based on local insights. Our alliance with WPP Group is
one of our key strengths.

of the Doshisha Academy by Joseph Hardy
Neesima. Founded on Christian principles, theuniversity fosters a spirit of independence and selfreliance, and has produced numerous graduateswith a wealth of international perspectives.
Upon graduation in 1976, Ueno enteredASATSU INC. in April. In his fourth year, after

Our “direct business” involves activities directly

gaining some experience in personnel andlinked to the business performances of our clients. ADK

administrative affairs, he moved to the sales

already has a track record in such fields as cosmetics andhealth foods and supplements. We will also strengthen

section, where he spent the next 24 years until
the age of 50. During that time, he was responsible
for advertising and other services for prominent

our focus on customer relationship management (CRM)

Japanese corporations with top-level brands. In

services going forward.

2005, he became head of the Kansai Branch, which
was struggling at the time, and worked hard to turnaround that branch’s operations.

The growth drivers of the ADK Group are its ability to act
toward achieving growth (the ability to implement andtake action), as well as its ability to motivate consumers
to act. Here, we serve as a pioneer in the consumer
activation business.
With “The power of action” as our slogan, we will
deploy our strategic and creative abilities to build a new
ADK Group.

Since 2007, Ueno has been an operating officer
in charge of corporate affairs. In that role, heintroduced an evaluation system aimed at raising
employee motivation and strove to enhance cost
controls.
In 2008, he became an executive director
and operating officer, rising to senior operating
officer in 2012 and taking charge of the Integrated
Solution Center. Incorporating multiple functions—
including the creative, sales promotion, and digitalbusiness departments—the Integrated Solution
Center is key to ADK’s solution-based capabilities
as an advertising agency. Ueno worked to reformand reinforce the Center in response to thechanging communications market. On March 28,
2013, he became president & Group CEO.
Ueno has a wife and one daughter. His current
hobby is playing golf.

ADK Annual Report 20129

Corporate Social Responsibility
ADK’s basic policy is to take an active role inrealizing a sustainable society. Based on this policy,

Environment Protection

we have continued to pursue a range of corporate

Our environmental protection and other socialsocial responsibility (CSR) activities, with a renewed

contribution initiatives are promoted by the CSR

focus on:Committee, established in January 2008 under the directcontrol of the president.

1 Promoting risk management;
2 Demonstrating our commitment toinitiatives. For example, we developed, proposed, andenvironmental protection; andimplemented environmental advertising campaigns, took

3 Other social contribution activities that we havepursued over the years.

Risk Management
ADK’s risk management system, overseen by the Risk
Management Committee, consists of four specialist
subcommittees—the Compliance Committee, Information
Security Committee, Business Continuity Committee, andProcess Owner Committee—each of which handles its own
specific aspect of risk management. The subcommittees
also work to identify and minimize operational risks thatlie outside of their area of specialization.
The Compliance Committee is charged withestablishing legal compliance systems and operating
the in-house reporting system, called the “ADK Group
Helpline.” The Information Security Committee focuseson the secure management of various types of businessrelated data, including personal information. The BusinessContinuity Committee is responsible for taking measures
to ensure business continuity in the event of earthquakes
and other disasters. The role of the Process Owner
Committee is to maintain and operate internal control
systems to assure the reliability of financial reports
pursuant to the Financial Instruments and Exchange Act.

10

ADK acquired ISO14001 certification in 2008. In
2012, the Company continued pursuing environmental

Corporate Social Responsibility

steps to lower our electricity consumption, and rigorously
promoted the 3Rs (reduce, reuse, recycle) concept.

Social Contribution
The ADK Group Code of Conduct declares that theADK Group shall strive hard to benefit society in thecommunications domain. To this end, the Group shallprovide ideas and creative services free of charge whereappropriate, working in close cooperation with public
entities and organizations, nongovernmental organizations(NGOs) and nonprofit organizations (NPOs), and outside
entities with specialist expertise. Guided by thisdeclaration, ADK conducted the following activities
in 2012.

Pro Bono Activity
Deploying skills to pursue volunteer activities!

skillstock Web Site
Opened in March 2012, the skillstock site is a Web-By matching the strengths of each individual withbased service. People register their areas of specialist

specific volunteer activities, the system ensures thatexpertise (skills) on the site and then receive

people’s strengths can be deployed most effectively

information on disaster restoration-related volunteer

in disaster regions.

activities that match those skills.

People wishing to volunteer can also register

As of March 18, 2012, just two weeks after its

with Volunteer Info, a site operated by an NGO,

opening, 610 people had registered with the site,

and their information is automatically uploaded tolisting a total of 966 skills. The skills registered

the skillstock site, thus widening the reach of thewere diverse (as shown below). For example, one

volunteer recruitment campaign. Even if one’s skills

user who registered “manuscript writing” as a skill

are not required in nearby volunteer initiatives, one

was listed on a personal Web page as a “volunteer

can peruse the “Everyone’s Skills” section of the site

survey interviewer at temporary dwellings (forto determine what type of volunteer activities may

disaster victims).” This shows that volunteer-related

be requested in the future.

information that matches an individual’s expertisereaches the right place.
Given the diversified needs for volunteers

From the initial stages, ADK participated in the
project on a volunteer basis. In addition to proposing
the “skillstock” name, we provided support inin disaster-affected regions, the skillstock sitevarious ways, such as through promotions using local

asks aspiring volunteers to register their skills.

characters and heroes.
Note: The skillstock site closed on December 31, 2012.

Samples of registered skills

I can teachpenmanshipI cancommunicate insign language（male）（female）

I can draw
pictures andmake things

I can coach
sports（male）

I can play music(rock, folk)（male）（female）

I can be aconversation
partner

I can help
people do their
shopping（male）（female）

ADK Annual Report 201211

Corporate Governance
1 Corporate GovernanceWith regard to business execution, ADK appoints
operating officers from among its executive directors
and employees. These operating officers are in charge

1 Corporate Governance Structureof the Company’s business execution organization. To

ADK recognizes that enhancing management decision-

we established the Operating Officers Committee, whichmaking efficiency and reinforcing the business execution

is chaired by the Group president. The Committee isoversight function are essential elements in raisingtasked with making decisions on matters delegated to it

corporate value. For this reason, the Company isby the Board of Directors, and other specified matters.

implementing various measures related to corporate

Summaries of the Committee’s deliberations are reported

governance described below.

to the Board of Directors. To ensure common recognition

promote consensus-building among corporate officers,of important issues among employees, excerpts ofa. Organizational Framework

meeting minutes are posted on the Company’s intranet.

As of March 29, 2013, the Company had 10 directors,
including one with representative status. Also, there wereb. Status of Establishment of Risk Management

three executive directors (excluding the representative

The Risk Management Committee, which is chaired bydirector) and three external directors.

the president, spearheads ADK’s efforts to build an

ADK adopts the corporate auditor system. Under

effective internal control system. The risk management

this system, ADK works to reinforce the supervisorysystem serves as “Regulations and Systems Relating tofunction and the monitoring of business execution by

Risk Management” and is consistent with internal control

promoting close cooperation between the external

systems as defined under Japan’s Companies Act.

directors, corporate auditors and directors responsible

The Risk Management Committee heads four

for Company’s internal audits.

dedicated subordinate organizations, each of which
undertakes its own specific

General Publicrisk management. They are the

Stakeholders Other Than Shareholders

Expectations

Corporate Governance

Shareholders
General Meeting of Shareholders

Elect

Elect

Corporate
Auditors

and the Process Owner Committee.
Risk management issues outside

Supervise & Manage

Elect &
Superviseof the purview of the subordinate

Directors

Representative
Directors
Executive Directors

Communicate

Accounting Auditors

Reportcommittees are handled directly by
the Risk Management Committee.
The Compliance Committee

Senior Operating Officers

Audit

Operating Officers

Internal Control

is responsible for creating

CenterSupervise & Manage

Operating Officers Committee

Group Audit
OfficeDivisions

Risk Management Committee
Compliance Committee
Information Security Committee
Business Continuity Committee
Process Owner Committee

Departments,
Branches &Branch Offices
MonitorAccount Service
Operation Support
OfficesMonitorBusiness Execution Organization

Corporate Social Responsibility (CSR)

Business Execution Monitoring, Internal Control and Risk Management Framework

12

Corporate Governancesystems to prevent illegal acts

Audit

Supervise& Manage
Planning
Management
Offices

Information Security Committee,
the Business Continuity Committee

Elect
Board of Directors

Board ofCorporate Auditors
Audit

Compliance Committee, theNote:
The Group’s system of internal controls is divided into three areas for monitoring purposes,
each of which is overseen by a particular officeor department. The Group Audit Office monitors
the Group’s overall business execution framework, the Account Service Operation Support
Office monitors the organization attached to
the Integrated Account Service Management
Center, and the Planning Management Officemonitors the organization attached to the Media Buying and Staff Center.

and for operating ADK’s internal reporting system. The

and employees shall report immediately to the corporate

Information Security Committee is tasked with ensuring

auditors on cases that may cause serious damage to thethe proper management of personal and other business

entire ADK Group, inappropriate actions in the execution

information. The Business Continuity Committee sets upof duties by directors, material facts that breach laws,

various procedures aimed at ensuring the continuation

regulations and the Articles of Incorporation, or reportsof business during times of emergency, such as major

received through the “Group Helpline System.”earthquakes. The duty of the Process Owner Committee

One support staff member is assigned to assist

is to operate and maintain the internal control system

the corporate auditors with their duties. As a means of

to ensure the reliability of financial reporting under thereinforcing independence from directors, the approval of

Financial Instruments and Exchange Law of Japan.

the corporate auditors is obtained beforehand concerningc. Status of the Establishment of a System ofInternal Controls
As described above, the Risk Management Committee

the support staff member’s performance review,
personnel transfer and the determination of applicablerewards and penalties.

system as stipulated under the Companies Act. One ofb. Coordination Between Internal Auditors,
Corporate Auditors and Account Auditors

its subordinate bodies, the Process Owner Committee,

The Group Audit Office submits audit reports to thespecializes in setting up and maintaining an internalpresident and the corporate auditors. Attendance atcontrol system to ensure the reliability of financial

meetings of the Board of Corporate Auditors by Group

reporting under the Financial Instruments and Exchange

Audit Office employees ensures coordination between

Law of Japan.

internal auditing and auditing by the corporate auditors.

spearheads the establishment of an internal control

To promote close cooperation between corporate
auditors, in addition to official Board of Corporate

2 Internal Audits and Auditing by

Corporate Auditors

a. Organization, Personnel and Procedures

Auditors meetings, both full-time and part-time corporate
auditors hold liaison meetings as appropriate to exchange
opinions. Furthermore, account auditors from Ernst &Young ShinNihon LLC, which is contracted to audit ADK’s

The Group Audit Office is responsible for conducting

accounts, are required to attend meetings of the Board

internal audits. As of December 31, 2012, the officeof Corporate Auditors. At these meetings, the accounthad a staff of eight. In addition to reporting the status

auditors brief and submit reports to the corporateof audit implementation to the Board of Directors, theauditors on items including audits of the Company’s

Office monitors the effectiveness of the risk management

accounts (quarterly reviews) and the auditing systemsystem and reports its findings to the Risk Managementof Ernst & Young ShinNihon LLC.

Committee.
To maintain a robust system of audits carried out bycorporate auditors, ADK employs four or more corporate
auditors, three or more external auditors, and three ormore full-time corporate auditors, all of which exceed the

3 External Directors and External

Corporate Auditors

corporate auditors, of whom three were external anda. System, Function and Roles of External
Directors and External Corporate Auditors

three were full-time.

As of March 29, 2013, ADK had three external directors

statutory minimum. As of March 29, 2013, ADK had four

Conforming to corporate auditing standards
determined by the Board of Corporate Auditors andand three external corporate auditors.
All of our external directors have abundantfollowing audit policies and the division of duties,

experience and broad-ranging knowledge related to theircorporate auditors attend important meetings, including ofareas of expertise. Through Board of Directors meetings

the Board of Directors. There, they receive reports on theand other forums, they deploy these resources to offer

execution status of business from directors and employees,

suitable advice and remarks about ADK’s management

and request detailed explanations as necessary. Directors

from a broader perspective based on external viewpoints,

ADK Annual Report 201213

thus contributing to decision making on important

are business partners of ADK. However, in the fiscal

items. In these ways, external directors help ensure theyear ended December 2012, sales derived from businessappropriateness of decision making and supervise thebetween the Company and Daiwa Securities and its group

execution of business.

companies totaled less than one percent of net sales.

The task of external corporate auditors is to express

In addition, when ADK issues new securities it employs

their impartial opinions from a more neutral perspective.

Daiwa Securities to serve as lead manager. However, such

They attend important meetings, including of the Board

dealings between ADK and Daiwa Securities do not haveof Directors; receive reports on the execution status of

any impact on the management of Daiwa Securities.

business from directors and employees; and request

External Auditor Makoto Ichikawa previously held

detailed explanations as necessary. In these ways, they

the position of operating officer at Norinchukin Bank,

monitor the execution of business by directors.

which is a business partner of the Company. However,To enable external directors and external corporatein the year ended December 2012 business between theauditors to fulfill their roles adequately, ADK has

Company and Norinchukin Bank accounted for less thanconcluded limited liability agreements with each external

one percent of the Company’s net sales. Furthermore,

director and external corporate auditor that limit theiras of the end of December 2012, the Company had noliability under Article 423, Paragraph 1, of the Companies

borrowings from the Bank.

Act of Japan. The maximum amount of limited liability

ADK does not have any advisory agreements withcovered by the agreements is ¥10 million or an amountExternal Auditor Masayuki Yoshinari or his legal office,stipulated by relevant regulations, whichever is higher.

and does not acquire services from either regarding

b. Personal Relationships, Capital
Relationships, Business Relationships or
Other Relationships of Interest Between
the Company and the Company’s External
Corporate Auditors

separate legal matters.

“Corporate Activity Award” Received
ADK received a “Corporate

ADK does not have any advisory agreements with

Activity Award” at the 4th

Hiroshi Ohbayashi, an external director, or his legal office,

Listed Company Awards

and does not it acquire services from either regarding

held by Tokyo Stockseparate legal matters.
External Director Hideaki Kido also holds the positionof chairman of IMAGICA TV Corp. A business relationshipidentifies listed companies that have engaged inexists between ADK and IMAGICA TV Corp. for the

corporate activity deemed to be beneficial by thedelivery of video and other services. However, because

TSE in its position as a market operator.

the proportion of net sales derived by the Company

The award theme for fiscal 2012 wasin the year ended December 2012, and the proportion“Designation of Outside Directors as Independentof net sales derived by IMAGICA TV Corp. in the most

Directors.” A total of four companies received arecent fiscal year (period ended March 2012) from thisCorporate Activity Award, each of which (1) newly

relationship totaled less than 0.1% for both companies, it isextremely small in scale.
External Director Mochio Umeda also holds the
positions of president of Muse Associates LLC andmanaging director of the Pacifica Fund. However,
the Company does not have a personal relationship,

appointed two or more outside directors, and (2)appointed two or more independent directors fromamong such newly appointed outside directors.
Because ADK appointed three independent
directors as outside directors, it was deemed
to be fostering the proliferation of corporate
activity guidelines determined by the TSE. Going

capital relationship, business relationship or any otherforward, ADK will work to improve corporate

relationship of interest with Mr. Umeda.

value and otherwise become a company that isExternal Auditor Hiroshi Ota previously held theposition of operating officer at the head office of the
Daiwa Securities Group and its group companies, which

14

Exchange, Inc. (TSE).
Under the award system, once a year the TSE

Corporate Governancebroadly supported by shareholders and all otherstakeholders.

c. Selection Criteria and Policies Concerning
Independence of External Directors andExternal Corporate Auditors from theCompany

and external corporate auditors, the Company’s basic
approach is to select candidates unlikely to have conflictsof interest with general shareholders, while referring to
the independence criteria prescribed by the Tokyo StockADK does not have any specific criteria or policies

Exchange (TSE). As of March 29, 2013, ADK had notified

regarding the independence from the Company of

the TSE that all of the Company’s external directors andappointed external directors or external corporate

external auditors are independent directors and auditors

auditors. However, when appointing external directors

pursuant to the provisions of the TSE’s regulations.

4 Executive Remunerationa. Total Executive Remuneration, Total per Type of Executive Remuneration and Number of
Eligible Executives

Position

Total
remuneration(Millions of Yen)

Directors(excludes external directors)

Total per type of remuneration (Millions of Yen)
Fixed
remuneration

Number of
eligible
persons

Retirement
benefits

Bonuses

294

288

—

5

11

Corporate auditors(excludes external corporate auditors)

17

17

—

—

1

External executives

61

61

—

—

6

Notes:
1. Bonuses were not paid in fiscal 2012.
2. The above remuneration includes that paid to two directors who retired upon the conclusion of the Company’s 57th Ordinary General Meeting of Shareholders heldon March 29, 2012. One of the Company’s 13 directors as of the end of fiscal 2012 serves without compensation, and therefore is not included in the table above.

b. Total Performance-Linked Remuneration

auditors. It terminated the granting of retirement benefits

No executives were paid performance-linked

to corporate auditors as of the close of the 52nd Ordinary

remuneration in an amount exceeding ¥100 million during

General Meeting of Shareholders held on March 28, 2007,

fiscal 2012.

and terminated the granting of retirement benefits todirectors as of the close of the 56th Ordinary Generalc. Summary of Policies Concerning
Determination of Directors’ Total
Remuneration

remuneration by referring to corresponding data on a group

Directors charged with business execution receive “fixedof companies in the non-manufacturing sector that achieve

remuneration” and “performance-linked remuneration”

a similar level of net sales as the Company and its peers.

Meeting of Shareholders held on March 30, 2011.
The Company determines specific levels of

determined according to the functions they perform.
External directors, directors and corporate auditors

i. Fixed Remuneration

not charged with business execution receive fixed

The Company passed a resolution at the 56th Ordinary

remuneration only.

General Meeting of Shareholders held on March 30, 2011,

The Company offers both long-term and short-term
incentives to directors charged with business execution in
the form of performance-linked remuneration. It consists

to limit directors’ fixed annual remuneration to an amountnot exceeding ¥500 million.
Fixed remuneration for directors comprises fixedof “bonuses” that are linked to short-term performance and“base remuneration” and “funds for the acquisition of“stock options” that are linked to long-term performance.

treasury stock” through the directors’ shareholding

Because the Company does not treat directors asassociation. However, “funds for the acquisition of

employees, it does not pay separate salaries to directors.

treasury stock” are paid to full-time directors only.

The Company has abolished the system of granting
retirement benefits to retiring directors and corporate

Fixed remuneration for corporate auditors comprises
base remuneration. In accordance with a resolution passed

ADK Annual Report 201215

at the Extraordinary General Meeting of Shareholders
held on November 20, 1998, remuneration paid is limited
to less than ¥10 million monthly.

5 Accounting Auditors
In accordance with the Companies Act and the Financial
Instruments and Exchange Law, the Company has aii. Bonuses

contractual agreement with Ernst & Young ShinNihon

The Company passed a resolution at the 57th Ordinary

LLC to serve as its accounting auditor. Furthermore, noGeneral Meeting of Shareholders held on March 29, 2012,

special interests exist between any managing partners

to grant directors (excluding external directors) bonusesof said audit organization engaged in the auditing of theseparate from the aforementioned fixed remuneration

Company’s accounts and the Company.

that are commensurate with the consolidated operating

Details of the independent account auditors who

income recorded each business year in an amount not

audited the Company’s fiscal 2012 accounts, the nameexceeding ¥150 million annually. The Company doesof their accounting firm and the number of persons who

not grant bonuses when annual consolidated operating

assisted with the audit are provided below.

income does not reach the targeted amount. When thetargeted amount has been achieved, the Company grants
bonuses amounting to 20%–40% of base remuneration,
which is fixed remuneration. (However, this excludes any
funds for acquiring treasury stock through the directors’shareholding association.)

Certified Public Accountants(Account Auditors)
Designated employeewith limited liability

Mitsuo Sakamoto

Designated employeewith limited liability

Kazuki Hayashi

Company

Ernst & Young
ShinNihon LLC

iii. Stock Options
The Company passed a resolution at the 57th Ordinary
General Meeting of Shareholders held on March 29, 2012,

6 Number of Directors

to grant directors (excluding external directors) stock

The Company’s Articles of Incorporation specify aacquisition rights separate from the aforementioned fixedminimum of three directors. There is no maximum number

remuneration and the aforementioned bonuses, not toof directors. The Company appoints directors to a term of

exceed ¥100 million annually. The amount of such stock

one year, which increases opportunities for shareholders

acquisition rights shall be equivalent to approximately 30%

to test the mandate of directors.

of the basic remuneration portion of fixed remuneration(excludes in-house share purchase funds for purchasing
shares via the directors’ shareholding association).
The exercise price of such stock acquisition rights

7 Change to Resolutions on the

Appointment of Directors

shall be ¥1.00 per share. The number of share acquisition

Under the Articles of Incorporation, a resolution forrights to be exercised fluctuates within a range from 0%

appointing a director shall be adopted by a majority ofto 100% of the total number of stock acquisition rights

votes upon the participation of one-third or more of

allocated according to the Total Shareholder Return results

shareholders with exercisable voting rights. The purpose(i.e., the sum of the difference between the average stockof this reduction in the quorum is to facilitate smoothprice on the Tokyo Stock Exchange in the three months

general meetings of shareholders.

(excluding non-trading dates) immediately preceding theallotment date and the average stock price on the Tokyo

The appointment of a director shall not be determinedby cumulative voting.

Stock Exchange in the three months (excluding nontrading dates) immediately preceding the first date of theexercise period and the dividend per share for the period
from the allotment date to the first date of the exercise

16

8 Delegation of Authority to the Board of

Directors

period, divided by the average stock price on the Tokyo

Under the Articles of Incorporation, items covered in

Stock Exchange in the three months (excluding non-trading

Article 459, Paragraph 1, of the Companies Act, suchdates) immediately preceding the allotment date) from theas distribution of surplus and purchase of treasury

allotment date to the first date of the exercise period.

stock, shall, except as otherwise provided for in laws orCorporate Governanceregulations, be determined by resolution of the Board of

9 Change to Requirements for Special

Directors, and not by resolution of a general meeting ofResolutions at General Shareholder
Meetings

shareholders. The Board has been delegated authority
to distribute surplus funds in order to facilitate flexible
profit distribution and acquisition of treasury stock in

Under the Articles of Incorporation, resolutions covered

line with the Company’s policy that positions shareholder

in Article 309, Paragraph 2, of the Companies Act shall be

return as a high management priority. Furthermore, thisadopted by a majority exceeding two-thirds of votes upon

authority is not granted to general shareholder meetings

the participation of one-third or more of shareholders

to avoid excessive returns and procedural confusion duewith exercisable voting rights. The purpose of thisto the duplication of the Board of Directors’ policy on

reduction in the quorum is to facilitate smooth generalshareholder return and the policy on returns reflected

meetings of shareholders.

in shareholder proposals.

2 Auditor Remuneration
1 Remuneration of Certified Public Accountants(Millions of Yen)

Fiscal 2011
Remuneration for audit
certification work
ADK
Affiliates
Total

Fiscal 2012

Remuneration for
non-auditing work

Remuneration for audit
certification work

Remuneration for
non-auditing work

110

—

112

15

—

—

—

—

110

—

112

15

2 Other Important Remuneration
Fiscal 2011 (January 1–December 31, 2011)

3 Non-Auditing Work Conducted by

Certified Public Accountants

Certain consolidated overseas affiliates paid remuneration

Fiscal 2011 (January 1–December 31, 2011)

in the amount of ¥2 million for authorized audit

Not applicablecertification work by audit offices belonging to the
network of Ernst & Young ShinNihon LLC, which theCompany contracts for auditing services by Certified
Public Accountants.

Fiscal 2012 (January 1–December 31, 2012)
The Company also paid remuneration for non-auditing
work conducted by Certified Public Accountants
and others. This work consisted primarily of project

Fiscal 2012 (January 1–December 31, 2012)assessments related to formulating concepts for core

ADK and certain consolidated overseas affiliates paid

systems for the subsequent financial year.

remuneration in the amount of ¥8 million for authorized
audit certification work by audit offices belonging to
the network of Ernst & Young ShinNihon LLC, which theCompany contracts for auditing services by Certified
Public Accountants.

4 Policy on Determining Audit

Remuneration

Decisions regarding remuneration for auditing work
conducted by accounting auditors shall be determined upon
obtaining the approval of the Board of Corporate Auditors
pursuant to Article 399 of the Companies Act following
discussion that takes into consideration the appropriatenessof the number of audit hours based on the details of anaudit plan submitted by the accounting auditors.

ADK Annual Report 201217

Board of Directors and Auditors(as of July 1, 2013)

Shinichi Ueno
Representative Director
President & Group CEO

18

Kazuhiko Narimatsu

Takeshi Kato

Yoshihiro Sakai

Executive Director, Senior Operating Officer
Account Service Management

Executive Director, Operating Officer
Corporate Management and Planning Center

Executive Director, Operating Officer
CFO

Koichiro Naganuma

Stuart Neish

Director, Chairman of the Board

Non-Executive Director
Regional Director, WPP Asia Pasific

Hiroshi Obayashi

Hideaki Kido

Mochio Umeda

Outside Director

Outside Director

Outside Director

Yoshiro Sakai

Makoto Ichikawa

Hiroshi Ota

Masayuki Yoshinari

Auditor (Full-time)

Auditor (Full-time)

Auditor (Full-time)

AuditorBoard of Directors and Auditors

Financial Section
Management’s Discussion and Analysis .................................20
Forward-Looking Statements and Risk Factors .................. 28
Consolidated Balance Sheets ...................................................... 32
Consolidated Statements of Income ........................................34
Consolidated Statements of Changes in Net Assets .......... 35
Consolidated Statements of Cash Flows ................................38
Notes to Consolidated Financial Statements ........................39
Independent Auditor’s Report .................................................... 65

ADK Annual Report 201219

Management’s Discussion and Analysis

Fiscal 2012 Consolidated Performance Highlights
Gross billings up 1.1% to ¥350.8 billion
Gross profit up 0.7% to ¥46.1 billion
Gross margin unchanged at 13.2%
Operating income down 17.6% to ¥3.1 billion
Net income of ¥2.7 billion; net income per share of ¥65.83

Overview of Fiscal 2012
In fiscal 2012, conditions in the Japanese economy werechallenging throughout. Until the middle of the year, theeconomy followed a recovery trend, albeit moderate,
mainly owing to disaster restoration-related demand andvarious government policies.
Subsequently, however, the economy weakened due
to several factors. These include a decline in exports
stemming from the economic slowdown overseas,
especially among emerging nations, as well as thedissipation of domestic policy benefits and a pause inpersonal consumption. Finally, toward the end of theyear, positive expectations about the fiscal and monetary
policies of the new government added impetus to thetrends of a weakening yen and higher stock prices, andsome bright signs appeared as a result.
According to the Current Survey of Selected
Service Industries by the Ministry of Economy, Trade2012 Advertising Expenditures in Japan(Millions of Yen, %)700,000

Total Sales
Year- on-Year Change

600,000

60%

50%

500,000

40%

400,000

30%

300,000

20%

200,000

10%

100,000

0%

0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Nov Dec-10%Preliminary Report on the Current Survey of Selected Service Industries:
Research and Statistics Department, Minister's Secretariat, Ministry of
Economy, Trade and Industry

and Industry (METI), total gross billings in the Japanese
advertising industry in the three-month period from

Under these circumstances, the ADK Group sought

March through May 2012 grew more than 10% compared

to provide communications programs emphasizing

with the previous corresponding period, which was

maximization of return on investment (ROI) for its

affected significantly by the Great East Japan Earthquake.

advertising clients. At the same time, we actively

Afterward, however, the growth rate slowed, and grossadvanced our operations in emerging markets andbillings in the two-month period of September andChina, as well as in the animation content business. As a

October fell short of the previous corresponding period.

result, gross billings remained mostly unchanged from

We believe that the situation will remain unstable.

the previous year. We continued efforts to meticulously
control costs while striving to reduce selling, general, andadministrative (SG&A) expenses. However, profits fell justshort of the previous year’s level.

20

Management’s Discussion and Analysis

Consolidated Performance
Gross Billings

and software at ADK, the parent company. Personnel

Gross billings totaled ¥350,822 million, an increase of 1.1%

expenses were up, due to increased employee numbers

compared with fiscal 2011, thanks to the contribution of

at ADDC, a newly consolidated subsidiary in Japan, and

ADK Digital Communications (ADDC), a newly consolidated

at subsidiaries overseas, including in the growing market

Internet media-rep company, in Japan, as well as

of China. Also, an advertising production subsidiary

increased sales in North America and Asia. Gross billings

increased its staff in expectation of higher sales.

of ADK, the parent company, remained mostly unchanged
from the previous year, mainly due to lack of growth in
the second half stemming from lower billings to major

Other Income and Expenses

clients.

Interest and dividend income was ¥1,613 million, andequity in earnings of affiliates was ¥13 million.
We reported total other income of ¥893 million, including

Gross Profita ¥150 million gain on sales of investment securities. By

Gross profit increased 0.7% year on year to ¥46,169

contrast, we posted ¥824 million in special retirement

million. The gross margin remained unchanged at 13.2%.

expenses and a ¥214 million loss on sales of investment

ADK’s gross margin declined from 11.0% in fiscal 2011

securities.

to 10.8% in fiscal 2012. On the other hand, overallprofitability in China improved.

Net Income
As a result, income before income taxes and minority

Operating Income

interests totaled ¥4,069 million, down 19.1% from fiscal

Operating income was ¥3,176 million, down ¥677

2011. However, tax expenses declined due to accumulation

million from fiscal 2011. SG&A expenses increasedof deferred tax assets. Accordingly, the Group reported

2.4%, mainly due to higher IT costs and depreciation

net income of ¥2,781 million, up 21.3% from fiscal 2011.

expenses associated with the replacement of computer

Quarterly Financial Highlights(Millions of Yen)

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Jan 1, 2012–Mar 31, 2012 Apr 1, 2012–Jun 30, 2012 Jul 1, 2012–Sep 30, 2012 Oct 1, 2012–Dec 31, 2012

Gross Billings

91,00488,78680,47790,553Operating Income

2,259

463

(600)

1,053

Income before Income Taxes andMinority Interests

2,518

347

(324)

1,526

Net Income

1,458

316

72

934

Net Income per Common Stock (Yen)

34.53

7.50

1.71

22.09

ADK Annual Report 201221

Balance Sheets and Cash Flow
Assets and Liabilities

Cash FlowsAt the end of fiscal 2012, the Group had total assets ofIn fiscal 2012, net cash provided by operating activities¥195,163 million, up ¥10,974 million from a year earlier.

fell short of the sum of net cash used in investing andFactors boosting assets included an increase in the market

financing activities by ¥322 million. After foreign currency

value of investment securities stemming mainly fromtranslation adjustments, cash and cash equivalents stoodrising share prices. By contrast, there was a decline inat ¥27,264 million, up ¥744 million from a year earlier.

notes and accounts receivable.

Net cash provided by operating activities amounted

Total liabilities amounted to ¥85,603 million, down

to ¥2,581 million compared with ¥8,957 million in the¥1,784 million from a year earlier. This was mainly due toprevious year. Major factors included ¥4,069 million ina decline in notes and accounts payable, which contrasted

income before income taxes and minority interests,

with an increase in deferred tax liabilities arising from thea ¥4,758 million decrease in notes and accounts

higher market value of investment securities.

receivable, and a ¥5,304 million decrease in notes andAt the fiscal year-end, net assets totaled ¥109,560

accounts payable.

million, up ¥12,760 million from a year earlier. Contributing

Net cash used in investing activities totaled ¥1,719

factors included an increase in the unrealized gain on

million compared with ¥3,780 million provided byavailable-for-sale securities. The equity ratio (excluding

investing activities in fiscal 2011. The main factor was aminority interests and subscription rights to shares) was¥1,054 million decrease in time deposits.

55.6%, up 3.6 points from a year earlier.

Net cash used in financing activities was ¥1,184 million
compared with ¥4,944 million in the previous year. This

Free Cash Flow

(Millions of Yen)

2012
Net cash provided byoperating activities

2011

2,581

8,957

Business reinvestment*(882)(1,895)

Free cash flow

1,700

7,062

was mainly due to ¥845 million in dividends paid, whichwas ¥4,600 million in fiscal 2011.

*Business reinvestment = Purchase of property and equipment + Purchaseof intangible assets – Sales of property and equipment

Capital Expenditures(Millions of Yen)

2012
Capital Expenditures
Buildings

Depreciation

Capital Expenditures

Depreciation

49

217

78

–

0

–

0

Vehicles

36

23

17

22

Furniture, fixtures and equipment

155

248

255

176

–

–

–

–

Building improvements

Land
Licenses

22

2011
184

–

–

–

–

Computer software

665

692

1,570

456

Lease assets

50

129

23

119

Others

0

29

–

16

Total

957

1,341

1,945

975

Management’s Discussion and Analysis

Segment Information
had a negative impact on earnings, and operating income

Advertising Businessdeclined 22.6% to ¥1,341 million.
Non-Consolidated Performance Summary

The Group’s advertising business segment generated(Millions of Yen)gross billings of ¥344,135 million, up 1.2% from the
2012

2011

Gross billings¥303,422¥301,878

0.5%

Gross profit

32,81233,156-1.0%

previous fiscal year. Segment profit declined 7.0% to¥3,587 million.
The parent company (ADK) and its subsidiaries inChangeJapan and overseas all enjoyed year-on-year increases

Operating income

1,341

1,734

-22.6%

in gross billings. Overseas subsidiaries reported profit

Net income

1,543

2,302

-33.0%

growth, but ADK and its domestic subsidiaries posted adecrease in profit.

Broken down by industry, we reported increased gross

ADK, which forms the core of the ADK Group,

billings to clients in the Distribution/Retail, Education/

reported gross billings of ¥303,422 million, up 0.5% from

Healthcare Services/Religion, and Beverages/Tobacco

the previous year. Gross profit slipped 1.0% to ¥32,812

Products sectors, although gross billings to clients in the

million. During the year, we continued striving to reduce

Finance/Insurance, Information/Communications, and

SG&A expenses. However, the large share of fixed costs

Cosmetics/Toiletry Goods sectors declined.

Non-Consolidated Gross Billings Breakdown by Client Industry
2012
Energy/Raw Materials/Machinery¥(Millions of Yen)

Composition

4,441

1.5%

Food

30,071

Beverages/Tobacco Products

24,6762011¥

Composition

ChangeYear-on-Year
Change

5,027

1.7%

¥ (586)-11.7%

9.9

31,71310.5(1,641)-5.2

8.1

23,034

7.6

1,642

7.1
-12.2

Pharmaceuticals/Medical Supplies

13,775

4.5

15,687

5.2(1,912)

Cosmetics/Toiletry Goods

31,10010.2

33,03810.9(1,938)-5.9

Apparel/Jewelry

9,884

3.3

8,766

2.9

1,118

12.8

Precision Instruments/Office Equipment

1,906

0.6

2,037

0.7

(130)

-6.4

Electric Machines/AV Equipment

3,625

1.2

3,667

1.2

(42)

-1.1

Automobiles/Auto-Related Products

15,396

5.1

15,418

5.1

(22)

-0.1

Household Products

2,949

1.0

3,193

1.1

(243)

-7.6

Hobbies/Sporting Goods

21,0907.0

20,997

7.0

92

0.4

Real Estate/Housing

8,683

2.9

8,555

2.8

127

1.5

Publications

2,964

1.0

2,668

0.9

295

11.1

Information/Communications

33,46311.0

35,72511.8(2,261)-6.3

Distribution/Retail25,552

8.4

21,356

7.1

4,195

19.6

Finance/Insurance

22,155

7.3

25,912

8.6(3,757)-14.5

Transportation/Leisure

11,184

3.7

10,620

3.5

564

5.3

Restaurants/Other Services

5,953

2.0

6,728

2.2

(775)

-11.5

Government/Organizations

11,067

3.6

9,561

3.2

1,505

15.7

7,675

2.5

5,679

1.9

1,995

35.1

Education/Healthcare Services/Religion
Classified Ads/Other
Total

15,806

5.2

12,486

4.1

3,319

26.6

¥303,422

100.0%¥301,878

100.0%¥1,544

0.5%

ADK Annual Report 201223

Broken down by business discipline, Magazine, Newspaper,
Digital Media, OOH Media, and Marketing and Promotion
reported higher gross billings, while others reported adecline in gross billings.

Non-Consolidated Performance by Discipline
Creative and Others

Newspaper

MarketingandPromotion(Millions of Yen)

Magazine

Breakdown by Discipline

TOTAL¥303,422
million(100%)MediaTV

OOH Media
Digital Media
Radio
Notes:
1. TV includes Program-sponsored ad, Spot and Content.
2. Digital Media includes Internet and Mobile-related media.
(Digital Solutions, such as Web Site Creation and System Development areincluded in “Marketing and Promotion.”)
3. OOH (Out–of-Home) Media includes transportation and outdoor advertisingand insertions.
4. Marketing and Promotion includes Marketing, Communication Planning,
Promotion, Events, PR, Exposition Events and Digital Solutions, etc.

24

Management’s Discussion and Analysis

Grossbillings

Composition

Year-onYear
ChangeMagazine¥ 13,984

4.6%

2.8%

Newspaper

21,006

6.9

3.1

TV

142,007

46.8

-2.2

Radio

3,075

1.0

-4.3

Digital Media

9,024

3.0

9.0

OOH Media
Subtotal

8,937

3.0

4.8

198,035

65.3

-0.6

MarketingandNon-Media Promotion
Creative andOthers58,726

19.3

9.2

46,660

15.4-4.7

Subtotal

105,386

34.7

2.6

Total

¥303,422

100.0%

0.5%

Magazine

Television

According to the Preliminary Report on the Current

Total sales of television advertising in Japan increased 3.8%.

Survey of Selected Service Industries announced by METI,

However, ADK’s gross billings from television

total sales of magazine advertising in Japan were almost

advertising declined 2.2% to ¥142,007 million. In

unchanged from the previous year, edging up 0.3% year

program-sponsored advertising, we reported increasedon year.

gross billings to clients in the Hobbies/Sporting Goods,

In the magazine business, gross billing to companies

Distribution/Retail, and Government/Organizationsin the Home Electrical Appliances/AV Equipment,

sectors, but decreased gross billings to clients inInformation/Communications, and Food sectors declined

the Finance/Insurance and Food sectors. As for spot

amid falling budgets among advertisers in general.

advertising, we posted higher gross billings to clients

However, we enjoyed increased gross billings to clientsin the Home Electrical Appliances/AV Equipment andin the Apparel/Jewelry and Beverages/Tobacco Products

Government/Organizations sectors, but lower grosssectors. Accordingly, gross billings from magazine

billings to clients in the Information/Communications,advertising rose 2.8% to ¥13,984 million.

Foods, and Finance/Insurance sectors. In the animation
content-related business, we continued promoting

Magazine
Figures of ADK (Millions of Yen)
0

10,0005,000

15,00020,000Share of
Gross Billings(Non-consolidated)

4.6%

12
11

animation distribution sites and mobile video distribution
while developing new animation content and actively
using popular characters. Animation content sales
increased as a result.
Television

030

Figures of ADK (Millions of Yen)

120
90
60
Total Sales in Advertising Industry(Billions of Yen)

050,0000400

100,000

150,000

200,000

Share of
Gross Billings(Non-consolidated)

46.8%

12
11

Newspaper
Total sales of newspaper advertising in Japan increased
3.2%.

1,600
800
1,200
Total Sales in Advertising Industry(Billions of Yen)

ADK’s gross billings from newspaper advertising
increased 3.1% to ¥21,006 million. This was mainly due tohigher gross billings to clients in the Distribution/Retail

Gross Billings from Television Ads (Breakdown by Category)(Millions of Yen)and Real Estate/Housing sectors, which outweighed lower
2012

gross billings to clients in the Hobbies/Sporting Goods,

2011¥ 54,795 ¥ 54,475

Change0.6%

Government/Organizations, Information/Communications,Time (program-sponsored ad)

and Food sectors.

Spot

73,67678,314-5.9

Content-related sales

13,534

12,3889.2

Newspaper
Figures of ADK (Millions of Yen)
05,000 10,000 15,000 20,000 25,000 30,000

Share of
Gross Billings

Total¥142,007 ¥145,178-2.2%(Non-consolidated)

6.9%

12
11
0

70

140

210

280

350

420

Total Sales in Advertising Industry(Billions of Yen)ADK Annual Report 201225

RadioOut-of-Home Media

Total sales of radio advertising in Japan declined 4.0%.

This category includes outdoor advertising such as

ADK’s gross billings from radio advertising declined

billboard, traffic advertising, and inserts. Japan’s total

4.3% to ¥3,075 million. We reported increased businesssales of outdoor advertising increased 0.2%, andwith clients in the Transportation/Leisure and Cosmetics/

traffic ads increased 8.7%, whereas inserts and direct mailToiletry Goods sectors, but decreased business withincreased 3.1%.

clients in the Automobiles/Auto-Related Products,

We enjoyed growth in business with clients in the

Information/Communications, and Finance/Insurance

Education/Healthcare Services/Religion, Distribution/

sectors.

Retail, and Beverages/Tobacco Products sectors, which
compensated for decreased business with clients in theRadio
Figures of ADK (Millions of Yen)
0

1,000

2,000

3,000

4,000

Share of
Gross Billings(Non-consolidated)

1.0%

Restaurants/Other Services and Pharmaceuticals/Medical
Supplies sectors. Accordingly, gross billings from OOH
media advertising rose 4.8% to ¥8,937 million.

12

Out-of-Home Media

11

0
0

15

30

45

2,000

4,000

6,000

Millions of Yen
8,000
10,000Share of
Gross Billings(Non-consolidated)

3.0%

60

Total Sales in Advertising Industry(Billions of Yen)

12
11

Digital Media
Total sales of Internet advertising in Japan increased 7.4%.
ADK’s gross billings from digital media advertisingclimbed 9.0% to ¥9,024 million. This was boosted byhigher gross billings to clients in the Finance/Insurance,
Cosmetics/Toiletry Goods, and Beverages/Tobacco
Products sectors, which contrasted with lower grossbillings to clients in the Information/Communications andDistribution/Retail sectors.
Digital Media
0

2,000

4,000

6,000

Millions of Yen
8,000 10,000

According to the aforementioned survey of METI, the total
sales from sales promotion, PR, and event planning inJapan increased 1.2% in 2012.
Despite lower gross billings to clients in the Finance/
Insurance, Cosmetics/Toiletry Goods, and Hobbies/
Sporting Goods sectors, we enjoyed increased business

Share of
Gross Billings(Non-consolidated)

3.0%
12

Marketing and Promotion

with clients in the Beverages/Tobacco Products,
Automobiles/Auto-Related Products, and Real Estate/
Housing sectors. As a result, total gross billings in themarketing and promotion business grew 9.2% to¥58,726 million.

11

Marketing and Promotion
0

20,00040,000Millions of Yen
60,00080,000Share of
Gross Billings(Non-consolidated)

19.3%
12
11

26

Management’s Discussion and Analysis

Creative and Others

Other BusinessIn this segment, we reported decreased businesswith clients in the Pharmaceuticals/Medical Supplies,
Information/Communications, and Cosmetics/Toiletry

Subsidiaries in the publishing business segment reported

Goods sectors. Accordingly, gross billings in the Creative¥6,686 million in sales, a 4.9% year-on-year decline, and a

and Others segment declined 4.7% to ¥46,660 million.

segment loss of ¥426 million compared with an ¥8 million
loss in fiscal 2011.

Creative and Others0Millions of Yen
10,000 20,000 30,000 40,000 50,000 60,000

Share of
Gross Billings(Non-consolidated)

15.4%

12
11

Overseas Sales
In fiscal 2012, the ADK Group obtained 7.8% of its grossbillings from overseas compared with 7.4% in fiscal 2011.
All overseas sales are in the advertising business.

Outlook for Fiscal 2013
In fiscal 2013, the export environment is expected toUnder this slow-growth environment, ADK’s

improve, buoyed largely by economic recovery in the

consolidated performance forecasts for fiscal 2013 are

United States and a weakening yen. In Japan, we feel thegross billings of ¥359.2 billion, operating income of ¥4.0

economy will resume a recovery trend, given planned

billion, and net income of ¥2.9 billion. EPS for the year islarge-scale government expenditures, centering on public

forecast at ¥69.21.

works projects. Nevertheless, the outlook for overseas
economies, such as Europe and China, remains uncertain,

On a non-consolidated basis, the forecasts for fiscal

which could place downward pressure on the domestic

2013 are gross billings of ¥308.0 billion, operating income

economy. Also, there is no evidence of a breakout fromof ¥2.0 billion, and net income of ¥1.55 billion. EPS for thethe current deflationary cycle, so we feel that optimism

year is forecast at ¥36.99.

is not yet justified.

ADK Annual Report 201227

Forward-Looking Statements and Risk Factors
This report may contain forward-looking statements based

3. Risks Arising from Trading Customs

on ADK management’s view and assumptions of future
developments as of the date of such statements. Theaforegoing statements herein are inherently subject to risks,

In Japan, traditionally advertisers do not strictly require an

Relationship with Advertisers

including, but not limited to, those shown below (under

exclusive relationship with their agencies, which may have

Tokyo Stock Exchange guidance), and uncertainties thatbusiness with competitors when planning and proposals

could lead to material differences between such statements

are well accepted. However, there is no assurance that thisand actual outcomes. Therefore, ADK does not warrant

practice will continue in the future. In the event that ADK

any certainty and accuracy thereto. ADK also expressly

fails to adapt to such changes in the advertising market,

disclaims any obligation to update or revise its forward-

its performance and financial condition could be adversely

looking statements.

affected. Furthermore, transactions with clients are madeby individual project and there is no guarantee that thebusiness will continue in the future.

1. Domestic Economy

Advertising companies in Japan do not always havedocumented contracts with media and clients, so as to

In fiscal 2012, the Group generated 92.2% of its grossmaximize their flexibility to adapt to sudden changes.

billings from the Japanese domestic market. Japanese

Therefore, there is the possibility that a dispute might arise

national advertising spending is influenced by corporate

during a transaction.

advertisers’ budgets, which is closely correlated with

An advertising agency buys media time or spaceconsumer spending. In the event that the domestic economy

and materials on behalf of its clients on its own account.

deteriorates seriously, the ADK Group’s performance andBy custom, an agency makes transactions with media

financial condition could be negatively affected.

companies at its own risk. Therefore, even if a client
defaults, the advertising company is still liable for the
media and/or materials toward a media owner and/or a

2. Response to Diversification and
Digitalization of Media and Changing
Consumers’ Media Consumption

subcontracting production company. Sometimes a purchaseis made through another agency. In the case that such anagency defaults, the advertising company is still liable forthe media and/or materials toward a media owner and/or aAdvertising media continue to diversify with the advent

subcontracting production company.

of new display equipment, such as digital signage,
smartphones, and tablet-type PCs. At the same time,b Media Inventories

people’s media consumption and behaviors are changing

In Japan, advertising agencies seeking to nurture high-with the rapid diffusion of social networks, such as

quality content or secure valuable advertising space

Facebook and Twitter. Therefore, markets of traditionalsometimes purchase media inventories at fixed prices inmass media, especially print media, are shrinking, whereas

advance. In such cases, the agency is obligated to pay

the Internet business is growing fast. Advertising clientsadvertising fees to the media company, regardless of the

expect their advertising companies to offer advanced

ultimate sales appeal of the inventories purchased. If thesolutions utilizing digital media, thereby allowing clientssales appeal is inadequate, this could have an adverse effectto gather and analyze data of people’s media consumption

on the Group’s performance and financial condition.

and purchasing behavior. We do not see traditional and new
media cannibalizing each other. Rather, they could enhanceeach other. The ADK Group continues to provide solutions,
including its cross-communications approach, which canintegrate both traditional and digital media. However, if theGroup fails to adapt to changes in the advertising media,
its performance and financial condition could be adversely
affected.

28

Forward-Looking Statements and Risk Factors

cCredit Risks of Subcontractors

In the event that ADK is unable to respondAdvertising companies work hard to enhance the quality

appropriately to client needs and changes in the advertisingof products and services provided by its subcontractors.

industry, and loses its competitiveness as a result, there

However, there are risks associated with a subcontractor’s

is a significant risk that its market share could decline andability to fulfill an order or maintain its business as aprofits could deteriorate. This would have a serious impact

going concern, and it is difficult to transfer such risks to

on its performance and financial condition.

the advertising client. Moreover, services offered by theadvertising industry are delineated, so there are cases
where the subcontractor may outsource work to a sub-5. Risks Arising from Operations

subcontractor, or where another agency is included in thearrangement between the ADK Group, its subcontractors,aand the media company. Given such multilayered

To achieve business stability and growth, the ADK Group

Client Portfolio

arrangements, the Group may need to provide small

has for many years maintained relationships with numerous

and specialty subcontractors with financial backup. In

advertising clients in various industries and will continueinternational business, meanwhile, sometimes partial or full

striving to make proposals that meet their needs. However,payment is required in advance as the custom. In the event

it is possible that the Group’s client portfolio will change andthat a subcontractor is unable to stay in business until anthat diversity across sectors will be inadequate. The parent

order is fulfilled, or the subcontractor is unable to accept

company’s largest 10 and 20 clients accounted for aroundresponsibility for losses related to defective products that

20% and 30%, respectively.

do not fully satisfy the advertising client’s scrutiny, theadvertising agency may not be able to recover funds paidb Relationship with the Mediain advance, or may be obligated to accept responsibility for

The ADK Group buys and resells various media, including

losses related to such defective products.

mass media and rapidly growing digital media, such as
mobile and Internet. In fiscal 2012, the parent company(ADK) generated 65.3% of its gross billings by handling

4. Competitive Risk

the four major mass media, as well as the Internet, digitaladvertising, and OOH media. Gross billings from television

The ADK Group, as Japan’s third-largest advertising group,

represented 46.8% of ADK’s non-consolidated grosscompetes against other large companies. Advertising clientsbillings. ADK continues to strive to secure advertising time

select their products on which to spend their advertising

and/or space in these media. However, in the event of abudgets and tend to appoint a small number of agencies

decrease in advertising volume and/or changes in businessto reduce their costs. This further accelerates priceterms and conditions and advertising methods, and/or thecompetitiveness among agencies. Competition gets evenemergence of new advertising formats, and the ADK Group

more fierce by the integration of brands in the wake ofdoes not respond to these changes appropriately, there isclients’ globalization and industry re-organization, leading toa significant possibility that its performance and financial

the consolidation of procurement. In addition, competition

condition could be adversely affected.

is accelerated by the entry of foreign mega-agency groups
into the Japanese market, as well as many new and rapidlycRelationship with Subcontractors

growing entrants in the Internet and other nontraditional

Although ADK carries out planning for advertising and sales

mass media advertising market. Non-industry players

promotion campaigns, the execution of these activities issuch as retailers and trading houses have entered into

mostly outsourced to qualified subcontractors. In the case of

the advertising market, in particular, the non-mass media

a change in trading relationships with these subcontracted

sectors, which will make tough competition even tougher.

companies, and in the event that ADK is unable to respond
appropriately, this could have a negative impact on its
performance and financial condition.

ADK Annual Report 201229

d Staff

The typical amount of content development investment

Advertising is a people business, and human talents areis increasing, volatility is growing, and the time to recoup

critical assets in the advertising industry. For this reason,

investments is increasing. In sum, the content business is

the ADK Group works constantly to secure exceptional

getting riskier but less profitable. There is no guarantee

human resources, assign them to appropriate locations, train

that this content or its derivatives will continue to succeed.

them so they can address changing market environments,

Continued resale income from existing content is notand ensure smooth internal communications. A series ofguaranteed either. Accordingly, in the case that the ADK

new laws will be enacted from April 2013, including theGroup is not able to generate income as it expects, it could

revised Labor Contract Act, the revised Worker Dispatch

experience a significant impact on its performance andAct, and the Law Concerning Stabilization of Employment

financial condition.

of Older Persons. In response, the Group will amend its
various personnel policies and consider a new employeegtraining framework to match its new business policies. In

To enhance its competitiveness in the changing advertising

Investment in Competitivenessthe event that ADK is unable to secure and train its talented

market, ADK occasionally invests in the digital business

staff adequately, there could be a negative impact on its

domain. Moreover, ADK invests in data collection and R&D,

performance and financial condition. In addition, most of its

which would be critical in offering cross-communications

staff costs are fixed costs and represent the largest portion

program ideas, and invests in IT to enhance operationalof its selling, general and administrative expenses. On aefficiency. However, in the event that the ADK Group

consolidated basis, staff expenses represented as much as

is unable to realize benefits from its investments as

62.5% of SG&A expenses in fiscal 2012.

planned, its performance and financial condition could besignificantly affected.

eOverseas Operations

ADK has been striving to develop overseas revenues. In

h Management of Group Companies

fiscal 2012, the ADK Group generated 7.8% of its gross

The ADK Group consists of the parent company, 47

billings from overseas sources. In overseas markets, because

subsidiaries, 15 affiliates, and one related company, andof differences in culture, society, law, and commercial

operates in the advertising and publications businesses.

customs, a variety of problems may arise. In addition, both

Although the ADK Group strives hard to realize synergies

country risk and currency risk are inherent in conducting

among these companies, in the event that it is unable to dointernational business. Such risks are deemed to be evenso as planned, its performance and financial condition could

greater in newly emerging markets where high growth isbe significantly affected.

anticipated. In the event that the ADK Group is unable toexpand its overseas operations as planned, its performanceiand financial condition could be significantly affected.

ADK has maintained strategic operating and equity ties

Relationship with WPP plc

with WPP plc since August 1998, holding a 2.47% equityfContent Businessstake in WPP (as of December 31, 2012). WPP is the largest

ADK has been successful in the animation content business,shareowner of ADK, holding 24.32% of the voting rights.

as well as in sports and cultural event marketing, which

At the same time, both companies have non-executive

enables ADK to differentiate itself from competitors. ADK

directors on each other’s boards. By way of operating

continues to develop new content under existing and newalliances with WPP Group operating companies, including

business models. However, the demography of Japan is

JWT, ADK has formed a number of creative and promotional

aging and people’s preferences and media consumption

tie-ups and will continue to develop operations worldwide.

are changing. Accordingly, the content business is getting
more complicated, and competition is becoming tougher.

Although ADK plans to continue and expand its capitaland business alliance with WPP Group, in the event that
the ADK Group is unable to realize the benefits from thisrelationship or if the relationship should negatively change
in any way, there could be an impact on the ADK Group’s
performance and financial condition in the future.

30

30

Forward-Looking Statements and Risk Factors

Although the yen-translated market value of the equitylContingent Litigation Risks

stake in WPP was ¥38,773 million (at a stock price of £8.88

The ADK Group cannot disregard the possibility of becoming

per share) as of the end of December 2012, compared withinvolved in future lawsuits or disputes, either directly ora book value of ¥22,262 million (at a stock price of £3.6517

indirectly, due to various circumstances. If the Group does

per share under the lower-of-cost-or-market method), in the

become involved in a lawsuit or dispute, its business results

event of a major deterioration in the Group’s sterling-based

and financial position could be affected depending on thestock price, there is a possibility that ADK would have tonature, progress, and outcome of said lawsuit or dispute.

account for valuation losses on this holding.

m Risk Related to Legal Restrictions, etc.
jMarketable Securities and Investment Securities

The advertising activities of an advertiser are subject to

The ADK Group’s holdings of marketable and investment

legal restrictions under various laws—such as the Law

securities (including the aforementioned stake in WPP)

for Preventing Unjustifiable Lagniappes and Misleading

totaled ¥55,312 million, representing 28.3% of its ¥195,163

Representation, the Copyright Law, the Trademark Law, themillion in total assets as of December 31, 2012. Of thisPharmaceutical Affairs Law, and the Specified Commercial

amount, ¥51,167 million consisted of publicly traded equity

Transactions Law—as well as to various self-imposed

securities (including WPP plc shares), mostly the equity

restrictions regarding media publications, evaluation criteria,

alliance with WPP and cross-shareholdings in advertisingand so on. In the event that tightening or new establishment

clients and other trading partners. The balance of unrealizedof such legal restrictions, or self-imposed control restrains

gains on available-for-sale securities was ¥13,553 million

the advertising activities of an advertiser, this might

after deducting deferred tax liabilities on such gains

sometimes influence business results and the financial(compared with ¥4,063 million as of December 31, 2011).

status of the Group.

However, in the event of a major decline in the market

Also, although there are no laws or regulations specificprices of these holdings, ADK would be forced to accountto the advertising business itself, which is the main businessfor valuation losses.

of the Group, the accompanying businesses are subject torestrictions under various laws, such as the ConstructionkRetirement Benefits and Pension Plans

Industry Act and the Security Services Act. The Group is

ADK and some of its Group companies adopt combinations

also subject to the Law on the Prevention of Delay in theof defined contribution and defined benefits pension plans,Payment of Subcontracting Charges and Related Matters,

as well as lump-sum retirement allowances.

the Act for Protection of Computer Processed Personal Data

In the event of deterioration in pension asset

held by Administrative Organs, and other laws regulating

management performance, and a significant change inbusiness activities in general. Moreover, the Group is

actuarial assumptions, the ADK Group could face a negativerequired to strictly observe the Internal Control Reporting

impact on its performance and financial condition.

System stipulated in the Financial Instruments and Exchange

ADK and some of its domestic subsidiaries are

Act. Although we believe that none of the above canmembers of the Japan Advertising Industry Welfare Pension

severely affect the Group, in the event that we are unable toFund. Because the ADK Group cannot technically andappropriately respond to changes in these legal restrictions

reasonably define how much pension assets and liabilities

in the future, such inability could affect the business results

it is accountable for, the Group recognizes its annual

and financial status of the Group, such as an increase in

cash contribution to the fund as its periodic benefit costs

operational expenses required to cope with the situation.

applicable for the fund. In the case that the fund requires
the Group to make a larger contribution due to changes inMarch 29, 2013

the discount rate, pension asset performance, number ofmember companies and beneficiaries, and so on, the Groupmay need to recognize larger net periodic benefit costs.

ADK Annual Report 201231

Consolidated Balance Sheets
ASATSU-DK INC. and Consolidated Subsidiaries
December 31, 2012 and 2011
Thousands of
U.S. Dollars (Note 1)

Millions of Yen

ASSETS

2 012

2 011

2 012

¥ 24,489¥ 22,642$ 282,850

6,472

6,334

74,751

84,12888,956

971,680

(257)

(311)

(2,970)

7,032

6,841

81,224

534

1,134

6,172

2,364

1,618

27,301

124,762

127,214

1,441,008

Land

1,248

1,260

14,418

Buildings and leasehold improvements

4,738

4,503

54,719

Other

3,383

3,193

39,076

9,369

8,956

108,213(5,073)(4,644)(58,592)

4,296

4,312

49,62154,00939,902623,806

1,303

2,232

15,049

259

412

2,996

10,534

10,116

121,657

66,10552,662

763,508¥195,163¥184,188$2,254,137

CURRENT ASSETS:
Cash and time deposits
Marketable securities (Note 3)
Notes and accounts receivable		—trade (Note 13)		Allowance for doubtful receivables

Inventories
Deferred tax assets (Note 8)
Other current assets
				Total current assets
PROPERTY AND EQUIPMENT:				Total
Accumulated depreciation
				Net property and equipment
INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 3)
Investments in unconsolidated		

subsidiaries and affiliated companies

Deferred tax assets (Note 8)
Other assets
				

Total investments and other assets

TOTAL ASSETS

See notes to consolidated financial statements.

32

Financial Section

ASATSU-DK INC. and Consolidated Subsidiaries
December 31, 2012 and 2011
Thousands of
U.S. Dollars (Note 1)

Millions of Yen

LIABILITIES AND NET ASSETSCURRENT LIABILITIES:
Short-term debt (Note 5)
Current portion of long-term debt (Note 5)
Notes and accounts payable—trade (Note 13)
Income taxes payable (Note 8)
Accrued bonuses to employees
Accrued bonuses to directors
Allowance for sales returns
Other current liabilities
				Total current liabilities
LONG-TERM LIABILITIES:Long-term debt (Note 5)
Accrued retirement benefits (Note 6)
Allowance for retirement benefits to directors
Provision for loss on guarantees
Deferred tax liabilities (Note 8)
Other long-term liabilities
				Total long-term liabilities

2 012

2 011

2 012

¥

¥

$

60
246
67,130
337
359
12
840
6,564
75,54894
273
71,383
741
764
12
600
8,243
82,110693
2,844
775,355
3,894
4,148
140
9,701
75,810872,585

246
1,275
430
66
6,584
1,454
10,055

484
1,378
395
35
1,582
1,404
5,278

2,841
14,7284,971
761
76,046
16,790116,137

NET ASSETS (Note 7):
Shareholders’ equity
Common stock		 Authorized, 206,000,000 shares in 2012 and 2011;
		 Issued, 42,655,400 and 45,155,400 shares in			 2012 and 2011, respectively
Capital surplus
Retained earnings
Treasury stock—at cost				Total shareholders’ equity—net

37,581
13,24645,428(747)
95,50837,581
20,02443,557(7,632)
93,530434,065
152,991
524,694(8,627)
1,103,123

Accumulated other comprehensive income
		 Unrealized gains on available-for-sale securities
		 Deferred losses on derivatives under hedge accounting
		 Foreign currency translation adjustments				 Total accumulated other comprehensive income

13,554(2)(539)
13,013

4,063(77)(1,681)
2,305

156,547(24)(6,228)150,295

Subscription rights to shares (Note 19)
Minority interests

6
1,033

—
965

68
11,929109,560

96,8001,265,415¥195,163¥184,188$2,254,137

CONTINGENT LIABILITIES (Note 14)

				Total net assets
TOTAL LIABILITIES AND NET ASSETS
See notes to consolidated financial statements.

ADK Annual Report 201233

33

Consolidated Statements of Income andComprehensive Income
ASATSU-DK INC. and Consolidated Subsidiaries
Years Ended December 31, 2012 and 2011
Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2 012

2 011

2 012

GROSS BILLINGS (Note 18)¥350,822¥347,112$4,052,002

COST OF SALES (Note 18)

304,653

301,276

3,518,748

			Gross profit

46,16945,836533,254

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES(Notes 9 and 18)

42,993

41,983

496,573

			Operating income

3,176

3,853

36,681OTHER INCOME (EXPENSES):Interest and dividend income—net
Gains on sales of securities
Losses on sales of securities
Losses on valuation of securities

1,613
150
(214)
(28)

1,391
1,862
(78)
(1,279)18,625
1,735(2,474)
(326)

13
(824)
16
(61)
228

184
(7)
2
(94)
(806)

146
(9,521)
187
(699)
2,645

893

1,175

10,318

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

4,069

5,028

46,999INCOME TAXES (Note 8):
Current
Deferred
Total
INCOME BEFORE MINORITY INTERESTS

754
511
1,265
2,804

1,073
1,651
2,724
2,304

8,701
5,907
14,60832,391

23

10

267

Equity in earnings of affiliated companies—net
Additional retirement benefits paid to employees
Provision for bad debts reserve—net of reversals
Foreign exchange losses—net
Other—net (Note 10)
		Other income—net

MINORITY INTERESTS IN INCOME
NET INCOME
MINORITY INTERESTS IN INCOME
INCOME BEFORE MINORITY INTERESTSOTHER COMPREHENSIVE INCOME (Note 20)
		 Unrealized gains (losses) on available-for-sale securities
		 Deferred gains on derivatives under hedge accounting
		 Foreign currency translation adjustments
		 Share of other comprehensive income in equity-method			affiliates
		 Total other comprehensive income
COMPREHENSIVE INCOME
		 Total comprehensive income attributable to			 shareholders of ASATSU-DK INC.
		Minority Interests
See notes to consolidated financial statements.

34

Financial Section

¥

2,781

¥

2,294

$

32,124

¥23

¥10

$267

2,804

2,304

32,391

9,492
75
1,188

(3,636)17(451)

109,633
862
13,726—
10,755(27)(4,097)—124,221¥ 13,559¥ (1,793)$ 156,612

13,48970(1,776)(17)

155,798814

Consolidated Statements of Changes in Net Assets (1)ASATSU-DK INC. and Consolidated Subsidiaries
Years Ended December 31, 2012 and 2011

Millions of Yen

Year Ended December 31, 2012
Shareholders’ equity
Common stock Capital surplus

Balance as of December 31, 2011¥37,581¥20,024

Retainedearnings¥43,557

Total
Treasury stock
shareholders’—at cost
equity¥(7,632)¥93,530

Changes during the fiscal year
Dividend payments(852)

Net income

2,781

(852)
2,781

Acquisitions of treasury stock

(4)

(4)

6,889

111

	Disposals and cancellation of treasury
		stock(6,778)Adjustments of retained earnings due to		change in scope of consolidation

(57)

(57)

Other decrease of retained earnings

(1)

(1)

Net changes of items other than
		shareholders’ equity
Total changes during the fiscal year
Balance as of December 31, 2012—

(6,778)

1,871

6,885

1,978

¥37,581¥13,246¥45,428¥ (747)¥95,508

Millions of Yen

Accumulated other comprehensive income
Total
Unrealized Deferred
Subscription
Foreign
Minority
accumulated
gains onlosses onrights tocurrencyinterests
otheravailable- derivatives
sharestranslation
comprehensive
for-sale under hedge
adjustments
incomesecurities accounting

Balance as of December 31, 2011

¥ 4,063¥(77) ¥(1,681) ¥ 2,305

¥—

¥ 965

Total net
assets¥ 96,800

Changes during the fiscal year
Dividend payments(852)

Net income

2,781

Acquisitions of treasury stock(4)	Disposals and cancellation of treasury
		stock

111

Adjustments of retained earnings due to		change in scope of consolidation(57)

Other decrease of retained earnings(1)

Net changes of items other than
		shareholders’ equity

9,491

75

1,142

10,7086

68

10,782

Total changes during the fiscal year

9,491

75

1,142

10,7086

68

12,760

Balance as of December 31, 2012¥13,554¥ (2)¥ (539)¥13,013¥6¥1,033¥109,560

See notes to consolidated financial statements.

ADK Annual Report 201235

35

Consolidated Statements of Changes in Net Assets (2)ASATSU-DK INC. and Consolidated Subsidiaries
Years Ended December 31, 2012 and 2011

Millions of Yen

Year Ended December 31, 2011
Shareholders’ equity
Common stock Capital surplus

Balance as of December 31, 2010

¥37,581¥20,024

Retainedearnings

Total
Treasury stock—shareholders’at costequity¥45,907¥(7,718)¥95,794

Changes during the fiscal year
Dividend payments(4,641)

Net income

2,294

Acquisitions of treasury stock(4,641)
2,294
(2)

(2)

88

88

	Disposals and cancellation of treasury
		stock
Other decrease of retained earnings

(3)

(3)

Net changes of items other than
		shareholders’ equity
Total changes during the fiscal year
Balance as of December 31, 2011——

(2,350)86(2,264)¥37,581¥20,024¥43,557¥(7,632)¥93,530

Millions of Yen

Accumulated other comprehensive income
Total
Unrealized
DeferredForeignaccumulated
gains onlosses on
currency
otheravailable- derivatives
translation
comprehensive
for-sale under hedge
adjustments
incomesecurities accounting

Balance as of December 31, 2010

¥ 7,727¥(94)¥(1,258)¥ 6,375

Minority
interests¥999

Total net
assets¥103,168

Changes during the fiscal year
Dividend payments(4,641)

Net income

2,294

Acquisitions of treasury stock(2)

	Disposals and cancellation of treasury
		stock

88

Other decrease of retained earnings(3)

Net changes of items other than36

		shareholders’ equity(3,664)17(423)(4,070)(34)(4,104)

Total changes during the fiscal year

(3,664)17(423)(4,070)(34)(6,368)

Balance as of December 31, 2011

¥ 4,063¥(77)¥(1,681)¥ 2,305¥965¥ 96,800

Financial Section

Consolidated Statements of Changes in Net Assets (3)ASATSU-DK INC. and Consolidated Subsidiaries
Years Ended December 31, 2012 and 2011

Thousands of U.S. Dollars (Note 1)

Year Ended December 31, 2012
Shareholders’ equity
Common stock Capital surplus

Balance as of December 31, 2011

$434,065$231,276

Retainedearnings$503,089

Total
Treasury stock—shareholders’at costequity$(88,157)$1,080,273

Changes during the fiscal year
Dividend payments(9,836)

Net income

32,124(9,836)32,124

Acquisitions of treasury stock

(49)

(49)

79,5791,294	Disposals and cancellation of treasury
		stock(78,285)

Adjustments of retained earnings due to		change in scope of consolidation

(668)

(668)

Other decrease of retained earnings

(15)

(15)

Net changes of items other than
		shareholders’ equity
Total changes during the fiscal year
Balance as of December 31, 2012—

(78,285)

21,60579,53022,850$434,065$152,991$524,694$ (8,627)$1,103,123

Thousands of U.S. Dollars (Note 1)

Accumulated other comprehensive income
Total
Unrealized Deferred
Subscription
Foreign
Minority
accumulated
gains onlosses onrights tocurrencyinterests
otheravailable- derivatives
sharestranslation
comprehensive
for-sale under hedge
adjustments
incomesecurities accounting

Balance as of December 31, 2011

$ 46,930$(886) $(19,423) $ 26,621$ — $11,148

Total net
assets$1,118,042

Changes during the fiscal year
Dividend payments(9,836)

Net income

32,124

Acquisitions of treasury stock(49)

	Disposals and cancellation of treasury
		stock

1,294

Adjustments of retained earnings due to		change in scope of consolidation(668)

Other decrease of retained earnings(15)

Net changes of items other than
		shareholders’ equity

109,617862

13,195

123,67468

781

124,523

Total changes during the fiscal year

109,617862

13,195

123,67468

781

147,373

Balance as of December 31, 2012

$156,547$ (24)$68 $11,929$1,265,415$ (6,228) $150,295

See notes to consolidated financial statements.

ADK Annual Report 201237

37

Consolidated Statements of Cash FlowsASATSU-DK INC. and Consolidated Subsidiaries
Years Ended December 31, 2012 and 2011
Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2 012
OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:		Income taxes—paid		 Depreciation and amortization
		 Equity in earnings of affiliated companies
		 Losses (gains) on sales of securities
		 Losses on valuation of securities
		 Changes in working capital and liabilities:				 Decrease in notes and accounts receivable				(Increase) decrease in inventories				 (Decrease) in notes and accounts payable
		 Increase in provision for bad debts
		 (Decrease) increase in accrued retirement benefits
		 (Increase) decrease in receivables
		 (Decrease) increase in payables
		Others—net
					Total adjustments					Net cash provided by operating activities

2 012¥ 4,069¥ 5,028$ 46,999(1,234)
1,341
(13)
64
28

(680)
975
(184)
(1,784)
1,279(14,247)
15,491
(146)
739
326

4,758
(41)
(5,304)
1
(126)
(15)
(614)
(333)
(1,488)
2,581

3,536
1,318
(3,099)
47
35
624
490
1,372
3,929
8,957

54,954(472)(61,257)
15(1,456)(170)(7,095)(3,869)(17,187)
29,812INVESTING ACTIVITIES:(Decrease) increase in time deposits—net
Proceeds from sales of securities
Purchases of securities
Proceeds from sales of property and equipment
Purchases of property and equipment
Purchases of intangible assets
Other investing activities					Net cash (used for) provided by investing activities(1,054)
1,156
(459)
26
(241)
(666)
(481)
(1,719)

1,213
5,085
(819)
27
(351)
(1,571)
196
3,780(12,176)
13,348(5,304)295(2,779)(7,698)(5,541)(19,855)

FINANCING ACTIVITIES:(Decrease) increase in short-term debt—net
Repayment of long-term debt
Purchases of treasury stock—net
Dividends paid
Other financing activities				 Net cash used for financing activities

(34)
(276)
108
(845)
(137)
(1,184)

10
(276)
86
(4,600)(164)(4,944)(394)(3,185)
1,245(9,756)(1,589)(13,679)

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON
CASH AND CASH EQUIVALENTS

1,105

(450)

12,761783¥ 7,343

CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR

26,51919,127306,297

CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATEDSUBSIDIARIES

34

—

395

CASH AND CASH EQUIVALENTS RESULTING FROM MERGERBETWEEN CONSOLIDATED SUBSIDIARIES AND UNCONSOLIDATEDSUBSIDIARIES

—

49

—

CASH AND CASH EQUIVALENTS OF DECONSOLIDATED SUBSIDIARIES

(72)

—

(831)

¥27,264¥26,519$314,900

NET INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, END OF THE YEAR
See notes to consolidated financial statements.

38

2 011

Financial Section

¥

$

9,039

Notes to Consolidated Financial Statements
ASATSU-DK INC. and Consolidated Subsidiaries
Years ended December 31, 2012 and 2011

1.	BASIS OF PRESENTING CONSOLIDATEDFINANCIAL STATEMENTS

Under the control or influence concept, those companies inwhich the Company, directly or indirectly, is able to exercise
control over operations are fully consolidated, and thosecompanies over which the Group has the ability to exercise

The accompanying consolidated financial statements havesignificant influence are accounted for by the equity

been prepared from the accounts maintained by ASATSU

method.

DK INC. (the “Company”) and its consolidated subsidiaries
in accordance with the provisions set forth in the Financial

Twenty-three (23) subsidiaries have a fiscal year end

Instruments and Exchange Law and its related accountingof December 31, as does the Company. One subsidiary

regulations, and in conformity with accounting principles

has a fiscal year end of September 30. The consolidated

and practices generally accepted in Japan, which arefinancial statements include the financial statements ofdifferent in certain respects as to the application andthis subsidiary for its respective fiscal years after making

disclosure requirements of International Financial Reporting

appropriate adjustments for significant transactions during

Standards.

the period from its respective year-end date to the yearend date of the consolidated financial statements.

In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made toInvestment in one (1) (one (1) in 2011) affiliated company,

the consolidated financial statements issued domesticallyin which the Company owns interests of 20% to 50%, isin order to present them in a form that is more familiar toaccounted for by the equity method. Investments in thereaders outside Japan.

remaining twenty-three (23) (twenty-seven (27) in 2011)
unconsolidated subsidiaries and fourteen (14) (fifteen (15)The consolidated financial statements are stated inin 2011) affiliated companies are stated at cost. If these

Japanese yen, the currency of the country in which

companies had been fully consolidated, or the equity

the Company is incorporated and mainly operates. The

method of accounting had been applied to the investments

translation of Japanese yen amounts into U.S. dollar

in these companies, the effect on the accompanying

amounts is included solely for the convenience of readersconsolidated financial statements would not be material.

outside Japan and has been made at the rate of ¥86.58 to
US$1.00, the approximate rate of exchange on December

ADK Digital Communications Inc., which was not included

31, 2012. Such translation should not be construed as ain the scope of consolidation as of December 31, 2011, wasrepresentation that the Japanese yen amounts could be

newly consolidated in 2012 due to its increased materiality

converted into U.S. dollars at that or any other rate.

on the consolidated financial statements.
Neo Shobo Inc. was excluded from the scope of

2.	SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES

consolidation in 2012 because it is under liquidation anda. Consolidation—The consolidated financial statements

Goodwill is amortized on a straight line basis over the

include the accounts of the Company and its significant

estimated useful life, up to a maximum of 20 years, in whichtwenty-four (24) (twenty-four (24) in 2011) majority-owned

each acquisition is expected to benefit the Group. Where

subsidiaries (together, the “Group”).

the amount is immaterial, goodwill is charged or credited toits effect on the consolidated financial statements was
immaterial.

income in the year incurred.

ADK Annual Report 201239

39

All significant inter-company balances and transactions

Cash equivalents include time deposits, certificates ofhave been eliminated in consolidation. All material

deposit and money management funds invested in bonds

unrealized profits included in assets resulting from intra-

for the short term, all of which mature or become duegroup transactions are eliminated.

within three months of the date of acquisition.

b. Cash and Cash Equivalents—Cash and cash equivalents

The balances of cash and time deposits as of December

consist of cash, demand deposits with banks and those31, 2012 and 2011 in the consolidated balance sheets were

deposits that are short-term investments, which are readily

reconciled to cash and cash equivalents for the years thenconvertible into cash and are not exposed to significant risk

ended as follows:of changes in value.
Thousands of
U.S. Dollars

Millions of Yen

2 012
Balance sheet:
Cash and time deposits
Securities
Total
Less:
Time deposits more than three months
Securities not applicable to cash equivalents(e.g., securities other than money management funds)
Cash and cash equivalents

2 011

2 012

¥24,489
6,472
30,961¥22,642
6,334
28,976$282,850
74,751
357,601

3,697

2,417

42,701—¥27,26440¥26,519—$314,900c. Inventories—Inventories consist principally of billablei) trading securities, which are held for the purpose of

production orders in process, which are stated at costearning capital gains in the near term, are reported atdetermined by the specific identification method. Billable

fair value, and the related unrealized gains and losses areproduction orders in process are primarily costs incurredreflected in earnings in the period such gains or losses arise;on behalf of clients when providing advertising servicesii) held-to-maturity debt securities, which are expected

such as marketing and branding consultation, designing andto be held to maturity with positive intent and ability, areproducing sales promotion programs, and event marketing

reported at cost after amortization or accumulation of any

to clients. Inventories also include publication merchandise.

differences between cost and face value; and iii) availablefor-sale securities that are not classified as either of the

Furthermore, the Group’s inventories include a broad range

aforementioned securities are reported at fair value, andof various copyrights related to advertising operations andany resulting unrealized gains and losses, net of applicable

expenses related to operations in progress, and appropriate

taxes, are reported as unrealized gains (losses) on available-classifications are not possible. They are therefore shown at

for-sale securities in net assets. As of December 31, 2012

an estimated aggregate amount.

and 2011, the Company and its consolidated subsidiaries
had no held-to-maturity debt securities.

Write-downs of inventories held for sale in the ordinary
course of business due to decreased profitability for the

If the market values of held-to-maturity debt securities,

years ended December 31, 2012 and 2011 were as follows:

equity securities issued by unconsolidated subsidiaries

Millions of Yen

2 012
Cost of sales

¥493

2 011
¥488

Thousands of
U.S. Dollars

and affiliated companies, and available-for-sale securities
decline significantly, such securities are stated at fair

2 012

value, and the difference between fair value and the$5,694carrying amount is recognized as a loss in the period of
the decline. If the fair value of equity securities issued

d. Marketable and Investment Securities—All applicablesecurities are classified and accounted for, depending on
management’s intent, as follows:40

Financial Section

by unconsolidated subsidiaries and affiliated companies
that are not accounted for by the equity method is notreadily available, such securities are written down to net

asset value with a corresponding charge in the statement

j. Provision for Loss on Guarantees—The Group setsof income and comprehensive income when the net asset

aside a reserve for losses on guarantees of liabilities owed

value declines significantly. Such adjusted fair value or net

by non-consolidated subsidiaries, affiliated companies orasset value becomes the carrying amount of the securities

business associates. The amount of such provision reflects

for the beginning of the next year.

estimated potential losses based on such factors as thefinancial condition of the parties whose liabilities aree. Allowance for Doubtful Receivables—A generalguaranteed.

provision is made for doubtful receivables based on theactual rate of uncollected receivables of the Company

k. Retirement Benefits and Pension Plans—The Groupin prior years. Provisions are also made against specificaccounted for the liability for retirement benefits based

receivables as and when required.

on the projected benefit obligations and plan assets atthe balance sheet date, except for the liability of thef. Property and Equipment—Property and equipment are

Japan Advertising Industry Pension Fund, as noted below.

carried at cost. Depreciation of property and equipment

Actuarial differences are amortized over 13 years, which isother than buildings acquired on and after April 1, 1998,

within the average remaining service lives of the employees

is computed mainly by the declining-balance method atof each consolidated company on a straight-line basis, andrates based on the estimated useful lives of the assets.

past service costs are expensed as they are incurred.

Depreciation of buildings, acquired after that date aredepreciated by the straight-line method over their

The Company and certain of its domestic subsidiaries are

estimated useful lives rates based on their estimated usefulmembers of the Japan Advertising Industry Pension Fund.

lives. Assets leased under finance leases are depreciated by

Because the Group cannot technically or reasonably define

the straight-line method over the lease term. The estimatedhow much pension assets and liabilities are attributable touseful lives of major assets are as follows:

the Group, the Group recognizes its annual cash contribution
to the fund as its periodic benefit costs applicable for the

Buildings and leasehold improvements

3—65 years

fund but not as pension assets and liabilities.

g. Impairment of Long-lived Assets—The Company reviews

The directors of some domestic subsidiaries are entitled,

its long-lived assets for impairment whenever events orin most circumstances, to lump-sum severance paymentschanges in circumstance indicate the carrying amountbased on current rates of pay, length of service and otherof an asset or asset group may not be recoverable. An

factors. The Group accrued 100% of the obligations based on

impairment loss is recognized if the carrying amount of aninternal regulations under the assumption that all directors

asset or asset group exceeds the sum of the undiscounted

retired at the balance sheet date.

future cash flows expected to result from the continued
use and eventual disposition of the asset or asset group.

l. Provision for Sales Returns—One domestic consolidated

The impairment loss is measured as the amount by which

subsidiary provides allowances, based on the actual

the carrying amount of the asset exceeds its recoverable

return rates over a certain period, for losses on returns ofamount, which is the higher of the discounted cash flows

publications and losses on unsold publications.

from the continued use and eventual disposition of theasset or the net selling price at disposition.

m. Leases—In March 2007, the Accounting Standards Boardof Japan (ASBJ) issued ASBJ Statement No. 13, “Accounting

h. Accrued Bonuses to Employees—The Group accrued theStandard for Lease Transactions,” which revised theestimated amount of bonuses to be paid for employees.

previous accounting standard for lease transactions issuedin June 1993.

i. Accrued Bonuses to Directors—The Group accrued theestimated amount of bonuses to be paid for directors of

ASBJ Statement No. 13 requires all finance leasecertain domestic subsidiaries.

transactions to be capitalized so that lease assets and leaseobligations are recognized on the balance sheet. However,

ADK Annual Report 201241

41

the standard allows certain leases to be accounted for as

Differences arising from such translation are shown as

operating lease transactions, provided those transactions“Foreign currency translation adjustments” in a separate

were contracted on or before the end of the year before

component of net assets.

the fiscal year of adoption of the revised Statement
and provided the leased property is not deemed to be

p. Derivatives and Hedging Activities—The Group uses

transferred to the lessee. In such cases, information to show

forward exchange contracts to manage its exposure to

the impact had such leases been capitalized is disclosed influctuations in foreign exchange. The Group also has

the notes to the lessee’s consolidated financial statements.

investments in bonds with embedded derivatives, some ofwhich have terms and conditions where risk exists that the

The Group applied ASBJ Statement No. 13 effective fromoriginal face value of such securities might not be redeemedfiscal 2009 but continues to report certain applicable leaseeven if there is no default. However, because the maximum

transactions as operating leases. For information on suchamount of any such losses would be limited to the face

operating leases, please refer to Note 11. Leases. In major

value of such bonds, the impact of the risk is limited.

overseas consolidated subsidiaries, leases are accounted for
as finance leases and leased assets are capitalized.

Derivatives are recognized as either assets or liabilities atfair value and gains or losses on derivative transactions aren. Software and R&D Costs—Research-and-development

recognized in the consolidated statements of income andcosts are charged to income when incurred. Capitalized

comprehensive income, unless such derivatives qualify forsoftware for internal use amounting to ¥2,241 million

specific hedge accounting.

($25,833 thousand) in 2012 and ¥2,328 million in 2011,
included in “Other assets” of Investments and Other Assets,

Short-term receivables and payables denominated in

was amortized by the straight-line method based on

foreign currencies for which foreign exchange forward

estimated useful lives of three to five years.

contracts are used to hedge the risk of foreign currency
fluctuations are translated at the contracted rate if theo. Translation of Foreign Currency Amounts—Short-forward contracts qualify for specific hedge accounting.

term and long-term monetary receivables and payables
denominated in foreign currencies are translated into

q. Per Share Information—The computation of basic net

Japanese yen at the exchange rates at the balance sheet

income per share is based on net income attributable todates. Foreign exchange gains and losses from translation

shareholders of common stock and the weighted average

are recognized in the consolidated statements of income

number of shares outstanding during each year, and dilutedand comprehensive income in the cases where notnet income per share is computed based on net income

hedged by foreign exchange derivatives or where hedging

attributable to shareholders of common stock after giving

transactions do not qualify for hedge accounting.

effect to the net income of an affiliated company that has
the dilutive potential of shares and a weighted average

The accounts of consolidated foreign subsidiaries andnumber of shares outstanding during each year. The

affiliated companies are translated into Japanese yen as

average number of common shares used in the computation

follows:

was 42,250,172 and 42,187,505 shares for the fiscal yearsa.	Asset and liability items are translated at the exchange

ended December 31, 2012 and 2011, respectively.

rates at the balance sheet dates;b.	Components of shareholders’ equity are translated at

The cash dividend per common share presented in thetheir historical rates at acquisition or upon occurrence;accompanying consolidated statements of income andandcomprehensive income is dividends applicable to netc.	Revenues, expenses and cash flow items are translated
into Japanese yen at the average exchange rate for each

income of the respective years including dividends paid
after the end of the respective year.

year.

r. ESOP Trust—The Company is committed to reinforcing
measures to ensure the welfare of its employees, who

42

Financial Sectionrepresent the driving force behind the Group’s growth.

The funded status of the plan is fully recognized as a

In addition, the Company seeks to increase employees’

liability or asset on the balance sheet. With respect to theawareness about its performance and stock price and thus

amortization method of the expected benefit, the benefit

boost medium- and long-term corporate value. To achieve

formula basis is newly allowed as an option, in addition

these aims, the Company has introduced an ESOP trust as

to the straight-line basis. In addition, the method for

an incentive plan.

determining the discount rate is amended.

An ESOP trust is a trust-type employee incentive plan

(2) Date of adoptionthat uses the Company's employee shareholder group

The Company and its domestic consolidated subsidiaries

framework. Specifically, the Company established a trust,

will adopt the accounting standard effective the fiscal year

the beneficiaries of which are employee members of theending December 31, 2014. The standard and guidance will

ADK Employee Shareholding Association (the “Association”)

not be applied retrospectively.

who satisfy certain requirements. The trust purchases acertain number of ADK shares, determined according to the(3) Impact of the adoption of the accounting standards

Association’s planned share purchases during the period

Currently, the Company is in the process of measuring thefrom April 2010 to March 2015. Such shares are acquired

effects of applying the revised accounting standard.

over a certain purchase period. Subsequently, the trust sells
shares to the Association at the market price each month on

t. Changes in Accounting Estimates—The Company

a set date.

made the decision in the fiscal year ended December 31,
2012, to relocate its head office in the summer of 2014.

The Company guarantees the losses in the Trust AccountConsequently, because a more precise estimate of asset(the “Trust Account”) resulting from the purchase and sale ofretirement obligations could be determined, the Company

the ADK shares and accounts for the transactions involving

changed the asset retirement obligations estimate thatthe trust as its own. Accordingly, shares of the Company

had been booked to address obligations that are incurred

held by the trust and the assets, liabilities, expenses andto restore the current premises to their original state at

income of the trust were recorded in the accompanying

the time of relocating, in accordance with the respective

consolidated financial statements.

real estate lease contracts for the building. Consequently,
compared with amounts calculated using the previous

For the purpose of calculating basic net income and net

estimation, consolidated operating income and income

assets per common stock, the common stock held by the

before income taxes and minority interests are ¥28 million

ESOP trust is considered treasury stock.

($323 thousand) lower for the fiscal year ended December
31, 2012.

s. New Accounting Pronouncements—“AccountingStandard for Retirement Benefits” (ASBJ Statement No. 26,

u. Supplemental Information—Effective January 1,

May 17, 2012) and “Guidance on Accounting Standard for2012, the Company has applied “Accounting Standard for

Retirement Benefits” (ASBJ Guidance No. 25, May 17, 2012)

Accounting Changes and Error Corrections” (ASBJ Statement
No. 24, December 4, 2009) and “Guidance on Accounting(1) Overview

Standard for Accounting Changes and Error Corrections”

Actuarial gains and losses and past service costs are(ASBJ Guidance No. 24, December 4, 2009) for accounting

required to be recognized in net assets, net of tax effects.

changes and corrections of prior period errors.

ADK Annual Report 201243

43

3. MARKETABLE AND INVESTMENT SECURITIESThe fair value of marketable and investment securities as of December 31, 2012 and 2011 was as follows:
Millions of Yen

2012
Cost
Available-for-sale:
Equity securities
Debt securities
Other
Total

¥30,173
1,296
177¥31,646

Unrealized gains

Unrealized losses¥21,400
4
8¥21,412

¥404
25
0
¥429

Cost

¥30,5871,460
199¥32,246

Unrealized gains

Unrealized losses¥7,0101
9¥7,020

¥544
69
13
¥626

Fair value¥37,053
1,392
195¥38,640

Thousands of U.S. Dollars

2012
Cost
Available-for-sale:
Equity securities
Debt securities
Other
Total

¥51,169
1,275
185¥52,629
Millions of Yen

2011
Available-for-sale:
Equity securities
Debt securities
Other
Total

Fair value$348,499
14,9692,044$365,512

Unrealized gains

Unrealized losses$247,17046
93$247,309$4,666289
0$4,955

Fair value$591,003
14,7262,137$607,866

Available-for-sale securities sold during the years ended December 31, 2012 and 2011 were as follows:
Millions of Yen

2012
Proceeds
Available-for-sale:
Equity securities
Debt securities
Other
Total

¥1,0390
106¥1,145

Realized gains

¥140
0
18
¥158

Proceeds

¥ 707
559
27
¥1,293

Proceeds

44

Financial Section

Realized gains

¥598
9
—
¥607

Realized losses

¥79
1
—
¥80

Thousands of U.S. Dollars

2012
Available-for-sale:
Equity securities
Debt securities
Other
Total

¥79
0
11
¥90
Millions of Yen

2011
Available-for-sale:
Equity securities
Debt securities
Other
Total

Realized losses$12,000
0
1,225$13,225

Realized gains$1,6170
208$1,825

Realized losses

$ 912
0
128
$1,040Investments in nonconsolidated subsidiaries and affiliates as of December 31, 2012 and 2011 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2 012
Investment securities (Stocks)
Investments and other assets
Other assets (Capital)

2 011

2 012

¥1,302¥2,057$15,038

394

174

4,551

Impairment losses on available-for-sale equity securities

considered to be a significant decline and impairment losses

for the years ended December 31, 2012 and 2011 were ¥1

are recognized. Further, where the decline is less than 50%

million ($11 thousand) and ¥430 million, respectively.

but more than 30% of cost and that decline is consistent, if,based on analysis of the specific financial and operational

When the fair value of securities has declined to below

conditions of each investee, recovery of fair value to cost is

50% of cost and there is no contradictory evidence, this isconsidered unlikely, an impairment is recognized.

4. LONG-LIVED ASSETSAt December 31, 2012, the Company reviewed its long-impairment loss of ¥255 million for the year as Other—net

lived assets for impairment, and as a result, recognizedin OTHER INCOME (EXPENSES). That total included ¥249

an impairment loss of ¥70 million ($809 thousand) for

million for Other assets (software), ¥4 million for buildings

the year as Other—net in OTHER INCOME (EXPENSES).

and ¥2 million for land. The recoverable amount of Other

The recoverable amount of Other assets (software) was

assets (software) was measured at zero, as its profitability

measured at zero, as its profitability has declined.

has declined. The recoverable amount of land and buildings
was measured at the higher of value in use or net selling

At December 31, 2011, the Company reviewed its long-price.

lived assets for impairment, and as a result, recognized an

ADK Annual Report 2012

45

45

5. SHORT-TERM AND LONG-TERM DEBT
The weighted average annual interest rates applicable to the short-term debt were 1.79% and 1.82% at December 31, 2012
and 2011, respectively.
Long-term debt as of December 31, 2012 and 2011 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2 012
Loans due through 2015*
Current portion
Total

2 011

¥ 492
(246)
¥ 246

2 012

¥ 757
(273)
¥ 484

Thousands of
U.S. Dollars

Millions of Yen

2 012
Obligations under finance leases*
Current portion
Total

2 011

¥ 305
(113)
¥ 192

$ 5,685(2,844)$ 2,841

2 012

¥ 375
(102)
¥ 273

$ 3,523(1,305)$ 2,218*The weighted average interest rates or the averages of interest rates applicable to loans outstanding at the end of each fiscal year
weighted by amounts of such loans as of said date, for loans due after more than one year were 0.77% p.a. in 2012 and 1.31% p.a. in 2011.
The weighted average interest rates of the current portion were 1.92% p.a. in 2012 and 2.08% p.a. in 2011. The weighted average interest
rates of obligations under finance leases, including the current portion, were 3.56% and 2.14% in 2012 and 2011, respectively.

The repayment schedule of long-term debt as of December 31, 2012 was as follows:Year Ending December 31

Millions of Yen

2013
2014
2015
2016 and thereafter
Total

¥246
164
82
—
¥492

Thousands of
U.S. Dollars$2,844
1,894
947—$5,685

The repayment schedule of obligations under finance leases as of December 31, 2012 was as follows:Year Ending December 31

Millions of Yen

2013
2014
2015
2016
Thereafter
Total

¥113
104
68
20
—
¥305

Thousands of
U.S. Dollars$1,305
1,202
785
231
—
$3,523

Details on long-term debt used for the ESOP trust at December 31, 2012 were as follows:
Current portion of long-term debt: ¥164 million ($1,894 thousand)Long-term debt: ¥246 million ($2,841 thousand)Assets pledged in place of guarantee monies to suppliers, such as newspapers, as of December 31, 2012 and 2011 were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

2 012
Cash and time deposits
Investment securities

46

Financial Section

2 011
¥57
11

2 012
¥57
8

$658
127

6. RETIREMENT BENEFITS AND PENSION PLANS
The Company and certain of its consolidated subsidiaries

provided by the Japan Advertising Industry Pension Fund,

provide two types of post-employment benefit plans,

as well as unfunded lump-sum payment plans under which

namely defined contribution pension plans and defined

all eligible employees are entitled to benefits based on

benefit pension plans. The latter consists of cash balancelevels of salary, length of service and other factors.

plans, funded non-contributory pension plans and plans
Liabilities for employees’ retirement benefits and pension plans as of December 31, 2012 and 2011 comprised the following:*
Thousands of
U.S. Dollars

Millions of Yen

2 012
Projected benefit obligation
Fair value of plan assets
Unrecognized actuarial differences
Accrued retirement benefits

2 011¥11,864(8,704)(1,885)¥ 1,275

2 012¥11,051(7,625)(2,048)¥ 1,378$ 137,031(100,531)(21,772)$ 14,728

Components of net periodic benefit costs for the years ended December 31, 2012 and 2011 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2 012
¥ 854
199
(114)
289
907
¥2,135Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial differences
Contributions paid during the period, etc.*
Net periodic benefit costs

2 011

2 012

¥ 843
192
(109)

258

942
¥2,126$ 9,864
2,298(1,317)
3,338
10,476$24,659

The discount rates used by the Group were 1.3% and 2.0%

is allocated equally to each service year over the estimatedas of December 31, 2012 and 2011, respectively. The rate ofnumber of total service years. Unrecognized actuarial

expected return on plan assets used by the Group was 1.5%

differences are amortized over 13 years on a straight-line

as of December 31, 2012 and 2011. The estimated amount ofbasis commencing from the succeeding period. Prior service

retirement benefits to be paid at the future retirement datecosts are charged to income when incurred.

* For plans provided by the Japan Advertising Industry Pension Fund, the Group cannot technically or reasonably allocate pension
assets and liabilities to the Group’s account. Therefore, the Group recognizes its annual cash contribution to this fund as its periodic
benefit costs, but does not recognize pension assets and liabilities as stated above.
		 Contributions paid during the period, etc., stated in the table shown above include the Group’s cash contribution for the period to theJapan Advertising Industry Pension Fund.
		 The information of total pension assets and liabilities of the Japan Advertising Industry Pension Fund, the Group’s share of thecontribution to the fund and the prorated share of pension assets or liabilities for the Group as measured by the share of thecontribution to the fund are as follows: (Note: This prorated calculation is simply for informational purposes only.)

ADK Annual Report 201247

47

a. Total pension assets and liabilities of the fundThousands of
U.S. Dollars

Millions of Yen

Pension liabilities*
Pension assets
Net assets (deficit)

M a r c h 31 , 2 012

M a r c h 31 , 2 011

M a r c h 31 , 2 012¥(90,787)
70,319¥(20,468)¥(88,314)
71,037¥(17,277)$(1,048,591)
812,185$ (236,406)

A p r il 1 , 2 011–
M a r c h 31 , 2 012

A p r il 1 , 2 010 –M a r c h 31 , 2 011

10.99%
6.49%
17.48%

10.39%
6.09%
16.48%*The discount rate for the pension liabilities was mainly 5.5%.

b. The Group’s share of the contribution to the fund

Share of the Group as employer
Share of Employees
Total

c. Prorated share of pension assets or liabilities as measured by the Group’s share of the contribution to the fundMillions of Yen

March 31, 2012

Share of the Group
Share of employees
as employer
Pension liabilities
Pension assets
Net deficit¥(9,976)
7,727¥(2,249)¥(5,893)
4,565¥(1,328)
Millions of Yen

March 31, 2011

Share of the Group
Share of employees
as employer
Pension liabilities
Pension assets
Net deficit¥(9,178)
7,383¥(1,795)¥(5,372)
4,321¥(1,051)

Thousands of U.S. Dollars

March 31, 2012

Share of the Group
Share of employees
as employer
Pension liabilities
Pension assets
Net deficit$(68,064)
52,726$(15,338)

d. Supplemental information

Prior service cost is amortized over 20 years by the

The Japan Advertising Industry Pension Fund’s total net

straight-line method, and the Group expensed additional

pension deficit of ¥20,468 million ($236,406 thousand) andcontributions of ¥114 million ($1,317 thousand) and ¥116

¥17,277 million as of March 31, 2012 and 2011, respectively,

million during the periods from April 1, 2011 to March 31,

stated in “a” above equals the sum of prior service liabilities

2012, and from April 1, 2010 to March 31, 2011, respectively,of ¥6,637 million ($76,657 thousand) and ¥7,161 million andfor this amortization.

net accumulated deficit carry-forward of ¥13,830 million($159,737 thousand) and ¥10,115 million, respectively.

48$(115,223)
89,247$ (25,976)

Financial Section

7. CHANGES IN NET ASSETS
The type of and the changes in the number of shares issued and treasury stock as of and for the years ended December 31,
2012 and 2011 were as follows:

2012
Type of shares

Shares issued

Treasury stock

Common stock

Common stock

45,155,400—(2,500,000)
42,655,400

2,941,598
1,987(2,563,036)
380,549

Number of shares as of December 31, 2011
Increase in the number of shares
Decrease in the number of shares
Number of shares as of December 31, 2012

Notes: 1. The decrease in the number of shares issued was due to the cancellation of 2,500,000 shares by resolution of the board of
directors.
			

2. The increase in the number of treasury stock was due to the purchase of 1,987 less-than-one-unit shares.

			

3. The decrease in the number of treasury stock was due to the cancellation of 2,500,000 shares by resolution of the board of
directors, sales of 63,000 shares by the ESOP trust and sales of 36 less-than-one-unit shares.

2011
Shares issued
Type of shares
Number of shares as of December 31, 2010
Increase in the number of shares
Decrease in the number of shares
Number of shares as of December 31, 2011

Treasury stock

Common stock

Common stock

45,155,400——
45,155,400

2,990,104
1,153(49,659)
2,941,598

Notes: 1. The increase in the number of treasury stock was due to the purchase of 1,153 less-than-one-unit shares.
			

2. The decrease in the number of treasury stock was due to sales of 49,500 shares by the ESOP trust and sales of 159 less-thanone-unit shares.

Information related to dividends for the fiscal years ended December 31, 2012 and 2011 was as follows:

Dividends paid during the fiscal year ended December 31, 2012
Resolution by:

Board of Directors
February 22, 2012

Board of Directors
August 10, 2012

Total amount of dividends*¥422 million¥422 million

Dividend per share

¥10

¥10

Record date

December 31, 2011

June 30, 2012

Effective date

March 21, 2012

September 10, 2012

*Dividends paid to the ESOP trust in the amount of ¥3 million ($35 thousand) and ¥3 million ($35 thousand) have been excluded from thetotal amount of dividends at February 22, 2012 and August 10, 2012, respectively.

ADK Annual Report 2012

49

49

Dividends whose record date was in the fiscal year ended December 31, 2012 but whose effective date was in the following
fiscal year.

Resolution by:

Board of Directors
February 12, 2013

Total amount of dividends*¥4,269 million

Fund for dividends

Retained earnings

Dividend per share¥101

Record date

December 31, 2012

Effective date

March 18, 2013

*Dividends paid to the ESOP trust in the amount of ¥30 million ($347 thousand) have been excluded from the total amount of dividends.

Dividends paid during the fiscal year ended December 31, 2011
Resolution by:

Board of Directors
February 10, 2011

Board of Directors
August 10, 2011

Board of Directors
October 13, 2011

Total amount of dividends*¥421 million¥421 million¥3,756 million

Dividend per share

¥10

¥10

¥89

Record date

December 31, 2010

June 30, 2011

October 31, 2011

Effective date

March 14, 2011

September 12, 2011

December 26, 2011

*Dividends paid to the ESOP trust in the amount of ¥4 million, ¥3 million and ¥33 million have been excluded from the total amount ofdividends at February 10, 2011, August 10, 2011, and October 13, 2011, respectively.

Dividends whose record date was in the fiscal year ended December 31, 2011, but whose effective date was in the following
fiscal year

Resolution by:

Board of Directors
February 22, 2012

Total amount of dividends*¥422 million

Fund for dividends

Retained earnings

Dividend per share¥10

Record date

December 31, 2011

Effective date

March 21, 2012

*Dividends paid to the ESOP trust in the amount of ¥3 million have been excluded from the total amount of dividends.

50

Financial Section

8. INCOME TAXESThe Company and its domestic consolidated subsidiaries are subject to corporate, inhabitant and enterprise taxes based on
income. The normal effective statutory tax rate for these taxes in the aggregate resulted in approximately 40.69% for 2012
and 2011, respectively. Overseas subsidiaries are subject to income taxes of the countries in which they operate.
The deferred tax assets and liabilities as a result of the tax effects of significant temporary differences as of December 31,
2012 and 2011 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Deferred tax assets:
Allowance for doubtful receivables
Accrued bonuses
Accrued retirement benefits
Inventories
Investment securities
Loss on settlement of disputeTax loss carry-forwards
Unrealized loss on available-for-sale securities
Deferred tax assets in overseas consolidated subsidiaries*
Other

2 012

2 011

¥

¥

454
56
250
20
1,086
0
162
61
69
1,311
3,469

2 012

594
267
188
57
998
248
215
144
50
1,244
4,005

$ 5,244
647
2,888
231
12,543
0
1,871
705
797
15,14240,068Valuation allowance(1,806)(1,906)(20,859)

Total deferred tax assets

1,663

2,099

19,209Deferred tax liabilities:
Unrealized gain on available-for-sale securities
Deferred tax liabilities in overseas consolidated subsidiaries*
Other

7,238
37
179

2,079
41
15

83,599427
2,067

Total deferred tax liabilities

7,454

2,135

86,093(36)$(66,884)

Total net deferred tax assets (liabilities)¥(5,791)¥*Deferred tax assets and liabilities in overseas consolidated subsidiaries as a result of the tax effects of significant temporary differences
and losses carried forward as of December 31, 2012 and 2011 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2 012
Deferred tax assets:
Tax loss carry-forwards
Other
Less valuation allowance
Deferred tax assets
Deferred tax liabilities:
Depreciation
Other
Deferred tax liabilities
Net deferred tax assets (liabilities)

2 011

2 012

¥ 8
71
(10)
69

¥ 11
58
(20)
49

$ 92
820
(116)
796

27
10
37

40
1
41

312
116
428

¥ 32

¥ 8

$ 368

ADK Annual Report 2012

51

51

The reconciliation between the statutory tax rate for the years ended December 31, 2012 and 2011, and the actual effective
tax rate reflected in the accompanying consolidated statements of income and comprehensive income were as follows:

2 012

2 011

Statutory tax rate
Certain expenses, including, but not limited to, entertainment expenses,
permanently not deductible for tax purposes
Certain income, including, but not limited to, dividend income, permanently
not taxable for tax purposes
Per capita levy and similar
Consolidated adjustment due to sale of affiliated company
Tax loss carry-forwards
Amendment of statutory tax rate
Tax rate difference applicable to overseas subsidiaries
Change in valuation allowance
Other—net

40.69%

40.69%

8.15

6.50(8.61)
0.85—(3.35)
0.75(8.73)(0.16)
1.49(2.98)
0.61
8.71
—
1.66
(4.58)
2.11
1.46

Effective tax rate

31.08%

54.18%(Change of deferred tax assets and deferred tax liabilities by the change of effective statutory tax rate)
The “Act on the Partial Revision of the Income Tax Act for the Establishment of a Taxation System Responding to Structural
Transformation of Economy and Society” and “Act on Special Measures for Securing Financial Resources Needed to Implement
Measures to Recover from the Great East Japan Earthquake” were issued on December 2, 2011. By these acts, the statutory tax rateused to calculate deferred tax assets and liabilities was changed from 40.69%. The new effective tax rates will be as follows, dependingon when the temporary differences will reverse.
From January 1, 2013 to December 31, 2015: 38.01%
On and after January 1, 2016: 35.64%
As a result, deferred tax liabilities, net of deferred tax assets, decreased by ¥218 million, deferred income taxes increased by ¥84
million and unrealized gain on available-for-sale securities increased by ¥301 million, as of and for the year ended December 31, 2011.

9. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income for the years ended December 31, 2012 and 2011 were ¥1,039 million($12,000 thousand) and ¥1,103 million, respectively.

52

Financial Section

10. OTHER INCOME (EXPENSES)
Additional retirement benefits paid to employees in the amounts of ¥824 million ($9,521 thousand) and ¥7 million for theyears ended December 31, 2012 and 2011 were provided mainly for support in finding new employment.
Other—net for the years ended December 31, 2012 and 2011 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2 012
Gains (losses) on sales of property and equipment
Losses on disposal of property and equipment
Impairment loss on investment and other assets
Impairment loss on long-lived assets
Loss on settlement of dispute
Loss on adjustment for changes of accounting standard for
asset retirement obligations
Other
Total

2 011

2 012

¥ (13)
(16)
(173)
(70)
—

¥ 15
(14)
—
(255)
(538)

$ (154)(190)(2,001)
(803)
—

—
500
¥ 228

(244)
230
¥(806)—
5,793$ 2,645

Gains (losses) on sales of property and equipment for the years ended December 31, 2012 and 2011 mainly consisted oflosses on sales of land and buildings, and gain on sales of land, respectively.
Losses on disposal of property and equipment for the years ended December 31, 2012 and 2011 mainly consisted of losses on
disposal of equipment, and losses on disposal of buildings, respectively.

11. LEASESThe Group leases certain computer equipment, office space, vehicles, software and other assets.
As discussed in Note 2.m. Leases, the Group accounts for certain leases as operating lease transactions, provided thetransactions were contracted on or before March 31, 2009, provided the leased assets are not deemed to be transferredto the lessee, and provided certain information is disclosed in the notes to the lessee’s consolidated financial statements toshow the impact had such leases been capitalized. The pro forma information for such operating lease transactions, such as
acquisition cost, accumulated depreciation, obligations under finance leases, depreciation/amortization expense and interest
expense for the years ended December 31, 2012 and 2011 were as follows:

Millions of Yen

Year ended December 31, 2012
Furniture andequipment

Machinery andvehiclesSoftwareTotal

Acquisition cost
Accumulated depreciation/amortization

¥206
190

¥—
—

¥15
13

¥221
203

Net book value

¥ 16

¥—

¥ 2

¥ 18

Obligations under finance leases:
Millions of Yen

Due within one year
Due after one year

¥21
0

Total

¥21

ADK Annual Report 2012

53

53

Millions of Yen

Year ended December 31, 2011
Furniture andequipment

Machinery andvehiclesSoftwareTotal

Acquisition cost
Accumulated depreciation/amortization

¥384
322

¥—
—

¥45
39

¥429
361

Net book value

¥ 62

¥—

¥ 6

¥ 68

Obligations under finance leases:
Millions of Yen

Due within one year
Due after one year

¥53
22

Total

¥75

Thousands of U.S. Dollars

Year ended December 31, 2012
Furniture andequipment

Machinery andvehiclesSoftwareTotal

Acquisition cost
Accumulated depreciation/amortization$2,380
2,195

$—
—

$173
150

$2,553
2,345

Net book value

$ 185

$—

$ 23

$ 208

Obligations under finance leases:
Thousands of
U.S. Dollars

Due within one year
Due after one year

$243
0

Total

$243

Breakdown of lease payments, depreciation/ amortization expense and interest expense under finance leases for the years
ended December 31, 2012 and 2011:
Thousands of
U.S. Dollars

Millions of Yen

2 012
Total lease payments
Depreciation/amortization expense
Interest expense

2 011
¥54
50
1

2 012

¥126
111
2

$624
578
12

The above depreciation/amortization expense and interest expense, which are not reflected in the accompanying
consolidated statements of income and comprehensive income, are computed by the straight-line method and the interest
method, respectively.
Obligations under operating leases:
Thousands of
U.S. Dollars

Millions of Yen

2 012
Due within one year
Due after one year
Total

54

Financial Section

¥ 699
2,411
¥3,110

2 011
¥ 618
2,552
¥3,170

2 012$ 8,073
27,848$35,921

12. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group Policy for Financial Instruments

screening customers, setting credit limits for each customer,

The Group invests its cash surplus in low risk and liquid

designating due date controls for each receivable andmarketable financial asset classes. Funding requirements

monitoring the financial status of major customers throughare mainly sourced from bank loans. Derivatives are used,the cooperation of the accounting department and each

not for speculative purposes, but to manage financial

front office to prevent the default risk of customers.

exposure to the volatility of exchange rates by way ofConsolidated subsidiaries of the Company manage their

hedging transactions. In addition, the Group purchases

credit risks and control their receivables, and are requiredbonds with embedded derivatives for the purpose of asset

to report certain substantial events to the Company whenmanagement.

they happen.

(2) N ature and Extent of Risks Arising from Financial

Market Risk Management (Foreign exchange risk andInstruments, and Risk Management Methodinterest-rate risk)

Receivables, such as trade notes and accounts, are exposed

To hedge the foreign currency exchange risk associated withto customer credit risk.

foreign currency trade receivables and payables, foreign
currency forward contracts are entered into for the purpose

Investment securities, mainly equity instruments ofof hedging risks associated with the ordinary course ofcustomers for the purpose of building strong businessbusiness.

relationships in addition to equity instruments ofbusiness alliances, are exposed to the risk of market price

Loan payables are exposed to market risks from changes influctuations.

interest rates, however, these market risks are consideredlimited as the balance of loans payable is not significant.

The payment terms of payables, such as trade notes andtrade accounts, are only short term.

The market values of marketable and investment securities
are managed by monitoring market prices and the financial

Bank loans are aimed at (mainly short-term) cash operation

position of the issuers on a regular basis, considering theand the purchase of treasury stock under the ESOP trust

relationships with the issuers.

system as the employees’ benefit plan. Bank loans, most ofwhich are contracted with floating rates, are exposed to the

Derivative transactions are determined in specified types

risk of rate fluctuations.

and volume based on the Company’s internal guidelines tobe approved by the authorized person. After the approval,

Derivatives mainly include forward foreign currency

derivative transactions are entered into and managed bycontracts, which are used to manage exposure to market

the accounting department. In addition, the accounting

risks from changes in the foreign exchange rates ofdepartment is required to report the financial position andreceivables and payables. Certain domestic subsidiaries

the results of derivative transactions to the management of

have purchased bonds with embedded derivatives that are

the Company on a regular basis.

exposed to the risk of a loss of principal.

Liquidity Risk Management
Regarding Hedge Accounting, please see Note 2.p. for more

The Company manages its liquidity risk by the corporate

detailed information.

treasury department preparing and updating the fundmanagement plan based on reports from each department,(3) Risk Management for Financial Instruments

and manages liquidity by holding adequate volumes ofCredit Risk Management

liquid assets.

The Company manages its credit risk from receivableson the basis of internal accounting rules, which include

ADK Annual Report 201255

55

(4) Supplementary Explanation on the Estimated Fair
Value

instead. Because various assumptions and factors arereflected in computing the fair value, different assumptions

The fair values of financial instruments are based on theand actual factors could result in different fair values. The

quoted price in active markets. If the quoted price is notamounts of derivative contracts presented in Note 16 do notavailable, other rational valuation techniques are usedindicate market risk.

(a) Fair value of financial instruments
Carrying amounts, the fair values and unrealized gains (losses) as of December 31, 2012 and 2011 were as follows. Financial
instruments whose fair values cannot be reliably determined were not included in the following tables.
Millions of Yen

2012
Carrying amount1
Cash and time deposits
Notes and accounts receivable
Securities and investment securities2
Notes and accounts payable
Short-term debt
Long-term debt
Derivative transactions3¥ 24,489
84,12858,833(67,130)
(60)
(492)
—

Unrealized gains(losses)

Fair value¥ 24,489
84,12858,833(67,130)
(60)
(492)
—

¥—
—
—
—
—
—
—
Millions of Yen

2011
Carrying amount1
Cash and time deposits
Notes and accounts receivable
Securities and investment securities2
Notes and accounts payable
Short-term debt
Long-term debt
Derivative transactions3¥ 22,642
88,95644,774(71,383)
(94)
(757)
51

Fair value¥ 22,642
88,952
44,774(71,383)
(94)
(759)
51

¥—
(4)
—
—
—
(2)
—

Thousands of U.S. Dollars

2012
Carrying amount1
Cash and time deposits
Notes and accounts receivable
Securities and investment securities2
Notes and accounts payable
Short-term debt
Long-term debt
Derivative transactions3

Unrealized gains(losses)$ 282,850
971,680
679,521(775,355)(693)(5,685)—

Fair value

Unrealized gains(losses)$ 282,850
971,680
679,521(775,355)(693)(5,685)
—

$—
—
—
—
—
—
—

Notes:
1. Liabilities are shown in parentheses.
2. Embedded derivatives, to the extent that they cannot be separated from the financial host contract, are considered with these as
trading transactions for measurement purposes and are shown in “Investment securities.”
3. Derivative transactions presented in the table above are net amounts. Total net payables are shown in parentheses.
> Cash and time deposits, and notes and accounts receivable		 The carrying values of cash and time deposits, and notes and accounts receivable due in one year or less approximate the fair value
because of their short maturities. The fair values of notes and accounts receivable due after one year are calculated based on future
cash flow discounted at an appropriate rate with credit spreads, for those grouped by a certain period of time and credit rating.
> Securities and investment securities
		 These mainly consist of stocks, bonds and mutual funds. The fair values of stocks are measured at the quoted market price on thestock exchange, whereas the fair values of bonds are measured at the quoted price obtained from a financial institution, and the fair

56

Financial Section

values of mutual funds are measured at the quoted values available.
> Notes and accounts payable, short-term debt
		 The carrying values of notes and accounts payable and short-term debt approximate the fair value because of their short maturities.
> Long-term debt
		 The carrying values of long-term debt with floating rates approximate the fair value because floating rates reflect the market rate
and the credit spread of the Company remains almost the same. The fair values of long-term debt with fixed rates are measured
at the present value of the principal and interest (including long-term debt due in one year or less), discounted at an expected rateapplied for new borrowings with the same terms.
> Derivative transactions
		 Information on the fair value for derivatives is included in Note 16.

(b) Carrying amount of financial instruments whose fair value cannot be reliably determined
Thousands of
U.S. Dollars

Millions of Yen

2 012
Investments in securities with no available fair value
Investments in affiliates
Other
Total

2 011

¥1,374
1,302
273¥2,9492 012¥1,411
2,057
224¥3,692$15,869
15,0383,153$34,060(5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
Millions of Yen

2012
Due in one year
or less
Cash and time deposits
Notes and accounts receivable
Securities and investment securities
Other
Total

Due after one year Due after five years
Due after 10 years
through five years through 10 years¥ 24,489
84,128
—

¥ —
—
33

¥

—
—
1,179

¥ —
—
62

¥108,617¥33¥1,179¥62
Millions of Yen

2011
Due in one year
or less
Cash and time deposits
Notes and accounts receivable
Securities and investment securities
Other
Total

Due after one year Due after five years
Due after 10 years
through five years through 10 years¥ 22,642
88,846
3

¥

—
110
116

¥111,491

¥226

¥

—
—
1,232

¥ —
—
40

¥1,232¥40

Thousands of U.S. Dollars

2012
Due in one year
or less
Cash and time deposits
Notes and accounts receivable
Securities and investment securities
Other
Total

Due after one year Due after five years
Due after 10 years
through five years through 10 years$ 282,850
971,680
—

$

—
—
381

$

—
—
13,617$——716$1,254,530$381$13,617$716

ADK Annual Report 201257

57

13. NOTES MATURING ON THE CLOSING DATE
Notes maturing on the closing date are settled on the date of clearance. Because December 31 was a financial institution
holiday, the following notes were included in the outstanding amounts as of December 31, 2012 and 2011.
Thousands of
U.S. Dollars

Millions of Yen

2 012
Notes receivable—trade
Notes payable—trade

2 011

¥539
822

¥542
929

2 012
$6,2259,494

14. CONTINGENT LIABILITIESAs of December 31, 2012, the Group had the following contingent liabilities:
Guarantee Obligations:
Millions of Yen

Aggregated amount of guarantees fordebts of subsidiaries and affiliates and payables of a client, GroupM Japan¥431

Thousands of
U.S. Dollars$4,978Other contingent liabilities:
On January 8, 2010, the Company filed a lawsuit against

allowing the Company’s claim partially. On March 25, 2013,

Art Corporation seeking payment of unpaid receivables

the Company appealed to the Tokyo High Court, as thefor services already provided and advance money in the

Company was not satisfied with the order.

total amount of ¥379 million ($4,377 thousand) together
with late charges. On April 22, 2010, Art Corporation filed

Also, there is a possibility that the plaintiff may also appeal

a countersuit against the Company seeking claims of ¥311

within two weeks after the judgment by the Tokyo District

million ($3,592 thousand) together with late charges.

Court.

On March 12, 2013, the Tokyo District Court dismissed

The Company will handle its claim and the counterclaim

the counterclaim filed by the plaintiff, Art Corporation,

consulting appropriately with the corporate lawyers ofand ordered the plaintiff to pay a sum of ¥62 million

the Company and the company considers its claim to be($716 thousand) together with an amount of late charges,

justifiable.

15. PER SHARE INFORMATIONPer share information for the years ended December 31, 2012 and 2011 was as follows:
Yen

PER SHARE OF COMMON STOCK:(As of and for the years ended December 31)
Net income (loss)
		Basic
		Diluted
Net assets
Cash dividend applicable to the year

58

Financial Section

U.S. Dollars

2 012

2 011

¥

¥

65.83
65.81
2,567.03
20.00

54.37
—
2,270.23
109.002 012$ 0.76
0.76
29.64
0.23

16. DERIVATIVESThe Group enters into foreign exchange forward contracts

Because the counterparties to these derivatives are limited

to hedge the foreign exchange risk associated with certain

to major sound financial institutions, the Group does notassets and liabilities denominated in foreign currencies.

anticipate any losses arising from credit risk.

The Group also has investments in bonds with embedded
derivatives, some of which have terms and conditions

Derivative transactions entered into by the Group havewhere risk exists that the original face value of suchbeen made in accordance with the internal rules andsecurities is not redeemed even if there is no default.

policies that regulate the authorization and exposure limit

However, because the maximum amount of any such losses

amount.

would be limited to the face value of such bonds, the impact
of such risk is limited.

Derivative transactions to which hedge accounting was not appliedYear ended December 31, 2012
There were no applicable transactions.
Millions of Yen

Year ended December 31, 2011

Currency:
OTC market
Foreign exchange forward contracts
		—buying (US$)
Total

Notional amounts

Due after one year

¥70

¥—

Unrealized gain
(loss)

Fair value

¥51

¥(19)
¥(19)

Derivative transactions to which hedge accounting was applied
Millions of Yen

Year ended December 31, 2012
Hedged item
Currency:
OTC market
Principal method Foreign exchange forward contracts
		—buying (US$)
Subtotal
Deferral method Foreign exchange forward contracts
		—buying (US$)
Subtotal
Total

Notional amounts

Due after one year

Fair value

Payables

¥301
¥301

¥—
¥—

¥297
¥297

Payables

¥ 2
¥ 2
¥303

¥—
¥—
¥—

*
—
—

ADK Annual Report 2012

59

59

Millions of Yen

Year ended December 31, 2011
Hedged item
Currency:
OTC market
Principal method Foreign exchange forward contracts
		—buying (US$)
Subtotal
Deferral method Foreign exchange forward contracts
		—buying (US$)
		—buying (EURO)		—buying (STG)
Subtotal
Total

Notional amounts

Due after one year

Payables¥1,171¥1,171¥272¥272

PayablesPayablesPayables

¥

¥

26
16
4
¥
46
¥1,217

Hedged item

Deferral method Foreign exchange forward contracts
		—buying (US$)
Subtotal
Total¥1,041¥1,041

—
—
—
¥ —
¥272

*
*
*
—
—

Thousands of U.S. Dollars

Year ended December 31, 2012
Currency:
OTC market
Principal method Foreign exchange forward contracts
		—buying (US$)
Subtotal

Fair value

Notional amounts

Due after one year

Fair value

Payables$3,477$3,477$—$—$3,430$3,430

Payables$23$
23$3,500

$—
$—
$—

*
—
—

*The estimated fair value of forward foreign exchange contracts is included in the estimated fair value of accounts payable becauseamounts in such derivative contracts designated as hedging instruments are handled together with the payables denominated in foreign
currencies that are subject to hedge accounting.

17. SUBSEQUENT EVENTS(1) Resolution to Buy Back the Company’s Shares
On February 12, 2013, the Board of Directors resolved to acquire certain treasury stock in accordance with Article 459.1 of
the Companies Act.

(2) Reason for Share Buyback
The Company plans to buy back its own shares with the aims of improving capital efficiency and promoting shareholder
return.

Details of share buyback
1. Type of shares: Common stock
2. Number of shares: 500,000 shares
		 (Maximum: equivalent to 1.17% of total shares outstanding, excluding treasury stock)
3. Total acquisition value: ¥1,250 million (maximum)
4. Acquisition period: February 18 to June 17, 2013
5. Method of share buyback: Purchase in the market through a trust bank

60

Financial Section

18. SEGMENT INFORMATION

Reportable segments are operating segments oradvertising activities that include planning and execution

aggregations of operating segments that meet specifiedof advertisements in various media such as magazines,

criteria. Operating segments are components of an entity

newspapers, television, radio, digital-media and OOH

about which separate financial information is available

media. The advertising activities also include planning andand such information is evaluated regularly by the Board

production for ad expressions and content, and service

of Directors in deciding how to allocate resources and inactivities such as sales promotion, marketing, and public

assessing performance. Generally, segment information

relations. The Group’s other business segment includes

is required to be reported on the same basis as is usedpublication and sales of magazines and books.

internally for evaluating operating segment performance(2) Methods of Measurement for the Amounts ofand deciding how to allocate resources to operating

Sales, Profit (Loss), Assets and Other Items for Eachsegments.

Reportable Segment
The segment information for the years ended December 31,

The accounting policies of each reportable segment are2012 and 2011 is also disclosed hereunder as required.

consistent with those disclosed in Note 2, “Summary of
Significant Accounting Policies.”(1) Description of Reportable Segment
The Group’s reportable segments are those for which

Segment profit (loss) is based on operating income of theseparate financial information is available and regularconsolidated statements of income and comprehensive

evaluation by the Company’s management is performed

income.

in order to decide how resources are allocated among theGroup. Therefore, the Group’s reportable segments are

The pricing of intra-segment sales or transfers is on an“Advertising” and “Other business.”

arm’s length basis.

The Group’s advertising segment covers various

Millions of Yen

2012
Reportable segments
Sales
Sales to external customers
Inter-segment sales or transfers
Total
Segment profit (loss)
Segment assets
Other:
Depreciation/amortization4
Increase in property and equipment,
		 and intangible assets

Adjustments

Consolidated3

¥

—
(6)
(6)

¥350,8220350,822

3,161

141

3,175

8,492

195,346(183)2

195,163

1,297

44

1,341

—

1,341

898

59

957

—

957

Advertising

Other business

Total¥344,1352
344,138¥6,6864
6,690¥350,822
6
350,828

3,587

(426)

186,854ADK Annual Report 2012

61

61

Thousands of U.S. Dollars

2012
Reportable segments
Sales
Sales to external customers
Inter-segment sales or transfers
Total

Other business$3,974,779
23
3,974,802$77,223
46
77,269$4,052,002
69
4,052,071

41,439(4,920)2,158,168

Segment profit (loss)
Segment assets

Adjustments

Advertising

Other:
Depreciation/amortization4
Increase in property and equipment,
		 and intangible assets

Total

$

Consolidated

—
(69)
(69)

$4,052,002—
4,052,002

36,5191621

36,681

98,0832,256,251(2,114)2

2,254,137

14,980509

15,489—15,48910,372681

11,053—

11,053
Millions of Yen

2011
Reportable segments
Sales
Sales to external customers
Inter-segment sales or transfers
Total

Adjustments

Advertising

Other business¥340,0830
340,083¥7,02960
7,089¥347,11260
347,172

3,859

(8)

175,552

Segment profit (loss)
Segment assets
Other:
Depreciation/amortization4
Increase in property and equipment,
		 and intangible assets

Total

¥

Consolidated3

—
(60)
(60)

¥347,112
0347,112

3,851

21

3,853

8,791

184,343(155)2

184,188

934

41

975

—

975

1,926

19

1,945

—

1,945

Notes: 1. Adjustments to segment profit (loss) consists of the elimination of inter-segment transactions and unrealized gain.
			

2. Adjustment to segment assets consists of elimination for inter-segment transactions.

			

3. Segment profit (loss) reconciles to operating income of the consolidated statements of income and comprehensive income.

			

4. Depreciation/amortization includes amortization of software capitalized on the balance sheets.

Related Information(1) Information by products and services

b. Property and equipment

Information about products and services is omitted as theMillions of Yensame information is disclosed within “segment information.”(2) Information by geographical areas

2012
Japan

¥3,594

Overseas

Information by business segments, geographic segments

a. Sales

2012
Japan

$41,511

consolidated statements of income and comprehensive
income for the years ended December 31, 2012 and 2011.

62

Financial Section

Overseas$ 8,108

Total$49,619
Millions of Yen

Information about sales is omitted as sales in Japanaccount for more than 90% of the net sales in the¥4,296

Thousands of U.S. Dollars

and billings to foreign customers of the Group for the years
ended December 31, 2012 and 2011 was as follows:

Total

¥702

2011
Japan

¥3,612

Overseas

¥699

Total

¥4,311

c. Major customers
Information about major customers is omitted as no customer accounts for more than 10% of the net sales in the
consolidated statements of income and comprehensive income for the years ended December 31, 2012 and 2011.

Information about impairment losses of assets by reportable segment
Millions of Yen

2012
Advertising
Impairment losses of assets

Other business¥69

Eliminations

—

Total

—

¥69

Thousands of U.S. Dollars

2012
Advertising
Impairment losses of assets

Other business$797

Eliminations

—

Total

—

$797
Millions of Yen

2011
Advertising
Impairment losses of assets

Other business¥255

Eliminations

—

Total

—

¥255

19. SUBSCRIPTION RIGHTS TO SHARES
a. Stock options outstanding at December 31, 2012 were as follows:
Company
stock option

Grantees

Number of options
grantedDate of grant

Exercise price

Exercise period

2012 Stock
Options

9 directors

50,000 shares

May 30, 2012

¥1($0.01)

From May 31, 2015 to May
30, 2022

Movement in stock options for the year ended December 31, 2012 was as follows:
2012

2012 Stock Option

Outstanding at December 31, 2011
GrantedExpired
VestedOutstanding at December 31, 2012—
50,000——50,000Non-vested (shares)

Vested (shares)

Outstanding at December 31, 2011
GrantedExpired
VestedOutstanding at December 31, 2012
Exercise price
Average stock price at exercise
Fair value at grant date

—
—
—
—
—
¥1 ($0.01)—¥1,218 ($14.13)

Stock option holders must be a director of the Company at the time he/she exercises the stock options unless he/she
retires due to the expiration of his/her term as a director or for any other justifiable reason.
The number of stock options that may be exercised shall increase in stages from 0% to 100% from the grant date to the firstday of the exercise period based on the Total Shareholder Return Results formula. The Total Shareholder Return Results

ADK Annual Report 2012

63

63

formula is the average closing stock price on the Tokyo Stock Exchange during the three months immediately preceding themonth of the first day of the exercise period (excluding any non-trading days); less the average closing stock price on theTokyo Stock Exchange during the three months immediately preceding the month of the grant date (excluding any nontrading days); plus any dividends per share during the period from the grant date to the first day of the exercise period; alldivided by the three-month average closing stock price immediately preceding the month of the grant date (excluding any
non-trading days).
The fair value at the grant date was estimated using the Monte Carlo Method with the following assumptions:
M ay 3 0 , 2 012
Volatility of stock price
Estimated remaining outstanding period
Estimated dividend per share
Risk-free interest rate

26.7%
3 years¥20 ($0.23)
0.11%

Notes:
1. Volatility of stock price is computed based on the historical stock prices over the past three years.
2. Estimated remaining outstanding period is the period through the first day of the exercise period.
3. Estimated dividend per share is the minimum annual amount based on the Company's dividend policy.
4. Risk-free interest rate is based on the Japanese government bond yield corresponding to the estimated remaining outstanding
period.

20. OTHER COMPREHENSIVE INCOME
Reclassification adjustments and tax effects for each component of other comprehensive income for the year ended
December 31, 2012 were as follows:

Unrealized gain on available-for-sale securities
Gain arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Deferred gain on derivatives under hedge accounting
Gain arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectTotal
Foreign currency translation adjustments
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectTotal
Total Other Comprehensive Income

Millions of Yen

Thousands of
U.S. Dollars

2 012

2 012

¥14,719(30)
14,689(5,197)¥ 9,492$170,005(347)
169,658(60,025)$109,633

¥

$

¥

124
—
124
(49)
75

¥ 1,188—
1,188—¥ 1,188¥10,755

$

1,428
—
1,428
(566)
862

$ 13,726—
13,726—$ 13,726$124,221

The corresponding information for the year ended December 31, 2011 was not required under the accounting standard forpresentation of comprehensive income as an exemption in the first year of adoption of that standard and, therefore, is notdisclosed herein.

64

Financial Section

Independent Auditor’s Report

ADK Annual Report 2012

65

65

Securities Holdings
ASATSU-DK INC. Consolidated Investments
as of December 31, 2012
Millions of Yen

2 012
Current

Bond Investment Trust/Money Market Fund

¥6,204

Mutual Funds in Equities and Bonds and Others

Non-Current

267

5 funds

Total¥6,471WPP plc¥38,773

2.48% or 31,295,646 shares

Other Publicly Traded Equities

12,394113 issues

Publicly Traded Equities Total¥51,167

Non-Publicly Traded Equities in Affiliated Companies¥

458

10 issues844

15 issues

Other Non-Publicly Traded Equities

1,374

68 issues

Non-Publicly Traded Equities Total¥ 2,677

Non-Publicly Traded Equities in Subsidiary Companies

Bonds
Mutual Funds in Equities and Bonds and Others

Total Noncurrent Investments in Securities

1,275

7 issues

191

8 issues¥55,312

Millions of Yen

Top Five Equitiy Investments by Balance

2 012

WPP plc¥38,773

31,295,646 shares

ASAHI Group Holdings, LTD.

66

1,837

1,000,000 shares

Shochiku Co., Ltd.

977

1,100,000 shares

Tokyo Broadcasting System, Incorporated

888

982,900 shares

NISSIN FOODS HOLDINGS CO., LTD.

720

220,000 shares

Financial Section

Investor Information(As of December 2012)

Parent company nameASATSU-DK INC.

EstablishedMarch 19, 1956

Head office13-1, Tsukiji 1-chome, Chuo-ku, Tokyo 104-8172, Japan

Number of employees

3,376 (consolidated basis)
1,916 (non-consolidated basis)

Common stock

Authorized: 206,000,000 shares
Issued: 42,655,400 shares

Number of shareholders 8,561

Percentage of Total Shares Issued

Treasury stock

0.17%

Individual and others

14.57%

Financial institutions

13.61%

Securities companies

0.56%

Other domestic corporations

5.80%

		
Major shareholders

Distribution
byownersForeigners

65.26%

Percentage of Ownership Voting*

WPP International Holding B.V. ·····························································································24.26%
Northern Trust Company (AVFC) Sub Account American Client ········································· 5.48%
The Silchester International Investors International Value Equity Trust ·························· 3.93%
Northern Trust Company AVFC Re U.S. Tax-Exempted Pension Funds ····························· 3.72%
State Street Bank and Trust Company····················································································· 3.43%
State Street Bank and Trust Company 505223····································································· 3.41%
JP Morgan Chase Bank, 380055 ····························································································· 2.25%
State Street Bank and Trust Company 505225····································································· 2.21%
Mellon Bank N.A. as Agent for Its Client Mellon Omnibus US Pension······························ 2.01%
The Master Trust Bank of Japan, Ltd., Retirement Benefit Trust Account························· 1.80%(Mitsubishi Corporation Account)*Percentage of Ownership Voting figures are based on 42,579,751 shares (42,655,400 shares issued andoutstanding, minus 75,649 shares of treasury stock).

Stock listing

Tokyo Stock Exchange, First Section

Securities code

9747

Transfer agent

Tokyo Securities Transfer Agent Co., Ltd.
6-2, Otemachi 2-chome, Chiyoda-ku,
Tokyo 100-0004, Japan

Annual meeting

The annual meeting of shareholders is normallyheld in March in Tokyo, Japan.

For further information

ASATSU-DK INC. Office of Corporate Communications
Tel.: +81-3-3547-2003
URL: http://www.adk.jp/english/index.html

ADK Annual Report 2012

67

67

ADK Group Network
DOMESTICANIMATION CONTENT GROUPAGENCY GROUP

Nihon Ad Systems Inc.
13-1, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3547-2183
Fax: +81-3-3547-2098

ADK International Inc. … ■13-1, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3546-9100
Fax: +81-3-3546-9208
ADK Dialog Inc. … ■1-1, Tsukiji 4-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3547-5163
Fax: +81-3-3547-5152
ADK Digital Communications Inc.. … ■13-1, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3547-2720
Fax: +81-3-3547-2000
Kyowa Kikaku Ltd. … ■20-15, Shimbashi 2-chome,
Minato-ku, Tokyo 105-0004
Tel.: +81-3-3571-3111
Fax: +81-3-3571-3314
ASP Co., Ltd .… ❑ (Note 2)
13-1, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3547-2100
Fax: +81-3-3547-2937
DA search & link Inc. … ❑ (Note 2)
5-11, Nishi-Shimbashi 1-chome,
Minato-ku, Tokyo 105-0003
Tel.: +81-3-5157-3951
Fax: +81-3-5157-3976

CREATIVE GROUPADK Arts Inc. … ■1-1, Tsukiji 4-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3545-5016
Fax: +81-3-3545-5075
Boys Inc. … ■13-13, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3545-1071
Fax: +81-3-3545-1305
Drill Inc. … ❑ (Note 2)
19-5, Udagawa-cho,Shibuya-ku, Tokyo 150-0042
Tel.: +81-3-5428-8771
Fax: +81-3-5428-8772
TOPS INC.
46-3, Minami-Otsuka 3-chome,
Toshima-ku, Tokyo 170-0005
Tel.: +81-3-5955-7961
Fax: +81-3-5955-7950

68

Financial Section

Right Song Music Publishing Co., Ltd.
13-1, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3547-2184
Fax: +81-3-3547-2098
Eiken Co., Ltd. … ■56-7, Minamisenjyu 6-chome,
Arakawa-ku, Tokyo 116-0003
Tel.: +81-3-3802-3011
Fax: +81-3-3807-6205
DAISUKI Inc.
22-17, Ebisu 1-chome
Shibuya-ku, Tokyo 150-0013
Tel.: +81-3-6361-1146
Fax: +81-3-6361-1146
PUBLISHING GROUPNIHONBUNGEISHA Co., Ltd. … ■1-7, Kanda-Jimbo-cho,
Chiyoda-ku, Tokyo 101-8407
Tel.: +81-3-3294-7771
Fax: +81-3-3294-7780

Knots Europe B.V. … ■ (Note 1)
Neptunusstraat 31,
2132 JA Hoofddorp, The Netherlands
Tel.: +31-23-554-3554
Fax: +31-23-554-3553
Paris
ADK France S.A.S.
352 Rue Saint-Honore,
75001 Paris, France
Tel.: +33-1-5345-3450
Fax: +33-1-5345-3455
Moscow
ASATSU-DK INC.
Moscow Representative Office
12 Krasnopresnenskaya nab., No. 1603,
Mezhdunarodnaya-2,
Moscow 123610, Russia
Tel.: +7-495-258-1591

ASIA
Beijing
Beijing Huawen-Asatsu International
Advertising Co., Ltd.
Room 1819-1822, Golden Land Bldg.,
No. 32 Liangmaqiao Road,
Chaoyang District, Beijing 100016, P.R.C.
Tel.: +86-10-6468-8867
Fax: +86-10-6468-8865

NORTH AMERICA

Tiexu Advertising Co., Ltd.
18F, Golden Land Bldg.,
No. 32 Liangmaqiao Road,
Chaoyang District, Beijing 100016, P.R.C.
Tel.: +86-10-6464-2122
Fax: +86-10-8448-3324

New York
ADK America Inc. N.Y. … ■6F, 515 W. 20th Street,
New York, NY 10011, U.S.A.
Tel.: +1-646-284-9800
Fax: +1-646-284-9825

Beijing Asatsu Advertising Co., Ltd.
Room 1915, Golden Land Bldg.,
No. 32 Liangmaqiao Road,
Chaoyang District, Beijing 100016, P.R.C.
Tel.: +86-10-6468-8702
Fax: +86-10-6468-8502

Los Angeles
ADK America Inc. L.A.
3137 S. La Cienega Blvd.,
Los Angeles, CA 90016, U.S.A.
Tel.: +1-310-630-3600
Fax: +1-310-630-3620

Beijing DongFang SanMeng Public Relations
Consulting Co., Ltd.
Room 1803, CITIC No. 19
Jianguomenwai Street,
Beijing 100004, P.R.C.
Tel.: +86-10-8391-3389
Fax: +86-10-8391-3399

OVERSEAS

EUROPE
Frankfurt
Asatsu (Deutschland) GmbH … ■Waldschmidtstrasse 19,60316 Frankfurt,Frankfurt am Main, Germany
Tel.: +49-6997-120-832
Fax: +49-6997-120-821
Amsterdam
ADK Europe B.V. … ■Neptunusstraat 31,
2132 JA Hoofddorp, The Netherlands
Tel.: +31-23-554-3530
Fax: +31-23-554-3553

IMMG-Beijing Co., Ltd.
Room 2006, Building 4,
No. 89 Jianguo Road,
Chaoyang District, Beijing 100025, P.R.C.
Tel.: +86-10-6530-7600
Fax: +86-10-6530-7113
Shanghai
Shanghai Asatsu Advertising Co., Ltd. … ■10F, Yongxing Mansion,
No. 887 Huaihai Zhong Lu,
Shanghai 200020, P.R.C.
Tel.: +86-21-6467-4118
Fax: +86-21-6474-7803

(As of April 2013)
Asatsu (Shanghai) Exposition & AdvertisingCo., Ltd. … ■ (Note 1)
23F, Jiushifuxing Mansion,
No. 918 Huaihai Road (M),Shanghai 200020, P.R.C.
Tel.: +86-21-6415-5881
Fax: +86-21-6271-3651
Asatsu Century (Shanghai)
Advertising Co., Ltd. … ■9F, Yongxing Mansion,
No. 887 Huaihai Road (M),Shanghai 200020, P.R.C.
Tel.: +86-21-6474-8908
Fax: +86-21-6474-8909
Beijing DongFang SanMeng Public Relations
Consulting Co., Ltd. Shanghai Branch
Room 1201, Yongxing Mansion,
No. 887 Huaihai Road (M),Shanghai 200020, P.R.C.
Tel.: +86-21-6433-9875
Fax: +86-21-6443-9705
Guangzhou
Guangdong Guangxu (ASATSU)
Advertising Co., Ltd. … ❑4F, Dongbao Tower, No. 767,
E. Dongfeng Road, YueXiu District,
Guangzhou 510600, P.R.C.
Tel.: +86-20-8888-9818
Fax: +86-20-3832-7601

Taipei
United-Asatsu International Ltd. … ■13F, No. 287 Nanking E. Road,
Sec. 3, Taipei 105, Taiwan, R.O.C.
Tel.: +886-2-8712-8555
Fax: +886-2-8712-9555
DIK-OCEAN Advertising Co., Ltd. … ■13F, No. 287 Nanking E. Road,
Sec. 3, Taipei 105, Taiwan, R.O.C.
Tel.: +886-2-8712-8555
Fax: +886-2-8712-9555
Singapore
ASATSU-DK SINGAPORE PTE. LTD. … ■1 Liang Seah Street, #02-05,
Singapore 189022
Tel.: +65-6333-5115
Fax: +65-6333-5225
Scoop AD WORLD Pte Ltd.
1 Liang Seah Street, #02-05,
Singapore 189022
Tel.: +65-6333-5115
Fax: +65-6333-5225
IMMG Pte Ltd.
213 Henderson Industrial Road, #01-09,
Henderson Industrial Park,
Singapore 159553
Tel.: +65-6376-5088
Fax: +65-6375-2029

Shanghai Asatsu Advertising Co., Ltd.
Guangzhou Branch
4F, Dongbao Tower, No. 767,
E. Dongfeng Road, YueXiu District,
Guangzhou 510600, P.R.C.
Tel.: +86-20-3832-0060
Fax: +86-20-3821-0643

Jakarta
PT. Asta Atria Surya
Wisma Slipi, Lantai 11 Jl. Let.
Jend. S. Parman Kav. 12,
Jakarta 11480, Indonesia
Tel.: +62-21-530-7155
Fax: +62-21-530-7156

ChengduShanghai Asatsu Advertising Co., Ltd.
Chengdu Branch
Room 1502, No. 16 in 3rd Section of
Hongxing Road,
Chengdu 610016, P.R.C.
Tel.: +86-28-8666-5471
Fax: +86-28-8672-5017

PT. Perdana IMMG Indonesia
Jl. Kemang I No. 5,
Jakarta Selatan 12730, Indonesia
Tel.: +62-21-718-3311
Fax: +62-21-718-3322

FuzhouShanghai Asatsu Advertising Co., Ltd.
Fuzhou Branch
Room 502, 8F, North Tower,
Xiao Kan Yuan Bldg., 208 Hudong Road,
Gulou District, Fuzhou 350003, P.R.C.
Tel.: +86-591-8801-2100
Fax: +86-591-8801-2108
Hong KongASATSU-DK HONG KONG LTD. … ■25F, Leighton Centre, 77 Leighton Road,
Causeway Bay, Hong Kong
Tel.: +852-2895-8111
Fax: +852-2576-3322
DK ADVERTISING (HK) LTD. … ■25F, Leighton Centre, 77 Leighton Road,
Causeway Bay, Hong Kong
Tel.: +852-2811-9999
Fax: +852-2811-9699

Kuala Lumpur
ASATSU-DK Malaysia Sdn. Bhd.… ■Level 18, Menara Merais, No. 1,
Jalan 19/3, 46300 Petaling Jaya,
Selangor, Malaysia
Tel.: +603-7954-0388
Fax: +603-7954-0266
Dai-Ichi Kikaku (Malaysia) Sdn. Bhd.
C-13A-3A, Dataran 3 Two, No. 2,
Jalan 19/1, 46300 Petaling Jaya,
Selangor, Malaysia
Tel.: +603-7960-8106
Fax: +603-7960-8103
Bangkok
ASATSU (THAILAND) CO., LTD. … ■24F, Sirinrat Bldg.,
3388/86 Rama 4 Road, Klongton, Klongtoey,
Bangkok 10110, Thailand
Tel.: +66-2-367-5951
Fax: +66-2-367-5946

DAI-ICHI KIKAKU (THAILAND) CO., LTD. … ■23F, Shinawatra Tower III,
1010 Vibhavadi Rangsit Road,
Ladyao, Chatuchak,Bangkok 10900, Thailand
Tel.: +66-2-949-2700
Fax: +66-2-949-2777
ASDIK Ltd. … ■6F, Shinawatra Tower III,
1010 Vibhavadi, Rangsit Road,
Ladyao, Chatuchak,Bangkok 10900, Thailand
Tel.: +66-2-949-2800
Fax: +66-2-949-2805
Ho Chi Minh CityASATSU-DK VIETNAM INC. … ■ (Note 1)
28 Nguyen Van Thu Street,
District 1, Ho Chi Minh City, Vietnam
Tel.: +84-8-3910-5550
Fax: +84-8-3910-5551
DIK VIETNAM CO., LTD. … ■ (Note 1)
3F, 28 Nguyen Van Thu Street,
District 1, Ho Chi Minh City, Vietnam
Tel.: +84-8-3911-8835
Fax: +84-8-3910-5554
ManilaADK INTEGRA INC.
25F, Raffles Corporate Center,
F. Ortigas, Jr. Road (formerly Emerald Ave.),
Ortigas Center, Pasig City 1605, Philippines
Tel.: +63-2-914-4297
Fax: +63-2-914-9001
Seoul
Asatsu-DK Korea Co., Ltd.
7F, DaeHeung Bldg., 4-3, Yangjae-dong,Seocho-gu, Seoul, Korea
Tel.: +82-2-511-5934
Fax: +82-2-511-5935
New Delhi
ADK-FORTUNE PVT. LTD.
B1/B2, Enkay Centre, Udyog Vihar Phase-V,
Gurgaon 122016, India
Tel.: +91-124-453-9723
Fax: +91-124-453-9752
Dubai
AGA ADK advertising & marketing
3F, Fortune Executive Tower,
Jumeirah Lake Towers,
Dubai, United Arab Emirates
Tel.: +971-4-4458-383
Fax: +971-4-4503-948… ■ Consolidated subsidiaries…❑A ffiliates accounted for by theequity method

Note 1: A dded to the scope of consolidated
reporting from 2013.
Note 2: A dded to affiliated companies accounted
for using the equity method from 2013.

ADK Annual Report 2012

69

69

ASATSU-DK INC.
http://www.adk.jp/english/index.html

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