Consolidated Financial Summary for the Interim Period of Fiscal Year Ending March 31, 2011 (Japanese Accounting Standards)

Transcription

1 Consolidated Financial Summary for the Interim Period of Fiscal Year Ending March 31, 2011 (Japanese Accounting Standards) November 4, 2010 Avex Group Holdings Inc. Tokyo Stock Exchange, First Section Code No: 7860 (URL Representative: Masato Matsuura, CEO Contact: Shigekazu Takeuchi, CFO, Senior Corporate Executive TEL: (03) Scheduled date to submit the Quarterly Securities Report (Shihanki Houkokusho): November 8, 2010 Scheduled date for commencement of dividend payments: December 9, 2010 Supplementary documents for quarterly results: Yes Quarterly results briefing: Yes (for institutional investors and securities analysts) Note: All amounts are rounded down to the nearest million yen. 1. Consolidated operating results for the Interim Period of Fiscal Year Ending March 31, 2011 (April 1, 2010 to September 30, 2010) (1) Consolidated sales and income (cumulative total) Note: Figures in percentages denote the year-on-year change. Net sales Operating income Ordinary income Net income Interim Period of Fiscal Year Ending March 31, 2011 Interim Period of Fiscal Year Ended March 31, 2010 million yen % million yen % million yen % million yen % 59, , , ,062 58, ,691 (45.0) 696 (66.1) (476) Interim Period of Fiscal Year Ending March 31, 2011 Interim Period of Fiscal Year Ended March 31, 2010 Net income per share yen Diluted net income per share (11.10) yen (2) Consolidated financial position Total assets Net assets Shareholders equity ratio Net assets per share million yen million yen % yen Interim Period of Fiscal Year Ending March 31, ,280 33, Year ended March 31, ,593 30, (Reference) Shareholders equity Interim Period of Fiscal Year Ending March 31, 2011: 31,823 million Year ended March 31, 2010: 28,721 million 2. Status of dividend payments Year ending March 31, 2011 (forecast) (Note) Revision of dividend forecast during current quarter: None 3. Forecasts for consolidated sales and income for the year ending March 31, 2011 (April 1, 2010 to March 31, 2011) Note: Figures in percentages denote the year-on-year change. Net income Net sales Operating income Ordinary income Net income per share million yen % million yen % million yen % million yen % yen Year ending March 31, , , , , (Note) Revision of financial forecasts during current quarter: Yes Annual dividends (Record date) End of first quarter End of second quarter End of third quarter End of year Annual yen yen yen yen yen Year ended March 31, Year ending March 31,

2 4. Others (For details, please refer to Other Information on page 4 of the accompanying materials.) (1) Changes in significant subsidiaries during the term: None (Note) Any changes in specific subsidiaries accompanied by a change in the scope of consolidation during the quarter under review (2) Adoption of simplified accounting methods and special accounting treatment: Yes (Note) Adoption of simplified accounting methods or accounting methods unique to the preparation of quarterly consolidated financial statements (3) Any changes in accounting policies and procedures and/or the method of presentation 1. Changes associated with the revision of accounting standards: Yes 2. Changes other than the above: None (Note) Any changes in the policies, procedures, or presentation method of the accounting methods for the preparation of quarterly consolidated financial statements included in Changes in the basis for preparing quarterly consolidated financial statements (4) Shares outstanding (common shares) a. Shares outstanding at term-end (including treasury stock) b. Treasury stocks at term-end Interim Period of Fiscal Year Ending March 31, 2011: March 31, 2010: Interim Period of Fiscal Year Ending March 31, 2011: March 31, 2010: c. Average number of shares outstanding (cumulative quarter) Interim Period of Fiscal Year Ending March 31, 2011: Interim Period of Fiscal Year Ended March 31, 2010: 46,157,810 shares 46,157,810 shares 3,214,658 shares 3,214,403 shares 42,943,231 shares 42,943,509 shares Status of a quarterly review This financial summary does not need to undergo a quarterly review under the Financial Instruments and Exchange Act. The quarterly consolidated financial statements have not been reviewed at the time of the announcement of this financial summary. Statement regarding the proper use of financial forecasts and other special remarks (1) Financial forecasts announced on May 13, 2010 have been revised in this consolidated financial summary. (2) Please note that the forecasts are based on certain assumptions that the Company deems reasonable. Therefore, actual results may differ materially from the forecasts due to various factors. For the matters related to the above financial forecasts, please refer to (3) Qualitative Information on the Consolidated Financial Forecasts in 1. Qualitative Information on Consolidated Results, etc. for the Interim Period Ended September 30, 2010 on page 3 of the accompanying materials.

3 Accompanying Materials Contents 1. Qualitative Information on Consolidated Results, etc. for the Interim Period Ended September 30, (1) Qualitative Information on Consolidated Results...2 (2) Qualitative Information on the Consolidated Financial Position...3 (3) Qualitative Information on the Consolidated Financial Forecasts Other Information...4 (1) Changes in Important Subsidiaries...4 (2) Adoption of Simplified Accounting Methods and Special Accounting Treatment...4 (3) Changes in Accounting Policies and Procedures and the Method of Presentation Quarterly Consolidated Financial Statements...5 (1) Quarterly Consolidated Balance Sheets...5 (2) Quarterly Consolidated Statements of Income...7 (3) Events or Conditions That May Cast Significant Doubt on the Going Concern Assumption...8 (4) Notes on Significant Changes in Shareholders Equity (if any)

4 1. Qualitative Information on Consolidated Results, etc. for the Interim Period Ended September 30, 2010 (1) Qualitative Information on Consolidated Results Interim period results Fiscal year ended March 31, 2007 Fiscal year ended March 31, 2008 Fiscal year ended March 31, 2009 Fiscal year ended March 31, 2010 (Unit: million yen) Fiscal year ending March 31, 2011 Net sales 41,437 45,545 56,323 58,128 59,506 Cost of sales 27,415 29,489 37,022 38,177 37,026 Gross profit 14,021 16,056 19,301 19,951 22,479 Gross profit margin 33.8% 35.3% 34.3% 34.3% 37.8% Personnel expenses 3,643 4,255 4,630 4,590 4,646 Sales promotion and advertising expenses 5,564 5,703 5,760 7,958 5,423 General expenses 4,378 4,875 5,834 5,710 5,424 Total SG&A expenses 13,586 14,835 16,226 18,259 15,494 Operating income (loss) 435 1,221 3,075 1,691 6,984 Operating margin 1.1% 2.7% 5.5% 2.9% 11.7% In the interim period of the fiscal year under review, the Japanese economy continued to recover, with improvements in corporate earnings and consumer spending. Nonetheless, challenges remained, given the sharp appreciation of the yen and a persistently high rate of unemployment. In the entertainment industry, the business environment was still severe. Music software production including videos for the period from April 2010 to September 2010 declined 8.2% from the same period in the previous year, and sales of paid music downloads for the period from April 2010 to June 2010 decreased 3.5% year on year (surveyed by the Recording Industry Association of Japan (RIAJ)). Meanwhile, the business environment surrounding the video software market remained steady, thanks to the release of a series of hit products. Consequently, total box office revenues of Japanese and foreign films were up 9.7% from the year-ago period for the period from April 2010 to September 2010 (according to data released by the Motion Picture Producers Association of Japan, Inc.), while total DVD software sales increased 3.5% on a year-on-year basis for the period from April 2010 to September 2010 (according to research data by the Japan Video Software Association (JVA)). In the concert market, as both attendance and sales were trending upward (based on data from the All Japan Concert Tour Promoter s Conference), it is presumed that demand from users for real music is increasing. It is also anticipated in digital media that new demand for content will be spurred going forward, mainly in the area of mobile and internet communications, through developments such as the introduction of the next-generation communication systems and the dissemination of smartphones, as well as progress in infrastructure and hardware. In this environment, the Avex Group promoted a vertical integration model, which undertakes on a comprehensive basis a broad array of operations ranging from the discovery and cultivation of artists to management, content production, package sales, digital distribution, concert production, merchandizing, e-commerce, and the operation of fan clubs to increase profit-earning opportunities. As a result of these initiatives, the Group s consolidated net sales rose 2.4% from the same period of the previous year, to 59,506 million yen in the interim period under review, primarily attributable to the release of albums by major artists and strong sales of video packages. The gross margin also improved, attributable to solid sales of profitable old music and video products. Operating income jumped 313% year on year, to 6,984 million yen, reflecting a fall in sales promotion and advertising expenses, the result of the effective implementation of promotional activities. As a consequence, net income amounted to 4,062 million yen (compared with a net loss of 476 million yen in the same period of the previous year). Amounts and profit margins before the fiscal year ended March 31, 2008 are shown for reference purposes only, as accounting standards changed from the fiscal year ended March 31,

5 (2) Qualitative Information on the Consolidated Financial Position Asset totaled 93,280 million yen at the end of the interim period under review, down 1,312 million yen from the end of the previous consolidated fiscal year. This decrease was attributable mainly to a decrease of 858 million yen in work in process, a decline of 2,840 million yen in other current assets, and a fall of 747 million yen in investment securities, offsetting a 3,058 million yen increase in notes and accounts receivable-trade. Liabilities totaled 60,011 million yen, down 4,314 million yen from the end of the previous consolidated fiscal year. The major causes for the decrease were a reduction of 3,583 million yen in interest-bearing debt (excluding lease obligations). Net assets amounted to 33,268 million yen, an increase of 3,001 million yen from the end of the previous consolidated fiscal year. The increase in net assets reflected a rise in retained earnings associated with net income of 4,062 million yen for the interim period under review, offsetting a decline in retained earnings with the outlay of 858 million yen for year-end dividends. (3) Qualitative Information on the Consolidated Financial Forecasts Taking into account the recent progress in its operating performance, the Company has revised its consolidated full-year financial forecasts for the fiscal year ending March 2011 (for the period from April 1, 2010 to March 31, 2011), which were announced on May 13, For the details, please refer to the Revision of Forecasts for Consolidated Sales and Income for Fiscal Year Ending March 2011, announced today on November 4,

6 2. Other Information (1) Changes in Important Subsidiaries Not applicable (2) Adoption of Simplified Accounting Methods and Special Accounting Treatment [Simplified Accounting Methods] (i) Valuation of inventories We eliminated the process of taking physical inventory at the end of the interim period under review, and instead adopted a rational computation method that uses actual ending inventory of the previous fiscal year as a base. As for devaluating the book value of inventory assets, the devaluation is applied only to those inventories whose profitability has clearly decreased. The devaluation is based on the estimated net sales value of such inventories. (ii) Calculation of income taxes, deferred tax assets and deferred tax liabilities The amount of income taxes paid is calculated using only significant taxable and deductible items and tax credit items. Judgments about the recoverability of deferred tax assets are made based on the earnings forecast at the end of the previous fiscal year and tax planning with respect to items where there have been no significant changes in the operating environment or in the occurrence of temporary differences following the end of the previous fiscal year. (3) Changes in Accounting Policies and Procedures and the Method of Presentation Application of the Accounting Standards for Asset Retirement Obligations The Accounting Standards for Asset Retirement Obligations (Accounting Standards Board of Japan (ASBJ) Statement No. 18 on March 31, 2008) and the Guidance on Accounting Standards for Asset Retirement Obligations (ASBJ Guidance No. 21 on March 31, 2008) were applied from the first quarter of this fiscal year. As a result of the applications, operating income and ordinary income for the interim period under review decreased 8 million yen each, and income before income taxes and minority interests declined 229 million yen. The change in asset retirement obligations associated with the application of these accounting standards was 316 million. [Additional information] Trust-type employee stock ownership plan (ESOP) To bolster the professional motivation and the management participation of the employees of the Avex Group, and to enhance medium-to long-term corporate value by continue to promote management that aims to improve its stock value, the Company resolved at a meeting of its Board of Directors held on August 30, 2010 that it would introduce a trust-type employee stock ownership plan (ESOP), an incentive plan (the Plan ), to the employees of the Avex Group. Under this Plan, the trust-type ESOP that is established to transfer the Company s shares to the Avex Employee Stock Holding Partnership (the Partnership ) will acquire in advance the number of shares that is to be acquired by the Partnership, and sell the shares to the Partnership over the next five years. The acquisition and disposal of the Company s shares are accounted based on the assumption that the Company and the trust account are the same entity. As a result, assets, including the Company s shares, liabilities, profits and losses related to the trust account are included in the quarterly consolidated balance sheets and statements of income. The number of treasury stock as at the end of the interim period of the consolidated fiscal year under review (September 30, 2010) was as follows: Number of treasury stock 3,214,658 Treasury stock held by the Company 3,039,358 Treasury stock held by the trust account 175,

7 3. Quarterly Consolidated Financial Statements (1) Quarterly Consolidated Balance Sheets (Assets) Current assets As of September 30, 2010 (Unit: million yen) Condensed consolidated balance sheets of the previous fiscal year (March 31, 2010) Cash and deposits 10,163 9,717 Notes and accounts receivable-trade 16,156 13,097 Operating investment securities 36 2 Operating investments in capital 436 Merchandise and finished goods 1, Work in process 1,879 2,737 Raw materials and supplies Other current assets 10,204 13,044 Allowance for doubtful accounts (322) (372) Total current assets 39,622 39,999 Noncurrent assets Property, plant and equipment Land 29,590 29,590 Other property, plant and equipment, net 7,229 7,312 Total property, plant and equipment 36,819 36,902 Intangible assets 1,143 1,239 Investments and other assets Investment securities 11,012 11,759 Other investments and other assets 5,045 4,996 Allowance for doubtful accounts (363) (305) Total investments and other assets 15,694 16,451 Total noncurrent assets 53,657 54,593 Total assets 93,280 94,593 (Liabilities) Current liabilities Notes and accounts payable-trade 1,414 1,480 Short-term loans payable 1,800 Current portion of long-term loans payable 3,199 2,640 Current portion of bonds 1,496 1,496 Accounts payable-other 9,813 8,060 Income taxes payable 1,924 1,999 Allowance for returned goods 4,472 3,692 Asset retirement obligations 28 Other current liabilities 9,004 11,926 Total current liabilities 31,353 33,095 Noncurrent liabilities Bonds payable 7,794 8,542 Long-term loans payable 18,740 20,335 Provision 634 1,286 Asset retirement obligations 296 Other noncurrent liabilities 1,194 1,067 Total noncurrent liabilities 28,658 31,230 Total liabilities 60,011 64,

8 (Net assets) Shareholders equity As of September 30, 2010 (Unit: million yen) Condensed consolidated balance sheets of the previous fiscal year (March 31, 2010) Capital stock 4,229 4,229 Capital surplus 5,001 5,001 Retained earnings 28,195 25,095 Treasury stock (5,366) (5,469) Total shareholders equity 32,060 28,856 Valuation and translation adjustments Valuation difference on available-for-sale securities (2) 70 Foreign currency translation adjustments (234) (206) Total valuation and translation adjustments (237) (135) Subscription rights to shares Minority interests 1,118 1,218 Total net assets 33,268 30,266 Total liabilities and net assets 93,280 94,

9 (2) Quarterly Consolidated Statements of Income (Consolidated Interim Period) (Unit: million yen) For the Interim Period ended September 30, 2009 For the Interim Period ended September 30, 2010 Net sales 58,128 59,506 Cost of sales 38,177 37,026 Gross profit 19,951 22,479 Selling, general and administrative expenses Advertising expenses 6,942 4,531 Promotion expenses 1, Employee salaries and bonuses 2,999 3,047 Other selling, general and administrative expenses 7,302 7,023 Total selling, general and administrative expenses 18,259 15,494 Operating income 1,691 6,984 Non-operating income Interest income 5 22 Dividend income 5 4 Gain on adjustment of accrued royalties 48 Other non-operating income Total non-operating income Non-operating expenses Interest expenses Equity in losses of affiliates Other non-operating expenses Total non-operating expenses 1, Ordinary income 696 6,412 Extraordinary income Gain on sale and redemption of investment securities 57 Gain on sales of noncurrent assets 7 0 Surrender value of insurance 44 Reversal of provision for directors' retirement benefits 57 Other extraordinary income 17 Total extraordinary income Extraordinary loss Loss on sales and retirement of noncurrent assets Loss on valuation of investment securities Impairment loss 5 Loss on insurance adjustment 99 Loss on adjustment for changes of accounting standard for asset retirement obligations 220 Other extraordinary loss 21 7 Total extraordinary loss Income before income taxes and minority interests 526 6,057 Income taxes-current 1,298 1,779 Income taxes-deferred Total income and other taxes 1,611 2,094 Income before minority interests 3,962 Minority interests in income (loss) (608) (100) Net income (loss) (476) 4,

10 (3) Events or Conditions That May Cast Significant Doubt on the Going Concern Assumption Not applicable (4) Notes on Significant Changes in Shareholders Equity (if any) Not applicable - 8 -