Annual Report 20052005
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Annual Report 20052005 Year Ended March 31, 2005 Business Synergy Original video game content spans into other forms of entertainment By efficiently utilizing original contents created for our home video game software we are expanding our business into other entertainment business opportunities such as movies, TV animation, publications, pachinko and pachislo slot machines, arcade games, and character merchandising. Through these other businesses, we can maximize our profitability from our initial investment, while creating synergy for our products in other areas of entertainment. MonsMonstterer HunHuntterer G ResResideidentnt EvilEvil 4 Home Video Games 3 ry 3 CCr ay MMay iill ev DevD ) (UK LIMITED. All Rights Reserved. ) INC. CONSTANTIN FILM 8 (CANADA X an X8 amaam eg ©2004 DAVIS FILMS IMPACT MegM ©CAPCOM 2004 ©Sammy ©RODEO ©CAPCOM, Shogakukan, ©2003Nintendo ShoPro, TV ©2003 Tokyo HUDSON SOFT ©2004 CAPCOM CO.,LTD. ALL RIGHTS RESERVED. ALIEN TM & © 1979.2004Twentieth Century Fox Film Corporation. All Rights Reserved. MARIO PARTY 5 ne t machinmachi islo slotslo A paachislch usha”ha” g “Onimus“Onim Arcade feafeattururiingn Games Deevvellooppmemenntt ofof arrccaadede gammees DisDistritributbutionion ooff gagameme concontententsts forfor momobilbile phonhoneses inin highhigh markarketet dedemandand “Plaz“ Pla Other undeu za C nd Caapcom”, am er ma pc Businesses ma om nnaa ”, gemge am MovMov me usse iiees dde ntnt o emmen eriviveed of C e d ffrorom g C nt fa gamam apcoap facic e concon co ilitiesit tetentnt m ies s Arcade ChaC Operations ha licl racra iceens ctter ns er it inging itemse b ms usins iinn inese ss OwnOw n pubp ub llisis hedhe d sst tratra teegyg y ggu uiided eb oooko ks BrB ro fef adcasta ea d turtu ca ringi st ng ofo f gaga TTV mem V a e annim ccharacim ha a r tiio ac onns terte s rs Corporate Profile Capcom’s core business is developing, publishing and distributing home video game software. To date, we have created many hit titles around the world including the multi-million unit selling “Megaman” and “Resident Evil” series of products. In recent years, we have created synergy by utilizing our original video game content in other areas of entertainment such as films, TV animation and publications. We will continue to be a creator of entertainment culture by delivering highly creative and innovative video games that excite customers and offer an entirely new level of game entertainment. Arcade Games We develop, produce, and distribute coin-operated arcade game software in Japan. We direct our efforts towards developing prize-winning coin-operated arcade games, which are in high demand in the market, as well as supplying other game companies and operators with our popular arcade games. Home Video Games Other Businesses We develop and distribute home We operate our businesses by video game software for leading utilizing assets gained from our game consoles and hand-held video game software and systems. This is our staple development expertise in other business and main competitive ventures. These include licensing resource, which accounts for Capcom game characters, more than 65% of total sales. We operating a publishing business, focus our management resources distributing LCD devices on the wide-ranging needs of our Arcade Operations designed for pachislo slot customers by delivering machines, and developing and award-winning action and We operate amusement facilities distributing game content for adventure games that have sold in Japan. We open arcades mobile phones. millions of units around the world. predominately in large commercial complexes to expand our customer base to attract more families and ladies. We operate arcades designed to entice customers by holding special events and service days. We also base arcade efficiently on a “scrap-and-build policy” whereby we can close unprofitable arcades as soon as possible, and aggressively open new arcades for effective business expansion. Contents Disclaimer Regarding Forward-looking Statements 1 Corporate Profile 14 Financial Section Management strategies, plans, projections and other statements excluding historical facts in this Annual Report are forecasts. Please note that the above business 2 Consolidated Financial 33 Research and Development projections are based on the information that is available at the time of this announcement Highlights and certain assumptions that serve as the basis of rational judgments. Actual 3 To Our Shareholders 35 Directors, performance may vary substantially from these projections due to various contributing Corporate Auditors and factors of the future. Additionally, changes in Corporate Officers market environments, such as the 5 diversification of user needs, may drastically Business Strategies affect the performance of this industry in which our company operates. 37 Corporate Data Factors contributing to performance fluctuations include but are not limited to: 7 Operational Review (1) the presence or absence of strong-selling titles and the number of units sold in the home 38 Stock Data video game software business which accounts for not less than 50% of our total sales; (2) the 11 Financial Strategies progress of home video game software development; (3) the proliferation of home 39 Corporate & Products video game consoles; (4) overseas sales; History (5) trends in stock prices and foreign exchange; 13 Corporate Governance (6) cooperation with other companies in development, sales, and operations; and (7) changes in market environments. 1 ■ Annual Report 2005 Consolidated Financial Highlights CAPCOM CO., LTD. AND ITS CONSOLIDATED SUBSIDIARIES YEARS ENDED MARCH 31 Millions of yen Thousands of U.S. dollars 20052004 2005 Net sales ................................................................................................. ¥ 65,896 ¥ 52,669 $ 615,850 Operating income .................................................................................. 7,753 1,403 72,458 Net income (loss) ................................................................................... 3,622 ( 9,159) 33,850 Total assets ............................................................................................. 106,361 93,096 994,028 Total shareholders’ equity ...................................................................... 32,491 31,854 303,654 Yen U.S. dollars Net income (loss) per share .................................................................. ¥ 63.37 ( ¥ 160.91) $ 0.59 Cash dividends applicable to the year per share ................................ 20.00 20.00 0.19 Shareholders’ equity per share ............................................................. 589.99 559.66 5.51 Note: U.S.dollar amounts are translated from yen at the rate of ¥107=US$1, the approximate exchange rate prevailing on the Tokyo Foreign Exchange Market on March 31, 2005. Net sales (¥ Million) Operating income (¥ Million) Net income (loss) (¥ Million) 6,007 75,000 10,000 9,727 6,000 4,912 65,896 62,743 62,036 3,622 60,000 8,000 7,753 52,669 7,155 3,000 49,083 6,680 45,000 6,000 30,000 4,000 -7,000 -9,159 15,000 2,000 1,403 -14,000 -19,598 -21,000 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 Total assets (¥ Million) Total shareholders’ equity (¥ Million) Shareholders’ equity per share (¥) 128,512 125,000 75,000 1,250.00 113,493 68,233 1,168.51 106,648 106,361 62,966 1,081.62 100,000 93,096 60,000 1,000.00 753.47 75,000 45,000 42,888 750.00 589.99 31,854 32,491 559.66 50,000 30,000 500.00 25,000 15,000 250.00 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 Annual Report 2005 ■ 2 To Our Shareholders '06 Pick a fruit of the structural reform–then take another step '05 toward growth '02 '04 Dissolved a financial Initiated structural reform subsidiary Loss on devaluation of land, buildings, and others '03 Rebuilt development and marketing systems KENZO TSUJIMOTO President and CEO Recovery following the completion of structural reform The fruits of structural reform As for home video games, the Capcom will come afterwards group’s staple business, the Japanese market has matured through a wider range of consumer goods The Capcom group recorded a net loss in the fiscal and services, such as cell phones and Internet years ended March 31, 2004, and March 31, 2003, services, and the expansion of the used-game which were mainly due to improvements on the market. The North American and European balance sheet, and from business strategies markets are expanding partially due to increases in determined through the course of doing business with the game user base. Under these conditions, a view of future group growth. We conducted overseas markets accounts for around 60% of corporate structural reforms across the entire group, home video game sales for the current period. The from the fiscal year ended March 31, 2003, aimed to group has also aggressively expanded its reinforce our earning structure and to converge our mixed-media product strategy to include movies, management resources on our main business and to TV animation, publications, and more as well as monitor global competitiveness. The effects of those added the distribution of games for mobile phones. reforms have been profitable. We have already seen a The details of our business strategy are outlined lowered ratio of COGS and SGA against net sales. in the message from our Chief Operating Officer. As a The Capcom group has defined Japan, North result of various corporate structural reforms over the America, and Europe as its main markets and has last