Sega Sammy Holdings Consolidated Financial Statements: 9 Months Ended December 31, 2009

Key insights

7 takeaways

01
Sega Sammy Holdings achieved a significant financial turnaround for the nine months ending December 31, 2009, reporting a consolidated operating income of ¥28,863 million compared to an operating loss in the same period the previous year.See it on page 1
02
Net income reached ¥16,945 million, a sharp recovery from the ¥10,840 million net loss recorded during the same period in 2008, despite a 7.7% decline in total net sales to ¥285,336 million.See it on page 3
03
The Pachislot and Pachinko segment served as the primary growth driver, with net sales rising 17.7% and operating income surging over 400% due to successful machine launches and cost management.See it on page 3
04
A change in accounting methodology, which shifted the treatment of content production expenses from immediate expensing to inventory capitalization, contributed an additional ¥4,717 million to operating income.See it on page 5
05
The Amusement Center Operations segment underwent a strategic consolidation, resulting in the closure of 51 underperforming domestic centers to mitigate revenue declines.See it on page 4
06
While the Consumer Business segment returned to profitability, overseas performance was negatively impacted by adverse market conditions and the postponement of specific software titles.See it on page 4
07
The company maintained its full-year projections for the fiscal year ending March 31, 2010, targeting ¥420,000 million in net sales and ¥27,000 million in operating income.See it on page 2

Summary

Sega Sammy Holdings reported a significant financial turnaround for the nine-month period ending December 31, 2009, transitioning from an operating loss in the previous year to a consolidated operating income of ¥28,863 million. Despite a 7.7% year-on-year decline in net sales to ¥285,336 million, the company achieved a net income of ¥16,945 million, contrasting sharply with the ¥10,840 million net loss recorded during the same period in 2008. This recovery was largely driven by strong performance in the Pachislot and Pachinko segment, which saw net sales rise by 17.7% and operating income surge by over 400% due to successful new machine launches and improved cost management.

The company’s broader operations faced a challenging economic environment characterized by stagnant personal consumption and weak demand in overseas home video game markets. The Amusement Machine Sales and Amusement Center Operations segments both experienced declines in revenue, with the latter continuing a strategic consolidation effort that included the closure of 51 underperforming domestic centers. In the Consumer Business segment, while domestic software sales remained firm, overseas performance was hampered by adverse market conditions and the postponement of certain titles, though the division successfully returned to profitability.

A key factor in the reported financial results was a change in accounting methodology regarding content production expenses. Starting in the first quarter of the fiscal year, the company began capitalizing production costs for game software and amusement machines as inventory rather than expensing them immediately. This shift, intended to better align production costs with realized earnings, resulted in a ¥4,717 million increase in operating income for the period. The company maintained its full-year consolidated projections, anticipating total net sales of ¥420,000 million and an operating income of ¥27,000 million for the fiscal year ending March 31, 2010.