Square Enix 2004 Annual Report Download - page 18

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16 SQUARE ENIX 2004
Until the previous fiscal year, the former ENIX had its own publication
business, while the former SQUARE licensed out its game strategy books
and other publications to third parties, and recorded revenue from royal-
ties.
In this Fiscal Year, the Publication business grew considerably on the
back of the major hit FULLMETAL ALCHEMIST, which is published in
the Company’s SHONEN GANGAN monthly magazine. FULLMETAL
ALCHEMIST comic volumes 5, 6 and 7 were released in June and
October 2003 and March 2004, respectively, bringing the total number of
comics in print to more than 10 million for volumes 1-7 of the series. Total
sales volume of other fan club books and novels topped one million copies.
Since becoming an animated TV program in October 2003, sales of
FULLMETAL ALCHEMIST comic books have grown faster than vol-
umes 1-4 of the series released prior to the previous fiscal year. FULL-
METAL ALCHEMIST is a prime example of our successful media mix.
There were no major title releases for game strategy books during this
Fiscal Year. Increase of sales from strategy books for big titles is expected
in the future.
In this Fiscal Year, sales in the Publication business increased ¥3,254
million to ¥9,671 million, and operating income rose ¥1,360 million to
¥3,180 million.
Others
(Millions of yen)
Fiscal 2003 Fiscal 2004 Change
Net Sales 4,220 3,824 (396)
Operating Income 2,188 1,027 (1,161)
Operating Income Margin 51.9% 26.9% —
In the Others business, the Company plans, produces, sells and licenses
derivatives of game software content. The sales and profits of consolidated
subsidiary DIGITAL ENTERTAINMENT ACADEMY CO., LTD. are
included in the other business segment.
Compared with the Simple Total, the operating income margin
declined significantly in the Others business, from 51.9% to 26.9%, owing
to the write-off of production costs for the FINAL FANTASY movie at
the former SQUARE in fiscal 2002, resulting in the recording of nearly all
revenues from related DVD royalties as profits at the former SQUARE in
fiscal 2003. Sales in the other business fell ¥396 million to ¥3,824 million,
and operating income dropped ¥1,161 million to ¥1,027 million.
Non-Operating Expenses
(Millions of yen)
Former Former SimpleTotal for Fiscal 2004 Change
ENIX SQUARE Fiscal 2003
Non-operating 24 390 414 1,590 1,176
Expenses
Under non-operating expenses, the Company recorded ¥760 million in
equity in losses of non-consolidated subsidiaries and affiliates due to the
bankruptcy of DIGICUBE CO., LTD. In addition, a foreign exchange loss
of ¥788 million was posted, for an increase of ¥655 million from the previ-
ous fiscal year, due to the appreciation of the yen against the dollar. As a
result of these factors, non-operating expenses totaled ¥1,590 million in
this Fiscal Year, an increase of ¥1,176 million from the ¥414 million
recorded in the previous fiscal year.
Extraordinary Loss
(Millions of yen)
Former Former SimpleTotal for Fiscal 2004 Change
ENIX SQUARE Fiscal 2003
Extraordinary 215 3,878 4,093 907 (3,186)
Loss
Extraordinary loss declined ¥3,186 million to ¥907 million, reflecting
¥1,074 million in provision for allowance for relocation expenses and
¥1,503 million in loss on write-off of bad debts incurred by the former
SQUARE in the previous fiscal year.
Deferred Income Taxes
(Millions of yen)
Former Former SimpleTotal for Fiscal 2004 Change
ENIX SQUARE Fiscal 2003
Deferred (1,156) (6,248) (7,404) 2,962 10,366
Income Taxes
The Company records deferred income taxes, as it believes that future
deductions of temporary differences on the amortization of the movie busi-
ness at the former SQUARE in the previous fiscal year can be recovered.
Overseas Sales
Overseas sales differ from geographical segment sales in that figures are
calculated based on what region products were finally sold in. For example,
titles licensed from Japan to publishers in Europe are recorded as sales in
Japan under geographical segment sales, whereas they are included in
Europe under overseas sales.
Overseas sales at the former ENIX in the previous fiscal year were less
than 10% of total overseas sales, so they were recorded in Japan.
Overseas Sales (North America)
(Millions of yen)
Former Former SimpleTotal for Fiscal 2004 Change
ENIX SQUARE Fiscal 2003
North America — 11,587 11,587 15,618 4,031
In the Games (Offline) business, the Company released a total of five titles,
comprising three titles for the PlayStation 2 (FINAL FANTASY X-2,
UNLIMITED SAGA and DRAKENGARD), one title for the PlayStation
(FINAL FANTASY ORIGINS), two titles for the Game Boy Advance
(FINAL FANTASY TACTICS ADVANCE and SWORD of MANA),
and one title for the GameCube (FINAL FANTASY CRYSTAL
CHRONICLES). In the previous fiscal year, the former SQUARE
released one new title in North America, and shipped more than 1.5 mil-