Square Enix 2006 Annual Report Download - page 57

5 4 5 5
A n n u a l R e p o r t 2 0 0 6
The following table sets forth the components of the purchase
price of the UIEvolution acquisition:
Millions of yen
Cost of the acquisition:
Cash, net of cash acquired ¥6,091
Total ¥6,091
Allocation of purchase price:
Property and equipment ¥0,010
Existing technology (useful life of 5 years) 2,853
Trade name and trade marks (useful life of 5 years) 401
Customer contracts (useful life of 2 years) 243
Goodwill 3,331
Net other liabilities (747)
Total ¥6,091
Acquisition of TAITO
On September 28, 2005, the Company acquired 93.7% of
outstanding shares of stock of Taito by a cash tender offer. Per
share price offered to the shareholders of Taito was ¥181,100
each. Following the acquisition of 93.7% stake in Taito, the
Company engaged in the minority cash-out transaction in
March 2006 in order for Taito to become a wholly owned
subsidiary of the Company. In a series of these transactions,
the aggregate purchase price, including assumption of liabilities,
was ¥87,145 million. The acquisition has been accounted for
as a purchase business combination in accordance with SFAS
No.141 and, accordingly, the result of operations and financial
position of the acquired business are included in the Company’s
consolidated financial statement from the dates of acquisition.
The balance of the purchase price in excess of the fair value of
the assets acquired and that of intangible assets acquired at the
date of acquisition was recorded as goodwill totaling ¥21,502
million, none of which is expected to be deductible for tax pur-
poses. The Company’s consolidated results of operations for the
year ended March 31, 2006 reflected Taito’s operating activities
for the period from September 28, 2005 (the date of acquisition)
to March 31, 2006.
The following table sets forth the components of the purchase
price of the Taito acquisition:
Thousands of
Millions of yen U.S. dollars
Cost of the acquisition:
Cash, net of cash acquired ¥53,144 $452,405
Liabilities assumed 34,001 289,444
Total ¥87,145 $741,849
Allocation of purchase price:
Current assets ¥16,841 $143,364
Non-current assets 42,994 365,997
Database (indefinite useful life) 1,449 12,335
Trademarks (useful life of 1.5 years) 232 1,975
Business license (useful life of 3.5 years) 2,046 17,417
Copyrights (useful life of 1 year) 2,081 17,715
Goodwill 21,502 183,046
Total ¥87,145 $741,849
Unaudited Pro Forma Information
The unaudited pro forma data below for the years ended March
31, 2006, 2005, and 2004 are presented as if the acquisitions
of UIEvolution and Taito had taken place on April 1, 2003. The
unaudited pro forma financial information is based on man-
agement’s estimates and assumptions and does not purport to
represent the results that actually would have occurred if the
acquisitions had, in fact, been completed on the dates
assumed, or which may result in the future.
Thousands of
Millions of yen U.S. dollars
(Except share data)
Years ended March 31
2006 2005 2004 2006
Total revenue ¥164,902 ¥158,623 ¥145,386 $1,403,779
Income before
income taxes ¥3,763 ¥26,753 ¥7,137 $32,033
Net income ¥13,692 ¥16,102 ¥4,422 $116,557
Net income per share
—Basic ¥124.00 ¥146.26 ¥40.19 $1.055
Net income per share
—Diluted ¥123.36 ¥144.99 ¥38.57 $1.050
6 . E q u it y In v e s t m e n t in t h e A f f ilia t e d
C o m p a n y
The Company had an equity interest of 26.54% in DigiCube
Co., Ltd., a domestic video game whole-seller devoted to the
convenience store market, listed on the Hercules market of
Osaka Securities Exchange, and accounted for using the equity
method. DigiCube went bankrupt in November 2003, and the
Company recognized an impairment loss on its investment in
DigiCube in the amount of ¥760 million. The bankruptcy
proceeding was closed on April 25th, 2006. Equity method of
accounting was no longer applied for the years ended March
31, 2006 and 2005.
7 . In v e n t o r ie s
As of March 31, 2006 and 2005, inventories consist of:
Thousands of
Millions of yen U.S. dollars
2006 2005 2006
Finished goods and merchandise ¥3,602 ¥0,938 $30,667
Work in progress 1,050 99 8,939
Raw materials 1,319 —11,227
Other supplies 59 76 501
Total ¥6,030 ¥1,113 $51,334