Square Enix 2015 Annual Report Download

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2015

Table of contents

  • Page 1
    2 015

  • Page 2
    ...Section 70 Corporate Data 71 Investor Information Disclaimer Regarding Forward-Looking Statements Statements in this annual report with respect to the current plans, estimates, strategy, and beliefs of SQUARE ENIX HOLDINGS CO., LTD., and consolidated subsidiaries [collectively "SQUARE ENIX HOLDINGS...

  • Page 3
    ... Margin (%) 20 15 10 5 0 -5 2011 2012 2013 2014 2015 Return on Equity (%) 10 5 0 -5 -10 -15 2011 2012 2013 2014 2015 Operating Income Margin Recurring Income Margin 01 ©2015 Square Enix Ltd. All Rights Reserved. Rise of the Tomb Raider is registered trademarks or trademarks of Square Enix Ltd.

  • Page 4
    .... 2003 Jun. 2004 Mar. 2013 Jun. 2013 Senior Vice President, SQUARE CO., LTD. (currently SQUARE ENIX HOLDINGS CO., LTD.) Senior Vice President and General Manager, Accounting and Finance Division Director, Accounting and Finance Senior Executive Managing Director and Representative Director President...

  • Page 5
    ...in device technology have resulted in even stronger demand for highly playable games. As such, how we go about differentiating ourselves in order to deliver unparalleled gaming experiences is an increasingly important issue. SCHOOLGIRL STRIKERS ©2014, 2015 SQUARE ENIX CO., LTD. All Rights Reserved...

  • Page 6
    ... game available via the cloud on smart devices and Nintendo 3DS. We are meanwhile rolling out "FINAL FANTASY XIV" to new service territories, having launched it in DRAGON QUEST X Online ©2012-2015 ARMOR PROJECT/BIRD STUDIO/SQUARE ENIX All Rights Reserved. FINAL FANTASY XIV ©2010-2015 SQUARE ENIX...

  • Page 7
    ...KOEI TECMO GAMES/SQUARE ENIX All Rights Reserved. FINAL FANTASY TYPE-0 HD ©2011, 2015 SQUARE ENIX CO., LTD. All Rights Reserved. CHARACTER DESIGN: TETSUYA NOMURA was strong from European and North American game players as the PSP version had only been available in Japan. As such, the title, which...

  • Page 8
    ...to build up our merchandise lineup as we see it as a key element in further enriching our content offering. LORD of VERMILION III ©2007-2013 SQUARE ENIX CO., LTD. All Rights Reserved. GUNSLINGER STRATOS 2 ©2012, 2014 SQUARE ENIX CO., LTD. All Rights Reserved. Gangan Online ©2015 SQUARE ENIX CO...

  • Page 9
    ... including console games, smart device games, arcades, PC games, and comics. All of those platforms are capable of giving rise to new IPs. We see this as a strength of our Group that is unmatched by any competitor. We will work in the fiscal year ending March 2016 to ensure that these IP cultivation...

  • Page 10
    ... focusing on a single product to business alliances of a wider scope. In so doing, we hope to capture earnings opportunities in a timely fashion and leverage them for our further growth. 4. Geographic Expansion The regions marked in red on the map below are those that the Square Enix Group has yet...

  • Page 11
    ... well as online games including MMOs, to continue to drive earnings. Moreover, the second half of the fiscal year will see the launch of new HD game titles developed by our European and North American studios. These major franchise titles embody the brand value of the Square Enix Group and continue...

  • Page 12
    ... the fiscal year ending March 2016 will be a year not only of reaping even greater rewards from the investments we have engaged in to date, but also a year for sowing new seeds that will take us to our next stage of growth. In an ever-changing business environment, our Group's management team has...

  • Page 13
    ...Director Yo Yosuke Matsuda Director Philip Timo Rogers Director Keiji Honda Director Yukinobu Chida Director *1 Yukihiro Yamamura Director *1 Yuji Nishiura Audit & Supervisory Board Members Ryoichi Kobayashi (Standing*2) Ryuji Matsuda *2 Masaji Tomiyama *2 Honorary Chairman Yasuhiro Fukushima...

  • Page 14
    ... Square Enix Group (the "Group") is continuing determined efforts to strengthen the competitiveness and profitability of its business segments of Digital Entertainment, Amusement, Publication and Merchandising. Net sales for the fiscal year ended March 31, 2015 totaled ¥167,891 million (an increase...

  • Page 15
    ... to meet customer lifestyles across a variety of usage environments such as consumer game consoles (including handheld game machines), personal computers and smart devices. During the fiscal year ended March 31, 2015, repeat sales, primarily through downloads, of catalogue titles released in the...

  • Page 16
    ... game machines and related products for amusement facilities. During the fiscal year ended March 31, 2015, the operation of amusement facilities has been showing steady results through efficient store management efforts, despite the adverse effect of the hike in the consumption tax, whereas sales...

  • Page 17
    ... on the Group's own IPs while also strengthening its product lineup with additional products based on third party IPs and overseas expansions. Net sales and operating income in the Merchandising segment totaled ¥3,997 million (an increase of 5.6% from the prior fiscal year) and ¥1,161 million (an...

  • Page 18
    ... produced a great number of titles for not only traditional video game consoles, but also smartphones The upcoming title of the series, "FINAL FANTASY XV," is scheduled for release in 2016 (on PlayStation 4 and Xbox One) FINAL FANTASY XV ©SQUARE ENIX CO., LTD. All Rights Reserved. MAIN CHARACTER...

  • Page 19
    ... title in the series, "DRAGON QUEST XI: Sugisarishi Tokiwo Motomete," is planned for release on PlayStation 4 and Nintendo 3DS (release date not yet decided) DRAGON QUEST XI: Sugisarishi Tokiwo Motomete ©2015 ARMOR PROJECT/BIRD STUDIO/SQUARE ENIX All Rights Reserved. DRAGON QUEST X Online ©2012...

  • Page 20
    ... box office "RISE OF THE TOMB RAIDER," the next game in this series, will be launched according to the following schedule: Xbox One and Xbox 360 editions: November 10, 2015 PC edition: early 2016 PlayStation 4 edition: 2016 year-end holiday season ©2015 Square Enix Ltd. All Rights Reserved. Rise...

  • Page 21
    ...action-RPG-based gameplay has won a number of awards The next version, "DEUS EX: MANKIND DIVIDED," will be launched according to the following schedule: PlayStation 4, Xbox One and PC editions: February 23, 2016 Deus Ex: Mankind Divided ©2015 Square Enix Ltd. All rights reserved. Developed by Eidos...

  • Page 22
    ©TAITO CORPORATION 1978, 2015 ALL RIGHTS RESERVED. ©SQUARE ENIX CO., LTD. All Rights Reserved. SPECIAL FEATURE Delivering Unforgettable Experiences ©SQUARE ENIX CO., LTD. All Rights Reserved. ILLUSTRATION: TOMOMI KOBAYASHI ©2010-2015 SQUARE ENIX CO., LTD. All Rights Reserved.

  • Page 23
    ©2007-2013 SQUARE ENIX CO., LTD. All Rights Reserved. ©2012, 2014 SQUARE ENIX CO., LTD. All Rights Reserved. ©2014, 2015 SQUARE ENIX CO., LTD. All Rights Reserved. ©2014, 2015 SQUARE ENIX CO., LTD. All Rights Reserved. ©Hiromu Arakawa/SQUARE ENIX ©Yana Toboso/SQUARE ENIX ©Satsuki ...

  • Page 24
    ...conducts accounting and operational audits based on the audit plan. The audit & supervisory board members attend meetings of the Board of Directors to audit the execution of duties of the directors. The Board of Directors has passed a resolution establishing the Company's Basic Policy on Building an...

  • Page 25
    ... does not have experience in corporate management excluding duties as outside director or audit & supervisory board member (external) at several companies. However, he holds a qualification as an attorney and has extensive expertise in finance and accounting-related matters. Based on this expertise...

  • Page 26
    ...) work closely with the Auditing Division, audit & supervisory board members and the Company's accounting firm, and are required to submit reports and offer opinions for discussion at meetings of the Board of Directors, Audit & Supervisory Board, Internal Control Committee and other corporate forums...

  • Page 27
    ... Meeting of Shareholders. (5) Matters relating to the Company's holdings of shares Matters relating to shares held by the Company, which has the largest balance-sheet value of investments in shares within the Square Enix Group, are as follows: (i) Number of companies in which shares are held and the...

  • Page 28
    ... for actions related to Article 423, Paragraph 1, of the Companies Act, up to the limit provided by law, through a resolution passed by the Board of Directors. This provision aims to ensure the maintenance of an environment in which directors and audit & supervisory board members may exercise...

  • Page 29
    ... compensation Fiscal year ended March 31, 2014 The Company's consolidated subsidiaries SQUARE ENIX OF EUROPE HOLDINGS LTD. and SQUARE ENIX OF AMERICA HOLDINGS, INC. paid compensation to the Ernst & Young Group amounting to ¥103 million for statutory audit operations and ¥6 million for non-audit...

  • Page 30
    ... of Cash Flows (JPNGAAP) Notes to Consolidated Financial Statements (JPNGAAP) The financial statements and notes thereto in this section are the English translation of the Japanese original, which was reconstructed by the Company at its sole discretion from those in the Annual Security Report...

  • Page 31
    .... These shareholdings include stock in listed companies subject to price fluctuation risk in the stock market and stock in privately held companies for which share prices are difficult to calculate. In the event that the fair value of these shares as of the end of the fiscal year declines by 50% or...

  • Page 32
    ... amount is then recorded as an expense. The content production account is appropriately revalued in accordance with changes in the business environment. As of March 31, 2015, the content production account totaled ¥35,113 million, an increase of ¥14,556 million from the previous fiscal year. 30

  • Page 33
    ...partial redemption of euro yen zero-coupon convertible bonds, the recording of net income, payments of year-end dividends (Â¥20 per share) for the previous fiscal year and interim dividends (Â¥10 per share) for the fiscal year under review, and an increase in foreign currency translation adjustments...

  • Page 34
    ...¥320 million from the previous fiscal year, primarily due to an increase in depreciation and amortization in the digital entertainment business. Total extraordinary gain was ¥1,520 million, mainly due to gain on sale of property and equipment of ¥1,394 million in line with sale of land and other...

  • Page 35
    ... business and meet customers' diverse needs for entertainment content/services. It is critically important that the Group acquires and develops ideally suited human resources to that end. The Group's operating forecast for the fiscal year ending March 31, 2016 is as follows (as of June 30, 2015...

  • Page 36
    ... may affect its business performance. Such factors include market trends, the political situation, economic climate, laws and regulations, social conditions, cultural factors, religious factors and customs. Date of resolution November 6, 2014 Resolution by the Board of Directors May 18, 2015...

  • Page 37
    ... employees. However, in the event that a security incident, as described in (6) above, occurs, and personal information is leaked to third parties, the Group's business performance may be affected. (8) Exchange rate fluctuations The Group includes consolidated subsidiaries located in North America...

  • Page 38
    ... Balance Sheet (JPNGAAP) SQUARE ENIX HOLDINGS CO., LTD. and Consolidated Subsidiaries As of March 31 Millions of yen 2015 Assets Current assets Cash and deposits Notes and accounts receivable Merchandise and finished goods Work in progress Raw materials and supplies Content production account...

  • Page 39
    Millions of yen 2015 Liabilities Current liabilities Notes and accounts payable Short-term loans Current portion of bonds Accrued income taxes Provision for bonuses Provision for sales returns Provision for game arcade closings Deferred tax liabilities Asset retirement obligations Other Total ...

  • Page 40
    ... Commission fee Office transfer-related expenses Miscellaneous loss Total non-operating expenses Recurring income Extraordinary gain Gain on sale of property and equipment Gain on sale of investment securities Gain on reversal of stock acquisition rights Compensation income Total extraordinary...

  • Page 41
    Consolidated Statement of Comprehensive Income (JPNGAAP) SQUARE ENIX HOLDINGS CO., LTD. and Consolidated Subsidiaries Years ended March 31 Millions of yen 2015 Income before minority interests Other comprehensive income Unrealized gain on revaluation of available-for-sale securities Foreign ...

  • Page 42
    Consolidated Statement of Changes in Net Assets (JPNGAAP) SQUARE ENIX HOLDINGS CO., LTD. and Consolidated Subsidiaries Years ended March 31 â- 2015 Shareholders' equity Common stock Capital surplus Retained earnings Treasury stock Millions of yen Total shareholders' equity Balance at the ...

  • Page 43
    â- 2014 Shareholders' equity Common stock Capital surplus Retained earnings Treasury stock Millions of yen Total shareholders' equity Balance at the beginning of the year Cumulative effects of changes in accounting policies Restated balance Changes during the year Issuance of new stocks ...

  • Page 44
    Consolidated Statement of Cash Flows (JPNGAAP) SQUARE ENIX HOLDINGS CO., LTD. and Consolidated Subsidiaries Years ended March 31 Millions of yen 2015 Cash ï¬,ows from operating activities Income before income taxes and minority interests Depreciation and amortization Impairment loss Increase (...

  • Page 45
    ...and equipment Purchases of intangible assets Purchases of investments in subsidiaries Payments for guarantee deposits Proceeds from collection of guarantee deposits Other, net Net cash used in investing activities Cash ï¬,ows from financing activities Proceeds from issuance of new stocks Redemption...

  • Page 46
    ... that were not accounted for under the equity method, including SHINRA TECHNOLOGIES, INC., Shinra Technologies Japan Co., Ltd., Tokyo RPG Factory Co., Ltd., SQUARE ENIX MOBILE STUDIO CO., LTD., and SQUARE ENIX Business Support, CO., LTD., as well as affiliated companies, were excluded from...

  • Page 47
    ... the balance sheet date. C) Provision for sales returns At certain consolidated subsidiaries prior to the fiscal year ended March 31, 2015, provisions are provided for losses on the return of published materials, at an amount calculated based on historical experience prior to this fiscal year and...

  • Page 48
    ... and income before income taxes and minority interests for the fiscal year ended March 31, 2015. The impact of this change on per share information is presented in the applicable section of these notes. (Consolidated Statement of Cash Flows) "Gain on sale of property and equipment" was included in...

  • Page 49
    ... Balance Sheet *1 Investments in non-consolidated subsidiaries and affiliates Millions of yen As of March 31, 2015 Investments and other assets ¥1,992 As of March 31, 2014 ¥92 Notes to Consolidated Statement of Income *1 Inventories at fiscal year-end are stated after writing down based...

  • Page 50
    ... assumption of market price. In the fiscal year ended March 31, 2014, the Group posted an impairment loss on the following groups of assets. Millions of yen Location Shinjuku-ku, Tokyo Shinjuku-ku, Tokyo Usage Idle assets Idle assets Assets planned for disposal Prize production and sale Idle...

  • Page 51
    ... Statement of Changes in Net Assets â- Year ended March 31, 2015 Thousands of shares Shares as of March 31, 2015 1. Type and number of shares issued and outstanding, and type and number of shares of treasury stock Shares as of April 1, 2014 Share increases during the year Share decreases...

  • Page 52
    ...2. Stock options and the Company's stock options Number of shares allocated for the purpose of stock options Category Details of stock options Type of shares issuable for the exercise of stock options As of April 1, 2014 Increase during the year Decrease during the year As of March 31, 2015 Balance...

  • Page 53
    ... of stock options Type of shares issuable for the exercise of stock options As of April 1, 2013 Increase during the year Decrease during the year As of March 31, 2014 Balance as of March 31, 2014 (Millions of yen) Supplying company (parent company) Issuance of euro yen zero-coupon convertible...

  • Page 54
    ... to forward foreign exchange transactions, all risk is centrally managed by the accounting division under the approval of a representative director and the director assigned to oversee accounting and finance matters. Investment securities mainly comprise stock market listed shares, and, hence, are...

  • Page 55
    ...-term basis, book value is used on the assumption that fair value is principally equivalent to book value. (3) Investment securities Investment securities comprise stock market listed shares, and fair value is the stock market trading price. For information relating to each of the holding purposes...

  • Page 56
    ... lack of market prices and the extreme difficulty in estimating fair value based 3 Planned redemption amounts subsequent to the consolidated balance sheet date for monetary claims Millions of yen As of March 31, 2015 Within one year Deposits Notes and accounts receivable Income taxes receivable...

  • Page 57
    ... with market value Millions of yen As of March 31, 2015 Type (1) Stocks (2) Bonds a. Government bonds and municipal bonds b. Corporate bonds c. Other (3) Other Subtotal (1) Stocks (2) Bonds a. Government bonds and municipal bonds b. Corporate bonds c. Other (3) Other Subtotal Book value ¥1,081...

  • Page 58
    ... for estimating fair value: The fair value is calculated by using forward exchange rates. 2. Derivative transactions for which hedge accounting has been applied â- Year ended March 31, 2015 Not applicable â- Year ended March 31, 2014 Not applicable Employees' Retirement Benefits 1. Overview of...

  • Page 59
    ... balance sheet Net defined benefit liabilities Net defined benefit liabilities and assets recorded in the consolidated balance sheet (4) Components of net periodic pension costs Fiscal year ended March 31, 2015 ¥ 8,992 (8,904) 87 2,113 2,200 2,200 ¥ 2,200 Fiscal year ended March 31, 2014...

  • Page 60
    ...follows: Percent Bonds Stocks General accounts Cash and deposits Others Total As of March 31, 2015 7 - 21 62 10 100 As of March 31, 2014 45 22 9 7 17 100 Note: Total plan assets include 4% of the retirement benefit trust plan, which has been established for the corporate pension plan. 2) Method...

  • Page 61
    ... Number of grantees Company directors Fiscal year ended March 31, 2014 ¥35 ¥44 2009 stock options Company directors 2009 stock options Company employees 2010 stock options Company directors 2010 stock options Company employees 2010 stock options Company employees 2011 stock options Company...

  • Page 62
    ... 2) Price information Yen 2008 stock options Exercise price Average share price at exercise Fair market value on grant date 2009 stock options 2009 stock options 2010 stock options 2010 stock options 2010 stock options 2011 stock options 2011 stock options 2012 stock options 2012 stock options 2014...

  • Page 63
    ...of March 31, 2015 Deferred tax assets 1) Current assets Enterprise tax payable Business office tax payable Provision for bonuses Accrued expenses Provision for sales returns Non-deductible portion of allowance for doubtful accounts Tax credits Loss on write-offs of content production account Loss on...

  • Page 64
    ... deduction for income growth Tax credit for R&D expenses Reduction of deferred tax assets and liabilities at fiscal year-end due to changes in corporate tax rate Differences in tax rate from the parent company's statutory tax rate Other Effective tax rate As of March 31, 2014 35.64% 0.33 (0.01...

  • Page 65
    ... March 31, 2015 Beginning balance Increase due to procurement of property and equipment Accretion expense Decrease due to fulfillment of asset retirement obligations Ending balance Millions of yen Fiscal year ended March 31, 2014 ¥803 3 6 (3) ¥810 ¥810 149 7 (5) ¥962 Matters Relating to Real...

  • Page 66
    ...same as those used in the preparation of the Company's consolidated financial statements. Reporting segment income corresponds to operating income. Intersegment sales are based on prevailing prices in the market for the content and/or services provided. 3. Information on sales, income (loss), assets...

  • Page 67
    ...same as those used in the preparation of the Company's consolidated financial statements. Reporting segment income corresponds to operating income. Intersegment sales are based on prevailing prices in the market for the content and/or services provided. 3. Information on sales, income (loss), assets...

  • Page 68
    ... grouped by country or region, based on customer location. (2) Property and equipment Millions of yen Japan ¥11,738 North America ¥1,391 Europe ¥394 Asia ¥96 Total ¥13,620 3. Information by major customer This information has been omitted because all sales to major customers account for...

  • Page 69
    ... mainly to impairment losses on telephone subscription rights. [Information related to amortization of goodwill and the unamortized balance in each reporting segment] Year ended March 31, 2015 Not applicable â- â- Year ended March 31, 2014 Not applicable [Information related to gain on negative...

  • Page 70
    ... outstanding during the fiscal year (thousands of shares) Adjustments to net income used to calculate diluted net income per share: Adjustments to net income: Increase in the number of shares of common stock (thousands of shares) (Number of shares reserved for the purpose of new share issuances for...

  • Page 71
    ...in Article 92-2 of Regulations for Consolidated Financial Statements. [Other] Quarterly Financial Information Millions of yen Cumulative period 1Q April 1, 2014 to June 30, 2014 2Q April 1, 2014 to September 30, 2014 3Q April 1, 2014 to December 31, 2014 4Q April 1, 2014 to March 31, 2015 Net sales...

  • Page 72
    ...(100.0%) 100.0% (100.0%) Holding of shares in and business management of Square Enix Group companies located in North America Digital entertainment, publication, merchandising in North America Development of games Development of games Established Fiscal Year-End Common Stock Percentage of Voting...

  • Page 73
    ... Department Mitsubishi UFJ Trust and Banking Corporation 7-10-11 Higashi-suna, Koto-ku, Tokyo 137-8082 TEL.: 0120-232-711 (Toll-free number within Japan) Listed on: The First Section of the Tokyo Stock Exchange Securities code: 9684 Trading unit: 100 shares Public notices: URL: http://www.pronexus...

  • Page 74
    SQUARE ENIX HOLDINGS CO., LTD. www.hd.square-enix.com/ Printed in Japan