Konami Grp Corp Regulatory News (KNM)

Consolidated Financial Results

for the Nine Months Ended December 31, 2009

(Prepared in Accordance with U.S. GAAP)

February 4, 2010

KONAMI CORPORATION

Address:

7-2, Akasaka 9-chome, Minato-ku, Tokyo, Japan

Stock code number, TSE:

9766

Ticker symbol, NYSE:

KNM

URL:

www.konami.net

Shares listed:

Tokyo Stock Exchange, New York Stock Exchange and London Stock Exchange

Representative:

Kagemasa Kozuki, Representative Director and Chief Executive Officer

Contact:

Noriaki Yamaguchi, Representative Director and Chief Financial Officer

(Phone: +81-3-5771-0222)

Adoption of U.S. GAAP:

Yes

1. Consolidated Financial Results for the Nine Months Ended December 31, 2009

(Amounts are rounded to the nearest million)

(Millions of Yen, except per share data)

Net revenues

Operating

income

Income before income taxes

Net income attributable to Konami Corporation

Nine months ended December 31, 2009

% change from previous period

190,932

(18.4)%

17,126

(50.6)%

16,119

(49.2)%

10,620

(40.4)%

Nine months ended December 31, 2008

% change from previous period

234,011

5.1%

34,712

25.7%

31,703

15.7%

17,826

17.3%

Basic net income attributable to Konami Corporation per share (yen)

Diluted net income attributable to Konami Corporation per share (yen)

Nine months ended December 31, 2009

79.58

79.58

Nine months ended December 31, 2008

129.72

129.72

Note:

Due to adoption of FASB Accounting Standards Codification 810, (former Statement of Financial Accounting Standards No.160), "Net income attributable to Konami Corporation" is used to herein to describe "Net Income" as the term was used for the year ended March 31, 2009.

(Millions of Yen, except per share amounts)

Total assets

Konami Corporation stockholders' equity

Konami Corporation stockholders'

equity ratio

Konami Corporation stockholders'

equity per share

December 31, 2009

303,062

181,654

59.9%

1,361.10

March 31, 2009

301,670

178,632

59.2%

1,338.46

2. Cash Dividends

Record Date

Cash dividends per share (yen)

First quarter end

Second quarter end

Third quarter end

Year end

Annual

Year ended March 31, 2009

-

27.00

-

27.00

54.00

Year ending March 31, 2010

-

27.00

-

-Forecast-

27.00

54.00

3. Consolidated Earnings Forecast for the Year Ending March 31, 2010

(Millions of Yen, except per share data)

Net revenues

Operating

income

Income before income taxes

Net income attributable to Konami Corporation

Net income attributable to Konami Corporation per share

Year ending March 31, 2010

% change from previous year

310,000

0.1%

30,000

9.6%

28,500

15.3%

16,000

47.1%

119.88

Note:

Change in earnings forecasts for the fiscal year ending March 31, 2010 during the three months ended December 31, 2009: None

4. Other

 1.

Changes accompanying amendment of accounting standard: Yes

 2.

Other: None

Please refer to page 10 for details.

 1.

Number of shares issued: (Treasury stock included)

 Nine months ended December 31, 2009

143,500,000

 shares

 Year ended March 31, 2009

143,500,000

 shares

 2.

Number of Treasury Stock:

 Nine months ended December 31, 2009

10,038,992

 shares

 Year ended March 31, 2009

10,038,498

 shares

 3.

Average number of shares outstanding:

 Nine months ended December 31, 2009

133,461,248

 shares

 Nine months ended December 31, 2008

137,422,938

 shares

Cautionary Statement with Respect to Forward-Looking Statements:

Statements made in this document with respect to our current plans, estimates, strategies and beliefs, including the above forecasts, are forward-looking statements about our future performance. These statements are based on management's assumptions and beliefs in light of information currently available to it and, therefore, you should not place undue reliance on them. A number of important factors could cause actual results to be materially different from and worse than those discussed in forward-looking statements. Such factors include, but are not limited to: (i) changes in economic conditions affecting our operations; (ii) fluctuations in currency exchange rates, particularly with respect to the value of the Japanese yen, the U.S. dollar and the Euro; (iii) our ability to continue to win acceptance of our products, which are offered in highly competitive markets characterized by the continuous introduction of new products, rapid developments in technology and subjective and changing consumer preferences; (iv) our ability to successfully expand internationally with a focus on our Digital Entertainment business and Gaming & System business; (v) our ability to successfully expand the scope of our business and broaden our customer base through our Health & Fitness business; (vi) regulatory developments and changes and our ability to respond and adapt to those changes; (vii) our expectations with regard to further acquisitions and the integration of any companies we may acquire; and (viii) the outcome of existing contingencies.

Please refer to pages 8 and 9 for further information regarding our business forecasts.

Business Performance

1. Consolidated Results of Operations

(1) Business Overview

Although there were temporary signs of recovery from the ongoing economic slowdown from the previous year, the business environment surrounding the KONAMI CORPORATION and its subsidiaries ("Konami") continued to be uncertain. This was due to factors such as the impact of the appreciation of the yen and deflation.

Regarding the entertainment industry, despite measures taken to arouse demand, the home video game market remained challenging - both in Japan and overseas - as compared to the previous year. The measures included the reduction of standalone video game console prices by various hardware manufacturers, the launch of new handheld video game consoles and the release of major game titles by various software producing companies towards the year-end sales season. The amusement arcade market also continued to see a decline in the volume of customer traffic due to factors such as suppressed consumer spending and the impact of the H1N1 influenza pandemic.

In the health and fitness industry, heightened interest in and demand related to the maintenance and promotion of good health is expected to continue into the future due to the aging population as well as concern over lifestyle diseases.

Against such backdrop, Konami's Digital Entertainment segment rolled out the latest titles in various home video game software series, such as Winning Eleven (known in the US and Europe as PRO EVOLUTION SOCCER) and JIKKYOU PAWAFURU PUROYAKYU. Meanwhile, the new romantic communication game LOVEPLUS and new titles targeting foreign tastes enjoyed steady sales. As products for amusement arcades, MAH-JONG FIGHT CLUB GARYOTENSEI, the latest in the series, was released, while the sale of card game products also continued to be satisfactory. Turnover in home video game software and arcade games, however, has declined in comparison to the same period of the previous year, which was marked by the release of major game titles.

In the Health & Fitness segment, we increased the number of new fitness clubs under Konami's direct management and expanded the portfolio of fitness clubs outsourced to us. At the same time, we advanced the development and introduction of facilities and services that meet the diversifying needs of customers. Furthermore, we reinforced the marketing of health products, drove forward the computerization of health management and strove to expand and enrich services, both within and outside our facilities, supporting the promotion and maintenance of good health.

As for the Gaming & System segment, Konami enriched its product lineup in the North American and Australian markets, with a focus, in the case of video slot machines, on the new-generation cabinet (outer structure) Podium running the K2V series, and on the Advantage 5 series in the case of mechanical stepper machines. Those sales progressed steadily. Meanwhile, we also increased the sale of the Konami Casino Management System and participation agreements (equipment sales in which profits are shared).

In terms of the consolidated results for the nine months ended December 31, 2009, net revenues amounted to Y190,932 million (a year-on-year decrease of 18.4%), operating income was Y17,126 million (a year-on-year decrease of 50.6%), income before income taxes was Y16,119 million (a year-on-year decrease of 49.2%), and net income attributable to Konami Corporation was Y10,620 million (a year-on-year decrease of 40.4%).

(2) Performance by Business Segment

Summary of net revenues by business segment:

Millions of Yen

Nine months ended December 31, 2008

Nine months ended December 31, 2009

 % change

Digital Entertainment

Y 148,711

Y 100,427

(32.5)

Health & Fitness

67,737

64,584

(4.7)

Gaming & System

13,297

14,729

10.8

Other and Eliminations

4,266

11,192

162.4

Consolidated net revenues

Y 234,011

Y 190,932

(18.4)

Digital Entertainment

Computer & Video Games business: In Japan, a diverse lineup of home video game products was released by Konami. In addition to sports titles - which are Konami's forte - such as WORLD SOCCER Winning Eleven 2010 (known in the US and Europe as PES 2010 - Pro Evolution Soccer) and the JIKKYOU PAWAFURU PUROYAKYU series, Konami also released the animated title Pen 1 Grand Prix: A penguin's troubles Special and TOKIMEKI MEMORIAL 4, which is the latest title following LOVEPLUS (which is proving popular in the market) in the romance themed simulation series, as one of the home video game software.

Furthermore, we utilized various popular Konami titles in promoting the online distribution for mobile phones and terminals. This included the commencement of the online distribution, such as DanceDanceRevolution S, for the Windows phone, following the distribution of software titles for the iPhone and iPod touch.

Amusement business: As amusement arcade video games, MAH-JONG FIGHT CLUB GARYOTENSEI and BASEBALL HEROES 2009 HA-SHA, the latest titles in their series, were released in addition to popular music game titles utilizing the e-AMUSEMENT service that links amusement arcades nationwide in Japan through its network. Meanwhile, in medal games, the new large-scale mass medal game GI-HORSEPARK GX was newly launched in addition to the new genre mass medal game, InfinityRings. As for card games, the genre continued to enjoy healthy sales.

In North America and Europe, the latest soccer title was launched, while the music game series DanceDanceRevolution and game content for overseas consumption, such as SAW, enjoyed strong sales.

Due to the absence of major titles, such as last year's METAL GEAR SOLID 4 GUNS OF THE PATRIOTS, however, the overall sales fell this quarter as compared to the same period the previous year.

In terms of financial performance, consolidated net revenues for the nine months ended December 31, 2009 in this segment amounted to Y100,427 million (a year-on-year decrease of 32.5%).

Health & Fitness

A difficult business climate persisted in the fitness club industry as consumer spending remained suppressed due to uncertainty over the future, price-competition progressed further and the increase in the number of fitness clubs made it difficult to recruit new members. Against such backdrop, Konami strove to enhance its services - both within and outside its facilities - and health products as well as expand the range of services and the lineup of products that meet regional characteristics and customer needs.

Operation of fitness clubs: Regarding directly managed facilities, 20 facilities were closed during this third quarter through merger and elimination of facilities executed as part of structural reform. Meanwhile, in addition to the five facilities opened during the first half of the year, Konami Sports Club Sendai Nagamachi (Miyagi Prefecture), which houses one of the largest fitness studios in the Tohoku region as well as extensive bath facilities, was opened in November 2009. Furthermore, in partnership with Advanced Medical Care, Inc., which provides operational support to Tokyo Midtown Clinic, health management and exercise guidance that combine the services provided by fitness clubs and medical institutions were launched from November 2009 at some Konami Sports Clubs. We developed facilities meeting the characteristics of each region, upgraded and enhanced services utilizing IT and Konami's strengths in health management, exercise and nutritional guidance, and provided support for the maintenance and promotion of good health - both within and outside our facilities - to our customers, whose health consciousness is on the rise.

Operation of sports facilities outsourced to us: In the management of facilities outsourced to Konami, we added the Sakai Municipal Mihara Sports Center (Osaka Prefecture) to the portfolio in October 2009, and we continued to promote the health of community residents by making use of Konami's know-how and experience in the operation of public facilities, etc. The number of sports facilities managed by Konami, including those that are directly managed or managed on an outsourced basis, was 327 nationwide as of the end of December 2009.  

Health products: In health products, we are expanding and enriching our products and services through such products as EXERCISEWATER ZERO, a sugar-free beverage with zero calories that was launched in August 2009; and the Konami Sports Club Widget, which is a new function that enables convenient health management using the mobile phone. The download service for this widget began in September 2009. In December 2009, in Tokyo, we launched the second catalog sales in an alliance with the Tokyo Branch of Japan Post Network Co., Ltd.

In terms of financial performance, consolidated net revenues for the nine months ended December 31, 2009 in this segment amounted to Y64,584 million (a year-on-year decrease of 4.7%).

Gaming & System

In the North American market, the Advantage 5 five-reel stepper machine series, which has become a standard item, and the Podium, a new generation cabinet (outer structure) running the K2V series, continue to enjoy favorable sales. Sales of the Konami Casino Management System, a system that shores up a steady flow of income through maintenance and services, and sales through participation agreements (in which profits are shared with casino operators) increased and are steadily expanding market shares. Full-scale marketing is also under progress in Central and South America, building a distributor network for the market.

In the Australian market, sales of video slot machines, including the new cabinet Podium running the K2V series, progressed favorably. The introduction of the Konami Casio Management System in the market also contributed to the improvement of Konami revenues.

The Global Gaming Expo, one of the gaming industry's largest trade fairs, was held in November 2009 in Las Vegas. Konami exhibited, and received favorable reviews for, a wide-ranging product lineup that responded to the needs of each market. It included new content for the K2V series, which was loaded onto the Podium new cabinet (outer structure) for the expo; Advantage Revolution, the latest slot machine in which progress has been made in the staging elements; Advantage 5; and the Konami Casino Management System.

In terms of financial performance, consolidated net revenues for the nine months ended December 31, 2009 in this segment amounted to Y14,729 million (a year-on-year increase of 10.8%).

2. Cash Flows

Cash flow summary for the nine months ended December 31, 2009:

Millions of Yen

Nine months ended December 31, 2008

Nine months ended December 31, 2009

Change

Net cash provided by operating activities

Y 14,105

Y 4,454

Y (9,651)

Net cash used in investing activities

(3,705)

(4,665)

(960)

Net cash used in financing activities

(14,466)

(9,715)

4,751

Effect of exchange rate changes on cash and cash equivalents

(2,536)

186

2,722

Net decrease in cash and cash equivalents

(6,602)

(9,740)

(3,138)

Cash and cash equivalents, end of the period

Y 45,528

Y 43,828

Y (1,700)

Cash and cash equivalents (hereafter, referred to as "Net cash"), for the nine months ended December 31, 2009, amounted to Y43,828 million, a decrease of Y9,740 million compared to the year ended March 31, 2009, and a year-on-year decrease of 3.7%.

Cash flow summary for each activity for the nine months ended December 31, 2009 is as follows:

Cash flows from operating activities:

Net cash from operating activities amounted to Y4,454 million for the nine months ended December 31, 2009, a year-on-year decrease of 68.4%. This primarily resulted from great decrease in net income compared to that for the nine months ended December 31, 2008, when our Digital Entertainment segment released hit titles for video game software and amusement arcades, as well as decreases in trade notes and accounts payable owing to disbursements.

Cash flows from investing activities:

Net cash used in investing activities amounted to Y4,665 million for the nine months ended December 31, 2009, a year-on-year increase of 25.9%. This increase mainly resulted from the lack of proceeds from sale of property and equipment which existed for the nine months ended December 31, 2008, despite a decrease in capital expenditures for investments.

Cash flows from financing activities:

Net cash used in financing activities amounted to Y9,715 million for the nine months ended December 31, 2009, a year-on-year decrease of 32.8%. These financing activities primarily resulted from the lack of redemption of bonds which took place during the nine months ended December 31, 2008.

3. Outlook for Fiscal Year Ending March 31, 2010

Digital Entertainment

In digital entertainment, we will continue to focus on the large-scale European and North American video game software markets in addition to the matured Japanese market. In particular, we will roll out on multiple platforms the Winning Eleven (known in the US and Europe as PRO EVOLUTION SOCCER) soccer game series, which is enjoying high recognition around the world.

In Japan, we plan to release QUIZ MAGIC ACADEMY DS Futatsu no Jikuu Seki, the latest title in the QUIZ MAGIC ACADEMY series that proved popular with the release of the first title. In North America and Europe, we will focus our efforts on soccer titles and animated content in addition to the DanceDanceRevolution series and other music games, which is a genre in which Konami has particular strength. Furthermore, we will also devote our efforts to the online marketing of titles for the increasing number of game consoles with network connectivity as well as mobile phones and mobile terminals.

In arcade video games, we plan to further upgrade and enlarge the lineup of products that utilize the e-AMUSEMENT service. We plan to release new titles, including QUIZ MAGIC ACADEMY Ⅶ and WORLD SOCCER Winning Eleven ARCADE CHAMPIONSHIP 2010, in our standard series games as well as the new medal game, FORTUNE TRINITY.

In card games, we will continue to develop our business widely in Japan and abroad.

As for popular content, we will pursue high synergy through multifaceted development that is not restricted to home video game software, arcade games or card games.

Health & Fitness

In health and fitness services, we will seek to accurately grasp diversifying customer needs and aim to enhance the added-value of the Konami Sports Club by proposing new lifestyles. We will also promote our health and fitness business by utilizing our strength in operating over 300 of Japan's largest-scale fitness clubs and seek to generate synergy through enrichment of the programs offered at our facilities, computerization of health management, upgrading and expansion of our product lineup and other efforts.

While market conditions are expected to remain harsh, we believe that opportunities for operating fitness clubs and developing and marketing health and fitness equipment will continue to increase with heightened social awareness for good health against the backdrop of the aging population and measures taken against lifestyle diseases.

Konami will continue to roll out facilities that meet regional characteristics and customer needs, expand the product and services lineup, and support the promotion and maintenance of good health both within and outside its facilities while keeping an eye on changes in the business environment.

Gaming & System

In slot machine marketing, regarding steppers, we will continue to promote the aggressive marketing of the Advantage 5 series that is enjoying popularity. Regarding video slot machines, we will carry out product development with a focus on the new Podium cabinet (outer structure) running the K2V series, which is a standard series, and seek to improve our sales.

The Konami Casino Management System continues to be adopted in the North American and Australian markets, particularly by major operators. In the future, we plan to aggressively market the system in other markets, develop new functions, pursue strategic alliances with other companies, and reinforce the system's strength as a product. Furthermore, we plan to stabilize operations by increasing the amount of steady, periodical income through expansion of participation agreement (profit sharing with operators) sales.

Konami plans to further reinforce collaboration between its three bases - the United States, Australia and Japan - and promote the efficiency of operations and reinforce production and sales. Furthermore, we plan to develop new products that respond to changes in society and meet demands and enhance the added-value of existing products. We will continue to use Konami's strengths in the domain of entertainment as the foundation for proposing new products that will bring even greater enjoyment to our customers.

Projected consolidated results for the fiscal year ending March 31, 2010 are as follows: net revenue of 310,000 million yen; operating income of 30,000 million yen; income before income taxes of 28,500 million yen; and net income attributable to Konami Corporation of 16,000 million yen. Thus, there is no change from the figures released in the "Consolidated financial results for the year ended March 31, 2009" dated May 14, 2009.

4. Other

(1) Changes in significant consolidated subsidiaries during the period (status changes of subsidiaries due to changes in the scope of consolidation) : None

(2) Adoption of simplified methods in accounting principles for quarterly consolidated financial statements: None

(3) Changes in accounting principles, procedures and reporting policies for quarterly consolidated financial statements (items to be disclosed in "Significant change in preparation basis for quarterly consolidated financial statements")

1.

Changes accompanying amendment of accounting standard: Yes

a) FASB Accounting Standards Codification ("ASC")

In the three months began July 1, 2009, Konami adopted ASC No.105, "Generally Accepted Accounting Principles" (former Statement of Financial Accounting Standards ("SFAS") No.168 "The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles - a replacement of FASB Statement No.162"). ASC No. 105 establishes that the FASB Accounting Standard Codification ™ is the single official source of authoritative U.S. Generally Accepted Accounting Principles, other than guidance issued by the Securities and Exchange Commission, doing away with the previous various hierarchy. The adoption of ASC No. 105 did not have a material effect on Konami's consolidated financial position or results of operations.

b) Business Combinations

Effective April 1, 2009, Konami has adopted ASC No.805, "Business Combinations" (former SFAS No.141 (revised 2007), "Business Combinations" ("SFAS 141R")). ASC No.805 establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. As of the effective date, the adoption of ASC No.805 did not have a significant impact on its consolidated financial statements.

c) Noncontrolling Interests in Consolidated Financial Statement

Effective April 1, 2009, Konami has adopted ASC No. 810, "Consolidation" (former SFAS No. 160 "Noncontrolling Interests in Consolidated Financial Statement, an amendment of ARB No. 51"). ASC No. 810 establishes accounting standards for noncontrolling interests and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. ASC No. 810 requires (i) that consolidated net income include the amounts attributable to both the parent and the noncontrolling interest, (ii) that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated and (iii) expanded disclosures that clearly identify and distinguish between the interests of the parent owner and the interests of the noncontrolling owners of a subsidiary. Upon the adoption of ASC No. 810 noncontrolling interests, which were previously referred to as minority interests and classified between total liabilities and stockholders' equity on the consolidated balance sheets, are now included as a separate component in equity. In addition, the presentation of consolidated statements of income and cash flows has been changed. The consolidated financial statements of the prior year have also been reclassified to conform to the presentation used for this current period.

 2.

Other: None

5. Consolidated Financial Statements

(1) Consolidated Balance Sheets (Unaudited)

Millions of Yen

Thousands of U.S. Dollars

December 31, 2008

December 31, 2009

March 31, 2009

December 31, 2009

%

%

%

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

Y 45,528

Y 43,828

Y 53,568

$ 475,874

Trade notes and accounts receivable, net

40,470

33,252

30,624

361,042

of allowance for doubtful accounts of

Y293 million, Y720 million

($7,818 thousand) and Y470 million at

December 31, 2008, December 31, 2009, and March 31, 2009,respectively

Inventories

34,690

32,264

23,512

350,315

Deferred income taxes, net

20,066

20,076

19,203

217,980

Prepaid expenses and other current

assets

9,840

9,754

9,768

105,907

Total current assets

150,594

46.0

139,174

45.9

136,675

45.3

1,511,118

PROPERTY AND EQUIPMENT, net

66,648

20.3

61,804

20.4

60,552

20.1

671,053

INVESTMENTS AND OTHER ASSETS:

Investments in marketable securities

615

220

560

2,389

Investments in affiliates

6,388

2,123

2,119

23,051

Identifiable intangible assets

37,808

35,740

35,883

388,056

Goodwill

21,889

21,895

21,925

237,731

Lease deposits

27,855

27,812

27,959

301,976

Deferred income taxes, net

2,494

3,263

3,641

35,429

Other assets

13,393

11,031

12,356

119,772

Total investments and other assets

110,442

33.7

102,084

33.7

104,443

34.6

1,108,404

TOTAL ASSETS

Y 327,684

100.0

Y 303,062

100.0

Y 301,670

100.0

$ 3,290,575

Millions of Yen

Thousands of U.S. Dollars

December 31, 2008

December 31, 2009

March 31, 2009

December 31, 2009

%

%

%

LIABILITIES

Current liabilities:

Current portion of long-term debt and

Y 3,286

Y 2,695

Y 3,627

$ 29,261

capital lease obligations

Trade notes and accounts payable

19,188

14,188

17,430

154,050

Accrued income taxes

7,447

5,426

6,683

58,914

Accrued expenses

21,034

18,217

17,738

197,796

Deferred revenue

15,827

13,304

7,586

144,452

Other current liabilities

7,459

6,298

9,322

68,382

Total current liabilities

74,241

22.7

60,128

19.9

62,386

20.7

652,855

Long-term liabilities:

Long-term debt and capital lease

obligations, less current portion

36,656

40,046

37,739

434,810

Accrued pension and severance costs

2,660

2,712

2,941

29,446

Deferred income taxes, net

10,779

5,513

6,564

59,859

Other long-term liabilities

8,673

8,171

8,501

88,719

Total long-term liabilities

58,768

17.9

56,442

18.6

55,745

18.5

612,834

TOTAL LIABILITIES

133,009

40.6

116,570

38.5

118,131

39.2

1,265,689

COMMITMENTS AND

CONTINGENCIES

EQUITY

Konami Corporation stockholders' equity:

Common stock, no par value-

Authorized 450,000,000 shares;

47,399

14.5

47,399

15.6

47,399

15.7

514,647

issued 143,500,000 shares at December 31, 2008, December 31, 2009 and March 31, 2009

Additional paid-in capital

77,090

23.5

77,089

25.4

77,090

25.6

837,014

Legal reserve

284

0.1

284

0.1

284

0.1

3,084

Retained earnings

83,899

25.6

80,361

26.5

76,947

25.5

872,541

Accumulated other comprehensive

income (loss)

(1,150)

(0.4)

(292)

(0.1)

98

0.0

(3,171)

Treasury stock, at cost-

6,038,344 shares, 10,038,992 shares and 10,038,498 shares at December 31, 2008, December 31, 2009 and March 31, 2009, respectively

(17,711)

(5.4)

(23,187)

(7.6)

(23,186)

 (7.7)

(251,759)

Total Konami Corporation

stockholders' equity

189,811

57.9

181,654

59.9

178,632

59.2

1,972,356

Noncontrolling interest

4,864

1.5

4,838

1.6

4,907

1.6

52,530

TOTAL EQUITY

194,675

59.4

186,492

61.5

183,539

60.8

2,024,886

TOTAL LIABILITIES AND EQUITY

Y 327,684

100.0

Y 303,062

100.0

Y 301,670

100.0

$ 3,290,575

Millions of Yen

Thousands of U.S. Dollars

Nine months

ended

December 31, 2008

Nine months

ended

December 31, 2009

Year ended

March 31, 2009

Nine months

ended

December, 2009

%

%

%

NET REVENUES:

Product sales revenue

Y 172,177

Y 133,294

Y 227,821

$ 1,447,274

Service revenue

61,834

57,638

81,950

625,820

Total net revenues

234,011

100.0

190,932

100.0

309,771

100.0

2,073,094

COSTS AND EXPENSES:

Costs of products sold

95,004

75,058

133,670

814,962

Costs of services rendered

59,885

56,183

78,966

610,022

Selling, general and administrative

44,410

42,565

58,653

462,160

Restructuring and impairment charges

-

-

11,121

-

Total costs and expenses

199,299

85.2

173,806

91.0

282,410

91.2

1,887,144

Operating income

34,712

14.8

17,126

9.0

27,361

8.8

185,950

OTHER INCOME (EXPENSES):

Interest income

410

126

459

1,368

Interest expense

(1,184)

(1,183)

(1,468)

(12,845)

Foreign currency exchange gain (loss), net

(2,224)

10

(1,641)

109

Other, net

(11)

40

8

434

Other income (expenses), net

(3,009)

(1.3)

(1,007)

(0.6)

(2,642)

(0.8)

(10,934)

INCOME BEFORE INCOME TAXES

31,703

13.5

16,119

8.4

24,719

8.0

175,016

INCOME TAXES

13,318

5.6

5,231

2.7

10,715

3.5

56,797

EQUITY IN NET INCOME (LOSS) OF AFFILIATED COMPANIES

34

0.0

49

0.0

(2,490)

(0.8)

532

NET INCOME

18,419

7.9

10,937

5.7

11,514

3.7

118,751

NET INCOME ATTRIBUTABLE TO THE NONCONTROLLING INTEREST

593

0.3

317

0.1

640

0.2

3,442

NET INCOME ATTRIBUTABLE TO KONAMI CORPORATION

Y 17,826

7.6

Y 10,620

5.6

 Y 10,874

3.5

$ 115,309

PER SHARE DATA:

Yen

U.S. Dollar

Nine months ended

Nine months ended

Year ended

Nine months ended

December 31, 2008

December 31, 2009

March 31, 2009

December 31, 2009

Basic net income attributable to Konami Corporation per share

Y 129.72

Y 79.58

Y 79.30

$ 0.86

Diluted net income attributable to Konami Corporation per share

129.72

79.58

79.30

0.86

Weighted-average common

shares outstanding

137,422,938

133,461,248

137,124,130

Diluted weighted-average

common shares outstanding

137,422,938

133,461,248

137,124,130

(6) Segment Information (Unaudited)

Nine months ended December 31, 2008

Digital Entertainment

Health & Fitness

Gaming & System

Other, Corporate and Eliminations

Consolidated

(Millions of Yen)

Net revenue:

 Customers

Y

148,491

Y

67,517

Y

13,297

Y

4,706

Y

234,011

 Intersegment

220

220

-

(440)

-

Total

148,711

67,737

13,297

4,266

234,011

Operating expenses

110,931

65,619

10,790

11,959

199,299

Operating income (loss)

Y

37,780

Y

2,118

Y

2,507

Y

(7,693)

Y

34,712

Nine months ended December 31, 2009

Digital Entertainment

Health & Fitness

Gaming & System

Other, Corporate and Eliminations

Consolidated

(Millions of Yen)

Net revenue:

 Customers

Y

100,182

Y

64,338

Y

14,729

Y

11,683

Y

190,932

 Intersegment

245

246

-

(491)

-

Total

100,427

64,584

14,729

11,192

190,932

Operating expenses

84,025

63,514

10,900

15,367

173,806

Operating income (loss)

Y

16,402

Y

1,070

Y

3,829

Y

(4,175)

Y

17,126

Year ended

March 31, 2009

Digital Entertainment

Health & Fitness

Gaming & System

Other, Corporate and Eliminations

Consolidated

(Millions of Yen)

Net revenue:

 Customers

Y

187,308

Y

89,702

Y

18,336

Y

14,425

Y

309,771

 Intersegment

320

263

-

(583)

-

Total

187,628

89,965

18,336

13,842

309,771

Operating expenses

146,076

98,235

14,889

23,210

282,410

Operating income (loss)

Y

41,552

Y

(8,270)

Y

3,447

Y

(9,368)

Y

27,361

Nine months ended December 31, 2009

Digital Entertainment

Health & Fitness

Gaming & System

Other, Corporate and Eliminations

Consolidated

(Thousands of U.S. Dollars)

Net revenue:

 Customers

$

1,087,752

$

698,567

$

159,924

$

126,851

$

2,073,094

 Intersegment

2,660

2,671

-

(5,331)

-

Total

1,090,412

701,238

159,924

121,520

2,073,094

Operating expenses

912,324

689,620

118,350

166,850

1,887,144

Operating income (loss)

$

178,088

$

11,618

$

41,574

$

(45,330)

$

185,950

Notes:

1.

Primary businesses of each segment are as follows:

Digital Entertainment Segment:

Production and sale of digital content and related products including Computer & Video Games, Amusement, Card Games, and Online.

Health & Fitness Segment:

Operation of health and fitness clubs, and production and sale of health and fitness related goods.

Gaming & System Segment:

Production, manufacture, sale and service of gaming machines and the Casino Management System for overseas markets.

2.

"Other" consists of segments which do not meet the quantitative criteria for separate presentation under ASC No. 280 "Segment Reporting" (former SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information")

3.

"Corporate" primarily consists of administrative expenses of the Company.

4.

"Eliminations" primarily consists of eliminations of intercompany sales and of intercompany profits on inventories.

Nine months ended

December 31, 2008

Japan

North America

Europe

Asia

/Oceania

Total

Eliminations

Consolidated

(Millions of Yen)

Net revenue:

 Customers

Y

167,090

Y

35,765

Y

27,253

Y

3,903

Y

234,011

-

Y

234,011

 Intersegment

19,220

3,082

91

448

22,841

Y

(22,841)

-

Total

186,310

38,847

27,344

4,351

256,852

(22,841)

234,011

Operating expenses

158,743

34,873

23,977

4,550

222,143

(22,844)

199,299

Operating income (loss)

Y

27,567

Y

3,974

Y

3,367

Y

(199)

Y

34,709

Y

3

Y

34,712

Nine months ended

December 31, 2009

Japan

North America

Europe

Asia

/Oceania

Total

Eliminations

Consolidated

(Millions of Yen)

Net revenue:

 Customers

Y

144,988

Y

25,287

Y

15,987

Y

4,670

Y

190,932

-

Y

190,932

 Intersegment

9,983

2,634

37

564

13,218

Y

(13,218)

-

Total

154,971

27,921

16,024

5,234

204,150

(13,218)

190,932

Operating expenses

141,592

24,430

16,348

4,714

187,084

(13,278)

173,806

Operating income (loss)

Y

13,379

Y

3,491

Y

(324)