(As of December 31, 2009)

In fiscal 2009, ended December 31, 2009, the Japanese economy started out facing severe conditions in the wake of the global economic crisis. However, signs of a turnaround began to appear as companies made good progress in streamlining their inventories, while growth in China provided an added boost. Nevertheless, the economy failed to enter full-scale recovery as employment issues and other serious challenges remained.
     ASATSU-DK INC. (ADK) accounts for the majority of the ADK Group’s consolidated gross billings. Confronting a difficult business environment unprecedented in recent times, ADK strengthened its capabilities to provide 360 degree solutions for advertisers and pursued proactive sales initiatives. Unable to avoid the impact of a shrinking market, however, ADK reported gross billings of ¥310,970 million, down 13.3% from the previous year. Due to a softening media market and intensifying competition in the advertising market, together with the fall in gross billings, gross profit declined 18.2%, to ¥31,603 million, and the gross profit ratio slipped 0.6 point, to 10.2%. During the year, the Company made large-scale reductions in personnel expenses and otherwise sought to cut costs. Due to a ¥432 million provision for doubtful accounts and other factors, however, selling, general and administrative expenses totaled ¥32,870 million, down 9.1%. Because this decline failed to compensate for the decrease in gross profit, ADK reported an operating loss of ¥1,267 million, compared with operating income of ¥2,463 million in fiscal 2008. This represented the first non-consolidated annual operating loss since the Company’s public listing in October 1987. Non-operating income, including interest and dividend income, amounted to ¥1,840 million, and non-operating expenses totaled ¥124 million. Accordingly, recurring profits for the year fell 88.7%, to ¥449 million. After accounting for other factors—such as sales and write-downs of investment securities and disposal of fixed assets—extraordinary profit amounted to ¥48 million and extraordinary losses totaled ¥1,024 million. As a result, the Company posted a net loss of ¥498 million, compared with net income of ¥1,721 million in the previous fiscal year.
     Domestic advertising subsidiaries generated overall increases in gross billings and profits thanks to sales-related initiatives taken by each company. Overseas advertising subsidiaries reported an overall decline in gross billings due to the global economic recession and the yen’s appreciation, but posted an increase in bottom-line profits thanks to cost-cutting efforts. Subsidiaries involved in book publishing and sales adopted more stringent publication planning criteria aimed at maintaining profitability. However, gross billings declines continued due to market shrinkage, and those subsidiaries, unable to offset fixed costs, reported operating losses for the year.
     On a consolidated basis, the ADK Group posted gross billings of ¥350,211 million, down 12.3% from the previous year. Gross profit declined 15.8%, to ¥41,367 million, and the gross profit ratio was down 0.5 point, to 11.8%. The Group posted an operating loss of ¥756 million, compared with operating income of ¥3,699 million in the previous year. Equity in earnings of affiliated companies totaled ¥126 million, down from ¥648 million in the previous year. This was due to lower gross billings and profits reported by Digital Advertising Consortium Inc. (media rep company specializing in Internet advertising) and Nippon Information Industry Corp. (information processing services company). Accordingly, non-operating income amounted to ¥2,082 million and non-operating expenses totaled ¥231 million. As a result, recurring profits fell 79.5%, to ¥1,094 million. Extraordinary profit amounted to ¥364 million and extraordinary losses—including loss on disposal of fixed assets and loss on valuation of investment securities—totaled ¥1,116 million. The Group reported net income of ¥73 million, down 96.5% from the previous fiscal year.