Summary of Consolidated Financial Results for the First Quarter Ended June 2011 [Japan GAAP]

Transcription

1 Summary of Consolidated Financial Results for the First Quarter Ended June 2011 [Japan GAAP] August 5, 2010 Name of Company: Startia, Inc. Stock Code: 3393 Stock Exchange Listing: Tokyo Stock Exchange URL: Representative Title: President, Representative Director and Chief Executive Officer Name: Hideyuki Hongo Contact Person Title: Director, Executive Officer and General Manager of Corporate Planning Department and Finance and Accounting Department Name: Masaaki Gokyu Tel: +81-(0) Date of filing quarterly report: August 10, 2011 (tentative) Date of commencement of dividend payment (tentative): None Supplementary materials for quarterly financial report: Yes Information meeting for quarterly financial report: None (Yen in millions, rounded down) 1. Financial results for the first three months ended June 30, 2011 (April 1, 2011 June 30, 2011) (1) Result of operations (Consolidated) (Percentage figures represent year on year changes) Net sales Operating income Ordinary income Net income Million yen % Million yen % Million yen % Million yen % First quarter ended June , (67) - (68) - (45) - First quarter ended June (41) - (44) - (45) - Notes: Comprehensive income First quarter ended June 30, 2011: (42) million yen (yoy -%) First quarter ended June 30, 2010: (45) million yen (yoy -%) Net income per share (basic) Yen Net income per share (diluted) Yen First quarter ended June 2011 (9.27) - First quarter ended June 2010 (2,118.94) - (2) Financial Position (Consolidated) Total assets Net assets Equity ratio Million yen Million yen % As of June 30, ,122 2, As of March 31, ,439 2, Reference: Shareholders equity As of June 30, 2011: 2,331 million yen As of March 31, 2011: 2,399 million yen 2. Dividends Dividends per share End of 1Q End of 2Q End of 3Q End of FY Annual Yen Yen Yen Yen Yen Fiscal year ended March Fiscal year ending March Fiscal year ending March 2012 (forecast) Note: Revisions to the most recently announced dividend forecast: None 1

2 3. Forecast for the fiscal year ending March 2012 (Consolidated, April 1, 2011 March 31, 2012) (Percentage figures represent year-on-year changes.) Net sales Operating income Ordinary income Net income Net income per share Million yen % Million yen % Million yen % Million yen % Yen First half 2, (66.1) 40 (67.9) 20 (69.2) 4.04 Full year 4, Note: Revisions to the most recently announced sales and earnings forecast: None 4. Others (1) Changes in significant subsidiaries (Changes in specific subsidiaries accompanied by changes in the scope of consolidation): Newly included: None Excluded: None (2) Use of accounting methods that are specific to preparation of the quarterly consolidated financial statements: None (3) Changes in accounting policies, changes in accounting estimates and retrospective restatements (a) Changes in accounting policies accompanying revisions in accounting standards: None (b) Changes other than in (a) above: None (c) Changes in accounting estimates: None (d) Retrospective restatements: None (4) Number of shares outstanding (common stock) (a) Shares outstanding (including treasury stock) As of June 30, 2011: 4,953,400 shares As of March 31, 2011: 4,953,400 shares (b) Treasury stock As of June 30, 2011: 51 shares As of March 31, 2011: 51 shares (c) Average number of shares outstanding during the term (quarterly consolidated cumulative period) Period ended June 30, 2011: 4,953,349 shares Period ended June 30, 2011: 21,503 shares * Information concerning quarterly review procedure: This quarterly financial report is not subject to the quarterly review procedure prescribed by the Financial Instruments and Exchange Law. The review procedure prescribed by the Financial Instruments and Exchange Law for the quarterly consolidated financial statements had not been completed when this quarterly financial report was released. * Explanation of the proper use of these earnings forecasts and other matters: Forward-looking statements in these materials are based on information available to management at the time this report was prepared, and assumptions that management believes are reasonable. Actual results may differ significantly from these statements for a number of reasons. Please refer to 1. Results of Operations (1) Analysis of results of operations on page 5 for precautions concerning the use of forecasts. The Company disclosed the supplemental data for the consolidated financial statements via the Company s website on Tuesday, August 9,

3 1. Results of Operations (1) Analysis of results of operations In the first quarter of the current fiscal year, there were signs of a moderate recovery of the Japanese economy. But there is still uncertainty about the timing of a full-scale recovery because employment and personal income statistics are still weak due to the negative effect of the 2011 off the Pacific coast of Tohoku Earthquake and the subsequent electricity shortage, as well as the prolonged upturn in the yen s value. In Japan, favorable market conditions for e-book hardware are emerging as e-books continue to receive much coverage in newspapers, magazines, TV programs and other media. In addition, cell phone carriers, major printing companies and prominent companies in other industries are starting to operate websites exclusively for e-books. The result is accelerating expansion of the e-book market that is driving rapid growth in the awareness of e-book production software and needs involving this software. The Earthquake made companies acutely aware of the need for information technology disaster preparedness. There is much higher interest in methods to quickly restore IT operations so that business operations can continue following a disaster. On the other hand, the Earthquake is having negative effects that include insufficient supplies of business phones caused by damage and power outages at the factories of companies that manufacture information and communications products. Under such business condition, the Startia Group is dedicated to building an earning structure that can be consistently profitable over the medium and long terms. We do not place undue emphasis on current earnings. To accomplish this goal, we analyze the earnings and growth prospects for each business. We then select the businesses that we should direct resources to in the future. This process has resulted in a significant shift of resources to businesses that generate a continuous income stream through the provision of services. We are further increasing emphasis on these businesses in the current fiscal year. In the first quarter, sales increased 16.7% to 1,027,930 thousand yen. Operating loss increased from 41,756 thousand yen one year earlier to 67,119 thousand yen, ordinary loss increased from 44,079 thousand yen to 68,455 thousand yen, and net loss increased from 45,562 thousand yen to 45,934 thousand yen. Business segment results were as follows. (Web Solutions) A review of the performance of the Web Solutions segment in the first quarter under review is presented below. The Web Solutions business segment is responsible for planning, developing, and selling the Digit@Link ActiBook e-book production software and web applications like the Digit@Link (CMS). It also offers total solutions that incorporate web applications and which are aimed at boosting our customers' sales and improving their business efficiency. This includes website production, web traffic consulting, and outsourced system development and customizing services. ActiBook in particular is performing well thanks to basic functionality improvements and the addition of Android support alongside iphone and ipad support. As a result, implementation of ActiBook is increasing steadily mainly at publishing and printing companies that require single-authoring multi-device capabilities (the ability to produce a single e-book that is compatible with a PC, iphone, ipad and Android smartphone). In addition to aggressive development activities, we are holding exhibitions, information meetings, seminars and other events to increase the number of users. For example, ActiBook was selected for the Net Print machines of Fuji Xerox that are placed at SevenEleven convenience stores. The result has been steady growth in the use of ActiBook, which is now used by 1,160 companies. First quarter segment sales increased 57.7% to 207,127 thousand yen; however, operating result turned into a loss of 2,528 thousand yen from operating income of 1,798 thousand yen. 3

4 (Network Solutions) A review of the performance of the Network Solutions segment in the first quarter under review is presented below. In the Network Solutions segment, we focused even more of our efforts on managed services, an area that we have been strengthening since the previous fiscal year. In the network devices sector, the continuing reluctance of companies to make capital expenditures caused sales of network related hardware to fall sharply and intermediary services for ISP connection subscriptions performed poorly as a result. But our Managed Gate networking equipment rental service continued to attract more customers. In the hosting services sector, demand is growing for IT outsourcing services, due in part to the effects of the Earthquake. In response, we offer flexible services and are strengthening efforts to cultivate new customers. These activities produced strong growth in the number of customers using our dedicated server service and Secure Samba SaaS Internet file server, thereby enlarging the customer base for services that generate a continuous income stream. First quarter segment sales increased 12.1% to 316,290 thousand yen and operating income increased 94.6% to 10,457 thousand yen. (Business Solutions) A review of the performance of the Business Solutions Web Solutions segment in the first quarter under review is presented below. In this segment, the highest priority is increasing sales of multi-function devices in the area covered by Startia s maintenance program. We shifted from an organization based on product categories to an organization structured in accordance with selling methods that can improve the efficiency of sales activities. The Earthquake has caused shortages of business phones and other problems. Due in part to this situation, we worked on signing up new customers in our maintenance area and on cross-selling business phones and multi-function devices. In addition, we worked on improving the efficiency of work performed by technical departments. Despite these measures, sales were lower than one year earlier because marketing activities faced major challenges. Helped by a stronger marketing effort in color machines, we were able to increase sales of multi-function devices about 1.4x times from the prior year, resulting in a big increase in the total number of units in operation. We handle subscription registration on behalf of Softbank Telecom Partners Inc. for the OTOKU Line telephone service of Softbank Telecom Corp. The services that we handle include the distribution of registration information, performance of registration procedures, on-site investigations and other tasks required to register new customers. We faced major challenges in this area. First quarter segment sales increased 7.9% to 504,512 thousand yen and operating loss increased from 42,024 thousand yen to 66,948 thousand yen. (2) Analysis of financial condition Total assets were 3,122,225 thousand yen at the end of the first quarter, 316,782 thousand yen less than at the end of the prior fiscal year due mainly to a 248,902 thousand yen decrease in cash and deposits. Liabilities decreased 249,055 thousand yen to 790,362 thousand yen. This was attributable mainly to decreases of 30,416 thousand yen in accounts payable-trade, 101,865 thousand yen in income taxes payable and 29,200 thousand yen in long-term loans payable. Net assets decreased 67,727 thousand yen to 2,331,862 thousand yen mainly because of the first quarter net loss of 45,934 thousand yen and dividend payments of 24,766 thousand yen in accordance with a resolution approved by shareholders. 4

5 (3) Cash flows Cash and cash equivalents were 1,756,186 thousand yen at the end of the first quarter, 45.4% higher than one year earlier. An overview of the cash flows in the first quarter under review is presented below. a. Cash flow from operating activities Net cash used in operating activities was 100,641 thousand yen compared with cash generated of 116,115 thousand yen one year earlier. Major causes are a 67,396 thousand yen loss before taxes, a 36,815 thousand yen decrease in the provision for bonuses and a 38,405 thousand yen decrease in accounts payable-other. b. Cash flow used in investing activities Net cash used in investing activities decreased from 83,437 thousand yen one year ago to 65,294 thousand yen. The primary use of cash was 59,693 thousand yen for the purchase of noncurrent assets. c. Cash flows from financing activities Net cash used in financing activities increased from 76,489 thousand yen one year earlier to 82,966 thousand yen. The primary uses of cash were 58,200 thousand yen for the repayment of long-term loans payable and 24,766 thousand yen for cash dividends paid. (4) Outlook for the fiscal year ending in March 2012 Improving customer satisfaction is a top priority for the Startia Group. One way to increase satisfaction is by introducing new products and services. But it doesn t stop there. As in the previous fiscal year, we are working even harder to retain current customers by expanding our lineup, including solutions for all-in-one billing. In addition, we have positioned the current fiscal year as a period to achieve the biggest growth in continuous-revenue-generation services since Startia s establishment. Since the beginning of this fiscal year, we have been taking actions aimed at building an even more powerful medium and long-term profit structure. Since first quarter performance was strong and generally in line with our forecast for both sales and earnings, there are no revisions at this time to the fiscal year forecast that was announced on May 13, Forecasts are based on the judgments of Startia in accordance with information that is currently available. Consequently, investors are asked to refrain from making investment decisions based solely on this forecast for sales and earnings. Actual results of operations may differ from the forecast for a number of reasons. 2. Others (1) Changes in significant subsidiaries during the period: None (2) Use of accounting methods that are specific to preparation of the quarterly consolidated financial statements: None (3) Changes in accounting policies, changes in accounting estimates and retrospective restatements: None 5

6 3. Quarterly Consolidated Financial Statements (1) Quarterly consolidated balance sheets (thousand yen) As of March 31, 2011 As of June 30, 2011 ASSETS Current assets Cash and deposits 2,010,103 1,761,200 Notes and accounts receivable-trade 631, ,629 Raw materials and supplies 21,011 19,849 Other 178, ,967 Allowance for doubtful accounts (32,333) (37,403) Total current assets 2,808,448 2,464,243 Noncurrent assets Property, plant and equipment 97, ,296 Intangible assets Goodwill 73,916 63,916 Other 166, ,373 Total intangible assets 240, ,290 Investments and other assets 277, ,067 Total noncurrent assets 615, ,653 Deferred assets 14,577 13,327 Total assets 3,439,007 3,122,225 LIABILITIES Current liabilities Accounts payable-trade 291, ,346 Current portion of long-term loans payable 151, ,800 Income taxes payable 104,935 3,070 Provision for bonuses 81,263 44,447 Other 268, ,498 Total current liabilities 898, ,162 Noncurrent liabilities Long-term loans payable 141, ,200 Total noncurrent liabilities 141, ,200 Total liabilities 1,039, ,362 NET ASSETS Shareholder s equity Capital stock 777, ,630 Capital surplus 918, ,793 Retained earnings 707, ,775 Treasury stock (14) (14) Total shareholder s equity 2,404,100 2,333,184 Accumulated other comprehensive income Valuation difference on available-for-sale securities (4,511) (1,322) Total accumulated other comprehensive income (4,511) (1,322) Total net assets 2,399,589 2,331,862 Total liabilities and net assets 3,439,007 3,122,225 6

7 (2) Quarterly consolidated statements of income and comprehensive income Quarterly consolidated statements of income For the first quarter (April 1 June 30) (thousand yen)) April 1, 2010 June 30, 2010 April 1, 2011 June 30, 2011 Net sales 881,049 1,027,930 Cost of sales 409, ,703 Gross profit 471, ,226 Selling, general and administrative expenses 512, ,345 Operating income (loss) (41,756) (67,119) Non-operating income Gain on write-off of assumed debt 3,628 1,379 Interest income 51 - Other Total non-operating income 3,916 1,540 Non-operating expenses Equity in losses of affiliates 4, Interest expenses 1, Amortization of stock issuance cost - 1,249 Total non-operating expenses 6,238 2,877 Ordinary income (loss) (44,079) (68,455) Extraordinary income Gain on transfer of business - 3,000 Total extraordinary income - 3,000 Extraordinary loss Loss on retirement of noncurrent assets Loss on valuation of investment securities - 1,717 Loss on adjustment for changes of accounting standard for asset retirement obligations 1,786 - Total extraordinary loss 1,801 1,940 Income (loss) before income taxes (45,880) (67,396) Income taxes-current 364 1,254 Income taxes-deferred (682) (22,715) Total income taxes (318) (21,461) Income (loss) before minority interests (45,562) (45,934) Net income (loss) (45,562) (45,934) 7

8 Quarterly consolidated statements of comprehensive income For the first quarter (April 1 June 30) (thousand yen) April 1, 2010 June 30, 2010 April 1, 2011 June 30, 2011 Income (loss) before minority interests (45,562) (45,934) Other comprehensive income Valuation difference on available-for-sale securities (25) 3,188 Total other comprehensive income (25) 3,188 Comprehensive income (45,587) (42,746) Comprising Comprehensive income attributable to owners of the parent (45,587) (42,746) Comprehensive income attributable to minority interests - - 8

9 (3) Quarterly consolidated statements of cash flows (thousand yen) April 1, 2010 June 30, 2010 April 1, 2011 June 30, 2011 Net cash provided by (used in) operating activities Income (loss) before income taxes (45,880) (67,396) Depreciation and amortization 29,322 40,641 Increase (decrease) in allowance for doubtful accounts 2,295 5,070 Increase (decrease) in provision for bonuses (48,009) (36,815) Interest and dividends income (51) - Interest expenses 1, Equity in (earnings) losses of affiliates 4, Loss (gain) on valuation of investment securities - 1,717 Loss on retirement of noncurrent assets Loss on adjustment for changes of accounting standard for asset retirement obligations 1,786 - Gain on transfer of business - (3,000) Decrease (increase) in notes and accounts receivable-trade 155,249 68,080 Decrease (increase) in inventories (22) 1,162 Increase (decrease) in notes and accounts payable-trade (24,645) (30,416) Increase (decrease) in accounts payable-other (10,105) (38,405) Increase (decrease) in accrued consumption taxes (1,548) (2,998) Other 97,446 63,110 Sub-total 162,090 2,601 Interest expenses paid (1,820) (185) Income taxes paid (44,154) (103,056) Net cash provided by (used in) operating activities 116,115 (100,641) Net cash provided by (used in) investment activities Purchase of noncurrent assets (53,767) (59,693) Payments for guarantee deposits (3,315) (848) Proceeds from collection of guarantee deposits 1,379 - Purchase of investment securities (20,000) - Proceeds from transfer of business - 3,000 Other (7,733) (7,752) Net cash provided by (used in) investing activities (83,437) (65,294) Net cash provided by (used in) financing activities Repayment of long-term loans payable (74,866) (58,200) Proceeds from exercise of stock option 2,625 - Cash dividends paid (7,488) (24,766) Proceeds from disposal of treasury stock 3,240 - Net cash provided by (used in) financing activities (76,489) (82,966) Net increase (decrease) in cash and cash equivalents (43,811) (248,902) Cash and cash equivalents at beginning of period 1,211,757 2,005,089 Cash and cash equivalents at end of period 1,167,946 1,756,186 9

10 (4) Notes to ongoing concern assumptions For the first three months ended June 2011 (April 1, June 30, 2011) Not applicable (5) Segment information I. For the first three months ended June 2010 (April 1, June 30, 2010) 1. Sales and income (loss) for reportable segments Web Solutions Reportable segments Network Business Solutions Solutions Total Adjustment (note 1,2) (thousand yen) Amount on statement of income *3 Net sales (1) Sales to external customers 131, , , , ,049 (2) Inter-segment sales and transfers ,902 70,381 93,587 (93,587) - Total 131, , , ,636 (93,587) 881,049 Segment income (loss) 1,798 5,373 (42,024) (34,852) (6,904) (41,756) Notes: 1. The adjustment amount for the inter-segment sales and transfers consists of 93,587 thousand yen in eliminated intersegment transactions. 2. The segment loss adjustment of negative 6,904 thousand yen is the sum of an inter-segment transaction elimination of positive 479 thousand yen and deduction of 7,383 thousand yen for corporate expenses that cannot be allocated to any segment 3. The total segment loss matches operating loss on the quarterly consolidated statement of income. II. For the first three months ended June 2011 (April 1, June 30, 2011) 1. Sales and income (loss) for reportable segments Web Solutions Reportable segments Network Business Solutions Solutions Total Adjustment (note 1,2) (thousand yen) Amount on statement of income *3 Net sales (1) Sales to external customers 207, , ,512 1,027,930-1,027,930 (2) Inter-segment sales and transfers - 82,783 93, ,993 (175,993) - Total 207, , ,723 1,203,924 (175,993) 1,027,930 Segment income (loss) (2,528) 10,457 (66,948) (59,018) (8,100) (67,119) Notes: 1. The adjustment amount for the inter-segment sales and transfers consists of 175,993 thousand yen in eliminated intersegment transactions. 2. The segment income adjustment of negative 8,100 thousand yen is corporate expenses of negative 8,100 thousand yen that cannot be allocated to any segment. 3. The total segment loss matches operating loss on the quarterly consolidated statement of income. (5) Notein case of significant changes to shareholders s equity For the first three months ended June 2011 (April 1, June 30, 2011) Not applicable 10