Exhibit 99.1
Jupiter Telecommunications Co., Ltd.
(Translation from Japanese disclosure to JASDAQ)
April 27, 2007
[U.S. GAAP]
Consolidated Quarterly Financial Results Release
For the Three Months Ended March 31, 2007
Jupiter Telecommunications Co., Ltd. (Consolidated)
Company code number: 4817 (URL http://www.jcom.co.jp/)
Shares traded: JASDAQ
Location of headquarters: Tokyo
Executive position of legal representative: Tomoyuki Moriizumi, Chief Executive Officer
Please address all communications to:
Koji Kobayashi, IR Department Phone: +81-3-6765-8157 E-Mail: KobayashiKo@jupiter.jcom.co.jp
Hiroto Motomiya, Accounting Controlling Dept. Phone: +81-3-6765-8140 E-Mail: MotomiyaH@jupiter.jcom.co.jp
1. Accounting Policy
(1) | Adoption of any simplified accounting method | : No |
(2) | Accounting policy or method change from last | : No |
| reporting period | |
(3) | Changes of consolidated companies | : No |
| Numbers of consolidated subsidiaries as of March 31, 2007 : 27 |
| Numbers of equity method affiliates as of March 31, 2007 : 5 |
2. Consolidated operating results (From January 1, 2007 to March 31, 2007)
(1) Consolidated financial results
(In millions of yen, with fractional amounts rounded)
| | Revenue | | Operating income | | Income before
income taxes | |
| | (Millions of yen) | | % | | (Millions of yen) | | % | | (Millions of yen) | | % | |
March 31, 2007 | | 63,672 | | 24.6 | | 10,307 | | 34.9 | | 9,070 | | 29.1 | |
March 31, 2006 | | 51,121 | | 20.4 | | 7,641 | | 14.4 | | 7,025 | | 41.7 | |
December 31, 2006 | | 221,915 | | 21.2 | | 31,582 | | 29.0 | | 27,503 | | 64.2 | |
| | Net income | | Net income per share | | Net income
per share (diluted) | |
| | (Millions of yen) | | % | | (Yen) | | (Yen) | |
March 31, 2007 | | 5,488 | | 25.6 | | 858.95 | | 855.00 | |
March 31, 2006 | | 4,370 | | 30.4 | | 686.66 | | 685.61 | |
December 31, 2006 | | 24,481 | | 26.6 | | 3,844.83 | | 3,838.33 | |
(Notes)
1. The percentages shown next to revenue, operating income, income before income taxes and net income represent year-on-year changes.
2. Average number of outstanding shares during term (consolidated):
Basic
For the three months ended March 31, 2007: 6,389,166 shares
For the three months ended March 31, 2006: 6,364,800 shares
For the fiscal year ended December 31, 2006: 6,367,220 shares
Diluted
For the three months ended March 31, 2007: 6,418,690 shares
For the three months ended March 31, 2006: 6,374,556 shares
For the fiscal year ended December 31, 2006: 6,378,001 shares
3. There is no change to the 2007 annual forecast from last disclosure on January 30, 2007.
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(2) Consolidated financial position
| | Total assets | | Shareholders’ equity | | Equity capital ratio
to total assets | | Shareholders’ equity
per share | |
| | (Millions of yen) | | (Millions of yen) | | % | | (Yen) | |
March 31, 2007 | | 627,550 | | 284,168 | | 45.3 | | 44,381.72 | |
December 31, 2006 | | 625,948 | | 277,296 | | 44.3 | | 43,445.59 | |
(Notes)
1. As for comparing figures of balance sheet items, we always compare that of first quarter end with that of last fiscal year end.
2. Number of outstanding shares at end of term (consolidated):
As of March 31, 2007: 6,402,804 shares
As of December 31, 2006: 6,382,611 shares
(3) Consolidated cash flow statement
| | Cash flows from
operating activities | | Cash flows from
investing activities | | Cash flows from
financing activities | | Balance of cash &
cash equivalents | |
| | (Millions of yen) | | (Millions of yen) | | (Millions of yen) | | (Millions of yen) | |
March 31, 2007 | | 21,762 | | (10,721 | ) | (6,425 | ) | 25,102 | |
March 31, 2006 | | 15,280 | | (10,161 | ) | (2,889 | ) | 37,513 | |
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3.Business Results and Financial Conditions
(1) Business Results (comparisons are year-on-year)
As the fusion of broadcasting and telecommunications continues to progress, the business conditions surrounding Jupiter Telecommunications Co., Ltd.’s consolidated group (J:COM Group or Group) has grown more challenging. During the quarter ended March 31, 2007, the J:COM Group responded to this challenging environment by continuing to focus on its “Volume plus Value” strategy. Steady progress was made in the execution of this strategy, which calls for the increase in the number of subscribing households (expanding volume)—and higher average monthly revenue per subscribing household (ARPU) (increasing value).
In pursuit of the volume strategy, the J:COM Group continues to tailor its marketing and sales specifically to each region in its network, based on analysis of subscriber needs that are obtained through home visits. The Group deploys approximately 2,000 sales staff to cover the densely populated metropolitan areas of the Kanto, Kansai, and Kyushu regions, along with Sapporo. The Group has also endeavored to strengthen its strategic sales channels to focus on demographics that provide higher growth potential.
The J:COM Group in particular worked to strengthen the following three sales channels. First, the J:COM “In My Room” bulk contracts for multiple dwelling units (MDUs) continues to be actively promoted by increasing sales capabilities. This contract is a popular program which provides steady revenues for the Group. Second, the Group continues to strengthen its agency sales through business tie-ups and collaborations with regional volume retailers, real-state companies, and stores, which play the role of wholesale distribution agents for the J:COM Group’s services. Third, the Group implements an approach called “Area Staff”. Through this system, the Group is working to enhance customer satisfaction for each of its services in an aim to retain subscribers, encourage customers to sign up for additional services by continuously providing support to existing customers, marketing additional services to each customer’s profile and reintroducing customers to existing service options. In addition, the Group is working to expand beyond the scope of individual households, by marketing its telephony services, high-speed Internet access services, and mobile services targeting approximately 200 thousand small office/home office operator (SOHO) subscribers in existing service areas.
In executing the value strategy, the J:COM Group seeks to increase ARPU by bundling its three services, J:COM TV (cable television), J:COM NET (high-speed Internet access), and J:COM PHONE (primary telephony), thereby increasing the bundling ratio (the number of services offered per subscribing household). In cable television, the J:COM Group continued to grow its to digital service (J:COM TV Digital) by adding both new customers and upgrading existing cable television customers from the Group’s analog services. As a part of this effort, the J:COM Group started offering nationwide the J:COM TV Digital Compact service, an economical alternative that has fewer channels than the regular digital service and lacks interactive capabilities available to J:COM TV Digital customers.
On March 1, 2007, the J:COM Group established a Media Business Department within the Marketing and Sales Division to promote diversification into new areas intended as future income sources. The Media Business Department will provide a full-scale advertising media business, using the Group’s subscriber base, community channels, VOD (Video on Demand services), a programming information guide magazine, and other J:COM media in a new advertising business model.
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As a result of the measures taken in pursuit of the “Volume plus Value” strategy, subscribing households (the number of households that are subscriber to one or more services) of consolidated managed system operators at the end of this quarter grew by 507,600 households (or 25%) from March 31, 2006 to 2,532,600 households as of March 31, 2007. By type of service, cable television subscriber numbers grew by 417,600 households (or 25%) to a total of 2,113,700 households, of which J: COM TV Digital subscribers rose by 480,600 households (or 70%) to 1,165,700 households, representing 55% of all cable television subscribing households as of March 31, 2007. The number of subscribers to high-speed Internet access and telephony services increased year over year by 238,400 households (or 27%) and 213,100 households (or 22%), respectively. This brought high-speed Internet access subscribers to 1,122,400 households and telephony service subscribers to 1,162,900 households as of March 31, 2007. The bundling ratio remained unchanged at 1.74 as of March 31, 2007 from March 31, 2006. The ratio excluding Cable West Group improved to 1.79 as of March 31, 2007 from 1.74 at March 31, 2006.
Revenue and Expenses
In the following discussion, the Group quantifies the impact of acquisitions on our results of operations. The acquisition impact represents the Group’s estimate of the difference between the operating results of the periods under comparison that is attributable to the timing of an acquisition. In general, the Group bases its estimate of the acquisition impact on an acquired entity’s operating results during the first three months following the acquisition date, such that changes from those operating results in subsequent periods are considered to be organic changes. Included as acquisition in the following discussion are the April 2006 acquisition of Sakura Cable Television Co., Ltd., the August 2006 acquisition of Cable Net Shimonoseki Co., Ltd., and the September 2006 acquisition of Cable West, Inc. and related companies.
Total Revenue. Total revenue increased by ¥12,551 million, or 25%, from ¥51,121 million for the three months ended March 31, 2006 to ¥63,672 million for the three months ended March 31, 2007. This increase includes ¥6,427 million that is attributable to the aggregate impact of acquisitions. Excluding the effects of these acquisitions total revenue increased by ¥6,124 million, or 12%.
Subscription Fees. Subscription fees increased by ¥9,964 million, or 22%, from ¥45,738 million for the three months ended March 31, 2006 to ¥55,702 million for the three months ended March 31, 2007. This increase includes ¥5,309 million increase that is attributable to the aggregate impact of acquisitions. Excluding the impact of acquisitions, subscription fees increased by ¥4,655 million, or 10%. Cable television subscription fees increased by ¥2,779 million, or 12%, from ¥23,663 million for the three months ended March 31, 2006 to ¥26,442 million for the three months ended March 31, 2007. High-speed Internet subscription fees increased by ¥941 million, or 7%, from ¥13,721 million for the three months ended March 31, 2006 to ¥14,662 million for the three months ended March 31, 2007. Telephony subscription fees increased by ¥935 million, or 11%, from ¥8,354 million for the three months ended March 31, 2006 to ¥9,289 million for the three months ended March 31, 2007. The 12% increase in cable television subscription revenue was due to 5% organic subscriber growth and the increasing proportion of cable television subscribers who subscribe to the Group’s digital service, for which the Group charges a higher fee compared to the analog service. As of March 31, 2007, 55% of cable television subscribers were receiving the Group’s digital service, compared to 40% as of March 31, 2006. The 7% increase in high-speed Internet subscription revenue was primarily attributable to organic subscriber growth
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of 11% offset by product bundling discounts. The 11% increase in telephony subscription revenue was attributable to a 19% increase in organic subscriber growth that was offset by a decrease in telephony ARPU.
Other Revenue. Other revenue increased by ¥2,587 million, or 48%, from ¥5,383 million for the three months ended March 31, 2006 to ¥7,970 million for the three months ended March 31, 2007. This increase includes a ¥1,119 million that is attributable to the aggregate impact of acquisitions. Excluding the impact of acquisitions, other revenue increased by ¥1,468 million, or 27%, with the increase primarily related to individually insignificant increases in various revenue categories. Other revenue includes poor reception compensation, construction, installation, advertising, program production, commission and other fees, and charges and sales made to the Group’s unconsolidated managed franchises for management, programming, construction materials and other services.
Operating Costs and Expenses. Operating and programming costs increased by ¥4,903 million, or 24%, from ¥20,861 million for the three months ended March 31, 2006 to ¥25,764 million for the three months ended March 31, 2007. This increase includes ¥2,169 million that is attributable to the aggregate impact of acquisitions. Excluding the impact of acquisitions, operating and programming costs increased by ¥2,734 million, or 13%. This increase is primarily attributable to costs directly related to the Group’s subscriber base of ¥1,142 million. Increases in network and maintenance costs, construction related expenses, labor and related costs and other individually insignificant items also contributed to the increase.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by ¥2,032 million, or 20%, from ¥10,237 million for the three months ended March 31, 2006 to ¥12,269 million for the three months ended March 31, 2007. This increase includes ¥1,740 million that is attributable to the aggregate impact of acquisitions. Excluding the impact of acquisitions, selling, general and administrative expenses increased by ¥292 million, or 3%, which is primarily attributable to higher labor and employee related costs.
Depreciation and Amortization. Depreciation and amortization expenses increased by ¥2,950 million, or 24%, from ¥12,382 million for the three months ended March 31, 2006 to ¥15,332 million for the three months ended March 31, 2007. This increase includes ¥2,260 million that is attributable to the aggregate impact of acquisitions. Excluding the impact of acquisitions the increase is primarily attributable to additions to fixed assets related to the installation of services to new customers.
As a result, operating income increased by ¥2,666 million, or 35%, from ¥7,641 million for the three months ended March 31,2006 to ¥10,307 million for the three months ended March 31, 2007
Interest Expense, net. Interest expense, net increased by ¥476 million, or 83%, from ¥573 million for the three months ended March 31, 2006 to ¥1,049 million for the three months ended March 31, 2007. This increase is primarily due to ¥52 billion of additional borrowings related to the acquisition of Cable West, Inc. in September 2006, and an increase in the overall applicable interest rates and margins between periods.
Income before income taxes increased by ¥2,045 million or 29%, from ¥7,025 million for the three months ended March 31, 2006, to ¥9,070 million for the three months ended March 31, 2007, for the reasons above.
Net Income. Net income increased by ¥1,118 million, or 26%, from ¥4,370 million for the three months ended March 31, 2006 to ¥5,488 million for the three months ended March 31, 2007 for the reasons set forth above.
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(2) Financial situation
For the three months ended March 31, 2007, the Group’s cash and cash equivalents increased by ¥4,616 million, from ¥20,486 million to ¥25,102 million, primarily as a result of cash provided by operating activities, offset by cash used for capital expenditures, payment of long-term debt and capital lease obligations.
The following is a summary of cash flow during the period ended March 31, 2007.
Cash Flows from Operating Activities
Net cash provided by operating activities was ¥21,762 million for the three months ended March 31, 2007, compared to ¥15,280 million the three months ended March 31, 2006, or an increase of ¥6,482 million, or 42%. The increase was primarily the result of a ¥5,559 million increase in revenue less selling, general and administrative and operating expenses (exclusive of stock compensation, depreciation, amortization).
Cash Flows from Investing Activities
Net cash used in investing activities was ¥10,721 million for the three months ended March 31, 2007, compared to ¥10,161 million for the three months ended March 31, 2006, or an increase of ¥560 million. The increase was primarily attributable to a ¥1,653 million increase in capital expenditures, offset by a decrease in the acquisition of new subsidiaries, net of cash acquired, the acquisition of minority interest in consolidated subsidiaries and other investing activities.
Cash Flows from Financing Activities
Net cash provided used in financing activities was ¥6,425 million for the three months ended March 31, 2007, compared to ¥2,889 million for the three months ended March 31, 2006, or an increase of ¥3,536 million. The net cash used in financing activities for the three months ended March 31, 2007 consisted of ¥4,090 million net payments of short term loans and long-term debt, and ¥4,028 million of principle payments under capital lease obligations, offset by ¥1,693 million in proceeds from the issuance of common stock.
(3) Forecasts for the year ending December 2007
There is no change to the Group’s forecast in this quarter.
(Cautionary note regarding future-related information)
The forecasts contained in this report have been prepared on the basis of information that is currently available. Because such estimates are inherently very uncertain, actual results may differ from the forecasts. The J:COM Group does not guarantee that it will achieve these estimated results and advises readers to refrain from depending solely on these forecasts. Readers should also note that the J:COM Group is under no obligation to revise this information on a regular basis.
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