INTER ACTION Corporation (7725) 1Q FY5/08 Financial Summaries

1
October 12, 2007

Financial Summaries for the First Quarter of the Fiscal Year Ending May 31, 2008
(June 1, 2007 – August 31, 2007)
Company name: INTER ACTION Corporation
Stock exchange listing: TSE Mothers Market
Stock code:
7725
URL: http://www.inter-action.co.jp/
Representative:
Masao Kimura, President, CEO & COO

Contact:
Tsuyoshi Fukuda, Executive Vice President & CFO
Tel: +81-45-788-8373
(All amounts are rounded down to the nearest million yen)
1. Consolidated Financial Results for the Three Months Ended August 31, 2007 (June 1, 2007 – August 31, 2007) (1) Consolidated results of operations
(Percentages represent year-on-year changes)


Sales
Operating income
Ordinary income
Net income

Million yen
%
Million yen
%
Million yen
%
Million yen
%
Three months ended Aug. 2007
299
(56.0)
(86)
-
(107)
-
(82)
-
Three months ended Aug. 2006
679
49.8
110
-
115
-
70
-
Fiscal year ended May 2007
1,909
(8.7)
13
(91.5)
24
(82.5)
(43)
-

Net income per share (basic)
Net income per share (diluted)
Yen
Yen
Three months ended Aug. 2007
(1,353.84)
-
Three months ended Aug. 2006
1,122.33
1,121.62
Fiscal year ended May 2007
(705.59)
-
(2) Consolidated financial position


Total assets
Net assets
Equity ratio
Net assets per share

Million yen
Million yen
%
Yen
As of Aug. 31, 2007
4,085
2,123
52.0
34,904.80
As of Aug. 31, 2006
4,682
2,621
56.0
41,726.66
As of May 31, 2007
4,219
2,238
53.1
36,789.60
(3) Consolidated cash flow position


Cash flows from
operating activities
Cash flows from
investing activities
Cash flows from
financing activities
Cash and cash equivalents
at end of period

Million yen
Million yen
Million yen
Million yen
Three months ended Aug. 2007
(186)
(59)
8
1,699
Three months ended Aug. 2006
137
(15)
(149)
2,121
Fiscal year ended May 2007
313
(92)
(434)
1,941
2. Dividends

Dividend per share
Record date
Year-end
Annual
Yen
Yen
Fiscal year ended May 2007
500.00
500.00
Fiscal year ending May 2008
-
Fiscal year ending May 2008 (forecast)
500.00
500.00
3. Consolidated Forecast for the Fiscal Year Ending May 31, 2008 (June 1, 2007 – May 31, 2008)
(Percentages represent changes from the same period of the previous fiscal year)

Sales
Operating income
Ordinary income
Net income
Net income per share

Million yen
%
Million yen
%
Million yen
%
Million yen
%
Yen
Interim 983
(6.8)
16 (66.5)
4 (91.3)
2
- 32.87
Full year
2,489
30.4
189
-
165
565.2
96
-
1,577.88

INTER ACTION Corporation (7725) 1Q FY5/08 Financial Summaries

2
4. Others
(1) Changes in consolidated subsidiaries during the period (changes in scope of consolidation): None
Newly added: -
Excluded: -
(2) Accounting standards for the preparation of quarterly consolidated financial statements:
The standards for the Interim Consolidated Financial Statements
(3) Changes in accounting principles from the most recent consolidated fiscal year: None (4) Auditing process by independent accountants: Yes
The quarterly consolidated financial statements have been through auditing process in accordance with the supplementary provisions “Standards of Auditors’ Opinion for the Quarterly Financial Statements” of the “Instructions for the Application of the Regulations for Timely Disclosure of Corporate Information by Issuers of Listed Securities” as set by the Tokyo Stock Exchange.
5. Summary of Non-consolidated Financial Results (June 1, 2007 – August 31, 2007) (1) Non-consolidated results of operations
(Percentages represent year-on-year changes)


Sales
Operating income
Ordinary income
Net income

Million yen
%
Million yen
%
Million yen
%
Million yen
%
Three months ended Aug. 2007
294
(56.7)
(56)
-
(74)
-
(49)
-
Three months ended Aug. 2006
679
49.3
138
-
145
-
88
-
Fiscal year ended May 2007
1,853
(11.3)
9
(96.6)
31
(88.4)
15
(91.2)

Net income per share (basic)
Yen Three months ended Aug. 2007
(813.84)
Three months ended Aug. 2006
1,407.18
Fiscal year ended May 2007
245.46
(2) Non-consolidated financial position


Total assets
Net assets
Equity ratio
Net assets per share

Million yen
Million yen
%
Yen
As of Aug. 31, 2007
4,103
2,292
55.9
37,675.18
As of Aug. 31, 2006
4,603
2,716
59.0
43,232.11
As of May 31, 2007
4,178
2,373
56.8
39,014.19

6. Non-consolidated Forecast for the Fiscal Year Ending May 31, 2008 (June 1, 2007 – May 31, 2008)
(Percentages represent changes from the same period of the previous fiscal year)

Sales
Operating income
Ordinary income
Net income
Net income per share

Million yen
%
Million yen
%
Million yen
%
Million yen
%
Yen
Interim 899
(14.8)
11 (90.2)
1 (99.1)
1 (98.6) 16.44
Full year
2,307
24.5
175
-
155
396.3
90
492.3
1,479.27


* Cautionary statement with respect to forward-looking statements Above forecasts regarding future performance in these materials are based on estimates and judgments of the Company’s management made in accordance with information available at the time this report was prepared. Forecasts therefore embody risks and uncertainties. Actual results may differ significantly from these forecasts for a number of factors.

INTER ACTION Corporation (7725) 1Q FY5/08 Financial Summaries

3
Qualitative Information and Financial Statements
1. Qualitative information regarding consolidated operational results
The operating environment for INTER ACTION remained challenging in the first quarter of the current fiscal year. Some Japanese manufacturers of semiconductor imagers postponed capital expenditures and imager manufacturers and test houses in South Korea and Taiwan reduced their capital expenditures.
In response to these challenges, the Company concentrated on developing products that target customers’ needs, building relationships with new customers and selling new options, like the pupil module, for existing machinery. However, due to the adverse market conditions, some customers delayed deliveries of INTER ACTION products that had been scheduled for the first quarter. The result was a year-on-year decline of 56.0% in sales to 299 million yen. First quarter orders received fell 57.4% to 193 million yen and the order backlog at the end of the first quarter was 410 million yen.
Despite a number of cost-cutting initiatives, INTER ACTION reported a loss in the first quarter mainly because of the downturn in sales and expenses for developing new products. There was an operating loss of 86 million yen compared with operating income of 110 million yen one year earlier, an ordinary loss of 107 million yen compared with ordinary income of 115 million yen one year earlier, and a net loss of 82 million yen compared with net income of 70 million yen one year earlier. Sales by product category were as follows.

(Electronics testing equipment business)
The performance of this segment was severely impacted by reductions in capital expenditures for illuminators in South Korea and Taiwan. The Group is currently working on developing camera module testing systems and production yield improvement testing systems into core businesses alongside illuminators in this segment. Despite extensive measures to develop and sell new products in these two new categories, significant contributions to segment sales and earnings will not begin to appear until at least the second quarter of this fiscal year. As a result, segment sales to external customers fell 56.7% to 294 million yen. Orders received were down 54.2% to 184 million yen and the order backlog was 276 million yen. (Security systems business)
The security systems business is operated by subsidiary BIJ Corporation. Due to aggressive sales activities, this company had an order backlog of 133 million yen at the end of the first quarter, 167.9% more than one year earlier. Since deliveries are scheduled for the second and third quarters, this segment had only 5 million yen of sales to external customers in the first quarter, just as initially planned, compared with no sales one year earlier. 2. Qualitative information regarding consolidated financial position
Total assets decreased 133 million yen over the end of the previous fiscal year to 4,085 million yen at the end of the first quarter of the current fiscal year. Current assets decreased 157 million yen to 3,106 million yen. This was mainly attributable to a decline in cash and deposits in banks. Fixed assets increased 24 million yen to 979 million yen mainly because of acquisition of investment securities.
Total liabilities decreased 18 million yen to 1,961 million yen. There was a 23 million yen increase in current liabilities to 680 million yen. Long-term liabilities decreased 42 million yen to 1,281 million yen.
Net assets decreased 114 million yen to 2,123 million yen.

INTER ACTION Corporation (7725) 1Q FY5/08 Financial Summaries

4
Cash flow position
Cash and cash equivalents totaled 1,699 million yen as of August 31, 2007, 242 million yen less than three months earlier.
Net cash used in operating activities was 186 million yen (compared with net cash provided of 137 million yen one year earlier). The primary uses of cash were net loss before income taxes of 112 million yen and a decrease in trade payables of 52 million yen.
Net cash used in investing activities was 59 million yen (compared with net cash used of 15 million yen one year earlier). The principal use of cash was payment of 84 million yen for acquisition of investment securities.
Net cash provided by financing activities was 8 million yen (compared with net cash used of 149 million yen one year earlier). 3. Qualitative information regarding forecast
Although first quarter performance fell somewhat short of the Company’s plans, the Company will continue to conduct product development and sales activities with the aim of achieving the current forecasts.
Interim and full-year forecasts remain the same as those disclosed on July 13, 2007, at this time. 4. Others
There is no change in significant subsidiaries during the period.

INTER ACTION Corporation (7725) 1Q FY5/08 Financial Summaries

5
5. Consolidated Financial Statements

(1) Consolidated Balance Sheets
Yen in thousands
FY5/07 1st Qtr.
As of Aug. 31, 2006
FY5/08 1st Qtr.
As of Aug. 31, 2007
FY5/07
As of May 31, 2007
Period
Account
Amount % Amount % Amount %

Assets
I Current
assets
1. Cash and deposits in banks

2,176,760
1,753,636

1,995,826
2. Trade notes and accounts receivable

722,273
519,605

512,686
3. Securities

19,974
20,032

20,014
4. Inventories

651,154
643,398

624,096
5. Other current assets

115,288
169,819

111,654
6. Allowance for doubtful accounts

(412)
(45)
(70)
Total
current
assets

3,685,038
78.7
3,106,448
76.0 3,264,207
77.4
II Fixed
assets
1. Tangible fixed assets
*1,2
(1) Buildings and structures

396,833
351,324

386,232
(2) Other tangible fixed assets
335,091
322,447

317,586

Total tangible fixed assets 731,925
673,772

703,818
2. Intangible assets

22,043
39,757

41,514
3. Investments and other assets

243,455
265,486

209,578

Total fixed assets

997,423
21.3
979,016
24.0 954,911
22.6
Total
assets
4,682,461
100.0
4,085,464
100.0 4,219,118
100.0
Liabilities
I Current
liabilities
1. Trade accounts payable

96,173
46,484
98,490
2. Short-term borrowings *2
330,012
409,178

359,178
3. Current portion of corporate bonds

522,000
-
60,000
4. Reserve for bonuses

16,965
21,248
-
5. Reserve for product warranty

7,154
18,473
15,755
6. Other current liabilities

208,812
184,759
123,654
Total
current
liabilities
1,181,118
25.2
680,144
16.6 657,078
15.6
II Long-term
liabilities
1. Corporate bonds

-
590,000
540,000
2. Long-term borrowings
*2
874,969
685,791
778,294
3. Reserve for retirement benefits

4,939
5,835
5,380
4. Other long-term liabilities

-
50
50

Total long-term liabilities

879,908
18.8
1,281,676
31.4 1,323,724
31.3
Total
liabilities
2,061,026
44.0
1,961,821
48.0 1,980,802
46.9
Net assets
I Shareholders’
equity
1. Common stock

1,101,360
23.5
1,102,711
27.0 1,102,711
26.1
2. Capital surplus

1,032,360
22.1
1,033,711
25.3 1,033,711
24.5
3. Retained earnings

651,569
13.9
424,594
10.4 537,383
12.8
4. Treasury stock

(163,811)
(3.5)
(435,250)
(10.7) (435,250)
(10.3)
Total
shareholders’
equity
2,621,479
56.0
2,125,768
52.0 2,238,557
53.1
II Valuation and translation adjustments
1. Unrealized holding gain (loss) on other
securities

(43)
(0.0)
(2,125)
(0.0) (241) (0.0)

Total valuation and translation
adjustments

(43)
(0.0)
(2,125)
(0.0) (241) (0.0)
Total
net
assets
2,621,435
56.0
2,123,642
52.0 2,238,315
53.1

Total liabilities and net assets

4,682,461
100.0
4,085,464
100.0 4,219,118
100.0