TOKYO, Nov. 13, 2008 (GLOBE NEWSWIRE) -- Internet Initiative Japan Inc. ("IIJ") (Nasdaq:IIJI) (TSE1:3774) today announced its consolidated financial results for the first six months of Fiscal Year Ending March 31, 2009 (from April to September 2008, "1H08").(1)
1H08 Financial Results In Line with 10/24/08 Revised Target
10/24 Target Actual Results
-------------- --------------
Revenues JPY33,200 million JPY33,254 million ($313.9 million)
Operating Income JPY950 million JPY1,005 million ($9.5 million)
Net Income JPY300 million JPY368 million ($3.5 million)
1H08 Highlights
* Revenue was up 10.9% YoY with the steady increase from recurring
revenues.
* Operating income was down 44.6% YoY. While gross margin decreased
by 0.2% YoY as revenue growth was weaker than expected, costs
related to business expansion increased and there were losses
from 4 new subsidiaries of JPY453 million.
* Net income was down 89.4% YoY largely affected by deferred tax
expense whereas we had deferred tax benefit of JPY1,970 million
in 1H07. We expect deferred tax benefit in 4Q08 due to the
difference in the timing of accounting the deferred tax benefit.
* Board-approved plan to repurchase own shares starting from
November 14, 2008
* Board-approved to pay cash dividend of JPY1,000 per share of
IIJ's common stock for interim period ended September 30, 2008
(400 ADSs is equivalent to 1 share of IIJ's common stock).
Overview of 1H08 Financial Results and Business Outlook(2)
Koichi Suzuki, President and CEO of IIJ said, "On October 24, we revised our 1H08 and Full FY2008 financial targets to reflect the volatile systems construction environment. Reported results are in line with the guidance and we will continue to take decisive steps to achieve our full year target in the tough environment."
"In the first half of FY2008, we continued to see stable growth in connectivity and outsourcing business supported by the need to facilitate the use of IT and to improve work efficiency. IP Services, especially connectivity of over 1Gbps are back on track with expected revenues in the following quarter, IIJ Mobile Service has exceeded 17,000 contracts as of today and Data Center demands are still strong. The new Nerima DC will begin operation in February 2009. On the contrary, systems construction was weak falling short of our budget as we saw some delays in decision making and there was an unprofitable systems integration project. The weak Japanese economy struck just when we began taking new measures for business expansion, such as increasing the number of engineers or starting new businesses," continued Suzuki.
"In the latter half of FY2008, while focusing on increasing recurring revenues from our current business and preparing the basis for mid- to long-term business growth, we plan to exercise effective cost control, especially in the systems construction area to improve our operating margin ratio as systems construction revenues are expected to be weak for a while due to the deteriorating Japanese economy.
"Though the Japanese economy is facing many challenges, we are determined that IT related investments for Japanese corporate, from small- to-large, are essential in the mid- and long-term and we see growth opportunities ahead."
1H08 Financial Results
Results of Operation
Operating Results Summary
--------------------------------------------------------------
1H08 1H07 YoY %
change
--------------------------------------------------------------
JPY millions JPY millions
Total Revenues 33,254 29,990 10.9%
--------------------------------------------------------------
Total Costs 27,085 23,811 13.7%
--------------------------------------------------------------
SG&A Expenses and R&D 5,164 4,363 18.4%
--------------------------------------------------------------
Operating Income 1,005 1,816 (44.6%)
--------------------------------------------------------------
Income before Income Tax
Expense 766 1,697 (54.9%)
--------------------------------------------------------------
Net Income 368 3,477 (89.4%)
--------------------------------------------------------------
Revenues
Revenues totaled JPY33,254 million, an increase of 10.9% YoY.
Revenues
---------------------------------------------------------------------
1H08 1H07 YoY %
change
---------------------------------------------------------------------
JPY millions JPY millions
Total Revenues: 33,254 29,990 10.9%
---------------------------------------------------------------------
Connectivity and Outsourcing
Services 17,001 14,807 14.8%
---------------------------------------------------------------------
SI 15,718 14,302 9.9%
---------------------------------------------------------------------
Equipment Sales 524 881 (40.5%)
---------------------------------------------------------------------
ATM Operation Business(2) 11 -- --
---------------------------------------------------------------------
Connectivity and Outsourcing Services revenue were JPY17,001 million, an increase of 14.8% YoY lead by the increase in outsourcing services revenues reflecting needs for data center and email related services, the increase in connectivity for home use revenues due to the full contribution from hi-ho, which we acquired in June 2007, of JPY2,425 million (6 months) compared to JPY1,419 million in 1H07 (4 months), and the increase in revenues from connectivity service for corporate use.
SI revenues were JPY15,718 million, an increase of 9.9% YoY. Systems construction revenues were down 6.4% YoY to JPY6,290 million as revenues fell short of our budget affected by the weak Japanese economy. Systems operation and maintenance revenues were up 24.4% YoY to JPY9,248 million.
Equipment sales revenues were JPY524 million, a decrease of 40.5% YoY.
ATM Operation Business revenues were JPY11 million.
Cost and expense
Cost of revenues was JPY27,085 million, an increase of 13.7% YoY.
Cost of Revenues
---------------------------------------------------------------------
1H08 1H07 YoY %
change
---------------------------------------------------------------------
JPY millions JPY millions
Cost of Revenues: 27,085 23,811 13.7%
---------------------------------------------------------------------
Connectivity and Outsourcing
Services 14,341 12,268 16.9%
---------------------------------------------------------------------
SI 12,178 10,787 12.9%
---------------------------------------------------------------------
Equipment Sales 466 756 (38.5%)
---------------------------------------------------------------------
ATM Operation Business 100 -- --
---------------------------------------------------------------------
Cost of Connectivity and Outsourcing Services revenue were JPY14,341 million, an increase of 16.9% YoY due to the increase in cost incurred by hi-ho for 6 months compared to 4 months in 1H07, network operation related and personnel related costs resulting from business expansion, and circuit related cost along with the upgrade in backbone. There were also initial cost related to GDX Japan Inc. and On-Demand Solutions Inc. of JPY76 million.
Gross margin was JPY2,660 million, an increase of 4.8% YoY. Gross margin ratio was 15.6% compared to 17.1% in 1H07.
Cost of SI revenues was JPY12,178 million in 2Q08, an increase of 12.9% YoY mainly due to the increase in outsourcing related costs.
Gross margin was JPY3,539 million, an increase of 0.7% YoY. Gross margin ratio was 22.5% compared to 24.6% in 1H07. We had an unprofitable systems integration project in 1H08.
Cost of Equipment Sales revenues was JPY466 million, a decrease of 38.5% YoY due to the decrease in equipment sales revenues. Gross margin ratio was 11.3% compared to 14.2% in 1H07.
Cost of ATM Operation Business revenues was JPY100 million and the gross margin was a loss of JPY89 million.
SG&A Expenses and R&D
Sales and marketing expenses were JPY2,351 million, an increase of 16.0% YoY. The increases were mainly due to the increase in personnel related expenses resulting from the hiring of personnel mainly in 1Q08 as well as expenses related to hi-ho of 6 months.
General and administrative expenses were JPY2,669 million, an increase of 20.3%YoY. The increases were mainly due to the increase in personnel and outsourcing related expenses. There were also expenses related to the 4 new subsidiaries.
Research and development expenses were JPY144 million, an increase of 23.4% YoY.
Operating income
Operating income was JPY1,005 million, a decrease of 44.6% YoY. While gross margin decreased by 0.2% YoY as revenue growth was weaker than expected mainly as a result of weak systems construction revenue and unprofitable systems integration project, cost related to business expansion increased. There were also losses from the 4 new subsidiaries totaling JPY453 million.
Other income (expenses) and others
Other income (expenses) was a net other expense of JPY239 million compared to net other expenses of JPY119 million in 1H07. There were losses of JPY61 million in 1H08 mainly related to equity securities compared to net gains of JPY49 million in 1H07.
Income tax expense was JPY539 million mainly due to deferred tax expense of JPY378 million compared to income tax benefit of JPY1,805 million in 1H07. In 1H07, there were deferred tax benefits of JPY1,970 million resulting from the revision of the valuation allowance against deferred income tax assets.
Minority interests in losses of subsidiaries were JPY140 million related to GDX Japan and Trust Networks Inc. compared to minority interests in losses of subsidiaries of JPY24 million in 1H07.
Equity in net income of equity method investees was JPY1 million compared to equity in net loss of equity method investees of JPY49 million in 1H07.
Net income was JPY368 million, a decrease of 89.4% YoY.
Financial Condition
Balance Sheets
As of September 30, 2008, total assets decreased by JPY2,427 million from the previous fiscal year end to JPY53,275 million.
For current assets, inventories increased by JPY353 million, mainly for ongoing SI projects; and account receivables decreased by JPY2,275 million, each from the respective amount as of March 31, 2008. Property and equipment increased by JPY1,928 million mainly due to an increase in property for our internal use. The fair value of available-for-sale securities as of September 30, 2008 decreased by JPY92 million to JPY753 million compared to March 31, 2008. For current liabilities, short-term borrowings decreased by JPY2,150 million due to repayments; and accounts payable decreased by JPY1,101 million, each from the respective amount as of March 31, 2008.
Total shareholders' equity as of September 30, 2008 was JPY24,979 million and shareholder's equity ratio (shareholder's equity/total assets) as of September 30, 2008 was 46.9%.
Cash Flows
Cash and cash equivalents as of September 30, 2008 decreased by JPY2,152 million to JPY9,319 million, compared to JPY11,471 million as of March 31, 2008.
Net cash provided by operating activities in 1H08 was JPY4,005 million, compared to net cash provided by operating activities of JPY117 million in 1H07, mainly due to operating income of JPY1,005 million, decrease in accounts receivable of JPY2,256 million, increase in inventories related to on-going SI projects, decrease in accounts payable mainly related to SI projects and payment of income taxes.
Net cash used in investing activities in 1H08 was JPY2,034 million, compared to net cash used in investing activities of JPY4,352 million in 1H07, mainly due to payment of JPY1,748 million for the purchase of property and equipment, JPY119 million for the purchase of short-term and other investments, and JPY100 million for the purchase of available-for-sales securities.
Net cash used in financing activities in 1H08 was JPY4,100 million, compared to net cash provided by financing activities of JPY2,346 million in 1H07, due to repayments of short-term borrowing with initial maturities over three months of JPY475 million (net), principal payments under capital leases of JPY1,744 million, a net decrease of JPY1,675 million in short-term borrowings with initial maturities less than three month and payment of JPY206 million for FY2007 year-end dividends.
1H08 Business Review
Analysis by Service
Connectivity and Outsourcing Services
Connectivity services revenues for corporate use increased by 5.8% YoY as contracted numbers for IP Service, broadband services and IIJ Mobile Services increased respectively. Contracts for over 1Gpbs IP Service increased by 15 contracts compared to September 30, 2007 with expected increase in revenues in the following quarters. IIJ Mobile Service has reached 17,000 contracts, in line with our expectations as we cultivate customers with large sales-force whom are in need to access their internal network from outside, with our high reliable security solutions. The total contracted bandwidth increased by 114.2Gbps to 449.1Gbps compared to September 30, 2007.
Connectivity services revenues for home use increased by 39.9% YoY to JPY3,211 million due to the full contribution to revenues from hi-ho of JPY2,425 million (6 months) compared to JPY1,419 million (4 months). Also users are shifting from dial-up and ADSL services to optical line services which charges higher monthly fees.
Outsourcing services revenues increased by 14.3% YoY as steady and continuous demands for email related and data center services in general continued.
Number of Contracts for Connectivity Services
---------------------------------------------------------------------
Sept. 30, Sept. 30, YoY
2008 2007 Change
---------------------------------------------------------------------
Connectivity Services (Corporate Use) 40,611 22,949 17,662
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IP Service (-99Mbps) 895 811 84
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IP Service (100Mbps-999Mbps) 213 179 34
---------------------------------------------------------------------
IP Service (1Gbps-) 76 61 15
---------------------------------------------------------------------
IIJ Data Center Connectivity Service 299 288 11
---------------------------------------------------------------------
IIJ FiberAccess/F and IIJ DSL/F 25,101 19,994 5,107
---------------------------------------------------------------------
Others 14,027 1,616 12,411
---------------------------------------------------------------------
Connectivity Services (Home Use) 457,289 500,185 (42,896)
---------------------------------------------------------------------
Under IIJ Brand 48,287 52,878 (4,591)
---------------------------------------------------------------------
hi-ho 186,396 189,872 (3,476)
---------------------------------------------------------------------
OEM(3) 222,606 257,435 (34,829)
---------------------------------------------------------------------
Total Contracted Bandwidth 449.1Gbps 334.9Gbps 114.2Gbps
---------------------------------------------------------------------
Connectivity and Outsourcing Services Revenues Breakdown and Cost
----------------------------------------------------------------------
1H08 1H07 YoY %
change
----------------------------------------------------------------------
JPY millions JPY millions
Connectivity Service (Corporate Use) 6,328 5,981 5.8%
----------------------------------------------------------------------
IP Service(4) 4,565 4,443 2.8%
----------------------------------------------------------------------
IIJ FiberAccess/F and IIJ DSL/F 1,434 1,280 12.1%
----------------------------------------------------------------------
Others 329 258 27.0%
----------------------------------------------------------------------
Connectivity Service (Home Use) 3,211 2,295 39.9%
----------------------------------------------------------------------
Under IIJ Brand 512 560 (8.6%)
----------------------------------------------------------------------
hi-ho 2,425 1,419 70.9%
----------------------------------------------------------------------
OEM 274 316 (13.1%)
----------------------------------------------------------------------
Outsourcing Services 7,462 6,531 14.3%
----------------------------------------------------------------------
Total Connectivity and
Outsourcing Services 17,001 14,807 14.8%
----------------------------------------------------------------------
Cost of Connectivity and
Outsourcing Services 14,341 12,268 16.9%
----------------------------------------------------------------------
Backbone Cost (included in the
cost of Connectivity and
Outsourcing Service) 1,846 1,668 10.7%
----------------------------------------------------------------------
Connectivity and Outsourcing
Services Gross Margin Ratio 15.6% 17.1% --
----------------------------------------------------------------------
SI
One-time revenues from systems construction decreased by 6.4% YoY and recurring revenues from systems operation and maintenance increased by 24.4% YoY.
Order backlog for SI and equipment sales as of September 30, 2008 decreased by 8.7% to JPY17,296 million compared to September 30, 2007. The order backlog for systems construction including equipment sales decreased by 40.4% to JPY5,500 million and systems operation and maintenance increased by 21.5% to JPY11,796 million compared to September 30, 2008 respectively.
SI Revenue Breakdown and Cost
---------------------------------------------------------------------
1H08 1H07 YoY %
change
---------------------------------------------------------------------
JPY millions JPY millions
SI Revenues 15,718 14,302 9.9%
---------------------------------------------------------------------
Systems Construction 6,290 6,721 (6.4%)
---------------------------------------------------------------------
Systems Operation and Maintenance 9,428 7,581 24.4%
---------------------------------------------------------------------
Cost of SI 12,178 10,787 12.9%
---------------------------------------------------------------------
SI Gross Margin Ratio 22.5% 24.6% --
---------------------------------------------------------------------
Order Backlog for SI and Equipment Sales
---------------------------------------------------------------------
Sept. 30, Sept. 30, YoY %
2008 2007 Change
---------------------------------------------------------------------
JPY millions JPY millions
SI and Equipment Sales Order Backlog 17,296 18,938 (8.7%)
---------------------------------------------------------------------
Equipment Sales
---------------
Equipment Sales Revenue and Cost
---------------------------------------------------------------------
1H08 1H07 YoY %
change
---------------------------------------------------------------------
JPY millions JPY millions
Equipment Sales Revenues 524 881 (40.5%)
---------------------------------------------------------------------
Cost of Equipment Sales 466 756 (38.5%)
---------------------------------------------------------------------
Equipment Sales Gross Margin Ratio 11.3% 14.2% --
---------------------------------------------------------------------
ATM Operation Business
----------------------
ATM Operation Business Revenue and Cost
---------------------------------------------------------------------
1H08 1H07 YoY %
change
---------------------------------------------------------------------
JPY millions JPY millions
ATM Operation Business Revenues 11 -- --
---------------------------------------------------------------------
Cost of ATM Operation Business 100 -- --
---------------------------------------------------------------------
Segment Information
Operating Revenues
------------------
-------------------------------------------------------------------
1H08
-------------------------------------------------------------------
JPY millions
Network services and Systems Integration Business 33,323
-------------------------------------------------------------------
External Customers 33,243
-------------------------------------------------------------------
Inter-Segment 80
-------------------------------------------------------------------
ATM Operation Business 11
-------------------------------------------------------------------
External Customers 11
-------------------------------------------------------------------
Inter-Segment --
-------------------------------------------------------------------
Elimination 80
-------------------------------------------------------------------
Consolidated 33,254
-------------------------------------------------------------------
Operating Income (losses)
-------------------------
-------------------------------------------------------------------
1H08
-------------------------------------------------------------------
JPY millions
Network services and Systems Integration Business 1,253
-------------------------------------------------------------------
ATM Operation Business (233)
-------------------------------------------------------------------
Elimination 14
-------------------------------------------------------------------
Consolidated 1,005
-------------------------------------------------------------------
FY2008 Financial Target
As corporate earnings are decreasing and capital expenditures are weakening in general, and the Japanese economy is deteriorating and is expected to continue for a while, we have revised IIJ's full FY2008 financial target downward from the initial target announced on May 15, 2008.
Income before
Operating Income Tax Net
Revenues Income Expense (Benefit) Income
--------------------------------------------------------------------
JPY million JPY million JPY million JPY million
Target
(Announced on
Oct 24, 2008) 73,000 3,800 3,000 2,800
--------------------------------------------------------------------
Dividend
The Board of Directors of IIJ resolved today to pay cash dividend of JPY1,000 per share of common stock for interim period ended September 30, 2008 to the shareholders of record as of September 30, 2008, payable December 5, 2008. IIJ also plans to pay year-end cash dividend of JPY1,000 per share (payable to shareholders of record as of March 31, 2009).
----------------------------------------------------------------------
Dividend per share
----------------------------------------------------------------------
Interim Year-end Total
----------------------------------------------------------------------
JPY JPY JPY
Fiscal year ended March 31, 2008 750.00 1,000.00 1,750.00
----------------------------------------------------------------------
Fiscal year ending March 31, 2009 1,000.00 --
Fiscal year ending March 31, 2009
(target) -- 1,000.00 2,000.00
----------------------------------------------------------------------
Repurchase of Own Shares
On October 28, 2008, The Board of Directors of IIJ resolved to repurchase its own shares pursuant to Article 156, Paragraph 1 of the Corporation Law as applied pursuant to Article 165, Paragraph 3 of the Corporation Law and IIJ's Article of Incorporation.
1. Type of shares to be repurchased: Common stock of IIJ
2. Total number of shares to be repurchased: Up to 4,000 shares
(Equivalent to 1.94% of the common shares outstanding)
3. Total amount to be repurchased: Up to JPY 400,000,000
4. Repurchasing period: From November 14, 2008 to January 30, 2009
** The shares to be repurchased within the limitation provided by
law may include IIJ's American Depository Shares ("ADS"). The ADS
is quoted on the Nasdaq market and the current ADS/share ratio is
400 ADSs per 1 share of IIJ's common stock and can be transferred
through our depository.
(1) Unless otherwise stated, all financial figures discussed in this
announcement are prepared in accordance with U.S. GAAP. All
financial figures are unaudited and consolidated. The
translations of Japanese yen into U.S. dollars are solely for the
convenience of readers outside of Japan. The rate used for the
translation was JPY105.94 per US$1.00, which was the noon buying
rate on September 30, 2008.
(2) From 1Q08, we have disclosed revenues and costs related to ATM
Operation Business.
(3) OEM services provided to other service providers.
(4) IP Service revenues include revenues from the Data Center
Connectivity Service.
Presentation
Presentation Materials will be posted on our web site (http://www.iij.ad.jp/en/IR/) on November 13, 2008.
About Internet Initiative Japan Inc.
Founded in 1992, Internet Initiative Japan Inc. ("IIJ") (Nasdaq:IIJI) (TSE:3774) is one of Japan's leading Internet-access and comprehensive network solutions providers. The company has built one of the largest Internet backbone networks in Japan, and between Japan and the United States. IIJ and its group of companies provide total network solutions that mainly cater to high-end corporate customers. The company's services include high-quality systems integration and security services, Internet access, hosting/housing, and content design.
The Internet Initiative Japan Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4613
For inquiries, contact:
YUKO KAZAMA IIJ Investor Relations Office Tel: +81-3-5259-6500 E-mail: ir@iij.ad.jp URL: http://www.iij.ad.jp/
Statements made in this press release regarding IIJ's or management's intentions, beliefs, expectations, or predictions for the future are forward-looking statements that are based on IIJ's and managements' current expectations, assumptions, estimates and projections about its business and the industry. These forward-looking statements, such as statements regarding FY2008 revenues and operating and net profitability, are subject to various risks, uncertainties and other factors that could cause IIJ's actual results to differ materially from those contained in any forward-looking statement. These risks, uncertainties and other factors include: IIJ's ability to maintain and increase revenues from higher-margin services such as systems integration and outsourcing services; the possibility that revenues from connectivity services may decline substantially as a result of competition and other factors; the ability to compete in a rapidly evolving and competitive marketplace; the impact on IIJ's profits of fluctuations in costs such as backbone costs and subcontractor costs; the impact on IIJ's profits of fluctuations in the price of available-for-sale securities; the impact of technological changes in its industry; IIJ's ability to raise additional capital to cover its indebtedness; the possibility that NTT, IIJ's largest shareholder, may decide to exercise substantial influence over IIJ; and other risks referred to from time to time in IIJ's filings on Form 20-F of its annual report and other filings with the United States Securities and Exchange Commission.
Internet Initiative Japan Inc.
Quarterly Consolidated Balance Sheets (Unaudited)
(As of September 30, 2008 and March 31, 2008)
---------------------------------------------------------------------
As of September 30, 2008 As of March 31, 2008
---------------------------------------------------------------------
Thousands of Thousands Thousands
U.S. Dollars of JPY % of JPY %
---------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents 87,967 9,319,235 11,470,980
Short-term
investments -- -- 12,181
Accounts
receivable, net
of allowance
for doubtful
accounts of
JPY 23,544
thousand and
JPY 24,677
thousand at
September 30,
2008 and March
31, 2008,
respectively 94,210 9,980,614 12,255,163
Inventories 14,512 1,537,377 1,184,160
Prepaid expenses 20,275 2,147,960 2,005,274
Other current
assets, net of
allowance for
doubtful
accounts of
JPY 15,320
thousand and
JPY 7,470
thousand at
September 30,
2008 and March
31, 2008,
respectively 12,284 1,301,333 1,557,869
---------------------- ------------
Total current
assets 229,248 24,286,519 45.6 28,485,627 51.1
INVESTMENTS IN
AND ADVANCES
TO EQUITY
METHOD
INVESTEES, net
of loan loss
valuation
allowance of
JPY 16,701
thousand at
September 30,
2008 and March
31, 2008 9,024 956,006 1.8 991,237 1.8
OTHER INVESTMENTS 22,437 2,376,978 4.5 2,363,770 4.2
PROPERTY AND
EQUIPMENT, net
of accumulated
depreciation
and amortization
of JPY
15,417,585
thousand and
JPY 14,029,785
thousand at
September 30,
2008 and March
31, 2008,
respectively 129,020 13,668,382 25.7 11,740,210 21.1
GOODWILL 23,667 2,507,258 4.7 2,507,258 4.5
OTHER INTANGIBLE
ASSETS -- Net 31,736 3,362,102 6.3 3,400,117 6.1
GUARANTEE
DEPOSITS 19,776 2,095,045 3.9 2,037,165 3.7
OTHER ASSETS,
net of
allowance for
doubtful
accounts of
JPY 65,088
thousand and
JPY 64,796
thousand at
September 30,
2008 and March
31, 2008,
respectively 37,976 4,023,185 7.5 4,177,162 7.5
---------------------- ------------
TOTAL 502,884 53,275,475 100.0 55,702,546 100.0
---------------------- ------------
---------------------------------------------------------------------
As of September 30, 2008 As of March 31, 2008
---------------------------------------------------------------------
Thousands of Thousands Thousands
U.S. Dollars of JPY % of JPY %
---------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS'
EQUITY
CURRENT
LIABILITIES:
Short-term
borrowings 66,075 7,000,000 9,150,000
Capital lease
obligations --
current portion 34,143 3,617,081 3,455,948
Accounts payable 64,136 6,794,589 7,895,238
Accrued expenses 9,954 1,054,540 994,138
Accrued
retirement and
pension costs
-- current 108 11,436 11,436
Deferred income 17,696 1,874,696 1,552,896
Other current
liabilities 3,768 399,207 864,366
---------------------- ------------
Total current
liabilities 195,880 20,751,549 38.9 23,924,022 42.9
CAPITAL LEASE
OBLIGATIONS --
Noncurrent 51,163 5,420,254 10.2 4,738,359 8.5
ACCRUED
RETIREMENT AND
PENSION COSTS
-- Noncurrent 11,624 1,231,434 2.3 1,101,951 2.0
OTHER NONCURRENT
LIABILITIES 6,973 738,712 1.4 663,399 1.2
---------------------- ------------
Total
Liabilities 265,640 28,141,949 52.8 30,427,731 54.6
---------------------- ------------
MINORITY
INTEREST 1,458 154,309 0.3 294,102 0.6
COMMITMENTS AND
CONTINGENCIES
SHAREHOLDERS'
EQUITY:
Common-stock --
authorized,
377,600 shares;
issued and
outstanding,
206,478 shares
at September
30, 2008 and
March 31, 2008 158,900 16,833,847 31.6 16,833,847 30.2
Additional
paid-in capital 260,636 27,611,737 51.8 27,611,737 49.6
Accumulated
deficit (183,070) (19,394,413) (36.4) (19,555,489) (35.1)
Accumulated
other
comprehensive
income (loss) (680) (71,954) (0.1) 90,618 0.1
---------------------- ------------
Total share-
holders' equity 235,786 24,979,217 46.9 24,980,713 44.8
---------------------- ------------
TOTAL 502,884 53,275,475 100.0 55,702,546 100.0
---------------------- ------------
---------------------------------------------------------------------
(Note) The U.S. dollar amounts represent translations of yen
amounts at the rate of JPY 105.94 which was the noon
buying rate in New York City for cable transfers in
foreign currencies as certified for customs purposes by
the Federal Reserve Bank of New York prevailing as of
September 30, 2008.
Internet Initiative Japan Inc.
Quarterly Consolidated Statements of Income (Unaudited)
(For the first half ended September 30, 2008 and September 30, 2007)
---------------------------------------------------------------------
Six Months Ended Six Months Ended
September 30, 2008 September 30, 2007
------------------------------------------------------
% of % of
Thousands of Thousands total Thousands total
U.S. Dollars of JPY revenues of JPY revenues
---------------------------------------------------------------------
REVENUES:
Connectivity and
outsourcing
services:
Connectivity
(corporate
use) 59,729 6,327,721 5,981,284
Connectivity
(home use) 30,312 3,211,251 2,294,848
Outsourcing
services 70,439 7,462,257 6,530,574
---------------------- ------------
Total 160,480 17,001,229 14,806,706
Systems
integration:
Systems
Construction 59,373 6,289,946 6,720,912
Systems
Operation and
Maintenance 88,990 9,427,609 7,581,276
---------------------- ------------
Total 148,363 15,717,555 14,302,188
Equipment sales 4,947 524,087 881,350
ATM operation
business 103 10,970 --
---------------------- ------------
Total
revenues 313,893 33,253,841 100.0 29,990,244 100.0
---------------------- ------------
COST AND EXPENSES:
Cost of
connectivity
and outsourcing
services 135,373 14,341,393 12,267,670
Cost of systems
integration 114,955 12,178,300 10,786,859
Cost of
equipment
sales 4,388 464,841 756,386
Cost of ATM
operation
business 943 99,984 --
---------------------- ------------
Total cost 255,659 27,084,518 81.5 23,810,915 79.4
Sales and
marketing 22,192 2,351,033 7.1 2,027,153 6.7
General and
administrative 25,195 2,669,171 8.0 2,219,623 7.4
Research and
development 1,356 143,677 0.4 116,445 0.4
---------------------- ------------
Total cost
and expenses 304,402 32,248,399 97.0 28,174,136 93.9
---------------------- ------------
OPERATING INCOME 9,491 1,005,442 3.0 1,816,108 6.1
---------------------- ------------
OTHER INCOME
(EXPENSE):
Interest
income 248 26,243 31,555
Interest
expense (1,949) (206,407) (215,278)
Foreign
exchange
gains 38 3,998 923
Net gains on
sales of other
investments -- -- 213,530
Losses on
write-down of
other
investments (577) (61,092) (164,056)
Other -- net (20) (2,134) 14,702
---------------------- ------------
Other income
(expense) --
net (2,260) (239,392) (0.7) (118,624) (0.4)
---------------------- ------------
INCOME FROM
OPERATIONS
BEFORE INCOME
TAX EXPENSE
(BENEFIT),
MINORITY
INTERESTS AND
EQUITY IN NET
INCOME (LOSS)
OF EQUITY
METHOD
INVESTEES 7,231 766,050 2.3 1,697,484 5.7
INCOME TAX
EXPENSE
(BENEFIT) 5,089 539,124 1.6 (1,804,833) (6.0)
MINORITY
INTERESTS IN
LOSSES
OF SUBSIDIARIES 1,320 139,793 0.4 24,212 0.1
EQUITY IN NET
INCOME (LOSS)
OF EQUITY
METHOD
INVESTEES 7 835 0.0 (49,129) (0.2)
---------------------- ------------
NET INCOME 3,469 367,554 1.1 3,477,400 11.6
---------------------------------------------------------------------
---------------------------------------------------------------------
Six Months Ended Six Months Ended
September 30, 2008 September 30, 2007
---------------------------------------------------------------------
NET INCOME PER
SHARE
BASIC
WEIGHTED-AVERAGE
NUMBER OF 206,478 206,002
SHARES (shares)
DILUTED WEIGHTED-
AVERAGE NUMBER
OF SHARES
(shares) 206,538 206,228
BASIC WEIGHTED-
AVERAGE NUMBER
OF ADS
EQUIVALENTS
(ADSs) 82,591,200 82,400,774
DILUTED WEIGHTED-
AVERAGE NUMBER
OF ADS
EQUIVALENTS
(ADSs) 82,615,200 82,491,200
BASIC NET INCOME
PER SHARE
(U.S. Dollars/
JPY / JPY) 16.80 1,780 16,880
DILUTED NET
INCOME PER SHARE
(U.S. Dollars/
JPY / JPY) 16.80 1,780 16,862
BASIC NET INCOME
PER ADS
EQUIVALENT
(U.S. Dollars/
JPY / JPY) 0.04 4.45 42.20
DILUTED NET
INCOME PER ADS
EQUIVALENT
(U.S. Dollars/
JPY / JPY) 0.04 4.45 42.14
---------------------------------------------------------------------
(Note 1) The U.S. dollar amounts represent translations of
yen amounts at the rate of JPY 105.94 which was the
noon buying rate in New York City for cable transfers
in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York
prevailing as of September 30, 2008.
(Note 2) The above presentation for the first half ended
September 30, 2007 has been changed to conform to the
presentation for the first half ended September 30,
2008.
Internet Initiative Japan Inc.
Quarterly Consolidated Statements of Cash Flows (Unaudited)
(For the first half ended September 30, 2008 and September 30, 2007)
--------------------------------------------------------------------
Six Months
Ended
Six Months Ended September 30,
September 30, 2008 2007
--------------------------------------------
Thousands of Thousands Thousands
U.S. Dollars of JPY of JPY
--------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income 3,469 367,554 3,477,400
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 24,534 2,599,105 2,238,630
Provision for
retirement and pension
costs, less payments 1,222 129,483 84,723
Provision for (reversal
of) allowance for
doubtful accounts and
advances 79 8,391 (4,924)
Loss on disposal of
property and equipment 337 35,728 11,524
Net gains on sales of
other investments -- -- (213,530)
Losses on write-down
of other investments 577 61,092 164,056
Foreign exchange losses 84 8,867 3,397
Equity in net loss of
equity method investees
(net of dividend) 279 29,545 49,129
Minority interests in
losses of subsidiaries (1,319) (139,793) (24,212)
Deferred income tax
expense (benefit) 3,568 377,983 (1,969,437)
Others 16 1,707 --
Changes in operating
assets and liabilities
net of effects from
acquisition of business
and a company
Decrease in accounts
receivable 21,293 2,255,821 576,507
Increase in inventories,
prepaid expenses and
other current and
noncurrent assets (3,885) (411,600) (1,639,019)
Decrease in accounts
payable (11,686) (1,238,019) (2,183,876)
Decrease in accrued
expenses, other current
and noncurrent
liabilities (767) (81,276) (453,660)
--------------------------------------------------------------------
Net cash provided by
operating activities 37,801 4,004,588 116,708
--------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of property
and equipment (16,499) (1,747,972) (991,559)
Purchase of
available-for-sale
securities (944) (99,992) (513,895)
Purchase of short-term
and other investments (1,126) (119,263) (31,822)
Investment in equity
method investee -- -- (250,389)
Purchases of subsidiary
stock from minority
shareholders -- -- (1,975,123)
Proceeds from sales of
available-for-sale
securities -- -- 609,112
Proceeds from sales and
redemption of
short-term and other
investments 113 12,009 6,751
Acquisition of a newly
controlled company, net
of cash acquired -- -- (912,450)
Payments of guarantee
deposits (743) (78,718) (265,850)
Refund of guarantee
deposits 169 17,882 3,361
Payments for refundable
insurance policies (242) (25,614) (23,439)
Refund from insurance
policies 70 7,382 --
Other (1) (104) (6,690)
--------------------------------------------------------------------
Net cash used in
investing activities (19,203) (2,034,390) (4,351,993)
--------------------------------------------------------------------
Six Months
Ended
Six Months Ended September 30,
September 30, 2008 2007
--------------------------------------------
Thousands of Thousands Thousands
U.S. Dollars of JPY of JPY
---------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from issuance of
short-term borrowings
with initial maturities
over three months 50,972 5,400,000 10,400,000
Repayments of short-term
borrowings with initial
maturities over three
months and long-term
borrowings (55,456) (5,875,000) (6,340,000)
Principal payments under
capital leases (16,460) (1,743,847) (1,657,941)
Net Increase (decrease)
in short-term
borrowings with initial
maturities less than
three months (15,811) (1,675,000) 250,000
Dividends paid (1,949) (206,478) (306,450)
---------------------------------------------------------------------
Net cash provided by
(used in) financing
activities (38,704) (4,100,325) 2,345,609
---------------------------------------------------------------------
EFFECT OF EXCHANGE RATE
CHANGES ON CASH AND CASH
EQUIVALENTS (205) (21,618) 5,008
NET DECREASE IN CASH AND
CASH EQUIVALENTS (20,311) (2,151,745) (1,884,668)
CASH AND CASH
EQUIVALENTS, BEGINNING
OF THE PERIOD 108,278 11,470,980 13,554,544
--------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
END OF THE PERIOD 87,967 9,319,235 11,669,876
--------------------------------------------------------------------
--------------------------------------------------------------------
ADDITIONAL CASH FLOW
INFORMATION:
Interest paid 1,942 205,700 216,937
Income taxes paid 3,794 401,943 727,324
NONCASH INVESTING AND
FINANCING ACTIVITIES:
Acquisition of assets
by entering into
capital leases 26,128 2,768,002 2,298,102
Purchase of minority
interests of
consolidated
subsidiaries -- -- 1,012,520
through share exchanges
ACQUISITION OF BUSINESS
AND A COMPANY:
Assets acquired -- -- 1,570,720
Cash paid -- -- (1,230,450)
Liabilities assumed -- -- 340,270
--------------------------------------------------------------------
(Note 1) The U.S. dollar amounts represent translations of
yen amounts at the rate of JPY 105.94 which was the
noon buying rate in New York City for cable transfers
in foreign currencies as certified for customs purposes
by the Federal Reserve Bank of New York prevailing as
of September 30, 2008.
(Note 2) The above presentation for the first half ended
September 30, 2007 has been changed to conform to the
presentation for the first half ended September 30,
2008.
2nd Quarter FY2008 Consolidated Financial Results (3 months)
The following tables are highlight data of 2nd Quarter FY2008 consolidated financial results (unaudited, from July 1, 2008 to September 30, 2008).
Operating Results Summary
-------------------------------------------------------------------
YoY
2Q08 2Q07 Change
-------------------------------------------------------------------
JPY JPY
millions millions
------------------------------------------------------------------
Total Revenues: 16,926 16,294 3.9%
-------------------------------------------------------------------
Connectivity and Outsourcing Services 8,605 7,936 8.4%
-------------------------------------------------------------------
SI 8,029 7,968 0.8%
-------------------------------------------------------------------
Equipment Sales 286 391 (26.9%)
-------------------------------------------------------------------
ATM Operation Business 6 -- --
-------------------------------------------------------------------
Cost of Revenues: 13,782 12,869 7.1%
-------------------------------------------------------------------
Connectivity and Outsourcing Services 7,276 6,598 10.3%
-------------------------------------------------------------------
SI 6,154 5,938 3.6%
-------------------------------------------------------------------
Equipment Sales 266 333 (20.1%)
-------------------------------------------------------------------
ATM Operation Business 86 -- --
-------------------------------------------------------------------
SG&A Expenses and R&D 2,550 2,301 10.8%
-------------------------------------------------------------------
Operating Income 594 1,125 (47.2%)
-------------------------------------------------------------------
Income before Income Tax Expense 456 941 (51.5%)
-------------------------------------------------------------------
Net Income 198 2,907 (93.2%)
-------------------------------------------------------------------
Connectivity and Outsourcing Services Revenues Breakdown and Cost
-------------------------------------------------------------------
YoY
2Q08 2Q07 Change
-------------------------------------------------------------------
JPY JPY
millions millions
------------------------------------------------------------------
Connectivity and Outsourcing
Services Revenues 8,605 7,936 8.4%
-------------------------------------------------------------------
Connectivity Service (Corporate Use) 3,218 3,009 7.0%
-------------------------------------------------------------------
IP Service 2,295 2,225 3.1%
-------------------------------------------------------------------
IIJ FiberAccess/F and IIJ DSL/F 721 664 8.6%
-------------------------------------------------------------------
Others 202 119 69.4%
-------------------------------------------------------------------
Connectivity Service (Home Use) 1,615 1,489 8.5%
-------------------------------------------------------------------
Under IIJ Brand 254 277 (8.4%)
-------------------------------------------------------------------
hi-ho 1,222 1,080 13.2%
-------------------------------------------------------------------
OEM 139 131 5.8%
-------------------------------------------------------------------
Outsourcing Services 3,772 3,438 9.7%
-------------------------------------------------------------------
Cost of Connectivity and
Outsourcing Services 7,276 6,598 10.3%
-------------------------------------------------------------------
Backbone Cost (included in the cost
of Connectivity and Outsourcing
Service) 951 849 12.0%
-------------------------------------------------------------------
Connectivity and Outsourcing Services
Gross Margin Ratio 15.4% 16.9% --
-------------------------------------------------------------------
SI Revenue Breakdown and Cost
-------------------------------------------------------------------
YoY
2Q08 2Q07 Change
-------------------------------------------------------------------
JPY JPY
millions millions
-------------------------------------------------------------------
SI Revenues 8,029 7,968 0.8%
-------------------------------------------------------------------
Systems Construction 3,254 4,168 (21.9%)
-------------------------------------------------------------------
Systems Operation and Maintenance 4,775 3,799 25.7%
-------------------------------------------------------------------
Cost of SI 6,154 5,938 3.6%
-------------------------------------------------------------------
SI Gross Margin Ratio 23.3% 25.5% --
-------------------------------------------------------------------
SI and Equipment Sales Order Backlog 17,296 18,928 (8.6%)
-------------------------------------------------------------------
Equipment Sales Revenue and Cost
-------------------------------------------------------------------
YoY
2Q08 2Q07 Change
-------------------------------------------------------------------
JPY JPY
millions millions
-------------------------------------------------------------------
Equipment Sales Revenues 286 391 (26.9%)
-------------------------------------------------------------------
Cost of Equipment Sales 266 333 (20.1%)
-------------------------------------------------------------------
Equipment Sales Gross Margin Ratio 7.0% 15.0% --
-------------------------------------------------------------------
ATM Operation Business Revenue and Cost
-------------------------------------------------------------------
YoY
2Q08 2Q07 Change
-------------------------------------------------------------------
JPY JPY
millions millions
-------------------------------------------------------------------
ATM Operation Business Revenues 6 -- --
-------------------------------------------------------------------
Cost of ATM Operation Business 86 -- --
-------------------------------------------------------------------
Other Financial Statistics
-------------------------------------------------------------------
YoY
2Q08 2Q07 Change
-------------------------------------------------------------------
JPY JPY
millions millions
-------------------------------------------------------------------
Adjusted EBITDA 1,948 2,316 (15.9%)
-------------------------------------------------------------------
CAPEX, including capital leases 2,685 1,058 153.9%
-------------------------------------------------------------------
Depreciation and amortization 1,354 1,191 13.7%
-------------------------------------------------------------------
Reconciliation of Non-GAAP Financial Measures
The following table summarizes the reconciliation of adjusted EBITDA to net income in our consolidated statements of income that are prepared in accordance with U.S. GAAP.
Adjusted EBITDA
-------------------------------------------------------------------
2Q08 2Q07
-------------------------------------------------------------------
JPY JPY
millions millions
-------------------------------------------------------------------
Adjusted EBITDA 1,948 2,316
-------------------------------------------------------------------
Depreciation and Amortization 1,354 1,191
-------------------------------------------------------------------
Operating Income 594 1,125
-------------------------------------------------------------------
Other Income (Expense) (138) (184)
-------------------------------------------------------------------
Income Tax Expense 326 (1,980)
-------------------------------------------------------------------
Minority Interests in Losses of
Subsidiaries 85 15
-------------------------------------------------------------------
Equity in Net Income (Loss) of Equity
Method Investees (17) (29)
-------------------------------------------------------------------
Net Income 198 2,907
-------------------------------------------------------------------
The following table summarizes the reconciliation of capital expenditures to the purchase of property and equipment in our consolidated statements of cash flows that are prepared and presented in accordance with U.S. GAAP.
CAPEX
-------------------------------------------------------------------
2Q08 2Q07
-------------------------------------------------------------------
JPY JPY
millions millions
-------------------------------------------------------------------
CAPEX, including capital leases 2,685 1,058
-------------------------------------------------------------------
Acquisition of Assets by Entering into
Capital Leases 1,705 636
-------------------------------------------------------------------
Purchase of Property and Equipment 980 422
-------------------------------------------------------------------
Internet Initiative Japan Inc.
------------------------------
Quarterly Consolidated Statements of Income (Unaudited)
------------------------------------------------------
(For the quarter ended September 30, 2008 and September 30, 2007)
Three Months Ended Three Months Ended
September 30, 2008 September 30, 2007
---------------------------- ------------------
Thousands
of Thousands % of Thousands % of
U.S. of total of total
Dollars JPY revenues JPY revenues
---------------------------------------------------------------------
REVENUES:
Connectivity and
outsourcing
services:
Connectivity
(corporate use) 30,375 3,217,967 3,008,512
Connectivity
(home use) 15,245 1,615,048 1,488,522
Outsourcing
services 35,603 3,771,761 3,438,596
-------------------- ----------
Total 81,223 8,604,776 7,935,630
Systems
integration:
Systems
Construction 30,717 3,254,198 4,168,310
Systems Operation
and Maintenance 45,069 4,774,533 3,799,414
-------------------- ----------
Total 75,786 8,028,731 7,967,724
Equipment sales 2,700 286,066 391,139
ATM operation
business 58 6,135 --
-------------------- ----------
Total revenues 159,767 16,925,708 100.0 16,294,493 100.0
-------------------- ----------
COST AND EXPENSES:
Cost of
connectivity and
outsourcing
services 68,683 7,276,321 6,598,148
Cost of systems
integration 58,090 6,154,063 5,937,975
Cost of equipment
sales 2,510 265,915 332,603
Cost of ATM
operation
business 806 85,303 --
-------------------- ----------
Total cost 130,089 13,781,602 81.4 12,868,726 79.0
Sales and
marketing 11,122 1,178,307 7.0 1,088,023 6.7
General and
administrative 12,143 1,286,463 7.6 1,152,780 7.1
Research and
development 804 85,156 0.5 60,394 0.3
-------------------- ----------
Total cost
and expenses 154,158 16,331,528 96.5 15,169,923 93.1
-------------------- ----------
OPERATING INCOME 5,609 594,180 3.5 1,124,570 6.9
-------------------- ----------
OTHER INCOME
(EXPENSE):
Interest income 173 18,287 20,343
Interest expense (946) (100,204) (118,370)
Foreign exchange
gains 60 6,401 1,849
Losses on
write-down of
other
investments (507) (53,701) (92,127)
Other -- net (80) (8,484) 4,469
-------------------- ----------
Other income
(expense) --
net (1,300) (137,701) (0.8) (183,836) (1.1)
-------------------- ----------
INCOME FROM
OPERATIONS BEFORE
INCOME TAX EXPENSE
(BENEFIT), MINORITY
INTERESTS AND
EQUITY IN NET LOSS
OF EQUITY METHOD
INVESTEES 4,309 456,479 2.7 940,734 5.8
INCOME TAX EXPENSE
(BENEFIT) 3,077 325,909 1.9 (1,980,199) (12.1)
MINORITY INTERESTS
IN LOSSES OF
SUBSIDIARIES 800 84,766 0.5 14,988 0.1
EQUITY IN NET LOSS
OF EQUITY METHOD
INVESTEES (159) (16,859) (0.1) (29,277) (0.2)
-------------------- ----------
NET INCOME 1,873 198,477 1.2 2,906,644 17.8
---------------------------------------------------------------------
---------------------------------------------------------------------
Three Months Ended Three Months Ended
September 30, 2008 September 30, 2007
---------------------------------------------------------------------
NET INCOME PER SHARE
BASIC
WEIGHTED-AVERAGE
NUMBER OF SHARES
(shares) 206,478 206,478
DILUTED
WEIGHTED-AVERAGE
NUMBER OF SHARES
(shares) 206,478 206,603
BASIC
WEIGHTED-AVERAGE
NUMBER OF ADS
EQUIVALENTS (ADSs) 82,591,200 82,591,200
DILUTED
WEIGHTED-AVERAGE
NUMBER OF ADS
EQUIVALENTS (ADSs) 82,591,200 82,641,071
BASIC NET INCOME
PER SHARE
(U.S. Dollars /
JPY / JPY) 9.07 961 14,077
DILUTED NET INCOME
PER SHARE (U.S.
Dollars / JPY / JPY) 9.07 961 14,069
BASIC NET INCOME
PER ADS EQUIVALENT
(U.S. Dollars /
JPY / JPY) 0.02 2.40 35.19
DILUTED NET INCOME
PER ADS EQUIVALENT
(U.S. Dollars /
JPY / JPY) 0.02 2.40 35.17
---------------------------------------------------------------------
(Note 1) The U.S. dollar amounts represent translations of yen
amounts at the rate of JPY 105.94 which was the noon buying
rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal
Reserve Bank of New York prevailing as of September 30, 2008.
(Note 2) The above presentation for the quarter ended September 30,
2007 has been changed to conform to the current quarter (the
quarter ended September 30, 2008) presentation.
Internet Initiative Japan Inc.
------------------------------
Quarterly Consolidated Statements of Cash Flows (Unaudited)
-----------------------------------------------------------
(For the quarter ended September 30, 2008 and September 30, 2007)
--------------------------------------------------------------------
Three Months Three Months
Ended Ended
Sept. 30, 2008 Sept. 30, 2007
--------------------- --------------
Thousands
of Thousands Thousands
U.S. of of
Dollars JPY JPY
--------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income 1,873 198,477 2,906,644
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 12,783 1,354,192 1,191,050
Provision for retirement and
pension costs, less payments 540 57,227 37,309
Provision for (reversal of)
allowance for doubtful
accounts and advances 73 7,699 (741)
Loss on disposal of property
and equipment 57 6,040 4,896
Losses on write-down of
other investments 507 53,701 92,127
Foreign exchange losses 18 1,946 711
Equity in net loss of equity
method investees 159 16,859 29,277
Minority interests in losses
of subsidiaries (800) (84,766) (14,988)
Deferred income tax
expense (benefit) 2,372 251,271 (2,113,684)
Others 16 1,707 366
Changes in operating assets
and liabilities
Increase in accounts
receivable (11,183) (1,184,692) (1,163,314)
Decrease in inventories,
prepaid expenses and other
current and noncurrent
assets 5,031 533,012 918,460
Increase in accounts
payable 5,411 573,285 123,717
Increase (decrease) in
accrued expenses, other
current and
noncurrent liabilities 1,896 200,796 (567,524)
--------------------------------------------------------------------
Net cash provided by
operating activities 18,753 1,986,754 1,444,306
--------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of property
and equipment (9,250) (979,895) (421,969)
Investment in equity
method investee -- -- (250,389)
Purchase of available-for-sale
securities (944) (99,992) (226,286)
Purchase of short-term and
other investments (1,126) (119,263) (152)
Proceeds from sales of
available-for-sale securities -- -- 71,000
Proceeds from sales and
redemption of short-term and
other investments 64 6,728 3,441
Payments of guarantee deposits (131) (13,855) (3,754)
Refund of guarantee deposits 19 1,965 8,031
Payments for refundable
insurance policies (120) (12,676) (12,357)
Refund from insurance policies 70 7,382 --
Other (0) (52) --
--------------------------------------------------------------------
Net cash used in
investing activities (11,418) (1,209,658) (832,435)
--------------------------------------------------------------------
--------------------------------------------------------------------
Three Months Three Months
Ended Ended
Sept. 30, 2008 Sept. 30, 2007
--------------------- --------------
Thousands
of Thousands Thousands
U.S. of of
Dollars JPY JPY
--------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from issuance of
short-term borrowings with
initial maturities over
three months 2,832 300,000 100,000
Repayments of short-term
borrowings with initial
maturities over three months
and long-term borrowings (4,955) (525,000) (1,769,000)
Principal payments under
capital leases (8,542) (904,912) (883,124)
Net increase (decrease) in
short-term borrowings with
initial maturities less than
three months (2,596) (275,000) 1,000,000
--------------------------------------------------------------------
Net cash used in financing
activities (13,261) (1,404,912) (1,552,124)
--------------------------------------------------------------------
EFFECT OF EXCHANGE RATE
CHANGES ON CASH AND
CASH EQUIVALENTS 36 3,846 12,181
NET DECREASE IN CASH AND
CASH EQUIVALENTS (5,890) (623,970) (928,072)
CASH AND CASH EQUIVALENTS,
BEGINNING OF THE PERIOD 93,857 9,943,205 12,597,948
--------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
END OF THE PERIOD 87,967 9,319,235 11,669,876
--------------------------------------------------------------------
(Note 1) The U.S. dollar amounts represent translations of yen
amounts at the rate of JPY 105.94 which was the noon buying
rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal
Reserve Bank of New York prevailing as of September 30,
2008.
(Note 2) The above presentation for the quarter ended September 30,
2007 has been changed to conform to the current quarter (the
quarter ended September 30, 2008) presentation.
Note: The following information is provided to disclose IIJ's financial results (unaudited) for the six months ended September 30, 2008 in the form defined by the Tokyo Stock Exchange.
Consolidated Financial Results for the Six Months Ended
September 30, 2008 ("1H FY2008")
(Under accounting principles generally accepted in
the United States ("U.S. GAAP"))
(Amounts of less than JPY one million are rounded)
1. Consolidated Financial Results for the Six Months
Ended September 30, 2008
(April 1, 2008 to September 30, 2008)
(1) Consolidated Results of Operations (% shown is YoY change)
---------------------------------------------------------------------
Income
before
Income
Tax
Total Operating Expense Net
Revenues Income (Benefit) Income
---------------------------------------------------------------------
JPY JPY JPY JPY
millions % millions % millions % millions %
Six months
ended
September
30, 2008 33,254 -- 1,005 -- 766 -- 368 --
---------------------------------------------------------------------
Six months
ended
September
30, 2007 29,990 13.4 1,816 32.5 1,697 (20.8) 3,477 21.8
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic Net Diluted Net
Income per Share Income per Share
---------------------------------------------------------------------
JPY JPY
Six months ended
September 30, 2008 1,780.11 1,779.60
---------------------------------------------------------------------
Six months ended
September 30, 2007 16,880.42 16,861.92
---------------------------------------------------------------------
(Note) In this document, income before income tax expense (benefit)
represents income from operations before income tax expense
(benefit), minority interests and equity in net loss of equity
method investees in IIJ's consolidated financial statements
for the six months ended September 30, 2008.
(2) Consolidated Financial Position
---------------------------------------------------------------------
Shareholders'
Equity as a Shareholders'
Shareholders' percentage of Equity
Total Assets Equity Total Assets per share
---------------------------------------------------------------------
JPY millions JPY millions % JPY
Six months
ended
September
30, 2008 53,275 24,979 46.9 120,977.62
---------------------------------------------------------------------
Six months
ended
September
30, 2007 55,703 24,981 44.8 120,985.87
---------------------------------------------------------------------
(Note) Shareholders' equity, shareholders' equity as a percentage of
total assets and shareholders' equity per share are calculated
and presented in accordance with U.S. GAAP.
2. Dividends
---------------------------------------------------------------------
Dividend per Share
---------------------------------------------------------------------
End End End
of the of the of the
first second third
quarter quarter quarter Year-end Total
---------------------------------------------------------------------
Yen Yen Yen Yen Yen
Fiscal Year
Ended March
31, 2008 -- 750.00 -- 1,000.00 1,750.00
---------------------------------------------------------------------
Fiscal Year
Ending March
31, 2009 -- 1,000.00 -- -- --
---------------------------------------------------------------------
Fiscal Year
Ending March
31, 2009
(Target) -- -- -- 1,000.00 2,000.00
---------------------------------------------------------------------
(Note) Scheduled revision to dividends during the six months ended
September 30, 2008: None
3. Target of Consolidated Financial Results for the Fiscal Year
Ending March 31, 2009
(April 1, 2008 through March 31, 2009) (% shown is YoY change)
---------------------------------------------------------------------
Income
before Basic
Income Net
Tax Income
Total Operating Expense Net per
Revenues Income (Benefit) Income share
---------------------------------------------------------------------
JPY JPY JPY JPY JPY
millions % millions % millions % millions %
Fiscal
year
ending
March
31,
2009 73,000 9.2 3,800 (20.2) 3,000 (31.2) 2,800 (45.9) 13,560.77
---------------------------------------------------------------------
(Note) Changes in target for year-end consolidated financial results
for the fiscal year ending March 31, 2009: No
4. Others
(1) Change of Condition in Consolidated Subsidiaries during the Six
Months Ended September 30, 2008 (Change of Condition in Specific
Consolidated Subsidiaries with a Change of Scope of
Consolidation): None
(2) Applicaton of Simplified Accounting Method or Specific
Accounting Principles for the preparation of
Shihanki-hokokusho: None
(3) Changes in Significant Accounting and Reporting Policies for
Consolidated Financial Statements
1) Changes caused by revision of accounting standards: Yes
2) Others: Yes
(note) From 1Q08, "Value-added Service Revenues ("VAS")"
and "Other Revenues" of "Connectivity and VAS
revenues" have been renamed to "Outsourcing
Services". Related to this change, "Connectivity
and VAS revenues" has been renamed to "Connectivity
and Outsourcing Services revenues".
(4) Number of Shares Outstanding (Shares of Common Stock)
1) The number of shares outstanding:
For the Six Months Ended September 30, 2008 206,478 shares
For the Fiscal Year Ended March 31, 2008 206,478 shares
2) The number of treasury stock:
For the Six Months Ended September 30, 2008 0 shares
For the Fiscal Year Ended March 31, 2008 0 shares
3) The weighted average number of shares outstanding:
For the Six Months Ended September 30, 2008 206,478 shares
For the Six Months Ended September 30, 2007 206,002 shares