TOKYO, Aug. 11, 2009 (GLOBE NEWSWIRE) -- Internet Initiative Japan Inc. (Nasdaq:IIJI) (TSE1:3774) ("IIJ") today announced its consolidated financial results for the three months ended June 30, 2009 ("1Q09").(1)
Highlights of First Quarter FY2009 Financial Results
* Revenue was JPY15,835 million ($164 million), down 3.0% YoY. While recurring revenues increased YoY, systems construction revenue decreased as a result of the weak IT related investments in Japan. * Operating income was JPY351 million ($4 million), down 14.7% YoY due to increase in operating loss related to our new ATM operation business of JPY165 million YoY, while operating income from connectivity and outsourcing service and SI increased 21.9% YoY to JPY584 million. * Net income attributable to IIJ(2) was JPY180 million ($2 million), up 6.7% YoY.
Overview of 1st Quarter FY2009 Financial Results and Business Outlook
"In an economic environment that continues to remain challenging, our operating income was above our original target largely because operating income from connectivity and outsourcing service and SI increased along with the increase in recurring revenues and the continuous tight cost control, while operating loss related to our ATM operation business increased as it is still in its course of business start up," said Koichi Suzuki, President and CEO of IIJ.
"As for the situation of our recurring revenue (87.7% of our 1Q09 total revenue), while it increased by 6.4% YoY, it dropped by 1.0% compared to 4Q08. There were price pressures which are common in the beginning of the fiscal year with corporate trying to reduce their running cost. However, we believe it will increase in the following quarters, especially because corporate needs for cost reduction are a following wind toward our outsourcing services. Security related services such as SMX service or anti-DDoS service are also expected to grow because companies must prevent their network from getting attacked. Needs for reliable and stable connectivity services also remain strong. Connectivity of over 1Gbps has been increasing quarter by quarter and we believe this trend will continue.
"As for SI, although anticipated, our systems construction revenue decreased by 40.6% YoY. Corporate customers are withholding their investments due to the sudden change in economy from the latter half of FY2008. Yet we see some light towards its recovery compared to when the economy was at a halt during last fiscal year. While we strive to receive orders, we will continue with our resolute operation for tight cost control through the rest of the fiscal year and increase SI gross margin.
"For our mid-term growth, we'll continuously introduce new services, which we believe will result in strengthening the basis of our business. In July 2009, we've introduced a new service brand 'LaIT' which offers reliable but affordable services packed with our technology to mid- to small-sized enterprises. We are also preparing the launch of cloud computing related services and additional features for our services such as IIJ Mobile service, email related services and VPN services.
"We hope that these new service developments will contribute to the innovation of the internet, as well as strengthening the basis of our business growth and lead to revenue growth."
1st Quarter FY2009 Financial Results Summary
Operating Results Summary
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1Q08 1Q09 YoY %
change
---------------------------------------------------------------------
JPY JPY
millions millions
Total Revenues 16,328 15,835 (3.0%)
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Connectivity and Outsourcing Services 8,396 9,126 8.7%
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SI 7,689 6,565 (14.6%)
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Equipment Sales 238 137 (42.6%)
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ATM Operation Business 5 7 54.3%
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Total Costs 13,303 12,837 (3.5%)
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Connectivity and Outsourcing Services 7,065 7,650 8.3%
---------------------------------------------------------------------
SI 6,024 4,876 (19.1%)
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Equipment Sales 199 119 (40.2%)
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ATM Operation Business 15 192 1,206.2%
---------------------------------------------------------------------
SG&A Expenses and R&D 2,614 2,647 1.3%
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Operating Income 411 351 (14.7%)
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Income before Income Tax Expense 310 300 (3.1%)
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Net income attributable to IIJ 169 180 6.7%
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Segment Summary
---------------------------------------------------------------------
1Q08 1Q09
---------------------------------------------------------------------
JPY JPY
millions millions
Net Revenues 16,328 15,835
---------------------------------------------------------------------
Network services and SI business 16,342 15,922
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ATM operation business 5 7
---------------------------------------------------------------------
Elimination 19 94
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Operating Income (Loss) 411 351
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Network service and SI business 484 589
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ATM operation business (69) (233)
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Elimination 4 5
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We have omitted segment analysis because most of our revenues are dominated by Network services and systems integration business.
1st Quarter FY2009 Results of Operation
Revenues
Revenues were JPY15,835 million, a decrease of 3.0% YoY.
Connectivity and Outsourcing Services revenue were JPY9,126 million, up 8.7% YoY. Connectivity service increased by 9.4% YoY to JPY5,146 million and outsourcing service increased by 7.8% YoY to JPY3,980 million. Connectivity service for corporate use grew followed by the steady increase in the use of broadband connectivity, especially connectivity of over 1Gbps and strong demands for IIJ Mobile Service. Contracts of over 1Gbps increased by 30 contracts YoY and total contracted bandwidth increased. Connectivity services for home use also grew YoY followed by the growth in mobile data communication service which was launched in Dec. 2008 and by the shift towards optical line services which charge higher monthly fees. Outsourcing service also increased followed by the steady demands for email security related services and network related services such as IIJ SMF service.
SI revenues were JPY6,565 million, down 14.6% YoY. Systems construction revenue, a one-time revenue, decreased by 40.6% YoY as Japanese companies are very careful towards new investments. The budget system in Japan, of which many ends in March, had also affected the weak systems construction revenues. Systems operation and maintenance, a recurring revenue, was a steady increase of 2.3% YoY.
Order backlog for SI and equipment sales as of June 30, 2009 was JPY16,341 million (down 2.9% YoY) compared to JPY16,836 million as of June 30, 2008, and orders received for 1Q09 was JPY8,171 million (down 7.7% YoY.) The order backlog and orders received for systems construction including equipment sales was JPY3,844 million (down 24.3% YoY) compared to JPY5,081 million as of June 30, 2008 and JPY2,921 million (down 18.7% YoY), respectively. The order backlog and orders received for systems operation and maintenance was JPY12,497 million (up 6.3%) compared to JPY11,755 million as of June 30, 2008 and JPY5,250 million (down 0.2% YoY), respectively.
Equipment sales revenues were JPY137 million, down 42.6% YoY (JPY238 million in 1Q08).
ATM Operation Business revenues were JPY7 million compared to JPY5 million in 1Q08. During 1Q09, Trust Networks began placing ATMs in Kansai areas. As of June 30, 2009, Trust Networks operates 26 ATMs.
Cost and expense
Cost of revenues was JPY12,837 million, a decrease of 3.5% YoY (JPY13,303 million in 1Q08).
Cost of Connectivity and Outsourcing Services revenue was JPY7,650 million (JPY7,065 million in 1Q08), an increase of 8.3% YoY largely affected by the increase in network operation related costs. Circuit related costs also increased corresponding with the growth of mobile data communication services. Backbone cost was JPY919 million, up 2.6% YoY. Gross margin was JPY1,475 million (JPY1,331 million in 1Q08), up 10.8% YoY and gross margin ratio was 16.2%.
Cost of SI revenues was JPY4,876 million, a decrease of 19.1% YoY (JPY6,024 million in 1Q08). Purchasing costs decreased along with the decrease in systems construction revenues. Outsourcing related costs also decreased as a result of reduction in full-time outsourcing personnel. Gross margin was JPY1,689 million, up 1.5% YoY (JPY1,665 million in 1Q08) and gross margin ratio was 25.7%.
Cost of Equipment Sales revenues was JPY119 million, a decrease of 40.2% YoY due to the decrease in equipment sales revenues. Gross margin was JPY18 million (JPY39 million in 1Q08) and gross margin ratio was 12.9%.
Cost of ATM Operation Business revenues was JPY192 million compared to JPY15 million in 1Q08 as the ATM operation business has moved on from business start up to business expansion phase.
SG&A Expenses and R&D
Sales and marketing expenses were JPY1,325 million (JPY1,173 million in 1Q08), an increase of 13.0% YoY largely due to the increase in disposal of customer relationship of non-amortized intangible assets. There were also increases in personnel related expenses.
General and administrative expenses were JPY1,245 million (JPY1,383 million in 1Q08), a decrease of 9.9% YoY mainly due to the decrease in outsourcing related expenses and general expenses as a result of tight cost control, especially from the latter half of FY2008.
Research and development expenses were JPY77 million (JPY58 million in 1Q08), an increase of 31.0% YoY as expenses related to IIJ Innovation Institute Inc. increased.
Operating income
Operating income decreased by 14.7% YoY to JPY351 million (JPY411 million in 1Q08). While gross margin for connectivity and outsourcing services and SI increased, operating loss related to ATM operation business increased and SG&A and R&D expenses also increased.
Other income (expenses)
Other income (expenses) was net other expenses of JPY51 million compared to net other expenses of JPY102 million in 1Q08. There were decreases in interest expense and gains in foreign exchange.
Income before income tax expenses
Income before income tax expenses was JPY300 million, a decrease of 3.1% YoY (JPY310 million in 1Q08).
Net Income
Net income was JPY87 million, down 23.3% YoY (JPY114 million in 1Q08).
Income tax expense was JPY244 million compared to JPY213 million in 1Q08. Deferred tax expenses was JPY186 million compared to expenses of JPY127 million in 1Q08.
Equity in net income of equity method investees was JPY32 million compared to JPY18 million in 1Q08.
Net income attributable to IIJ
Net income attributable to IIJ was JPY180 million, up 6.7% YoY (JPY169 million in 1Q08).
Net losses attributable to noncontrolling interests was JPY93 million compared to JPY55 million in 1Q08, both related to GDX Japan Inc. and Trust Networks Inc.
1st Quarter FY2009 Financial Condition
Balance Sheets
As of June 30, 2009, the balance of total assets was JPY50,671 million, a decrease of JPY1,630 million from the balance as of March 31, 2009.
For current assets, as compared to each of the respective balances as of March 31, 2009, accounts receivable decreased by JPY1,724 million and prepaid expenses increased by JPY839 million mainly for bonus payments to our employees and maitenance expenses related to SI projects increased. As for current liabilities, short-term borrowings decreased by JPY200 million and accounts payable decreased by JPY1,291 million, from each of the respective balances as of March 31, 2009.
As of June 30, 2009, we had net deferred tax asset (current) of JPY586 million and net deferred tax asset (non-current) of JPY2,254 million, respectively.
The balance of other investments as of June 30, 2009 was JPY2,125 million, an increase of JPY211 million from the balance as of March 31, 2009. The breakdown of other investments were JPY900 million in available-for-sale securities, JPY861 million in nonmarketable equity securities and JPY364 million in other.
As of June 30, 2009, the balance of non-amortized intangible assets (excluding telephone rights) such as goodwill was JPY5,418 million and the balance of amortized intangible assets were JPY274 million. The breakdown of non-amortized intangible assets were JPY2,639 million in goodwill, JPY2,587 million in customer relationships and JPY192 million in trademark. The breakdown of amortized intangible assets were JPY154 million in customer relationships and JPY119 million in licenses.
Total IIJ shareholders' equity as of June 30, 2009 was JPY25,296 million, an increase of JPY127 million from the balance as of March 31, 2009. IIJ Shareholders' equity ratio (IIJ shareholders' equity/total assets) as of June 30, 2009 was 49.9%, up 1.8% compared to March 31, 2009.
Cash Flows
Cash and cash equivalents as of June 30, 2009 were JPY9,897 million compared to JPY9,943 million as of June 30, 2008.
Net cash provided by operating activities in 1Q09 was JPY2,164 million, compared to net cash provided by operating activities of JPY2,018 million in 1Q08. While operating income was JPY351 million (JPY411 million in 1Q08), a decrease compared to 1Q08, there were changes in operating assets and liabilities during 1Q09, mainly resulting from the decrease in accounts receivable of JPY1,735 million, decrease in inventories, decrease in prepaid expenses and other current and noncurrent assets of JPY501 million, decrease in accounts payable related to on-going SI projects of JPY937 million and payment of JPY208 million in income taxes.
Net cash used in investing activities in 1Q09 was JPY1,105 million, compared to net cash used in investing activities of JPY825 million in 1Q08, mainly due to payment of JPY1,094 million for the purchase of property and equipment (JPY768 million in 1Q08).
Net cash used in financing activities in 1Q09 was JPY1,332 million, compared to net cash used in financing activities of JPY2,695 million in 1Q08, mainly due to principal payments under capital leases of JPY930 million (payment of JPY839 million in 1Q08), net repayments of short-term borrowings with initial maturities less than three months of JPY200 million (net repayment of JPY1,400 million in 1Q08) and payments of JPY203 million for the year-end dividends for the fiscal year ended March 31, 2009.
Supplemental Information
Number of Contracts for Connectivity Services
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June 30, June 30, YoY
2008 2009 Change
---------------------------------------------------------------------
Connectivity Services
(Corporate Use) 32,939 53,513 20,574
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IP Service (-99Mbps) 854 925 71
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IP Service (100Mbps-999Mbps) 203 227 24
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IP Service (1Gbps-) 72 102 30
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IIJ Data Connectivity Service 286 298 12
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IIJ FiberAccess/F and IIJ DSL/F 24,466 26,274 1,808
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IIJ Mobile Service(3) 5,399 24,201 18,802
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Others 1,659 1,486 (173)
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Connectivity Services (Home Use) 467,453 428,171 (39,282)
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Under IIJ Brand 49,279 48,053 (1,226)
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hi-ho 188,575 176,225 (12,350)
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OEM 229,599 203,893 (25,706)
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Total Contracted Bandwidth 422.1Gbps 584.7Gbps 162.6Gbps
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Connectivity and Outsourcing Services Revenues Breakdown
---------------------------------------------------------------------
1Q08 1Q09 YoY %
change
---------------------------------------------------------------------
JPY JPY
millions millions
Connectivity Service (Corporate Use) 3,110 3,448 10.9%
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IP Service(4) 2,270 2,347 3.4%
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IIJ FiberAccess/F and IIJ DSL/F 713 726 1.9%
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IIJ Mobile Service(5) 36 299 719.7%
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Others 91 76 (15.6%)
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Connectivity Service (Home Use) 1,596 1,698 6.4%
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Under IIJ Brand 257 253 (2.0%)
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hi-ho 1,203 1,302 8.3%
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OEM 136 143 5.5%
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Outsourcing Services 3,690 3,980 7.8%
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Total Connectivity and Outsourcing
Services 8,396 9,126 8.7%
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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
---------------------------------------------------------------------
1Q08 1Q09
---------------------------------------------------------------------
JPY millions JPY millions
Adjusted EBITDA 1,656 1,711
---------------------------------------------------------------------
Depreciation and Amortization 1,245 1,360
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Operating Income 411 351
---------------------------------------------------------------------
Other Income (Expense) (102) (51)
---------------------------------------------------------------------
Income Tax Expense 213 244
---------------------------------------------------------------------
Equity in Net Income (Loss of Equity
Method Investees 18 31
---------------------------------------------------------------------
Net income 114 87
---------------------------------------------------------------------
Net income attributable to
noncontrolling interests 55 93
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Net Income attributable to IIJ 169 180
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CAPEX
---------------------------------------------------------------------
1Q08 1Q09
---------------------------------------------------------------------
JPY millions JPY millions
CAPEX, including capital leases 1,831 1,489
---------------------------------------------------------------------
Acquisition of Assets by Entering into
Capital Leases 1,063 395
---------------------------------------------------------------------
Purchase of Property and Equipment 768 1,094
---------------------------------------------------------------------
Changes in accounting principles, procedures and disclosures in quarterly consolidated financial statements
Business Combinations
Effective April 1, 2009, IIJ adopted Statement of Financial Accounting Standards ("SFAS") No. 141 (revised 2007) "Business Combinations" ("SFAS No. 141 R"). SFAS No. 141R requires an acquirer in a business combination to generally recognize and measure all the identifiable assets acquired, the liabilities assumed, goodwill and any noncontrolling interest in the acquiree at their fair values as of the acquisition date. Also, SFAS 141R requires several new disclosure requirements that enable users of the financial statements to evaluate the nature and financial effects of the business combination. Also in April 2009, the FASB issued FASB Staff Positions ("FSP") No. FAS 141R-1, "Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies". No. FAS 141R-1 addresses the initial recognition, measurement and subsequent accounting for assets and liabilities arising from contingencies in a business combination, and requires that such assets acquired or liabilities assumed be initially recognized at fair value at the acquisition date if fair value can be determined during the measurement period. The adoption of SFAS No. 141 R and FSP No. FAS 141R-1 did not have any impact on IIJ's results of operations and financial position as there were no business combinations during the three months ended June 30, 2009, however the impact in the future would depend on the size and the detail of the business combination.
Noncontrolling Interests in Consolidated Financial Statements
Effective April 1, 2009, IIJ adopted SFAS No. 160 "Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No 51." SFAS No. 160 requires noncontrolling interest held by parties other than the parent be clearly identified, labeled and presented in the consolidated statement of financial position within equity, but separate from the parent's equity. SFAS No. 160 also requires changes in parent's ownership interest while the parent retains its controlling financial interest in its subsidiary and be accounted for as equity transactions. Upon the adoption of AFAS No. 160, "Noncontrolling interests," which were previously referred to as "Minority interests" and classified between "Total liabilities" and "Shareholders' equity" in the consolidated balance sheets, are now included as a separate component of "Equity." In addition, "Net income" in the consolidated statements of income now includes net income attributable to noncontrolling interests, which was previously referred to as "Minority interests" and deducted. As a result, the adoption of SFAS No. 160 changed the presentation and disclosure of noncontrolling interest in the consolidated financial statements retrospectively, but did not have a material impact on IIJ's results of operations and financial position.
Presentation
Presentation Materials will be posted on our web site (http://www.iij.ad.jp/en/IR/) on May 15, 2009.
About Internet Initiative Japan Inc.
Founded in 1992, IIJ is one of Japan's leading Internet-access and comprehensive network solutions providers. IIJ and its group of companies provide total network solutions that mainly cater to high-end corporate customers. IIJ's services include high-quality systems integration and security services, Internet access, hosting/housing, and content design. Moreover, IIJ has built one of the largest Internet backbone networks in Japan, and between Japan and the United States. IIJ was listed on the U.S. NASDAQ Stock Market in 1999 and on the First Section of the Tokyo Stock Exchange in 2006.
The Internet Initiative Japan Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4613
For inquiries, contact:
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.
(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 translation
of Japanese yen into U.S. dollars is solely for the convenience
of readers outside of Japan. The rate used for the translation
was JPY96.42 per US$1.00, which was the noon buying rate on June
30, 2009.
(2) Effective April 1, 2009, we have adopted SFAS No. 160,
"Noncontrolling Interests in Consolidated Financial Statements -
an amendment of ARB No. 51." For details, please refer to page 6
in this presentation material.
(3) Contracts for mobile data communication service for home use is
included in Connectivity service (home use).
(4) IP Service revenues include revenues from the Data Center
Connectivity Service.
(5) Revenue from mobile data communication service for home use is
included in Connectivity service (home use).
Internet Initiative Japan Inc.
------------------------------
Quartely Consolidated Balance Sheets (Unaudited)
------------------------------------------------
(As of March 31, 2009 and June 30, 2009)
As of March 31, As of June 30,
2009 2009
---------------- --------------------------
Thousands
Thousands of U.S. Thousands
of JPY % Dollars of JPY %
---------- ---- -------- ---------- ----
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents 10,187,724 102,649 9,897,436
Accounts receivable, net
of allowance for
doubtful accounts of
JPY 22,072 thousand and
JPY 14,788 thousand at
March 31, 2009 and June
30, 2009, respectively 10,256,527 88,489 8,532,066
Inventories 529,756 5,556 535,764
Prepaid expenses 1,771,955 27,081 2,611,173
Other current assets,
net of allowance for
doubtful accounts of
JPY 11,720 thousand and
JPY 10,120 thousand at
March 31, 2009 and June
30, 2009, respectively 1,610,807 13,695 1,320,462
---------- -------- ----------
Total current assets 24,356,769 46.6 237,470 22,896,901 45.2
---------- -------- ----------
INVESTMENTS IN EQUITY
METHOD INVESTEES 947,626 1.8 10,149 978,512 1.9
OTHER INVESTMENTS 1,914,594 3.7 22,044 2,125,487 4.2
PROPERTY AND EQUIPMENT,
net of accumulated
depreciation and
amortization of JPY
16,444,517 thousand and
JPY 17,260,967 thousand
at March 31, 2009 and
June 30, 2009,
respectively 13,172,891 25.2 135,961 13,109,350 25.9
GOODWILL 2,639,319 5.0 27,373 2,639,319 5.2
OTHER INTANGIBLE ASSETS
--Net 3,201,806 6.1 31,755 3,061,818 6.0
GUARANTEE DEPOSITS 2,072,652 4.0 21,853 2,107,052 4.2
OTHER ASSETS, net of
allowance for doubtful
accounts of JPY 72,800
thousand and JPY 76,344
thousand at March 31,
2009 and June 30 2009,
respectively, and net of
loan loss valuation
allowance of JPY 16,701
thousand at March 31,
2009 and June 30 2009,
respectively 3,995,542 7.6 38,917 3,752,363 7.4
---------- -------- ----------
TOTAL 52,301,199 100.0 525,522 50,670,802 100.0
---------- -------- ----------
As of March 31, As of June 30,
2009 2009
---------------- --------------------------
Thousands
Thousands of U.S. Thousands
of JPY % Dollars of JPY %
---------- ---- -------- ---------- ----
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings 7,350,000 74,155 7,150,000
Capital lease
obligations
--current portion 3,272,257 33,002 3,182,099
Accounts payable 6,064,829 49,513 4,774,081
Accrued expenses 1,069,310 12,038 1,160,703
Accrued retirement and
pension costs --current 11,959 124 11,959
Deferred income 1,255,749 13,255 1,278,018
Other current
liabilities 763,544 8,775 846,049
---------- -------- ----------
Total current
liabilities 19,787,648 37.8 190,862 18,402,909 36.3
---------- -------- ----------
CAPITAL LEASE OBLIGATIONS
--Noncurrent 4,866,120 9.3 45,911 4,426,767 8.7
ACCRUED RETIREMENT AND
PENSION COSTS --
Noncurrent 1,399,592 2.7 15,124 1,458,274 2.9
OTHER NONCURRENT
LIABILITIES 1,004,920 1.9 10,539 1,016,107 2.0
---------- -------- ----------
Total Liabilities 27,058,280 51.7 262,436 25,304,057 49.9
---------- -------- ----------
COMMITMENTS AND
CONTINGENCIES
SHAREHOLDERS' EQUITY:
INTERNET INITIATIVE JAPAN
INC. SHAREHOLDERS'
EQUITY:
Common-stock--
authorized, 377,600
shares; issued and
outstanding, 206,478
shares at March 31,
2009 and June 30,
2009, respectively 16,833,847 32.2 174,589 16,833,847 33.2
Additional paid-in
capital 27,611,737 52.8 285,437 27,521,819 54.3
Accumulated deficit (18,549,142)(35.5)(192,607)(18,571,208)(36.7)
Accumulated other
comprehensive loss (320,711) (0.6) (848) (81,767) (0.1)
Treasury stock--3,934
shares held by the
company at March 31,
2009 and June 30,
2009, respectively (406,547) (0.8) (4,217) (406,547) (0.8)
---------- -------- ----------
Total Internet
Initiative Japan
Inc. shareholders'
equity 25,169,184 48.1 262,354 25,296,144 49.9
---------- -------- ----------
NONCONTROLLING INTERESTS 73,735 0.2 732 70,601 0.2
---------- -------- ----------
Total equity 25,242,919 48.3 263,086 25,366,745 50.1
---------- -------- ----------
TOTAL 52,301,199 100.0 525,522 50,670,802 100.0
---------- -------- ----------
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(Note 1) The U.S. dollar amounts represent translations of yen
amounts at the rate of JPY 96.42 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 June 30, 2009.
(Note 2) The above presentation as of March 31, 2009 has been
changed to conform to the presentation as of June 30, 2009.
Internet Initiative Japan Inc.
------------------------------
Quartely Consolidated Statements of Income (Unaudited)
------------------------------------------------------
(For the three months ended June 30, 2008 and June 30, 2009)
Three Months Ended Three Months Ended
June 30, 2008 June 30, 2009
------------------ ---------------------------
% of Thousands % of
Thousands total of U.S. Thousands total
of JPY revenues Dollars of JPY revenues
----------- ------- --------- ---------- -------
REVENUES:
Connectivity and
outsourcing services:
Connectivity
(corporate use) 3,109,754 35,765 3,448,493
Connectivity
(home use) 1,596,203 17,610 1,697,894
Outsourcing
services 3,690,496 41,272 3,979,443
----------- --------- ----------
Total 8,396,453 94,647 9,125,830
----------- --------- ----------
Systems integration:
Systems Construction 3,035,748 18,706 1,803,635
Systems Operation
and Maintenance 4,653,076 49,378 4,761,011
----------- --------- ----------
Total 7,688,824 68,084 6,564,646
----------- --------- ----------
Equipment sales 238,021 1,416 136,575
ATM operation
business 4,835 77 7,459
----------- --------- ----------
Total revenues 16,328,133 100.0 164,224 15,834,510 100.0
----------- --------- ----------
COST AND EXPENSES:
Cost of connectivity
and outsourcing
services 7,065,072 79,346 7,650,504
Cost of systems
integration 6,024,237 50,568 4,875,725
Cost of equipment
sales 198,926 1,233 118,927
Cost of ATM operation
business 14,681 1,989 191,769
----------- --------- ----------
Total cost 13,302,916 81.5 133,136 12,836,925 81.1
----------- --------- ----------
Sales and marketing 1,172,726 7.2 13,740 1,324,880 8.4
General and
administrative 1,382,708 8.5 12,914 1,245,145 7.9
Research and
development 58,521 0.3 795 76,682 0.4
Total cost and ----------- --------- ----------
expenses 15,916,871 97.5 160,585 15,483,632 97.8
----------- --------- ----------
OPERATING INCOME 411,262 2.5 3,639 350,878 2.2
----------- --------- ----------
OTHER INCOME (EXPENSE):
Interest income 7,956 59 5,714
Interest expense (106,203) (902) (87,024)
Foreign exchange
gains (losses) (2,403) 100 9,663
Losses on write-down
of other investments (7,391) (16) (1,504)
Other--net 6,350 230 22,129
----------- --------- ----------
Other expense -- net (101,691) (0.6) (529) (51,022) (0.3)
----------- --------- ----------
INCOME FROM OPERATIONS
BEFORE INCOME TAX
EXPENSE AND EQUITY IN
NET INCOME IN EQUITY
METHOD INVESTEES 309,571 1.9 3,110 299,856 1.9
----------- --------- ----------
INCOME TAX EXPENSE 213,215 1.3 2,530 243,943 1.5
EQUITY IN NET INCOME OF
EQUITY METHOD
INVESTEES 17,694 0.1 327 31,513 0.2
----------- --------- ----------
NET INCOME 114,050 0.7 907 87,426 0.6
----------- --------- ----------
LESS: NET LOSS
ATTRIBUTABLE TO
NONCONTROLLING
INTERESTS 55,027 0.3 965 93,052 0.5
----------- --------- ----------
NET INCOME ATTRIBUTABLE
TO INTERNET INITIATIVE
JAPAN INC 169,077 1.0 1,872 180,478 1.1
----------- --------- ----------
Three Months
Ended Three Months Ended
June 30, 2008 June 30, 2009
------------- ------------------
NET INCOME PER SHARE (ADS)
BASIC WEIGHTED-AVERAGE NUMBER OF
SHARES (shares) 206,478 202,544
DILUTED WEIGHTED-AVERAGE NUMBER
OF SHARES (shares) 206,598 202,544
BASIC WEIGHTED-AVERAGE NUMBER OF
ADS EQUIVALENTS (ADSs) 82,591,200 81,017,600
DILUTED WEIGHTED-AVERAGE NUMBER
OF ADS EQUIVALENTS (ADSs) 82,639,332 81,017,600
BASIC NET INCOME ATTRIBUTABLE
TO INTERNET INITIATIVE JAPAN INC.
PER SHARE (JPY / U.S. Dollars
/ JPY) 818.86 9.24 891.06
DILUTED NET INCOME ATTRIBUTABLE
TO INTERNET INITIATIVE JAPAN INC.
PER SHARE (JPY / U.S. Dollars
/ JPY) 818.39 9.24 891.06
BASIC NET INCOME ATTRIBUTABLE
TO INTERNET INITIATIVE JAPAN INC.
PER ADS (JPY / U.S. Dollars
/ JPY) 2.05 0.02 2.23
DILUTED NET INCOME ATTRIBUTABLE
TO INTERNET INITIATIVE JAPAN INC.
PER ADS (JPY / U.S. Dollars
/ JPY) 2.05 0.02 2.23
---------------------------------------------------------------------
(Note1) The U.S. dollar amounts represent translations of yen
amounts at the rate of JPY 96.42 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
June 30, 2009.
(Note2) The above presentation for the three months ended June
30, 2008 has been changed to conform to the presentation
for the three months ended June 30, 2009.
Internet Initiative Japan Inc.
------------------------------
Quartely Consolidated Statements of Cash Flows (Unaudited)
----------------------------------------------------------
(For the three months ended June 30, 2008 and June 30, 2009)
Three Months
Ended June 30, Three Months
2008 Ended June 30, 2009
-------------------------------------
Thousands Thousands of Thousands
of JPY U.S. Dollars of JPY
---------------------------------------------------------------------
OPERATING ACTIVITIES:
Net Income 114,050 906 87,426
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 1,244,913 14,103 1,359,820
Provision for retirement
and pension costs,
less payments 72,256 609 58,682
Provision for (reversal
of) allowance for doubtful
accounts and advances 692 (52) (5,049)
Loss on disposal of
property and equipment 29,688 93 8,965
Losses on write-down of
other investments 7,391 16 1,504
Foreign exchange losses 6,921 123 11,918
Equity in net (income)
loss of equity method
investees (net of dividend) 12,686 (327) (31,513)
Deferred income tax expense 126,712 1,929 185,982
Changes in operating assets
and liabilities net of
effects from acquisition
of business and a company:
Decrease in accounts
receivable 3,328,373 17,990 1,734,601
Increase in inventories,
prepaid expenses
and other current and
noncurrent assets (832,472) (5,195) (500,933)
Decrease in accounts
payable (1,811,304) (9,713) (936,518)
Decrease in income taxes
payable (331,972) (1,612) (155,467)
Increase in accrued expenses,
other current and
noncurrent liabilities 49,900 3,572 344,462
---------------------------------------------------------------------
Net cash provided by
operating activities 2,017,834 22,442 2,163,880
---------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of property and
equipment (768,077) (11,349) (1,094,298)
Purchase of available-
for-sale securities -- (70) (6,750)
Proceeds from sales and
redemption of short-term and
other investments 5,281 140 13,500
Payments of guarantee
deposits (64,863) (355) (34,229)
Refund of guarantee deposits 15,917 24 2,337
Payments for refundable
insurance policies (12,938) (141) (13,615)
Refund from insurance
policies -- 286 27,613
Other (52) -- --
---------------------------------------------------------------------
Net cash used in investing
activities (824,732) (11,465) (1,105,442)
---------------------------------------------------------------------
Three Months
Ended June 30, Three Months Ended
2008 June 30, 2009
-------------------------------------
Thousands Thousands of Thousands
of JPY U.S. Dollars of JPY
---------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from issuance of
short-term borrowings
with initial maturities
over three months 5,100,000 52,894 5,100,000
Repayments of short-term
borrowings with initial
maturities over three
months and long-term
borrowings (5,350,000) (52,894) (5,100,000)
Principal payments under
capital leases (838,935) (9,641) (929,625)
Net increase (decrease) in
short-term borrowings with
initial maturities less
than three months (1,400,000) (2,074) (200,000)
Dividends paid (206,478) (2,101) (202,544)
---------------------------------------------------------------------
Net cash used in financing
activities (2,695,413) (13,816) (1,332,169)
---------------------------------------------------------------------
EFFECT OF EXCHANGE RATE
CHANGES ON CASH AND CASH
EQUIVALENTS (25,464) (172) (16,557)
NET DECREASE IN CASH AND
CASH EQUIVALENTS (1,527,775) (3,011) (290,288)
CASH AND CASH EQUIVALENTS,
BEGINNING OF THE PERIOD 11,470,980 105,660 10,187,724
---------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
END OF THE PERIOD 9,943,205 102,649 9,897,436
---------------------------------------------------------------------
ADDITIONAL CASH FLOW
INFORMATION:
Interest paid 104,913 988 95,241
Income tax paid 511,927 2,153 207,572
NONCASH INVESTING AND
FINANCING ACTIVITIES:
Acquisition of assets by
entering into capital leases 1,063,149 4,098 395,145
Facilities purchase
liabilities 147,907 3,686 355,442
(Note 1) The U.S. dollar amounts represent translations of yen
amounts at the rate of JPY 96.42 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 June 30, 2009.
(Note 2) The above presentation for the three months ended June
30, 2008 has been changed to conform to the presentation for
the three months ended June 30, 2009.
Going Concern Assumption (Unaudited)
------------------------------------
For the three months ended June 30, 2008
Nothing to be reported.
For the three months ended June 30, 2009
Nothing to be reported.
Segment Information (Unaudited)
-------------------------------
Business Segments:
Revenues:
Three Months Three Months
Ended Ended
June 30, 2008 June 30, 2009
-----------------------------
Thousands of Thousands of
JPY JPY
---------------------------------------------------------------------
Network service and systems integration
business 16,341,901 15,921,322
---------------------------------------------------------------------
Customers 16,323,298 15,827,051
---------------------------------------------------------------------
Intersegment 18,603 94,271
---------------------------------------------------------------------
ATM operation business 4,835 7,459
---------------------------------------------------------------------
Customers 4,835 7,459
---------------------------------------------------------------------
Intersegment -- --
---------------------------------------------------------------------
Elimination 18,603 94,271
---------------------------------------------------------------------
Consolidated total 16,328,133 15,834,510
---------------------------------------------------------------------
Segment profit or loss:
Three Months Three Months
Ended Ended
June 30, 2008 June 30, 2009
-----------------------------
Thousands of Thousands of
JPY JPY
---------------------------------------------------------------------
Network service and systems integration
business 484,028 588,834
---------------------------------------------------------------------
ATM operation business (69,350) (232,912)
---------------------------------------------------------------------
Elimination 3,416 5,044
---------------------------------------------------------------------
Consolidated operating income 411,262 350,878
---------------------------------------------------------------------
Substantially all revenues are from customers operating in Japan.
Geographic information is not presented due to immateriality of
revenue attributable to international operations.
Material Changes In Shareholders' Equity (Unaudited)
-----------------------------------------------------
For the three months ended June 30, 2008
Nothing to be reported.
For the three months ended June 30, 2009
Nothing to be reported.
Note: The following information is provided to disclose Internet Initiative Japan Inc. ("IIJ") financial results (unaudited) for the three month ended June 30, 2009 in the form defined by the Tokyo Stock Exchange.
Consolidated Financial Results for the Three Months Ended June 30,
2009 [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 Three months Ended
June 30, 2009
(April 1, 2009 to June 30, 2009)
(1) Consolidated Results of Operations (% shown is YoY change)
---------------------------------------------------------------------
Income before
Income Tax Net Income
Total Operating Expense attributable
Revenues Income (Benefit) to IIJ
---------------------------------------------------------------------
JPY % JPY % JPY % JPY %
millions millions millions millions
Three months
ended June
30, 2009 15,835 (3.0) 351 (14.7) 300 (3.1) 180 6.7
Three months
ended June
30, 2008 16,328 19.2 411 (40.5) 310 (59.1) 169 (70.4)
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic Net Income Diluted Net Income
attributable to IIJ per attributable to IIJ per
Share Share
---------------------------------------------------------------------
JPY JPY
Three months ended June
30, 2009 891.06 891.06
Three months ended June
30, 2008 818.86 818.39
---------------------------------------------------------------------
(Note) Effective April 1, 2009, we adopted SFAS No. 160
"Noncontrolling Interests in Consolidated Financial
Statements - an amendment of ARB No. 51". SFAS No. 160
establishes accounting and reporting standards for the
noncontrolling interest (previously referred to as minority
interests) in a subsidiary and for the deconsolidation of a
subsidiary. According to this, in this document, Income
before income tax expense (benefit) represents income from
operations before income tax expense and equity in net
income in equity method investees in IIJ's consolidated
financial statements. Additionally, Net income attributable
to IIJ is equivalent to net income in the former
presentation materials up to FY2008.
(2) Consolidated Financial Position
---------------------------------------------------------------------
IIJ
Shareholders'
Equity as a
IIJ percentage IIJ
Total Shareholders of Total Shareholders'
Assets Equity Assets per share
---------------------------------------------------------------------
JPY JPY % JPY
millions millions
Three months
ended June
30, 2009 50,671 25,296 49.9 124,892.09
Fiscal year
ended March
31, 2009 52,301 25,169 48.1 124,265.27
---------------------------------------------------------------------
(Note) With the adoption of SFAS No. 160, Shareholders' equity,
shareholders' equity as a percentage of total assets and
shareholders' equity per share were renamed to IIJ
Shareholders' equity, IIJ shareholders' equity as a
percentage of total assets and IIJ shareholders' equity per
share, respectively, from the three months ended June 30,
2009.
2. Dividends
---------------------------------------------------------------------
Dividend per Shares
---------------------------------------------------------------------
1st 2nd 3rd Year-end Total
quarter-end quarter-end quarter-end
---------------------------------------------------------------------
Yen Yen Yen Yen Yen
Fiscal year
ended March
31, 2009 -- 1,000.00 -- 1,000.00 2,000.00
---------------------------------------------------------------------
Fiscal year
ended March
31, 2010 --
---------------------------------------------------------------------
Fiscal year
ending March
31, 2010
(Target) -- 1,000.00 -- 1,000.00 2,000.00
---------------------------------------------------------------------
(Note) Changes to Dividend Target during the three months ended
June 30, 2009: None
3. Target of Consolidated Financial Results for the
Fiscal Year Ending March 31, 2010
(April 1, 2009 through March 31, 2010) (% shown is YoY change)
---------------------------------------------------------------------
Income before
Income Tax
Expense
Total Revenues Operating Income (Benefit)
---------------------------------------------------------------------
JPY % JPY % JPY %
millions millions millions
Interim period
ending
September
30, 2009 33,500 0.7 800 (20.4) 550 (28.2)
Fiscal year
ending
March 31, 73,000 4.7 3,300 13.1 2,700 32.7
2010
---------------------------------------------------------------------
Net income attributable to IIJ:
Interim period ending September 30, 2009: JPY300 million
Fiscal year ending March 31, 2010: JPY1,700 million
Basic net income per share attributable to IIJ shareholders:
Interim period ending September 30, 2009: JPY1,481.16
Fiscal year ending March 31, 2010: JPY8,393.24
(Note 1) Changes to target for year-end consolidated financial
results for the fiscal year ending March 31, 2010: None
4. Others
(1) Change of Condition in Consolidated Subsidiaries during the
Three Months Ended June 30, 2009 (Change of Condition in
Specific Consolidated Subsidiaries with a Change of Scope of
Consolidation): None
(2) Application of Simplified Accounting Method or Specific
Accounting Principles for quarterly consolidated financial
statements : None
(3) Changes in Significant Accounting and Reporting Policies for
Consolidated Financial Statements
1) Changes duet to the revision of accounting standards: Yes
2) Others: None
(4) Number of Shares Outstanding (Shares of Common Stock)
1) The number of shares outstanding (inclusive of treasy stock):
As of June 30, 2009: 206,478 shares
As of March 31, 2009: 206,478 shares
2) The number of treasury stock:
As of June 30, 2009: 3,934 shares
As of March 31, 2009: 3,934 shares
3) The weighted average number of shares outstanding:
For the three months ended June 30, 2009: 202,544 shares
For the three months ended June 30, 2008: 205,165 shares