EXHIBIT 99.1
IIJ Announces First Three Months Financial Results for the Fiscal Year Ending March 31, 2011
TOKYO, Aug. 13, 2010 (GLOBE NEWSWIRE) -- Internet Initiative Japan Inc. ("IIJ") (Nasdaq:IIJI) (TSE:3774) today announced its consolidated financial results for the three months ended June 30, 2010 ("1Q10").1
Highlights of First Quarter FY2010 Financial Results
- Revenues were JPY15,813 million ($179 million), down 0.1% YoY. While connectivity and outsourcing services steadily grew, systems integration decreased mainly affected by the scale-down of a contract from a certain large contract.
- Operating income was JP266 million ($3 million), down 24.3% YoY, mainly due to the increase in SG&A expenses. Operating loss related to the ATM operation business decreased to JPY160 million ($2 million).
- Net income attributable to IIJ was JPY247 million ($3 million), up 36.8% YoY.
Overview of 1st Quarter FY2010 Financial Results and Business Outlook
"We are seeing slight recovery in systems construction, however, the Japanese economy is still struggling for full recovery and is difficult to foresee," said Koichi Suzuki, President and CEO of IIJ.
"As for our operating results, connectivity and outsourcing service revenues steadily increased by 2.0% YoY followed by the continuous demands for outsourcing services for cost reduction purposes. For systems integration ("SI"), there were scale-down of a contract from a certain large client for both construction and operation and maintenance. Systems construction revenue increased YOY with carried over projects from 4Q09, systems operation and maintenance decreased YoY. As a result, our revenues were nearly the same as 1Q09. And SG&A expenses increased as there were increases in personnel related and other expenses which increases annually at the beginning of the fiscal year.
"For the coming quarters, we expect connectivity and outsourcing services to grow steadily as continuous demands for bandwidth and outsourcing are anticipated and demands for cloud computing are gradually growing. In addition, we would like to pursue getting more systems construction projects toward the latter half of FY2010, which we hope will increase along with the recovery of the Japanese economy. We aim to complete the transaction to acquire the subsidiary of AT&T Japan LLC on September 1, 2010. We believe this business acquisition will broaden the basis of our business growth.
"We will make sure to do our best to maintain our position as one of the leading total network solution provider in Japan."
| 1st Quarter FY2010 Financial Results Summary | |||
| Operating Results Summary | |||
| 1Q09 | 1Q10 | YoY % change | |
| JPY millions | JPY millions | ||
| Total Revenues | 15,835 | 15,813 | (0.1%) |
| Connectivity and Outsourcing Services | 9,126 | 9,304 | 2.0% |
| SI | 6,565 | 6,259 | (4.7%) |
| Equipment Sales | 137 | 144 | 5.7% |
| ATM Operation Business | 7 | 106 | 1,318.4% |
| Total Costs | 12,837 | 12,788 | (0.4%) |
| Connectivity and Outsourcing Services | 7,650 | 7,647 | 0.0% |
| SI | 4,876 | 4,793 | (1.7%) |
| Equipment Sales | 119 | 119 | 0.3% |
| ATM Operation Business | 192 | 229 | 19.5% |
| SG&A Expenses and R&D | 2,647 | 2,759 | 4.3% |
| Operating Income | 351 | 266 | (24.3%) |
| Income before Income Tax Expense | 300 | 279 | (6.9%) |
| Net income attributable to IIJ | 180 | 247 | 36.8% |
| Segment Summary | ||
| 1Q09 | 1Q10 | |
| JPY millions | JPY millions | |
| Net Revenues | 15,835 | 15,813 |
| Network services and SI business | 15,922 | 15,816 |
| ATM operation business | 7 | 106 |
| Elimination | 94 | 109 |
| Operating Income (Loss) | 351 | 266 |
| Network service and SI business | 589 | 432 |
| ATM operation business | (233) | (160) |
| Elimination | 5 | 6 |
We have omitted segment analysis because most of our revenues are dominated by Network services and systems integration business.
1st Quarter FY2010 Results of Operation
Revenues
Revenues were JPY15,813 million, down 0.1% YoY.
Connectivity and Outsourcing Services revenue were JPY9,304 million, up 2.0% YoY. Connectivity service for corporate use revenue was JPY3,466 million, up 0.5% YoY. While contracts over 1Gbps IP service increased by 21 contracts YoY, there were affects from cancellation due to corporate merger and migration of contracted lines from certain large clients that occurred during FY2009 and decrease in volume charge revenue which occurred in 4Q09. For IIJ mobile service, despite the cancellation from a large client during this first quarter, revenue steadily increased.
Connectivity service for home use revenue was JPY1,694 million, down 0.2% YoY. OEM service revenue decreased as one of our OEM clients terminated their service as planned which resulted in the decrease in our OEM service revenues.
Outsourcing service revenue was JPY4,144 million, up 4.1% YoY. Services such as email related services, services that prevent virus infection through a web browser and data center related services increased, respectively.
| Number of Contracts for Connectivity Services | |||
| as of June 30, 2009 | as of June 30, 2010 | YoY Change | |
| Connectivity Services (Corporate Use) | 53,513 | 64,118 | 10,605 |
| IP Service (-99Mbps) | 925 | 904 | (21) |
| IP Service (100Mbps-999Mbps) | 227 | 269 | 42 |
| IP Service (1Gbps-) | 102 | 123 | 21 |
| IIJ Data Center Connectivity Service | 298 | 301 | 3 |
| IIJ FiberAccess/F and IIJ DSL/F | 26,274 | 28,691 | 2,417 |
| IIJ Mobile Service2 | 24,201 | 32,466 | 8,265 |
| Others | 1,486 | 1,364 | (122) |
| Connectivity Services (Home Use) | 428,171 | 377,612 | (50,559) |
| Under IIJ Brand | 48,053 | 45,790 | (2,263) |
| hi-ho | 176,225 | 163,922 | (12,303) |
| OEM | 203,893 | 167,900 | (35,993) |
| Total Contracted Bandwidth | 584.7 Gbps | 660.9 Gbps | 76.2 Gbps |
| Connectivity and Outsourcing Services Revenues Breakdown | |||
| 1Q09 | 1Q10 | YoY % change | |
| JPY millions | JPY millions | ||
| Connectivity Service (Corporate Use) | 3,448 | 3,466 | 0.5% |
| IP Service3 | 2,347 | 2,238 | (4.7%) |
| IIJ FiberAccess/F and IIJ DSL/F | 726 | 740 | 1.9% |
| IIJ Mobile Service4 | 299 | 422 | 41.1% |
| Others | 76 | 66 | (13.0%) |
| Connectivity Service (Home Use) | 1,698 | 1,694 | (0.2%) |
| Under IIJ Brand | 253 | 257 | 1.7% |
| hi-ho | 1,302 | 1,303 | 0.1% |
| OEM | 143 | 134 | (6.1%) |
| Outsourcing Services | 3,980 | 4,144 | 4.1% |
| Total Connectivity and Outsourcing Services | 9,126 | 9,304 | 2.0% |
SI revenues were JPY6,259 million, down 4.7% YoY. SI transactions during the first quarter are seasonally low and there were scale-down of a contract from a certain large client (decrease of JPY0.6 billion in systems construction revenue and JPY0.7 billion in systems operation and maintenance revenue YoY, respectively). Systems construction revenue, a one-time revenue, was JPY2,011 million, up 11.5% YoY with carried over projects from 4Q09. Systems operation and maintenance, a recurring revenue, was JPY4,248 million, down 10.8% YoY as a result of scale-down in contract from a certain large client.
The order backlog for systems construction and equipment sales was JPY4,580 million, up 19.1% YoY and order backlog for systems operation and maintenance was JPY12,258 million, down 1.9% YoY as of June 30, 2010, respectively.
Equipment sales revenues were JPY144 million, up 5.7% YoY.
ATM Operation Business revenues were JPY106 million.
Cost and expense
Cost of revenues was JPY12,788 million, down 0.4% YoY.
Cost of Connectivity and Outsourcing Services revenue was JPY7,647 million, nearly the same as 1Q09. While personnel related and outsourcing related costs increased, circuit related cost decreased. Gross margin for connectivity and outsourcing service was JPY1,657 million, up 12.3% YoY and gross margin ratio was 17.8%, up 1.6% YoY.
Cost of SI revenues was JPY4,793 million, down 1.7% YoY. While network operation related and outsourcing related costs increased, purchasing cost decreased. Gross margin for SI was JPY1,466 million, down 13.2% YoY and gross margin ratio was 23.4%, down 2.3% YoY.
Cost of Equipment Sales revenues was JPY119 million, up 0.3% YoY. Gross margin for equipment sales was JPY25 million and gross margin ratio was 17.4%, up 4.5% YoY.
Cost of ATM Operation Business revenues was JPY229 million. Outsourcing costs were reduced.
SG&A and R&D Expenses
SG&A and R&D expenses were JPY2,759 million, up 4.3% YoY.
Sales and marketing expenses were JPY1,406 million, up 6.2% YoY mainly due to continuous increase in personnel related expenses.
General and administrative expenses were JPY1,265 million, up 1.6% YoY mainly due to the increase in depreciation expenses.
Research and development expenses were JPY88 million, up 15.1% YoY.
Operating income
Operating income was JPY266 million, down 24.3% YoY. While gross margin was almost the same as 1Q09, there were increases in SG&A and R&D expenses.
Other income (expenses)
Other income (expenses) was net other income of JPY14 million as dividends received and gains on sales of other investments increased and interest expense decreased.
Income before income tax expenses
Income before income tax expenses was JPY279 million, down 6.9% YoY.
Net Income
Income tax expense was JPY120 million. Deferred tax expenses was JPY88 million compared to expense of JPY186 million in 1Q09.
Equity in net income of equity method investees was JPY34 million.
Net income was JPY193 million, up 121.1% YoY.
Net income attributable to IIJ
Net loss attributable to noncontrolling interests was JPY54 million, related to GDX Japan Inc. and Trust Networks Inc.
Net income attributable to IIJ was JPY247 million, up 36.8% YoY.
Full FY2009 Financial Condition
Balance Sheets
As of June 30, 2010, the balance of total assets was JPY50,805 million, a decrease of JPY310 million from the balance as of March 31, 2010.
For current assets, as compared to each of the respective balances as of March 31, 2010, prepaid expense increased by JPY1,426 million, accounts receivables decreased by JPY1,761 million and inventories decreased by JPY169 million. As for current liabilities, as compared to each of the respective balances as of March 31, 2010, deferred income increased by JPY466 million and accounts payable decreased by JPY547 million. Noncurrent capital lease obligations decreased by JPY351 million to JPY3,306 million.
The balance of other investments as of June 30, 2010 was JPY2,642 million, an increase of JPY60 million from the balance as of March 31, 2010. The breakdown of other investments were JPY1,486 million in nonmarketable equity securities, JPY888 million in available-for-sale securities and JPY268 million in other.
As of June 30, 2010, the balance of non-amortized intangible assets (excluding telephone rights) such as goodwill was JPY2,806 million and the balance of amortized intangible assets was JPY2,560 million. The breakdown of non-amortized intangible assets were JPY2,614 million in goodwill and JPY192 million in trademark. The breakdown of amortized intangible assets were JPY2,486 million in customer relationships and JPY74 million in licenses.
Total IIJ shareholders' equity as of June 30, 2010 was JPY27,288 million, a decrease of JPY31 million from the balance as of March 31, 2010. IIJ Shareholders' equity ratio (IIJ shareholders' equity/total assets) as of June 30, 2010 was 53.7%.
Cash Flows
Cash and cash equivalents as of June 30, 2010 were JPY9,137 million compared to JPY9,897 million as of June 30, 2009.
Net cash provided by operating activities for 1Q10 was JPY2,274 million. While operating income was JPY266 million, decreased compared to 1Q09, there were changes in operating assets and liabilities during 1Q09, mainly resulting from the decrease in accounts receivable of JPY1,768 million, increase in inventories, prepaid expenses and other current and noncurrent assets of JPY1,084 million, increase in accrued expenses, other current and noncurrent liabilities of JPY1,085 million and decrease in accounts payable of JPY812 million.
Net cash used in investing activities for 1Q10 was JPY955 million mainly due to purchase of property and equipment of JPY913 million.
Net cash used in financing activities for 1Q10 was JPY928 million mainly due to principal payments under capital leases of JPY745 million and payments of JPY253 million for FY2009 year-end dividends.
FY2010 Financial Targets (announced on June 1, 2010)
Our targets for the fiscal year ending March 31, 2011 are as follows:
| (JPY in millions) | ||||
| Revenues | Operating Income | Income before Income Tax Expense (Benefit) | Net Income attributable to IIJ | |
| 1H FY2010 | 32,300 | 1,200 | 1,100 | 800 |
| Full FY2010 | 84,500 | 4,800 | 4,100 | 3,000 |
Our financial results tend to be weak in the fist quarter of every fiscal year due to seasonal factor. For 1Q10, operating income level slightly decreased YoY as revenue and gross margin were almost the same but SG&A expenses increased as there were annual increases in personnel related and other expenses at the beginning of the fiscal year. Towards 4Q10 when revenue and income level become the largest, we will focus on getting more systems construction projects which we hope will gradually recover and accumulate recurring revenues followed by steady demands while keeping our control costs and expenses at an adequate level.
Considering the above, we have not changed our FY2010 financial targets announced on June 1, 2010.
Reconciliation of Non-GAAP Financial Measures
The following table summarizes the reconciliation of adjusted EBITDA to net income attributable to IIJ in our consolidated statements of income that are prepared in accordance with U.S. GAAP.
| Adjusted EBITDA | ||
| 1Q09 | 1Q10 | |
| JPY millions | JPY millions | |
| Adjusted EBITDA | 1,711 | 1,517 |
| Depreciation and Amortization5 | 1,360 | 1,251 |
| Operating Income | 351 | 266 |
| Other Income (Expense) | (51) | 14 |
| Income Tax Expense | 244 | 121 |
| Equity in Net Income of Equity Method Investees | 31 | 34 |
| Net income | 87 | 193 |
| Net loss attributable to noncontrolling interests | 93 | 54 |
| Net Income attributable to IIJ | 180 | 247 |
| CAPEX | ||
| 1Q09 | 1Q10 | |
| JPY millions | JPY millions | |
| CAPEX, including capital leases | 1,489 | 1,221 |
| Acquisition of Assets by Entering into Capital Leases | 395 | 308 |
| Purchase of Property and Equipment | 1,094 | 913 |
Presentation
Presentation Materials will be posted on our web site (http://www.iij.ad.jp/en/IR/) on August 13, 2010.
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
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 fluc tuations 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.
1Unless 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 JPY88.49 per US$1.00, which was the noon buying rate on June 30, 2010.
2Contracts of IIJ Mobile Service are of mobile data communication service for corporate use.
3IP Service revenues include revenues from the Data Center Connectivity Service.
4Revenue from mobile data communication service for home use is included in Connectivity service (home use).
5Depreciation and amortization includes impairment loss on other intangible assets. (See IIJ's consolidated financial statements for details).
| Internet Initiative Japan Inc. | |||||
| Consolidated Balance Sheets (Unaudited) | |||||
| (As of March 31, 2010 and June 30, 2010) | |||||
| As of March 31, 2010 | As of June 30, 2010 | ||||
| Thousands of JPY | % | Thousands of U.S. Dollars | Thousands of JPY | % | |
| ASSETS | |||||
| CURRENT ASSETS: | |||||
| Cash and cash equivalents | 8,764,415 | 103,256 | 9,137,145 | ||
| Accounts receivable, net of allowance for doubtful accounts of JPY 37,178 thousand and JPY 29,583 thousand at March 31, 2010 and June 30, 2010, respectively | 11,396,597 | 108,884 | 9,635,137 | ||
| Inventories | 807,803 | 7,216 | 638,528 | ||
| Prepaid expenses | 1,593,000 | 34,117 | 3,019,030 | ||
| Deferred tax assets —Current | 1,570,746 | 16,339 | 1,445,824 | ||
Other current assets, net of allowance for doubtful accounts of JPY 720 thousand at March 31, 2010 and June 30, 2010, respectively | 762,081 | 8,530 | 754,808 | ||
| Total current assets | 24,894,642 | 48.7 | 278,342 | 24,630,472 | 48.5 |
| INVESTMENTS IN EQUITY METHOD INVESTEES | 1,131,354 | 2.2 | 13,184 | 1,166,709 | 2.3 |
| OTHER INVESTMENTS | 2,581,610 | 5.1 | 29,854 | 2,641,754 | 5.2 |
| PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization of JPY 17,653,271 thousand and JPY 18,452,419 thousand at March 31, 2010 and June 30, 2010, respectively | 12,970,152 | 25.4 | 149,410 | 13,221,294 | 26.0 |
| GOODWILL | 2,639,319 | 5.2 | 29,544 | 2,614,319 | 5.1 |
| OTHER INTANGIBLE ASSETS —Net | 2,819,187 | 5.5 | 31,201 | 2,761,016 | 5.4 |
| GUARANTEE DEPOSITS | 2,003,862 | 3.9 | 22,675 | 2,006,504 | 4.0 |
| DEFERRED TAX ASSETS —Noncurrent | 685,370 | 1.3 | 6,480 | 573,454 | 1.1 |
| OTHER ASSETS, net of allowance for doubtful accounts of JPY91,319 thousand and JPY88,722 thousand at March 31, 2010 and June 30, 2010, respectively, and net of loan loss valuation allowance of JPY 720 thousand at March 31, 2010 and June 30 2010, respectively | 1,389,954 | 2.7 | 13,446 | 1,189,807 | 2.4 |
| TOTAL | 51,115,450 | 100.0 | 574,136 | 50,805,329 | 100.0 |
| As of March 31, 2010 | As of June 30, 2010 | ||||
| Thousands of JPY | % | Thousands of U.S. Dollars | Thousands of JPY | % | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
| CURRENT LIABILITIES: | |||||
| Short-term borrowings | 4,450,000 | 51,079 | 4,520,000 | ||
| Capital lease obligations —current portion | 2,729,673 | 29,887 | 2,644,694 | ||
| Accounts payable | 6,967,654 | 72,554 | 6,420,305 | ||
| Accrued expenses | 1,184,483 | 14,890 | 1,317,647 | ||
| Accrued retirement and pension costs —current | 14,539 | 165 | 14,539 | ||
| Deferred income —current | 1,445,174 | 21,592 | 1,910,711 | ||
| Other current liabilities | 922,345 | 8,363 | 740,031 | ||
| Total current liabilities | 17,713,868 | 34.7 | 198,530 | 17,567,927 | 34.6 |
| CAPITAL LEASE OBLIGATIONS —Noncurrent | 3,657,657 | 7.2 | 37,363 | 3,306,208 | 6.5 |
| ACCRUED RETIREMENT AND PENSION COSTS —Noncurrent | 1,302,054 | 2.5 | 15,395 | 1,362,297 | 2.7 |
| DEFERRED TAX ASSETS —Noncurrent | 212,773 | 0.4 | 574 | 50,766 | 0.1 |
| DEFERRED INCOME—Noncurrent | 560,677 | 1.1 | 10,768 | 952,856 | 1.8 |
| OTHER NONCURRENT LIABILITIES | 304,718 | 0.6 | 3,238 | 286,563 | 0.6 |
| Total Liabilities | 23,751,747 | 46.5 | 265,868 | 23,526,617 | 46.3 |
| COMMITMENTS AND CONTINGENCIES | |||||
| SHAREHOLDERS' EQUITY: | |||||
| Common-stock—authorized, 377,600 shares; issued and outstanding, 206,478 shares at March 31, 2010 and June 30, 2010 | 16,833,847 | 32.9 | 190,235 | 16,833,847 | 33.1 |
| Additional paid-in capital | 27,443,600 | 53.7 | 310,132 | 27,443,600 | 54.0 |
| Accumulated deficit | (16,720,092) | (32.7) | (189,019) | (16,726,308) | (32.9) |
| Accumulated other comprehensive income | 168,769 | 0.3 | 1,623 | 143,654 | 0.3 |
| Treasury stock—3,934 shares held by the company at March 31, 2010 and June 30, 2010 | (406,547) | (0.8) | (4,594) | (406,547) | (0.8) |
| Total Internet Initiative Japan Inc. shareholders' equity | 27,319,577 | 53.4 | 308,377 | 27,288,246 | 53.7 |
| NONCONTROLLING INTERESTS | 44,126 | 0.1 | (109) | (9,534) | (0.0) |
| Total equity | 27,363,703 | 53.5 | 308,268 | 27,278,712 | 53.7 |
| TOTAL | 51,115,450 | 100.0 | 574,136 | 50,805,329 | 100.0 |
| (Note1) The U.S. dollar amounts represent translations of yen amounts at the rate of JPY 88.49 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, 2010. | |||||
| Internet Initiative Japan Inc. | |||||
| Quarterly Consolidated Statements of Income (Unaudited) | |||||
| (Three Months ended June 30, 2009 and June 30, 2010) | |||||
| Three Months Ended June 30, 2009 | Three Months Ended June 30, 2010 | ||||
| Thousands of JPY | % of total revenues | Thousands of U.S. Dollars | Thousands of JPY | % of total revenues | |
| REVENUES: | |||||
| Connectivity and outsourcing services: | |||||
| Connectivity (corporate use) | 3,448,493 | 39,166 | 3,465,820 | ||
| Connectivity (home use) | 1,697,894 | 19,148 | 1,694,436 | ||
| Outsourcing services | 3,979,443 | 46,828 | 4,143,759 | ||
| Total | 9,125,830 | 105,142 | 9,304,015 | ||
| Systems integration: | |||||
| Systems construction | 1,803,635 | 22,731 | 2,011,495 | ||
| Systems operation and maintenance | 4,761,011 | 48,000 | 4,247,529 | ||
| Total | 6,564,646 | 70,731 | 6,259,024 | ||
| Equipment sales | 136,575 | 1,632 | 144,423 | ||
| ATM operation business | 7,459 | 1,196 | 105,801 | ||
| Total revenues | 15,834,510 | 100.0 | 178,701 | 15,813,263 | 100.0 |
| COST AND EXPENSES: | |||||
| Cost of connectivity and outsourcing services | 7,650,504 | 86,414 | 7,646,798 | ||
| Cost of systems integration | 4,875,725 | 54,163 | 4,792,872 | ||
| Cost of equipment sales | 118,927 | 1,348 | 119,285 | ||
| Cost of ATM operation business | 191,769 | 2,590 | 229,148 | ||
| Total cost | 12,836,925 | 81.1 | 144,515 | 12,788,103 | 80.9 |
| Sales and marketing | 1,324,880 | 8.4 | 15,893 | 1,406,371 | 8.9 |
| General and administrative | 1,245,145 | 7.9 | 14,294 | 1,264,868 | 8.0 |
| Research and development | 76,682 | 0.4 | 997 | 88,242 | 0.5 |
| Total cost and expenses | 15,483,632 | 97.8 | 175,699 | 15,547,584 | 98.3 |
| OPERATING INCOME | 350,878 | 2.2 | 3,002 | 265,679 | 1.7 |
| OTHER INCOME (EXPENSE): | |||||
| Interest income | 5,714 | 63 | 5,568 | ||
| Interest expense | (87,024) | (650) | (57,513) | ||
| Foreign exchange gains (loss) | 9,663 | (36) | (3,173) | ||
| Net gains on sales of other investments | -- | 181 | 16,019 | ||
| Losses on write-down of other investments | (1,504) | (66) | (5,887) | ||
| Other—net | 22,129 | 661 | 58,489 | ||
| Other income (expense) — net | (51,022) | (0.3) | 153 | 13,503 | 0.1 |
| INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY IN NET INCOME IN EQUITY METHOD INVESTEES | 299,856 | 1.9 | 3,155 | 279,182 | 1.8 |
| INCOME TAX EXPENSE | 243,943 | 1.5 | 1,360 | 120,356 | 0.8 |
| EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES | 31,513 | 0.2 | 389 | 34,478 | 0.2 |
| NET INCOME | 87,426 | 0.6 | 2,184 | 193,304 | 1.2 |
| LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS | 93,052 | 0.5 | 607 | 53,660 | 0.4 |
| NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC. | 180,478 | 1.1 | 2,791 | 246,964 | 1.6 |
| Three Months Ended June 30, 2009 | Three Months Ended June 30, 2010 | ||||
| NET INCOME PER SHARE | |||||
| BASIC WEIGHTED-AVERAGE NUMBER OF SHARES (shares) | 202,544 | 202,544 | |||
| DILUTED WEIGHTED-AVERAGE NUMBER OF SHARES (shares) | 202,544 | 202,544 | |||
| BASIC WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) | 81,017,600 | 81,017,600 | |||
| DILUTED WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) | 81,017,600 | 81,017,600 | |||
| BASIC NET INCOME PER SHARE (JPY / U.S. Dollars / JPY) | 891.06 | 13.78 | 1,219.31 | ||
| DILUTED NET INCOME PER SHARE (JPY / U.S. Dollars / JPY) | 891.06 | 13.78 | 1,219.31 | ||
| BASIC NET INCOME PER ADS EQUIVALENT (JPY / U.S. Dollars / JPY) | 2.23 | 0.03 | 3.05 | ||
| DILUTED NET INCOME PER ADS EQUIVALENT (JPY / U.S. Dollars / JPY) | 2.23 | 0.03 | 3.05 | ||
| (Note 1) The U.S. dollar amounts represent translations of yen amounts at the rate of JPY 88.49 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, 2010. | |||||
| Internet Initiative Japan Inc. | |||
| Quarterly Consolidated Statements of Cash Flows (Unaudited) | |||
| (Three Months ended June 30, 2009 and June 30, 2010) | |||
| Three Months Ended June 30, 2009 | Three Months Ended June 30, 2010 | ||
| Thousands of JPY | Thousands of U.S. Dollars | Thousands of JPY | |
| OPERATING ACTIVITIES: | |||
| Net income | 87,426 | 2,184 | 193,304 |
| Adjustments to reconcile net income to net cash provided by operating activities: | |||
| Depreciation and amortization | 1,359,820 | 14,138 | 1,251,044 |
| Provision for retirement and pension costs, less payments | 58,682 | 681 | 60,243 |
| Reversal of allowance for doubtful accounts and advances | (5,049) | (60) | (5,317) |
| Loss on disposal of property and equipment | 8,965 | 59 | 5,288 |
| Net gains on sales of other investments | -- | (181) | (16,019) |
| Losses on write-down of other investments | 1,504 | 67 | 5,887 |
| Gain on receipt of investment securities | -- | (204) | (18,060) |
| Foreign exchange losses | 11,918 | 229 | 20,246 |
| Equity in net income of equity method investees | (31,513) | (390) | (34,478) |
| Deferred income tax expense | 185,982 | 998 | 88,313 |
| Others | -- | 551 | 48,798 |
| Changes in operating assets and liabilities net of effects from acquisition of business and a company: | |||
| Decrease in accounts receivable | 1,734,601 | 19,975 | 1,767,614 |
| Increase in inventories, prepaid expenses and other current and noncurrent assets | (500,933) | (12,252) | (1,084,214) |
| Decrease in accounts payable | (936,518) | (9,176) | (812,009) |
| Decrease in income taxes payable | (155,467) | (3,189) | (282,219) |
| Increase in accrued expenses, other current and noncurrent liabilities | 344,462 | 12,263 | 1,085,196 |
| Net cash provided by operating activities | 2,163,880 | 25,693 | 2,273,617 |
| INVESTING ACTIVITIES: | |||
| Purchase of property and equipment | (1,094,298) | (10,313) | (912,587) |
| Purchase of available-for-sale securities | (6,750) | (410) | (36,283) |
| Purchase of other investments | -- | (565) | (50,000) |
| Proceeds from sales of available-for-sale securities | -- | 52 | 4,579 |
| Proceeds from sales and redemption of other investments | 13,500 | 226 | 20,000 |
| Payments of guarantee deposits | (34,229) | (51) | (4,503) |
| Refund of guarantee deposits | 2,337 | 23 | 1,985 |
| Payments for refundable insurance policies | (13,615) | (84) | (7,391) |
| Refund from insurance policies | 27,613 | 335 | 29,642 |
| Net cash used in investing activities | (1,105,442) | (10,787) | (954,558) |
| Three Months Ended June 30, 2009 | Three Months Ended June 30, 2010 | ||
| Thousands of JPY | Thousands of U.S. Dollars | Thousands of JPY | |
| FINANCING ACTIVITIES: | |||
| Proceeds from issuance of short-term borrowings with initial maturities over three months | 5,100,000 | 565 | 50,000 |
| Repayments of short-term borrowings with initial maturities over three months | (5,100,000) | -- | -- |
| Principal payments under capital leases | (929,625) | (8,416) | (744,757) |
| Net Increase (decrease) in short-term borrowings with initial maturities less than three months | (200,000) | 226 | 20,000 |
| Dividends paid | (202,544) | (2,861) | (253,180) |
| Net cash used in financing activities | (1,332,169) | (10,486) | (927,937) |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (16,557) | (208) | (18,392) |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (290,288) | 4,212 | 372,730 |
| CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD | 10,187,724 | 99,044 | 8,764,415 |
| CASH AND CASH EQUIVALENTS, END OF THE PERIOD | 9,897,436 | 103,256 | 9,137,145 |
| ADDITIONAL CASH FLOW INFORMATION: | |||
| Interest paid | 95,241 | 643 | 56,889 |
| Income tax paid | 207,572 | 3,542 | 313,436 |
| NONCASH INVESTING AND FINANCING ACTIVITIES: | |||
| Acquisition of assets by entering into capital leases | 395,145 | 3,485 | 308,411 |
| Facilities purchase liabilities | 355,442 | 10,098 | 893,569 |
| (Note 1) The U.S. dollar amounts represent translations of yen amounts at the rate of JPY 88.49 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, 2010. | |||
| Going Concern Assumption (Unaudited) | ||||
| Nothing to be reported. | ||||
| Segment Information (Unaudited) | ||||
| Business Segments: | ||||
| Revenues: | ||||
| Three Months Ended June 30, 2009 | Three Months Ended June 30, 2010 | |||
| Thousands of JPY | Thousands of JPY | |||
| Network service and systems integration business | 15,921,322 | 15,815,529 | ||
| Customers | 15,827,051 | 15,707,462 | ||
| Intersegment | 94,271 | 108,067 | ||
| ATM operation business | 7,459 | 105,801 | ||
| Customers | 7,459 | 105,801 | ||
| Intersegment | -- | -- | ||
| Elimination | 94,271 | 108,067 | ||
| Consolidated total | 15,834,510 | 15,813,263 | ||
| Segment profit or loss: | ||||
| Three Months Ended June 30, 2009 | Three Months Ended June 30, 2010 | |||
| Thousands of JPY | Thousands of JPY | |||
| Network service and systems integration business | 588,834 | 432,091 | ||
| ATM operation business | (232,912) | (160,492) | ||
| Elimination | 5,044 | 5,920 | ||
| Consolidated operating income | 350,878 | 265,679 | ||
| 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) | ||||
| Nothing to be reported. | ||||
Note: The following information is provided to disclose Internet Initiative Japan Inc. ("IIJ") financial results (unaudited) for the three months ended June 30, 2010 in the form defined by the Tokyo Stock Exchange.
Consolidated Financial Results for the Three Months Ended June 30, 2010
[Under accounting principles generally accepted in the United States ("U.S. GAAP")]
August 13, 2010
Company name: Internet Initiative Japan Inc. Exchange listed: Tokyo Stock Exchange First Section
Stock code number: 3774 URL: http://www.iij.ad.jp/
Representative: Koichi Suzuki, President and Representative Director
Contact: Akihisa Watai, Managing Director and CFO TEL: (03) 5259-6500
Schedule date for filing of quarterly report: scheduled on August 16, 2010
Scheduled date for dividend payment: -
Supplemental material on quarterly results: Yes
Presentation on quarterly results: Yes (for institutional investors and analysts)
(Amounts of less than JPY one million are rounded)
| 1. Consolidated Financial Results for the Three Months Ended June 30, 2010 | |||||||||||
| (April 1, 2010 to June 30, 2010) | |||||||||||
| (1) Consolidated Results of Operations | (% shown is YoY change) | ||||||||||
| Total Revenues | Operating Income | Income before Income Tax Expense | Net Income attributable to IIJ | ||||||||
| JPY millions | ％ | JPY millions | ％ | JPY millions | ％ | JPY millions | ％ | ||||
| Three months ended June 30, 2010 | 15,813 | (0.1) | 266 | (24.3) | 279 | (6.9) | 247 | 36.8 | |||
| Three months ended June 30, 2009 | 15,835 | (3.0) | 351 | (14.7) | 300 | (3.1) | 180 | 6.7 | |||
| Basic Net Income attributable to IIJ per Share | Diluted Net Income attributable to IIJ per Share | |
| JPY | JPY | |
| Three months ended June 30, 2010 | 1,219.31 | 1,219.31 |
| Three months ended June 30, 2009 | 891.06 | 891.06 |
| (2) Consolidated Financial Position | |||||
| Total Assets | Total Equity | Shareholders' Equity | Shareholders' Equity as a percentage of Total Assets | Shareholders' Equity per share | |
| JPY millions | JPY millions | JPY millions | % | JPY | |
| June 30, 2010 | 50,805 | 27,279 | 27,288 | 53.7 | 134,727.50 |
| March 31, 2010 | 51,115 | 27,364 | 27,320 | 53.4 | 134,882.18 |
| 2. Dividends | |||||
| Dividend per Shares | |||||
| 1st quarter- end | 2nd quarter- end | 3rd quarter- end | Year-end | Total | |
| Yen | Yen | Yen | Yen | Yen | |
| Fiscal year ended March 31, 2010 | -- | 1,000.00 | -- | 1,250.00 | 2,250.00 |
| Fiscal year ending March 31, 2011 | -- | ||||
| Fiscal year ending March 31, 2011 (Target) | -- | 1,250.00 | -- | 1,250.00 | 2,500.00 |
| Changes in forecasts of dividends during the three months ended June 30 ,2010: None | |||||
| 3. Target of Consolidated Financial Results for the Fiscal Year Ending March 31, 2011 | |||||||||
| (April 1, 2010 through March 31, 2011) | (% shown is YoY change) | ||||||||
| Total Revenues | Operating Income | Income before Income Tax Expense (Benefit) | Net Income Attributable to IIJ | Basic Net Income attributable to IIJ per Share | |||||
| JPY millions | % | JPY millions | % | JPY millions | % | JPY millions | % | JPY | |
| Interim Period Ending September 30, 2010 | 32,300 | 0.1 | 1,200 | 2.9 | 1,100 | 7.3 | 800 | 11.8 | 3,949.76 |
| Fiscal year ending March 31, 2011 | 84,500 | 24.3 | 4,800 | 40.7 | 4,100 | 43.4 | 3,000 | 34.3 | 14,811.60 |
| Changes in earnings forecasts for the fiscal year ending March 31, 2010 during the three months ended June 30, 2010: None | |||||||||
| 4. Others | ||||||
| (1) Change in significant subsidiaries for the three months ended June 3, 2010 | ||||||
| (Change in significant subsidiaries for the three months ended June 30, 2010 which resulted in changes in scope of consolidation): Yes | ||||||
| Newly Established ( -- ) Excluded: 1 (Name: IIJ Technology Inc. ) | ||||||
| (2) Application of simplified or exceptional accounting: None | ||||||
| (Application of simplified or exceptional accounting for quarterly consolidated financial statements): | ||||||
| (3) Changes in Significant Accounting and Reporting Policies for Consolidated Financial Statements | ||||||
| 1) Changes due 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 treasury stock): | ||||||
| As of June 30, 2010: | 206,478 shares | |||||
| As of March 31, 2010: | 206,478 shares | |||||
| 2) The number of treasury stock: | ||||||
| As of June 30, 2010: | 3,934 shares | |||||
| As of March 31, 2010: | 3,934 shares | |||||
| 3) The weighted average number of shares outstanding: | ||||||
| For the three months ended June 30, 2010: | 202,544shares | |||||
| For the three months ended June 30, 2009: | 202,544 shares | |||||
CONTACT: IIJ Investor Relations Office
Yuko Kazama
+81-3-5259-6500
ir@iij.ad.jp
http://www.iij.ad.jp/en/IR