EXHIBIT 99.1
TOKYO, May 15, 2014 (GLOBE NEWSWIRE) -- Internet Initiative Japan Inc. ("IIJ") (Nasdaq:IIJI) (TSE:3774) today announced its full year ("FY2013") and 4th quarter ("4Q13") consolidated financial results for the fiscal year ended March 31, 2014 (from April 1, 2013 to March 31, 2014).1
| Highlights of Financial Results for FY2013 | ||||
| Revenues | JPY114,272 million (up 7.6% YoY) | |||
| Operating Income | JPY5,723 million (down 26.2% YoY) | |||
| Net Income attributable to IIJ | JPY4,442 million (down 16.2% YoY) | |||
| Financial Targets for FY2014 | ||||
| Revenues | JPY123,000 million (up 7.6% YoY) | |||
| Operating Income | JPY7,200 million (up 25.8% YoY) | |||
| Net Income attributable to IIJ | JPY4,500 million (up 1.3% YoY) | |||
| Annual Cash Dividend | JPY22.00 per share | |||
Overview of FY2013 Financial Results and Business Outlook
"Our business bases have been largely strengthened with several unconventional transactions in FY2013, while income results were weak mainly due to certain large customers' revenues leveling off as we reported in 3Q earnings. We've pursued some progressive large-scale projects by leveraging our cloud facilities and services, MVNO (Mobile Virtual Network Operator) infrastructure and system integration features. We strongly believe these projects should surely contribute to our continuous revenue and income growth for the coming few years," said Koichi Suzuki, Founder and CEO of IIJ.
"Our cloud services "IIJ GIO" continued to grow in revenue, the number of customers, and system volume. Same as our prominent connectivity business, we mainly target large institutions with our reliable and value-added cloud service features. As seen in the case of Sompo Japan, one of the largest Japanese insurance companies, extensively adopting IIJ GIO to their IT system platforms, we're starting to see the usage of cloud services by some Japanese blue-chips becoming more advanced and conjugated. We also anticipate that BigData trend should encourage the adoption of cloud services. These recent changes in market momentum are certainly tailwinds for IIJ in the middle term," followed Eijiro Katsu, President and COO of IIJ.
"Triggered by our LTE SIM card offerings to consumers, our MVNO business has largely expanded in FY2013. Consumers can enjoy much cheaper smart-phones connectivity with our SIM card services than mobile carriers' expensive services. These MVNO services are relatively new in the Japanese market and we're anticipating further penetration to continue. We're also receiving increasing requirements from large institutions to act as MVNE (Mobile Virtual Network Enabler), asking us to offer our established large MVNO infrastructure. The demands for M2M (Machine to Machine connection) are also continuously expanding. By grasping these business opportunities for both corporate and consumers, we believe we'll be able to have continuous income increase by improving our network utilization," said Katsu.
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 JPY102.98 per US$1.00, which was the noon buying rate on March 31, 2014.
"As for systems integration, we continued to see great demands supported by overall Japanese economic recovery. We've acquired several flagship projects to which we jointly offer our network services and systems integration. We believe strong demands for network related systems investment and outsourcing from Japanese corporate should continue and our role to offer total network solutions become more important," continued Katsu.
"For FY2014, we shall devote ourselves to return to strong profit growth. We'd like to pursue on selling profitable monthly recurring revenue services more efficiently, increasing the number of large accounts, implementing stricter control on systems integration profitability and so on. At the same time, we will continuously implement our middle- to long- term growth strategies, including continuous recruitment of employees in aiming to dramatically enlarge our business scale. And also, we'd like to keep looking into M&A opportunities," concluded Katsu.
FY2013 Financial Results Summary
| Operating Results Summary | |||
| FY2012 | FY2013 | YoY % | |
| Change | |||
| JPY millions | JPY millions | ||
| Total Revenues | 106,248 | 114,272 | 7.6 |
| Network Services | 65,232 | 67,286 | 3.1 |
| Systems Integration (SI) | 37,205 | 42,469 | 14.1 |
| Equipment Sales | 1,491 | 1,690 | 13.4 |
| ATM Operation Business | 2,320 | 2,827 | 21.8 |
| Total Costs | 84,394 | 93,206 | 10.4 |
| Network Services | 50,692 | 53,046 | 4.6 |
| Systems Integration (SI) | 30,425 | 36,510 | 20.0 |
| Equipment Sales | 1,318 | 1,527 | 15.8 |
| ATM Operation Business | 1,959 | 2,123 | 8.3 |
| SG&A Expenses and R&D | 14,101 | 15,343 | 8.8 |
| Operating Income | 7,753 | 5,723 | (26.2) |
| Income before Income Tax Expense | 7,757 | 6,275 | (19.1) |
| Net income attributable to IIJ | 5,301 | 4,442 | (16.2) |
| Segment Results Summary | ||
| FY2012 | FY2013 | |
| JPY millions | JPY millions | |
| Total Revenues | 106,248 | 114,272 |
| Network services and SI business | 104,487 | 111,901 |
| ATM operation business | 2,320 | 2,827 |
| Elimination | 559 | 456 |
| Operating Income (Loss) | 7,753 | 5,723 |
| Network service and SI business | 7,629 | 5,275 |
| ATM operation business | 239 | 578 |
| Elimination | 115 | 130 |
We have omitted segment analysis because most of our revenues are dominated by Network services and Systems Integration (SI) business.
FY2013 Results of Operation
Revenues
Total revenues were JPY114,272 million, up 7.6% YoY.
Network Services revenue was JPY67,286 million, up 3.1% YoY.
Revenues for Internet connectivity services for corporate use were JPY16,585 million, up 3.5% YoY. The increase was mainly due to the increasing demands for mobile and broader bandwidth services. However, revenues were weaker than expected as IP service revenues from certain large network carrier with large IP contracts did not increase as much as we initially targeted for FY2013.
Revenues for Internet connectivity services for home use were JPY6,025 million, up 10.2% YoY. The increase in revenues from our low-priced LTE SIM card offerings covered the decrease in both contracts and revenues from our legacy-type home use internet services. Number of contracts for LTE SIM card offerings reached approximately 139,000 contracts as of March 31, 2014 (approximately 50,000 contracts as of March 31, 2013).
WAN services revenues were JPY25,006 million, down 0.6% YoY. The price down pressure by certain large customers had negative impact on revenues and income despite the continuous increase in revenues from other customers.
Outsourcing services revenues were JPY19,670 million, up 5.9% YoY, mainly due to the increase in revenues of "IIJ GIO Hosting Package Services". However, revenues were weaker than expected as cloud and data center revenues from certain large game providers did not increase as much as we initially targeted for FY2013.
| Network Services Revenues Breakdown | |||
| FY2012 | FY2013 | YoY % | |
| Change | |||
| JPY millions | JPY millions | ||
| Internet Connectivity Service (Corporate Use) | 16,027 | 16,585 | 3.5 |
| IP Service2 | 10,217 | 10,357 | 1.4 |
| IIJ FiberAccess/F and IIJ DSL/F | 3,170 | 3,147 | (0.7) |
| IIJ Mobile Service3 | 2,401 | 2,850 | 18.7 |
| Others | 239 | 231 | (3.7) |
| Internet Connectivity Service (Home Use) | 5,466 | 6,025 | 10.2 |
| Under IIJ Brand | 1,350 | 2,273 | 68.3 |
| hi-ho | 3,489 | 3,047 | (12.7) |
| OEM | 627 | 705 | 12.5 |
| WAN Services | 25,168 | 25,006 | (0.6) |
| Outsourcing Services | 18,571 | 19,670 | 5.9 |
| Total Network Services | 65,232 | 67,286 | 3.1 |
2 IP Service revenues include revenues from the Data Center Connectivity Service.
3 Revenue from mobile data communication service for home use is included in Internet Connectivity service (home use).
| Number of Contracts for Connectivity Services | |||
| as of | as of | YoY | |
| March 31, 2013 | March 31, 2014 | Change | |
| Internet Connectivity Services (Corporate Use) | 114,614 | 142,655 | 28,041 |
| IP Service (-99Mbps) | 905 | 847 | (58) |
| IP Service (100Mbps-999Mbps) | 401 | 448 | 47 |
| IP Service (1Gbps--) | 207 | 271 | 64 |
| IIJ Data Center Connectivity Service | 306 | 288 | (18) |
| IIJ FiberAccess/F and IIJ DSL/F | 48,940 | 56,384 | 7,444 |
| IIJ Mobile Service4 | 62,517 | 83,124 | 20,607 |
| Others | 1,338 | 1,293 | (45) |
| Internet Connectivity Services (Home Use) | 489,223 | 625,297 | 136,074 |
| Under IIJ Brand | 102,256 | 171,968 | 69,712 |
| hi-ho | 149,000 | 155,177 | 6,177 |
| OEM | 237,967 | 298,152 | 60,185 |
| Total Contracted Bandwidth | 1,218.7Gbps | 1,539.3Gbps | 320.6 |
SI revenues were JPY42,469 million, up 14.1% YoY.
Systems construction revenue, a one-time revenue, was JPY18,673 million, up 18.0% YoY. Both number and scale of systems construction projects increased. Systems operation and maintenance revenue, a recurring revenue, was JPY23,796 million, up 11.3% YoY. The increase was mainly due to the continuous demands on "IIJ GIO Component Services." However, systems operation and maintenance revenues were weaker than expected as systems operation and maintenance revenues from certain large game providers did not increase as much as we initially targeted for FY2013.
The orders received for SI and equipment sales for FY2013 totaled JPY48,387 million, up 15.4% YoY. In the breakdown, the orders received for systems construction and equipment sales was JPY21,763 million, up 26.7% YoY, and the orders received for systems operation and maintenance was JPY26,624 million, up 7.6% YoY.
The order backlog for SI and equipment sales as of March 31, 2014 amounted to JPY24,308 million, up 21.1% YoY. In the breakdown, the order backlog for systems construction and equipment sales was JPY5,102million, up 37.8% YoY, and the order backlog for systems operation and maintenance was JPY19,206 million, up 17.3% YoY.
Equipment sales revenues were JPY1,690 million, up 13.4% YoY.
ATM Operation Business revenues were JPY2,827 million, up 21.8% YoY. The increase was in accordance with the continuous increase in the numbers of newly placed ATMs. As of May 15, 2014, 855 ATMs are placed (625 ATMs as of May 15, 2013).
Cost and expense
Total cost of revenues was JPY93,206 million, up 10.4% YoY.
Cost of Network Services revenue was JPY53,046 million, up 4.6% YoY, The increase was mainly due to the increase in network operation related costs, circuit-related costs and personnel-related costs. Gross margin was JPY14,240 million, down 2.1 % YoY and gross margin ratio was 21.2%.
Cost of SI revenues was JPY36,510 million, up 20.0% YoY. The increase was mainly due to the increase in purchasing costs along with the increase in systems construction revenues as well as outsourcing-related and personnel-related costs. Gross margin was JPY5,959 million, down 12.1% YoY and gross margin ratio was 14.0%.
Cost of Equipment Sales revenues was JPY1,527 million, up 15.8% YoY. Gross margin was JPY164 million, down 5.2% YoY and gross margin ratio was 9.7%.
Cost of ATM Operation Business revenues was JPY2,123 million, up 8.3% YoY in accordance with the number of newly placed ATMs. Gross margin was JPY704 million, up 95.2% YoY and gross margin ratio was 24.9%.
4 Contracts of IIJ Mobile Service are of mobile data communication service for corporate use.
SG&A and R&D Expenses
SG&A and R&D expenses in total were JPY15,343 million, up 8.8% YoY (JPY14,101 million in FY2012).
Sales and marketing expenses were JPY8,548 million, up 6.1% YoY. The increase was mainly due to the increase in personnel-related expenses and sales commission expenses related to Internet connectivity services for home use.
General and administrative expenses were JPY6,374 million, up 13.2% YoY. The increase was mainly due to the increase in personnel-related expenses, rent expenses and depreciation related to asset retirement obligation, and commission expenses related to the procurement of employees.
Research and development expenses were JPY421 million, up 2.8% YoY.
Operating income
Operating income was JPY5,723 million, down 26.2% YoY.
Other income (expenses)
Other income (expenses) was an income of JPY552 million (an income of JPY4 million for FY2012), mainly due to net gain on other investments of JPY313 million, foreign currency gains of JPY219 million (JPY112 million for FY2012), and interest expense of JPY256 million (JPY287million for FY2012).
Income before income tax expenses
Income before income tax expenses was JPY6,275 million, down 19.1% YoY. (JPY7,757 million for FY2012)
Net Income
Income tax expense was JPY1,795 million (JPY2,608 million for FY2012), including deferred income tax benefit of JPY822 million related to Trust Networks Inc., a subsidiary of IIJ.
Equity in net income of equity method investees was JPY204 million (JPY168 million for FY2012) mainly due to net income of Internet Revolution, Inc. and Internet Multifeed Co.
As a result of the above, net income was JPY4,684 million, down 11.9% YoY (JPY5,317 million for FY2012).
Net income attributable to IIJ
Net income attributable to non-controlling interests was JPY242 million mainly related to net income of Trust Networks Inc. (JPY16 million for FY2012).
Net income attributable to IIJ was JPY4,442 million, down 16.2% YoY (JPY5,301 million for FY2012).
FY2013 Financial Condition
Balance Sheets
As of March 31, 2014, the balance of total assets was JPY103,867 million, increased by JPY21,755 million from the balance as of March 31, 2013 (JPY82,111 million as of March 31, 2013).
As for current assets as of March 31, 2014, as compared to the respective balances as of March 31, 2013, cash and cash equivalents increased by JPY10,162 million mainly due to the equity finance in 2Q13, prepaid expense increased by JPY636 million, accounts receivable increased by JPY450 million and inventories increased by JPY369 million. As for noncurrent assets, as compared to the respective balances as of March 31, 2013, other investments increased by JPY2,585 million mainly due to new investments for our business partner and the increase in fair value, and property and equipment increased by JPY3,946 million resulting from the continuous investment mainly for network infrastructure and servers including cloud-related. Guarantee deposits (current and noncurrent) increased by JPY674 million along with our office expansion. As for current liabilities, as compared to the respective balances as of March 31, 2013, accounts payable increased by JPY620 million and income taxes payable decreased by JPY590 million.
As for the balances of capital lease obligations, as compared to the respective balances as of March 31, 2013, capital lease obligations-current portion increased by JPY248 million to JPY3,753 million and capital lease obligations-noncurrent decreased by JPY767 million to JPY4,603 million.
As of March 31, 2014, the balance of other investments was JPY6,356 million. The breakdown of other investments were JPY3,751 million in available-for-sale securities, JPY2,530 million in nonmarketable equity securities and JPY75 million in other.
As of March 31, 2014, the breakdown of major non-amortized intangible assets were JPY5,970 million in goodwill and JPY107 million in trademark. The balance of amortized intangible assets, which was customer relationships, was JPY4,202 million.
Total IIJ shareholders' equity as of March 31, 2014 was JPY59,912 million, increased by JPY22,305 million from the respective balance as of March 31, 2013, mainly due to the equity finance in 2Q13. IIJ shareholders' equity ratio (total IIJ shareholders' equity/total assets) as of March 31, 2014 was 57.7%.
Cash Flows
Cash and cash equivalents as of March 31, 2014 were JPY22,421 million compared to JPY12,259 million as of March 31, 2013.
Net cash provided by operating activities for FY2013 was JPY8,787 million compared to net cash provided by operating activities of JPY9,639 million for FY2012 mainly due to the decrease in net income and increase in depreciation and amortization, while the increase in cash inflow from accounts receivable was smaller than the increase in cash outflow from such as accounts payable.
Net cash used in investing activities for FY2013 was JPY10,203 million compared to net cash used in investing activities of JPY5,946 million for FY2012 mainly due to payments for purchase of property and equipment of JPY9,124 million (JPY5,589 million for FY2012), payments for purchase of other investments of JPY1,186 million (JPY468 million for FY2012) and payments of guarantee deposits of JPY689 million (JPY164 million for FY2012).
Net cash provided by financing activities for FY2013 was JPY11,382 million compared to net cash used in financing activities of JPY4,996 million for FY2012, mainly due to proceeds from issuance of common stock of JPY17,271 million net of issuance cost, principal payments under capital leases of JPY3,969 million (JPY3,679 million for FY2012), net repayment of borrowings of JPY1,010 million (net repayment of JPY610 million for FY2012) and dividends payments for FY2012 year-end and FY2013 interim dividends of JPY911 million (JPY709 million for FY2012).
FY2014 Financial Targets
Our financial targets for FY2014 are as follows:
| (JPY in millions) | ||||
| Revenues | Operating Income | Income before Income Tax Expense | Net Income attributable to IIJ | |
| 1H FY2014 Target | 57,500 | 2,800 | 2,700 | 1,750 |
| Full FY2014 Target | 123,000 | 7,200 | 7,000 | 4,500 |
With the steady recovery of the Japanese economy, IT investment in Japan is expected to continue during FY2014. In mid- to long-term, the ongoing demands to outsource corporate internal IT systems and network including the full use of cloud services would continue to be a great business opportunity, even with the intense competition in such areas. Under such competitive market, in FY2014, we should continue to make various business developments to strengthen our business and competitiveness. We would also improve gross margin for network service and systems integration by further focusing on increasing our stock revenues.
We target revenue of JPY123 billion, up 7.6% YoY. We expect our monthly recurring revenue services to further accumulate including a significant increase in the revenue for consumer LTE SIM card offering, cloud-related revenues to reach approximately JPY13 billion, systems construction revenues to increase and ATM operation business revenues to continuously increase.
We target operating cost and expenses of JPY115.8 billion, up 6.7% YoY. We expect continuous increase in personnel-related expenses, increase in depreciation of network equipment, additional expenses from the relocation of headquarter in the first half of FY2014 and increase in costs related to purchasing and outsourcing in relation to SI revenue growth.
For operating income, we target JPY7.2 billion, up 25.8% YoY. We expect gross margin and gross margin ratio of recurring network services and systems integration to increase along with recurring revenue growth, as well as the profit contribution from our cloud service "IIJ GIO" and ATM operation business.
We target income before income tax expense (benefit) of JPY7.0 billion, up 11.6% YoY, considering interest expenses and others.
We target net income attributable to IIJ of JPY4.5 billion, up 1.3% YoY, considering taxes calculated by a normal statutory rate and income of equity method investees and non-controlling interests.
FY2014 Dividend Forecast
Our FY2014 dividend forecast is as follows:
| Interim | Year-end | Full Year | |
| FY2014 Dividend (forecast) | JPY11.00 (forecast) | JP11.00 (forecast) | JPY22.00 (forecast) |
| FY2013 Dividend (scheduled) | JPY11.00 (paid) | JPY11.00 (scheduled) | JPY22.00 (scheduled) |
Based on our Company's Article of Incorporation, we plan to pay our dividend twice a year, at interim and at fiscal year-end. The dividends for interim and fiscal year-end are decided at the Company's board of directors and at the general meeting of shareholders, respectively.
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 | ||
| FY2012 | FY2013 | |
| JPY millions | JPY millions | |
| Adjusted EBITDA | 15,309 | 14,546 |
| Depreciation and Amortization5 | (7,508) | (8,823) |
| Impairment loss on other intangible assets | (48) | -- |
| Operating Income | 7,753 | 5,723 |
| Other Income (Expense) | 4 | 552 |
| Income Tax Expense | 2,608 | 1,795 |
| Equity in Net Income of Equity Method Investees | 168 | 204 |
| Net income | 5,317 | 4,684 |
| Net loss (income) attributable to noncontrolling interests | (16) | (242) |
| Net Income attributable to IIJ | 5,301 | 4,442 |
| CAPEX | ||
| FY2012 | FY2013 | |
| JPY millions | JPY millions | |
| CAPEX, including capital leases | 10,405 | 12,560 |
| Acquisition of Assets by Entering into Capital Leases | 4,816 | 3,436 |
| Purchase of Property and Equipment | 5,589 | 9,124 |
Presentation
Presentation materials will be posted on our web site (http://www.iij.ad.jp/en/ir/) on May 15, 2014.
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, and cloud computing. Moreover, IIJ has built one of the largest Internet backbone networks in Japan that is connected to the United States, the United Kingdom and Asia. IIJ listed on the U.S. NASDAQ Stock Market in 1999 and on the First Section of the Tokyo Stock Exchange in 2006.
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 FY2014 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.
5 Depreciation 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, 2013 and March 31, 2014) | |||
| As of March 31, 2013 | As of March 31, 2014 | ||
| Thousands of JPY | Thousands of U.S. Dollars | Thousands of JPY | |
| ASSETS | |||
| CURRENT ASSETS: | |||
| Cash and cash equivalents | 12,258,872 | 217,723 | 22,421,100 |
| Accounts receivable, net of allowance for doubtful accounts of JPY93,934 thousand and JPY53,871 thousand at March 31, 2013 and March 31, 2014, respectively | 18,764,703 | 186,582 | 19,214,248 |
| Inventories | 1,301,684 | 16,219 | 1,670,258 |
| Prepaid expenses | 2,492,164 | 30,378 | 3,128,290 |
| Deferred tax assets —current | 1,046,828 | 13,527 | 1,392,971 |
| Current portion of guarantee deposits | 1,200 | 14,199 | 1,462,223 |
| Other current assets, net of allowance for doubtful accounts of JPY10,732 thousand and JPY720 thousand at March 31, 2013 and March 31, 2014, respectively | 1,575,518 | 23,416 | 2,411,376 |
| Total current assets | 37,440,969 | 502,044 | 51,700,466 |
| INVESTMENTS IN EQUITY METHOD INVESTEES | 1,681,723 | 20,253 | 2,085,689 |
| OTHER INVESTMENTS | 3,771,262 | 61,719 | 6,355,817 |
| PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization of JPY29,516,394 thousand and JPY34,725,611 thousand at March 31, 2013 and March 31, 2014, respectively | 23,025,755 | 261,910 | 26,971,485 |
| GOODWILL | 5,969,951 | 57,972 | 5,969,951 |
| OTHER INTANGIBLE ASSETS —Net | 4,791,431 | 42,134 | 4,338,944 |
| GUARANTEE DEPOSITS | 2,051,449 | 12,278 | 1,264,535 |
| DEFERRED TAX ASSETS —Noncurrent | 163,773 | 6,184 | 636,807 |
| NET INVESTMENT IN SALES-TYPE LEASES —Noncurrent | 898,040 | 7,310 | 752,774 |
| Prepaid expenses —Noncurrent | 2,201,108 | 25,570 | 2,633,154 |
| OTHER ASSETS, net of allowance for doubtful accounts of JPY71,727 thousand and JPY62,800 thousand at March 31, 2013 and March 31, 2014, respectively. | 115,805 | 11,235 | 1,156,953 |
| TOTAL | 82,111,266 | 1,008,609 | 103,866,575 |
| As of March 31, 2013 | As of March 31, 2014 | ||
| Thousands of JPY | Thousands of U.S. Dollars | Thousands of JPY | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||
| CURRENT LIABILITIES: | |||
| Short-term borrowings | 9,400,000 | 91,280 | 9,400,000 |
| Long-term borrowings —current portion | 1,010,000 | 9,516 | 980,000 |
| Capital lease obligations —current portion | 3,505,471 | 36,444 | 3,753,026 |
| Accounts payable —trade | 10,973,120 | 111,591 | 11,491,666 |
| Accounts payable —other | 949,264 | 10,200 | 1,050,429 |
| Income taxes payable | 1,669,849 | 10,483 | 1,079,480 |
| Accrued expenses | 2,266,427 | 19,941 | 2,053,550 |
| Deferred income —current | 1,806,074 | 15,155 | 1,560,603 |
| Other current liabilities | 803,902 | 10,664 | 1,098,173 |
| Total current liabilities | 32,384,107 | 315,274 | 32,466,927 |
| LONG-TERM BORROWINGS | 980,000 | -- | -- |
| CAPITAL LEASE OBLIGATIONS —Noncurrent | 5,370,365 | 44,701 | 4,603,322 |
| ACCRUED RETIREMENT AND PENSION COSTS -Noncurrent | 2,112,085 | 22,087 | 2,274,540 |
| DEFERRED TAX LIABILITIES —Noncurrent | 412,132 | 10,613 | 1,092,863 |
| DEFERRED INCOME —Noncurrent | 2,562,208 | 26,329 | 2,711,347 |
| OTHER NONCURRENT LIABILITIES | 656,191 | 5,214 | 536,950 |
| Total Liabilities | 44,477,088 | 424,218 | 43,685,949 |
| COMMITMENTS AND CONTINGENCIES | |||
| SHAREHOLDERS' EQUITY: | |||
| Common-stock —authorized, 75,520,000 shares; issued and outstanding, 41,295,600 shares at March 31, 2013 | 16,833,847 | 247,592 | 25,497,022 |
| —authorized, 75,520,000 shares; issued and outstanding, 46,697,800 shares at March 31, 2014 | |||
| Additional paid-in capital | 27,300,325 | 349,214 | 35,961,995 |
| Accumulated deficit | (6,399,088) | (27,846) | (2,867,548) |
| Accumulated other comprehensive loss | 263,770 | 16,632 | 1,712,786 |
| Treasury stock—758,800 shares and 758,709 shares held by the company at March 31, 2013 and March 31, 2014, respectively | (392,079) | (3,807) | (392,070) |
| Total Internet Initiative Japan Inc. shareholders' equity | 37,606,775 | 581,785 | 59,912,185 |
| NONCONTROLLING INTERESTS | 27,403 | 2,606 | 268,441 |
| Total equity | 37,634,178 | 584,391 | 60,180,626 |
| TOTAL | 82,111,266 | 1,008,609 | 103,866,575 |
| (Note1) The U.S. dollar amounts represent translations of yen amounts at the rate of JPY102.98 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 March 31, 2014. | |||
| Internet Initiative Japan Inc. | |||
| Consolidated Statements of Income (Unaudited) | |||
| (For the fiscal year ended March 31, 2013 and March 31, 2014) | |||
| Fiscal Year Ended March 31, 2013 | Fiscal Year Ended March 31, 2014 | ||
| Thousands of JPY | Thousands of U.S. Dollars | Thousands of JPY | |
| REVENUES: | |||
| Network services: | |||
| Internet connectivity services (corporate use) | 16,027,134 | 161,052 | 16,585,175 |
| Internet connectivity services (home use) | 5,466,198 | 58,502 | 6,024,560 |
| WAN services | 25,168,425 | 242,823 | 25,005,867 |
| Outsourcing services | 18,570,641 | 191,009 | 19,670,127 |
| Total | 65,232,398 | 653,386 | 67,285,729 |
| Systems integration: | |||
| Systems construction | 15,824,938 | 181,333 | 18,673,638 |
| Systems operation and maintenance | 21,380,158 | 231,073 | 23,795,927 |
| Total | 37,205,096 | 412,406 | 42,469,565 |
| Equipment sales | 1,490,906 | 16,413 | 1,690,225 |
| ATM operation business | 2,320,086 | 27,451 | 2,826,832 |
| Total revenues | 106,248,486 | 1,109,656 | 114,272,351 |
| COST AND EXPENSES: | |||
| Cost of network services | 50,692,190 | 515,108 | 53,045,814 |
| Cost of systems integration | 30,424,802 | 354,538 | 36,510,328 |
| Cost of equipment sales | 1,318,344 | 14,825 | 1,526,618 |
| Cost of ATM operation business | 1,959,597 | 20,617 | 2,123,168 |
| Total cost | 84,394,933 | 905,088 | 93,205,928 |
| Sales and marketing | 8,058,481 | 83,003 | 8,547,693 |
| General and administrative | 5,632,430 | 61,896 | 6,374,057 |
| Research and development | 410,000 | 4,092 | 421,361 |
| Total cost and expenses | 98,495,844 | 1,054,079 | 108,549,039 |
| OPERATING INCOME | 7,752,642 | 55,577 | 5,723,312 |
| OTHER INCOME (EXPENSE): | |||
| Dividend income | 47,117 | 495 | 51,003 |
| Interest income | 25,708 | 260 | 26,719 |
| Interest expense | (287,314) | (2,489) | (256,371) |
| Foreign exchange gains | 112,136 | 2,130 | 219,381 |
| Net gain on sales of other investments | 13,565 | 1,045 | 107,655 |
| Net gain on other investments | -- | 3,043 | 313,393 |
| Losses on write-down of other investments | (19,788) | -- | -- |
| Other -net | 112,798 | 872 | 89,799 |
| Other income (expense) —net | 4,222 | 5,356 | 551,579 |
| INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES | 7,756,864 | 60,933 | 6,274,891 |
| INCOME TAX EXPENSE | 2,607,582 | 17,434 | 1,795,305 |
| EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES | 168,065 | 1,982 | 204,046 |
| NET INCOME | 5,317,347 | 45,481 | 4,683,632 |
| LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (16,693) | (2,344) | (241,395) |
| NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC. | 5,300,654 | 43,137 | 4,442,237 |
| Fiscal Year Ended March 31, 2013 | Fiscal Year Ended March 31, 2014 | ||
| NET INCOME PER SHARE | |||
| BASIC WEIGHTED-AVERAGE NUMBER OF SHARES (shares) | 40,536,800 | 44,306,680 | |
| DILUTED WEIGHTED-AVERAGE NUMBER OF SHARES (shares) | 40,572,600 | 44,361,083 | |
| BASIC WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) | 81,073,600 | 88,613,360 | |
| DILUTED WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) | 81,145,200 | 88,722,166 | |
| BASIC NET INCOME PER SHARE (JPY / U.S. Dollars / JPY) | 130.76 | 0.97 | 100.26 |
| DILUTED NET INCOME PER SHARE (JPY / U.S. Dollars / JPY) | 130.65 | 0.97 | 100.14 |
| BASIC NET INCOME PER ADS EQUIVALENT (JPY / U.S. Dollars / JPY) | 65.38 | 0.49 | 50.13 |
| DILUTED NET INCOME PER ADS EQUIVALENT (JPY / U.S. Dollars / JPY) | 65.32 | 0.49 | 50.07 |
| (Note) The U.S. dollar amounts represent translations of yen amounts at the rate of JPY102.98 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 March 31, 2014. | |||
| Internet Initiative Japan Inc. | ||||||||||||||||
| Consolidated Statements of Shareholders' Equity (Unaudited) | ||||||||||||||||
| (For the fiscal year ended March 31, 2013 and March 31, 2014) | ||||||||||||||||
| Internet Initiative Japan Inc. shareholders' equity | ||||||||||||||||
| Total equity | Accumulated deficit | Accumulated other comprehensive income (loss) | Shares of common stock outstanding | Common stock | Treasury stock | Additional paid-in capital | NON CONTROLLING INTERESTS | |||||||||
| Thousands of JPY | Thousands of JPY | Thousands of JPY | Shares | Thousands of JPY | Thousands of JPY | Thousands of JPY | Thousands of JPY | |||||||||
| BALANCE, MARCH 31, 2012 | 32,696,247 | (10,990,348) | (23,533) | 41,295,600 | 16,833,847 | (392,079) | 27,260,318 | 8,042 | ||||||||
| Acquisition and establishment of new consolidated subsidiaries | 2,688 | 2,688 | ||||||||||||||
| Stock-based compensation | 40,007 | 40,007 | ||||||||||||||
| Comprehensive income （loss): | ||||||||||||||||
| Net Income | 5,317,347 | 5,300,654 | 16,693 | |||||||||||||
| Other Comprehensive income (loss), net of tax | 287,283 | 287,303 | (20) | |||||||||||||
| Total comprehensive income | 5,604,630 | |||||||||||||||
| Dividends paid | (709,394) | (709,394) | ||||||||||||||
| BALANCE, MARCH 31, 2013 | 37,634,178 | (6,399,088) | 263,770 | 41,295,600 | 16,833,847 | (392,079) | 27,300,325 | 27,403 | ||||||||
| Acquisition of noncontrolling interests in consolidated subsidiaries | -- | 61 | 53 | 99 | (213) | |||||||||||
| Issuance of common stock, net of issuance cost | 17,271,204 | 5,400,000 | 8,661,600 | 8,609,604 | ||||||||||||
| Issuance of common stock upon exercise of stock options | 3,151 | 2,200 | 1,575 | 1,576 | ||||||||||||
| Stock-based compensation | 50,391 | 50,391 | ||||||||||||||
| Comprehensive income （loss): | ||||||||||||||||
| Net Income | 4,683,632 | 4,442,237 | 241,395 | |||||||||||||
| Other Comprehensive income (loss), net of tax | 1,448,811 | 1,448,955 | (144) | |||||||||||||
| Total comprehensive income: | 6,132,443 | |||||||||||||||
| Dividends paid | (910,697) | (910,697) | ||||||||||||||
| Purchase of treasury stock | (44) | (44) | ||||||||||||||
| BALANCE, MARCH 31, 2014 | 60,180,626 | (2,867,548) | 1,712,786 | 46,697,800 | 25,497,022 | (392,070) | 35,961,995 | 268,441 | ||||||||
| (For the fiscal year ended March 31, 2014 (In USD)) | ||||||||||||||||
| Internet Initiative Japan Inc. shareholders' equity | ||||||||||||||||
| Total equity | Accumulated deficit | Accumulated other comprehensive income | Shares of common stock outstanding | Common stock | Treasury stock | Additional paid-in capital | NON CONTROLLING INTERESTS | |||||||||
| Thousands of USD | Thousands of USD | Thousands of USD | Shares | Thousands of USD | Thousands of USD | Thousands of USD | Thousands of USD | |||||||||
| BALANCE, MARCH 31, 2013 | 365,451 | (62,139) | 2,561 | 41,295,600 | 163,467 | (3,807) | 265,103 | 266 | ||||||||
| Acquisition of noncontrolling interests in consolidated subsidiaries | -- | 1 | 0 | 2 | (3) | |||||||||||
| Issuance of common stock, net of issuance cost | 167,714 | 5,400,000 | 84,110 | 83,604 | ||||||||||||
| Issuance of common stock upon exercise of stock options | 31 | 2,200 | 15 | 16 | ||||||||||||
| Stock-based compensation | 489 | 489 | ||||||||||||||
| Comprehensive income （loss): | ||||||||||||||||
| Net Income | 45,481 | 43,137 | 2,344 | |||||||||||||
| Other Comprehensive income (loss), net of tax | 14,069 | 14,070 | (1) | |||||||||||||
| Total comprehensive income: | 59,550 | |||||||||||||||
| Dividends paid | (8,844) | (8,844) | ||||||||||||||
| Purchase of treasury stock | (0) | (0) | ||||||||||||||
| BALANCE, MARCH 31, 2014 | 584,391 | (27,846) | 16,632 | 46,697,800 | 247,592 | (3,807) | 349,214 | 2,606 | ||||||||
| (Note) The U.S. dollar amounts represent translations of yen amounts at the rate of JPY102.98 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 March 31, 2014. | ||||||||||||||||
| Internet Initiative Japan Inc. | ||||||
| Consolidated Statements of Cash Flows (Unaudited) | ||||||
| (For the fiscal year ended March 31, 2013 and March 31, 2014) | ||||||
| Fiscal Year Ended March 31, 2013 | Fiscal Year Ended March 31, 2014 | |||||
| Thousands of JPY | Thousands of U.S. Dollars | Thousands of JPY | ||||
| OPERATING ACTIVITIES: | ||||||
| Net income | 5,317,347 | 45,481 | 4,683,632 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 7,507,808 | 85,677 | 8,822,981 | |||
| Impairment loss on intangible assets | 48,000 | -- | -- | |||
| Provision for retirement and pension costs, less payments | 213,963 | 2,200 | 226,599 | |||
| Reversal of allowance for doubtful accounts | (10,712) | (456) | (46,935) | |||
| Loss on disposal of property and equipment | 14,638 | 811 | 83,487 | |||
| Net gain on sales of other investments | (13,565) | (1,045) | (107,655) | |||
| Net gain on other investments | -- | (3,043) | (313,393) | |||
| Impairment of other investments | 19,788 | -- | -- | |||
| Foreign exchange gains, net | (55,983) | (1,262) | (129,916) | |||
| Equity in net income of equity method investees | (168,065) | (1,981) | (204,046) | |||
| Deferred income tax benefit | (527,128) | (6,796) | (699,826) | |||
| Others | 39,377 | 694 | 71,448 | |||
| Changes in operating assets and liabilities net of effects from acquisition of business and a company: | ||||||
| Increase in accounts receivable | (2,906,215) | (3,325) | (342,391) | |||
| Decrease in net investment in sales-type lease ―noncurrent | 37,406 | 1,411 | 145,266 | |||
| Increase in inventories | (492,022) | (3,550) | (365,533) | |||
| Increase in prepaid expenses | (635,031) | (5,951) | (612,802) | |||
| Increase in other current and noncurrent assets | (1,295,279) | (17,493) | (1,801,403) | |||
| Increase in accounts payable | 1,881,105 | 4,631 | 476,860 | |||
| Decrease in income taxes payable | (545,914) | (5,776) | (594,782) | |||
| Increase in deferred income ―noncurrent | 1,015,049 | 888 | 91,462 | |||
| Increase (decrease) in accrued expenses and other current and noncurrent liabilities | 194,201 | (5,789) | (596,174) | |||
| Net cash provided by operating activities | 9,638,768 | 85,326 | 8,786,879 | |||
| INVESTING ACTIVITIES: | ||||||
| Purchases of property and equipment | (5,588,815) | (88,600) | (9,123,998) | |||
| Proceeds from sales of property and equipment | 543,978 | 4,431 | 456,330 | |||
| Purchases of available-for-sale securities | (48,903) | (1,627) | (167,545) | |||
| Purchases of other investments | (467,622) | (11,517) | (1,185,985) | |||
| Investment in an equity method investee | (100,000) | (1,941) | (199,920) | |||
| Proceeds from sales of available-for-sale securities | -- | 3,805 | 391,814 | |||
| Proceeds from sales of other investments | 109,944 | 3,416 | 351,740 | |||
| Payments of guarantee deposits | (164,417) | (6,690) | (688,902) | |||
| Refund of guarantee deposits | 17,349 | 196 | 20,233 | |||
| Payments for refundable insurance policies | (737) | (182) | (18,787) | |||
| Refund from insurance policies | -- | 156 | 16,026 | |||
| Acquisition of a newly controlled company, net of cash acquired | (229,058) | -- | -- | |||
| Other | (17,620) | (522) | (53,766) | |||
| Net cash used in investing activities | (5,945,901) | (99,075) | (10,202,760) | |||
| Fiscal Year Ended March 31, 2013 | Fiscal Year Ended March 31, 2014 | |||||
| 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 | 71,000 | 2,428 | 250,000 | |||
| Repayments of short-term borrowings with initial maturities over three months and long-term borrowings | (1,081,000) | (12,235) | (1,260,000) | |||
| Principal payments under capital leases | (3,678,940) | (38,539) | (3,968,724) | |||
| Net increase in short-term borrowings with initial maturities less than three months | 400,000 | -- | -- | |||
| Proceeds from issuance of stock to minority shareholders | 2,570 | -- | -- | |||
| Dividends paid | (709,394) | (8,844) | (910,697) | |||
| Proceeds from issuance of common stock, net of issuance cost | -- | 167,714 | 17,271,204 | |||
| Other | -- | 1 | 109 | |||
| Net cash provided by (used in) financing activities | (4,995,764) | 110,525 | 11,381,892 | |||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | 24,945 | 1,906 | 196,217 | |||
| NET INCREASE （DECREASE) IN CASH AND CASH EQUIVALENTS | (1,277,952) | 98,682 | 10,162,228 | |||
| CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 13,536,824 | 119,041 | 12,258,872 | |||
| CASH AND CASH EQUIVALENTS, END OF YEAR | 12,258,872 | 217,723 | 22,421,100 | |||
| ADDITIONAL CASH FLOW INFORMATION: | ||||||
| Interest paid | 287,158 | 2,493 | 256,722 | |||
| Income taxes paid | 3,527,987 | 26,294 | 2,707,784 | |||
| NONCASH INVESTING AND FINANCING ACTIVITIES: | ||||||
| Acquisition of assets by entering into capital leases | 4,816,248 | 33,368 | 3,436,245 | |||
| Facilities purchase liabilities | 949,264 | 10,200 | 1,050,429 | |||
| Asset retirement obligation | 26,620 | 1,601 | 164,833 | |||
| Acquisition of a company: | ||||||
| Assets acquired | 404,139 | -- | -- | |||
| Liabilities assumed | 104,321 | -- | -- | |||
| Noncontrolling interests | 118 | -- | -- | |||
| Cash paid | (299,700) | -- | -- | |||
| Cash acquired | 70,642 | -- | -- | |||
| Acquisition of a newly controlled company, net of cash acquired | (229,058) | -- | -- | |||
| (Note1) The U.S. dollar amounts represent translations of yen amounts at the rate of JPY102.98 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 March 31, 2014. | ||||||
4th Quarter FY2013 Consolidated Financial Results (3 months)
The following tables are highlight data of 4th Quarter FY2013 (3 months) consolidated financial results (unaudited, for the 3 months ended March 31, 2014).
| Operating Results Summary | ||||||
| 4Q12 | 4Q13 | YoY % Change | ||||
| JPY millions | JPY millions | |||||
| Total Revenues: | 29,558 | 31,526 | 6.7 | |||
| Network Services | 16,717 | 16,984 | 1.6 | |||
| Systems Integration (SI) | 11,604 | 13,273 | 14.4 | |||
| Equipment Sales | 623 | 512 | (17.9) | |||
| ATM Operation Business | 614 | 757 | 23.3 | |||
| Cost of Revenues: | 23,229 | 25,977 | 11.8 | |||
| Network Services | 12,720 | 13,282 | 4.4 | |||
| Systems Integration (SI) | 9,431 | 11,684 | 23.9 | |||
| Equipment Sales | 569 | 465 | (18.3) | |||
| ATM Operation Business | 509 | 546 | 7.3 | |||
| SG&A Expenses and R&D | 3,619 | 4,036 | 11.5 | |||
| Operating Income | 2,710 | 1,513 | (44.2) | |||
| Income before Income Tax Expense | 2,811 | 1,649 | (41.3) | |||
| Net Income attributable to IIJ | 2,188 | 1,518 | (30.6) | |||
| Network Service Revenue Breakdown | |||
| 4Q12 | 4Q13 | YoY % Change | |
| JPY millions | JPY millions | ||
| Internet Connectivity Service (Corporate Use) | 4,244 | 4,085 | (3.7) |
| IP Service | 2,782 | 2,539 | (8.8) |
| IIJ FiberAccess/F and IIJ DSL/F | 773 | 779 | 0.9 |
| IIJ Mobile Service | 629 | 709 | 12.8 |
| Others | 60 | 58 | (3.0) |
| Internet Connectivity Service (Home Use) | 1,356 | 1,628 | 20.1 |
| Under IIJ Brand | 382 | 696 | 82.2 |
| hi-ho | 811 | 749 | (7.7) |
| OEM | 163 | 183 | 12.5 |
| WAN Services | 6,288 | 6,220 | (1.1) |
| Outsourcing Services | 4,829 | 5,051 | 4.6 |
| Network Services Revenues | 16,717 | 16,984 | 1.6 |
Reconciliation of Non-GAAP Financial Measures (4th Quarter FY2013 (3 months))
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 | ||
| 4Q12 | 4Q13 | |
| JPY millions | JPY millions | |
| Adjusted EBITDA | 4,722 | 3,832 |
| Depreciation and Amortization | (1,964) | (2,319) |
| Impairment loss on other intangible assets | (48) | -- |
| Operating Income | 2,710 | 1,513 |
| Other Income (Expense) | 101 | 136 |
| Income Tax Expense | 653 | (47) |
| Equity in Net Income (loss) of Equity Method Investees | 36 | 13 |
| Net income | 2,194 | 1,709 |
| Net Loss (Income) attributable to non-controlling interests | (6) | (191) |
| Net Income attributable to IIJ | 2,188 | 1,518 |
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 | ||
| 4Q12 | 4Q13 | |
| JPY millions | JPY millions | |
| CAPEX, including capital leases | 1,953 | 2,697 |
| Acquisition of Assets by Entering into Capital Leases | 774 | 801 |
| Purchase of Property and Equipment | 1,179 | 1,896 |
| Internet Initiative Japan Inc. | ||||||
| Quarterly Consolidated Statements of Income (Unaudited) | ||||||
| (Three Months ended March 31, 2013 and March 31, 2014) | ||||||
| Three Months Ended March 31, 2013 | Three Months Ended March 31, 2014 | |||||
| Thousands of JPY | Thousands of U.S. Dollars | Thousands of JPY | ||||
| REVENUES: | ||||||
| Network services: | ||||||
| Internet connectivity services (corporate use) | 4,244,105 | 39,674 | 4,085,649 | |||
| Internet connectivity services (home use) | 1,355,560 | 15,807 | 1,627,764 | |||
| WAN services | 6,288,667 | 60,399 | 6,219,920 | |||
| Outsourcing services | 4,829,036 | 49,048 | 5,050,931 | |||
| Total | 16,717,368 | 164,928 | 16,984,264 | |||
| Systems integration: | ||||||
| Systems Construction | 6,000,759 | 68,349 | 7,038,521 | |||
| Systems Operation and Maintenance | 5,603,166 | 60,539 | 6,234,333 | |||
| Total | 11,603,925 | 128,888 | 13,272,854 | |||
| Equipment sales | 623,603 | 4,974 | 512,236 | |||
| ATM operation business | 613,500 | 7,346 | 756,554 | |||
| Total revenues | 29,558,396 | 306,136 | 31,525,908 | |||
| COST AND EXPENSES: | ||||||
| Cost of network services | 12,720,525 | 128,976 | 13,281,985 | |||
| Cost of systems integration | 9,431,170 | 113,461 | 11,684,188 | |||
| Cost of equipment sales | 568,947 | 4,511 | 464,561 | |||
| Cost of ATM operation business | 509,138 | 5,307 | 546,532 | |||
| Total cost | 23,229,780 | 252,255 | 25,977,266 | |||
| Sales and marketing | 2,027,664 | 21,383 | 2,201,980 | |||
| General and administrative | 1,485,233 | 16,785 | 1,728,538 | |||
| Research and development | 105,940 | 1,025 | 105,561 | |||
| Total cost and expenses | 26,848,617 | 291,448 | 30,013,345 | |||
| OPERATING INCOME | 2,709,779 | 14,688 | 1,512,563 | |||
| OTHER INCOME (EXPENSE): | ||||||
| Dividend income | 2,604 | 27 | 2,744 | |||
| Interest income | 5,819 | 78 | 8,049 | |||
| Interest expense | (69,417) | (605) | (62,263) | |||
| Foreign exchange gains | 124,841 | 163 | 16,783 | |||
| Net gain on other investments | -- | 1,369 | 140,970 | |||
| Other—net | 37,272 | 297 | 30,613 | |||
| Other expense — net | 101,119 | 1,329 | 136,896 | |||
| INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY IN NET INCOME IN EQUITY METHOD INVESTEES | 2,810,898 | 16,017 | 1,649,459 | |||
| INCOME TAX EXPENSE (BENEFIT) | 653,414 | (450) | (46,385) | |||
| EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES | 36,377 | 125 | 12,842 | |||
| NET INCOME | 2,193,861 | 16,592 | 1,708,686 | |||
| LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (5,492) | (1,850) | (190,519) | |||
| NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC. | 2,188,369 | 14,742 | 1,518,167 | |||
| Three Months Ended March 31, 2013 | Three Months Ended March 31, 2014 | |||||
| NET INCOME PER SHARE | ||||||
| BASIC WEIGHTED-AVERAGE NUMBER OF SHARES | 40,536,800 | 45,939,091 | ||||
| DILUTED WEIGHTED-AVERAGE NUMBER OF SHARES | 40,583,800 | 45,998,489 | ||||
| BASIC WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) | 81,073,600 | 91,878,182 | ||||
| DILUTED WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) | 81,167,600 | 91,996,978 | ||||
| BASIC NET INCOME PER SHARE (JPY / U.S. Dollars / JPY) | 53.98 | 0.32 | 33.05 | |||
| DILUTED NET INCOME PER SHARE (JPY / U.S. Dollars / JPY) | 53.92 | 0.32 | 33.00 | |||
| BASIC NET INCOME PER ADS EQUIVALENT (JPY / U.S. Dollars / JPY) | 26.99 | 0.16 | 16.52 | |||
| DILUTED NET INCOME PER ADS EQUIVALENT (JPY / U.S. Dollars / JPY) | 26.96 | 0.16 | 16.50 | |||
| (Note) The U.S. dollar amounts represent translations of yen amounts at the rate of JPY102.98 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 March 31, 2014. | ||||||
| Internet Initiative Japan Inc. | ||||||
| Quarterly Consolidated Statements of Cash Flows (Unaudited) | ||||||
| (Three Months ended March 31, 2013 and March 31, 2014) | ||||||
| Three Months Ended March 31, 2013 | Three Months Ended March 31, 2014 | |||||
| Thousands of JPY | Thousands of U.S. Dollars | Thousands of JPY | ||||
| OPERATING ACTIVITIES: | ||||||
| Net income | 2,193,861 | 16,592 | 1,708,686 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 1,964,291 | 22,517 | 2,318,779 | |||
| Impairment loss on other intangible assets | 48,000 | -- | -- | |||
| Provision for retirement and pension costs, less payments | 48,701 | 522 | 53,784 | |||
| Reversal of allowance for doubtful accounts and advances | (10,570) | (11) | (1,127) | |||
| Loss on disposal of property and equipment | 10,045 | 700 | 72,044 | |||
| Net gain on sales of other investments | -- | (1,369) | (140,970) | |||
| Foreign exchange losses (gains), net | (38,699) | 247 | 25,478 | |||
| Equity in net income of equity method investees | (36,377) | (125) | (12,842) | |||
| Deferred income tax benefit | (679,103) | (10,588) | (1,090,417) | |||
| Others | 26,224 | 174 | 17,881 | |||
| Changes in operating assets and liabilities net of effects from acquisition of business and a company: | ||||||
| Increase in accounts receivable | (3,341,586) | (23,499) | (2,419,892) | |||
| Decrease (increase) in net investment in sales-type lease ―noncurrent | (202,461) | 367 | 37,794 | |||
| Decrease in inventories | 489,685 | 8,239 | 848,410 | |||
| Decrease in prepaid expenses | 757,088 | 8,245 | 849,097 | |||
| Increase in other current and noncurrent assets | (716,734) | (10,090) | (1,039,069) | |||
| Increase in accounts payable | 1,821,357 | 11,988 | 1,234,546 | |||
| Increase in income taxes payable | 1,274,354 | 8,726 | 898,628 | |||
| Increase in deferred income ―noncurrent | 238,400 | 970 | 99,854 | |||
| Decrease in accrued expenses, other current and noncurrent liabilities | (87,505) | (3,941) | (405,831) | |||
| Net cash provided by operating activities | 3,758,971 | 29,664 | 3,054,833 | |||
| INVESTING ACTIVITIES: | ||||||
| Purchases of property and equipment | (1,178,696) | (18,415) | (1,896,347) | |||
| Proceeds from sales of property and equipment | 71,272 | 2,135 | 219,831 | |||
| Purchases of available-for-sale securities | (7,653) | (670) | (69,051) | |||
| Purchases of other investments | (60,620) | (565) | (58,154) | |||
| Investment in an equity method investee | -- | (1,941) | (199,920) | |||
| Proceeds from sales of other investments | 17,310 | 3,221 | 331,740 | |||
| Payments of guarantee deposits | (77,463) | (73) | (7,524) | |||
| Refund of guarantee deposits | 1,986 | 121 | 12,415 | |||
| Payments for refundable insurance policies | (183) | (137) | (14,090) | |||
| Other | (8,002) | (404) | (41,557) | |||
| Net cash used in financing activities | (1,242,049) | (16,728) | (1,722,657) | |||
| Three Months Ended March 31, 2013 | Three Months Ended March 31, 2014 | |||||
| Thousands of JPY | Thousands of U.S. Dollars | Thousands of JPY | ||||
| FINANCING ACTIVITIES: | ||||||
| Principal payments under capital leases | (938,318) | (9,970) | (1,026,718) | |||
| Other | -- | 1 | 150 | |||
| Net cash used in financing activities | (938,318) | (9,969) | (1,026,568) | |||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | 31,972 | 128 | 13,142 | |||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 1,610,576 | 3,095 | 318,750 | |||
| CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD | 10,648,296 | 214,628 | 22,102,350 | |||
| CASH AND CASH EQUIVALENTS, END OF THE PERIOD | 12,258,872 | 217,723 | 22,421,100 | |||
| (Note1) The U.S. dollar amounts represent translations of yen amounts at the rate of JPY102.98 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 March 31, 2014. | ||||||
Note: The following information is provided to disclose Internet Initiative Japan Inc. ("IIJ") financial results (unaudited) for the fiscal year ended March 31, 2014 ("FY2013") in the form defined by the Tokyo Stock Exchange.
Consolidated Financial Results for the Fiscal Year Ended March 31, 2014
[Under accounting principles generally accepted in the United States ("U.S. GAAP")]
| May 15, 2014 | ||
| Company name: Internet Initiative Japan Inc. | Exchange listed: Tokyo Stock Exchange First Section | |
| Stock code number: 3774 | URL: http://www.iij.ad.jp/ | |
| Representative: Eijiro Katsu, President and Representative Director | ||
| Contact: Akihisa Watai, Managing Director and CFO | TEL: (03) 5259-6500 | |
| Scheduled date for annual general shareholder's meeting: June 25, 2014 | ||
| Scheduled date for dividend payment: June 26, 2014 | ||
| Scheduled date for filing of annual report (Yuka-shoken-houkokusho) to Japan's regulatory organization: June 27, 2014 | ||
| Supplemental material on annual results: Yes | ||
| Presentation on annual results: Yes (for institutional investors and analysts) | ||
| (Amounts of less than JPY one million are rounded) | ||
1. Consolidated Financial Results for the Fiscal Year Ended March 31, 2014
(April 1, 2013 to March 31, 2014)
| (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 | % | ||||||||
| Fiscal Year Ended March 31, 2014 | 114,272 | 7.6 | 5,723 | (26.2) | 6,275 | (19.1) | 4,442 | (16.2) | |||||||
| Fiscal Year Ended March 31, 2013 | 106,248 | 9.2 | 7,753 | 22.0 | 7,757 | 29.8 | 5,301 | 45.6 | |||||||
| (Note1) Total comprehensive income attributable to IIJ | Fiscal Year Ended March 31, 2014: JPY5,891 million (up 5.4% YoY) | ||||||||||||||
| Fiscal Year Ended March 31, 2013: JPY5,588 million (up 50.9% YoY) | |||||||||||||||
| (Note2) Income before income tax expense represents income from operations before income tax expense and equity in net income in equity method investees, respectively, in IIJ's consolidated financial statements. | |||||||||||||||
| Basic Net Income attributable to IIJ per Share | Diluted Net Income attributable to IIJ per Share | Net Income attributable to IIJ to Total Shareholders' Equity | Income before Income Tax Expense to Total Assets | Total Revenues Operating Margin Ratio | ||||||
| JPY | JPY | % | % | % | ||||||
| Fiscal Year Ended March 31, 2014 | 100.26 | 100.14 | 9.1 | 6.7 | 5.0 | |||||
| Fiscal Year Ended March 31, 2013 | 130.76 | 130.65 | 15.1 | 10 | 7.3 | |||||
| (Reference) Equity in net income of equity method investees | Fiscal Year Ended March 31, 2014: JPY204 million | |||||||||
| Fiscal Year Ended March 31, 2013: JPY168 million | ||||||||||
| (Note) IIJ conducted a 1:200 stock split on common stock with an effective date of October 1, 2012. Accordingly, basic net income attributable to IIJ per share and diluted net income attributable to IIJ per share would have been calculated as if the stock split were conducted at the beginning of the fiscal year ended March 31, 2013. | ||||||||||
| (2) Consolidated Financial Position | ||||||||||
| Total Assets | Total Equity | Total IIJ Shareholders' Equity | Total IIJ Shareholders' Equity to Total Assets | Total IIJ Shareholders' Equity per Share | ||||||
| JPY millions | JPY millions | JPY millions | % | JPY | ||||||
| As of March 31, 2014 | 103,867 | 60,181 | 59,912 | 57.7 | 1,304.17 | |||||
| As of March 31, 2013 | 82,111 | 37,634 | 37,607 | 45.8 | 927.72 | |||||
| (3) Consolidated Cash Flow | |||||||||
| Operating Activities | Investing Activities | Financing Activities | Cash and Cash Equivalents (End of the Period) | ||||||
| JPY millions | JPY millions | JPY millions | JPY millions | ||||||
| Fiscal year ended March 31, 2014 | 8,787 | (10,203) | 11,382 | 22,421 | |||||
| Fiscal year ended March 31, 2013 | 9,639 | (5,946) | (4,996) | 12,259 | |||||
| 2. Dividends | ||||||||
| Dividend per Shares | ||||||||
| 1Q-end | 2Q-end | 3Q-end | Year-end | Total | Total cash dividends for the year | Payout Ratio (consolidated) | Ratio of Dividends to Shareholder's Equity (consolidated) | |
| JPY | JPY | JPY | JPY | JPY | JPY millions | % | % | |
| Fiscal Year Ended March 31, 2013 | -- | 1,750 | -- | 10.00 | 1,760.00 | 760 | 14.3 | 2.2 |
| Fiscal Year Ended March 31, 2014 | -- | 11.00 | -- | 11.00 | 22.00 | 1,011 | 21.9 | 2.0 |
| Fiscal Year Ending March 31, 2015 (forecast) | -- | 11.00 | -- | 11.00 | 22.00 | 22.5 | ||
| (Note) IIJ conducted a 1:200 stock split on common stock with an effective date of October 1, 2012. 2Q-end dividend (interim dividend) for the fiscal year ended March 31, 2013 does not take the stock split into consideration. The dividends for 2Q-end and the total dividend for the fiscal year ended March 31, 2013 would have been JPY8.75 and JPY18.75 respectively if the stock split were conducted at the beginning of the fiscal year ended March 31, 2013. | ||||||||
| 3. Target of Consolidated Financial Results for the Fiscal Year Ending March 31, 2015 | |||||||||
| (April 1, 2014 through March 31, 2015) | (% 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, 2014 | 57,500 | 5.7 | 2,800 | (6.9) | 2,700 | (19.3) | 1,750 | (20.6) | 38.09 |
| Fiscal Year Ending March 31, 2015 | 123,000 | 7.6 | 7,200 | 25.8 | 7,000 | 11.6 | 4,500 | 1.3 | 97.96 |
| * Notes | |
| (1) Changes in Significant Subsidiaries for the Fiscal Year Ended March 31, 2014 | |
| (Changes in significant subsidiaries for the Fiscal Year Ended March 31, 2014 which resulted in changes in scope of consolidation): None | |
| (2) Changes in Significant Accounting and Reporting Policies for the Consolidated Financial Statements | |
| 1) Changes due to the revision of accounting standards: No | |
| 2) Others: No | |
| (3) Number of Shares Outstanding (Shares of Common Stock) | |
| 1) The number of shares outstanding (inclusive of treasury stock): | |
| As of March 31, 2014: 46,697,800 shares | |
| As of March 31, 2013: 41,295,600 shares | |
| 2) The number of treasury stock: | |
| As of March 31, 2014: 758,709 shares | |
| As of March 31, 2013: 758,800 shares | |
| 3) The weighted average number of shares outstanding: | |
| For the Fiscal Year Ended March 31, 2014: 44,306,680 shares | |
| For the Fiscal Year Ended March 31, 2013: 40,536,800 shares | |
| (Note) IIJ conducted a 1:200 stock split on common stock with an effective date of October 1, 2012. Number of shares outstanding (shares of common stock) in the above would have been calculated as if the stock split were conducted at the beginning of the fiscal year ended March 31, 2013. | |
[English Translation]
May 15, 2014
Company name: 1-105 Kanda Jimbo-cho, Chiyoda-ku, Tokyo
Internet Initiative Japan Inc.
Company representative: Eijiro Katsu, President and Representative Director
(Stock Code Number: 3774 The First Section of the Tokyo Stock Exchange)
Contact: Akihisa Watai, Managing Director and CFO
TEL: 03-5259-6500
Information Pertaining to Our Largest Shareholder
| 1. About Our Largest Shareholder (As of March 31, 2014) | |||
| Name | Relationship | Its Ownership Percentage (%) | Securities Exchanges where its Shares are Listed |
| Nippon Telegraph and Telephone Corporation ("NTT") | IIJ is NTT's affiliate company | 26.4 | Tokyo Stock Exchange (First Section) |
| (4.4) | New York Stock Exchange | ||
| (Notes) The percentage in parentheses is the indirect ownership by NTT included in the figure above. | |||
| 2. Position of the Listed Company (IIJ) within NTT Group and other relationships |
| a) Position of the Listed Company (IIJ) within NTT Group |
| The ownership percentage by NTT, which is IIJ's largest shareholder, was 26.4% as of March 31, 2014, including its indirect ownership. However, IIJ's business activities are not affected by NTT's ownership in IIJ and IIJ is maintaining its management independence. |
| b) Personal Relationships with NTT Group |
| IIJ's board of directors consists of 12 members including 4 outside directors as of May 15, 2014. Takashi Hiroi, an outside director (part-time director) of IIJ, is an employee of NTT (General Manager of Business Planning Division of NTT), and also an outside company auditor of NTT Urban Development Corporation. However, he is monitoring IIJ's business operations as an outside director and does not have any personal relationships, such as family relationships, with IIJ's other directors and auditors. He did not acquire any interest such as capital or business relationships upon becoming an outside director. |
| 3. Business Relationship with NTT Group |
| IIJ uses services provided by Nippon Telegraph and Telephone East Corporation ("NTT East") and Nippon Telegraph and Telephone West Corporation ("NTT West") for a significant portion of IIJ's access circuits as well as services provided by NTT Communications Corporation ("NTT Communications") for a significant portion of IIJ's domestic and international backbones. The amount paid to NTT East and West, and to NTT Communications for their telecommunication circuits was JPY1,478 million and JPY3,260 million, respectively for the fiscal year ended March 31, 2014. |
| IIJ leases a part of Internet data center facilities from NTT Group companies to provide Internet data center services to IIJ's customers. The amount paid to NTT Group related to the lease of Internet data center facilities were JPY1,607 million for the fiscal year ended March 31, 2014. |
| 4. Policy Concerning Measures to Protect Minority Shareholders in Transactions with NTT Group |
| Business transactions with the NTT Group are within the scope of normal business practices and there is no special contract made in relation to the investment by NTT Group. |
CONTACT: IIJ Investor Relations
Tel: +81-3-5259-6500
E-mail: ir@iij.ad.jp
URL: http://www.iij.ad.jp/en/ir