FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 under
the Securities Exchange Act of 1934
For February 9, 2007
Commission File Number: 0-30204
-------
Internet Initiative Japan Inc.
(Translation of registrant's name into English)
Jinbocho Mitsui Bldg. 1-105 Kanda Jinbo-cho, Chiyoda-ku, Tokyo 101-0051, Japan
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F:
Form 20-F [ X ] Form 40-F [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1): ____
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a
Form 6-K if submitted solely to provide an attached annual report to security
holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(7): ____
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a
Form 6-K if submitted to furnish a report or other document that the registrant
foreign private issuer must furnish and make public under the laws of the
jurisdiction in which the registrant is incorporated, domiciled or legally
organized (the registrant's "home country"), or under the rules of the home
country exchange on which the registrant's securities are traded, as long as the
report or other document is not a press release, is not required to be and has
not been distributed to the registrant's security holders, and, if discussing a
material event, has already been the subject of a Form 6-K submission or other
Commission filing on EDGAR.
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [ ] No [ X ]
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-
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EXHIBIT INDEX
Exhibit Date Description of Exhibit
------- ---- ----------------------
1 2007/02/08 IIJ Announces Third Quarter Results for the Year
Ending March 31, 2007
2 2007/02/08 IIJ Announces its Plan for the Annual Dividend for
the Fiscal Year Ending March 31, 2007
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Internet Initiative Japan Inc.
Date: February 9, 2007 By: /s/ Koichi Suzuki
---------------------------------------
Koichi Suzuki
President, Chief Executive Officer and
Representative Director
EXHIBIT 1
---------
IIJ Announces Third Quarter Results for the Year Ending March 31, 2007
Favorable Results Continued Largely Due to Increasing Outsourcing
and Integration Demand
TOKYO--(BUSINESS WIRE)--Feb. 8, 2007--Internet Initiative Japan
Inc. (Nasdaq: IIJI, Tokyo Stock Exchange First Section: 3774) ("IIJ"),
one of Japan's leading Internet-access and comprehensive network
solutions providers, today announced its financial results for the
third quarter of the fiscal year ending March 31, 2007 ("FY2006").(1)
Highlights of Third Quarter FY2006 Results
-- Revenue totaled JPY 13,587 million ($114.2 million), an
increase of 14.5% from 3Q05.
-- Operating income was JPY 986 million ($8.3 million), an
increase of 42.7% from 3Q05.
-- Net income was JPY 1,405 million ($11.8 million), an increase
of 18.2% from 3Q05.
Target for FY2006(2)
-- IIJ revised its targets for FY2006 that were announced on
November 2, 2006. The revised targets are JPY 56.5 billion for
revenues, JPY 3.4 billion for operating income, JPY 5.2
billion for income before income tax expense (benefit)(3) and
JPY 5.2 billion for net income.
-- As announced today, we plan to pay an annual cash dividend of
JPY 1,500 per one share of common stock for FY2006.
Overview of 3rd Quarter of FY2006 Financial Results and Business
Outlook(2)
"Our financial results continued to be very favorable this
quarter," said Koichi Suzuki, President and CEO of IIJ. "This was
largely due to continued increasing demand from our corporate
customers for outsourcing services and systems integration. Corporate
customers are expanding their use of Internet Protocol in their
information systems and have been more willing to invest in their
information systems to increase their competitiveness. To capture the
demand, we have been developing products based on our high engineering
skills and enhancing our solutions line-up. We started to provide
services such as "IIJ Secure MX Service" and "IIJ Managed Firewall"
this quarter. "IIJ Secure MX Service" is a service that provides
comprehensive e-mail security functions for corporate risk management,
such as anti-spam, the recording of all incoming and outgoing e-mails,
the encryption of e-mail connections and the provision of on-line
storage. We have received many orders and inquiries for this service
since we introduced it last October and currently we provide our
anti-spam solutions to over 200,000 e-mail accounts. We are also
actively involved in research and development activities, such as a
pilot program for broadcasting high quality video content of NHK
(Japan Broadcasting Corporation) to realize a content distribution
platform. We also take part in various projects to develop safer, more
secure and more effective usage of the Internet, such as the "Secure
Service Platform", a technology to realize a safer and more secure
Internet environment, and the international logistics pilot program
using RFID."
"Today, we also announced that we plan to pay an annual cash
dividend for FY2006, subject to an approval by our general
shareholders' meeting," continued Suzuki. "The payment of dividends
will be the first time since our establishment, and we continue to
make efforts to pay dividends to our shareholders while simultaneously
enhancing our financial position, enhancing our business in the mid
and long-term and retaining earnings for new business development
(please refer to the press release that we made today for the
details)."
"In consideration of our achievements through the third quarter,
we revised our target for our financial results for FY2006 favorably,"
said Akihisa Watai, CFO of IIJ. "We believe that the increase in
value-added services and systems integration revenues will continue to
contribute to continued growth in revenues and income."
3rd Quarter FY2006 Financial Results
----------------------------------------------------------------------
Operating Results Summary (JPY in millions)
----------------------------------------------------------------------
YoY %
3Q06 3Q05 change
----------------------------------------------------------------------
Total Revenues 13,587 11,870 14.5%
----------------------------------------------------------------------
Total Costs 10,727 9,652 11.1%
----------------------------------------------------------------------
SG&A Expenses and R&D 1,874 1,527 22.7%
----------------------------------------------------------------------
Operating Income 986 691 42.7%
----------------------------------------------------------------------
Income before Income Tax Expense 1,603 1,333 20.3%
----------------------------------------------------------------------
Net Income 1,405 1,189 18.2%
----------------------------------------------------------------------
Revenues
Revenues in 3Q06 totaled JPY 13,587 million, an increase of 14.5%
from JPY 11,870 million in 3Q05.
Revenues (JPY in millions)
----------------------------------------------------------------------
YoY %
3Q06 3Q05 change
----------------------------------------------------------------------
Total Revenues: 13,587 11,870 14.5%
----------------------------------------------------------------------
Connectivity and Value-added Services 6,100 5,840 4.4%
----------------------------------------------------------------------
Systems Integration 7,093 5,261 34.8%
----------------------------------------------------------------------
Equipment Sales 394 769 (48.8%)
----------------------------------------------------------------------
Connectivity and Value-added Services ("VAS") revenues were JPY
6,100 million in 3Q06, an increase of 4.4% compared to 3Q05. The
increase was mainly due to an increase in revenues from value-added
services.
SI revenues increased 34.8% to JPY 7,093 million in 3Q06 compared
to 3Q05. The increase was due to an increase in one-time revenues from
network design, construction and consultation and a steady increase in
monthly recurring revenues from network operation and maintenance.
Equipment sales revenues were JPY 394 million in 3Q06, a decrease
of 48.8% compared to 3Q05.
Cost and expense
Cost of revenues was JPY 10,727 million in 3Q06, an increase of
11.1% compared to 3Q05.
Cost of Revenues (JPY in millions)
----------------------------------------------------------------------
YoY %
3Q06 3Q05 change
----------------------------------------------------------------------
Cost of Revenues: 10,727 9,652 11.1%
----------------------------------------------------------------------
Connectivity and Value-added Services 5,073 5,035 0.7%
----------------------------------------------------------------------
Systems Integration 5,322 3,910 36.1%
----------------------------------------------------------------------
Equipment Sales 332 707 (52.9%)
----------------------------------------------------------------------
Cost of Connectivity and VAS revenues was JPY 5,073 million in
3Q06, an increase of 0.7% compared to 3Q05.
Cost of SI revenues was JPY 5,322 million in 3Q06, an increase of
36.1% compared to 3Q05. The increase was mainly due to an increase in
revenues from systems integration projects.
Cost of Equipment Sales revenues was JPY 332 million in 3Q06, a
decrease of 52.9% compared to 3Q05. The decrease was mainly due to a
decrease in revenues from equipment sales.
Sales and marketing expenses were JPY 910 million in 3Q06, an
increase of 20.6% compared to 3Q05. The increase was mainly due to an
increase in advertising expenses and personnel expenses along with
business expansion.
General and administrative expenses were JPY 924 million in 3Q06,
an increase of 25.0% compared to 3Q05. The increase was mainly due to
an increase in personnel expenses.
Operating income
Operating income was JPY 986 million in 3Q06, an increase of 42.7%
compared to 3Q05. The increase was mainly due to the increase in
revenues from relatively higher-margin value-added services and
systems integration.
Other income and others
Other income in 3Q06 was JPY 617 million, a decrease of 3.8% from
JPY 642 million in 3Q05. The gain from the sale of available-for-sale
securities in 3Q06 was JPY 757 million.
Income tax expense in 3Q06 was JPY 92 million, compared to income
tax expense of JPY 28 million in 3Q05. Minority interests in earnings
of subsidiaries in 3Q06 was JPY 70 million. Equity in net loss of
equity method investees in 3Q06 was JPY 36 million.
Net income was JPY 1,405 million in 3Q06, an increase of 18.2%
compared to 3Q05.
3rd Quarter FY2006 Business Review
Analysis by Service
Connectivity and Value-added Services
For dedicated access services, the number of contracts increased
by 2,939 to 16,663 compared to 3Q05. Total contracted bandwidth
increased by 185.5 Gbps to 260.0 Gbps compared to 3Q05.
Dedicated access service revenues were JPY 2,703 million, an
increase of 4.8% compared to 3Q05. The increase was mainly due to the
shift to higher speed bandwidth by customers in IP Services, which are
mainly used for Internet connections in corporate headquarters and
data centers, and an increase in the number of contracts for broadband
services that connect corporate branch offices and shops through
Internet VPN.
Dial-up access service revenues were JPY 604 million in 3Q06, a
decrease of 6.6% compared to 3Q05, mainly due to a decrease in
revenues from services for individual customers, such as IIJ4U.
VAS revenues were JPY 1,861 million in 3Q06, an increase of 12.9%
compared to 3Q05. The increase was due to an increase in revenues from
various types of services, such as e-mail, security and Internet VPN
related services and data center services, though there was a factor
to decrease the revenues on quarter over quarter comparison, such as a
merger between our customers.
Other revenues were JPY 932 million in 3Q06, a decrease of 3.4%
compared to 3Q05.
As a result, revenues from Internet connectivity and value-added
services in 3Q06 were JPY 6,100 million, an increase of 4.4% compared
to 3Q05. The gross margin for Internet connectivity and value-added
services in 3Q06 was JPY 1,028 million, an increase of 27.6% compared
to 3Q05. The gross margin ratio in 3Q06 was 16.8%, compared to 13.8%
in 3Q05.
Number of Contracts for Connectivity Services
----------------------------------------------------------------------
YoY
3Q06 3Q05 Change
----------------------------------------------------------------------
Dedicated Access Service Contracts 16,663 13,724 2,939
----------------------------------------------------------------------
IP Service (Low Bandwidth: 64kbps-
768kbps) 69 51 18
----------------------------------------------------------------------
IP Service (Medium Bandwidth: 1Mbps-
99Mbps) 685 645 40
----------------------------------------------------------------------
IP Service (High Bandwidth: 100Mbps-) 213 145 68
----------------------------------------------------------------------
IIJ T1 Standard and IIJ Economy 53 154 (101)
----------------------------------------------------------------------
IIJ Data Center Connectivity Service 264 240 24
----------------------------------------------------------------------
IIJ FiberAccess/F and IIJ DSL/F
(Broadband Services) 15,379 12,489 2,890
----------------------------------------------------------------------
Dial-up Access Service Contracts 570,880 647,464 (76,584)
----------------------------------------------------------------------
Dial-up Access Services, under IIJ
Brand 58,884 61,640 (2,756)
----------------------------------------------------------------------
Dial-up Access Services, OEM(4) 511,996 585,824 (73,828)
----------------------------------------------------------------------
Total Contracted Bandwidth 260.0Gbps 185.5Gbps 74.5Gbps
----------------------------------------------------------------------
Connectivity and VAS Revenue Breakdown and Cost (JPY in millions)
----------------------------------------------------------------------
YoY %
3Q06 3Q05 Change
----------------------------------------------------------------------
Connectivity Service Revenues 3,307 3,227 2.5%
----------------------------------------------------------------------
Dedicated Access Service Revenues 2,703 2,580 4.8%
----------------------------------------------------------------------
IP Service (5) 2,113 1,987 6.3%
----------------------------------------------------------------------
IIJ T1 Standard and IIJ Economy 43 98 (55.8%)
----------------------------------------------------------------------
IIJ FiberAccess/F and IIJ DSL/F
(Broadband Services) 547 495 10.6%
----------------------------------------------------------------------
Dial-up Access Service Revenues 604 647 (6.6%)
----------------------------------------------------------------------
Under IIJ Brand 405 421 (3.8%)
----------------------------------------------------------------------
OEM 199 226 (11.9%)
----------------------------------------------------------------------
VAS Revenues 1,861 1,649 12.9%
----------------------------------------------------------------------
Other Revenues 932 964 (3.4%)
----------------------------------------------------------------------
Total Connectivity and VAS Revenues 6,100 5,840 4.4%
----------------------------------------------------------------------
Cost of Connectivity and VAS 5,073 5,035 0.7%
----------------------------------------------------------------------
Backbone Cost (included in the cost
of Connectivity and VAS) 888 884 0.5%
----------------------------------------------------------------------
Connectivity and VAS Gross Margin Ratio 16.8% 13.8% --
----------------------------------------------------------------------
Systems Integration
Revenue from systems integration was JPY 7,093 million in 3Q06, an
increase of 34.8% compared to 3Q05. The increase was due to an
increase of 23.7% in monthly recurring revenues from outsourced
operations compared to 3Q05 as well as a significant increase of 47.7%
in one-time revenues from the construction of networks compared to
3Q05. The gross margin for systems integration in 3Q06 was JPY 1,772
million and the gross margin ratio in 3Q06 was 25.0%, compared to
25.7% in 3Q05.
Systems Integration Revenue Breakdown and Cost (JPY in millions)
----------------------------------------------------------------------
YoY %
3Q06 3Q05 Change
----------------------------------------------------------------------
Systems Integration Revenues 7,093 5,261 34.8%
----------------------------------------------------------------------
Systems Integration 3,605 2,440 47.7%
----------------------------------------------------------------------
Outsourced Operation 3,488 2,821 23.7%
----------------------------------------------------------------------
Cost of Systems Integration 5,322 3,910 36.1%
----------------------------------------------------------------------
Systems Integration Gross Margin Ratio 25.0% 25.7% --
----------------------------------------------------------------------
Equipment Sales
Revenue from equipment sales was JPY 394 million in 3Q06. The
gross margin ratio for equipment sales in 3Q06 was 15.4%, compared to
8.0% in 3Q05.
Equipment Sales Revenue and Cost (JPY in millions)
YoY %
3Q06 3Q05 Change
----------------------------------------------------------------------
Equipment Sales Revenues 394 769 (48.8%)
----------------------------------------------------------------------
Cost of Equipment Sales 332 707 (52.9%)
----------------------------------------------------------------------
Equipment Sales Gross Margin Ratio 15.4% 8.0% --
----------------------------------------------------------------------
Other Financial Statistics
Other Financial Statistics (JPY in millions)
----------------------------------------------------------------------
YoY %
3Q06 3Q05 change
----------------------------------------------------------------------
Adjusted EBITDA(6) 2,044 1,751 16.8%
----------------------------------------------------------------------
CAPEX, including capital leases(7) 1,250 1,697 (26.3%)
----------------------------------------------------------------------
Depreciation and amortization 1,058 1,060 (0.1%)
----------------------------------------------------------------------
Reconciliation of Non-GAAP Financial Measures
The following table summarizes the reconciliation of adjusted
EBITDA to net income in IIJ's consolidated statements of income that
are prepared in accordance with U.S. GAAP and presented in Appendix 2:
Adjusted EBITDA (JPY in millions)
----------------------------------------------------------------------
3Q06 3Q05
----------------------------------------------------------------------
Adjusted EBITDA 2,044 1,751
----------------------------------------------------------------------
Depreciation and Amortization (1,058) (1,060)
----------------------------------------------------------------------
Operating Income 986 691
----------------------------------------------------------------------
Other Income 617 642
----------------------------------------------------------------------
Income Tax Expense (Benefit) 92 28
----------------------------------------------------------------------
Minority Interests in Earnings of Subsidiaries (70) (137)
----------------------------------------------------------------------
Equity in Net Income (Loss) of Equity Method
Investees (36) 21
----------------------------------------------------------------------
Net Income 1,405 1,189
----------------------------------------------------------------------
The following table summarizes the reconciliation of capital
expenditures to purchase of property and equipment in IIJ's
consolidated statements of cash flows that are prepared and presented
in accordance with U.S. GAAP and presented in Appendix 3:
CAPEX (JPY in millions)
----------------------------------------------------------------------
3Q06 3Q05
----------------------------------------------------------------------
CAPEX, including capital leases 1,250 1,697
----------------------------------------------------------------------
Acquisition of Assets by Entering into Capital Leases 824 1,308
----------------------------------------------------------------------
Purchase of Property and Equipment 426 389
----------------------------------------------------------------------
Target
In consideration of recent trends in the Company's financial
results mentioned in the overview of the financial results and
business outlook, IIJ revised its targets for its FY2006 financial
results. The revised targets are as follows:
(JPY in millions)
----------------------------------------------------------------------
Income before
Revenues Operating Income Income Tax Net Income
Expense (Benefit)
----------------------------------------------------------------------
56,500 3,400 5,200 5,200
----------------------------------------------------------------------
As announced today, IIJ plans to pay an annual cash dividend of
JPY 1,500 per one share of common stock for the fiscal year ending
March 31, 2007.
Presentation
On February 9, 2007, IIJ will post a presentation of its results
on its website. For details, please access the following URL:
http://www.iij.ad.jp/en/IR/
About Internet Initiative Japan Inc.
Founded in 1992, Internet Initiative Japan Inc. (IIJ, NASDAQ:
IIJI, Tokyo Stock Exchange First Section: 3774) is one of Japan's
leading Internet-access and comprehensive network solutions providers.
The company has built one of the largest Internet backbone networks in
Japan, and between Japan and the United States. IIJ and its group of
companies provide total network solutions that mainly cater to
high-end corporate customers. The company's services include
high-quality systems integration and security services, Internet
access, hosting/housing, and content design.
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 FY2006 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 value-added services; the possibility that
revenues from connectivity services may decline substantially as a
result of competition and other factors; the ability to compete in a
rapidly evolving and competitive marketplace; the impact on IIJ's
profits of fluctuations in costs such as backbone costs and
subcontractor costs; the impact on IIJ's profits of fluctuations in
the price of available-for-sale securities; the impact of
technological changes in its industry; IIJ's ability to raise
additional capital to cover its indebtedness; the possibility that
NTT, IIJ's largest shareholder, may decide to exercise substantial
influence over IIJ; and other risks referred to from time to time in
IIJ's filings on Form 20-F of its annual report and other filings with
the United States Securities and Exchange Commission.
(1) Unless otherwise stated, all financial figures discussed in
this announcement are prepared in accordance with U.S. GAAP. All
financial figures are unaudited and consolidated. For all 3Q06
results, translations of Japanese yen amounts into U.S. dollars are
solely for the convenience of readers outside of Japan and have been
made at the rate of JPY 119.02 = US$1.00.
(2) This Overview and Business Outlook contains forward-looking
statements and projections such as statements regarding FY2006
revenues and operating and net income that are subject to known and
unknown risks and uncertainties that could cause actual results to
differ materially from those expressed or implied by these statements.
These risks and uncertainties include, but are not limited to, the
factors noted at the end of this release and to the risk factors and
other information included in IIJ's annual report on Form 20-F, filed
with the SEC on July 11, 2006, as well as other filings and documents
furnished to the Securities and Exchange Commission. IIJ plans to keep
this press release publicly available on its Web site (www.iij.ad.jp),
but may discontinue this practice at any time. IIJ intends to publish
its next Overview and Business Outlook in its 4Q06 earnings release,
presently scheduled for release in May 2007.
(3) In this document, income before income tax expense (benefit)
represents income from operations before income tax expense (benefit),
minority interests and equity in net income (loss) of equity method
investees in IIJ's consolidated financial statements.
(4) OEM services provided to other service providers.
(5) IP Service revenues includes revenues from Data Center
Connectivity Service.
(6) Please refer to the Reconciliation of Non-GAAP Financial
Measures below.
(7) Please refer to the Reconciliation of Non-GAAP Financial
Measures below.
Appendix 1
Internet Initiative Japan Inc.
----------------------------------------------------------------------
Quarterly Consolidated Balance Sheets (Unaudited)
----------------------------------------------------------------------
(As of December 31, 2006 and March 31, 2006)
----------------------------------------------------------------------
As of December 31, 2006 As of March 31, 2006
----------------------------------------------------------------------
Thousands
of U.S. Thousands of % Thousands of %
Dollars Yen Yen
----------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash 117,250 13,955,110 13,727,021
Accounts
receivable, net of
allowance for
doubtful accounts
of JPY 24,690
thousand and JPY
23,411 thousand at
December 31, 2006
and March 31,
2006, respectively 68,640 8,169,550 11,962,304
Short-term
investment 99 11,809 --
Inventories 9,143 1,088,259 851,857
Prepaid expenses 13,132 1,562,891 1,031,325
Other current
assets, net of
allowance for
doubtful accounts
of JPY 3,850
thousand and JPY
33,250 thousand at
December 31, 2006
and March 31,
2006, respectively 8,376 996,890 214,121
---------------------- -------------
Total current
assets 216,640 25,784,509 56.7 27,786,628 54.8
INVESTMENTS IN AND
ADVANCES TO EQUITY
METHOD INVESTEES,
net of loan loss
valuation allowance
of JPY 16,701
thousand at
December 31, 2006
and March 31, 2006 8,473 1,008,407 2.2 1,162,971 2.3
OTHER INVESTMENTS 45,719 5,441,508 12.0 8,020,705 15.8
PROPERTY AND
EQUIPMENT--Net 79,123 9,417,245 20.7 10,299,496 20.3
INTANGIBLE ASSETS--
Net 5,641 671,429 1.5 632,594 1.2
GUARANTEE DEPOSITS 13,301 1,583,128 3.5 1,549,653 3.1
OTHER ASSETS, net of
allowance for
doubtful accounts
of JPY 66,366
thousand and JPY
40,980 thousand at
December 31, 2006
and March 31, 2006,
respectively 13,081 1,556,832 3.4 1,252,942 2.5
---------------------- -------------
TOTAL 381,978 45,463,058 100.0 50,704,989 100.0
---------------------- -------------
LIABILITIES AND
SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Short-term
borrowings 47,051 5,600,000 4,555,000
Long-term
borrowings--
current portion 8,405 1,000,363 1,989,963
Payable under
securities loan
agreement 4,719 561,600 999,600
Capital lease
obligations--
current portion 23,929 2,848,075 3,003,914
Accounts payable 48,799 5,808,051 10,107,942
Accrued expenses 5,588 665,112 540,027
Other current
liabilities 16,757 1,994,410 1,702,208
---------------------- -------------
Total current
liabilities 155,248 18,477,611 40.6 22,898,654 45.2
LONG-TERM BORROWINGS -- -- -- 290,000 0.6
CAPITAL LEASE
OBLIGATIONS--
Noncurrent 36,094 4,295,908 9.5 4,980,659 9.8
ACCRUED RETIREMENT
AND PENSION COSTS 3,215 382,619 0.8 223,332 0.4
OTHER NONCURRENT
LIABILITIES 5,042 600,167 1.3 827,086 1.6
---------------------- -------------
Total Liabilities 199,599 23,756,305 52.2 29,219,731 57.6
---------------------- -------------
MINORITY INTEREST 12,043 1,433,341 3.2 1,263,320 2.5
---------------------- -------------
COMMITMENTS AND
CONTINGENCIES -- -- -- -- --
SHAREHOLDERS'
EQUITY:
Common-stock
--authorized,
377,600 shares;
issued and
outstanding,
204,300 shares at
December 31, 2006
and March 31, 2006 141,437 16,833,847 37.0 16,833,847 33.2
Additional paid-in
capital 223,485 26,599,217 58.5 26,599,217 52.5
Accumulated deficit (213,591) (25,421,633) (55.9) (29,680,482) (58.5)
Accumulated other
comprehensive
income 19,713 2,346,219 5.2 6,553,594 12.9
Treasury stock--777
shares held by an
equity method
investee at
December 31, 2006,
and March 31, 2006 (708) (84,238) (0.2) (84,238) (0.2)
---------------------- -------------
Total
shareholders'
equity 170,336 20,273,412 44.6 20,221,938 39.9
---------------------- -------------
TOTAL 381,978 45,463,058 100.0 50,704,989 100.0
---------------------- -------------
----------------------------------------------------------------------
(Note)
The U.S. dollar amounts represent translations of yen amounts at the
rate of JPY 119.02, 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
December 29, 2006.
Appendix 2
Internet Initiative Japan Inc.
----------------------------------------------------------------------
Quarterly Consolidated Statements of Income (Unaudited)
----------------------------------------------------------------------
(For the three months ended December 31, 2006 and December 31, 2005)
----------------------------------------------------------------------
Three Months Ended Three Months Ended
December 31, 2006 December 31, 2005
-----------------------------------------------------
Thousands % of % of
of U.S. Thousands total Thousands total
Dollars of Yen revenues of Yen revenues
----------------------------------------------------------------------
REVENUES:
Connectivity
and value-
added
services:
Dedicated
access 22,709 2,702,783 2,579,659
Dial-up access 5,080 604,570 647,596
Value-added
services 15,637 1,861,118 1,648,893
Other 7,829 931,872 964,417
--------------------- -----------
Total 51,255 6,100,343 5,840,565
Systems
integration 59,598 7,093,326 5,260,867
Equipment sales 3,305 393,436 768,794
--------------------- -----------
Total
revenues 114,158 13,587,105 100.0 11,870,226 100.0
--------------------- -----------
COST AND
EXPENSES:
Cost of
connectivity
and value-
added services 42,621 5,072,712 5,034,990
Cost of systems
integration 44,712 5,321,685 3,910,321
Cost of
equipment
sales 2,798 333,035 707,030
--------------------- -----------
Total cost 90,131 10,727,432 78.9 9,652,341 81.3
Sales and
marketing 7,647 910,087 6.7 754,918 6.4
General and
administrative 7,764 924,021 6.8 738,931 6.2
Research and
development 334 39,786 0.3 33,331 0.3
--------------------- -----------
Total cost
and expenses 105,876 12,601,326 92.7 11,179,521 94.2
--------------------- -----------
OPERATING INCOME 8,282 985,779 7.3 690,705 5.8
--------------------- -----------
OTHER INCOME:
Interest income 31 3,701 1,795
Interest
expense (830) (98,861) (108,252)
Foreign
exchange
losses (2) (244) (1,650)
Gain on other
investments--
net 6,356 756,521 736,212
Other--net (367) (43,720) 13,693
--------------------- -----------
Other income--
net 5,188 617,397 4.5 641,798 5.4
--------------------- -----------
INCOME FROM
OPERATIONS
BEFORE INCOME
TAX EXPENSE,
MINORITY
INTERESTS AND
EQUITY IN NET
INCOME (LOSS)
OF EQUITY
METHOD
INVESTEES 13,470 1,603,176 11.8 1,332,503 11.2
INCOME TAX
EXPENSE 778 92,596 0.7 27,449 0.2
MINORITY
INTERESTS IN
EARNINGS OF
SUBSIDIARIES (588) (69,927) (0.5) (137,167) (1.2)
EQUITY IN NET
INCOME (LOSS)
OF EQUITY
METHOD
INVESTEES (300) (35,724) (0.3) 20,964 0.2
--------------------- -----------
NET INCOME 11,804 1,404,929 10.3 1,188,851 10.0
----------------------------------------------------------------------
----------------------------------------------------------------------
BASIC WEIGHTED-
AVERAGE NUMBER
OF SHARES 203,989 195,565
DILUTED
WEIGHTED-
AVERAGE NUMBER
OF SHARES 204,224 196,132
BASIC WEIGHTED-
AVERAGE NUMBER
OF ADS
EQUIVALENTS 81,595,600 78,226,000
DILUTED
WEIGHTED-
AVERAGE NUMBER
OF ADS
EQUIVALENTS 81,689,600 78,452,800
BASIC NET INCOME
PER SHARE 57.86 6,887 6,079
DILUTED NET
INCOME PER
SHARE 57.80 6,879 6,061
BASIC NET INCOME
PER ADS
EQUIVALENT 0.14 17.22 15.20
DILUTED NET
INCOME PER ADS
EQUIVALENT 0.14 17.20 15.15
----------------------------------------------------------------------
(Note)
1) The U.S. dollar amounts represent translations of yen amounts at
the rate of JPY 119.02, 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 December 29, 2006.
2) IIJ conducted a 1 for 5 stock split effective on October 11, 2005.
The numbers of shares of common stock authorized, and issued and
outstanding, and shares held by an equity method investee in this
table are calculated with the assumption that the stock split was
made at the beginning of FY2005. IIJ issued 12,500 new shares of
common stock for public offering when it listed on the Mothers market
of TSE in December 2005.
Appendix 3
Internet Initiative Japan Inc.
----------------------------------------------------------------------
Quarterly Condensed Consolidated Statements of Cash Flows (Unaudited)
----------------------------------------------------------------------
(For the three months ended December 31, 2006 and December 31, 2005)
----------------------------------------------------------------------
Three Months Three Months
Ended Ended
December 31, December 31,
2006 2005
-------------------------------------
Thousands
of U.S. Thousands of Thousands of
Dollars Yen Yen
----------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income 11,804 1,404,929 1,188,851
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 8,893 1,058,490 1,059,859
Provision for (reversal of)
doubtful accounts 38 4,471 (16,180)
Gains on other investments--net (6,356) (756,521) (736,212)
Foreign exchange losses (gains) 36 4,321 (3,495)
Equity in net loss (income) of
equity method investees 300 35,724 (20,964)
Minority interests in earnings
of subsidiaries 588 69,927 137,167
Deferred income tax expense 184 21,871 11,262
Others 1,752 208,481 138
Changes in operating assets and
liabilities:
Increase in accounts receivable (2,383) (283,644) (27,566)
Increase in inventories,
prepaid expenses and other
current and noncurrent assets (5,909) (703,233) (672,961)
Increase (decrease) in accounts
payable 6,992 832,177 (954,857)
Increase in accrued expenses,
other current and noncurrent
liabilities 1,398 166,449 985,923
----------------------------------------------------------------------
Net cash provided by
operating activities 17,337 2,063,442 950,965
----------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of property and
equipment (3,583) (426,499) (389,008)
Purchase of short-term and other
investments (3,504) (417,043) (281,181)
Proceeds from sales of other
investments 8,312 989,247 755,583
Acquisition of businesses (628) (74,751) --
Refund (payment) of guarantee
deposits--net (278) (33,039) 2,655
Other (109) (12,949) 36,943
----------------------------------------------------------------------
Net cash provided by
investing activities 210 24,966 124,992
----------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from issuance of short-
term borrowings with initial
maturities over three months 34,868 4,150,000 --
Repayments of short-term
borrowings with initial
maturities over three months
and long-term borrowings (37,053) (4,410,113) (209,133)
Proceeds from securities loan
agreement 678 80,640 2,162,640
Repayments of securities loan
agreement -- -- (2,552,080)
Principal payments under capital
leases (7,277) (866,065) (797,392)
Net increase in short-term
borrowings 420 50,000 248,039
Proceeds from issuance of common
stock, net of issuance cost -- -- 6,030,064
----------------------------------------------------------------------
Net cash provided by (used
in) financing activities (8,364) (995,538) 4,882,138
----------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH 20 2,495 8,901
NET INCREASE IN CASH 9,203 1,095,365 5,966,996
CASH, BEGINNING OF EACH PERIOD 108,047 12,859,745 6,953,496
----------------------------------------------------------------------
CASH, END OF EACH PERIOD 117,250 13,955,110 12,920,492
----------------------------------------------------------------------
(Note)
The U.S. dollar amounts represent translations of yen amounts at the
rate of JPY 119.02, 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
December 29, 2006.
======================================================================
(English Translation)
Overview of Financial Results for the Nine Months Ended December 31, 2006
(Consolidated)
(Prepared in accordance with Generally Accepted Accounting Principles
in the United States of America ("U.S. GAAP"))
February 8, 2007
Company name Internet Initiative Japan Inc.
("IIJ", stock code number: 3774, the First Section of the Tokyo Stock Exchange
("TSE"))
(URL http://www.iij.ad.jp/)
Contacts Company representative: Koichi Suzuki, President and
Representative Director
Person-in-charge: Akihisa Watai, Director and CFO TEL: (03)-5259-6500
1. Items regarding Preparation of Quarterly Consolidated Financial Results
(1) Adoption of simplified accounting method: No
(2) Changes in accounting method from the most recent fiscal year: No
(3) Changes in scope of consolidation and equity method: Yes
IIJ added 1 subsidiary into the consolidation.
2. Overview of Financial Results for the Nine Months Ended December 31, 2006
(April 1, 2006 through December 31, 2006)
(1) Consolidated Results of Operations
(Amounts less than one million yen are rounded)
-----------------------------------------------------------------------------------------------
Total revenues Operating income Income before income tax
expense (benefit)
-----------------------------------------------------------------------------------------------
Millions of Yen % Millions of Yen % Millions of Yen %
Nine months ended
December 31, 2006 40,031 18.9 2,356 63.1 3,748 20.4
Nine months ended
December 31, 2005 33,679 14.4 1,445 144.1 3,111 307.4
-----------------------------------------------------------------------------------------------
(For reference) Year
ended March 31, 2006 49,813 2,411 5,379
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Net Income Basic Net Income per Diluted Net Income per
Share Share
-----------------------------------------------------------------------------------------------
Millions of Yen % Yen Yen
Nine months ended
December 31, 2006 4,259 51.4 20,878 20,858
Nine months ended
December 31, 2005 2,812 332.2 14,580 14,559
-----------------------------------------------------------------------------------------------
(For reference) Year
ended March 31, 2006 4,754 24,301 24,258
-----------------------------------------------------------------------------------------------
(Notes)
1) Equity in net income (loss) of equity method investees was equity in net
loss of JPY 161 million, equity in net income of JPY 53 million and equity
in net loss of JPY 14 million for the nine months ended December 31, 2006,
the nine months ended December 31, 2005 and the fiscal year ended March 31,
2006, respectively.
2) The weighted-average number of shares of common stock outstanding
(consolidated) was 203,989, 192,872 and 195,613 for the nine months ended
December 31, 2006, the nine months ended December 31, 2005 and the year
ended March 31, 2006, respectively. IIJ conducted a 1 for 5 stock split
effective on October 11, 2005. The numbers are calculated with the
assumption that the stock spilt was made at the beginning of the fiscal
year ended March 31, 2006.
3) In this document, income before income tax expense (benefit) represents
income from operations before income tax expense (benefit), minority
interests and equity in net income (loss) of equity method investees in
IIJ's consolidated financial statements.
4) The percentage figures for total revenues, operating income and others show
an increase or decrease compared to the same quarter in the last fiscal
year.
(2) Changes in Consolidated Financial Position (Amounts less than one million yen are rounded)
----------------------------------------------------------------------------------------------------
Total Assets Shareholders' Equity-to-Assets Shareholders'
Equity Ratio Equity per Share
----------------------------------------------------------------------------------------------------
Millions of Yen Millions of Yen % Yen
As of December 31, 2006 45,463 20,273 44.6 99,385
As of December 31, 2005 43,952 19,050 43.3 93,387
----------------------------------------------------------------------------------------------------
(For reference) As of
March 31, 2006 50,705 20,222 39.9 99,132
------------------------------------------------------------------------------------------------
(Note)
The number of shares of common stock outstanding (consolidated) was 203,989,
203,989 and 203,989 as of December 31, 2006, December 31, 2005 and March 31,
2006, respectively.
(3) Consolidated Cash Flows (Amounts less than one million yen are rounded)
------------------------------------------------------------------------------------------------
Net cash provided Net cash provided Net cash provided Cash and cash
by operating by (used in) by (used in) equivalents at end
activities investing financing of period
activities activities
------------------------------------------------------------------------------------------------
Millions of Yen Millions of Yen Millions of Yen Millions of Yen
Nine months ended
December 31, 2006 4,576 (1,097) (3,246) 13,955
Nine months ended
December 31, 2005 3,948 971 2,685 12,920
------------------------------------------------------------------------------------------------
(For reference) Year
ended March 31, 2006 6,559 1,805 39 13,727
------------------------------------------------------------------------------------------------
* The financial statements and others in this document are unaudited.
3. Results of Operations and Financial Conditions
[Qualitative Information Regarding Results of Operations]
(1) Overview of Financial Results for the Nine Months ended December 31, 2006
(from April 1, 2006 to December 31, 2006)
For the nine months ended December 31, 2006, the revenues and profits
increased compared to the nine months ended December 31, 2005, affected by an
increase of corporate investment in information networks and expansion of
Internet usage.
The IIJ Group provides high quality comprehensive suite of Internet
connectivity services, value-added services such as e-mail, security,
network-related services, and systems integration, along with expansion of
broadband in corporate customers, such as Internet VPN to connect corporate
branch offices and shops with broadband services and an increase in customers'
demands for Internet engineering skills because corporate customers are having
open systems for their internal network systems.
For the recent topics, IIJ started to provide "IIJ Secure MX Service" in
October 2006 and IIJ have received many orders and inquiries for this service.
It is a service that provides comprehensive e-mail security functions for
corporate risk management, such as anti-spam, the recording of all incoming and
outgoing e-mails, the encryption of e-mail connections and the provision of
on-line storage. At the end of the nine months ended December 31, 2006, IIJ
provides its anti-spam solutions to over 200,000 e-mail accounts.
The IIJ Group is also actively involved in research and development
activities, such as a pilot program for broadcasting high quality video content,
such as NHK (Japan Broadcasting Corporation) program "Project X: The
challengers" provided by NHK Enterprises, Inc. and other hi-vision video. The
IIJ Group also take part in various projects to develop safer, more secure and
more effective usage of the Internet, such as the "Secure Service Platform", a
technology to realize a safer and more secure Internet environment, and the
international logistics pilot program using RFID.
As a result, for the IIJ Group's consolidated results of operation for the
nine months ended December 31, 2006, total revenues amounted to JPY 40,031
million, an increase of 18.9% compared to the nine months ended December 31,
2005. Operating income amounted to JPY 2,356 million, an increase of 63.1%
compared to the nine months ended December 31, 2005. Income before income tax
benefit amounted to JPY 3,748 million, an increase of 20.4% compared to the nine
months ended December 31, 2005 and net income amounted to JPY 4,259 million, an
increase of 51.4% compared to the nine months ended December 31, 2005.
(2) Analysis of the Results of Operations
1) Revenues
Revenues for the nine months ended December 31, 2006 totaled JPY 40,031
million, an increase of 18.9% compared to the nine months ended December 31,
2005.
----------------------------------------------------------------------------------------------------------------------------
Nine months ended Nine months ended
December 31, 2006 December 31, 2005
(From April 1, 2006 to (From April 1, 2005 to YoY %
December 31, 2006) December 31, 2005) Change
----------------------------------------------------------------------------------------------------------------------------
Millions of Yen Millions of Yen %
Connectivity and value-added services ("VAS") 18,120 17,374 4.3
----------------------------------------------------------------------------------------------------------------------------
Systems Integration ("SI") 20,347 14,263 42.7
----------------------------------------------------------------------------------------------------------------------------
Equipment Sales 1,564 2,042 (23.4)
----------------------------------------------------------------------------------------------------------------------------
Total Revenues 40,031 33,679 18.9
----------------------------------------------------------------------------------------------------------------------------
Connectivity and VAS revenues were JPY 18,120 million for the nine months
ended December 31, 2006, an increase of 4.3% compared to the nine months ended
December 31, 2005.
SI revenues increased by 42.7% from the nine months ended December 31, 2005
to JPY 20,347 million for the nine months ended December 31, 2006. The increase
was mainly due to a steady increase in revenues from network system outsourcing
and maintenance which generated recurring revenues and increase in one-time
revenues from network design, construction and consultation.
Equipment sales revenues were JPY 1,564 million for the nine months ended
December 31, 2006, a decrease of 23.4 % compared to the nine months ended
December 31, 2005.
2) Cost of Revenues
The cost of revenues was JPY 32,309 million for the nine months ended
December 31, 2006, an increase of 16.9% compared to the nine months ended
December 31, 2005.
----------------------------------------------------------------------------------------------------------------------------
Nine months ended Nine months ended
December 31, 2006 December 31, 2005
(From April 1, 2006 to (From April 1, 2005 to YoY %
December 31, 2006) December 31, 2005) Change
----------------------------------------------------------------------------------------------------------------------------
Millions of Yen Millions of Yen %
Connectivity and VAS 15,397 14,987 2.7
----------------------------------------------------------------------------------------------------------------------------
SI 15,514 10,739 44.5
----------------------------------------------------------------------------------------------------------------------------
Equipment Sales 1,398 1,917 (27.0)
----------------------------------------------------------------------------------------------------------------------------
Total Cost of Revenues 32,309 27,643 16.9
----------------------------------------------------------------------------------------------------------------------------
The cost of connectivity and VAS revenues was JPY 15,397 million for the nine
months ended December 31, 2006, an increase of 2.7% compared to the nine months
ended December 31, 2005.
The cost of SI revenues increased by 44.5% to JPY 15,514 million for the nine
months ended December 31, 2006 from the nine months ended December 31, 2005,
mainly due to an increase in revenues from systems integration.
The cost of equipment sales revenues was JPY 1,398 million for the nine
months ended December 31, 2006, a decrease of 27.0% compared to the nine months
ended December 31, 2005, mainly due to a decrease in revenues from equipment
sales.
3) Sales and Marketing Expenses
Sales and marketing expenses were JPY 2,543 million for the nine months ended
December 31, 2006, an increase of 9.5% compared to the nine months ended
December 31, 2005. The increase was mainly due to an increase in personnel
expenses and advertising expenses along with the business expansion.
4) General and Administrative Expenses
General and administrative expenses were JPY 2,701 million for the nine
months ended December 31, 2006, an increase of 25.5% compared to the nine months
ended December 31, 2005. The increase was mainly due to an increase in personnel
related expenses.
5) Operating Income
Operating income was JPY 2,356 million for the nine months ended December 31,
2006, an increase of 63.1% compared to the nine months ended December 31, 2005.
The increase was mainly due to the increase in gross margin, which was caused by
the increase in revenues from value-added services and systems integration.
6) Other Income and Others
Other income for nine months ended December 31, 2006 was JPY 1,391 million, a
decrease of 16.5% compared to the nine months ended December 31, 2005. The
increase included a gain from sale of available-for-sale securities of JPY 1,680
million.
Income tax benefit for the nine months ended December 31, 2006 was JPY 867
million. The benefit was mainly because of deferred tax benefits of JPY 1,223
million resulting from a release of valuation allowance against deferred tax
assets related to tax operating loss carryforwards and others. Minority
interests in earnings of subsidiaries for the nine months ended December 31,
2006 was JPY 195 million. Equity in net loss of equity method investees for the
nine months ended December 31, 2006 was JPY 161 million.
7) Net Income
Net income for the nine months ended December 31, 2006 was JPY 4,259 million,
an increase of 51.4% compared to the nine months ended December 31, 2005.
c. Analysis by Service
1) Connectivity and VAS
Dedicated access service revenues have been in the increasing trend in
quarterly (3 months) comparison. However, the revenue decreased by 0.2% to JPY
8,006 million mainly related to a decrease by JPY 468 million in interconnection
revenues between IIJ's network and Asia Internet Holding Co., Ltd. ("AIH"),
IIJ's former equity method investee, because AIH merged into IIJ. The increase
in the number of new contracts and contracted bandwidth for IP Service are the
main factors for the increasing trend.
Dial-up access service revenues were JPY 1,817 million for the nine months
ended December 31, 2006, a decrease of 10.4% compared to the nine months ended
December 31, 2005. The decrease was mainly due to the decrease in revenues from
services for individual customers, such as IIJ4U, as well as the discontinuance
of services of a large customer to which IIJ provided its services as OEM.
VAS revenues were JPY 5,508 million for the nine months ended December 31,
2006, an increase of 22.5% compared to the nine months ended December 31, 2005.
The increase was due to an increase in revenues from various types of services,
such as e-mail, security and network-related outsourcing services and data
center services, though there was a factor to decrease the revenues on quarter
over quarter comparison, such as a merger between IIJ's major customers (in
October).
Other revenues were JPY 2,789 million for the nine months ended December 31,
2006, a decrease of 1.4% compared to the nine months ended December 31, 2005.
As a result, revenues from connectivity and VAS for the nine months ended
December 31, 2006 were JPY 18,120 million, an increase of 4.3% compared to the
nine months ended December 31, 2005. The gross margin of connectivity and VAS
was JPY 2,723 million, an increase of 14.1% compared to the nine months ended
December 31, 2005 and the gross margin ratio was 15.0%.
(Connectivity and VAS Revenue Breakdown and Cost)
----------------------------------------------------------------------------------------------------------------------------
Nine months ended Nine months ended
December 31, 2006 December 31, 2005
(From April 1, 2006 to (From April 1, 2005 to YoY %
December 31, 2006) December 31, 2005) Change
----------------------------------------------------------------------------------------------------------------------------
Millions of Yen Millions of Yen %
Connectivity and VAS Revenues 18,120 17,374 4.3
----------------------------------------------------------------------------------------------------------------------------
Dedicated Access Service Revenues 8,006 8,022 (0.2)
----------------------------------------------------------------------------------------------------------------------------
Dial-up Access Service Revenues 1,817 2,029 (10.4)
----------------------------------------------------------------------------------------------------------------------------
VAS Revenues 5,508 4,495 22.5
----------------------------------------------------------------------------------------------------------------------------
Other Revenues 2,789 2,828 (1.4)
----------------------------------------------------------------------------------------------------------------------------
Cost of Connectivity and VAS 15,397 14,987 2.7
----------------------------------------------------------------------------------------------------------------------------
Backbone Cost (included in the cost
of Connectivity and VAS) 2,636 2,594 1.6
----------------------------------------------------------------------------------------------------------------------------
Connectivity and VAS Gross Margin Ratio 15.0% 13.7% --
----------------------------------------------------------------------------------------------------------------------------
(Number of Contracts for Connectivity Services and Total Contracted Bandwidth)
----------------------------------------------------------------------------------------------------------------------------
At the end of nine months At the end of nine months
ended December 31, 2006 ended December 31, 2005 YoY
(As of December 31, 2006) (As of December 31, 2005) Change
----------------------------------------------------------------------------------------------------------------------------
Dedicated Access Service Contracts 16,663 13,724 2,939
----------------------------------------------------------------------------------------------------------------------------
IP Service (Low Bandwidth: 64kbps-768kbps) 69 51 18
----------------------------------------------------------------------------------------------------------------------------
IP Service (Medium Bandwidth: 1Mbps-99Mbps) 685 645 40
----------------------------------------------------------------------------------------------------------------------------
IP Service (High Bandwidth: 100Mbps-) 213 145 68
----------------------------------------------------------------------------------------------------------------------------
IIJ T1 Standard and IIJ Economy 53 154 (101)
----------------------------------------------------------------------------------------------------------------------------
IIJ Data Center Connectivity Service 264 240 24
----------------------------------------------------------------------------------------------------------------------------
IIJ FiberAccess/F and IIJ DSL/F
(Broadband Services) 15,379 12,489 2,890
----------------------------------------------------------------------------------------------------------------------------
Dial-up Access Service Contracts 570,880 647,464 (76,584)
----------------------------------------------------------------------------------------------------------------------------
Dial-up Access Services, under IIJ Brand 58,884 61,640 (2,756)
----------------------------------------------------------------------------------------------------------------------------
Dial-up Access Services, OEM 511,996 585,824 (73,828)
----------------------------------------------------------------------------------------------------------------------------
Total Contracted Bandwidth 260.0Gbps 185.5Gbps 74.5Gbps
----------------------------------------------------------------------------------------------------------------------------
2) SI
Revenues from SI were JPY 20,347 million for the nine months ended December
31, 2006, an increase of 42.7% compared to the nine months ended December 31,
2005. The one-time revenues from systems construction was JPY 10,254 million, a
significant increase of 69.8% compared to the nine months ended December 31,
2005. The recurring revenues from network system outsourcing and maintenance was
JPY 10,093 million, a continuous increase of 22.7% compared to the nine months
ended December 31, 2005. The gross margin of SI was JPY 4,833 million, an
increase of 37.2% compared to the nine months ended December 31, 2005 and the
gross margin ratio was 23.8%.
(SI Revenues, Cost of Revenues and Gross Margin Ratio)
---------------------------------------------------------------------------------------------------------------------------
Nine months ended Nine months ended
December 31, 2006 December 31, 2005
(From April 1, 2006 to (From April 1, 2005 to YoY %
December 31, 2006) December 31, 2005) Change
---------------------------------------------------------------------------------------------------------------------------
Millions of Yen Millions of Yen %
SI Revenues 20,347 14,263 42.7
---------------------------------------------------------------------------------------------------------------------------
Systems Integration 10,254 6,038 69.8
---------------------------------------------------------------------------------------------------------------------------
Outsourced Operation 10,093 8,225 22.7
---------------------------------------------------------------------------------------------------------------------------
Cost of SI 15,514 10,739 44.5
---------------------------------------------------------------------------------------------------------------------------
SI Gross Margin Ratio 23.8% 24.7% --
---------------------------------------------------------------------------------------------------------------------------
3) Equipment sales
Revenues from equipment sales were JPY 1,564 million for the nine months
ended December 31, 2006. The gross margin of equipment sales was JPY 166 million
and the gross margin ratio was 10.6%.
(Equipment Sales Revenue and Cost)
---------------------------------------------------------------------------------------------------------------------------
Nine months ended Nine months ended
December 31, 2006 December 31, 2005
(From April 1, 2006 to (From April 1, 2005 to YoY %
December 31, 2006) December 31, 2005) Change
---------------------------------------------------------------------------------------------------------------------------
Millions of Yen Millions of Yen %
Equipment Sales Revenues 1,564 2,042 (23.4)
---------------------------------------------------------------------------------------------------------------------------
Cost of Equipment Sales 1,398 1,917 (27.0)
---------------------------------------------------------------------------------------------------------------------------
Equipment Sales Gross Margin Ratio 10.6% 6.2% --
---------------------------------------------------------------------------------------------------------------------------
[Qualitative Information Regarding Changes in Consolidated Financial Position]
Cash at the end of the nine months ended December 31, 2006 was JPY 13,955
million (JPY 12,920 million at the end of the nine months ended December 31,
2005).
(Net cash provided by operating activities)
Net cash provided by operating activities was JPY 4,576 million for the nine
months ended December 31, 2006 (net cash provided by operating activities was
JPY 3,948 million for the nine months ended December 31, 2005). Operating income
increased due to an increase in revenues from value-added services and systems
integration.
(Net cash provided by (used in) investing activities)
Net cash used in investing activities was JPY 1,097 million for the nine
months ended December 31, 2006 (net cash provided by investing activities was
JPY 971 million for the nine months ended December 31, 2005). Purchase of
short-term and other investments of JPY 2,078 million and purchase of property
and equipment of JPY 986 million offset proceeds from sales and redemption of
short-term and other investments of JPY 2,107 million.
(Net cash provided by (used in) financing activities)
Net cash used in financing activities was JPY 3,246 million for the nine
months ended December 31, 2006 (net cash provided by investing activities was
JPY 2,685 million for the nine months ended December 31, 2005). Repayments of
short-term borrowings with initial maturities over three months and long-term
borrowings of JPY 5,630 million, net decrease in short-term borrowings of JPY
3,405 million, principal payments under capital leases of JPY 2,574 million,
repayments of securities loan agreement of JPY 1,496 million offset proceeds
from issuance of short-term borrowings with initial maturities over three months
and long-term borrowings of JPY 8,800 million and proceeds from securities loan
agreement of JPY 1,058 million.
[Reference] Overview of Non-consolidated Financial Results for the Nine Months
Ended December 31, 2006
(1) Results of Operations
(Amounts less than one million yen are rounded)
------------------------------- ------------------------------ ----------------------------- ------------------------------
Total revenues Operating income Ordinary income
------------------------------- ------------------------------ ----------------------------- ------------------------------
Millions of Yen % Millions of Yen % Millions of Yen %
Nine months ended December
31, 2006 28,844 12.6 1,022 270.0 1,006 365.9
Nine months ended December
31, 2005 25,610 8.0 276 50.8 216 575.0
------------------------------- ------------------------------ ----------------------------- ------------------------------
(For reference) Year ended
March 31, 2006 37,458 846 737
------------------------------- ------------------------------ ----------------------------- ------------------------------
------------------------------- ------------------------------ ----------------------------- ------------------------------
Net Income Basic Net Income per Share Diluted Net Income per Share
------------------------------- ------------------------------ ----------------------------- ------------------------------
Millions of Yen % Yen Yen
Nine months ended December
31, 2006 2,895 41.8 14,171.51 14,157.72
Nine months ended December
31, 2005 2,042 315.9 10,570.31 10,558.94
------------------------------- ------------------------------ ----------------------------- ------------------------------
(For reference) Year ended
March 31, 2006 4,231 21,597.37 21,565.07
------------------------------- ------------------------------ ----------------------------- ------------------------------
(Notes)
1) The weighted-average number of shares of common stock outstanding was
204,300, 193,164 and 195,910 for the nine months ended December 31, 2006,
the nine months ended December 31, 2005 and the fiscal year ended March
31, 2006, respectively. IIJ conducted a 1 for 5 stock split effective on
October 11, 2005. The numbers are calculated with the assumption that the
stock spilt was made at the beginning of the fiscal year ended March 31,
2006.
2) The percentage figures for the total revenues, operating income and others
show an increase or decrease compared to the same quarter in the last
fiscal year.
(2) Changes in Financial Position (Amounts less than one million yen are rounded)
------------------------------- ---------------------- ---------------------- ---------------------- -----------------------
Equity-to-Assets Shareholders' Equity
Total Assets Shareholders' Equity Ratio per Share
------------------------------- ---------------------- ---------------------- ---------------------- -----------------------
Millions of Yen Millions of Yen % Yen
As of December 31, 2006 30,397 18,632 61.3 91,201.14
As of December 31, 2005 31,603 16,480 52.1 80,664.17
------------------------------- ---------------------- ---------------------- ---------------------- -----------------------
(For reference) As of March
31, 2006 36,294 18,223 50.2 89,196.61
------------------------------- ---------------------- ---------------------- ---------------------- -----------------------
(Note)
The number of shares of common stock outstanding was 204,300, 204,300 and
204,300 as of December 31, 2006, December 31, 2005 and March 31, 2006,
respectively.
4. Target of Consolidated Financial Results for the Fiscal Year Ending March 31,
2007 (April 1, 2006 through March 31, 2007)
(Amounts less than one million yen are rounded)
-----------------------------------------------------------------------------------------------------------------------------
Income before Income
Total Revenues Operating Income Tax Expense (Benefit) Net Income
-----------------------------------------------------------------------------------------------------------------------------
Millions of Yen Millions of Yen Millions of Yen Millions of Yen
Year ending March 31, 2007 56,500 3,400 5,200 5,200
------------------------------ ------------------------ ---------------------- ---------------------- -----------------------
(Reference) Net income per share for the fiscal year ending March 31, 2007,
based on the target above: JPY 25,492
[Qualitative Information Regarding Results of Operations]
For the nine months ended December 31, 2006, the business environment in
IIJ's key markets continued to be favorable such as demand from corporate
customers for higher speed Internet connectivity services due to the expansion
of network usage, demand for outsourcing services because of an increase of
security incidents and an overall shortage of Internet engineers, and
construction of corporate information technology networks based on Internet
connectivity. For the nine months ended December 31, 2006, revenues increased
stably in each of connectivity and value-added services and systems integration.
The IIJ Group's consolidated financial results tend to fluctuate greatly in the
fourth quarter when many companies in Japan have their fiscal year end. Revenues
will exceed the previously announced target mainly due to the higher revenues
from connectivity and value-added services and systems integration. Income
before income tax expense (benefit) and net income will exceed the previously
announced target along with an increase in operating income.
[Reference] Target of Non-consolidated Financial Results for the Fiscal Year
Ending March 31, 2007 (April 1, 2006 through March 31, 2007)
(Amounts less than one million yen are rounded)
-----------------------------------------------------------------------------------------------------------------------------
Total Revenues Operating Income Ordinary Income Net Income
-----------------------------------------------------------------------------------------------------------------------------
Millions of Yen Millions of Yen Millions of Yen Millions of Yen
Year ending March 31, 2007 41,000 1,400 1,400 4,300
------------------------------ ------------------------ ---------------------- ---------------------- -----------------------
(Reference) Net income per share for the fiscal year ending March 31, 2007,
based on the target above: JPY 21,047.48
5. Other Reference Information
IIJ announced its plan for the annual dividend for the fiscal year ending March
31, 2007 on February 8, 2007 as below:
------------------------------- ---------------------- ---------------------- ----------------------
At the end of the At the end of the
interim period fiscal year Total annual dividend
------------------------------- ---------------------- ---------------------- ----------------------
Plan previously announced
(November 9, 2006) -- -- --
Plan revised this time -- JPY 1,500 JPY 1,500
------------------------------- ---------------------- ---------------------- ----------------------
(Reference) Actual dividend
payment in the previous
fiscal year -- -- --
------------------------------- ---------------------- ---------------------- ----------------------
(Reference) Please see the press release "IIJ announces its plan for the annual
dividend for the fiscal year ending March 31, 2007" that IIJ made on February 8,
2007 for the details.
(Note for the target of financial results and plan for the annual dividend)
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
revenues and operating and net profitability above, 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
value-added 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.
Consolidated Financial Statements (Unaudited)
(From April 1, 2006 through December 31, 2006)
(1) Consolidated Balance Sheets
------------------------------------------------------------------------------------------------------------------------------------
As of December 31, 2006 As of December 31, 2005 As of March 31, 2006
---------------------------------------------------------------------------------- ------------------------- -----------------------
Thousands of
U.S. Dollars Thousands of Yen % Thousands of Yen % Thousands of Yen %
---------------------------------------------------------- ---------------- ------ ------------------ ------ ---------------- ------
ASSETS
CURRENT ASSETS:
Cash 117,250 13,955,110 12,920,492 13,727,021
Accounts receivable, net of allowance for
doubtful accounts of JPY 24,690 thousand,
and JPY 17,268 thousand and JPY 23,411
thousand at December 31, 2006, December 31,
2005 and March 31, 2006, respectively 68,640 8,169,550 6,732,241 11,962,304
Short term investment 99 11,809 -- --
Inventories 9,143 1,088,259 706,657 851,857
Prepaid expenses 13,132 1,562,891 1,240,384 1,031,325
Other current assets, net of allowance for
doubtful accounts of JPY 3,850 thousand,
JPY 34,400 thousand and JPY 33,250 thousand
at December 31, 2006, December 31, 2005 and
March 31, 2006, respectively 8,376 996,890 127,593 214,121
-------------- ---------------- ------------------ ----------------
Total current assets 216,640 25,784,509 56.7 21,727,367 49.4 27,786,628 54.8
INVESTMENTS IN AND ADVANCES TO EQUITY METHOD
INVESTEES, net of loan loss valuation
allowance of JPY 16,701 thousand, JPY
31,378 thousand and JPY 16,701 thousand at
December 31, 2006, December 31, 2005 and
March 31, 2006, respectively 8,473 1,008,407 2.2 473,954 1.1 1,162,971 2.3
OTHER INVESTMENTS 45,719 5,441,508 12.0 8,749,015 19.9 8,020,705 15.8
PROPERTY AND EQUIPMENT--Net 79,123 9,417,245 20.7 9,554,859 21.7 10,299,496 20.3
INTANGIBLE ASSETS--Net 5,641 671,429 1.5 632,224 1.5 632,594 1.2
GUARANTEE DEPOSITS 13,301 1,583,128 3.5 2,098,008 4.8 1,549,653 3.1
OTHER ASSETS, net of allowance for doubtful
accounts of JPY 66,366 thousand, JPY 40,654
thousand and JPY 40,980 thousand at
December 31, 2006, December 31, 2005 and
March 31, 2006, respectively 13,081 1,556,832 3.4 716,725 1.6 1,252,942 2.5
-------------- ---------------- ------------------ ----------------
TOTAL 381,978 45,463,058 100.0 43,952,152 100.0 50,704,989 100.0
-------------- ---------------- ------------------ ----------------
------------------------------------------------------------------------------------------------------------------------------------
As of December 31, 2006 As of December 31, 2005 As of March 31, 2006
---------------------------------------------------------------------------------- ------------------------- -----------------------
Thousands of
U.S. Dollars Thousands of Yen % Thousands of Yen % Thousands of Yen %
---------------------------------------------------------- ---------------- ------ ------------------ ------ ---------------- ------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings 47,051 5,600,000 5,170,216 4,555,000
Long-term borrowings--current portion 8,405 1,000,363 2,388,977 1,989,963
Payable under securities loan agreement 4,719 561,600 1,128,960 999,600
Capital lease obligations--current portion 23,929 2,848,075 2,825,959 3,003,914
Accounts payable 48,799 5,808,051 4,095,648 10,107,942
Accrued expenses 5,588 665,112 591,887 540,027
Other current liabilities 16,757 1,994,410 1,594,807 1,702,208
-------------- ---------------- ------------------ ----------------
Total current liabilities 155,248 18,477,611 40.6 17,796,454 40.5 22,898,654 45.2
LONG-TERM BORROWINGS -- -- -- 1,000,363 2.3 290,000 0.6
CAPITAL LEASE OBLIGATIONS--Noncurrent 36,094 4,295,908 9.5 4,299,577 9.8 4,980,659 9.8
ACCRUED RETIREMENT AND PENSION COSTS 3,215 382,619 0.8 203,022 0.5 223,332 0.4
OTHER NONCURRENT LIABILITIES 5,042 600,167 1.3 450,326 1.0 827,086 1.6
-------------- ---------------- ------------------ ----------------
Total Liabilities 199,599 23,756,305 52.2 23,749,742 54.1 29,219,731 57.6
-------------- ---------------- ------------------ ----------------
MINORITY INTEREST 12,043 1,433,341 3.2 1,152,396 2.6 1,263,320 2.5
-------------- ---------------- ------------------ ----------------
COMMITMENTS AND CONTINGENCIES -- -- -- -- -- -- --
SHAREHOLDERS' EQUITY:
Common-stock
--authorized, 377,600 shares; issued and
outstanding, 204,300 shares at December 31,
2006, December 31, 2005 and March 31, 2006 141,437 16,833,847 37.0 16,833,847 38.3 16,833,847 33.2
Additional paid-in capital 223,485 26,599,217 58.5 26,599,217 60.5 26,599,217 52.5
Accumulated deficit (213,591) (25,421,633) (55.9) (31,621,887) (72.0) (29,680,482) (58.5)
Accumulated other comprehensive income 19,713 2,346,219 5.2 7,323,075 16.7 6,553,594 12.9
Treasury stock--777 shares held by an equity
method investee at December 31, 2006,
December 31, 2005 and March 31, 2006 (708) (84,238) (0.2) (84,238) (0.2) (84,238) (0.2)
-------------- ---------------- ------------------ ----------------
Total shareholders' equity 170,336 20,273,412 44.6 19,050,014 43.3 20,221,938 39.9
-------------- ---------------- ------------------ ----------------
TOTAL 381,978 45,463,058 100.0 43,952,152 100.0 50,704,989 100.0
-------------- ---------------- ------------------ ----------------
------------------------------------------------------------------------------------------------------------------------------------
(Note)
The U.S. dollar amounts represent translations of yen amounts at the rate of JPY 119.02, 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 December 29, 2006.
(2) Consolidated Statements of Income
-----------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Fiscal Year Ended
Nine Months Ended December 31, 2006 December 31, 2005 March 31, 2006
-------------------------------------- ----------------------- -----------------------
Thousands of Thousands of % of total Thousands of % of total Thousands of % of total
U.S. Dollars Yen revenues Yen revenues Yen revenues
-------------------------------------- -------------- ------------ ---------- ------------ ---------- ------------ ----------
REVENUES:
Connectivity and value-added services:
Dedicated access 67,261 8,005,418 8,021,884 10,625,268
Dial-up access 15,269 1,817,374 2,028,705 2,673,808
Value-added services 46,281 5,508,337 4,495,343 6,249,891
Other 23,431 2,788,701 2,827,742 3,673,872
-------------- ------------ ------------ ------------
Total 152,242 18,119,830 17,373,674 23,222,839
Systems integration 170,955 20,347,104 14,262,542 23,504,537
Equipment sales 13,143 1,564,205 2,042,933 3,085,208
-------------- ------------ ------------ ------------
Total revenues 336,340 40,031,139 100.0 33,679,149 100.0 49,812,584 100.0
-------------- ------------ ------------ ------------
COST AND EXPENSES:
Cost of connectivity and value-added
services 129,363 15,396,845 14,986,811 20,077,990
Cost of systems integration 130,344 15,513,501 10,739,357 18,120,418
Cost of equipment sales 11,755 1,399,048 1,916,824 2,818,036
-------------- ------------ ------------ ------------
Total cost 271,462 32,309,394 80.7 27,642,992 82.1 41,016,444 82.4
Sales and marketing 21,365 2,542,815 6.4 2,322,281 6.9 3,079,526 6.2
General and administrative 22,691 2,700,746 6.7 2,152,014 6.4 3,147,315 6.3
Research and development 1,025 121,977 0.3 117,182 0.3 158,155 0.3
-------------- ------------ ------------ ------------
Total cost and expenses 316,543 37,674,932 94.1 32,234,469 95.7 47,401,440 95.2
-------------- ------------ ------------ ------------
OPERATING INCOME 19,797 2,356,207 5.9 1,444,680 4.3 2,411,144 4.8
-------------- ------------ ------------ ------------
OTHER INCOME:
Interest income 94 11,182 9,669 13,099
Interest expense (2,557) (304,361) (324,165) (437,364)
Foreign exchange gains (losses) (2) (254) 3,313 3,470
Gain on other investments--net 14,110 1,679,356 1,885,009 3,197,690
Other--net 45 5,377 92,822 190,520
-------------- ------------ ------------ ------------
Other income--net 11,690 1,391,300 3.5 1,666,648 4.9 2,967,415 6.0
-------------- ------------ ------------ ------------
INCOME FROM OPERATIONS BEFORE INCOME
TAX EXPENSE (BENEFIT), MINORITY
INTERESTS AND EQUITY IN NET INCOME
(LOSS) OF EQUITY METHOD INVESTEES 31,487 3,747,507 9.4 3,111,328 9.2 5,378,559 10.8
-------------- ------------ ------------ ------------
INCOME TAX EXPENSE (BENEFIT) (7,286) (867,187) (2.2) 109,460 0.3 257,360 0.5
MINORITY INTERESTS IN EARNINGS OF
SUBSIDIARIES (1,639) (195,035) (0.5) (242,799) (0.7) (353,883) (0.7)
EQUITY IN NET INCOME (LOSS) OF EQUITY
METHOD INVESTEES (1,351) (160,810) (0.4) 53,096 0.1 (13,746) (0.1)
-------------- ------------ ------------ ------------
NET INCOME 35,783 4,258,849 10.7 2,812,165 8.3 4,753,570 9.5
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Fiscal Year Ended
Nine Months Ended December 31, 2006 December 31, 2005 March 31, 2006
-------------------------------------- ----------------------- -----------------------
U.S. Dollars Yen Yen Yen
-------------------------------------- -------------- ------------ ---------- ------------ ---------- ------------ ----------
BASIC WEIGHTED-AVERAGE NUMBER OF SHARES 203,989 192,872 195,613
DILUTED WEIGHTED-AVERAGE NUMBER OF SHARES 204,186 193,161 195,955
BASIC NET INCOME PER SHARE 175 20,878 14,580 24,301
DILUTED NET INCOME PER SHARE 175 20,858 14,559 24,258
-------------------------------------- -------------- ------------ ---------- ------------ ---------- ------------ ----------
(Note)
1) The U.S. dollar amounts represent translations of yen amounts at the rate of JPY 119.02, 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 December 29, 2006.
2) IIJ conducted a 1 for 5 stock split effective on October 11, 2005. The numbers of shares of common stock authorized, and
issued and outstanding, and shares held by an equity method investee in this table are calculated with the assumption that
the stock split was made at the beginning of FY2005.
(3) Consolidated Statements of Shareholders' Equity
Consolidated statements of shareholders' equity for the nine months ended December 31, 2006
(Unit: Thousands of Yen)
-------------------------------------------------------------------------------------------------------------------------------
Shares of
Common
Stock Additional Accumulated
Outstanding Common Paid-in Accumulated Other Treasury Total
(Including Stock Capital Deficit Comprehensive Stock
Treasury Income
Stock)
(Shares)
-------------------------------------------------------------------------------------------------------------------------------
BALANCE, APRIL 1, 2006 204,300 16,833,847 26,599,217 (29,680,482) 6,553,594 (84,238) 20,221,938
Net income 4,258,849 4,258,849
Other comprehensive loss, net of tax (4,207,375) (4,207,375)
-----------
Total comprehensive income 51,474
------------------------------------------------------ ----------- ----------- ------------ -------------- -------- -----------
BALANCE, DECEMBER 31, 2006 204,300 16,833,847 26,599,217 (25,421,633) 2,346,219 (84,238) 20,273,412
------------ ----------- ----------- ------------ -------------- -------- -----------
-------------------------------------------------------------------------------------------------------------------------------
Consolidated statements of shareholders' equity for the nine months ended December 31, 2006
(Unit: Thousands of U.S. Dollars)
-------------------------------------------------------------------------------------------------------------------------------
Shares of
Common
Stock Additional Accumulated
Outstanding Common Paid-in Accumulated Other Treasury Total
(Including Stock Capital Deficit Comprehensive Stock
Treasury Income
Stock)
(Shares)
----------------------------------------- ------------ ----------- ----------- ------------ -------------- -------- -----------
BALANCE, APRIL 1, 2006 204,300 141,437 223,485 (249,374) 55,063 (708) 169,903
Net income 35,783 35,783
Other comprehensive loss, net of tax (35,350) (35,350)
-----------
Total comprehensive income 433
BALANCE, DECEMBER 31, 2006 204,300 141,437 223,485 (213,591) 19,713 (708) 170,336
------------ ----------- ----------- ------------ -------------- -------- -----------
-------------------------------------------------------------------------------------------------------------------------------
(Note)
1) The U.S. dollar amounts represent translations of yen amounts at the rate of JPY 119.02, 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 December 29, 2006.
Consolidated statements of shareholders' equity for the nine months ended December 31, 2005
(Unit: Thousands of Yen)
-------------------------------------------------------------------------------------------------------------------------------
Shares of
Common
Stock Additional Accumulated
Outstanding Common Paid-in Accumulated Other Treasury Total
(Including Stock Capital Deficit Comprehensive Stock
Treasury Income
Stock)
(Shares)
-------------------------------------------------------------------------------------------------------------------------------
BALANCE, APRIL 1, 2005 191,800 13,765,372 23,637,628 (34,434,052) 8,690,125 (44,000) 11,615,073
Net income 2,812,165 2,812,165
Other comprehensive loss, net of tax (1,367,050) (1,367,050)
-----------
Total comprehensive income 1,445,115
Issuance of common stock, net of issuance
cost 12,500 3,068,475 2,961,589 6,030,064
Purchase of common stock by an equity
method investee (40,238) (40,238)
------------------------------------------------------------------------------ ------------ -------------- -------- -----------
BALANCE, DECEMBER 31, 2005 204,300 16,833,847 26,599,217 (31,621,887) 7,323,075 (84,238) 19,050,014
------------ ----------- ----------- ------------ -------------- -------- -----------
-------------------------------------------------------------------------------------------------------------------------------
Consolidated statements of shareholders' equity for the fiscal year ended March 31, 2006
(Unit: Thousands of Yen)
-------------------------------------------------------------------------------------------------------------------------------
Shares of
Common
Stock Additional Accumulated
Outstanding Common Paid-in Accumulated Other Treasury Total
(Including Stock Capital Deficit Comprehensive Stock
Treasury Income
Stock)
(Shares)
-------------------------------------------------------------------------------------------------------------------------------
BALANCE, APRIL 1, 2005 191,800 13,765,372 23,637,628 (34,434,052) 8,690,125 (44,000) 11,615,073
Net income 4,753,570 4,753,570
Other comprehensive loss, net of tax (2,136,531) (2,136,531)
-----------
Total comprehensive income 2,617,039
Issuance of common stock, net of issuance
cost 12,500 3,068,475 2,961,589 6,030,064
Purchase of common stock by an equity
method investee (40,238) (40,238)
------------------------------------------------------------------------------ ------------ -------------- -------- -----------
BALANCE, MARCH 31, 2006 204,300 16,833,847 26,599,217 (29,680,482) 6,553,594 (84,238) 20,221,938
------------ ----------- ----------- ------------ -------------- -------- -----------
(4) Condensed Consolidated Statements of Cash Flows
-----------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Fiscal Year Ended
Nine Months Ended December 31, 2006 December 31, 2005 March 31, 2006
----------------------------------- ------------------ -----------------
Thousands of U.S.
Dollars Thousands of Yen Thousands of Yen Thousands of Yen
---------------------------------------------------- ------------------ ---------------- ------------------ -----------------
OPERATING ACTIVITIES:
Net income 35,783 4,258,849 2,812,165 4,753,570
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 27,177 3,234,615 3,083,743 4,209,037
Provision for (reversal of) doubtful accounts and
advances 0 25 (23,192) (12,009)
Gains on other investments--net (14,110) (1,679,356) (1,885,009) (3,197,690)
Foreign exchange losses (gains) 16 1,935 (13,904) (7,825)
Equity in net loss (income) of equity method
investees 1,351 160,810 (53,096) 13,746
Minority interests in earnings of subsidiaries 1,639 195,035 242,799 353,883
Deferred income tax expense (benefit) (10,278) (1,223,275) 18,924 (230,841)
Others 2,501 297,719 45,900 215,480
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 32,473 3,864,892 797,068 (4,460,173)
Increase in inventories, prepaid expenses and other
current and noncurrent assets (5,128) (610,349) (1,291,936) (1,390,398)
Decrease in accounts payable (34,679) (4,127,491) (815,811) 4,975,623
Increase in accrued expenses, other current and
noncurrent liabilities 1,701 202,463 1,030,259 1,336,421
-----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 38,446 4,575,872 3,947,910 6,558,824
-----------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of property and equipment (8,287) (986,367) (716,701) (919,366)
Purchase of short-term and other investments (17,461) (2,078,224) (581,336) (674,569)
Investment in an equity method investee - - - (750,000)
Purchase of subsidiary stock from minority
shareholders (232) (27,559) (192,142) (192,142)
Proceeds from sales and redemption of short-term and
other investments 17,703 2,107,022 2,251,661 3,613,239
Acquisition of a newly controlled company, net of - -
cash acquired 229,457 229,457
Acquisition of businesses (628) (74,751) - -
Refund (payment) of guarantee deposits--net (146) (17,396) (43,811) 506,795
Other (166) (19,743) 23,640 (8,564)
-----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (9,217) (1,097,018) 970,768 1,804,850
-----------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Fiscal Year Ended
Nine Months Ended December 31, 2006 December 31, 2005 March 31, 2006
----------------------------------- ------------------ -----------------
Thousands of U.S.
Dollars Thousands of Yen Thousands of Yen Thousands of Yen
---------------------------------------------------- ------------------ ---------------- ------------------ -----------------
FINANCING ACTIVITIES:
Proceeds from issuance of short-term borrowings with
initial maturities over three months and long-term
borrowings 73,937 8,800,000 1,000,000 1,000,000
Repayments of short-term borrowings with initial
maturities over three months and long-term
borrowings (47,300) (5,629,600) (1,876,679) (2,986,056)
Proceeds from securities loan agreement 8,887 1,057,680 3,897,440 4,897,040
Repayments of securities loan agreement (12,567) (1,495,680) (4,498,000) (5,626,960)
Principal payments under capital leases (21,623) (2,573,613) (2,312,961) (3,105,519)
Net increase (decrease) in short-term borrowings (28,609) (3,405,000) 445,583 (169,633)
Proceeds from issuance of common stock, net of - -
issuance cost 6,030,064 6,030,064
-----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (27,275) (3,246,213) 2,685,447 38,936
-----------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (38) (4,552) 29,890 37,934
NET INCREASE IN CASH 1,916 228,089 7,634,015 8,440,544
CASH, BEGINNING OF EACH PERIOD 115,334 13,727,021 5,286,477 5,286,477
-----------------------------------------------------------------------------------------------------------------------------
CASH, END OF EACH PERIOD 117,250 13,955,110 12,920,492 13,727,021
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
ADDITIONAL CASH FLOW INFORMATION:
Interest paid 2,415 287,451 304,367 426,692
Income taxes paid 2,856 339,973 121,038 148,101
NONCASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of assets by entering into capital
leases 14,635 1,741,877 2,308,588 3,842,952
Exchange of common stock investment due to merger:
Market value of common shares acquired - - - 7,390
Cost of investment - - - 2,584
Acquisition of business and a company:
Assets acquired 1,985 236,307 843,485 843,485
Cash paid (628) (74,751) (733,589) (733,589)
Liabilities assumed 1,357 161,556 109,896 109,896
-----------------------------------------------------------------------------------------------------------------------------
(Note)
1) The U.S. dollar amounts represent translations of yen amounts at the rate of JPY 119.02, 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 December 29, 2006.
EXHIBIT 2
---------
IIJ Announces its Plan for the Annual Dividend for the Fiscal Year
Ending March 31, 2007
TOKYO--(BUSINESS WIRE)--Feb. 8, 2007--Internet Initiative Japan
Inc. ("IIJ", NASDAQ: IIJI, TSE1: 3774), one of Japan's leading
Internet access and comprehensive network solutions providers, today
announced that it plans to pay an annual cash dividend for the fiscal
year ending March 31, 2007 ("FY2006") in consideration to the recent
financial results.
The plan for the annual cash dividend for FY2006
(From April 1, 2006 to March 31, 2007)
Dividend per one share of common stock*: JPY 1,500
* 400 American Depository Shares represent one share of common
stock
IIJ continues to make efforts to pay dividends to shareholders
continuously and stably, while simultaneously enhancing its financial
position, expanding its business in the mid and long-term and
retaining earnings for new business development.
IIJ eliminated its accumulated deficit in its non-consolidated
financial statements by reducing additional paid-in capital and common
stock in August 2006. As a result, IIJ expects to have retained
earnings in its non-consolidated financial statements. IIJ's financial
results for FY2006 have been in the favorable trend as it announced
today. IIJ expects to pay dividends to its shareholders for the first
time in its history for FY2006.
IIJ plans to propose the dividend payment at its general
shareholders' meeting that is scheduled to be held in June 2007.
About IIJ
Founded in 1992, Internet Initiative Japan Inc. (IIJ, NASDAQ:
IIJI, TSE1: 3774) 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. The company's services include
high-quality systems integration and security services, Internet
access, hosting/housing, and content design. Moreover, the company has
built one of the largest Internet backbone networks in Japan, and
between Japan and the United States. IIJ was listed on NASDAQ in 1999
and on the First Section of the Tokyo Stock Exchange in 2006. For more
information about IIJ, visit the IIJ Web site at
http://www.iij.ad.jp/en/.
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 FY2006 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 value-added 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.
CONTACT: IIJ Corporate Communications
+81-3-5259-6500
Fax: +81-3-5259-6311
ir@iij.ad.jp
http://www.iij.ad.jp/