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, 2005
Commission File Number: 0-30204
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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 per-mitted 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 per-mitted 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 reg-istrant 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
mate-rial 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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THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN
THE PROSPECTUS INCLUDED IN THE REGISTRATION STATMENT ON FORM F-3 (FILE NO.
333-12696) OF INTERNET INITIATIVE JAPAN INC. AND TO BE A PART THEREOF FROM THE
DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY
DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.
EXHIBIT INDEX
Exhibit Date Description of Exhibit
------- ---------- ----------------------
1 2005/02/09 IIJ Announces Increase in Operating and Net Income in
the Third Quarter of Fiscal Year 2004
-------------------------------------------------------
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, 2005 By: /s/ Koichi Suzuki
------------------------------
Koichi Suzuki
President, Chief Executive Officer and
Representative Director
EXHIBIT 1
---------
IIJ Announces Increase in Operating and Net
Income in the Third Quarter of Fiscal Year 2004
TOKYO & NEW YORK--(BUSINESS WIRE)--Feb. 9, 2005--Internet
Initiative Japan Inc. (Nasdaq: IIJI) ("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, 2005 ("FY2004").(1)
Highlights of Third Quarter FY2004 Results
-- Revenue totaled JPY 10,261 million ($99.9 million), an
increase of 6.5% from JPY 9,633 million in 3Q03 and a decrease
of 2.4% from JPY 10,512 million in 2Q04.
-- Operating income was JPY 410 million ($4.0 million), an
increase of 73.9% from JPY 236 million in 3Q03 and an increase
of 45.4% from JPY 282 million in 2Q04, and inline with
guidance provided in 2Q04.
-- Net income was JPY 920 million ($9.0 million), an increase
from a loss of JPY 273 million in 2Q04.
Outlook for Fourth Quarter FY2004(2)
-- We expect annual and sequential increases in revenue and
operating income in 4Q04.
Overview of 3rd Quarter Financial Results and Business Outlook(2)
"We are extremely pleased with our performance in the past
quarter," said Koichi Suzuki, President and CEO of IIJ. "We achieved
increase and improvement in operating and net income in 3Q04, and we
met the guidance that we provided in 2Q04. Our comprehensive suite of
services, including Internet connectivity, outsourcing and Systems
Integration ("SI") are fundamentally based on our high-quality
Internet engineering skills. We believe that this expertise is what
has allowed us to continue to meet the increased corporate demand for
reliable and high-quality network solutions, including network design
and implementation, security consulting and outsourced network
operations. Value-added Services ("VAS") is one area in particular in
which we believe we will be able to capitalize on our skills in
network and service operations. In the past quarter, revenues from
this business line continued to grow and the business line became a
solid source of ongoing revenue due to the increased number of
contracts for security-related services and multi-site connectivity
using Internet VPN technology. We believe that the increased awareness
of security-related issues along with the expected enforcement of the
law protecting personal information in April 2005 has been a primary
driver of security-related services. Additionally, the steady decrease
in connectivity service revenues that has been seen in the past few
years started to level out in the third quarter due to an increase in
the number of new contracts, especially for multi-site connectivity."
"Operating income in 3Q04 increased compared to both 3Q03 and
2Q04," said Akihisa Watai, CFO of IIJ. "The increase in operating
income was achieved due to an increase in revenues from higher-margin
VAS and SI, a decrease in backbone costs and stringent management of
our SG&A expenses. In 4Q04, we expect that revenue and operating
income will continue to increase, since the declining trend of
connectivity services revenues started to stabilize in 3Q04 and the
revenue from SI is usually the strongest in the fourth quarter of our
fiscal year."
3rd Quarter FY2004 Financial Results
Operating Result Summary
(JPY in millions)
3Q04 3Q03 YoY % 2Q04 QoQ %
change change
Total Revenues 10,261 9,633 6.5% 10,512 (2.4%)
Total Costs 8,486 8,125 4.4% 8,854 (4.2%)
SG&A Expenses and R&D 1,365 1,272 7.3% 1,376 (0.8%)
Operating Income 410 236 73.9% 282 45.4%
Net Income (Loss) 920 1,979 (53.5%) (273) (437.4%)
Revenues
Revenues in 3Q04 totaled JPY 10,261 million, an increase of 6.5%
from JPY 9,633 million in 3Q03 and a decrease of 2.4% from JPY 10,512
million in 2Q04.
Revenues
(JPY in millions)
3Q04 3Q03 YoY % 2Q04 QoQ %
change change
Total Revenues: 10,261 9,633 6.5% 10,512 (2.4%)
Connectivity & VAS 5,666 5,633 0.6% 5,508 2.9%
SI 3,970 2,889 37.4% 3,838 3.4%
Equipment Sales 625 1,111 (43.7%) 1,166 (46.4%)
Connectivity and VAS revenues were JPY 5,666 million in 3Q04, an
increase of 0.6% from JPY 5,633 million in 3Q03 and 2.9% from JPY
5,508 million in 2Q04.
Dedicated access service revenues were JPY 2,781 million in 3Q04,
a decrease of 13.2% compared to 3Q03 and a decrease of 1.8% compared
to 2Q04. The increase in revenues from broadband services did not
offset the revenue decrease from IIJ T1 Standard and IIJ Economy.
However, the level of decline in dedicated access service revenues
shrank from what was significant and steady decline in prior quarters.
Dial-up access service revenues were JPY 727 million in 3Q04, a
decrease of 6.8% compared to 3Q03 and a decrease of 1.8% compared to
2Q04 due to the decrease in revenues from IIJ4U.
VAS revenues were JPY 1,276 million in 3Q04, an increase of 13.5%
compared to 3Q03 and an increase of 4.6% compared to 2Q04. The
increase compared to 3Q03 and 2Q04 is mainly due to construction of
special facilities for large customers and an increase in revenues
from every packaged type of outsourcing services such as
security-related services.
Other revenues were JPY 882 million in 3Q04, an increase of 68.1%
compared to 3Q03 and an increase of 23.3% compared to 2Q04, mainly due
to an increase in revenues from Wide-area Ethernet Services.
SI revenues increased 37.4% to JPY 3,970 million in 3Q04 from JPY
2,889 million in 3Q03 and increased 3.4% from JPY 3,838 million in
2Q04. The increase is mainly due to additional revenues from the
purchase of the security system business operations of Yamatane Co.
Ltd. in October 2004.
Equipment sales revenues were JPY 625 million in 3Q04, a decrease
of 43.7% compared to 3Q03 and 46.4% compared to 2Q04.
Cost and expense
Cost of revenues was JPY 8,486 million in 3Q04, an increase of
4.4% compared to 3Q03 and a decrease of 4.2% compared to 2Q04.
Cost of Revenues
(JPY in millions)
3Q04 3Q03 YoY % 2Q04 QoQ %
change change
Total Costs: 8,486 8,125 4.4% 8,854 (4.2%)
Connectivity & VAS 4,874 4,877 (0.1%) 4,780 2.0%
SI 3,031 2,198 37.8% 2,983 1.6%
Equipment Sales 581 1,050 (44.6%) 1,091 (46.7%)
Cost of Connectivity and VAS revenues was JPY 4,874 million, a
decrease of 0.1% compared to 3Q03 and an increase of 2.0% compared to
2Q04. The gross-margin ratio for Connectivity and VAS in 3Q04 was
14.0%, compared to 13.4% in 3Q03 and 13.2% in 2Q04 due to a decrease
in backbone costs.
Cost of SI revenues was JPY 3,031 million in 3Q04, an increase of
37.8% compared to 3Q03 and an increase of 1.6% compared to 2Q04. The
gross margin ratio for SI in 3Q04 was 23.7%, compared to 23.9% in 3Q03
and 22.3% in 2Q04. The improvement in margin compared to 2Q04 was due
to the increase in outsourced operation services with relatively
high-margin.
Sales and marketing expenses were JPY 684 million in 3Q04, a
decrease of 2.2% compared to 3Q03 and a decrease of 3.9% compared to
2Q04. The decrease from 2Q04 is mainly due to a decrease in allowance
for doubtful accounts.
General and administrative expenses were JPY 633 million in 3Q04,
an increase of 30.1% compared to 3Q03 and an increase of 3.3% compared
to 2Q04. The increase compared to 3Q03 is mainly due to an increase in
personnel expenses and impairment losses on telephone rights.
Operating income
Operating income was JPY 410 million in 3Q04, compared to JPY 236
million in 3Q03 and JPY 282 million in 2Q04 mainly due to improved
gross-margins in Connectivity, VAS and SI.
Other income (expenses) in 3Q04 was JPY 333 million, compared to
JPY 1,570 million in 3Q03 and other expenses of JPY 10 million in
2Q04. The increase from 2Q04 is mainly due to gain on the sale of
available-for-sale securities which amounted to JPY 531 million. The
other income in 3Q03 included the gain on sales of the shares of
DLJdirect SFG Securites.
Income tax expense (benefit) for 3Q04 was a benefit of JPY 221
million, compared to a benefit of JPY 280 million in 3Q03 and an
expense of JPY 517 million in 2Q04. The difference from 2Q04 was
mainly due to a decrease in valuation allowance for deferred tax
assets attributable primarily to the income tax effect of increasing
unrealized gain on certain available-for-sale securities during the
quarter.
Equity in net income (loss) of equity method investees amounted to
a net loss of JPY 1 million in 3Q04, compared to a net loss of JPY 58
million in 3Q03 and net income of JPY 16 million in 2Q04.
Net income (loss) was net income of JPY 920 million in 3Q04,
compared to net income of JPY 1,979 million in 3Q03 and net loss of
JPY 273 million in 2Q04. The increase compared to 2Q04 was mainly due
to the improvement in operating income, gain on the sale of
available-for-sale securities and the income tax benefit due to the
effect of increases in unrealized gains on certain available-for-sale
securities.
3rd Quarter FY2004 Business Review
Analysis by Service
Connectivity and Value-added Services
Number of Contracts for Connectivity Services
3Q04 3Q03 2Q04
Dedicated Access Service Contracts 9,427 6,884 8,880
IP Service (Low Bandwidth: 64kbps-
768kbps)(3) 67 98 71
IP Service (Medium Bandwidth: 1Mbps-
99Mbps) 609 535 597
IP Service (High Bandwidth: 100Mbps-) 103 72 93
IIJ T1 Standard and IIJ Economy(4) 313 581 358
IIJ Data Center Connectivity Service 228 188 225
IIJ FiberAccess/F and IIJ DSL/F
(Broadband Services) 8,107 5,410 7,536
Dial-up Access Service Contracts 708,517 666,920 711,637
Dial-up Access Services, under IIJ
Brand 69,260 77,626 70,629
Dial-up Access Services, OEM(5) 639,257 589,294 641,008
Total Contracted Bandwidth 109.5Gbps 75.8Gbps 104.9Gbps
The total number of contracts for dedicated access services
continued to steadily increase in 3Q04. The number of contracts for
medium and high speeds of IP Services increased as corporate customers
continued to upgrade their bandwidth to higher-speed services (10 or
100Mbps), rather than shift to lower-cost broadband services. The
number of contacts over 1Gbps also increased to 22. The number of
contracts for broadband services continued to increase steadily due to
the new connectivity contracts for multi-site connectivity with
Internet VPN.
Connectivity and VAS Revenue Breakdown and Cost
(JPY in millions)
3Q04 3Q03 YoY % 2Q04 QoQ %
Change change
Connectivity Service Revenues 3,508 3,984 (11.9%) 3,572 (1.8%)
Dedicated Access Service
Revenues 2,781 3,204 (13.2%) 2,832 (1.8%)
IP Service (6) 2,186 2,485 (12.0%) 2,222 (1.7%)
IIJ T1 Standard and IIJ Economy 195 391 (50.2%) 228 (14.5%)
IIJ FiberAccess/F and IIJ DSL/F
(Broadband Services) 400 328 22.0% 382 4.8%
Dial-up Access Service Revenues 727 780 (6.8%) 740 (1.8%)
Under IIJ Brand 478 552 (13.4%) 501 (4.6%)
OEM 249 228 9.3% 239 4.2%
VAS Revenues 1,276 1,125 13.5% 1,220 4.6%
Other Revenues 882 525 68.1% 716 23.3%
Total Connectivity and VAS
Revenues 5,666 5,633 0.6% 5,508 2.9%
Cost of Connectivity and VAS 4,874 4,877 (0.1%) 4,780 2.0%
Backbone Cost (included in the
cost of Connectivity and VAS) 858 1,094 (21.6%) 877 (2.2%)
Connectivity and VAS Gross Margin
Ratio 14.0% 13.4% 13.2%
The trend of decreasing revenues from IP Services, and decreasing
revenues from IIJ T1 Standard and IIJ Economy due to the shift to
lower cost broadband services has slowed. Revenue from broadband
services increased due to new multi-site connectivity customers. As a
result of the factors above, the rate of decline in total connectivity
service revenues in 3Q04 decreased from what was a significant and
steady decline in prior years.
VAS revenues increased by 13.5% compared to 3Q03 and 4.6% compared
to 2Q04. The revenues steadily increased for almost every packaged
type of outsourcing services. We had approximately 1,400
security-related contracts in 3Q04, an increase of 7.8% compared to
2Q04. Increased awareness of security issues, especially resulting
from the expected implementation of the law protecting personal
information in April 2005 also had a positive effect. Revenue from
network-related services rose due to the increase of contracts for IIJ
SMF Service to provide automatic router configuration and monitoring
for IIJ SEIL routers and SEIL Rental Service that is related to
multi-site connectivity cases.
Other revenues also increased steadily mainly due to an increase
in revenue from Wide-area Ethernet services and corporate LAN related
services.
Backbone costs decreased by 21.6% compared to 3Q03 and by 2.2%
compared to 2Q04. We expect that this will become more stable in the
coming quarters.
Cross-selling Ratios
3Q04 2Q04
VAS Cross-selling Ratio 87.5% 86.9%
SI Cross-selling Ratio 90.0% 80.0%
The cross-selling ratio between Connectivity and VAS, as the
percentage of the largest 1,000 Connectivity service customers that
use VAS was 87.5%.
The cross-selling ratio between Connectivity and SI, as the
percentage of SI customers that use Connectivity services among the
largest 100 SI customers was 90.0%.
Systems Integration
Systems Integration
Revenue Breakdown and Cost
(JPY in millions)
3Q04 3Q03 YoY % 2Q04 QoQ %
change change
Systems Integration Revenues 3,970 2,889 37.4% 3,838 3.4%
Systems Integration 1,672 1,509 10.8% 2,101 (20.4%)
Outsourced Operation 2,298 1,380 66.5% 1,737 32.3%
Cost of Systems Integration 3,031 2,198 37.8% 2,983 1.6%
Systems Integration Gross Margin
Ratio 23.7% 23.9% 22.3%
SI revenues increased by 37.4% compared to 3Q03 and 3.4% compared
to 2Q04. The increase is mainly due to additional revenues from the
purchase of the security system business operations of Yamatane Co.
Ltd. ("Yamatane"). The steady increase in revenues from outsourced
operations was also achieved by new outsourcing contracts related to
the one-time integration of systems that occurred in 2Q04. We expect
that overall SI revenues will continue to increase in 4Q04, since the
fourth quarter is the strongest quarter in our fiscal year.
Equipment Sales
Equipment Sales Revenue and Cost
(JPY in millions)
3Q04 3Q03 YoY % 2Q04 QoQ %
change change
Equipment Sales Revenues 625 1,111 (43.7%) 1,166 (46.4%)
Cost of Equipment Sales 581 1,050 (44.6%) 1,091 (46.7%)
Equipment Sales Gross Margin Ratio 7.0% 5.5% 6.5%
Other Financial Statistics
Other Financial Statistics
(JPY in millions)
3Q04 3Q03 YoY % 2Q04 QoQ %
Change change
Adjusted EBITDA(7) 1,508 1,218 23.9% 1,275 18.3%
CAPEX, including capital leases(8) 2,017 508 296.9% 1,345 49.9%
Depreciation and amortization(9) 1,116 1,004 11.2% 1,012 10.4%
Key Service Developments
Participation in RFID development:
In November 2004, IIJ announced that it will participate along
with IIJ Technology Inc, in testing Radio Frequency ID tags ("RFID")
on international shipping containers in the physical distribution
industry as part of the FY2004 RFID Pilot Project that is being run by
the Ministry of Economy, Trade, and Industry. In this test, the IIJ
Group will provide network infrastructure and the EPC System, a system
that was developed by IIJ and enables the general recording,
referencing, and updating over the Internet of information tied to
RFID tags, such as tag code, association, and history to verify its
validity. The EPC System provides more generalized and flexible use
than the proprietary use in a certain company or industry by using the
Internet. IIJ is planning to introduce new services based on the
knowledge and know-how accumulated in the experiment.
Addition of a spam filter to our Internet service for consumer
customers:
In December 2004, IIJ announced that it would add a spam filter to
its Internet service for consumer customers, IIJ4U. In Japan, spam is
becoming a serious problem and the feature is provided free of charge
to consumers who use the optional Virus Protection service, which
detects and deletes viruses. There are also plans to extend this spam
filtering feature to IIJmio in early 2005.
Reconciliation of Non-GAAP Financial Measures
The following table summarizes the reconciliation of adjusted
EBITDA to net income according to the consolidated statements of
operations that are prepared in accordance with accounting principles
generally accepted in the U.S. and presented in Appendix 1:
Adjusted EBITDA
(JPY in millions)
3Q04 3Q03 2Q04
Adjusted EBITDA 1,508 1,218 1,275
Depreciation and Amortization(10) (1,098) (982) (993)
Operating Income 410 236 282
Other Income (Expenses) 333 1,570 (10)
Income Tax Expense (Benefit) (221) (280) 518
Minority Interests in Consolidated Subsidiaries (43) (49) (43)
Equity in Net Income (Loss) of Equity Method
Investees (1) (58) 16
Net Income (Loss) 920 1,979 (273)
The following table summarizes the reconciliation of capital
expenditures to the purchase of property and equipment according to
the consolidated statements of cash flows that are prepared and
presented in accordance with accounting principles generally accepted
in the U.S. in Appendix 4:
CAPEX
(JPY in millions)
3Q04 3Q03 2Q04
Capital Expenditures 2,017 508 1,345
Acquisition of Assets by Entering into
Capital Leases 1,911 168 1,294
Purchase of Property and Equipment 106 340 51
Management Message/Webcast
On February 10, IIJ will present its management message and the
Company's results and outlook by webcast. 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) 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. Services range from
the delivery of new generation network services over an optical-fiber
infrastructure that is optimized for data communications, to the
construction of pan-Asian IP backbone networks. The company also
offers 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 4Q04 revenues and operating
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 expectation that net
losses will continue or may increase; 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; the impact on IIJ's profits of fluctuations in the
price of available-for-sale securities; the impact on IIJ's profits of
fluctuations in costs such as backbone costs and subcontractor costs;
IIJ's ability to generate significant revenues from its other services
such as systems integration; the ability to compete in a rapidly
evolving and competitive marketplace; the impact of technological
changes in its industry; 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 3Q04
results, translations of Japanese yen amounts into US dollars are
solely for the convenience of readers outside of Japan and have
been made at the rate of JPY 102.68 = US$1.00, the approximate
exchange rate on December 31, 2004.
(2)This Overview and Business Outlook contains forward-looking
statements and projections such as statements regarding 4Q04
revenues and operating profitability 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 contained in IIJ's filings
on Form 20-F and Form 6-K, 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 4Q04 earnings release, presently scheduled for May 2005.
(3)Including IPv6 Services.
(4)Referred to "Limited Functionality Services" in 1Q04 for the
services with local access not shared, limited on several
functionality compared to IP service such as number of IP address
allocated and fixed speed of 64kbps, 128kbps and 1.5Mbps.
(5)OEM stands for Original Equipment Manufacturer.
(6)IP Service revenues includes revenues from Data Center Connectivity
Service.
(7)Please refer to the Reconciliation of Non-GAAP Financial Measures
below.
(8)Please refer to the Reconciliation of Non-GAAP Financial Measures
on the next page.
(9)Depreciation and amortization includes amortization of issuance
cost of convertible notes.
(10)Depreciation and amortization excludes amortization of issuance
cost of convertible notes that was included in other expenses.
INTERNET INITIATIVE JAPAN INC. Appendix 1
---------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)
----------------------------------------------------------
For the Three Months Ended Dec 31, 2004, Dec 31,2003 and Sept 30, 2004
(Expressed in Thousands of Japanese Yen (JPY) and U.S.
Dollars (USD) Except for Per Share and ADS Data) (1)
Year-over-year Comparison
Dec 31, 2004
----------------------------
% of
Total
USD (1) JPY Revenues
------- ----------- --------
Revenues:
Connectivity and value-added
services:
Dedicated access services 27,084 2,780,955 27.1%
Dial-up access services 7,078 726,798 7.1
Value-added services 12,427 1,275,958 12.4
Other 8,594 882,466 8.6
------- ----------- --------
Total connectivity and value-
added services 55,183 5,666,177 55.2
Systems integration revenues 38,660 3,969,610 38.7
Equipment sales 6,089 625,196 6.1
------- ----------- --------
Total revenues 99,932 10,260,983 100.0
------- ----------- --------
Costs and expenses:
Cost of connectivity and value-added
services 47,465 4,873,759 47.5
Cost of systems integration revenues 29,516 3,030,666 29.5
Cost of equipment sales 5,662 581,368 5.7
------- ----------- --------
Total costs 82,643 8,485,793 82.7
Sales and marketing 6,659 683,731 6.6
General and administrative 6,164 632,874 6.2
Research and development 471 48,406 0.5
------- ----------- --------
Total costs and
expenses 95,937 9,850,804 96.0
------- ----------- --------
Operating income 3,995 410,179 4.0
------- ----------- --------
Other income (expenses) 3,239 332,623 3.2
------- ----------- --------
Income before income tax expense
(benefit) 7,234 742,802 7.2
------- ----------- --------
Income tax expense (benefit) (2,152) (220,980) (2.2)
Minority interests in consolidated
subsidiaries (419) (43,040) (0.4)
Equity in net income (loss) of equity
method investees (8) (795) 0.0
------- ----------- --------
Net income (loss) 8,959 919,947 9.0%
======= =========== ========
Basic Net Income (Loss) Per Share 24,012
Basic Net Income (Loss) Per ADS Equivalent 12.01
Weighted Average Number of Shares 38,312
Weighted Average Number of ADS Equivalents 76,623,702
Year-over-year Comparison
Dec 31, 2003
------------------------------
% of
Total YOY
JPY Revenues Chg %
----------- --------- --------
Revenues:
Connectivity and value-added
services:
Dedicated access services 3,204,046 33.3% (13.2%)
Dial-up access services 779,544 8.1 (6.8)
Value-added services 1,124,596 11.7 13.5
Other 525,106 5.4 68.1
----------- --------- --------
Total connectivity and
value-added services 5,633,292 58.5 0.6
Systems integration revenues 2,888,936 30.0 37.4
Equipment sales 1,110,927 11.5 (43.7)
----------- --------- --------
Total revenues 9,633,155 100.0 6.5
----------- --------- --------
Costs and expenses:
Cost of connectivity and value-added
services 4,876,741 50.6 (0.1)
Cost of systems integration
revenues 2,198,668 22.8 37.8
Cost of equipment sales 1,049,663 10.9 (44.6)
----------- --------- --------
Total costs 8,125,072 84.3 4.4
Sales and marketing 698,948 7.3 (2.2)
General and administrative 486,332 5.1 30.1
Research and development 86,966 0.9 (44.3)
----------- --------- --------
Total costs and
expenses 9,397,318 97.6 4.8
----------- --------- --------
Operating income 235,837 2.4 73.9
----------- --------- --------
Other income (expenses) 1,569,957 16.3 (78.8)
----------- --------- --------
Income before income tax expense
(benefit) 1,805,794 18.7 (58.9)
----------- --------- --------
Income tax expense (benefit) (280,406) (2.9) (21.2)
Minority interests in consolidated
subsidiaries (48,710) (0.5) (11.6)
Equity in net income (loss) of equity
method investees (58,354) (0.6) (98.6)
----------- --------- --------
Net income (loss) 1,979,136 20.5% (53.5)
=========== ========= ========
Basic Net Income (Loss) Per Share 51,658
Basic Net Income (Loss) Per AD
Equivalent 25.83
Weighted Average Number of Shares 38,312
Weighted Average Number of ADS
Equivalents 76,623,702
Sequential Comparison
Sept. 30, 2004
-------------------------------
% of
Total QOQ
JPY Revenues Chg %
----------- -------- ----------
Revenues:
Connectivity and value-added
services:
Dedicated access services 2,832,355 27.0% (1.8%)
Dial-up access services 739,957 7.0 (1.8)
Value-added services 1,220,119 11.6 4.6
Other 715,617 6.8 23.3
----------- -------- ----------
Total connectivity and
value-added services 5,508,048 52.4 2.9
Systems integration revenues 3,837,711 36.5 3.4
Equipment sales 1,166,569 11.1 (46.4)
----------- -------- ----------
Total revenues 10,512,328 100.0 (2.4)
----------- -------- ----------
Costs and expenses:
Cost of connectivity and value-added
services 4,780,268 45.5 2.0
Cost of systems integration
revenues 2,982,577 28.3 1.6
Cost of equipment sales 1,090,870 10.4 (46.7)
----------- -------- ----------
Total costs 8,853,715 84.2 (4.2)
Sales and marketing 711,661 6.8 (3.9)
General and administrative 612,526 5.8 3.3
Research and development 52,237 0.5 (7.3)
----------- -------- ----------
Total costs and
expenses 10,230,139 97.3 (3.7)
----------- -------- ----------
Operating income 282,189 2.7 45.4
----------- -------- ----------
Other income (expenses) (10,188) (0.1) (3,364.9)
----------- -------- ----------
Income before income tax expense
(benefit) 272,001 2.6 173.1
----------- -------- ----------
Income tax expense (benefit) 517,379 4.9 (142.7)
Minority interests in consolidated
subsidiaries (42,837) (0.4) 0.5
Equity in net income (loss) of equity
method investees 15,548 0.1 (105.1)
----------- -------- ----------
Net income (loss) (272,667) (2.6%) (437.4)
=========== ======== ==========
Basic Net Income (Loss) Per Share (7,117)
Basic Net Income (Loss) Per ADS
Equivalent (3.56)
Weighted Average Number of Shares 38,312
Weighted Average Number of ADS
Equivalents 76,623,702
Note (1): The translations of Japanese yen amounts into US dollar
amounts with respect to the three months ended Dec 31, 2004
are included solely for the convenience of readers outside
Japan and have been made at the rate of JPY 102.68 =$1, the
approximate rate of exchange on Dec 31, 2004.
INTERNET INITIATIVE JAPAN INC. Appendix 2
------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)
------------------------------------------------
For the Nine Months Ended Dec 31, 2004, Dec 31, 2003
(Expressed in Thousands of Japanese Yen (JPY) and
U.S. Dollars (USD) Except for Per Share and ADS Data)(1)
Year-over-year Comparison
Dec 31, 2004
-----------------------------
% of
Total
USD (1) JPY Revenues
-------- ----------- --------
Revenues:
Connectivity and value-added
services:
Dedicated access services 83,091 8,531,798 29.0%
Dial-up access services 21,608 2,218,688 7.5
Value-added services 35,868 3,682,914 12.5
Other 21,333 2,190,473 7.4
-------- ----------- --------
Total connectivity and
value-added services 161,900 16,623,873 56.4
Systems integration revenues 102,278 10,501,959 35.7
Equipment sales 22,618 2,322,386 7.9
-------- ----------- --------
Total revenues 286,796 29,448,218 100.0
-------- ----------- --------
Costs and expenses:
Cost of connectivity and
value-added services 140,878 14,465,368 49.1
Cost of systems integration
revenues 79,566 8,169,863 27.8
Cost of equipment sales 20,917 2,147,704 7.3
-------- ----------- --------
Total costs 241,361 24,782,935 84.2
Sales and marketing 20,046 2,058,342 7.0
General and administrative 18,174 1,866,051 6.3
Research and development 1,451 149,011 0.5
-------- ----------- --------
Total costs and expenses 281,032 28,856,339 98.0
-------- ----------- --------
Operating income (loss) 5,764 591,879 2.0
-------- ----------- --------
Other income 1,673 171,735 0.6
-------- ----------- --------
Income before income tax expense
(benefit) 7,437 763,614 2.6
-------- ----------- --------
Income tax expense (benefit) (13,254) (1,360,936) (4.6)
Minority interests in consolidated
subsidiaries (455) (46,693) (0.1)
Equity in net income (loss) of equity
method investees 37 3,758 0.0
-------- ----------- --------
Net income (loss) 20,273 2,081,615 7.1%
======== =========== ========
Basic Net Income (Loss) Per Share 54,333
Basic Net Income (Loss) Per ADS
Equivalent 27.17
Weighted Average Number of Shares 38,312
Weighted Average Number of ADS
Equivalents 76,623,702
Year-over-year Comparison
Dec 31, 2003
-----------------------------
% of
Total YOY
JPY Revenues Chg %
----------- -------- --------
Revenues:
Connectivity and value-added
services:
Dedicated access services 9,761,680 35.9% (12.6%)
Dial-up access services 2,330,551 8.6 (4.8)
Value-added services 3,192,670 11.8 15.4
Other 1,581,204 5.8 38.5
----------- -------- --------
Total connectivity and
value-added services 16,866,105 62.1 (1.4)
Systems integration revenues 7,846,238 28.9 33.8
Equipment sales 2,450,117 9.0 (5.2)
----------- -------- --------
Total revenues 27,162,460 100.0 8.4
----------- -------- --------
Costs and expenses:
Cost of connectivity and
value-added services 15,237,607 56.1 (5.1)
Cost of systems integration
revenues 6,797,764 25.0 20.2
Cost of equipment sales 2,295,320 8.5 (6.4)
----------- -------- --------
Total costs 24,330,691 89.6 1.9
Sales and marketing 2,771,562 10.2 (25.7)
General and administrative 1,580,597 5.8 18.1
Research and development 279,182 1.0 (46.6)
----------- -------- --------
Total costs and expenses 28,960,032 106.6 (0.4)
----------- -------- --------
Operating income (loss) (1,799,572) (6.6) (132.9)
----------- -------- --------
Other income 1,208,265 4.4 (85.8)
----------- -------- --------
Income before income tax expense
(benefit) (591,307) (2.2) (229.1)
----------- -------- --------
Income tax expense (benefit) (1,242,083) (4.6) 9.6
Minority interests in consolidated
subsidiaries 393,107 1.5 (111.9)
Equity in net income (loss) of equity
method investees (1,817,721) (6.7) (100.2)
----------- -------- --------
Net income (loss) (773,838) (2.8%) (369.0)
=========== ======== ========
Basic Net Income (Loss) Per Share (26,198)
Basic Net Income (Loss) Per ADS
Equivalent (13.10)
Weighted Average Number of Shares 29,538
Weighted Average Number of ADS
Equivalents 59,076,611
Note (1): The translations of Japanese yen amounts into US dollar
amounts with respect to the three months ended Dec 31, 2004
are included solely for the convenience of readers outside
Japan and have been made at the rate of JPY102.68 =$1, the
approximate rate of exchange on Dec 31,2004.
INTERNET INITIATIVE JAPAN INC. Appendix 3
---------------------------------------
CONSOLIDATED BALANCE SHEETS(UNAUDITED)
-----------------------------------------------------
As of Dec 31, 2004, Dec 31, 2003 and Sept 30, 2004
(Expressed in Thousands of Japanese Yen (JPY) and U.S.
Dollars (USD)) (1)
Dec 31, 2004
-----------------------------
USD (1) JPY %
--------- ------------ ------
ASSETS
-------------------------------------
Current Assets:
Cash and cash equivalents 118,414 12,158,790 26.9%
Accounts receivable, net 60,687 6,231,361 13.8
Inventories 3,624 372,144 0.8
Prepaid expenses 9,632 989,003 2.2
Other current assets 3,255 334,169 0.7
--------- ------------ ------
Total current assets 195,612 20,085,467 44.4
Investments in and Advances to Equity
Method Investees 7,398 759,585 1.7
Other Investments 107,831 11,072,053 24.4
Property and Equipment, net 97,428 10,003,936 22.1
Guarantee Deposits 19,968 2,050,305 4.5
Other Assets 12,544 1,288,024 2.9
--------- ------------ ------
Total assets 440,781 45,259,370 100.0%
========= ============ ======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Short-term borrowings 46,999 4,825,844 10.7%
Payable under securities loan
agreement 7,039 722,800 1.6
Accounts payable 34,731 3,566,158 7.9
Accrued expenses 6,484 665,821 1.5
Other current liabilities 7,599 780,267 1.7
Long-term borrowings-current portion 21,281 2,185,094 4.8
Convertible notes 107,986 11,088,000 24.5
Capital lease obligations-current
portion 27,118 2,784,469 6.1
--------- ------------ ------
Total current liabilities 259,237 26,618,453 58.8
Long-term Borrowings 23,270 2,389,339 5.3
Convertible Notes
Capital Lease Obligations-Noncurrent 43,429 4,459,352 9.8
Accrued Retirement and Pension Costs 1,176 120,732 0.3
Other Noncurrent Liabilities 3,120 320,393 0.7
--------- ------------ ------
Total liabilities 330,232 33,908,269 74.9
--------- ------------ ------
Minority Interest 9,632 988,964 2.2
--------- ------------ ------
Shareholders' Equity:
Common stock 134,061 13,765,372 30.4
Additional paid-in capital 230,207 23,637,628 52.2
Accumulated deficit (318,551) (32,708,815) (72.2)
Accumulated other comprehensive
income 55,629 5,711,952 12.6
Treasury stock (429) (44,000) (0.1)
--------- ------------ ------
Total shareholders' equity 100,917 10,362,137 22.9
--------- ------------ ------
Total liabilities and
shareholders' equity 440,781 45,259,370 100.0%
========= ============ ======
Dec 31, 2003 Sept 30, 2004
------------------- ---------------------
JPY % JPY %
------------ ------ ------------ --------
ASSETS
------
Current Assets:
Cash and cash equivalents 12,140,595 31.5% 11,802,165 27.4%
Accounts receivable, net 6,640,226 17.3 6,770,303 15.7
Inventories 196,252 0.5 262,180 0.6
Prepaid expenses 875,338 2.3 652,061 1.5
Other current assets 391,766 1.0 106,364 0.3
------------ ------ ------------ --------
Total current
assets 20,244,177 52.6 19,593,073 45.5
Investments in and Advances
to Equity Method Investees 1,024,126 2.7 752,630 1.7
Other Investments 5,821,912 15.1 10,657,082 24.7
Property and Equipment, net 8,448,327 22.0 9,045,349 21.0
Guarantee Deposits 2,076,387 5.4 2,080,345 4.8
Other Assets 849,954 2.2 963,895 2.3
------------ ------ ------------ --------
Total assets 38,464,883 100.0% 43,092,374 100.0%
============ ====== ============ ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Short-term borrowings 6,764,410 17.6% 5,732,204 13.3%
Payable under securities
loan agreement 816,800 1.9
Accounts payable 4,611,586 12.0 4,502,356 10.5
Accrued expenses 513,996 1.3 448,585 1.0
Other current liabilities 594,974 1.5 604,868 1.4
Long-term borrowings-current
portion 1,947,309 5.1 1,650,139 3.8
Convertible notes 11,088,000 25.7
Capital lease
obligations-current
portion 2,415,596 6.3 2,491,070 5.8
------------ ------ ------------ --------
Total current
liabilities 16,847,871 43.8 27,334,022 63.4
Long-term Borrowings 1,945,434 5.0 1,732,473 4.0
Convertible Notes 11,832,000 30.7
Capital Lease
Obligations-Noncurrent 2,801,993 7.3 3,620,613 8.4
Accrued Retirement and
Pension Costs 67,557 0.2 102,224 0.3
Other Noncurrent
Liabilities 180,329 0.5 300,190 0.7
------------ ------ ------------ --------
Total liabilities 33,675,184 87.5 33,089,522 76.8
------------ ------ ------------ --------
Minority Interest 486,388 1.3 945,572 2.2
------------ ------ ------------ --------
Shareholders' Equity:
Common stock 13,765,372 35.8 13,765,372 31.9
Additional paid-in
capital 23,637,628 61.5 23,637,628 54.8
Accumulated deficit (35,459,129) (92.2) (33,628,762) (78.0)
Accumulated other
comprehensive income 2,359,503 6.1 5,327,042 12.4
Treasury stock (63) 0.0 (44,000) (0.1)
------------ ------ ------------ --------
Total shareholders'
equity 4,303,311 11.2 9,057,280 21.0
------------ ------ ------------ --------
Total liabilities
and shareholders'
equity 38,464,883 100.0% 43,092,374 100.0%
============ ====== ============ ========
Note (1): The translations of Japanese yen amounts into US dollar
amounts with respect to the three months ended Dec 31, 2004
are included solely for the convenience of readers outside
Japan and have been made at the rate of JPY 102.68 =$1, the
approximate rate of exchange on Dec 31, 2004.
INTERNET INITIATIVE JAPAN INC. Appendix 4
------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED)
-----------------------------------------------
For the Three Months Ended Dec 31, 2004, Dec 31, 2003 and
Sept 30, 2004
(Expressed in Thousands of Japanese Yen (JPY)
and U.S. Dollars (USD)) (1)
Dec 31, Sept 30,
Dec 31, 2004 2003 2004
------------------- ----------- -----------
USD (1) JPY JPY JPY
-------- --------- ----------- -----------
Operating
Activities:
Net income (loss) 8,959 919,947 1,979,136 (272,667)
Depreciation
and
amortization 10,873 1,116,447 1,004,236 1,011,532
Provision for
(reversal of)
doubtful accounts (180) (18,455) (40,428) 19,968
Equity in net
income (loss) of
equity method
investees 8 795 58,354 (15,548)
Minority interests
in consolidated
subsidiaries 419 43,040 48,710 42,837
Foreign exchange
losses (gains) 145 14,912 12,279 (14,152)
Gain on retirement
of convertible
notes - - (88,975) -
Net gains on
other
investments (5,135) (527,300) (1,532,033) (98,103)
Decrease (increase)
in accounts
receivable 5,677 582,873 138,452 (1,396,506)
Increase (decrease)
in accounts
payable (9,597) (985,459) (70,261) 566,837
Decrease (increase)
in inventories (1,071) (109,964) 72,267 149,969
Deferred
income taxes (2,530) (259,783) (286,208) 501,873
Other (1,427) (146,465) (209,740) 542,953
-------- ----------- ----------- -----------
Net cash provided by
operating
activities 6,141 630,588 1,085,789 1,038,993
-------- ----------- ----------- -----------
Investing Activities:
Purchase of
property and
equipment (1,032) (105,946) (339,621) (51,435)
Proceeds from
sales of other
investment 7,312 750,800 1,946,875 125,281
Purchase of
other investments (47) (4,854) (6,039) (3,083)
Refund (payment)
of guarantee
deposits-net 303 31,162 727 (19,193)
Acquisition of
business (3,613) (371,011) - -
Other (10) (1,029) (225) 904
-------- ----------- ----------- -----------
Net cash provided by
investing
activities 2,913 299,122 1,601,717 52,474
-------- ----------- ----------- -----------
Financing Activities:
Proceeds from
long-term
borrowings 12,174 1,250,000 - 1,000,000
Repayments of
long-term
borrowings (567) (58,179) (1,036,247) (1,436,943)
Proceeds from
(repayments of)
securities
loan agreement (916) (94,000) - 816,800
Repurchase of
convertible notes - - (3,047,460) -
Principal
payments
under capital
leases (7,372) (756,982) (671,339) (688,418)
Net increase
(decrease) in
short-term
borrowings (8,827) (906,360) 2,459,505 369,203
-------- ----------- ----------- -----------
Net cash provided by
(used in) financing
activities (5,508) (565,521) (2,295,541) 60,642
-------- ----------- ----------- -----------
Effect of Exchange
Rate Changes on Cash (73) (7,564) (34,305) 22,853
-------- ----------- ----------- -----------
Net Increase in Cash
and Cash Equivalents 3,473 356,625 357,660 1,174,962
-------- ----------- ----------- -----------
Cash and Cash
Equivalents,
Beginning of Period 114,941 11,802,165 11,782,935 10,627,203
-------- ----------- ----------- -----------
Cash and Cash
Equivalents, End of
Period 118,414 12,158,790 12,140,595 11,802,165
======== =========== =========== ===========
Note (1): The translations of Japanese yen amounts into US dollar
amounts with respect to the three months ended Dec 31, 2004
are included solely for the convenience of readers outside
Japan and have been made at the rate of JPY102.68 =$1, the
approximate rate of exchange on Dec 31, 2004.
CONTACT: IIJ Media & Investor Relations Division
Taisuke ONO / Naoshi YONEYAMA, +81-3-5259-6500
ir@iij.ad.jp
http://www.iij.ad.jp/