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TMCNet:  IIJ Announces Full Year and Fourth Quarter Financial Results for the Fiscal Year Ended March 31, 2014

[May 14, 2014]

IIJ Announces Full Year and Fourth Quarter Financial Results for the Fiscal Year Ended March 31, 2014

(GlobeNewswire Via Acquire Media NewsEdge) TOKYO, May 15, 2014 (GLOBE NEWSWIRE) -- Internet Initiative Japan Inc. ("IIJ") (Nasdaq:IIJI) (TSE:3774) today announced its full year ("FY2013") and 4th quarter ("4Q13") consolidated financial results for the fiscal year ended March 31, 2014 (from April 1, 2013 to March 31, 2014).1      Highlights of Financial Results for FY2013         Revenues  JPY114,272 million (up 7.6% YoY) Operating Income  JPY5,723 million (down 26.2% YoY) Net Income attributable to IIJ  JPY4,442 million (down 16.2% YoY)        Financial Targets for FY2014   Revenues  JPY123,000 million  (up 7.6% YoY)   Operating Income  JPY7,200 million (up 25.8% YoY) Net Income attributable to IIJ  JPY4,500 million (up 1.3% YoY) Annual Cash Dividend JPY22.00 per share     Overview of FY2013 Financial Results and Business Outlook "Our business bases have been largely strengthened with several unconventional transactions in FY2013, while income results were weak mainly due to certain large customers' revenues leveling off as we reported in 3Q earnings. We've pursued some progressive large-scale projects by leveraging our cloud facilities and services, MVNO (Mobile Virtual Network Operator) infrastructure and system integration features. We strongly believe these projects should surely contribute to our continuous revenue and income growth for the coming few years," said Koichi Suzuki, Founder and CEO of IIJ.


"Our cloud services "IIJ GIO" continued to grow in revenue, the number of customers, and system volume. Same as our prominent connectivity business, we mainly target large institutions with our reliable and value-added cloud service features. As seen in the case of Sompo Japan, one of the largest Japanese insurance companies, extensively adopting IIJ GIO to their IT system platforms, we're starting to see the usage of cloud services by some Japanese blue-chips becoming more advanced and conjugated. We also anticipate that BigData trend should encourage the adoption of cloud services. These recent changes in market momentum are certainly tailwinds for IIJ in the middle term," followed Eijiro Katsu, President and COO of IIJ.

"Triggered by our LTE SIM card offerings to consumers, our MVNO business has largely expanded in FY2013. Consumers can enjoy much cheaper smart-phones connectivity with our SIM card services than mobile carriers' expensive services. These MVNO services are relatively new in the Japanese market and we're anticipating further penetration to continue. We're also receiving increasing requirements from large institutions to act as MVNE (Mobile Virtual Network Enabler), asking us to offer our established large MVNO infrastructure. The demands for M2M (Machine to Machine connection) are also continuously expanding. By grasping these business opportunities for both corporate and consumers, we believe we'll be able to have continuous income increase by improving our network utilization," said Katsu.

1 Unless otherwise stated, all financial figures discussed in this announcement are prepared in accordance with U.S. GAAP. All financial figures are unaudited and consolidated. The translation of Japanese yen into U.S. dollars is solely for the convenience of readers outside of Japan. The rate used for the translation was JPY102.98 per US$1.00, which was the noon buying rate on March 31, 2014.

"As for systems integration, we continued to see great demands supported by overall Japanese economic recovery. We've acquired several flagship projects to which we jointly offer our network services and systems integration. We believe strong demands for network related systems investment and outsourcing from Japanese corporate should continue and our role to offer total network solutions become more important," continued Katsu.

"For FY2014, we shall devote ourselves to return to strong profit growth. We'd like to pursue on selling profitable monthly recurring revenue services more efficiently, increasing the number of large accounts, implementing stricter control on systems integration profitability and so on. At the same time, we will continuously implement our middle- to long- term growth strategies, including continuous recruitment of employees in aiming to dramatically enlarge our business scale. And also, we'd like to keep looking into M&A opportunities," concluded Katsu.

FY2013 Financial Results Summary Operating Results Summary   FY2012FY2013 YoY %      Change   JPY millionsJPY millions  Total Revenues 106,248114,272 7.6Network Services 65,23267,286 3.1Systems Integration (SI) 37,20542,469 14.1Equipment Sales 1,4911,690 13.4ATM Operation Business 2,3202,827 21.8Total Costs 84,39493,206 10.4Network Services 50,69253,046 4.6Systems Integration (SI) 30,42536,510 20.0Equipment Sales 1,3181,527 15.8ATM Operation Business 1,9592,123 8.3SG&A Expenses and R&D 14,10115,343 8.8Operating Income 7,7535,723 (26.2)Income before Income Tax Expense 7,7576,275 (19.1)Net income attributable to IIJ 5,3014,442 (16.2)Segment Results Summary   FY2012FY2013   JPY millionsJPY millionsTotal Revenues 106,248114,272Network services and SI business 104,487111,901ATM operation business 2,3202,827Elimination 559456Operating Income (Loss) 7,7535,723Network service and SI business 7,6295,275ATM operation business 239578Elimination 115130 We have omitted segment analysis because most of our revenues are dominated by Network services and Systems Integration (SI) business.

FY2013 Results of Operation Revenues Total revenues were JPY114,272 million, up 7.6% YoY.

Network Services revenue was JPY67,286 million, up 3.1% YoY.

Revenues for Internet connectivity services for corporate use were JPY16,585 million, up 3.5% YoY. The increase was mainly due to the increasing demands for mobile and broader bandwidth services. However, revenues were weaker than expected as IP service revenues from certain large network carrier with large IP contracts did not increase as much as we initially targeted for FY2013.

Revenues for Internet connectivity services for home use were JPY6,025 million, up 10.2% YoY. The increase in revenues from our low-priced LTE SIM card offerings covered the decrease in both contracts and revenues from our legacy-type home use internet services. Number of contracts for LTE SIM card offerings reached approximately 139,000 contracts as of March 31, 2014 (approximately 50,000 contracts as of March 31, 2013).

WAN services revenues were JPY25,006 million, down 0.6% YoY. The price down pressure by certain large customers had negative impact on revenues and income despite the continuous increase in revenues from other customers.

Outsourcing services revenues were JPY19,670 million, up 5.9% YoY, mainly due to the increase in revenues of "IIJ GIO Hosting Package Services". However, revenues were weaker than expected as cloud and data center revenues from certain large game providers did not increase as much as we initially targeted for FY2013.

Network Services Revenues Breakdown   FY2012FY2013 YoY %      Change   JPY millionsJPY millions  Internet Connectivity Service (Corporate Use) 16,02716,585 3.5IP Service2 10,21710,357 1.4IIJ FiberAccess/F and IIJ DSL/F 3,1703,147 (0.7)IIJ Mobile Service3 2,4012,850 18.7Others 239231 (3.7)Internet Connectivity Service (Home Use) 5,4666,025 10.2Under IIJ Brand 1,3502,273 68.3hi-ho 3,4893,047 (12.7)OEM 627705 12.5WAN Services 25,16825,006 (0.6)Outsourcing Services 18,57119,670 5.9Total Network Services 65,23267,286 3.12 IP Service revenues include revenues from the Data Center Connectivity Service.

3 Revenue from mobile data communication service for home use is included in Internet Connectivity service (home use).

Number of Contracts for Connectivity Services   as of as of  YoY   March 31, 2013March 31, 2014 ChangeInternet Connectivity Services (Corporate Use) 114,614142,655 28,041IP Service (-99Mbps) 905847 (58)IP Service (100Mbps-999Mbps) 401448 47IP Service (1Gbps--) 207271 64IIJ Data Center Connectivity Service 306288 (18)IIJ FiberAccess/F and IIJ DSL/F 48,94056,384 7,444IIJ Mobile Service4 62,51783,124 20,607Others 1,3381,293 (45)Internet Connectivity Services (Home Use)  489,223625,297 136,074Under IIJ Brand 102,256171,968 69,712hi-ho 149,000155,177 6,177OEM 237,967298,152 60,185Total Contracted Bandwidth 1,218.7Gbps1,539.3Gbps 320.6SI revenues were JPY42,469 million, up 14.1% YoY.

Systems construction revenue, a one-time revenue, was JPY18,673 million, up 18.0% YoY. Both number and scale of systems construction projects increased. Systems operation and maintenance revenue, a recurring revenue, was JPY23,796 million, up 11.3% YoY. The increase was mainly due to the continuous demands on "IIJ GIO Component Services." However, systems operation and maintenance revenues were weaker than expected as systems operation and maintenance revenues from certain large game providers did not increase as much as we initially targeted for FY2013.

The orders received for SI and equipment sales for FY2013 totaled JPY48,387 million, up 15.4% YoY. In the breakdown, the orders received for systems construction and equipment sales was JPY21,763 million, up 26.7% YoY, and the orders received for systems operation and maintenance was JPY26,624 million, up 7.6% YoY.

The order backlog for SI and equipment sales as of March 31, 2014 amounted to JPY24,308 million, up 21.1% YoY. In the breakdown, the order backlog for systems construction and equipment sales was JPY5,102million, up 37.8% YoY, and the order backlog for systems operation and maintenance was JPY19,206 million, up 17.3% YoY.

Equipment sales revenues were JPY1,690 million, up 13.4% YoY.

ATM Operation Business revenues were JPY2,827 million, up 21.8% YoY. The increase was in accordance with the continuous increase in the numbers of newly placed ATMs. As of May 15, 2014, 855 ATMs are placed (625 ATMs as of May 15, 2013).

Cost and expense Total cost of revenues was JPY93,206 million, up 10.4% YoY.

Cost of Network Services revenue was JPY53,046 million, up 4.6% YoY, The increase was mainly due to the increase in network operation related costs, circuit-related costs and personnel-related costs. Gross margin was JPY14,240 million, down 2.1 % YoY and gross margin ratio was 21.2%.

Cost of SI revenues was JPY36,510 million, up 20.0% YoY. The increase was mainly due to the increase in purchasing costs along with the increase in systems construction revenues as well as outsourcing-related and personnel-related costs. Gross margin was JPY5,959 million, down 12.1% YoY and gross margin ratio was 14.0%.

Cost of Equipment Sales revenues was JPY1,527 million, up 15.8% YoY. Gross margin was JPY164 million, down 5.2% YoY and gross margin ratio was 9.7%.

Cost of ATM Operation Business revenues was JPY2,123 million, up 8.3% YoY in accordance with the number of newly placed ATMs. Gross margin was JPY704 million, up 95.2% YoY and gross margin ratio was 24.9%.

4 Contracts of IIJ Mobile Service are of mobile data communication service for corporate use.

SG&A and R&D Expenses SG&A and R&D expenses in total were JPY15,343 million, up 8.8% YoY (JPY14,101 million in FY2012).

Sales and marketing expenses were JPY8,548 million, up 6.1% YoY. The increase was mainly due to the increase in personnel-related expenses and sales commission expenses related to Internet connectivity services for home use.

General and administrative expenses were JPY6,374 million, up 13.2% YoY. The increase was mainly due to the increase in personnel-related expenses, rent expenses and depreciation related to asset retirement obligation, and commission expenses related to the procurement of employees.

Research and development expenses were JPY421 million, up 2.8% YoY.

Operating income Operating income was JPY5,723 million, down 26.2% YoY.

Other income (expenses) Other income (expenses) was an income of JPY552 million (an income of JPY4 million for FY2012), mainly due to net gain on other investments of JPY313 million, foreign currency gains of JPY219 million (JPY112 million for FY2012), and interest expense of JPY256 million (JPY287million for FY2012).

Income before income tax expenses Income before income tax expenses was JPY6,275 million, down 19.1% YoY. (JPY7,757 million for FY2012) Net Income Income tax expense was JPY1,795 million (JPY2,608 million for FY2012), including deferred income tax benefit of JPY822 million related to Trust Networks Inc., a subsidiary of IIJ.

Equity in net income of equity method investees was JPY204 million (JPY168 million for FY2012) mainly due to net income of Internet Revolution, Inc. and Internet Multifeed Co.

As a result of the above, net income was JPY4,684 million, down 11.9% YoY (JPY5,317 million for FY2012).

Net income attributable to IIJ Net income attributable to non-controlling interests was JPY242 million mainly related to net income of Trust Networks Inc. (JPY16 million for FY2012).

Net income attributable to IIJ was JPY4,442 million, down 16.2% YoY (JPY5,301 million for FY2012).

FY2013 Financial Condition Balance Sheets As of March 31, 2014, the balance of total assets was JPY103,867 million, increased by JPY21,755 million from the balance as of March 31, 2013 (JPY82,111 million as of March 31, 2013).

As for current assets as of March 31, 2014, as compared to the respective balances as of March 31, 2013, cash and cash equivalents increased by JPY10,162 million mainly due to the equity finance in 2Q13, prepaid expense increased by JPY636 million, accounts receivable increased by JPY450 million and inventories increased by JPY369 million. As for noncurrent assets, as compared to the respective balances as of March 31, 2013, other investments increased by JPY2,585 million mainly due to new investments for our business partner and the increase in fair value, and property and equipment increased by JPY3,946 million resulting from the continuous investment mainly for network infrastructure and servers including cloud-related. Guarantee deposits (current and noncurrent) increased by JPY674 million along with our office expansion. As for current liabilities, as compared to the respective balances as of March 31, 2013, accounts payable increased by JPY620 million and income taxes payable decreased by JPY590 million.

As for the balances of capital lease obligations, as compared to the respective balances as of March 31, 2013, capital lease obligations-current portion increased by JPY248 million to JPY3,753 million and capital lease obligations-noncurrent decreased by JPY767 million to JPY4,603 million.

As of March 31, 2014, the balance of other investments was JPY6,356 million. The breakdown of other investments were JPY3,751 million in available-for-sale securities, JPY2,530 million in nonmarketable equity securities and JPY75 million in other.

As of March 31, 2014, the breakdown of major non-amortized intangible assets were JPY5,970 million in goodwill and JPY107 million in trademark. The balance of amortized intangible assets, which was customer relationships, was JPY4,202 million.

Total IIJ shareholders' equity as of March 31, 2014 was JPY59,912 million, increased by JPY22,305 million from the respective balance as of March 31, 2013, mainly due to the equity finance in 2Q13. IIJ shareholders' equity ratio (total IIJ shareholders' equity/total assets) as of March 31, 2014 was 57.7%.

Cash Flows Cash and cash equivalents as of March 31, 2014 were JPY22,421 million compared to JPY12,259 million as of March 31, 2013.

Net cash provided by operating activities for FY2013 was JPY8,787 million compared to net cash provided by operating activities of JPY9,639 million for FY2012 mainly due to the decrease in net income and increase in depreciation and amortization, while the increase in cash inflow from accounts receivable was smaller than the increase in cash outflow from such as accounts payable.

Net cash used in investing activities for FY2013 was JPY10,203 million compared to net cash used in investing activities of JPY5,946 million for FY2012 mainly due to payments for purchase of property and equipment of JPY9,124 million (JPY5,589 million for FY2012), payments for purchase of other investments of JPY1,186 million (JPY468 million for FY2012) and payments of guarantee deposits of JPY689 million (JPY164 million for FY2012).

Net cash provided by financing activities for FY2013 was JPY11,382 million compared to net cash used in financing activities of JPY4,996 million for FY2012, mainly due to proceeds from issuance of common stock of JPY17,271 million net of issuance cost, principal payments under capital leases of JPY3,969 million (JPY3,679 million for FY2012), net repayment of borrowings of JPY1,010 million (net repayment of JPY610 million for FY2012) and dividends payments for FY2012 year-end and FY2013 interim dividends of JPY911 million (JPY709 million for FY2012).

FY2014 Financial Targets Our financial targets for FY2014 are as follows:          (JPY in millions)            Revenues Operating Income Income before Income Tax Expense Net Income attributable to IIJ 1H FY2014 Target 57,500 2,800 2,700 1,750 Full FY2014 Target 123,000 7,200 7,000 4,500 With the steady recovery of the Japanese economy, IT investment in Japan is expected to continue during FY2014. In mid- to long-term, the ongoing demands to outsource corporate internal IT systems and network including the full use of cloud services would continue to be a great business opportunity, even with the intense competition in such areas. Under such competitive market, in FY2014, we should continue to make various business developments to strengthen our business and competitiveness. We would also improve gross margin for network service and systems integration by further focusing on increasing our stock revenues.

We target revenue of JPY123 billion, up 7.6% YoY. We expect our monthly recurring revenue services to further accumulate including a significant increase in the revenue for consumer LTE SIM card offering, cloud-related revenues to reach approximately JPY13 billion, systems construction revenues to increase and ATM operation business revenues to continuously increase.

We target operating cost and expenses of JPY115.8 billion, up 6.7% YoY. We expect continuous increase in personnel-related expenses, increase in depreciation of network equipment, additional expenses from the relocation of headquarter in the first half of FY2014 and increase in costs related to purchasing and outsourcing in relation to SI revenue growth.

For operating income, we target JPY7.2 billion, up 25.8% YoY. We expect gross margin and gross margin ratio of recurring network services and systems integration to increase along with recurring revenue growth, as well as the profit contribution from our cloud service "IIJ GIO" and ATM operation business.

We target income before income tax expense (benefit) of JPY7.0 billion, up 11.6% YoY, considering interest expenses and others.

We target net income attributable to IIJ of JPY4.5 billion, up 1.3% YoY, considering taxes calculated by a normal statutory rate and income of equity method investees and non-controlling interests.

FY2014 Dividend Forecast Our FY2014 dividend forecast is as follows:          Interim Year-end Full YearFY2014 Dividend (forecast)JPY11.00 (forecast)JP11.00 (forecast)JPY22.00 (forecast) FY2013 Dividend (scheduled) JPY11.00 (paid) JPY11.00 (scheduled) JPY22.00 (scheduled) Based on our Company's Article of Incorporation, we plan to pay our dividend twice a year, at interim and at fiscal year-end. The dividends for interim and fiscal year-end are decided at the Company's board of directors and at the general meeting of shareholders, respectively.

Reconciliation of Non-GAAP Financial Measures The following table summarizes the reconciliation of adjusted EBITDA to net income attributable to IIJ in our consolidated statements of income that are prepared in accordance with U.S. GAAP.

Adjusted EBITDA   FY2012FY2013   JPY millionsJPY millionsAdjusted EBITDA 15,30914,546Depreciation and Amortization5 (7,508)(8,823)Impairment loss on other intangible assets (48)--Operating Income 7,7535,723Other Income (Expense) 4552Income Tax Expense 2,6081,795Equity in Net Income of Equity Method Investees 168204Net income 5,3174,684Net loss (income) attributable to noncontrolling interests (16)(242)Net Income attributable to IIJ 5,3014,442      CAPEX   FY2012FY2013   JPY millionsJPY millionsCAPEX, including capital leases10,40512,560Acquisition of Assets by Entering into Capital Leases4,8163,436Purchase of Property and Equipment5,5899,124Presentation Presentation materials will be posted on our web site (http://www.iij.ad.jp/en/ir/) on May 15, 2014.

About Internet Initiative Japan Inc.

Founded in 1992, IIJ is one of Japan's leading Internet-access and comprehensive network solutions providers. IIJ and its group of companies provide total network solutions that mainly cater to high-end corporate customers. IIJ's services include high-quality systems integration and security services, Internet access, and cloud computing. Moreover, IIJ has built one of the largest Internet backbone networks in Japan that is connected to the United States, the United Kingdom and Asia. IIJ listed on the U.S. NASDAQ Stock Market in 1999 and on the First Section of the Tokyo Stock Exchange in 2006.

Statements made in this press release regarding IIJ's or management's intentions, beliefs, expectations, or predictions for the future are forward-looking statements that are based on IIJ's and managements' current expectations, assumptions, estimates and projections about its business and the industry. These forward-looking statements, such as statements regarding FY2014 revenues and operating and net profitability, are subject to various risks, uncertainties and other factors that could cause IIJ's actual results to differ materially from those contained in any forward-looking statement. These risks, uncertainties and other factors include: IIJ's ability to maintain and increase revenues from higher-margin services such as systems integration and outsourcing services; the possibility that revenues from connectivity services may decline substantially as a result of competition and other factors; the ability to compete in a rapidly evolving and competitive marketplace; the impact on IIJ's profits of fluctuations in costs such as backbone costs and subcontractor costs; the impact on IIJ's profits of fluctuations in the price of available-for-sale securities; the impact of technological changes in its industry; IIJ's ability to raise additional capital to cover its indebtedness; the possibility that NTT, IIJ's largest shareholder, may decide to exercise substantial influence over IIJ; and other risks referred to from time to time in IIJ's filings on Form 20-F of its annual report and other filings with the United States Securities and Exchange Commission.

5 Depreciation and amortization includes impairment loss on other intangible assets. (See IIJ's consolidated financial statements for details).

 Internet Initiative Japan Inc.Consolidated Balance Sheets (Unaudited)(As of March 31, 2013 and March 31, 2014)           As of March 31, 2013 As of March 31, 2014   Thousands of JPY Thousands of U.S. Dollars Thousands of JPY ASSETS     CURRENT ASSETS:     Cash and cash equivalents 12,258,872 217,723 22,421,100 Accounts receivable, net of allowance for doubtful  accounts of JPY93,934 thousand and JPY53,871  thousand at March 31, 2013 and March 31, 2014,  respectively 18,764,703 186,582 19,214,248 Inventories 1,301,684 16,219 1,670,258 Prepaid expenses 2,492,164 30,378 3,128,290 Deferred tax assets —current 1,046,828 13,527 1,392,971 Current portion of guarantee deposits 1,200 14,199 1,462,223 Other current assets, net of allowance for  doubtful accounts of JPY10,732 thousand and  JPY720 thousand at March 31, 2013 and  March 31, 2014, respectively 1,575,518 23,416 2,411,376         Total current assets 37,440,969 502,044 51,700,466 INVESTMENTS IN EQUITY METHOD INVESTEES 1,681,723 20,253 2,085,689 OTHER INVESTMENTS 3,771,262 61,719 6,355,817 PROPERTY AND EQUIPMENT, net of accumulated  depreciation and amortization of JPY29,516,394  thousand and JPY34,725,611 thousand at March  31, 2013 and March 31, 2014, respectively 23,025,755 261,910 26,971,485 GOODWILL 5,969,951 57,972 5,969,951 OTHER INTANGIBLE ASSETS —Net 4,791,431 42,134 4,338,944 GUARANTEE DEPOSITS 2,051,449 12,278 1,264,535 DEFERRED TAX ASSETS —Noncurrent 163,773 6,184 636,807 NET INVESTMENT IN SALES-TYPE LEASES   —Noncurrent 898,040 7,310 752,774 Prepaid expenses —Noncurrent 2,201,108 25,570 2,633,154 OTHER ASSETS, net of allowance for doubtful  accounts of JPY71,727 thousand and JPY62,800  thousand at March 31, 2013 and March 31, 2014,  respectively.

115,805 11,235 1,156,953         TOTAL 82,111,266 1,008,609 103,866,575                   As of March 31, 2013 As of March 31, 2014   Thousands of JPY Thousands of U.S. Dollars Thousands of JPY LIABILITIES AND SHAREHOLDERS' EQUITY      CURRENT LIABILITIES:      Short-term borrowings 9,400,000 91,280 9,400,000 Long-term borrowings —current portion 1,010,000 9,516 980,000 Capital lease obligations —current portion 3,505,471 36,444 3,753,026 Accounts payable —trade 10,973,120 111,591 11,491,666 Accounts payable —other 949,264 10,200 1,050,429 Income taxes payable 1,669,849 10,483 1,079,480 Accrued expenses 2,266,427 19,941 2,053,550 Deferred income —current 1,806,074 15,155 1,560,603 Other current liabilities 803,902 10,664 1,098,173 Total current liabilities 32,384,107 315,274 32,466,927 LONG-TERM BORROWINGS 980,000 -- -- CAPITAL LEASE OBLIGATIONS —Noncurrent 5,370,365 44,701 4,603,322 ACCRUED RETIREMENT AND PENSION COSTS  -Noncurrent 2,112,085 22,087 2,274,540 DEFERRED TAX LIABILITIES —Noncurrent 412,132 10,613 1,092,863 DEFERRED INCOME —Noncurrent 2,562,208 26,329 2,711,347 OTHER NONCURRENT LIABILITIES 656,191 5,214 536,950 Total Liabilities 44,477,088 424,218 43,685,949 COMMITMENTS AND CONTINGENCIES             SHAREHOLDERS' EQUITY:      Common-stock —authorized, 75,520,000 shares;  issued and outstanding, 41,295,600 shares at  March 31, 2013 16,833,847 247,592 25,497,022 —authorized, 75,520,000 shares;  issued and outstanding, 46,697,800 shares at  March 31, 2014       Additional paid-in capital 27,300,325 349,214 35,961,995 Accumulated deficit (6,399,088) (27,846) (2,867,548) Accumulated other comprehensive loss 263,770 16,632 1,712,786 Treasury stock—758,800 shares and 758,709 shares held by the company at March 31, 2013 and March 31, 2014, respectively (392,079) (3,807) (392,070)         Total Internet Initiative Japan Inc. shareholders' equity 37,606,775 581,785 59,912,185 NONCONTROLLING INTERESTS 27,403 2,606 268,441 Total equity 37,634,178 584,391 60,180,626 TOTAL 82,111,266 1,008,609 103,866,575         (Note1) The U.S. dollar amounts represent translations of yen amounts at the rate of JPY102.98 which was the noon buying rate in New  York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York  prevailing as of March 31, 2014.

 Internet Initiative Japan Inc.Consolidated Statements of Income (Unaudited)(For the fiscal year ended March 31, 2013 and March 31, 2014)           Fiscal Year Ended March 31, 2013 Fiscal Year Ended March 31, 2014   Thousands of JPY Thousands of U.S. Dollars Thousands of JPY REVENUES:       Network services:       Internet connectivity services (corporate use) 16,027,134 161,052 16,585,175 Internet connectivity services (home use) 5,466,198 58,502 6,024,560 WAN services 25,168,425 242,823 25,005,867 Outsourcing services 18,570,641 191,009 19,670,127 Total 65,232,398 653,386 67,285,729 Systems integration:       Systems construction 15,824,938 181,333 18,673,638 Systems operation and maintenance 21,380,158 231,073 23,795,927 Total 37,205,096 412,406 42,469,565 Equipment sales 1,490,906 16,413 1,690,225 ATM operation business 2,320,086 27,451 2,826,832 Total revenues 106,248,486 1,109,656 114,272,351 COST AND EXPENSES:       Cost of network services 50,692,190 515,108 53,045,814 Cost of systems integration 30,424,802 354,538 36,510,328 Cost of equipment sales 1,318,344 14,825 1,526,618 Cost of ATM operation business 1,959,597 20,617 2,123,168 Total cost 84,394,933 905,088 93,205,928 Sales and marketing 8,058,481 83,003 8,547,693 General and administrative 5,632,430 61,896 6,374,057 Research and development 410,000 4,092 421,361 Total cost and expenses 98,495,844 1,054,079 108,549,039 OPERATING INCOME 7,752,642 55,577 5,723,312 OTHER INCOME (EXPENSE):       Dividend income 47,117 495 51,003 Interest income 25,708 260 26,719 Interest expense (287,314) (2,489) (256,371) Foreign exchange gains 112,136 2,130 219,381 Net gain on sales of other investments 13,565 1,045 107,655 Net gain on other investments -- 3,043 313,393 Losses on write-down of other investments (19,788) -- -- Other -net 112,798 872 89,799 Other income (expense) —net 4,222 5,356 551,579 INCOME FROM OPERATIONS BEFORE INCOME  TAX EXPENSE AND EQUITY IN NET INCOME  OF EQUITY METHOD INVESTEES 7,756,864 60,933 6,274,891 INCOME TAX EXPENSE  2,607,582 17,434 1,795,305 EQUITY IN NET INCOME OF EQUITY METHOD  INVESTEES 168,065 1,982 204,046         NET INCOME 5,317,347 45,481 4,683,632 LESS: NET INCOME ATTRIBUTABLE TO  NONCONTROLLING INTERESTS (16,693) (2,344) (241,395) NET INCOME ATTRIBUTABLE TO INTERNET  INITIATIVE JAPAN INC.

5,300,654 43,137 4,442,237           Fiscal Year Ended March 31, 2013 Fiscal Year Ended March 31, 2014 NET INCOME PER SHARE       BASIC WEIGHTED-AVERAGE NUMBER OF  SHARES (shares) 40,536,800   44,306,680 DILUTED WEIGHTED-AVERAGE NUMBER  OF SHARES (shares) 40,572,600   44,361,083 BASIC WEIGHTED-AVERAGE NUMBER OF  ADS EQUIVALENTS (ADSs) 81,073,600   88,613,360 DILUTED WEIGHTED-AVERAGE NUMBER  OF ADS EQUIVALENTS (ADSs) 81,145,200   88,722,166 BASIC NET INCOME PER SHARE  (JPY / U.S. Dollars / JPY) 130.76 0.97 100.26 DILUTED NET INCOME PER SHARE  (JPY / U.S. Dollars / JPY) 130.65 0.97 100.14 BASIC NET INCOME PER ADS  EQUIVALENT (JPY / U.S. Dollars / JPY) 65.38 0.49 50.13 DILUTED NET INCOME PER ADS  EQUIVALENT (JPY / U.S. Dollars / JPY) 65.32 0.49 50.07         (Note) The U.S. dollar amounts represent translations of yen amounts at the rate of JPY102.98 which was the noon buying rate in New York  City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York prevailing  as of March 31, 2014.

 Internet Initiative Japan Inc.Consolidated Statements of Shareholders' Equity (Unaudited)  (For the fiscal year ended March 31, 2013 and March 31, 2014)                                       Internet Initiative Japan Inc. shareholders' equity     Total equity Accumulated deficit Accumulated other comprehensive income (loss) Shares of common stock outstanding Common stock Treasury stock Additional paid-in capital NON CONTROLLING INTERESTS   Thousands of JPY Thousands of JPY Thousands of JPY Shares Thousands of JPY Thousands of JPY Thousands of JPY Thousands of JPY BALANCE, MARCH 31, 2012 32,696,247 (10,990,348) (23,533) 41,295,600 16,833,847 (392,079) 27,260,318 8,042  Acquisition and establishment of  new consolidated subsidiaries 2,688             2,688  Stock-based compensation 40,007           40,007    Comprehensive income  (loss):                 Net Income 5,317,347 5,300,654           16,693 Other Comprehensive  income (loss), net of tax 287,283   287,303         (20)                    Total comprehensive income 5,604,630                Dividends paid (709,394) (709,394)             BALANCE, MARCH 31, 2013 37,634,178 (6,399,088) 263,770 41,295,600 16,833,847 (392,079) 27,300,325 27,403  Acquisition of noncontrolling  interests in consolidated  subsidiaries --   61     53 99 (213)  Issuance of common stock, net  of issuance cost 17,271,204     5,400,000 8,661,600   8,609,604    Issuance of common stock upon   exercise of stock options 3,151     2,200 1,575   1,576    Stock-based compensation 50,391           50,391    Comprehensive income  (loss):                 Net Income 4,683,632 4,442,237           241,395 Other Comprehensive  income (loss), net of tax 1,448,811   1,448,955         (144)                    Total comprehensive income: 6,132,443                Dividends paid (910,697) (910,697)              Purchase of treasury stock (44)         (44)     BALANCE, MARCH 31, 2014 60,180,626 (2,867,548) 1,712,786 46,697,800 25,497,022 (392,070) 35,961,995 268,441                                    (For the fiscal year ended March 31, 2014 (In USD))             Internet Initiative Japan Inc. shareholders' equity     Total equity Accumulated deficit Accumulated other comprehensive income Shares of common stock outstanding Common stock Treasury stock Additional paid-in capital NON CONTROLLING INTERESTS   Thousands of USD Thousands of USD Thousands of USD Shares Thousands of USD Thousands of USD Thousands of USD Thousands of USD BALANCE, MARCH 31, 2013 365,451 (62,139) 2,561 41,295,600 163,467 (3,807) 265,103 266  Acquisition of noncontrolling  interests in consolidated  subsidiaries --   1     0 2 (3)  Issuance of common stock, net  of issuance cost 167,714     5,400,000 84,110   83,604    Issuance of common stock upon   exercise of stock options 31     2,200 15   16    Stock-based compensation 489           489    Comprehensive income  (loss):                 Net Income 45,481 43,137           2,344 Other Comprehensive  income (loss), net of tax 14,069   14,070         (1)                    Total comprehensive income: 59,550                Dividends paid (8,844) (8,844)              Purchase of treasury stock (0)         (0)     BALANCE, MARCH 31, 2014 584,391 (27,846) 16,632 46,697,800 247,592 (3,807) 349,214 2,606                   (Note) The U.S. dollar amounts represent translations of yen amounts at the rate of JPY102.98 which was the noon buying rate in New York City for cable  transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York prevailing as of March 31, 2014.   Internet Initiative Japan Inc.Consolidated Statements of Cash Flows (Unaudited)(For the fiscal year ended March 31, 2013 and March 31, 2014)                 Fiscal Year Ended March 31, 2013 Fiscal Year Ended March 31, 2014   Thousands of JPY Thousands of U.S. Dollars Thousands of JPY OPERATING ACTIVITIES:       Net income 5,317,347 45,481 4,683,632 Adjustments to reconcile net income to net cash  provided by operating activities:       Depreciation and amortization 7,507,808 85,677 8,822,981 Impairment loss on intangible assets 48,000 -- -- Provision for retirement and pension costs, less payments 213,963 2,200 226,599 Reversal of allowance for doubtful accounts (10,712) (456) (46,935) Loss on disposal of property and equipment 14,638 811 83,487 Net gain on sales of other investments (13,565) (1,045) (107,655) Net gain on other investments -- (3,043) (313,393) Impairment of other investments 19,788 -- -- Foreign exchange gains, net (55,983) (1,262) (129,916) Equity in net income of equity method investees (168,065) (1,981) (204,046) Deferred income tax benefit (527,128) (6,796) (699,826) Others 39,377 694 71,448 Changes in operating assets and liabilities net of effects  from acquisition of business and a company:       Increase in accounts receivable (2,906,215) (3,325) (342,391) Decrease in net investment in sales-type lease  ?noncurrent 37,406 1,411 145,266 Increase in inventories (492,022) (3,550) (365,533) Increase in prepaid expenses  (635,031) (5,951) (612,802) Increase in other current and noncurrent assets (1,295,279) (17,493) (1,801,403) Increase in accounts payable 1,881,105 4,631 476,860 Decrease in income taxes payable (545,914) (5,776) (594,782) Increase in deferred income ?noncurrent 1,015,049 888 91,462 Increase (decrease) in accrued expenses and   other current and noncurrent liabilities 194,201 (5,789) (596,174) Net cash provided by operating activities 9,638,768 85,326 8,786,879 INVESTING ACTIVITIES:       Purchases of property and equipment (5,588,815) (88,600) (9,123,998) Proceeds from sales of property and equipment 543,978 4,431 456,330 Purchases of available-for-sale securities (48,903) (1,627) (167,545) Purchases of other investments (467,622) (11,517) (1,185,985) Investment in an equity method investee (100,000) (1,941) (199,920) Proceeds from sales of available-for-sale securities -- 3,805 391,814 Proceeds from sales of other investments 109,944 3,416 351,740 Payments of guarantee deposits (164,417) (6,690) (688,902) Refund of guarantee deposits 17,349 196 20,233 Payments for refundable insurance policies (737) (182) (18,787) Refund from insurance policies -- 156 16,026 Acquisition of a newly controlled company,  net of cash acquired (229,058) -- -- Other (17,620) (522) (53,766) Net cash used in investing activities (5,945,901) (99,075) (10,202,760)         Fiscal Year Ended March 31, 2013 Fiscal Year Ended March 31, 2014   Thousands of JPY Thousands of U.S. Dollars Thousands of JPY FINANCING ACTIVITIES:       Proceeds from issuance of short-term borrowings  with initial maturities over three months 71,000 2,428 250,000 Repayments of short-term borrowings with initial  maturities over three months and long-term borrowings (1,081,000) (12,235) (1,260,000) Principal payments under capital leases (3,678,940) (38,539) (3,968,724) Net increase in short-term borrowings with  initial maturities less than three months 400,000 -- -- Proceeds from issuance of stock to minority shareholders 2,570 -- -- Dividends paid (709,394) (8,844) (910,697) Proceeds from issuance of common stock, net of issuance cost -- 167,714 17,271,204 Other -- 1 109 Net cash provided by (used in) financing activities (4,995,764) 110,525 11,381,892         EFFECT OF EXCHANGE RATE CHANGES ON  CASH AND CASH EQUIVALENTS 24,945 1,906 196,217         NET INCREASE (DECREASE) IN CASH AND  CASH EQUIVALENTS (1,277,952) 98,682 10,162,228 CASH AND CASH EQUIVALENTS, BEGINNING OF  YEAR 13,536,824 119,041 12,258,872 CASH AND CASH EQUIVALENTS, END OF  YEAR 12,258,872 217,723 22,421,100         ADDITIONAL CASH FLOW INFORMATION:       Interest paid 287,158 2,493 256,722 Income taxes paid 3,527,987 26,294 2,707,784         NONCASH INVESTING AND FINANCING ACTIVITIES:       Acquisition of assets by entering into capital leases 4,816,248 33,368 3,436,245 Facilities purchase liabilities 949,264 10,200 1,050,429 Asset retirement obligation 26,620 1,601 164,833 Acquisition of a company:        Assets acquired 404,139 -- --  Liabilities assumed 104,321 -- --  Noncontrolling interests 118 -- --  Cash paid (299,700) -- --  Cash acquired  70,642 -- --  Acquisition of a newly controlled company,  net of cash acquired (229,058) -- --         (Note1) The U.S. dollar amounts represent translations of yen amounts at the rate of JPY102.98 which was the noon buying rate in New  York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York  prevailing as of March 31, 2014.4th Quarter FY2013 Consolidated Financial Results (3 months) The following tables are highlight data of 4th Quarter FY2013 (3 months) consolidated financial results (unaudited, for the 3 months ended March 31, 2014).

Operating Results Summary           4Q124Q13 YoY % Change   JPY millionsJPY millions Total Revenues: 29,55831,5266.7Network Services 16,71716,9841.6Systems Integration (SI) 11,60413,27314.4Equipment Sales 623512(17.9)ATM Operation Business 61475723.3Cost of Revenues: 23,22925,97711.8Network Services 12,72013,2824.4Systems Integration (SI) 9,43111,68423.9Equipment Sales 569465(18.3)ATM Operation Business 5095467.3SG&A Expenses and R&D 3,6194,03611.5Operating Income 2,7101,513(44.2)Income before Income Tax Expense 2,8111,649(41.3)Net Income attributable to IIJ 2,1881,518(30.6)Network Service Revenue Breakdown   4Q124Q13 YoY % Change   JPY millionsJPY millions Internet Connectivity Service (Corporate Use) 4,2444,085 (3.7) IP Service 2,7822,539 (8.8) IIJ FiberAccess/F and IIJ DSL/F 773779 0.9 IIJ Mobile Service 629709 12.8Others 6058 (3.0)Internet Connectivity Service (Home Use) 1,3561,628 20.1Under IIJ Brand 382696 82.2hi-ho 811749 (7.7)OEM 163183 12.5WAN Services 6,2886,220 (1.1)Outsourcing Services 4,8295,051 4.6Network Services Revenues 16,71716,984 1.6Reconciliation of Non-GAAP Financial Measures (4th Quarter FY2013 (3 months)) The following table summarizes the reconciliation of adjusted EBITDA to net income in our consolidated statements of income that are prepared in accordance with U.S. GAAP.

Adjusted EBITDA   4Q124Q13   JPY millionsJPY millionsAdjusted EBITDA4,7223,832Depreciation and Amortization(1,964)(2,319)Impairment loss on other intangible assets(48)--Operating Income2,7101,513Other Income (Expense)101136Income Tax Expense653(47)Equity in Net Income (loss) of Equity Method Investees3613Net income2,1941,709Net Loss (Income) attributable to non-controlling interests(6)(191)Net Income attributable to IIJ2,1881,518 The following table summarizes the reconciliation of capital expenditures to the purchase of property and equipment in our consolidated statements of cash flows that are prepared and presented in accordance with U.S. GAAP.

CAPEX   4Q124Q13   JPY millionsJPY millionsCAPEX, including capital leases1,9532,697Acquisition of Assets by Entering into Capital Leases774801Purchase of Property and Equipment1,1791,896  Internet Initiative Japan Inc.Quarterly Consolidated Statements of Income (Unaudited)(Three Months ended March 31, 2013 and March 31, 2014)           Three Months Ended March 31, 2013 Three Months Ended March 31, 2014   Thousands of JPY Thousands of U.S. Dollars Thousands of JPY REVENUES:       Network services:       Internet connectivity services (corporate use) 4,244,105 39,674 4,085,649 Internet connectivity services (home use) 1,355,560 15,807 1,627,764 WAN services 6,288,667 60,399 6,219,920 Outsourcing services 4,829,036 49,048 5,050,931 Total 16,717,368 164,928 16,984,264 Systems integration:       Systems Construction 6,000,759 68,349 7,038,521 Systems Operation and Maintenance 5,603,166 60,539 6,234,333 Total 11,603,925 128,888 13,272,854 Equipment sales 623,603 4,974 512,236 ATM operation business 613,500 7,346 756,554 Total revenues 29,558,396 306,136 31,525,908 COST AND EXPENSES:       Cost of network services 12,720,525 128,976 13,281,985 Cost of systems integration 9,431,170 113,461 11,684,188 Cost of equipment sales 568,947 4,511 464,561 Cost of ATM operation business 509,138 5,307 546,532 Total cost 23,229,780 252,255 25,977,266 Sales and marketing 2,027,664 21,383 2,201,980 General and administrative 1,485,233 16,785 1,728,538 Research and development 105,940 1,025 105,561 Total cost and expenses 26,848,617 291,448 30,013,345 OPERATING INCOME 2,709,779 14,688 1,512,563 OTHER INCOME (EXPENSE):       Dividend income 2,604 27 2,744 Interest income 5,819 78 8,049 Interest expense (69,417) (605) (62,263) Foreign exchange gains 124,841 163 16,783 Net gain on other investments -- 1,369 140,970 Other—net 37,272 297 30,613 Other expense — net 101,119 1,329 136,896 INCOME FROM OPERATIONS BEFORE INCOME  TAX EXPENSE AND EQUITY IN NET INCOME  IN EQUITY METHOD INVESTEES 2,810,898 16,017 1,649,459 INCOME TAX EXPENSE (BENEFIT) 653,414 (450) (46,385) EQUITY IN NET INCOME OF EQUITY  METHOD INVESTEES 36,377 125 12,842         NET INCOME 2,193,861 16,592 1,708,686 LESS: NET INCOME ATTRIBUTABLE TO  NONCONTROLLING INTERESTS (5,492) (1,850) (190,519) NET INCOME ATTRIBUTABLE TO  INTERNET INITIATIVE JAPAN INC.

2,188,369 14,742 1,518,167                 Three Months Ended March 31, 2013 Three Months Ended March 31, 2014 NET INCOME PER SHARE       BASIC WEIGHTED-AVERAGE NUMBER OF  SHARES 40,536,800   45,939,091 DILUTED WEIGHTED-AVERAGE NUMBER  OF SHARES 40,583,800   45,998,489 BASIC WEIGHTED-AVERAGE NUMBER OF  ADS EQUIVALENTS (ADSs) 81,073,600   91,878,182 DILUTED WEIGHTED-AVERAGE NUMBER  OF ADS EQUIVALENTS (ADSs) 81,167,600   91,996,978 BASIC NET INCOME PER SHARE  (JPY / U.S. Dollars / JPY) 53.98 0.32 33.05 DILUTED NET INCOME PER SHARE  (JPY / U.S. Dollars / JPY) 53.92 0.32 33.00 BASIC NET INCOME PER ADS  EQUIVALENT (JPY / U.S. Dollars / JPY) 26.99 0.16 16.52 DILUTED NET INCOME PER ADS  EQUIVALENT (JPY / U.S. Dollars / JPY) 26.96 0.16 16.50         (Note) The U.S. dollar amounts represent translations of yen amounts at the rate of JPY102.98 which was the noon buying rate in New York  City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York prevailing  as of March 31, 2014.

 Internet Initiative Japan Inc.Quarterly Consolidated Statements of Cash Flows (Unaudited)(Three Months ended March 31, 2013 and March 31, 2014)           Three Months Ended March 31, 2013 Three Months Ended March 31, 2014   Thousands of JPY Thousands of U.S. Dollars Thousands of JPY OPERATING ACTIVITIES:       Net income 2,193,861 16,592 1,708,686 Adjustments to reconcile net income to net cash  provided by operating activities:       Depreciation and amortization 1,964,291 22,517 2,318,779 Impairment loss on other intangible assets 48,000 -- -- Provision for retirement and pension  costs, less payments 48,701 522 53,784 Reversal of allowance for doubtful   accounts and advances (10,570) (11) (1,127) Loss on disposal of property and equipment 10,045 700 72,044 Net gain on sales of other investments -- (1,369) (140,970) Foreign exchange losses (gains), net (38,699) 247 25,478 Equity in net income of equity method investees (36,377) (125) (12,842) Deferred income tax benefit (679,103) (10,588) (1,090,417) Others 26,224 174 17,881 Changes in operating assets and liabilities net of effects  from acquisition of business and a company:       Increase in accounts receivable (3,341,586) (23,499) (2,419,892) Decrease (increase) in net investment in sales-type  lease ?noncurrent (202,461) 367 37,794 Decrease in inventories 489,685 8,239 848,410 Decrease in prepaid expenses  757,088 8,245 849,097 Increase in other current and noncurrent assets (716,734) (10,090) (1,039,069) Increase in accounts payable 1,821,357 11,988 1,234,546 Increase in income taxes payable 1,274,354 8,726 898,628 Increase in deferred income ?noncurrent 238,400 970 99,854 Decrease in accrued expenses, other  current and noncurrent liabilities (87,505) (3,941) (405,831)         Net cash provided by operating activities 3,758,971 29,664 3,054,833 INVESTING ACTIVITIES:       Purchases of property and equipment (1,178,696) (18,415) (1,896,347) Proceeds from sales of property and equipment 71,272 2,135 219,831 Purchases of available-for-sale securities (7,653) (670) (69,051) Purchases of other investments (60,620) (565) (58,154) Investment in an equity method investee -- (1,941) (199,920) Proceeds from sales of other investments 17,310 3,221 331,740 Payments of guarantee deposits (77,463) (73) (7,524) Refund of guarantee deposits 1,986 121 12,415 Payments for refundable insurance policies (183) (137) (14,090) Other (8,002) (404) (41,557) Net cash used in financing activities (1,242,049) (16,728) (1,722,657)         Three Months Ended March 31, 2013 Three Months Ended March 31, 2014   Thousands of JPY Thousands of U.S. Dollars Thousands of JPY FINANCING ACTIVITIES:       Principal payments under capital leases (938,318) (9,970) (1,026,718) Other -- 1 150 Net cash used in financing activities (938,318) (9,969) (1,026,568)         EFFECT OF EXCHANGE RATE CHANGES ON  CASH AND CASH EQUIVALENTS 31,972 128 13,142         NET INCREASE IN CASH AND CASH EQUIVALENTS 1,610,576 3,095 318,750 CASH AND CASH EQUIVALENTS, BEGINNING OF  THE PERIOD 10,648,296 214,628 22,102,350 CASH AND CASH EQUIVALENTS, END OF  THE PERIOD 12,258,872 217,723 22,421,100         (Note1) The U.S. dollar amounts represent translations of yen amounts at the rate of JPY102.98 which was the noon buying rate in New  York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York  prevailing as of March 31, 2014.

Note: The following information is provided to disclose Internet Initiative Japan Inc. ("IIJ") financial results (unaudited) for the fiscal year ended March 31, 2014 ("FY2013") in the form defined by the Tokyo Stock Exchange.

Consolidated Financial Results for the Fiscal Year Ended March 31, 2014 [Under accounting principles generally accepted in the United States ("U.S. GAAP")]     May 15, 2014 Company name: Internet Initiative Japan Inc.

Exchange listed: Tokyo Stock Exchange First Section Stock code number: 3774 URL: http://www.iij.ad.jp/   Representative: Eijiro Katsu, President and Representative Director     Contact: Akihisa Watai, Managing Director and CFO TEL: (03) 5259-6500   Scheduled date for annual general shareholder's meeting: June 25, 2014   Scheduled date for dividend payment: June 26, 2014     Scheduled date for filing of annual report (Yuka-shoken-houkokusho) to Japan's regulatory organization: June 27, 2014 Supplemental material on annual results: Yes     Presentation on annual results: Yes (for institutional investors and analysts)      (Amounts of less than JPY one million are rounded)  1. Consolidated Financial Results for the Fiscal Year Ended March 31, 2014 (April 1, 2013 to March 31, 2014) (1) Consolidated Results of Operations  (% shown is YoY change)   Total Revenues Operating Income Income before Income Tax Expense Net Income attributable to IIJ   JPY millions % JPY millions % JPY millions % JPY millions % Fiscal Year Ended March 31, 2014 114,272 7.6 5,723 (26.2) 6,275 (19.1) 4,442 (16.2) Fiscal Year Ended March 31, 2013 106,248 9.2 7,753 22.0 7,757 29.8 5,301 45.6         (Note1) Total comprehensive income attributable to IIJ      Fiscal Year Ended March 31, 2014: JPY5,891 million (up 5.4% YoY)         Fiscal Year Ended March 31, 2013: JPY5,588 million (up 50.9% YoY) (Note2) Income before income tax expense represents income from operations before income tax expense and equity in net income in equity method investees, respectively, in IIJ's consolidated financial statements.

              Basic Net Income attributable to IIJ per Share Diluted Net Income attributable to IIJ per Share Net Income attributable to IIJ to Total Shareholders' Equity Income before Income Tax Expense to Total Assets Total Revenues Operating Margin Ratio   JPY JPY % % % Fiscal Year Ended March 31, 2014 100.26 100.14 9.1 6.7 5.0 Fiscal Year Ended March 31, 2013 130.76 130.65 15.1 10 7.3     (Reference) Equity in net income of equity method investees  Fiscal Year Ended March 31, 2014: JPY204 million       Fiscal Year Ended March 31, 2013: JPY168 million (Note) IIJ conducted a 1:200 stock split on common stock with an effective date of October 1, 2012. Accordingly, basic net income attributable to IIJ per share and diluted net income attributable to IIJ per share would have been calculated as if the stock split were conducted at the beginning of the fiscal year ended March 31, 2013.

(2) Consolidated Financial Position  Total Assets Total Equity Total IIJ Shareholders' Equity Total IIJ Shareholders' Equity to Total Assets Total IIJ Shareholders' Equity per Share   JPY millions JPY millions JPY millions % JPY As of March 31, 2014 103,867 60,181 59,912 57.7 1,304.17 As of March 31, 2013 82,111 37,634 37,607 45.8 927.72             (3) Consolidated Cash Flow   Operating Activities Investing Activities Financing Activities Cash and Cash Equivalents (End of the Period)   JPY millions JPY millions JPY millions JPY millions Fiscal year ended March 31, 2014 8,787 (10,203) 11,382 22,421 Fiscal year ended March 31, 2013 9,639 (5,946) (4,996) 12,259            2. Dividends   Dividend per Shares         1Q-end 2Q-end 3Q-end Year-end Total Total cash dividends for the year Payout Ratio (consolidated) Ratio of Dividends to Shareholder's Equity (consolidated)   JPY JPY JPY JPY JPY JPY millions % % Fiscal Year Ended March 31, 2013  -- 1,750 -- 10.00 1,760.00 760 14.3 2.2 Fiscal Year Ended March 31, 2014  -- 11.00 -- 11.00 22.00 1,011 21.9 2.0 Fiscal Year Ending March 31, 2015  (forecast) -- 11.00 -- 11.00 22.00   22.5    (Note) IIJ conducted a 1:200 stock split on common stock with an effective date of October 1, 2012. 2Q-end dividend (interim dividend) for the fiscal year ended March 31, 2013 does not take the stock split into consideration. The dividends for 2Q-end and the total dividend for the fiscal year ended March 31, 2013 would have been JPY8.75 and JPY18.75 respectively if the stock split were conducted at the beginning of the fiscal year ended March 31, 2013.3. Target of Consolidated Financial Results for the Fiscal Year Ending March 31, 2015(April 1, 2014 through March 31, 2015)  (% shown is YoY change)   Total Revenues Operating  Income Income before Income Tax Expense (Benefit) Net Income attributable to IIJ Basic Net Income attributable to IIJ per Share   JPY millions % JPY millions % JPY millions % JPY millions % JPY Interim Period Ending September 30, 2014 57,500 5.7 2,800 (6.9) 2,700 (19.3) 1,750 (20.6) 38.09 Fiscal Year Ending March 31, 2015 123,000 7.6 7,200 25.8 7,000 11.6 4,500 1.3 97.96   * Notes   (1) Changes in Significant Subsidiaries for the Fiscal Year Ended March 31, 2014  (Changes in significant subsidiaries for the Fiscal Year Ended March 31, 2014 which resulted in changes in scope of consolidation): None (2) Changes in Significant Accounting and Reporting Policies for the Consolidated Financial Statements  1) Changes due to the revision of accounting standards: No  2) Others: No (3) Number of Shares Outstanding (Shares of Common Stock) 1) The number of shares outstanding (inclusive of treasury stock): As of March 31, 2014:  46,697,800 shares   As of March 31, 2013:  41,295,600 shares   2) The number of treasury stock:   As of March 31, 2014:  758,709 shares   As of March 31, 2013: 758,800 shares   3) The weighted average number of shares outstanding: For the Fiscal Year Ended March 31, 2014: 44,306,680 shares   For the Fiscal Year Ended March 31, 2013: 40,536,800 shares   (Note) IIJ conducted a 1:200 stock split on common stock with an effective date of October 1, 2012. Number of shares outstanding (shares of common stock) in the above would have been calculated as if the stock split were conducted at the beginning of the fiscal year ended March 31, 2013.

[English Translation] May 15, 2014 Company name: 1-105 Kanda Jimbo-cho, Chiyoda-ku, Tokyo Internet Initiative Japan Inc.

Company representative: Eijiro Katsu, President and Representative Director (Stock Code Number: 3774 The First Section of the Tokyo Stock Exchange) Contact: Akihisa Watai, Managing Director and CFO TEL: 03-5259-6500   Information Pertaining to Our Largest Shareholder   1. About Our Largest Shareholder (As of March 31, 2014) Name Relationship Its Ownership Percentage (%) Securities Exchanges where its Shares are Listed Nippon Telegraph and Telephone Corporation ("NTT") IIJ is NTT's affiliate company 26.4 Tokyo Stock Exchange (First Section)     (4.4) New York Stock Exchange   (Notes) The percentage in parentheses is the indirect ownership by NTT included in the figure above.

  2. Position of the Listed Company (IIJ) within NTT Group and other relationships a) Position of the Listed Company (IIJ) within NTT Group The ownership percentage by NTT, which is IIJ's largest shareholder, was 26.4% as of March 31, 2014, including its indirect ownership. However, IIJ's business activities are not affected by NTT's ownership in IIJ and IIJ is maintaining its management independence.

b) Personal Relationships with NTT Group  IIJ's board of directors consists of 12 members including 4 outside directors as of May 15, 2014. Takashi Hiroi, an outside director (part-time director) of IIJ, is an employee of NTT (General Manager of Business Planning Division of NTT), and also an outside company auditor of NTT Urban Development Corporation. However, he is monitoring IIJ's business operations as an outside director and does not have any personal relationships, such as family relationships, with IIJ's other directors and auditors. He did not acquire any interest such as capital or business relationships upon becoming an outside director.

3. Business Relationship with NTT Group IIJ uses services provided by Nippon Telegraph and Telephone East Corporation ("NTT East") and Nippon Telegraph and Telephone West Corporation ("NTT West") for a significant portion of IIJ's access circuits as well as services provided by NTT Communications Corporation ("NTT Communications") for a significant portion of IIJ's domestic and international backbones. The amount paid to NTT East and West, and to NTT Communications for their telecommunication circuits was JPY1,478 million and JPY3,260 million, respectively for the fiscal year ended March 31, 2014.

IIJ leases a part of Internet data center facilities from NTT Group companies to provide Internet data center services to IIJ's customers. The amount paid to NTT Group related to the lease of Internet data center facilities were JPY1,607 million for the fiscal year ended March 31, 2014.

4. Policy Concerning Measures to Protect Minority Shareholders in Transactions with NTT Group Business transactions with the NTT Group are within the scope of normal business practices and there is no special contract made in relation to the investment by NTT Group.CONTACT: IIJ Investor Relations Tel: +81-3-5259-6500 E-mail: ir@iij.ad.jp URL: http://www.iij.ad.jp/en/ir Source: Internet Initiative Japan Inc.

2014 GlobeNewswire, Inc.

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