Revenues Up 18 Percent Driven by Strong Growth in the U.S. Market
TOKYO, Feb. 9 /Xinhua-PRNewswire-FirstCall/ -- Trend Micro
Incorporated (TSE:4704)(NASDAQ:TMIC), a leader in network antivirus
and Internet content security software and services, today
announced earnings results for the fourth quarter and consolidated
revenue for fiscal year 2005. For the fourth quarter, Trend Micro
posted a record 20.57 billion Yen ($175.1 million, 117.43JPY=1USD)
in net sales, representing 16 percent growth year over year and 14
percent growth over the third quarter. Operating income for the
quarter was 7.94 billion Yen ($67.6 million) and net income was
5.80 billion Yen ($49.3 million). For 2005, Trend Micro posted
record consolidated net sales of 73.03 billion Yen (or U.S. $621.9
million), representing an annual growth rate of 18 percent. The
company also reported operating income of 27.57 billion Yen (or
U.S. $234.8 million) and net income of 18.67 billion Yen (or US
$159.0 million). Revenues from products and services sold to
enterprise, mid-sized, and small business customers worldwide
comprised 78 percent of 2005 revenues; revenue from consumer
products comprised the remaining 22 percent. Trend Micro continued
to experience growth worldwide, most notably in North America where
sales grew 30 percent annually. In particular, the region
experienced 56 percent growth in consumer sales. In the Japan and
Asia-Pacific regions, annual sales increased 16 and 25 percent,
respectively. "2005 was a significant year for our company," said
Eva Chen, CEO of Trend Micro. "We did a lot in the last year to
build a strong foundation that we believe positions us for the next
stage of growth and continued leadership. Our future growth will be
fuelled not only by our technological innovation but by
continuously understanding our customers and delivering solutions
that exceed their expectations." Based on information currently
available to the company, consolidated net sales for the first
quarter ending March 31, 2006, is expected to be 19.5 billion Yen
(or U.S. $165.3 million, based on an exchange rate of118PY = 1USD).
Operating income and net income are expected to be 7.8 billion Yen
(or U.S. $66.1 million) and 4.4 billion Yen (or U.S. $37.3
million), respectively. 2005 Business Highlights Awards and
Recognition Corporate -- Trend Micro was listed on the Dow Jones
Sustainability Indexes for the second consecutive year. -- For the
second year in a row, VARBusiness magazine named Trend Micro
Company of the Year and awarded it the Product Innovation Annual
Report Card Award. -- In March, Trend Micro Premium Support won the
SSPA STAR Award 2005 for Best Practices. -- For the third
consecutive year, Trend Micro was acknowledged as the No.1 global
brand in Taiwan, according to a study by global brand consultancy
Interbrand. Products -- Trend Micro PC-cillin Internet Security
2005 and OfficeScan achieved the industry's first spyware
certification. -- Trend Micro's ScanMail was named 2005 Readers'
Choice Award Winner by Windows IT Pro in the Antivirus/Mail Server
category of the 2005 Windows IT Pro Readers' Choice Awards. -- In
May, PC-cillin won Editor's Choice from Entrepreneur Magazine. --
In January, Trend Micro was voted the "Best Solution" by Tech
Data's TechSelect Member. Products and Innovation In 2005, Trend
Micro introduced the following new products to complement its
existing multi-threat security solutions for gateways, servers,
desktops, mobile devices, etc.: -- Anti-Spyware Solutions --
Shortly after acquiring InterMute, Trend Micro, delivered versatile
anti-spyware solutions that feature standalone and integrated
deployment options for large enterprises, small and medium
businesses, and consumers. The solutions provide multi-layered
options for delivering anti-spyware protection throughout the
network environment -- from the gateway to the desktop. -- Trend
Micro Network Reputation Services (Trend Micro RBL+ and Network
Anti-Spam Services) -- Resulting from the Kelkea acquisition, these
service-based solutions provide a first line of defense that stops
spam at its source -- before it reaches the network. Real-time spam
blocking identifies new sources of spam, including zombies and
botnets, as soon as they begin spamming. -- Communication and
Collaboration Solutions -- Trend Micro launched a group of
solutions offering enhanced antivirus, content, and anti-spam
protection for email, instant messaging, and collaboration
environments. These solutions include Trend Micro ScanMail for
Exchange 7.0, Trend Micro ScanMail Lotus Domino 3.0, Trend Micro
Instant Messaging Security for Microsoft Office Live Communication
Server, Trend Micro PortalProtect for Microsoft SharePoint,
InterScan Messaging Security Suite, and Spam Prevention Solution.
Corporate and Business Highlights -- Trend Micro's strategic
alliance partner Cisco announced a number of outbreak prevention
solutions, including the Cisco Incident Control System, which the
two companies developed jointly. -- Trend Micro announced that
leading computer system manufacturer Dell is offering North
American customers the choice to pre-install Trend Micro PC-cillin
Internet Security on new desktop and notebook systems. -- In
August, the U.S. International Trade Commission issued a final
ruling in Trend Micro's patent infringement lawsuit against
Fortinet, ordering the Sunnyvale, CA-based company to stop
advertising, distributing, importing, and selling FortiGate(TM)
products in the United States. The decision validated Trend Micro's
patent involving virus scanning at the server and gateway. * On
January 30, 2006, Tend Micro Inc. and Fortinet, Inc. announced that
the two companies have reached a settlement in a longstanding
patent dispute involving Fortinet's alleged infringement of Trend
Micro's U.S. Patent 5,623,600. -- To ensure continued innovation
and sharpen its focus on new and emerging threats, Trend Micro
announced the appointment of three chief technologists. Raimund
Genes as chief technologist for anti-malware; Ed English as chief
technologist post for anti-spyware; and Dave Rand as chief
technologist of Internet content security. -- New customers in the
fourth quarter included: Chunghwa Telecom (Taiwan), Hydro One
(Canada), National Library of Medicine (U.S.), North Carolina Farm
Bureau Insurance Group (U.S.). Notice Regarding Forward-looking
Statements Certain statements that we make in this release are
forward-looking statements. These forward-looking statements are
based upon management's current assumptions and beliefs in light of
the information currently available to it, but involve known and
unknown risks and uncertainties. Many important factors could cause
our actual results to differ materially from those expressed in our
forward-looking statements. These factors include: -- Difficulties
in addressing new virus and other computer security problems --
Timing of new product introductions and lack of market acceptance
for our new products -- The level of continuing demand for, and
timing of sales of, our existing products -- Rapid technological
change within the antivirus software industry -- Changes in
customer needs for antivirus software -- Existing products and new
product introductions by our competitors and the pricing of those
products -- Declining prices for products and services -- The
effect of future acquisitions on our financial condition and
results of operations -- The effect of adverse economic trends on
our principal markets -- The effect of foreign exchange
fluctuations on our results of operations -- An increase in the
incidence of product returns -- The potential lack of attractive
investment targets and -- Difficulties in successfully executing
our investment strategy We assume no obligation to update any
forward-looking statements. For more details regarding risk factors
relating to our future performance, please refer to our filings
with the U.S. Securities and Exchange Commission. About Trend
Micro, Inc. Trend Micro, Inc. is a leader in network antivirus and
Internet content security software and services. The Tokyo-based
corporation has business units worldwide. Trend Micro products are
sold through corporate and value-added resellers and managed
service providers. For additional information and evaluation copies
of all Trend Micro products, visit our Web site,
http://www.trendmicro.com/ . Trend Micro and the t-ball logo are
trademarks or registered trademarks of Trend Micro Incorporated.
TrendLabs is a service mark of Trend Micro Incorporated. All other
company or product names may be trademarks or registered trademarks
of their owners. Supplementary Information (1) CONSOLIDATED BALANCE
SHEETS (Thousands of yen) December 31, December 31, Account 2004
2005 Amount % Amount % < Assets > Current assets: Cash and
cash equivalents 52,908,357 59,612,577 Time deposits 383,276
1,435,293 Marketable securities 15,288,575 22,395,365 Notes and
accounts receivable, trade -- less allowance for doubtful accounts
(Yen) 292,815 in FY2004 and (Yen) 282,257 in FY2005, respectively
-- less sales returns (Yen) 572,123 in FY2004 and (Yen) 422,453 in
FY2005, respectively 15,245,213 19,198,870 Inventories 201,243
359,897 Deferred income taxes 6,224,972 6,727,229 Prepaid expenses
and other current assets 1,560,058 1,925,791 Total current assets
91,811,694 86.0 111,655,022 84.0 Investments and other assets:
Securities investments 9,831,913 11,159,428 Investment in and
advances to affiliated companies 175,281 321,569 Software
development costs 438,464 1,174,691 Other intangibles 296,368
1,390,434 Goodwill -- 2,130,179 Deferred income taxes 1,695,771
2,033,488 Other 636,009 671,800 Total investments and other assets
13,073,806 12.3 18,881,589 14.2 Property and equipment: Office
furniture and equipment 3,323,526 4,468,891 Other properties
1,165,173 1,539,195 4,488,699 6,008,086 Less: Accumulated
depreciation (2,640,288) (3,609,473) Total property and equipment
1,848,411 1.7 2,398,613 1.8 Total assets 106,733,911 100.0
132,935,224 100.0 < Liabilities, minority interest and
shareholders' equity > Current liabilities: Notes payable, trade
88,087 118,572 Accounts payable, trade 1,271,067 794,450 Accounts
payable, other 2,699,762 3,208,625 Withholding income taxes 882,693
1,082,302 Accrued expenses 2,143,694 3,138,674 Accrued income and
other taxes 7,192,085 5,476,791 Deferred revenue 24,634,662
31,506,315 Other 651,503 895,088 Total current liabilities
39,563,553 37.1 46,220,817 34.8 Long-term liabilities: Deferred
revenue 3,268,892 3,874,936 Accrued pension and severance costs
656,041 889,774 Other 70,665 82,056 Total long-term liabilities
3,995,598 3.7 4,846,766 3.6 Minority interest -- -- 4,531 0.0
Shareholders' equity: Common stock Authorized -- December 31,2004
250,000,000 shares (no par value) -- December 31,2005 250,000,000
shares (no par value) Issued -- December 31,2004 135,755,872 shares
11,426,977 -- December 31,2005 136,603,725 shares 12,484,849
Additional paid-in capital 17,359,335 18,572,063 Retained earnings
42,165,026 55,971,955 Accumulated other comprehensive income Net
unrealized gain (loss) on debt and equity securities 284,348
657,885 Cumulative translation adjustments (606,463) 1,459,600
(322,115) 2,117,485 Treasury stock, at cost -- December 31,2004
2,588,439 shares (7,454,463) -- December 31,2005 2,513,231 shares
(7,283,242) Total shareholders' equity 63,174,760 59.2 81,863,110
61.6 Total liabilities, minority interest and shareholders' equity
106,733,911 100.0 132,935,224 100.0 (2) CONSOLIDATED STATEMENTS OF
INCOME (Thousands of yen) Account For the year For the year
Increase ended ended (Decrease) 31-Dec-04 31-Dec-05 Amount % Amount
% % Net sales 62,049,254 100.0 73,029,901 100.0 17.7 Cost of sales:
Amortization of capitalized software, and Material 3,236,499
2,598,603 Maintenance 2,260,934 1,671,320 Customer Support
5,723,426 6,857,901 Total Cost of sales 11,220,859 18.1 11,127,824
15.2 (0.8) Operating Expense: Selling 16,009,409 20,944,484
Research and development 2,597,325 4,395,207 General and
administrative 6,143,985 8,990,611 Total operating expenses
24,750,719 39.9 34,330,302 47.0 38.7 Operating income 26,077,676
42.0 27,571,775 37.8 5.7 Other incomes (expenses): Interest income
451,217 836,910 Interest expense -87,464 -3,709 Gain (loss) on
sales of marketable securities 101,199 370,326 Foreign exchange
gain (loss), net -183,292 327,257 Other income (expense), net
-34,350 5,741 Total other income (expense) 247,310 0.4 1,536,525
2.1 521.3 Net income before tax 26,324,986 42.4 29,108,300 39.9
10.6 Income taxes: Current 11,893,659 11,863,127 Deferred
-1,390,387 -1,358,568 10,503,272 16.9 10,504,559 14.4 0.0 Income
before minority interest and equity in earnings of affiliated
companies 15,821,714 25.5 18,603,741 25.5 17.6 Minority interest in
income of consolidated subsidiaries -- -- -338 0.0 -- Equity in
earnings (losses) of affiliated companies 53,122 0.1 66,551 0.1
25.3 Net income 15,874,836 25.6 18,669,954 25.6 17.6 Per share
data: Net income Yen Yen -Basic 120.64 139.85 -Diluted 118.59
137.83 (3) CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Thousands of yen) For the year For the year Account ended ended
December 31, December 31, 2004 2005 Net income 15,874,836
18,669,954 Other comprehensive income (loss), before tax:
Unrealized gains (losses) on debt and equity securities: Unrealized
holding gains (loss) arising during period 514,117 1,375,136 Less
reclassification adjustment for (gains) losses included in net
income (143,702) (704,199) 370,415 670,937 Foreign currency
translation adjustments (105,517) 2,066,063 Total 264,898 2,737,000
Income tax expense related to unrealized gains (losses) on debt and
equity securities (157,032) (297,400) Other comprehensive income
(loss), net of tax 107,866 2,439,600 Comprehensive income
15,982,702 21,109,554 (4) CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
EQUITY (Thousands of yen) For the year For the year Account ended
ended December 31, December 31, 2004 2005 < Common stock >
Balance at beginning of period 7,396,194 11,426,977 Exercise of
stock purchase warrants and stock acquisition rights 4,030,783
1,057,872 Balance at end of period 11,426,977 12,484,849 <
Additional paid-in capital > Balance at beginning of period
13,165,881 17,359,335 Tax benefit from exercise of non-qualified
stock warrants 498,905 155,323 Tax recognition derived from
elimination of reversed warrant related with stock option plan
(312,708) -- Loss on sales of treasury stock, Net of tax (22,941)
-- Exercise of stock purchase warrants and stock acquisition rights
4,030,198 1,057,405 Balance at end of period 17,359,335 18,572,063
< Retained earnings > Balance at beginning of period
28,236,466 42,165,026 Net income 15,874,836 18,669,954 Stock issue
costs, net of tax (11,977) (3,519) Cash dividends (1,829,260)
(4,794,028) Loss on sales of treasury stock, net of tax (105,039)
(65,478) Balance at end of period 42,165,026 55,971,955 < Net
realized gain (loss) on debt and equity securities > Balance at
beginning of period 70,965 284,348 Net change during the period
213,383 373,537 Balance at end of period 284,348 657,885 <
Cumulative translation adjustments > Balance at beginning of
period (500,946) (606,463) Aggregate translation adjustments for
the period (105,517) 2,066,063 Balance at end of period (606,463)
1,459,600 < Treasury stock, at cost > Balance at beginning of
period (4,416,763) (7,454,463) Purchase of treasury stock
(3,759,507) (142,062) Sales of treasury stock 721,807 313,283
Balance at end of period (7,454,463) (7,283,242) Total
shareholders' equity 63,174,760 81,863,110 (5) CONSOLIDATED
STATEMENTS OF CASH FLOWS (Thousands of yen) Account For the year
For the year ended ended December 31, December 31, 2004 2005 Cash
flows from operating activities: Net income 15,874,836 18,669,954
Adjustments to reconcile net income to net cash provided by
operating activities - Depreciation and amortization 1,590,743
1,878,050 Pension and severance costs, less payments 166,649
207,109 Deferred income taxes (1,390,387) (1,358,568) (Gain) loss
on sales of marketable securities (101,199) (370,326) Equity in
earnings of affiliated companies (53,122) (66,551) (Gain) loss on
sale and disposal of fixed assets -- 11,585 Minority interest --
338 Changes in assets and liabilities: Increase (decrease) in
deferred revenue 7,293,488 6,209,680 (Increase) decrease in
accounts receivable, net of allowances (3,421,729) (3,567,924)
(Increase) decrease in inventories (124,093) (124,971) Increase
(decrease) in notes and accounts payable, trade 379,882 (526,321)
Increase (decrease) in accrued income and other taxes 2,912,481
(1,826,959) (Increase) decrease in other current assets (90,479)
(34,426) Increase (decrease) in accounts payable, other 823,199
381,414 Increase (decrease) in other current liabilities 1,107,855
1,336,703 (Increase) decrease in other assets 110,628 (207,984)
Other (178,744) (34,809) Net cash provided by operating activities
24,900,008 20,645,612 Cash flows from investing activities:
Payments for purchases of property and equipment (801,935)
(1,153,193) Software development cost (645,166) (1,446,248)
Payments for purchases of other intangibles (229,167) (216,107)
Proceeds from sales of marketable securities 4,986,012 22,079,575
(Payment for)/Proceeds from marketable securities maturing within
three months or less (net) (2,156,191) (189,708) Payments for
purchases of marketable securities and security investments
(17,240,100) (28,043,534) Payments for business acquisition --
(2,716,702) (Payments for)/Proceeds from time deposits 57,047
(1,052,017) Net cash used in investing activities (16,029,500)
(12,737,934) Cash flows from financing activities: Issuance of
common stock pursuant to exercise of stock purchase warrants and
stock acquisition rights 8,049,004 2,111,758 Redemption of bonds
(6,500,000) -- Proceeds from/(Purchase of) treasury stock (net)
(3,165,679) 105,743 Tax benefit from exercise of Non-qualified
stock warrants 498,905 155,322 Tax recognition derived from
elimination of reversed warrant related (312,708) -- with stock
option plan Capital contribution from minority interest -- 4,193
Dividends paid (1,819,607) (4,782,764) Net cash used in financing
activities (3,250,085) (2,405,748) Effect of exchange rate changes
on cash and cash equivalents 568,994 1,202,290 Net increase
(decrease) in cash and cash equivalents 6,189,417 6,704,220 Cash
and cash equivalents at beginning of period 46,718,940 52,908,357
Cash and cash equivalents at end of period 52,908,357 59,612,577
Supplementary information of cash flow: Payment for interest
expense 114,121 3,709 Payment for income taxes 8,990,398 13,109,985
For additional Information: Mr. Mahendra Negi Chief Financial
Officer/IR Officer Phone: +81-3-5334-4899 Fax: +81-3-5334-4874
Email: DATASOURCE: Trend Micro Incorporated CONTACT: Mr. Mahendra
Negi of Trend Micro Incorporated, +81-3-5334-4899, or fax,
+81-3-5334-4874, or Web site: http://www.trendmicro.com/
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