Technology and service acquisitions and Significant Growth in Networking
Products Highlight Quarter
TOKYO, Aug. 3 /Xinhua-PRNewswire-FirstCall/ -- Trend Micro, Inc.
(TSE: 4704; Nasdaq: TMIC), a leader in network antivirus and Internet content
security software and services, today announced earnings results for the
second quarter 2005.
Trend Micro posted consolidated net sales of 17.19 billion Yen (or US
$159.57 million, 107.72 JPY = 1USD), operating income of 5.47 billion Yen (or
US $50.78 million) and net income of 3.93 billion Yen (or US $36.52 million)
for the second quarter 2005. These figures reflect gains of nearly 16% in net
sales compared with the same period in the previous year. Operating income
was down 13% from the same quarter in the previous year, largely due to
additional support costs incurred in Japan in April.
The company continued to enjoy steady growth around the world. Both the
United States and the Asia-Pacific regions experienced a 29 percent year-over-
year increase in revenue, and sales in the Europe, Middle East and Africa
(EMEA) increased 19 percent over the same period. Much of the company's
growth was buoyed by strong sales in networking security products. For
example, in the second quarter, revenue for network products including Trend
Micro Network VirusWall grew 232 percent year-over-year worldwide, with
especially strong growth in the United States, EMEA and Japan compared to the
previous year. Gateway Suite products also saw strong revenue growth compared
to the same quarter in the previous year, highlighted by a 35 percent increase
in Europe and a 63 percent increase in the Asia-Pacific region.
While growth remained steady, Trend Micro strengthened its position in the
marketplace by announcing two major acquisitions that enhance the company's
ability to protect customers from some of the most pressing threats. On May
10, 2005, the company announced its acquisition of InterMute, a leading
developer of anti-spyware products. Shortly after the announcement, the
company introduced Trend Micro Anti-Spyware 3.0 and Trend Micro Anti-Spyware
for Small and Medium Businesses 3.0. On June 14, 2005, Trend Micro announced
its acquisition of Kelkea Inc., a leading authority on IP filtering and
reputation services. The acquisition enables Trend Micro to accelerate its
development of network-level solutions against spam and other related threats.
''The second quarter of this year has included some challenges and some
significant triumphs for Trend Micro, but we continue to focus on service
quality improvement, and continued growth and expansion,'' said Eva Chen, CEO
of Trend Micro. ''The steady traction of our network-level solutions,
partnerships and alliances, and new technology and service acquisitions are
indicative of our strength and success as we further enhance our abilities to
protect customers from even more complex threats.''
Based on information currently available to the company, consolidated net
sales for the third quarter ending September 30, 2005 is expected to be 17.2
billion Yen (or US $153.6 million, based on an exchange rate of 112JPY =
1USD). Operating income and net income are expected to be 6.2 billion Yen (or
US $55.4 million) and 3.75 billion Yen (or US $33.5 million), respectively.
Second Quarter Business Highlights
-- New Acquisitions
Trend Micro acquired InterMute, Inc., a leading developer of
anti-spyware products, and quickly announced three new standalone
products for the detection and removal of spyware and grayware for
businesses and consumers. Trend Micro Anti-spyware products
feature CWShredder(TM), regarded as one of the most effective
solutions for eliminating the CoolWebSearch Web browsing hijacker
and its many variants -- some of which avoid detection and removal
through ever-changing methods.
Trend Micro acquired Kelkea Inc., a leading authority on IP
filtering and reputation services, and is offering Trend Micro
Network Reputation Services to anti-spam customers. Trend Micro
plans to further develop technologies to combat phishing attacks,
zombies, and botnets; the company will also enhance current
anti-spam solutions through the extensive knowledge base of more
than 1.5 billion IP addresses.
-- Anti-Spyware Solutions
Trend Micro introduced several new solutions for combating the
growing spyware problem, including a multi-layered solutions strategy
for coordinated security at the enterprise gateway, server, and
client levels. The company also introduced standalone anti-spyware
offerings designed for businesses and consumers.
During the quarter, Trend Micro was the first company in the security
industry to achieve Checkmark Spyware certification for spyware
detection performance. Two products -- Trend Micro OfficeScan(TM)
and Trend Micro PC-cillin(TM) Internet Security Suite -- received the
certification.
-- Products and Innovation
The following products were introduced in the second quarter 2005:
Trend Micro InterScan(TM) Web Security Suite 2.5 -- gateway security
solution designed to block spyware, grayware, phishing attacks,
viruses, and other malware entering corporate networks via the
Internet gateway.
Trend Micro OfficeScan v7.0 -- an advanced, integrated client and
server security solution that combines comprehensive threat
protection with services and policy enforcement compatibility to help
ensure enterprise uptime and productivity.
Trend Micro Anti-Spyware 3.0 and Trend Micro Anti-Spyware for Small
and Medium Businesses 3.0 -- standalone options for detection and
removal of evasive spyware and grayware.
Trend Micro Mobile Security 2.0 -- extends multiplatform protection
to defend Microsoft Windows Mobile 5.0 operating system from viruses,
worms, and other malicious threats.
-- Global Business Highlights
In May 2005, a U.S. International Trade Commission judge issued a
final determination in Trend Micro's favor involving the unfair
import proceeding Trend Micro brought against Fortinet. As a result,
the judge has recommended that the ITC issue an order prohibiting
Fortinet from importing FortiGate products into the United States.
New customers and new business in the Asia-Pacific region included:
Guangzhou University of Traditional Chinese Medicine in China and
Chung-Hwa Telecom in Taiwan.
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, the t-ball logo, OfficeScan, PC-cillin, and VirusWall 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.
For additional Information
Mr. Mahendra Negi
Chief Financial Officer / IR Officer
Phone: +81-3-5334-4899
Fax: +81-3-5334-4874
Email: ir@trendmicro.co.jp
Supplementary Information
(1) CONSOLIDATED BALANCE SHEETS
(Thousands
of yen)
June 30, June 30, December 31,
Account 2004 2005 2004
Amount % Amount % Amount %
Current assets:
Cash and cash
equivalents 40,462,189 55,797,854 52,908,357
Time deposits 460,391 906,397 383,276
Marketable
securities 13,792,770 14,915,254 15,288,575
Notes and accounts receivable,
trade -less
allowance for doubtful
accounts and sales
returns of
(Yen)842,681 in
the first half
of FY2004,
(Yen)1,077,276
in the first
half of FY2005
and (Yen)864,938
in FY2004,
respectively 12,323,100 13,742,453 15,245,213
Inventories 189,226 280,722 201,243
Deferred income
taxes 5,955,785 6,272,727 6,224,972
Prepaid expenses
and other
current assets 1,108,786 1,457,490 1,560,058
Total current
assets 74,292,247 86.1 93,372,897 83.7 91,811,694 86.0
Investments and
other assets:
Securities
investments 6,867,926 9,321,151 9,831,913
Investment
in and
advances to
affiliate
companies 138,183 206,944 175,281
Software
development costs 530,841 640,578 438,464
Other
intangibles 307,188 1,260,470 296,368
Goodwill -- 2,442,109 --
Deferred
income taxes 1,774,102 1,543,222 1,695,771
Other 652,561 662,846 636,009
Total
investments
and other
assets 10,270,801 11.9 16,077,320 14.4 13,073,806 12.3
Property and equipment:
Office furniture
and equipment 2,943,219 3,841,551 3,323,526
Other properties 1,162,394 1,349,320 1,165,173
4,105,613 5,190,871 4,488,699
Less: Accumulated
depreciation (2,389,676) (3,094,701) (2,640,288)
Total property 1,715,937 2.0 2,096,170 1.9 1,848,411 1.7
and equipment
Total assets 86,278,985 100.0 111,546,387 100.0 106,733,911 100.0
(Thousands of yen)
June 30, June 30, December 31,
Account 2004 2005 2004
Amount % Amount % Amount %
Current
liabilities:
Notes payable,
trade 63,044 139,895 88,087
Accounts
payable, trade 1,824,187
Accounts
payable, other 1,987,842 2,970,364
Withholding
income taxes 572,839 839,157 882,693
Accrued expenses 2,185,496 2,886,400 2,143,694
Accrued income
and other taxes 4,638,402 4,133,554 7,192,085
Deferred revenue 20,409,178 26,240,519 24,634,662
Other 796,297 781,518 651,503
Total current
liabilities 32,477,285 37.6 38,735,692 34.7 39,563,553 37.1
Long-term
liabilities:
Deferred revenue 3,187,325 3,425,101 3,268,892
Accrued pension
and severance
costs 588,430 767,945 656,041
Other 160,329 64,108 70,665
Total long-term
liabilities 3,936,084 4.6 4,257,154 3.8 3,995,598 3.7
Minority
interest -- -- 4,613 0.0 -- --
Shareholders'
equity:
Common stock
Authorized
-June 30,2004
250,000,000
shares
-June 30,2005
250,000,000
shares
-December
31,2004
250,000,000
shares
(no par value)
Issued
-June 30,2004
133,997,891
shares 9,144,983
-June 30,2005
136,051,155
shares 11,803,201
-December
31,2004
135,755,872
shares 11,426,977
Additional paid-
in capital 14,756,997 18,035,675 17,359,335
Retained
earnings 33,355,669 45,829,022 42,165,026
Accumulated
other
comprehensive
income
(loss)
Net unrealized
gain (loss) on
debt and (91,832) (2,654)
equity
securities 284,348
Cumulative
translation
adjustments (565,491) 230,810 (606,463)
(657,323) 228,156 (322,115)
Treasury stock,
at cost
-June 30,2004
2,504,854
shares (6,734,710)
-June 30,2005
2,545,688
shares (7,347,126)
-December
31,2004
2,588,439
shares (7,454,463)
Total
shareholders'
equity 49,865,616 57.8 68,548,928 61.5 63,174,760 59.2
Total
liabilities,
minority
interest and
shareholders'
equity 86,278,985 100.0 111,546,387 100.0 106,733,911 100.0
(2) CONSOLIDATED STATEMENTS OF INCOME
(Thousands of yen)
Account For the six For the six
months ended months ended
June 30,2004 June 30,2005
Amount % Amount %
Net sales 28,464,157 100.0 34,489,740 100.0
Cost of sales 1,926,769 1,191,244
Gross profit 26,537,388 93.2 33,298,496 96.5
Operating expenses:
Selling 7,457,213 10,338,819
Research and development and
maintenance 2,278,974 2,891,775
Customer support 2,717,490 3,190,146
General and administrative 2,705,635 4,106,616
Total operating expenses 15,159,312 53.2 20,527,356 59.5
Operating income 11,378,076 40.0 12,771,140 37.0
Other incomes (expenses):
Interest income 160,957 326,282
Interest expense (44,644) (2,241)
Gain (loss) on sales of marketable
securities 82,857 20,534
Foreign exchange gain (loss), net (29,075) 197,132
Other income (expense), net (21,451) 2,897
Total other income (expenses) 148,644 0.5 544,604 1.6
Net income before tax 11,526,720 40.5 13,315,744 38.6
Income taxes:
Current 5,498,022 4,698,548
Deferred (922,416) 158,283
4,575,606 16.1 4,856,831 14.1
Income before
minority interest and
equity
in earnings of affiliated
companies 6,951,114 24.4 8,458,913 24.5
Minority interest in income of
consolidated
subsidiaries -- -- (420) 0.0
Equity in earnings of affiliated
companies 17,893 0.1 31,663 0.1
Net income 6,969,007 24.5 8,490,156 24.6
Per share data:
Net income Yen Yen
-Basic 52.41 63.67
-Diluted 51.47 62.71
Cash dividends 14.00 36.00
(Thousands of yen)
Account For the year ended
December 31,2004
Amount %
Net sales
Cost of sales 62,049,254 100.00
Gross profit 3,236,499
58,812,755 94.8
Operating expenses:
Selling 16,009,409
Research and development and
maintenance 4,858,259
Customer support 5,723,426
General and administrative 6,143,985
Total operating expenses 32,735,079 52.8
Operating income 26,077,676 42.0
Other incomes (expenses):
Interest income 451,217
Interest expense (87,464)
Gain (loss) on sales of marketable
securities 101,199
Foreign exchange gain (loss), net (183,292)
Other income (expense), net (34,350)
Total other income (expenses) 247,310 0.4
Net income before tax 26,324,986 42.4
Income taxes:
Current 11,893,659
Deferred (1,390,387)
10,503,272 16.9
Income before minority interest and
Equity in earnings of
affiliated companies 15,821,714 25.5
Minority interest in income of
consolidated
subsidiaries -- --
Equity in earnings of affiliated
companies 53,122 0.1
Net income 15,874,836 25.6
Per share data:
Net income Yen
-Basic 120.64
-Diluted 118.59
Cash dividends 14
(3) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Thousands of yen)
Account For the For the For the year
six six ended
months months December 31,
ended ended 2004
June 30, June 30,
2004 2005
Net income 6,969,007 8,490,156 15,874,836
Other comprehensive income (loss),
before tax:
Unrealized gains (losses) on debt and
equity
securities:
Unrealized holding gains (losses)
arising
during period (198,675) (279,612) 514,117
Less reclassification adjustment for
(gains)
losses included in net income (67,303) (186,353) (143,702)
(265,978) (465,965) 370,415
Foreign currency translation
adjustments (64,545) 837,273 (105,517)
Total (330,523) 371,308 264,898
Income tax expense related to
unrealized gains
(losses) on debt and equity
securities 103,181 178,963 (157,032)
Other comprehensive income (loss),
net of tax (227,342) 550,271 107,866
Comprehensive income 6,741,665 9,040,427 15,982,702
(4) CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Thousands of yen)
Account For the For the For the year
six six ended
months months December 31,
ended ended 2004
June 30, June 30,
2004 2005
Balance at beginning of period 7,396,194 11,426,977 7,396,194
Exercise of stock purchase warrants
and stock acquisition rights 1,748,789 376,224 4,030,783
Balance at end of period 9,144,983 11,803,201 11,426,977
Balance at beginning of period 13,165,881 17,359,335 13,165,881
Tax benefit from exercise of
non-Qualified stock warrants 115,383 300,271 498,905
Tax recognition derived from
elimination of
reversed warrant related
with stock option plan (249,978) -- (312,708)
Loss on sales of treasury stock,
net of tax (22,941) -- (22,941)
Exercise of stock purchase
warrants and stock
acquisition rights 1,748,652 376,069 4,030,198
Balance at end of period 14,756,997 18,035,675 17,359,335
Balance at beginning of period 28,236,466 42,165,026 28,236,466
Net income 6,969,007 8,490,156 15,874,836
Stock issue costs, net of tax (3,735) (1,829) (11,977)
Cash dividends (1,829,260) (4,794,028)
Loss on sales of treasury stock,
net of tax (16,809) (30,303) (105,039)
Balance at end of period 33,355,669 45,829,022 42,165,026
Balance at beginning of period 70,965 284,348 70,965
Net change during the period (162,797) (287,002) 213,383
Balance at end of period (91,832) (2,654) 284,348
Balance at beginning of period (500,946) (606,463) (500,946)
Aggregate translation adjustments
for the period (64,545) 837,273 (105,517)
Balance at end of period (565,491) 230,810 (606,463)
Balance at beginning of period (4,416,763) (7,454,463) (4,416,763)
Purchase of treasury stock (2,616,694) (42,631) (3,759,507)
Sales of treasury stock 298,747 149,968 721,807
Balance at end of period (6,734,710) (7,347,126) (7,454,463)
Total shareholders' equity 49,865,616 68,548,928 63,174,760
(5) CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of yen)
Account For the For the For the year
six six ended
months months December 31,
ended ended 2004
June 30, June 30,
2004 2005
Cash flows from operating
activities:
Net income 6,969,007 8,490,156 15,874,836
Adjustments to reconcile net income
to net cash provided by
operating activities --
Depreciation and amortization 785,396 942,777 1,590,743
Pension and severance costs, less
payments 99,262 91,650 166,649
Deferred income taxes (922,416) 158,283 (1,390,387)
(Gain) loss on sales of marketable
securities (82,857) (20,534) (101,199)
Equity in earnings of affiliated
companies (17,893) (31,663) (53,122)
Minority interest -- 420 --
Changes in assets and liabilities:
Increase (decrease) in deferred
revenue 3,201,387 1,424,155 7,293,488
(Increase) decrease in accounts
receivable,
net of allowances (719,133) 1,552,014 (3,421,729)
(Increase) decrease in inventories (112,030) (53,076) (124,093)
Increase (decrease) in notes and
accounts payable, trade 896,839 (510,190) 379,882
Increase (decrease) in accrued
income and other taxes 358,248 (3,219,572) 2,912,481
(Increase) decrease in other current
assets 16,948 133,075 (90,479)
Increase (decrease) in accounts
payable, other 279,029 250,129 823,199
Increase (decrease) in other current
liabilities 908,479 321,916 1,107,855
(Increase) decrease in other assets 390,684 5,754 110,628
Other 117,191 113,694 (178,744)
Net cash provided by operating
activities 12,168,141 9,648,988 24,900,008
Cash flows from investing
activities:
Payments for purchases of property
and equipment (226,434) (507,160) (801,935)
Software development cost (402,096) (475,129) (645,166)
Payments for purchases of other
intangibles (200,253) (83,946) (229,167)
Proceeds from sales of marketable
securities 954,474 8,545,586 4,986,012
(Payments for) / Proceeds from
marketable securities
maturing within three months
or less (net) -- 784,865 (2,156,191)
Payments for purchases of
marketable securities and
security investments (11,062,351) (8,241,925) (17,240,100)
Payment for business acquisition -- (2,716,702) --
(Payments for) / Proceeds from time
deposits (20,068) (523,121) 57,047
Net cash used in investing
activities (10,956,728) (3,217,532) (16,029,500)
Cash flows from financing
activities:
Issuance of common stock pursuant to
exercise of stock
purchase warrants and stock
acquisition rights 3,493,706 750,464 8,049,004
Redemption of bonds (6,500,000) -- (6,500,000)
Proceeds from/(Purchase of)
treasury stock (net) (2,357,697) 77,034 (3,165,679)
Tax benefit from exercise of
non-qualified stock warrants 115,383 300,271 498,905
Tax recognition derived from
elimination of reversed
warrant related with
stock option plan (249,978) -- (312,708)
Capital contribution from
minority interest -- 4,193 --
Dividend paid (1,814,984) (4,766,610) (1,819,607)
Net cash used in financing
activities (7,313,570) (3,634,648) (3,250,085)
Effect of exchange rate changes on
cash and cash equivalents (154,594) 92,689 568,994
Net increase (decrease) in cash and
cash equivalents (6,256,751) 2,889,497 6,189,417
Cash and cash equivalents at
beginning of period 46,718,940 52,908,357 46,718,940
Cash and cash equivalents at
End of period 40,462,189 55,797,854 52,908,357
Supplementary information of cash
flow:
Payment for interest expense 19,424 2,241 114,121
Payment for income taxes 5,754,866 7,350,227 8,990,398
SOURCE Trend Micro, Inc.
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Related links:
http://www.trendmicro.com
CONTACT:
Mr. Mahendra Negi of Trend Micro, Inc.,
+81-3-5334-4899, or fax, +81-3-5334-4874, or ir@trendmicro.co.jp
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