Revenues Up 17 Percent Annually, Driven by Strong Sales in the
Small and Mid-Sized Business Market and Overall US Growth TOKYO,
Feb. 21 /Xinhua-PRNewswire-FirstCall/ -- Trend Micro Incorporated
(TSE:4704TSE:Nasdaq:TSE: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 2006 ended December 31, 2006. For the fourth
quarter, Trend Micro posted a record 23.386 billion Yen ($198.524
million, 117.80JPY=1USD) in net sales, representing 14 percent
growth in Yen year-over-year and 11 percent growth over the third
quarter in Yen. Operating income for the quarter was 6.705 billion
Yen ($56.921 million) and net income was 5.030 billion Yen ($42.697
million). For 2006, Trend Micro posted record consolidated net
sales of 85.614 billion Yen (or U.S. $726.771 million),
representing an annual growth rate of 17 percent. The company also
reported operating income of 27.076 billion Yen (or U.S. $229.845
million) and net income of 17.236 billion Yen (or US $146.317
million). Revenues from products and services sold to enterprise,
mid-sized, and small business customers worldwide comprised 76
percent of 2006 revenues; revenue from consumer products comprised
the remaining 24 percent. Trend Micro continued to experience
double digit growth worldwide, most notably in North America where
sales grew 25 percent annually while Europe saw a growth of 15
percent year on year. In the Japan and Asia-Pacific regions, annual
sales increased 13 and 16 percent, respectively. '2006 was a
healthy year for our company, annual growth remained in double
digits and our steadfast focus on delivering new products and
services designed specifically to meet the needs of our
different-sized customers helped fuel development,' said Eva Chen,
CEO of Trend Micro. 'In the past year, we delivered a number of new
security solutions which prevent malicious content and attacks.
During 2007, we will continue this momentum by focusing on
protection against web-based threats that can result in data
leakage and information theft. This approach is helping us to build
a strong foundation to position us for the next stage of growth and
our continued leadership.' Based on information currently available
to the company, consolidated net sales for the first quarter ending
March 31, 2007, is expected to be 23.000 billion Yen (or U.S.
$194.915 million, based on an exchange rate of 118JPY = 1USD).
Operating income and net income are expected to be 5.500 billion
Yen (or U.S. $46.610 million) and 2.850 billion Yen (or U.S.
$24.153 million), respectively. Growth rate figures are calculated
from Japanese Yen results. Some discrepancy may therefore be noted
in US Dollar comparisons owing to fluctuations in currency
conversion rates. 2006 Business Highlights Awards and Recognition
Corporate -- Trend Micro was listed on the Dow Jones Sustainability
Index for the third consecutive year. -- Trend Micro placed second
in the Ziff Davis CIO Insight 2006 Vendor Value Study, ahead of all
other security vendors. The study conducted among top IT managers
and CIO's ranked 40 of the most important information technology
vendors by value, reliability and loyalty. Additionally, Trend
Micro was the top-scoring Mid-Market vendor. -- Dave Rand, CTO for
Trend Micro Internet Content Security, addressed the Messaging
Anti-Abuse Working Group General Meeting in June 2006, where he
presented validation that botnets are now the primary source of
spam. -- In August, Trend Micro was recognized as number 9 on the
Cape Horn Strategies '2006 Software Industry Sustained Success
Honor Roll' having achieved 9 consecutive years of profitable
growth. -- In November 2006, Trend Micro received the Taiwan
International Achievement award at the Fourth Taiwan Business
Awards. -- Independent research firm, Forrester Research
acknowledged Trend Micro as a Leader in Enterprise Anti-Spyware in
their report "The Forrester Wave: Enterprise Antispyware, Q1 2006'.
-- In August 2006, U.S. based solution-provider readers of CMP
Technology's VARBusiness magazine recognized Trend Micro in the
Annual Report Card (ARC) award program, for the outstanding
satisfaction levels it provides. Trend Micro received the Product
Innovation award, for the third consecutive year, and the Loyalty
award in the Security Management Software category from the
biweekly magazine that provides strategic insight to technology
integrators Products -- In March 2006, Trend Micro was named as CRN
Channel Champion in both Client Security Software and Network
Security Software Categories by the US edition of CRN Magazine. --
Trend Micro Internet Security and Trend Micro AntiVirus plus
AntiSpyware were awarded the Certified for Windows Vista Logo. --
TechTarget's SearchComputingMagazine.com named Trend Micro Mobile
Security among its 'Products of the Year' in January 2006. -- In
early January, TechData's TechSelect Channel Community awarded
Trend Micro's SMB Solutions 'Best Solution.' -- During the fourth
quarter, the Network VirusWall Enforcer underwent extensive
comparative testing in the Infoworld magazine labs and came away
with the top score. The reviewer noted that the 'step-by-step
policy configuration was simple to create thanks to the wizardlike
interface.' Products and Innovation New products Trend Micro
introduced during 2006, included the following: -- Consumer: Trend
Micro Internet Security, incorporates Trend Micro's well-known PC-
cillin(TM) engine and anti-malware protection along with a host of
new features addressing rootkits, spyware, phishing, spam, hackers,
viruses, WiFi attacks, smartphone threats and the growing number of
identity-theft threats. In addition, the Trend Micro Internet
Security subscription includes TrendSecure(TM), Trend Micro's new
online security services. -- Small and Mid-sized Businesses.
InterScan Gateway Security Appliance is designed for mid-sized
organizations looking for an easy to install, easy to maintain
content security solution. While protecting corporate and personal
data, the appliance supports employee productivity and it includes
an anti-bot functionality to help prevent internal PC's from
becoming zombies. Trend Micro(TM) Email Security Services were
developed specifically with the small and medium businesses (SMB)
in mind. This service protects their network and infrastructure by
stopping threats before they reach the customer's gateway. --
Enterprise: InterScan Web Security Appliance is a new gateway-based
hardware solution with unique capabilities designed to provide
enterprise organizations with comprehensive front-line protection
against malware and content security threats including spyware.
Network VirusWall(TM) Enforcer, is a second-generation
enterprise-class Network Access Control (NAC) appliance that
ensures that all devices -- managed or unmanaged, local or remote
-- comply with security policies before they're granted access to
corporate networks. InterScan(TM) Messaging Security Appliance is a
comprehensive solution for enterprises to address email-based
threats including spam, phishing, bots, spyware, and viruses, as
well as content compliance. Patents In 2006, Trend Micro was
awarded the following patents: -- U.S. Patent No. 7,099,853,
entitled "Configurable Hierarchical Content Filtering System"
covers a content filtering scanning method that distributes the
scanning of incoming data against a knowledge base to more than one
computer. This technology advantageously allows a complete pattern
file to be segmented, with different computers scanning incoming
data using different segments of the pattern file. -- U.S. Patent
No. 7,062,553, entitled "Virus Epidemic Damage Control System and
Method for Network Environment" covers a method of early virus
detection by analyzing whether identical sections of files have
been modified over a certain time interval. According to a specific
example of the patented technology, a network system finds all
files having been modified within a predetermined time interval and
analyzes the modifications. If the modified sections of the
modified files are identical or similar, the network is alerted of
a possible virus outbreak, allowing early containment and
quarantine. Business Highlights -- New customers in the fourth
quarter included: Nova Information Systems in the United States and
Eastern Norway Regional Health Authority, Statoil ASA and ISC
Central (Dutch Police Force) in EMEA Notice Regarding
Forward-looking StatementsCertain 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 2005 2006 Amount % Amount % < Assets >
Current assets: Cash and cash equivalents 59,612,577 76,196,954
Time deposits 1,435,293 514,293 Marketable securities 22,395,365
25,958,661 Notes and accounts receivable, trade -less allowance for
doubtful accounts (Yen) 282,257 in FY2005 and (Yen) 514,223 in
FY2006, respectively -less sales returns (Yen) 422,453 in FY2005
and (Yen) 208,275 in FY2006, respectively 19,198,870 19,923,830
Inventories 359,897 685,952 Deferred income taxes 6,727,229
9,438,457 Prepaid expenses and other current assets 1,925,791
3,708,789 Total current assets 111,655,022 84.0 136,426,936 81.6
Investments and other assets: Securities investments 11,159,428
15,681,524 Investment in and advances to affiliated companies
321,569 254,308 Software development costs 1,174,691 1,167,079
Other intangibles 1,390,434 2,088,618 Goodwill 2,130,179 2,982,963
Deferred income taxes 2,033,488 4,370,672 Other 671,800 792,871
Total investments and other assets 18,881,589 14.2 27,338,035 16.3
Property and equipment: Office furniture and equipment 4,468,891
6,542,245 Other properties 1,539,195 2,249,875 6,008,086 8,792,120
Less: Accumulated depreciation (3,609,473) (5,292,452) Total
property and equipment 2,398,613 1.8 3,499,668 2.1 Total assets
132,935,224 100.0 167,264,639 100.0 < Liabilities, minority
interest and shareholders' equity > Current liabilities: Notes
payable, trade 118,572 143,637 Accounts payable, trade 794,450
1,428,202 Accounts payable, other 3,208,625 3,753,566 Withholding
income taxes 1,082,302 1,465,451 Accrued expenses 3,138,674
4,023,464 Accrued income and other taxes 5,476,791 10,100,431
Deferred revenue 31,506,315 45,093,703 Other 895,088 961,342 Total
current liabilities 46,220,817 34.8 66,969,796 40.1 Long-term
liabilities: Deferred revenue 3,874,936 7,681,730 Accrued pension
and severance costs 889,774 1,149,219 Other 82,056 261,214 Total
long-term liabilities 4,846,766 3.6 9,092,163 5.4 Minority interest
4,531 0.0 6,632 0.0 Shareholders' equity: Common stock Authorized
-December 31,2005 250,000,000 shares (no par value) -December
31,2006 250,000,000 shares (no par value) Issued -December 31,2005
136,603,725 shares 12,484,849 -December 31,2006 137,344,504 shares
13,479,076 Additional paid-in capital 18,572,063 24,755,879
Retained earnings 55,971,955 63,386,138 Accumulated other
comprehensive income Net unrealized gain (loss) on debt and
1,012,828 equity securities 657,885 Cumulative translation
adjustments 1,459,600 2,910,707 Unrecognized pension liabilities --
(181,855) 2,117,485 3,741,680 Treasury stock, at cost -December
31,2005 2,513,231 shares (7,283,242) -December 31,2006 4,509,612
shares (14,166,725) Total shareholders' equity 81,863,110 61.6
91,196,048 54.5 Total liabilities, minority 132,935,224 100.0
167,264,639 100.0 interest and shareholders' equity (2)
CONSOLIDATED STATEMENTS OF INCOME (Thousands of yen) For the year
For the year Increase Account ended ended December 31, December 31,
(Decrease) 2005 2006 Amount % Amount % % Net sales 73,029,901 100.0
85,613,662 100.0 17.2 Cost of sales: Amortization of capitalized
2,598,603 4,138,033 software, and Material Maintenance 1,671,320
3,259,764 Customer Support 6,857,901 8,496,171 Total Cost of sales
11,127,824 15.2 15,893,968 18.6 42.8 Operating Expense: Selling
20,944,484 27,216,279 Research and development 4,395,207 4,719,313
General and administrative 8,990,611 10,708,306 Total operating
expenses 34,330,302 47.0 42,643,898 49.8 24.2 27,571,775 37.8
27,075,796 31.6 (1.8) Operating income Other incomes (expenses):
Interest income and dividend 1,775,896 received 836,910 Interest
expense (3,709) (19,638) Gain (loss) on sales of marketable
securities 370,326 464,055 Foreign exchange gain (loss), net
327,257 (37,955) Other income (expense), net 5,741 297,686 Total
other income 1,536,525 2.1 2,480,044 2.9 61.4 (expense) Net income
before tax 29,108,300 39.9 29,555,840 34.5 1.5 Income taxes:
Current 11,863,127 16,012,347 Deferred (1,358,568) (3,644,302)
10,504,559 14.4 12,368,045 14.4 17.7 Income before minority
interest and equity in 18,603,741 25.5 17,187,795 20.1 (7.6)
earnings of affiliated companies Minority interest in income of
consolidated (338) 0.0 (812) 0.0 140.2 subsidiaries Equity in
earnings (losses) of affiliated companies 66,551 0.1 49,207 0.0
(26.1) Net income 18,669,954 25.6 17,236,190 20.1 (7.7) Per share
data: Net income Yen Yen -Basic 139.85 128.65 -Diluted 137.83
128.11 (3) CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Thousands of yen) For the For the year year Account ended ended
December 31, December 31, 2005 2006 Net income 18,669,954
17,236,190 Other comprehensive income (loss), before tax:
Unrealized gains (losses) on debt and equity securities: Unrealized
holding gains (loss) arising during period 1,375,136 959,373 Less
reclassification adjustment for (gains) losses included in net
income (704,199) (381,360) 670,937 578,013 Foreign currency
translation adjustments 2,066,063 1,451,107 Unrecognized pension
liabilities; Pension liability adjustment to initially apply SFAS
No.158 -- (164,786) Total 2,737,000 1,864,334 Tax effect of other
comprehensive income(loss): Income tax expense related to
unrealized gains (losses) on debt and equity (297,400) (223,070)
securities Income tax expense related to unrecognized pension
liabilities -- (17,069) (297,400) (240,139) Other comprehensive
income (loss), net of tax 2,439,600 1,624,195 Comprehensive income
21,109,554 18,860,385 (4) CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
EQUITY (Thousands of yen) For the year For the year Account ended
ended December 31, 2005 December31, 2006 < Common stock >
Balance at beginning of period 11,426,977 12,484,849 Exercise of
stock purchase warrants and stock acquisition rights 1,057,872
994,227 Balance at end of period 12,484,849 13,479,076 <
Additional paid-in capital > Balance at beginning of period
17,359,335 18,572,063 Tax benefit from exercise of non-qualified
155,323 140,089 stock warrants Tax recognition derived from
elimination of -- (59,091) reversed warrant related with stock
option plan Stock option compensation expense -- 5,108,924 Exercise
of stock purchase warrants and stock acquisition rights 1,057,405
993,894 Balance at end of period 18,572,063 24,755,879 <
Retained earnings > Balance at beginning of period (Previously
announced) 42,165,026 55,971,955 Cumulative-effect of the
adjustment by applying SAB No.108 -- (2,251,639) Balance at
beginning of period (After adjusted) 42,165,026 53,720,316 Net
income 18,669,954 17,236,190 Stock issue costs, net of tax (3,519)
(3,761) Cash dividends (4,794,028) (7,509,068) Loss on sales of
treasury stock, net of tax (65,478) (57,539) Balance at end of
period 55,971,955 63,386,138 < Net realized gain (loss) on debt
and equity securities > Balance at beginning of period 284,348
657,885 Net change during the period 373,537 354,943 Balance at end
of period 657,885 1,012,828 < Cumulative translation adjustments
> Balance at beginning of period (606,463) 1,459,600 Aggregate
translation adjustments for the period 2,066,063 1,451,107 Balance
at end of period 1,459,600 2,910,707 < Unrecognized pension cost
> Balance at beginning of period -- -- Accumulated adjustments
by applying SFAS No.158 -- (181,855) Balance at end of period --
(181,855) < Treasury stock, at cost > Balance at beginning of
period (7,454,463) (7,283,242) Purchase of treasury stock (142,062)
(7,117,842) Sales of treasury stock 313,283 234,359 Balance at end
of period (7,283,242) (14,166,725) Total shareholders' equity
81,863,110 91,196,048 (5) CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of yen) For the For the year year Account ended ended
December 31, December 31, 2005 2006 Cash flows from operating
activities: Net income 18,669,954 17,236,190 Adjustments to
reconcile net income to net cash provided by operating activities
Depreciation and amortization 1,878,050 3,466,388 Pension and
severance costs, less payments 207,109 248,564 Deferred income
taxes (1,358,568) (3,644,302) (Gain) loss on sales of marketable
securities (370,326) (464,055) Equity in earnings of affiliated
companies (66,551) (49,207) (Gain) loss on sale and disposal of
fixed assets 11,585 3,466 Stock option compensation expense --
4,971,477 Dividends received from affiliated company -- 28,000
Minority interest 338 812 Changes in assets and liabilities:
Increase (decrease) in deferred revenue 6,209,680 12,960,443
(Increase) decrease in accounts receivable, net of allowances
(3,567,924) (84,956) (Increase) decrease in inventories (124,971)
(303,254) Increase (decrease) in notes and accounts payable, trade
(526,321) 587,337 Increase (decrease) in accrued income and other
taxes (1,826,959) 4,644,548 (Increase) decrease in other current
assets (34,426) (667,417) Increase (decrease) in accounts payable,
other 381,414 143,162 Increase (decrease) in other current
liabilities 1,336,703 (61,823) (Increase) decrease in other assets
(207,984) (931,569) Other 34,809 (695,385) Net cash provided by
operating activities 20,645,612 37,388,419 Cash flows from
investing activities: Payments for purchases of property and
(1,153,193) (1,942,091) equipment (1,446,248) (1,456,755) Software
development cost Payments for purchases of other intangibles
(216,107) (1,395,220) Proceeds from sales of marketable securities
22,079,575 20,648,519 (Payment for)/Proceeds from marketable
securities maturing within three months or less (net) (189,708)
1,292,234 Payments for purchases of marketable securities and
security investments (28,043,534) (28,355,269) Payments for
business acquisition (2,716,702) (816,655) (Payments for)/Proceeds
from time deposits (1,052,017) 921,000 Net cash used in investing
activities (12,737,934) (11,104,237) Cash flows from financing
activities: Issuance of common stock pursuant to exercise of stock
purchase warrants and stock acquisition rights 2,111,758 1,984,360
Proceeds from sales of treasury stock 247,805 176,820 Payment for
purchase of treasury stock (142,062) (7,117,842) Tax benefit from
exercise of non-qualified stock warrants 155,322 140,089 Tax
recognition derived from elimination of reversed warrant related
with stock option plan -- (59,091) Capital contribution from
minority interest 4,193 -- Dividends paid (4,782,764) (7,497,089)
Net cash used in financing activities (2,405,748) (12,372,753)
Effect of exchange rate changes on cash and cash equivalents
1,202,290 2,672,948 Net increase (decrease) in cash and cash
equivalents 6,704,220 16,584,377 Cash and cash equivalents at
beginning of period 52,908,357 59,612,577 Cash and cash equivalents
at end of period 59,612,577 76,196,954 Supplementary information of
cash flow: Payment for interest expense 3,709 19,638 Payment for
income taxes 13,109,985 9,516,032 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
Inc. CONTACT: Mahendra Negi of Trend Micro, +81-3-5334-4899, or
fax, +81-3-5334-4874, or
Copyright