O2Micro Reports First Quarter Financial Results

Apr 30, 2008
O2Micro Reports First Quarter Financial Results

O2Micro Reports First Quarter Financial Results

GEORGE TOWN, Grand Cayman, Apr 30, 2008 (BUSINESS WIRE) -- O2Micro® International Limited (NASDAQ: OIIM) (SEHK: 0457), a leading supplier of innovative power management, and security components and systems for the Computer, Consumer, Industrial, and Communications markets, reported its financial results today for the first quarter ended March 31, 2008.

Financial results for the first quarter ending 3/31/2008:

Net sales for the first quarter of fiscal 2008 were $37.6 million. Q1 sales were up 7% from the first quarter of fiscal 2007. The increase in net sales reflects higher unit volumes and growth in underlying markets.

O2Micro recorded a gross margin of 58.5% in the first quarter of 2008. The gross margin compares favorably to the year-ago quarter when the company achieved a gross margin of 54.6%. The increase in gross margin compared to the year-ago period is due to product mix and the company's ongoing effort to drive cost reductions. In particular, the company's "Ocean One" initiative has seen good success and this has translated directly into recent gross margin increases.

Operating expenses were within expected target ranges for the first quarter. R&D expense was $9.8 million, or 26% of net revenue, while SG&A expense was $8.8 million, or 24% of net revenue. These dollar amounts include $258,000 and $415,000 of stock-based compensation, respectively. After tallying all of the net expenses, we delivered GAAP operating income of $2.2 million. The GAAP operating margin was 5.8% in the first quarter of 2008, which compares favorably to a 1% operating loss in Q1 2007.

GAAP net income was $2.3 million in Q1 2008. Net income per fully diluted ADS was $0.06. Both of these compare favorably with Q1 2007 when the company reported GAAP net income of $99,000 and break-even net income per ADS.

Supplementary data:

During the first quarter, the company spent $4.5 million to repurchase 531,751 ADS units. This brought the balance of unrestricted cash and short-term investments to $84.5 million, or $2.21 per fully diluted ADS as of March 31, 2008. Net accounts receivable was $24.9 million, and there were 59 days sales outstanding in accounts receivable at the end of Q1. At the same time, inventory was $22.2 million and turned over 2.8 times in the quarter.

Sterling Du, Chairman and CEO, commented, "O2Micro is off to a good start in 2008. We are driving toward another year of record revenue in spite of the economic headwinds that have developed." Mr. Du continued, "O2Micro is a company that is built for the future. We are fortifying on our leading position in our core consumer and computer markets, while new growth areas, including DC/DC and battery management, are continuing to expand."

Conference Call: O2Micro will hold its first quarter conference call today at 2:00 p.m. PDT, 5:00 p.m. EDT, and 5:00 a.m. (May 1, 2008) Hong Kong time. You may participate using the following dial-in information.

In the US and CANADA: 888-417-8526, pass code #8341358

In HONG KONG: 800-968-103, pass code #8341358

Other INTERNATIONAL participants: 719-325-2485, pass code #8341358

A replay of the call will be available by phone until May 7th using the following dial-in information.

In the US and CANADA: 888-203-1112, pass code #8341358

In HONG KONG: 800-901-108, pass code #8341358



Other INTERNATIONAL participants: 719-457-0820, pass code #8341358

A live simulcast will also be available on the company website at www.o2micro.com, and an online replay will be available on the website for one week.

About O2Micro

Founded in April 1995, O2Micro develops and markets innovative power management, and security components and systems for the Computer, Consumer, Industrial, and Communications markets. Products include Intelligent Lighting, Battery Management, Power Management, SmartCardBus® and Security products, such as VPN/Firewall system solutions.

O2Micro International maintains an extensive portfolio of intellectual property with 9,604 patent claims granted, and over 10,000 more pending. The company maintains offices worldwide. Additional company and product information can be found on the company website at www.o2micro.com.

O2Micro, the O2Micro logo, SmartCardBus and combinations thereof are registered trademarks of O2Micro. All other trademarks are the property of their respective owners.

Certain statements in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. They include statements regarding O2Micro's future growth, long term profitability, increases in shareholder value, introduction of innovative technologies, expansion of O2Micro's product and patent portfolios, legal expenditures, litigation activity and other statements regarding O2Micro's or management's intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future. Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. Factors that could cause actual results to differ materially include risks and uncertainties such as reduced demand for products of electronic equipment manufacturers which include O2Micro's products due to adverse economic conditions in general or specifically affecting O2Micro's markets, technical difficulties and delays in the development process, and errors in the products. You are also referred to the Form F-1 in connection with the company's initial public offering in August 2000, Form F-3 in connection with the company's public offering in November 2001, and the annual reports on Form 20-F, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements. The company assumes no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

            O2Micro International Limited and Subsidiaries
   Consolidated Statements of Operations and Comprehensive Income
                              (Unaudited)
         (In Thousand U.S. Dollars, Except Per Share Amounts)

                                                 Three Months Ended
                                                      March 31,
                                               -----------------------
                                                  2008        2007
                                               ----------- -----------

NET SALES                                      $   37,556  $   35,037

COST OF SALES                                      15,596      15,922
                                               ----------- -----------

GROSS PROFIT                                       21,960      19,115
                                               ----------- -----------

OPERATING EXPENSES (INCOME)
Research and development (1)                        9,756       7,954
Selling, general and administrative (1)             8,847       8,128
Patent related litigation                           3,174       3,255
Litigation income                                  (2,000)          -
                                               ----------- -----------
Total Operating Expenses                           19,777      19,337
                                               ----------- -----------

INCOME (LOSS) FROM OPERATIONS                       2,183        (222)
                                               ----------- -----------

NON-OPERATING INCOME
Interest income                                       670         814
Foreign exchange loss                                (114)       (256)
Other - net                                            13           2
                                               ----------- -----------
Total Non-operating Income                            569         560
                                               ----------- -----------

INCOME BEFORE INCOME TAX                            2,752         338

INCOME TAX EXPENSE                                    492         239
                                               ----------- -----------

NET INCOME                                          2,260          99

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments            2,010         (11)
Unrealized gain (loss) on available-for-sale
 securities                                        (2,864)        707
                                               ----------- -----------
Total Other Comprehensive Income (Loss)              (854)        696
                                               ----------- -----------

COMPREHENSIVE INCOME                           $    1,406  $      795
                                               =========== ===========

EARNINGS PER SHARE:
Basic                                          $   0.0012  $   0.0001
                                               =========== ===========
Diluted                                        $   0.0012  $   0.0001
                                               =========== ===========

EARNINGS PER ADS
Basic                                          $     0.06  $        -
                                               =========== ===========
Diluted                                        $     0.06  $        -
                                               =========== ===========

SHARES USED IN EARNINGS PER SHARE
 CALCULATION:
Basic (in thousands)                            1,894,334   1,907,216
                                               =========== ===========
Diluted (in thousands)                          1,903,655   1,914,363
                                               =========== ===========

ADS UNITS USED IN EARNINGS PER ADS
 CALCULATION:
Basic (in thousands)                               37,887      38,144
                                               =========== ===========
Diluted (in thousands)                             38,073      38,287
                                               =========== ===========

(1) INCLUDES STOCK-BASED COMPENSATION CHARGE
 AS FOLLOWS:
Research and development                       $      258  $      252
Selling, general and administrative                   415         350
                                               ----------- -----------
                                               $      673  $      602
                                               =========== ===========


            O2Micro International Limited and Subsidiaries
                     Consolidated Balance Sheets
           (In Thousand U.S. Dollars, Except Share Amounts)

                                              March 31,   December 31,
                                                2008          2007
                                            ------------- ------------
ASSETS                                       (Unaudited)
--------------------------------------------

CURRENT ASSETS
Cash and cash equivalents                   $     41,050  $    52,597
Restricted cash                                    1,165        6,830
Short-term investments                            43,407       28,650
Accounts receivable - net                         24,855       24,600
Inventories                                       22,187       22,127
Prepaid expenses and other current assets          8,799        7,476
                                            ------------- ------------
Total Current Assets                             141,463      142,280
                                            ------------- ------------

LONG-TERM INVESTMENTS                             23,961       26,715
                                            ------------- ------------

PROPERTY AND EQUIPMENT - NET                      42,552       43,148
                                            ------------- ------------

OTHER ASSETS
Restricted assets - net                           10,837       12,393
                                            ------------- ------------
Other Assets                                       4,257        3,876
                                            ------------- ------------

TOTAL ASSETS                                $    223,070  $   228,412
                                            ============= ============

LIABILITIES AND SHAREHOLDERS' EQUITY
--------------------------------------------

CURRENT LIABILITIES
Notes and accounts payable                  $      7,579  $    10,841
Income tax payable                                 1,262        1,065
Accrued expenses and other current
 liabilities                                      11,409       11,597
                                            ------------- ------------
Total Current Liabilities                         20,250       23,503
                                            ------------- ------------

OTHER LONG-TERM LIABILITIES
Accrued pension liabilities                          552          520
                                            ------------- ------------
FIN 48 tax liabilities                               210          210
                                            ------------- ------------

Total Liabilities                                 21,012       24,233
                                            ------------- ------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Preference shares at $0.00002 par value per
 share
  Authorized - 250,000,000 shares                      -            -
Ordinary shares at $0.00002 par value per
 share
  Authorized - 4,750,000,000 shares
  Issued -1,914,266,850 and 1,911,868,150
   shares as of March 31, 2008 and December
   31, 2007, respectively                             38           38
Additional paid-in capital                       145,882      144,944
Retained earnings                                 59,107       56,847
Accumulated other comprehensive income             2,792        3,646
Treasury stock - 31,587,550 shares and
 5,000,000 as of March 31, 2008 and December
 31, 2007, respectively                           (5,761)      (1,296)
                                            ------------- ------------
Total Shareholders' Equity                       202,058      204,179
                                            ------------- ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $    223,070  $   228,412
                                            ============= ============

SOURCE: O2Micro International Limited

O2Micro
Gary E. Abbott, Director of Investor Relations
408-987-5920 ext. 8888
gary.abbott@o2micro.com