O2Micro Reports Second Quarter Financial Results

Jul 30, 2008
O2Micro Reports Second Quarter Financial Results

O2Micro Reports Second Quarter Financial Results

GEORGE TOWN, Grand Cayman--(BUSINESS WIRE)--July 30, 2008--O2Micro® International Limited (NASDAQ:OIIM) (SEHK:0457), a leading supplier of innovative power management, and security components and systems, reported its financial results today for the second quarter of fiscal 2008 and six months ending June 30, 2008.

Financial results for the second quarter ending 6/30/2008:

Net sales for the second quarter of 2008 were $40.8 million, an increase of 8.6% from the preceding quarter, and up 6.8% from the second quarter of the prior year. The GAAP gross margin on net sales was 58.2% in the second quarter, which was similar to 58.5% in the preceding quarter, and up from 56.7% from the second quarter of the prior year.

The Company recorded a GAAP operating margin of 11.1% in the second quarter. Research and Development (R&D) expenditures were $9.5 million, or 23.2% of net sales including $288,000 of stock-based compensation. SG&A expenses were $9.7 million, or 23.9% of net sales, including $433,000 of stock-based compensation.

GAAP Net Income for the second quarter of 2008 was $4.4 million or 12 cents per American Depositary Share (ADS).

Financial results for the six months ending 6/30/2008:

Net sales for the six months ending June 30, 2008 were $78.3 million, an increase of 7.0% from the prior year. The GAAP gross margin on net sales was 58.3% in the first half of fiscal 2008, up from 55.7% in the first half of fiscal 2007.

The Company recorded a GAAP operating margin of 8.6% for the first half of fiscal 2008. This compares with a GAAP operating margin of 7.1% in the first six months of fiscal 2007. For the first six months of fiscal 2008, R&D expenditures were $19.2 million, or 24.5% of net sales, including $546,000 of stock-based compensation; SG&A expenses were $21.8 million for the same period, or 27.8% of net sales, including $848,000 of stock-based compensation.

GAAP Net Income for the first half of fiscals 2007 and 2008 was $5.8 million and $6.6 million, respectively. GAAP Net Income per fully diluted ADS rose from 15 cents in the first six months of fiscal 2007 to 17 cents in the comparable period of fiscal 2008. GAAP Net Income increased by 13% during the first half of fiscal 2008 when compared with the first half of 2007 and GAAP Net Income per fully diluted ADS increased by 15% for the same periodic comparison.

Supplementary data:

As of June 30, 2008, O2Micro had unrestricted cash and short-term investments of $82.6 million, or $2.19 per ADS. Net accounts receivable was $26.8 million, and there were 57 days sales outstanding in accounts receivable at the end of the second quarter of 2008. Inventory was $20.7 million and turned over 3.2 times in the same quarterly period.

As of June 30, 2008, O2Micro's headcount consisted of 1,063 employees, including 608 people working in R&D. This headcount was approximately flat with 1,075 employees at the end of the first quarter of 2008.

Management Commentary:

Sterling Du, Chairman and CEO, commented, "During these challenging economic times, we are continuing to grow because O2Micro is bringing great new products to the market." Mr. Du continued, "Our newest products are building momentum and we look forward to increasing contributions from our Security, DC/DC, and battery lines in the coming quarters."

Conference Call: O2Micro will hold its second quarter conference call today at 2:00 p.m. PDT, 5:00 p.m. EDT, and 5:00 a.m. (July 31, 2008) Hong Kong time. You may participate using the following dial-in information.

In the US and CANADA: 866-316-1372, pass code #9146108
In HONG KONG: 800-965-503, pass code #9146108
Other INTERNATIONAL participants: 913-312-1272, pass code #9146108

A replay of the call will be available by phone until August 6th using the following dial-in information.

In the US and CANADA: 888-203-1112, pass code #9146108
In HONG KONG: 800-901-108, pass code #9146108
Other INTERNATIONAL participants: 719-457-0820, pass code #9146108

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 10,001 patent claims granted, and over 12,000 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       Six Months Ended
                              June 30,                June 30,
                       ----------------------- -----------------------
                          2008        2007        2008        2007
                        ---------   ---------   ---------   ---------

NET SALES              $   40,790  $   38,191  $   78,346  $   73,228

COST OF SALES              17,061      16,518      32,657      32,440
                       ----------- ----------- ----------- -----------

GROSS PROFIT               23,729      21,673      45,689      40,788
                       ----------- ----------- ----------- -----------

OPERATING EXPENSES
 (INCOME)
Research and
 development (1)            9,457       8,219      19,213      16,173
Selling, general and
 administrative (1)         9,740      11,425      21,761      22,808
Litigation income               -      (3,364)     (2,000)     (3,364)
                       ----------- ----------- ----------- -----------
Total Operating
 Expenses                  19,197      16,280      38,974      35,617
                       ----------- ----------- ----------- -----------

INCOME FROM OPERATIONS      4,532       5,393       6,715       5,171
                       ----------- ----------- ----------- -----------

NON-OPERATING INCOME
Interest income               493         814       1,163       1,628
Foreign exchange
 income (loss)               (315)        108        (429)       (148)
Other - net                    (4)          5           9           7
                       ----------- ----------- ----------- -----------
Total Non-operating
 Income                       174         927         743       1,487
                       ----------- ----------- ----------- -----------

INCOME BEFORE INCOME
 TAX                        4,706       6,320       7,458       6,658

INCOME TAX EXPENSE            344         578         836         817
                       ----------- ----------- ----------- -----------

NET INCOME                  4,362       5,742       6,622       5,841

OTHER COMPREHENSIVE
 INCOME (LOSS)
Foreign currency
 translation
 adjustments                  607         335       2,617         324
Unrealized gain (loss)
 on available-for-sale
 securities                  (228)      3,090      (3,092)      3,797
                       ----------- ----------- ----------- -----------
Total Other
 Comprehensive Income
 (Loss)                       379       3,425        (475)      4,121
                       ----------- ----------- ----------- -----------

COMPREHENSIVE INCOME   $    4,741  $    9,167  $    6,147  $    9,962
                       =========== =========== =========== ===========

EARNINGS PER SHARE:
Basic                  $   0.0023  $   0.0030  $   0.0035  $   0.0031
                       =========== =========== =========== ===========
Diluted                $   0.0023  $   0.0030  $   0.0035  $   0.0030
                       =========== =========== =========== ===========

EARNINGS PER ADS
Basic                  $     0.12  $     0.15  $     0.18  $     0.15
                       =========== =========== =========== ===========
Diluted                $     0.12  $     0.15  $     0.17  $     0.15
                       =========== =========== =========== ===========

SHARES USED IN
 EARNINGS PER SHARE
 CALCULATION:
Basic (in thousands)    1,879,216   1,904,024   1,886.775   1,905,620
                       =========== =========== =========== ===========
Diluted (in thousands)  1,889,751   1,920,974   1,896,828   1,917,668
                       =========== =========== =========== ===========

ADS UNITS USED IN
 EARNINGS PER ADS
 CALCULATION:
Basic (in thousands)       37,584      38,080      37,735      38,112
                       =========== =========== =========== ===========
Diluted (in thousands)     37,795      38,419      37,937      38,353
                       =========== =========== =========== ===========

(1) INCLUDES STOCK-
 BASED COMPENSATION
 CHARGE AS FOLLOWS:
Research and
 development           $      288  $      278  $      546  $      530
Selling, general and
 administrative               433         354         848         704
                       ----------- ----------- ----------- -----------
                       $      721  $      632  $    1,394  $    1,234
                       =========== =========== =========== ===========

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

                                               June 30,   December 31,
                                                 2008         2007
                                              ----------- ------------
ASSETS                                        (Unaudited)
---------------------------------------------

CURRENT ASSETS
Cash and cash equivalents                     $   34,859  $    52,597
Restricted cash                                    1,165        6,830
Short-term investments                            47,744       28,650
Accounts receivable - net                         26,821       24,600
Inventories                                       20,670       22,127
Prepaid expenses and other current assets          8,104        7,476
Assets held for sale                               7,439            -
                                              ----------- ------------
Total Current Assets                             146,802      142,280
                                              ----------- ------------

LONG-TERM INVESTMENTS                             22,317       26,715
                                              ----------- ------------

PROPERTY AND EQUIPMENT - NET                      35,743       43,148
                                              ----------- ------------

OTHER ASSETS
Restricted assets - net                           10,853       12,393
                                              ----------- ------------
Other Assets                                      12,301        3,876
                                              ----------- ------------

TOTAL ASSETS                                  $  228,016  $   228,412
                                              =========== ============

LIABILITIES AND SHAREHOLDERS' EQUITY
---------------------------------------------
CURRENT LIABILITIES
Notes and accounts payable                    $    8,511  $    10,841
Income tax payable                                   958        1,065
Accrued expenses and other current
 liabilities                                      11,763       11,597
Liabilities associated with assets held for
 sale                                                729            -
                                              ----------- ------------
Total Current Liabilities                         21,961       23,503
                                              ----------- ------------

OTHER LONG-TERM LIABILITIES
Accrued pension liabilities                          559          520
FIN 48 tax liabilities                               225          210
Other liabilities                                     24            -
                                              ----------- ------------
Total Long-Term Liabilities                          808          730
                                              ----------- ------------

Total Liabilities                                 22,769       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 - 1,887,935,450 and 1,911,868,150
   shares as of June 30, 2008 and December
   31, 2007, respectively                             38           38
Additional paid-in capital                       144,533      144,944
Retained earnings                                 60,011       56,847
Accumulated other comprehensive income             3,171        3,646
Treasury stock - 14,607,650 shares and
 5,000,000 as of June 30, 2008 and December
 31, 2007, respectively                           (2,506)      (1,296)
                                              ----------- ------------
Total Shareholders' Equity                       205,247      204,179
                                              ----------- ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY    $  228,016  $   228,412
                                              =========== ============

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

SOURCE: O2Micro International Limited