O2Micro Reports First Quarter Earnings

Date5-May-2004
SANTA CLARA, Calif. & GEORGE TOWN, Grand Cayman--(BUSINESS WIRE)--May 5, 2004--O2Micro® International Limited (Nasdaq:OIIM - News), a leading supplier of innovative power management and security ICs to manufacturers of products for the computer, consumer, industrial, and communications markets, reported its financial results today for the first quarter ended March 31, 2004.

Net sales for the first quarter were $22.2 million. First quarter revenue of $22.2 million was a decrease of 12% from the preceding quarter, and an increase of 15% over the comparable quarter of the prior year. Earnings per share for the first quarter, fully diluted, were 10 cents per share, compared to 13 cents per share in the preceding quarter and 4 cents per share in the comparable quarter of the prior year.

Net income for the first quarter of $4.2 million was a decrease of 18% from the preceding quarter, and an increase of 149% from the comparable quarter of the prior year. First quarter R&D expenditures were $4.6 million, a decrease of 1% from the preceding quarter, and a decrease of 7% from the comparable quarter of the prior year.

"Despite an unexpectedly difficult quarter in the notebook market, O2Micro was able to achieve significant growth vs. the prior year by successfully expanding our markets and customer base," said Sterling Du, Chairman and CEO of O2Micro.

Conference Call: O2Micro will hold its fourth quarter conference call today at 2:00 p.m. PST, 5:00 p.m. EST. You may participate by dialing 800-915-4836 or 973-317-5319 (for International participants), no passcode required. A replay of the call will be available by phone until May 11th by dialing 800-428-6051 or 973-709-2089 (for International participants), passcode #349247. A live simulcast will also be available on the company website at www.o2micro.com, and an online replay will be available on the site for one week.

About O2Micro

Founded in April 1995, O2Micro designs, develops and markets innovative power management and security components for manufacturers of products for the computer, consumer, industrial, and communications markets. Products include Intelligent Lighting, Battery Charger and Management, DC/DC Converter, SmartCardBus® and 4-in-1 MemoryCardBus(TM) ICs.

O2Micro International maintains an extensive portfolio of intellectual property with 1514 patent claims granted, and over 5000 more pending. The company maintains offices worldwide. Additional company and product information can be found on the company website at www.o2micro.com.

Statements made in this release that are not historical, including statements regarding O2Micro's or management's intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 developments 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.

Note: In "O2Micro," the 2 should read as subscript.

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

                                                  Three Months Ended
                                                       March 31
                                                   2004       2003
                                                 ---------- ----------
NET SALES                                          $22,196    $19,341

COST OF SALES                                        9,400      8,384
                                                 ---------- ----------

GROSS PROFIT                                        12,796     10,957
                                                 ---------- ----------

OPERATING EXPENSES
Research and development                             4,561      4,912
Selling, general and administrative                  4,259      4,319
                                                 ---------- ----------
Total Operating Expenses                             8,820      9,231
                                                 ---------- ----------

INCOME FROM OPERATIONS                               3,976      1,726
                                                 ---------- ----------

NON-OPERATING INCOME (EXPENSES)
Interest income                                        231        279
Impairment loss on long-term investments                 -       ( 11)
Gain on sale of long-term investments                  340          -
Foreign exchange gain - net                            222         46
Other - net                                              3       ( 83)
                                                 ---------- ----------
Total Non-operating Income                             796        231
                                                 ---------- ----------

INCOME BEFORE INCOME TAX                             4,772      1,957

INCOME TAX EXPENSE                                     566        270
                                                 ---------- ----------

NET INCOME                                           4,206      1,687

OTHER COMPREHENSIVE INCOME (LOSS)
Translation adjustments on subsidiaries                170      ( 256)
Unrealized gain (loss) on available-for-sale
 securities                                           ( 86)        84
                                                 ---------- ----------
Total Other Comprehensive income (Loss)                 84      ( 172)
                                                 ---------- ----------

COMPREHENSIVE INCOME                                $4,290     $1,515
                                                 ========== ==========

EARNINGS PER SHARE:
Basic                                                $0.11      $0.04
                                                 ========== ==========
Diluted                                              $0.10      $0.04
                                                 ========== ==========

SHARES USED IN EARNINGS PER SHARE CALCULATION:
Basic (in thousands)                                39,054     38,091
                                                 ========== ==========
Diluted (in thousands)                              40,617     38,828
                                                 ========== ==========


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

                                              March 31,   December 31,
ASSETS                                         2004          2003
------------------------------------------ ------------- -------------
                                            (Unaudited)
CURRENT ASSETS
Cash and cash equivalents                       $59,929       $66,489
Restricted cash                                   1,901         1,892
Short-term investments                           64,158        53,923
Accounts receivable - net                        11,522         9,794
Inventories                                       8,139         9,613
Prepaid expenses and other current assets         3,419         3,365
                                           ------------- -------------
Total Current Assets                            149,068       145,076
                                           ------------- -------------

LONG-TERM INVESTMENTS                             7,505         7,865
                                           ------------- -------------

FIXED ASSETS - NET                                4,841         4,880
                                           ------------- -------------

OTHER ASSETS
Restricted assets - net                          10,528        10,044
                                           ------------- -------------
Other Assets                                      1,380         1,428
                                           ------------- -------------

TOTAL ASSETS                                   $173,322      $169,293
                                           ============= =============

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------------
CURRENT LIABILITIES
Notes and accounts payable                       $5,235        $6,334
Income taxes payable                              3,410         2,852
Accrued expenses and other current
 liabilities                                      4,999         5,380
                                           ------------- -------------
Total Current Liabilities                        13,644        14,566
                                           ------------- -------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Preference shares at $0.001 par value per
 share
   Authorized - 5,000,000 shares                      -             -
Ordinary shares at $0.001 par value per
 share
   Authorized - 95,000,000 shares
   Issued - 39,123,609 and 39,032,616
    shares as of March 31, 2004 and
    December 31, 2003, respectively                  39            39
Additional paid-in capital                      137,874       137,076
Accumulated other comprehensive loss              ( 437)        ( 521)
Retained earnings                                22,202        18,133
                                           ------------- -------------
Total Shareholders' Equity                      159,678       154,727
                                           ------------- -------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY     $173,322      $169,293
                                           ============= =============


Contact:
     O2Micro
     Gil Goodrich, 408-987-5920 ext. 8013
     gil.goodrich@o2micro.com