02MICRO(R) REPORTS FOURTH QUARTER EARNINGS AND RECORD HIGH REVENUE

Date2-Feb-2006
O2Micro(R) Reports Fourth Quarter Earnings and Record High Revenue

Wednesday February 1, 4:00 pm ET

SANTA CLARA, Calif. & GEORGE TOWN, Grand Cayman--(BUSINESS WIRE)--Feb. 1, 2006--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 fourth quarter and the fiscal year ended December 31, 2005.

Net sales for the fourth quarter were $28.6 million. Fourth quarter revenue of $28.6 million was an increase of 2% from the preceding quarter, and a increase of 20% from the comparable quarter of the prior year. Earnings per share for the fourth quarter, fully diluted, were 1 cent per share, compared to 7 cents per share in the preceding quarter and 7 cents per share in the comparable quarter of the prior year.

In December 2005, O2Micro announced that it would postpone the implementation of its offering and listing on the Hong Kong Stock Exchange (HKSE). This postponement resulted in a one-time charge of $2,460,000 incurred in Q4. The earnings per diluted share, excluding this one-time charge, was approximately 7 cents per share for Q4 and 27 cents per share for FY2005, as compared to the reported earnings for Q4 of 1 cent per share and FY2005 of 20 cents per share.

The earnings per share, excluding the one-time charge for expenses relating to the offering and HKSE listing effort, is not in accordance with U.S. generally accepted accounting principles (GAAP). However, the Company believes that this non-GAAP financial measure provides further insight into the results of ongoing operations and enhances the comparability of those results to results in prior periods.

Net income for the fourth quarter of $226,000 was a decrease of 92% from the preceding quarter, and a decrease of 92% from the comparable quarter of the prior year. Fourth quarter R&D expenditures were $7.2 million, an increase of 9% from the preceding quarter, and an increase of 18% from the comparable quarter of the prior year.

For the fiscal year ended December 31, 2005, total revenues were $105.6 million, an increase of 14% from $92.2 million in fiscal year 2004. Earnings per share for the year ended December 31, 2005 were 20 cents fully diluted, compared to 35 cents fully diluted for the previous year. Net income was $8.1 million, compared to $14.1 million for the previous year. R&D expenditures were $25.4 million, compared to $20.3 million for the previous year, an increase of 25%.

"O2Micro grew Q4 revenue 2% from the previous quarter, and fiscal year 2005 revenue 14% from the previous year," commented Sterling Du, Chairman and CEO of O2Micro.

Conference Call: O2Micro will hold its fourth quarter and fiscal year end conference call today at 2:00 p.m. PST, 5:00 p.m. EST. You may participate by dialing (800) 289-0518, or (913) 981-5532 (for International participants), no passcode required. A replay of the call will be available by phone until February 8th by dialing (888) 203-1112, passcode #4875702 or (719) 457-0820 (for International participants), passcode #4875702. 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 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 3,556 patent claims granted, and over 5,000 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.

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, 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

(In Thousand U.S. Dollars, Except Per Share Amounts)

 

Three Months Ended Year Ended

December 31 December 31

------------------- ------------------

2005 2004 2005 2004

--------- --------- --------- --------

Unaudited Unaudited

NET SALES $28,592 $23,842 $105,552 $92,196

 

COST OF SALES 11,482 9,486 40,741 37,403

--------- --------- --------- --------

 

GROSS PROFIT 17,110 14,356 64,811 54,793

--------- --------- --------- --------

 

OPERATING EXPENSES

Research and development 7,214 6,103 25,421 20,260

Selling, general and

administrative 5,456 4,968 20,279 16,348

Patent litigation 2,325 1,788 10,174 5,334

--------- --------- --------- --------

Total Operating Expenses 14,995 12,859 55,874 41,942

--------- --------- --------- --------

 

INCOME FROM OPERATIONS 2,115 1,497 8,937 12,851

--------- --------- --------- --------

 

NON-OPERATING INCOME (EXPENSES)

Interest income 882 522 2,824 1,455

Hong Kong Stock Exchange

listing expenses ( 2,460) - ( 2,460) -

Gain on sale of long-term

investments - - - 340

Foreign exchange gain (loss) 66 759 ( 443) 648

Other - net 163 240 323 262

--------- --------- --------- --------

Total Non-operating Income ( 1,349) 1,521 244 2,705

--------- --------- --------- --------

 

INCOME BEFORE INCOME TAX 766 3,018 9,181 15,556

 

INCOME TAX EXPENSE 540 357 1,034 1,472

--------- --------- --------- --------

 

NET INCOME 226 2,661 8,147 14,084

 

OTHER COMPREHENSIVE INCOME

(LOSS)

Translation adjustments on

subsidiaries ( 406) 728 ( 238) 714

Unrealized gain (loss) on

available-for-sale securities ( 470) ( 478) ( 770) ( 303)

--------- --------- --------- --------

Total Other Comprehensive

Income (Loss) ( 876) 250 ( 1,008) 411

--------- --------- --------- --------

 

COMPREHENSIVE INCOME (LOSS) ( $650) $2,911 $7,139 $14,495

========= ========= ========= ========

 

EARNINGS PER SHARE:

 

Basic $0.01 $0.07 $0.21 $0.36

========= ========= ========= ========

Diluted $0.01 $0.07 $0.20 $0.35

========= ========= ========= ========

 

SHARES USED IN EARNINGS PER

SHARE CALCULATION:

Basic (in thousands) 39,037 39,186 39,223 39,156

========= ========= ========= ========

Diluted (in thousands) 39,688 39,808 39,893 40,102

========= ========= ========= ========

 

O2Micro International Limited and Subsidiaries

Consolidated Balance Sheets

(In Thousand U.S. Dollars, Except Share Amounts)

 

December 31 December 31

2005 2004

------------ ------------

ASSETS

------

 

CURRENT ASSETS

Cash and cash equivalents $46,375 $56,320

Restricted cash 5,605 1,887

Short-term investments 55,653 63,768

Accounts receivable - net 11,460 9,431

Inventories 15,943 11,231

Prepaid expenses and other current assets 6,665 4,491

------------ ------------

Total Current Assets 141,701 147,128

------------ ------------

 

LONG-TERM INVESTMENTS 16,898 11,781

------------ ------------

 

LAND, PROPERTY AND EQUIPMENT - NET 23,319 10,758

------------ ------------

 

OTHER ASSETS

Restricted assets - net 14,492 13,873

------------ ------------

Other Assets 3,245 1,656

------------ ------------

 

TOTAL ASSETS $199,655 $185,196

============ ============

 

LIABILITIES AND SHAREHOLDERS' EQUITY

------------------------------------

 

CURRENT LIABILITIES

Notes and accounts payable $5,760 $3,635

Income taxes payable 3,907 3,751

Accrued expenses and other current

liabilities 14,092 7,029

------------ ------------

Total Current Liabilities 23,759 14,415

------------ ------------

 

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 - 39,055,887 and 39,188,062 shares

as of December 31, 2005 and 2004,

respectively 39 39

Additional paid-in capital 141,531 139,581

Treasury stock ( 3,296) -

Accumulated other comprehensive loss ( 1,117) ( 110)

Retained earnings 38,739 31,271

------------ ------------

Total Shareholders' Equity 175,896 170,781

------------ ------------

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $199,655 $185,196

============ ============

 

Contact:

O2Micro

Gil Goodrich, 408-987-5920, Ext. 8013

gil.goodrich@o2micro.com

Source: O2Micro International Limited