02MICRO INTERNATIONAL LIMITED ANNOUNCES THIRD QUARTER FINANCIAL RESULTS

Date30-Oct-2008
O2Micro(R) Reports Third Quarter Financial Results

Wednesday October 29, 7:00 am ET

 

GEORGE TOWN, Grand Cayman--(BUSINESS WIRE)--O2Micro® International Limited (NASDAQ :OIIM) (SEHK:0457 - News), a leading supplier of innovative power management and security components, will announce its financial results today for the third quarter of fiscal 2008 and for nine months ended September 30, 2008.

Financial results for the third quarter ending 9/30/2008:

 

Net sales for the third quarter of 2008 were $37.8 million, a decrease of 7.4% from the preceding quarter, and a decrease of 16.3% from the third quarter of the prior year. The GAAP gross margin on net sales was 59.3% in the third quarter, up from 58.2% in the preceding quarter, and 57.5% from the third quarter of the prior year.

 

The Company recorded a GAAP operating margin of 1.9% in the third quarter, after including the one-time write-off of $2.9 million in prepayments to foundry services. R&D expenditures were $9.8 million, or 26.0% of net sales, including $284,000 of stock-based compensation. SG&A expenses were $8.9 million, or 23.6% of net sales, including $429,000 of stock-based compensation.

 

During the third quarter, the company also wrote down investment assets related to the bankruptcy of SinoMos. This resulted in a one-time impairment loss on long-term investments of $13.1 million. It is reflected in the Non-operating Loss that was reported in the quarter.

 

GAAP Net Loss for the third quarter of 2008 was $12.6 million or $0.34 per American Depositary Share (ADS). This loss includes the one-time write-off of $2.9 million in prepayments to foundry services and the impairment loss on long-term investments of $13.1 million.

 

Financial results for the nine months ending 9/30/2008:

 

Net sales for the nine months ended September 30, 2008 were $116.1 million, a decrease of 1.9% from the prior year. The GAAP gross margin on net sales was 58.6% in the first nine months of fiscal 2008, up from 56.4% in the first nine months of fiscal 2007.

 

The Company recorded a GAAP operating margin of 6.4% for the first nine months of fiscal 2008. This compares with a GAAP operating margin of 13.7% in same timeframe of fiscal 2007. The major differences in the year-to-year comparison of operating margin include the one-time $2.9 million charge for the write-off of prepaid foundry services discussed above, as well as lower litigation income during 2008.

 

For the first nine months of fiscal 2008, R&D expenditures were $29.0 million, or 25.0% of net sales, including $830,000 of stock-based compensation; SG&A expenses were $30.7 million for the same period, or 26.4% of net sales, including $1.3 million of stock-based compensation.

 

GAAP Net Loss for the first nine months of fiscal 2008 was $5.9 million. GAAP Net Income for the first nine months of fiscal 2007 was $17.3 million. GAAP Earnings per fully diluted ADS declined from $0.45 in the first nine months of fiscal 2007 to GAAP Loss per ADS of $0.16 in the comparable period of fiscal 2008. These year-to-year declines were exacerbated by the write-off and impairment charges in the third quarter of fiscal 2008 that were discussed above, as well as by the higher non-recurring legal income that was recognized in fiscal 2007.

 

Supplementary data:

 

As of September 30, 2008, O2Micro had unrestricted cash and short-term investments of $97.1 million, or $2.59 per ADS. Net accounts receivable was $21.3 million, and there were 57 days sales outstanding in accounts receivable at the end of the third quarter of 2008. Inventory was $18.3 million and turned 3.2 times in the same quarterly period.

 

As of September 30, 2008, O2Micro’s headcount consisted of 943 employees, including 628 people working in R&D. This headcount was down 120 employees from the end of last quarter due primarily to the planned divestiture of the OceanOne group.

 

Management Commentary:

 

Sterling Du, Chairman and CEO, commented, “O2Micro is facing the same challenges as every other company and we will rely on our commitment to R&D and new product development to see us through this difficult period.” Mr. Du continued, “Although some of our customers are retrenching, we continue to be an important partner and expect to fully participate whenever a recovery comes about.”

 

Conference Call: O2Micro will hold its third quarter conference call at 5:00 a.m. PDT, 8:00 a.m. EDT, and 8:00 p.m. Hong Kong time. You may participate using the following dial-in information.

 

In the US and CANADA: 866-409-1555, pass code #7041539

In HONG KONG: 800-965-503, pass code #7041539

Other INTERNATIONAL participants: 913-312-1444, pass code #7041539

 

A replay of the call will be available by phone until November 5th using the following dial-in information.

 

In the US and CANADA: 888-203-1112, pass code #7041539

In HONG KONG: 800-901-108, pass code #7041539

Other INTERNATIONAL participants: 719-457-0820, pass code #7041539

 

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 for the Computer, Consumer, Industrial, and Communications markets. Products include Intelligent Lighting, Battery Management, Power Management, and SmartCardBus® products.

 

O2Micro International maintains an extensive portfolio of intellectual property with 10,532 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 Nine Months Ended

September 30, September 30,

2008 2007 2008 2007

NET SALES $ 37,787 $ 45,139 $ 116,133 $ 118,367

COST OF SALES 15,383 19,200 48,040 51,640

GROSS PROFIT 22,404 25,939 68,093 66,727

OPERATING EXPENSES (INCOME)

Research and development (1) 9,813 8,683 29,026 24,856

Selling, general and administrative (1) 8,930 11,765 30,691 34,573

Write-off of prepayments to foundry services 2,942 - 2,942 -

Litigation income - (5,500 ) (2,000 ) (8,864 )

Total Operating Expenses 21,685 14,948 60,659 50,565

INCOME FROM OPERATIONS 719 10,991 7,434 16,162

NON-OPERATING INCOME

Interest income 547 830 1,710 2,458

Foreign exchange loss (93 ) (65 ) (522 ) (213 )

Impairment loss on long-term investments (13,073 ) - (13,073 ) -

Other – net 20 105 29 112

Total Non-operating Income (Loss) (12,599 ) 870 (11,856 ) 2,357

INCOME (LOSS) BEFORE INCOME TAX (11,880 ) 11,861 (4,422 ) 18,519

INCOME TAX EXPENSE 689 448 1,525 1,265

NET INCOME (LOSS) (12,569 ) 11,413 (5,947 ) 17,254

OTHER COMPREHENSIVE INCOME (LOSS)

Foreign currency translation adjustments (820 ) 511 1,797 835

Unrealized gain (loss) on available-for-sale securities (1,623 ) (1,318 ) (4,715 ) 2,479

Total Other Comprehensive Income (Loss) (2,443 ) (807 ) (2,918 ) 3,314

COMPREHENSIVE INCOME (LOSS) $ (15,012 ) $ 10,606 $ (8,865 ) $ 20,568

EARNINGS (LOSS) PER SHARE:

Basic $ (0.0068 ) $ 0.0060 $ (0.0032 ) $ 0.0091

Diluted NA $ 0.0058 NA $ 0.0089

EARNINGS (LOSS) PER ADS

Basic $ (0.34 ) $ 0.30 $ (0.16 ) $ 0.45

Diluted NA $ 0.29 NA $ 0.45

SHARES USED IN EARNINGS PER SHARE CALCULATION:

Basic (in thousands) 1,845,031 1,902,278 1,872,860 1,904,506

Diluted (in thousands) 1,848,713 1,960,613 1,880,790 1,931,983

ADS UNITS USED IN EARNINGS PER ADS CALCULATION:

Basic (in thousands) 36,901 38,046 37,457 38,090

Diluted (in thousands) 36,974 39,212 37,616 38,640

(1) INCLUDES STOCK-BASED COMPENSATION CHARGE AS FOLLOWS:

Research and development $ 284 $ 273 $ 830 $ 803

Selling, general and administrative $ 429 $ 362 $ 1,277 $ 1,066

O2Micro International Limited and Subsidiaries

 

Consolidated Balance Sheets

 

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

September 30, December 31,

2008

2007

ASSETS

(Unaudited)

CURRENT ASSETS

Cash and cash equivalents $ 38,538 $ 52,597

Restricted cash 1,156 6,830

Short-term investments 58,594 28,650

Accounts receivable – net 21,297 24,600

Inventories 18,319 22,127

Prepaid expenses and other current assets 2,747 7,476

Total Current Assets 140,651 142,280

LONG-TERM INVESTMENTS 13,320 26,715

PROPERTY AND EQUIPMENT – NET 35,410 43,148

OTHER ASSETS

Restricted assets – net 2,251 12,393

Other Assets 13,701 3,876

TOTAL ASSETS $ 205,333 $ 228,412

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES

Notes and accounts payable $ 5,923 $ 10,841

Income tax payable 977 1,065

Accrued expenses and other current liabilities 11,365 11,597

Total Current Liabilities 18,265 23,503

OTHER LONG-TERM LIABILITIES

Accrued pension liabilities 457 520

FIN 48 tax liabilities 225 210

Other liabilities 24 -

Total Long-Term Liabilities 706 730

Total Liabilities 18,971 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 – 1,875,740,250 and 1,911,868,150 shares as of September 30, 2008 and December 31, 2007, respectively

37 38

Additional paid-in capital 144,403 144,944

Retained earnings 46,003 56,847

Accumulated other comprehensive income 728 3,646

Treasury stock – 46,813,450 shares and 5,000,000 as of September 30, 2008 and December 31, 2007, respectively (4,809 ) (1,296 )

Total Shareholders’ Equity 186,362 204,179

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 205,333 $ 228,412

 

Contact:

O2Micro

Gary E. Abbott, 408-987-5920 ext. 8888

Director of Investor Relations

gary.abbott@o2micro.com

 

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Source: O2Micro International Limited