OIIM O2 Micro International Ltd

O2Micro(R) International Limited (Nasdaq:OIIM), 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 third quarter ended September 30, 2005. Net sales for the third quarter were $28.0 million. Third quarter record high revenue of $28.0 million was an increase of 9% from the preceding quarter, and an increase of 27% from the comparable quarter of the prior year. Earnings per share for the third quarter, fully diluted, were 7 cents per share, compared to 7 cents per share in the preceding quarter and 8 cents per share in the comparable quarter of the prior year. Net income for the third quarter of $2.9 million was a decrease of 4% from the preceding quarter, and a decrease of 7% from the comparable quarter of the prior year. Third quarter R&D expenditures were $6.6 million, an increase of 6% from the preceding quarter, and an increase of 35% from the comparable quarter of the prior year. "O2Micro was again profitable in Q3. The company continues to build its base for future growth with additions to key engineering resources, and product and patent portfolios. During Q3, O2Micro received 13 patent issues with 465 claims. As of September 30th, O2Micro has 116 issued patents with 3,055 issued claims," commented Sterling Du, Chairman and CEO of O2Micro. Conference Call: O2Micro will hold its third quarter conference call today at 2:00 p.m. PST, 5:00 p.m. EST. You may participate by dialing (800) 289-0730, or (913) 981-5509 (for International participants), no pass code required. A replay of the call will be available by phone until November 9th by dialing (888) 203-1112, pass code #8426898 or (719) 457-0820 (for International participants), pass code #8426898. 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(R) and Security products, such as VPN/Firewall system solutions. O2Micro International maintains an extensive portfolio of intellectual property with 3,076 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 our future growth, expansion of our 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. -0- *T O2Micro International Limited and Subsidiaries Consolidated Statements of Operations and Comprehensive Income (In Thousand U.S. Dollars, Except Per Share Amounts) Three Months Nine Months Ended Ended September 30, September 30, ------------- --------------- 2005 2004 2005 2004 ----- ---- ---- ---- Unaudited Unaudited NET SALES $28,047 $22,093 $76,960 $68,354 COST OF SALES 10,738 8,793 29,259 27,917 ------- ------- ------- ------- GROSS PROFIT 17,309 13,300 47,701 40,437 ------- ------- ------- ------- OPERATING EXPENSES Research and development 6,617 4,915 18,207 14,157 Selling, general and administrative 5,064 3,866 14,824 11,380 Patent litigation 2,716 1,818 7,849 3,546 ------- ------- ------- ------- Total Operating Expenses 14,397 10,599 40,880 29,083 ------- ------- ------- ------- INCOME FROM OPERATIONS 2,912 2,701 6,821 11,354 ------- ------- ------- ------- NON-OPERATING INCOME (EXPENSES) Interest income 651 448 1,943 933 Impairment loss on long-term investments - - - - Gain on sale of long-term investments - - - 340 Foreign exchange gain (loss) ( 371) ( 80) ( 509) ( 111) Other - net 92 12 160 22 ------- ------- ------- ------- Total Non-operating Income 372 380 1,594 1,184 ------- ------- ------- ------- INCOME BEFORE INCOME TAX 3,284 3,081 8,415 12,538 INCOME TAX EXPENSE 432 12 494 1,115 ------- ------- ------- ------- NET INCOME 2,852 3,069 7,921 11,423 OTHER COMPREHENSIVE INCOME (LOSS) Translation adjustments on subsidiaries ( 492) ( 75) ( 324) ( 14) Unrealized gain (loss) on available-for-sale securities ( 313) 242 ( 613) 175 ------- ------- ------- ------- Total Other Comprehensive Income (Loss) ( 805) 167 ( 937) 161 ------- ------- ------- ------- COMPREHENSIVE INCOME $ 2,047 $ 3,236 $ 6,984 $11,584 ======= ======= ======= ======= EARNINGS PER SHARE: Basic $ 0.07 $ 0.08 $ 0.20 $ 0.29 ======= ======= ======= ======= Diluted $ 0.07 $ 0.08 $ 0.20 $ 0.28 ======= ======= ======= ======= SHARES USED IN EARNINGS PER SHARE CALCULATION: Basic (in thousands) 39,159 39,117 39,214 39,146 ======= ======= ======= ======= Diluted (in thousands) 40,389 39,722 39,931 40,220 ======= ======= ======= ======= O2Micro International Limited and Subsidiaries Consolidated Balance Sheets (In Thousand U.S. Dollars, Except Share Amounts) Sept. 30, Dec. 31, 2005 2004 --------- ---------- ASSETS ------ CURRENT ASSETS Cash and cash equivalents $ 40,662 $ 56,320 Restricted cash 4,097 1,887 Short-term investments 70,468 63,768 Accounts receivable - net 13,352 9,431 Inventories 13,479 11,231 Prepaid expenses and other current assets 8,197 4,491 -------- -------- Total Current Assets 150,255 147,128 -------- -------- LONG-TERM INVESTMENTS 16,384 11,781 -------- -------- LAND, PROPERTY AND EQUIPMENT - NET 18,742 10,758 -------- -------- OTHER ASSETS Restricted assets - net 13,030 13,873 -------- -------- Other Assets 2,876 1,656 -------- -------- TOTAL ASSETS $201,287 $185,196 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES Notes and accounts payable $ 7,307 $ 3,635 Income taxes payable 3,465 3,751 Accrued expenses and other current liabilities 12,103 7,029 -------- -------- Total Current Liabilities 22,875 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 - 39,283,125 and 39,188,062 shares as of September 30, 2005 and December 31, 2004, respectively 39 39 Additional paid-in capital 140,907 139,581 Accumulated other comprehensive loss ( 1,047) ( 110) Retained earnings 38,513 31,271 -------- -------- Total Shareholders' Equity 178,412 170,781 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $201,287 $185,196 ======== ======== *T