02MICRO REPORTS FOURTH QUARTER AND FISCAL YEAR END FINANCIAL RESULTS
|O2Micro Reports Fourth Quarter and Fiscal Year End Financial Results|
Wednesday February 4, 2009, 4:00 pm EST
GEORGE TOWN, Grand Cayman--(BUSINESS WIRE)--O2Micro® International Limited (NASDAQ :OIIM) (SEHK:0457 - News), a leading supplier of innovative power management and security components, reported its financial results today for the fourth quarter and fiscal year ended December 31, 2008.
Financial Results for the Fourth Quarter ending 12/31/2008:
Net sales in the fourth quarter of 2008 were $22.7 million. Sales decreased by 52%, compared to the fourth quarter of 2007. The decrease in sales was exacerbated by the global economic crisis that worsened in the quarter. The GAAP gross margin was 55.6% in the fourth quarter of 2008 and declined from 58.7% in Q4 2007. The lower gross margin was primarily due to reduced revenue levels and the fixed cost component inside of the cost of sales.
GAAP operating expenses were lower than the year-ago period, excluding non-recurring items. R&D expense was $8.4 million in Q4 2008 and it was $1.4 million less than the corresponding expense in Q4 2007. SG&A expense was $8.3 million in Q4 2008 and it was down $2.7 million from the comparable year-ago period. During the fourth quarter of 2008, the company also recorded a non-recurring charge of $2.8 million for goodwill impairment. There was no comparable impairment charge in the fourth quarter of 2007. Similarly, there was not any non-recurring litigation income in the fourth quarter of 2008, although there was $500,000 of non-recurring litigation income in the fourth quarter of 2007.
The company reported a GAAP loss from operations of $6.9 million in the fourth quarter of 2008, compared to GAAP income from operations of $7.5 million in the fourth quarter of 2007. The decline from the fourth quarter of 2007 to the fourth quarter of 2008 was due to lower revenue and gross margin and the non-recurring goodwill impairment charge that was incurred this quarter, in addition to the non-recurring litigation income that was collected in the year-ago quarter.
In Q4 2008, O2Micro had non-operating income of $796,000 and incurred $715,000 of income tax expense. This compares with Q4 2007 non-operating income and income tax expense of $462,000 and $191,000, respectively. Non-operating income consists primarily of interest income on the company’s cash and investments and income tax expense relates to statutory tax accruals from certain international geographies.
During the fourth quarter of 2008, these results produced a GAAP net loss of $6.8 million, compared to GAAP net income of $7.7 million in Q4 2007. The GAAP loss per ADS was $0.19 in Q4 2008 and compares with GAAP earnings per ADS of $0.20 in Q4 2007.
Financial Results for the Fiscal Year Ended 12/31/2008:
For the twelve months ending December 31, 2008, revenue was $138.8 million. Revenue declined by 16% from the prior year due to progressively worsening economic conditions. The GAAP gross margin was 58.1% for the complete 2008 fiscal year. The fiscal 2008 gross margin percentage reflected an improvement from 57.1% in fiscal 2007.
GAAP operating expenses decreased slightly from 2007 to 2008 after excluding non-recurring income and expenses. R&D expense increased from $34.6 million in 2007 to $37.4 million in 2008. This increase reflects the company’s commitment to developing new products. This increase was more than offset by lower SG&A expenses, which declined from $45.6 million in 2007 to $39.0 million in 2008. During 2007, the company received $9.4 million of non-recurring litigation income and it received an additional $2.0 million of one-time litigation income in 2008. In addition, the company expensed $5.7 million of combined non-recurring items for the write-off of prepaid foundry services in the third quarter of 2008 and the impairment of goodwill in the fourth quarter of 2008.
GAAP income from operations was $564,000 in fiscal 2008. Income from operations was down from $23.6 million in fiscal 2007. Approximately $13.1 million of the year-to-year decline in income from operations was due to higher non-recurring expenses in 2008 and lower litigation income compared to 2007. The remaining decline in operating income is attributable to the normal operating results of the company.
Non-operating loss was $11.1 million in 2008, compared to non-operating income of $2.8 million in 2007. The non-operating loss that was reported in 2008 includes a one-time impairment loss of $13.1 million in long-term investments that was incurred in Q3 2008.
GAAP net loss in 2008 was $12.7 million, including $18.8 million of non-recurring expenses and $2.0 million of non-recurring litigation income. This compares to GAAP net income of $25.0 million in 2007, which includes $9.4 million on non-recurring litigation income. GAAP loss per ADS was $0.34 in 2008 and compares with GAAP earnings per ADS of $0.64 in 2007.
As of December 31, 2008, O2Micro had unrestricted cash and short-term investments of $104.2 million, or $2.84 per ADS. Net accounts receivable was $10.6 million, and there were 63 days sales outstanding in accounts receivable at the end of the fourth quarter of 2008. Inventory was $16.4 million and turned over 2.3 times in Q4 2008.
As of 12/31/08, O2Micro’s headcount consisted of 876 employees, of which 586 are engineers. This headcount was down from 943 employees at the end of the third quarter of 2008.
Sterling Du, Chairman and CEO, commented, “During these turbulent times, we are taking the opportunity to streamline our operations and improve our efficiency. We are working harder than ever to be successful and we aren’t standing still and waiting for an economic recovery.” He continued, “We are continuing to invest our R&D dollars in several young product lines and we are seeing early signs of success with them.”
Conference Call: O2Micro will hold its fourth quarter conference call at 2:00 p.m. PST, 5:00 p.m. EST, and 6:00 a.m. (February 5, 2009) Hong Kong time. You may participate using the following dial-in information.
In the US and CANADA: 888-542-1101, pass code #4565867
In HONG KONG: 800-968-103, pass code #4565867
Other INTERNATIONAL participants: 719-457-2626, pass code #4565867
A replay of the call will be available by phone until February 11th using the following dial-in information.
In the US and CANADA: 888-203-1112, pass code #4565867
In HONG KONG: 800-901-108, pass code #4565867
Other INTERNATIONAL participants: 719-457-0820, pass code #4565867
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.
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 11,377 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
(In Thousand U.S. Dollars, Except Per Share Amounts)
Three Months Ended Years Ended
2008 2007 2008 2007
NET SALES $ 22,692 $ 47,173 $ 138,825 $ 165,540
COST OF SALES 10,070 19,459 58,110 71,099
GROSS PROFIT 12,622 27,714 80,715 94,441
OPERATING EXPENSES (INCOME)
Research and development (1) 8,398 9,768 37,424 34,624
Selling, general and administrative (1) 8,312 10,987 39,003 45,560
Goodwill Impairment 2,782 - 2,782 -
Write-off of prepayments to foundry services - - 2,942 -
Litigation income - (500 ) (2,000 ) (9,364 )
Total Operating Expenses 19,492 20,255 80,151 70,820
INCOME (LOSS) FROM OPERATIONS (6,870 ) 7,459 564 23,621
Interest income 618 804 2,328 3,262
Foreign exchange income gain (loss) 110 (335 ) (412 ) (548 )
Impairment loss on long-term investments - - (13,073 ) -
Other – net 68 (7 ) 97 105
Total Non-operating Income (Loss) 796 462 (11,060 ) 2,819
INCOME (LOSS) BEFORE INCOME TAX (6,074 ) 7,921 (10,496 ) 26,440
INCOME TAX EXPENSE 715 191 2,240 1,456
NET INCOME (LOSS) (6,789 ) 7,730 (12,736 ) 24,984
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments (331 ) 832 1,466 1,667
Unrealized gain (loss) on available-for-sale securities (134 ) 223 (4,849 ) 2,702
Unrealized pension loss (123 ) (95 ) (123 ) (95 )
Total Other Comprehensive Income (Loss) (588 ) 960 (3,506 ) 4,274
COMPREHENSIVE INCOME (LOSS) $ (7,377 ) $ 8,690 $ (16,242 ) $ 29,258
EARNINGS (LOSS) PER SHARE:
Basic $ (0.0037 ) $ 0.0040 $ (0.0068 ) $ 0.0131
Diluted NA $ 0.0039 NA $ 0.0129
EARNINGS (LOSS) PER ADS
Basic $ (0.19 ) $ 0.20 $ (0.34 ) $ 0.66
Diluted NA $ 0.20 NA $ 0.64
SHARES USED IN EARNINGS PER SHARE CALCULATION:
Basic (in thousands) 1,832,744 1,909,382 1,862,831 1,905,725
Diluted (in thousands) 1,834,501 1,979,189 1,869,218 1,943,785
ADS UNITS USED IN EARNINGS PER ADS CALCULATION:
Basic (in thousands) 36,655 38,188 37,257 38,115
Diluted (in thousands) 36,690 39,584 37,384 38,876
(1) INCLUDES STOCK-BASED COMPENSATION CHARGE AS FOLLOWS:
Research and development $ 237 $ 255 $ 1,067 $ 1,058
Selling, general and administrative $ 344 $ 342 $ 1,621 $ 1,408
O2Micro International Limited and Subsidiaries
Consolidated Balance Sheets
(In Thousand U.S. Dollars, Except Share Amounts)
Cash and cash equivalents $ 31,844 $ 52,597
Restricted cash 1,153 6,830
Short-term investments 72,344 28,650
Accounts receivable – net 10,578 24,600
Inventories 16,388 22,127
Prepaid expenses and other current assets 2,314 7,476
Total Current Assets 134,621 142,280
LONG-TERM INVESTMENTS 13,199 26,715
PROPERTY AND EQUIPMENT – NET 34,353 43,148
Restricted assets – net 1,411 12,393
Other Assets 9,689 3,876
TOTAL ASSETS $ 193,273 $ 228,412
LIABILITIES AND SHAREHOLDERS’ EQUITY
Notes and accounts payable $ 4,120 $ 10,841
Income tax payable 226 1,065
Accrued expenses and other current liabilities 8,269 11,597
Total Current Liabilities 12,615 23,503
OTHER LONG-TERM LIABILITIES
Accrued pension liabilities 553 520
FIN 48 tax liabilities 302 210
Other liabilities 23 -
Total Long-Term Liabilities 878 730
Total Liabilities 13,493 24,233
COMMITMENTS AND CONTINGENCIES
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 – 1,832,788,400 and 1,911,868,150 shares as of December 31, 2008 and 2007, respectively 37 38
Additional paid-in capital 141,784 144,944
Retained earnings 37,819 56,847
Accumulated other comprehensive income 140 3,646
Treasury stock – 5,000,000 as of December 31, 2007 - (1,296 )
Total Shareholders’ Equity 179,780 204,179
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 193,273 $ 228,412
Gary E. Abbott, 408-987-5920, x8888