FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

 
For the month of August, 2007

Commission File Number: 000-51847

Himax Technologies, Inc.
(Translation of registrant’s name into English)

No.26, Zih Lian Road, Fonghua Village,
Sinshih Township, Tainan County 744,
Taiwan, Republic of China
 (Address of principal executive offices)


Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 
Form 20-F
X
 
Form 40-F
   

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 
Yes
 
 
No
X
 
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 
Yes
 
 
No
X
 
 
Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

 
Yes
 
 
No
X
 
 
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A
 





Himax Technologies, Inc.

INDEX TO EXHIBITS
 
Exhibit
 
   
99.1
Press release entitled, “Himax reports second quarter 2007 results” dated August 7, 2007.
   
99.2
Himax second quarter 2007 results conference call transcript dated August 7, 2007.

 



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
HIMAX TECHNOLOGIES, INC.
 
       
 
By:
/s/ Max Chan 
 
   
Name: Max Chan
 
   
Title: Chief Financial Officer
 
       
 
Date: August 7, 2007



Exhibit 99.1
 
 
HIMAX REPORTS SECOND QUARTER 2007 RESULTS



Tainan, Taiwan, August 7, 2007 - Himax Technologies, Inc. (“Himax” or ”Company”)
(NASDAQ: HIMX) today reported financial results for the second quarter ended June 30, 2007.

Net revenue for the second quarter of 2007 was $222.9 million, representing a 29.8% growth year over year and a 20.5% growth sequentially.

Gross margin was 20.4% in the second quarter of 2007, up 120 basis points year over year and 90 basis points sequentially.

Operating margin was 11.2% in the second quarter of 2007. Operating income was $24.9 million, up 31.8% from the same period last year, and up 48.5% sequentially.

Excluding share-based compensation and acquisition-related charges, non-GAAP operating margin was 12.6% in the second quarter of 2007. Non-GAAP operating income was 28.1 million, up 40.7% from the same period last year, and up 46.4% sequentially.

Net income for the second quarter of 2007 was $26.8 million, up 37.5% from the same period last year, and up 49.0% sequentially. This represents earnings per share of $0.14 per basic and diluted share, compared to $0.10 per basic and diluted share in the second quarter of 2006, and $0.09 per basic and diluted share in the first quarter of 2007.

Excluding share-based compensation and acquisition-related charges, non-GAAP net income was $30.0 million, up 45.8% from the same period last year, and up 47.0% sequentially. This represents earnings per share of $0.15 per basic and diluted share, compared to $0.10 per basic and diluted share in the second quarter of 2006, and $0.10 per basic and diluted share in the first quarter of 2007.

Share-based compensation was $1.5 million, compared to $1.1 million in the second quarter of 2006, and $1.5 million in the first quarter of 2007.  Acquisition-related charges were $1.6 million, compared to $0 in the second quarter of 2006 and $0.9 million in the first quarter of 2007.

A reconciliation of our gross margin and operating margin excluding share-based compensation and acquisition-related charges, a non-GAAP financial measure, to GAAP gross margin and GAAP operating margin, our most comparable GAAP figure, is set out in the attached reconciliation schedule.

 A reconciliation of our diluted EPS excluding share-based compensation and acquisition-related charges, a non-GAAP financial measure, to diluted GAAP EPS, our most comparable GAAP figure, is set out in the attached reconciliation schedule.
 
Jordan Wu, President and Chief Executive Officer of Himax, commented, “We are pleased with the quarter results as revenues came in at the top end of our guidance and both gross margin and EPS were able to beat our guidance. Revenues increased as panel makers raised fab utilization
 
1

 
and certain of our customers ramped up their newly installed capacity. We are also pleased that we were able to improve our gross margin for the third consecutive quarter. This positive trend showed the results of our continued efforts in diversifying our product offering and supplier base.”

Looking forward, Mr. Wu added, “We expect large panel sales momentum to continue into the third quarter.   Outlook for our small- and medium-sized products remains healthy as our product offering, technology roadmap, and design-in status with several tier-1 customers look promising. We expect revenue to grow 8 to 10% sequentially in the third quarter and gross margin to remain flat. Our 2007 RSU is expected to be granted at the end of September 2007, of which a portion will be immediately expensed on the grant date. We expect diluted GAAP EPS to be in the range of $0.08 to $0.09. ”


Investor Conference Call / Webcast Details
The Company’s management will review detailed second quarter 2007 results on Monday, August 6, 2007 at 7:00 PM EDT (7:00 AM, Tuesday, August 7, Taiwan time).  The conference call-in number is +1-201-689-8560 (international) and +1-877-407-0784 (U.S. domestic). A live webcast of the conference call will be available on the Company’s website at www.himax.com.tw.  The playback will be available beginning two hours after the conclusion of the conference call and will be accessible by dialing +1-201-612-7415 (international) and 1-877-660-6853 (U.S. domestic). The account number to access the replay is 3055 and the confirmation ID number is 248178.

About Himax Technologies, Inc.
Himax Technologies, Inc. designs, develops and markets semiconductors that are critical components of flat panel displays. The Company’s principal products are display drivers for large-sized TFT-LCD panels, which are used in desktop monitors, notebook computers and televisions, and display drivers for small- and medium-sized TFT-LCD panels, which are used in mobile handsets and consumer electronics products such as digital cameras, mobile gaming devices and car navigation displays. In addition, the Company is expanding its product offering to include television semiconductor solutions, as well as LCOS products  Based in Tainan, Taiwan, the Company has regional offices in Hsinchu and Taipei, Taiwan; Suzhou and Shenzhen, China; Yokohama, Japan and Anyangsi Kyungkido, South Korea; and Irvine, California, USA.

Contacts:
Max Chan
Chief Financial Officer
Himax Technologies, Inc.
+886-2-3393-0877 Ext. 22300
max_chan@himax.com.tw
Jackson Ko/Jessie Wang
Investor Relations
Himax Technologies, Inc.
+886-2-3393-0877
Ext. 22240/22618
jackson_ko@himax.com.tw
Jessie_wang@himax.com.tw
In the U.S.
David Pasquale
The Ruth Group
+1-646-536-7006
dpasquale@theruthgroup.com

Forward-Looking Statements:
Certain statements in this press release, including statements regarding expected future financial results and industry growth, are forward-looking statements that involve a number of risks and uncertainties that could cause actual events or results to differ materially from those described in this press release. Factors that could cause actual results to differ include general business and economic conditions and the state of the semiconductor industry; level of competition; demand for end-use applications products; reliance on a small group of principal customers; continued success in technological innovations; development of alternative flat panel display technologies; ability to develop and protect our intellectual property; pricing pressures including declines in average selling prices; changes in customer order patterns; shortages in supply of key components; changes in environmental laws and regulations; exchange rate fluctuations; regulatory approvals for further investments in our subsidiaries; and other risks described from time to time in the Company’s SEC filings, including its Form 20-F dated June 22, 2007, as amended.  We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Tables Attached –

2


Himax Technologies, Inc.
Unaudited Condensed Consolidated Statements of Income
(These interim financials do not fully comply with US GAAP because they omit all interim
disclosure required by US GAAP.)
(Figures in Thousands of U.S. Dollars, Except Per Share Data)
 

   
Three Months
Ended June 30,
   
Three
Months
Ended
March
31,
 
   
2007
   
2006
   
2007
 
Revenues
                 
   Revenues from third parties, net
  $
102,276
    $
84,634
    $
75,836
 
   Revenues from related parties, net
   
120,607
     
87,041
     
109,055
 
     
222,883
     
171,675
     
184,891
 
                         
Costs and expenses:
                       
   Cost of revenues
   
177,452
     
138,766
     
148,830
 
   Research and development
   
15,328
     
11,603
     
14,800
 
   General and administrative
   
3,222
     
1,334
     
3,000
 
   Sales and marketing
   
1,995
     
1,097
     
1,501
 
Total costs and expenses
   
197,997
     
152,800
     
168,131
 
                         
Operating income
   
24,886
     
18,875
     
16,760
 
                         
Non operating income (loss):
                       
Interest income
   
1,514
     
1,843
     
1,382
 
Impairment loss on an investment
   
---
      (1,500 )    
---
 
Foreign exchange gains (losses), net
   
36
     
1,398
      (490 )
Interest expense
   
---
      (27 )    
---
 
Other income, net
   
159
     
58
     
42
 
     
1,709
     
1,772
     
934
 
Income before income taxes and minority interest
   
26,595
     
20,647
     
17,694
 
Income tax expense
   
---
     
1,246
     
---
 
Income before minority interest
   
26,595
     
19,401
     
17,694
 
Minority interest, net of tax
   
247
     
124
     
325
 
Net income
  $
26,842
    $
19,525
    $
18,019
 
                         
Basic earnings per ordinary share and ADS
  $
0.14
    $
0.10
    $
0.09
 
Diluted earnings per ordinary share and ADS
  $
0.14
    $
0.10
    $
0.09
 
                         
Basic Weighted Average Outstanding Shares
   
197,656
     
195,535
     
195,761
 
Diluted Weighted Average Outstanding Shares
   
198,013
     
198,512
     
195,968
 

3


Himax Technologies, Inc.
Unaudited Supplemental Financial Information
(Figures in Thousands of U.S. Dollars)

The amount of share-based compensation included in applicable costs and
expenses categories is summarized as follows:
 
Three Months
Ended June 30,
   
Three
Months
Ended
March
 31,
 
   
2007
   
2006
   
2007
 
Share-based compensation
                 
          Cost of revenues
  $
25
    $
18
    $
25
 
          Research and development
   
1,201
     
818
     
1,187
 
          General and administrative
   
151
     
98
     
151
 
          Sales and marketing
   
156
     
129
     
156
 
Total
  $
1,533
    $
1,063
    $
1,519
 
                         
The amount of acquisition-related charges included in applicable expenses categories is summarized as follows:
                       
                         
       Research and development
  $
1,234
    $
---
    $
789
 
   Sales and marketing
   
408
     
---
     
98
 
Total
  $
1,642
    $
---
    $
887
 





4


Himax Technologies, Inc.
Unaudited Condensed Consolidated Statements of Income
(Figures in Thousands of U.S. Dollars, Except Per Share Data)
   

   
Six Months Ended
 
   
June 30,
 
   
2007
   
2006
 
Revenues
           
   Revenues from third parties, net
  $
178,112
    $
150,061
 
   Revenues from related parties, net
   
229,662
     
196,473
 
     
407,774
     
346,534
 
                 
Costs and expenses:
               
   Cost of revenues
   
326,282
     
276,064
 
   Research and development
   
30,128
     
22,505
 
   General and administrative
   
6,222
     
3,392
 
   Sales and marketing
   
3,496
     
2,104
 
Total costs and expenses
   
366,128
     
304,065
 
                 
Operating income
   
41,646
     
42,469
 
                 
Non operating income (loss):
               
Interest income
   
2,896
     
2,048
 
Impairment loss on an investment
   
---
      (1,500 )
Foreign exchange gains (losses), net
    (454 )    
1,166
 
Interest expense
   
---
      (311 )
Other income, net
   
201
     
113
 
     
2,643
     
1,516
 
Income before income taxes and
   minority interest
   
44,289
     
43,985
 
Income tax expense
   
---
     
2,737
 
Income before minority interest
   
44,289
     
41,248
 
Minority interest, net of tax
   
572
     
216
 
Net income
  $
44,861
    $
41,464
 
                 
Basic earnings per ordinary share and ADS
  $
0.23
    $
0.22
 
Diluted earnings per ordinary share and ADS
  $
0.23
    $
0.22
 
                 
Basic Weighted Average Outstanding Shares
   
196,714
     
187,102
 
Diluted Weighted Average Outstanding Shares
   
197,134
     
190,510
 

5


Himax Technologies, Inc.
Unaudited Condensed Consolidated Balance Sheets
(Figures in Thousands of U.S.Dollars)
       

   
June 30,
   
Mar 31,
   
Dec 31,
 
   
2007
   
2007
   
2006
 
Assets
                 
Current assets:
                 
Cash and cash equivalents
  $
137,508
    $
111,838
    $
109,753
 
Marketable securities available-for-sale
   
13,327
     
12,783
     
8,828
 
Restricted cash equivalents and marketable securities
   
171
     
106
     
108
 
Accounts receivable, less allowance for doubtful accounts, sales returns and discounts
   
116,812
     
108,147
     
112,767
 
Accounts receivable from related parties, less allowance for doubtful accounts, sales returns and discounts
   
137,602
     
105,740
     
116,850
 
Inventories
   
125,146
     
119,379
     
101,341
 
Deferred income taxes
   
6,829
     
7,401
     
6,744
 
Prepaid expenses and other current assets
   
10,113
     
10,276
     
10,324
 
Total current assets
  $
547,508
    $
475,670
    $
466,715
 
Property, plant and equipment, net
   
45,801
     
45,767
     
38,895
 
Deferred income taxes
   
12,842
     
11,964
     
11,405
 
Intangible assets, net
   
34,273
     
35,865
     
393
 
Investments in non-marketable securities
   
1,857
     
817
     
817
 
Refundable deposits and prepaid pension costs
   
593
     
618
     
569
 
     
95,366
     
95,031
     
52,079
 
Total assets
  $
642,874
    $
570,701
    $
518,794
 
                         
Liabilities, minority interest and stockholders’ equity
                       
Current liabilities:
                       
Accounts payable
  $
171,218
    $
121,459
    $
120,407
 
Income tax payable
   
7,333
     
12,150
     
11,666
 
Other accrued expenses and other current liabilities
   
16,023
     
16,987
     
21,206
 
Total current liabilities
  $
194,574
    $
150,596
    $
153,279
 
Accrued pension liability
  $
196
    $
196
    $
192
 
Total liabilities
  $
194,770
    $
150,792
    $
153,471
 
Minority interest
  $
1,715
    $
1,980
    $
1,396
 
Stockholders’ equity:
                       
Ordinary share, US$0.0001 par value, 500,000,000 shares authorized
   
20
     
20
     
19
 
Additional paid-in capital
   
259,189
     
257,678
     
221,666
 
Accumulated other comprehensive loss
    (198 )     (305 )     (275 )
Unappropriated earnings
   
187,378
     
160,536
     
142,517
 
Total stockholders’ equity
  $
446,389
    $
417,929
    $
363,927
 
Total liabilities, minority interest and stockholders’ equity
  $
642,874
    $
570,701
    $
518,794
 
                         
 
6

 
Himax Technologies, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(Figures in Thousands of U.S. Dollars)

   
Three Months
Ended June 30,
   
Three
Months
Ended
March 31,
 
   
2007
   
2006
   
2007
 
                   
Cash flows from operating activities:
                 
Net income
  $
26,842
    $
19,525
    $
18,019
 
Adjustments to reconcile net income to net cash provided
by operating activities:
                       
  Depreciation and amortization
   
2,587
     
1,204
     
2,026
 
  Write-off of in-process research and development
   
900
     
---
     
700
 
  Share-based compensation expenses
   
1,533
     
1,063
     
1,519
 
  Minority interest, net of tax
    (247 )     (124 )     (325 )
  Loss on disposal of property, plant and equipment
   
204
     
5
     
35
 
  Gain on sale of subsidiary shares and investments in
  non-marketable securities, net
    (125 )     (33 )     (21 )
  Gain on sale of marketable securities, net
    (23 )     (22 )     (30 )
 Impairment loss on an investment
   
---
     
1,500
     
---
 
  Deferred income taxes
    (727 )     (1,677 )    
---
 
  Inventories write downs
   
5,103
     
1,888
     
3,118
 
Changes in operating assets and liabilities:
                       
  Accounts receivable
    (8,661 )     (13,672 )    
6,084
 
  Accounts receivable from related parties
    (31,856 )    
5,076
     
11,514
 
  Inventories
    (10,868 )     (5,897 )     (20,803 )
  Prepaid expenses and other current assets
   
486
      (2,838 )     (85 )
  Accounts payable
   
49,753
     
12,525
     
416
 
  Income tax payable
    (4,333 )     (3,056 )    
---
 
  Other accrued expenses and other current liabilities
   
4,071
      (195 )     (6,290 )
Net cash provided by operating activities
   
34,639
     
15,272
     
15,877
 
                         
Cash flows from investing activities:
                       
Purchase of property, plant and equipment
    (6,877 )     (4,065 )     (6,483 )
Proceeds from sale of property, plant and equipment
   
3
     
---
     
---
 
Purchase of available-for-sales marketable securities
    (11,723 )     (8,625 )     (17,581 )
Sales and maturities of available-for-sale marketable securities
   
11,258
     
9,830
     
13,639
 
Cash acquired in acquisition
   
---
     
---
     
6,197
 
Proceeds from sale of subsidiary shares and investments in non-marketable securities by Himax Technologies Limited
   
131
     
55
     
34
 
Purchase of investments in non-marketable securities
    (1,040 )    
---
     
---
 
Purchase of subsidiary shares from minority interest
    (46 )     (84 )     (17 )
Refund from (increase in) refundable deposits
   
76
      (23 )     (16 )
Release (pledge) of restricted cash equivalents
    (91 )    
14,101
     
2
 
Net cash provided by (used in) investing activities
    (8,309 )    
11,189
      (4,225 )
   

7


Himax Technologies, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(Figures in Thousands of U.S. Dollars)
 

   
Three Months
Ended June 30,
   
Three Months
Ended March 31,
 
   
2007
   
2006
   
2007
 
Cash flows from financing activities:
                 
Proceeds from initial public offering, net of issuance costs
  $
---
    $
147,813
    $
---
 
Proceeds from issuance of new shares by subsidiaries
   
---
     
---
     
1,217
 
Acquisition of ordinary shares for retirement
    (625 )    
---
      (10,841 )
Repayment of short-term debt
   
---
      (38,577 )    
---
 
Net cash provided by (used in) financing activities
    (625 )    
109,236
      (9,624 )
Effect of exchange rate changes on cash and cash equivalents
    (35 )     (60 )    
57
 
Net increase in cash and cash equivalents
   
25,670
     
135,637
     
2,085
 
Cash and cash equivalents at beginning of period
   
111,838
     
31,247
     
109,753
 
Cash and cash equivalents at end of period
  $
137,508
    $
166,884
    $
111,838
 
                         
Supplemental disclosures of cash flow information:
                       
   Cash paid during the period for:
                       
      Interest
  $
---
    $
28
    $
---
 
      Income taxes
  $
4,706
    $
5,549
    $
17
 
Supplemental disclosures of non-cash investing and financing activities:
                       
   Payable for purchase of equipment and construction in progress
  $ (4,473 )   $ (18 )   $
1,384
 
                         
Fair value of ordinary shares issued by Himax Technologies, Inc. in the acquisition of Wisepal Technologies, Inc.
  $
---
    $
---
    $
45,031
 







8


Himax Technologies, Inc.
Unaudited Supplemental Data – Reconciliation Schedule
(Figures in Thousands of U.S. Dollars, Except Per Share Data)
 
Gross Margin and Operating Margin Excluding Share-based Compensation and Acquisition-Related Charges:

   
Three Months
Ended June 30,
   
Three Months
Ended March 31,
 
   
2007
   
2006
   
2007
 
Revenues
  $
222,883
    $
171,675
    $
184,891
 
                         
Gross profit
   
45,431
     
32,909
     
36,061
 
Add: Share-based compensation – Cost of revenues
   
25
     
18
     
25
 
Gross profit excluding share-based compensation
   
45,456
     
32,927
     
36,086
 
Gross margin excluding share-based compensation
    20.4 %     19.2 %     19.5 %
                         
Operating income
   
24,886
     
18,875
     
16,760
 
Add: Share-based compensation
   
1,533
     
1,063
     
1,519
 
Operating income excluding share-based compensation
   
26,419
     
19,938
     
18,279
 
Add: Acquisition-related charges – In-process R&D write off
   
900
     
---
     
700
 
–  Intangible assets
amortization
   
742
     
---
     
187
 
Operating income excluding share-based compensation
and acquisition-related charges
   
28,061
     
19,938
     
19,166
 
Operating margin excluding share-based compensation
and acquisition-related charges
    12.6 %     11.6 %     10.4 %
Net income excluding share-based compensation and acquisition-related charges
   
30,017
     
20,588
     
20,425
 
Net margin excluding share-based compensation and acquisition-related charges
    13.5 %     12.0 %     11.0 %

*  Gross margin excluding share-based compensation equals gross profit excluding share-based compensation divided by revenues
*  Operating margin excluding share-based compensation and acquisition-related charges  equals operating income excluding share-based compensation and acquisition-related charges divided by revenues
*  Net margin excluding share-based compensation and acquisition-related charges  equals net income excluding share-based compensation and acquisition-related charges divided by revenues








9


Himax Technologies, Inc.
Unaudited Supplemental Data – Reconciliation Schedule
(Figures in Thousands of U.S. Dollars, Except Per Share Data)
 

Diluted Earnings Per Share Excluding Share-based Compensation and Acquisition-Related Charges:
 

   
Three Months
Ended June 30,
 
   
2007
 
Diluted GAAP EPS
 
$0.14
 
Add: Estimated share-based compensation per diluted share
 
$0.01
 
Add: Estimated acquisition-related charges per diluted share
 
$0.01
 
Diluted non-GAAP EPS excluding share-based compensation and acquisition-related charges
 
$0.15
 
         
Numbers do not add up due to rounding
 
 
 
 
 
 
 
 

 
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Exhibit 99.2
 
LIVE CALL INFORMATION
REPLAY INFORMATION
Tuesday, August 7, 2007  7AM Taiwan
Monday, August 6, 2007 7PM NYC
CEO / CFO Number: 1-201-689-8561
Listener Call Number: 1-201-689-8560
 
 
Accessible 2 hours after the call through
noon on Tuesday, August 14, 2007 Taiwan
Replay Number: 1-201-612-7415
Account number: 3055
Conference ID number: 248178

Operator Intro: Welcome to Himax Technologies second quarter 2007 results Conference Call.  At this time, all participants are in a listen-only mode.  Later we will conduct a question and answer session.  At that time, if you have a question, you will need to press the star 1 on your push button phone.  The call is scheduled for one hour.

As a reminder, this conference is being recorded today.  A replay will be available 2 hours after the call today, through noon on Tuesday, August 14, 2007 in Taiwan.  The replay dial-in number is 1-201-612-7415 with account number 3055 and conference ID number 248178.  The replay will also be accessible at www.himax.com.tw.


 David
 
Thank you operator. Welcome everyone to Himax’s second quarter 2007 earnings call.  Joining us from the company are Mr. Jordan Wu, President and Chief Executive Officer, and Mr. Max Chan, Chief Financial Officer.  After the company’s prepared comments we will have time for any questions.

If you have not yet received a copy of today’s results release, please call The Ruth Group at 646-536-7003.  Or you can get a copy off of Himax’s website.

Before we begin the formal remarks, the Company’s attorneys advise that certain statements in this conference call, including statements regarding expected future financial results and industry growth, are forward-looking statements that involve a number of risks and uncertainties that could cause actual events or results to differ materially from those described in this conference call.

Factors that could cause actual results to differ include general business and economic conditions and the state of the semiconductor industry; level of competition; demand for end-use applications products; reliance on a small group of principal customers; continued success in technological innovations; ability to develop and protect our intellectual property; pricing pressures including declines in average selling prices; changes in customer order patterns; shortages in supply of key components; changes in environmental laws and regulations; exchange rate fluctuations; regulatory approvals for further investments in our subsidiaries; and other risks described from time to time in the Company’s SEC filings, including its Form 20-F dated June 22, 2007, as amended.

The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

At this time, I would now like to turn the call over to Mr. Jordan Wu.  Please go ahead, sir.
 
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Mr. Jordan Wu

Thank you David and thank you everyone for joining us on today’s call.

I will now start with a brief highlight of Himax’s performance during the second quarter of 2007 and discuss the outlook for the third quarter of 2007.  Max, our CFO, will then provide further details on our financial performance.

We had a pretty strong second quarter as revenues came in at the top end of our guidance. At the same time, both gross margin and EPS were able to beat our guidance.

Our second quarter net revenue was $222.9 million, representing a 29.8% growth year over year, and a 20.5% growth quarter over quarter. The strong increase in revenue was due to panel makers raising fab utilization to fulfill increasing demand for products across all applications.

In terms of customer mix, revenues from related parties were $120.6 million, about 54.1% of total revenue in the second quarter.  Revenues from third parties were $102.3 million, or 45.9 % of total revenue.

Revenues from large panel display drivers were up 24.3% from the same period last year, or up 21.0% sequentially and accounted for approximately 82.2% of our total revenues in the second quarter.  Customers raised fab utilization to meet the growing demands for all of TV, monitor and notebook panels.  Furthermore, certain of our customers were ramping up their newly installed capacity which helped increase the demand for our products.

Revenues from small- and medium-sized display drivers grew 64.6% year over year and 14.6% sequentially, driven by increasing demand for both our mobile phone and consumer electronic products. Small- and medium-sized revenue accounted for about 15.1% of our total revenues, down slightly from 15.9% in the first quarter. We are pleased with the strong year over year growth which was driven primarily by market share gains, a result of new businesses coming from certain top tier customers.
 
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Our gross margin was 20.4% in the second quarter of 2007, up 120 basis points year over year and 90 basis points sequentially. Despite the tough pricing environment, we are pleased that we were able to improve our gross margin for the third consecutive quarter.  This positive trend showed the results of our continued efforts in diversifying our product offering and supplier base.

Our GAAP operating income was $24.9 million, up 31.8% from the same period last year, and up 48.5% from the previous quarter.  Our share-based compensation and acquisition-related charges were approximately $1.5 million and $1.6 million respectively. Therefore, excluding share-based compensation and acquisition-related charges, our non-GAAP operating income was $28.1 million with a margin of 12.6%, compared to 11.6% in the same period last year, and 10.4% in the first quarter of 2007.

Our GAAP net income came in at $26.8 million, up 37.5% from the same period last year, and 49.0% from the previous quarter. EPS was $0.14, as compared to $0.10 in the same period last year and $0.09 in the previous quarter.

Excluding share-based compensation and acquisition-related charges, our non-GAAP net income was $30.0 million, up 45.8% from the same period last year, and 47.0% from the previous quarter. Non-GAAP EPS was $0.15 as compared to $0.10 in the same period last  year and $0.10 in the previous quarter.

Now let me talk about our guidance for the third quarter of 2007.

We expect sales momentum to carry on into the third quarter. We believe demand for our large panel drivers will continue to increase.  We expect our customers to continue their high capacity utilization. Strong momentum in PC-related products, thanks mainly to the back-to-school seasonal demand, will continue to drive panel sales. Demand for our TV-related products remain robust, primarily a result of the continued ramping of new capacity in certain of our customers.  Outlook for our small- and medium-sized products remains healthy as our product offering, technology roadmap, and design-in status with several tier-1 customers look promising. 

Overall, we expect revenue to grow around 8 to 10% sequentially in the third quarter and gross margin to remain flat.  We expect diluted GAAP EPS to be in the range of $0.08 to $0.09. Our
 
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2007 RSU is expected to be granted at the end of September 2007, of which a portion will be immediately expensed on the grant date.

Now let me turn over to Max Chan, our CFO, for some financial details.

 Mr. Max Chan

Thank you, Jordan.

Our net revenues in the second quarter were $222.9 million, representing a year-on-year growth of 29.8% and a sequential growth of 20.5%.

Our gross margin increased to 20.4% from 19.5% a quarter ago, primarily due to product mix change.

Our GAAP operating expenses were $20.5 million in the second quarter, up from $19.3 million in the previous quarter.

Our non-GAAP operating expenses, excluding share-based compensation and acquisition-related charges were approximately $17.4 million in the second quarter, slightly increased from approximately $16.9 million in the previous quarter. In the second quarter, share-based compensation was approximately $1.5 million, and acquisition-related charges were approximately $1.6 million, including one-time accounting adjustments of $1.1 million. Going forward, barring further acquisitions, we expect acquisition-related charges to be approximately $0.6 million per quarter.

Our net cash provided by operating activities was approximately $34.6 million, increased from approximately $15.9 million in the previous quarter. This increase was primarily a result of one-time effect of payment term extension received from certain of our vendors.

Capital expenditure for the second quarter was approximately $6.9 million, mainly for the purchase of software, equipments and subsequent payments relating to our headquarters.

Our total headcount became approximately 1,000 at the end of the second quarter.
 
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Jordan provided our 3Q07 outlook earlier. We are basing that guidance on approximately 198 million diluted weighted average outstanding shares.


Operator, that concludes our prepared remarks.  We can now take any questions.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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