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Diodes Incorporated Reports First Quarter 2014 Financial Results
Continued Margin Improvement; Revenue and
First Quarter Highlights
- Revenue was
$210.0 million , a decrease of 0.5 percent from the$211.0 million in the fourth quarter 2013, and an increase of 18.6 percent from the$177.0 million in the first quarter 2013, which included one month of revenue from BCD Semiconductor; - Gross profit was
$61.6 million , compared to$60.8 million in the fourth quarter of 2013 and$46.2 million in the first quarter of 2013; - Gross profit margin was 29.3 percent, compared to 28.8 percent in the fourth quarter of 2013 and 26.1 percent in the first quarter of 2013;
- GAAP net income was
$10.2 million , or$0.21 per diluted share, compared to the fourth quarter of 2013 of$6.2 million , or$0.13 per diluted share, and the first quarter of 2013 GAAP net loss of($1.9) million , or($0.04) per share; - Non-GAAP adjusted net income was
$12.4 million , or$0.26 per diluted share, compared to$11.3 million , or$0.24 per diluted share, in the fourth quarter of 2013 and$7.5 million , or$0.16 per diluted share, in the first quarter of 2013; - Excluding
$2.1 million , net of tax, of share-based compensation expense, GAAP and non-GAAP adjusted net income would have increased by$0.04 per diluted share; and - Achieved
$46.1 million cash flow from operations, including an approximately$4.0 million reduction in inventory, and$34.3 million of free cash flow, including$11.8 million of capital expenditures. Net cash flow was$15.0 million , which includes the pay down of$17.3 million on long-term debt.
Commenting on the results, Dr.
“Also during the quarter, we improved our balance sheet by reducing long-term debt by approximately
“As we look to the second quarter, we expect revenue to increase sequentially, highlighted by continued gross margin improvement as well as an ongoing commitment to cost controls that we expect to drive further profitability and cash generation.”
First Quarter 2014
Revenue for the first quarter 2014 was
Gross profit for the first quarter 2014 was
Operating expenses for the first quarter 2014 were
First quarter 2014 GAAP net income was
First quarter 2014 non-GAAP adjusted net income was
The following is a summary reconciliation of GAAP net income to non-GAAP adjusted net income and per share data, net of tax (in thousands, except per share data):
| Three Months Ended | |||
| March 31, 2014 | |||
| GAAP net income | $ | 10,202 | |
| GAAP diluted earnings per share | $ | 0.21 | |
| Adjustments to reconcile net income | |||
| to adjusted net income: | |||
| Retention costs | 586 | ||
| Amortization of acquisition related intangible assets | 1,565 | ||
| Non-GAAP adjusted net income | $ | 12,353 | |
| Non-GAAP adjusted diluted earnings per share | $ | 0.26 | |
(See the reconciliation tables of net income to adjusted net income near the end of the release for further details.)
Included in first quarter 2014 GAAP and non-GAAP adjusted net income was approximately
EBITDA, which represents earnings before net interest expense, income tax, depreciation and amortization, for the first quarter 2014 was
For the first quarter 2014, net cash provided by operating activities was
Balance Sheet
As of
Business Outlook
Dr. Lu concluded, “For the second quarter of 2014, we expect revenue to increase to a range of
Conference Call
Diodes will host a conference call on
About
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such statements include statements regarding our expectation that: as we look to the second quarter, we expect revenue to increase sequentially, highlighted by continued gross margin improvement as well as an ongoing commitment to cost controls, that we expect to drive further profitability and cash generation; for the second quarter of 2014, we expect revenue to increase to a range of
Recent news releases, annual reports and
| DIODES INCORPORATED AND SUBSIDIARIES | ||||||||
| CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS | ||||||||
|
(unaudited) |
||||||||
|
(in thousands, except per share data) |
||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2014 | 2013 | |||||||
| NET SALES | $ | 209,986 | $ | 176,964 | ||||
| COST OF GOODS SOLD | 148,405 | 130,781 | ||||||
| Gross profit | 61,581 | 46,183 | ||||||
| OPERATING EXPENSES | ||||||||
| Selling, general and administrative | 32,330 | 30,376 | ||||||
| Research and development | 12,920 | 10,080 | ||||||
| Amortization of acquisition related intangible assets | 1,981 | 1,909 | ||||||
| Loss on sale of assets | 7 | 42 | ||||||
| Total operating expenses | 47,238 | 42,407 | ||||||
| Income from operations | 14,343 | 3,776 | ||||||
| OTHER INCOME (EXPENSES) | ||||||||
| Interest income | 397 | 80 | ||||||
| Interest expense | (1,260 | ) | (945 | ) | ||||
| Gain (loss) on securities carried at fair value | (256 | ) | 366 | |||||
| Other | (231 | ) | 1,020 | |||||
| Total other income (expenses) | (1,350 | ) | 521 | |||||
| Income before income taxes and noncontrolling interest | 12,993 | 4,297 | ||||||
| INCOME TAX PROVISION | 2,547 | 6,574 | ||||||
| NET INCOME (LOSS) | 10,446 | (2,277 | ) | |||||
| Less: NET LOSS (INCOME) attributable to noncontrolling interest | (244 | ) | 351 | |||||
| NET INCOME (LOSS) attributable to common stockholders | $ | 10,202 | $ | (1,926 | ) | |||
| EARNINGS (LOSS) PER SHARE attributable to common stockholders | ||||||||
| Basic | $ | 0.22 | $ | (0.04 | ) | |||
| Diluted | $ | 0.21 | $ | (0.04 | ) | |||
| Number of shares used in computation | ||||||||
| Basic | 46,699 | 46,021 | ||||||
| Diluted | 47,996 | 46,201 | ||||||
Note: Throughout this release, we refer to “net income attributable to common stockholders” as “net income.”
| DIODES INCORPORATED AND SUBSIDIARIES | ||||||||
| RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME | ||||||||
|
(in thousands, except per share data) |
||||||||
|
(unaudited) |
||||||||
|
For the three months ended March 31, 2014: |
||||||||
|
Operating |
Income Tax |
Net Income | ||||||
| GAAP | $ | 10,202 | ||||||
| Earnings per share (GAAP) | ||||||||
| Diluted | $ | 0.21 | ||||||
| Adjustments to reconcile net income | ||||||||
| to adjusted net income: | ||||||||
| Retention costs | 690 | (104 | ) | 586 | ||||
| Amortization of acquisition related intangible assets | 1,981 | (416 | ) | 1,565 | ||||
| Adjusted (Non-GAAP) | $ | 12,353 | ||||||
| Diluted shares used in computing | ||||||||
| earnings per share | 47,996 | |||||||
| Adjusted earnings per share (Non-GAAP) | ||||||||
| Diluted | $ | 0.26 | ||||||
Note: Included in GAAP and non-GAAP adjusted net income was approximately
| DIODES INCORPORATED AND SUBSIDIARIES | |||||||||||
| CONSOLIDATED RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME – Cont. | |||||||||||
|
(in thousands, except per share data) |
|||||||||||
|
(unaudited) |
|||||||||||
|
For the three months ended March 31, 2013: |
|||||||||||
|
Cost of |
Operating |
Income Tax |
Net Income |
||||||||
| GAAP | $ | (1,926 | ) | ||||||||
| Loss per share (GAAP) | |||||||||||
| Diluted | $ | (0.04 | ) | ||||||||
| Adjustments to reconcile net loss | |||||||||||
| to adjusted net income: | |||||||||||
| Retention costs | - | 325 | (49 | ) | 276 | ||||||
| Amortization of acquisition related intangible assets | - | 1,909 | (443 | ) | 1,466 | ||||||
| Inventory valuations | 1,828 | - | (274 | ) | 1,554 | ||||||
| Acquisition costs | - | 600 | 110 | 710 | |||||||
| Tax expense related to tax audit | - | - | 5,447 | 5,447 | |||||||
| Adjusted (Non-GAAP) | $ | 7,527 | |||||||||
| Diluted shares used in computing | |||||||||||
| earnings per share | 47,233 | ||||||||||
| Adjusted earnings per share (Non-GAAP) | |||||||||||
| Diluted | $ | 0.16 | |||||||||
Note: Included in GAAP and non-GAAP adjusted net income was approximately
ADJUSTED NET INCOME (Non-GAAP)
This measure consists of generally accepted accounting principles (“GAAP”) net income attributable to common stockholders (“net income”), which is then adjusted solely for the purpose of adjusting for retention costs, amortization of acquisition related intangible assets, inventory valuations, acquisition costs and tax payments related to tax audit, as discussed below. Excluding retention costs, inventory valuations, acquisition costs and tax payments related to tax audit provides investors with a better depiction of the Company’s operating results and provides a more informed baseline for modeling future earnings expectations. Excluding the amortization of acquisition related intangible assets allows for comparison of the Company’s current and historic operating performance. The Company excludes the above listed items to evaluate the Company’s operating performance, to develop budgets, to determine incentive compensation awards and to manage cash expenditures. Presentation of the above non-GAAP measures allows investors to review the Company’s results of operations from the same viewpoint as the Company’s management and Board of Directors. The Company has historically provided similar non-GAAP financial measures to provide investors an enhanced understanding of its operations, facilitate investors’ analyses and comparisons of its current and past results of operations and provide insight into the prospects of its future performance. The Company also believes the non-GAAP measures are useful to investors because they provide additional information that research analysts use to evaluate semiconductor companies. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results and may differ from measures used by other companies. For example, we do not adjust for any amounts attributable to noncontrolling interest except for one-time non-cash items outside the course of ordinary business, such as impairment of goodwill. The Company recommends a review of net income on both a GAAP basis and non-GAAP basis be performed to get a comprehensive view of the Company’s results. The Company provides a reconciliation of GAAP net income to non-GAAP adjusted net income.
Detail of non-GAAP adjustments:
Retention costs – The Company excluded costs accrued within operating expenses in regard to the
Amortization of acquisition related intangible assets – The Company excluded the amortization of its acquisition related intangible assets including developed technologies and customer relationships. The fair value of the acquisition related intangible assets, which was recognized through acquisition accounting, is amortized using straight-line methods which approximate the proportion of future cash flows estimated to be generated each period over the estimated useful lives of the applicable assets. The Company believes the exclusion of the amortization expense of acquisition related assets is appropriate as a significant portion of the purchase price for its acquisitions was allocated to the intangible assets that have short lives and exclusion of the amortization expense allows comparisons of operating results that are consistent over time for both the Company’s newly acquired and long-held businesses. In addition, the Company excluded the amortization expense as there is significant variability and unpredictability among companies with respect to this expense.
Inventory valuations – The Company excluded cost incurred for inventory valuations. The Company adjusted the inventory acquired from the BCD acquisition to account for the reasonable profit allowance for the selling effort on finished goods inventory and the reasonable profit allowance for the completing and selling effort on the work–in-progress inventory. This non-cash adjustment to inventory is not recurring in nature, however it could be recurring to the extent there are additional acquisitions. The Company believes the exclusion of the BCD inventory valuation provides investors with a more accurate reflection of costs likely to be incurred in the absence of an usual event such as an acquisition and facilitates comparisons with the results of other periods that may not reflect such costs.
Acquisition costs – The Company excluded costs associated with acquiring BCD, which consisted of advisory, legal and other professional and consulting fees. These costs were expensed in the first quarter of 2013 when the costs were incurred and services were received, and in which the corresponding tax adjustments were made for the non-deductible portions of these expenses. The Company believes the exclusion of the acquisition related costs provides investors with a more accurate reflection of costs likely to be incurred in the absence of an usual event such as an acquisition and facilitates comparisons with the results of other periods that may not reflect such costs.
Tax expense related to tax audit – The Company excluded additional tax expense in regard to a tax audit of the
ADJUSTED EARNINGS PER SHARE (Non-GAAP)
This non-GAAP financial measure is the portion of the Company’s GAAP net income assigned to each share of stock, excluding retention costs, amortization of acquisition related intangible assets, inventory valuations, acquisition costs and tax payments related to tax audit, as discussed above. Excluding retention costs, inventory valuations, acquisition costs and tax payments related to tax audit provides investors with a better depiction of the Company’s operating results and provides a more informed baseline for modeling future earnings expectations. Excluding the amortization of acquisition related intangible assets allows for comparison of the Company’s current and historic operating performance, as described in further detail above. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results and may differ from measures used by other companies. For example, we do not adjust for any amounts attributable to noncontrolling interest except for one-time non-cash items outside the course of ordinary business, such as impairment of goodwill. The Company recommends a review of diluted earnings per share on both a GAAP basis and non-GAAP basis be performed to obtain a comprehensive view of the Company’s results. Information on how these share calculations are made is included in the reconciliation tables provided.
CASH FLOW ITEMS
Free cash flow (FCF) (Non-GAAP)
FCF for the first quarter of 2014 is a non-GAAP financial measure, which is calculated by taking cash flow from operations less capital expenditures. For the first quarter of 2014, the amount was
CONSOLIDATED RECONCILIATION OF NET INCOME TO EBITDA
EBITDA represents earnings before net interest expense, income tax provision, depreciation and amortization. Management believes EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties, such as financial institutions in extending credit, in evaluating companies in our industry and provides further clarity on our profitability. In addition, management uses EBITDA, along with other GAAP and non-GAAP measures, in evaluating our operating performance compared to that of other companies in our industry. The calculation of EBITDA generally eliminates the effects of financing, operating in different income tax jurisdictions, and accounting effects of capital spending, including the impact of our asset base, which can differ depending on the book value of assets and the accounting methods used to compute depreciation and amortization expense. EBITDA is not a recognized measurement under GAAP, and when analyzing our operating performance, investors should use EBITDA in addition to, and not as an alternative for, income from operations and net income, each as determined in accordance with GAAP. Because not all companies use identical calculations, our presentation of EBITDA may not be comparable to similarly titled measures used by other companies. For example, our EBITDA takes into account all net interest expense, income tax provision, depreciation and amortization without taking into account any attributable to noncontrolling interest. Furthermore, EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as tax and debt service payments.
The following table provides a reconciliation of net income to EBITDA (in thousands, unaudited):
| Three Months Ended | |||||||
| March 31, | |||||||
| 2014 | 2013 | ||||||
| Net income (loss) (GAAP) | $ | 10,202 | $ | (1,926 | ) | ||
| Plus: | |||||||
| Interest expense, net | 863 | 865 | |||||
| Income tax provision | 2,547 | 6,574 | |||||
| Depreciation and amortization | 19,176 | 17,558 | |||||
| EBITDA (Non-GAAP) | $ | 32,788 | $ | 23,071 | |||
| DIODES INCORPORATED AND SUBSIDIARIES | ||||||||
| CONSOLIDATED CONDENSED BALANCE SHEETS | ||||||||
| ASSETS | ||||||||
|
(in thousands) |
||||||||
| March 31, | December 31, | |||||||
| 2014 | 2013 | |||||||
| (Unaudited) | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 211,642 | $ | 196,635 | ||||
| Short-term investments | 20,522 | 22,922 | ||||||
| Accounts receivable, net | 175,604 | 192,267 | ||||||
| Inventories | 176,693 | 180,396 | ||||||
| Deferred income taxes, current | 9,684 | 10,513 | ||||||
| Prepaid expenses and other | 49,232 | 47,352 | ||||||
| Total current assets | 643,377 | 650,085 | ||||||
| PROPERTY, PLANT AND EQUIPMENT, net | 315,817 | 322,013 | ||||||
| DEFERRED INCOME TAXES, non current | 22,278 | 28,237 | ||||||
| OTHER ASSETS | ||||||||
| Goodwill | 84,508 | 84,714 | ||||||
| Intangible assets, net | 51,662 | 53,571 | ||||||
| Other | 22,962 | 23,638 | ||||||
| Total assets | $ | 1,140,604 | $ | 1,162,258 | ||||
| DIODES INCORPORATED AND SUBSIDIARIES | ||||||||||
| CONSOLIDATED CONDENSED BALANCE SHEETS | ||||||||||
| LIABILITIES AND EQUITY | ||||||||||
|
(in thousands, except share data) |
||||||||||
| March 31, | December 31, | |||||||||
| 2014 | 2013 | |||||||||
| (Unaudited) | ||||||||||
| CURRENT LIABILITIES | ||||||||||
| Lines of credit | $ | 2,482 | $ | 5,814 | ||||||
| Accounts payable | 91,544 | 89,212 | ||||||||
| Accrued liabilities | 53,156 | 60,684 | ||||||||
| Income tax payable | 1,178 | 1,206 | ||||||||
| Total current liabilities | 148,360 | 156,916 | ||||||||
| LONG-TERM DEBT, net of current portion | 165,440 | 182,799 | ||||||||
| OTHER LONG-TERM LIABILITIES | 71,771 | 78,866 | ||||||||
| Total liabilities | 385,571 | 418,581 | ||||||||
| COMMITMENTS AND CONTINGENCIES | - | - | ||||||||
| EQUITY | ||||||||||
| Diodes Incorporated stockholders' equity | ||||||||||
| Preferred stock - par value $1.00 per share; 1,000,000 shares authorized; | ||||||||||
| no shares issued or outstanding | - | - | ||||||||
| Common stock - par value $0.66 2/3 per share; 70,000,000 shares authorized; | ||||||||||
| 46,728,209 and 46,680,973 issued and outstanding at March 31, 2014 and | ||||||||||
| December 31, 2013, respectively | 31,154 | 31,120 | ||||||||
| Additional paid-in capital | 293,136 | 289,668 | ||||||||
| Retained earnings | 436,530 | 426,328 | ||||||||
| Accumulated other comprehensive loss | (46,966 | ) | (44,374 | ) | ||||||
| Total Diodes Incorporated stockholders' equity | 713,854 | 702,742 | ||||||||
| Noncontrolling interest | 41,179 | 40,935 | ||||||||
| Total equity | 755,033 | 743,677 | ||||||||
| Total liabilities and equity | $ | 1,140,604 | $ | 1,162,258 | ||||||
Source:
Company Contact:
Diodes Incorporated
Laura Mehrl
Director of Investor Relations
P: 972-987-3959
E: laura_mehrl@diodes.com
or
Investor Relations Contact:
Shelton Group
Leanne Sievers
EVP, Investor Relations
P: 949-224-3874
E: lsievers@sheltongroup.com
