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Diodes Incorporated Reports Record Fourth Quarter and Fiscal 2007 Financial Results
Fiscal 2007 Highlights:
-- Revenue increased 17 percent to a record $401.2 million
-- Adjusted net income increased 22 percent to $64.9 million
-- Adjusted EPS increased 20 percent to $1.50 per share
-- Generated $91 million in cash flow from operations
Fourth Quarter Highlights:
-- Revenue increased 13.9 percent over the prior year period to a record $107.6 million
-- Gross profit margin increased 110 basis points sequentially to 33.5 percent
-- Adjusted net income increased 18 percent to a record $18.6 million, or $0.43 per share, up from $15.8 million, or $0.37 per share, in the fourth quarter of 2006
For the fiscal year 2007, revenue increased 16.9 percent to a record $401.2 million, compared to $343.3 million for fiscal 2006. Gross profit increased 14.5 percent to $130.4 million, or 32.5 percent of revenue, compared to $113.9 million, or 33.2 percent, last year. Net income increased 23.9 percent to $59.7 million, or $1.41 per diluted share, compared to $48.1 million, or $1.16 per share, in 2006. Adjusted net income, which excludes $4.3 million of net share-based compensation and $1.0 million in net restructuring charges in 2007, increased 21.5 percent to $64.9 million, or $1.50 per diluted share, compared to $53.4 million in 2006.
Revenue for the fourth quarter of 2007 increased 13.9 percent to $107.6 million, compared to $94.4 million reported in the fourth quarter of 2006. Sequentially, revenue were 2.2 percent higher due to a 1.2 percent increase in units sold and a more favorable product mix.
Gross profit for the fourth quarter of 2007 increased 14.2 percent to $36.0 million, or 33.5 percent of revenue, as compared to $31.5 million, or 33.4 percent of revenue, in the prior year quarter and 32.4 percent in the third quarter of 2007.
Commenting on the results, Dr. Keh-Shew Lu, President and CEO of Diodes Incorporated, said, "We are pleased to once again report record results for both the quarter and the year. Most notably in the quarter, we achieved strong gross margin improvements as a result of the benefits associated with internalizing our analog manufacturing as well as a shift in product mix towards our new, higher margin products. We also continued to make significant progress with our new product road map and overall design activity remained strong, in particular with our Hall sensors for cell phones and notebook computers. Additionally, Asia sales volume further expanded in the quarter with solid demand in the consumer and computer markets."
Dr. Lu further commented, "These quarterly results conclude another outstanding year for Diodes with record revenue and profit for 2007. Our 17 percent top-line growth once again outpaced the semiconductor market, which grew approximately 3.2 percent for the year. Our consistent performance is a direct result of our history of execution in broadening our market focus, aggressively introducing new products and gaining share in our high growth markets. Overall, our strategic initiative to become a broad-based supplier is widely accepted by our customers and continues to drive increased market share in the discrete and analog space. Our business and financial successes further validate our ability to deliver profitable growth, which has consistently outperformed the industry. We also continue to realize incremental operational efficiencies that will contribute to improved results and margins over time, as evidenced by our fourth quarter."
Fourth quarter net income was $18.3 million, or $0.43 per diluted share, compared to $14.7 million, or $0.35 per share, in the fourth quarter of 2006 and $16.1 million, or $0.38 per share, in the prior quarter.
Adjusted net income for the fourth quarter of 2007, which excludes $1.3 million of SFAS 123R stock option expense and a $0.7 million credit due to lower actual restructuring charges, was a record $18.6 million, or $0.43 per diluted share, an increase of 18.1 percent compared to the $15.8 million, or $0.37 per share, reported in the prior year quarter and an increase of 8.9 percent compared to the $17.1 million, or $0.40 per share, reported in the third quarter of 2007.
As of December 31, 2007, Diodes had approximately $380 million in total cash and short-term investments, $452 million in working capital, $237 million in long-term debt (including the convertible note) and unused and available credit facilities of $59 million.
Business Outlook
"As we look to the first quarter of 2008, we expect revenue to be in the range of $95 million to $101 million with gross margin comparable to the fourth quarter," stated Dr. Lu. "Our estimated first quarter revenue reflects seasonality combined with the impact of the overall weakening economy, in particular on key targeted end-equipment in the consumer and computing markets, as well as our foundry and subcontracting business, which is showing greater weakness than our core revenue drivers. Over the longer-term, we believe that Diodes' history of execution in significantly outperforming the industry, combined with our focus on customer-centric innovation and efficient manufacturing, will return us to our historical growth rates and will continue to deliver positive results for our shareholders. Additionally, we remain focused on evaluating synergistic, accretive acquisition targets in the coming quarter and beyond to further drive increased value and profitable growth for Diodes."
Conference Call
Diodes will host a conference call on Wednesday, February 13, 2008 at 10:00 a.m. Central Time (11:00 a.m. Eastern Time) to discuss its fourth quarter and fiscal 2007 financial results. This conference call will be broadcast live over the Internet and can be accessed by all interested parties on the Investor section of Diodes' website at http://www.diodes.com. To listen to the live call, please go to the Investor section of Diodes website and click on the Conference Call link at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available shortly after the call on Diodes' website for approximately 60 days.
About Diodes Incorporated
Diodes Incorporated (Nasdaq: DIOD), an S&P SmallCap 600 Index company, is a leading global manufacturer and supplier of high-quality application specific standard products within the broad discrete and analog semiconductor markets, serving the consumer electronics, computing, communications, industrial and automotive markets. Diodes' products include diodes, rectifiers, transistors, MOSFETs, protection devices, functional specific arrays, power management devices including DC-DC switching and linear voltage regulators, amplifiers and comparators, and Hall-effect sensors. The Company has its corporate offices in Dallas, Texas, with a sales, marketing, engineering and logistics office in Southern California; design centers in Dallas, San Jose and Taipei; a wafer fabrication facility in Missouri; two manufacturing facilities in Shanghai; a fabless IC plant in Hsinchu Science Park, Taiwan; engineering, sales, warehouse and logistics offices in Taipei and Hong Kong, and sales and support offices throughout the world. With its acquisition of APD Semiconductor, a privately held U.S.-based fabless semiconductor company, Diodes acquired proprietary SBR(R) technology. Diodes, Inc.'s product focus is on high-growth end-user equipment markets such as TV/Satellite set-top boxes, portable DVD players, datacom devices, ADSL modems, power supplies, medical devices, wireless notebooks, flat panel displays, digital cameras, mobile handsets, DC to DC conversion, wireless 802.11 LAN access points, brushless DC motor fans, and automotive applications. For further information, including SEC filings, visit the Company's website at http://www.diodes.com.
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: we will continue to focus on gross margin improvements by internalizing our analog manufacturing and shifting product mix towards our new and higher margin products; we continue to make significant progress with our new product road map; our overall design activity continues to be strong, particularly with our Hall sensors for cell phones and notebook computers; Asia continues to expand sales volume; we continue to broadening our market focus, aggressively introducing new products and gaining share in our high growth markets; our customers continue to accept our strategic initiative to become a broad-based supplier and such strategic initiative continues to drive increased market share in the discrete and analog space; our ability to deliver profitable growth continues to consistently outperform the industry; we continue to realize incremental operational efficiencies to improve earnings results and gross margin; we expect our first quarter gross margin to be comparable to the fourth quarter 2007's gross margin; we expect our estimated first quarter revenue reflects seasonality combined with the impact of the overall weakening economy, in particular on key targeted end-equipment in the consumer and computing markets, as well as our foundry and subcontracting business; we will return to our historical growth rates and will continue to deliver positive results for our shareholders based on our execution in significantly outperforming the industry and our focus on customer-centric innovation and efficient manufacturing; we continue to focus on evaluating synergistic and accretive acquisition targets to further increase Company's value and its profitable growth. Potential risks and uncertainties include, but are not limited to, such factors as the Company's business strategy, the introduction and market reception to new product announcements, fluctuations in product demand and supply, the continue introduction of new products, the Company's ability to maintain customer and vendor relationships, technological advancements, impact of competitive products and pricing, growth in targeted markets, successful integration of acquired companies and/or assets, the Company's ability to successfully make additional acquisitions, risks of foreign operations, availability of tax credits, and other information detailed from time to time in the Company's filings with the United States Securities and Exchange Commission.
Recent news releases, annual reports, and SEC filings are available at the Company's website: http://www.diodes.com. Written requests may be sent directly to the Company, or they may be e-mailed to: diodes-fin@diodes.com.
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended Twelve months ended
December 31, 2007, December 31, 2007,
------------------ -------------------
2006 2007 2006 2007
-------- --------- --------- ---------
Net sales $94,432 $107,591 $343,308 $401,159
Cost of goods sold 62,883 71,567 229,416 270,780
-------- --------- --------- ---------
Gross profit 31,549 36,024 113,892 130,379
Selling, general and
administrative expenses 13,063 14,778 47,945 55,461
Research and development
expenses 2,332 3,860 8,317 13,515
Restructuring costs and fixed
asset impairment - (767) 152 1,003
-------- --------- --------- ---------
Total operating expenses 15,395 17,871 56,414 69,979
Income from operations 16,154 18,153 57,478 60,400
Other income (expense)
Interest income 3,891 5,085 6,699 18,117
Interest expense (1,218) (1,704) (1,582) (6,831)
Other 225 (155) (1,474) (225)
-------- --------- --------- ---------
2,898 3,226 3,643 11,061
Income before income taxes and
minority interest 19,052 21,379 61,121 71,461
Income tax provision (3,911) (2,306) (11,689) (9,428)
-------- --------- --------- ---------
Income before minority interest 15,141 19,073 49,432 62,033
Minority interest in joint
venture earnings (466) (775) (1,289) (2,376)
-------- --------- --------- ---------
Net income $14,675 $ 18,298 $ 48,143 $ 59,657
======== ========= ========= =========
Earnings per share
Basic (1) $ 0.38 $ 0.46 $ 1.25 $ 1.51
Diluted (1) $ 0.35 $ 0.43 $ 1.16 $ 1.41
======== ========= ========= =========
Number of shares used in
computation
Basic (1) 38,925 40,113 38,443 39,601
Diluted (1) 41,829 42,702 41,502 42,331
======== ========= ========= =========
(1) Adjusted for the effect of a 3-for-2 stock split in July 2007.
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended Twelve months ended
December 31, 2007, December 31, 2007,
------------------ -------------------
2006 2007 2006 2007
--------- -------- ----------- -------
Net income $14,675 $18,298 $48,143 $59,657
========= ======== =========== =======
Adjustments to reconcile net
income to adjusted net income:
Stock option expense included
in cost of goods sold: 70 54 469 273
Stock option expense included
in selling and general
administrative expenses: 1,283 1,144 5,394 4,824
Stock option expense included
in research and development
expenses: 164 108 603 463
Total stock option expense 1,517 1,306 6,466 5,560
Restructuring costs - (709) - 1,061
Other adjustments - - - 55
Income tax benefit related to
stock option expense,
restructuring costs and other
adjustments 406 251 1,170 1,384
Adjusted net income $15,786 $18,644 $53,439 $64,949
========= ======== =========== =======
Diluted shares used in
computing earnings per share 41,829 42,702 41,502 42,331
Incremental shares considered
to be outstanding: (1) 801 790 949 836
--------- -------- ----------- -------
Adjusted diluted shares used
in computing Adjusted
earnings per share 42,630 43,492 42,451 43,167
========= ======== =========== =======
Adjusted earnings per share
Basic (1) $ 0.41 $ 0.46 $ 1.39 $ 1.64
Diluted (1) $ 0.37 $ 0.43 $ 1.26 $ 1.50
========= ======== =========== =======
(1) Adjusted for the effect of a 3-for-2 stock split in July 2007.
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED RECONCILIATION OF NET INCOME TO EBITDA
EBITDA represents earnings before net interest expense, income tax
provision, depreciation and amortization. Our management believes
EBITDA is useful to investors because it is frequently used by
securities analysts, investors and other interested parties in
evaluating companies in our industry. In addition, our management
believes that EBITDA is useful in evaluating our operating
performance compared to that of other companies in our industry
because the calculation of EBITDA generally eliminates the effects of
financing and income taxes and the accounting effects of capital
spending, which items may vary for different companies for reasons
unrelated to overall operating performance. As a result, our
management uses EBITDA as a measure to evaluate the performance of
our business. However, EBITDA is not a recognized measurement under
generally accepted accounting principles, or 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 of other companies.
Furthermore, EBITDA is not intended to be a measure of free cash flow
for our management's discretionary use, as it does not consider
certain cash requirements such as a tax and debt service payments.
The following table provides a reconciliation of net income to EBITDA
(in thousands, unaudited):
Three Months Ended
December 31, 2007,
-------------------
2006 2007
--------- ---------
Net Income $14,675 $ 18,298
Plus:
Interest expense, net (2,673) (3,692)
Income tax provision 3,911 2,306
Depreciation and amortization 7,012 7,916
--------- ---------
EBITDA $22,925 $ 24,828
--------- ---------
Twelve Months Ended
December 31, 2007,
-------------------
2006 2007
--------- ---------
Net Income $48,143 $ 59,657
Plus:
Interest expense, net (5,117) (12,538)
Income tax provision 11,689 9,428
Depreciation and amortization 21,065 28,333
--------- ---------
EBITDA $75,780 $ 84,880
--------- ---------
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
ASSETS
(in thousands, except share data)
December 31, December 31,
2006 2007
------------ ------------
CURRENT ASSETS (unaudited)
Cash and cash equivalents $ 48,888 $ 56,179
Short-term investments 291,008 323,472
------------ ------------
Total cash and short-term investments 339,896 379,651
Accounts receivable
Customers 72,175 84,638
Related parties 6,147 5,405
------------ ------------
78,322 90,043
Less: Allowance for doubtful receivables (617) (465)
------------ ------------
77,705 89,578
Inventories 48,202 53,031
Deferred income taxes, current 4,650 5,174
Prepaid expenses and other current assets 8,393 10,576
------------ ------------
Total current assets 478,846 538,010
PROPERTY, PLANT AND EQUIPMENT, at cost, net
of accumulated depreciation and
amortization 95,469 123,407
DEFERRED INCOME TAXES, non current 5,428 3,241
OTHER ASSETS
Intangible assets 10,669 9,643
Goodwill 25,030 25,135
Other 6,697 6,929
------------ ------------
TOTAL ASSETS $622,139 $706,365
============ ============
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(in thousands, except share data)
December 31, December 31,
2006 2007
------------ ------------
(unaudited)
CURRENT LIABILITIES
Accounts payable
Trade 40,030 42,010
Related parties 12,120 13,135
Accrued liabilities 24,966 27,841
Income tax payable 3,433 1,732
Long-term debt, current portion 2,802 1,345
Capital lease obligations, current portion 141 145
------------ ------------
Total current liabilities 83,492 86,208
LONG-TERM DEBT, net of current portion
2.25% convertible senior notes due 2026 230,000 230,000
Others 7,115 5,815
CAPITAL LEASE OBLIGATIONS, net of current
portion 1,477 1,331
OTHER LONG-TERM LIABILITIES 1,101 6,249
MINORITY INTEREST IN JOINT VENTURE 4,787 7,164
------------ ------------
Total liabilities 327,972 336,767
STOCKHOLDERS' EQUITY
Preferred stock - par value $1.00 per
share; 1,000,000 shares authorized; no
shares issued and outstanding - -
Common stock - par value $0.66 2/3 per
share; 70,000,000 shares authorized;
38,941,901 and 40,172,491 shares issued
and outstanding at December 31, 2006 and
December 31, 2007, respectively (1) 17,308 26,782
Additional paid-in capital 113,449 121,412
Retained earnings 162,802 220,504
Accumulated other comprehensive gain 608 900
------------ ------------
Total stockholders' equity 294,167 369,598
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $622,139 $706,365
============ ============
(1) Adjusted for the effect of a 3-for-2 stock split in July 2007
SOURCE: Diodes Incorporated
Diodes Incorporated Carl Wertz, Chief Financial Officer, 805-446-4800 carl_wertz@diodes.com
