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Diodes Incorporated Reports Record Third Quarter Results
* Record revenues of $92.6 million, up 71%
* Record pro forma earnings of $14.2 million, up 69%
WESTLAKE VILLAGE, Calif., Nov. 1 /PRNewswire-FirstCall/ -- Diodes Incorporated (Nasdaq: DIOD), a leading manufacturer and supplier of high-quality discrete and analog semiconductors, today reported record financial results for the third quarter ending September 30, 2006.
Third Quarter Highlights:
* Revenues increased 70.8% YOY and 11.9% sequentially to a record
$92.6 million
* Gross profit increased 62.6% YOY and 11.9% sequentially to
$30.7 million
* Pro forma net income increased 69.1% YOY to a record $14.2 million, or
$0.49 per fully diluted share, up from $8.4 million, or $0.34 per
share, in the third quarter of 2005, and $0.45 in the second quarter of
2006
* Net income on a GAAP basis increased 12.2% sequentially to
$12.8 million, or $0.45 per fully diluted share, up from $11.4 million
or $0.41 per share in the second quarter of 2006
* YTD cash flow from operations increased 23.2% to $46.0 million
Revenues for the third quarter of 2006 increased 70.8% year-over-year and 11.9% sequentially to a record $92.6 million. Pro forma net income increased 69.1% year-over-year to a record $14.2 million, or $0.49 per fully diluted share, up from $8.4 million, or $0.34 per share, in the third quarter of 2005, and $0.45 in the second quarter of 2006. Pro forma results are included because under FAS 123(R), the Company began expensing stock options in the first quarter of 2006, and therefore, equivalent stock option expense was not reflected in the 2005 periods. Pro forma net income and earnings per share exclude approximately $1.6 million in non-cash, net stock option expense (see table for a reconciliation of the impact of pro forma net income to GAAP net income). Net income on a GAAP basis increased 12.2% sequentially to $12.8 million, or $0.45 per fully diluted share, compared to $11.4 million, or $0.41 per share, in the second quarter of 2006.
Commenting on the quarter, Dr. Keh-Shew Lu, President and CEO of Diodes Incorporated, said: "During the third quarter Diodes' sales and net income reached new highs, as we leveraged our innovative products, efficient manufacturing, and intense customer focus to gain market share in the discrete market and expand into adjacent segments. The planned acquisition of APD Semiconductor announced last week will provide Diodes with access to advanced technologies in the discrete semiconductor market and will allow us to offer another superior product line in respect to both cost and performance. In addition, our convertible bond issue is expected to be accretive to earnings and provides us with tremendous flexibility to pursue corporate growth initiatives, including acquisitions, to accelerate our profitable growth."
On October 5, the Company issued $230 million in aggregate principal convertible senior notes due on October 1, 2026. The notes will pay interest semiannually at a rate of 2.25% per annum, with a 39.68% conversion premium, and with any conversion premium redeemable into cash and/or shares of common stock at the Company's preference. At current market rates, the pre-tax net investment interest income on the proceeds of the bond offering is projected to be approximately $5.0 to $5.5 million per year. The Company expects this transaction to be accretive to earnings per share given the current short-term interest environment and intends to use the net proceeds from this offering for working capital and other general corporate purposes, including acquisitions.
For the first nine months of 2006, revenues increased 62.2% to $248.9 million, compared to $153.4 million in the same period last year. Net income for the first nine months of 2006 was $33.5 million, or $1.19 per fully diluted share. Pro forma net income for the first nine months of 2006, which excludes $4.3 million of net stock option expense, increased 62.1% to $37.8 million, compared to $23.3 million in the same period in 2005. Pro forma fully diluted earnings per share grew to $1.32 for the first nine months of 2006, compared to $0.96, for the same period last year.
End-Markets
"Our strong third quarter top-line growth was driven by better than expected sales in the consumer electronics segment as well as customer acceptance of our analog product line. We are extremely pleased with our progress on the Anachip acquisition and the resulting attractive cross selling opportunities and new product development initiatives combining analog and discrete circuits. Our discrete market share rose to an all time high during the quarter, driven by a broad range of end equipment categories, including digital audio players, set-top boxes, LCD monitors, notebooks and wireless LAN. For the third quarter of 2006, consumer electronics and computer made up 37% and 35% of total sales respectively, with telecom contributing 13%," commented Mark King, Sr. Vice President of Sales and Marketing.
"Asia contributed 73% of our third quarter sales, with the help of better than expected sales in the computer and consumer segments as well as robust growth in our analog product line. North American accounted for 24% of sales driven by strong OEM demand, with distributor point of sale again reaching a record high. Sales in Europe slowed sequentially as a result of the summer holiday, contributing 3% of total sales, but were up 105% from the third quarter of 2005 as we continued to make progress with new design wins and expanded customer relationships," said Mr. King. "We experienced market share gains in all regions during the third quarter for our discrete products, and in Asia, we reached another all-time high in market share."
Design Wins and New Products
"Design activity remained brisk in the third quarter with multiple wins at over 50 customers. There is strong interest in our analog designs from our traditional accounts as well as important discrete wins at original Anachip customers," Mr. King commented. "Demand for Diodes' switchers, LDO's and hall sensors was robust with wins coming from a broad list of end equipment, including digital audio players, mobile phones and set-top boxes. On the discrete side we experienced strong interest on our DFN, PowerDI and array platforms for portable media devices, power converters and LCD monitors."
Diodes recently launched the AH180, a new generation of low-voltage Hall Sensor switch designed to meet the two critical factors of today's demanding requirements of device manufacturers: time to market and solution cost. Its size, together with the exceptional power consumption performance, allow the AH180 to easily fit a wide range of applications in the portable consumer electronics and computer devices, such as razor-thin multimedia 3G wireless handsets, and positions the Company in some of the fastest growing end-user markets.
Sales of new products reached a record 29.7% of total sales, compared to 14.1% a year ago, and 24.9% last quarter, and this growth includes the contribution of the Anachip acquisition. New product revenue was driven by products in sub-miniature array, QFN, PowerDI123, PowerDI5, and Schottky platforms on the discrete side, as well as the analog product lines. Diodes released 35 products covering nine product families in the third quarter.
Additional Financial Highlights
Gross profit for the third quarter of 2006 increased 62.6% to $30.7 million, or 33.2% of revenue, compared to the same period last year. This increase in gross profit was helped by improved product mix and increased sales volume. Due to strong product demand for discrete devices and high capacity utilization during the quarter, our migration of analog production to our highly productive in-house packaging facility was not as brisk as expected in the quarter.
For the quarter, SG&A expenses were $11.8 million or 12.8% of revenue, versus $7.6 million, or 14.0% of revenue, in the comparable quarter last year. Included in third quarter SG&A expenses were $1.6 million in non-cash, stock option expense. For comparable purposes, excluding the stock option expense, SG&A for the third quarter of 2006 would have been 11.3% of sales (see table for a reconciliation of the impact of stock option expense to reported results).
Operating income for the third quarter increased 63.1% to a record $16.9 million, or 18.3% of sales, compared to $10.4 million for the third quarter of 2005. Sequentially, operating margins improved 180 basis points over the second quarter 2006 driven by increased sales volume as well as operating synergies from the Anachip combination.
In the quarter ended September 30, 2006, a one-time adjustment to correct prior year accounting for share-grants and intercompany currency losses had a tax-adjusted reduction to net income of approximately $0.6 million, equivalent to $0.02 per share.
Investment in research and development grew to $1.9 million, or 2.1% of revenue, compared to $0.94 million, or 1.7% of sales, in the third quarter of 2005.
Capital expenditures for the current quarter were $4.9 million and $32.4 million year to date. Depreciation expense for the quarter was $4.4 million and $14.1 million year to date.
At quarter-end, Diodes had $109 million in total cash and short-term investments (not including the $224 million proceeds from the bond offering), $159.3 million in working capital, $5.7 million in long-term debt and unused and available credit facilities of $50 million. For the first nine months of 2006, shareholder equity increased 23% to $277.0 million.
Business Outlook
"Coming off our 6th consecutive quarter of record revenue performance, including our 11.9% sequential growth this quarter, and with a book-to-bill ratio at parity, we currently expect to see sequential revenue growth in the 1 to 3% range, with comparable gross margins, for the fourth quarter of 2006. Over the next few quarters, as we continue to introduce new discrete and analog products and internalize packaging of our analog products, we expect to see gradual expansion in our gross margins," stated Dr. Lu. "We are very pleased with our progress to-date in executing against our strategic objectives and we are excited about the opportunities ahead for profitable growth through customer-focused innovation".
Conference Call
Diodes Incorporated will hold its third quarter conference call for all interested persons at 2 p.m. Pacific Time (5 p.m. Eastern Time) on November 1st, 2006 to discuss its 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 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 60 days.
About Diodes Incorporated
Diodes Incorporated (Nasdaq: DIOD) is a leading manufacturer and supplier of high-quality discrete and analog semiconductor products, primarily to the communications, computing, industrial, consumer electronics and automotive markets. The Company's corporate sales, marketing, engineering and logistics headquarters is located in Southern California, with two manufacturing facilities in Shanghai, China, a wafer fabrication plant in Kansas City, Missouri, engineering, sales, warehouse and logistics offices in Taipei, Taiwan and Hong Kong, and sales and support offices throughout the world. Diodes, Inc. recently acquired Anachip Corporation, a fabless analog IC company in Hsinchu Science Park, Taiwan.
Diodes, Inc.'s product focus is on subminiature surface-mount discrete devices, analog power management ICs and Hall-effect sensors all of which are widely used in end-user equipment 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. Potential risks and uncertainties include, but are not limited to, such factors as the integration of ADP within Diodes existing operations, the Company's ability to successfully make additional acquisitions, fluctuations in product demand, the 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, 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.
CONTACT:
Carl Wertz, Chief Financial Officer, Diodes Incorporated
(805) 446-4800
e-mail: carl_wertz@diodes.com
or
Crocker Coulson, President, CCG Investor Relations,
(310) 231-8600, Ext. 103,
e-mail: crocker.coulson@ccgir.com
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.
CONSOLIDATED CONDENSED INCOME STATEMENT and BALANCE SHEET FOLLOWS
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2006 2005 2006
Net sales $54,200,000 $92,575,000 $153,398,000 $248,876,000
Cost of goods
sold (1) 35,323,000 61,879,000 100,428,000 166,532,000
Gross profit 18,877,000 30,696,000 52,970,000 82,344,000
Selling and general
administrative
expenses (2) 7,581,000 11,825,000 21,469,000 34,824,000
Research and
development
expenses (3) 938,000 1,941,000 2,688,000 5,985,000
Loss (gain) on
disposal of fixed
assets -- 32,000 (105,000) 152,000
Total operating
expenses 8,519,000 13,798,000 24,052,000 40,961,000
Income from
operations 10,358,000 16,898,000 28,918,000 41,383,000
Other income
(expense)
Interest income 23,000 1,069,000 66,000 2,807,000
Interest expense (188,000) (89,000) (465,000) (363,000)
Other 116,000 (1,563,000) 95,000 (1,758,000)
(49,000) (583,000) (304,000) 686,000
Income before income
taxes and minority
interest 10,309,000 16,315,000 28,614,000 42,069,000
Income tax
provision (4) (1,621,000) (3,212,000) (4,523,000) (7,778,000)
Income before
minority interest 8,688,000 13,103,000 24,091,000 34,291,000
Minority interest in
joint venture
earnings (305,000) (333,000) (802,000) (824,000)
Net income $8,383,000 $12,770,000 $23,289,000 $33,467,000
Earnings per share
Basic $0.38 $0.50 $1.08 $1.31
Diluted $0.34 $0.45 $0.96 $1.19
Number of shares
used in computation
Basic 22,010,235 25,686,913 21,658,863 25,520,156
Diluted (5) 24,731,514 28,152,592 24,344,795 28,055,154
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED RECONCILIATION OF NET INCOME TO PRO FORMA NET INCOME
Pro forma consolidated statements of income are presented because we use it as an additional measure of our operating performance. Pro forma net income and pro forma net income per share should not be considered as alternatives to net income, earnings per share or other measures of consolidated operations and cash flow data prepared in accordance with accounting principles generally accepted in the United States of America, as indicators of our operating performance, or as alternatives to cash flow as a measure of liquidity. Pro forma consolidated statements of income are intended to present our operating results, excluding items described below, for the periods presented.
Pro forma net income Three Months Ended Nine Months Ended
and earnings per share
reconciliation September 30, September 30,
2005 2006 2005 2006
GAAP net income $8,383,000 $12,770,000 $23,289,000 $33,467,000
Pro forma adjustments:
Stock option expense
included in cost of
goods sold: -- 133,000 -- 399,000
Stock option expense
included in selling
and general
administrative
expenses: -- 1,355,000 -- 4,112,000
Stock option expense
included in
research and
development
expenses: -- 146,000 -- 439,000
Total stock option
expense -- 1,634,000 -- 4,950,000
Income tax benefit
related to stock
option expense -- 228,000 -- 661,000
Pro forma net income $8,383,000 $14,176,000 $23,289,000 $37,756,000
Diluted shares
used in computing
Pro forma
earnings per
share 24,731,514 28,152,592 24,344,795 28,055,154
Incremental shares
considered to be
outstanding: -- 499,355 -- 497,651
Adjusted diluted
shares used in
computing
Pro forma
earnings per
share 24,731,514 28,651,947 24,344,795 28,552,805
Pro forma earnings per
share
Basic $0.38 $0.55 $1.08 $1.48
Diluted $0.34 $0.49 $0.96 $1.32
1) For the quarter and nine months ended September 30, 2006, includes
$133,000 and $399,000 of stock option expense, respectively.
2) For the quarter and nine months ended September 30, 2006, includes
$1,355,000 and $4,112,000 of stock option expense, respectively.
3) For the quarter and nine months ended September 30, 2006, includes
$146,000 and $439,000 of stock option expense, respectively.
4) For the quarter and nine months ended September 30, 2006, includes
$228,000 and $661,000 of income tax benefit related to stock option
expense, respectively.
5) For the quarter and nine months ended September 30, 2006, 499,355 and
497,651 incremental shares are considered to be outstanding under FAS123R,
respectively.
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:
Three Months Ended
September 30,
(in thousands) 2005 2006
Net Income $8,383 $12,770
Plus:
Interest expense, net 165 (980)
Income tax provision 1,508 3,212
Depreciation and amortization 4,074 4,383
EBITDA $14,130 $19,385
Nine Months Ended
September 30,
(in thousands) 2005 2006
Net Income $23,288 $33,467
Plus:
Interest expense, net 399 (2,445)
Income tax provision 4,523 7,778
Depreciation and amortization 11,887 14,053
EBITDA $40,097 $52,853
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(Unaudited)
ASSETS
December 31, September 30,
2005 2006
CURRENT ASSETS (unaudited)
Cash and cash equivalents $73,288,000 $53,157,000
Short-term investments 40,348,000 56,139,000
Total cash and short-term
investments 113,636,000 109,296,000
Accounts receivable
Customers 48,348,000 70,049,000
Related parties 6,804,000 5,554,000
55,152,000 75,603,000
Less: Allowance for
doubtful receivables (534,000) (675,000)
54,618,000 74,928,000
Inventories 24,611,000 45,767,000
Deferred income taxes, current 2,541,000 2,565,000
Prepaid expenses and other
current assets 5,326,000 6,663,000
Prepaid income taxes -- 441,000
Total current assets 200,732,000 239,660,000
PROPERTY, PLANT AND EQUIPMENT, at
cost, net of accumulated
depreciation and amortization 68,930,000 89,168,000
DEFERRED INCOME TAXES, non current 8,466,000 11,043,000
OTHER ASSETS
Equity investment 5,872,000 --
Goodwill 5,090,000 24,093,000
Other 425,000 2,906,000
TOTAL ASSETS $289,515,000 $366,870,000
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, September 30,
2005 2006
(unaudited)
CURRENT LIABILITIES
Line of credit $3,000,000 $--
Accounts payable
Trade 18,619,000 37,250,000
Related parties 7,921,000 13,215,000
Accrued liabilities 19,782,000 27,756,000
Long-term debt, current portion 4,621,000 1,954,000
Capital lease obligations,
current portion 138,000 141,000
Total current liabilities 54,081,000 80,316,000
LONG-TERM DEBT, net of current
portion 4,865,000 3,709,000
CAPITAL LEASE OBLIGATIONS, net of
current portion 1,618,000 1,508,000
MINORITY INTEREST IN JOINT VENTURE 3,477,000 4,321,000
Total liabilities 64,041,000 89,854,000
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; 25,258,119
and 25,930,914 shares issued at
December 31, 2005 and September 30,
2006, respectively 16,839,000 17,355,000
Additional paid-in capital 94,664,000 111,357,000
Retained earnings 114,659,000 148,126,000
Less: 226,162,000 276,838,000
Accumulated other
comprehensive gain (loss) (688,000) 178,000
Total stockholders' equity 225,474,000 277,016,000
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY 289,515,000 366,870,000
SOURCE Diodes Incorporated
-0- 11/01/2006
/CONTACT: Carl Wertz, Chief Financial Officer of Diodes Incorporated,
+1-805-446-4800, carl_wertz@diodes.com; or Crocker Coulson, President of CCG
Investor Relations, +1-310-231-8600, ext. 103, crocker.coulson@ccgir.com, for
Diodes Incorporated/
/Web site: http://www.diodes.com /
(DIOD)
CO: Diodes Incorporated
ST: California
IN: CPR SEM
SU: ERN ERP CCA
MH-KA
-- LAW165 --
4093 11/01/2006 16:00 EST http://www.prnewswire.com
