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Diodes Incorporated Reports Second Quarter 2013 Financial Results
Achieves Record Revenue with Continued Gross Margin Improvement
Second Quarter Highlights
- Revenue was
$214.4 million , an increase of 21.1 percent from the$177.0 million in the first quarter 2013, and an increase of 34.6 percent from the$159.2 million in the second quarter 2012; - GAAP gross profit was
$61.3 million , including a$3.7 million inventory valuation adjustment related to the BCD acquisition, and GAAP gross margin was 28.6 percent; - Non-GAAP adjusted gross profit was
$64.9 million compared to non-GAAP gross profit of$48.0 million in first quarter 2013, and non-GAAP gross profit of$41.0 million in second quarter 2012; - Non-GAAP adjusted gross profit margin was 30.3 percent compared to non-GAAP gross margin of 27.1 percent in first quarter 2013, and non-GAAP gross margin of 25.8 percent in the second quarter 2012;
- GAAP net income was
$8.6 million , or$0.18 per diluted share, compared to first quarter 2013 GAAP net loss of$1.9 million , or($0.04) per share, and second quarter 2012 GAAP net income of$6.7 million , or$0.14 per diluted share; - Non-GAAP adjusted net income was
$15.5 million , or$0.33 per diluted share, compared to non-GAAP adjusted net income of$7.5 million , or$0.16 per diluted share, in first quarter 2013, and non-GAAP adjusted net income of$6.4 million , or$0.14 per diluted share, in second quarter 2012; - Excluding
$2.1 million of share-based compensation expense, GAAP and non-GAAP adjusted net income would have increased by$0.05 per diluted share; and - Achieved
$29.8 million cash flow from operations,$13.3 million net cash flow, and$22.0 million of free cash flow.
Commenting on the results, Dr.
“During the quarter, we were also able to improve our non-GAAP gross margin to 30.3 percent, which excludes the BCD inventory valuation adjustment, due to improved product mix, lower gold prices, copper wire conversion, as well as our cost reduction efforts. Furthermore, the integration of BCD has been progressing as we move ahead of schedule in transferring BCD products into our
“Additionally, our continued revenue growth and improved cost controls are helping to move operating expenses toward our target model of 20 percent on a non-GAAP basis. As a result of these collective factors, we reported solid earnings growth and generated strong cash flow for the quarter. In summary, we expect to achieve further progress in the third quarter as we continue to successfully execute on our business model.”
Revenue for the second quarter 2013 was
GAAP gross profit was
Non-GAAP adjusted gross profit for the second quarter 2013 was
Second quarter 2013 GAAP net income was
Second quarter 2013 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 | ||||
June 30, 2013 | ||||
GAAP net income | $ | 8,635 | ||
GAAP diluted earnings per share | $ | 0.18 | ||
Adjustments to reconcile net income to adjusted net income: |
||||
Inventory valuations | 3,108 | |||
Restructuring | 1,127 | |||
Retention costs | 829 | |||
Amortization of acquisition related intangible assets | 1,825 | |||
Non-GAAP adjusted net income | $ | 15,523 | ||
Non-GAAP adjusted diluted earnings per share | $ | 0.33 | ||
(See the reconciliation tables of net income to adjusted net income near the end of the release for further details.)
Included in second quarter 2013 GAAP and non-GAAP adjusted net income was approximately
EBITDA, which represents earnings before net interest expense, income tax, depreciation and amortization, for the second quarter 2013 was
As of
Business Outlook
Dr. Lu concluded, “As we look to the third quarter of 2013, we expect continued revenue growth with revenue ranging between
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: furthermore, the integration of BCD has been progressing as we move ahead of schedule in transferring BCD products into our
Recent news releases, annual reports and
DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share data) |
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Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
NET SALES | $ | 214,379 | $ | 159,239 | $ | 391,343 | $ | 303,902 | ||||||||
COST OF GOODS SOLD | 153,086 | 118,211 | 283,867 | 229,168 | ||||||||||||
Gross profit | 61,293 | 41,028 | 107,476 | 74,734 | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Selling, general and administrative | 35,080 | 24,760 | 65,456 | 46,906 | ||||||||||||
Research and development | 12,145 | 8,218 | 22,225 | 15,382 | ||||||||||||
Amortization of acquisition related intangible assets | 2,295 | 1,103 | 4,204 | 2,198 | ||||||||||||
Restructuring |
1,535 | - | 1,535 | - | ||||||||||||
Gain on sale of assets | - | (1,357 | ) | 42 | (3,556 | ) | ||||||||||
Total operating expenses | 51,055 | 32,724 | 93,462 | 60,930 | ||||||||||||
Income from operations | 10,238 | 8,304 | 14,014 | 13,804 | ||||||||||||
OTHER INCOME (EXPENSES) | ||||||||||||||||
Interest income | 323 | 115 | 403 | 287 | ||||||||||||
Interest expense | (1,567 | ) | (171 | ) | (2,512 | ) | (294 | ) | ||||||||
Amortization of debt discount | - | - | - | - | ||||||||||||
Other | 1,521 | 307 | 2,907 | 945 | ||||||||||||
Total other income (expenses) | 277 | 251 | 798 | 938 | ||||||||||||
Income before income taxes and noncontrolling interest | 10,515 | 8,555 | 14,812 | 14,742 | ||||||||||||
INCOME TAX PROVISION | 1,475 | 856 | 8,049 | 1,474 | ||||||||||||
NET INCOME | 9,040 | 7,699 | 6,763 | 13,268 | ||||||||||||
Less: NET INCOME attributable to noncontrolling interest | (405 | ) | (1,046 | ) | (54 | ) | (1,744 | ) | ||||||||
NET INCOME attributable to common stockholders | $ | 8,635 | $ | 6,653 | $ | 6,709 | $ | 11,524 | ||||||||
EARNINGS PER SHARE attributable to common stockholders | ||||||||||||||||
Basic | $ | 0.19 | $ | 0.15 | $ | 0.15 | $ | 0.25 | ||||||||
Diluted | $ | 0.18 | $ | 0.14 | $ | 0.14 | $ | 0.25 | ||||||||
Number of shares used in computation | ||||||||||||||||
Basic | 46,148 | 45,642 | 46,085 | 45,551 | ||||||||||||
Diluted | 47,507 | 46,859 | 47,383 | 46,916 | ||||||||||||
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 June 30, 2013: |
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Cost of |
Operating |
Other |
Income Tax |
Net Income | ||||||||
Per-GAAP | $ | 8,635 | ||||||||||
Earnings per share (Per-GAAP) | ||||||||||||
Diluted | $ | 0.18 | ||||||||||
Adjustments to reconcile net income to adjusted net income: |
||||||||||||
Inventory valuations | 3,656 | - | - | (548 | ) | 3,108 | ||||||
Restructuring | - | 1,533 | - | (406 | ) | 1,127 | ||||||
Retention costs | - | 975 | - | (146 | ) | 829 | ||||||
Amortization of acquisition related intangible assets | - | 2,295 | - | (470 | ) | 1,825 | ||||||
Adjusted (Non-GAAP) | $ | 15,524 | ||||||||||
Diluted shares used in computing earnings per share |
47,507 | |||||||||||
Adjusted earnings per share (Non-GAAP) | ||||||||||||
Diluted | $ | 0.33 | ||||||||||
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 June 30, 2012: |
||||||||||||
Operating |
Other |
Income Tax |
Net Income | |||||||||
Per-GAAP | $ | 6,653 | ||||||||||
Earnings per share (Per-GAAP) | ||||||||||||
Diluted | $ | 0.14 | ||||||||||
Adjustments to reconcile net income to adjusted net income: |
||||||||||||
Amortization of acquisition related intangible assets | 1,103 | - | (259 | ) | 844 | |||||||
Gain on sale of assets | (1,330 | ) | - | 226 | (1,104 | ) | ||||||
Adjusted (Non-GAAP) | $ | 6,393 | ||||||||||
Diluted shares used in computing earnings per share |
46,859 | |||||||||||
Adjusted earnings per share (Non-GAAP) | ||||||||||||
Diluted | $ | 0.14 | ||||||||||
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 six months ended June 30, 2013: |
||||||||||||
Cost of |
Operating |
Other |
Income Tax |
Net Income | ||||||||
Per-GAAP | $ | 6,709 | ||||||||||
Earnings per share (Per-GAAP) | ||||||||||||
Diluted | $ | 0.14 | ||||||||||
Adjustments to reconcile net income to adjusted net income: |
||||||||||||
Inventory valuations | 5,484 | - | - | (823 | ) | 4,661 | ||||||
Acquisition costs | - | 600 | - | 110 | 710 | |||||||
Retention costs | - | 1,300 | - | (195 | ) | 1,105 | ||||||
Restructuring | - | 1,533 | - | (406 | ) | 1,127 | ||||||
Amortization of acquisition related intangible assets | - | 4,204 | - | (913 | ) | 3,291 | ||||||
Tax expense related to tax audit | - | - | - | 5,447 | 5,447 | |||||||
Adjusted (Non-GAAP) | $ | 23,051 | ||||||||||
Diluted shares used in computing earnings per share |
47,383 | |||||||||||
Adjusted earnings per share (Non-GAAP) | ||||||||||||
Diluted | $ | 0.49 | ||||||||||
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 six months ended June 30, 2012: |
||||||||||||
Operating |
Other |
Income Tax |
Net Income | |||||||||
Per-GAAP | $ | 11,524 | ||||||||||
Earnings per share (Per-GAAP) | ||||||||||||
Diluted | $ | 0.25 | ||||||||||
Adjustments to reconcile net income to adjusted net income: |
||||||||||||
Amortization of acquisition related intangible assets | 2,198 | - | (549 | ) | 1,649 | |||||||
Gain on sale of assets | (3,452 | ) | - | 735 | (2,717 | ) | ||||||
Adjusted (Non-GAAP) | $ | 10,456 | ||||||||||
Diluted shares used in computing earnings per share |
46,916 | |||||||||||
Adjusted earnings per share (Non-GAAP) | ||||||||||||
Diluted | $ | 0.22 | ||||||||||
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, which is then adjusted solely for the purpose of adjusting for inventory valuations, restructuring, acquisition costs, retention costs, amortization of acquisition related intangible assets, tax payments related to tax audit and gain on sale of assets, as discussed below. Excluding inventory valuations, restructuring, acquisition costs, retention costs, tax payments related to tax audit and gain on sale of assets 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
Detail of non-GAAP adjustments:
Inventory valuations – The Company excluded cost incurred for inventory valuations. The Company adjusted the inventory acquired from the
Restructuring – The Company has recorded restructuring charges to reduce its cost structure in order to enhance operating effectiveness and improve profitability. These restructuring activities related to our
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 as that was when the costs were incurred and services were received of 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 an enhanced view of certain costs the Company may incur from time to time and facilitates comparisons with the results of other periods that may not reflect such costs.
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 allocated to the assets through purchase 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 across other companies with respect to this expense.
Tax expense related to tax audit – The Company excluded additional tax expense in regard to a tax audit of the
Gain on sale of assets – The Company excluded the gain recorded for the sale of assets. During the second quarter 2012, the Company sold an intangible asset located in
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 inventory valuations, restructuring, acquisition costs, retention costs, amortization of acquisition related intangible assets, tax payments related to tax audit and gain on sale of assets, as discussed above. Excluding inventory valuations, restructuring, acquisition costs, retention costs, tax payments related to tax audit and gain on sale of assets 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. 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.
ADJUSTED GROSS PROFIT
Adjusted gross profit (Non-GAAP) - This measure consists of GAAP gross profit, which is then adjusted solely for the purpose of adjusting for inventory valuations (as described above) related to the acquisition of BCD. Excluding inventory valuations provides investors with a better depiction of the Company’s gross profit and provides a more informed baseline for modeling future gross profit. Presentation of the non-GAAP measure 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 measure is useful to investors because it provides 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.
Three Months Ended | Three Months Ended | Three Months Ended | ||||||||||||||
June 30, 2013 | March 31, 2013 | June 30, 2012 | ||||||||||||||
unaudited | unaudited | unaudited | ||||||||||||||
GAAP gross profit | $ | 61,293 | $ | 46,183 | $ | 41,028 | ||||||||||
GAAP gross profit margin | 28.6 | % | 26.1 | % | 25.8 | % | ||||||||||
Adjustments to reconcile GAAP gross profit |
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to non-GAAP adjusted gross profit: |
||||||||||||||||
Inventory valuations | 3,656 | 1,828 | - | |||||||||||||
Non-GAAP adjusted gross profit | $ | 64,949 | $ | 48,011 | $ | 41,028 | ||||||||||
Non-GAAP gross profit margin | 30.3 | % | 27.1 | % | 25.8 | % | ||||||||||
CASH FLOW ITEMS
Free cash flow (FCF) (Non-GAAP)
FCF for the second quarter of 2013 is a non-GAAP financial measure, which is calculated by taking cash flow from operations less capital expenditures. For the second quarter of 2013, 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 | ||||||
June 30, | ||||||
2013 | 2012 | |||||
Net income (per-GAAP) | $ | 8,635 | $ | 6,653 | ||
Plus: | ||||||
Interest expense, net | 1,244 | 56 | ||||
Income tax provision | 1,475 | 856 | ||||
Depreciation and amortization | 18,877 | 15,590 | ||||
EBITDA (Non-GAAP) | $ | 30,231 | $ | 23,155 | ||
Six Months Ended | ||||||
June 30, | ||||||
2013 | 2012 | |||||
Net income (per-GAAP) | $ | 6,709 | $ | 11,524 | ||
Plus: | ||||||
Interest expense, net | 2,109 | 7 | ||||
Income tax provision | 8,049 | 1,474 | ||||
Depreciation and amortization | 36,435 | 31,363 | ||||
EBITDA (Non-GAAP) | $ | 53,302 | $ | 44,368 |
DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS |
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ASSETS (in thousands) |
||||||||
June 30, | December 31, | |||||||
2013 | 2012 | |||||||
CURRENT ASSETS | (unaudited) | |||||||
Cash and cash equivalents | $ | 213,546 | $ | 157,121 | ||||
Accounts receivable, net | 181,878 | 152,073 | ||||||
Inventories | 186,786 | 153,293 | ||||||
Deferred income taxes, current | 12,305 | 9,995 | ||||||
Prepaid expenses and other | 48,371 | 18,928 | ||||||
Total current assets | 642,886 | 491,410 | ||||||
PROPERTY, PLANT AND EQUIPMENT, net | 331,287 | 243,296 | ||||||
DEFERRED INCOME TAXES, non current | 31,959 | 36,819 | ||||||
OTHER ASSETS | ||||||||
Goodwill | 86,233 | 87,359 | ||||||
Intangible assets, net | 56,319 | 44,337 | ||||||
Other | 22,890 | 16,842 | ||||||
Total assets | $ | 1,171,574 | $ | 920,063 |
DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS |
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LIABILITIES AND EQUITY (in thousands, except share data) |
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June 30, | December 31, | |||||||||
2013 | 2012 | |||||||||
CURRENT LIABILITIES | (unaudited) | |||||||||
Lines of credit | $ | 4,507 | $ | 7,629 | ||||||
Accounts payable | 107,047 | 64,072 | ||||||||
Accrued liabilities | 63,070 | 41,139 | ||||||||
Income tax payable | 1,456 | 678 | ||||||||
Total current liabilities | 176,080 | 113,518 | ||||||||
LONG-TERM DEBT, net of current portion | 209,337 | 44,131 | ||||||||
OTHER LONG-TERM LIABILITIES | 58,246 | 41,974 | ||||||||
Total liabilities | 443,663 | 199,623 | ||||||||
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; | ||||||||||
46,327,031 and 46,010,815 issued and outstanding at June 30, 2013 and | ||||||||||
December 31, 2012, respectively | 30,885 | 30,674 | ||||||||
Additional paid-in capital | 288,284 | 280,571 | ||||||||
Retained earnings | 406,505 | 399,796 | ||||||||
Accumulated other comprehensive loss | (41,070 | ) | (33,856 | ) | ||||||
Total Diodes Incorporated stockholders' equity | 684,604 | 677,185 | ||||||||
Noncontrolling interest | 43,307 | 43,255 | ||||||||
Total equity | 727,911 | 720,440 | ||||||||
Total liabilities and equity | $ | 1,171,574 | $ | 920,063 |
Source:
Company Contact:
Diodes Incorporated
Laura Mehrl, 972-987-3959
Director of Investor Relations
laura_mehrl@diodes.com
or
Investor Relations Contact:
Shelton Group
Leanne Sievers, 949-224-3874
EVP, Investor Relations
lsievers@sheltongroup.com