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Diodes Incorporated Reports Third Quarter 2003 Results with Record Revenue; New Product Sales & Strong Asian Market Drive 15% Year-over-Year Revenue Growth
WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)--Oct. 28, 2003--Diodes Incorporated (Nasdaq:DIOD), a leading manufacturer and supplier of high quality discrete semiconductors, today reported financial results for the third quarter of fiscal year 2003 ended September 30, 2003.
Third Quarter Highlights:
-- Revenue increased 15.4% year-over-year and 4.6% sequentially
to a record $34.9 million
-- Net income increased 45% to $2.6 million, or $0.26 per share,
up from $1.8 million, or $0.20 per share, in 3Q02
-- New product revenue grew to a record 13% of sales
-- Gross margin improved 120 basis points sequentially
Revenues for the third quarter of 2003 were a record $34.9 million, a sequential increase of 4.6% from the second quarter of 2003, and an increase of 15.4% from the third quarter of 2002. Net income for the quarter jumped 45% to $2.6 million, compared to $1.8 million for the three months ended September 30, 2002, and rose 18% sequentially. Earnings per share were $0.26 for the third quarter of 2003, as compared to $0.20 for the same period last year.
For the first nine months of 2003, the Company earned $6.7 million, or $0.70 per share, on revenues of $97.8 million, as compared to net income of $3.5 million, or $0.40 per share, on revenues of $87.2 million for the same period in 2002.
Commenting on the quarter, C.H. Chen, President and CEO of Diodes Incorporated, said, "We are pleased with our strong third quarter results. Diodes posted record revenue and very strong net income growth. Over the past two years we have been targeting the fast growing advanced consumer electronics and mobile computing markets with our higher margin, differentiated discrete products. We have entered key accounts and gained numerous design wins in consumer electronics and portable communications. We believe we have just begun to benefit from the upswing in those markets."
Diodes' growth in the third quarter was driven by a combination of the strong Asian market, which accounted for 56% of sales, up from 53% last quarter, and demand for the Company's new next-generation products.
Gross margin for the third quarter of 2003 increased to $9.2 million, or 26.2% of sales, compared to $8.3 million, or 25.0% of sales, in the second quarter of this year and $7.9 million, or 26.0%, in the third quarter of 2002. The increase was due to product mix changes as well as higher selling prices from the Company's new differentiated products, partially offset by pricing pressures on lower margin discrete commodity products. In addition, margins were hampered by substantially lower selling prices for wafer products.
For the quarter, SG&A expenses were $5.1 million as compared to $4.8 million in the second quarter of 2003 and $4.3 million in the comparable quarter last year. The Company continues to invest in expanding its sales and marketing footprint in both Asia and Europe and is providing increased selling incentives associated with the higher revenue. Therefore, SG&A expenses as a percentage of sales increased to 14.6% from 14.4% in the second quarter of this year and 14.2% in the prior-year quarter. Research and development expenses climbed to $0.6 million, or 1.8% of revenue, from $0.5 million, or 1.5%, in the second quarter of 2003, reflecting the Company's commitment to bring proprietary technology and advanced devices to market.
Operating margins, impacted by a $300,000 reserve at Diodes-FabTech for excess equipment due to production line re-engineering, decreased to 9.0% in the third quarter, compared to 10.1% generated in the third quarter of 2002. Operating margins for the first nine months of 2003 increased to 9.5% compared to 6.5% for the same period last year.
Other income in the third quarter of 2003 was favorably impacted by the receipt of a $250,000 high-technology grant at Diodes-China, partially offset by currency losses, primarily in Taiwan. In addition, a 36% decline in long-term debt and lower interest rates sharply reduced interest expense.
Growth in net income outpaced the rise in operating income as the Company's effective tax rate decreased to 13.5% from 29.4% in the year-ago quarter, and 22.3% in the second quarter of 2003, as more profit was earned by the Company's Asian subsidiaries in lower tax jurisdictions. The Company is benefiting from its Hong Kong subsidiary, established last year, not only due to its lower tax rates, but also as another entry point into the Asia market.
"We are pleased with the strong demand for our next-generation products," Chen continued. "During the third quarter, sales of new products grew to represent 13% of total revenue, up from 12.5% last quarter and up from 7% in the third quarter of 2002. This is a record high. Sales of our performance Schottky and Zener product lines and multi-chip arrays were particularly strong during the quarter, as these products fulfill the growing need for high efficiency, compact essential electronic components.
"We have a pipeline of new products, which will deliver substantial improvements in cost, performance and size, and add to our comprehensive portfolio of industry-leading Schottky and Zener devices. To intensify our new product development efforts, we added two more senior engineers to our team in the quarter."
At September 30, 2003, Diodes had $9.8 million in cash and cash equivalents, $10.6 million in long-term debt, $7.4 million outstanding on its revolving credit line, $31.5 million in available credit facilities and $65.7 million in shareholders' equity.
Mr. Chen concluded, "We are excited about our prospects and believe that our business strategy has positioned Diodes to continue to outpace the growth of the discrete marketplace as the anticipated recovery in semiconductor demand unfolds. Entering the fourth quarter, shipments for October have been good and orders for November delivery in Asia remain strong, while our orders in North America and Europe have accelerated. Order cycles appear to be lengthening and inventory at our distributors remains relatively low. We expect to see a positive trend in revenue and earnings for the fourth quarter and will provide more specific guidance as our order volume progresses."
Conference Call
Diodes Incorporated will hold its third quarter conference call for all interested persons at 8 a.m. PST (11 a.m. EST) today 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 90 days.
About Diodes Incorporated
Diodes Incorporated (Nasdaq:DIOD) is a leading manufacturer and supplier of high-quality discrete semiconductor products, primarily to the communications, computing, industrial, consumer electronics and automotive markets. The Company operates three Far East subsidiaries, Diodes-China (QS-9000 and ISO-14001 certified) in Shanghai, Diodes-Taiwan (ISO-9000 certified) in Taipei and Diodes-Hong Kong. Diodes-China's manufacturing focus is on subminiature surface-mount devices destined for wireless devices, notebook, flat panel display, digital camera, mobile handset, set-top box, DC-to-DC conversion and automotive applications, among others. Diodes-Taiwan is our Asia-Pacific sales, logistics and distribution center. Diodes-Hong Kong covers sales, warehouse and logistics functions. The Company's 5" wafer foundry, Diodes-FabTech (QS-9000 certified), specializes in Schottky products and is located just outside Kansas City, Missouri. The Company's ISO-9000 corporate sales, marketing, engineering and logistics headquarters is located in Southern California. 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 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, risks of foreign operations, 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
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2002 2003 2002 2003
------------ ------------ ------------ ------------
Net sales $30,287,000 $34,941,000 $87,157,000 $97,785,000
Cost of goods sold 22,420,000 25,779,000 67,807,000 72,816,000
------------ ------------ ------------ ------------
Gross profit 7,867,000 9,162,000 19,350,000 24,969,000
Selling, general
and administrative
expenses 4,291,000 5,089,000 12,395,000 14,097,000
Research and
development
expenses 459,000 612,000 1,231,000 1,358,000
Loss on sale and
impairment of
fixed assets 56,000 300,000 94,000 244,000
------------ ------------ ------------ ------------
Total operating
expenses 4,806,000 6,001,000 13,720,000 15,699,000
Operating
income 3,061,000 3,161,000 5,630,000 9,270,000
Other income
(expense)
Interest
expense, net (281,000) (209,000) (895,000) (672,000)
Other (159,000) 126,000 (28,000) 29,000
------------ ------------ ------------ ------------
(440,000) (83,000) (923,000) (643,000)
Income from
operations before
income taxes
and minority
interest 2,621,000 3,078,000 4,707,000 8,627,000
Income tax benefit
(provision) (771,000) (416,000) (949,000) (1,684,000)
------------ ------------ ------------ ------------
Income from
operations before
minority interest 1,850,000 2,662,000 3,758,000 6,943,000
Minority interest
in joint venture
earnings (83,000) (99,000) (219,000) (285,000)
------------ ------------ ------------ ------------
Net income $1,767,000 $2,563,000 $3,539,000 $6,658,000
============ ============ ============ ============
Earnings per share
Basic $0.22 $0.30 $0.43 $0.79
Diluted $0.20 $0.26 $0.40 $0.70
============ ============ ============ ============
Weighted average
shares outstanding
Basic 8,190,887 8,542,328 8,177,506 8,436,987
Diluted 8,862,272 9,698,012 8,834,311 9,502,693
============ ============ ============ ============
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
December 31, September 30,
2002 2003
------------- -------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $7,284,000 $9,783,000
Accounts receivable
Customers 19,387,000 24,150,000
Related parties 3,138,000 3,906,000
------------- -------------
22,525,000 28,056,000
Less: Allowance for doubtful
receivables 353,000 330,000
------------- -------------
22,172,000 27,726,000
Inventories 14,916,000 15,270,000
Deferred income taxes, current 4,338,000 4,342,000
Prepaid expenses, income taxes and other
current assets 2,228,000 2,460,000
------------- -------------
Total current assets 50,938,000 59,581,000
PROPERTY, PLANT AND EQUIPMENT, at cost,
net of accumulated depreciation and
amortization 44,693,000 47,504,000
DEFERRED INCOME TAXES, non-current 3,205,000 2,280,000
OTHER ASSETS
Goodwill 5,090,000 5,090,000
Other 1,084,000 1,287,000
------------- -------------
TOTAL ASSETS $105,010,000 $115,742,000
============= =============
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, September 30,
2002 2003
------------- -------------
(Unaudited)
CURRENT LIABILITIES
Line of credit $3,025,000 $7,419,000
Accounts payable
Trade 9,039,000 10,420,000
Related parties 3,361,000 3,706,000
Accrued liabilities 8,693,000 9,498,000
Current portion of long-term debt
Related party 2,500,000 2,500,000
Other 3,333,000 3,333,000
Current portion of capital lease
obligations 157,000 160,000
------------- -------------
Total current liabilities 30,108,000 37,036,000
LONG-TERM DEBT, net of current portion
Related party 6,250,000 4,375,000
Other 6,333,000 3,833,000
CAPITAL LEASE OBLIGATIONS, net of current
portion 2,495,000 2,370,000
MINORITY INTEREST IN JOINT VENTURE 2,145,000 2,431,000
STOCKHOLDERS' EQUITY
Class A convertible 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; 30,000,000 shares authorized;
9,292,764 and 9,644,261 shares issued at
December 31, 2002 and September 30,
2003, respectively 6,195,000 6,428,000
Additional paid-in capital 8,060,000 8,928,000
Retained earnings 45,684,000 52,342,000
------------- -------------
59,939,000 67,698,000
Less:
Treasury stock - 1,075,672 shares of
common stock, at cost 1,782,000 1,782,000
Accumulated other comprehensive loss 478,000 219,000
------------- -------------
2,260,000 2,001,000
Total stockholders' equity 57,679,000 65,697,000
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $105,010,000 $115,742,000
============= =============
CONTACT: Diodes Incorporated
Carl Wertz, 805-446-4800
or
CCG
Crocker Coulson, 818-789-0100
crocker.coulson@ccgir.com
SOURCE: Diodes Incorporated
