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Diodes Incorporated Reports Third Quarter 2014 Financial Results
Achieves Record Revenue with Record Gross Profit
Third Quarter Highlights
- Revenue was a record
$233.8 million , an increase of 4.7 percent from the$223.2 million in the second quarter of 2014, and an increase of 4.1 percent from the$224.5 million in the third quarter of 2013; - Gross profit was a record
$74.7 million , compared to$70.3 million in the second quarter of 2014 and$69.6 million in the third quarter of 2013; - Gross profit margin was 32.0 percent, compared to 31.5 percent in the second quarter of 2014 and 31.0 percent in the third quarter of 2013;
- GAAP net income was
$19.4 million , or$0.40 per diluted share, compared to$17.4 million , or$0.36 per diluted share in the second quarter of 2014, and$13.6 million , or$0.28 per diluted share in the third quarter of 2013; - Non-GAAP adjusted net income was
$21.2 million , or$0.43 per diluted share, compared to$18.2 million , or$0.38 per diluted share, in the second quarter of 2014 and$15.8 million , or$0.33 per diluted share, in the third quarter of 2013; - Excluding
$2.4 million , net of tax, of share-based compensation expense, GAAP and non-GAAP adjusted net income would have increased by$0.05 per diluted share; and - Achieved
$27.3 million of cash flow from operations, and$13.8 million of free cash flow, including$13.5 million of capital expenditures. Net cash flow was$1.4 million , which includes the pay down of$15.2 million of long-term debt.
Commenting on the results, Dr.
Third Quarter 2014
Revenue for the third quarter of 2014 was a record
Gross profit for the third quarter of 2014 reached a record
Operating expenses for the third quarter of 2014 were
GAAP net income for the third quarter of 2014 was
Non-GAAP adjusted net income for the third quarter of 2014 was
The following is a summary reconciliation of GAAP net income to non-GAAP adjusted net income and per share data, net of tax (unaudited and in thousands, except per share data):
Three Months Ended | ||||
September 30, 2014 | ||||
GAAP net income | $ | 19,427 | ||
GAAP diluted earnings per share | $ | 0.40 | ||
Adjustments to reconcile net income to adjusted net income: | ||||
Retention costs | 182 | |||
Amortization of acquisition related intangible assets | 1,578 | |||
Non-GAAP adjusted net income | $ | 21,187 | ||
Non-GAAP adjusted diluted earnings per share | $ | 0.43 | ||
(See the reconciliation tables of net income to adjusted net income near the end of the release for further details.)
Included in the third quarter of 2014 GAAP and non-GAAP adjusted net income was approximately
EBITDA, which represents earnings before net interest expense, income tax, depreciation and amortization, was
Net cash provided by operating activities was
Balance Sheet
As of
Business Outlook
Dr. Lu concluded, “For the fourth quarter of 2014, we expect revenue to range 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: for the fourth quarter of 2014, we expect revenue to range between
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 | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | |||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||
NET SALES | $ | 233,777 | $ | 224,510 | $ | 666,980 | $ | 615,853 | ||||||||||
COST OF GOODS SOLD | 159,045 | 154,951 | 460,363 | 438,818 | ||||||||||||||
Gross profit | 74,732 | 69,559 | 206,617 | 177,035 | ||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||
Selling, general and administrative | 33,897 | 33,810 | 99,518 | 99,266 | ||||||||||||||
Research and development | 13,864 | 13,611 | 39,565 | 35,836 | ||||||||||||||
Amortization of acquisition related intangible assets | 1,987 | 1,871 | 5,960 | 6,075 | ||||||||||||||
Restructuring | — | — | — | 1,535 | ||||||||||||||
Gain (loss) on sale of assets | (20 | ) | 5 | (916 | ) | 47 | ||||||||||||
Total operating expenses | 49,728 | 49,297 | 144,127 | 142,759 | ||||||||||||||
Income from operations | 25,004 | 20,262 | 62,490 | 34,276 | ||||||||||||||
OTHER INCOME (EXPENSES) | ||||||||||||||||||
Interest income | 324 | 576 | 1,158 | 979 | ||||||||||||||
Interest expense | (1,074 | ) | (1,638 | ) | (3,489 | ) | (4,150 | ) | ||||||||||
Other | 2,050 | (1,706 | ) | 2,640 | 1,201 | |||||||||||||
Total other income (expenses) | 1,300 | (2,768 | ) | 309 | (1,970 | ) | ||||||||||||
Income before income taxes and noncontrolling interest | 26,304 | 17,494 | 62,799 | 32,306 | ||||||||||||||
INCOME TAX PROVISION | 6,172 | 3,604 | 14,370 | 11,653 | ||||||||||||||
NET INCOME | 20,132 | 13,890 | 48,429 | 20,653 | ||||||||||||||
Less: NET INCOME attributable to noncontrolling interest | (705 | ) | (271 | ) | (1,415 | ) | (325 | ) | ||||||||||
NET INCOME attributable to common stockholders | $ | 19,427 | $ | 13,619 | $ | 47,014 | $ | 20,328 | ||||||||||
EARNINGS PER SHARE attributable to common stockholders | ||||||||||||||||||
Basic | $ | 0.41 | $ | 0.29 | $ | 1.00 | $ | 0.44 | ||||||||||
Diluted | $ | 0.40 | $ | 0.28 | $ | 0.97 | $ | 0.43 | ||||||||||
Number of shares used in computation | ||||||||||||||||||
Basic | 47,548 | 46,605 | 47,047 | 46,260 | ||||||||||||||
Diluted | 48,736 | 48,023 | 48,385 | 47,584 | ||||||||||||||
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 September 30, 2014: |
|||||||||||
Operating |
Other Income |
Income Tax |
Net Income | ||||||||
Per-GAAP | $ | 19,427 | |||||||||
Earnings per share (Per-GAAP) | |||||||||||
Diluted | $ | 0.40 | |||||||||
Adjustments to reconcile net income to adjusted net income: | |||||||||||
Retention costs | 214 | — | (32 | ) | 182 | ||||||
Amortization of acquisition related intangible assets | 1,987 | — | (409 | ) | 1,578 | ||||||
Adjusted (Non-GAAP) | $ | 21,187 | |||||||||
Diluted shares used in computing earnings per share | 48,736 | ||||||||||
Adjusted earnings per share (Non-GAAP) | |||||||||||
Diluted | $ | 0.43 | |||||||||
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 September 30, 2013: |
|||||||||||||
Cost of Goods |
Operating |
Other Income |
Income Tax |
Net Income | |||||||||
Per-GAAP | $ | 13,619 | |||||||||||
Earnings per share (Per-GAAP) | |||||||||||||
Diluted | $ | 0.28 | |||||||||||
Adjustments to reconcile net income to adjusted net income:
|
|||||||||||||
Retention costs | — | 815 | — | (122 | ) | 693 | |||||||
Amortization of acquisition related intangible assets | — | 1,871 | — | (371 | ) | 1,500 | |||||||
Adjusted (Non-GAAP) | $ | 15,812 | |||||||||||
Diluted shares used in computing earnings per share | 48,023 | ||||||||||||
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 nine months ended September 30, 2014: |
|||||||||||||
Operating |
Other Income |
Income Tax |
Net Income | ||||||||||
Per-GAAP | $ | 47,014 | |||||||||||
Earnings per share (Per-GAAP) | |||||||||||||
Diluted | $ | 0.97 | |||||||||||
Adjustments to reconcile net income to adjusted net income:
|
|||||||||||||
Retention costs | 1,162 | — | (175 | ) | 987 | ||||||||
Gain on sale of assets | (1,176 | ) | — | 200 | (976 | ) | |||||||
Amortization of acquisition related intangible assets | 5,960 | — | (1,235 | ) | 4,725 | ||||||||
Adjusted (Non-GAAP) | $ | 51,750 | |||||||||||
Diluted shares used in computing earnings per share | 48,385 | ||||||||||||
Adjusted earnings per share (Non-GAAP) | |||||||||||||
Diluted | $ | 1.07 | |||||||||||
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 nine months ended September 30, 2013: |
|||||||||||||
Cost of Goods |
Operating |
Other Income |
Income Tax |
Net Income | |||||||||
Per-GAAP | $ | 20,328 | |||||||||||
Earnings per share (Per-GAAP) | |||||||||||||
Diluted | $ | 0.43 | |||||||||||
Adjustments to reconcile net income to adjusted net income:
|
|||||||||||||
Inventory valuations | 5,484 | — | — | (823 | ) | 4,661 | |||||||
Acquisition costs | — | 600 | — | 110 | 710 | ||||||||
Retention costs | — | 2,115 | — | (317 | ) | 1,798 | |||||||
Restructuring costs | — | 1,533 | — | (406 | ) | 1,127 | |||||||
Amortization of acquisition related intangible assets | — | 6,075 | — | (1,285 | ) | 4,790 | |||||||
Tax expense related to tax audit | — | — | — | 5,447 | 5,447 | ||||||||
Adjusted (Non-GAAP) | $ | 38,862 | |||||||||||
Diluted shares used in computing earnings per share | 47,584 | ||||||||||||
Adjusted earnings per share (Non-GAAP) | |||||||||||||
Diluted | $ | 0.82 | |||||||||||
Note: Included in GAAP and non-GAAP adjusted net income was approximately
ADJUSTED NET INCOME (Non-GAAP)
This measure consists of accounting principles generally accepted in
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.
Gain on sale of assets –During the second quarter of 2014, the Company sold a building located in
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 unusual 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 second 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 unusual event such as an acquisition and facilitates comparisons with the results of other periods that may not reflect such costs.
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
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 third quarter of 2014 is a non-GAAP financial measure, which is calculated by taking cash flow from operations less capital expenditures. For the third 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 | |||||||
September 30, | |||||||
2014 | 2013 | ||||||
Net income (per-GAAP) | $ | 19,427 | $ | 13,619 | |||
Plus: | |||||||
Interest expense, net | 750 | 1,062 | |||||
Income tax provision | 6,172 | 3,604 | |||||
Depreciation and amortization | 18,921 | 18,459 | |||||
EBITDA (Non-GAAP) | $ | 45,270 | $ | 36,744 | |||
Nine Months Ended | |||||||
September 30, | |||||||
2014 | 2013 | ||||||
Net income (per-GAAP) | $ | 47,014 | $ | 20,328 | |||
Plus: | |||||||
Interest expense, net | 2,331 | 3,171 | |||||
Income tax provision | 14,370 | 11,653 | |||||
Depreciation and amortization | 57,254 | 54,894 | |||||
EBITDA (Non-GAAP) | $ | 120,969 | $ | 90,046 |
DIODES INCORPORATED AND SUBSIDIARIES | |||||||
CONSOLIDATED CONDENSED BALANCE SHEETS | |||||||
ASSETS | |||||||
(in thousands) |
|||||||
September 30, | December 31, | ||||||
2014 | 2013 | ||||||
(unaudited) | |||||||
CURRENT ASSETS | |||||||
Cash and cash equivalents | $ | 236,849 | $ | 196,635 | |||
Short-term investments | 14,165 | 22,922 | |||||
Accounts receivable, net | 193,639 | 192,267 | |||||
Inventories | 189,119 | 180,396 | |||||
Deferred income taxes, current | 9,828 | 10,513 | |||||
Prepaid expenses and other | 52,130 | 47,352 | |||||
Total current assets | 695,730 | 650,085 | |||||
PROPERTY, PLANT AND EQUIPMENT, net | 312,176 | 322,013 | |||||
DEFERRED INCOME TAXES, non current | 24,597 | 28,237 | |||||
OTHER ASSETS | |||||||
Goodwill | 83,542 | 84,714 | |||||
Intangible assets, net | 47,391 | 53,571 | |||||
Other | 24,804 | 23,638 | |||||
Total assets | $ | 1,188,240 | $ | 1,162,258 |
DIODES INCORPORATED AND SUBSIDIARIES | |||||||||
CONSOLIDATED CONDENSED BALANCE SHEETS | |||||||||
LIABILITIES AND EQUITY | |||||||||
(in thousands, except share data) |
|||||||||
September 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
(unaudited) | |||||||||
CURRENT LIABILITIES | |||||||||
Lines of credit | $ | 2,009 | $ | 5,814 | |||||
Accounts payable | 97,367 | 89,212 | |||||||
Accrued liabilities | 65,390 | 60,684 | |||||||
Income tax payable | 3,777 | 1,206 | |||||||
Total current liabilities | 168,543 | 156,916 | |||||||
LONG-TERM DEBT, net of current portion | 147,533 | 182,799 | |||||||
OTHER LONG-TERM LIABILITIES | 78,134 | 78,866 | |||||||
Total liabilities | 394,210 | 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; | |||||||||
47,572,500 and 46,680,973 issued and outstanding at September 30, 2014 and | |||||||||
December 31, 2013, respectively | 31,717 | 31,120 | |||||||
Additional paid-in capital | 305,143 | 289,668 | |||||||
Retained earnings | 473,342 | 426,328 | |||||||
Accumulated other comprehensive loss | (58,847 | ) | (44,374 | ) | |||||
Total Diodes Incorporated stockholders' equity | 751,355 | 702,742 | |||||||
Noncontrolling interest | 42,675 | 40,935 | |||||||
Total equity | 794,030 | 743,677 | |||||||
Total liabilities and equity | $ | 1,188,240 | $ | 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