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Diodes Incorporated Reports Third Quarter 2015 Financial Results
Gains LTM Market Share Despite Challenging Market Conditions; Announces
Third Quarter Highlights
- Revenue was
$208.9 million , a decrease of 4.8 percent from the$219.5 million in the second quarter 2015 and a decrease of 10.6 percent from the$233.8 million in the third quarter 2014. Third quarter revenue reflected a 56 percent decline in assembly test manufacturing services, while revenue excluding manufacturing services was down only 1.5 percent sequentially; - Gross profit was
$61.6 million , compared to$69.4 million in the second quarter 2015 and$74.7 million in the third quarter 2014; - Gross profit margin was 29.5 percent, compared to 31.6 percent in the second quarter 2015 and 32.0 percent in the third quarter 2014;
- GAAP net income was
$2.8 million , or$0.06 per diluted share, compared to second quarter 2015 of$15.1 million , or$0.31 per diluted share, and third quarter 2014 of$19.4 million , or$0.40 per diluted share; - Non-GAAP adjusted net income was
$6.3 million , or$0.13 per diluted share, compared to$16.6 million , or$0.34 per diluted share, in second quarter 2015 and$21.2 million , or$0.43 per diluted share, in third quarter 2014; - Excluding
$2.7 million , net of tax, non-cash share-based compensation expense, GAAP and non-GAAP adjusted net income would have increased by$0.05 per diluted share; and - Achieved
$45.5 million of cash flow from operations, and($2.6) million of free cash flow, including$48.1 million of capital expenditures primarily for theChengdu site expansion. Net cash flow was($5.8) million , which includes the pay down of$6.1 million of long-term debt.
Commenting on the results, Dr.
Dr. Lu concluded, “We currently expect this weak environment and the distributor inventory adjustments to extend into the fourth quarter so have taken additional measures to carefully manage expenses, including reductions in travel and vendor expenses as well as a freeze on new hires. Since we are cautiously optimistic for overall improvements in 2016, we expect these actions to be temporary and do not anticipate the need for more aggressive steps. Looking forward, I continue to believe Diodes’ increased focus on automotive, industrial and the high-volume portable and wearable markets will be key drivers of our business in the coming year.”
Third Quarter 2015
Revenue for the third quarter 2015 was
Gross profit for the third quarter 2015 was
GAAP operating expenses for the third quarter 2015 were
Income taxes during the first, second and third quarters of each year are accrued using an estimated worldwide annual effective tax rate, which is based on full-year forecasted income in each jurisdiction that Diodes operates. During the third quarter of 2015, the Company decreased its full-year income forecast, specifically in
Third quarter 2015 GAAP net income was
Third quarter 2015 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 | |||||
September 30, 2015 | |||||
GAAP net income | $ | 2,837 | |||
GAAP diluted earnings per share | $ | 0.06 | |||
Adjustments to reconcile net income to adjusted net income: | |||||
Impairment Loss of Long-lived Assets | 1,250 | ||||
M&A Transaction cost | 755 | ||||
Amortization of acquisition related intangible assets | 1,468 | ||||
Non-GAAP adjusted net income | $ | 6,310 | |||
Non-GAAP adjusted diluted earnings per share | $ | 0.13 | |||
(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 2015 GAAP and non-GAAP adjusted net income was approximately
EBITDA (a non-GAAP measure), which represents earnings before net interest expense, income tax, depreciation and amortization, for the third quarter 2015, was
For the third quarter 2015, net cash provided by operating activities was
As of
The results announced today are preliminary, as they are subject to the Company finalizing its closing procedures and customary quarterly review by the Company's independent registered public accounting firm. As such, these results are subject to revision until the Company files its Quarterly Report on Form 10-Q for the third quarter of 2015.
Business Outlook
Dr. Lu concluded, “Due to continued weakness in the overall environment, we expect revenue for the fourth quarter of 2015 to range between
Share Repurchase Program
In conjunction with its earnings release today, Diodes also announced the Board of Directors has approved an authorization to purchase up to
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: we currently expect this weak environment and the distributor inventory adjustments to extend into the fourth quarter so have taken additional measures to carefully manage expenses, including reductions in travel and vendor expenses as well as a freeze on new hires; since we are cautiously optimistic for overall improvements in 2016, we expect these actions to be temporary and do not anticipate the need for more aggressive steps; looking forward, I continue to believe Diodes’ increased focus on automotive, industrial and the high-volume portable and wearable markets will be key drivers of our business in the coming year; due to continued weakness in the overall environment, we expect revenue for the fourth quarter of 2015 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, | |||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||||||||
NET SALES | $ | 208,888 | $ | 233,777 | $ | 634,522 | $ | 666,980 | ||||||||||||||
COST OF GOODS SOLD | 147,252 | 159,045 | 439,536 | 460,363 | ||||||||||||||||||
Gross profit | 61,636 | 74,732 | 194,986 | 206,617 | ||||||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||||
Selling, general and administrative | 34,669 | 33,897 | 98,282 | 99,518 | ||||||||||||||||||
Research and development | 13,745 | 13,864 | 40,644 | 39,565 | ||||||||||||||||||
Amortization of acquisition related intangible assets | 1,828 | 1,987 | 5,630 | 5,960 | ||||||||||||||||||
Loss (gain) on fixed assets | 1,421 | (20 | ) | 1,556 | (916 | ) | ||||||||||||||||
Total operating expenses | 51,663 | 49,728 | 146,112 | 144,127 | ||||||||||||||||||
Income from operations | 9,973 | 25,004 | 48,874 | 62,490 | ||||||||||||||||||
OTHER INCOME (EXPENSES) | ||||||||||||||||||||||
Interest income | 153 | 324 | 695 | 1,158 | ||||||||||||||||||
Interest expense | (781 | ) | (1,074 | ) | (2,602 | ) | (3,489 | ) | ||||||||||||||
Gain (loss) on securities carried at fair value | (91 | ) | 169 | (145 | ) | 1,364 | ||||||||||||||||
Other | 974 | 1,881 | 626 | 1,276 | ||||||||||||||||||
Total other expenses | 255 | 1,300 | (1,426 | ) | 309 | |||||||||||||||||
Income before income taxes and noncontrolling interest | 10,228 | 26,304 | 47,448 | 62,799 | ||||||||||||||||||
INCOME TAX PROVISION | 6,593 | 6,172 | 16,179 | 14,370 | ||||||||||||||||||
NET INCOME | 3,635 | 20,132 | 31,269 | 48,429 | ||||||||||||||||||
Less: NET INCOME attributable to noncontrolling interest | (798 | ) | (705 | ) | (2,222 | ) | (1,415 | ) | ||||||||||||||
NET INCOME attributable to common stockholders | $ | 2,837 | $ | 19,427 | $ | 29,047 | $ | 47,014 | ||||||||||||||
EARNINGS PER SHARE attributable to common stockholders | ||||||||||||||||||||||
Basic | $ | 0.06 | $ | 0.41 | $ | 0.60 | $ | 1.00 | ||||||||||||||
Diluted | $ | 0.06 | $ | 0.40 | $ | 0.59 | $ | 0.97 | ||||||||||||||
Number of shares used in computation | ||||||||||||||||||||||
Basic | 48,586 | 47,548 | 48,114 | 47,047 | ||||||||||||||||||
Diluted | 49,564 | 48,736 | 49,351 | 48,385 | ||||||||||||||||||
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, 2015: |
||||||||||||
Operating |
Income Tax |
Net Income | ||||||||||
Per-GAAP | $ | 2,837 | ||||||||||
Earnings per share (Per-GAAP) | ||||||||||||
Diluted | $ | 0.06 | ||||||||||
Adjustments to reconcile net income to adjusted net income: | ||||||||||||
Impairment Loss of Long-lived Assets | 1,470 | (220 | ) | 1,250 | ||||||||
M&A Transaction cost | 1,161 | (406 | ) | 755 | ||||||||
Amortization of acquisition related intangible assets | 1,828 | (360 | ) | 1,468 | ||||||||
Adjusted (Non-GAAP) | $ | 6,310 | ||||||||||
Diluted shares used in computing earnings per share | 49,564 | |||||||||||
Adjusted earnings per share (Non-GAAP) | ||||||||||||
Diluted | $ | 0.13 | ||||||||||
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, 2014: |
||||||||||
Operating |
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 | |||||||
Gain on sale of assets | - | |||||||||
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 nine months ended September 30, 2015: |
||||||||||||
Operating |
Income Tax |
Net Income | ||||||||||
Per-GAAP | $ | 29,047 | ||||||||||
Earnings per share (Per-GAAP) | ||||||||||||
Diluted | $ | 0.59 | ||||||||||
Adjustments to reconcile net income to adjusted net income: | ||||||||||||
Impairment Loss of Long-lived Assets | 1,470 | (220 | ) | 1,250 | ||||||||
M&A Transaction cost | 1,161 | (406 | ) | 755 | ||||||||
Retention costs | 83 | (13 | ) | 70 | ||||||||
Amortization of acquisition related intangible assets | 5,630 | (1,141 | ) | 4,489 | ||||||||
Adjusted (Non-GAAP) | $ | 35,611 | ||||||||||
Diluted shares used in computing earnings per share | 49,351 | |||||||||||
Adjusted earnings per share (Non-GAAP) | ||||||||||||
Diluted | $ | 0.72 | ||||||||||
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 |
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
ADJUSTED NET INCOME and ADJUSTED EARNINGS PER SHARE (Non-GAAP)
This consists of generally accepted accounting principles (“GAAP”) net income and earnings per share, which are then adjusted solely for the purpose of adjusting for amortization of acquisition-related intangible assets and retention costs. Excluding the above items provides investors with a better depiction of the Company’s operating results and provides a more informed baseline for modeling future earnings expectations. The Company excludes the above items to evaluate the Company’s operating performance, to develop budgets, 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 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 its future performance. The Company also believes the non-GAAP measures are useful to investors because they provide additional information that research analysts use to evaluate semiconductor companies. These non-GAAP measures 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 net income and earnings per share on both a GAAP and non-GAAP basis to obtain a comprehensive view of the Company’s results. The Company provides a reconciliation of GAAP net income and GAAP earnings per share to non-GAAP adjusted net income and non-GAAP adjusted earnings per share.
Retention costs – The Company excluded costs related to the employee retention plan in connection with the acquisition of
M&A Transaction cost – The Company excluded costs associated with the proposed
Impairment of long-lived assets – The Company excluded impairments recorded on long-lived assets that were primarily related to assets that will no longer be used in our production process as we transition from six inch to eight inch production capability in our
Amortization of acquisition-related intangible assets – The Company excluded this item, including developed technologies and customer relationships. The fair value of the acquisition-related intangible assets, which was recognized 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 this item is appropriate because 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 this item because there is significant variability and unpredictability among companies with respect to this expense.
CASH FLOW ITEMS
Free cash flow (FCF) (Non-GAAP)
FCF for the third quarter 2015 is calculated by subtracting capital expenditures from cash flow from operations. For the third quarter 2015, FCF 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 and 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 amounts 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 | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
Net income (per-GAAP) | $ | 2,837 | $ | 19,427 | $ | 29,047 | $ | 47,014 | |||||||||
Plus: | |||||||||||||||||
Interest expense, net | 628 | 750 | 1,907 | 2,331 | |||||||||||||
Income tax provision | 6,593 | 6,172 | 16,179 | 14,370 | |||||||||||||
Depreciation and amortization | 19,599 | 18,921 | 57,969 | 57,254 | |||||||||||||
EBITDA (Non-GAAP) | $ | 29,657 | $ | 45,270 | $ | 105,102 | $ | 120,969 | |||||||||
DIODES INCORPORATED AND SUBSIDIARIES | |||||||||
CONSOLIDATED CONDENSED BALANCE SHEETS | |||||||||
ASSETS | |||||||||
(in thousands) |
|||||||||
September 30, | December 31, | ||||||||
2015 | 2014 | ||||||||
(unaudited) | |||||||||
CURRENT ASSETS | |||||||||
Cash and cash equivalents | $ | 188,755 | $ | 243,000 | |||||
Short-term investments | 24,586 | 11,726 | |||||||
Accounts receivable, net | 202,467 | 188,248 | |||||||
Inventories | 197,698 | 182,026 | |||||||
Deferred income taxes, current | 11,193 | 11,295 | |||||||
Prepaid expenses and other | 38,389 | 50,510 | |||||||
Total current assets | 663,088 | 686,805 | |||||||
PROPERTY, PLANT AND EQUIPMENT, net | 371,036 | 309,931 | |||||||
DEFERRED INCOME TAXES, non-current | 32,259 | 32,550 | |||||||
OTHER ASSETS | |||||||||
Goodwill | 79,389 | 81,229 | |||||||
Intangible assets, net | 42,841 | 45,028 | |||||||
Other | 24,580 | 23,614 | |||||||
Total assets | $ | 1,213,193 | $ | 1,179,157 | |||||
DIODES INCORPORATED AND SUBSIDIARIES | |||||||||||
CONSOLIDATED CONDENSED BALANCE SHEETS | |||||||||||
LIABILITIES AND EQUITY | |||||||||||
(in thousands, except share data) |
|||||||||||
September 30, | December 31, | ||||||||||
2015 | 2014 | ||||||||||
(unaudited) | |||||||||||
CURRENT LIABILITIES | |||||||||||
Lines of credit | $ | 261 | $ | 1,064 | |||||||
Accounts payable | 86,388 | 79,390 | |||||||||
Accrued liabilities | 91,868 | 60,436 | |||||||||
Income tax payable | 9,106 | 8,381 | |||||||||
Total current liabilities | 187,623 | 149,271 | |||||||||
LONG-TERM DEBT, net of current portion | 93,510 | 140,787 | |||||||||
OTHER LONG-TERM LIABILITIES | 74,591 | 78,932 | |||||||||
Total liabilities | 355,724 | 368,990 | |||||||||
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; 48,588,184 and 47,591,092 issued and outstanding at September 30, 2015 and December 31, 2014, respectively | 32,394 | 31,729 | |||||||||
Additional paid-in capital | 335,835 | 314,942 | |||||||||
Retained earnings | 519,053 | 490,006 | |||||||||
Accumulated other comprehensive loss | (77,564 | ) | (68,402 | ) | |||||||
Total Diodes Incorporated stockholders' equity | 809,718 | 768,275 | |||||||||
Noncontrolling interest | 47,751 | 41,892 | |||||||||
Total equity | 857,469 | 810,167 | |||||||||
Total liabilities and equity | $ | 1,213,193 | $ | 1,179,157 | |||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20151105006803/en/
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