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Diodes Incorporated Reports Third Quarter 2016 Financial Results
Achieves Another Quarter of Record Revenue and Gross Profit
Third Quarter Highlights
- Revenue was a record
$250.7 million , increasing 6.0 percent from the$236.6 million in the second quarter 2016 and 20.0 percent from the$208.9 million in the third quarter 2015; - Gross profit was a record
$80.6 million , compared to$74.8 million in the second quarter 2016 and$61.6 million in the third quarter 2015; - Gross profit margin was 32.2 percent, compared to 31.6 percent in the second quarter 2016 and 29.5 percent in the third quarter 2015;
- GAAP net income was
$10.6 million , or$0.21 per diluted share, compared to a GAAP net income of$5.8 million , or$0.12 per diluted share, in the second quarter 2016 and GAAP net income of$2.8 million , or$0.06 per diluted share, in the third quarter 2015; - Non-GAAP adjusted net income was
$15.1 million , or$0.30 per diluted share, compared to$9.8 million , or$0.20 per diluted share, in second quarter 2016 and$6.3 million , or$0.13 per diluted share, in third quarter 2015; - Excluding
$2.9 million , net of tax, non-cash share-based compensation expense, GAAP and non-GAAP adjusted net income would have increased by$0.06 per diluted share; and - Achieved
$33.1 million of cash flow from operations, and$15.1 million of free cash flow, including$18.0 million of capital expenditures. Net cash flow was$28.0 million .
Commenting on the results, Dr.
“Also during the quarter, we completed the sales integration of Pericom in
“Lastly, after the close of the quarter we successfully renewed our syndicated loan for a new five-year term, resulting in lower interest payments and greater flexibility to return value to shareholders through our stock buyback program.”
Third Quarter 2016
Revenue for the third quarter 2016 was a record
Gross profit for the third quarter 2016 reached a record
GAAP operating expenses for the third quarter 2016 were
Third quarter 2016 GAAP net income was
Third quarter 2016 non-GAAP adjusted net income was
The following is an unaudited 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, 2016 | |||||||
GAAP net income | $ | 10,648 | |||||
GAAP diluted earnings per share | $ | 0.21 | |||||
Adjustments to reconcile net income to non-GAAP net income: | |||||||
M&A Activities | |||||||
Pericom | 2,980 | ||||||
Retention costs | 258 | ||||||
Amortization of acquisition-related intangible assets | 2,722 | ||||||
Others | 1,425 | ||||||
Amortization of acquisition-related intangible assets | 1,425 | ||||||
Non-GAAP net income | $ | 15,053 | |||||
Non-GAAP diluted earnings per share | $ | 0.30 | |||||
(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 2016 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 2016, was
For the third quarter 2016, net cash provided by operating activities was
Balance Sheet
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 quarter ending
Business Outlook
Dr. Lu concluded, “For the fourth quarter of 2016, 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: we continue to invest in the automotive market through a combination of new products and targeted customer development as we work towards our near-term goal of 10% of revenue; in fact, we have recently made solid progress on design-in opportunities as a direct result of our cross-selling efforts in support of revenue growth and market share gains in 2017 and beyond; for the fourth quarter of 2016, 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, | |||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||
NET SALES | $ | 250,694 | $ | 208,888 | $ | 710,077 | $ | 634,522 | ||||||||||||
COST OF GOODS SOLD | 170,071 | 147,252 | 490,417 | 439,536 | ||||||||||||||||
Gross profit | 80,623 | 61,636 | 219,660 | 194,986 | ||||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||
Selling, general and administrative | 38,321 | 34,669 | 119,165 | 98,282 | ||||||||||||||||
Research and development | 17,088 | 13,745 | 52,247 | 40,644 | ||||||||||||||||
Amortization of acquisition-related intangible assets | 5,117 | 1,828 | 15,379 | 5,630 | ||||||||||||||||
Others | 144 | 1,421 | 184 | 1,556 | ||||||||||||||||
Total operating expenses | 60,670 | 51,663 | 186,975 | 146,112 | ||||||||||||||||
Income from operations | 19,953 | 9,973 | 32,685 | 48,874 | ||||||||||||||||
OTHER INCOME (EXPENSES) | ||||||||||||||||||||
Interest income | 321 | 153 | 1,075 | 695 | ||||||||||||||||
Interest expense | (3,684 | ) | (781 | ) | (9,880 | ) | (2,602 | ) | ||||||||||||
Loss on securities carried at fair value | - | (91 | ) | - | (145 | ) | ||||||||||||||
Other | (959 | ) | 974 | (1,494 | ) | 626 | ||||||||||||||
Total other expenses | (4,322 | ) | 255 | (10,299 | ) | (1,426 | ) | |||||||||||||
Income before income taxes and noncontrolling interest | 15,631 | 10,228 | 22,386 | 47,448 | ||||||||||||||||
INCOME TAX PROVISION | 4,097 | 6,593 | 5,941 | 16,179 | ||||||||||||||||
NET INCOME | 11,534 | 3,635 | 16,445 | 31,269 | ||||||||||||||||
Less: NET INCOME attributable to noncontrolling interest | (886 | ) | (798 | ) | (1,778 | ) | (2,222 | ) | ||||||||||||
NET INCOME attributable to common stockholders | $ | 10,648 | $ | 2,837 | $ | 14,667 | $ | 29,047 | ||||||||||||
EARNINGS PER SHARE attributable to common stockholders | ||||||||||||||||||||
Basic | $ | 0.22 | $ | 0.06 | $ | 0.30 | $ | 0.60 | ||||||||||||
Diluted | $ | 0.21 | $ | 0.06 | $ | 0.30 | $ | 0.59 | ||||||||||||
Number of shares used in computation | ||||||||||||||||||||
Basic | 48,814 | 48,586 | 48,496 | 48,114 | ||||||||||||||||
Diluted | 49,922 | 49,564 | 49,565 | 49,351 | ||||||||||||||||
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, 2016: |
|||||||||||
Operating |
Income Tax |
Net Income | |||||||||
Per-GAAP | $ | 10,648 | |||||||||
Earnings per share (Per-GAAP) | |||||||||||
Diluted | $ | 0.21 | |||||||||
Adjustments to reconcile net income to non-GAAP net income: | |||||||||||
M&A Activities | |||||||||||
Pericom | 2,980 | ||||||||||
Retention costs | 397 | (139 | ) | ||||||||
Amortization of acquisition-related intangible assets | 3,320 | (598 | ) | ||||||||
Others | 1,425 | ||||||||||
Amortization of acquisition-related intangible assets |
1,797 | (372 | ) | ||||||||
Non-GAAP | $ | 15,053 | |||||||||
Diluted shares used in computing earnings per share | 49,922 | ||||||||||
Non-GAAP earnings per share | |||||||||||
Diluted | $ | 0.30 | |||||||||
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, 2015: |
|||||||||||
Operating |
Income Tax |
Net Income | |||||||||
Per-GAAP | $ | 2,837 | |||||||||
Earnings per share (Per-GAAP) | |||||||||||
Diluted | $ | 0.06 | |||||||||
Adjustments to reconcile net income to non-GAAP 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 | |||||||
Non-GAAP | $ | 6,310 | |||||||||
Diluted shares used in computing earnings per share | 49,564 | ||||||||||
Non-GAAP earnings per share | |||||||||||
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 nine months ended September 30, 2016: |
|||||||||||||||
COGS |
Operating |
Income Tax |
Net Income | ||||||||||||
Per-GAAP | $ | 14,667 | |||||||||||||
Earnings per share (Per-GAAP) | |||||||||||||||
Diluted | $ | 0.30 | |||||||||||||
Adjustments to reconcile net income to non-GAAP net income: | |||||||||||||||
M&A Activities | |||||||||||||||
Pericom | 11,842 | ||||||||||||||
Inventory adjustment | 3,060 | (153 | ) | ||||||||||||
Transaction costs | 471 | (165 | ) | ||||||||||||
Retention costs | 1,190 | (417 | ) | ||||||||||||
Amortization of acquisition-related intangible assets | 9,924 | (1,786 | ) | ||||||||||||
Employee award costs | (404 | ) | 122 | ||||||||||||
Others | 4,326 | ||||||||||||||
Amortization of acquisition-related intangible assets | 5,456 | (1,130 | ) | ||||||||||||
Non-GAAP | $ | 30,835 | |||||||||||||
Diluted shares used in computing earnings per share | 49,565 | ||||||||||||||
Non-GAAP earnings per share | |||||||||||||||
Diluted | $ | 0.62 | |||||||||||||
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 non-GAAP 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 | |||||||
Non-GAAP | $ | 35,611 | |||||||||
Diluted shares used in computing earnings per share | 49,351 | ||||||||||
Non-GAAP earnings per share | |||||||||||
Diluted | $ | 0.72 | |||||||||
Note: Included in GAAP and non-GAAP adjusted net income was approximately
ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE
The Company adjusts
Detail of non-GAAP adjustments
Inventory adjustments– The Company adjusted the inventory acquired in the Pericom acquisition to account for the reasonable profit allowance for the selling effort on finished goods inventory and the reasonable profit allowance for the effort to complete and sell the work-in-progress inventory. This non-cash fair value 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 Pericom inventory adjustment 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.
Transaction costs – The Company excluded costs associated with acquiring Pericom, which consisted of advisory, legal and other professional and consulting fees. These costs were expensed in the third quarter of 2016 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 this item provides investors with 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 related to employee retention in connection with the Pericom acquisition. Although these retention costs will be recurring every quarter until the final retention payment has been made, they are not part of the employees’ normal annual salaries and therefore are being excluded. The Company believes the exclusion of retention costs related to the acquisitions 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.
Amortization of acquisition-related intangible assets – The Company excluded this item, including amortization of 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 life of the applicable assets. The Company believes that 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.
Employee award costs –The Company adjusted for costs related to the immediate vesting of Pericom equity awards upon closing of the Pericom acquisition. The expense for these awards was recognized immediately after the acquisition and the Company believes adjusting for the one-time expense related to the immediate vesting of these awards provides investors with a more accurate reflection of the continuing operations of the Company and facilitates comparisons with the results of other periods which may not reflect such costs.
CASH FLOW ITEMS
Free cash flow (FCF) (Non-GAAP)
FCF for the third quarter of 2016 is a non-GAAP financial measure, which is calculated by subtracting capital expenditures from cash flow from operations. For the third quarter of 2016, 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, 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 | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income (per-GAAP) | $ | 10,648 | $ | 2,837 | $ | 14,667 | $ | 29,047 | ||||||||
Plus: | ||||||||||||||||
Interest expense, net | 3,363 | 628 | 8,805 | 1,907 | ||||||||||||
Income tax provision | 4,097 | 6,593 | 5,941 | 16,179 | ||||||||||||
Depreciation and amortization | 24,371 | 19,599 | 74,731 | 57,969 | ||||||||||||
EBITDA (non-GAAP) | $ | 42,479 | $ | 29,657 | $ | 104,144 | $ | 105,102 |
DIODES INCORPORATED AND SUBSIDIARIES | ||||||||||
CONSOLIDATED CONDENSED BALANCE SHEETS | ||||||||||
September 30, | December 31, | |||||||||
2016 | 2015 | |||||||||
(unaudited) | ||||||||||
CURRENT ASSETS | ||||||||||
Cash and cash equivalents | $ | 220,526 | $ | 218,435 | ||||||
Short-term investments | 34,766 | 64,685 | ||||||||
Accounts receivable, net | 239,278 | 218,496 | ||||||||
Inventories | 204,251 | 202,832 | ||||||||
Prepaid expenses and other | 40,691 | 46,103 | ||||||||
Total current assets | 739,512 | 750,551 | ||||||||
PROPERTY, PLANT AND EQUIPMENT, net | 415,618 | 439,340 | ||||||||
DEFERRED INCOME TAXES, non-current | 50,702 | 45,120 | ||||||||
OTHER ASSETS | ||||||||||
Goodwill | 131,661 | 132,913 | ||||||||
Intangible assets, net | 180,232 | 196,409 | ||||||||
Other | 34,715 | 34,494 | ||||||||
Total assets | $ | 1,552,440 | $ | 1,598,827 | ||||||
CURRENT LIABILITIES | ||||||||||
Accounts payable | $ | 90,548 | $ | 86,463 | ||||||
Accrued liabilities | 71,758 | 77,801 | ||||||||
Income tax payable | - | 5,117 | ||||||||
Current portion of long-term debt | 10,300 | 10,282 | ||||||||
Total current liabilities | 172,606 | 179,663 | ||||||||
LONG-TERM DEBT, net of current portion | 407,052 | 453,738 | ||||||||
DEFERRED TAX LIABILITIES - non current | 32,219 | 32,276 | ||||||||
OTHER LONG-TERM LIABILITIES | 97,150 | 90,153 | ||||||||
Total liabilities | 709,027 | 755,830 | ||||||||
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; 48,816,264 and 48,148,077 issued and outstanding at September 30, 2016 and December 31, 2015, respectively | 32,856 | 32,404 | ||||||||
Additional paid-in capital | 353,539 | 344,086 | ||||||||
Retained earnings | 528,947 | 514,280 | ||||||||
Treasury stock | (11,009 | ) | (11,009 | ) | ||||||
Accumulated other comprehensive loss | (105,735 | ) | (84,416 | ) | ||||||
Total Diodes Incorporated stockholders' equity | 798,598 | 795,345 | ||||||||
Noncontrolling interest | 44,815 | 47,652 | ||||||||
Total equity | 843,413 | 842,997 | ||||||||
Total liabilities and equity | $ | 1,552,440 | $ | 1,598,827 |
View source version on businesswire.com: http://www.businesswire.com/news/home/20161109006228/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