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8-K - FORM 8-K - DIODES INC /DEL/ | d77649e8vk.htm |
EX-99.2 - EX-99.2 - DIODES INC /DEL/ | d77649exv99w2.htm |
EX-99.3 - EX-99.3 - DIODES INC /DEL/ | d77649exv99w3.htm |
Exhibit 99.1
Diodes Incorporated Reports Third Quarter 2010 Financial Results
Achieves Record Net Income, Gross Margin and Revenue
Dallas, Texas November 8, 2010 Diodes Incorporated (Nasdaq: DIOD), a leading global
manufacturer and supplier of high-quality application specific standard products within the broad
discrete, logic and analog semiconductor markets, today reported financial results for the third
quarter ended September 30, 2010.
Third Quarter Highlights
| Achieved sixth consecutive quarter of sequential revenue growth; | |
| Revenue was a record $163.1 million, an increase of 33.6 percent over the $122.1 million in the third quarter of 2009 and a sequential increase of 9.4 percent over the $149.2 million in the second quarter of 2010; | |
| Gross profit was a record $61.0 million, an increase of 62.2 percent over the $37.6 million in the third quarter of 2009 and a sequential increase of 14.0 percent over the $53.5 million in the second quarter of 2010; | |
| Gross margin was a record 37.4 percent, compared to 30.8 percent in the third quarter of 2009 and 35.8 percent in the second quarter of 2010; | |
| Income before income taxes and noncontrolling interest was a record $27.4 million, compared to $7.2 million in the third quarter of 2009 and $20.6 million in the second quarter of 2010; | |
| GAAP net income was a record $21.2 million, or $0.46 per diluted share, compared to $7.0 million, or $0.16 per diluted share, in the third quarter of 2009 and $16.6 million, or $0.37 per diluted share, in the second quarter of 2010; | |
| Non-GAAP adjusted net income was $23.2 million, or $0.51 per diluted share, compared to $9.1 million, or $0.21 per diluted share, in the third quarter of 2009 and $18.7 million, or $0.41 per diluted share, in the second quarter of 2010; | |
| Excluding $2.1 million of share-based compensation expense, both GAAP and non-GAAP adjusted net income would have increased by $0.05 per diluted share; and | |
| Achieved $43.1 million cash flow from operations, $18.2 million net cash flow and $17.8 million free cash flow. |
Revenue for the third quarter of 2010 was a record $163.1 million, an increase of 33.6 percent over
the $122.1 million in the third quarter of 2009 and a sequential increase of 9.4 percent over the
$149.2 million in the second quarter of 2010. Revenue increased in the quarter due to strong demand
for products across all of the Companys worldwide markets. The successful capturing of Zetex
product synergies has allowed the Company to take advantage of European and North American market
strength, which has resulted in higher revenue growth in those regions.
Gross profit for the third quarter of 2010 was a record $61.0 million, an increase of 62.2 percent
over the $37.6 million in the third quarter of 2009 and a sequential increase of 14.0 percent over
the $53.5 million in the second quarter of 2010. Gross margin in the third quarter of 2010 was a
record 37.4 percent, compared to 30.8 percent in the third quarter of 2009 and 35.8 percent in the
second quarter of 2010. Gross margin improved in the quarter due to a favorable mix of higher
margin products, generally stable ASPs, another quarterly record of output at our packaging
facilities and continued high utilization at the Companys wafer fabs.
Commenting on the quarter, Dr. Keh-Shew Lu, President and Chief Executive Officer of Diodes
Incorporated, stated, The third quarter represents the Companys sixth consecutive quarter of
sequential revenue growth and was complemented by our achievement of record net income in the
quarter. Over that time, we have consistently executed on our new product development plans and
expanded our design
wins, which have contributed to our market share gains at key customers and record results.
Additionally, the capital investments that we made to expand capacity at our packaging facilities
over the last twelve months have enabled us to achieve record output during this year. Although
capacity remains tight, we have proactively shifted our product mix toward higher margin products
to achieve the highest gross margin in the Companys history. These results reflect Diodes
continued commitment to grow faster than our addressable markets as we secure greater market share
in key end-equipment, launch additional products in new markets and leverage our broadened product
portfolio to maintain a higher level of design wins.
Third quarter of 2010 GAAP net income was $21.2 million, or $0.46 per diluted share, compared to
third quarter of 2009 of $7.0 million, or $0.16 per diluted share, and second quarter of 2010 of
$16.6 million, or $0.37 per diluted share.
Non-GAAP adjusted net income was $23.2 million, or $0.51 per diluted share, which excluded, net of
tax, $1.3 million of non-cash interest expense related to the amortization of debt discount on the
Convertible Senior Notes and $0.8 million of non-cash acquisition related intangible asset
amortization costs. 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):
GAAP net income |
$ | 21,162 | ||
GAAP diluted earnings per share |
$ | 0.46 | ||
Adjustments to reconcile net income
to adjusted net income: |
||||
Amortization of debt discount |
1,277 | |||
Amortization of acquisition related intangible assets |
790 | |||
Non-GAAP adjusted net income |
$ | 23,229 | ||
Non-GAAP adjusted diluted earnings per share |
$ | 0.51 | ||
See tables below for further details of the reconciliation.
Included in the third quarter of 2010 GAAP and non-GAAP adjusted net income was approximately $2.1
million, net of tax, non-cash share-based compensation expense. Excluding this expense, both GAAP
and non-GAAP adjusted diluted EPS would have increased by an additional $0.05 per share.
As of September 30, 2010, Diodes had approximately $264 million in cash and cash equivalents and
$130 million in long-term debt primarily related to its Convertible Senior Notes.
Business Outlook
Dr. Lu concluded, With the market supply shortage easing as well as supply and demand becoming
more balanced, we expect to return to more seasonal trends for the fourth quarter. We believe we
will further expand our market share as a result of our continued focus on design wins, new
products and customer expansion. In terms of fourth quarter guidance, revenue is anticipated to
range between $160 million and $168 million, or between a decrease of 2 percent and an increase of
3 percent sequentially. Gross margin is expected to be comparable to the third quarter level.
Operating expenses are anticipated to be comparable to third quarter levels on a percent of
revenue basis. We expect our income tax rate for the fourth quarter to range between 17 and 23
percent. Shares used to calculate GAAP EPS for the fourth quarter are anticipated to be
approximately 46.3 million.
Conference Call
Diodes will host a conference call on Monday, November 8, 2010 at 4:00 p.m. Central Time (5:00
p.m. Eastern Time) to discuss its third quarter 2010 financial results. Investors and analysts may
join the conference call by dialing 1-800-901-5213 and providing the confirmation code 92825783.
International callers may join the teleconference by dialing 1-617-786-2962. A telephone replay of
the conference call will be available approximately two hours after the conference call and will be
available until November 11, 2010 at midnight Central Time. The replay dial-in number is
1-888-286-8010, and the pass code is 18355966. International callers should dial 1-617-801-6888 and
enter the same pass code at the prompt. Additionally, this conference call will be broadcast live
over the Internet and can be accessed by all interested parties on the Investors section of Diodes
website at http://www.diodes.com. To listen to the live call, please go to the Investors 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 approximately 60 days.
About Diodes Incorporated
Diodes Incorporated (Nasdaq: DIOD), a Standard and Poors SmallCap 600 and Russell 3000 Index
company, is a leading global manufacturer and supplier of high-quality application specific
standard products within the broad discrete, logic, and analog semiconductor markets. Diodes
serves the consumer electronics, computing, communications, industrial, and automotive markets.
Diodes products include diodes, rectifiers, transistors, MOSFETs, protection devices, functional
specific arrays, single gate logic, amplifiers and comparators, Hall-effect and temperature
sensors; power management devices, including LED drivers, DC-DC switching and linear voltage
regulators, and voltage references along with special function devices, such as USB power switches,
load switches, voltage supervisors, and motor controllers. The Companys corporate headquarters,
logistics center, and Americas sales office are located in Dallas, Texas. Design, marketing, and
engineering centers are located in Dallas; San Jose, California; Taipei, Taiwan; Manchester,
England; and Neuhaus, Germany. The Companys wafer fabrication facilities are located in Kansas
City, Missouri and Manchester, with two manufacturing facilities located in Shanghai, China,
another in Neuhaus, and a joint venture facility located in Chengdu, China. Additional
engineering, sales, warehouse, and logistics offices are located in Taipei; Hong Kong; Manchester;
and Munich, Germany; with support offices located throughout the world. For further information,
including SEC filings, visit the Companys 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. Such statements include statements regarding our expectation that: the
successful capturing of Zetex product synergies has allowed the Company to take advantage of
European and North American market strength, which has resulted in higher revenue growth in those
regions; the capital investments that we made to expand capacity at our packaging facilities over
the last twelve months have enabled us to achieve record output during this year; although capacity
remains tight, we have proactively shifted our product mix toward higher margin products to achieve
the highest gross margin in the Companys history; these results reflect Diodes continued
commitment to grow faster than our addressable markets as we secure greater market share in key
end-equipment, launch additional products in new markets and leverage our broadened product
portfolio to maintain a higher level of design wins; with the market supply shortage easing as well
as supply and demand becoming more balanced, we expect to return to more seasonal trends for the
fourth quarter; we believe we will further expand our market share as a result of our continued
focus on design wins, new products and customer expansion; in terms of fourth quarter guidance,
revenue is anticipated to range between $160 million and $168 million, or between a decrease of 2
percent and an increase of 3 percent sequentially; gross margin is expected to be comparable to
the third quarter level; operating expenses are anticipated to be comparable to third quarter
levels on a percent of revenue basis; we expect our income tax rate for the fourth quarter to range
between 17 and 23 percent; and shares used to calculate GAAP EPS for the fourth quarter are
anticipated to be approximately 46.3 million. Potential risks and uncertainties include, but are
not limited to, such factors as: we may not be able to maintain our current growth strategy or
continue to maintain our current performance and loadings in our manufacturing facilities; risks of
domestic and foreign operations; unfavorable currency exchange rates; our future guidance may be
incorrect; the global economic weakness may be more severe or last longer than we currently
anticipated; and other information detailed from time to time in the Companys filings with the
United States Securities and Exchange Commission.
Recent news releases, annual reports and SEC filings are available at the Companys 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.
# # #
Company Contact:
|
Investor Contact: | |
Diodes Incorporated
|
Shelton Group | |
Laura Mehrl
|
Leanne K. Sievers | |
Director of Investor Relations
|
EVP, Investor Relations | |
P: (972) 385-4492
|
P: (949) 224-3874 | |
E: laura_mehrl@diodes.com |
E: lsievers@sheltongroup.com |
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
NET SALES |
$ | 163,120 | $ | 122,122 | $ | 449,120 | $ | 304,070 | ||||||||
COST OF GOODS SOLD |
102,143 | 84,547 | 286,893 | 224,632 | ||||||||||||
Gross profit |
60,977 | 37,575 | 162,227 | 79,438 | ||||||||||||
OPERATING EXPENSES |
||||||||||||||||
Selling, general and administrative |
22,837 | 19,079 | 65,822 | 50,375 | ||||||||||||
Research and development |
7,212 | 6,284 | 20,403 | 16,944 | ||||||||||||
Amortization of acquisition related intangible assets |
1,098 | 1,271 | 3,304 | 3,480 | ||||||||||||
Restructuring |
| (291 | ) | | (440 | ) | ||||||||||
Total operating expenses |
31,147 | 26,343 | 89,529 | 70,359 | ||||||||||||
Income from operations |
29,830 | 11,232 | 72,698 | 9,079 | ||||||||||||
OTHER INCOME (EXPENSES) |
||||||||||||||||
Interest income |
279 | 805 | 2,587 | 3,907 | ||||||||||||
Interest expense |
(939 | ) | (1,784 | ) | (4,317 | ) | (5,709 | ) | ||||||||
Amortization of debt discount |
(2,006 | ) | (1,981 | ) | (5,713 | ) | (6,471 | ) | ||||||||
Other |
251 | (1,062 | ) | 1,749 | (1,074 | ) | ||||||||||
Total other expenses |
(2,415 | ) | (4,022 | ) | (5,694 | ) | (9,347 | ) | ||||||||
Income (loss) before income taxes and noncontrolling interest |
27,415 | 7,210 | 67,004 | (268 | ) | |||||||||||
INCOME TAX PROVISION (BENEFIT) |
5,346 | (629 | ) | 11,705 | 4,924 | |||||||||||
NET INCOME (LOSS) |
22,069 | 7,839 | 55,299 | (5,192 | ) | |||||||||||
Less: NET INCOME attributable to noncontrolling interest |
(907 | ) | (819 | ) | (2,532 | ) | (1,507 | ) | ||||||||
NET INCOME (LOSS) attributable to common stockholders |
$ | 21,162 | $ | 7,020 | $ | 52,767 | $ | (6,699 | ) | |||||||
EARNINGS (LOSS) PER SHARE attributable to common stockholders |
||||||||||||||||
Basic |
$ | 0.48 | $ | 0.17 | $ | 1.20 | $ | (0.16 | ) | |||||||
Diluted |
$ | 0.46 | $ | 0.16 | $ | 1.16 | $ | (0.16 | ) | |||||||
Number of shares used in computation |
||||||||||||||||
Basic |
44,346 | 42,533 | 44,031 | 41,761 | ||||||||||||
Diluted |
45,673 | 44,013 | 45,418 | 41,761 | ||||||||||||
Note: Throughout this release, we refer to net income (loss) attributable to common
stockholders as net income (loss).
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME
(in thousands, except per share data)
(unaudited)
CONSOLIDATED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME
(in thousands, except per share data)
(unaudited)
For the three months ended September 30, 2010:
Other | ||||||||||||||||
Operating | Income | Income Tax | ||||||||||||||
Expenses | (Expense) | Provision | Net Income | |||||||||||||
Per-GAAP |
$ | 21,162 | ||||||||||||||
Earnings per share (Per-GAAP) |
||||||||||||||||
Diluted |
$ | 0.46 | ||||||||||||||
Adjustments to reconcile net income
to adjusted net income: |
||||||||||||||||
Amortization of acquisition related intangible assets |
1,098 | | (308 | ) | 790 | |||||||||||
Amortization of debt discount |
| 2,006 | (729 | ) | 1,277 | |||||||||||
Adjusted (Non-GAAP) |
$ | 23,229 | ||||||||||||||
Diluted shares used in computing
earnings per share |
45,673 | |||||||||||||||
Adjusted earnings per share (Non-GAAP) |
||||||||||||||||
Diluted |
$ | 0.51 | ||||||||||||||
Note: Included in GAAP and non-GAAP adjusted net income was approximately $2.1 million, net of
tax, non-cash share-based compensation expense. Excluding this expense, both GAAP and non-GAAP
adjusted diluted earnings per share (EPS) would have increased by an additional $0.05 per share.
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME Cont.
(in thousands, except per share data)
(unaudited)
CONSOLIDATED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME Cont.
(in thousands, except per share data)
(unaudited)
For the three months ended September 30, 2009:
Other | ||||||||||||||||
Operating | Income | Income Tax | ||||||||||||||
Expenses | (Expense) | Provision | Net Income | |||||||||||||
Per-GAAP |
$ | 7,020 | ||||||||||||||
Earnings per share (Per-GAAP) |
||||||||||||||||
Diluted |
$ | 0.16 | ||||||||||||||
Adjustments to reconcile net income
to adjusted net income: |
||||||||||||||||
Amortization of acquisition related intangible assets |
1,271 | | (356 | ) | 915 | |||||||||||
Restructuring |
(291 | ) | | 111 | (180 | ) | ||||||||||
Loss on extinguishment of debt |
| 161 | (63 | ) | 98 | |||||||||||
Amortization of debt discount |
| 1,981 | (773 | ) | 1,208 | |||||||||||
Adjusted (Non-GAAP) |
$ | 9,061 | ||||||||||||||
Diluted shares used in computing
earnings per share |
44,013 | |||||||||||||||
Adjusted earnings per share (Non-GAAP) |
||||||||||||||||
Diluted |
$ | 0.21 | ||||||||||||||
Note: Included in GAAP and non-GAAP adjusted net loss was approximately $1.8 million, net of
tax, non-cash share-based compensation expense. Excluding this expense, both GAAP and non-GAAP
adjusted diluted EPS would have increased by an additional $0.04 per share.
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME Cont.
(in thousands, except per share data)
(unaudited)
CONSOLIDATED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME Cont.
(in thousands, except per share data)
(unaudited)
For the nine months ended September 30, 2010:
Other | ||||||||||||||||
Operating | Income | Income Tax | ||||||||||||||
Expenses | (Expense) | Provision | Net Income | |||||||||||||
Per-GAAP |
$ | 52,767 | ||||||||||||||
Earnings per share (Per-GAAP) |
||||||||||||||||
Diluted |
$ | 1.16 | ||||||||||||||
Adjustments to reconcile net income
to adjusted net income: |
||||||||||||||||
Amortization of acquisition related intangible assets |
3,304 | | (926 | ) | 2,378 | |||||||||||
Gain on sale of assets |
| (1,837 | ) | 661 | (1,176 | ) | ||||||||||
Impairment of long-lived assets |
| 144 | (55 | ) | 89 | |||||||||||
Amortization of debt discount |
| 5,713 | (2,175 | ) | 3,538 | |||||||||||
Adjusted (Non-GAAP) |
$ | 57,596 | ||||||||||||||
Diluted shares used in computing
earnings per share |
45,418 | |||||||||||||||
Adjusted earnings per share (Non-GAAP) |
||||||||||||||||
Diluted |
$ | 1.27 | ||||||||||||||
Note: Included in GAAP and non-GAAP adjusted net income was approximately $6.4 million, net of
tax, non-cash share-based compensation expense. Excluding this expense, both GAAP and non-GAAP
adjusted diluted EPS would have increased by an additional $0.14 per share.
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME Cont.
(in thousands, except per share data)
(unaudited)
CONSOLIDATED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME Cont.
(in thousands, except per share data)
(unaudited)
For the nine months ended September 30, 2009:
Other | ||||||||||||||||
Operating | Income | Income Tax | Net Income | |||||||||||||
Expenses | (Expense) | Provision | (Loss) | |||||||||||||
Per-GAAP |
$ | (6,699 | ) | |||||||||||||
Loss per share (Per-GAAP) |
||||||||||||||||
Diluted |
$ | (0.16 | ) | |||||||||||||
Adjustments to reconcile net loss
to adjusted net income: |
||||||||||||||||
Amortization of acquisition related intangible assets |
3,480 | | (977 | ) | 2,503 | |||||||||||
Restructuring |
(440 | ) | | (85 | ) | (525 | ) | |||||||||
Gain on extinguishment of debt |
| (1,192 | ) | 465 | (727 | ) | ||||||||||
Forgiveness of debt |
| (1,501 | ) | 188 | (1,313 | ) | ||||||||||
Taxes on repatriation of earnings |
| | 10,631 | 10,631 | ||||||||||||
Amortization of debt discount |
| 6,471 | (2,526 | ) | 3,945 | |||||||||||
Adjusted (Non-GAAP) |
$ | 7,815 | ||||||||||||||
Diluted shares used in computing
earnings per share |
42,967 | |||||||||||||||
Adjusted earnings per share (Non-GAAP) |
||||||||||||||||
Diluted |
$ | 0.18 | ||||||||||||||
Note: Included in GAAP and non-GAAP adjusted net income was approximately $4.9 million, net of
tax, non-cash share-based compensation expense. Excluding this expense, both GAAP and non-GAAP
adjusted diluted EPS would have increased by an additional $0.12 per share.
ADJUSTED NET INCOME
This measure consists of generally accepted accounting principles (GAAP) net income (loss),
which is then adjusted solely for the purpose of adjusting for amortization of acquisition related
intangible assets, amortization of debt discount, impairment of long-lived assets, gain on sale of
assets, restructuring costs, loss (gain) on extinguishment of debt, forgiveness of debt, and taxes
on repatriation of foreign earnings, as discussed below. Excluding impairment of long-lived assets,
gain on sale of assets, restructuring costs, loss (gain) on extinguishment of debt, forgiveness of
debt, and taxes on repatriation of foreign earnings provides investors with a better depiction of
the Companys operating results and provides a more informed baseline for modeling future earnings
expectations. Excluding the amortization of acquisition related intangible assets and amortization
of debt discount allows for comparison of the Companys current and historic operating performance.
The Company excludes the above listed items to evaluate the Companys 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 Companys results of
operations from the same viewpoint as the Companys 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 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 on both a GAAP basis and non-GAAP
basis be performed to get a comprehensive view of the Companys results. The Company provides a
reconciliation of GAAP net income (loss) to non-GAAP adjusted net income.
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 Companys newly acquired and long-held businesses. In addition,
the Company excluded the amortization expense as there is significant variability and
unpredictability across companies with respect to this expense.
Amortization of debt discount The Company excluded the amortization of debt discount on
its 2.25% Convertible Senior Notes (Notes). This amortization was excluded from managements
assessment of the Companys core operating performance. Although the amortization of debt discount
is recurring in nature, the expected life of the Notes is five years as that is the earliest date
in which the Notes can be put back to the Company at par value. As such, the amortization period
ends October 1, 2011, at which time the Company will no longer be recording an amortization of debt
discount. In addition, the Company has repurchased some of its Notes, which can make the principal
amount outstanding and related amortization vary from period to period, and as such the Company
believes the exclusion of the amortization facilitates comparisons with the results of other
periods that may reflect different principal amounts outstanding and related amortization.
Impairment of long-lived assets The Company excluded the impairment of long-lived
assets. During the second quarter of 2010, the Company impaired certain assets, which was excluded
from managements assessment of the Companys core operating performance. The Company believes the
exclusion of the impairment of long-lived assets provides investors an enhanced view of a gain the
Company may incur from time to time and facilitates comparisons with results of other periods that
may not reflect such impairments.
Gain on sale of assets The Company excluded the gain recorded for the sale assets.
During the first quarter of 2010, the Company sold assets located in Germany and this gain was
excluded from managements assessment of the Companys core operating performance. The Company
believes the exclusion of the gain on sale of assets provides investors an enhanced view of a gain
the Company may incur from time to time and facilitates comparisons with results of other periods
that may not reflect such gains.
Restructuring costs The Company recorded various restructuring charges to reduce its
cost structure in order to enhance operating effectiveness and improve profitability. These
restructuring activities impacted various functional areas of the Companys operations in several
locations and were undertaken to meet specific business objectives in light of the facts and
circumstances at the time of each restructuring event. These restructuring charges are excluded
from managements assessment of the Companys operating performance. The Company believes the
exclusion of the restructuring charges provides investors an enhanced view of the cost structure of
the Companys operations and facilitates comparisons with the results of other periods that may not
reflect such charges or may reflect different levels of such charges.
Loss (gain) on extinguishment of debt The Company excluded the loss (gain) from
extinguishment of debt from the repurchase of its Notes. The loss (gain) was excluded from
managements assessment of the Companys core operating performance. The Company believes the
exclusion of the loss (gain) on extinguishment of debt provides investors an enhanced view of a
loss (gain) the Company may incur from time to time and facilitates comparisons with results of
other periods that may not reflect such losses (gains).
Forgiveness of debt The Company excluded the forgiveness of debt related to one of its
Asia subsidiaries in the second quarter of 2009. This forgiveness of debt is excluded from
managements assessment of our operating performance. The Company believes the exclusion of the
forgiveness of debt provides investors an enhanced view of the adjustment the Company may incur
from time to time and facilitates comparisons with the results of other periods that may not
reflect such charges.
Taxes on repatriation of foreign earnings The Company excluded the non-cash income tax
expense related to the repatriation of foreign earnings. During the first quarter of 2009, the
Company repatriated approximately $28.5 million of accumulated earnings from one of its Chinese
subsidiaries, resulting in additional non-cash federal and state income tax expense. The Company
intends to permanently reinvest overseas all of its remaining earnings from its foreign
subsidiaries. The Company believes the exclusion of the non-cash income tax expense related to the
repatriation of foreign earnings provides investors an enhanced view of a one-time occurrence and
facilitates comparisons with results of other periods that do not reflect such a non-cash income
tax expense.
ADJUSTED EARNINGS PER SHARE
This non-GAAP financial measure is the portion of the Companys GAAP net income (loss) assigned
to each share of stock, excluding amortization of acquisition related intangible assets,
amortization of debt discount, impairment of long-lived assets, gain on sale of assets,
restructuring costs, loss (gain) on extinguishment of debt, forgiveness of debt and taxes on
repatriation of foreign earnings, as described above. Excluding impairment of long-lived assets,
gain on sale of assets, restructuring costs, gain on extinguishment of debt, forgiveness of debt
and taxes on repatriation of foreign earnings provides investors with a better depiction of the
Companys operating results and provides a more informed baseline for modeling future earnings
expectations, as described in further detail above. Excluding the amortization of acquisition
related intangible assets and amortization of debt discount allows for comparison of the Companys
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 Companys results.
Information on how these share calculations are made is included in the reconciliation table
provided.
FREE CASH FLOW (FCF)
FCF of $17.8 million for the third quarter of 2010 is a non-GAAP financial measure, which is
calculated by taking cash flow from operations less capital expenditures ($43.1 million less (-)
$25.3 million). FCF represents the cash and cash equivalents that we are able to generate after
taking into account cash outlays required to maintain or expand property, plant and equipment. FCF
is important because it allows us to pursue opportunities to develop new products, make
acquisitions and reduce debt.
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED RECONCILIATION OF NET INCOME (LOSS) TO EBITDA
CONSOLIDATED RECONCILIATION OF NET INCOME (LOSS) TO EBITDA
EBITDA represents earnings before net interest expense, income tax provision (benefit),
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 measures,
in evaluating our operating performance compared to that of other companies in our industry because
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. Furthermore, EBITDA is not
intended to be a measure of free cash flow for managements 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 (loss) to EBITDA (in thousands,
unaudited):
Three Months Ended | ||||||||
September 30, | ||||||||
2010 | 2009 | |||||||
Net income (per-GAAP) |
$ | 21,162 | $ | 7,020 | ||||
Plus: |
||||||||
Interest expense, net (1) |
2,666 | 2,960 | ||||||
Income tax provision (benefit) |
5,346 | (629 | ) | |||||
Depreciation and amortization |
13,090 | 12,092 | ||||||
EBITDA (Non-GAAP) |
$ | 42,264 | $ | 21,443 | ||||
Nine Months Ended | ||||||||
September 30, | ||||||||
2010 | 2009 | |||||||
Net income (loss) (per-GAAP) |
$ | 52,767 | $ | (6,699 | ) | |||
Plus: |
||||||||
Interest expense, net (2) |
7,443 | 8,273 | ||||||
Income tax provision |
11,705 | 4,924 | ||||||
Depreciation and amortization |
37,760 | 35,079 | ||||||
EBITDA (Non-GAAP) |
$ | 109,675 | $ | 41,577 | ||||
(1) | Includes $2.0 million for both the three months ended September 30, 2010 and 2009, of amortization of debt discount. | |
(2) | Includes $5.7 million and $6.5 million for the nine months ended September 30, 2010 and 2009, respectively, of amortization of debt discount. |
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
(in thousands)
(in thousands)
September 30, | December 31, | |||||||
2010 | 2009 | |||||||
(unaudited) | ||||||||
CURRENT ASSETS |
||||||||
Cash and cash equivalents |
$ | 263,807 | $ | 241,953 | ||||
Short-term investment securities |
| 296,600 | ||||||
Accounts receivable, net |
123,493 | 99,074 | ||||||
Inventories |
113,069 | 89,652 | ||||||
Deferred income taxes, current |
9,257 | 7,834 | ||||||
Prepaid expenses and other |
10,207 | 11,591 | ||||||
Total current assets |
519,833 | 746,704 | ||||||
PROPERTY, PLANT AND EQUIPMENT, net |
199,098 | 162,988 | ||||||
OTHER ASSETS |
||||||||
Goodwill |
67,668 | 68,075 | ||||||
Intangible assets, net |
29,949 | 34,892 | ||||||
Other |
5,836 | 5,324 | ||||||
Total assets |
$ | 822,384 | $ | 1,017,983 | ||||
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
CONSOLIDATED CONDENSED BALANCE SHEETS
LIABILITIES AND EQUITY
(in thousands, except share data)
(in thousands, except share data)
September 30, | December 31, | |||||||
2010 | 2009 | |||||||
(unaudited) | ||||||||
CURRENT LIABILITIES |
||||||||
Lines of
credit and short-term debt |
$ | | $ | 299,414 | ||||
Accounts payable |
74,766 | 62,448 | ||||||
Accrued liabilities |
46,337 | 27,236 | ||||||
Income tax payable |
3,919 | 2,641 | ||||||
Current portion of
long-term debt |
384 | 373 | ||||||
Current portion of capital
lease obligations |
288 | 283 | ||||||
Total current
liabilities |
125,694 | 392,395 | ||||||
LONG-TERM DEBT, net of current
portion |
||||||||
Convertible senior notes |
126,318 | 121,333 | ||||||
Long-term borrowings |
3,263 | 3,464 | ||||||
CAPITAL LEASE OBLIGATIONS, net of
current portion |
1,441 | 1,669 | ||||||
DEFERRED INCOME TAXES, non-current |
10,360 | 7,743 | ||||||
OTHER LONG-TERM LIABILITIES |
44,929 | 40,455 | ||||||
Total liabilities |
312,005 | 567,059 | ||||||
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;
44,360,466 and
43,729,304 issued and
outstanding at September
30, 2010 and
December 31, 2009,
respectively |
29,574 | 29,153 | ||||||
Additional paid-in capital |
223,745 | 211,618 | ||||||
Retained earnings |
300,941 | 248,174 | ||||||
Accumulated other
comprehensive loss |
(55,930 | ) | (48,311 | ) | ||||
Total Diodes
Incorporated
stockholders equity |
498,330 | 440,634 | ||||||
Noncontrolling interest |
12,049 | 10,290 | ||||||
Total equity |
510,379 | 450,924 | ||||||
Total
liabilities and
equity |
$ | 822,384 | $ | 1,017,983 | ||||