Exhibit 99.1
Diodes Incorporated Reports Second Quarter 2010 Financial Results
Achieves Record Quarterly Revenue of $149.2 Million, Record Gross Profit of $53.5 Million and Record Gross Margin of 35.8%
Dallas, Texas – August 5, 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 second quarter ended June 30, 2010.
Second Quarter Highlights:
| • | Revenue was a record $149.2 million, an increase of 43.6 percent over the $103.9 million in the second quarter of 2009 and a sequential increase of 9.1 percent over the $136.8 million in the first quarter of 2010; |
| • | Gross profit was a record $53.5 million, an increase of 95.3 percent over the $27.4 million in the second quarter of 2009 and a sequential increase of 11.9 percent over the $47.8 million in the first quarter of 2010; |
| • | Gross margin was a record 35.8 percent, compared to 26.3 percent in the second quarter of 2009 and 34.9 percent in the first quarter of 2010; |
| • | Income before income taxes and noncontrolling interest was $20.6 million, compared to income of $2.8 million in the second quarter of 2009 and income of $19.0 million in the first quarter of 2010; |
| • | GAAP net income was $16.6 million, or $0.37 per diluted share, compared to second quarter of 2009 net loss of $3.0 million, or ($0.07) per share, and first quarter of 2010 net income of $15.0 million, or $0.33 per diluted share; |
| • | Non-GAAP adjusted net income was $18.7 million, or $0.41 per diluted share, compared to adjusted net income of $2.5 million, or $0.06 per diluted share, in the second quarter of 2009 and adjusted net income of $15.7 million, or $0.35 per diluted share, in the first 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 |
| • | On June 30, 2010, our auction rate securities (“ARS”) were put back to UBS AG in connection with the previously disclosed settlement agreement, in which our ARS were liquidated for cash and the proceeds were used to pay off the “no net cost” loan. |
Revenue for the second quarter of 2010 was a record $149.2 million, an increase of 43.6 percent over the $103.9 million in the second quarter of 2009 and a sequential increase of 9.1 percent over the $136.8 million in the first quarter of 2010. Revenue increased in the quarter due to strong demand for products across all of the Company’s worldwide markets with further growth in North America and Asia. The Company also experienced sustained improvement in Europe and reported record revenue in the region for the second consecutive quarter despite the continued weakness in the exchange rate.
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Gross profit for the second quarter of 2010 was a record $53.5 million, an increase of 95.3 percent over the $27.4 million in the second quarter of 2009 and a sequential increase of 11.9 percent over the $47.8 million in the first quarter of 2010. Gross margin in the second quarter was a record 35.8 percent, compared to 26.3 percent in the second quarter of 2009 and 34.9 percent in the first quarter of 2010. Gross margin improved in the quarter as a result of better than expected utilization at the wafer fabs, record output at the Company’s packaging facilities and a favorable mix of higher margin new products.
Commenting on the quarter, Dr. Keh-Shew Lu, President and Chief Executive Officer of Diodes Incorporated, stated, “Diodes once again achieved record results in revenue, gross profit and gross margin, reflecting the continued execution on our profitable growth strategy. Our focus on design wins, new product development and the cross-selling from our Zetex acquisition continues to produce material growth for our business. Additionally, our achievement of record gross profit and record gross margin is a direct result of the operational efficiencies at our manufacturing and packaging facilities combined with continued success on our new product initiatives. We were also pleased to have reached a final resolution in regard to our ARS, which we put back to UBS AG for cash and used the proceeds to fully repay the related “no net cost” loan, both of which are no longer on our balance sheet. As I have stated previously, Diodes has emerged from the downturn as a stronger company with expanded growth opportunities, and I believe our achievement of record results for the third consecutive quarter is proof of our success.”
Second quarter of 2010 GAAP net income was $16.6 million, or $0.37 per diluted share, compared to second quarter of 2009 net loss of $3.0 million, or ($0.07) per share, and first quarter of 2010 net income of $15.0 million, or $0.33 per diluted share.
Non-GAAP adjusted net income was $18.7 million, or $0.41 per diluted share, which excluded, net of tax, $1.1 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):
| Three Months Ended | ||||
| June 30, 2010 | ||||
GAAP net income | $ | 16,647 | ||
GAAP diluted earnings per share | $ | 0.37 | ||
Adjustments to reconcile net income to adjusted net income: | ||||
Amortization of debt discount | 1,143 | |||
Amortization of acquisition related intangible assets | 776 | |||
Other | 89 | |||
Non-GAAP adjusted net income | $ | 18,655 | ||
Non-GAAP adjusted diluted earnings per share | $ | 0.41 | ||
See tables below for further details of the reconciliation.
Included in the second 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 diluted share.
As of June 30, 2010, Diodes had approximately $246 million in cash and cash equivalents. Under the previously disclosed settlement with UBS AG regarding our ARS, effective June 30, 2010 the Company put back all of the ARS securities to UBS and paid off the associated “no net cost” loan, both of which are no longer on Diodes’ balance sheet. At quarter end, the Company had $128 million in long-term debt primarily related to its Convertible Senior Notes.
Business Outlook
Dr. Lu concluded, “Due to our aggressive design win and new product introduction efforts, the demand for Diodes’ products continues to be strong. Building on our record second quarter results, we expect to post our sixth consecutive quarter of sequential revenue growth in the third quarter with revenue anticipated to range between $158 million and $164 million, or an increase of 6 to 10 percent sequentially. Gross profit is expected to increase at a rate comparable to our revenue growth, which would also represent another record. Operating expenses are anticipated to decrease slightly from second quarter levels on a percent of revenue basis. We expect our income tax rate for the third quarter to range between 15 and 20 percent as profitability in higher tax jurisdictions continues to improve. For the third quarter, we expect shares used to calculate GAAP EPS to be approximately 46.0 million.”
Conference Call
Diodes will host a conference call on Thursday, August 5, 2010 at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss its second quarter 2010 financial results. Investors and analysts may join the conference call by dialing 1-866-272-9941 and providing the confirmation code 67752179. International callers may join the teleconference by dialing 1-617-213-8895. A telephone replay of the conference call will be available approximately two hours after the conference call and will be available until August 9, 2010 at
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midnight Central Time. The replay dial-in number is 1-888-286-8010, and the pass code is 68776987. 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 Poor’s 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 Company’s 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 Company’s 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 Company’s website at http://www.diodes.com.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such statements include statements regarding our expectation that: building on our record second quarter results, we expect to post our sixth consecutive quarter of sequential revenue growth in the third quarter with revenue anticipated to range between $158 million and $164 million, or an increase of 6 to 10 percent sequentially; gross profit is expected to increase at a rate comparable to our revenue growth, which would also represent another record; operating expenses are anticipated to decrease slightly from second quarter levels on a percent of revenue basis; we expect our income tax rate for the third quarter to range between 15 and 20 percent as profitability in higher tax jurisdictions continues to improve; and for the third quarter, we expect shares used to calculate GAAP EPS to be approximately 46.0 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 Company’s filings with the United States Securities and Exchange Commission.
Recent news releases, annual reports and SEC filings are available at the Company’s website: http://www.diodes.com. Written requests may be sent directly to the Company, or they may be e-mailed to: diodes-fin@diodes.com.
# # #
Company Contact: | Investor Contact: | |
Diodes Incorporated | Shelton Group | |
Carl Wertz | Leanne K. Sievers | |
VP, Finance and Investor Relations | EVP, Investor Relations | |
P: (805) 446-4800 | P: (949) 224-3874 | |
E:carl_wertz@diodes.com | E:lsievers@sheltongroup.com |
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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 | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
NET SALES | $ | 149,153 | $ | 103,898 | $ | 286,000 | $ | 181,948 | ||||||||
COST OF GOODS SOLD | 95,686 | 76,528 | 184,750 | 140,085 | ||||||||||||
| Gross profit | 53,467 | 27,370 | 101,250 | 41,863 | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
| Selling, general and administrative | 21,422 | 15,240 | 42,841 | 31,296 | ||||||||||||
| Research and development | 6,815 | 5,385 | 13,191 | 10,660 | ||||||||||||
| Amortization of acquisition related intangible assets | 1,078 | 1,118 | 2,206 | 2,209 | ||||||||||||
| Impairment of long-lived assets | 144 | — | 144 | — | ||||||||||||
| Restructuring | — | (248 | ) | — | (149 | ) | ||||||||||
| Total operating expenses | 29,459 | 21,495 | 58,382 | 44,016 | ||||||||||||
| Income (loss) from operations | 24,008 | 5,875 | 42,868 | (2,153 | ) | |||||||||||
OTHER INCOME (EXPENSES) | ||||||||||||||||
| Interest income | 996 | 1,345 | 2,308 | 3,102 | ||||||||||||
| Interest expense | (1,396 | ) | (1,877 | ) | (3,378 | ) | (3,925 | ) | ||||||||
| Amortization of debt discount | (1,873 | ) | (2,281 | ) | (3,707 | ) | (4,490 | ) | ||||||||
| Other | (1,150 | ) | (275 | ) | 1,498 | (12 | ) | |||||||||
| Total other expenses | (3,423 | ) | (3,088 | ) | (3,279 | ) | (5,325 | ) | ||||||||
| Income (loss) before income taxes and noncontrolling interest | 20,585 | 2,787 | 39,589 | (7,478 | ) | |||||||||||
INCOME TAX PROVISION | 3,035 | 5,156 | 6,359 | 5,553 | ||||||||||||
NET INCOME (LOSS) | 17,550 | (2,369 | ) | 33,230 | (13,031 | ) | ||||||||||
| Less: NET INCOME attributable to noncontrolling interest | (903 | ) | (584 | ) | (1,625 | ) | (688 | ) | ||||||||
NET INCOME (LOSS) attributable to common stockholders | $ | 16,647 | $ | (2,953 | ) | $ | 31,605 | $ | (13,719 | ) | ||||||
EARNINGS (LOSS) PER SHARE attributable to common stockholders | ||||||||||||||||
| Basic | $ | 0.38 | $ | (0.07 | ) | $ | 0.72 | $ | (0.33 | ) | ||||||
| Diluted | $ | 0.37 | $ | (0.07 | ) | $ | 0.70 | $ | (0.33 | ) | ||||||
| Number of shares used in computation | ||||||||||||||||
| Basic | 43,975 | 41,587 | 43,871 | 41,368 | ||||||||||||
| Diluted | 45,510 | 41,587 | 45,358 | 41,368 | ||||||||||||
| Note: | Throughout this release, we refer to “net income (loss) attributable to common stockholders” as “net income (loss).” |
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DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS)
(in thousands, except per share data)
(unaudited)
CONSOLIDATED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS)
(in thousands, except per share data)
(unaudited)
For the three months ended June 30, 2010:
| Other | ||||||||||||||||
| Operating | Income | Income Tax | ||||||||||||||
| Expenses | (Expense) | Provision | Net Income | |||||||||||||
Per-GAAP | $ | 16,647 | ||||||||||||||
Earnings per share (Per-GAAP) | ||||||||||||||||
| Diluted | $ | 0.37 | ||||||||||||||
Adjustments to reconcile net income to adjusted net income: | ||||||||||||||||
Amortization of acquisition related intangible assets | 1,078 | — | (302 | ) | 776 | |||||||||||
Impairment of long-lived assets | — | 144 | (55 | ) | 89 | |||||||||||
Amortization of debt discount | — | 1,873 | (730 | ) | 1,143 | |||||||||||
Adjusted (Non-GAAP) | $ | 18,655 | ||||||||||||||
| Diluted shares used in computing earnings per share | 45,510 | |||||||||||||||
Adjusted earnings per share (Non-GAAP) | ||||||||||||||||
| Diluted | $ | 0.41 | ||||||||||||||
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.
For the three months ended June 30, 2009:
| Other | ||||||||||||||||
| Operating | Income | Income Tax | Net Income | |||||||||||||
| Expenses | (Expense) | Provision | (Loss) | |||||||||||||
Per-GAAP | $ | (2,953 | ) | |||||||||||||
Loss per share (Per-GAAP) | ||||||||||||||||
| Diluted | $ | (0.07 | ) | |||||||||||||
Adjustments to reconcile net loss to adjusted net income: | ||||||||||||||||
Amortization of acquisition related intangible assets | 1,118 | — | (315 | ) | 803 | |||||||||||
Restructuring | (248 | ) | — | (145 | ) | (393 | ) | |||||||||
Loss on extinguishment of debt | — | 137 | (53 | ) | 84 | |||||||||||
Forgiveness of debt | — | (1,501 | ) | 188 | (1,313 | ) | ||||||||||
Taxes on repatriation of earnings | — | — | 4,915 | 4,915 | ||||||||||||
Amortization of debt discount | — | 2,281 | (890 | ) | 1,391 | |||||||||||
Adjusted (Non-GAAP) | $ | 2,534 | ||||||||||||||
| Diluted shares used in computing earnings per share | 42,792 | |||||||||||||||
Adjusted earnings per share (Non-GAAP) | ||||||||||||||||
| Diluted | $ | 0.06 | ||||||||||||||
Note: Included in GAAP and non-GAAP adjusted net loss was approximately $1.5 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.
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DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS) – Cont.
(in thousands, except per share data)
(unaudited)
CONSOLIDATED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS) – Cont.
(in thousands, except per share data)
(unaudited)
For the six months ended June 30, 2010:
| Other | ||||||||||||||||
| Operating | Income | Income Tax | ||||||||||||||
| Expenses | (Expense) | Provision | Net Income | |||||||||||||
Per-GAAP | $ | 31,605 | ||||||||||||||
Earnings per share (Per-GAAP) | ||||||||||||||||
| Diluted | $ | 0.70 | ||||||||||||||
Adjustments to reconcile net income to adjusted net income: | ||||||||||||||||
Amortization of acquisition related intangible assets | 2,206 | — | (618 | ) | 1,588 | |||||||||||
Gain on sale of assets | — | (1,837 | ) | 661 | (1,176 | ) | ||||||||||
Impairment of long-lived assets | — | 144 | (55 | ) | 89 | |||||||||||
Amortization of debt discount | — | 3,707 | (1,446 | ) | 2,261 | |||||||||||
Adjusted (Non-GAAP) | $ | 34,367 | ||||||||||||||
| Diluted shares used in computing earnings per share | 45,358 | |||||||||||||||
Adjusted earnings per share (Non-GAAP) | ||||||||||||||||
| Diluted | $ | 0.76 | ||||||||||||||
Note: Included in GAAP and non-GAAP adjusted net income was approximately $4.2 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 $0.09 per share.
For the six months ended June 30, 2009:
| Other | ||||||||||||||||
| Operating | Income | Income Tax | ||||||||||||||
| Expenses | (Expense) | Provision | Net Loss | |||||||||||||
Per-GAAP | $ | (13,719 | ) | |||||||||||||
Loss per share (Per-GAAP) | ||||||||||||||||
| Diluted | $ | (0.33 | ) | |||||||||||||
Adjustments to reconcile net loss to adjusted net loss: | ||||||||||||||||
Amortization of acquisition related intangible assets | 2,209 | — | (619 | ) | 1,590 | |||||||||||
Restructuring | (149 | ) | — | (196 | ) | (345 | ) | |||||||||
Gain on extinguishment of debt | — | (1,353 | ) | 528 | (825 | ) | ||||||||||
Forgiveness of debt | — | (1,501 | ) | 188 | (1,313 | ) | ||||||||||
Taxes on repatriation of earnings | — | — | 10,631 | 10,631 | ||||||||||||
Amortization of debt discount | — | 4,490 | (1,751 | ) | 2,739 | |||||||||||
Adjusted (Non-GAAP) | $ | (1,242 | ) | |||||||||||||
| Diluted shares used in computing earnings per share | 41,368 | |||||||||||||||
Adjusted loss per share (Non-GAAP) | ||||||||||||||||
| Diluted | $ | (0.03 | ) | |||||||||||||
Note: Included in GAAP and non-GAAP adjusted net income was approximately $3.0 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 $0.07 per share.
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ADJUSTED NET INCOME
This measure consists of generally accepted accounting principles (“GAAP”) net income, 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, 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, gain on extinguishment of debt, forgiveness of debt, and taxes on repatriation of foreign earnings 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 and amortization of debt discount allows for comparison of the Company’s current and historic operating performance. The Company excludes the above listed items to evaluate the Company’s 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 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 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 Company’s results. The Company provides a reconciliation of GAAP net income to non-GAAP adjusted net income.
Detail of non-GAAP adjustments:
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 Company’s 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 management’s assessment of the Company’s 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 management’s assessment of the Company’s 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 management’s assessment of the Company’s 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 Company’s 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 management’s assessment of the Company’s operating performance. The Company believes the exclusion of the restructuring charges provides investors an enhanced view of the cost structure of the Company’s operations and facilitates comparisons with the results of other periods that may not reflect such charges or may reflect different levels of such charges.
Gain on extinguishment of debt —The Company excluded the gain from extinguishment of debt from the repurchase of its Notes. This gain was excluded from management’s assessment of the Company’s core operating performance. The Company believes the exclusion of the gain on extinguishment of debt 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.
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 management’s 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 Company’s GAAP net income 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, 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 Company’s 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 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. 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 table provided.
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DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED RECONCILIATION OF NET INCOME TO EBITDA
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 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 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 | ||||||||
| June 30, | ||||||||
| 2010 | 2009 | |||||||
| Net income (loss) (per-GAAP) | $ | 16,647 | $ | (2,953 | ) | |||
| Plus: | ||||||||
| Interest expense (income), net (1) | 2,273 | 2,813 | ||||||
| Income tax provision | 3,035 | 5,156 | ||||||
| Depreciation and amortization | 12,601 | 11,632 | ||||||
EBITDA (Non-GAAP) | $ | 34,556 | $ | 16,648 | ||||
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2010 | 2009 | |||||||
| Net income (loss) (per-GAAP) | $ | 31,605 | $ | (13,719 | ) | |||
| Plus: | ||||||||
| Interest expense (income), net (2) | 4,777 | 5,313 | ||||||
| Income tax provision | 6,359 | 5,553 | ||||||
| Depreciation and amortization | 24,670 | 22,987 | ||||||
EBITDA (Non-GAAP) | $ | 67,411 | $ | 20,134 | ||||
| (1) | Includes $1.9 million and $2.3 million for the three months ended June 30, 2010 and 2009, respectively, of amortization of debt discount. | |
| (2) | Includes $3.7 million and $4.5 million for the six months ended June 30, 2010 and 2009, respectively, of amortization of debt discount. |
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DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
(in thousands)
(in thousands)
| June 30, | December 31, | |||||||
| 2010 | 2009 | |||||||
| (unaudited) | ||||||||
CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 245,640 | $ | 241,953 | ||||
| Short-term investment securities | — | 296,600 | ||||||
| Accounts receivable, net | 117,302 | 99,074 | ||||||
| Inventories | 101,768 | 89,652 | ||||||
| Deferred income taxes, current | 9,325 | 7,834 | ||||||
| Prepaid expenses and other | 13,124 | 11,591 | ||||||
Total current assets | 487,159 | 746,704 | ||||||
PROPERTY, PLANT AND EQUIPMENT,net | 184,243 | 162,988 | ||||||
OTHER ASSETS | ||||||||
| Goodwill | 65,185 | 68,075 | ||||||
| Intangible assets, net | 30,729 | 34,892 | ||||||
| Other | 5,375 | 5,324 | ||||||
Total assets | $ | 772,691 | $ | 1,017,983 | ||||
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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)
| June 30, | December 31, | |||||||
| 2010 | 2009 | |||||||
| (unaudited) | ||||||||
CURRENT LIABILITIES | ||||||||
| Lines of credit and short-term debt | $ | 1,555 | $ | 299,414 | ||||
| Accounts payable | 67,720 | 62,448 | ||||||
| Accrued liabilities | 41,053 | 27,236 | ||||||
| Income tax payable | 3,059 | 2,641 | ||||||
| Current portion of long-term debt | 373 | 373 | ||||||
| Current portion of capital lease obligations | �� | 281 | 283 | |||||
Total current liabilities | 114,041 | 392,395 | ||||||
LONG-TERM DEBT, net of current portion | ||||||||
| Convertible senior notes | 124,312 | 121,333 | ||||||
| Long-term borrowings | 3,266 | 3,464 | ||||||
CAPITAL LEASE OBLIGATIONS, net of current portion | 1,477 | 1,669 | ||||||
DEFERRED INCOME TAXES, non-current | 8,596 | 7,743 | ||||||
OTHER LONG-TERM LIABILITIES | 44,610 | 40,455 | ||||||
Total liabilities | 296,302 | 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; 44,263,625 and 43,729,304 issued and outstanding at June 30, 2010 and December 31, 2009, respectively | 29,509 | 29,153 | ||||||
| Additional paid-in capital | 220,353 | 211,618 | ||||||
| Retained earnings | 279,779 | 248,174 | ||||||
| Accumulated other comprehensive loss | (65,094 | ) | (48,311 | ) | ||||
Total Diodes Incorporated stockholders’ equity | 464,547 | 440,634 | ||||||
Noncontrolling interest | 11,842 | 10,290 | ||||||
Total equity | 476,389 | 450,924 | ||||||
Total liabilities and equity | $ | 772,691 | $ | 1,017,983 | ||||
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