EXHIBIT 99.1
DIODES INCORPORATED
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On November 30, 2020, Diodes Incorporated (the “Company”) completed its acquisition (the “Acquisition”) of Lite-On Semiconductor Corporation (“LSC”) pursuant to the Share Swap Agreement dated as of August 8, 2019. Each LSC shareholder received TWD 42.50 or, based on November 30, 2020 exchange rates, approximately $1.49 per share, representing aggregate consideration of approximately $453 million. As a result of the transaction’s close, the common stock of LSC will no longer be listed for trading on the Taiwan Stock Exchange.
The following unaudited pro forma condensed combined financial statements are based upon the historical condensed consolidated financial statements and notes thereto of the Company (as adjusted for the Acquisition).
The unaudited pro forma condensed combined balance sheet gives pro forma effect to the Acquisition as if it had been completed on September 30, 2020 and combines the Company’s September 30, 2020 unaudited consolidated balance sheet with LSC’s unaudited consolidated balance sheet as of September 30, 2020. The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2020, gives pro forma effect to the Acquisition as if it had been completed on January 1, 2019 and combines the Company’s unaudited condensed consolidated statement of operations for the nine months ended September 30, 2020 and LSC’s unaudited condensed consolidated statement of operations for the nine months ended September 30, 2020. The unaudited pro forma condensed combined statement of operations for the twelve months ended December 31, 2019, gives pro forma effect to the transactions as if they had been completed on January 1, 2019 and combines the Company’s unaudited consolidated statement of operations for the twelve months ended December 31, 2019 and LSC’s audited consolidated statement of operations for the twelve months ended December 31, 2019.
The unaudited pro forma financial information is presented for informational purposes only and do not reflect changes that are the result of Release No. 33-10786, issued on May 20, 2020. The historical condensed combined financial information has been adjusted to give effect to pro forma events that are: 1) directly attributable to the Acquisition; 2) factually supportable; and 3) with respect to the statement of income, expected to have a continuing impact on the combined results. It does not purport to indicate the results that would have actually been attained had the Acquisition occurred on the assumed dates or for the periods presented, or which may be realized in the future. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable under the circumstances. A final determination of fair values relating to the Acquisition may differ materially from the preliminary estimates and will include management’s final valuation of the fair value of assets acquired and liabilities assumed. This final valuation will be based on the actual net assets of LSC that existed as of the date of the completion of the Acquisition. Any adjustments to the preliminary estimated fair value amounts could have a significant impact on the unaudited pro forma condensed combined financial information contained herein, and our future results of operations and financial position.
These unaudited pro forma condensed combined financial statements should be read in conjunction with the historical consolidated financial statements and related notes contained in the annual, quarterly and other reports filed by the Company with the United States Securities and Exchange Commission (“SEC”) and with LSC’s historical consolidated financial statements and related notes contained in the Form 8-K filed by the Company with the SEC on December 4, 2020 in addition to the unaudited interim financial statements filed with this 8-K/A.
1
Diodes Incorporated |
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Unaudited Pro Forma Condensed Combined Balance Sheet |
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As of September 30, 2020 |
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| Historical Diodes |
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| Historical LSC As Adjusted (Note 2) |
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| Pro Forma Adjustments |
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| Pro Forma Combined |
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Assets |
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| Note (3) |
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Current assets: |
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Cash and cash equivalents |
| $ | 587,643 |
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| $ | 112,739 |
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| $ | (453,426 | ) | a | $ | 246,956 |
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Short-term investments |
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| 3,014 |
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|
| 1,129 |
|
|
| - |
|
|
| 4,143 |
|
Accounts receivable, net |
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| 261,782 |
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|
| 45,087 |
|
|
| (2,274 | ) | d |
| 304,595 |
|
Inventories |
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| 260,289 |
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|
| 56,355 |
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|
| 2,514 |
| b |
| 319,158 |
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Prepaid expenses and other |
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| 101,961 |
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|
| 10,472 |
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|
| 115 |
| f |
| 112,548 |
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Total current assets |
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| 1,214,689 |
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|
| 225,782 |
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| (453,071 | ) |
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| 987,400 |
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Property, plant and equipment, net |
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| 453,487 |
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| 85,484 |
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| (28,190 | ) | b |
| 510,781 |
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Deferred income tax |
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| 23,566 |
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| 27,335 |
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| (11,978 | ) | f |
| 38,923 |
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Goodwill |
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| 155,492 |
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|
| - |
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|
| - |
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| 155,492 |
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Intangible assets, net |
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| 114,306 |
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| 647 |
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| (647 | ) | b |
| 114,306 |
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Other long-term assets |
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| 71,112 |
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| 214,500 |
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| (174,650 | ) | e |
| 110,962 |
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Total assets |
| $ | 2,032,652 |
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| $ | 553,748 |
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| $ | (668,536 | ) |
| $ | 1,917,864 |
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Liabilities |
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Current liabilities: |
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Line of credit |
| $ | 70,746 |
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| $ | 72,165 |
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| $ | - |
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| $ | 142,911 |
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Accounts payable |
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| 127,315 |
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| 42,843 |
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|
| (166 | ) | d |
| 169,992 |
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Accrued liabilities and other |
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| 103,259 |
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| 39,710 |
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|
| 3,818 |
| g |
| 146,787 |
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Income tax payable |
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| 5,235 |
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| 6,619 |
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| (342 | ) | f |
| 11,512 |
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Current portion of long-term debt |
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| 14,978 |
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| - |
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| - |
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| 14,978 |
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Total current liabilities |
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| 321,533 |
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| 161,337 |
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| 3,310 |
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| 486,180 |
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Long-term debt, net of current portion |
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| 330,766 |
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| - |
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| - |
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| 330,766 |
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Deferred tax liabilities |
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| 14,445 |
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| 59,841 |
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| (51,523 | ) | f |
| 22,763 |
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Other long-term liabilities |
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| 114,857 |
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| 10,493 |
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| - |
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| 125,350 |
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Total liabilities |
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| 781,601 |
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| 231,671 |
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| (48,213 | ) |
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| 965,059 |
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Commitments and contingencies |
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| - |
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| - |
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| - |
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| - |
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Stockholders' equity |
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Common stock |
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| 35,628 |
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| 107,373 |
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| (107,373 | ) | c |
| 35,628 |
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Additional paid-in capital |
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| 440,944 |
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| 75,815 |
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| (75,815 | ) | c |
| 440,944 |
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Retained earnings |
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| 858,311 |
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| 167,619 |
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| (169,017 | ) | c,g |
| 856,913 |
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Treasury stock, at cost |
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| (39,205 | ) |
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| (7,427 | ) |
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| (289,381 | ) | c,e |
| (336,013 | ) |
Accumulated other comprehensive loss |
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| (97,105 | ) |
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| (21,263 | ) |
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| 21,263 |
| c |
| (97,105 | ) |
Total stockholders' equity |
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| 1,198,573 |
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| 322,117 |
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| (620,323 | ) |
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| 900,367 |
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Noncontrolling interest |
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| 52,478 |
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| (40 | ) |
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| - |
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| 52,438 |
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Total equity |
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| 1,251,051 |
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| 322,077 |
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| (620,323 | ) |
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| 952,805 |
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Total liabilities and stockholders' equity |
| $ | 2,032,652 |
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| $ | 553,748 |
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| $ | (668,536 | ) |
| $ | 1,917,864 |
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2
Diodes Incorporated |
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Unaudited Pro Forma Condensed Combined Statement of Operations |
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For the Nine Months Ended September 30, 2020 |
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| Historical Diodes |
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| Historical LSC As Adjusted |
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| Pro Forma Adjustments |
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| Pro Forma Combined |
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| Note (2) |
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| Note (4) |
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Net sales |
| $ | 878,845 |
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| $ | 164,270 |
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| $ | (9,920 | ) | a |
| $ | 1,033,195 |
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Cost of goods sold |
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| 570,421 |
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| 146,226 |
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| (10,093 | ) | a,c |
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| 706,554 |
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Gross profit |
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| 308,424 |
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| 18,044 |
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|
| 173 |
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| 326,641 |
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Operating expenses |
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Selling, general and administrative |
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| 132,238 |
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| 14,997 |
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| (1,552 | ) | b,c |
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| 145,683 |
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Research and development |
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| 69,469 |
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| 8,633 |
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|
| - |
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| 78,102 |
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Amortization of acquisition related intangible assets |
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| 12,249 |
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| 2,090 |
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| (2,090 | ) | c |
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| 12,249 |
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Impairment of fixed assets |
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| - |
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| 3,107 |
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| (3,107 | ) | i |
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| - |
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Other operating (income) expense |
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| (108 | ) |
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| (301 | ) |
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| - |
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|
| (409 | ) |
Total operating expense |
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| 213,848 |
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| 28,526 |
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| (6,749 | ) |
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| 235,625 |
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Income from operations |
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| 94,576 |
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| (10,482 | ) |
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| 6,922 |
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| 91,016 |
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Other income (expense) |
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Interest income |
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| 579 |
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|
| 1,216 |
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|
| - |
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|
|
| 1,795 |
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Interest expense |
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| (7,643 | ) |
|
| (1,145 | ) |
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| (5,969 | ) | g |
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| (14,757 | ) |
Foreign currency loss, net |
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| (6,143 | ) |
|
| (538 | ) |
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| - |
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|
| (6,681 | ) |
Other income |
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| 2,902 |
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|
| 97,637 |
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| (93,900 | ) | h,j |
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| 6,639 |
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Total other expense |
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| (10,305 | ) |
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| 97,170 |
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| (99,869 | ) |
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|
| (13,004 | ) |
Income before income taxes and noncontrolling interest |
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| 84,271 |
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| 86,688 |
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| (92,947 | ) |
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| 78,012 |
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Income tax provision |
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| 15,097 |
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| 8,161 |
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| (18,589 | ) | d |
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| 4,669 |
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Net income |
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| 69,174 |
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| 78,527 |
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| (74,358 | ) |
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| 73,343 |
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Less net (income) loss attributable to noncontrolling interest |
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| (821 | ) |
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| 881 |
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|
| - |
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|
| 60 |
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Net income attributable to common stockholders |
| $ | 68,353 |
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| $ | 79,408 |
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| $ | (74,358 | ) |
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| $ | 73,403 |
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Earnings per share attributable to common stockholders: |
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Basic |
| $ | 1.33 |
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| $ | 1.68 |
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Diluted |
| $ | 1.30 |
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| $ | 1.64 |
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Number of shares used in earnings per share computation: |
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Basic |
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| 51,563 |
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| (7,766 | ) | e |
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| 43,797 |
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Diluted |
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| 52,612 |
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| (7,766 | ) | f |
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| 44,846 |
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3
Diodes Incorporated |
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Unaudited Pro Forma Condensed Combined Statement of Operations |
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For the Year Ended December 31, 2019 |
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| Historical Diodes |
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| Historical LSC As Adjusted |
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| Pro Forma Adjustments |
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| Pro Forma Combined |
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| Note (2) |
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| Note (5) |
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Net sales |
| $ | 1,249,130 |
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| $ | 359,303 |
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| $ | (161,432 | ) | a,j |
| $ | 1,447,001 |
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Cost of goods sold |
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| 783,323 |
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| 278,561 |
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| (99,971 | ) | a,c,j |
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| 961,913 |
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Gross profit |
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| 465,807 |
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| 80,742 |
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| (61,461 | ) |
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| 485,088 |
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Operating expenses |
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|
|
|
|
|
|
|
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|
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|
|
|
|
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Selling, general and administrative |
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| 181,343 |
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| 31,719 |
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| (16,371 | ) | b,c,j |
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| 196,691 |
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Research and development |
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| 88,517 |
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| 32,635 |
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| (23,243 | ) | j |
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| 97,909 |
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Amortization of acquisition related intangible assets |
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| 18,041 |
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|
| 5,723 |
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| (5,723 | ) | c |
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| 18,041 |
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Impairment of fixed assets |
|
| - |
|
|
| 297 |
|
|
| (297 | ) | i |
|
| - |
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Gain on disposal of fixed assets |
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| (24,429 | ) |
|
| - |
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|
| - |
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|
|
| (24,429 | ) |
Other operating (income) expense |
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| 1,727 |
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| (34 | ) |
|
| - |
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|
| 1,693 |
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Total operating expense |
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| 265,199 |
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| 70,340 |
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|
| (45,634 | ) |
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|
| 289,905 |
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Income from operations |
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| 200,608 |
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| 10,402 |
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| (15,827 | ) |
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| 195,183 |
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Other income (expense) |
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Interest income |
|
| 2,189 |
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|
| 4,708 |
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|
| 263 |
| j |
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| 7,160 |
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Interest expense |
|
| (7,893 | ) |
|
| (2,854 | ) |
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| (11,130 | ) | g |
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| (21,877 | ) |
Foreign currency loss, net |
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| (3,737 | ) |
|
| 1,221 |
|
|
| - |
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|
|
| (2,516 | ) |
Other income |
|
| 7,079 |
|
|
| 21,148 |
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| (26,628 | ) | h,j |
|
| 1,599 |
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Total other expense |
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| (2,362 | ) |
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| 24,223 |
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|
| (37,495 | ) |
|
|
| (15,634 | ) |
Income before income taxes and noncontrolling interest |
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| 198,246 |
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|
| 34,625 |
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| (53,322 | ) |
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|
| 179,549 |
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Income tax provision |
|
| 44,131 |
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|
| 6,056 |
|
|
| (10,665 | ) | d |
|
| 39,522 |
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Net income |
|
| 154,115 |
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|
| 28,569 |
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|
| (42,657 | ) |
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|
| 140,027 |
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Less net (income) loss attributable to noncontrolling interest |
|
| (865 | ) |
|
| (14,241 | ) |
|
| 14,682 |
| j |
|
| (424 | ) |
Net income attributable to common stockholders |
| $ | 153,250 |
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| $ | 14,328 |
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| $ | (27,975 | ) |
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| $ | 139,603 |
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Earnings per share attributable to common stockholders: |
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Basic |
| $ | 3.02 |
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| $ | 3.24 |
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Diluted |
| $ | 2.96 |
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| $ | 3.17 |
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Number of shares used in earnings per share computation: |
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Basic |
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| 50,787 |
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|
|
|
|
|
| (7,766 | ) | e |
|
| 43,021 |
|
Diluted |
|
| 51,860 |
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|
|
|
|
|
| (7,766 | ) | f |
|
| 44,094 |
|
4
Pro Forma Adjustments Relating to the acquisition of LSC
Note 1. Basis of Presentation
The Acquisition of LSC by Diodes was considered a business combination under ASC 805, and accounted for using the acquisition method of accounting in accordance with U.S. GAAP. Diodes recorded the fair value of assets acquired and liabilities assumed from LSC.
Management has made significant estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.
The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings or cost savings that may be associated with the Acquisition.
The pro forma adjustments reflecting the completion of the Acquisition are based on certain currently available information and certain assumptions and methodologies that Diodes believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated.
Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be material. Diodes believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Acquisition based on information available to management at this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Acquisition taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the post-combination company. They should be read in conjunction with the historical financial statements and notes thereto of Diodes and LSC.
Note 2. Adjustments to Historical LSC Financial Information
The historical financial information of LSC was prepared in accordance with IFRS and presented in Taiwan Dollars (TWD). The historical financial information was translated from TWD to U.S. dollars using the following historical exchange rates:
| TWD to USD |
Period end exchange rate as of September 30, 2020 | 0.03436 |
Average exchange rate for the nine months ended September 30, 2020 | 0.03354 |
Average exchange rate for the year ended December 31, 2019 | 0.03235 |
In addition, adjustments were made to convert LSC’s financial information from IFRS to U.S. GAAP and to align LSC’s accounting policies to those applied by Diodes. Refer to tables below for impacted line items and adjustment amounts in the pro forma condensed combined balance sheet and statements of operations.
5
Impact on pro forma balance sheet as of September 30, 2020:
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| As of September 30, 2020 |
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| As of September 30, 2020 |
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| As of September 30, 2020 |
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| Historical IFRS LSC (TWD) |
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| Total IFRS to US GAAP Adjustments (TWD) |
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| Reclassification Adjustments |
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| Historical US GAAP LSC (TWD) |
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| Historical US GAAP LSC (USD) |
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Assets |
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| D |
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Current assets: |
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|
|
|
|
|
|
|
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|
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|
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|
|
Cash and cash equivalents |
| $ | 3,280,716 |
|
| $ | - |
|
| $ | - |
|
| $ | 3,280,716 |
|
| $ | 112,739 |
|
Short-term investments |
|
| 32,861 |
|
|
| - |
|
|
| - |
|
|
| 32,861 |
|
|
| 1,129 |
|
Accounts receivable, net |
|
| 1,312,035 |
|
|
| - |
|
|
| - |
|
|
| 1,312,035 |
|
|
| 45,087 |
|
Inventories |
|
| 1,639,945 |
|
|
| - |
|
|
| - |
|
|
| 1,639,945 |
|
|
| 56,355 |
|
Other Accounts Receivable |
|
| 113,326 |
|
|
| - |
|
|
| (113,326 | ) |
|
| - |
|
|
| - |
|
Assets for sale |
|
| 17,946 |
|
|
| - |
|
|
| (17,946 | ) |
|
| - |
|
|
| - |
|
Prepaid expenses and other |
|
| 173,460 |
|
|
| - |
|
|
| 131,272 |
|
|
| 304,732 |
|
|
| 10,472 |
|
Total current assets |
|
| 6,570,289 |
|
|
| - |
|
|
| - |
|
|
| 6,570,289 |
|
|
| 225,782 |
|
Property, plant and equipment, net |
|
| 2,566,583 |
|
|
| (79,005 | ) | A |
| - |
|
|
| 2,487,578 |
|
|
| 85,484 |
|
Financial assets |
|
| 5,443,346 |
|
|
| - |
|
|
| (5,443,346 | ) |
|
| - |
|
|
| - |
|
Right-of-use assets |
|
| 148,822 |
|
|
| 40,155 |
| A |
| (188,977 | ) |
|
| - |
|
|
| - |
|
Investment properties |
|
| 345,848 |
|
|
| - |
|
|
| (345,848 | ) |
|
| - |
|
|
| - |
|
Deferred income tax |
|
| 795,461 |
|
|
| - |
|
|
| - |
|
|
| 795,461 |
|
|
| 27,335 |
|
Goodwill |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Intangible assets, net |
|
| 18,833 |
|
|
| - |
|
|
| - |
|
|
| 18,833 |
|
|
| 647 |
|
Other long-term assets |
|
| 137,985 |
|
|
| 125,789 |
| A,C |
| 5,978,171 |
|
|
| 6,241,945 |
|
|
| 214,500 |
|
Total assets |
| $ | 16,027,167 |
|
| $ | 86,939 |
|
| $ | - |
|
| $ | 16,114,106 |
|
| $ | 553,748 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Line of credit |
| $ | 2,100,000 |
|
| $ | - |
|
| $ | - |
|
| $ | 2,100,000 |
|
| $ | 72,165 |
|
Financial Liabilities |
|
| 916 |
|
|
| - |
|
|
| (916 | ) |
|
| - |
|
|
| - |
|
Accounts payable |
|
| 1,246,734 |
|
|
| - |
|
|
| - |
|
|
| 1,246,734 |
|
|
| 42,843 |
|
Accrued liabilities and other |
|
| 1,143,072 |
|
|
| - |
|
|
| 12,507 |
|
|
| 1,155,579 |
|
|
| 39,710 |
|
Lease liabilities - current |
|
| 10,762 |
|
|
| 829 |
| A |
| (11,591 | ) |
|
| - |
|
|
| - |
|
Income tax payable |
|
| 192,618 |
|
|
| - |
|
|
| - |
|
|
| 192,618 |
|
|
| 6,619 |
|
Current portion of long-term debt |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total current liabilities |
|
| 4,694,102 |
|
|
| 829 |
|
|
| - |
|
|
| 4,694,931 |
|
|
| 161,337 |
|
Long-term debt, net of current portion |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Lease liabilities - non-current |
|
| 226,781 |
|
|
| (66,483 | ) | A |
| (160,298 | ) |
|
| - |
|
|
| - |
|
Deferred tax liabilities |
|
| 1,741,366 |
|
|
| - |
|
|
| - |
|
|
| 1,741,366 |
|
|
| 59,841 |
|
Other long-term liabilities |
|
| 141,444 |
|
|
| 3,607 |
| A, B |
| 160,298 |
|
|
| 305,349 |
|
|
| 10,493 |
|
Total liabilities |
|
| 6,803,693 |
|
|
| (62,047 | ) |
|
| - |
|
|
| 6,741,646 |
|
|
| 231,671 |
|
Commitments and contingencies |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Stockholders' equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
| 3,124,567 |
|
|
| - |
|
|
| - |
|
|
| 3,124,567 |
|
|
| 107,373 |
|
Additional paid-in capital |
|
| 2,206,214 |
|
|
| - |
|
|
| - |
|
|
| 2,206,214 |
|
|
| 75,815 |
|
Retained earnings |
|
| 4,728,740 |
|
|
| 148,986 |
| A,B,C |
| - |
|
|
| 4,877,726 |
|
|
| 167,619 |
|
Treasury stock, at cost |
|
| (216,136 | ) |
|
| - |
|
|
| - |
|
|
| (216,136 | ) |
|
| (7,427 | ) |
Accumulated other comprehensive loss |
|
| (618,759 | ) |
|
| - |
|
|
| - |
|
|
| (618,759 | ) |
|
| (21,263 | ) |
Total stockholders' equity |
|
| 9,224,626 |
|
|
| 148,986 |
|
|
| - |
|
|
| 9,373,612 |
|
|
| 322,117 |
|
Noncontrolling interest |
|
| (1,152 | ) |
|
| - |
|
|
| - |
|
|
| (1,152 | ) |
|
| (40 | ) |
Total equity |
|
| 9,223,474 |
|
|
| 148,986 |
|
|
| - |
|
|
| 9,372,460 |
|
|
| 322,077 |
|
Total liabilities and stockholders' equity |
| $ | 16,027,167 |
|
| $ | 86,939 |
|
| $ | - |
|
| $ | 16,114,106 |
|
| $ | 553,748 |
|
6
Impact on pro forma income statement for the nine months ended September 30, 2020:
|
| For the nine months ended September 30, 2020 |
|
|
|
|
|
|
|
|
|
| For the nine months ended September 30, 2020 |
|
| For the nine months ended September 30, 2020 |
| |||
|
| Historical IFRS LSC (TWD) |
|
| IFRS to US GAAP Adjustments (TWD) |
|
| Reclassification Adjustments |
|
| Historical US GAAP LSC (TWD) |
|
| Historical LSC As Adjusted |
| |||||
|
|
|
|
|
|
|
|
|
| D |
|
|
|
|
|
|
|
|
| |
Net sales |
| $ | 4,898,948 |
|
| $ | - |
|
| $ | (774 | ) |
| $ | 4,898,174 |
|
| $ | 164,270 |
|
Cost of goods sold |
|
| 4,360,333 |
|
|
| - |
|
|
| (203 | ) |
|
| 4,360,130 |
|
|
| 146,226 |
|
Gross profit |
|
| 538,615 |
|
|
| - |
|
|
| (571 | ) |
|
| 538,044 |
|
|
| 18,044 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
| 468,581 |
|
|
| 3,339 |
| A |
| (24,735 | ) |
|
| 447,185 |
|
|
| 14,997 |
|
Research and development |
|
| 282,325 |
|
|
| - |
|
|
| (24,915 | ) |
|
| 257,410 |
|
|
| 8,633 |
|
Amortization of acquisition related intangible assets |
|
| - |
|
|
| - |
|
|
| 62,331 |
|
|
| 62,331 |
|
|
| 2,090 |
|
Impairment of fixed assets |
|
| - |
|
|
| - |
|
|
| 92,645 |
|
|
| 92,645 |
|
|
| 3,107 |
|
Reversal of expected credit losses |
|
| 574 |
|
|
| - |
|
|
| (574 | ) |
|
| - |
|
|
| - |
|
Other operating (income) expense |
|
| - |
|
|
| - |
|
|
| (8,989 | ) |
|
| (8,989 | ) |
|
| (301 | ) |
Total operating expense |
|
| 751,480 |
|
|
| 3,339 |
|
|
| 95,763 |
|
|
| 850,582 |
|
|
| 28,526 |
|
Income from operations |
|
| (212,865 | ) |
|
| (3,339 | ) |
|
| (96,334 | ) |
|
| (312,538 | ) |
|
| (10,482 | ) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| - |
|
|
| - |
|
|
| 36,270 |
|
|
| 36,270 |
|
|
| 1,216 |
|
Other gains and losses |
|
| 2,431,780 |
|
|
| - |
|
|
| (2,431,780 | ) |
|
| - |
|
|
| - |
|
Finance costs |
|
| (38,206 | ) |
|
| 3,339 |
| A |
| 34,867 |
|
|
| - |
|
|
| - |
|
Interest expense |
|
| - |
|
|
| - |
|
|
| (34,149 | ) |
|
| (34,149 | ) |
|
| (1,145 | ) |
Foreign currency loss, net |
|
| - |
|
|
| - |
|
|
| (16,052 | ) |
|
| (16,052 | ) |
|
| (538 | ) |
Share of profit of associates |
|
| 310,430 |
|
|
| - |
|
|
| (310,430 | ) |
|
| - |
|
|
| - |
|
Other income |
|
| 102,606 |
|
|
| - |
|
|
| 2,808,719 |
|
|
| 2,911,325 |
|
|
| 97,637 |
|
Total other expense |
|
| 2,806,610 |
|
|
| 3,339 |
|
|
| 87,445 |
|
|
| 2,897,394 |
|
|
| 97,170 |
|
Income before income taxes and noncontrolling interest |
|
| 2,593,745 |
|
|
| - |
|
|
| (8,889 | ) |
|
| 2,584,856 |
|
|
| 86,688 |
|
Income tax provision |
|
| 251,783 |
|
|
| - |
|
|
| (8,445 | ) |
|
| 243,338 |
|
|
| 8,161 |
|
Net income |
|
| 2,341,962 |
|
|
| - |
|
|
| (444 | ) |
|
| 2,341,518 |
|
|
| 78,527 |
|
Less net (income) loss attributable to noncontrolling interest |
|
| 25,815 |
|
|
| - |
|
|
| 444 |
|
|
| 26,259 |
|
|
| 881 |
|
Net income attributable to common stockholders |
| $ | 2,367,777 |
|
| $ | - |
|
| $ | - |
|
| $ | 2,367,777 |
|
| $ | 79,408 |
|
7
Impact on pro forma income statement for the year ended December 31, 2019:
|
| For the year ended December 31, 2019 |
|
|
|
|
|
|
|
|
|
| For the year ended December 31, 2019 |
|
| For the year ended December 31, 2019 |
| |||
|
| Historical IFRS LSC (TWD) |
|
| IFRS to US GAAP Adjustments (TWD) |
|
| Reclassification Adjustments |
|
| Historical US GAAP LSC (TWD) |
|
| Historical LSC As Adjusted |
| |||||
|
|
|
|
|
|
|
|
|
| D |
|
|
|
|
|
|
|
|
| |
Net sales |
| $ | 11,107,856 |
|
| $ | - |
|
| $ | - |
|
| $ | 11,107,856 |
|
| $ | 359,303 |
|
Cost of goods sold |
|
| 8,611,756 |
|
|
| - |
|
|
| (47 | ) |
|
| 8,611,709 |
|
|
| 278,561 |
|
Gross profit |
|
| 2,496,100 |
|
|
| - |
|
|
| 47 |
|
|
| 2,496,147 |
|
|
| 80,742 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
| 1,080,025 |
|
|
| 11,545 |
| A |
| (110,989 | ) |
|
| 980,581 |
|
|
| 31,719 |
|
Research and development |
|
| 1,075,058 |
|
|
| - |
|
|
| (66,135 | ) |
|
| 1,008,923 |
|
|
| 32,635 |
|
Amortization of acquisition related intangible assets |
|
| - |
|
|
| - |
|
|
| 176,924 |
|
|
| 176,924 |
|
|
| 5,723 |
|
Impairment of fixed assets |
|
| - |
|
|
| - |
|
|
| 9,167 |
|
|
| 9,167 |
|
|
| 297 |
|
Reversal of expected credit losses |
|
| (536 | ) |
|
| - |
|
|
| 536 |
|
|
| - |
|
|
| - |
|
Other operating (income) expense |
|
| - |
|
|
| - |
|
|
| (1,039 | ) |
|
| (1,039 | ) |
|
| (34 | ) |
Total operating expense |
|
| 2,154,547 |
|
|
| 11,545 |
|
|
| 8,464 |
|
|
| 2,174,556 |
|
|
| 70,340 |
|
Income from operations |
|
| 341,553 |
|
|
| (11,545 | ) |
|
| (8,417 | ) |
|
| 321,591 |
|
|
| 10,402 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| - |
|
|
| - |
|
|
| 145,539 |
|
|
| 145,539 |
|
|
| 4,708 |
|
Other gains and losses |
|
| (149,862 | ) |
|
| - |
|
|
| 149,862 |
|
|
| - |
|
|
| - |
|
Finance Costs |
|
| (101,237 | ) |
|
| 11,545 |
| A |
| 89,692 |
|
|
| - |
|
|
| - |
|
Interest expense |
|
| - |
|
|
| - |
|
|
| (88,226 | ) |
|
| (88,226 | ) |
|
| (2,854 | ) |
Foreign currency loss, net |
|
| - |
|
|
| - |
|
|
| 37,743 |
|
|
| 37,743 |
|
|
| 1,221 |
|
Share of profit of associates |
|
| 722,751 |
|
|
| - |
|
|
| (722,751 | ) |
|
| - |
|
|
| - |
|
Other income |
|
| 257,225 |
|
|
| - |
|
|
| 396,558 |
|
|
| 653,783 |
|
|
| 21,148 |
|
Total other expense |
|
| 728,877 |
|
|
| 11,545 |
|
|
| 8,417 |
|
|
| 748,839 |
|
|
| 24,223 |
|
Income before income taxes and noncontrolling interest |
|
| 1,070,430 |
|
|
| - |
|
|
| - |
|
|
| 1,070,430 |
|
|
| 34,625 |
|
Income tax provision |
|
| 187,233 |
|
|
| - |
|
|
| - |
|
|
| 187,233 |
|
|
| 6,056 |
|
Net income |
|
| 883,197 |
|
|
| - |
|
|
| - |
|
|
| 883,197 |
|
|
| 28,569 |
|
Less net (income) loss attributable to noncontrolling interest |
|
| (440,272 | ) |
|
| - |
|
|
| - |
|
|
| (440,272 | ) |
|
| (14,241 | ) |
Net income attributable to common stockholders |
| $ | 442,925 |
|
| $ | - |
|
| $ | - |
|
| $ | 442,925 |
|
| $ | 14,328 |
|
(A) Reflects adjustments to convert LSC from IAS 19 to ASC 842.
(B) Reflects adjustments to align LSC pension accounting under IAS 19 to ASC 715.
(C) Reflects adjustments to convert LSC investment valuation methodology under IFRS to US GAAP.
(D) To reclassify LSC financial statement line items to align with Diodes financial statement line items.
8
Note 3. Reflects pro forma adjustments for the Diodes and LSC unaudited pro forma condensed combined Balance Sheet as of September 30, 2020 as follows:
| (a) | Reflects the funding of cash consideration for the purchase of outstanding shares of LSC by Diodes using cash on hand. The purchase price was calculated as follows: |
|
LSC Outstanding Shares |
| 307,371,139 | (a1) |
Price Per Share (TWD) | $ | 42.50 | (a2) |
Purchase Price (TWD 000’s) | $ | 13,063,273 |
|
Exchange Rate |
| 0.03471 | (a3) |
Purchase Price (USD 000’s) | $ | 453,426 |
|
Less: Settlement of Pre-existing Relationships |
| (299,395) | (a4) |
Adjusted Purchase Consideration (USD 000’s) | $ | 154,031 |
|
|
|
|
|
(a1) The shares represent the outstanding shares of LSC acquired by Diodes which represents 100% of the outstanding shares as of the acquisition date.
(a2) Price per share, in TWD, is purchase price as agreed to within the Share Swap Agreement (“Agreement”) between Diodes and LSC.
(a3) Exchange rate as of November 30, 2020.
(a4) LSC held 7,765,778 shares, or approximately 15% of Diodes outstanding stock at September 30, 2020. In accordance with ASC 805, Management concluded that the repurchase of shares constituted settlement of a preexisting relationship which was a transaction separate and apart from the business combination along with payables and receivables between Diodes and LSC. The Company allocated a total of $299.4 million to settle pre-existing relationships with LSC. The pre-existing relationships consisted of $296.8 million related to the transaction to reacquire Company stock valued using the closing price on the date the major terms were agreed to and $2.6 million for the settlement of a net receivables due from Diodes to LSC leaving $154.0 million as the purchase price for the business acquisition. The reacquired shares are accounted for as treasury stock on the balance sheet.
| (b) | Under the acquisition method of accounting, the identifiable assets acquired and liabilities assumed of LSC are recorded at the acquisition date fair values. The pro forma adjustments are preliminary and based on estimates of the fair value and useful lives of the assets acquired and liabilities assumed and have been prepared to illustrate the estimated effect of the Acquisition. |
|
For all assets acquired and liabilities assumed other than identified intangible assets, inventory, and property, plant and equipment, the carrying value was assumed to equal fair value. The final determination of the fair value of certain assets and liabilities will be completed within the one-year measurement period as required by ASC 805. The size and breadth of the Acquisition may necessitate the use of this measurement period to adequately analyze and assess a number of the factors used in establishing the asset and liability fair values as of the acquisition date. Any potential adjustments made could be material in relation to the preliminary values presented.
Accordingly, the pro forma purchase price allocation is subject to further adjustment as additional information becomes available and as additional analyses and final valuations are completed. There can be no assurances that these additional analyses and final valuations will not result in significant changes to the adjustments to book value set forth below to estimate fair value (in millions):
Inventory | 2.5 | (b1) |
Property, plant and equipment | (30.0) | (b2) |
Intangible assets | (0.6) | (b3) |
9
(b1) Reflects adjustment of the historical LSC inventory balance of $2.5 million. This adjustment has no impact to the pro forma combined statement of operations because it does not have a continuing impact. The acquired inventory was evaluated and adjusted for a reasonable profit allowance, which is intended to report only the profits normally associated with the activities following the acquisition as it relates to the work-in-progress and finished goods inventory.
(b2) Represents a decrease to property and equipment by $30.0 million due to the balance being adjusted to estimated fair value. The expected useful lives, by asset class are as follows:
Buildings | 5-30 years |
|
Leasehold Improvements | 2-5 years |
|
Land | N/A |
|
Machinery & Equipment | 1-15 years |
|
(b3) Represents a decrease to intangible assets by $0.6 million due to the balance being adjusted to write-off the intangible assets that were previously recorded by LSC. The fair values of the developed technology intangible assets were determined by using an “income approach,” specifically the relief-from-royalty approach, which is a commonly accepted valuation approach. This approach is based on the assumption that in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset. As a result of this valuation, management has preliminarily determined that the intangible assets have no value.
| (c) | Reflects the elimination of the historical equity of LSC. |
|
| (d) | Reflects the elimination of approximately $2.3 million of accounts receivable and $0.2 million of accounts payable, representing receivables and payables between Diodes and LSC that are eliminated in consolidation as a result of the acquisition. |
|
| (e) | As mentioned in (a4) above, LSC held 7,765,778 shares, or approximately 15% of Diodes outstanding stock at September 30, 2020. This adjustment reflects the fair value of the Diodes stock owned by LSC, the removal of the book value of the shares on LSC's books, and the reclassification of those shares to Treasury stock in the amount of $296.8 million. |
|
| (f) | Reflects the preliminary estimate of deferred income taxes resulting from the fair value adjustments related to the identifiable intangible assets, inventory, and property, plant and equipment partially offset by the reversal of existing LSC goodwill deferred tax liabilities. The estimate of deferred income taxes is preliminary and is subject to change based upon final determination of the fair value of assets acquired and liabilities assumed and the statutory rates in the jurisdictions where the assets and liabilities driving taxable income are generated. |
|
| (g) | To reflect estimated remaining costs related directly to the transaction of approximately $1.4 million for estimated legal fees, accounting fees, and other external costs in addition to $2.4 million of additional accrued expenses for social insurance and IT related costs. |
|
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Note 4. Reflects pro forma adjustments for the Diodes and LSC Statement of Operations for the nine months ended September 30, 2020 as follows:
(a)Reflects the elimination of revenue and related cost of goods sold from LSC to Diodes. During the nine months ended September 30, 2020, LSC recorded revenues from Diodes of $9.9 million and related cost of goods sold of $6.3 million.
(b)Reflects the removal of transaction costs of $1.1 million incurred as a result of Diodes acquisition of LSC that are not expected to have an ongoing impact to the operations of Diodes.
(c)Reflects the removal of previously recorded amortization and depreciation expense of $6.3 million as a result of the purchase price accounting adjustments to intangibles and property, plant and equipment.
(d)Reflects income tax effect of the adjustments described above based on a combined estimated effective tax rate of 20.0% for the nine months ended September 30, 2020.
(e)Pro forma basic shares used in computing net income per share give effect of Diodes reacquisition of its outstanding shares held by LSC. Diodes will include those shares in Treasury Stock and therefore they have been excluded from the number of shares used in the computation of earnings per share for basic shares.
Numerator: |
|
|
|
Pro forma net income | $ | 73,403 |
|
|
|
|
|
Denominator: |
|
|
|
Weighted average common share outstanding |
| 51,563 |
|
Diodes shares reacquired |
| (7,766 | ) |
Pro forma shares used in computing basic earnings per share |
| 43,797 |
|
|
|
|
|
Pro forma basic net income per share | $ | 1.68 |
|
(f)Pro forma diluted shares used in computing net income per share give effect of Diodes reacquisition of its outstanding shares held by LSC. Diodes will include those shares in Treasury Stock and therefore they have been excluded from the number of shares used in earnings per share computation for diluted shares.
Numerator: |
|
|
|
Pro forma net income | $ | 73,403 |
|
|
|
|
|
Denominator: |
|
|
|
Weighted average common share outstanding |
| 52,612 |
|
Diodes shares reacquired |
| (7,766 | ) |
Pro forma shares used in computing basic earnings per share |
| 44,846 |
|
|
|
|
|
Pro forma diluted net income per share | $ | 1.64 |
|
(g)Reflects additional interest expense of $6.0 million related to the draws on the Company’s amended and restated credit agreement totaling $444.0 million to fund the acquisition, had the draws occurred on January 1, 2019.
(h)Reflects the removal of profits recorded in the statement of operations during the nine months ended September 30, 2020 as a result of LSC’s investment in Diodes.
(i)Reflects the removal of fixed asset impairment charges.
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(j)In January 2020, LSC disposed of their investment in On-Bright Electronics Co., Ltd (On-Bright). Adjustments reflect the removal of the operations of On-Bright as On-Bright was not included in the assets acquired.
Note 5. Reflects pro forma adjustments for the Diodes and LSC Statement of Operations for the year ended December 31, 2019 as follows:
(a)Reflects the elimination of revenue and related cost of goods sold from LSC to Diodes. During the year ended December 31, 2019, LSC recorded revenues from Diodes of $13.7 million and related cost of goods sold of $9.0 million.
(b)Reflects the removal of transaction costs of $1.0 million incurred as a result of Diodes acquisition of LSC that are not expected to have an ongoing impact to the operations of Diodes.
(c)Reflects the removal of previously recorded amortization and depreciation expense of $8.8 million as a result of the purchase price accounting adjustments to intangibles and property, plant and equipment.
(d)Reflects income tax effect of the adjustments described above based on a combined estimated effective tax rate of 20.0% for the year ended December 31, 2019.
(e)Pro forma basic shares used in computing net income per share give effect of Diodes reacquisition of its outstanding shares held by LSC. Diodes will include those shares in Treasury Stock and therefore they have been excluded from the number of shares used in earnings per share computation for basic shares.
Numerator: |
|
|
|
Pro forma net income | $ | 139,603 |
|
|
|
|
|
Denominator: |
|
|
|
Weighted average common share outstanding |
| 50,787 |
|
Diodes shares reacquired |
| (7,766 | ) |
Pro forma shares used in computing basic earnings per share |
| 43,021 |
|
|
|
|
|
Pro forma basic net income per share | $ | 3.24 |
|
(f)Pro forma diluted shares used in computing net income per share give effect of Diodes reacquisition of its outstanding shares held by LSC. Diodes will include those shares in Treasury Stock and therefore they have been excluded from the number of shares used in earnings per share computation for diluted shares.
Numerator: |
|
|
|
Pro forma net income | $ | 139,603 |
|
|
|
|
|
Denominator: |
|
|
|
Weighted average common share outstanding |
| 51,860 |
|
Diodes shares reacquired |
| (7,766 | ) |
Pro forma shares used in computing basic earnings per share |
| 44,094 |
|
|
|
|
|
Pro forma diluted net income per share | $ | 3.17 |
|
(g)Reflects additional interest expense of $11.1 million related to the draws on the Company’s amended and restated credit agreement totaling $444.0 million to fund the acquisition, had the draws occurred on January 1, 2019.
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(h)Reflects the removal of profits recorded in the statement of operations during the year ended December 31, 2019 as a result of LSC’s investment in Diodes.
(i)Reflects the removal of fixed asset impairment charges.
(j)In January 2020, LSC disposed of their investment in On-Bright Electronics Co., Ltd (On-Bright). Adjustments reflect the removal of operations of On-Bright as On-Bright was not included in the assets acquired.
13