[DIODES(TM) INCORPORATED LOGO]
FOR IMMEDIATE RELEASE
Diodes Incorporated Reports Record Third Quarter Results
o Record revenues of $92.6 million, up 71%
o Record pro forma earnings of $14.2 million, up 69%
Westlake Village, California, November 1, 2006 -- Diodes Incorporated (NasdaqGS:
DIOD), a leading manufacturer and supplier of high-quality discrete and analog
semiconductors, today reported record financial results for the third quarter
ending September 30, 2006.
Third Quarter Highlights:
o Revenues increased 70.8% YOY and 11.9% sequentially to a record $92.6
million
o Gross profit increased 62.6% YOY and 11.9% sequentially to $30.7 million
o Pro forma net income increased 69.1% YOY to a record $14.2 million, or
$0.49 per fully diluted share, up from $8.4 million, or $0.34 per share,
in the third quarter of 2005, and $0.45 in the second quarter of 2006
o Net income on a GAAP basis increased 12.2% sequentially to $12.8 million,
or $0.45 per fully diluted share, up from $11.4 million or $0.41 per share
in the second quarter of 2006
o YTD cash flow from operations increased 23.2% to $46.0 million
Revenues for the third quarter of 2006 increased 70.8% year-over-year and 11.9%
sequentially to a record $92.6 million. Pro forma net income increased 69.1%
year-over-year to a record $14.2 million, or $0.49 per fully diluted share, up
from $8.4 million, or $0.34 per share, in the third quarter of 2005, and $0.45
in the second quarter of 2006. Pro forma results are included because under FAS
123(R), the Company began expensing stock options in the first quarter of 2006,
and therefore, equivalent stock option expense was not reflected in the 2005
periods. Pro forma net income and earnings per share exclude approximately $1.6
million in non-cash, net stock option expense (see table for a reconciliation of
the impact of pro forma net income to GAAP net income). Net income on a GAAP
basis increased 12.2% sequentially to $12.8 million, or $0.45 per fully diluted
share, compared to $11.4 million, or $0.41 per share, in the second quarter of
2006.
Commenting on the quarter, Dr. Keh-Shew Lu, President and CEO of Diodes
Incorporated, said: "During the third quarter Diodes' sales and net income
reached new highs, as we leveraged our innovative products, efficient
manufacturing, and intense customer focus to gain market share in the discrete
market and expand into adjacent segments. The planned acquisition of APD
Semiconductor announced last week will provide Diodes with access to advanced
technologies in the discrete semiconductor market and will allow us to offer
another superior product line in respect to both cost and performance. In
addition, our convertible bond issue is expected to be accretive to earnings and
provides us with tremendous flexibility to pursue corporate growth initiatives,
including acquisitions, to accelerate our profitable growth."
On October 5, the Company issued $230 million in aggregate principal convertible
senior notes due on October 1, 2026. The notes will pay interest semiannually at
a rate of 2.25% per annum, with a 39.68% conversion premium, and with any
conversion premium redeemable into cash and/or shares of common stock at the
Company's preference. At current market rates, the pre-tax net investment
interest income on the proceeds of the bond offering is projected to be
approximately $5.0 to $5.5 million per year. The Company expects this
transaction to be accretive to earnings per share given the current short-term
interest environment and intends to use the net proceeds from this offering for
working capital and other general corporate purposes, including acquisitions.
For the first nine months of 2006, revenues increased 62.2% to $248.9 million,
compared to $153.4 million in the same period last year. Net income for the
first nine months of 2006 was $33.5 million, or $1.19 per fully diluted share.
Pro forma net income for the first nine months of 2006, which excludes $4.3
million of net stock option expense, increased 62.1% to $37.8 million, compared
to $23.3 million in the same period in 2005. Pro forma fully diluted earnings
per share grew to $1.32 for the first nine months of 2006, compared to $0.96,
for the same period last year.
End-Markets
"Our strong third quarter top-line growth was driven by better than expected
sales in the consumer electronics segment as well as customer acceptance of our
analog product line. We are extremely pleased with our progress on the Anachip
acquisition and the resulting attractive cross selling opportunities and new
product development initiatives combining analog and discrete circuits. Our
discrete market share rose to an all time high during the quarter, driven by a
broad range of end equipment categories, including digital audio players,
set-top boxes, LCD monitors, notebooks and wireless LAN. For the third quarter
of 2006, consumer electronics and computer made up 37% and 35% of total sales
respectively, with telecom contributing 13%," commented Mark King, Sr. Vice
President of Sales and Marketing.
"Asia contributed 73% of our third quarter sales, with the help of better than
expected sales in the computer and consumer segments as well as robust growth in
our analog product line. North American accounted for 24% of sales driven by
strong OEM demand, with distributor point of sale again reaching a record high.
Sales in Europe slowed sequentially as a result of the summer holiday,
contributing 3% of total sales, but were up 105% from the third quarter of 2005
as we continued to make progress with new design wins and expanded customer
relationships," said Mr. King. "We experienced market share gains in all regions
during the third quarter for our discrete products, and in Asia, we reached
another all-time high in market share."
Design Wins and New Products
"Design activity remained brisk in the third quarter with multiple wins at over
50 customers. There is strong interest in our analog designs from our
traditional accounts as well as important discrete wins at original Anachip
customers," Mr. King commented. "Demand for Diodes' switchers, LDO's and hall
sensors was robust with wins coming from a broad list of end equipment,
including digital audio players, mobile phones and set-top boxes. On the
discrete side we experienced strong interest on our DFN, PowerDI and array
platforms for portable media devices, power converters and LCD monitors."
Diodes recently launched the AH180, a new generation of low-voltage Hall Sensor
switch designed to meet the two critical factors of today's demanding
requirements of device manufacturers: time to market and solution cost. Its
size, together with the exceptional power consumption performance, allow the
AH180 to easily fit a wide range of applications in the portable consumer
electronics and computer devices, such as razor-thin multimedia 3G wireless
handsets, and positions the Company in some of the fastest growing end-user
markets.
Sales of new products reached a record 29.7% of total sales, compared to 14.1% a
year ago, and 24.9% last quarter, and this growth includes the contribution of
the Anachip acquisition. New product revenue was driven by products in
sub-miniature array, QFN, PowerDI123, PowerDI5, and Schottky platforms on the
discrete side, as well as the analog product lines. Diodes released 35 products
covering nine product families in the third quarter.
Additional Financial Highlights
Gross profit for the third quarter of 2006 increased 62.6% to $30.7 million, or
33.2% of revenue, compared to the same period last year. This increase in gross
profit was helped by improved product mix and increased sales volume. Due to
strong product demand for discrete devices and high capacity utilization during
the quarter, our migration of analog production to our highly productive
in-house packaging facility was not as brisk as expected in the quarter.
For the quarter, SG&A expenses were $11.8 million or 12.8% of revenue, versus
$7.6 million, or 14.0% of revenue, in the comparable quarter last year. Included
in third quarter SG&A expenses were $1.6 million in non-cash, stock option
expense. For comparable purposes, excluding the stock option expense, SG&A for
the third quarter of 2006 would have been 11.3% of sales (see table for a
reconciliation of the impact of stock option expense to reported results).
Operating income for the third quarter increased 63.1% to a record $16.9
million, or 18.3% of sales, compared to $10.4 million for the third quarter of
2005. Sequentially, operating margins improved 180 basis points over the second
quarter 2006 driven by increased sales volume as well as operating synergies
from the Anachip combination.
In the quarter ended September 30, 2006, a one-time adjustment to correct prior
year accounting for share-grants and intercompany currency losses had a
tax-adjusted reduction to net income of approximately $0.6 million, equivalent
to $0.02 per share.
Investment in research and development grew to $1.9 million, or 2.1% of revenue,
compared to $0.94 million, or 1.7% of sales, in the third quarter of 2005.
Capital expenditures for the current quarter were $4.9 million and $32.4 million
year to date. Depreciation expense for the quarter was $4.4 million and $14.1
million year to date.
At quarter-end, Diodes had $109 million in total cash and short-term investments
(not including the $224 million proceeds from the bond offering), $159.3 million
in working capital, $5.7 million in long-term debt and unused and available
credit facilities of $50 million. For the first nine months of 2006, shareholder
equity increased 23% to $277.0 million.
Business Outlook
"Coming off our 6th consecutive quarter of record revenue performance, including
our 11.9% sequential growth this quarter, and with a book-to-bill ratio at
parity, we currently expect to see sequential revenue growth in the 1 to 3%
range, with comparable gross margins, for the fourth quarter of 2006. Over the
next few quarters, as we continue to introduce new discrete and analog products
and internalize packaging of our analog products, we expect to see gradual
expansion in our gross margins," stated Dr. Lu. "We are very pleased with our
progress to-date in executing against our strategic objectives and we are
excited about the opportunities ahead for profitable growth through
customer-focused innovation".
Conference Call
Diodes Incorporated will hold its third quarter conference call for all
interested persons at 2 p.m. Pacific Time (5 p.m. Eastern Time) on November 1st,
2006 to discuss its results. This conference call will be broadcast live over
the Internet and can be accessed by all interested parties on the investor
section of Diodes' website at www.diodes.com. To listen to the live call, please
go to the Investor 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 60 days.
About Diodes Incorporated
Diodes Incorporated (NasdaqGS: DIOD) is a leading manufacturer and supplier of
high-quality discrete and analog semiconductor products, primarily to the
communications, computing, industrial, consumer electronics and automotive
markets. The Company's corporate sales, marketing, engineering and logistics
headquarters is located in Southern California, with two manufacturing
facilities in Shanghai, China, a wafer fabrication plant in Kansas City,
Missouri, engineering, sales, warehouse and logistics offices in Taipei, Taiwan
and Hong Kong, and sales and support offices throughout the world. Diodes, Inc.
recently acquired Anachip Corporation, a fabless analog IC company in Hsinchu
Science Park, Taiwan.
Diodes, Inc.'s product focus is on subminiature surface-mount discrete devices,
analog power management ICs and Hall-effect sensors all of which are widely used
in end-user equipment such as TV/Satellite set top boxes, portable DVD players,
datacom devices, ADSL modems, power supplies, medical devices, wireless
notebooks, flat panel displays, digital cameras, mobile handsets, DC to DC
conversion, Wireless 802.11 LAN access points, brushless DC motor fans, and
automotive applications. 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. Potential risks and uncertainties include, but are not limited to,
such factors as the integration of ADP within Diodes existing operations, the
Company's ability to successfully make additional acquisitions, fluctuations in
product demand, the introduction of new products, the Company's ability to
maintain customer and vendor relationships, technological advancements, impact
of competitive products and pricing, growth in targeted markets, successful
integration of acquired companies and/or assets, risks of foreign operations,
availability of tax credits, and other information detailed from time to time in
the Company's filings with the United States Securities and Exchange Commission.
Source: Diodes Incorporated
CONTACT: Carl Wertz, Chief Financial Officer, Diodes Incorporated (805) 446-4800
e-mail: carl_wertz@diodes.com
or
Crocker Coulson, President, CCG Investor Relations, (310) 231-8600, Ext. 103,
e-mail: crocker.coulson@ccgir.com
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.
CONSOLIDATED CONDENSED INCOME STATEMENT and BALANCE SHEET FOLLOWS
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ---------------------------
2005 2006 2005 2006
----------- ----------- ------------ ------------
Net sales $54,200,000 $92,575,000 $153,398,000 $248,876,000
Cost of goods sold (1) 35,323,000 61,879,000 100,428,000 166,532,000
----------- ----------- ------------ ------------
Gross profit 18,877,000 30,696,000 52,970,000 82,344,000
Selling and general administrative 7,581,000 11,825,000 21,469,000 34,824,000
expenses (2)
Research and development expenses (3) 938,000 1,941,000 2,688,000 5,985,000
Loss (gain) on disposal of fixed assets -- 32,000 (105,000) 152,000
----------- ----------- ------------ ------------
Total operating expenses 8,519,000 13,798,000 24,052,000 40,961,000
Income from operations 10,358,000 16,898,000 28,918,000 41,383,000
Other income (expense)
Interest income 23,000 1,069,000 66,000 2,807,000
Interest expense (188,000) (89,000) (465,000) (363,000)
Other 116,000 (1,563,000) 95,000 (1,758,000)
----------- ----------- ------------ ------------
(49,000) (583,000) (304,000) 686,000
Income before income taxes and minority interest 10,309,000 16,315,000 28,614,000 42,069,000
Income tax provision (4) (1,621,000) (3,212,000) (4,523,000) (7,778,000)
----------- ----------- ------------ ------------
Income before minority interest 8,688,000 13,103,000 24,091,000 34,291,000
Minority interest in joint veture earnings (305,000) (333,000) (802,000) (824,000)
----------- ----------- ------------ ------------
Net income $ 8,383,000 $12,770,000 $ 23,289,000 $ 33,467,000
=========== =========== ============ ============
Earnings per share
Basic $ 0.38 $ 0.50 $ 1.08 $ 1.31
Diluted $ 0.34 $ 0.45 $ 0.96 $ 1.19
=========== =========== ============ ============
Number of shares used in computation
Basic 22,010,235 25,686,913 21,658,863 25,520,156
Diluted (5) 24,731,514 28,152,592 24,344,795 28,055,154
=========== =========== ============ ============
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED RECONCILIATION OF NET INCOME TO PRO FORMA NET INCOME
Pro forma consolidated statements of income are presented because we use it as
an additional measure of our operating performance. Pro forma net income and pro
forma net income per share should not be considered as alternatives to net
income, earnings per share or other measures of consolidated operations and cash
flow data prepared in accordance with accounting principles generally accepted
in the United States of America, as indicators of our operating performance, or
as alternatives to cash flow as a measure of liquidity. Pro forma consolidated
statements of income are intended to present our operating results, excluding
items described below, for the periods presented.
Pro forma net income and earnings per share reconciliation
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2005 2006 2005 2006
----------- ----------- ----------- -----------
GAAP net income $ 8,383,000 $12,770,000 $23,289,000 $33,467,000
=========== =========== =========== ===========
Pro forma adjustments:
Stock option expense
included in cost of goods sold: -- 133,000 -- 399,000
Stock option expense
included in selling and general
administrative expenses: -- 1,355,000 -- 4,112,000
Stock option expense
included in research and
development expenses: -- 146,000 -- 439,000
Total stock option expense -- 1,634,000 -- 4,950,000
Income tax benefit related to
stock option expense -- 228,000 -- 661,000
Pro forma net income $ 8,383,000 $14,176,000 $23,289,000 $37,756,000
=========== =========== =========== ===========
Diluted shares used in computing
Pro forma earnings per share 24,731,514 28,152,592 24,344,795 28,055,154
Incremental shares considered
to be outstanding: -- 499,355 -- 497,651
----------- ----------- ----------- -----------
Adjusted diluted shares used in computing
Pro forma earnings per share 24,731,514 28,651,947 24,344,795 28,552,805
=========== =========== =========== ===========
Pro forma earnings per share
Basic $ 0.38 $ 0.55 $ 1.08 $ 1.48
Diluted $ 0.34 $ 0.49 $ 0.96 $ 1.32
=========== =========== =========== ===========
1) For the quarter and nine months ended September 30, 2006, includes
$133,000 and $399,000 of stock option expense, respectively.
2) For the quarter and nine months ended September 30, 2006, includes
$1,355,000 and $4,112,000 of stock option expense, respectively.
3) For the quarter and nine months ended September 30, 2006, includes
$146,000 and $439,000 of stock option expense, respectively.
4) For the quarter and nine months ended September 30, 2006, includes
$228,000 and $661,000 of income tax benefit related to stock option
expense, respectively.
5) For the quarter and nine months ended September 30, 2006, 499,355 and
497,651 incremental shares are considered to be outstanding under FAS123R,
respectively.
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED RECONCILIATION OF NET INCOME TO EBITDA
EBITDA represents earnings before net interest expense, income tax provision,
depreciation and amortization. Our management believes EBITDA is useful to
investors because it is frequently used by securities analysts, investors and
other interested parties in evaluating companies in our industry. In addition,
our management believes that EBITDA is useful 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 and income
taxes and the accounting effects of capital spending, which items may vary for
different companies for reasons unrelated to overall operating performance. As a
result, our management uses EBITDA as a measure to evaluate the performance of
our business. However, EBITDA is not a recognized measurement under generally
accepted accounting principles, or 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 of
other companies. Furthermore, EBITDA is not intended to be a measure of free
cash flow for our management's discretionary use, as it does not consider
certain cash requirements such as a tax and debt service payments.
The following table provides a reconciliation of Net Income to EBITDA:
Three Months Ended
September 30,
-----------------
(in thousands) 2005 2006
------- -------
Net Income $ 8,383 $12,770
Plus:
Interest expense, net 165 (980)
Income tax provision 1,508 3,212
Depreciation and amortization 4,074 4,383
------- -------
EBITDA $14,130 $19,385
======= =======
Nine Months Ended
September 30,
-----------------
(in thousands) 2005 2006
------- -------
Net Income $23,288 $33,467
Plus:
Interest expense, net 399 (2,445)
Income tax provision 4,523 7,778
Depreciation and amortization 11,887 14,053
------- -------
EBITDA $40,097 $52,853
======= =======
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(Unadited)
ASSETS
December 31, September 30,
2005 2006
------------ -------------
CURRENT ASSETS (unaudited)
Cash and cash equivalents $ 73,288,000 $ 53,157,000
Short-term investments 40,348,000 56,139,000
------------ ------------
Total cash and short-term investments 113,636,000 109,296,000
Accounts receivable
Customers 48,348,000 70,049,000
Related parties 6,804,000 5,554,000
------------ ------------
55,152,000 75,603,000
Less: Allowance for doubtful receivables (534,000) (675,000)
------------ ------------
54,618,000 74,928,000
Inventories 24,611,000 45,767,000
Deferred income taxes, current 2,541,000 2,565,000
Prepaid expenses and other current assets 5,326,000 6,663,000
Prepaid income taxes -- 441,000
------------ ------------
Total current assets 200,732,000 239,660,000
PROPERTY, PLANT AND EQUIPMENT, at cost, net
of accumulated depreciation and amortization 68,930,000 89,168,000
DEFERRED INCOME TAXES, non current 8,466,000 11,043,000
OTHER ASSETS
Equity investment 5,872,000 --
Goodwill 5,090,000 24,093,000
Other 425,000 2,906,000
------------ ------------
TOTAL ASSETS $289,515,000 $366,870,000
============ ============
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, September 30,
2005 2006
------------ -------------
(unaudited)
CURRENT LIABILITIES
Line of credit $ 3,000,000 $ --
Accounts payable
Trade 18,619,000 37,250,000
Related parties 7,921,000 13,215,000
Accrued liabilities 19,782,000 27,756,000
Long-term debt, current portion 4,621,000 1,954,000
Capital lease obligations, current portion 138,000 141,000
------------ ------------
Total current liabilities 54,081,000 80,316,000
LONG-TERM DEBT, net of current portion 4,865,000 3,709,000
CAPITAL LEASE OBLIGATIONS, net of current portion 1,618,000 1,508,000
MINORITY INTEREST IN JOINT VENTURE 3,477,000 4,321,000
------------ ------------
Total liabilities 64,041,000 89,854,000
STOCKHOLDERS' EQUITY
Preferred stock - par value $1.00 per share;
1,000,000 shares authorized;
no shares issued and outstanding
Common stock - par value $0.66 2/3 per share;
70,000,000 shares authorized; 25,258,119 and 25,930,914
shares issued at December 31, 2005
and September 30, 2006, respectively 16,839,000 17,355,000
Additional paid-in capital 94,664,000 111,357,000
Retained earnings 114,659,000 148,126,000
------------ ------------
Less: 226,162,000 276,838,000
Accumulated other comprehensive gain (loss) (688,000) 178,000
------------ ------------
Total stockholders' equity 225,474,000 277,016,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 289,515,000 366,870,000
============ ============