Diodes Incorporated Reports First Quarter 2013 Financial Results

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Diodes Incorporated Reports First Quarter 2013 Financial Results

Achieves Record Revenue with Improved Margins

PLANO, Texas--(BUSINESS WIRE)-- Diodes Incorporated (NAS: 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 its financial results for the first quarter ended March 31, 2013.


First Quarter Highlights

  • Completed acquisition of BCD Semiconductor Manufacturing Limited ("BCD") on March 5 and included initial purchase accounting adjustments in first quarter 2013 GAAP results;
  • Revenue was $177.0 million, an increase of 8.4 percent from the $163.3 million in the fourth quarter 2012, and an increase of 22.3 percent from the $144.7 million in the first quarter 2012;
  • GAAP gross profit was $46.2 million, including a $1.8 million inventory valuation adjustment related to the BCD purchase, and GAAP gross margin was 26.1 percent;
  • Non-GAAP adjusted gross profit was $48.0 million compared to GAAP gross profit of $43.2 million in fourth quarter 2012, and GAAP gross profit of $33.7 million in first quarter 2012;
  • Non-GAAP adjusted gross profit margin was 27.1 percent compared to GAAP gross profit margin of 26.5 percent in fourth quarter 2012, and GAAP gross margin of 23.3 percent in the first quarter 2012;
  • GAAP income tax expense was $6.6 million, including a $5.4 million China tax audit adjustment for 2009-2011;
  • GAAP net loss was $1.9 million, or ($0.04) per share, compared to fourth quarter 2012 GAAP net income of $4.1 million, or $0.09 per diluted share, and first quarter 2012 GAAP net income of $4.9 million, or $0.10 per diluted share;
  • Non-GAAP adjusted net income was $7.5 million, or $0.16 per diluted share, compared to non-GAAP adjusted net income of $6.2 million, or $0.13 per diluted share in fourth quarter 2012, and non-GAAP adjusted net income of $4.1 million, or $0.09 per diluted share, in first quarter 2012;
  • Excluding $2.1 million, net of tax, of share-based compensation expense, GAAP net loss per share of ($0.04) would have improved by $0.05 per share and non-GAAP adjusted net earnings per fully diluted share of $0.16 would have improved by $0.04 per diluted share; and
  • Achieved $31.3 million cash flow from operations, $43.1 million net cash flow, including $20.2 million of BCD cash at quarter end, and $15.4 million of free cash flow.

As previously disclosed the Company's updated guidance provided on March 7, 2013 did not include the impact of any BCD purchase price accounting adjustments. Based on the subsequent initial valuation of BCD's acquired assets, GAAP gross profit includes an inventory valuation adjustment totaling $1.8 million. In addition, as previously disclosed, the China government audited the high-tech company status of the Company's largest China subsidiary that has utilized a preferential tax rate of 15 percent. On April 11, 2013, the Company was notified by the China government that they had completed their tax audit and had concluded that the Company owed additional tax related to the 2011 tax year in the amount of $5.4 million.

Commenting on the results, Dr. Keh-Shew Lu, President and Chief Executive Officer, stated, "I am pleased to report that Diodes achieved record quarterly revenue despite the typical seasonal softness in the quarter and the slowdown at certain key OEMs. Our sequential revenue growth was due to the result of our continued design win momentum, as well as, one month of revenue contribution from our acquisition of BCD.

"Additionally, non-GAAP adjusted gross profit margin, which excludes the BCD inventory valuation adjustment, improved 60 basis points sequentially and was favorable to our updated guidance due to revenue increases in the higher margin regions of North America and Europe, a better than expected manufacturing recovery following the Chinese New Year holiday, lower gold prices and a more favorable product mix.

"Also during the quarter, we finalized our acquisition of BCD and the integration to-date has gone smoothly. This transaction, excluding purchase price accounting adjustments, was immediately accretive to earnings.

"Overall, we believe the first quarter sets the stage for continued growth and margin improvement in the second quarter, which will represent our first full quarter with BCD."

First Quarter 2013

Revenue for the first quarter 2013 was $177.0 million, an increase of 8.4 percent over the $163.3 million in the fourth quarter 2012, and an increase of 22.3 percent from the $144.7 million in the first quarter 2012. Revenue was up sequentially primarily due to one month of revenue contribution from BCD, as well as, the result of our continued design win momentum.

GAAP gross profit was $46.2 million, including a $1.8 million inventory valuation adjustment related to the BCD purchase. GAAP gross profit margin was 26.1 percent.

Non-GAAP adjusted gross profit for the first quarter 2013 was $48.0 million, or 27.1 percent of revenue, compared to GAAP gross profit of $43.2 million, or GAAP gross profit margin of 26.5 percent of revenue, in the fourth quarter 2012, and GAAP gross profit of $33.7 million, or GAAP gross profit margin of 23.3 percent, in the first quarter 2012. Gross profit margin improved over the prior quarter as a result of increased revenue in higher margin regions, a better than expected manufacturing recovery following the Chinese New Year holiday, lower gold prices, and improved product mix.

First quarter 2013 GAAP net loss was $1.9 million, or ($0.04) per share, which compared to fourth quarter 2012 GAAP net income of $4.1 million, or $0.09 per diluted share, and first quarter 2012 GAAP net income of $4.9 million, or $0.10 per diluted share.

First quarter 2013 non-GAAP adjusted net income was $7.5 million, or $0.16 per diluted share, which excluded, net of tax, $2.5 million of items related to the BCD acquisition, $1.5 million of non-cash acquisition-related intangible asset amortization costs, and $5.4 million due to the China tax audit adjustment. This compared to non-GAAP adjusted net income of $6.2 million, or $0.13 per diluted share, in the fourth quarter 2012 and $4.1 million, or $0.09 per diluted share, in the first quarter 2012.

The following is a summary reconciliation of GAAP net loss to non-GAAP adjusted net income and per share data, net of tax (in thousands, except per share data):

  Three Months Ended
March 31, 2013

Cost of
Goods
Sold

  

Operating
Expenses

  

Income Tax
Provision

  

Net Income
(Loss)

 
GAAP

 

$

(1,926

)

 
Loss per share (GAAP)
Diluted

 

$

(0.04

)

 
Adjustments to reconcile net loss
to adjusted net income:
 
Items related to the BCD acquisition
(excluding intangible assets)1,828925(213)

2,540

 
Amortization of acquisition related intangible assets-1,909(443)1,466
 
Tax expense related to tax audit--5,447 5,447 
 
Adjusted (Non-GAAP)

 

$

7,527

 
 
Diluted shares used in computing
earnings per share 47,233 
 
Adjusted earnings per share (Non-GAAP)
Diluted

 

$

0.16

 
 

(See the reconciliation of net loss to adjusted net income tables near the end of the release for further details, including details of all items included in "items related to the BCD acquisition.")

Included in first quarter 2013 GAAP net loss and non-GAAP adjusted net income was approximately $2.1 million, net of tax, non-cash share-based compensation expense. Excluding share-based compensation expense, GAAP net loss per share of ($0.04) would have improved by $0.05 per share and non-GAAP adjusted diluted earnings per share of $0.16 would have improved by $0.04 per share.

EBITDA, which represents earnings before net interest expense, income tax, depreciation and amortization, for the first quarter 2013 was $23.1 million, compared to $24.1 million for the fourth quarter 2012 and $21.2 million for the first quarter 2012. For a reconciliation of GAAP net income (loss) to EBITDA (non-GAAP), see the table near the end of the release for further details.

As of March 31, 2013, the Company had approximately $200 million in cash and cash equivalents, and working capital was approximately $453 million.

Business Outlook

Dr. Lu concluded, "For the second quarter 2013, we expect continued growth with revenue increasing to between $206 million and $218 million, or up 16 percent to 23 percent sequentially, including the first full quarter of revenue from BCD. GAAP gross profit margin, which will include approximately $4.0 million relating to an inventory valuation adjustment pertaining to the inventory acquired as part of the BCD purchase, is expected to be 27.0 percent, plus or minus 2 percent. Non-GAAP gross profit margin, excluding the inventory valuation adjustment, is expected to be 29.0 percent, plus or minus 2 percent.

"In early second quarter 2013, we announced a restructuring of our UK development team and the closure of our New York sales office. We expect that these actions will be completed in the second quarter. Restructuring costs in the second quarter 2013 are expected to be approximately $1.7 million, and will provide cost savings going forward of approximately $3.0 million per year.

"GAAP operating expenses are expected to be 23.6 percent of revenue, plus or minus 1 percent. Non-GAAP operating expenses, excluding amortization of intangible expenses, restructuring expenses, and BCD retention bonus accruals, are expected to be 21.3 percent of revenue plus or minus 1 percent. We expect our income tax rate to range between 14 percent and 20 percent, and shares used to calculate GAAP earnings per share for the second quarter are anticipated to be approximately 47.4 million."

A summary of the guidance for GAAP and non-GAAP financial measures follows:

  GAAP  Non-GAAP
Revenue $ (millions)$206 to $218$206 to $218
Sequential growth (%)16% to 23%16% to 23%
 
Gross profit margin (% of Revenue)25.0% to 29.0%27.0% to 31.0%
 
Operating expenses (% of Revenue)22.6% to 24.6%20.3% to 22.3%
 
Tax rate (%)14% to 20%14% to 20%
 
Shares (millions)47.447.4
 

Conference Call

Diodes will host a conference call on Thursday, May 9, 2013 at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss its first quarter financial results. Investors and analysts may join the conference call by dialing 1-866-515-2915 and providing the confirmation code 64110633. International callers may join the teleconference by dialing 1-617-399-5129 and enter the same confirmation code at the prompt. A telephone replay of the call will be made available approximately two hours after the call and will remain available until Thursday, May 16, 2013 at midnight Central Time. The replay number is 1-888-286-8010 with a pass code of 33988622. 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 15 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 (NAS: 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, AC-DC converters and controllers, 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. Diodes' corporate headquarters, logistics center, and Americas' sales office are located in Plano, Texas. Design, marketing, and engineering centers are located in Plano; San Jose, California; Taipei, Taiwan; Manchester, England; and Neuhaus, Germany. Diodes' wafer fabrication facilities are located in Kansas City, Missouri and Manchester, with four manufacturing facilities located in Shanghai, China, and two joint venture facilities located in Chengdu, China, as well as manufacturing facilities located in Neuhaus and Taipei. Additional engineering, sales, warehouse, and logistics offices are located in Fort Worth, Texas; Taipei; Hong Kong; Manchester; Shanghai; Shenzhen, China; Seongnam-si, South Korea; Suwon, South Korea; Tokyo, Japan; and Munich, Germany, with support offices throughout the world. For further information, including SEC filings, visit Diodes' 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: overall, we believe the first quarter sets the stage for continued growth and margin improvement in the second quarter, which will represent our first full quarter with BCD; for the second quarter 2013, we expect continued growth with revenue increasing to between $206 million and $218 million, or up 16 percent to 23 percent sequentially, including the first full quarter of revenue from BCD; GAAP gross profit margin, which will include approximately $4.0 million relating to an inventory valuation adjustment pertaining to the inventory acquired as part of the BCD purchase,is expected to be 27.0 percent, plus or minus 2 percent; non-GAAP gross profit margin, excluding the inventory valuation adjustment, is expected to be 29.0 percent, plus or minus 2 percent; in early second quarter 2013, we announced a restructuring of our UK development team and the closure of our New York sales office; we expect that these actions will be completed in the second quarter; restructuring costs in the second quarter 2013 are expected to be approximately $1.7 million, and will provide cost savings going forward of approximately $3.0 million per year; GAAP operating expenses are expected to be 23.6 percent of revenue, plus or minus 1 percent; non-GAAP operating expenses, excluding amortization of intangible expenses, restructuring expenses, and BCD retention bonus accruals, are expected to be 21.3 percent of revenue plus or minus 1 percent; and we expect our income tax rate to range between 14 percent and 20 percent, and shares used to calculate GAAP earnings per share for the second quarter are anticipated to be approximately 47.4 million.Potential risks and uncertainties include, but are not limited to, such factors as: the risk that BCD's business will not be integrated successfully into Diodes'; the risk that the expected benefits of the acquisition may not be realized; the risk that BCD's standards, procedures and controls will not be brought into conformance within Diodes' operations; difficulties coordinating Diodes' and BCD's new product and process development, hiring additional management and other critical personnel, and increasing the scope, geographic diversity and complexity of Diodes' operations; difficulties in consolidating facilities and transferring processes and know-how; the diversion of our management's attention from the management of our business; the risk that we may not be able to maintain our current growth strategy or continue to maintain our current performance, costs and loadings in our manufacturing facilities; risks of domestic and foreign operations, including excessive operation costs, labor shortages, higher tax rates and our joint venture prospects; the risk of 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 Diodes' 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.

  
 

DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share data)

 
Three Months Ended
March 31,
2013 2012
NET SALES$176,964$144,663
 
COST OF GOODS SOLD 130,781  110,957 
 
Gross profit46,18333,706
 
OPERATING EXPENSES
Selling, general and administrative30,37622,146
Research and development10,0807,164
Amortization of acquisition related intangible assets1,9091,095
Loss (gain) on sale of assets 42  (2,199)
Total operating expenses 42,407  28,206 
 
Income from operations3,7765,500
 
OTHER INCOME (EXPENSES)
Interest income80172
Interest expense(945)(123)
Gain (loss) on securities carried at fair value366-
Other 1,020  638 
Total other income (expenses)521687
 
Income before income taxes and noncontrolling interest4,2976,187
 
INCOME TAX PROVISION 6,574  618 
 
NET INCOME (LOSS)(2,277)5,569
 
Less: NET LOSS (INCOME) attributable to noncontrolling interest 351  (698)
 
NET INCOME (LOSS) attributable to common stockholders$(1,926)$4,871 
 
EARNINGS (LOSS) PER SHARE attributable to common stockholders
Basic$(0.04)$0.11 
Diluted$(0.04)$0.10 
 
Number of shares used in computation
Basic 46,021  45,460 
Diluted 46,021  46,935 
 

Note: Throughout this release, we refer to "net income attributable to common stockholders" as "net income."

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DIODES INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME

(in thousands, except per share data)

(unaudited)

 

For the three months ended March 31, 2013:

Cost of
Goods
Sold

Operating
Expenses

Income Tax
Provision

 

Net Income
(Loss)

 
GAAP$(1,926)
 
Loss per share (GAAP)
Diluted$(0.04)
 
Adjustments to reconcile net loss
to adjusted net income:
 
Inventory valuations1,828-(274)1,554