Diodes Incorporated Reports Fourth Quarter and Fiscal 2012 Financial Results

Diodes Incorporated Reports Fourth Quarter and Fiscal 2012 Financial Results

Solid Fourth Quarter Performance with Improved Margins; Agrees to Acquire BCD Semiconductor

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 fourth quarter and fiscal year ended December 31, 2012.


Fourth Quarter Highlights

  • Agreed to acquire BCD Semiconductor Manufacturing Limited ("BCD") for approximately $151 million in cash (BCD 2012 revenue $143 million, net income $8 million);

  • Revenue was $163.3 million, an increase of 14.0 percent over the $143.3 million reported in the fourth quarter of 2011, and a decrease of 2.0 percent from the $166.6 million in the third quarter of 2012;

  • Gross profit was $43.2 million, compared to $35.5 million in the fourth quarter of 2011 and $43.6 million in the third quarter of 2012;

  • Gross profit margin was 26.5 percent, compared to 24.8 percent in the fourth quarter 2011 and 26.2 percent in the third quarter of 2012;

  • Operating expenses were $39.7 million or 24.3 percent of revenue, which included approximately $1.5 million of BCD acquisition; excluding acquisition costs, non-GAAP adjusted operating expenses were $38.2 million, or 23.4 percent of revenue, slightly below the midpoint of the Company's guidance.

  • GAAP net income was $4.1 million, or $0.09 per diluted share, compared to fourth quarter 2011 of $3.1 million, or $0.07 per diluted share, and third quarter 2012 of $8.6 million, or $0.18 per diluted share;

  • Non-GAAP adjusted net income was $6.2 million, or $0.13 per diluted share, compared to fourth quarter 2011 of $4.0 million, or $0.09 per diluted share, and third quarter 2012 of $9.5 million, or $0.20 per diluted share;

  • Excluding $2.4 million of share-based compensation expense, both GAAP and non-GAAP adjusted net income would have increased by $0.05 per diluted share;

  • Achieved $16.4 million cash flow from operations, negative ($11.1) million net cash primarily due to $16 million paid to acquire Power Analog Microelectronics ("PAM"), and free cash flow was a $1.1 million, which included $15.3 million of capital expenditures. Capital expenditures included $2.1 million associated with the Chengdu assembly test facility construction;

  • Completed acquisition of PAM; and

  • Completed $300 million Revolving Credit Line.

Commenting on the results, Dr. Keh-Shew Lu, President and Chief Executive Officer of Diodes Incorporated, stated, "Diodes once again delivered solid financial results in 2012, a year in which the global markets remained challenging. Fourth quarter revenue grew 14 percent over the prior year period as we continued to gain momentum for our products used in smartphones and tablets. Our new product initiatives and increasing customer content remained key drivers of our market share gains throughout the year. Despite gold prices being up approximately 4 percent and the loading down from third quarter to fourth quarter, margins improved due mainly to additional copper wire conversion and productivity improvements, coupled with a small mix improvement. Also during the quarter, we began integrating Eris Technology Corporation ("Eris") and PAM."

"To further capitalize on market expansion opportunities and improve leverage through select acquisitions, we also recently announced the proposed acquisition of BCD Semiconductor, which we expect will greatly enhance our analog product portfolio by expanding our product offerings for standard linear and AC/DC solutions for switch-mode power supply chargers and adaptors. Combining manufacturing synergies and BCD's established local market position in China with Diodes' global customer base and sales channels provides enhanced profitability and growth opportunities for the Company in 2013 and beyond."

Business Outlook

Dr. Lu concluded, "As we look to the first quarter of 2013, we are expecting a slightly better than seasonal quarter with revenue ranging between $157 million and $170 million, or flat plus or minus 4 percent sequentially. We expect gross margin to be 25 percent, plus or minus 2 percent. Operating expenses are expected to be 23 percent of revenue, plus or minus 1 percent. We expect our income tax rate to range between 10 and 17 percent, and shares used to calculate GAAP EPS for the first quarter are anticipated to be approximately 47.0 million."

Fourth Quarter 2012

Revenue for the fourth quarter of 2012 was $163.3 million, an increase of 14.0 percent over the $143.3 million reported in the fourth quarter of 2011, and a decrease of 2.0 percent from the $166.6 million in the third quarter of 2012. The sequential decline in revenue was primarily due to seasonal weakness, partially offset by initial revenue recognized from PAM and Eris.

Gross profit for the fourth quarter of 2012 was $43.2 million, or 26.5 percent of revenue, compared to $35.5 million, or 24.8 percent, in the fourth quarter of 2011 and $43.6 million, or 26.2 percent of revenue, in the third quarter 2012. Gross profit margin improved during the quarter due mainly to additional copper wire conversion, productivity improvements as well as moderate improvements in product mix, despite gold prices being up approximately 4 percent and loading down sequentially.

Income taxes for the fourth quarter of 2012 was $2.8 million, making our effective income tax rate 43 percent, which includes a one-time $2.7 million non-cash tax expense associated with a correction of the Company's foreign tax credits and deferred taxes. In addition, the China government began an audit of our high-tech company status for our largest Chinese subsidiary that has a reduced tax rate of 15 percent.

Fourth quarter 2012 GAAP net income was $4.1 million, or $0.09 per diluted share, compared to GAAP net income of $3.1 million, or $0.07 per diluted share, in the fourth quarter of 2011 and GAAP net income of $8.6 million, or $0.18 per diluted share, in the third quarter of 2012.

Non-GAAP adjusted net income for the fourth quarter of 2012 was $6.2 million, or $0.13 per diluted share, which excluded, net of tax, $1.1 million of non-cash acquisition related intangible asset amortization costs and $1.0 million of acquisition costs, compared to non-GAAP adjusted net income of $4.0 million, or $0.09 per diluted share, in the fourth quarter of 2011 and non-GAAP adjusted net income of $9.5 million, or $0.20 per diluted share, in the third quarter of 2012. The following is a summary reconciliation of GAAP net income to non-GAAP adjusted net income and per share data, net of tax (in thousands, except per share data):

Three Months Ended

December 31, 2012

unaudited

GAAP net income

$

4,075

GAAP diluted earnings per share

$

0.09

Adjustments to reconcile GAAP net income

to Non-GAAP adjusted net income:

Amortization of acquisition related intangible assets

1,131

Acquisition costs

959

Non-GAAP adjusted net income

$

6,165

Non-GAAP adjusted diluted earnings per share

$

0.13

See the tables below for further details of the reconciliation.

Included in fourth quarter 2012 GAAP and non-GAAP adjusted net income was approximately $2.4 million, net of tax, non-cash share-based compensation expense. Excluding share based compensation expense, both GAAP and non-GAAP adjusted diluted EPS would have increased by an additional $0.05 per diluted share, the same amount per diluted share by which share-based compensation affected GAAP and non-GAAP adjusted net income in fourth quarter 2011.

EBITDA, which represents earnings before net interest expense, income tax, depreciation and amortization, for the fourth quarter of 2012 was $24.1 million, compared to $19.7 million for the fourth quarter of 2011 and $24.8 million for the third quarter of 2012. For a reconciliation of GAAP net income to EBITDA (non-GAAP), see the table below.

For the fourth quarter of 2012, cash flow from operations was $16.4 million while net cash flow was a negative ($11.1) million primarily due to $16 million paid to acquire PAM. Free cash flow was a $1.1 million, which included $15.3 million of capital expenditures. Capital expenditures included $2.1 million of associated with the Chengdu assembly test facility construction.

As of December 31, 2012, Diodes had approximately $157 million in cash and cash equivalents and working capital was approximately $378 million.

Fiscal 2012

For the fiscal year 2012, revenue was $633.8 million as compared to $635.3 million reported in 2011. Gross profit was $161.6 million, or 25.5 percent of revenue, compared to $193.7 million, or 30.5 percent of revenue, in the prior year. GAAP net income was $24.2 million, or $0.51 per diluted share, compared to $50.7 million, or $1.09 per diluted share in 2011.

Non-GAAP adjusted net income for fiscal 2012 was $26.1 million, or $0.56 per diluted share, which excluded, net of tax, $3.7 million of non-cash acquisition related intangible asset amortization costs, $2.7 million gain on the sale of assets and $1.0 million of acquisition costs, compared to non-GAAP adjusted net income of $58.0 million, or $1.24 per diluted share, in the prior year. The following is a summary reconciliation of GAAP net income to non-GAAP adjusted net income and per share data, net of tax (in thousands, except per share data):

Twelve Months Ended

December 31, 2012

unaudited

GAAP net income

$

24,152

GAAP diluted earnings per share

$

0.51

Adjustments to reconcile GAAP net income

to Non-GAAP adjusted net income:

Amortization of acquisition related intangible assets

3,682

Gain on sale of assets

(2,717

)

Acquisition costs

959

Non-GAAP adjusted net income

$

26,076

Non-GAAP adjusted diluted earnings per share

$

0.56

See the tables below for further details of the reconciliation.

Included in fiscal 2012 GAAP and non-GAAP adjusted net income was approximately $9.4 million, net of tax, non-cash share-based compensation expense. Excluding this expense, both GAAP and non-GAAP adjusted diluted EPS would have increased by an additional $0.20 per diluted share, a comparable amount per diluted share by which share-based compensation affected GAAP and non-GAAP adjusted net income in fiscal 2011.

EBITDA, which represents earnings before net interest expense, income tax provision, depreciation and amortization, for fiscal 2012 was $93.2 million, compared to $130.5 million for fiscal 2011. For a reconciliation of GAAP net income to EBITDA (non-GAAP), see table below.

For the year ended December 31, 2012, net cash provided by operating activities was $64 million. Net cash flow was $28 million. Free cash flow was $6 million, which included $58 million of capital expenditures. Capital expenditures included approximately $15 million of capital expenditures associated with the Chengdu assembly test facility construction.

Conference Call

Diodes will host a conference call on Wednesday, February 13, 2013 at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss its fiscal 2012 and fourth quarter financial results. Investors and analysts may join the conference call by dialing 1-866-202-4683 and providing the confirmation code 92396703. International callers may join the teleconference by dialing 1-617-213-8846 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 Wednesday, February 20, 2013 at midnight Central Time. The replay number is 1-888-286-8010 with a pass code of 33061397. 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, 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 two 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; 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: to further capitalize on market expansion opportunities and improve leverage through select acquisitions, we also recently announced the proposed acquisition of BCD Semiconductor, which we expect will greatly enhance our analog product portfolio by expanding our product offerings for standard linear and AC/DC solutions for switch-mode power supply chargers and adaptors; combining manufacturing synergies and BCD's established local market position in China with Diodes' global customer base and sales channels provides enhanced profitability and growth opportunities for the Company in 2013 and beyond; as we look to the first quarter of 2013, we are expecting a slightly better than seasonal quarter with revenue ranging between $157 million and $170 million, or flat plus or minus 4 percent sequentially; we expect gross margin to be 25 percent, plus or minus 2 percent; operating expenses are expected to be 23 percent of revenue, plus or minus 1 percent; and we expect our income tax rate to range between 10 and 17 percent, and shares used to calculate GAAP EPS for the first quarter are anticipated to be approximately 47.0 million.Potential risks and uncertainties include, but are not limited to, such factors as: we may not be able to maintain our current growth strategy or continue to maintain our current performance, 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; unfavorable currency exchange rates; our future guidance may be incorrect; the global economic weakness may be more severe or last longer than we currently anticipated; and other information detailed from time to time in the Company's filings with the United States Securities and Exchange Commission.

Recent news releases, annual reports and SEC filings are available at the Company's website: http://www.diodes.com. Written requests may be sent directly to the Company, or they may be e-mailed to: diodes-fin@diodes.com.

DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share data)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2012

2011

2012

2011

NET SALES

$

163,287

$

143,313

$

633,806

$

635,251

COST OF GOODS SOLD

120,040

107,818

472,220

441,554

Gross profit

43,247

35,495

161,586

193,697

OPERATING EXPENSES

Selling, general and administrative

28,661

22,585

101,363

89,974

Research and development

9,295

6,876

33,761

27,231

Amortization of acquisition related intangible assets

1,721

1,095

5,122

4,503

Gain on sale of assets

-

-

(3,556

)

-

Total operating expenses

39,677

30,556

136,690

121,708

Income from operations

3,570

4,939

24,896

71,989

OTHER INCOME (EXPENSES)

Interest income

194

175

778

1,024

Interest expense

(307

)

(116

)

(876

)

(3,139

)

Amortization of debt discount

-

-

-

(6,032

)

Gain (loss) on securities carried at fair value

3,724

296

7,100

(1,039

)

Other

(561

)

(1,236

)

(1,091

)

861

Total other income (expenses)

3,050

(881

)

5,911

(8,325

)

Income before income taxes and noncontrolling interest

6,620

4,058

30,807

63,664

INCOME TAX PROVISION

2,842

245

4,825

10,157

NET INCOME

3,778

3,813

25,982

53,507

Less: NET INCOME attributable to noncontrolling interest

297

(698

)

(1,830

)

(2,770

)

NET INCOME attributable to common stockholders

$

4,075

$

3,115

$

24,152

$

50,737

EARNINGS PER SHARE attributable to common stockholders

Basic

$

0.09

$

0.07

$

0.53

$

1.12

Diluted

$

0.09

$

0.07

$

0.51

$

1.09

Number of shares used in computation

Basic

46,011

45,425

45,780

45,202

Diluted

46,900

46,599

46,899

46,713

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

DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME

(in thousands, except per share data)

(unaudited)

For the fiscal year ended December 31, 2012:

Operating
Expenses

Other
Income
(Expense)

Income Tax
Provision

Net Income

GAAP

$

24,152