Diodes Incorporated Reports Second Quarter 2013 Financial Results

Diodes Incorporated Reports Second Quarter 2013 Financial Results

Achieves Record Revenue with Continued Gross Margin Improvement

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 second quarter ended June 30, 2013.


Second Quarter Highlights

  • Revenue was $214.4 million, an increase of 21.1 percent from the $177.0 million in the first quarter 2013, and an increase of 34.6 percent from the $159.2 million in the second quarter 2012;
  • GAAP gross profit was $61.3 million, including a $3.7 million inventory valuation adjustment related to the BCD acquisition, and GAAP gross margin was 28.6 percent;
  • Non-GAAP adjusted gross profit was $64.9 million compared to non-GAAP gross profit of $48.0 million in first quarter 2013, and non-GAAP gross profit of $41.0 million in second quarter 2012;
  • Non-GAAP adjusted gross profit margin was 30.3 percent compared to non-GAAP gross margin of 27.1 percent in first quarter 2013, and non-GAAP gross margin of 25.8 percent in the second quarter 2012;
  • GAAP net income was $8.6 million, or $0.18 per diluted share, compared to first quarter 2013 GAAP net loss of $1.9 million, or ($0.04) per share, and second quarter 2012 GAAP net income of $6.7 million, or $0.14 per diluted share;
  • Non-GAAP adjusted net income was $15.5 million, or $0.33 per diluted share, compared to non-GAAP adjusted net income of $7.5 million, or $0.16 per diluted share, in first quarter 2013, and non-GAAP adjusted net income of $6.4 million, or $0.14 per diluted share, in second quarter 2012;
  • Excluding $2.1 million of share-based compensation expense, GAAP and non-GAAP adjusted net income would have increased by $0.05 per diluted share; and
  • Achieved $29.8 million cash flow from operations, $13.3 million net cash flow, and $22.0 million of free cash flow.

Commenting on the results, Dr. Keh-Shew Lu, President and Chief Executive Officer, stated, "Our past design win momentum and new product initiatives, combined with our first full quarter of BCD Semiconductor, contributed to the achievement of record quarterly revenue and increased market share despite the slowdown at certain major OEM customers and continued weakness in the PC market.

"During the quarter, we were also able to improve our non-GAAP gross margin to 30.3 percent, which excludes the BCD inventory valuation adjustment, due to improved product mix, lower gold prices, copper wire conversion, as well as our cost reduction efforts. Furthermore, the integration of BCD has been progressing as we move ahead of schedule in transferring BCD products into our Shanghai packaging facilities.

"Additionally, our continued revenue growth and improved cost controls are helping to move operating expenses toward our target model of 20 percent on a non-GAAP basis. As a result of these collective factors, we reported solid earnings growth and generated strong cash flow for the quarter. In summary, we expect to achieve further progress in the third quarter as we continue to successfully execute on our business model."

Second Quarter 2013

Revenue for the second quarter 2013 was $214.4 million, which includes the first full quarter of revenue from BCD, increased 21.1 percent over the $177.0 million in the first quarter 2013 and 34.6 percent from the $159.2 million in the second quarter 2012. Revenue was up sequentially primarily due to three months of revenue contribution from BCD compared to one month in the prior quarter, as well as continued design win momentum and market share gains.

GAAP gross profit was $61.3 million, including a $3.7 million inventory valuation adjustment related to the BCD acquisition. GAAP gross profit margin was 28.6 percent.

Non-GAAP adjusted gross profit for the second quarter 2013 was $64.9 million, or 30.3 percent of revenue, compared to non-GAAP gross profit of $48.0 million, or 27.1 percent of revenue, in the first quarter 2013, and non-GAAP gross profit of $41.0 million, or 25.8 percent of revenue, in the second quarter 2012. Gross profit margin improved 320 basis points over the prior quarter as a result of improved product mix, lower gold prices, copper wire conversion, and the benefit of the Company's cost reduction efforts.

Second quarter 2013 GAAP net income was $8.6 million, or $0.18 per diluted share, which compared to a first quarter 2013 GAAP net loss of $1.9 million, or ($0.04) per share, and second quarter 2012 GAAP net income of $6.7 million, or $0.14 per diluted share.

Second quarter 2013 non-GAAP adjusted net income was $15.5 million, or $0.33 per diluted share, which excluded, net of tax, $4.0 million of items related to the BCD acquisition, $1.8 million of non-cash acquisition-related intangible asset amortization costs, and $1.1 million of restructuring costs. This compares to non-GAAP adjusted net income of $7.5 million, or $0.16 per diluted share, in the first quarter 2013 and $6.4 million, or $0.14 per diluted share, in the second quarter 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
June 30, 2013
GAAP net income$8,635
 
GAAP diluted earnings per share$0.18
 

Adjustments to reconcile net income to adjusted net income:

 
Inventory valuations3,108
 
Restructuring1,127
 
Retention costs829
 
Amortization of acquisition related intangible assets 1,825
 
Non-GAAP adjusted net income$15,523
 
Non-GAAP adjusted diluted earnings per share$0.33
 

(See the reconciliation tables of net income to adjusted net income near the end of the release for further details.)

Included in second quarter 2013 GAAP 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, 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 second quarter 2012.

EBITDA, which represents earnings before net interest expense, income tax, depreciation and amortization, for the second quarter 2013 was $30.2 million, compared to $23.1 million for the first quarter 2013 and $23.2 million for the second quarter 2012. For a reconciliation of GAAP net income to EBITDA (non-GAAP), see the table near the end of the release for further details.

As of June 30, 2013, the Company had approximately $214 million in cash and cash equivalents, and working capital was approximately $467 million.

Business Outlook

Dr. Lu concluded, "As we look to the third quarter of 2013, we expect continued revenue growth with revenue ranging between $220 million and $230 million, or up 3 to 7 percent sequentially. We expect GAAP gross margin to be 30.3 percent, plus or minus 2 percent. The BCD purchase price accounting adjustments in cost of goods sold were completed in the second quarter. Included in the third quarter gross margin guidance is the impact of a disruption in our manufacturing operations in one of our Shanghai wafer fabs due to an incident in our landlord's power station that caused a power outage to the fab. The power outage occurred on July 26 causing some work-in-progress inventory to be scrapped and approximately one-half month of output to be lost. Full power has been restored to the manufacturing operations. GAAP operating expenses are expected to be 22.5 percent of revenue, plus or minus 1 percent. Non-GAAP operating expenses, excluding amortization of intangible expenses and acquisition-related employee retention accruals, are expected to be 21.0 percent of revenue, plus or minus 1 percent. We expect our income tax rate to range between 18 and 24 percent, and shares used to calculate GAAP EPS for the third quarter are anticipated to be approximately 48.3 million."

Conference Call

Diodes will host a conference call on Wednesday, August 7, 2013 at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss its second quarter financial results. Investors and analysts may join the conference call by dialing 1-866-318-8613 and providing the confirmation code 85190859. International callers may join the teleconference by dialing 1-617-399-5132 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, August 14, 2013 at midnight Central Time. The replay number is 1-888-286-8010 with a pass code of 28094129. 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: furthermore, the integration of BCD has been progressing as we move ahead of schedule in transferring BCD products into our Shanghai packaging facilities; additionally, our continued revenue growth and improved cost controls are helping to move operating expenses toward our target model of 20 percent on a non-GAAP basis; in summary, we expect to achieve further progress in the third quarter as we continue to successfully execute on our business model; as we look to the third quarter of 2013, we expect continued revenue growth with revenue ranging between $220 million and $230 million, or up 3 to 7 percent sequentially; we expect GAAP gross margin to be 30.3 percent, plus or minus 2 percent; the BCD purchase price accounting adjustments in cost of goods sold were completed in the second quarter; included in the third quarter gross margin guidance is the impact of a disruption in our manufacturing operations in one of our Shanghai wafer fabs due to an incident in our landlord's power station that caused a power outage to the fab; the power outage occurred on July 26 causing some work-in-progress inventory to be scrapped and approximately one-half month of output to be lost; full power has been restored to the manufacturing operations;GAAP operating expenses are expected to be 22.5 percent of revenue, plus or minus 1 percent; non-GAAP operating expenses, excluding amortization of intangible expenses and acquisition-related employee retention accruals, are expected to be 21.0 percent of revenue, plus or minus 1 percent; and we expect our income tax rate to range between 18 and 24 percent, and shares used to calculate GAAP EPS for the third quarter are anticipated to be approximately 48.3 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 EndedSix Months Ended
June 30,June 30,
2013 20122013 2012
NET SALES$214,379$159,239$391,343 $303,902
 
COST OF GOODS SOLD 153,086  118,211  283,867  229,168 
 
Gross profit61,29341,028107,47674,734
 
OPERATING EXPENSES
Selling, general and administrative35,08024,76065,45646,906
Research and development12,1458,21822,22515,382
Amortization of acquisition related intangible assets2,2951,1034,2042,198

Restructuring

1,535-1,535-
Gain on sale of assets -  (1,357) 42  (3,556)
Total operating expenses 51,055  32,724  93,462  60,930 
 
Income from operations10,2388,30414,01413,804
 
OTHER INCOME (EXPENSES)
Interest income323115403287
Interest expense(1,567)(171)(2,512)(294)
Amortization of debt discount----
Other 1,521  307  2,907  945 
Total other income (expenses)277251798938
 
Income before income taxes and noncontrolling interest10,5158,55514,81214,742
 
INCOME TAX PROVISION 1,475  856  8,049  1,474 
 
NET INCOME9,0407,6996,76313,268
 
Less: NET INCOME attributable to noncontrolling interest (405) (1,046) (54) (1,744)
 
NET INCOME attributable to common stockholders$8,635 $6,653 $6,709 $11,524 
 
EARNINGS PER SHARE attributable to common stockholders
Basic$0.19 $0.15 $0.15 $0.25 
Diluted$0.18 $0.14 $0.14 $0.25 
 
Number of shares used in computation
Basic 46,148  45,642  46,085  45,551 
Diluted 47,507  46,859  47,383  46,916 
 

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

     
 

DIODES INCORPORATED AND SUBSIDIARIES

RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME

(in thousands, except per share data)


(unaudited)

 

For the three months ended June 30, 2013:

Cost of
Goods
Sold

Operating
Expenses

Other
Income
(Expense)

Income Tax
Provision

Net Income
 
Per-GAAP$8,635
 
Earnings per share (Per-GAAP)
Diluted$0.18
 

Adjustments to reconcile net income to adjusted net income:

 
Inventory valuations3,656--(548)3,108
 
Restructuring-1,533-(406)1,127
 
Retention costs-975-(146)829
 
Amortization of acquisition related intangible assets-2,295-(470) 1,825
 
Adjusted (Non-GAAP)$ Read Full Story

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