Diodes Incorporated Reports First Quarter Financial Results

The Company’s financial statements present net income and earnings per share that are calculated using accounting principles generally accepted in the United States (“GAAP”). The Company’s management makes adjustments to the GAAP measures that it feels are necessary to allow investors and other readers of the Company’s financial releases to view the Company’s operating results as viewed by the Company’s management, board of directors and research analysts in the semiconductor industry. These non-GAAP measures are not prepared in accordance with, and should not be considered alternatives or necessarily superior to, GAAP financial data and may be different from non-GAAP measures used by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures, even if they have similar names. The explanation of the adjustments made in the table above, are set forth below:

Detail of non-GAAP adjustments

Amortization of acquisition-related intangible assetsThe Company excluded this item, including amortization of developed technologies and customer relationships. The fair value of the acquisition-related intangible assets, which was recognized through purchase accounting, is amortized using straight-line methods which approximate the proportion of future cash flows estimated to be generated each period over the estimated useful life of the applicable assets. The Company believes that exclusion of this item is appropriate because a significant portion of the purchase price for its acquisitions was allocated to the intangible assets that have short lives and exclusion of the amortization expense allows comparisons of operating results that are consistent over time for both the Company’s newly acquired and long-held businesses. In addition, the Company excluded this item because there is significant variability and unpredictability among companies with respect to this expense.

KFAB restructuring - The Company has recorded restructuring charges related to the shutdown and relocation of its wafer fabrication facility located in Lee’s Summit, MO (“KFAB”). These restructuring charges are excluded from management’s assessment of the Company’s operating performance. The Company believes the exclusion of the restructuring charges provides investors an enhanced view of the cost structure of the Company’s operations and facilitates comparisons with the results of other periods that may not reflect such charges or may reflect different levels of such charges.

Officer retirement – In 2018, the Company excluded costs related to the retirement of two executives. These costs represent cash payments and the accelerated vesting of previously issued stock awards. The Company feels it is appropriate to exclude these costs since they don’t represent ongoing operating expenses and will present investors with a more accurate indication of our continuing operations.

CASH FLOW ITEMS

Free cash flow (FCF) (Non-GAAP)

FCF for the first quarter of 2019 is a non-GAAP financial measure, which is calculated by subtracting capital expenditures from cash flow from operations. For the first quarter of 2019, FCF was $51.2 million, which represents the cash and cash equivalents that we are able to generate after taking into account cash outlays required to maintain or expand property, plant and equipment. FCF is important because it allows us to pursue opportunities to develop new products, make acquisitions and reduce debt.

CONSOLIDATED RECONCILIATION OF NET INCOME TO EBITDA

EBITDA represents earnings before net interest expense, income tax provision, depreciation and amortization. Management believes EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties, such as financial institutions in extending credit, in evaluating companies in our industry and provides further clarity on our profitability. In addition, management uses EBITDA, along with other GAAP and non-GAAP measures, in evaluating our operating performance compared to that of other companies in our industry. The calculation of EBITDA generally eliminates the effects of financing, operating in different income tax jurisdictions, and accounting effects of capital spending, including the impact of our asset base, which can differ depending on the book value of assets and the accounting methods used to compute depreciation and amortization expense. EBITDA is not a recognized measurement under 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 used by other companies. For example, our EBITDA takes into account all net interest expense, income tax provision, depreciation and amortization without taking into account any amounts attributable to noncontrolling interest. Furthermore, EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as tax and debt service payments.

The following table provides a reconciliation of net income to EBITDA (in thousands, unaudited):

  Three Months Ended
March 31,
  2019     2018
Net income (per-GAAP) $ 31,716 $ 18,526
Plus:
Interest expense, net 1,270 2,243
Income tax provision 10,298 7,783
Depreciation and amortization   26,641   25,610
EBITDA (non-GAAP) $ 69,925 $ 54,162
   
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)

 
March 31, December 31,
  2019     2018  
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 301,167 $ 241,053
Short-term investments 6,751 7,499

Accounts receivable, net of allowances of $4,258 and $4,102 at March 31, 2019 and December 31, 2018, respectively

215,229 228,405
Inventories 216,569 215,435
Prepaid expenses and other   41,274     42,446  
Total current assets   780,990     734,838  
Property, plant and equipment, net 441,215 446,835
Deferred income tax 31,830 31,652
Goodwill 135,669 132,437
Intangible assets, net 133,506 137,935
Other   89,788     42,674  
Total assets $ 1,612,998   $ 1,526,371  
 
Liabilities
Current liabilities:
Line of credit $ 12,330 $ 10,254
Accounts payable 107,078 117,808
Accrued liabilities and other 86,880 82,605
Income tax payable 21,452 15,744
Current portion of long-term debt   28,403     27,613  
Total current liabilities   256,143     254,024  
Long-term debt, net of current portion 187,378 186,143
Deferred tax liabilities 18,003 17,993
Other long-term liabilities   134,176     90,779  
Total liabilities   595,700     548,939  
 
Commitments and contingencies
 
Stockholders' equity

Preferred stock - par value $1.00 per share; 1,000,000 shares authorized; no shares issued or outstanding

Common stock - par value $0.66 2/3 per share; 70,000,000 shares authorized; 50,596,756 and 50,221,035, issued and outstanding at March 31, 2019 and December 31, 2018, respectively

34,704 34,454
Additional paid-in capital 410,163 399,915
Retained earnings 668,424 636,708

Treasury stock, at cost, 1,457,206 shares held at March 31, 2019 and December 31, 2018

(37,768 ) (37,768 )
Accumulated other comprehensive loss   (106,848 )   (101,846 )
Total stockholders' equity 968,675 931,463
Noncontrolling interest   48,623     45,969  
Total equity   1,017,298     977,432  
Total liabilities and stockholders' equity $ 1,612,998   $ 1,526,371  

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