Diodes Incorporated Reports Second 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 assets The 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 second quarter of 2019 is a non-GAAP financial measure, which is calculated by subtracting capital expenditures from cash flow from operations. For the second quarter of 2019, FCF was $8.5 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

 

Six Months Ended

June 30, 2019

 

June 30, 2019

2019

 

2018

 

2019

 

2018

Net income (per-GAAP)

$

36,284

$

25,068

$

68,000

$

43,594

Plus:
Interest expense, net

 

1,378

 

2,101

 

2,648

 

4,344

Income tax provision

 

11,174

 

10,753

 

21,472

 

18,536

Depreciation and amortization

 

28,277

 

26,536

 

54,918

 

52,146

EBITDA (non-GAAP)

$

77,113

$

64,458

$

147,038

$

118,620

 

DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)

June 30,

 

December 31,

 

2019

 

 

 

2018

 

(unaudited)

(audited)

Assets
Current assets:
Cash and cash equivalents

$

235,352

 

$

241,053

 

Short-term investments

 

6,604

 

 

7,499

 

Accounts receivable, net of allowances of $4,230 and $4,102 at
June 30, 2019 and December 31, 2018, respectively

 

240,056

 

 

228,405

 

Inventories

 

222,969

 

 

215,435

 

Asset held for sale

 

4,947

 

 

-

 

Prepaid expenses and other

 

46,726

 

 

42,446

 

Total current assets

 

756,654

 

 

734,838

 

Property, plant and equipment, net

 

470,690

 

 

446,835

 

Deferred income tax

 

28,751

 

 

31,652

 

Goodwill

 

138,772

 

 

132,437

 

Intangible assets, net

 

130,035

 

 

137,935

 

Other

 

89,257

 

 

42,674

 

Total assets

$

1,614,159

 

$

1,526,371

 

 
Liabilities
Current liabilities:
Line of credit

$

15,454

 

$

10,254

 

Accounts payable

 

110,521

 

 

117,808

 

Accrued liabilities and other

 

102,679

 

 

82,605

 

Income tax payable

 

16,769

 

 

15,744

 

Current portion of long-term debt

 

29,988

 

 

27,613

 

Total current liabilities

 

275,411

 

 

254,024

 

Long-term debt, net of current portion

 

141,919

 

 

186,143

 

Deferred tax liabilities

 

19,048

 

 

17,993

 

Other long-term liabilities

 

126,629

 

 

90,779

 

Total liabilities

 

563,007

 

 

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;
50,744,888 and 50,221,035, issued and outstanding at June 30, 2019 and
December 31, 2018, respectively

 

34,803

 

 

34,454

 

Additional paid-in capital

 

414,451

 

 

399,915

 

Retained earnings

 

704,708

 

 

636,708

 

Treasury stock, at cost, 1,457,206 shares held at June 30, 2019
and December 31, 2018

 

(37,768

)

 

(37,768

)

Accumulated other comprehensive loss

 

(112,225

)

 

(101,846

)

Total stockholders' equity

 

1,003,969

 

 

931,463

 

Noncontrolling interest

 

47,183

 

 

45,969

 

Total equity

 

1,051,152

 

 

977,432

 

Total liabilities and stockholders' equity

$

1,614,159

 

$

1,526,371

 

 

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