Diodes Incorporated Reports Second Quarter 2013 Financial Results

  Diodes Incorporated Reports Second Quarter 2013 Financial Results

       Achieves Record Revenue with Continued Gross Margin Improvement

Business Wire

PLANO, Texas -- August 7, 2013

Diodes Incorporated (Nasdaq: 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 valuations                                               3,108
                                                            
Restructuring                                                      1,127
                                                            
Retention costs                                                    829
                                                            
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 (Nasdaq: 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 Ended          Six Months Ended
                         June 30,                    June 30,
                         2013         2012          2013         2012
NET SALES                $ 214,379     $ 159,239     $ 391,343    $ 303,902
                                                                   
COST OF GOODS SOLD        153,086     118,211     283,867     229,168 
                                                                   
Gross profit               61,293        41,028        107,476       74,734
                                                                   
OPERATING EXPENSES
Selling, general and       35,080        24,760        65,456        46,906
administrative
Research and               12,145        8,218         22,225        15,382
development
Amortization of
acquisition related        2,295         1,103         4,204         2,198
intangible assets
Restructuring              1,535         -             1,535         -
Gain on sale of assets    -           (1,357  )    42          (3,556  )
Total operating           51,055      32,724      93,462      60,930  
expenses
                                                                   
Income from operations     10,238        8,304         14,014        13,804
                                                                   
OTHER INCOME
(EXPENSES)
Interest income            323           115           403           287
Interest expense           (1,567  )     (171    )     (2,512  )     (294    )
Amortization of debt       -             -             -             -
discount
Other                     1,521       307         2,907       945     
Total other income         277           251           798           938
(expenses)
                                                                   
Income before income
taxes and                  10,515        8,555         14,812        14,742
noncontrolling
interest
                                                                   
INCOME TAX PROVISION      1,475       856         8,049       1,474   
                                                                   
NET INCOME                 9,040         7,699         6,763         13,268
                                                                   
Less: NET INCOME
attributable to           (405    )    (1,046  )    (54     )    (1,744  )
noncontrolling
interest
                                                                   
NET INCOME
attributable to common   $ 8,635      $ 6,653      $ 6,709      $ 11,524  
stockholders
                                                                   
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   Operating   Other       Income Tax
                     Goods     Expenses    Income      Provision    Net Income
                     Sold                  (Expense)
                                                                    
Per-GAAP                                                            $  8,635
                                                                    
Earnings per share
(Per-GAAP)
Diluted                                                             $  0.18
                                                                    
Adjustments to
reconcile net
income to adjusted
net income:
                                                                    
Inventory            3,656     -           -           (548   )        3,108
valuations
                                                                    
Restructuring        -         1,533       -           (406   )        1,127
                                                                    
Retention costs      -         975         -           (146   )        829
                                                                    
Amortization of
acquisition          -         2,295       -           (470   )       1,825
related intangible
assets
                                                                    
Adjusted                                                            $  15,524
(Non-GAAP)
                                                                    
Diluted shares
used in computing                                                     47,507
earnings per share
                                                                    
Adjusted earnings
per share
(Non-GAAP)
Diluted                                                             $  0.33
                                                                       

Note: Included in 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
earnings per share would have improved by $0.05 per share.

                                                               
                                                                    
DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME – Cont.

(in thousands, except per share data)

(unaudited)
                                                                    
For the three months ended June 30, 2012:
                               Operating   Other       Income Tax
                               Expenses    Income      Provision    Net Income
                                           (Expense)
                                                                    
Per-GAAP                                                            $ 6,653  
                                                                    
Earnings per share
(Per-GAAP)
Diluted                                                             $ 0.14   
                                                                    
Adjustments to reconcile net
income to adjusted net
income:
                                                                    
Amortization of acquisition    1,103       -           (259   )       844
related intangible assets
                                                                    
Gain on sale of assets         (1,330  )   -           226           (1,104 )
                                                                    
Adjusted (Non-GAAP)                                                 $ 6,393  
                                                                    
Diluted shares used in                                               46,859 
computing earnings per share
                                                                    
Adjusted earnings per share
(Non-GAAP)
Diluted                                                             $ 0.14   
                                                                             

Note: Included in GAAP and non-GAAP adjusted net income was approximately $2.3
million, net of tax, non-cash share-based compensation expense. Excluding
share-based compensation expense, both GAAP and non-GAAP adjusted diluted
earnings per share would have improved by $0.05 per share.

                                                              
                                                                    
DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME – Cont.

(in thousands, except per share data)

(unaudited)
                                                                    
For the six months ended June 30, 2013:
                     Cost of   Operating   Other       Income Tax
                     Goods     Expenses    Income      Provision    Net Income
                     Sold                  (Expense)
                                                                    
Per-GAAP                                                            $  6,709
                                                                    
Earnings per share
(Per-GAAP)
Diluted                                                             $  0.14
                                                                    
Adjustments to
reconcile net
income to adjusted
net income:
                                                                    
Inventory            5,484     -           -           (823    )       4,661
valuations
                                                                    
Acquisition costs    -         600         -           110             710
                                                                    
Retention costs      -         1,300       -           (195    )       1,105
                                                                    
Restructuring        -         1,533       -           (406    )       1,127
                                                                    
Amortization of
acquisition          -         4,204       -           (913    )       3,291
related intangible
assets
                                                                    
Tax expense
related to tax       -         -           -           5,447          5,447
audit
                                                                    
Adjusted                                                            $  23,051
(Non-GAAP)
                                                                    
Diluted shares
used in computing                                                     47,383
earnings per share
                                                                    
Adjusted earnings
per share
(Non-GAAP)
Diluted                                                             $  0.49
                                                                       

Note: Included in GAAP and non-GAAP adjusted net income was approximately $4.4
million, net of tax, non-cash share-based compensation expense. Excluding this
expense, both GAAP and non-GAAP adjusted diluted earnings per share would have
improved by $0.10 per share.

                                                               
                                                                    
DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME – Cont.

(in thousands, except per share data)

(unaudited)
                                                                    
For the six months ended June 30, 2012:
                               Operating   Other       Income Tax
                               Expenses    Income      Provision    Net Income
                                           (Expense)
                                                                    
Per-GAAP                                                            $ 11,524 
                                                                    
Earnings per share
(Per-GAAP)
Diluted                                                             $ 0.25   
                                                                    
Adjustments to reconcile net
income to adjusted net
income:
                                                                    
Amortization of acquisition    2,198       -           (549   )       1,649
related intangible assets
                                                                    
Gain on sale of assets         (3,452  )   -           735           (2,717 )
                                                                    
Adjusted (Non-GAAP)                                                 $ 10,456 
                                                                    
Diluted shares used in                                               46,916 
computing earnings per share
                                                                    
Adjusted earnings per share
(Non-GAAP)
Diluted                                                             $ 0.22   
                                                                             

Note: Included in GAAP and non-GAAP adjusted net income was approximately $4.6
million, net of tax, non-cash share-based compensation expense. Excluding this
expense, both GAAP and non-GAAP adjusted diluted earnings per share would have
improved by $0.10 per share.

ADJUSTED NET INCOME (Non-GAAP)

This measure consists of generally accepted accounting principles (“GAAP”) net
income, which is then adjusted solely for the purpose of adjusting for
inventory valuations, restructuring, acquisition costs, retention costs,
amortization of acquisition related intangible assets, tax payments related to
tax audit and gain on sale of assets, as discussed below. Excluding inventory
valuations, restructuring, acquisition costs, retention costs, tax payments
related to tax audit and gain on sale of assets provides investors with a
better depiction of the Company’s operating results and provides a more
informed baseline for modeling future earnings expectations. Excluding the
amortization of acquisition related intangible assets allows for comparison of
the Company’s current and historic operating performance. The Company excludes
the above listed items to evaluate the Company’s operating performance, to
develop budgets, to determine incentive compensation awards and to manage cash
expenditures. Presentation of the above non-GAAP measures allows investors to
review the Company’s results of operations from the same viewpoint as the
Company’s management and Board of Directors. The Company has historically
provided similar non-GAAP financial measures to provide investors an enhanced
understanding of its operations, facilitate investors’ analyses and
comparisons of its current and past results of operations and provide insight
into the prospects of its future performance. The Company also believes the
non-GAAP measures are useful to investors because they provide additional
information that research analysts use to evaluate semiconductor companies.
These non-GAAP measures should be considered in addition to results prepared
in accordance with GAAP, but should not be considered a substitute for or
superior to GAAP results and may differ from measures used by other companies.
For example, we do not adjust for any amounts attributable to noncontrolling
interest. The Company recommends a review of net income on both a GAAP basis
and non-GAAP basis be performed to get a comprehensive view of the Company’s
results. The Company provides a reconciliation of GAAP net income to non-GAAP
adjusted net income.

Detail of non-GAAP adjustments:

Inventory valuations – The Company excluded cost incurred for inventory
valuations. The Company adjusted the inventory acquired from the BCD
Semiconductor Manufacturing Limited (“BCD”) acquisition to account for the
reasonable profit allowance for the selling effort on finished goods inventory
and the reasonable profit allowance for the completing and selling effort on
the work–in-progress inventory. This non-cash adjustment to inventory is not
recurring in nature. The Company believes the exclusion of inventory
valuations provides investors an enhanced view of certain costs the Company
may incur from time to time and facilitates comparisons with the results of
other periods that may not reflect such costs.

Restructuring – The Company has recorded restructuring charges to reduce its
cost structure in order to enhance operating effectiveness and improve
profitability. These restructuring activities related to our UK development
team and the closure of our New York sales office. 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.

Acquisition costs – The Company excluded costs associated with acquiring BCD,
which consisted of advisory, legal and other professional and consulting fees.
These costs were expensed in the first quarter of 2013 as that was when the
costs were incurred and services were received of which, the corresponding tax
adjustments were made for the non-deductible portions of these expenses. The
Company believes the exclusion of the acquisition related costs provides
investors an enhanced view of certain costs the Company may incur from time to
time and facilitates comparisons with the results of other periods that may
not reflect such costs.

Retention costs – The Company excluded costs accrued within operating expenses
in regard to the $5 million employee retention plan in connection with the BCD
acquisition. The retention payments are payable at the 12, 18 and 24 month
anniversaries of the acquisition with the majority of the cost occurring in
the first 12 months. Although these retention costs will be recurring every
quarter until the final retention payment has been made, they are not part of
the employees normal annual salaries and therefore being excluded. The Company
believes the exclusion of retention costs provides investors an enhanced view
of certain costs the Company may incur from time to time and facilitates
comparisons with the results of other periods that may not reflect such costs.

Amortization of acquisition related intangible assets – The Company excluded
the amortization of its acquisition related intangible assets including
developed technologies and customer relationships. The fair value of the
acquisition related intangible assets, which was allocated to the assets
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 lives of the applicable assets. The Company
believes the exclusion of the amortization expense of acquisition related
assets is appropriate as 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 the amortization
expense as there is significant variability and unpredictability across other
companies with respect to this expense.

Tax expense related to tax audit – The Company excluded additional tax expense
in regard to a tax audit of the China tax authorities. The China government
audited the Company’s High and New Technology Enterprise (“HNTE”) status for
the years 2009 through 2011 and determined there was an underpayment for the
tax year 2011. The Company has been approved for the HNTE status for 2012
through 2014. Given that 2011 is an isolated occurrence, the additional tax
and any penalties and interest associated with the audit are being excluded.
The Company believes the exclusion of tax expense related to tax audit
provides investors an enhanced view of certain costs the Company may incur
from time to time and facilitates comparisons with the results of other
periods that may not reflect such costs.

Gain on sale of assets – The Company excluded the gain recorded for the sale
of assets. During the second quarter 2012, the Company sold an intangible
asset located in Europe and this gain was excluded from management’s
assessment of the Company’s core operating performance as this long-lived
asset was a non-core intellectual asset. The Company believes the exclusion of
the gain on sale of assets provides investors an enhanced view of a gain the
Company may incur from time to time and facilitates comparisons with results
of other periods that may not reflect such gains.

Adjusted Earnings per Share (Non-GAAP) - This non-GAAP financial measure is
the portion of the Company’s GAAP net income assigned to each share of stock,
excluding inventory valuations, restructuring, acquisition costs, retention
costs, amortization of acquisition related intangible assets, tax payments
related to tax audit and gain on sale of assets, as discussed above. Excluding
inventory valuations, restructuring, acquisition costs, retention costs, tax
payments related to tax audit and gain on sale of assets provides investors
with a better depiction of the Company’s operating results and provides a more
informed baseline for modeling future earnings expectations. Excluding the
amortization of acquisition related intangible assets allows for comparison of
the Company’s current and historic operating performance, as described in
further detail above. This non-GAAP measure should be considered in addition
to results prepared in accordance with GAAP, but should not be considered a
substitute for or superior to GAAP results and may differ from measures used
by other companies. The Company recommends a review of diluted earnings per
share on both a GAAP basis and non-GAAP basis be performed to obtain a
comprehensive view of the Company’s results. Information on how these share
calculations are made is included in the reconciliation tables provided.

ADJUSTED GROSS PROFIT

Adjusted gross profit (Non-GAAP) - This measure consists of GAAP gross profit,
which is then adjusted solely for the purpose of adjusting for inventory
valuations (as described above) related to the acquisition of BCD. Excluding
inventory valuations provides investors with a better depiction of the
Company’s gross profit and provides a more informed baseline for modeling
future gross profit. Presentation of the non-GAAP measure allows investors to
review the Company’s results of operations from the same viewpoint as the
Company’s management and Board of Directors. The Company has historically
provided similar non-GAAP financial measures to provide investors an enhanced
understanding of its operations, facilitate investors’ analyses and
comparisons of its current and past results of operations and provide insight
into the prospects of its future performance. The Company also believes the
non-GAAP measure is useful to investors because it provides additional
information that research analysts use to evaluate semiconductor companies.
This non-GAAP measure should be considered in addition to results prepared in
accordance with GAAP, but should not be considered a substitute for or
superior to GAAP results and may differ from measures used by other companies.

                                                        
                      Three Months         Three Months         Three Months
                      Ended                Ended                Ended
                      June 30, 2013        March 31, 2013       June 30, 2012
                      unaudited            unaudited            unaudited
GAAP gross profit     $   61,293          $   46,183          $   41,028  
                                                                
GAAP gross profit         28.6    %            26.1    %            25.8    %
margin
                                                                
Adjustments to
reconcile GAAP
gross profit
to non-GAAP
adjusted gross
profit:
                                                                
Inventory                3,656              1,828              -       
valuations
                                                                
Non-GAAP adjusted     $   64,949          $   48,011          $   41,028  
gross profit
                                                                
Non-GAAP gross            30.3    %            27.1    %            25.8    %
profit margin
                                                                
                                                                

CASH FLOW ITEMS

Free cash flow (FCF) (Non-GAAP)

FCF for the second quarter of 2013 is a non-GAAP financial measure, which is
calculated by taking cash flow from operations less capital expenditures. For
the second quarter of 2013, the amount was $22.0 million ($29.8 million less
(-) $7.8 million). FCF 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 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
                                June 30,
                                2013      2012
                                           
Net income (per-GAAP)           $ 8,635    $ 6,653
Plus:
Interest expense, net             1,244      56
Income tax provision              1,475      856
Depreciation and amortization    18,877    15,590
EBITDA (Non-GAAP)               $ 30,231   $ 23,155
                                           
                                           
                                Six Months Ended
                                June 30,
                                2013       2012
                                           
Net income (per-GAAP)           $ 6,709    $ 11,524
Plus:
Interest expense, net             2,109      7
Income tax provision              8,049      1,474
Depreciation and amortization    36,435    31,363
EBITDA (Non-GAAP)               $ 53,302   $ 44,368

                                                  
                                                       
DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS
                                                       
ASSETS

(in thousands)
                                                       
                                       June 30,        December 31,
                                       2013            2012
CURRENT ASSETS                         (unaudited)
Cash and cash equivalents              $ 213,546       $   157,121
Accounts receivable, net                 181,878           152,073
Inventories                              186,786           153,293
Deferred income taxes, current           12,305            9,995
Prepaid expenses and other              48,371           18,928
Total current assets                    642,886          491,410
                                                       
                                                       
PROPERTY, PLANT AND EQUIPMENT, net       331,287           243,296
                                                       
DEFERRED INCOME TAXES, non current       31,959            36,819
                                                       
OTHER ASSETS
Goodwill                                 86,233            87,359
Intangible assets, net                   56,319            44,337
Other                                   22,890           16,842
Total assets                           $ 1,171,574     $   920,063

                                                             
                                                                  
DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS
                                                                  
LIABILITIES AND EQUITY

(in thousands, except share data)
                                                                  
                                                June 30,          December 31,
                                                2013              2012
CURRENT LIABILITIES                             (unaudited)
Lines of credit                                 $ 4,507           $  7,629
Accounts payable                                  107,047            64,072
Accrued liabilities                               63,070             41,139
Income tax payable                               1,456            678     
Total current liabilities                        176,080          113,518 
                                                                  
LONG-TERM DEBT, net of current portion            209,337            44,131
OTHER LONG-TERM LIABILITIES                      58,246           41,974  
Total liabilities                                443,663          199,623 
                                                                  
COMMITMENTS AND CONTINGENCIES
                                                                  
EQUITY
Diodes Incorporated 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;
46,327,031 and 46,010,815 issued and
outstanding at June 30, 2013 and
December 31, 2012, respectively                   30,885             30,674
Additional paid-in capital                        288,284            280,571
Retained earnings                                 406,505            399,796
Accumulated other comprehensive loss             (41,070   )       (33,856 )
Total Diodes Incorporated stockholders'          684,604          677,185 
equity
Noncontrolling interest                          43,307           43,255  
Total equity                                      727,911            720,440
Total liabilities and equity                    $ 1,171,574      $  920,063 

Contact:

Company Contact:
Diodes Incorporated
Laura Mehrl, 972-987-3959
Director of Investor Relations
laura_mehrl@diodes.com
or
Investor Relations Contact:
Shelton Group
Leanne Sievers, 949-224-3874
EVP, Investor Relations
lsievers@sheltongroup.com
 
Press spacebar to pause and continue. Press esc to stop.