EX-99.1 2 v064723_ex99-1.txt FOR IMMEDIATE RELEASE Diodes Incorporated Reports Record Fourth Quarter and Full Year 2006 Results o Annual revenues up 60% to a record $343.3 million o 4Q EPS increases 18% sequentially to $0.53 versus $0.45 in 3Q Westlake Village, California, February 6, 2007 - Diodes Incorporated (NasdaqGS: DIOD), a leading manufacturer and supplier of high-quality discrete and analog semiconductors, today reported record financial results for the fourth quarter ending December 31, 2006. Year 2006 Record Performance: >> Revenues increase 60% to $343.3 million >> Pro forma net income increased 60% to $53.4 million >> EPS rises to $1.74 ($1.89 pro forma) >> Generates $70 million in cash flow from operations Fourth Quarter Highlights: >> Revenues increased 54% YOY to a record $94.4 million >> Gross profit increased 47% YOY to $31.5 million or 33.4% >> Pro forma net income increased 57% YOY to a record $15.8 million, or $0.56 per fully diluted share, up from $10.0 million, or $0.36 per share >> Net income increased 15% sequentially to a record $14.7 million, or $0.53 per fully diluted share, up from $12.8 million, or $0.45 per share in the third quarter of 2006 >> Cash flow from operations increased 78% YOY to $23.5 million For the full fiscal year 2006, revenues increased 59.9% to $343.3 million, compared to $214.8 million for fiscal 2005. Pro forma net income for the year, which excludes $5.3 million of net share-based compensation, increased 60.3% to $53.4 million, compared to $33.3 million in 2005. Pro forma fully diluted earnings per share grew to $1.89 for 2006, compared to $1.29, for 2005. Revenues for the fourth quarter of 2006 increased 53.9% year-over-year and 2% sequentially to a record $94.4 million. Pro forma net income increased 57.2% year-over-year to a record $15.8 million, or $0.56 per fully diluted share, up from $10.0 million, or $0.36 per share, in the fourth quarter of 2005, and $0.49 in the third quarter of 2006. Pro forma results are included because under FAS 123(R), in the first quarter of 2006, the Company began expensing stock options, and therefore, equivalent share-based compensation expense was not reflected in the 2005 periods. Pro forma net income and earnings per share exclude approximately $1.1 million in non-cash, net share-based compensation expense (see table for a reconciliation of the impact of pro forma net income to GAAP net income). Net income on a GAAP basis increased 14.9% sequentially to $14.7 million, or $0.53 per fully diluted share, compared to $12.8 million, or $0.45 per share, in the third quarter of 2006. Commenting on the quarter, Dr. Keh-Shew Lu, President and CEO of Diodes Incorporated, said: "During the fourth quarter and for the full fiscal year 2006 Diodes delivered an outstanding performance as we continued to outpace the overall market and take market share in the discrete and the analog space. Overall we feel our record performance for the quarter and the year reflects our customers' acceptance of our broader product line and reaffirms our confidence in the soundness of our current strategic direction. Looking forward to 2007, we expect to continue to build on our strengths as we benefit from synergies between our discrete and adjacent analog segments and continue to focus on customer centric innovation and efficient manufacturing to deliver profitable growth." In the fourth quarter the Company issued $230 million in aggregate principal convertible senior notes due on October 1, 2026. The notes pay interest semiannually at a rate of 2.25% per annum and are convertible, at the Company's option, into cash and/or shares of common stock. The Company intends to use the net proceeds from this offering for working capital and other general corporate purposes, including acquisitions. End-Markets "In the fourth quarter we saw strong demand from the computer and consumer electronics segments with increased demand in the telecom segment. We continue to see good acceptance from our customers for our extended analog and discrete product lines and remain excited about the attractive cross selling and product development opportunities going into 2007. In the fourth quarter we outperformed the overall market and took share in a broad range of end equipment categories, including digital audio players, set-top boxes, LCD monitors and notebook computers. During the quarter, computers and consumer electronics made up 37% and 36% of total sales respectively, with telecom contributing 15%," commented Mark King, Sr. Vice President of Sales and Marketing. "Asia grew 5% sequentially and contributed 75% of our fourth quarter sales, supported by the consumer and computer segments. We have integrated the recently acquired APD product line into our sales channels and expect to see significant opportunities in the Asia power management market. North America and Europe were down sequentially due to seasonal downturn in some key OEM accounts and distributor point-of-purchase. Sales in Europe contributed 2.7% for the quarter and 3.3% for the year as sales into this important market more than doubled from last year as we continued to make progress with new design wins, contracts and initial orders, including our first omnipolar hall sensor products in an industrial application," said Mr. King. Design Wins and New Products "Design activity was again strong in the fourth quarter with multiple wins at over 60 accounts. We experienced good traction on commodity analog design wins in North America and Europe including LDO and switching regulators in motherboards, set-top boxes and game consoles and in Asia for LCD panels, printers and GPS systems," Mr. King commented. "On the discrete side we continued to see strong interest on our DFN leadless packages, PowerDI and array platforms for digital audio devices, mobile handsets, power converters and DSL modems." During the quarter the Company made substantial progress on the integration of the APD SBR(R) patented wafer technology acquisition with approximately 75% of the product line qualified and converted to the Diodes, Inc. brand. In addition, subsequent to the end of the quarter, Diodes introduced the SBR(R) PowerDITM123 product family; a technological breakthrough achieved in a first of several planned SBR(R) product introductions representing performance unobtainable with traditional Schottky technology. Based on the positive feedback from customers, management expects design activity on this product line to be strong in the coming quarters. Sales of new products reached a record 33.4% of total sales, compared to 15.6% a year ago, and 29.7% last quarter, and this growth includes the contribution of our analog line. New product revenue was driven by products in sub-miniature array, QFN, PowerDITM, and Schottky platforms on the discrete side, as well as the analog product lines. Additional Financial Highlights Gross profit for the fourth quarter of 2006 increased 47.4% compared to the same period last year to $31.5 million, or 33.4% of revenue. This increase in gross profit was helped by improved product mix and increased sales volume. For the fiscal year 2006, gross profit was up 53.1% to $113.9 million, with gross margin coming in at 33.2%. For the quarter, SG&A expenses were $13.1 million or 13.8% of revenue ($11.8 million or 12.5% without $1.3 million in non-cash, share-based FAS123(R) compensation), versus $8.8 million, or 14.4% of revenue, in the fourth quarter last year (see table for a reconciliation of the impact of share-based compensation expense to reported results). For the year, SG&A expenses were $47.9 million, or 14.0% of revenues ($42.6 million or 12.4% without $5.4 million in non-cash, share-based FAS123(R) compensation), compared to 14.1% for 2005. Investment in research and development grew to $2.3 million, or 2.5% of revenue, compared to $1.0 million, or 1.7% of sales, in the fourth quarter of 2005. For the year, investment in research and development increased 124% to $8.3 million from $3.7 million. Capital expenditures for the quarter were $12.7 million and $45.1 million the year. For 2006, excluding the $6 million Taiwan building purchase, capital expenditures were at approximately 11.4% of revenue, in-line with our 10-12% full-year guidance. Depreciation expense for the quarter was $7.0 million and $21.1 million for the year. At December 31, 2006, Diodes had approximately $340 million in total cash and short-term investments, $396 million in working capital, $237 million in long-term debt, and unused and available credit facilities of $50.9 million. For the fiscal year 2006, shareholder equity increased 30.4% to $294 million. In addition, for the fourth quarter and year, cash flow generated from operating activities was $23.5 million and $70.0 million, representing increases of 77.8% and 38.5%, respectively, over the comparable periods last year. Business Outlook "Coming off our 7th consecutive quarter of record revenue, albeit at a more modest 2% sequential growth, and with a book-to-bill ratio below par, we currently expect to see first quarter 2007 revenue in the $90 to $94 million range, with comparable gross margins. Moving forward we will continue to leverage our core competencies in manufacturing excellence and customer centric innovation to expand our market share in the discrete and standard analog markets targeting growth above the overall market, and as we internalize packaging of our analog products, and continue to introduce new products, we expect to see gradual expansion in our gross margins," stated Dr. Lu. "As we enter 2007 we remain excited with the opportunities ahead, and we are confident our successful track record of execution and our current strategic position will allow us to continue to outpace the overall industry." Conference Call Diodes Incorporated will hold a conference call on Tuesday, February 6th, 2007 at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss its fourth quarter and full year 2006 results. This conference call will be broadcast live over the Internet and can be accessed by all interested parties on the investor section of Diodes' website at www.diodes.com. To listen to the live call, please go to the Investor section of Diodes website and click on the Conference Call link at least fifteen 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 60 days. About Diodes Incorporated Diodes Incorporated (NasdaqGS: DIOD), an S&P SmallCap 600 Index company, is a leading manufacturer and supplier of high-quality discrete and analog semiconductor products, primarily to the communications, computing, industrial, consumer electronics and automotive markets. The Company has its Corporate sales, marketing, engineering and logistics headquarters in Southern California; Design Centers in Dallas and San Jose; wafer fabrication plant in Missouri; two manufacturing plants in Shanghai; fabless analog IC plant in Hsinchu Science Park, Taiwan; engineering, sales, warehouse and logistics offices in Taipei and Hong Kong, and sales and support offices throughout the world. With its recent asset acquisition of APD Semiconductor, a privately held U.S.-based fabless discrete semiconductor company, Diodes acquired proprietary SBR(R) technology. Diodes' product focus is on subminiature surface-mount discrete devices, analog power management ICs and Hall-effect sensors all of which are widely used in end-user equipment such as TV/Satellite set top boxes, portable DVD players, datacom devices, ADSL modems, power supplies, medical devices, wireless notebooks, flat panel displays, digital cameras, digital audio players, mobile handsets, DC to DC conversion, Wireless 802.11 LAN access points, brushless DC motor fans, and automotive applications. For further information, please visit our website at 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. Potential risks and uncertainties include, but are not limited to, such factors as the integration of ADP within Diodes existing operations, the Company's ability to successfully make additional acquisitions, fluctuations in product demand, the introduction of new products, the Company's ability to maintain customer and vendor relationships, technological advancements, impact of competitive products and pricing, growth in targeted markets, successful integration of acquired companies and/or assets, risks of foreign operations, availability of tax credits, and other information detailed from time to time in the Company's filings with the United States Securities and Exchange Commission. Source: Diodes Incorporated CONTACT: Carl Wertz, Chief Financial Officer, Diodes Incorporated (805) 446-4800 e-mail: carl_wertz@diodes.com or Crocker Coulson, President, CCG Investor Relations, (310) 231-8600, Ext. 103, e-mail: crocker.coulson@ccgir.com -------------------------------------------------------------------------------- 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. CONSOLIDATED CONDENSED INCOME STATEMENT and BALANCE SHEET FOLLOWS DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Twelve Months Ended December 31, December 31, ------------------------------- ------------------------------- 2005 2006 2005 2006 ------------- ------------- ------------- ------------- Net sales $ 61,367,000 $ 94,432,000 $ 214,765,000 $ 343,308,000 Cost of goods sold (1) 39,960,000 62,883,000 140,388,000 229,416,000 ------------- ------------- ------------- ------------- Gross profit 21,407,000 31,549,000 74,377,000 113,892,000 Selling and general administrative 8,816,000 13,063,000 30,285,000 47,945,000 expenses (2) Research and development expenses (3) 1,025,000 2,332,000 3,713,000 8,317,000 Loss (gain) on disposal of fixed assets 3,000 -- (102,000) 152,000 ------------- ------------- ------------- ------------- Total operating expenses 9,844,000 15,395,000 33,896,000 56,414,000 Income from operations 11,563,000 16,154,000 40,481,000 57,478,000 Other income (expense) Interest income 752,000 3,891,000 819,000 6,699,000 Interest expense (132,000) (1,218,000) (598,000) (1,582,000) Other 199,000 225,000 406,000 (1,474,000) ------------- ------------- ------------- ------------- 819,000 2,898,000 627,000 3,643,000 Income before income taxes and minority interest 12,382,000 19,052,000 41,108,000 61,121,000 Income tax provision (4) (2,049,000) (3,911,000) (6,685,000) (11,689,000) ------------- ------------- ------------- ------------- Income before minority interest 10,333,000 15,141,000 34,423,000 49,432,000 Minority interest in joint veture earnings (292,000) (466,000) (1,094,000) (1,289,000) ------------- ------------- ------------- ------------- Net income $ 10,041,000 $ 14,675,000 $ 33,329,000 $ 48,143,000 ============= ============= ============= ============= Earnings per share Basic $ 0.40 $ 0.57 $ 1.44 $ 1.88 Diluted $ 0.36 $ 0.53 $ 1.29 $ 1.74 ============= ============= ============= ============= Number of shares used in computation Basic 25,169,874 25,949,677 23,168,180 25,628,419 Diluted (5) 28,024,223 27,886,235 25,894,384 27,667,755 ============= ============= ============= =============
DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATED RECONCILIATION OF NET INCOME TO PRO FORMA NET INCOME (Unaudited) Pro forma consolidated statements of income are presented because we use it as an additional measure of our operating performance. Pro forma net income and pro forma net income per share should not be considered as alternatives to net income, earnings per share or other measures of consolidated operations and cash flow data prepared in accordance with accounting principles generally accepted in the United States of America, as indicators of our operating performance, or as alternatives to cash flow as a measure of liquidity. Pro forma consolidated statements of income are intended to present our operating results, excluding items described below, for the periods presented.
Pro forma net income Three Months Ended Twelve Months Ended and earnings per share reconciliation December 31, December 31, ---------------------------- ---------------------------- 2005 2006 2005 2006 ----------- ----------- ----------- ----------- GAAP net income $10,041,000 $14,675,000 $33,329,000 $48,143,000 =========== =========== =========== =========== Pro forma adjustments: Stock option expense included in cost of goods sold: -- 70,000 -- 469,000 Stock option expense included in selling and general administrative expenses: -- 1,283,000 -- 5,394,000 Stock option expense included in research and development expenses: -- 164,000 -- 603,000 Total stock option expense -- 1,517,000 -- 6,466,000 Income tax benefit related to stock option expense -- 406,000 -- 1,170,000 Pro forma net income $10,041,000 $15,786,000 $33,329,000 $53,439,000 =========== =========== =========== =========== Diluted shares used in computing Pro forma earnings per share 28,024,223 27,886,235 25,894,384 27,667,755 Incremental shares considered to be outstanding: -- 533,951 -- 632,670 ----------- ----------- ----------- ----------- Adjusted diluted shares used in computing Pro forma earnings per share 28,024,223 28,420,186 25,894,384 28,300,425 =========== =========== =========== =========== Pro forma earnings per share Basic $ 0.40 $ 0.61 $ 1.44 $ 2.09 Diluted $ 0.36 $ 0.56 $ 1.29 $ 1.89 =========== =========== =========== ===========
1) For the quarter and twelve months ended December 31, 2006, includes $70,000 and $469,000 of stock option expense, respectively. 2) For the quarter and twelve months ended December 31, 2006, includes $1,283,000 and $5,394,000 of stock option expense, respectively. 3) For the quarter and twelve months ended December 31, 2006, includes $164,000 and $603,000 of stock option expense, respectively. 4) For the quarter and twelve months ended December 31, 2006, includes $406,000 and $1,170,000 of income tax benefit related to stock option expense, respectively. 5) For the quarter and twelve months ended December 31, 2006, 533,951 and 632,670 incremental shares are considered to be outstanding under FAS123R, respectively. DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATED RECONCILIATION OF NET INCOME TO EBITDA (Unaudited) EBITDA represents earnings before net interest expense, income tax provision, depreciation and amortization. Our management believes EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in evaluating companies in our industry. In addition, our management believes that EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry because the calculation of EBITDA generally eliminates the effects of financing and income taxes and the accounting effects of capital spending, which items may vary for different companies for reasons unrelated to overall operating performance. As a result, our management uses EBITDA as a measure to evaluate the performance of our business. However, EBITDA is not a recognized measurement under generally accepted accounting principles, or 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 of other companies. Furthermore, EBITDA is not intended to be a measure of free cash flow for our management's discretionary use, as it does not consider certain cash requirements such as a tax and debt service payments. The following table provides a reconciliation of Net Income to EBITDA:
Three Months Ended December 31, ----------------------------- 2005 2006 ----------- ----------- Net Income 10,041,000 14,675,000 Plus: Interest expense, net (620,000) (2,673,000) Income tax provision 2,049,000 3,911,000 Depreciation and amortization 4,341,000 7,012,000 ----------- ----------- EBITDA 15,811,000 22,925,000 ----------- ----------- Twelve Months Ended December 31, ----------------------------- 2005 2006 ----------- ----------- Net Income 33,329,000 48,143,000 Plus: Interest expense, net (221,000) (5,117,000) Income tax provision 6,685,000 11,689,000 Depreciation and amortization 16,228,000 21,065,000 ----------- ----------- EBITDA 56,021,000 75,780,000 ----------- -----------
DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEET ASSETS
December 31, December 31, 2005 2006 ------------- ------------- CURRENT ASSETS (unaudited) Cash and cash equivalents $ 73,288,000 $ 48,888,000 Short-term investments 40,348,000 291,008,000 ------------- ------------- Total cash and short-term investments 113,636,000 339,896,000 Accounts receivable Customers 48,348,000 72,175,000 Related parties 6,804,000 6,147,000 ------------- ------------- 55,152,000 78,322,000 Less: Allowance for doubtful receivables (534,000) (617,000) ------------- ------------- 54,618,000 77,705,000 Inventories 24,611,000 48,702,000 Deferred income taxes, current 2,541,000 4,426,000 Prepaid expenses and other current assets 5,326,000 8,393,000 Total current assets 200,732,000 479,122,000 PROPERTY, PLANT AND EQUIPMENT, at cost, net of accumulated depreciation and amortization 68,930,000 95,469,000 DEFERRED INCOME TAXES, non current 8,466,000 5,823,000 OTHER ASSETS Equity investment 5,872,000 -- Intangible assets 9,169,000 Goodwill 5,090,000 24,635,000 Other 425,000 6,697,000 ------------- ------------- TOTAL ASSETS $ 289,515,000 $ 620,915,000 ============= =============
DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEET LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, December 31, 2005 2006 ------------- ------------- (unaudited) CURRENT LIABILITIES Line of credit $ 3,000,000 $ -- Accounts payable Trade 18,619,000 40,029,000 Related parties 7,921,000 12,120,000 Accrued liabilities 18,312,000 24,967,000 Income tax payable 1,470,000 3,433,000 Long-term debt, current portion 4,621,000 2,802,000 Capital lease obligations, current portion 138,000 141,000 ------------- ------------- Total current liabilities 54,081,000 83,492,000 LONG-TERM DEBT, net of current portion 2.25% convertible senior notes due 2026 -- 230,000,000 Other 4,865,000 7,115,000 CAPITAL LEASE OBLIGATIONS, net of current portion 1,618,000 1,477,000 OTHER LONG-TERM LIABILITIES -- 101,000 MINORITY INTEREST IN JOINT VENTURE 3,477,000 4,787,000 ------------- ------------- Total liabilities 64,041,000 326,972,000 STOCKHOLDERS' EQUITY Preferred stock - par value $1.00 per share; 1,000,000 shares authorized; no shares issued and outstanding -- -- Common stock - par value $0.66 2/3 per share; 70,000,000 shares authorized; 25,258,119 and 25,961,267 shares issued at December 31, 2005 and December 31, 2006, respectively 16,839,000 17,308,000 Additional paid-in capital 94,664,000 113,225,000 Retained earnings 114,659,000 162,802,000 Accumulated other comprehensive gain (loss) (688,000) 608,000 ------------- ------------- Total stockholders' equity 225,474,000 293,943,000 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 289,515,000 620,915,000 ============= =============