Diodes Incorporated Reports Fourth Quarter and Fiscal 2020 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 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.

Acquisition related financing costs The Company excluded expenses associated with a new credit facility and refinance of existing debt to prepare for the acquisition of Lite-On Semiconductor. The Company believes the exclusion of the acquisition related financing costs provides investors with a more accurate reflection of costs likely to be incurred in the absence of an unusual event such as an acquisition and facilitates comparisons with the results of other periods that may not reflect such costs.

Acquisition related costs The Company excluded expenses associated with the acquisition of Lite-On Semiconductor, which consisted of advisory, legal and other professional and consulting fees. These costs were expensed as they were incurred and as services were received, and in 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 with a more accurate reflection of costs likely to be incurred in the absence of an unusual event such as an acquisition and facilitates comparisons with the results of other periods that may not reflect such costs.

Board member retirement costs – The Company excluded expenses in connection with the retirement of a member of the Company’s board of directors. The Company modified that director’s unvested RSU grants to vest upon his retirement. The shares subject to the modified grants will be released that board member as if they were vesting under the original vesting timeline. In connection with this modification the Company recorded additional expense of approximately $1.7 million.

Land sale inspection extension fee – The Company excluded receipt of inspection extension fees related to the sale of the land located in Plano, TX. This fee is paid by the land purchaser for the right to extend the sale close date, and the fee is not applied to the purchase price. The Company feels it is appropriate to exclude these fees since they don’t represent ongoing operating income and their exclusion will present investors with a more accurate indication of our continuing operations.

Gain on LSC investments – During December 2020, after being acquired by the Company, LSC recorded a market to market gain on an equity investment. The Company believes this gain is not reflective of the ongoing operations and exclusion of this gain provides investors an enhanced view of the Company’s operating results.

Restructuring costs – The Company has recorded restructuring charges related to the shutdown and relocation of one of our assembly and test facilities located in Chengdu, China, restructuring at other China sites, and restructuring of select European entities. 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.

Loss on impairment – The Company excluded impairment loss related to the intangible assets previously acquired from TFSS. The Company feels it is appropriate to exclude this impairment loss since they don’t represent ongoing operating expenses and will present investors with a more accurate indication of our continuing operations.

Gain on land sale – The Company excluded the gain related to the sale of the land located in Plano, TX during December 2019. The Company feels it is appropriate to exclude this gain since they don’t represent ongoing operating income and their exclusion will present investors with a more accurate indication of our continuing operations.

CASH FLOW ITEMS

Free cash flow (FCF) (Non-GAAP)

FCF for the fourth quarter of 2020 is a non-GAAP financial measure, which is calculated by subtracting capital expenditures from cash flow from operations. For the fourth quarter of 2020, FCF was $33.5 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

 

Twelve Months Ended

December 31, 2020

 

December 31, 2020

 

2020

 

 

2019

 

 

2020

 

 

2019

Net income (per-GAAP)

$

29,735

$

47,190

$

98,088

$

153,250

Plus:
Interest expense, net

 

3,532

 

1,321

 

10,596

 

5,704

Income tax provision

 

6,015

 

12,046

 

21,112

 

44,131

Depreciation and amortization

 

27,802

 

27,757

 

108,845

 

110,562

EBITDA (non-GAAP)

$

67,084

$

88,314

$

238,641

$

313,647

 

DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)

 

December 31,

December 31,

2020

2019

(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents

$

268,065

 

$

258,390

 

Restricted Cash

 

52,464

 

 

1,117

 

Short-term investments

 

6,142

 

 

4,825

 

Accounts receivable, net of allowances of $3,806 and $4,866 at
December 31, 2020 and 2019, respectively

 

320,061

 

 

260,322

 

Inventories

 

307,062

 

 

236,472

 

Prepaid expenses and other

 

70,193

 

 

48,833

 

Total current assets

 

1,023,987

 

 

809,959

 

Property, plant and equipment, net

 

530,815

 

 

469,574

 

Deferred income tax

 

57,841

 

 

17,516

 

Goodwill

 

158,331

 

 

141,318

 

Intangible assets, net

 

110,591

 

 

119,523

 

Other long-term assets

 

97,892

 

 

81,494

 

Total assets

$

1,979,457

 

$

1,639,384

 

 
Liabilities
Current liabilities:
Line of credit

$

140,563

 

$

13,342

 

Accounts payable

 

168,045

 

 

122,148

 

Accrued liabilities

 

160,117

 

 

100,571

 

Income tax payable

 

19,177

 

 

16,156

 

Current portion of long-term debt

 

21,860

 

 

33,105

 

Total current liabilities

 

509,762

 

 

285,322

 

Long-term debt, net of current portion

 

288,179

 

 

64,401

 

Deferred tax liabilities

 

34,598

 

 

16,333

 

Other long-term liabilities

 

130,795

 

 

120,545

 

Total liabilities

 

963,334

 

 

486,601

 

 
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; 44,276,194 and 51,206,969, issued and outstanding at December 31, 2020 and 2019, respectively

 

35,692

 

 

35,111

 

Additional paid-in capital

 

449,598

 

 

427,262

 

Retained earnings

 

888,046

 

 

789,958

 

Treasury stock, at cost, 9,259,858 shares held at December 31, 2020 and 1,457,206 shares held at December 31, 2019

 

(335,910

)

 

(37,768

)

Accumulated other comprehensive loss

 

(73,606

)

 

(108,139

)

Total stockholders' equity

 

963,820

 

 

1,106,424

 

Noncontrolling interest

 

52,303

 

 

46,359

 

Total equity

 

1,016,123

 

 

1,152,783

 

Total liabilities and stockholders' equity

$

1,979,457

 

$

1,639,384

 


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