Diodes Incorporated Reports Record Fourth Quarter and Fiscal 2021 Financial Results

Note: Included in GAAP and non-GAAP adjusted net income was approximately $18.6 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 $0.36 per share.

ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE

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 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.

LSC investments related – The Company excluded market to market adjustments and the associated tax on certain LSC equity investments. The Company has also excluded certain taxes related to integration and restructuring activities within certain Taiwan subsidiaries including LSC. The Company believes this is not reflective of the ongoing operations and exclusion of this provides investors an enhanced view of the Company’s operating results.

Gain on sale of manufacturing subsidiary – The Company excluded gains associated with the sale of a manufacturing subsidiary. The transaction closed in December 2021. The Company believes this is not reflective of the ongoing operations and exclusion of this 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.

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 to 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.

CASH FLOW ITEMS

Free cash flow (FCF) (Non-GAAP)

FCF for the fourth quarter of 2021 is a non-GAAP financial measure, which is calculated by subtracting capital expenditures from cash flow from operations. For the fourth quarter of 2021, FCF was $22.5 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 December 31

2021

 

2020

 

2021

 

2020

Net income (per-GAAP)

$

65,513

$

29,735

$

228,763

$

98,088

Plus:
Interest expense, net

 

405

 

3,532

 

4,352

 

10,596

Income tax provision

 

42,487

 

6,015

 

78,807

 

21,112

Depreciation and amortization

 

30,572

 

27,802

 

122,656

 

108,845

EBITDA (non-GAAP)

$

138,977

$

67,084

$

434,578

$

238,641

 

DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)

 
December 31 December 31,

2021

2020

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

$

363,599

 

$

268,065

 

Restricted Cash

 

3,219

 

 

52,464

 

Short-term investments

 

6,542

 

 

6,142

 

Accounts receivable, net of allowances of $4,324 and $3,806 at
December 31, 2021 and December 31, 2020, respectively

 

358,496

 

 

320,061

 

Inventories

 

348,622

 

 

307,062

 

Prepaid expenses and other

 

107,194

 

 

70,193

 

Total current assets

 

1,187,672

 

 

1,023,987

 

Property, plant and equipment, net

 

582,079

 

 

530,815

 

Deferred income tax

 

21,256

 

 

57,841

 

Goodwill

 

149,890

 

 

158,331

 

Intangible assets, net

 

94,550

 

 

110,591

 

Other long-term assets

 

159,048

 

 

97,892

 

Total assets

$

2,194,495

 

$

1,979,457

 

 
Liabilities
Current liabilities:
Line of credit

$

18,068

 

$

140,563

 

Accounts payable

 

221,254

 

 

168,045

 

Accrued liabilities

 

184,649

 

 

160,117

 

Income tax payable

 

29,682

 

 

19,177

 

Current portion of long-term debt

 

17,381

 

 

21,860

 

Total current liabilities

 

471,034

 

 

509,762

 

Long-term debt, net of current portion

 

265,574

 

 

288,179

 

Deferred tax liabilities

 

32,230

 

 

34,598

 

Other long-term liabilities

 

122,933

 

 

130,795

 

Total liabilities

 

891,771

 

 

963,334

 

 
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; 45,017,774 and 44,276,194, issued and outstanding at
December 31, 2021 and December 31, 2020, respectively

 

36,195

 

 

35,692

 

Additional paid-in capital

 

471,649

 

 

449,598

 

Retained earnings

 

1,116,809

 

 

888,046

 

Treasury stock, at cost, 9,272,513 shares held at December 31, 2021 and
9,259,858 shares held at December 31, 2020

 

(336,894

)

 

(335,910

)

Accumulated other comprehensive loss

 

(50,517

)

 

(73,606

)

Total stockholders' equity

 

1,237,242

 

 

963,820

 

Noncontrolling interest

 

65,482

 

 

52,303

 

Total equity

 

1,302,724

 

 

1,016,123

 

Total liabilities and stockholders' equity

$

2,194,495

 

$

1,979,457

 


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