Market Overview

Diodes Incorporated Reports Second Quarter 2018 Financial Results

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Market Share Gains and Increasing Profits Result in Record Revenue,
Gross Profit, EBITDA and Net Income with Strong Revenue and
Profitability Growth Expected to Continue in the Third Quarter

Diodes Incorporated (NASDAQ:DIOD), a leading global manufacturer and
supplier of high-quality application specific standard products within
the broad discrete, logic, analog and mixed-signal semiconductor
markets, today reported its financial results for the second quarter
ended June 30, 2018.

Second Quarter Highlights

  • Revenue was a record $304.1 million, an increase of 15.1 percent from
    the $264.2 million in the second quarter 2017 and an increase of 10.8
    percent from the $274.5 million in the first quarter 2018;
  • GAAP gross profit was a record $107.3 million, compared to $90.1
    million in the second quarter 2017 and $98.6 million in the first
    quarter 2018;
  • GAAP gross profit margin was 35.3 percent, compared to 34.1 percent in
    the second quarter 2017 and 35.9 percent in the first quarter 2018;
  • GAAP net income was a record $25.1 million, or $0.49 per diluted
    share, compared to GAAP net income of $13.2 million, or $0.26 per
    diluted share, in the second quarter 2017 and GAAP net income of $18.5
    million, or $0.37 per share, in the first quarter 2018;
  • Non-GAAP adjusted net income was a record $29.3 million, or $0.58 per
    diluted share, compared to $17.8 million, or $0.36 per diluted share,
    in the second quarter 2017 and $24.2 million, or $0.48 per diluted
    share, in the first quarter 2018;
  • Excluding $3.8 million, net of tax, of non-cash share-based
    compensation expense, both GAAP and non-GAAP earnings per share would
    have increased by $0.07 per diluted share;
  • EBITDA was a record $64.5 million, or 21.2 percent of revenue,
    compared to $45.8 million, or 17.3 percent of revenue, in the second
    quarter 2017 and $54.2 million, or 19.7 percent of revenue, in the
    first quarter 2018; and
  • Achieved cash flow from operations of $34.4 million and $13.1 million
    free cash flow, including $21.4 million of capital expenditures. Net
    cash flow was a negative $30.1 million, which includes the pay down of
    $36.1 million of long-term debt.

Commenting on the results, Dr. Keh-Shew Lu, president and chief
executive officer, stated, "Diodes achieved a number of key milestones
in the second quarter, reaching record levels across multiple financial
metrics driven by continued revenue growth, market share gains and
further traction on our Pericom products. Our exceptionally strong
performance reflects record sales in both our automotive and industrial
end markets, which contributed to new record revenue levels being
achieved across all regions. Our automotive revenue was up 50 percent
year-over-year, and our industrial revenue at 27 percent of total
revenue was the first time industrial was our largest representative end
market.

"Additionally, through revenue growth, we continue to decrease operating
expenses as a percentage of revenue, also contributing to our
achievement of record EBITDA and record non-GAAP earnings per share in
the quarter. In fact, EBITDA increased over 40 percent and non-GAAP net
income increased over 60 percent as compared to the prior year period on
revenue growth of 15 percent, further demonstrating the significant
leverage in our operating model. As a result, we generated strong cash
flow that enabled us to further pay-down our long-term debt.

"Also highlighting these solid results is our expectation for continued
growth in the third quarter, once again setting new records across our
business. Our strong results and growth this year has positioned us to
potentially achieve our most profitable year in the Company's history."

Second Quarter 2018

Revenue for second quarter 2018 was $304.1 million, an increase of 15.1
percent from $264.2 million in second quarter 2017 and an increase of
10.8 percent from the $274.5 million in the first quarter 2018.

GAAP gross profit for the second quarter 2018 was a record $107.3
million, or 35.3 percent of revenue, compared to the second quarter 2017
of $90.1 million, or 34.1 percent of revenue, and first quarter 2018 of
$98.6 million, or 35.9 percent of revenue. The 120 basis point
year-over-year increase in gross margin was due primarily to favorable
product mix, increased contribution from the Pericom products as well as
improved capacity utilization.

GAAP operating expenses for second quarter 2018 were $69.4 million, or
22.8 percent of revenue, and $64.2 million, or 21.1 percent of revenue,
on a non-GAAP basis, which excluded $4.7 million of amortization of
acquisition-related intangible asset expenses and $0.5 million of
restructuring charges associated with the shutdown and relocation of the
Company's wafer fabrication facility located in Lee's Summit, MO
("KFAB"). GAAP operating expenses in the second quarter 2017 were $66.3
million, or 25.1 percent of revenue, and in the first quarter 2018 were
$71.7 million, or 26.1 percent of revenue.

Second quarter 2018 GAAP net income was a record $25.1 million, or $0.49
per diluted share, compared to net income of $13.2 million, or $0.26 per
diluted share, in second quarter 2017 and net income of $18.5 million,
or $0.37 per share, in first quarter 2018.

Second quarter 2018 non-GAAP adjusted net income was a record $29.3
million, or $0.58 per diluted share, which excluded, net of tax, $3.8
million of non-cash acquisition-related intangible asset amortization
costs and $0.4 million of restructuring expenses. This compares to
non-GAAP adjusted net income of $17.8 million, or $0.36 per diluted
share, in the second quarter 2017 and $24.2 million, or $0.48 per
diluted share, in the first quarter 2018.

The following is an unaudited 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, 2018
GAAP net income $ 25,068
 
GAAP diluted income per share $ 0.49
 
Adjustments to reconcile net income to non-GAAP net income:
 
M&A
 
Pericom 2,604
 
Amortization of acquisition-related intangible assets 2,604
 
KFAB 447
 
Restructuring 447
 
Others 1,228
 
Amortization of acquisition-related intangible assets 1,228
 
Non-GAAP net income $ 29,347
 
Non-GAAP diluted earnings per share $ 0.58
 

Note: Throughout this release, we refer to "net income attributable to
common stockholders" as "net income."

(See the reconciliation tables of GAAP net income to non-GAAP adjusted
net income near the end of this release for further details.)

Included in second quarter 2018 GAAP net income and non-GAAP adjusted
net income was approximately $3.8 million, net of tax, of non-cash
share-based compensation expense. Excluding share-based compensation
expense, both GAAP earnings per share ("EPS") and non-GAAP adjusted EPS
would have increased by $0.07 per diluted share for second quarter 2018,
$0.07 for second quarter 2017 and $0.10 for first quarter 2018.

EBITDA (a non-GAAP measure), which represents earnings before net
interest expense, income tax, depreciation and amortization, in the
second quarter 2018 was a record $64.5 million, or 21.1 percent of
revenue, compared to $45.8 million, or 17.3 percent of revenue, in the
second quarter 2017 and $54.2 million, or 19.7 percent of revenue in the
first quarter 2018. Year-to-date EBITDA was $118.6 million, which is an
increase of over 59 percent from the same period in 2017. For a
reconciliation of GAAP net income to EBITDA, see the table near the end
of this release for further details.

For second quarter 2018, net cash provided by operating activities was
$34.4 million. Net cash flow was a negative $30.1 million, including the
$36.1 million long-term debt pay down. Free cash flow (a non-GAAP
measure) was $13.1 million, which includes $21.4 million of capital
expenditures.

Balance Sheet

As of June 30, 2018, the Company had approximately $159.6 million in
cash, cash equivalents and short-term investments, long-term debt
(including the current portion) totaled approximately $185.8 million,
and working capital was approximately $380.8 million.

The results announced today are preliminary, as they are subject to the
Company finalizing its closing procedures and customary quarterly review
by the Company's independent registered public accounting firm. As such,
these results are subject to revision until the Company files its Form
10-Q for the quarter ending June 30, 2018.

Business Outlook

Dr. Lu concluded, "After growing 10.8% in the second quarter of 2018,
for the third quarter of 2018, we expect continued strong growth with
revenue increasing to a range between $313 million and $329 million, or
up 2.9 to 8.2 percent sequentially. At the midpoint, this represents a
12.5 percent growth versus third quarter 2017. We expect GAAP gross
margin to be 35.8 percent, plus or minus 1 percent. Non-GAAP operating
expenses, which are GAAP operating expenses adjusted for amortization of
acquisition-related intangible assets, are expected to be approximately
21.0 percent of revenue, plus or minus 1 percent. We expect interest
expense to be approximately $2.5 million. Our income tax rate is
expected to be 29 percent, plus or minus 3 percent, and shares used to
calculate diluted EPS for the third quarter are anticipated to be
approximately 51.4 million." Please note that purchase accounting
adjustments of $4.0 million, after tax, for Pericom and previous
acquisitions are not included in these non-GAAP estimates.

Conference Call

Diodes will host a conference call on Tuesday, August 7, 2018, at 4:00
p.m. Central Time (5:00 p.m. Eastern Time) to discuss its second quarter
2018 financial results. Investors and analysts may join the conference
call by dialing 1-855-232-8957 and providing the confirmation
code 7785459. International callers may join the teleconference
by dialing 1-315-625-6979 and entering 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
Aug. 14, 2018 at midnight Central Time. The replay number is
1-855-859-2056 with a pass code of 7785459. International callers should
dial 1-404-537-3406 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 90 days.

About Diodes Inc.

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, analog, and mixed-signal semiconductor
markets. Diodes serves the consumer electronics, computing,
communications, industrial, and automotive markets. Diodes' products
include diodes, rectifiers, transistors, MOSFETs, protection devices,
function-specific arrays, single gate logic devices, 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 and Americas' sales office are located in Plano, Texas and
Milpitas, California. Design, marketing, and engineering centers are
located in Plano; Milpitas; Taipei, Taiwan; Taoyuan City, Taiwan; Zhubei
City, Taiwan; Manchester, England; and Neuhaus, Germany. Diodes' wafer
fabrication facilities are located in Manchester and Shanghai, China.
Diodes has assembly and test facilities located in Neuhaus, Shanghai,
Jinan, Chengdu, and Yangzhou, China. Additional engineering, sales,
warehouse, and logistics offices are located in Taipei; Hong Kong;
Manchester; Shanghai; Shenzhen, China; Seongnam-si, South Korea; and
Munich, Germany, with support offices throughout the world.

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 containing forward-looking words such as "expect,"
"anticipate," "sets the stage," "continuing," "working diligently to,"
"position the company for," "aim," "estimate," and variations thereof,
including without limitation statements, whether direct or implied,
regarding expectations of revenue growth, market share gains, increase
in gross margin and increase in gross profits in 2018 and beyond; that
for the third quarter of 2018, we expect strong growth and revenue to
range between $313 million and $329 million, or up 2.9 to 8.2 percent
sequentially; expect GAAP gross margin to be 35.5 percent, plus or minus
1 percent; non-GAAP operating expenses, which are GAAP operating
expenses adjusted for amortization of acquisition-related intangible
assets, are expected to be approximately 21 percent of revenue, plus or
minus 1 percent; expect net interest expense to be approximately $2.5
million; expect tax rate to be 29 percent, plus or minus 3 percent;
shares used to calculate diluted EPS for the third quarter are
anticipated to be approximately 51.4 million; purchase accounting
adjustments for Pericom and previous acquisitions of $4.0 million after
tax are not included in these non-GAAP estimates; our expectation that
we may be positioned to have our most profitable year in the Company's
history in 2018; and other statements identified by words such as
"estimates," "expects," "projects," "plans," "will," and similar
expressions. Potential risks and uncertainties include, but are not
limited to, such factors as: the risk that such expectations may not be
met: the risk that the expected benefits of acquisitions may not be
realized or that integration of acquired businesses may not continue as
rapidly as we anticipate; 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; the
risk that we may not be able to increase our automotive industrial, or
other revenue and market share; risks of domestic and foreign
operations, including excessive operating costs, labor shortages, higher
tax rates, and our joint venture prospects; the risk that we may not
continue our share repurchase program; the risks of cyclical downturns
in the semiconductor industry and of changes in end-market demand or
product mix that may affect gross margin or render inventory obsolete;
the risk of unfavorable currency exchange rates; the risk that our
future outlook or guidance may be incorrect; the risks of global
economic weakness or instability in global financial markets; the risks
of trade restrictions, tariffs, or embargoes; the risk of breaches of
our information technology systems; and other information, including the
"Risk Factors" 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,
2018     2017 2018   2017
NET SALES $ 304,085 $ 264,224 $ 578,597 $ 500,527
 
COST OF GOODS SOLD   196,817     174,085     372,734     336,477  
 
Gross profit 107,268 90,139 205,863 164,050
 
OPERATING EXPENSES
Selling, general and administrative 42,153 39,697 89,303 79,387
Research and development 22,050 19,796 42,250 37,836
Amortization of acquisition-related intangible assets 4,678 4,646 9,445 9,404
Restructuring 526 1,838 206 4,069
Other operating expenses   17     334     (125 )   169  
Total operating expenses   69,424     66,311     141,079     130,865  
 
Income from operations 37,844 23,828 64,784 33,185
 
OTHER INCOME (EXPENSES)
Interest income 443 308 957 603
Interest expense (2,544 ) (3,447 ) (5,301 ) (6,932 )
Foreign currency gain (loss), net 300 (1,628 ) (2,729 ) (5,422 )
Others   377     802     5,012     531  
Total other expenses (1,424 ) (3,965 ) (2,061 ) (11,220 )
 
Income before income taxes and noncontrolling interest 36,420 19,863 62,723 21,965
 
INCOME TAX PROVISION   10,753     6,039     18,536     6,599  
 
NET INCOME 25,667 13,824 44,187 15,366
 
Less: NET INCOME attributable to noncontrolling interest   (599 )   (645 )   (593 )   (970 )
 
NET INCOME attributable to common stockholders $ 25,068   $ 13,179   $ 43,594   $ 14,396  
 
EARNINGS PER SHARE attributable to common stockholders
Basic $ 0.50   $ 0.27   $ 0.88   $ 0.30  
Diluted $ 0.49   $ 0.26   $ 0.86   $ 0.29  
 
Number of shares used in computation
Basic   49,680     48,518     49,509     48,418  
Diluted   50,792     49,944     50,727     49,807  
 

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, 2018:

 
COGS

Operating
Expenses

Income Tax
Provision

Net Income
 
Per-GAAP $ 25,068
 
Earnings per share (Per-GAAP)
Diluted $ 0.49
 
Adjustments to reconcile net income to non-GAAP net income:
 
M&A
 
Pericom 2,604
 
Amortization of acquisition-related intangible assets 3,175 (571 )
 
KFAB 447
 
Restructuring 526 (79 )
 
Others 1,228
 
Amortization of acquisition-related intangible assets 1,503 (275 )
 
Non-GAAP $ 29,347
 
Diluted shares used in computing earnings per share   50,792
 
Non-GAAP earnings per share
Diluted $ 0.58
 

Note: Included in GAAP and non-GAAP net income was approximately $3.8
million, net of tax, non-cash share-based compensation expense.
Excluding share-based compensation expense, both GAAP and non-GAAP
diluted earnings per share would have improved by $0.07 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, 2017:

 
COGS

Operating
Expenses

Income Tax
Provision

Net Income
 
Per-GAAP $ 13,179
 
Earnings per share (Per-GAAP)
Diluted $ 0.26
 
Adjustments to reconcile net income to non-GAAP net income:
 
M&A
 
Pericom 2,599
 
Retention costs 159 (56 )
 
Amortization of acquisition-related intangible assets 3,044 (548 )
 
Others 1,260
 
Amortization of acquisition-related intangible assets 1,602 (342 )
 
KFAB - Restructuring (490 ) 1,733 (435 ) 808
 
Non-GAAP $ 17,846
 
Diluted shares used in computing earnings per share   49,944
 
Non-GAAP earnings per share
Diluted $ 0.36
 

Note: Included in GAAP and non-GAAP adjusted net income was
approximately $4.8 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 $0.07 per share.

               
 
DIODES INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME

(in thousands, except per share data)

(unaudited)

 

For the six months ended June 30, 2018:

 
COGS

Operating
Expenses

Income Tax
Provision

Net Income
 
Per-GAAP $ 43,594
 
Earnings per share (Per-GAAP)
Diluted $ 0.86
 
Adjustments to reconcile net income to non-GAAP net income:
 
M&A
 
Pericom 5,178
 
Amortization of acquisition-related intangible assets 6,314 (1,136 )
 
KFAB 194
 
Restructuring 206 (12 )
 
Others 4,570
 
Amortization of acquisition-related intangible assets 3,131 (575 )
 
Officer retirement 2,550 (536 )
 
Non-GAAP $ 53,536
 
Diluted shares used in computing earnings per share   50,727
 
Non-GAAP earnings per share
Diluted $ 1.06
 

Note: Included in GAAP and non-GAAP adjusted net income was
approximately $7.4 million, net of tax, non-cash share-based
compensation expense, excluding officer severance. Excluding share-based
compensation expense, both GAAP and non-GAAP adjusted diluted earnings
per share would have improved by $0.15 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, 2017:

 

Operating
Expenses

Income Tax
Provision

Net Income
 
Per-GAAP $ 14,396
 
Earnings per share (Per-GAAP)
Diluted $ 0.29
 
Adjustments to reconcile net income to non-GAAP net income:
 
M&A
 
Pericom 5,222
 
Retention costs 353 (124 )
 
Amortization of acquisition-related intangible assets 6,089 (1,096 )
 
Others 2,614
 
Amortization of acquisition-related intangible assets 3,315 (701 )
 
KFAB - Restructuring 4,069 (1,424 ) 2,645
 
Non-GAAP $ 24,877
 
Diluted shares used in computing earnings per share   49,807
 
Non-GAAP earnings per share
Diluted $ 0.50
 

Note: Included in GAAP and non-GAAP adjusted net income was
approximately $9.0 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 $0.12 per share.

ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER
SHARE

The Company adjusts United States generally accepted accounting
principles ("GAAP") net income and earnings per share attributable to
common stockholders to provide investors a better depiction of the
Company's operating results, allow for a more accurate comparison
between the Company's current and historical operating results and
provide a baseline for more informed modeling of future earnings. The
Company makes adjustments for inventory acquired, transaction costs,
retention costs, amortization of acquisition-related intangible assets
and restructuring costs. The Company also excludes these items to
evaluate the Company's operating performance, develop budgets, determine
incentive compensation awards and manage cash expenditure.
The 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 except for one-time non-cash items outside the
course of ordinary business, such as impairment of goodwill. 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
and provides a reconciliation of GAAP net income to non-GAAP adjusted
net income.

Detail of non-GAAP adjustments

Retention costs The Company
excluded costs related to employee retention in connection with the
Pericom acquisition. 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 are
being excluded. The Company believes the exclusion of retention costs
related to acquisitions 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.

Amortization of acquisition-related intangible
assets
The Company excluded this item, including
amortization of developed technologies and customer relationships. The
fair value of the acquisition-related intangible assets, which was
recognized through purchase accounting, is amortized using straight-line
methods which approximate the proportion of future cash flows estimated
to be generated each period over the estimated useful life of the
applicable assets. The Company believes that exclusion of this item is
appropriate because a significant portion of the purchase price for its
acquisitions was allocated to the intangible assets that have short
lives and exclusion of the amortization expense allows comparisons of
operating results that are consistent over time for both the Company's
newly acquired and long-held businesses. In addition, the Company
excluded this item because there is significant variability and
unpredictability among companies with respect to this expense.

KFAB restructuring The
Company has recorded restructuring charges related to the shutdown and
relocation of its wafer fabrication facility located in Lee's Summit, MO
("KFAB"). These restructuring charges are excluded from management's
assessment of the Company's operating performance. The Company believes
the exclusion of the restructuring charges provides investors an
enhanced view of the cost structure of the Company's operations and
facilitates comparisons with the results of other periods that may not
reflect such charges or may reflect different levels of such charges.

Officer Retirement The
Company has recorded increased expense related to the retirement of two
corporate officers. The officer retirement expense has been excluded
from management's assessment of the Company's current period operating
performance in order to facilitate comparisons with previously presented
periods that do not reflect such expense.

CASH FLOW ITEMS

Free cash flow (FCF) (Non-GAAP)

FCF for the second quarter of 2018 is a non-GAAP financial measure,
which is calculated by subtracting capital expenditures from cash flow
from operations. For the second quarter of 2018, FCF was a $13.1
million, which represents the cash and cash equivalents that we are able
to generate after taking into account cash outlays required to maintain
or expand property, plant and equipment. FCF is important because it
allows us to pursue opportunities to develop new products, make
acquisitions and reduce debt.

CONSOLIDATED RECONCILIATION OF NET INCOME TO
EBITDA

EBITDA represents earnings before net interest expense, income tax
provision, depreciation and amortization. Management believes EBITDA is
useful to investors because it is frequently used by securities
analysts, investors and other interested parties, such as financial
institutions in extending credit, in evaluating companies in our
industry and provides further clarity on our profitability. In addition,
management uses EBITDA, along with other GAAP and non-GAAP measures, in
evaluating our operating performance compared to that of other companies
in our industry. The calculation of EBITDA generally eliminates the
effects of financing, operating in different income tax jurisdictions,
and accounting effects of capital spending, including the impact of our
asset base, which can differ depending on the book value of assets and
the accounting methods used to compute depreciation and amortization
expense. EBITDA is not a recognized measurement under GAAP, and when
analyzing our operating performance, investors should use EBITDA in
addition to, and not as an alternative for, income from operations and
net income, each as determined in accordance with GAAP. Because not all
companies use identical calculations, our presentation of EBITDA may not
be comparable to similarly titled measures used by other companies. For
example, our EBITDA takes into account all net interest expense, income
tax provision, depreciation and amortization without taking into account
any amounts attributable to noncontrolling interest. Furthermore,
EBITDA is not intended to be a measure of free cash flow for
management's discretionary use, as it does not consider certain cash
requirements such as tax and debt service payments.

The following table provides a reconciliation of net income to EBITDA (in
thousands, unaudited):

    Three Months Ended       Six Months Ended
June 30, June 30,
2018     2017 2018     2017
 
Net income (per-GAAP) $ 25,068 $ 13,179 $ 43,594 $ 14,396
Plus:
Interest expense, net 2,101 3,139 4,344 6,329
Income tax provision 10,753 6,039 18,536 6,599
Depreciation and amortization   26,536   23,435   52,146   47,099
EBITDA (non-GAAP) $ 64,458 $ 45,792 $ 118,620 $ 74,423
 
       
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)

 
June 30, December 31,
2018 2017
(unaudited) (audited)
CURRENT ASSETS
Cash and cash equivalents $ 152,403 $ 203,820
Short-term investments 7,225 4,558
Accounts receivable, net 199,949 200,112
Inventories 222,786 216,506
Prepaid expenses and other   36,177     37,328  
Total current assets   618,540     662,324  
 
PROPERTY, PLANT AND EQUIPMENT, net 460,237 459,169
 
DEFERRED INCOME TAXES 39,811 40,580
 
OTHER ASSETS
Goodwill 132,829 134,187
Intangible assets, net 146,941 156,445
Other   38,414     35,968  

Total assets

$ 1,436,772   $ 1,488,673  
 
 
CURRENT LIABILITIES
Line of Credit $ 4,268 $ 1,008
Accounts payable 104,575 108,001
Accrued liabilities and other 88,225 99,301
Income tax payable 16,920 18,216
Current portion of long-term debt   23,717     20,636  
Total current liabilities   237,705     247,162  
 
LONG-TERM DEBT, net of current portion 162,121 247,492
DEFERRED TAX LIABILITIES - non current 26,322 25,176
OTHER LONG-TERM LIABILITIES   87,809     94,925  
Total liabilities   513,957     614,755  
 
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; 49,846,164 and 49,130,090, issued and outstanding at
June 30, 2018 and December 31, 2017, respectively
34,204 33,727
Additional paid-in capital 391,332 386,338
Retained earnings 576,280 532,687
Treasury stock, at cost, 1,457,206 and 1,457,206 shares held at June
30, 2018 and December 31,2017, respectively
(37,768 ) (37,768 )
Accumulated other comprehensive loss   (81,633 )   (83,480 )
Total Diodes Incorporated stockholders' equity 882,415 831,504
Noncontrolling interest   40,400     42,414  
Total equity   922,815     873,918  
Total liabilities and equity $ 1,436,772   $ 1,488,673  
 

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