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.
Gain on LSC investments -- 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.
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.
CASH FLOW ITEMS
Free cash flow (FCF) (Non-GAAP)
FCF for the third quarter of 2021 is a non-GAAP financial measure, which is calculated by subtracting capital expenditures from cash flow from operations. For the third quarter of 2021, FCF was $57.8 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 Nine Months Ended
September 30 September 30
---------------------- ---------------------
2021 2020 2021 2020
-------- ------- ------- -------
Net income
(per-GAAP) $ 68,424 $ 27,152 $ 163,250 $ 68,353
Plus:
Interest
expense, net 652 3,607 3,947 7,064
Income tax
provision 14,766 5,871 36,320 15,097
Depreciation and
amortization 30,682 26,699 92,084 81,043
-------- ------- ------- -------
EBITDA (non-GAAP) $ 114,524 $ 63,329 $ 295,601 $171,557
======== ======= ======= =======
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
September 30 December 31,
2021 2020
--------- ---------
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 280,543 $ 268,065
Restricted Cash 4,295 52,464
Short-term investments 7,364 6,142
Accounts receivable, net of
allowances of $3,887 and $3,806 at
September 30, 2021 and December 31,
2020, respectively 348,688 320,061
Inventories 322,088 307,062
Prepaid expenses and other 100,905 70,193
--------- ---------
Total current assets 1,063,883 1,023,987
Property, plant and equipment, net 540,520 530,815
Deferred income tax 52,436 57,841
Goodwill 149,592 158,331
Intangible assets, net 98,570 110,591
Other long-term assets 136,908 97,892
--------- ---------
Total assets $ 2,041,909 $ 1,979,457
========= =========
Liabilities
Current liabilities:
Line of credit $ 15,690 $ 140,563
Accounts payable 195,098 168,045
Accrued liabilities 179,908 160,117
Income tax payable 35,525 19,177
Current portion of long-term debt 18,404 21,860
--------- ---------
Total current liabilities 444,625 509,762
Long-term debt, net of current
portion 218,000 288,179
Deferred tax liabilities 34,729 34,598
Other long-term liabilities 127,442 130,795
--------- ---------
Total liabilities 824,796 963,334
--------- ---------
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; 45,015,853 and
44,276,194, issued and outstanding
at September 30, 2021 and December
31, 2020, respectively 36,194 35,692
Additional paid-in capital 463,748 449,598
Retained earnings 1,051,296 888,046
Treasury stock, at cost, 9,272,513
shares held at September 30, 2021
and 9,259,858 shares held at
December 31, 2020 (336,894) (335,910)
Accumulated other comprehensive loss (58,281) (73,606)
--------- ---------
Total stockholders' equity 1,156,063 963,820
Noncontrolling interest 61,050 52,303
--------- ---------
Total equity 1,217,113 1,016,123
--------- ---------
Total liabilities and stockholders'
equity $ 2,041,909 $ 1,979,457
========= =========
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CONTACT: Company Contact:
Diodes Inc.
Gurmeet Dhaliwal
Director, IR & Corporate Marketing
P: 408-232-9003
E: Gurmeet_Dhaliwal@diodes.com
Investor Relations Contact:
Shelton Group
Leanne Sievers
President, Investor Relations
P: 949-224-3874
E: lsievers@sheltongroup.com