Diodes Inc. Reports Third Quarter 2008 Financial Results

Diodes Inc. reported financial results for the third quarter ended September 30, 2008. In the third quarter, Diodes made the required preliminary estimate of the purchase accounting impact of the Zetex acquisition in its GAAP financials. The impact of the purchase accounting is identified for comparison purposes.

Revenue for the third quarter of 2008 increased 27.3% to a record $134.0 million as compared to $105.3 million reported in the third quarter of 2007 and increased 15.5% when compared to $116.0 million reported in the second quarter of 2008, which included one month of Zetex results.

Gross profit for the third quarter of 2008, which included $5.4 million of non-cash purchase price adjustments related to the Zetex acquisition, was $38.1 million, or 28.4% of revenue. Excluding the non-cash purchase price adjustments, gross margin was 32.5% as compared to 34.1% in second quarter of 2008 with the decrease primarily due to lower capacity utilization in manufacturing operations as a result of market conditions and a reduction of finished goods inventory.

Commenting on the quarter, Dr. Keh-Shew Lu, President and CEO of Diodes Incorporated, said, "The third quarter represented our first full quarter of operations with Zetex, and our integration efforts remain on track and have been progressing well throughout the quarter. Due to current and future expectations for the overall economy, we have identified a number of expense reduction opportunities to optimize our cost structure across the organization. These initiatives include accelerating our plan to integrate the Zetex products into our manufacturing facilities, reducing manufacturing process and raw material costs as well as realigning our product development and wafer fabrication organizations, including a shut-down of our 4-inch fab line in Oldham, headcount reductions at our wafer fab in Kansas City and a hiring freeze at all other locations."

Third quarter GAAP net loss was $2.9 million, or ($0.07) per share, which included $14.8 million in net purchase price adjustments, consisting of a one-time non-cash $5.2 million inventory charge, a $0.2 million non-cash depreciation expense, a $7.9 million one-time non-cash write-off of acquired in-process research and development charges and $1.6 million in amortization of acquisition related intangible assets. Excluding the acquisition charges, adjusted non-GAAP net income was $11.9 million, or $0.27 per share.

Adjusted net income computed on a non-GAAP basis for the third quarter of 2008, which excluded approximately $600,000 of SFAS 123R net stock option expenses and the acquisition charges, was $12.5 million, or $0.29 per diluted share. Beginning in the fourth quarter of 2008, Diodes intends to change its reporting policy regarding SFAS 123R net stock option expenses, which will be included in adjusted net income in future quarters.

As of September 30, 2008, Diodes had approximately $82.7 million in total cash, $285 million in long-term investments (representing $320 million of auction rate securities at par value), $201 million in working capital and $400 million in long-term debt (including the convertible notes).