Record Annual Revenue and Profit for Diodes Inc.
Diodes Incorporated reported its financial results for the fourth quarter and fiscal year ended December 31, 2016. Revenue grew to a record $942.2 million, an increase of 11.0 percent over the $848.9 million in 2015 due primarily to the Pericom acquisition; GAAP gross profit was a record $286.9 million as compared to $248.6 million in 2015; GAAP gross margin improved 120 basis points to 30.5 percent from 29.3 percent in 2015; and GAAP net income was $15.9 million, or $0.32 per diluted share, compared to $24.3 million, or $0.49 per diluted share in 2015.
Fourth quarter highlights include: Revenue was $232.1 million, a decrease of 7.4 percent from the $250.7 million in the third quarter 2016 due mainly to the KFAB fire, and an increase of 8.3 percent from the $214.4 million in fourth quarter 2015 due primarily to the Pericom acquisition; Gross profit was $67.3 million, including approximately $5.3 million of fab expenses associated with the KFAB fire, compared to $80.6 million in third quarter 2016 and $53.6 million in fourth quarter 2015; Gross profit margin was 29.0 percent, compared to 32.2 percent in third quarter 2016 and 25.0 percent in fourth quarter 2015;
GAAP net income was $1.3 million, or $0.03 per diluted share, including approximately $4.0 million or $0.08 per diluted share negative impact due to the KFAB fire and $2.1 million or $0.04 per diluted share negative impact due to a non-cash impairment of a non-operating investment, compared to GAAP net income $10.6 million, or $0.21 per diluted share, in third quarter 2016 and a GAAP net loss of $4.8 million, or ($0.10) per share, in fourth quarter 2015 due mainly to the Pericom acquisition;
Commenting on the results, Dr. Keh-Shew Lu, President and Chief Executive Officer, stated, â€œDiodes ended the year achieving record revenue and gross profit, driven by increased content at new customers as well as higher contribution from new products. We also made solid progress on our integration of Pericom Semiconductor throughout the year, which sets the stage for expanded growth opportunities in 2017.
â€œAdditionally, our automotive revenue reached a record level, increasing almost 50% over the prior year and representing 7% of our annual revenue. Over the past three years, Diodes has significantly advanced our automotive strategy through investments in new products and customer expansion. Going forward, we expect to further expand revenue growth and capture additional share through new product introductions and design wins.
â€œLastly, we ended the year with a stronger balance sheet, reducing debt by $36 million, generated $125 million in net cash from operations and returned approximately 15% of that to our stockholders. We maintained CapEx at approximately 6% of revenue, which is at the low end of our 5-9% model. We are continuing to make solid progress on process development at our 8â€ fab in Shanghai (SFAB2), which we expect to complete by the end of first quarter 2017. Our collective achievements throughout the year position the Company for continued growth, market share gains and margin expansion as we aim to reach our goal of $1 billion in annual revenue.â€
As previously announced, Diodes experienced a fire on November 18, 2016 in the wet etch wafer fabrication area at its wafer fab in Leeâ€™s Summit, Mo. This fire resulted in a temporary suspension of production. The cleanup and repair cost, coupled with the fab idle capacity expenses in the fourth quarter, was approximately $7.5 million before tax, which was partially offset by a $1.5 million initial insurance payment. The Company received the necessary approvals from the fire department to commence production on January 20, and, after tool qualification, normal production resumed on January 23, 2017. Diodes is working diligently to recover lost output in order to fully support customersâ€™ requirements in a timely manner.
In addition, Diodes has been notified that the landlord has decided not to renew the lease of the KFAB wafer fabrication plant, which expires on December 31, 2017. KFAB has leased this facility since 1994.
In light of the landlordâ€™s decision not to renew the lease, Diodes has begun activities to transfer the KFAB wafer manufacturing operations to other Diodesâ€™ wafer fabrication plants and external foundries. The Company expects to cease operations there late in third quarter 2017 and to vacate the premises no later than November 15, 2017. Employees will be offered retention and standard severance packages.
Total KFAB shutdown costs are expected to be approximately $10 million to $12 million, on a pretax basis, which will be expensed and paid throughout 2017. Expenses to be incurred include cash costs of approximately $4 million for employee retention and severance, $2 million for contract termination costs, $2 million for equipment and building decommissioning costs as well as non-cash costs of $2 million for equipment impairment and $1 million of inventory write-off. Because of lower costs and improved utilization at its internal wafer fabs, Diodes expects the annual savings to be $11 million to $13 million once the equivalent volume has been fully transferred to other production sites.