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Diodes Incorporated Reports Third Quarter 2014 Financial Results

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Diodes Incorporated (Nasdaq: DIOD), a leading global manufacturer and supplier of high-quality application specific standard products within the broad discrete, logic and analog semiconductor markets, today reported its financial results for the third quarter ended September 30, 2014.

Third Quarter Highlights

  • Revenue was a record $233.8 million, an increase of 4.7 percent from the $223.2 million in the second quarter of 2014, and an increase of 4.1 percent from the $224.5 million in the third quarter of 2013;
  • Gross profit was a record $74.7 million, compared to $70.3 million in the second quarter of 2014 and $69.6 million in the third quarter of 2013;
  • Gross profit margin was 32.0 percent, compared to 31.5 percent in the second quarter of 2014 and 31.0 percent in the third quarter of 2013;
  • GAAP net income was $19.4 million, or $0.40 per diluted share, compared to $17.4 million, or $0.36 per diluted share in the second quarter of 2014, and $13.6 million, or $0.28 per diluted share in the third quarter of 2013;
  • Non-GAAP adjusted net income was $21.2 million, or $0.43 per diluted share, compared to $18.2 million, or $0.38 per diluted share, in the second quarter of 2014 and $15.8 million, or $0.33 per diluted share, in the third quarter of 2013;
  • Excluding $2.4 million, net of tax, of share-based compensation expense, GAAP and non-GAAP adjusted net income would have increased by $0.05 per diluted share; and
  • Achieved $27.3 million of cash flow from operations, and $13.8 million of free cash flow, including $13.5 million of capital expenditures. Net cash flow was $1.4 million, which includes the pay down of $15.2 million of long-term debt.

Commenting on the results, Dr. Keh-Shew Lu, President and Chief Executive Officer, stated, “Diodes achieved another quarter of solid financial results, highlighted by record revenue and record gross profit. Growth was driven by continued strength in the consumer, communications and computing markets in Asia. Additionally, ongoing improvement in product mix and assembly/test capacity utilization contributed to gross margin reaching 32 percent for the first time since the second quarter of 2011. Earnings per share also reached the highest level in three years, demonstrating the Company’s strong operating performance.”

Third Quarter 2014

Revenue for the third quarter of 2014 was a record $233.8 million, an increase of 4.7 percent from the $223.2 million in the second quarter of 2014, and an increase of 4.1 percent from the $224.5 million in the third quarter of 2013. The increase in revenue was due to growth across the Company’s consumer, communications and computing end markets.

Gross profit for the third quarter of 2014 reached a record $74.7 million, or 32.0 percent of revenue, compared to 70.3 million, or 31.5 percent of revenue in the second quarter of 2014, and compared to $69.6 million, or 31.0 percent of revenue in the third quarter of 2013. The increase in gross profit margin was primarily due to continued improvement in product mix and assembly/test capacity utilization.

Operating expenses for the third quarter of 2014 were $49.7 million, or 21.3 percent of revenue, compared to $47.2 million, or 21.1 percent of revenue, in the second quarter of 2014 and $49.3 million, or 22.0 percent of revenue, in the third quarter of 2013.

GAAP net income for the third quarter of 2014 was $19.4 million, or $0.40 per diluted share, compared to $17.4 million, or $0.36 per diluted share in the second quarter of 2014, and compared to $13.6 million, or $0.28 per diluted share in the third quarter of 2013.

Non-GAAP adjusted net income for the third quarter of 2014 was $21.2 million, or $0.43 per diluted share, which excluded, net of tax, $1.6 million of non-cash acquisition related intangible asset amortization costs and $0.2 million of retention costs associated with the BCD acquisition. This compares to non-GAAP adjusted net income of $18.2 million, or $0.38 per diluted share, in the second quarter of 2014 and $15.8 million, or $0.33 per diluted share, in the third quarter of 2013.

The following is a summary reconciliation of GAAP net income to non-GAAP adjusted net income and per share data, net of tax (unaudited and in thousands, except per share data):

Three Months Ended
September 30, 2014
GAAP net income $ 19,427
GAAP diluted earnings per share $ 0.40
Adjustments to reconcile net income to adjusted net income:
Retention costs 182
Amortization of acquisition related intangible assets 1,578
Non-GAAP adjusted net income $ 21,187
Non-GAAP adjusted diluted earnings per share $ 0.43

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

Included in the third quarter of 2014 GAAP and non-GAAP adjusted net income was approximately $2.4 million, net of tax, non-cash share-based compensation expense. Excluding share-based compensation expense, both GAAP and non-GAAP adjusted diluted EPS would have increased by an additional $0.05 per diluted share. GAAP and non-GAAP adjusted net income would have increased by an additional $0.05 per diluted share in the second quarter of 2014 and $0.05 per diluted share in the third quarter of 2013.

EBITDA, which represents earnings before net interest expense, income tax, depreciation and amortization, was $45.3 million for the third quarter of 2014, compared to $42.9 million for the second quarter of 2014 and $36.7 million for the third quarter of 2013. For a reconciliation of GAAP net income to EBITDA (a non-GAAP measure), see the table near the end of this release for further details.

Net cash provided by operating activities was $27.3 million for the third quarter of 2014. Net cash flow was $1.4 million, which reflects the pay down of $15.2 million of long-term debt. Free cash flow was $13.8 million, which includes $13.5 million of capital expenditures.

Balance Sheet

As of September 30, 2014, the Company had approximately $237 million in cash and cash equivalents and approximately $14 million in short-term investments. Long-term debt totaled approximately $148 million. Working capital was approximately $527 million.

Business Outlook

Dr. Lu concluded, “For the fourth quarter of 2014, we expect revenue to range between $217 million to $231 million, or down 7.0 percent to 1.0 percent sequentially due to normal seasonality. We expect gross margin to be 31.6 percent, plus or minus 2 percent. Operating expenses are expected to be approximately 22.2 percent of revenue, plus or minus 1 percent. We expect our income tax rate to be 25 percent, plus or minus 3 percent, and shares used to calculate diluted EPS for the fourth quarter are anticipated to be approximately 49.0 million.”

Conference Call

Diodes will host a conference call on Thursday, November 6, 2014 at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss its third quarter financial results. Investors and analysts may join the conference call by dialing 1-855-232-8957 and providing the confirmation code 17759854 at the prompt. International callers may join the conference call by dialing 1-315-625-6979 and providing 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 Thursday, November 13, 2014 at midnight Central Time. The replay number is 1-855-859-2056 with a pass code of 17759854. 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 and 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 60 days.

About Diodes Incorporated

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 and analog semiconductor markets. Diodes serves the consumer electronics, computing, communications, industrial, and automotive markets. Diodes’ products include diodes, rectifiers, transistors, MOSFETs, protection devices, functional specific arrays, single gate logic, 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. Design, marketing, and engineering centers are located in Plano; San Jose, California; Taipei, Taiwan; Manchester, England; and Neuhaus, Germany. Diodes’ wafer fabrication facilities are located in Kansas City, Missouri and Manchester, with two additional facilities located in Shanghai, China. Diodes has an assembly and test facility located in Shanghai, in Chengdu, China, as well as in Neuhaus and in Taipei. Additional engineering, sales, warehouse, and logistics offices are located in Fort Worth, Texas; Taipei; Hong Kong; Manchester; Shanghai; Shenzhen, China; Seongnam-si, South Korea; Suwon, South Korea; Tokyo, Japan; and Munich, Germany, with support offices throughout the world. For further information, including SEC filings, visit Diodes’ website at http://www.diodes.com.

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 regarding our expectation that: for the fourth quarter of 2014, we expect revenue to range between $217 million to $231 million, or down 7.0 percent to 1.0 percent sequentially due to normal seasonality; we expect gross margin to be 31.6 percent, plus or minus 2 percent; operating expenses are expected to be approximately 22.2 percent of revenue, plus or minus 1 percent; and we expect our income tax rate to be 25 percent, plus or minus 3 percent, and shares used to calculate diluted EPS for the fourth quarter are anticipated to be approximately 49.0 million. 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; 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; risks of domestic and foreign operations, including excessive operation costs, labor shortages, higher tax rates and our joint venture prospects; the risk of unfavorable currency exchange rates; our future guidance may be incorrect; the global economic weakness may be more severe or last longer than we currently anticipated; 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 Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
NET SALES $ 233,777 $ 224,510 $ 666,980 $ 615,853
COST OF GOODS SOLD 159,045 154,951 460,363 438,818
Gross profit 74,732 69,559 206,617 177,035
OPERATING EXPENSES
Selling, general and administrative 33,897 33,810 99,518 99,266
Research and development 13,864 13,611 39,565 35,836
Amortization of acquisition related intangible assets 1,987 1,871 5,960 6,075
Restructuring 1,535
Gain (loss) on sale of assets (20 ) 5 (916 ) 47
Total operating expenses 49,728 49,297 144,127 142,759
Income from operations 25,004 20,262 62,490 34,276
OTHER INCOME (EXPENSES)
Interest income 324 576 1,158 979
Interest expense (1,074 ) (1,638 ) (3,489 ) (4,150 )
Other 2,050 (1,706 ) 2,640 1,201
Total other income (expenses) 1,300 (2,768 ) 309 (1,970 )
Income before income taxes and noncontrolling interest 26,304 17,494 62,799 32,306
INCOME TAX PROVISION 6,172 3,604 14,370 11,653
NET INCOME 20,132 13,890 48,429 20,653
Less: NET INCOME attributable to noncontrolling interest (705 ) (271 ) (1,415 ) (325 )
NET INCOME attributable to common stockholders $ 19,427 $ 13,619 $ 47,014 $ 20,328
EARNINGS PER SHARE attributable to common stockholders
Basic $ 0.41 $ 0.29 $ 1.00 $ 0.44
Diluted $ 0.40 $ 0.28 $ 0.97 $ 0.43
Number of shares used in computation
Basic 47,548 46,605 47,047 46,260
Diluted 48,736 48,023 48,385 47,584

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 September 30, 2014:

Operating
Expenses

Other Income
(Expense)

Income Tax
Provision

Net Income
Per-GAAP $ 19,427
Earnings per share (Per-GAAP)
Diluted $ 0.40
Adjustments to reconcile net income to adjusted net income:
Retention costs 214 (32 ) 182
Amortization of acquisition related intangible assets 1,987 (409 ) 1,578
Adjusted (Non-GAAP) $ 21,187
Diluted shares used in computing earnings per share 48,736
Adjusted earnings per share (Non-GAAP)
Diluted $ 0.43

Note: Included in GAAP and non-GAAP adjusted net income was approximately $2.4 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 $0.05 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 September 30, 2013:

Cost of Goods
Sold

Operating
Expenses

Other Income
(Expense)

Income Tax
Provision

Net Income
Per-GAAP $ 13,619
Earnings per share (Per-GAAP)
Diluted $ 0.28

Adjustments to reconcile net income to adjusted net income:

Retention costs 815 (122 ) 693
Amortization of acquisition related intangible assets 1,871 (371 ) 1,500
Adjusted (Non-GAAP) $ 15,812
Diluted shares used in computing earnings per share 48,023
Adjusted earnings per share (Non-GAAP)
Diluted $ 0.33

Note: Included in GAAP and non-GAAP adjusted net income was approximately $2.3 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 $0.05 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 nine months ended September 30, 2014:

Operating
Expenses

Other Income
(Expense)

Income Tax
Provision

Net Income
Per-GAAP $ 47,014
Earnings per share (Per-GAAP)
Diluted $ 0.97

Adjustments to reconcile net income to adjusted net income:

Retention costs 1,162 (175 ) 987
Gain on sale of assets (1,176 ) 200 (976 )
Amortization of acquisition related intangible assets 5,960 (1,235 ) 4,725
Adjusted (Non-GAAP) $ 51,750
Diluted shares used in computing earnings per share 48,385
Adjusted earnings per share (Non-GAAP)
Diluted $ 1.07

Note: Included in GAAP and non-GAAP adjusted net income was approximately $6.7 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 $0.14 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 nine months ended September 30, 2013:

Cost of Goods
Sold

Operating
Expenses

Other Income
(Expense)

Income Tax
Provision

Net Income
Per-GAAP $ 20,328
Earnings per share (Per-GAAP)
Diluted $ 0.43

Adjustments to reconcile net income to adjusted net income:

Inventory valuations 5,484 (823 ) 4,661
Acquisition costs 600 110 710
Retention costs 2,115 (317 ) 1,798
Restructuring costs 1,533 (406 ) 1,127
Amortization of acquisition related intangible assets 6,075 (1,285 ) 4,790
Tax expense related to tax audit 5,447 5,447
Adjusted (Non-GAAP) $ 38,862
Diluted shares used in computing earnings per share 47,584
Adjusted earnings per share (Non-GAAP)
Diluted $ 0.82

Note: Included in GAAP and non-GAAP adjusted net income was approximately $6.5 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 $0.14 per share.

ADJUSTED NET INCOME (Non-GAAP)

This measure consists of accounting principles generally accepted in the United States (“GAAP”) net income attributable to common stockholders (“net income”), which is then adjusted solely for the purpose of adjusting for retention costs, amortization of acquisition related intangible assets, gain on sale of assets, inventory valuations, acquisition costs, restructuring and tax payments related to tax audit, as discussed below. Excluding retention costs, gain on sale of assets, inventory valuations, acquisition costs, restructuring and tax payments related to tax audit provides investors with a better depiction of the Company’s operating results and provides a more informed baseline for modeling future earnings expectations. Excluding the amortization of acquisition related intangible assets allows for comparison of the Company’s current and historic operating performance. The Company excludes the above listed items to evaluate the Company’s operating performance, to develop budgets, to determine incentive compensation awards and to manage cash expenditures. 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. The Company provides a reconciliation of GAAP net income to non-GAAP adjusted net income.

Detail of non-GAAP adjustments:

Retention costs – The Company excluded costs accrued within operating expenses in regard to the $5 million employee retention plan in connection with the BCD Semiconductor Manufacturing Limited (“BCD”) acquisition. The retention payments are payable at the 12, 18 and 24 month anniversaries of the acquisition with the majority of the expense occurring in the second 12 months. 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 the BCD acquisition 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 assetsThe Company excluded the amortization of its acquisition related intangible assets including developed technologies and customer relationships. The fair value of the acquisition related intangible assets, which was recognized through acquisition 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 lives of the applicable assets. The Company believes the exclusion of the amortization expense of acquisition related assets is appropriate as 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 the amortization expense as there is significant variability and unpredictability among companies with respect to this expense.

Gain on sale of assets -During the second quarter of 2014, the Company sold a building located in Taiwan and this gain was excluded from management’s assessment of the Company’s core operating performance. The Company believes the exclusion of the gain on sale of assets provides investors an enhanced view of a gain the Company may incur from time to time and facilitates comparisons with results of other periods that may not reflect such gains.

Inventory valuations - The Company excluded cost incurred for inventory valuations. The Company adjusted the inventory acquired from the BCD acquisition to account for the reasonable profit allowance for the selling effort on finished goods inventory and the reasonable profit allowance for the completing and selling effort on the work-in-progress inventory. This non-cash adjustment to inventory is not recurring in nature, however it could be recurring to the extent there are additional acquisitions. The Company believes the exclusion of the BCD inventory valuation 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.

Acquisition costs - The Company excluded costs associated with acquiring BCD, which consisted of advisory, legal and other professional and consulting fees. These costs were expensed in the second quarter of 2013 when the costs were incurred and 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.

Restructuring - The Company has recorded restructuring charges to reduce its cost structure in order to enhance operating effectiveness and improve profitability. These restructuring activities related to our UK development team and the closure of our New York sales office. 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.

Tax expense related to tax audit – The Company excluded additional tax expense in regard to a tax audit of the China tax authorities. The China government audited the Company’s High and New Technology Enterprise (“HNTE”) status for the years 2009 through 2014 and determined there was an underpayment for the tax year 2013. The Company has been approved for the HNTE status for 2013 through 2014. Given that 2013 is an isolated occurrence, the additional tax and any penalties and interest associated with the audit are being excluded. The Company believes the exclusion of tax expense related to this tax audit provides investors with a more accurate indication of tax expense likely to be incurred on an ongoing basis and facilitates comparisons with the results of other periods that may not reflect such audit determinations.

ADJUSTED EARNINGS PER SHARE (Non-GAAP)

This non-GAAP financial measure is the portion of the Company’s GAAP net income assigned to each share of stock, excluding retention costs, amortization of acquisition related intangible assets, inventory valuations, acquisition costs and tax payments related to tax audit, as discussed above. Excluding retention costs, inventory valuations, acquisition costs and tax payments related to tax audit provides investors with a better depiction of the Company’s operating results and provides a more informed baseline for modeling future earnings expectations. Excluding the amortization of acquisition related intangible assets allows for comparison of the Company’s current and historic operating performance, as described in further detail above. This non-GAAP measure 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 diluted earnings per share on both a GAAP basis and non-GAAP basis be performed to obtain a comprehensive view of the Company’s results. Information on how these share calculations are made is included in the reconciliation tables provided.

CASH FLOW ITEMS

Free cash flow (FCF) (Non-GAAP)

FCF for the third quarter of 2014 is a non-GAAP financial measure, which is calculated by taking cash flow from operations less capital expenditures. For the third quarter of 2014, the amount was $13.8 million ($27.3 million less (-) $13.5 million). FCF 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 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
September 30,
2014 2013
Net income (per-GAAP) $ 19,427 $ 13,619
Plus:
Interest expense, net 750 1,062
Income tax provision 6,172 3,604
Depreciation and amortization 18,921 18,459
EBITDA (Non-GAAP) $ 45,270 $ 36,744
Nine Months Ended
September 30,
2014 2013
Net income (per-GAAP) $ 47,014 $ 20,328
Plus:
Interest expense, net 2,331 3,171
Income tax provision 14,370 11,653
Depreciation and amortization 57,254 54,894
EBITDA (Non-GAAP) $ 120,969 $ 90,046
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS

(in thousands)

September 30, December 31,
2014 2013
(unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 236,849 $ 196,635
Short-term investments 14,165 22,922
Accounts receivable, net 193,639 192,267
Inventories 189,119 180,396
Deferred income taxes, current 9,828 10,513
Prepaid expenses and other 52,130 47,352
Total current assets 695,730 650,085
PROPERTY, PLANT AND EQUIPMENT, net 312,176 322,013
DEFERRED INCOME TAXES, non current 24,597 28,237
OTHER ASSETS
Goodwill 83,542 84,714
Intangible assets, net 47,391 53,571
Other 24,804 23,638
Total assets $ 1,188,240 $ 1,162,258
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
LIABILITIES AND EQUITY

(in thousands, except share data)

September 30, December 31,
2014 2013
(unaudited)
CURRENT LIABILITIES
Lines of credit $ 2,009 $ 5,814
Accounts payable 97,367 89,212
Accrued liabilities 65,390 60,684
Income tax payable 3,777 1,206
Total current liabilities 168,543 156,916
LONG-TERM DEBT, net of current portion 147,533 182,799
OTHER LONG-TERM LIABILITIES 78,134 78,866
Total liabilities 394,210 418,581
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;
47,572,500 and 46,680,973 issued and outstanding at September 30, 2014 and
December 31, 2013, respectively 31,717 31,120
Additional paid-in capital 305,143 289,668
Retained earnings 473,342 426,328
Accumulated other comprehensive loss (58,847 ) (44,374 )
Total Diodes Incorporated stockholders’ equity 751,355 702,742
Noncontrolling interest 42,675 40,935
Total equity 794,030 743,677
Total liabilities and equity $ 1,188,240 $ 1,162,258

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