Item 1. Financial Statements
Item 1. Financial Statements.
DIODES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
September 30,
December 31,
2020
2019
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
587,643
$
258,390
Short-term investments
3,014
4,825
Accounts receivable, net of allowances of $ 3,056 and $ 4,866 at
September 30, 2020 and December 31, 2019, respectively
261,782
260,322
Inventories
260,289
236,472
Prepaid expenses and other
101,961
49,950
Total current assets
1,214,689
809,959
Property, plant and equipment, net
453,487
469,574
Deferred income tax
23,566
17,516
Goodwill
155,492
141,318
Intangible assets, net
114,306
119,523
Other long-term assets
71,112
81,494
Total assets
$
2,032,652
$
1,639,384
Liabilities
Current liabilities:
Line of credit
$
70,746
$
13,342
Accounts payable
127,315
122,148
Accrued liabilities and other
103,259
100,571
Income tax payable
5,235
16,156
Current portion of long-term debt
14,978
33,105
Total current liabilities
321,533
285,322
Long-term debt, net of current portion
330,766
64,401
Deferred tax liabilities
14,445
16,333
Other long-term liabilities
114,857
120,545
Total liabilities
781,601
486,601
Commitments and contingencies (See Note 9)
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; 51,945,299 and 51,206,969 , issued and outstanding
at September 30, 2020 and December 31, 2019, respectively
35,628
35,111
Additional paid-in capital
440,944
427,262
Retained earnings
858,311
789,958
Treasury stock at cost, 1,494,080 and 1,457,206 , at
September 30, 2020 and December 31, 2019, respectively
( 39,205
)
( 37,768
)
Accumulated other comprehensive loss
( 97,105
)
( 108,139
)
Total stockholders' equity
1,198,573
1,106,424
Noncontrolling interest
52,478
46,359
Total equity
1,251,051
1,152,783
Total liabilities and stockholders' equity
$
2,032,652
$
1,639,384
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 3 -
DIODES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
Net sales
$
309,459
$
323,674
$
878,845
$
947,973
Cost of goods sold
198,369
201,628
570,421
591,528
Gross profit
111,090
122,046
308,424
356,445
Operating expenses
Selling, general and administrative
44,651
46,123
132,238
137,143
Research and development
24,469
22,689
69,469
66,566
Amortization of acquisition related intangible assets
4,007
4,519
12,249
13,539
Other operating expense (income)
108
-
( 108
)
( 158
)
Total operating expense
73,235
73,331
213,848
217,090
Income from operations
37,855
48,715
94,576
139,355
Other income (expense)
Interest income
138
272
579
1,780
Interest expense
( 3,745
)
( 2,007
)
( 7,643
)
( 6,163
)
Foreign currency loss, net
( 2,618
)
( 822
)
( 6,143
)
( 1,382
)
Other income
1,627
2,577
2,902
5,056
Total other expense
( 4,598
)
20
( 10,305
)
( 709
)
Income before income taxes and noncontrolling interest
33,257
48,735
84,271
138,646
Income tax provision
5,871
10,613
15,097
32,085
Net income
27,386
38,122
69,174
106,561
Less net income attributable to noncontrolling interest
( 234
)
( 62
)
( 821
)
( 501
)
Net income attributable to common stockholders
$
27,152
$
38,060
$
68,353
$
106,060
Earnings per share attributable to common stockholders:
Basic
$
0.52
$
0.75
$
1.33
$
2.09
Diluted
$
0.51
$
0.73
$
1.30
$
2.05
Number of shares used in earnings per share computation:
Basic
51,825
50,998
51,563
50,687
Diluted
52,729
51,869
52,612
51,699
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 4 -
DIODES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
Net income
$
27,386
$
38,122
$
69,174
$
106,561
Unrealized gain (loss) on defined benefit plan, net of tax
288
( 6,553
)
( 6,563
)
( 11,562
)
Unrealized gain (loss) on swaps and collars, net of tax
212
259
( 409
)
( 3,146
)
Unrealized foreign currency gain (loss), net of tax
20,887
( 9,186
)
18,006
( 11,151
)
Comprehensive income
48,773
22,642
80,208
80,702
Less: Comprehensive income attributable to noncontrolling interest
( 234
)
( 62
)
( 821
)
( 501
)
Total comprehensive income attributable to common stockholders
$
48,539
$
22,580
$
79,387
$
80,201
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 5 -
DIODES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands)
Common stock
Treasury stock
Additional
paid-in
Retained
Accumulated
other comprehensive
Total Diodes
Incorporated Stockholders'
Noncontrolling
Total
Shares
Amount
Shares
Amount
capital
earnings
loss
equity
interest
equity
Balance, June 30, 2020
53,082
$
35,389
( 1,483
)
$
( 38,660
)
$
433,989
$
831,159
$
( 118,492
)
$
1,143,385
$
52,242
$
1,195,627
Total comprehensive income
-
-
-
-
-
27,152
21,387
48,539
234
48,773
Contributions from noncontrolling interests
-
-
-
-
-
-
-
-
2
2
Common stock issued for share-based plans
357
239
-
-
3,093
-
-
3,332
-
3,332
Share-based compensation
-
-
-
-
6,155
-
-
6,155
-
6,155
Deferred compensation plan
-
-
( 11
)
( 545
)
545
-
-
-
-
-
Tax related to net share settlement
-
-
-
-
( 2,838
)
-
-
( 2,838
)
-
( 2,838
)
Balance, September 30, 2020
53,439
$
35,628
( 1,494
)
$
( 39,205
)
$
440,944
$
858,311
$
( 97,105
)
$
1,198,573
$
52,478
$
1,251,051
Balance, December 31, 2019
52,664
$
35,111
( 1,457
)
$
( 37,768
)
$
427,262
$
789,958
$
( 108,139
)
$
1,106,424
$
46,359
$
1,152,783
Total comprehensive income
-
-
-
-
-
68,353
11,034
79,387
821
80,208
Acquisition of non-controlling interest
-
-
-
-
( 1,225
)
-
-
( 1,225
)
( 4,928
)
( 6,153
)
Contributions from noncontrolling interests
-
-
-
-
-
-
-
-
11,779
11,779
Dividends to noncontrolling interest
-
-
-
-
-
-
-
-
( 1,553
)
( 1,553
)
Common stock issued for share-based plans
775
517
-
-
3,880
-
-
4,397
-
4,397
Share-based compensation
-
-
-
-
17,833
-
-
17,833
-
17,833
Deferred compensation plan
-
-
( 37
)
( 1,437
)
1,437
-
-
-
-
-
Tax related to net share settlement
-
-
-
-
( 8,243
)
-
-
( 8,243
)
-
( 8,243
)
Balance, September 30, 2020
53,439
$
35,628
( 1,494
)
$
( 39,205
)
$
440,944
$
858,311
$
( 97,105
)
$
1,198,573
$
52,478
$
1,251,051
Balance, June 30, 2019
52,202
$
34,803
( 1,457
)
$
( 37,768
)
$
414,451
$
704,708
$
( 112,225
)
$
1,003,969
$
47,183
$
1,051,152
Total comprehensive income
-
-
-
-
-
38,060
( 15,480
)
22,580
62
22,642
Common stock issued for share-based plans
268
179
-
-
324
-
-
503
-
503
Share-based compensation
-
-
-
-
5,589
-
-
5,589
-
5,589
Tax related to net share settlement
-
-
-
-
( 2,788
)
-
-
( 2,788
)
-
( 2,788
)
Balance, September 30, 2019
52,470
$
34,982
( 1,457
)
$
( 37,768
)
$
417,576
$
742,768
$
( 127,705
)
$
1,029,853
$
47,245
$
1,077,098
Balance, December 31, 2018
51,678
$
34,454
( 1,457
)
$
( 37,768
)
$
399,915
$
636,708
$
( 101,846
)
$
931,463
$
45,969
$
977,432
Total comprehensive income
-
-
-
-
-
106,060
( 25,859
)
80,201
501
80,702
Noncontrolling interests
-
-
-
-
-
-
-
-
3,343
3,343
Dividends to noncontrolling interest
-
-
-
-
-
-
-
-
( 2,568
)
( 2,568
)
Common stock issued for share-based plans
792
528
-
-
6,680
-
-
7,208
-
7,208
Share-based compensation
-
-
-
-
15,364
-
-
15,364
-
15,364
Tax related to net share settlement
-
-
-
-
( 4,383
)
-
-
( 4,383
)
-
( 4,383
)
Balance, September 30, 2019
52,470
$
34,982
( 1,457
)
$
( 37,768
)
$
417,576
$
742,768
$
( 127,705
)
$
1,029,853
$
47,245
$
1,077,098
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 6 -
DIODES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
2020
2019
Cash flows from operating activities
Net income
$
69,174
$
106,561
Adjustments to reconcile net income to net cash provided by operating activities, net of effects of acquisitions
Depreciation
68,168
68,533
Amortization of intangible assets
12,249
13,539
Share-based compensation expense
18,684
15,364
Deferred income taxes
( 10,232
)
( 612
)
Other
1,235
( 976
)
Changes in operating assets:
Accounts receivable
602
( 29,868
)
Inventory
( 20,535
)
( 9,062
)
Other operating assets
2,903
( 3,452
)
Changes in operating liabilities:
Accounts payable
3,886
236
Accrued liabilities
( 6,821
)
10,206
Income tax payable
( 11,013
)
9,853
Other operating liabilities
( 1,865
)
( 2,617
)
Net cash flows provided by operating activities
126,435
177,705
Cash flows from investing activities
Acquisitions, net of cash received
591
( 33,029
)
Purchases of property, plant and equipment
( 48,497
)
( 76,128
)
Proceeds from maturity of short-term investments
7,723
15,332
Purchases of short-term investments
( 5,858
)
( 15,921
)
Additional acquisition of noncontrolling interest
( 6,130
)
-
Other
395
( 430
)
Net cash and cash equivalents used in investing activities
( 51,776
)
( 110,176
)
Cash flows from financing activities
Advances on lines of credit and short-term debt
60,647
9,954
Repayments of line of credit and short-term debt
( 3,667
)
( 3,067
)
Taxes paid related to net share settlement
( 8,243
)
( 4,383
)
Proceeds from long-term debt
726,363
278,237
Repayments of long-term debt
( 477,659
)
( 372,976
)
Net proceeds from issuance of common stock
1,977
7,208
Repayment of and proceeds from finance lease obligation
( 671
)
( 912
)
Dividend distribution to noncontrolling interests
( 1,565
)
( 2,577
)
Other
( 2,502
)
1,524
Net cash and cash equivalents provided by (used in) financing activities
294,680
( 86,992
)
Effect of exchange rate changes on cash and cash equivalents
10,988
( 2,614
)
Change in cash and cash equivalents, including restricted cash
380,327
( 22,077
)
Cash and cash equivalents, beginning of period, including restricted cash
259,507
241,833
Cash and cash equivalents, end of period, including restricted cash
$
639,834
$
219,756
- 7 -
Supplemental Cash Flow Information
Interest paid during the period
$
6,434
$
5,781
Taxes paid during the period
$
42,928
$
24,422
Non-cash investing and financing activities:
Accounts payable balance related to the purchase of
property, plant and equipment
$
8,906
$
13,261
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the total of the same such amounts shown above. The Company’s restricted cash primarily consisted of the cash required to be on deposit under contractual agreements with banks to support outstanding loan and import/export guarantees.
Nine Months Ended
September 30,
2020
2019
Current assets:
Cash and cash equivalents
$ 587,643
$ 218,349
Restricted cash (included in other current assets)
52,191
1,407
Total cash, cash equivalents and restricted cash
$ 639,834
$ 219,756
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 8 -
DIODES INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – Summary of Operations and Significant Accounting Policies
Summary of Operations
Diodes Incorporated, together with its subsidiaries (collectively, the “Company,” “we” or “our”) (Nasdaq: DIOD), 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. We serve the consumer electronics, computing, communications, industrial, and automotive markets. Our products include diodes, rectifiers, transistors, MOSFETs, protection devices, function-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. We also have timing, connectivity, switching, and signal integrity solutions for high-speed signals. Our corporate headquarters and Americas’ sales offices are located in Plano, Texas and Milpitas, California. Design, marketing, and engineering centers are located in Plano; Milpitas; Taipei, Taoyuan City and Zhubei City, Taiwan; Oldham, England; and Neuhaus, Germany. Our wafer fabrication facilities are located in Oldham and Shanghai, China and Greenock, Scotland. We have assembly and test facilities located in Shanghai, Jinan and Chengdu, China, as well as in Hong Kong, Neuhaus and Taipei. Additional engineering, research and development, sales, warehouse, and logistics offices are located in Taipei; Hong Kong; Oldham; Shanghai; Shenzhen and Yangzhou, China; Seongnam-si, South Korea; Munich, Germany; and Tokyo, Japan, with support offices throughout the world.
Basis of Presentation
The condensed consolidated financial data at December 31, 2019 is derived from audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission (“SEC”) on February 12, 2020 (“Form 10-K”). The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q. They do not include all information and footnotes necessary for a fair presentation of financial position, operating results and cash flows in conformity with GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in our Form 10-K. All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair presentation of the operating results for the period presented have been included in the interim period. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, 2020.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. As permitted under GAAP, interim accounting for certain expenses, including income taxes, are based on full year forecasts. For interim financial reporting purposes, income taxes are recorded based upon estimated annual effective income tax rates taking into consideration discrete items occurring in a quarter.
Dollar amounts and share amounts are presented in thousands, except per share amounts, unless otherwise noted. Certain prior year’s balances may have been reclassified to conform to the current financial statement presentation.
Recently Issued Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board issued Accounting Standards (“FASB”) Update (“ASU”) No. 2020-04 Reference Rate Reform (Topic 848) . ASU No. 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU No. 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the second quarter of 2020; the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
- 9 -
In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, which requires measurement and recognition of expected credit losses for financial assets held. We adopted ASU No. 2016-13 effective January 1, 2020. The adoption of ASU No. 2016-13 did not have a mat erial impact on our consolidated financial statements and related disclosures.
NOTE 2 – Earnings per Share
Earnings per share (“EPS”) is calculated by dividing net income attributable to common stockholders by the weighted-average number of shares of Common Stock outstanding during the period. Diluted EPS is calculated similarly but includes potential dilution from the exercise of stock options and stock awards, except when the effect would be anti-dilutive. During the three and nine months ended September 30, 2020 and 2019 we paid no dividends on our Common Stock.
The table below sets forth the reconciliation between net income and the weighted average shares outstanding used for calculating basic and diluted EPS:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
Earnings (numerator)
Net income attributable to common stockholders
$
27,152
$
38,060
$
68,353
$
106,060
Shares (denominator)
Weighted average common shares outstanding (basic)
51,825
50,998
51,563
50,687
Dilutive effect of stock options and stock awards outstanding
904
871
1,049
1,012
Adjusted weighted average common shares outstanding (diluted)
52,729
51,869
52,612
51,699
Earnings per share attributable to common stockholders
Basic
$
0.52
$
0.75
$
1.33
$
2.09
Diluted
$
0.51
$
0.73
$
1.30
$
2.05
Stock options and stock awards excluded from EPS
calculation because the effect would be anti-dilutive
-
3
3
107
NOTE 3 – Inventories
The table below sets forth inventories which are stated at the lower of cost or net realizable value:
September 30, 2020
December 31, 2019
Finished goods
$
68,950
$
62,900
Work-in-progress
55,505
55,082
Raw materials
135,834
118,490
Total
$
260,289
$
236,472
NOTE 4 – Goodwill and Intangible Assets
The table below sets forth the changes in goodwill :
Balance at December 31, 2019
$
141,318
Savitech acquisition (see Note 14 for additional information)
13,962
Foreign currency translation adjustment
212
Balance at September 30, 2020
$
155,492
- 10 -
The table below sets forth the value of intangible assets, other than goodwill:
September 30,
December 31,
2020
2019
Intangible assets subject to amortization:
Gross carrying amount
$
245,067
$
239,975
Accumulated amortization
( 136,701
)
( 124,452
)
Foreign currency translation adjustment
( 7,959
)
( 9,842
)
Total
100,407
105,681
Intangible assets with indefinite lives:
Gross carrying amount
14,992
14,883
Foreign currency translation adjustment
( 1,093
)
( 1,041
)
Total
13,899
13,842
Total intangible assets, net
$
114,306
$
119,523
The table below sets forth amortization expense related to intangible assets subject to amortization:
Amortization expense
2020
2019
Three months ended September 30,
$
4,007
$
4,519
Nine months ended September 30,
$
12,249
$
13,539
NOTE 5 – Income Tax Provision
The table below sets forth information related to our income tax expense:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
Domestic pre-tax income
$
15,053
$
13,547
$
28,029
$
34,097
Foreign pre-tax income
$
18,203
$
35,188
$
56,242
$
104,549
Income tax provision
$
5,871
$
10,613
$
15,097
$
32,085
Effective tax rate
17.7
%
21.8
%
17.9
%
23.1
%
Impact of tax holidays on tax expense
$
( 208
)
$
330
$
( 1,522
)
$
1,179
Earnings per share impact of tax holidays:
Basic
$
-
$
( 0.01
)
$
0.03
$
( 0.02
)
Diluted
$
-
$
( 0.01
)
$
0.03
$
( 0.02
)
The decrease in the effective tax rate for the three and nine months ended September 30, 2020 when compared to the three and nine months ended September 30, 2019, is primarily attributable to a decrease in non-U.S. withholding taxes and a net increase in favorable U.S. permanent differences.
Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of certain European and Asian subsidiaries. Any future distributions of foreign earnings will not be subject to additional U.S. income tax, but may be subject to non-U.S. withholding taxes.
We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations by tax authorities for tax years before 2012, or for the 2015 tax year. We are no longer subject to China income tax examinations by tax authorities for tax years before 2010. With respect to state and local jurisdictions and countries outside of the U.S. (other than China), with limited exceptions, the Company is no longer subject to income tax audits for years before 2014. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties, if any, have been provided for in the Company’s reserve for any adjustments that may result from currently pending tax audits. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in interest expense. As of September 30, 2020, the gross amount of unrecognized tax benefits was approximately $ 37.5 million.
- 11 -
It is reasonably possible that the amount of the unrecognized benefit with respect to certain of the Company’s unrecognized tax positions will significantly increase or decrease within the next 12 months. At this time, an estimate of the range of the reasonably possible outcomes cannot be made.
In response to the outbreak of the novel strain of coronavirus (“COVID-19”) pandemic, the United States Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted on March 27, 2020. We do not expect the CARES Act to have a material impact on our financial statements because we do not qualify for most of the relief provisions prescribed in the CARES Act. We will continue to assess the impacts of the CARES Act and any other legislation adopted by the United States government or other applicable governmental agencies in response to COVID-19 as additional guidance is published by the relevant authorities.
NOTE 6 – Share-Based Compensation
All share-based compensation is attributable to share grants. All outstanding stock options are fully vested, and all expense related to stock options has been recognized in previous periods. Approximately $ 2.0 million of cash proceeds were received from stock option exercises during the nine months ended September 30, 2020. The table below sets forth the line items where share-based compensation expense was recorded:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
Cost of goods sold
$
241
$
281
$
771
$
665
Selling, general and administrative
5,157
4,566
15,583
12,513
Research and development
892
742
2,330
2,186
Total share-based compensation expense
$
6,290
$
5,589
$
18,684
$
15,364
Share Grants – Restricted stock awards and restricted stock units generally vest in equal annual installments over a four-year period. All new grants are granted under the Company’s 2013 Equity Incentive Plan, and there will be no additional share grants under the 2001 Omnibus Equity Incentive Plan. Restricted stock grants are measured based on the fair market value of the underlying stock on the date of grant, and compensation expense is recognized on a straight-line basis over the requisite four-year service period. During the second quarter of 2020, 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 to 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.
Performance stock units (“PSUs”) are measured based on the fair market value of the underlying stock on the date of grant and compensation expense is recognized over the three-year performance period, with adjustments made to the expense to recognize the probable payout percentage. PSUs will vest upon the Company achieving a cumulative 3 -year non-GAAP operating income target for the applicable periods.
As of September 30, 2020, total unrecognized share-based compensation expense related to share grants was approximately $ 50.8 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 2.2 years.
NOTE 7 – Segment Information and Net Sales
Segment Reporting. For financial reporting purposes, we operate in a single segment, standard semiconductor products, through our various manufacturing and distribution facilities. We aggregate our products because the products are similar and have similar economic characteristics, use similar production processes and share the same customer type. Our primary operations include operations in Asia, North America and Europe. No customer accounted for 10% or more of our net sales or outstanding accounts receivable at any point in the periods presented in this report.
- 12 -
The tables below set forth net sales based on the location of the subsidiary producing the net sale.
Three Months Ended September 30, 2020
Asia
North America
Europe
Consolidated
Total sales
$
374,456
$
225,503
$
57,207
$
657,166
Intercompany elimination
( 161,630
)
( 157,370
)
( 28,707
)
( 347,707
)
Net sales
$
212,826
$
68,133
$
28,500
$
309,459
Three Months Ended September 30, 2019
Asia
North America
Europe
Consolidated
Total sales
$
323,876
$
175,900
$
63,583
$
563,359
Intercompany elimination
( 115,879
)
( 96,150
)
( 27,656
)
( 239,685
)
Net sales
$
207,997
$
79,750
$
35,927
$
323,674
As of and for the
Nine Months Ended September 30, 2020
Asia
North America
Europe
Consolidated
Total sales
$
999,758
$
584,218
$
169,993
$
1,753,969
Intercompany elimination
( 412,103
)
( 383,379
)
( 79,642
)
( 875,124
)
Net sales
$
587,655
$
200,839
$
90,351
$
878,845
Property, plant and equipment, net
$
355,608
$
24,455
$
73,424
$
453,487
Total assets
$
1,551,935
$
263,444
$
217,273
$
2,032,652
As of and for the
Nine Months Ended September 30, 2019
Asia
North America
Europe
Consolidated
Total sales
$
917,516
$
450,874
$
180,759
$
1,549,149
Intercompany elimination
( 305,581
)
( 228,344
)
( 67,251
)
( 601,176
)
Net sales
$
611,935
$
222,530
$
113,508
$
947,973
Property, plant and equipment, net
$
385,862
$
23,186
$
59,074
$
468,122
Total assets
$
1,173,683
$
237,467
$
198,663
$
1,609,813
Disaggregation of Net Sales. We disaggregate net sales from contracts with customers into direct sales and distribution sales (“Distributors”) and by geographic area. Direct sales customers consist of those customers using our product in their manufacturing process, and Distributors are those customers who resell our products to third parties. We deliver our products to customers around the world for use in consumer electronics, computing, communications, industrial and automotive. Further, most of our contracts are fixed-price arrangements, and are short term in nature, ranging from days to several months.
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The tables below set forth net sales for the Company disaggregated into geographic locations based on shipment and by type (direct sales or Distributor ) for the three months and nine months ended September 30, 2020 and 2019:
Three Months Ended
September 30,
Net Sales by Region
2020
2019
Asia
$
243,773
$
240,390
Europe
41,897
53,336
Americas
23,789
29,948
Total net sales
$
309,459
$
323,674
Net Sales by Type
Direct sales
$
115,437
$
110,313
Distributor sales
194,022
213,361
Total net sales
$
309,459
$
323,674
Nine Months Ended
September 30,
Net Sales by Region
2020
2019
Asia
$
677,634
$
703,761
Europe
131,973
137,780
Americas
69,238
106,432
Total net sales
$
878,845
$
947,973
Net Sales by Type
Direct sales
$
396,018
$
305,602
Distributor sales
482,827
642,371
Total net sales
$
878,845
$
947,973
Net sales from products shipped to China was $ 161.6 million and $ 163.3 million for the three months ended September 30, 2020 and 2019, respectively, and $ 452.9 million and $ 475.1 million for the nine months ended September 30, 2020 and 2019, respectively.
NOTE 8 – Debt
Our Asia subsidiaries maintain credit facilities with several financial institutions through our foreign entities worldwide totaling $ 155.7 million. Other than two Taiwanese credit facilities that are collateralized by assets, our foreign credit lines are unsecured, uncommitted, repayable on demand, terminable by the lender at any time and contain no restrictive covenants. Interest payments are due monthly on outstanding amounts under the credit lines. The unused and available credit under the various facilities as of September 30, 2020, was approximately $ 86.2 million, net of a $ 70.7 million advanced under our foreign credit lines and $ 0.4 million credit used for import and export guarantee. In connection with our Asia credit facilities $ 52.2 million of cash deposits have been restricted in support of a corresponding loan amount.
On May 29, 2020 , the Company, Diodes Holding B.V. (the “Foreign Borrower” and, collectively with the Company, the “Borrowers”), and certain subsidiaries of the Company as guarantors, entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) that amends and restates that certain Amended and Restated Credit Agreement dated as of October 26, 2016 (as amended, modified and/or supplemented from time to time prior to May 29, 2020, the “Existing Credit Agreement”). Certain capitalized terms used in this description of the Credit Agreement have the meanings given to them in the Credit Agreement. The Company analyzed the amendment to the Existing Credit Agreement pursuant to the guidance in ASC No. 470-50, Debt—Modifications and Extinguishments. The Company determined that certain lenders had changes in cash flows which were substantially different as a result of the amendment to the Existing Credit Agreement, which resulted in a debt extinguishment of $ 52.2 million and a loss on extinguishment and third-party fees of $ 0.7 million being expensed in the nine-month period ended September 30, 2020.
The Credit Agreement rebalances the Company’s existing senior credit facilities under the Existing Credit Agreement from (x) aggregate credit facilities of $ 500,000,000 , consisting of (A) a $ 250,000,000 revolving senior credit facility, which included a $ 10,000,000 swing line sublimit, a $ 10,000,000 letter of credit sublimit, and a $ 20,000,000 alternative currency sublimit, and (B) a $ 250,000,000 term loan to (y) aggregate credit facilities of $ 670,000,000 consisting of (A) an acquisition draw term commitment of $ 340,000,000 (the “Acquisition Draw Term Commitment”), (B) an initial term commitment of $ 180,000,000 (the “Initial Term Commitment” and, together with the Acquisition Draw Term Commitment, the “Term Loan”) and (C) a $ 150,000,000 revolving
- 14 -
senior credit facility (the “Revolver”), which includes a $ 20,000,000 uncommitted swing line sublimit, a $ 10,000,000 letter of credit sublimi t, and a $ 40,000,000 alternative currency sublimit.
The Revolver and the Term Loan mature on May 29, 2023 (the “Maturity Date”). Both the term loan portion and the revolving portion of the Credit Agreement bear an interest rate at LIBOR or similar other indices plus a specified margin. The Company plans to use a portion of the proceeds available under the Revolver and the Term Loan (i) to finance the Company’s previously announced acquisition of Lite-On Semiconductor Corporation, (ii) to refinance certain existing indebtedness of the Borrowers and their subsidiaries under the Existing Credit Agreement and (iii) for working capital, capital expenditures, and other lawful corporate purposes, including, without limitation, financing permitted acquisitions.
The Credit Agreement contains certain financial and non-financial covenants, including, but not limited to, a maximum Consolidated Leverage Ratio, a minimum Consolidated Fixed Charge Coverage Ratio, and restrictions on liens, indebtedness, investments, fundamental changes, dispositions, and restricted payments (including dividends and share repurchases). These covenants are generally similar to the corresponding covenants in the Existing Credit Agreement, except that certain amounts permitted as exceptions to negative covenants restricting liens, indebtedness, investments, dispositions and restricted payments have been revised, and additional exceptions to certain negative covenants have been added, including increased capacity for certain intercompany Indebtedness and Investment (including existing Lite-On Indebtedness), and the right to enter into certain securitization transactions and receivables facilities, subject to limitations set forth in the Credit Agreement. Furthermore, under the Credit Agreement, restricted payments, including dividends and share repurchases, are permitted in certain circumstances, including while the pro forma Consolidated Leverage Ratio is, both before and after giving effect to any such restricted payment, at least 0.25 to 1.00 less than the maximum permitted under the Credit Agreement.
In addition to the liquidity provided by the Credit Agreement, our 51 % owned subsidiary, ERIS Technology Corporation (“ERIS”), borrowed $ 13.7 million through a short-term loan and $ 29.4 million on a long-term basis from local Taiwan banks. The ERIS debt matures in periods from 2020 through 2033 .
Borrowings outstanding as of September 30, 2020 and December 31, 2019, are set forth in the table below:
September 30,
December 31,
Current Amount
Description
2020
2019
Interest Rate
Maturity
Short-term debt
$
70,746
$
13,342
Libor + Margin
Various during 2020 - 2021
Long-term debt
Notes payable to Bank of Taiwan
$
4,142
$
4,242
Variable, 1.3% base
June-33
Notes payable to Bank of China Trust Company
3,436
-
Taibor 3 month rate + 0.5%
December-21
Notes payable to Bank of China Trust Company
16,357
19,212
Taibor 3 month rate + 0.5%
May-24
Notes payable to E Sun Bank
3,436
-
1-M deposit rate plus 0.08%
December-22
Notes payable to E Sun Bank
378
-
1-M deposit rate plus 0.08%
June-27
Notes payable to E Sun Bank
1,684
-
1-M deposit rate plus 0.08%
June-30
Term loan and revolver
318,750
75,187
Libor plus margin
May-23
Total long-term debt
348,183
98,641
Less: Current portion of long-term debt
( 14,978
)
( 33,105
)
Less: Unamortized debt costs
( 2,439
)
( 1,135
)
Total long-term debt, net of current portion
$
330,766
$
64,401
- 15 -
NOTE 9 – Commitments and Contingencies
Purchase commitments – As of September 30, 2020, we had approximately $ 19.8 million in non-cancelable purchase contracts related to capital expenditures, primarily related to our manufacturing facilities in Asia. As of September 30, 2020, we also had a commitment to purchase approximately $ 20.3 million of wafers to be used in our manufacturing process. These wafer purchases will occur during 2020.
Defined Benefit Plan - We have a contributory defined benefit plan that covers certain employees in the United Kingdom. As of September 30, 2020, the unfunded liability for this defined benefit plan was approximately $ 30.7 million. An actuarial valuation was performed as of March 31, 2019, resulting in a deficit of approximately GBP 26.7 million (approximately $ 34.7 million based on a GBP: USD exchange rate of 1.3 :1). As a result of this valuation we have agreed to a revised schedule of contributions of GBP 2.0 million (approximately $ 2.6 million based on a GBP: USD exchange rate of 1.3 :1) to be paid in annual installments with effect from April 1, 2020 to address the deficit revealed by the valuation (with the first payment made by March 31, 2021, and payments to be made by December 31 each year thereafter). These contributions, together with the assumed asset outperformance, are expected to eliminate the deficit by December 31, 2028. Further, we will pay GBP 0.2 million in annual installments effective April 1, 2020 to cover expenses.
Contingencies – From time to time, we are involved in various legal proceedings that arise in the normal course of business. While we intend to defend any lawsuit vigorously, we presently believe that the ultimate outcome of any pending legal proceeding will not have any material adverse effect on our consolidated financial position, cash flows or operating results. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, which could impact our business and operating results for the period in which the ruling occurs or future periods. Based on information available, we evaluate the likelihood of potential outcomes of all pending disputes. We record an appropriate liability when the amount of any liability associated with a pending dispute is deemed probable and reasonably estimable. In addition, we do not accrue for estimated legal fees and other directly related costs as they are expensed as incurred. The Company is not currently a party to any pending litigation that the Company considers material.
Note 10 – Derivative Financial Instruments
We use derivative instruments to manage risks related to foreign currencies, interest rates and the net investment risk in our foreign subsidiaries. Our objectives for holding derivatives include reducing, eliminating, and efficiently managing the economic impact of these exposures as effectively as possible. Our derivative programs include strategies that both qualify and do not qualify for hedge accounting treatment.
Hedges of Foreign Currency Risk - We are exposed to fluctuations in various foreign currencies against our different functional currencies. We use foreign currency forward agreements to manage this exposure. At September 30, 2020, and December 31, 2019, we had $ 124.7 million and $ 105.9 million, respectively, outstanding foreign currency forward contracts that are intended to preserve the economic value of foreign currency denominated monetary assets and liabilities; these instruments are not designated for hedge accounting treatment in accordance with ASC No. 815. The fair value of these instruments approximates zero .
Hedges of Interest Rate and Net Investment Risk - The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps, including interest rate collars, as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
The table below sets forth the fair value of the Company’s interest rate related derivative financial instruments as well as their classification on our condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019:
Other Current Assets
Other Assets
Other Current Liabilities
Other Liabilities
2020
2019
2020
2019
2020
2019
2020
2019
Interest rate swaps and collars
$
-
$
194
-
$
36
$
2,016
$
51
$
92
$
127
- 16 -
The tables below set forth the effect of the Company’s derivative financial instruments on our condensed consolidated statements of income for the three and nine months ended September 30, 2020 and 2019:
Amount of Gain or (Loss) Recognized in OCI on Derivative
Location of Gain or (Loss) Reclassified from Accumulated OCI into
Income
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Net Income
Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion Excluded from Effectiveness Testing)
Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Derivative Instruments Designated as Hedging Instruments
September 30,
September 30,
September 30,
2020
2019
2020
2019
2020
2019
Three Months Ended
Interest rate swaps and collars
$
2
$
( 136
)
Interest expense
$
( 210
)
$
224
N/A
$
-
$
-
Cross currency swaps
$
-
$
-
N/A
$
-
$
-
Interest income
$
-
$
-
Nine Months Ended
Interest rate swaps and collars
$
( 1,569
)
$
( 3,145
)
Interest expense
$
( 283
)
$
1,149
N/A
-
-
Cross currency swaps
$
-
$
( 298
)
N/A
-
-
Interest income
$
-
$
688
We estimate that $ 0.6 million of net derivative gains included in accumulated other comprehensive income (“AOCI”) as of September 30, 2020 will be reclassified into expense within the following 12 months. No gains or losses were reclassified from AOCI into earnings as a result of forecasted transactions that failed to occur during three and nine months ended September 30, 2020 or 2019.
Amount of Gain or (Loss) Recognized in Net Income
Location of Gain or (Loss) Recognized in Net Income
Derivative Instruments Not Designated as Hedging Instruments
September 30,
2020
2019
Three Months Ended
Foreign currency forward contracts
$
2,252
$
( 2,563
)
Foreign currency loss, net
Nine Months Ended
Foreign currency forward contracts
$
( 286
)
$
( 3,793
)
Foreign currency loss, net
As of September 30, 2020 and December 31, 2019, the Company had no t posted any collateral related to these agreements.
- 17 -
NOTE 11 – Leases
The Company leases certain assets used in its business, including land, buildings and equipment. These leased assets are used for operational and administrative purposes.
The components of lease expense are set forth in the table below:
September 30,
September 30,
2020
2019
2020
2019
Operating lease expense
$
3,841
$
3,671
$
11,240
$
11,148
Finance lease expense:
Amortization of assets
209
244
627
733
Interest on lease liabilities
4
11
17
39
Short-term lease expense
99
89
315
223
Variable lease expense
726
681
2,175
2,101
Total lease expense
$
4,879
$
4,696
$
14,374
$
14,244
The table below sets forth supplemental balance sheet information related to leases. In our condensed consolidated balance sheets, right of use (“ROU”) assets are included in other long-term assets while lease liabilities are located in accrued liabilities and other for the current portion and other long-term liabilities for the non-current portion:
September 30, 2020
December 31, 2019
Operating leases:
Operating lease ROU assets
$ 49,376
$ 57,427
Current operating lease liabilities
10,936
12,554
Noncurrent operating lease liabilities
21,695
27,545
Total operating lease liabilities
$ 32,631
$ 40,099
Finance leases:
Finance lease ROU assets
$ 2,509
$ 3,396
Accumulated amortization
( 2,089 )
( 1,924 )
Finance lease ROU assets, net
$ 420
$ 1,472
Current finance lease liabilities
$ 370
$ 903
Non-current finance lease liabilities
11
138
Total finance lease liabilities
$ 381
$ 1,041
Weighted average remaining lease term (in years):
Operating leases
4.0
4.4
Finance leases
0.6
1.3
Weighted average discount rate:
Operating leases
3.9 %
3.8 %
Finance leases
3.0 %
3.0 %
- 18 -
The table below sets forth supplemental cash flow and other information related to leases:
Nine Months Ended
Nine Months Ended
September 30, 2020
September 30, 2019
Cash paid for the amounts included in the measurements of lease liabilities:
Operating cash outflows from operating leases
$ 12,808
$ 14,728
Operating cash outflows from finance leases
17
39
Financing cash outflow from finance leases
671
912
ROU assets obtained in exchange for lease liabilities incurred:
Operating leases
294
3,611
The table below sets forth information about lease liability maturities:
September 30, 2020
Operating Leases
Finance Leases
Remainder of 2020
$
3,640
$
231
2021
10,673
143
2022
8,793
4
2023
4,734
4
2024
2,474
3
2025
2,377
-
2026 and thereafter
2,617
-
Total lease payments
35,308
385
Less: imputed interest
( 2,677 )
( 4 )
Total lease obligations
32,631
381
Less: current obligations
( 10,936 )
( 370 )
Long-term lease obligations
$
21,695
$
11
NOTE 12 – Employee Benefit Plans
We maintain a Non-Qualified Deferred Compensation Plan (the “Deferred Compensation Plan”) for executive officers, key employees and members of the Board of Directors. The Deferred Compensation Plan allows eligible participants to defer the receipt of eligible compensation, including equity awards, until designated future dates. We offset our obligations under the Deferred Compensation Plan primarily by investing in the actual underlying investments. At September 30, 2020 and December 31, 2019, these investments totaled approximately $ 11.7 million and $ 12.9 million, respectively.
NOTE 13 – Related Parties
We conduct business with a related party company, Lite-On Semiconductor Corporation and its subsidiaries and affiliates (collectively, “LSC”), and Nuvoton Technology Corporation and its subsidiaries and affiliates (collectively, “Nuvoton”). LSC is our largest stockholder, owning approximately 15 % of o ur ou t s t a nd i n g C o m m on S toc k as of September 30, 2020, a n d i s a m e m ber of t he L ite- On G r o u p o f c o m p a n ies . On August 8, 2019, we announced that we entered into an agreement with LSC pursuant to which the Company shall acquire LSC. The aggregate consideration payable by the Company, based on the September 30, 2020 exchange rate, is approximately $ 451.4 million. This amount is subject to change, based on the Taiwan dollar to United States dollar exchange rate at closing. The acquisition received LSC stockholder approval on October 25, 2019. On September 22, 2020, we received approval from the China’s State Administration for Market Regulation (“SAMR”) to proceed with the acquisition. LSC has initiated the process to terminate its listing on the Taiwan Stock Exchange and revoke its public offering with the Taiwan Financial Supervisory Commission. With the exception of the remaining customary closing conditions, all other conditions to the acquisition’s closing have been satisfied, including the approvals from the Taiwan Fair Trade Commission, the Investment Commission of the Ministry of Economic Affairs and China’s National Development and Reform Commission and SAMR, and we anticipate completing the acquisition by the end of November 2020, subject to customary closing conditions. We expect to fund the purchase price of the transaction primarily with proceeds from the Credit Agreement. See Note 8. Raymond Soong, the former Chairman of our Board of Directors, is the Chairman of LSC, and is the Chairman of Lite-On Technology Corporation (“LTC”), a significant shareholder of LSC. C.H. Chen, our former President and Chief Executive Officer and currently the Vice Chairman of our Board of Directors, is also Vice Chairman of LSC and a board member of LTC. Dr. Keh-Shew Lu, Chairman of our Board of Directors, President and Chief Executive Officer, is a board member of LTC, and a
- 19 -
board member of Nuvoton. We consider our relationships with LSC and Nuvoton to be mutually beneficial, and we plan to continue our strategic alliance with LSC and Nuvoton. We purchase wafers from Nuvoton for use in our production process.
We also conduct business with Keylink International (B.V.I.) Inc. and its subsidiaries and affiliates (collectively, “Keylink”). Keylink is our 5% joint venture partner in our Shanghai assembly and test facilities. We sell products to, and purchase inventory from Keylink. In addition, our subsidiaries in China lease their manufacturing facilities in Shanghai from, and subcontract a portion of our manufacturing process (metal plating and environmental services) to, Keylink. We also pay fees for plating and rental services and consulting to Keylink. The aggregate amounts paid to Keylink for the three months ended September 30, 2020 and 2019 were approximately $ 3.9 million and $ 3.7 million, respectively. The aggregate amounts paid to Keylink for the nine months ended September 30, 2020 and 2019 were approximately $ 10.7 million and $ 11.5 million, respectively. I n a dd itio n, Chengdu Ya Guang Electronic Company Limited (“ Y a G u a ng”) is our 2 % joint venture partner in one of our Chengdu assembly and test facilities and i s o ur 5 % j o i nt v e n t ure p a r t n e r i n ou r other C h eng du asse m bly a nd tes t facility ; h owe v er, we have no material transactions with Ya Guang. We also purchase materials from Jiyuan Crystal Photoelectric Frequency Technology Ltd (“JCP”), a frequency control product manufacturing company in which we have made an equity investment and account for that investment using the equity method of accounting.
The Audit C ommittee of t he Bo a rd r e views all related party transactions for pot e ntial conflict of i nterest s i tuations on a n ongoing basis, all in accord a nce with su c h procedures as t he Audit Committee m ay adopt from time to time.
The table below sets forth net sales to and purchases from related parties:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
LSC
Net sales
$
151
$
273
$
450
$
729
Purchases
$
3,262
$
2,548
$
9,816
$
11,039
Nuvoton
Purchases
$
3,363
$
2,650
$
7,018
$
5,951
Keylink
Net sales
$
5,550
$
4,923
$
14,510
$
11,304
Purchases
$
297
$
604
$
1,128
$
1,794
JCP
Purchases
$
330
$
151
$
777
$
462
The table below sets forth accounts receivable from, and accounts payable to, related parties:
September 30,
December 31,
2020
2019
LSC
Accounts receivable
$
166
$
184
Accounts payable
$
2,222
$
2,154
Nuvoton
Accounts payable
$
1,257
$
1,055
Keylink
Accounts receivable
$
31,265
$
31,598
Accounts payable
$
26,704
$
28,244
JCP
Accounts payable
$
307
$
173
Note 14 –Acquisitions
Savitech Acquisition
On February 5, 2020 , the Company entered into an agreement to invest up to approximately $ 14.2 million to acquire at least 51 % of Savitech Corporation (“Savitech”), a fabless semiconductor design company located in Zhubei City, Taiwan. The Company will make the investment in two tranches. The first tranche of $ 5.6 million, which provided the Company with a 33.6 % ownership of
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Savitech, was made on March 4, 2020. The initial tranche was funded with cash on hand. The second tranche, currently recorded in other current liabilities, as shown in the table below, and currently valued at $ 8.5 million will increase the Company’ s ownership to at least 51 % of Savitech. The second tranche will be paid on June 30, 2021, provided Savitech achieves previously agreed-to revenue levels. If revenue levels are not achieved the Company will pay less than the maximum $ 8.6 million, but regardless of the amount paid for the second tranche, the Company will still acquire at least 51 % of Savitech.
The Company recorded the purchase of Savitech as a business acquisition and will consolidate Savitech into its operations, based on the voting model, with a non-controlling interest related to the interest the Company does not own in Savitech. The Company made its investment in Savitech in order to increase the Company’s integrated circuit business. Total purchase consideration recorded was $ 13.9 million. The goodwill will not be tax deductible. The Company also incurred acquisition costs of approximately $ 0.1 million that were recognized in selling, general and administrative expense. The table below sets forth the fair value of the assets and liabilities recorded in the acquisition and the corresponding line item in which the item is recorded in our condensed consolidated balance sheet at the date of acquisition.
Cash and cash equivalents
$
6.2
Prepaid expenses and other
0.7
Goodwill
13.9
Intangible assets, net
6.1
Other long-term assets
0.4
Accrued liabilities and other
9.9
Noncontrolling interest
11.8
Wafer Fabrication Facility Acquisition
On April 1, 2019 , the Company completed the previously announced acquisition of a wafer fabrication facility located in Greenock, Scotland (“GFAB”). The Company recorded the purchase of GFAB as a business acquisition. The Company purchased GFAB in order to increase the Company’s wafer production capacity. Total consideration paid by the Company was $ 33.2 million and was funded by advances under the revolving portion of our long-term credit facility. The facility and assets were wholly acquired, and there is no remaining minority interest. The goodwill will not be tax deductible. The Company also incurred acquisition costs of approximately $ 0.6 million that were recognized in selling, general and administrative expense. Due to a lack of available data we are unable to provide historical financial pro forma data. The table below sets forth the fair value of the assets and liabilities recorded in the GFAB acquisition and the corresponding line item in which the item is recorded in our condensed consolidated balance sheet.
Property, plant and equipment, net
$
24.4
Inventories
3.6
Prepaid expenses and other
5.2
Goodwill
0.9
Deferred tax liabilities
1.0
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.