DIODES INC /DEL/ 10-K

Item 9A . Controls and Procedures. Disclosure Controls and Procedures Our Chief Executive Officer, Keh-Shew Lu, and Chief Financial Officer, Brett R. Whitmire, with the participation of our management, carried out an evaluation as of December 31, 2020, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended). Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer believe that, as of the end of the period covered by this report, our disclosure controls and procedures are effective at the reasonable assurance level to ensure that information required to be included in this report is: • recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and • accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding disclosure. Disclosure controls and procedures, no matter how well designed and implemented, can provide only reasonable assurance of achieving an entity’s disclosure objectives. The likelihood of achieving such objectives is affected by limitations inherent in disclosure controls and procedures. These include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures such as simple errors, mistakes or intentional circumvention of the established processes. 47 - Management's Annual Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and implemented by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of ours are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of management, including our Chief Executive Officer and the Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). This evaluation included review of the documentation of controls, testing of operating effectiveness of controls and a conclusion on this evaluation. In fiscal year 2020, we completed the acquisition of Lite-On Semiconductor Corp (“LSC”). We have excluded LSC‘s business, which was accounted for as a business combination, from our assessment of the effectiveness of internal control over financial reporting. Total assets for LSC represent $353.0 million, or 17.8%, of total assets as of $1,979.5 million. Total net sales for LSC represent $16.9 million, or 1.3%, of net sales for the year ended December 31, 2020. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2020. The effectiveness of our internal control over financial reporting as of December 31, 2020, has been audited by Moss Adams LLP, an independent registered public accounting firm, as stated in their report which appears in Item 8 of this Annual Report on Form 10-K. Changes in Internal Control Over Financial Reporting There was no change in our internal control over financial reporting, known to the Chief Executive Officer or the Chief Financial Officer, that occurred during the last fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, other than the acquisition of LSC during the fourth quarter of 2020. Item 9B. Other Information. None. 48 - PART III Ite m 10. Directors, Executive Officers and Corporate Governance. The information concerning our directors, executive officers and corporate governance is incorporated herein by reference from the section entitled “Proposal One – Election of Directors” contained in our definitive proxy statement to be filed pursuant to Section 14(a) of the Securities Exchange Act of 1934 within 120 days after our fiscal year end of December 31, 2020, for our annual stockholders’ meeting for 2021 (the “Proxy Statement”). We have adopted a code of ethics that applies to our Chief Executive Officer and senior financial officers. The code of ethics has been posted on our website under the Corporate Governance portion of the Investor Relations section at www.diodes.com. We intend to satisfy disclosure requirements regarding amendments to, or waivers from, any provisions of our code of ethics on our website. Item 11. Executive Compensation. The information concerning executive compensation is incorporated herein by reference from the sections entitled “Compensation Discussion and Analysis,” “Executive Compensation,” and “ Compensation Committee Interlocks and Insider Participation” contained in the Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information concerning the security ownership of certain beneficial owners and management and related stockholder matters is incorporated herein by reference from the sections entitled “General Information – Security Ownership of Certain Beneficial Owners and Management,” and “Executive Compensation – Equity Compensation Plan Information” contained in the Proxy Statement. Item 13. Certain Relationships, Related Transactions and Director Independence. The information concerning certain relationships, related transactions and director independence is incorporated herein by reference from the sections entitled “Corporate Governance – Certain Relationships and Related Person Transactions” and “Corporate Governance – Director Independence” and “Proposal One – Election of Directors” contained in the Proxy Statement. Item 14. Principal Accounting Fees and Services. The information concerning our principal accountant’s fees and services is incorporated herein by reference from the section entitled “Ratification of the Appointment of Independent Registered Public Accounting Firm” contained in the Proxy Statement. 49 - PART IV Ite m 15. Exhibits, Financial Statement Schedules. (a) Financial Statements and Schedules Our consolidated financial statements are as set forth under Item 8 of this report on Form 10-K. (1) Financial statements: Page Report of Independent Registered Public Accounting Firm 51 Consolidated Balance Sheets at December 31, 2020, and 2019 54 Consolidated Statements of Income for the Years Ended December 31, 2020, 2019 and 2018 55 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019 and 2018 56 Consolidated Statements of Equity for the Years Ended December 31, 2020, 2019 and 2018 57 Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018 58 Notes to Consolidated Financial Statements 60 (2) Schedules: None Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements and note thereto. (b) Exhibits The exhibits listed on the Index to Exhibits are filed as exhibits or incorporated by reference to this Annual Report. (c) Financial Statements of Unconsolidated Subsidiaries and Affiliates Not Applicable. Item 16. Form 10-K Summary. None 50 - Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Diodes Incorporated Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Diodes Incorporated and Subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting included in Item 9A. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. As discussed in Management’s Annual Report on Internal Control over Financial Reporting, on November 30, 2020, the Company acquired Lite-On Semiconductor Corporation (“LSC”). For the purposes of assessing internal control over financial reporting, management excluded LSC, whose financial statements constitute 17.8% of the Company’s 51 - consolidated total assets and 1.3% of consolidated net sales as of and for the year ended December 31, 2020. Accordingly, our audit did not include the internal control over financial reporting of LSC. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matters communicated below are matters arising from the current year audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee of the Company’s board of directors and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate. Revenue – Ship and Debit Reserve As described in Note 1, the Company records reserves related to estimated customer incentives, such as “ship and debit”, which arise when the Company, from time to time based on market conditions, issue credits to certain distributors upon their shipments to their end customers. The ship and debit reserve comprehends both claims in process and anticipated claims arising from the eventual sale of distribution inventory that is subject to claim activity. The Company performs a look-back analysis of revenues and credits issued to distributors. Using their look-back analysis, the Company adjusts their assumptions and estimated reserves each quarter. The resulting ship and debit reserve is recorded as a reduction to revenue for the year ended December 31, 2020 with a corresponding reduction to accounts receivable, which approximated $48.8 million as of December 31, 2020. Estimating the ship and debit reserve involves the application of models which require management to make certain assumptions including historical customer ship and debit credit rates and credit lag times on such revenues. These assumptions could be affected by current and future economic and market conditions. We identified the ship and debit reserve as a critical audit matter because auditing management’s estimate of the ship and debit reserve was complex and judgmental due to the significant estimation required by management. The primary procedures we performed to address this critical audit matter included: • Obtaining an understanding, evaluating the design and testing the operating effectiveness of internal controls over the measurement of the ship and debit reserve, including testing controls over management’s review of the reserve calculation and the underlying assumptions used to develop the estimate. 52 - • Testing select distributor balances. • Vouching revenues and ship and debit credits to supporting documents. • Evaluating the reasonableness of management’s assumptions by comparing the significant assumptions used to historical customer trends and current industry and market trends, including testing the completeness and accuracy of the underlying data. • Performing sensitivity analyses on the significant assumptions to evaluate the potential changes in the ship and debit reserve that would result from changes in the assumptions. Business Combinations – Preliminary Determination of Fair Value of Assets Acquired As described in Note 1 and Note 19, a significant component of the purchase of LSC included property, plant and equipment. The preliminary valuation of the property, plant and equipment was conducted primarily using the cost approach and the sales comparison approach was used to estimate the underlying land value. The Company makes estimates and assumptions about economic obsolescence allocated to the various property, plant and equipment categories considering the perspective of marketplace participants. The resulting preliminary value of property, plant and equipment was estimated to be approximately $68.0 million as of November 30, 2020. We identified the property, plant and equipment preliminary valuation, inclusive of the economic obsolescence estimate, as a critical audit matter since the assumptions as described above involve high levels of management judgment and in turn led to a high degree of auditor judgment, effort and subjectivity in performing procedures and evaluating audit evidence related to management’s valuation methods and significant assumptions. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained. The primary procedures we performed to address this critical audit matter included: • Obtaining an understanding, evaluating the design and testing the operating effectiveness of internal controls over the measurement of the estimated fair values of the acquired fixed assets, including testing controls over management’s review of the valuation calculation and the underlying assumptions used to develop the estimate. • Evaluating the appropriateness of management’s valuation methodologies. • Assessing the reasonableness of various inputs of the cost approach and the sales comparison approach. • Assessing the reasonableness of any economic obsolescence allocated to the various property, plant and equipment categories. • Involving the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained, including economic obsolescence. /s/ Moss Adams LLP Los Angeles, California February 19, 2021 We have served as the Company’s auditor since 1993. 53 - DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) December 31, 2020 2019 Assets Current assets: Cash and cash equivalents $ 268,065 $ 258,390 Restricted cash 52,464 1,117 Short-term investments 6,142 4,825 Accounts receivable, net of allowances of $ 3,806 and $ 4,866 at December 31, 2020 and 2019, respectively 320,061 260,322 Inventories 307,062 236,472 Prepaid expenses and other current assets 70,193 48,833 Total current assets 1,023,987 809,959 Property, plant and equipment, net 530,815 469,574 Deferred income tax 57,841 17,516 Goodwill 158,331 141,318 Intangible assets, net 110,591 119,523 Other long-term assets 97,892 81,494 Total assets $ 1,979,457 $ 1,639,384 Liabilities Current liabilities: Line of credit $ 140,563 $ 13,342 Accounts payable 168,045 122,148 Accrued liabilities 160,117 100,571 Income tax payable 19,177 16,156 Current portion of long-term debt 21,860 33,105 Total current liabilities 509,762 285,322 Long-term debt, net of current portion 288,179 64,401 Deferred tax liabilities 34,598 16,333 Other long-term liabilities 130,795 120,545 Total liabilities 963,334 486,601 Commitments and contingencies (See Note 17) 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; 44,276,194 and 51,206,969 , issued and outstanding at December 31, 2020 and 2019, respectively 35,692 35,111 Additional paid-in capital 449,598 427,262 Retained earnings 888,046 789,958 Treasury stock, at cost; 9,259,858 and 1,457,206 , issued and outstanding at December 31, 2020 and 2019, respectively ( 335,910 ) ( 37,768 ) Accumulated other comprehensive loss ( 73,606 ) ( 108,139 ) Total stockholders' equity 963,820 1,106,424 Noncontrolling interest 52,303 46,359 Total equity 1,016,123 1,152,783 Total liabilities and stockholders' equity $ 1,979,457 $ 1,639,384 The accompanying notes are an integral part of these consolidated financial statements. 54 - DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) Twelve Months Ended December 31, 2020 2019 2018 Net sales $ 1,229,215 $ 1,249,130 $ 1,213,989 Cost of goods sold 798,094 783,323 778,713 Gross profit 431,121 465,807 435,276 Operating expenses Selling, general and administrative 185,067 181,343 176,197 Research and development 94,288 88,517 86,286 Amortization of acquisition-related intangible assets 16,261 18,041 18,351 Loss (gain) on disposal of fixed assets 106 ( 24,429 ) ( 636 ) Other operating expense 1,067 1,727 596 Total operating expenses 296,789 265,199 280,794 Income from operations 134,332 200,608 154,482 Other income (expense) Interest income 1,066 2,189 1,978 Interest expense ( 11,662 ) ( 7,893 ) ( 9,901 ) Foreign currency loss, net ( 9,814 ) ( 3,737 ) ( 3,701 ) Other income 6,419 7,079 7,104 Total other expense ( 13,991 ) ( 2,362 ) ( 4,520 ) Income before income taxes and noncontrolling interest 120,341 198,246 149,962 Income tax provision 21,112 44,131 44,556 Net income 99,229 154,115 105,406 Less: net income attributable to noncontrolling interest ( 1,141 ) ( 865 ) ( 1,385 ) Net income attributable to common stockholders $ 98,088 $ 153,250 $ 104,021 Earnings per share attributable to common stockholders Basic $ 1.92 $ 3.02 $ 2.09 Diluted $ 1.88 $ 2.96 $ 2.04 Number of shares used in computation Basic 51,004 50,787 49,841 Diluted 52,133 51,860 50,935 The accompanying notes are an integral part of these consolidated financial statements. 55 - DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Twelve Months Ended December 31, 2020 2019 2018 Net income $ 99,229 $ 154,115 $ 105,406 Unrealized (loss) gain on defined benefit plan, net of tax ( 3,723 ) ( 4,142 ) 3,440 Unrealized (loss) gain on hedge instruments, net of tax ( 3,183 ) ( 3,652 ) 737 Unrealized foreign currency gain (loss), net of tax 41,439 1,501 ( 22,543 ) Comprehensive income 133,762 147,822 87,040 Less: Comprehensive income attributable to noncontrolling interest ( 1,141 ) ( 865 ) ( 1,385 ) Total comprehensive income attributable to common stockholders $ 132,621 $ 146,957 $ 85,655 The accompanying notes are an integral part of these consolidated financial statements. 56 - DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (In thousands) Common stock Treasury stock Additional paid-in Retained Accumulated other comprehensive Total Diodes Incorporated Stockholders' Noncontrolling Total (Amounts in thousands) Shares Amount Shares Amount capital earnings loss equity interest equity Balance, December 31, 2017 50,587 $ 33,727 ( 1,457 ) $ ( 37,768 ) $ 386,338 $ 532,687 $ ( 83,480 ) $ 831,504 $ 42,414 $ 873,918 Total comprehensive income - - - - - 104,021 ( 18,366 ) 85,655 1,385 87,040 Contributions from noncontrolling interests - - - - - - - - 4,902 4,902 Dividends to noncontrolling interest - - - - - - - - ( 2,732 ) ( 2,732 ) Common stock issued for share-based plans 1,091 727 - - 4,134 - - 4,861 - 4,861 Share-based compensation - - - - 20,736 - - 20,736 - 20,736 Tax related to net share settlement - - - - ( 11,293 ) - - ( 11,293 ) - ( 11,293 ) 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 - - - - - 153,250 ( 6,293 ) 146,957 865 147,822 Contributions from noncontrolling interests - - - - - - - - 3,343 3,343 Dividends to noncontrolling interest - - - - - - - - ( 3,818 ) ( 3,818 ) Common stock issued for share-based plans 986 657 - - 11,244 - - 11,901 - 11,901 Share-based compensation - - - - 20,535 - - 20,535 - 20,535 Tax related to net share settlement - - - - ( 4,432 ) - - ( 4,432 ) - ( 4,432 ) 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 - - - - - 98,088 34,533 132,621 1,141 133,762 Acquisition of noncontrolling interest Yea Shin - - - - ( 1,225 ) - - ( 1,225 ) ( 4,930 ) ( 6,155 ) Contributions from noncontrolling interests - - - - - - - - 11,832 11,832 Dividends to noncontrolling interests - - - - - - - - ( 2,099 ) ( 2,099 ) Common stock issued for share-based plans 872 581 - - 6,249 - - 6,830 - 6,830 Share-based compensation - - - - 24,177 - - 24,177 - 24,177 Deferred compensation plan - - - - - - - - - - Tax related to net share settlement - - - - ( 8,302 ) - - ( 8,302 ) - ( 8,302 ) Stock buyback related to the LSC acquisition - - ( 7,766 ) ( 296,705 ) - - - ( 296,705 ) - ( 296,705 ) Stock buyback related to deferred compensation plan - - ( 37 ) ( 1,437 ) 1,437 - - - - - Balance December 31, 2020 53,536 $ 35,692 ( 9,260 ) $ ( 335,910 ) $ 449,598 $ 888,046 $ ( 73,606 ) $ 963,820 $ 52,303 $ 1,016,123 The accompanying notes are an integral part of these consolidated financial statements. 57 - DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Twelve Months Ended December 31, 2020 2019 2018 Operating Activities Net income $ 99,229 $ 154,115 $ 105,406 Adjustments to reconcile net income to net cash provided by operating activities, net of effects of acquisitions: Depreciation 91,747 91,543 86,291 Amortization of intangible assets 16,260 18,041 18,353 Amortization of debt issuance costs 1,455 521 522 Share-based compensation 25,260 20,535 20,736 Loss (gain) on disposal of property, plant and equipment 119 ( 24,429 ) ( 636 ) Deferred income taxes ( 14,456 ) 9,904 3,674 Other ( 949 ) ( 187 ) ( 2,335 ) Changes in operating assets: Accounts receivable ( 10,501 ) ( 30,775 ) ( 29,478 ) Inventories ( 4,560 ) ( 11,325 ) ( 2,154 ) Prepaid expenses and other current assets ( 9,067 ) ( 6,630 ) ( 11,119 ) Changes in operating liabilities: Accounts payable 7,422 3,513 9,977 Accrued liabilities ( 9,198 ) 7,369 ( 13,445 ) Other liabilities ( 2,182 ) ( 2,694 ) 345 Income taxes payable (refundable) ( 3,359 ) 271 ( 571 ) Net cash and cash equivalents provided by operating activities 187,220 229,772 185,566 Investing Activities Acquisitions, net of cash acquired ( 24,593 ) ( 33,028 ) ( 41 ) Purchases of short-term investments ( 11,486 ) ( 19,271 ) ( 15,901 ) Sales of short-term investments 10,277 21,847 12,576 Purchase of equity securities ( 6,131 ) - - Purchases of property, plant and equipment ( 75,813 ) ( 98,505 ) ( 87,507 ) Proceeds from sales of property, plant and equipment 232 29,366 429 Other 742 ( 835 ) 1,500 Net cash and cash equivalents used by investing activities ( 106,772 ) ( 100,426 ) ( 88,944 ) Financing Activities Advances on lines of credit and short-term debt 77,483 9,954 9,151 Repayments on lines of credit and short-term debt ( 40,498 ) ( 7,362 ) ( 2,797 ) Proceeds from long-term debt 956,363 405,540 465,656 Repayments of long-term debt ( 744,237 ) ( 522,860 ) ( 522,473 ) Debt issuance costs ( 2,477 ) ( 223 ) - Repayments of finance lease obligations ( 919 ) ( 1,082 ) 1,198 Net proceeds from the issuance of common stock 6,830 11,901 4,862 Capital contribution from noncontrolling interest 10 - 6,255 Dividend distribution to noncontrolling interest ( 2,112 ) ( 3,818 ) ( 2,694 ) Repurchase of common stock ( 296,705 ) - - Taxes related to net share settlement ( 8,302 ) ( 4,432 ) ( 11,294 ) Other 262 ( 50 ) 225 Net cash and cash equivalents used by financing activities ( 54,302 ) ( 112,432 ) ( 51,911 ) Effect of exchange rate changes on cash and cash equivalents, including restricted cash 34,876 760 ( 8,078 ) Increase (decrease) in cash and cash equivalents, including restricted cash 61,022 17,674 36,633 Cash and cash equivalents, beginning of year, including restricted cash 259,507 241,833 205,200 Cash and cash equivalents, end of year, including restricted cash $ 320,529 $ 259,507 $ 241,833 The accompanying notes are an integral part of these consolidated financial statements. 58 - DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (In thousands) Twelve Months Ended December 31, 2020 2019 2018 Supplemental Cash Flow Information Cash paid during the year for: Interest $ 10,219 $ 7,235 $ 9,962 Income taxes $ 48,040 $ 37,158 $ 33,265 Non-cash activities: Accounts payable balance related to the purchase of property, plant and equipment $ 7,297 $ 10,167 $ 12,598 The following table provides a reconciliation between cash, cash equivalents and restricted cash reported within the consolidated balance sheets to the total of the same such amounts shown above: Twelve Months Ended December 31, 2020 2019 2018 Current Assets: Cash and cash equivalents $ 268,065 $ 258,390 $ 241,053 Restricted cash (included in other current assets) 52,464 1,117 780 Total cash, cash equivalents and restricted cash $ 320,529 $ 259,507 $ 241,833 The accompanying notes are an integral part of these consolidated financial statements. 59 - DIODES INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Table amounts in thousands except per share data) Note 1 – Summary of Operations and Significant Accounting Policies Nature of operations Diode s 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. Diodes serves the consumer electronics, computing, communications, industrial, and automotive markets. Diodes’ products include diodes, rectifiers, transistors, MOSFETs, GPP bridges, GPP Rectifiers, 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. Diodes also has timing, connectivity, switching, and signal integrity solutions for high-speed signals. Diodes’ corporate headquarters and Americas’ sales office are located in Plano, Texas, and Milpitas, California. Design, marketing, and engineering centers are located in Plano; Milpitas; Taipei, Taoyuan City, Zhubei City, Taiwan; Shanghai, Yangzhou, China; Oldham, England; and Neuhaus, Germany. Diodes’ wafer fabrication facilities are located in Oldham, Greenock, UK and Shanghai and Wuxi, China and Keelung and Hsinchu, Taiwan. Diodes has assembly and test facilities located in Shanghai, Jinan, Chengdu and Wuxi, China as well as in Neuhaus, Germany and Jhongli and Keelung, Taiwan. Additional engineering, sales, warehouse, and logistics offices are located in Taipei, Taiwan; Hong Kong; Oldham, UK; Shanghai, Shenzhen, Wuhan and Yangzhou, China; Seongnam-si, South Korea; and Munich, Frankfurt, Germany; with support offices throughout the world. Our product focus is on high-growth end-user equipment markets such as satellite TV set-top boxes, portable DVD players, datacom devices, ADSL modems, power supplies, medical devices (non-life support devices/systems), PCs and notebooks, flat panel displays, digital cameras, mobile handsets, AC-to-DC and DC-to-DC conversion, Wireless 802.11 LAN access points, brushless DC motor fans, serial connectivity, and automotive applications. Significant Accounting Policies Principles of consolidation – The consolidated financial statements include the accounts of Diodes Incorporated, its wholly-owned subsidiaries and its controlled majority-owned subsidiaries. We account for equity investments in companies over which we have the ability to exercise significant influence, but do not hold a controlling interest, under the equity method, and we record our proportionate share of income or losses in Interest and other, net in the consolidated statements of income. All significant intercompany balances and transactions have been eliminated. Use of estimates – The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires that management make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The level of uncertainty in estimates and assumptions increases with the length of time until the underlying transactions are completed. Actual results may differ from these estimates in amounts that may be material to the consolidated financial statements and accompanying notes. Revenue recognition – Effective January 1, 2018, we adopted the comprehensive new revenue recognition standard ASC 606. ASC 606 defines a performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and under ASC 606 is the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Generally speaking, our performance obligations represent a promise to transfer various semiconductor products, and have the same pattern of revenue recognition. Our performance obligations are satisfied at either a point in time, or over time as work progresses. The vast majority of our revenue from products and services is accounted for at a point in time. Substantially all of our revenue in direct and Distributor sales is recognized at a point in time. Further, the payment terms on our sales are based on negotiations with our customers. Our customers can order different types of semiconductors in a single contract (purchase order), and each line on a purchase order represents a separate performance obligation. Depending on the terms of an arrangement, we may also be responsible for shipping and handling activities. In accordance with ASC 606-10-25-18B, we have elected to account for shipping and handling as activities to fulfill our promise to transfer the good(s). As such, shipping and handling activities do not represent a separate performance obligation, and are accrued as a fulfillment cost. Further, although we offer warranties on our products, our warranties are considered to be assurance-type in nature and do not cover anything beyond ensuring that the product is functioning as intended. - 60 - Based on the guidance in ASC 606, assurance-type warranties do not represent separate performance obligations; therefore, the primary performance obligation in the majority of our contracts is the delivery of a specific good through the purchase order submitted by our customer. We record allowances/reserves for a number of items. The following items are the largest dollar items for which we record allowances/reserves, with ship and debit making up the vast majority: (i) ship and debit, which arise when we issue credit to certain distributors upon their shipments to their end customers; (ii) stock rotation, which are contractual obligations that permit certain distributors, up to four times a year, to return a portion of their inventory based on historical shipments to them in exchange for an equal and offsetting order; and (iii) price protection, which arise when market conditions cause average selling prices to decrease and we issue credit to certain distributors on their inventory. Ship and debit reserves are recorded as a reduction to net sales with a corresponding reduction to accounts receivable. Stock rotation reserves and price protection reserves are recorded as a reduction to net sales with a corresponding increase in accrued liabilities. We also assess our customer’s ability and intention to pay, which is based on a variety of factors including our customer’s historical payment experience, their financial condition and the condition of the global economy and financial markets. Payment terms and conditions typically vary depending on negotiations with the customer. Net sales are reduced in the period of sale for estimates of product returns and other allowances including distributor adjustments, which were approximately $ 194.7 million, $ 163.9 million and $ 158.8 million in 2020, 2019 and 2018, respectively. Product warranty – We generally warrant our products for a period of one year from the date of sale. Historically, warranty expense has not been material. Cash, cash equivalents, and short-term investments – We consider all highly liquid investments with maturity of three months or less at the date of purchase to be cash equivalents. We currently maintain substantially all of our day-to-day operating cash balances with major financial institutions. We hold short-term investments consisting of time deposits, which are highly liquid with maturity dates greater than three months at the date of purchase. Generally, we can access these investments in a relatively short amount of time but in doing so we generally forfeit a portion of interest income. See Note 3 below for additional information regarding fair value of financial instruments. Allowance for doubtful accounts – We evaluate the collectability of our accounts receivable based upon a combination of factors, including the current business environment and historical experience. If we are aware of a customer’s inability to meet its financial obligations, we record an allowance to reduce the receivable to the amount we reasonably believe will be collected from the customer. For all other customers, we record an allowance based upon the amount of time the receivables are past due. If actual accounts receivable collections differ from these estimates, an adjustment to the allowance may be necessary with a resulting effect on operating expense. Accounts receivable are presented net of valuation allowance, which were approximately $ 3.8 million at December 31, 2020 and $ 4.9 million at December 31, 2019. Inventories – Inventories are stated at the lower of cost or net realizable value. Cost is determined principally by the first-in, first-out method. Cost includes materials, labor, and manufacturing overhead related to the purchase and production of inventories. Any write-down of inventory to the lower of cost or net realizable value at the close of a fiscal period creates a new cost basis that subsequently would not be marked up based on changes in underlying facts and circumstances. On an on-going basis, we evaluate inventory for obsolescence and slow-moving items. This evaluation includes analysis of sales levels, sales projections, and purchases by item, as well as raw material usage related to our manufacturing facilities. If our review indicates a reduction in utility below carrying value, we reduce inventory to a new cost basis. If future demand or market conditions are different than our current estimates, an inventory adjustment to write down inventory may be required, and would be reflected in cost of goods sold in the period the revision is made. Property, plant and equipment – Purchased property, plant and equipment is recorded at historical cost, and property, plant and equipment acquired in a business combination is recorded at fair value on the date of acquisition. Property, plant and equipment is depreciated using straight-line methods over the estimated useful lives, which range from 20 to 55 years for buildings and 3 to 10 years for machinery and equipment. The estimated lives of leasehold improvements range from 3 to 5 years , and are amortized over the shorter of the remaining lease term or their estimated useful lives. Goodwill and other indefinite lived intangible assets – Goodwill and indefinite lived assets are tested for impairment on an annual basis or when an event or changes in circumstances indicate that its carrying value may not be recoverable. Goodwill impairment is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment. Diodes has one operating segment. No goodwill impairment occurred in 2020, 2019, or 2018. Goodwill is reviewed for impairment using either a qualitative assessment or a quantitative goodwill impairment test. If we choose to perform a qualitative assessment and determine the fair value more likely than not exceeds the carrying value, no further evaluation is necessary. When we perform the quantitative goodwill impairment test, we compare fair value to carrying value, which includes goodwill. If fair value exceeds carrying value, the goodwill is not considered impaired. If the carrying value is higher than the fair value, the difference would be recognized as an impairment loss. 61 - Impairment of long-lived assets – Our long-lived assets are reviewed whenever events or changes in circumstances indicate that the carrying value may not be recoverable . We consider assets to be impaired if the carrying value exceeds the undiscounted projected cash flows from operations. If impairment exists, the assets are written down to fair value or to the projected discounted cash flows from related operations. As of December 31, 2020, we expect the remaining carrying value of assets to be recoverable. Business combinations – We account for acquired businesses using the acquisition method of accounting, which requires that once control of a business is obtained, 100 % of the assets acquired and liabilities assumed, including amounts attributed to noncontrolling interests, be recorded at the date of acquisition at their respective fair values . Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. For significant acquisitions we may use independent third-party valuation specialists to assist us in determining the fair value of assets acquired and liabilities assumed. Significant judgment is often required in estimating the fair value of assets acquired and liabilities assumed. The Company makes estimates and assumptions about conditions of the assets, other costs not captured in the base costs, and consideration for entrepreneurial profit, depreciation, functional obsolescence, and economic obsolescence allocated to the various property, plant and equipment categories considering the perspective of marketplace participants. While management believes those expectations and assumptions are reasonable, they are inherently uncertain. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions, which could result in subsequent impairments. During the normal course of business the Company pursues acquisitions. See Note 19 for additional information regarding business combinations. Income taxes – Income taxes are accounted for using an asset and liability approach whereby deferred tax assets and liabilities are recorded for differences in the financial reporting bases and tax bases of our assets and liabilities. If it is more likely than not that some portion of deferred tax assets will not be realized, a valuation allowance is recorded. GAAP prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Tax positions shall initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions shall initially and subsequently be measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and all relevant facts. All deferred income taxes are classified as noncurrent assets or noncurrent liabilities on the consolidated balance sheet as of December 31, 2020 and 2019, respectively. Research and development costs – Internally-developed research and development costs are expensed as incurred. Acquired in-process research and development (“IPR&D”) is capitalized as an indefinite-lived intangible asset and evaluated periodically for impairment. When the project is completed, an expected life is determined and the IPR&D is amortized as an expense over the expected life. Shipping and handling costs – Shipping and handling costs for products shipped to customers, which are included in selling, general and administrative expenses, were approximately $ 16.6 million, $ 13.9 million and $ 14.8 million for the twelve months ended December 31, 2020, 2019 and 2018, respectively. Concentration of credit risk – Financial instruments, which potentially subject us to concentrations of credit risk, include trade accounts receivable. Credit risk is limited by the dispersion of our customers over various geographic areas, operating primarily in electronics manufacturing and distribution. We perform a credit evaluation of new customers and monitor the accounts receivable aging of our existing customers. Generally we require no collateral from our customers and historically credit losses have been insignificant. We currently maintain substantially all of our day-to-day cash balances and short-term investments with major financial institutions. Cash balances are usually in excess of Federal and/or foreign deposit insurance limits. 62 - Valuation of financial instruments – The carrying value of our financial instruments, including cash and cash equivalents, short-term investments, accounts receivable, accounts payable, credit line, and long-term debt approximate fair value due to their current market conditions, maturity dates and other factors. Share-based compensation – We use the Black-Scholes-Merton model to determine the fair value of stock options on the date of grant and recognize compensation expense for stock options on a straight-line basis. 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. Performance stock units 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. The amount of compensation expense recognized using the Black-Scholes-Merton model requires us to exercise judgment and make assumptions relating to the factors that determine the fair value of our stock option grants. The fair value calculated by this model is a function of several factors, including the grant price, the expected future volatility, the expected term of the option and the risk-free interest rate of the option. The expected term and expected future volatility of the options require judgment. In addition, we estimate the expected forfeiture rate and only recognize expense for those stock options expected to vest. We estimate the forfeiture rate based on historical experience, and to the extent our actual forfeiture rate is different from our estimate, share-based compensation expense is adjusted accordingly. Treasury stock – Under a program previously authorized by our board of directors we purchased shares of our common stock. This program expired on December 31, 2019 , and there currently is no authorized plan to repurchase our shares of common stock. Shares that are reacquired are recorded as treasury stock, at cost, the measurement date of cost being date of purchase, as a reduction to stockholder’ equity. During the fourth quarter of 2020, as part of the Lite-On Semiconductor acquisition, the Company reacquired 7,765,778 shares of its Common Stock. Functional currencies and foreign currency translation – We translate the assets and liabilities of our non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates on the balance sheet date. Net sales and expense for these subsidiaries are translated at the weighted-average exchange rate during the period presented. Resulting translation adjustments are recorded as a separate component of accumulated other comprehensive income or loss within stockholders’ equity in the consolidated balance sheets. Included in other income are foreign exchange losses of approximately $ 9.8 million for the twelve month ended December 31, 2020, and approximately $ 3.7 million for the twelve months periods ended December 31, 2019 and 2018, respectively. Defined benefit plan – We maintain plans covering certain of our employees in the U.K. The overfunded or underfunded status of pension and postretirement benefit plans are recognized on the balance sheet. Actuarial gains and losses, and prior service costs or credits, are recognized in other comprehensive income (loss), net of tax effects, until they are amortized as a component of net periodic benefit cost. For financial reporting purposes, the net pension and supplemental retirement benefit obligations and the related periodic pension costs are calculated based upon, among other things, assumptions of the discount rate for plan obligations, estimated return on pension plan assets and mortality rates. These obligations and related periodic costs are measured using actuarial techniques and assumptions. The projected unit credit method is the actuarial cost method used to compute the pension liabilities and related expenses. The expected long-term return on plan assets was determined based on historical and expected future returns of the various asset classes. The plan’s investment policy includes a mandate to diversify assets and invest in a variety of asset classes to achieve its expected long-term return and is currently invested in a variety of funds representing most standard equity and debt security classes. Trustees of the plan may make changes at any time. As part of the LSC acquisition we have assumed the liability associated with a defined benefit plan for certain LSC employees. The net liability assumed was approximately $ 4.7 million, as of December 31, 2020. Noncontrolling interest - Noncontrolling interest primarily relates to the minority investors’ share of the earnings of certain China and Taiwan subsidiaries. Noncontrolling interests are a separate component of equity and not a liability. Increases or decreases in noncontrolling interest, due to changes in our ownership interest of the subsidiaries that leave control intact, are recorded as equity transactions . The noncontrolling interest in our subsidiaries and their equity balances are reported separately in the consolidated financial statements, and activities of these subsidiaries are included therein. Contingencies – From time to time, we may be involved in a variety of legal matters that arise in the normal course of business. Based on information available, we evaluate the likelihood of potential outcomes. We record and disclose the appropriate liability when the amount 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. Comprehensive income (loss) – GAAP generally requires that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities are reported as separate components of the equity section of the consolidated balance sheet, such items, along with net income, are components of comprehensive income or loss. The components of 63 - accumulated other comprehensive income or loss include foreign currency translation adjustments and unrealized gain or loss on defined benefit plan. Accumulated other comprehensive loss was approximately $ 73.6 million, $ 108.1 million and $ 101.8 million at December 31, 2020, 2019 and 2018, respectively. As of December 31, the accumulated balance for each component of comprehensive income is as follows: 2020 2019 Unrealized foreign currency losses $ ( 21,614 ) $ ( 63,053 ) Unrealized gain on cross currency and interest rate swaps, net of tax $ ( 3,574 ) $ ( 391 ) Unrealized loss on defined benefit plan $ ( 48,418 ) $ ( 44,695 ) Reclassifications – Certain immaterial amounts from prior periods have been reclassified to conform to the current years’ presentation. Recently Issued Accounting Pronouncements The Financial Accounting Standards Board (“FASB”) issued the following Accounting Standards Updates (“ASU”) which could have potential impact to the Company’s financial statements: In March 2020, the FASB issued 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. In June 2016, the FASB issued 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 material impact on our consolidated financial statements and related disclosures. Note 2 – Earnings per Share Basic earnings per share is calculated by dividing net earnings attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is calculated similarly but includes potential dilution from the exercise of stock options and stock awards, except when the effect would be anti-dilutive. Earnings per share are computed using the “treasury stock method.” Twelve Months Ended December 31, 2020 2019 2018 Earnings (numerator) Net income (loss) attributable to common stockholders $ 98,088 $ 153,250 $ 104,021 Shares (denominator) Weighted average common shares outstanding (basic) 51,004 50,787 49,841 Dilutive effect of stock options and stock awards outstanding 1,129 1,073 1,094 Adjusted weighted average common shares outstanding (diluted) 52,133 51,860 50,935 Earnings (loss) per share attributable to common stockholders Basic $ 1.92 $ 3.02 $ 2.09 Diluted $ 1.88 $ 2.96 $ 2.04 Stock options and stock awards excluded from EPS calculation because their inclusion would be anti-dilutive 137 101 1,103 64 - Note 3 – Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We use valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement costs). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. These two types of inputs create a three-tier fair value hierarchy that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows: Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (for example, interest rates, volatilities, prepayment speeds, loss severities, credit risks and default rates) or inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 Inputs - Significant unobservable inputs that reflect an entity’s own assumptions that market participants would use in pricing the assets or liabilities. As of December 31, 2020, we had short-term and long-term investments. Long-term investments are included with Other long-term assets on the consolidated balance sheet. Trading securities held at December 31, 2020, were purchased on the open market and unrealized gains and losses are included in Other income (expense). The trading securities are valued under the fair value hierarchy using Level 1 Inputs. Short-term investments consist of investments such as time deposits, which are highly liquid with maturity dates greater than three months at the date of purchase. Generally, we can access these short-term investments in a relatively short amount of time but in doing so we generally forfeit a portion of earned and future interest income. Long-term investments consist of certain equity securities acquired as part of the LSC acquisition. Deferred compensation investments consist of the Company’s stock, mutual funds and cash. See Note 13 for additional information related to our deferred compensation program and Note 18 for additional information related to our interest rate swaps and foreign currency hedges. The short-term investments, long-term investments and deferred compensation investments are valued under the fair value hierarchy using Level 1 and Level 2 Inputs. Financial assets and liabilities carried at fair value as of December 31, 2020, are classified in the following table: Description Fair Market Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Changes in Fair Values Included in Current Period Earnings Short-term investments $ 6,142 $ 6,142 $ - $ - $ - Long-term investments 18,295 18,295 - - - Cross-currency swap liability 2,305 - 2,305 - - Interest rate swap liability 1,626 - 1,626 - - Deferred compensation investments 12,829 691 12,138 - - 65 - Financial assets and liabilities carried at fair value as of December 31, 2019 are classified in the following table: Description Fair Market Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Changes in Fair Values Included in Current Period Earnings Short-term investments $ 4,825 $ 4,825 $ - $ - $ - Interest rate swap assets 51 - 51 - - Deferred compensation investments 12,912 2,534 10,378 - - Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis; that is, the instruments are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). We believe our long-term debt under our revolving credit facility approximates fair value and is valued under the fair value hierarchy using Level 2 Inputs. Financial assets and financial liabilities measured at fair value on a non-recurring basis were not significant at December 31, 2020 and 2019. We also are responsible for a pension plan in the U.K. that holds investments carried at fair value. See Note 13 for additional information related to these pension plan investments. Note 4 – Inventories Inventories, stated at the lower of cost or market value, at December 31 were: 2020 2019 Finished goods $ 85,506 $ 62,900 Work-in-progress 73,466 55,082 Raw materials 148,090 118,490 $ 307,062 $ 236,472 Note 5 – Property, Plant and Equipment Property, plant and equipment at December 31 were: 2020 2019 Buildings and leasehold improvements $ 267,700 $ 228,522 Machinery and equipment 942,405 863,771 1,210,105 1,092,293 Less: Accumulated depreciation and amortization ( 791,348 ) ( 706,658 ) 418,757 385,635 Construction in-progress 45,060 30,747 Land 66,998 53,192 $ 530,815 $ 469,574 Depreciation and amortization of property, plant and equipment was $ 91.7 million, $ 91.5 million and $ 86 .3 million for the years ended December 31, 2020, 2019 and 2018, respectively. During the fourth quarter of 2019 the Company recorded a $ 24.3 million gain realized upon selling land. The land was acquired in a previous period in anticipation of building a new corporate headquarters building. 66 - Note 6 – Intangible Assets Intangible assets subject to amortization at December 31 were as follows: December 31, 2020 Intangible Assets Useful life Gross Carrying Amount Accumulated Amortization Currency Exchange Net Amortized intangible assets Patents 5 - 15 years $ 13,040 $ ( 11,409 ) $ ( 139 ) $ 1,492 Developed product technology 2 - 10 years 164,300 ( 89,027 ) ( 5,891 ) 69,382 Customer relationships 7 - 12 years 62,093 ( 34,597 ) ( 1,688 ) 25,808 Software license and other 3 - 4 years 5,743 ( 5,677 ) ( 63 ) 3 Total amortized intangible assets 245,176 ( 140,710 ) ( 7,781 ) 96,685 Intangible assets with indefinite lives In process research and development Indefinite 4,580 - - 4,580 Trademarks and trade names Indefinite 10,303 - ( 977 ) 9,326 Total Intangible assets with indefinite lives 14,883 - ( 977 ) 13,906 Total intangible assets $ 260,059 $ ( 140,710 ) $ ( 8,758 ) $ 110,591 December 31, 2019 Intangible Assets Useful life Gross Carrying Amount Accumulated Amortization Currency Exchange Net Amortized intangible assets Patents 5 - 15 years $ 12,931 $ ( 10,634 ) $ ( 254 ) $ 2,043 Developed product technology 2 - 10 years 159,129 ( 77,915 ) ( 7,857 ) 73,357 Customer relationships 7 - 12 years 62,093 ( 30,138 ) ( 1,682 ) 30,273 Software license and other 3 - 4 years 5,822 ( 5,765 ) ( 49 ) 8 Total amortized intangible assets 239,975 ( 124,452 ) ( 9,842 ) 105,681 Intangible assets with indefinite lives In process research and development Indefinite 4,580 - - 4,580 Trademarks and trade names Indefinite 10,303 - ( 1,041 ) 9,262 Total Intangible assets with indefinite lives 14,883 - ( 1,041 ) 13,842 Total intangible assets $ 254,858 $ ( 124,452 ) $ ( 10,883 ) $ 119,523 Amortization expense related to intangible assets subject to amortization was $ 16.3 million, $ 18.0 million and $ 18.4 million for the years ended December 31, 2020, 2019 and 2018, respectively. In process research and development is transferred to amortized intangible assets at the time the product becomes viable. The weighted amortization period for intangible assets subject to amortization is 9.8 years. The schedule below sets future amortization expense of our currently owned intangible assets: 2021 $ 16,606 2022 15,981 2023 15,716 2024 15,359 2025 14,483 2026 and thereafter 18,540 Total $ 96,685 67 - Note 7 – Goodwill Changes in goodwill for the years ended December 31, were as follows: Balance at December 31, 2018 $ 132,437 Acquisitions: Wafer fabrication in Greenock, Scotland 931 Canyon Investment 1,671 ERIS acquisition of Yea Shin Technology Corporation 4,320 Foreign currency translation adjustment 1,959 Balance at December 31, 2019 141,318 Acquisitions: Savitech 13,962 Foreign currency translation adjustment 3,051 Balance at December 31, 2020 $ 158,331 Note 8 – Bank Credit Agreements and Other Short-term and Long-term Debt Short-term debt Our Asia subsidiaries maintain credit facilities with several financial institutions through our foreign entities worldwide totaling $ 307.1 million. The increase from 2019 to 2020 reflects $ 147.6 million short-term facility assumed as part of the LSC acquisition. 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. These credit facilities bear interest at LIBOR or similar indices plus a specified margin. Interest payments are due monthly on outstanding amounts under the credit lines. The unused and available credit under the various facilities as of December 31, 2020, was approximately $ 166.0 million, net of a $ 140.6 million advanced under our foreign credit lines and $ 0.5 million credit used for import and export guarantee. Long-term debt 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 “Second and Amended 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”). On December 31, 2020, Diodes Holding B.V. merged into Diodes Holdings UK Limited, which following the merger became the Foreign Borrower under the Credit Agreement, and in connection with the merger, the parties to the Second Amended and Restated Credit Agreement entered into a Consent and Amendment No. 2 to Second Amended and Restated Credit Agreement (“Consent and Amendment No. 2”; the Second Amended and Restated Credit Agreement as amended by Consent and Amendment No. 2 is referred to as the “Credit Agreement”). Certain capitalized terms used in this description of the Credit Agreement have the meanings given to them in the Credit Agreement, the current form of which is set forth in Exhibit A to Consent and Amendment No. 2, which is attached as an exhibit to this report. The Company analyzed the amendment and restatement of 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 and restatement of 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 Second Amended and Restated Credit Agreement rebalanced 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 senior credit facility (the “Revolver”), which includes a $ 20,000,000 uncommitted swing line sublimit, a $ 10,000,000 letter of credit sublimit, 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 used a portion of the proceeds available under the Revolver and the Term Loan (i) to finance the Company’s acquisition of Lite-On Semiconductor Corporation, which is described more fully elsewhere in this report, (ii) to refinance certain existing indebtedness of 68 - 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 our credit lines, our 51 % owned subsidiary, ERIS Technology Corporation (“ERIS”), has short-term debt of $ 12.3 million and long-term debt of $ 30.0 million on a long-term basis from local Taiwan banks. The ERIS debt matures in various periods from 2021 through 2033 . Borrowings outstanding as of December 31, 2020 and December 31, 2019, are set forth in the table below: December 31, Description 2020 2019 Interest Rate Current Amount Maturity Short-term debt $ 140,567 $ 13,342 Libor plus margin Various during 2021 Long-term debt Notes payable to Bank of Taiwan $ 4,154 $ 4,242 Variable, 1.3% base June 2033 Notes payable to Bank of China Trust Company 3,511 - Taibor 3 month rate + 0.5% December 2021 Notes payable to Bank of China Trust Company 16,714 19,212 Taibor 3 month rate + 0.5% May 2024 Notes payable to E Sun Bank 3,511 - 1-M deposit rate plus 0.08% December 2022 Notes payable to E Sun Bank 386 - 1-M deposit rate plus 0.08% June 2027 Notes payable to E Sun Bank 1,721 - 1-M deposit rate plus 0.08% June 2030 Term loan and revolver 282,250 75,187 Libor plus margin May 2023 Total long-term debt 312,247 98,641 Less: Current portion of long-term debt ( 21,860 ) ( 33,105 ) Less: Unamortized debt-issuance costs ( 2,208 ) ( 1,135 ) Total long-term debt, net of current portion $ 288,179 $ 64,401 The table below sets forth the annual contractual maturities of long-term debt at December 31, 2020: 2021 $ 21,861 2022 22,333 2023 250,181 2024 13,636 2025 4,236 Total long-term debt $ 312,247 69 - Note 9 – 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 table below sets forth the components of lease expense for the years ended December 31: 2020 2019 Operating lease expense $ 15,111 $ 14,824 Finance lease expense: Amortization of assets 836 978 Interest on lease liabilities 14 48 Short-term lease expense 525 336 Variable lease expense 2,940 2,663 Total lease expense $ 19,426 $ 18,849 The table below sets forth supplemental balance sheet information related to leases as of December 31: 2020 2019 Operating leases: Operating lease ROU assets $ 54,457 $ 57,427 Current operating lease liabilities 10,663 12,554 Noncurrent operating lease liabilities 27,041 27,545 Total operating lease liabilities $ 37,704 $ 40,099 Finance leases: Finance lease ROU assets $ 2,507 $ 3,396 Accumulated amortization ( 2,298 ) ( 1,924 ) Finance lease ROU assets, net $ 209 $ 1,472 Current finance lease liabilities $ 149 $ 903 Non-current finance lease liabilities 24 138 Total finance lease liabilities $ 173 $ 1,041 Weighted average remaining lease term (in years): Operating leases 7.6 4.4 Finance leases 0.6 1.3 Weighted average discount rate: Operating leases 4.0 % 3.8 % Finance leases 3.1 % 3.0 % The table below sets forth supplemental cash flow and other information related to leases for the twelve months ended December 31: 2020 2019 Cash paid for the amounts included in the measurements of lease liabilities: Operating cash outflows from operating leases $ 15,943 $ 18,325 Operating cash outflows from finance leases 19 48 Financing cash outflow from finance leases 919 1,082 ROU assets obtained in exchange for lease liabilities incurred: Operating leases 6,339 3,956 70 - The table below sets forth information about lease liability maturities: December 31, 2020 Operating Leases Finance Leases 2021 $ 11,842 $ 151 2022 9,993 12 2023 5,626 10 2024 3,102 2 2025 2,999 - 2026 2,585 - 2027 and thereafter 8,648 - Total lease payments 44,795 175 Less: imputed interest ( 7,091 ) ( 2 ) Total lease obligations 37,704 173 Less: current obligations ( 10,663 ) ( 149 ) Long-term lease obligations $ 27,041 $ 24 Note 10 – Accrued Liabilities and Other Long-Term Liabilities Accrued liabilities and other current liabilities at December 31 were: 2020 2019 Accrued expenses $ 60,322 $ 30,761 Compensation and payroll taxes 48,748 34,043 Equipment purchases 7,297 10,167 Operating lease 10,663 12,554 Finance lease 149 903 Accrued pricing adjustments 7,891 5,617 Accrued professional services 3,708 3,258 Tax payable - non-income tax related 7,858 2,972 Other 13,481 296 $ 160,117 $ 100,571 Other long-term liabilities at December 31 were: 2020 2019 Accrued defined benefit plan $ 35,316 $ 28,795 Unrecognized tax benefits 27,965 28,215 Operating lease 27,041 27,545 Finance lease 24 138 Deferred grants and subsidy 11,924 12,774 Deferred compensation 14,833 12,166 Tax contingencies 8,787 8,631 Other 4,905 2,281 $ 130,795 $ 120,545 71 - Note 11 – Stockholders’ Equity We have never declared or paid cash dividends on our Common Stock. Our U.S. Credit Facility permits us to pay dividends up to $ 25.0 million per fiscal year to its stockholders so long as we have not defaulted under the U.S. Credit Facility at the time of such dividend and no default would result from declaring or paying such dividend. The payment of dividends is within the discretion of our Board of Directors. See Note 8 for additional information regarding our credit agreements. During November 2015, the Company’s board of directors authorized a share repurchase plan to repurchase up to an aggregate of $ 100 million of the Company’s outstanding common stock. This repurchase plan expired December 31, 2019 , and was not renewed. During 2020, in connection with the LSC acquisition, the Company acquired approximately 7.8 million shares of its stock that was owned by LSC. These shares are reflected as treasury stock in the consolidated balance sheet. Note 12 – Income Taxes The table below sets forth our (loss) income before taxes for the years ended December 31: Income (loss) before income taxes 2020 2019 2018 U.S. $ 45,526 $ 73,352 $ ( 24,141 ) Foreign 74,815 124,894 174,103 Total $ 120,341 $ 198,246 $ 149,962 The table below sets forth the components of our income tax provision (benefit) for the years ended December 31: 2020 2019 2018 Current tax provision Federal $ 631 $ 259 $ - Foreign 17,115 28,829 42,726 State 56 92 24 17,802 29,180 42,750 Deferred tax provision (benefit) Federal 6,411 886 2,400 Foreign ( 6,210 ) 11,994 ( 3,107 ) State 65 30 56 266 12,910 ( 651 ) Liability for unrecognized tax benefits 3,044 2,041 2,457 Total income tax provision $ 21,112 $ 44,131 $ 44,556 72 - Effective Tax Rate Reconciliation The table below sets forth a reconciliation between the effective tax rate and the statutory tax rates for the years ended December 31: 2020 2019 2018 Percent Percent Percent of pretax of pretax of pretax Amount earnings* Amount earnings* Amount earnings* Federal tax $ 25,272 21.0 $ 41,632 21.0 $ 31,488 21.0 State income taxes, net of federal tax provision ( 378 ) ( 0.3 ) 1,389 0.7 ( 375 ) ( 0.3 ) Foreign income taxed at different tax rates 81 0.1 ( 5,786 ) ( 2.9 ) ( 2,844 ) ( 1.9 ) U.S. tax impact of foreign operations ( 3,031 ) ( 2.5 ) ( 3,340 ) ( 1.7 ) 4,140 2.8 Foreign withholding taxes ( 1,798 ) ( 1.5 ) 22,685 11.4 10,962 7.3 Research and development ( 4,210 ) ( 3.5 ) ( 3,686 ) ( 1.9 ) ( 3,541 ) ( 2.4 ) Liability for unrecognized tax benefits 3,044 2.5 2,041 1.0 2,457 1.6 Valuation allowance 2,199 1.8 ( 10,563 ) ( 5.3 ) ( 379 ) ( 0.3 ) Employee stock-based compensation ( 660 ) ( 0.5 ) ( 52 ) - ( 2,154 ) ( 1.4 ) U.S. Tax Cuts and Jobs Act - - - - 2,762 1.8 Other 593 0.5 ( 189 ) ( 0.1 ) 2,040 1.4 Income tax provision $ 21,112 17.5 $ 44,131 22.3 $ 44,556 29.7 * The sum of the amounts in the table may not equal to the effective tax rate due to rounding. Uncertain Tax Positions In accordance with the provisions related to accounting for uncertainty in income taxes, we recognize the benefit of a tax position if the position is “more likely than not” to prevail upon examination by the relevant tax authority. The table below sets forth a reconciliation of the beginning and ending amount of unrecognized tax benefits: 2020 2019 2018 Balance at January 1, $ 35,652 $ 32,209 $ 30,581 Additions based on tax positions related to the current year 7,495 9,274 4,667 Additions for prior year tax positions 4,952 39 - Reductions for prior year tax positions ( 5,633 ) ( 5,870 ) ( 3,039 ) Balance at December 31, $ 42,466 $ 35,652 $ 32,209 If the $ 42.5 million of unrecognized tax benefits as of December 31, 2020, is recognized, approximately $ 40.3 million would affect the effective tax rate. It is reasonably possible that the amount of the unrecognized benefit with respect to certain of our unrecognized tax positions will significantly increase or decrease within the next 12 months. These changes may be the result of settlements of ongoing audits or competent authority proceedings. At this time, an estimate of the range of the reasonably possible outcomes cannot be made. 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 tax year 2015. 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., with limited exceptions, we are no longer subject to income tax audits for years before 2015. Although the outcome of tax audits is always uncertain, we believe that adequate amounts of tax, interest and penalties, if any, have been provided for in our reserve for any adjustments that may result from future tax audits. We recognize accrued interest and penalties, if any, related to unrecognized tax benefits in interest expense. We had an immaterial amount of accrued interest and penalties at December 31, 2020, 2019 and 2018. 73 - Deferred Taxes The table below sets forth our deferred tax assets and liabilities as of December 31: 2020 2019 Deferred tax assets Inventory cost $ 15,154 $ 10,423 Accrued expenses and accounts receivable 5,294 4,420 Foreign tax credits - 5,848 Research and development tax credits 15,807 16,263 Net operating loss carryforwards 42,734 24,139 Lease obligations 2,982 3,773 Plant, equipment and intangible assets 162 - Accrued pension 6,386 4,629 Share based compensation and others 8,810 7,805 97,329 77,300 Valuation allowances ( 45,591 ) ( 29,414 ) Total deferred tax assets, non-current 51,738 47,886 Deferred tax liabilities Plant, equipment and intangible assets - ( 13,816 ) Right of use assets ( 2,936 ) ( 4,008 ) Outside basis differences and others ( 13,467 ) ( 23,648 ) Total deferred tax liabilities, non-current ( 16,403 ) ( 41,472 ) Net deferred tax assets $ 35,335 $ 6,414 ASU No. 2013-11 provides that an entity is required to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. The $ 23.2 million net deferred tax assets presented in the balance sheet as of December 31, 2020, is net of $ 12.3 million of unrecognized tax benefits. The $ 35.3 million and $ 6.4 million net deferred tax asset presented above for December 31, 2020 and 2019, respectively, is prior to the net balance sheet presentation required by ASU 2013-11. At December 31, 2020, we had federal and state tax credit and research credit carryforwards of approximately $ 7 million and $ 9 million, respectively, which are available to offset future income tax liabilities. The federal tax credit carryforwards begin to expire in 2032 and the state tax credit carryforwards will begin to expire in 2020. Consistent with prior years, we determined that it is more likely than not that our state research credit carryforwards will expire before they are utilized. During 2019 we determined that it is more likely than not that our federal tax credit carryforwards will be utilized before expiration. We released the previously recorded valuation allowances as a credit to income tax expense. The valuation allowances recorded against the related deferred tax assets totaled $ 8 million as of December 31, 2020 and 2019. At December 31, 2020, we had state net operating loss (“NOL”) carryforwards of approximately $ 1 million, and foreign NOL carryforwards of $ 209 million which are available to offset future taxable income. The state NOL carryforward will begin to expire in 2021. We determined that it is more likely than not that the state NOL carryforwards will expire before they are fully utilized and recorded a full valuation allowance on the related deferred tax assets. The foreign NOL carryforwards will begin to expire in 2021. We determined that it is more likely than not that a portion of the foreign NOL carryforwards will expire before they are fully utilized. The valuation allowances recorded against the related deferred tax assets totaled $ 32 million and $ 19 million as of December 31, 2020 and 2019, respectively . Supplemental Information Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of European and Asian subsidiaries. As of December 31, 2020, we had undistributed earnings from non-U.S. operations of approximately $ 1.6 billion (including approximately $ 287 million of restricted earnings, which are not available for dividends). Undistributed earnings of our China subsidiaries comprise $ 469 million of this total. Additional Chinese withholding taxes of approximately $ 45 million would be required should the $ 469 million of such earnings be distributed out of China as dividends. The impact of tax holidays decreased our tax expense by approximately $ 0.9 million, $ 3.1 million and $ 1.6 million for the years ended December 31, 2020, 2019 and 2018, respectively. The benefit of the tax holidays on basic and diluted earnings per share was $ 0.02 , $ 0.06 and $ 0.03 for the twelve months ended December 31, 2020, 2019 and 2018, respectively. 74 - Note 13 – Employee Benefit Plans Defined Benefit Plan In connection with the Zetex acquisition, we adopted a contributory defined benefit plan that covers certain employees in the U.K. The defined benefit plan is closed to new entrants and frozen with respect to future benefit accruals. The retirement benefit is based on the final average compensation and service of each eligible employee. We determined the fair value of the defined benefit plan assets and utilize an annual measurement date of December 31. At subsequent measurement dates, defined benefit plan assets will be determined based on fair value. Defined benefit plan assets consist of a diverse range of listed and unlisted securities including corporate bonds and mutual funds and are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension liability. The net pension and supplemental retirement benefit obligations and the related periodic costs are based on, among other things, assumptions of the discount rate, estimated return on plan assets and mortality rates. These obligations and related periodic costs are measured using actuarial techniques and assumptions. The projected unit credit method is the actuarial cost method used to compute the pension liabilities and related expenses. All unrecognized actuarial gains and losses, prior service costs and accumulated other comprehensive income are eliminated and the balance sheet liability is set equal to the funded status of the defined benefit plan at acquisition date. In October 2018, a U.K. High Court ruling required pension plans, subject to guaranteed minimum pension rules to amend their pension plan formulas to equalize benefits for men and women to adjust for unequal results previously calculated. The U.K. High Court ruling went on to require pension plans to make back payments subject to plan rule limitations, with interest applied at one percentage point over the Bank of England base rate. The guarantee equalization payment was allowed for by increasing the pension liability. Our portion of the total equalization amount was approximately £ 0.5 million (or approximately $ 0.7 million based on GBP: USD exchange rate of 1 :1.3). In connection with the LSC acquisition, we adopted a contributory defined benefit plan. The table below sets forth net periodic benefit costs of the plan for the twelve months ended December 31: Defined Benefit Plan 2020 2019 Components of net periodic benefit cost: Service cost $ 257 $ 256 Interest cost 3,035 4,069 Recognized actuarial loss 2,100 1,546 Expected return on plan assets ( 7,405 ) ( 7,511 ) Prior service cost 56 55 Net periodic benefit cost $ ( 1,957 ) $ ( 1,585 ) The table below sets forth the benefit obligation, the fair value of plan assets, and the funded status as of December 31: Defined Benefit Plan 2020 2019 Change in benefit obligation: Beginning balance $ 158,680 $ 141,104 Service cost 257 255 Interest cost 3,027 4,045 Actuarial loss 12,522 11,214 Benefits paid ( 4,769 ) ( 4,158 ) Currency changes 5,575 6,220 Benefit obligation at December 31 $ 175,292 $ 158,680 Change in plan assets: Beginning balance - fair value $ 132,621 $ 117,162 Employer contribution 2,822 2,629 Actual return on plan assets 12,535 11,791 Benefits paid ( 4,769 ) ( 4,158 ) Currency changes 4,652 5,197 Fair value of plan assets at December 31 $ 147,861 $ 132,621 Underfunded status at December 31 $ ( 27,431 ) $ ( 26,059 ) 75 - Based on an actuarial study performed as of December 31, 2020, the plan was underfunded by approximately $ 27.4 million and the liability is reflected in our consolidated balance sheets as a noncurrent liability and the amount recognized in accumulated other comprehensive loss was approximately $ 50.3 million. We apply the “10% corridor” approach to amortize unrecognized actuarial gains (losses). Under this approach, only actuarial gains (losses) that exceed 10% of the greater of the projected benefit obligation or the market-related value of the plan assets are amortized. For the twelve months ended December 31, 2020, the plan’s total recognized loss increased by approximately $ 5.3 million. The variance between the actual and expected return to plan assets during 2020 decreased the total unrecognized net loss by approximately $ 5.1 million. The total unrecognized net loss is more than 10% of the projected benefit obligation and 10% of the plan assets. Therefore, the excess amount will be amortized over the average term to retirement of plan participants, not yet in receipt of pension, which as of December 31, 2020, was approximately 10.5 years. The following weighted-average assumptions were used to determine net periodic benefit costs for the twelve months ended December 31: 2020 2019 Discount rate 1.3 % 2.9 % Expected long-term return on plan assets 4.9 % 6.4 % The following weighted-average assumption was used to determine the benefit obligations at December 31: 2020 2019 Discount rate 1.3 % 2.0 % The expected long-term return on plan assets was determined based on historical and expected future returns of the various asset classes. The plan’s investment policy includes a mandate to diversify assets and invest in a variety of asset classes to achieve its expected long-term return and is currently invested in a variety of funds representing most standard equity and debt security classes. Trustees of the plan may make changes at any time. The table below sets forth the plan asset allocations of the assets in the plan and expected long-term return by asset category : Asset category Expected long-term return Asset allocation Growth assets 6.9 % 68 % Hedging assets 0.7 % 30 % Cash 0.1 % 2 % Benefit plan payments are primarily made from funded benefit plan trusts and current assets. The table below sets forth the expected future benefit payments, including future benefit accrual, as of December 31, 2020 : 2021 $ 4,566 2022 4,945 2023 5,339 2024 5,688 2025 5,759 2026-2030 30,859 The trustees are required to review the funding position every three years. 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 :1.3). 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 :1.3 ) 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. The defined benefit plan’s investment strategy is to invest 65 % in growth strategy assets and 35 % in hedging strategy assets. The growth strategy consists of a highly diversified set of assets, and the hedging component is designed to hedge a significant proportion of the plan’s interest and inflation rate risks. The overall strategy is designed to return a long-term return of 2.6 % p.a. above the liability benchmark which is broadly equal to changes in the plan’s liabilities. 76 - The plan’s trustees appoint fund managers to carry out all the day-to-day functions relating to the management of the fund and its administration. The fund managers must invest their portion of the plan’s assets in accordance with their investment manager agreement agreed by the trustees. The trustees are responsible for agreeing these investment manager agreements and for deciding on the portion of the plan’s assets that will be invested with each fund manager. When making decisions, the trustees take advice from experts including the plan’s actuary and also have the option to consult with the Company. The following table summarizes the major categories of the plan assets: December 31, 2020 Asset category Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 14,390 $ - $ - $ 14,390 Equity securities: U.K. - 1,066 - 1,066 Overseas equities - 25,760 - 25,760 Emerging markets - 7,607 - 7,607 Fixed income securities: Government bonds - 751 - 751 Non-government bonds - 11,858 - 11,858 Other types of investments Hedge funds - 25,676 - 25,676 Property - 2,693 - 2,693 Liability-driven investments - 49,167 - 49,167 Commodities - 8,890 - 8,890 Other - 3 - 3 Total $ 14,390 $ 133,471 $ - $ 147,861 Fair value is taken to mean the bid value of securities, as supplied by the fund managers. All the plan’s securities are publicly traded and highly liquid. The plan does not hold any Level 3 securities. See Note 3 for additional information regarding fair value and Levels 1, 2 and 3. The investment manager agreements require the fund managers to invest in a diverse range of stocks and bonds across each particular asset class. The stocks held by the plan in a particular asset class should therefore match closely the underlying stocks in the relevant index. We believe that this leads to minimal concentration of risk within each asset class; although we recognize that some asset classes are inherently more risky than others. We also have pension plans in Asia for which the benefit obligation, fair value of the plan assets and the funded status amounts are immaterial and therefore, not included in the amounts or assumptions above. As of December 31, 2020, the Company has recorded a net liability of $ 4.7 million related to the LSC defined benefit plan. 401(k) Retirement Plan We maintain a 401(k) retirement plan (the “Plan”) for the benefit of qualified employees at our U.S. locations. Employees who participate may elect to make salary deferral contributions to the Plan up to 100 % of the employees’ eligible payroll subject to annual Internal Revenue Code maximum limitations. We currently make a matching contribution of $ 1 for every $ 2 contributed by the participant up to 6 % ( 3 % maximum matching) of the participant’s eligible payroll, which vests over an initial four years . In addition, we may make a discretionary contribution to the entire qualified employee pool, in accordance with the Plan. As stipulated by the regulations of China, we maintain a retirement plan pursuant to the local municipal government for the employees in China. We are required to make contributions to the retirement plan at a rate between 10 % and 22 % of the employee’s eligible payroll. Pursuant to the Taiwan Labor Standard Law and Factory Law, we maintain a retirement plan for the employees in Taiwan, whereby we make contributions at a rate of 6 % of the employee’s eligible payroll. For the years ended December 31, 2020, 2019 and 2018, total amounts expensed under these plans were approximately $ 10.2 million, $ 16.3 million and $ 17.0 million, respectively. 77 - Deferred Compensation Plan 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 December 31, 2020 and December 31, 2019, these investments totaled approximately $ 12.8 million and $ 12.9 million, respectively. Note 14 – Share-Based Compensation The table below sets forth the line items where share-based compensation expense was recorded for the twelve months ended December 31: 2020 2019 2018 Cost of goods sold $ 1,064 $ 925 $ 362 Selling, general and administrative expense 21,013 16,687 17,395 Research and development expense 3,183 2,923 2,979 Total share-based compensation expense $ 25,260 $ 20,535 $ 20,736 The table below sets forth share-based compensation expense by type for the twelve months ended December 31: 2020 2019 2018 Stock options $ - $ - $ 274 Share grants 25,260 20,535 20,462 Total share-based compensation expense $ 25,260 $ 20,535 $ 20,736 In May 2013, our stockholders approved our 2013 Equity Incentive Plan (“2013 Plan”). Since the approval of the 2013 Plan, all stock options are granted under the 2013 Plan, and we will not grant any further stock options under our 2001 Plan. Stock options under the 2013 Plan generally vest in equal annual installments over a four-year period and expire eight years after the grant date . The number of shares originally authorized to be awarded under the 2013 Plan was 6 million shares. In May 2017, our stockholders approved an amendment to the 2013 Plan, authorizing and additional 6 million shares to be awarded, bringing the total shares authorized to be awarded under the 2013 Plan to 12 million shares. Share-based compensation expense for stock options granted in previous years was calculated on the date of grant using the Black-Scholes-Merton option-pricing model . No stock options were granted in any of the periods presented. Total cash received from option exercises was approximately $ 6.8 million, $ 11.9 million and $ 4.9 million during 2020, 2019 and 2018, respectively. At December 31, 2020, there was no unrecognized compensation expense related to unvested options. The table below sets forth a summary of activity in our stock option plan: Stock Options Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value Outstanding at December 31, 2017 1,228 22.85 Exercised ( 240 ) 20.28 Outstanding at December 31, 2018 988 23.47 $ 8,693 Exercised ( 524 ) 22.68 $ 10,600 Outstanding and Exercisable at December 31, 2019 464 24.37 $ 14,849 Exercised ( 272 ) 25.11 $ 8,278 Outstanding and Exercisable at December 31, 2020 192 23.32 1.4 $ 9,059 78 - The table below sets forth information about stock options outstanding at December 31, 2020: Plan Range of Exercise Prices Number Exercisable Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price 2001 Plan 18.48 - 19.27 102 1.4 $ 19.25 2013 Plan 27.92 90 1.4 27.92 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 2013 Plan, and there will be no additional share grants under the 2001 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. 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. The table below sets forth a summary of our non-vested share grants in 2020, 2019 and 2018: Nonvested at December 31, 2017 2,280 22.24 Granted 646 32.06 Vested ( 1,213 ) 21.39 Forfeited ( 46 ) 24.72 Nonvested at December 31, 2018 1,667 26.68 Granted 670 38.15 Vested ( 573 ) 24.90 Forfeited ( 67 ) 30.44 Nonvested at December 31, 2019 1,697 31.71 Granted 573 48.83 Vested ( 770 ) 27.78 $ 37,620 Forfeited and other 88 38.31 Nonvested at December 31, 2020 1,588 39.30 $ 111,947 During 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. During 2018, we modified previously granted stock option and stock awards for two corporate officers who retired. The result of the modification was the acceleration of the vesting of 7,500 stock options and 79,720 stock awards for the corporate officers. The incremental expense recorded for this modification was approximately $ 1.8 million, which was expensed in SG&A during 2018 The total unrecognized share-based compensation expense as of December 31, 2020, was approximately $ 44.8 million, relating to share grants, which was expected to be recognized over a weighted average period of approximately 2.2 years. The aggregate fair value amount of share grants that vested during 2020 was $ 37.6 million. Note 15 – Related Party Transactions We historically conducted business with a related party company, Lite-On Semiconductor Corporation; (“LSC”), and its subsidiaries and affiliates. LSC was also our largest stockholder, owning approximately 15 % of our outstanding Common Stock. As of November 30, 2020, we acquired LSC and they are no longer a stockholder or related party. We sold products to LSC totaling less than 1 % of our net sales for the years ended December 31, 2020, 2019 and 2018, respectively. Raymond Soong, the former Chairman of the Board of Directors of Diodes, was the Chairman of LSC, and was the Chairman of Lite-On Technology Corporation (“LTC”), which was a significant shareholder of LSC. C.H. Chen, our former President and Chief Executive Officer and currently the Vice Chairman of the Board of Directors, was also Vice Chairman of LSC and a board member of LTC. Dr. Keh-Shew Lu, our current 79 - Chairman of the Board of Directors, President and Chief Executive Officer, is a board member of LTC, and a board member of Nuvoton. We consider our relationships Nuvoton to be mutually beneficial and we plan to continue our strategic alliance with Nuvoton. We purchase wafers from Nuvoton for use in our production process. We also conduct business with Nuvoton Technology Corporation and its subsidiaries and affiliates (collectively, “Nuvoton”). We also conduct business with Keylink International (B.V.I.) Inc. and its subsidiaries and affiliates (“Keylink”). Keylink is our 5 % joint venture partner in our Shanghai assembly and test facilities. We sell products to, and purchase inventory from, companies owned by Keylink. We sold products to companies owned by Keylink, totaling approximately 2 % for the 12 months ended December 31, 2020 and 1 % of net sales for each of the twelve month periods ended December 31, 2019 and 2018. 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 a consulting fee to Keylink. The aggregate amounts paid to Keylink for the years ended December 31, 2020, 2019 and 2018 were approximately $ 14.6 million, $ 15.3 million and $ 16.6 million, respectively. In addition, Chengdu Ya Guang Electronic Company Limited (“Ya Guang”) is our 2 % joint venture partner in one of our Chengdu assembly and test facilities and our 5 % partner in our other Chengdu assembly and test facilities ; however, we have no material transactions with Ya Guang, other than this joint venture. We also purchase materials from Jiyuan Crystal Photoelectric Frequency Technology Ltd. (“JCP”) an FCP manufacturing company in which we have made an equity investment and account for using the equity method of accounting. The Audit Committee of the Board reviews all related party transactions for potential conflict of interest situations on an ongoing basis, all in accordance with such procedures as the Audit Committee may adopt from time to time. The table below sets forth net sales and purchases from related parties for the twelve months ended December 31: 2020 2019 2018 LSC, its subsidiaries and affiliates Net sales $ 518 $ 912 $ 1,179 Purchases $ 12,062 $ 13,799 $ 21,126 Keylink Net sales $ 19,757 $ 15,543 $ 12,227 Purchases $ 1,538 $ 2,399 $ 3,581 Nuvoton Net sales $ 10 $ - $ - Purchases $ 8,418 $ 7,719 $ 11,152 JCP Purchases $ 1,095 $ 625 $ 600 The table below sets forth accounts receivable from and accounts payable to related parties at December 31: 2020 2019 LSC, its subsidiaries and affiliates Accounts receivable N/A $ 184 Accounts payable N/A $ 2,154 Keylink Accounts receivable $ 35,365 $ 31,598 Accounts payable $ 31,247 $ 28,244 Nuvoton Accounts receivable $ 10 $ - Accounts payable $ 796 $ 1,055 JCP Accounts payable $ 357 $ 173 80 - Note 16 – Segment Information, Revenue and Enterprise-Wide Disclosures 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. The accounting policies of the operating entities are the same as those described in the summary of significant accounting policies. No customer accounted for 10 % or more or our net sales during the twelve months ended 2020. During the twelve months ended December 31, 2019 and 2018, one customer, a broad-based global distributor that sells to thousands of different end users, accounted for approximately 10.0 % or $ 119.6 million and $ 120.0 million, respectively, of our net sales. No customer accounted for 10% or greater of our outstanding accounts receivable at December 31, 2020 or 2019. The tables below set forth net sales based on the location of the subsidiary producing the net sale: 2020 Asia North America Europe Consolidated Total sales $ 1,399,517 $ 807,405 $ 222,227 $ 2,429,149 Inter-company sales ( 565,723 ) ( 531,385 ) ( 102,826 ) ( 1,199,934 ) Net sales $ 833,794 $ 276,020 $ 119,401 $ 1,229,215 Property, plant and equipment $ 421,185 $ 24,726 $ 84,904 $ 530,815 Assets $ 1,522,835 $ 229,610 $ 227,012 $ 1,979,457 2019 Asia North America Europe Consolidated Total sales $ 1,234,750 $ 612,697 $ 234,092 $ 2,081,539 Inter-company sales ( 418,377 ) ( 320,746 ) ( 93,286 ) ( 832,409 ) Net sales $ 816,373 $ 291,951 $ 140,806 $ 1,249,130 Property, plant and equipment $ 379,075 $ 23,104 $ 67,395 $ 469,574 Assets $ 1,207,331 $ 216,250 $ 215,803 $ 1,639,384 2018 Asia North America Europe Consolidated Total sales $ 1,069,068 $ 179,459 $ 195,406 $ 1,443,933 Inter-company sales ( 150,421 ) ( 24,322 ) ( 55,201 ) ( 229,944 ) Net sales $ 918,647 $ 155,137 $ 140,205 $ 1,213,989 Property, plant and equipment $ 392,445 $ 30,507 $ 23,883 $ 446,835 Assets $ 1,095,037 $ 240,540 $ 190,794 $ 1,526,371 Disaggregation of Revenue . 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. 81 - 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 twelve months ended December 31, 2020, 2019 and 2018: Net Sales by Type for the Twelve Months Ended December 31, Net Sales by Region 2020 2019 2018 Asia $ 961,376 $ 942,577 $ 944,118 Europe 171,985 181,015 138,117 Americas 95,854 125,538 131,754 Total net sales $ 1,229,215 $ 1,249,130 $ 1,213,989 Net Sales by Type 2020 2019 2018 Direct sales $ 419,024 $ 407,851 $ 346,997 Distributor sales 810,191 841,279 866,992 Total net sales $ 1,229,215 $ 1,249,130 $ 1,213,989 Net sales from products shipped to China for the twelve months ended December 31, 2020, 2019 and 2018, was $ 649.9 million $ 633.8 million and $ 662.6 million, respectively. Note 17 – Commitments and Contingencies Lease commitments – We lease offices, manufacturing plants, equipment, vehicles and warehouses under various lease agreements expiring through 2028. For information related to our lease commitments see Note 9. In addition, we have the following land right leases. None of the leases requires a rental payment. Location Term (years) Expiration Date Chengdu, China 50 2061 Shanghai, China * 50 2056 Shandong, China 50 2058 Shanghai, China * 50 2058 Yangzhou, China 50 2065 * Separate leases by separate Diodes’ subsidiaries Purchase commitments – We have entered into non-cancelable purchase contracts for capital expenditures, primarily for manufacturing equipment, for approximately $ 21.9 million at December 31, 2020. As of December 31, 2020, we also had a commitment to purchase approximately $ 53.0 million of wafers to be used in our manufacturing process. These wafer purchases will occur from 2021 to 2023 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 current pending legal proceeding will not have any material adverse effect on our 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 on 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. We record the appropriate liability when the amount 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. 82 - Note 18 – Derivative Financial Instruments In accordance with ASC 815 we recognize derivative instruments on our balance sheet, and we measure them at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate the derivative as being in a hedging relationship, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivative instruments that are designated, and qualify as hedges of the exposure to changes in the fair value are considered fair value hedges. Derivative instruments that are designated, and qualify as hedges of the exposure to variability in expected future cash flows are considered cash flow hedges. Derivative instruments may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. We currently only utilize cash flow hedges and do not use derivatives for trading or speculative purposes. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge, or the earnings effect of the hedged forecasted transactions in a cash flow hedge. We may enter into derivative contracts that are intended to economically hedge certain risks, even though we elect not to apply hedge accounting under ASC 815. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in the consolidated statements of income. Specific information about the valuations of derivatives is described in Note 1 and classification of derivatives in the fair value hierarchy is described in Note 3. Currently our interest rate swaps and interest rate collars are designated as hedges while our foreign exchange contracts are not designated as hedges. The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period in which the hedged forecasted transaction affects earnings. Certain of the Company's agreements with its derivative counterparties contain provisions where if certain merger activity, a change of control, or a capital structure change occurs that materially changes the Company's creditworthiness in an adverse manner, the Company’s counterparty may have the right to terminate any derivative transactions under such agreement. The company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company's default on the indebtedness. 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 December 31, 2020 and 2019, we had 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 815. One of our foreign currency forward agreements has a fair value of $ 1.8 million and is recorded in our Consolidated Balance Sheets. 83 - The tables below set forth outstanding foreign currency forward contracts at December 31, 2020 and 2019: Notional Amount Effective Date Maturity Date Index* Weighted Average Strike Rate Cash Flow Hedge Designation 1,205 December 2020 February 2021 EUR/GPB 0.8948 Non-designated 2,202 December 2020 February 2021 EUR/USD 1.2218 Non-designated 12,879 December 2020 February 2021 GPB/USD 1.3654 Non-designated 213,508 April 2020 - December 2020 January 2021 - May 2021 USD/CNY 6.5806 Non-designated 3,189 December 2020 February 2021 USD/JPY 103.3150 Non-designated 43,180 January 2020 - December 2020 January 2021 - May 2021 USD/TWD 28.1442 Non-designated $ 276,163 $ 1,844 December 2019 February 2020 EUR/GPB 0.8471 Non-designated 3,375 December 2019 February 2020 EUR/USD 1.1230 Non-designated 25,957 December 2019 February 2020 GPB/USD 1.3257 Non-designated 39,340 December 2019 February 2020 USD/CNY 6.9762 Non-designated 763 December 2019 February 2020 USD/JPY 108.7320 Non-designated 33,621 December 2019 February 2020 USD/TWD 29.9880 Non-designated 500 January 2019 January 2020 USD/TWD 30.6350 Non-designated 500 October 2019 February 2020 USD/TWD 30.5710 Non-designated $ 105,900 * EUR = Euro GBP = British Pound Sterling USD = United States Dollar CNY = Chinese Yuan Renminbi JPY = Japan Yen TWD = Taiwan dollar Hedges of Interest Rate 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 this objective, 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 information related to the number of and the notional amount of our interest rate related derivative instruments at December 31 2020 and December 31, 2019: Number of Instruments Notional Amount 2020 2019 2020 2019 Interest rate swaps and collars 6 9 $ 140,000 $ 200,000 The table below sets forth the fair value of the Company’s interest rate related derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of December 31, 2020 and December 31, 2019: Fair Value 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 $ 1,626 $ 51 $ - $ 127 84 - The tables below sets forth the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income for the years ended December 31 2020, 2019 and 2018: Amount of Gain or (Loss) Recognized in OCI on Derivative Location of Gain or (Loss) Reclassified from Accumulated OCI into 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 Amount of Gain or (Loss) Reclassified from Accumulated OCI into Net Income December 31, December 31, December 31, 2020 2019 2018 2020 2019 2018 2020 2019 2018 Interest rate swaps and collars $ ( 1,581 ) $ ( 2,997 ) $ 1,790 Interest expense $ ( 445 ) $ 1,248 $ 860 N/A $ - $ - $ - Cross currency swaps ( 2,305 ) ( 298 ) - N/A - - - Interest income - 688 We estimate that $ 0.5 million of net derivative losses included in accumulated other comprehensive income (“AOCI”) as of December 31, 2020, will be reclassified into earnings 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 fiscal year 2020. Amount of Gain or (Loss) Recognized in Net Income Location of Gain or (Loss) Recognized in Net Income Derivatives Not Designated As Hedging Instruments December 31, 2020 2019 2018 Foreign currency forward contracts $ 3,584 $ ( 3,662 ) $ ( 8,493 ) Foreign currency loss, net At December 31, 2020 and 2019, the fair value of derivatives in a net asset position, which includes accrued interest but excludes any adjustments for nonperformance risk, related to these agreements was $ 1.6 million and $ 0.1 million, respectively. As of December 31, 2020 and 2019, the Company had no t posted any collateral related to these agreements. Note 19 – Business Acquisitions LSC Acquisition On November 30, 2020 the Company closed on the previously announced acquisition of Lite-On Semiconductor (“LSC”), a Taiwan-based supplier of “green” power-related discrete analog semiconductor devices. The Company purchased LSC in order to include LSC’s “green” power-related semiconductor devices that are designed for power saving and low power dissipation to serve the power supply market, and to reacquire the 7,765,778 Diodes shares owned by LSC, which was approximately 15 % of Diodes’ outstanding shares prior to the close of such acquisition. The Company recorded the purchase of LSC as a business combination, with Diodes owning 100 % of LSC. LSC has been consolidated into the operations of Diodes. The purchase price per the Share Swap Agreement, was 42.50 TWD per outstanding LSC share. On November 30, 2020, Diodes acquired the 307,371,139 outstanding shares for a total aggregate purchase price of approximately $ 453.4 million. The acquisition was funded with cash previously drawn from the Second and Amended and Restated Credit Agreement, see Note 8 for additional information. In connection with the acquisition, the Company incurred acquisition costs of approximately $ 3.5 million that were recognized in selling, general and administrative expense. There was $ 16.9 million of revenue and $ 1.6 million of net income attributable to LSC included within the Company’s statement of operations for the year ended December 31, 2020. The net income generated by LSC was primarily attributable to investments held by LSC and not the continuing operations of the business. The reacquired shares were treated as a settlement of a pre-existing relationship and as a transaction separate and apart from the business combination along with the settlement of payables and receivables between Diodes and LSC. There was no gain or loss on the settlement of the payables and receivables between the Company and LSC. The cash attributed to the reacquisition of the Diodes shares is presented within the financing section of the statement of cash flows. 85 - Total consideration paid $ 453.4 Less: Settlement of pre-existing relationships Reacquisition of Diodes stock owned by LSC (1) ( 296.8 ) Net accounts receivable on LSC books owed by Diodes ( 2.6 ) Total amount of pre-existing relationship settled ( 299.4 ) Remaining consideration $ 154.0 (1) Value determined based on closing price of Diodes’ stock on the date the acquisition agreement. The table below sets forth the fair value of the assets acquired and liabilities assumed based on relative fair value at the date of acquisition and the corresponding line item in the Company’s consolidated balance sheet at the date of acquisition. U.S. GAAP permits companies to complete the final determination of the fair values during the measurement period from the acquisition date. The size and breadth of the LSC acquisition will necessitate the use of this measurement period to adequately analyze and assess a number of the factors used in establishing the asset and liability fair values as of the acquisition date including (i) changes in fair values of property, plant and equipment and inventories, (ii) changes in fair value of certain liabilities assumed and (iii) tax impact associated with any other changes in fair value. Any potential adjustments made could be material in relation to the preliminary values. A final determination of the assets acquired and liabilities assumed has not been completed and the following table is considered preliminary. The Company engaged a third party valuation specialist to assist with the assessment of any intangibles assets acquired as part of the LSC acquisition and it was determined that there were no intangible assets as a result of the LSC acquisition. Cash and cash equivalents $ 131,046 Accounts receivable 44,896 Inventories 55,710 Prepaid expenses and other current assets 11,447 Property, plant and equipment 67,952 Deferred income tax 15,732 Other long-term assets 26,037 Total assets acquired 352,820 Line of credit 88,508 Accounts payable 35,245 Accrued liabilities and other 48,992 Income tax payable 6,264 Deferred tax liabilities 8,941 Other long-term liabilities 10,783 Total liabilities assumed 198,733 Non-controlling interest 54 Net assets acquired $ 154,033 The following unaudited pro forma summary presents consolidated information of the Company as if the acquisition and consolidation of LSC had occurred on January 1, 2019: Twelve Months Ended Twelve Months Ended December 31, 2020 December 31, 2019 Net revenues $ 1,421,494 $ 1,447,001 Net income $ 95,908 $ 140,027 Net income attributable to common stockholders $ 96,517 $ 139,603 Earnings per share - basic $ 2.23 $ 3.24 Earnings per share - diluted $ 2.18 $ 3.17 The unaudited pro forma consolidated results of operations do not purport to be indicative of the results that would have been obtained if the above acquisition had actually occurred as of the dates indicated or of those results that may be obtained in the future. The unaudited proforma consolidated results for year ended December 31, 2020, include adjustments that result in a reduction to amortization and depreciation of $ 5.5 million, removal of sales to Diodes on the books of LSC and related cost of goods sold of $ 12.4 million and $ 7.9 million, respectively, removal of LSC’s share of Diodes’ profits as a 15 % shareholder of $ 13.1 million, removal of 86 - $ 2.4 million of transaction costs, additional interest expense of $ 6.0 million, removal of impairment charges of $ 6.3 million, removal of operations of On-Bright, and a tax impact of those adjustments of a reduction to tax expense of $ 18.6 million. The unaudited proforma consolidated results for year ended December 31, 2019, include adjustments that result in a reduction to amortization and depreciation of $ 8.8 million, removal of sales to Diodes on the books of LSC and related COGS of $ 13.7 million and $ 9.0 million, respectively, removal of LSC’s share of Diodes’ profits as a 15 % shareholder of $ 23.4 million, removal of $ 1.0 million of transaction costs, additional interest expense of $ 11.1 million, removal of impairment charges of $ 0.3 million, removal of the operation of On-Bright, and a tax impact of those adjustments of a reduction to tax expense of $ 10.7 million. These unaudited pro forma consolidated results of operations were derived, in part, from the historical consolidated financial statements of LSC and other available information and assumptions believed to be reasonable under the circumstances. LSC will be conformed to Diodes’ reporting calendar. 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 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 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 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 $ 24.4 Inventories 3.6 Prepaid expenses and other 5.2 Goodwill 0.9 Deferred tax liabilities 1.0 87 - Note 20 – Selected Quarterly Financial Data (Unaudited) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2020 Net sales $ 280,717 $ 288,669 $ 309,459 $ 350,370 Gross profit 95,842 101,492 111,090 122,697 Net income attributable to common shareholders 20,168 21,033 27,152 29,735 Earnings per share attributable to common shareholders Basic $ 0.39 $ 0.41 $ 0.52 $ 0.60 Diluted $ 0.38 $ 0.40 $ 0.51 $ 0.59 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2019 Net sales $ 302,293 $ 322,006 $ 323,674 $ 301,157 Gross profit 112,411 121,988 122,046 109,362 Net income (loss) attributable to common shareholders 31,716 36,284 38,060 47,190 Earnings (loss) per share attributable to common shareholders Basic $ 0.63 $ 0.72 $ 0.75 $ 0.90 Diluted $ 0.62 $ 0.70 $ 0.73 $ 0.90 Note: The sum of the quarterly earnings per share may not equal the full year amount, as the computations of the weighted average number of common shares outstanding for each quarter and for the full year are performed independently. NOTE 21 – Subsequent Event On January 22, 2021 , Diodes Hong Kong Limited (the “Borrower”), a company incorporated under the laws of Hong Kong and a subsidiary of Diodes Incorporated (“Diodes Incorporated”), entered into a Facility Agreement (the “Facility Agreement”) with The Hongkong and Shanghai Banking Corporation Limited, as Arranger (the “Arranger”), the financial institutions listed in Schedule 1 thereto, The Hongkong and Shanghai Banking Corporation Limited, as Agent, and The Hongkong and Shanghai Banking Corporation Limited, as Security Agent (the “Security Agent”). In addition, on January 22, 2021 , the Borrower entered into a Hong Kong Debenture (the “Debenture”) with the Security Agent. In connection with the Facility Agreement and the Debenture, Diodes Incorporated executed a letter of awareness for the benefit of the Hongkong and Shanghai Banking Corporation Limited (the “Letter of Awareness”). Certain capitalized terms used in the following description of the Facility Agreement have the meanings given to them in the Facility Agreement. Certain capitalized terms used in the following description of the Debenture have the meanings given to them in the Debenture. Pursuant to the Facility Agreement, the Lenders agreed to make available to the Borrower a US Dollar revolving loan facility in an aggregate amount equal to $ 100,000,000 . The interest rate on Loans made under the Facility will be the sum of the Margin and LIBOR. The Margin is equal to 1.25 %, in the event the Consolidated Leverage Ratio is less than 1.50 :1. The Margin increases, on a sliding scale, as the Consolidated Leverage Ratio increases up to a maximum of 2.25 % if the Consolidated Leverage Ratio is greater than 3.00 :1. The Non-utilisation Fee payable on the undrawn and uncancelled amount of each Lender’s Commitment under the Facility is also dependent upon the Consolidated Leverage Ratio. The Non-utilisation Fee is 0.15 % if the Consolidated Leverage Ratio is less than 1.50 :1. The Non-utilisation Fee increases, on a sliding scale, as the Consolidated Leverage Ratio increases up to a maximum of 0.35 % if the Consolidated Leverage Ratio is greater than or equal to 3.00 :1. The Facility matures on January 22, 2023 (the “Final Repayment Date”). The Availability Period extends from January 22, 2021 through December 22, 2022. Unutilized Commitments will be cancelled at 5 p.m. on the last day of the Availability Period. The Borrower will be able to borrow funds under the Facility on a revolving basis during the Availability Period, however, all borrowed amounts must be repaid on or prior to the Final Repayment Date unless the Facility is extended or refinanced. Neither Diodes Incorporated nor the Borrower can provide any assurances regarding whether the Facility will be extended or refinanced or the terms of any such hypothetical future extension or refinancing. The Borrower plans to use a portion of the proceeds available under the Facility (i) to refinance certain existing indebtedness of the Borrower and (ii) to finance its working capital requirements and its general corporate purposes. The Facility Agreement contains certain financial and non-financial covenants, including, but not limited to, a maximum Leverage Ratio, a minimum Tangible Net Worth, a minimum Interest Cover Ratio, and restrictions on payments of dividends (solely if 88 - at the time of, or as a result of, such declaration or payment, an Event of Default is continuing or would occur). The Facility Agreement is governed by the laws of Hong Kong. Pursuant to the Debenture, the Borrower granted to the Security Agent, on behalf of itself and the other Secured Parties, a security interest over all present and future Security Assets of the Borrower. The security interest is continuing security for the payment, discharge and performance of all of the Secured Liabilities, which includes the Borrower’s payment obligations under the Facility Agreement. The Debenture is governed by the laws of Hong Kong. Pursuant to the Letter of Awareness, Diodes Incorporated agreed, among other things, to notify the Arranger in the event of any decision being taken to dispose of the whole or any part of Diodes Incorporated’s shareholding in the Borrower. The Letter of Awareness is interpreted according to Hong Kong law. 89 - INDEX TO EXHIBITS Number Description Form Date of First Filing Exhibit Number Filed Herewith 3.1 Certificate of Incorporation, as amended 10-K February 20, 2018 3.1 3.2 Amended By-laws of the Company, amended as of January 6, 2016 8-K January 11, 2016 3.1 4.1 Form of Certificate for Common Stock, par value $0.66-2/3 per share S-3 August 25, 2005 4.1 4.2 Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 10-K February 12, 2020 4.2 10.1* Stock Award Agreement dated as of September 22, 2009, between the Company and Keh-Shew Lu 10-Q May 9, 2014 10.6 10.2* Confirmation Agreement dated April 1, 2013, between the Company and Keh-Shew Lu 8-K April 3, 2013 99.1 10.3* Employment Agreement dated as of July 21, 2015, between the Company and Keh-Shew Lu 8-K July 27, 2015 99.1 10.4* Stock Unit Agreement, dated as of July 21, 2015, between the Company and Keh-Shew Lu 8-K July 27, 2015 99.3 10.5* Amendment No. 1 to Employment Agreement dated as of February 22, 2017, between the Company and Keh-Shew Lu. 8-K February 27, 2017 99.1 10.6* Employment agreement dated as of August 29, 2005, between the Company and Mark King 8-K September 2, 2005 10.2 10.7* Separation letter between the Company and Mark King, dated January 11, 2018 10‑Q May 8, 2018 10.1 10.8* Separation letter between the Company and Ed Tang, dated January 18, 2018 10‑Q May 8, 2018 10.2 10.9* Form of Indemnification Agreement between the Company and its directors and executive officers 8-K September 2, 2005 10.5 10.10* Diodes Incorporated 2001 Omnibus Equity Incentive Plan, as amended and restated December 22, 2008 10-K February 26, 2009 10.87 10.11* Diodes Incorporated Second Amended and Restated Deferred Compensation Plan effective January 1, 2009 10-K February 27, 2017 10.9 10.12* First Amendment to the Diodes Incorporated Second Amended and Restated Deferred Compensation Plan effective June 1, 2013 10-K February 27, 2017 10.10 10.13* Diodes Incorporated 2013 Equity Incentive Plan, as amended and restated on May 3, 2017 S-8 August 17, 2017 99.1 10.14* Form of Incentive Stock Option Agreement for the Diodes Incorporated 2013 Equity Incentive Plan S-8 June 13, 2013 99.2 10.15* Form of Stock Unit Agreement for the Diodes Incorporated 2013 Equity Incentive Plan S-8 June 13, 2013 99.4 90 - Number Description Form Date of First Filing Exhibit Number Filed Herewith 10.15.1* Form of Restricted Stock Unit Agreement 8-K February 27, 2017 99.2 10.15.2* Form of Performance Stock Unit Agreement 8-K February 27, 2017 99.3 10.16* Form of Nonstatutory Stock Option Agreement for the Diodes Incorporated 2013 Equity Incentive Plan, as amended (Domestic Version) 10-K February 27, 2014 10.80 10.17* Form of Nonstatutory Stock Option Agreement for the Diodes Incorporated 2013 Equity Incentive Plan (International Version) 10-K February 27, 2014 10.81 10.18* Form of Unit Stock Agreement for the Diodes Incorporated 2013 Equity Incentive Plan, as amended (Domestic Version) 10-K February 27, 2014 10.82 10.19* Form of Stock Unit Agreement for the Diodes Incorporated 2013 Equity Incentive Plan (International Version) 10-K February 27, 2014 10.83 10.20* Form of Stock Unit Agreement (Substitute for Pericom Semiconductor Corporation Domestic Existing RSUs and Options) S-8 June 30, 2016 99.2 10.21* Form of Stock Unit Agreement (Substitute for Pericom Semiconductor Corporation International Existing RSUs and Options) S-8 June 30, 2016 99.3 10.22 Joint Venture Agreement dated as of March 18, 1996, between the Company and J.H. Xing 10-K April 1, 1996 10.17 10.23 Sale and Leasing Agreement dated as of March 30, 2002, between Shanghai Kaihong Electronic Ltd. and Shanghai Ding Hong Electronics Company, Ltd. 10-Q May 15, 2002 10.46 10.24 Lease Agreement dated as of March 30, 2002, between Shanghai Kaihong Electronic Company, Ltd. and Shanghai Ding Hong Electronic Equipment, Ltd. 10-Q May 15, 2002 10.47 10.25 Lease Agreement dated as of September 30, 2003, between Shanghai Kaihong Electronic Co., Ltd. and Shanghai Ding Hong Electronic Equipment, LTD. 10-Q August 9, 2004 10.52 10.25.1 Supplementary to the Lease Agreement between Shanghai Kaihong Electronic Co. Ltd., and Shanghai Ding Hong Electronic Co., Ltd. 10-Q August 9, 2004 10.58 10.26 Amendment to the Sale and Lease Agreement, dated as of September 30, 2004, between Shanghai Ding Hong Electronic Equipment Ltd. and Shanghai Kai Hong Electronic Company, Limited 10-Q August 9, 2004 10.56 10.27 Lease Agreement dated as of June 28, 2004, between Diodes Shanghai Co., Ltd. and Shanghai Yuan Hao Electronic Co., Ltd. 10-Q August 9, 2004 10.57 91 - Number Description Form Date of First Filing Exhibit Number Filed Herewith 10.27.1 Supplement to Lease Agreement dated January 1, 2007, for Disposal of Waste and Scraps, between Shanghai Kai Hong Technology Co., Ltd. and Shanghai Yuan Hao Electronic Co., Ltd. 10-K February 29, 2008 10.50 10.27.2 Supplementary Agreement dated December 31, 2007, between Shanghai Kai Hong Technology Co., Ltd. and Shanghai Yuan Hao Electronic Co., Ltd. 10-K February 29, 2008 10.53 10.28 Wafer Purchase Agreement dated January 10, 2006, between Anachip Corporation and Lite-On Semiconductor Corporation 8-K January 12, 2006 2.1 10.29 Supplementary to the Lease Agreement dated September 5, 2004, between Shanghai Kaihong Electronic Co., Ltd. and Shanghai Ding Hong Electronic Co., Ltd. 10-Q May 10, 2006 10.14 10.30 Supplementary to the Lease Agreement dated June 28, 2004, between Diodes Shanghai Company Limited and Shanghai Yuan Hao Electronic Co., Ltd. 10-Q May 10, 2006 10.15 10.31 Agreement on Application, Construction and Transfer of Power Facilities dated as of March 15, 2006, between the Company and Shanghai Yahong Electronic Co., Ltd. 10-Q May 10, 2006 10.16 10.32 Supplement dated January 1, 2007 to the Lease Agreement on Disposal of Waste and Scraps, between Shanghai Kaihong Electronic Co., Ltd. and Shanghai Ding Hong Electronic Co., Ltd. 10-K February 29, 2008 10.51 10.33 Accommodation Building Fourth and Fifth Floor Lease Agreement dated December 31, 2007, between Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology) and Shanghai Ding Hong Electronic Co., Ltd. 10-K February 29, 2008 10.54 10.34 Fourth Floor of the Accommodation Building Lease Agreement dated January 1, 2008, between Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology) and Shanghai Ding Hong Electronic Co., Ltd. 10-Q August 11, 2008 10.5 10.35 Factory Building Lease Agreement dated March 1, 2008, between Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology) and Shanghai Yuan Hao Electronic Co. Ltd. 10-Q August 11, 2008 10.6 10.36 Supplemental Agreement to the Factory Building Lease Agreement dated as of August 11, 2008, between Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology) and Shanghai Yuan Hao Electronic Co., Ltd. 10-Q November 7, 2008 10.2 10.37 Distributorship Agreement dated November 1, 2008, between Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology) and Shanghai Keylink Logistic Co., Ltd. 10-K February 26, 2009 10.83 92 - Number Description Form Date of First Filing Exhibit Number Filed Herewith 10.38 Lease Facility Safety Management Agreement dated December 31, 2008, between Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology) and Shanghai Yuan Howe Electronic Co., Ltd. 10-K February 26, 2009 10.84 10.39 Second Supplemental Agreement to the Factory Building Lease Agreement dated August 19, 2009, between Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology) and Shanghai Yuan Hao Electronic Co., Ltd. 10-Q November 6, 2009 10.1 10.40 Consulting Agreement dated January 1, 2009, between the Company and Keylink International (B.V.I.) Co., Ltd. 10-Q May 8, 2009 10.1 10.41 Power Facility Construction Agreement dated October 29, 2009, between Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology) and Shanghai Yuan Hao Electronic Co., Ltd. 10-K March 1, 2010 10.97 10.42 First Amendment to the DSH #2 Building Lease Agreement dated December 31, 2009, between Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology) and Shanghai Yuan Howe Electronics Co., Ltd. 10-K March 1, 2010 10.98 10.43 Construction Project Contract effective December 31, 2009, between Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology) and Shanghai Yuan Howe Electronic Co., Ltd. 10-Q May 7, 2010 10.2 10.43.2 Third Floor of the Accommodation Building Lease Agreement dated April 12, 2010, between Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology) and Shanghai Ding Hong Electronic Co., Ltd. 10-Q May 7, 2010 10.3 10.44 Second Floor of the Accommodation Building Lease Agreement dated September 1, 2010, between Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology) and Shanghai Ding Hong Electronic Company, Ltd. 10-Q November 9, 2010 10.1 10.45 Investment Cooperation Agreement effective as of September 10, 2010, between Diodes Hong Kong Holding Company Limited and the Management Committee of the Chengdu Hi-Tech Industrial Development Zone 8-K September 16, 2010 99.1 10.46 Supplementary Agreement to the Investment Cooperation Agreement effective as of September 10, 2010, between Diodes Hong Kong Holding Company Limited and the Management Committee of the Chengdu Hi-Tech Industrial Development Zone 8-K September 16, 2010 99.2 10.47 Joint Venture Agreement effective as of November 5, 2010, between Diodes Hong Kong Holding Company Limited and Chengdu Ya Guang Electronic Company Limited 8-K November 12, 2010 99.1 93 - Number Description Form Date of First Filing Exhibit Number Filed Herewith 10.48 Joint Venture Agreement Supplement Concerning the Establishment of Diodes Technology (Chengdu) Company Limited effective as of November 5, 2010, between Diodes Hong Kong Holding Company Limited and Chengdu Ya Guang Electronic Company Limited 8-K November 12, 2010 99.2 10.49 Second Amendment to the DSH #2 Building Lease Agreement dated November 15, 2010, between Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology) and Shanghai Yuan Howe Electronics Company, Ltd. 10-K February 28, 2011 10.112 10.50 Power Facility Expansion Construction Contract dated January 24, 2011, between Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology) and Shanghai Yuan Howe Electronics Company, Ltd. 10-K February 28, 2011 10.113 10.51 First Floor of the Accommodation Building Agreement dated June 1, 2011, between Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology) and Shanghai Ding Hong Electronic Company, Ltd. 10-Q November 9, 2011 10.1 10.52 Third Floor of the Dormitory Building Lease Agreement dated July 1, 2011, between Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology) and Shanghai Ding Hong Electronic Company, Ltd. 10-Q November 9, 2011 10.2 10.53 Third Supplemental Agreement to the Factory Building Lease Agreement dated May 16, 2011, between Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology) and Shanghai Yuan Hao Electronic Company, Ltd. 10-Q November 9, 2011 10.3 10.54 Supplement Agreement to the Power Facility Construction Application Agreement dated March 21, 2011, between Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology) and Shanghai Yuan Hao Electronic Company, Ltd. 10-Q August 9, 2011 10.1 10.55 Plating Process Agreement dated December 31, 2007, among Shanghai Kaihong Electronic Co., Ltd., Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology), Diodes Shanghai, Shanghai Ding Hong Electronic Co., Ltd. and Shanghai Micro-Surface Co., Ltd. 10-K February 29, 2008 10.52 10.56 Construction Design Consulting Agreement dated April 1, 2011, between Diodes Technology (Chengdu) Company Limited and Lite-On Technology Corporation 10-Q August 9, 2012 10.1 94 - Number Description Form Date of First Filing Exhibit Number Filed Herewith 10.57 Second Supplementary Agreement dated as of January 23, 2013, to the Investment Cooperation Agreement effective as of September 10, 2010, among Diodes Hong Kong Holding Company Limited, Diodes (Shanghai) Investment Company Limited, Diodes Technology (Chengdu) Company Limited, and the Management Committee of the Chengdu Hi-Tech Industrial Development Zone 10-K February 27, 2013 10.75 10.58 DSH #2 Building Lease Agreement dated as of January 28, 2013, between Diodes Shanghai Co., Ltd. (a/k/a Shanghai Kaihong Technology) and Shanghai Yuan Howe Electronics Co., Ltd. 10-K February 27, 2013 10.76 10.59 Supplement Agreement to Lease Agreement dated September 2013, between Shanghai Kaihong Electronic Co., Ltd and Shanghai Ding Hong Electronic Co., Ltd. 10-Q November 12, 2013 10.6 10.60 Amendment to Dinghong Building Lease Agreements between Shanghai Kaihong Electronic Co. Ltd. and Shanghai Dinghong Electronic Co., Ltd. 10-Q November 6, 2018 10.2 10.61 Termination Agreement to Dinghong Male Dorm Building Lease Agreement between Shanghai Kaihong Electronic Co. Ltd. and Shanghai Dinghong Electronic Co., Ltd. 10-Q November 6, 2018 10.4 10.62 Termination Agreement to Dinghong Female Dorm Building Lease Agreement between Shanghai Kaihong Electronic Technology Co. Limited and Shanghai Dinghong Electronic Co. Ltd. 10-Q November 6, 2018 10.5 10.63 Power Account Transfer Agreement between Shanghai Kaihong Technology Company Limited and Shanghai YuanHao Co. 10-Q November 6, 2018 10.6 10.64 Construction Design Consulting Assignment Agreement Supplemental Agreement, between Diodes Technology (Chengdu) Company Limited and Lite-On Technology Corporation 10-Q August 8, 2013 10.1 10.65 Procurement Agreement dated May 3, 2013, between Diodes Taiwan Inc. and Lite-On Technology Corporation 10-Q August 8, 2013 10.2 10.66 Share Transfer Memorandum of Understanding dated June 18, 2013, among the Company, Chengdu Ya Guang Electronic Engineering Factory and Zetex Chengdu Electronics Limited 10-Q August 8, 2013 10.3 10.67 Plating Process Agreement dated February 8, 2013, between Zetex (Chengdu) Electronic Company Limited and Diodes Technology (Chengdu) Company Limited 10-Q May 10, 2013 10.1 95 - Number Description Form Date of First Filing Exhibit Number Filed Herewith 10.68 Equity Transfer Agreement dated April 2014, between Chengdu Ya Guang Electronic Engineering Factory and Diodes (Shanghai) Investment Company Limited 10-Q May 9, 2014 10.1 10.69 Equity Transfer Agreement Amendment dated April 2014, between Chengdu Ya Guang Electronic Engineering Factory and Diodes (Shanghai) Investment Company Limited 10-Q May 9, 2014 10.2 10.70 Fourth Supplemental Agreement to the Factory Building Lease Agreement dated April 23, 2014, between Shanghai Kaihong Technology Co., Ltd. and Shanghai Yuan Hao Electronic Co., Ltd. 10-Q May 9, 2014 10.3 10.71 Plating Processing Agreement dated February 28, 2014, between Zetex (Chengdu) Electronic Company Limited and Diodes Technology (Chengdu) Company Limited 10-Q May 9, 2014 10.4 10.72 Amended Consulting Agreement dated as of January 1, 2015, between Diodes Incorporated and Keylink International (B.V.I) Co., Ltd. 10-K March 2, 2015 10.78 10.73 Chemical Warehouse Lease Agreement dated November 1, 2014, between Shanghai Kaihong Electronic Co., Ltd. and Shanghai Ding Hong Electronic Co., Ltd. 10-K March 2, 2015 10.79 10.74 Chemical Warehouse Lease Agreement dated September 22, 2015, between Shanghai Kaihong Technology Co., Ltd. and Shanghai Yuan Hao Electronic Co., Ltd. 10-Q November 6, 2015 10.1 10.75 Amendment to Yuanhao Building Lease Agreements between Shanghai Kaihong Technology Company Limited and Shanghai Yuanhao Electronic Co. Ltd 10-Q November 6, 2018 10.3 10.76 Fifth Supplemental Facility Lease Agreement dated February 1, 2015, between Shanghai Kaihong Technology Co., Ltd. and Shanghai Yuan Hao Electronic Co., Ltd. 10-Q November 6, 2015 10.2 10.77 Property Lease Safety Agreement dated July 2016, between Zetex (Chengdu) Electronics Ltd. and Chengdu Yaguang Electronic Co., Ltd. 10-Q August 9, 2016 99.1 10.78 Property Lease Agreement dated July 2016, between Zetex (Chengdu) Electronics Ltd. and Chengdu Yaguang Electronic Co., Ltd. 10-Q August 9, 2016 99.2 10.79 2016 Amendment to Joint Venture Agreement effective as of December 7, 2016, between Diodes (Shanghai) Investment Company Limited and Chengdu Ya Guang Electronic Company Limited 8-K December 13, 2016 99.1 10.80 Diodes Zetex Pension Scheme Recovery Plan dated February 22, 2017, between Trustees of the Diodes Zetex Pension Scheme and Diodes Zetex Limited 10-K February 27, 2017 10.78 96 - Number Description Form Date of First Filing Exhibit Number Filed Herewith 10.81 Diodes Zetex Pension Scheme Schedule of Contributions dated February 22, 2017, between Trustees of the Diodes Zetex Pension Scheme and Diodes Zetex Limited 10-K February 27, 2017 10.79 10.82 Framework Agreement dated January 16, 2017, among Diodes Zetex Limited, Diodes Zetex Semiconductors Limited, the Company, HR Trustees Limited and Trustees 10-K February 27, 2017 10.80 10.83 Guarantee dated March 26, 2012, among Diodes Zetex Semiconductors Limited, Diodes Zetex Limited, HR Trustees Limited and Trustees 10-Q August 9, 2012 10.5 10.84 Diodes Zetex Pension Scheme Information Protocol dated April 10, 2012, among Diodes Zetex Limited, Diodes Zetex Semiconductors Limited, the Company, HR Trustees Limited and Trustees 10-Q August 9, 2012 10.6 10.85 Legal Charge dated March 26, 2012, among Zetex Semiconductors Limited, HR Trustees Limited and Trustees 10-Q August 9, 2012 10.7 10.86 Credit Agreement dated March 21, 2011, between Mega International Commercial Bank and Diodes Taiwan Inc. 10-Q August 9, 2011 10.2 10.87 Amended and Restated Credit Agreement dated October 26, 2016, among the Company, Diodes International B.V., Diodes Holding B.V., Diodes Investment Company, Diodes FabTech Inc., Diodes Holdings UK Limited, Diodes Zetex Limited, Pericom Semiconductor Corporation, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and the other Lenders party thereto 8-K November 1, 2016 10.1 10.87.1 Amendment No. 1 and Limited Waiver dated February 13, 2017, among the parties to the Amended and Restated Credit Agreement dated October 26, 2016 (Exhibit 10.87 above) 8-K February 14, 2017 10.1 10.87.2 Amendment No. 2 dated August 24, 2017, among the parties to the Amended and Restated Credit Agreement dated October 26, 2016 (Exhibit 10.87 above) 10-K February 20, 2018 10.80.2 10.88 Consent to Credit Agreement 10-Q November 6, 2018 10.1 10.89 Consent and Amendment No. 3 to Amended and Restated Credit Agreement dated December 27, 2018, among the parties to the Amended and Restated Credit Agreement dated October 26, 2016 (Exhibit 87 above) 10-K February 21, 2019 10.89 10.90* Transition agreement between Diodes Incorporated and Richard White 8-K March 6, 2019 10.1 10.91* Amended Transition Agreement between Diodes Incorporated and Richard White 8-K/A April 1, 2019 10.1 10.92 Consent to Credit Agreement 10-Q May 7, 2019 10.1 97 - Number Description Form Date of First Filing Exhibit Number Filed Herewith 10.93 Consent to Credit Agreement 10-Q August 5, 2019 10.1 10.94 Share Swap Agreement between Diodes Incorporated and Lite-On Semiconductor Corp. dated as of August 8, 2019 8-K August 9, 2019 2.1 10.95 First Amendment to Second Amended and Restated Credit Agreement dated as of September 21, 2020 X 10.96 Consent Agreement with Respect to Second Amended and Restated Credit Agreement and Foreign Security Agreements dated as of November 2, 2020 X 10.97 Consent and Amendment No. 2 to Second Amended and Restated Credit Agreement dated as of November 17, 2020. Portions of this Exhibit have been omitted X 14** Code of Ethics for Chief Executive Officer and Senior Financial Officers 21 Subsidiaries of the Registrant X 23.1 Consent of Independent Registered Public Accounting Firm X 31.1 Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 X 31.2 Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 32.1*** Certification Pursuant to 18 U.S.C. adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X 32.2*** Certification Pursuant to 18 U.S.C. adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X 101.INS Inline XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. X 101.SCH Inline XBRL Taxonomy Extension Schema X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase X 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase X 98 - Number Description Form Date of First Filing Exhibit Number Filed Herewith 104 Cover Page Interactive Data File, formatted in Inline XBRL X * Constitute management contracts, or compensatory plans or arrangements, which are required to be filed pursuant to Item 601 of Regulation S-K. ** Provided in the Corporate Governance portion of the Investor Relations section of the Company’s website at http://www.diodes.com *** A certification furnished pursuant to Item 601 of the Regulation S-K will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference. PLEASE NOTE: It is inappropriate for investors to assume the accuracy of any covenants, representations or warranties that may be contained in agreements or other documents filed as exhibits to this Annual Report on Form 10-K. In certain instances the disclosure schedules to such agreements or documents contain information that modifies, qualifies and creates exceptions to the representations, warranties and covenants. Moreover, some of the representations and warranties may not be complete or accurate as of a particular date because they are subject to a contractual standard of materiality that is different from those generally applicable to stockholders or were used for the purpose of allocating risk among the parties rather than establishing certain matters as facts. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts at the time they were made or otherwise. 99 - SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DIODES INCORPORATED (Registrant) By: /s/ Keh-Shew Lu February 19, 2021 KEH-SHEW LU President and Chief Executive Officer (Principal Executive Officer) By: /s/ Brett R. Whitmire February 19, 2021 Brett R. Whitmire Chief Financial Officer (Principal Financial and Accounting Officer) KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Dr. Keh-Shew Lu, President and Chief Executive Officer, and Brett R. Whitmire, Chief Financial Officer, his true and lawful attorneys-in-fact and agents, with full power of substitution, to sign and execute on behalf of the undersigned any and all amendments to this report, and to perform any acts necessary in order to file the same, with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requested and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents, or their or his or her substitutes, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 19, 2021. /s/ Keh-Shew Lu KEH-SHEW LU Chairman, President and Chief Executive Officer (Principal Executive Officer) /s/ Brett R. Whitmire Brett R. Whitmire Chief Financial Officer (Principal Financial Officer) /s/ Keh-Shew Lu /s/ Peter M. Menard KEH-SHEW LU PETER M. MENARD Chairman of the Board of Directors Director /s/ C.H. Chen /s/ Michael K. C. Tsai C.H. CHEN MICHAEL K.C. TSAI Director and Vice Chairman Lead Director /s/ Warren Chen /s/ Christina Wen-Chi Sung WARREN CHEN CHRISTINA WEN-CHI SUNG Director Director /s/ Michael R. Giordano MICHAEL R. GIORDANO Director 100 -