What changed in this filing

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Item 1. Financial Statements

2021-08-05 compared with 2021-05-06 · 123 added, 61 removed, 519 unchanged (26% of the section changed)

8 unchanged sentences

Accounts receivable, net of allowances of $ 3,822 and $ 3,806 at

March 31, 2021 and December 31, 2020, respectively

June 30, 2021 and December 31, 2020, respectively

Prepaid expenses and other

23 unchanged sentences

44,730,897 and 44,276,194 , issued and outstanding

at March 31, 2021 and December 31, 2020, respectively

at June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

Retained earnings

Treasury stock at cost, 9,259,858 shares at March 31, 2021 and December 31, 2020

Treasury stock at cost, 9,262,833 shares at June 30, 2021 and 9,259,858 shares at December 31, 2020

Accumulated other comprehensive loss

7 unchanged sentences

Three Months Ended

Six Months Ended

Cost of goods sold

23 unchanged sentences

Three Months Ended

Unrealized gain on defined benefit plan, net of tax

Unrealized gain (loss) on swaps and collars, net of tax

Unrealized foreign currency loss, net of tax

Six Months Ended

Unrealized gain (loss) on defined benefit plan, net of tax

Unrealized (loss) gain on swaps and collars, net of tax

Unrealized foreign currency gain (loss), net of tax

Comprehensive income

9 unchanged sentences

Noncontrolling

Balance, March 31, 2021

Total comprehensive income

Net changes in noncontrolling interests

Dividends to noncontrolling interests

Common stock issued for share-based plans

Share-based compensation

Deferred compensation plan

Tax related to net share settlement

Balance, June 30, 2021

Balance, December 31, 2020

1 unchanged sentence

Net changes in noncontrolling interests

Dividends to noncontrolling interest

Common stock issued for share-based plans

Share-based compensation

Deferred compensation plan

Tax related to net share settlement

Balance, June 30, 2021

The accompanying notes are an integral part of these condensed consolidated financial statements.

DIODES INCORPORATED AND SUBSIDIARIES (CONT.)

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands)

Treasury stock

other comprehensive

Incorporated stockholders'

Noncontrolling

Balance, March 31, 2020

Total comprehensive income

Acquisition of noncontrolling interests

Contributions from noncontrolling interests

Dividends to noncontrolling interests

Common stock issued for share-based plans

Share-based compensation

Deferred compensation plan

Tax related to net share settlement

Balance, June 30, 2020

Balance, December 31, 2019

Total comprehensive income

Acquisition of noncontrolling interests

Contributions from noncontrolling interests

Dividends to noncontrolling interest

Dividends to noncontrolling interests

Common stock issued for share-based plans

Share-based compensation

Stock buyback related to deferred compensation plan

Deferred compensation plan

Tax related to net share settlement

Balance, March 31, 2020

Balance, June 30, 2020

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities

17 unchanged sentences

Purchases of property, plant and equipment

Proceeds from sale of property, plant and equipment

Proceeds from maturity of short-term investments

Purchases of short-term investments

Purchase of equity securities

Additional acquisition of noncontrolling interests

Net cash and cash equivalents used in investing activities

9 unchanged sentences

Capital contribution from noncontrolling interests

Net cash and cash equivalents used in financing activities

Net cash and cash equivalents (used in) provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

8 unchanged sentences

property, plant and equipment

Dividend payable to noncontrolling interest

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the total of the same such amounts shown above.

The Company’s restricted cash primarily consisted of the cash required to be on deposit under our Asia credit facilities to support outstanding loan and import/export guarantees.

As of March 31, 2021, restricted cash of $ 54.8 million was pledged as collateral for issuance of bank loans, bank acceptance notes and letters of credit .

During April 2021 $ 50.0 million of the restricted cash was released from all contractual restrictions, as the applicable loans were repaid in full.

Three Months Ended

As of June 30, 2021, restricted cash of $ 2.3 million was pledged as collateral for issuance of bank loans, bank acceptance notes and letters of credit .

Six Months Ended

Current assets:

18 unchanged sentences

and Neuhaus, Germany.

The Company’s wafer fabrication facilities are located in Oldham, Greenock, Scotland and Shanghai and Wuxi, China and Keelung and Hsinchu, Taiwan.

The Company’s wafer fabrication facilities are located in Oldham, England, Greenock, Scotland and Shanghai and Wuxi, China and Keelung and Hsinchu, Taiwan.

The Company 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;

Oldham, England;

Shanghai, Shenzhen, Wuhan and Yangzhou, China;

10 unchanged sentences

In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair presentation of the operating results for the period presented have been included in the interim period.

Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, 2021.

Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, 2021.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

7 unchanged sentences

Diluted EPS is calculated similarly but includes potential dilution from the exercise of stock options and stock awards, except when the effect would be anti-dilutive.

During the three months ended March 31, 2021 and 2020, we paid no dividends on our Common Stock.

During the three and six months ended June 30, 2021 and 2020, we paid no dividends on our Common Stock.

The table below sets forth the reconciliation between net income and the weighted average shares outstanding used for calculating basic and diluted EPS:

Three Months Ended

Six Months Ended

Earnings (numerator)

9 unchanged sentences

The table below sets forth inventories which are stated at the lower of cost or net realizable value:

March 31, 2021

June 30, 2021

December 31, 2020

6 unchanged sentences

Foreign currency translation adjustment

Balance at March 31, 2021

Balance at June 30, 2021

The table below sets forth the value of intangible assets, other than goodwill:

9 unchanged sentences

Amortization expense

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

NOTE 5 – Income Tax Provision

1 unchanged sentence

Three Months Ended

Six Months Ended

Domestic pre-tax income

4 unchanged sentences

Earnings per share impact of tax holidays:

The increase in the effective tax rate for the three months ended March 31, 2021 when compared to the three months ended March 31, 2020, is primarily attributable to a change in pre-tax earnings during the comparable periods.

The decrease in the effective tax rate for the three and six months ended June 30, 2021 when compared to the three and six months ended June 30, 2020, is primarily attributable to the change in pre-tax earnings during the comparable periods.

Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of certain European and Asian subsidiaries.

11 unchanged sentences

The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits in interest expense.

As of March 31, 2021, the gross amount of unrecognized tax benefits was approximately $ 43.9 million.

As of June 30, 2021, the gross amount of unrecognized tax benefits was approximately $ 45.9 million.

It is reasonably possible that the amount of the unrecognized benefit with respect to certain of the Company’s unrecognized tax positions will significantly increase or decrease within the next 12 months.

1 unchanged sentence

NOTE 6 – Share-Based Compensation

For the three months ended March 31, 2021, we recognized stock option expense of approximately $ 0.02 million.

For the three and six months ended June 30, 2021, we recognized stock option expense of approximately $ 0.02 million and $ 0.04 million, respectively.

This stock option expense is related to stock options granted by Savitech Corporation (“Savitech”) in Savitech stock to their employees.

1 unchanged sentence

The remainder of our share-based compensation expense was related to share grants.

Approximately $ 0.8 million of cash proceeds were received from stock option exercises during the three months ended March 31, 2021.

Approximately $ 2.1 million of cash proceeds were received from stock option exercises during the six months ended June 30, 2021.

The table below sets forth the line items where share-based compensation expense was recorded:

Three Months Ended

Six Months Ended

Cost of goods sold

3 unchanged sentences

Share Grants – Restricted stock awards and restricted stock units generally vest in equal annual installments over a four-year period.

All new grants are granted under the Company’s 2013 Equity Incentive Plan, and there will be no additional share grants under the 2001 Omnibus Equity Incentive Plan.

All new grants are granted under the Company’s 2013 Equity Incentive Plan.

Restricted stock grants are measured based on the fair market value of the underlying stock on the date of grant, and compensation expense is recognized on a straight-line basis over the requisite four-year service period.

1 unchanged sentence

PSUs will vest upon the Company achieving a cumulative 3 -year non-GAAP operating income target for the applicable periods.

As of March 31, 2021, total unrecognized share-based compensation expense related to share grants was approximately $ 52.2 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 2.2 years.

As of June 30, 2021, total unrecognized share-based compensation expense related to share grants was approximately $ 53.9 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 2.1 years.

NOTE 7 – Segment Information and Net Sales

5 unchanged sentences

The tables below set forth net sales based on the location of the subsidiary producing the net sale:

Three Months Ended June 30, 2021

Intercompany elimination

Three Months Ended June 30, 2020

Intercompany elimination

As of and for the

Three Months Ended March 31, 2021

Six Months Ended June 30, 2021

Intercompany elimination

1 unchanged sentence

As of and for the

Three Months Ended March 31, 2020

Six Months Ended June 30, 2020

Intercompany elimination

5 unchanged sentences

Further, most of our contracts are fixed-price arrangements, and are short term in nature, ranging from days to several months.

The tables below set forth net sales for the Company disaggregated into geographic locations based on shipment and by type (direct sales or Distributor ) for the three months ended March 31, 2021 and 2020:

The tables below set forth net sales for the Company disaggregated into geographic locations based on shipment and by type (direct sales or Distributor ):

Three Months Ended

4 unchanged sentences

Total net sales

Net sales from products shipped to China was $ 222.3 million and $ 138.9 million for the three months ended March 31, 2021 and 2020, respectively.

Six Months Ended

Net Sales by Region

Total net sales

Net Sales by Type

Distributor sales

Total net sales

Net sales from products shipped to China was $ 229.3 million and $ 152.4 million for the three months ended June 30, 2021 and 2020, respectively and $ 451.7 million and $ 291.3 million for the six months ended June 30, 2021 and 2020, respectively.

NOTE 8 – Debt

4 unchanged sentences

Interest payments are due monthly on outstanding amounts under the credit lines.

The unused and available credit under the various facilities as of March 31, 2021, was approximately $ 127.9 million, net of a $ 67.6 million advanced under our foreign credit lines and $ 0.5 million credit used for import and export guarantee.

In connection with our Asia credit facilities $ 54.8 million of cash

deposits have been restricted in support of a corresponding loan amount.

During April 2021 $ 50.0 million of the restricted cash was released from all contractual restrictions, as the applicable loans were repaid in full.

The unused and available credit under the various facilities as of June 30, 2021, was approximately $ 111.8 million, net of a $ 60.2 million advanced under our foreign credit lines and $ 1.1 million credit used for import and export guarantee.

Long-term debt

The Company maintains a long-term credit facility (“Credit Agreement”) consisting of a term loan with a current balance of $ 218.0 million and a $ 150.0 million r evolving senior credit facility.

The Company maintains a long-term credit facility (“Credit Agreement”) consisting of a term loan with a current balance of $ 114.7 million and a $ 150.0 million r evolving senior credit facility, of which nothing was drawn as of June 30, 2021.

The Company used a portion of the proceeds available under the term commitment and the revolving senior credit facility to finance the Company’s acquisition of Lite-On Semiconductor Corporation.

3 unchanged sentences

The ERIS debt matures in various periods from 2021 through 2033 .

Borrowings outstanding as of March 31, 2021 and December 31, 2020, are set forth in the table below:

Borrowings outstanding as of June 30, 2021 and December 31, 2020, are set forth in the table below:

Current Amount

27 unchanged sentences

NOTE 9 – Commitments and Contingencies

Purchase commitments – As of March 31, 2021, we had approximately $ 58.6 million in non-cancelable purchase contracts related to capital expenditures, primarily related to our manufacturing facilities in Asia.

As of March 31, 2021, we also had a commitment to purchase approximately $ 40.4 million of wafers to be used in our manufacturing process during 2021 and 2022.

Purchase commitments – As of June 30, 2021, we had approximately $ 66.8 million in non-cancelable purchase contracts related to capital expenditures, primarily related to our manufacturing facilities in Asia.

As of June 30, 2021, we also had a commitment to purchase approximately $ 28.7 million of wafers to be used in our manufacturing process during 2021 and 2022.

Defined Benefit Plan - We have a contributory defined benefit plan that covers certain employees in the United Kingdom.

As of March 31, 2021, the underfunded liability for this defined benefit plan was approximately $ 25.1 million.

As of June 30, 2021, the underfunded liability for this defined benefit plan was approximately $ 19.9 million.

An actuarial valuation was performed as of March 31, 2019, resulting in a deficit of approximately GBP 26.7 million (approximately $ 37.4 million based on a GBP:

2 unchanged sentences

USD exchange rate of 1.4 :1) to be paid in annual installments with effect from April 1, 2020 to address the deficit revealed by the valuation (with the first payment made by March 31, 2021, and payments to be made by December 31 each year thereafter).

These contributions, together with the assumed asset outperformance, are expected to

eliminate the deficit by December 31, 2028.

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 (approximately $ 0.3 million based on GBP:

10 unchanged sentences

We use derivative instruments to manage risks related to foreign currencies, interest rates and the net investment risk in our foreign subsidiaries.

Our objectives for holding derivatives include reducing, eliminating, and efficiently managing the economic impact of these exposures as effectively as possible.

Our objectives for holding derivatives include reducing, eliminating, and efficiently managing the economic

impact of these exposures as effectively as possible.

Our derivative programs include strategies that both qualify and do not qualify for hedge accounting treatment.

1 unchanged sentence

We use foreign currency forward agreements to manage this exposure.

At March 31, 2021 and December 31, 2020, we had $ 268.2 million and $ 276.2 million, respectively, of outstanding foreign currency forward agreements that are intended to preserve the economic value of foreign currency denominated monetary assets and liabilities;

At June 30, 2021 and December 31, 2020, we had $ 215.6 million and $ 276.2 million, respectively, of outstanding foreign currency forward agreements that are intended to preserve the economic value of foreign currency denominated monetary assets and liabilities;

these instruments are not designated for hedge accounting treatment in accordance with ASC No.

We have recorded foreign currency forward agreements with a fair value of $ 0.2 on million our consolidated balance sheet.

We have recorded foreign currency forward agreements with a fair value of less than $ 3.0 thousand on our consolidated balance sheet.

Hedges of Interest Rate and Net Investment Risk - The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements.

1 unchanged sentence

Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The table below sets forth the fair value of the Company’s interest rate related derivative financial instruments as well as their classification on our condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020:

Other Current Liabilities

Other Liabilities

Interest rate swaps and collars

The tables below set forth the effect of the Company’s derivative financial instruments on our condensed consolidated statements of income for the three months ended March 31, 2021 and 2020:

The tables below set forth the effect of the Company’s derivative financial instruments on our condensed consolidated statements of income for the three and six months ended June 30, 2021 and 2020:

Amount of Gain or (Loss) Recognized in OCI on Derivative

7 unchanged sentences

Interest expense

Cross currency swaps

Interest income

We estimate that $ 0.4 million of net derivative gains included in accumulated other comprehensive income (“AOCI”) as of March 31, 2021 will be reclassified into expense within the following 12 months.

No gains or losses were reclassified from AOCI into earnings as a result of forecasted transactions that failed to occur during three ended March 31, 2021 or 2020.

Six Months Ended

Interest rate swaps and collars

Interest expense

Cross currency swaps

Interest income

We estimate that $ 0.2 million of net derivative gains included in accumulated other comprehensive income (“AOCI”) as of June 30, 2021 will be reclassified into expense within the following 12 months.

No gains or losses were reclassified from AOCI into earnings as a result of forecasted transactions that failed to occur during three and six months ended June 30, 2021 or 2020.

Amount of Gain or (Loss) Recognized in Net Income

4 unchanged sentences

Foreign currency loss, net

As of March 31, 2021 and December 31, 2020, the Company had no t posted any collateral related to these agreements.

Six Months Ended

Foreign currency forward contracts

Foreign currency loss, net

As of June 30, 2021 and December 31, 2020, the Company had no t posted any collateral related to these agreements.

NOTE 11 – Leases

3 unchanged sentences

Three Months Ended

Six Months Ended

Operating lease expense

7 unchanged sentences

In our condensed consolidated balance sheets, right of use (“ROU”) assets are included in other long-term assets while lease liabilities are located in accrued liabilities and other for the current portion and other long-term liabilities for the non-current portion:

March 31, 2021

June 30, 2021

December 31, 2020

18 unchanged sentences

The table below sets forth supplemental cash flow and other information related to leases:

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

Cash paid for the amounts included in the measurements of lease liabilities:

5 unchanged sentences

The table below sets forth information about lease liability maturities:

March 31, 2021

June 30, 2021

Operating Leases

11 unchanged sentences

We offset our obligations under the Deferred Compensation Plan primarily by investing in the actual underlying investments.

At March 31, 2021 and December 31, 2020, these investments totaled approximately $ 13.2 million and $ 12.8 million, respectively.

At June 30, 2021 and December 31, 2020, these investments totaled approximately $ 14.1 million and $ 12.8 million, respectively.

NOTE 13 – Related Parties

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., prior to the close of the acquisition by Diodes.

LSC was also our largest stockholder, owning approximately 15 % of our outstanding Common Stock., prior to the close of the acquisition of LSC by Diodes.

On November 30, 2020, we acquired LSC and LSC is no longer a stockholder or related party, but instead it is a wholly owned subsidiary of ours.

9 unchanged sentences

We sell products to, and purchase inventory from, companies owned by Keylink.

We sold products to companies owned by Keylink, totaling approximately 1 % of our net sales for the three months ended periods ended March 31, 2021 and March 30, 2020.

We sold products to companies owned by Keylink, totaling approximately 1.0 % and 1.7 % of our net sales for the three months ended June 30, 2021 and 2020, respectively.

We sold products to companies owned by Keylink, totaling approximately 1.2 % and 1.6 % of our net sales for the six months ended June 30, 2021 and 2020, respectively.

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 three months ended March 31, 2021 and, 2020 were approximately $ 4.3 million and $ 3.1 million, respectively.

The aggregate amounts paid to Keylink for the three months ended June 30, 2021 and, 2020 were approximately $ 4.3 million and $ 3.8 million, respectively.

The aggregate amounts paid to Keylink for the six months ended June 30, 2021 and, 2020 were approximately $ 8.7 million and $ 6.9 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 ;

5 unchanged sentences

Three Months Ended

Six Months Ended

The table below sets forth accounts receivable from, and accounts payable to, related parties:

66 unchanged sentences

The second tranche, currently recorded in accrued liabilities and other, as shown in the table below, and currently valued at $ 9.1 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.

Based on preliminary reporting, as of June 30, 2021, it is estimated that Savitech exceeded the previously agreed-to revenue levels and based on this preliminary reporting, the Company accrued an additional $ 0.3 million related to the second tranche payment.

After the Company verifies the preliminarily reported revenue by Savitech, the Company will make the second tranche payment.

The Company recorded the purchase of Savitech as a business acquisition and now consolidates 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.

10 unchanged sentences

Noncontrolling interest

Note 15 – Subsequent Event

During July 2021, the Company acquired an interest in an early stage fabless wafer design company by purchasing $ 10.0 million of preferred stock and a $ 5.0 million convertible promissory note.

The promissory note is convertible into additional preferred shares, has an interest rate of 3 % and is due on the fifth anniversary of the transaction close.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements