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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

Or

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to .

Commission file number: 002-25577

DIODES INCORPORATED

(Exact name of registrant as specified in its charter)

Delaware	95-2039518
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

4949 Hedgcoxe Road, Suite 200, Plano, Texas	75024
(Address of principal executive offices)	(Zip code)

(972) 987-3900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.66 2/3	DIOD	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s Common Stock outstanding as of August 1, 2022 was 45,481,026.

Table of Contents

	Page
Part I – Financial Information
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3. Quantitative and Qualitative Disclosures About Market Risk	28
Item 4. Controls and Procedures	28
Part II – Other Information
Item 1. Legal Proceedings	29
Item 1A. Risk Factors	29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3. Defaults Upon Senior Securities	29
Item 4. Mine Safety Disclosures	29
Item 5. Other Information	29
Item 6. Exhibits	30
Signatures	31

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	June 30,			December 31,
	2022			2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	299,868		$	363,599
Restricted cash		7,679			3,219
Short-term investments		8,833			6,542
Accounts receivable, net of allowances of $4,936 and $4,324 at   June 30, 2022 and December 31, 2021, respectively		401,196			358,496
Inventories		371,351			348,622
Prepaid expenses and other		125,686			107,194
Total current assets		1,214,613			1,187,672
Property, plant and equipment, net		671,654			582,079
Deferred income tax		20,189			21,256
Goodwill		145,898			149,890
Intangible assets, net		86,071			94,550
Other long-term assets		146,619			159,048
Total assets	$	2,285,044		$	2,194,495
Liabilities
Current liabilities:
Lines of credit	$	25,907		$	18,068
Accounts payable		219,329			221,254
Accrued liabilities and other		205,152			184,649
Income tax payable		40,253			29,682
Current portion of long-term debt		9,336			17,381
Total current liabilities		499,977			471,034
Long-term debt, net of current portion		229,912			265,574
Deferred tax liabilities		31,541			32,230
Other long-term liabilities		106,155			122,933
Total liabilities		867,585			891,771
Commitments and contingencies (See Note 9)
Stockholders' equity
Preferred stock - par value $1.00 per share; 1,000,000 shares authorized; no   shares issued or outstanding		-			-
Common stock - par value $0.66 2/3 per share; 70,000,000 shares   authorized; and 45,288,669 shares and 45,017,774 shares issued and   outstanding at June 30, 2022 and December 31, 2021, respectively		36,376			36,195
Additional paid-in capital		478,374			471,649
Retained earnings		1,269,655			1,116,809
Treasury stock, at cost, 9,272,513 shares at June 30, 2022 and at December 31, 2021		(337,112	)		(336,894	)
Accumulated other comprehensive loss		(93,974	)		(50,517	)
Total stockholders' equity		1,353,319			1,237,242
Noncontrolling interest		64,140			65,482
Total equity		1,417,459			1,302,724
Total liabilities and stockholders' equity	$	2,285,044		$	2,194,495
The accompanying notes are an integral part of these condensed consolidated financial statements.

-3-

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
Net sales	$	500,972		$	440,448		$	983,095		$	853,569
Cost of goods sold		294,446			280,646			579,872			555,131
Gross profit		206,526			159,802			403,223			298,438
Operating expenses
Selling, general and administrative		69,067			60,280			140,510			118,956
Research and development		30,762			29,987			59,439			57,646
Amortization of acquisition related intangible assets		3,980			4,060			7,842			8,083
Other operating expense (income)		(3,521	)		118			(3,864	)		1,006
Total operating expense		100,288			94,445			203,927			185,691
Income from operations		106,238			65,357			199,296			112,747
Other (expense) income
Interest income		861			818			1,687			1,586
Interest expense		(1,590	)		(2,017	)		(2,704	)		(4,881	)
Foreign currency gain (loss), net		1,819			(510	)		3,540			(1,789	)
Unrealized (loss) gain on investments		(7,764	)		5,261			(13,312	)		8,916
Other income		1,647			1,837			3,523			4,154
Total other (expense) income		(5,027	)		5,389			(7,266	)		7,986
Income before income taxes and noncontrolling interest		101,211			70,746			192,030			120,733
Income tax provision		18,461			12,120			35,107			21,554
Net income		82,750			58,626			156,923			99,179
Less net income attributable to noncontrolling interest		(2,595	)		(3,252	)		(4,077	)		(4,353	)
Net income attributable to common stockholders	$	80,155		$	55,374		$	152,846		$	94,826
Earnings per share attributable to common stockholders:
Basic	$	1.77		$	1.24		$	3.38		$	2.13
Diluted	$	1.75		$	1.22		$	3.33		$	2.09
Number of shares used in earnings per share computation:
Basic		45,265			44,667			45,185			44,538
Diluted		45,841			45,380			45,913			45,327

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

-4-

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
Net income	$	82,750		$	58,626		$	156,923		$	99,179
Unrealized gain on defined benefit plan, net of tax		7,133			4,961			5,600			6,855
Unrealized gain (loss) on swaps and collars, net of tax		2,063			(2,027	)		4,894			1,799
Unrealized foreign currency (loss), net of tax		(41,366	)		12,849			(53,951	)		9,111
Comprehensive income		50,580			74,409			113,466			116,944
Less: Comprehensive income attributable to noncontrolling interest		(2,595	)		(3,252	)		(4,077	)		(4,353	)
Total comprehensive income attributable to common stockholders	$	47,985		$	71,157		$	109,389		$	112,591

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

-5-

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)

	Common stock				Treasury stock						Additional  paid-in			Retained		Accumulated  other comprehensive			Total Diodes  Incorporated stockholders'			Noncontrolling			Total
	Shares		Amount		Shares			Amount			capital			earnings		loss			equity			interest			equity
Balance, March 31 2022		54,504	$	36,338		(9,273	)	$	(336,894	)	$	470,363		$	1,189,500	$	(61,804	)	$	1,297,503		$	62,516		$	1,360,019
Total comprehensive income (loss)		-		-		-			-			-			80,155		(32,170	)		47,985			2,595			50,580
Net changes in noncontrolling interests		-		-		-			-			-			-					-			(971	)		(971	)
Common stock issued for share-based plans		58		38		-			-			18			-		-			56			-			56
Share-based compensation		-		-		-			-			8,607			-		-			8,607			-			8,607
Deferred compensation plan		-		-		-			(218	)		218			-		-			-			-			-
Tax related to net share settlement		-		-		-			-			(832	)		-		-			(832	)		-			(832	)
Balance, June 30, 2022		54,562	$	36,376		(9,273	)	$	(337,112	)	$	478,374		$	1,269,655	$	(93,974	)	$	1,353,319		$	64,140		$	1,417,459
Balance, December 31, 2021		54,290	$	36,195		(9,273	)	$	(336,894	)	$	471,649		$	1,116,809	$	(50,517	)	$	1,237,242		$	65,482		$	1,302,724
Total comprehensive income		-		-		-			-			-			152,846		(43,457	)		109,389			4,077			113,466
Net changes in noncontrolling interests		-		-		-			-			(1,014	)		-		-			(1,014	)		(5,419	)		(6,433	)
Common stock issued for share-based plans		272		181		-			-			(41	)		-		-			140			-			140
Share-based compensation		-		-		-			-			16,426			-		-			16,426			-			16,426
Deferred compensation plan		-		-		-			(218	)		218			-		-			-			-			-
Tax related to net share settlement		-		-		-			-			(8,864	)		-		-			(8,864	)		-			(