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wNN

29.9

 

 

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, 2019

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 July 31, 2019 was 50,996,162.

 

 

 


 

 

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

  

23

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

  

35

 

Item 4. Controls and Procedures

  

35

 

Part II – Other Information

  

 

Item 1. Legal Proceedings

 

36

Item 1A. Risk Factors

 

36

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

36

Item 3. Defaults Upon Senior Securities

 

37

Item 4. Mine Safety Disclosures

 

37

Item 5. Other Information

 

37

Item 6. Exhibits

 

38

 

Signatures

  

39

 

 

 

 


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,

 

 

2019

 

 

2018

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

235,352

 

 

$

241,053

 

Short-term investments

 

6,604

 

 

 

7,499

 

Accounts receivable, net of allowances of $4,230 and $4,102 at

  June 30, 2019 and December 31, 2018, respectively

 

240,056

 

 

 

228,405

 

Inventories

 

222,969

 

 

 

215,435

 

Assets held for sale

 

4,947

 

 

 

-

 

Prepaid expenses and other

 

46,726

 

 

 

42,446

 

Total current assets

 

756,654

 

 

 

734,838

 

Property, plant and equipment, net

 

470,690

 

 

 

446,835

 

Deferred income tax

 

28,751

 

 

 

31,652

 

Goodwill

 

138,772

 

 

 

132,437

 

Intangible assets, net

 

130,035

 

 

 

137,935

 

Other

 

89,257

 

 

 

42,674

 

Total assets

$

1,614,159

 

 

$

1,526,371

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Line of credit

$

15,454

 

 

$

10,254

 

Accounts payable

 

110,521

 

 

 

117,808

 

Accrued liabilities and other

 

102,679

 

 

 

82,605

 

Income tax payable

 

16,769

 

 

 

15,744

 

Current portion of long-term debt

 

29,988

 

 

 

27,613

 

Total current liabilities

 

275,411

 

 

 

254,024

 

Long-term debt, net of current portion

 

141,919

 

 

 

186,143

 

Deferred tax liabilities

 

19,048

 

 

 

17,993

 

Other long-term liabilities

 

126,629

 

 

 

90,779

 

Total liabilities

 

563,007

 

 

 

548,939

 

 

 

 

 

 

 

 

 

Commitments and contingencies (See Note 8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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;

  50,744,888 and 50,221,035, issued and outstanding at June 30, 2019

  and December 31, 2018,  respectively

 

34,803

 

 

 

34,454

 

Additional paid-in capital

 

414,451

 

 

 

399,915

 

Retained earnings

 

704,708

 

 

 

636,708

 

Treasury stock, at cost, 1,457,206 shares held at June 30, 2019

  and December 31, 2018

 

(37,768

)

 

 

(37,768

)

Accumulated other comprehensive loss

 

(112,225

)

 

 

(101,846

)

Total stockholders' equity

 

1,003,969

 

 

 

931,463

 

Noncontrolling interest

 

47,183

 

 

 

45,969

 

Total equity

 

1,051,152

 

 

 

977,432

 

Total liabilities and stockholders' equity

$

1,614,159

 

 

$

1,526,371

 

 

 

 

 

 

 

 

 

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,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net sales

$

322,006

 

 

$

304,085

 

 

$

624,299

 

 

$

578,597

 

Cost of goods sold

 

200,018

 

 

 

196,817

 

 

 

389,900

 

 

 

372,734

 

Gross profit

 

121,988

 

 

 

107,268

 

 

 

234,399

 

 

 

205,863

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

47,333

 

 

 

42,153

 

 

 

91,021

 

 

 

89,303

 

Research and development

 

21,707

 

 

 

22,050

 

 

 

43,877

 

 

 

42,250

 

Amortization of acquisition related intangible assets

 

4,536

 

 

 

4,678

 

 

 

9,020

 

 

 

9,445

 

Other operating (income) expense

 

(104

)

 

 

543

 

 

 

(158

)

 

 

81

 

Total operating expense

 

73,472

 

 

 

69,424

 

 

 

143,760

 

 

 

141,079

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

48,516

 

 

 

37,844

 

 

 

90,639

 

 

 

64,784

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

633

 

 

 

443

 

 

 

1,508

 

 

 

957

 

Interest expense

 

(2,011

)

 

 

(2,544

)

 

 

(4,156

)

 

 

(5,301

)

Foreign currency (loss) gain, net

 

(496

)

 

 

300

 

 

 

(560

)

 

 

(2,729

)

Other income

 

1,235

 

 

 

377

 

 

 

2,480

 

 

 

5,012

 

Total other expense

 

(639

)

 

 

(1,424

)

 

 

(728

)

 

 

(2,061

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes and noncontrolling interest

 

47,877

 

 

 

36,420

 

 

 

89,911

 

 

 

62,723

 

Income tax provision

 

11,174

 

 

 

10,753

 

 

 

21,472

 

 

 

18,536

 

Net income

 

36,703

 

 

 

25,667

 

 

 

68,439

 

 

 

44,187

 

Less net (income) attributable to noncontrolling interest

 

(419

)

 

 

(599

)

 

 

(439

)

 

 

(593

)

Net income attributable to common stockholders

$

36,284

 

 

$

25,068

 

 

$

68,000

 

 

$

43,594

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.72

 

 

$

0.50

 

 

$

1.35

 

 

$

0.88

 

Diluted

$

0.70

 

 

$

0.49

 

 

$

1.32

 

 

$

0.86

 

Number of shares used in earnings per share computation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

50,658

 

 

 

49,680

 

 

 

50,529

 

 

 

49,509

 

Diluted

 

51,620

 

 

 

50,792

 

 

 

51,566

 

 

 

50,727

 

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,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income

$

36,703

 

 

$

25,667

 

 

$

68,439

 

 

$

44,187

 

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

 

1,020

 

 

 

7,266

 

 

 

(5,009

)

 

 

7,701

 

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

 

503

 

 

 

927

 

 

 

(3,406

)

 

 

3,275

 

Unrealized foreign currency loss, net of tax

 

(6,900

)

 

 

(24,985

)

 

 

(1,964

)

 

 

(9,130

)

Comprehensive income

 

31,326

 

 

 

8,875

 

 

 

58,060

 

 

 

46,033

 

Less: Comprehensive income attributable to noncontrolling interest

 

(419

)

 

 

(599

)

 

 

(439

)

 

 

(593

)

Total comprehensive income attributable to common stockholders

$

30,907

 

 

$

8,276

 

 

$

57,621

 

 

$

45,440

 

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, 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

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

43,593

 

 

 

1,847

 

 

 

45,440

 

 

 

593

 

 

 

46,033

 

Noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Dividends to noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,607

)

 

 

(2,607

)

Common stock issued for share-based plans

 

 

716

 

 

 

477

 

 

 

-

 

 

 

-

 

 

 

2,532

 

 

 

-

 

 

 

-

 

 

 

3,009

 

 

 

-

 

 

 

3,009

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

11,079

 

 

 

-

 

 

 

-

 

 

 

11,079

 

 

 

-

 

 

 

11,079

 

Tax related to net share settlement

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(8,617

)

 

 

-

 

 

 

-

 

 

 

(8,617

)

 

 

-

 

 

 

(8,617

)

Balance,  June 30, 2018

 

 

51,303

 

 

$

34,204

 

 

 

(1,457

)

 

$

(37,768

)

 

$

391,332

 

 

$

576,280

 

 

$

(81,633

)

 

$

882,415

 

 

$

40,400

 

 

$

922,815

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

68,000

 

 

 

(10,379

)

 

 

57,621

 

 

 

439

 

 

 

58,060

 

Noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,343

 

 

 

3,343

 

Dividends to noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,568

)

 

 

(2,568

)

Common stock issued for share-based plans

 

 

524

 

 

 

349

 

 

 

-

 

 

 

-

 

 

 

6,356

 

 

 

-

 

 

 

-

 

 

 

6,705

 

 

 

-

 

 

 

6,705

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9,775

 

 

 

-

 

 

 

-

 

 

 

9,775

 

 

 

-

 

 

 

9,775

 

Tax related to net share settlement