10-Q

4444wNN

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 September 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 October 31, 2019 was 51,041,969.

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	25
Item 3. Quantitative and Qualitative Disclosures About Market Risk	37
Item 4. Controls and Procedures	37
Part II – Other Information
Item 1. Legal Proceedings	38
Item 1A. Risk Factors	38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3. Defaults Upon Senior Securities	39
Item 4. Mine Safety Disclosures	40
Item 5. Other Information	40
Item 6. Exhibits	41
Signatures	42

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	September 30,			December 31,
	2019			2018
	[(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	218,349		$	241,053
Short-term investments		7,928			7,499
Accounts receivable, net of allowances of $4,726 and $4,102 at   September 30, 2019 and December 31, 2018, respectively		257,421			228,405
Inventories		230,815			215,435
Assets held for sale		4,947			-
Prepaid expenses and other		43,575			42,446
Total current assets		763,035			734,838
Property, plant and equipment, net		468,122			446,835
Deferred income tax		28,975			31,652
Goodwill		138,020			132,437
Intangible assets, net		125,446			137,935
Other		86,215			42,674
Total assets	$	1,609,813		$	1,526,371
Liabilities
Current liabilities:
Line of credit	$	17,086		$	10,254
Accounts payable		117,226			117,808
Accrued liabilities and other		106,456			82,605
Income tax payable		25,404			15,744
Current portion of long-term debt		31,532			27,613
Total current liabilities		297,704			254,024
Long-term debt, net of current portion		87,939			186,143
Deferred tax liabilities		18,661			17,993
Other long-term liabilities		128,411			90,779
Total liabilities		532,715			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;   51,012,794 and 50,221,035, issued and outstanding at September 30, 2019   and December 31, 2018,  respectively		34,982			34,454
Additional paid-in capital		417,576			399,915
Retained earnings		742,768			636,708
Treasury stock, at cost, 1,457,206 shares held at September 30, 2019   and December 31, 2018		(37,768	)		(37,768	)
Accumulated other comprehensive loss		(127,705	)		(101,846	)
Total stockholders' equity		1,029,853			931,463
Noncontrolling interest		47,245			45,969
Total equity		1,077,098			977,432
Total liabilities and stockholders' equity	$	1,609,813		$	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						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Net sales	$	323,674		$	320,946		$	947,973		$	899,543
Cost of goods sold		201,628			205,732			591,528			578,466
Gross profit		122,046			115,214			356,445			321,077
Operating expenses
Selling, general and administrative		46,123			42,475			137,143			131,778
Research and development		22,689			22,549			66,566			64,799
Amortization of acquisition related intangible assets		4,519			4,418			13,539			13,863
Other operating (income) expense		-			(66	)		(158	)		15
Total operating expense		73,331			69,376			217,090			210,455
Income from operations		48,715			45,838			139,355			110,622
Other income (expense)
Interest income		272			474			1,780			1,431
Interest expense		(2,007	)		(2,318	)		(6,163	)		(7,619	)
Foreign currency (loss) gain, net		(822	)		(655	)		(1,382	)		(3,384	)
Other income		2,577			1,061			5,056			6,073
Total other income (expense)		20			(1,438	)		(709	)		(3,499	)
Income before income taxes and noncontrolling interest		48,735			44,400			138,646			107,123
Income tax provision		10,613			13,190			32,085			31,726
Net income		38,122			31,210			106,561			75,397
Less net (income) attributable to noncontrolling interest		(62	)		(302	)		(501	)		(895	)
Net income attributable to common stockholders	$	38,060		$	30,908		$	106,060		$	74,502
Earnings per share attributable to common stockholders:
Basic	$	0.75		$	0.62		$	2.09		$	1.50
Diluted	$	0.73		$	0.61		$	2.05		$	1.46
Number of shares used in earnings per share computation:
Basic		50,998			50,115			50,687			49,713
Diluted		51,869			51,077			51,699			50,883

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

-4-

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Net income	$	38,122		$	31,210		$	106,561		$	75,397
Unrealized (loss) gain on defined benefit plan, net of tax		(6,553	)		(493	)		(11,562	)		7,207
Unrealized gain (loss) on swaps and collars, net of tax		259			378			(3,146	)		3,653
Unrealized foreign currency loss, net of tax		(9,186	)		(9,849	)		(11,151	)		(18,978	)
Comprehensive income		22,642			21,246			80,702			67,279
Less: Comprehensive income attributable to noncontrolling interest		(62	)		(302	)		(501	)		(895	)
Total comprehensive income attributable to common stockholders	$	22,580		$	20,944		$	80,201		$	66,384

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

-5-

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)

	Common stock				Treasury stock						Additional paid-in			Retained		Accumulated other comprehensive			Total Diodes Incorporated Stockholders'			Noncontrolling			Total
	Shares		Amount		Shares			Amount			capital			earnings		loss			equity			interest			equity
Balance, June 30, 2018		51,303	$	34,204		(1,457	)	$	(37,768	)	$	391,332		$	576,280	$	(81,633	)	$	882,415		$	40,400		$	922,815
Total comprehensive income		-		-		-			-			-			30,909		(9,965	)		20,944			302			21,246
Noncontrolling interests		-		-		-			-			-			-		-			-			4,209			4,209
Dividends to noncontrolling interest		-		-		-			-			-			-		-			-			(128	)		(128	)
Common stock issued for share-based plans		345		229		-			-			1,623			-		-			1,852			-			1,852
Share-based compensation		-		-		-			-			4,896			-		-			4,896			-			4,896
Tax related to net share settlement		-		-		-			-			(2,439	)		-		-			(2,439	)		-			(2,439	)
Balance,  September 30, 2018		51,648	$	34,433		(1,457	)	$	(37,768	)	$	395,412		$	607,189	$	(91,598	)	$	907,668		$	44,783		$	952,451
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		-		-		-			-			-			74,502		(8,118	)		66,384			895			67,279
Noncontrolling interests		-		-		-			-			-			-		-			-			4,209			4,209
Dividends to noncontrolling interest		-		-		-			-			-			-		-			-			(2,735	)		(2,735	)
Common stock issued for share-based plans		1,061		706		-			-			4,155			-		-			4,861			-			4,861
Share-based compensation		-		-		-			-			15,975			-		-			15,975			-			15,975
Tax related to net share settlement		-		-		-			-			(11,056	)		-		-			(11,056	)		-			(11,056	)
Balance,  September 30, 2018		51,648	$	34,433		(1,457	)	$	(37,768	)	$	395,412		$	607,189	$	(91,598	)	$	907,668		$	44,783		$	952,451
Balance, June 30, 2019		52,202	$	34,803		(1,457	)	$	(37,768	)	$	414,451		$	704,708	$	(112,225	)	$	1,003,969		$	47,183		$	1,051,152
Total comprehensive income		-		-		-			-			-			38,060		(15,480	)		22,580			62			22,642
Common stock issued for share-based plans		268		179		-			-			324			-		-			503			-			503
Share-based compensation		-		-		-			-			5,589			-		-			5,589			-			5,589
Tax related to net share settlement		-		-		-			-			(2,788	)		-		-			(2,788	)		-			(2,788	)
Balance,  September 30, 2019		52,470	$	34,982		(1,457	)	$	(37,768	)	$	417,576		$	742,768	$	(127,705	)	$	1,029,853		$	47,245		$	1,077,098
Balance, December 31, 2018		51,678	$	34,454		(1,457	)	$	(37,768	)	$	399,915		$	636,708	$	(101,846	)	$	931,463		$	45,969		$	977,432
Total comprehensive income		-		-		-			-			-			106,060		(25,859	)		80,201			501			80,702
Noncontrolling interests		-		-		-			-			-			-		-			-			3,343			3,343
Dividends to noncontrolling interest		-		-		-			-			-			-		-			-			(2,568	)		(2,568	)
Common stock issued for share-based plans		792		528		-			-			6,680			-		-			7,208			-			7,208
Share-based compensation		-		-		-			-			15,364			-		-			15,364			-			15,364
Tax related to net share settlement		-		-		-			-			(4,383	)		-		-			(4,383	)		-			(4,383	)
Balance,  September 30, 2019		52,470	$	34,982		(1,457	)	$	(37,768	)	$	417,576		$	742,768	$	(127,705	)	$	1,029,853		$	47,245		$	1,077,098

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

-6-

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Nine Months Ended
	September 30,
	2019			2018
Operating Activities
Net income	$	106,561		$	75,397
Adjustments to reconcile net income to net cash provided by operating activities, net of effects of acquisitions
Depreciation and amortization		81,302			76,868
Share-based compensation expense		15,364			15,975
Other		(206	)		(615	)
Changes in operating assets:
Change in accounts receivable		(29,868	)		(28,596	)
Change in inventory		(9,062	)		(5,378	)
Change in other operating assets		(3,475	)		(11,177	)
Changes in operating liabilities:
Change in accrued liabilities		10,206			9,070
Change in income tax payable (refundable)		9,853			(2,388	)
Change in other operating liabilities		(2,970	)		(5,228	)
Net cash flows provided by operating activities		177,705			123,928
Cash flows from investing activities
Acquisitions, net of cash received		(33,029	)		(41	)
Purchases of property, plant and equipment		(76,128	)		(72,159	)
Purchases of short-term investments		(15,921	)		(13,959	)
Proceeds from maturity of short-term investments		15,332			10,831
Other		(430	)		1,235
Net cash and cash equivalents used in investing activities		(110,176	)		(74,093	)
Cash flows from financing activities
Advances on lines of credit and short-term debt		9,954			9,151
Repayments of line of credit and short-term debt		(3,067	)		-
Taxes paid related to net share settlement		(4,383	)		(11,056	)
Proceeds from long-term debt		278,237			304,656
Repayments of long-term debt		(372,976	)		(408,863	)
Net proceeds from issuance of common stock		7,208			4,861
Repayment of and proceeds from finance lease obligation		(912	)		1,489
Dividend distribution to noncontrolling interests		(2,577	)		(2,694	)
Capital contribution from noncontrolling interest		-			5,263
Other		1,524			(764	)
Net cash and cash equivalents used in financing activities		(86,992	)		(97,957	)
Effect of exchange rate changes on cash and cash equivalents		(2,614	)		(6,039	)
Change in cash and cash equivalents, including restricted cash		(22,077	)		(54,161	)
Cash and cash equivalents, beginning of period, including restricted cash		241,833			205,262
Cash and cash equivalents, end of period, including restricted cash		219,756		$	151,101

-7-

Supplemental Cash Flow Information
Interest paid during the period		5,781		$	7,661
Taxes paid during the period		24,422		$	29,435
Non-cash investing and financing activities:
(Increase) decrease in accounts payable related to the purchase of       property, plant and equipment	$	(1,263	)	$	8,093

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:

	Nine Months Ended
	September 30,
	2019	2018
Current assets:
Cash and cash equivalents	$218,349	$150,274
Restricted cash (included in other current assets)	1,407	827
Total cash, cash equivalents and restricted cash	$219,756	$151,101

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

-8-

DIODES INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – Nature of Operations, Basis of Presentation, Recently Issued Accounting Pronouncements and Updates to Accounting Policies and Estimates

Nature of Operations

Diodes Incorporated, together with its subsidiaries (collectively, the “Company,” “we” or “our”) (Nasdaq: DIOD), is a leading global manufacturer and supplier of high-quality, application-specific standard products within the broad discrete, logic, analog and mixed-signal semiconductor markets. We serve the consumer electronics, computing, communications, industrial, and automotive markets. Our products include diodes, rectifiers, transistors, MOSFETs, protection devices, function-specific arrays, single gate logic, amplifiers and comparators, Hall-effect and temperature sensors, power management devices, including LED drivers, AC-DC converters and controllers, DC-DC switching and linear voltage regulators, and voltage references along with special function devices, such as USB power switches, load switches, voltage supervisors, and motor controllers. We also have timing, connectivity, switching, and signal integrity solutions for high-speed signals. Our corporate headquarters and Americas’ sales offices are located in Plano, Texas and Milpitas, California. Design, marketing, and engineering centers are located in Plano; Milpitas; Taipei, Taoyuan City and Zhubei City, Taiwan; Oldham, England; and Neuhaus, Germany. Our wafer fabrication facilities are located in Oldham and Shanghai, China and Greenock, Scotland. We have assembly and test facilities located in Shanghai, Jinan and Chengdu, China, as well as in Hong Kong, Neuhaus and Taipei. Additional engineering, research and development, sales, warehouse, and logistics offices are located in Taipei; Hong Kong; Oldham; Shanghai; Shenzhen and Yangzhou, China; Seongnam-si, South Korea; Munich, Germany; and Tokyo, Japan, with support offices throughout the world.

Basis of Presentation

The condensed consolidated financial data at December 31, 2018 is derived from audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission (“SEC”) on February 21, 2019 (“Form 10-K”). The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q. They do not include all information and footnotes necessary for a fair presentation of financial position, operating results and cash flows in conformity with GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in our Form 10-K.  All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair presentation of the operating results for the period presented have been included in the interim period. Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, 2019.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. As permitted under GAAP, interim accounting for certain expenses, including income taxes, are based on full year forecasts. For interim financial reporting purposes, income taxes are recorded based upon estimated annual effective income tax rates taking into consideration discrete items occurring in a quarter.

Dollar amounts and share amounts are presented in thousands, except per share amounts, unless otherwise noted. Certain prior year’s balances may have been reclassified to conform to the current financial statement presentation.

Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issued the following Accounting Standards Updates (“ASU”) which could have potential impact on the Company’s financial statements:   

-9-

Recently Adopted Standards

ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) – In February 2016, the FASB issued ASU 2016-02, which amends the accounting treatment for leases and requires, among other things, lessees to recognize a right-of-use (“ROU”) asset and lease liability for most lease arrangements. The amendments were effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted ASU 2016-02 on January 1, 2019, using the modified retrospective transition approach, under which financial results reported in periods prior to 2018 are unchanged. We elected the following allowed practical expedients as permitted under the transition guidance within the new standard:

• Not record leases with an initial term of 12 months on the balance sheet;

• Not separate non-lease components of leases from the lease components; and

• Not reassess (1) the definition of a lease, (2) lease classification, and (3) initial direct costs for existing leases during transition.

Upon adoption of ASU 2016-02, the Company recorded ROU assets of $68.3 million, including land-use rights of $17.1 million previously recorded in other assets and $2.5 million previously recorded in property, plant and equipment and ROU liabilities of $50.4 million. For additional information related to the Company’s leases, see Note 10.    

ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting ("ASU 2018-07") - In June 2018, the FASB issued ASU 2018-07, which simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation—Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 was effective for the Company on January 1, 2019. The adoption of this standard did not have a material effect on our condensed consolidated financial statements or disclosures.

ASU No. 2017-12 - Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”) -In August 2017, the FASB issued ASU No. 2017-12 to better align hedge accounting with risk management strategies, and as a result, more hedging strategies will be eligible for hedge accounting. Public business entities will have until the end of the first quarter in which a hedge is designated to perform an initial assessment of a hedge’s effectiveness. After initial qualification, the new guidance permits a qualitative effectiveness assessment for certain hedges instead of a quantitative test if the company can reasonably support an expectation of high effectiveness throughout the term of the hedge. An initial quantitative test to establish that the hedge relationship is highly effective is still required. The amendments are effective for fiscal years beginning after December 15, 2018, and the Company adopted the new standard January 1, 2019. The new standard had no impact on the Company’s financial statements.

On January 1, 2019, the Company adopted ASU No. 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes”. The amendments in this ASU permit the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under ASC 815, in addition to the currently permissible benchmark interest rates. This ASU provides the Company the ability to utilize the OIS rate based on SOFR as the benchmark interest rate on certain hedges of interest rate risk. The new standard had no impact on the Company’s financial statements.

Standards Effective in Future Years

The FASB has issued the following relevant standards, effective in future years, which are not expected to have a material impact on our consolidated condensed financial statements:

Standard No.	Standard Name	Standard Effective Date
2018-13	Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement	January 1, 2020
2018-14	Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans	January 1, 2020

In April 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, that clarifies and improves areas of guidance related to the recently issued standards on credit losses (ASU 2016-13), hedging (ASU 2017-12), and recognition and measurement of financial instruments (ASU 2016-01). The amendments generally have the same effective dates as their related standards. If already adopted, the amendments of ASU 2016-01 and ASU

-10-

2016-13 are effective for fiscal years beginning after December 15, 2019 and the amendments of ASU 2017-12 are effective as of the beginning of the Company’s next annual reporting period; early adoption is permitted. The Company is currently evaluating the impact this change will have on its consolidated financial statements and disclosures.    

All other issued and not yet effective accounting standards are not expected to be relevant to the Company.

Updates to Accounting Policies and Estimates

Leases

The Company determines if an arrangement is a lease at inception. ROU assets are included in Other assets in the Company’s condensed consolidated balance sheets. Current ROU liabilities are included in Accrued liabilities and other and long-term ROU liabilities are included in Other long-term liabilities, in our condensed consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. To determine the present value of the lease payments, we estimate our incremental borrowing rate based on information available at the lease commencement date.

The Company’s lease term includes options to extend the lease when it is reasonably certain that it will exercise that option. Leases with a term of 12 months or less are not recorded on the balance sheet. Our leases typically do not contain any residual value guarantees.  For real estate, we account for the lease and non-lease components as a single lease component.

NOTE 2 – Earnings per Share

Earnings per share (“EPS”) is calculated by dividing net income attributable to common stockholders by the weighted-average number of shares of Common Stock outstanding during the period. Diluted EPS is calculated similarly but includes potential dilution from the exercise of stock options and stock awards, except when the effect would be anti-dilutive.  During the three and nine months ended September 30, 2019 and 2018 we paid no dividends on our Common Stock.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Earnings (numerator)
Net income attributable to common stockholders	$	38,060	$	30,908	$	106,060	$	74,502
Shares (denominator)
Weighted average common shares outstanding (basic)		50,998		50,115		50,687		49,713
Dilutive effect of stock options and stock awards outstanding		871		962		1,012		1,170
Adjusted weighted average common shares outstanding (diluted)		51,869		51,077		51,699		50,883
Earnings per share attributable to common stockholders
Basic	$	0.75	$	0.62	$	2.09	$	1.50
Diluted	$	0.73	$	0.61	$	2.05	$	1.46
Stock options and stock awards excluded from EPS   calculation because the effect would be anti-dilutive		3		-		107		94

-11-

NOTE 3 – Inventories

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

	September 30, 2019		December 31, 2018
Finished goods	$	59,721	$	59,244
Work-in-progress		67,446		59,166
Raw materials		103,648		97,025
Total	$	230,815	$	215,435

NOTE 4 – Goodwill and Intangible Assets

The table below sets forth the changes in goodwill:

Balance at December 31, 2018	$	132,437
Acquisitions:
Wafer fabrication facility in Greenock, Scotland (a)		931
Canyon investment (b)		1,671
ERIS investment in Yea-Shin (c)		4,320
Foreign currency translation adjustment		(1,339	)
Balance at September 30, 2019	$	138,020

The increase in goodwill is related to:

(a)  The Company’s acquisition accounting for the purchase of a wafer fabrication facility in Greenock, Scotland, (“GFAB”).  (See Note 13 for additional information).

(b)  The Company’s acquisition accounting for the Company’s investment of $3.4 million in Canyon Semiconductor.  This investment brings our ownership of Canyon to 51%.  During the nine months ended September 30 2019, as a measurement period adjustment, we finalized our acquisition accounting with finalization of   the value of non-controlling interest and deferred taxes.   

(c)  The Company’s acquisition accounting related to Eris’ investment of approximately $6.4 million in Yea-Shin Technology Corporation.  During the second quarter of 2019, as a measurement period adjustment, we increased goodwill approximately $4.3 million, related to finalization of deferred taxes. The Company owns approximately 51% of Eris and Eris owns approximately 60% of Yea-Shin.    

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

	September 30,			December 31,
	2019			2018
Intangible assets subject to amortization:
Gross carrying amount	$	244,554		$	238,867
Accumulated amortization		(119,949	)		(106,410	)
Foreign currency translation adjustment		(8,271	)		(8,281	)
Total		116,334			124,176
Intangible assets with indefinite lives:
Gross carrying amount		10,303			14,883
Foreign currency translation adjustment		(1,191	)		(1,124	)
Total		9,112			13,759
Total intangible assets, net	$	125,446		$	137,935

The table below sets forth amortization expense related to intangible assets subject to amortization:

Amortization expense	2019		2018
Three months ended September 30	$	4,519	$	4,418
Nine months ended September 30	$	13,539	$	13,863

-12-

NOTE 5 – Income Tax Provision

The table below sets forth information related to our income tax expense:  

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Domestic pre-tax income (loss)	$	13,547		$	(7,267	)	$	34,097		$	(11,289	)
Foreign pre-tax income	$	35,188		$	51,667		$	104,549		$	118,412
Income tax provision	$	10,613		$	13,190		$	32,085		$	31,726
Effective tax rate		21.8	%		29.7	%		23.1	%		29.6	%
Impact of tax holidays on tax expense	$	330		$	638		$	1,179		$	(104	)
Earnings per share impact of tax holidays:
Basic	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	-
Diluted	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	-

The decrease in the effective tax rate for the three and nine months ended September 30, 2019 when compared to the three and nine months ended September 30, 2018, is primarily attributable to an increase in estimated full year global pretax book income and a net decrease in unfavorable U.S. permanent differences.         

Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of European and Asian subsidiaries.  Any future distributions of foreign earnings will not be subject to additional U.S. income tax, but may be subject to non-U.S. withholding taxes.

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations by tax authorities for tax years before 2012, or for the 2015 tax year. We are no longer subject to China income tax examinations by tax authorities for tax years before 2009. With respect to state and local jurisdictions and countries outside of the U.S. (other than China), with limited exceptions, the Company is no longer subject to income tax audits for years before 2013. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties, if any, have been provided for in the Company’s reserve for any adjustments that may result from currently pending tax audits. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in interest expense. As of September 30, 2019, the gross amount of unrecognized tax benefits was approximately $33.8   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. At this time, an estimate of the range of the reasonably possible outcomes cannot be made.

NOTE 6 – Share-Based Compensation

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Cost of goods sold	$	281	$	96	$	665	$	267
Selling, general and administrative		4,566		3,993		12,513		13,477
Research and development		742		807		2,186		2,233
Total share-based compensation expense	$	5,589	$	4,896	$	15,364	$	15,977

-13-

The table below sets forth share-based compensation expense by type:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Stock options	$	-	$	-	$	-	$	275
Share grants		5,589		4,896		15,364		15,702
Total share-based compensation expense	$	5,589	$	4,896	$	15,364	$	15,977

Stock Options. Approximately $7.2 million in cash proceeds was received from stock option exercises during the nine months ended September 30, 2019.

As of September 30, 2019, we had no unrecognized share-based compensation expense related to unvested stock options.  

Share Grants. Restricted stock awards and restricted stock units generally vest in equal annual installments over a four-year period.   We also have share grants that are performance-based and time-based that vest upon achievement of certain performance criteria over time.             

As of September 30, 2019, total unrecognized share-based compensation expense related to share grants was approximately $44.4 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 2.3 years.          

NOTE 7 – Segment Information and Net Sales

Segment Reporting. For financial reporting purposes, we operate in a single segment, standard semiconductor products, through our various manufacturing and distribution facilities. We aggregate our products because the products are similar and have similar economic characteristics, use similar production processes and share the same customer type. Our primary operations include operations in Asia, North America and Europe.  During the three months ended September 30, 2018, one customer, a broad-based global distributor that sells to thousands of different end users, accounted for 10.2%, or $32.7 million, respectively, of our net sales.  No customer accounted for 10% or more of our revenue for any other period presented. This customer did not account for 10% or greater of our outstanding accounts receivable at September 30, 2019 or 2018.  

-14-

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

Three Months Ended September 30, 2019	Asia			North America			Europe			Consolidated
Total sales	$	323,876		$	175,900		$	63,583		$	563,359
Intercompany elimination		(115,879	)		(96,150	)		(27,656	)		(239,685	)
Net sales	$	207,997		$	79,750		$	35,927		$	323,674
Three Months Ended September 30, 2018	Asia			North America			Europe			Consolidated
Total sales	$	283,635		$	51,640		$	49,209		$	384,484
Intercompany elimination		(40,690	)		(8,773	)		(14,075	)		(63,538	)
Net sales	$	242,945		$	42,867		$	35,134		$	320,946
As of and for the
Nine Months Ended September 30, 2019	Asia			North America			Europe			Consolidated
Total sales	$	917,516		$	450,874		$	180,759		$	1,549,149
Intercompany elimination		(305,581	)		(228,344	)		(67,251	)		(601,176	)
Net sales	$	611,935		$	222,530		$	113,508		$	947,973
Property, plant and equipment, net	$	385,862		$	23,186		$	59,074		$	468,122
Total assets		1,173,683			237,467			198,663		$	1,609,813
As of and for the
Nine Months Ended September 30, 2018	Asia			North America			Europe			Consolidated
Total sales	$	797,455		$	116,868		$	150,382		$	1,064,705
Intercompany elimination		(106,330	)		(16,276	)		(42,556	)		(165,162	)
Net sales	$	691,125		$	100,592		$	107,826		$	899,543
Property, plant and equipment, net	$	399,632		$	30,133		$	24,321		$	454,086
Total assets	$	1,075,840		$	202,024		$	189,920		$	1,467,784

Disaggregation of Net sales. We disaggregate net sales from contracts with customers into direct sales and distribution sales (“Distributors”) and by geographic area. Direct sales customers consist of those customers using our product in their manufacturing process, and Distributors are those customers who resell our products to third parties. We sell our products to customers in multiple areas of the world including Asia, Europe, and North America. Across these regions, we sell products to end users in a variety of markets such as 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.

-15-

The tables below set forth the amount of net sales by type (direct sales or Distributor) and the location of the customer based on the location where the products were shipped for the three and nine months ended September 30, 2019 and 2018:

	Net Sales for the Three Months Ended September 30,
	Direct Sales						Distributor
	2019			2018			2019			2018
China	$	57,952		$	60,037		$	105,305		$	113,191
U.S.		2,388			4,409			20,723			30,550
Korea		6,546			4,597			10,594			13,250
Germany		3,079			3,076			16,705			20,912
Singapore		124			637			16,166			16,979
Taiwan		819			621			21,850			17,675
All others (1)		39,405			20,574			22,018			14,438
Total	$	110,313		$	93,951		$	213,361		$	226,995
	Percent of Net Sales by Type for the Three Months Ended September 30,
	Direct Sales						Distributor
	2019			2018			2019			2018
China		53	%		64	%		49	%		50	%
U.S.		2	%		5	%		10	%		13	%
Korea		6	%		5	%		5	%		6	%
Germany		3	%		3	%		8	%		9	%
Singapore		—			1	%		8	%		7	%
Taiwan		1	%		1	%		10	%		8	%
All others (1)		35	%		21	%		10	%		7	%
Total		100	%		100	%		100	%		100	%
	Total Net Sales for the Three Months Ended September 30,
	Dollars						Percent of Net Sales
	2019			2018			2019			2018
China	$	163,257		$	173,228			50	%		54	%
U.S.		23,111			34,959			7	%		11	%
Korea		17,140			17,847			5	%		6	%
Germany		19,784			23,988			6	%		7	%
Singapore		16,290			17,616			5	%		5	%
Taiwan		22,669			18,296			7	%		6	%
All others (1)		61,423			35,012			20	%		11	%
Total	$	323,674		$	320,946			100	%		101	%

-16-

	Net Sales for the Nine Months Ended September 30,
	Direct Sales						Distributor
	2019			2018			2019			2018
China	$	169,861		$	164,109		$	305,197		$	323,875
U.S.		8,509			12,866			78,693			78,081
Korea		17,309			12,148			27,588			32,163
Germany		9,536			9,001			53,355			63,343
Singapore		490			1,549			47,022			52,380
Taiwan		1,977			2,399			65,421			52,696
All others (1)		97,920			52,558			65,095			42,375
Total	$	305,602		$	254,630		$	642,371		$	644,913
	Percent of Net Sales by Type for the Nine Months Ended September 30,
	Direct Sales						Distributor
	2019			2018			2019			2018
China		56	%		64	%		48	%		50	%
U.S.		3	%		5	%		12	%		12	%
Korea		6	%		5	%		4	%		5	%
Germany		3	%		4	%		8	%		10	%
Singapore		—			1	%		7	%		8	%
Taiwan		1	%		1	%		10	%		8	%
All others (1)		31	%		20	%		11	%		7	%
Total		100	%		100	%		100	%		100	%
	Total Net Sales for the Nine Months Ended September 30,
	Dollar						Percent of Net Sales
	2019			2018			2019			2018
China	$	475,058		$	487,984			50	%		54	%
U.S.		87,202			90,947			9	%		10	%
Korea		44,897			44,311			5	%		5	%
Germany		62,891			72,344			7	%		8	%
Singapore		47,512			53,929			5	%		6	%
Taiwan		67,398			55,095			7	%		6	%
All others (1)		163,015			94,933			17	%		11	%
Total	$	947,973		$	899,543			100	%		100	%

(1) Represents countries with less than 3% of the total net sales each.

NOTE 8 – Commitments and Contingencies

Purchase commitments – As of September 30, 2019, we had approximately $26.1 million in non-cancelable purchase contracts related to capital expenditures, primarily related to our manufacturing facilities in Asia.  As of September 30, 2019, we also had a commitment to purchase approximately $72.7 million of wafers to be used in our manufacturing process.  These wafer purchases will occur during 2019 and 2020.

Defined Benefit Plan - We have a contributory defined benefit plan that covers certain employees in the United Kingdom.  As of September 30, 2019, the unfunded liability for this defined benefit plan was approximately $33.0 million.  We are obligated to make annual contributions, each year through December 2029, of approximately GBP 2 million (approximately $2.6  million based on a GBP: USD exchange rate of 1.3:1).  It is necessary for the Trustees to review the contributions required to fund the benefits promised to the employees at least every three years.  A review as of April 2019 is underway and the outcome of the review could result in a change in the amount of the payment or the period over which payment is required.

-17-

Contingencies – From time to time, we are involved in various legal proceedings that arise in the normal course of business. While we intend to defend any lawsuit vigorously, we presently believe that the ultimate outcome of any pending legal proceeding will not have any material adverse effect on our consolidated financial position, cash flows or operating results. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, which could impact our business and operating results for the period in which the ruling occurs or future periods.  Based on information available, we evaluate the likelihood of potential outcomes of all pending disputes. We record an appropriate liability when the amount of any liability associated with a pending dispute is deemed probable and reasonably estimable. In addition, we do not accrue for estimated legal fees and other directly related costs as they are expensed as incurred.  The Company is not currently a party to any pending litigation that the Company considers material.

Note 9 – Derivative Financial Instruments

We use derivative instruments to manage risks related to foreign currencies, interest rates and the net investment risk in our foreign subsidiaries. Our objectives for holding derivatives include reducing, eliminating, and efficiently managing the economic impact of these exposures as effectively as possible. Our derivative programs include strategies that both qualify and do not qualify for hedge accounting treatment.

Hedges of Foreign Currency Risk - We are exposed to fluctuations in various foreign currencies against our different functional currencies. We use foreign currency forward agreements to manage this exposure. At September 30, 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.  The fair value of these instruments approximates zero. 

The table below sets forth outstanding foreign currency forward contracts at September 30, 2019 and December 31, 2018:

Notional Amount		Effective Date	Maturity Date	Index*	Weighted Average Foreign Exchange Rate	Balance Sheet Hedge Designation
$	2,242	September 2019	November 2019	EUR/GBP	0.88592	Non-designated
	2,785	September 2019	November 2019	EUR/USD	1.0939	Non-designated
	21,195	September 2019	November 2019	GBP/USD	1.2328	Non-designated
	39,681	September 2019	November 2019	USD/CNY	7.0985	Non-designated
	806	September 2019	November 2019	USD/JPY	108.08	Non-designated
	33,733	September 2019	November 2019	USD/TWD	30.925	Non-designated
	500	January 2019	October 2019	USD/TWD	30.635	Non-designated
	500	January 2019	January 2020	USD/TWD	30.635	Non-designated
	500	January 2019	November 2019	USD/TWD	30.705	Non-designated
$	101,942
Notional Amount		Effective Date	Maturity Date	Index*	Weighted Average Foreign Exchange Rate	Balance Sheet Hedge Designation
$	1,221	December 2018	February 2019	EUR/GBP	0.8981	Non-designated
	12,538	December 2018	February 2019	EUR/USD	1.1479	Non-designated
	8,463	December 2018	February 2019	GBP/USD	1.2785	Non-designated
	44,946	December 2018	February 2019	USD/CNY	6.8738	Non-designated
	844	December 2018	February 2019	USD/JPY	110.14	Non-designated
	54,041	December 2018	February 2019	USD/TWD	30.559	Non-designated
	300	December 2018	January 2019	USD/TWD	30.669	Non-designated
$	122,353
*  EUR = Euro
GBP = British Pound Sterling
USD = United States Dollar
CNY = Chinese Yuan Renminbi
JPY =  Japan Yen
TWD = Taiwan dollar

-18-

Hedges of Interest Rate and Net Investment Risk - The Company’s objective in using interest rate swaps and collars is to minimize the risks associated with its floating rate debt. The Company makes use of cross currency swaps to decrease the foreign exchange risk inherent in the Company’s investment in its foreign subsidiaries. To accomplish these objectives, the Company uses the instruments detailed in the table below, measured in U.S. dollar equivalents:

	Number of Instruments		Notional Amount
	September 30, 2019	December 31, 2018	September 30, 2019		December 31, 2018
Interest rate swaps and collars	10	12	$	200,000	$	210,000

The table below sets forth the fair value of the Company’s derivative financial instruments, excluding adjustments for performance risk, if any, as well as their classification on our condensed consolidated balance sheets:

	Other Current Assets				Other Assets				Other Current Liabilities				Other Liabilities
	September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
Interest rate swaps and collars	$	299	$	1,936	$	0	$	2,795	$	57	$	-	$	407	$	-

The tables below sets forth the effect of the Company’s derivative financial instruments on the condensed consolidated statements of operations for the three and nine months ended September 30, 2019 and 2018:

	Amount of Gain or (Loss) Recognized in OCI on Derivative					Location of Gain or (Loss) Reclassified from Accumulated OCI into Income	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Net Income				Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion  Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Derivative Instruments Designated as Hedging Instruments	September 30,						September 30,					September 30,
	2019			2018			2019		2018			2019		2018
Three Months Ended
Interest rate swaps and collars	$	(136	)	$	636	Interest expense	$	224	$	299	N/A		-		-
Cross currency swaps	$	-		$	-	N/A		-		-	Interest income		-		-
Nine Months Ended
Interest rate swaps and collars	$	(3,145	)	$	4,143	Interest expense	$	1,149	$	526	N/A		-		-
Cross currency swaps	$	(298	)	$	-	N/A		-		-	Interest income	$	688	$	-

We estimate that $0.2 million of net derivative gains included in accumulated other comprehensive income (“AOCI”) as of September 30, 2019 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 three months ended September 30, 2019 or 2018.

-19-

	Amount of Gain or (Loss) Recognized in Net Income						Location of Gain or (Loss) Recognized in Net Income
Derivative Instruments Not Designated as Hedging Instruments
	September 30,
	2019			2018
Three Months Ended
Foreign currency forward contracts	$	(2,563	)	$	(2,200	)	Foreign currency loss, net
Nine Months Ended
Foreign currency forward contracts	$	(3,793	)	$	(7,570	)	Foreign currency loss, net

As of September 30, 2019 and December 31, 2018, the Company had not posted any collateral related to these agreements.

NOTE 10 – Leases

The Company leases certain assets used in its business, including land, buildings and equipment.  These leased assets are used for operational and administrative purposes.

The components of lease expense are set forth in the table below:

	Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019
Operating lease expense	$	3,671	$	11,148
Finance lease expense:
Amortization of assets		244		733
Interest on lease liabilities		11		39
Short-term lease expense		89		223
Variable lease expense		681		2,101
Total lease expense	$	4,696	$	14,244

-20-

The table below sets forth supplemental balance sheet information related to leases:

	September 30, 2019
Operating leases:
Operating lease ROU assets	$60,217
Current operating lease liabilities	12,235
Noncurrent operating lease liabilities	29,920
Total operating lease liabilities	$42,155
Finance leases:
Finance lease ROU assets	$3,396
Accumulated amortization	(1,680)
Finance lease ROU assets, net	$1,716
Current finance lease liabilities	$896
Non-current finance lease liabilities	367
Total finance lease liabilities	$1,263
Weighted average remaining lease term (in years):
Operating leases	4.6
Finance leases	1.5
Weighted average discount rate:
Operating leases	3.8%
Finance leases	3.6%

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

	Nine Months Ended
	September 30, 2019
Cash paid for the amounts included in the measurements of lease liabilities:
Operating cash outflows from operating leases	$14,728
Operating cash outflows from finance leases	39
Financing cash outflow from finance leases	912
ROU assets obtained in exchange for lease liabilities incurred:
Operating leases	3,611

-21-

The table below sets forth information about lease liability maturities:

	September 30, 2019
	Operating Leases		Finance Leases
Remainder of 2019	$	3,535	$	230
2020		13,410		922
2021		9,476		139
2022		8,028		-
2023		4,437		-
2024		2,370		-
2025 and thereafter		4,785	-
Total lease payments		46,041		1,291
Less: imputed interest		(3,886)		(28)
Total lease obligations		42,155		1,263
Less: current obligations		(12,235)		(896)
Long-term lease obligations	$	29,920	$	367

NOTE 11 – Employee Benefit Plans  

Deferred Compensation

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 by investing in the actual underlying investments. These investments are classified as trading securities and are carried at fair value. At September 30, 2019 and December 31, 2018, these investments totaled approximately $11.5 million and $10.6 million, respectively. All gains and losses in these investments are materially offset by corresponding gains and losses in the Deferred Compensation Plan liabilities.

NOTE 12 – Related Parties

We conduct business with a related party company, Lite-On Semiconductor Corporation and its subsidiaries and affiliates (collectively, “LSC”), and Nuvoton Technology Corporation and its subsidiaries and affiliates (collectively, “Nuvoton”). LSC is our largest stockholder, owning approximately 15% of our outstanding Common Stock as of September 30, 2019, and is a member of the Lite-On Group of companies. On August 8, 2019, we announced that we entered into an agreement with LSC pursuant to which the Company shall acquire LSC, see Note 13 for additional information. Raymond Soong, the Chairman of our Board of Directors, is the Chairman of LSC, and is the Chairman of Lite-On Technology Corporation (“LTC”), a significant shareholder of LSC. C.H. Chen, our former President and Chief Executive Officer and currently the Vice Chairman of our Board of Directors, is also Vice Chairman of LSC and a board member of LTC. Dr. Keh-Shew Lu, our President and Chief Executive Officer and a member of our Board of Directors, is a board member of LTC, and a board member of Nuvoton. We consider our relationships with LSC and Nuvoton to be mutually beneficial, and we plan to continue our strategic alliance with LSC and Nuvoton.  We purchase wafers from Nuvoton for use in our production process.

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We also conduct business with Keylink International (B.V.I.) Inc. and its subsidiaries and affiliates (collectively, “Keylink”). Keylink is our 5% joint venture partner in our Shanghai assembly and test facilities.  We sell products to, and purchase inventory from Keylink. In addition, our subsidiaries in China lease their manufacturing facilities in Shanghai from, and subcontract a portion of our manufacturing process (metal plating and environmental services) to, Keylink. We also pay fees for plating and rental services and consulting to Keylink. The aggregate amounts paid to Keylink for the three months ended September 30, 2019 and 2018 were approximately $3.7 million and $3.8 million, respectively.   The aggregate amounts paid to Keylink for the nine months ended September 30, 2019 and 2018 were approximately $11.5 million and $12.6 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 is our 5% joint venture partner in our other Chengdu assembly and test facility; however, we have no material transactions with Ya Guang. We also purchase materials from Jiyuan Crystal Photoelectric Frequency Technology Ltd (“JCP”), a frequency control product manufacturing company in which we have made an equity investment and account for that investment using the equity method of accounting.      

The Audit 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 to and purchases from related parties:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
LSC
Net sales	$	273	$	304	$	729	$	896
Purchases	$	2,548	$	5,208	$	11,039	$	16,630
Nuvoton
Purchases	$	2,650	$	2,361	$	5,951	$	7,774
Keylink
Net sales	$	4,923	$	4,684	$	11,304	$	8,762
Purchases	$	604	$	907	$	1,794	$	2,646
JCP
Purchases	$	151	$	201	$	462	$	488

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

	September 30,		December 31,
	2019		2018
LSC
Accounts receivable	$	337	$	286
Accounts payable	$	1,749	$	2,696
Nuvoton
Accounts payable	$	1,238	$	1,939
Keylink
Accounts receivable	$	15,004	$	6,264
Accounts payable	$	11,597	$	4,656
JCP
Accounts payable	$	206	$	151

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Note 13 –Acquisitions

Wafer Fabrication Facility Acquisition

On April 1, 2019, the Company completed the previously announced acquisition of a wafer fabrication facility (“GFAB”) located in Greenock, Scotland.  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, net	$	24.4
Inventories		3.6
Prepaid expenses and other		5.2
Goodwill		0.9
Deferred tax liabilities			1.0

LSC Acquisition

On August 8, 2019, we announced we had entered into a Share Swap Agreement that provides for the acquisition of LSC by the Company for approximately $428 million in cash.  This amount is subject to change, based on Taiwan dollar to United States dollar exchange rates at closing. The acquisition received LSC shareholder approval on October 25, 2019, but is subject to customary closing conditions and regulatory approvals.  We expect to fund the purchase price of the transaction primarily with proceeds from a new bank financing arrangement. We anticipate completing the acquisition in April 2020.

Note 14 – Assets Held for Sale

Assets held for sale consist of approximately 16 acres of raw land located in Plano, Texas, that the Company is in the process of selling.  The land was originally acquired as a site to construct a future corporate headquarters. The Company decided that its existing headquarters is adequate and construction of a new headquarters building is not necessary.  The Company has been actively marketing the land and has a signed contract to sell the land to an unaffiliated third party for cash.  During the second quarter of 2019, the buyer received necessary local zoning approval for its building plans.  We anticipate the sale will close within the next 12 months.  We have not recorded any impairment charges in connection with the land.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Except for the historical information contained herein, the matters addressed in this Item 2 constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as identified under the heading “Cautionary Statement for Purposes of the “Safe Harbor” Provision of the Private Securities Litigation Reform Act of 1995” herein. Such forward-looking statements are subject to a variety of risks and uncertainties, including those discussed below under the heading “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, that could cause actual results to differ materially from those anticipated by our management. The Private Securities Litigation Reform Act of 1995 (the “PSLRA”) provides certain “safe harbor” provisions for forward-looking statements. All forward-looking statements made in this Quarterly Report on Form 10-Q are made pursuant to the PSLRA. We undertake no obligation to publicly release the results of any revisions to our forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unexpected events. Unless the context otherwise requires, the words “Diodes,” the “Company,” “we,” “us” and “our” refer to Diodes Incorporated and its subsidiaries. Dollar amounts and share amounts are presented in thousands, except per share amounts, unless otherwise noted.

This management’s discussion should be read in conjunction with the management’s discussion included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (“Form 10-K”), previously filed with Securities and Exchange Commission (“SEC”) on February 21, 2019.

Overview

We are a leading global manufacturer and supplier of high-quality, application-specific standard products within the broad discrete, logic, analog and mixed-signal semiconductor markets. For detailed information, see Note 1 – Nature of Operations, Basis of Presentation, Recently Issued Accounting Pronouncements and Updates to Accounting Policies and Estimates, included in the condensed consolidated financial statements in Item 1 above.  Our products are sold primarily throughout Asia, North America and Europe. We believe that our focus on application-specific standard products utilizing innovative, highly efficient packaging and cost-effective process technologies, coupled with our collaborative, customer-focused product development, provides us with a meaningful competitive advantage relative to other semiconductor companies.

Factors Relevant to Our Results of Operations for the Three Months Ended September 30, 2019

• During the third quarter of 2019, net sales were $323.7 million, an increase of 0.8% from the $320.9 million in the third quarter of 2018, and an increase of 0.5% from the $322.0 million in the second quarter of 2019;

• Gross profit was $122.0 million, compared to $115.2 million of gross profit in the third quarter of 2018 and $122.0 million in the second quarter of 2019;

• Gross profit margin was 37.7%, compared to gross profit margin of 35.9% in the third quarter of 2018 and 37.9% in the second quarter of 2019;

• Net income was $38.1 million, or $0.73 per diluted share, compared to net income of $30.9 million, or $0.61 per diluted share, in the third quarter of 2018 and net income of $36.3 million, or $0.70 per diluted share, in the second quarter of 2019; and

• Cash flow from operations was $67.2 million.  Net cash flow was a negative $17.7 million, which includes a paydown of $52.6 million of long-term debt and $25.4 million of capital expenditures.

Recent Developments

On August 8, 2019, we announced we had entered into a Share Swap Agreement that provides for the acquisition of LSC by the Company for approximately $428 million in cash.  This amount is subject to change, based on Taiwan dollar to United States dollar exchange rates at closing. We are in the process of arranging financing for the transaction. The acquisition received LSC shareholder approval on October 25, 2019, but is subject to customary closing conditions and regulatory approvals.  We expect to fund the purchase price of the transaction primarily with proceeds from a new bank financing arrangement. We anticipate completing the acquisition in April 2020.

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Results of Operations for the Three Months Ended September 30, 2019 and 2018

The table below sets forth the consolidated statement of operations line items as a percentage of net sales.

	Percent of  Net Sales
	Three Months Ended September 30,
	2019			2018
Net sales		100	%		100	%
Cost of goods sold		(62	)		(64	)
Gross profit		38			36
Total operating expense		23			22
Income from operations		15			14
Total other expense		-			-
Income before income taxes and noncontrolling interest		15			14
Income tax provision		(3	)		(4	)
Net income		12			10
Net income attributable to common stockholders		12			10

The following table and discussion explains in greater detail our consolidated operating results and financial condition for the three months ended September 30, 2019, compared to the three months ended September 30, 2018. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.

	Three Months Ended
	September 30,
	2019			2018			Increase/(Decrease)			% Change
Net sales	$	323,674		$	320,946		$	2,728			0.8	%
Cost of goods sold		201,628			205,732			(4,104	)		(2.0	%)
Gross profit		122,046			115,214			6,832			5.9	%
Total operating expense		73,331			69,376			3,955			5.7	%
Interest income		272			474			(202	)		(42.6	%)
Interest expense		(2,007	)		(2,318	)		(311	)		(13.4	%)
Foreign currency (loss) gain, net		(822	)		(655	)		167			25.5	%
Other income		2,577			1,061			1,516			142.9	%
Income tax provision		10,613			13,190			(2,577	)		(19.5	%)

Net sales increased approximately $2.7 million for the three months ended September 30, 2019, compared to the same period last year due to continued strong performance in the automotive market and our serial-connectivity products. For the three months ended September 30, 2019, combined net sales in the automotive and industrial markets represented 38% of total sales.  

The table below sets forth our revenue as a percentage of total revenue by end-user market for the three months ended September 30, 2019 and 2018:

	Three Months Ended
	September 30,
	2019			2018
Industrial		28.0	%		27.0	%
Communications		22.0	%		23.0	%
Consumer		24.0	%		25.0	%
Computing		16.0	%		16.0	%
Automotive		10.0	%		9.0	%

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Cost of goods sold decreased approximately $4.1 million for the three months ended September 30, 2019, compared to the same period last year.  As a percent of sales, cost of goods sold was 62.3% for the three months ended September 30, 2019, compared to 64.1% for the same period last year. Average unit cost increased approximately 8.0% for the three months ended September 30, 2019, compared to the same period last year. For the three months ended September 30, 2019, gross profit increased approximately 5.9% when compared to the same period last year. Gross profit margin for the three month periods ended September 30, 2019 and 2018 was 37.7% and 35.9%, respectively. The increase in gross profit margin was due to higher revenue contribution from the automotive market and our serial-connectivity products, which typically have higher gross profit margins.

Operating expenses for the three months ended September 30, 2019, increased approximately $4.0 million, or 5.7%, compared to the three months ended September 30, 2018. Selling, general and administrative expenses (“SG&A”) increased approximately $3.6 million and research and development expenses (“R&D”) increased approximately $0.1 million. Amortization of acquisition related intangibles increased $0.1 million. SG&A, as a percentage of sales, was 14.2% and 13.2% for the three months ended September 30, 2019 and 2018, respectively. R&D, as a percentage of sales, was 7.0% for both of the three month periods ended September 30, 2019 and 2018.  

Interest income decreased 42.6% for the three months ended September 30, 2019, compared to the same period last year, due to lower interest rates earned on invested funds.  Interest expense decreased 13.4% for the three months ended September 30, 2019, compared to the same period last year. The decrease in interest expense for the three months ended September 30, 2019 was due to lower levels of debt partially offset by higher interest rates on the floating rate portion of the borrowings used to effect the Pericom acquisition in the fourth quarter of 2015. Foreign currency (loss) gain, net was a net loss of $0.8 million for the three months ended September 30, 2019, compared to a net loss of $0.7 million for the same period last year.

We recognized an income tax expense of approximately $10.6 million and $13.2 million for the three months ended September 30, 2019 and 2018, respectively. The decrease in income taxes for 2019 compared to 2018 was primarily attributable to the recognition of previously unrecognized tax benefits due to the lapse of the statute of limitations for the 2015 tax year during the third quarter of 2019.

Results of Operations for the Nine Months Ended September 30, 2019 and 2018

The table below sets forth the consolidated statement of operations line items as a percentage of net sales.

	Percent of  Net Sales
	Nine Months Ended September 30,
	2019			2018
Net sales		100	%		100	%
Cost of goods sold		(62	)		(64	)
Gross profit		38			36
Total operating expense		23			24
Income from operations		15			12
Total other expense		-			-
Income before income taxes and noncontrolling interest		15			12
Income tax provision		(3	)		(4	)
Net income		12			8
Net income attributable to common stockholders		12			8

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The following table and discussion explains in greater detail our consolidated operating results and financial condition for the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.

	Nine Months Ended
	September 30,
	2019			2018			Increase/(Decrease)			% Change
Net sales	$	947,973		$	899,543		$	48,430			5.4	%
Cost of goods sold		591,528			578,466			13,062			2.3	%
Gross profit		356,445			321,077			35,368			11.0	%
Total operating expense		217,090			210,455			6,635			3.2	%
Interest income		1,780			1,431			349			24.4	%
Interest expense		(6,163	)		(7,619	)		(1,456	)		(19.1	%)
Foreign currency (loss) gain, net		(1,382	)		(3,384	)		(2,002	)		(59.2	%)
Other income		5,056			6,073			(1,017	)		(16.7	%)
Income tax provision		32,085			31,726			359			1.1	%

Net sales increased approximately $48.4 million for the nine months ended September 30, 2019, compared to the same period last year due to continued market share gains.  We experienced record net sales in Europe and record net sales in both the automotive and industrial end markets.  For the nine months ended September 30, 2019, combined net sales in the automotive and industrial markets represented 38.7% of total sales.  

The table below sets forth our revenue as a percentage of total revenue by end-user market for the nine months ended September 30, 2019 and 2018:

	Nine Months Ended
	September 30,
	2019			2018
Industrial		28.7	%		25.8	%
Communications		22.6	%		23.3	%
Consumer		23.0	%		25.6	%
Computing		15.7	%		16.3	%
Automotive		10.0	%		9.0	%

Cost of goods sold increased approximately $13.1 million for the nine months ended September 30, 2019, compared to the same period last year.  As a percent of sales, cost of goods sold was 62.4% for the nine months ended September 30, 2019 compared to 64.3% for the same period last year. Average unit cost increased approximately 6.7% for the nine months ended September 30, 2019, compared to the same period last year. For the nine months ended September 30, 2019, gross profit increased approximately 11.0% when compared to the same period last year. Gross profit margin for the nine month periods ended September 30, 2019 and 2018 was 37.6% and 35.7%, respectively. The increase in gross profit margin was due to higher revenue contribution from the automotive and industrial markets and our serial-connectivity products, which typically have higher gross profit margins.

Operating expenses for the nine months ended September 30, 2019, increased approximately $6.6 million, or 3.2%, compared to the nine months ended September 30, 2018. SG&A increased approximately $5.4 million and R&D increased approximately $1.8 million. Amortization of acquisition related intangibles decreased $0.3 million. SG&A, as a percentage of sales, was 14.5% and 14.6% for the nine months ended September 30, 2019 and 2018, respectively. R&D, as a percentage of sales, was 7.0% and 7.2% for the nine months ended September 30, 2019 and 2018, respectively.  

Interest income increased 24.4% for the nine months ended September 30, 2019, compared to the same period last year, due to interest received on cross currency swaps.  Interest expense decreased 19.1% for the nine months ended September 30, 2019, compared to the same period last year. The decrease in interest expense for the nine months ended September 30, 2019 was due to lower levels of debt partially offset by higher interest rates on the floating rate portion of the borrowings used to effect the Pericom acquisition in the fourth quarter of 2015. Foreign currency (loss) gain, net was a net loss of $1.4 million for the nine months ended September 30, 2019, compared to a net loss of $3.4 million for the same period last year, reflecting the effectiveness of our currency hedges.

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We recognized an income tax expense of approximately $32.1 million and $31.7 million for the nine months ended September 30, 2019 and 2018, respectively. The increase in income taxes for 2019 compared to 2018 was primarily attributable to an increase in pretax book income, partially offset by the recognition of previously unrecognized tax benefits due to the lapse of the statute of limitations for the 2015 tax year during the third quarter of 2019.

Financial Condition

Liquidity and Capital Resources

Our primary sources of liquidity are cash and cash equivalents, funds from operations and, if necessary, borrowings under our credit facilities.

Short-term debt

Our Asia subsidiaries maintain credit facilities with several financial institutions through our foreign entities worldwide totaling $133.4 million. At September 30, 2019, borrowings were $1.0 million and letters of credit were $0.4 million under the Asia credit facilities. 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 quarterly on outstanding amounts under the credit lines. In addition to our credit lines, our 51% owned subsidiary, ERIS Technology Corporation (“ERIS”), borrowed $19.6 million on a long-term basis from local Taiwan banks in order to make an investment.  The first loan of $4.3 million matures in 2033, while the second loan of $15.3 million matures in 2024.

Long-term debt

We currently have a U.S. banking credit facility (the “U.S. Credit Facility”) under which we may draw up to $250 million on a revolving basis, in addition to a $250 million term loan.  The U.S. Credit Facility matures October 26, 2021.  The remaining portion of the term loan of the U.S. Credit Facility is repayable in part through quarterly installments that increase over time from $6.3 million in the first three quarters of 2019 to $9.4 million per quarter in the final year of the U.S. Credit Facility. We may, from time to time, request increases in the aggregate commitments under the U.S. Credit Facility of up to $200 million, subject to the lenders electing to increase their commitments or by means of the addition of new lenders, and subject to at least half of each increase in aggregate commitments being in the form of term loans, with the remaining amount of each increase being an increase in the amount of the revolving portion of the U.S. Credit Facility.  The U.S. Credit Facility 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).  The obligations of the Company and the other borrowers under the U.S. Credit Facility are secured by substantially all of the assets of the Company, including controlling interests in its first-tier subsidiaries, and by specified assets of certain of its subsidiaries.  

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The details of our borrowings outstanding as of September 30, 2019 are set forth in the table below:

Description	Amount outstanding	Interest Rate	Maturity Date
Short-term debt:
Foreign credit lines	$17,086	Libor or other similar indices plus a specified margin	Various during 2019 - 2020
Long-term debt
Notes payable to Bank of Taiwan	4,169	Two-year savings rate +0.1148%	June 2033
Notes payable to CTBC Bank	15,345	TAIBOR 3 month rate +.05%	May 2024
U.S. Credit facility:
Revolving portion	-	Libor + a specified margin	October 2021
Term portion	101,000	Libor + a specified margin	October 2021
Total long-term debt	120,514
Less: Current portion of long-term debt	(31,532)
Less: Unamortized debt issuance costs	(1,043)
Total long-term debt, net of current portion	$87,939

Our primary liquidity requirements have been to meet our inventory and capital expenditure needs and to fund on-going operations. At September 30, 2019 and December 31, 2018, our working capital was $465.3 million and $480.8 million, respectively. We expect cash generated by our operations together with existing cash, cash equivalents, short-term investments and available credit facilities to be sufficient to cover cash needs for working capital and capital expenditures for at least the next 12 months.  

Capital expenditures for the nine months ended September 30, 2019 and 2018 were $77.4 million and $64.1 million, respectively.  For the first nine months of 2019 capital expenditures were approximately 8% of our net sales, which is in line with our capital spending target range of 5% to 9% of net sales.  

Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of European subsidiaries.  As of September 30, 2019, our foreign subsidiaries held approximately $68.4 million of cash, cash equivalents and investments of which approximately $19.6 million would be subject to a potential non-U.S. withholding tax if distributed outside the country in which the cash is currently held.  Of this total, $7.6 million is held in China.

As of September 30, 2019, we had short-term investments totaling $7.9 million. These investments are highly liquid with maturity dates greater than three months at the date of purchase. We generally can access these investments in a relatively short time frame but in doing so we generally forfeit all earned and future interest income.

Share Repurchase Program

During 2015, our Board of Directors (“Board”) approved a stock repurchase program.  The Board authorized the repurchase of up to an aggregate of $100.0 million of our outstanding Common Stock.  The share repurchase program is expected to continue through the end of 2019 unless extended or shortened by the Board.  Currently there is approximately $62.3 million available for repurchase of outstanding Common Stock under this publicly announced repurchase program.  No shares were repurchased during the three months ended September 30, 2019.  

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Discussion of Cash Flow

Our primary source of liquidity is cash flow from operations. Additional sources of liquidity are cash and cash equivalents, short-term investments and our credit facilities. Our cash and cash equivalents decreased from $241.1 million at December 31, 2018 to $218.3 million at September 30, 2019.  

The table below sets forth a summary of the condensed consolidated statements of cash flows:

	Nine Months Ended September 30,
	2019			2018			Change
Net cash flows provided by operating activities	$	177,705		$	123,928		$	53,777
Net cash and cash equivalents used in investing activities		(110,176	)		(74,093	)		(36,083	)
Net cash and cash equivalents used in financing activities		(86,992	)		(97,957	)		10,965
Effect of exchange rate changes on cash and cash equivalents		(2,614	)		(6,039	)		3,425
Net decrease in cash and cash equivalents, including restricted cash	$	(22,077	)	$	(54,161	)	$	32,084

Operating Activities

Net cash flows provided by operating activities for the nine months ended September 30, 2019 was $177.7 million.  Net cash flows provided by operating activities resulted from net income of $106.6 million, depreciation and amortization of $81.3 million, share-based compensation of $15.4 million and a decrease in noncash working capital accounts of $25.3 million. Cash flows from operating activities for the nine months ended September 30, 2018 was $123.9 million.  Net cash flows from operating activities resulted from net income of $75.4 million, depreciation and amortization of $76.9 million, share-based compensation of $16.0 million and a decrease in noncash working capital accounts of $43.7 million.

Investing Activities

Net cash and cash equivalents used in investing activities was $110.2 million for the nine months ended September 30, 2019. Net cash and cash equivalents used in investing activities was primarily due to the purchase of property, plant and equipment of $76.1 and the acquisition of GFAB for $33.2 million during the nine months ended September 30, 2019. Net cash and cash equivalents used in investing activities was $74.1 million for the nine months ended September 30, 2018. Net cash and cash equivalents used in investing activities was primarily due to the purchase of property, plant and equipment of $72.2 million during the nine months ended September 30, 2018.

Financing Activities

Net cash and cash equivalents used in financing activities was $87.0 million for the nine months ended September 30, 2019. Net cash used in financing activities in the nine months ended September 30, 2019 consisted primarily of $94.7 million net repayments of long-term debt, taxes paid on net share settlement of $4.4 million and dividend distributions to noncontrolling interests of $2.6 million.  These uses of cash were partially offset by inflows of $7.2 million related to stock option exercises and $6.9 million of net increases in lines of credit and short-term debt. Net cash and cash equivalents used in financing activities was $98.0 million for the nine months ended September 30, 2018. Net cash and cash equivalents used in the nine months ended September 30, 2018 consisted primarily of repayments of long-term debt, net of $104.2 million, taxes paid on net share settlement of $11.1 million, partially offset by proceeds from our short-term lines of credit of $9.2 million, proceeds from a capital contribution in a partially owned subsidiary by a noncontrolling interest of $5.3 million and proceeds received upon the exercise of stock options of $4.9 million.

Use of Derivative Instruments and Hedging

We use interest rate swaps, foreign exchange forward contracts and cross currency swaps to provide a level of protection against interest rate risks and foreign exchange exposure.

Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage 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

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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.

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 and 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.  The fair value of our foreign exchange hedges approximates zero.

Net Investment Hedges

During 2019, we used cross currency swaps to hedge our foreign exchange exposure related to our investment in our foreign subsidiaries.  These instruments were subject to market fluctuations due to changes in foreign exchange rates and at times may be in a loss position.  Market fluctuations were recorded to other comprehensive income/loss since these instruments are subject to hedge accounting. If these instruments are in a loss position at maturity, or if we decided to exit these instruments while they are in a loss position, we would have to make a cash payment in the amount of the loss position.  During the second quarter of 2019, we decided to exit our positions in cross currency swaps.  As a result of exiting this position we were required to make a cash payment of approximately $0.3 million.

Off-Balance Sheet Arrangements

We do not have any transactions, arrangements or other relationships with unconsolidated entities that will affect our liquidity or capital resources. We have no special purpose entities that provide off-balance sheet financing, liquidity or market or credit risk support, nor do we engage in leasing, swap agreements, or outsourcing of research and development services that could expose us to liability that is not reflected on the face of our financial statements.

Contractual Obligations

There have been no material changes in our Contractual Obligations as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on February 21, 2019.  

Critical Accounting Policies

Our critical accounting policies are described in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in the notes to our consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on February 21, 2019. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been discussed in the notes to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q in Note 1 – Nature of Operations, Basis of Presentation, Recently Issued Accounting Pronouncements and Updates to Accounting Policies and Estimates. The application of our critical accounting policies may require management to make judgments and estimates about the amounts reflected in the condensed consolidated financial statements. Management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates.

Recently Issued Accounting Pronouncements

See Note 1 - Nature of Operations, Basis of Presentation, Recently Issued Accounting Pronouncements and Updates to Accounting Policies and Estimates, of the Notes to Condensed Consolidated Financial Statements, for detailed information regarding the status of recently issued accounting pronouncements.

Available Information

Our Internet address is http://www.diodes.com.  Information included on, or accessible through, our website shall not be deemed to form a part of the Quarterly Report on Form 10-Q. We make available, free of charge through our Internet website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Our website also provides access to investor financial information, including SEC filings and press releases, as well as stock quotes and information on corporate governance compliance.

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Cautionary Statement for Purposes of the “Safe Harbor” Provision of the Private Securities Litigation Reform Act of 1995

Except for the historical information contained herein, the matters addressed in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934. We generally identify forward-looking statements by the use of terminology such as “may,” “will,” “could,” “should,” “potential,” “continue,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” or similar phrases or the negatives of such terms. Such forward-looking statements are subject to a variety of risks and uncertainties, including those discussed under “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, and in other reports we file with the SEC from time to time, that could cause actual results to differ materially from those anticipated by our management. The PSLRA provides certain “safe harbor” provisions for forward-looking statements. All forward-looking statements made in this Quarterly Report on Form 10-Q are made pursuant to the PSLRA.

All forward-looking statements contained in this Quarterly Report on Form 10-Q are subject to, in addition to the other matters described in this Quarterly Report on Form 10-Q, a variety of significant risks and uncertainties. The following discussion highlights some of these risks and uncertainties. Further, from time to time, information provided by us or statements made by our employees may contain forward-looking information. There can be no assurance that actual results or business conditions will not differ materially from those set forth or suggested in such forward-looking statements as a result of various factors, including those discussed below.

For more detailed discussion of these factors, see the “Risk Factors” discussion in Item 1A of our most recent Annual Report on Form 10-K as filed with the SEC and in Part II, Item 1A of this report The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this report, and we undertake no obligation to update the forward-looking statements to reflect subsequent events or circumstances.

Risk Factors

RISKS RELATED TO OUR BUSINESS

The success of our business depends on the strength of the global economy and the stability of the financial markets, and any weaknesses in these areas may have a material adverse effect on our net sales, operating results and financial condition.

During times of difficult market conditions, our fixed costs combined with lower net sales and lower profit margins may have a negative impact on our business, operating results and financial condition.

Downturns in the highly cyclical semiconductor industry or changes in end-market demand could adversely affect our operating results and financial condition.

The semiconductor business is highly competitive, and increased competition may harm our business, operating results and financial condition.

One of our external suppliers is also a related party. The loss of this supplier could harm our business, operating results and financial condition.

Delays in initiation of production at facilities due to implementing new production techniques or resolving problems associated with technical equipment malfunctions could adversely affect our manufacturing efficiencies, operating results and financial condition.

We are and will continue to be under continuous pressure from our customers and competitors to reduce the price of our products, which could adversely affect our growth and profit margins.

Our customers require our products to undergo a lengthy and expensive qualification process without any assurance of product sales and may demand to audit our operations from time to time.  A failure to qualify a product or a negative audit finding could adversely affect our net sales, operating results and financial condition.

Our customer orders are subject to cancellation or modification usually with no penalty. High volumes of order cancellation or reduction in quantities ordered could adversely affect our net sales, operating results and financial condition.

Production at our manufacturing facilities could be disrupted for a variety of reasons, including natural disasters and other extraordinary events, which could prevent us from producing enough of our products to maintain our sales and satisfy our customers’ demands and could adversely affect our operating results and financial condition.

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New technologies could result in the development of new products by our competitors and a decrease in demand for our products, and we may not be able to develop new products to satisfy changes in demand, which would adversely affect our net sales, market share, operating results and financial condition.

We may be adversely affected by any disruption in our information technology systems, which could adversely affect our cash flows, operating results and financial condition.

We may be subject to claims of infringement of third-party intellectual property rights or demands that we license third-party technology, which could result in significant expense, reduction in our intellectual property rights and a negative impact on our business, operating results and financial condition.

We depend on third-party suppliers for timely deliveries of raw materials, manufacturing services, product and process development, parts and equipment, as well as finished products from other manufacturers, and our reputation with customers, operating results and financial condition could be adversely affected if we are unable to obtain adequate supplies in a timely manner.

If we do not succeed in continuing to vertically integrate our business, we will not realize the cost and other efficiencies we anticipate, which could adversely affect our ability to compete, our operating results and financial condition.

Part of our growth strategy involves identifying and acquiring companies. We may be unable to identify suitable acquisition candidates or consummate desired acquisitions and, if we do make any acquisitions, we may be unable to successfully integrate any acquired companies with our operations, which could adversely affect our business, operating results and financial condition.

We are subject to litigation risks, including securities class action litigation and intellectual property litigation, which may be costly to defend and the outcome of which is uncertain and could adversely affect our business and financial condition.

We are subject to many environmental laws and regulations that could result in significant expenses and could adversely affect our business, operating results and financial condition.

Our products, or products we purchase from third parties for resale, may be found to be defective and, as a result, warranty claims and product liability claims may be asserted against us and we may not have recourse against our suppliers, which may harm our business, reputation with our customers, operating results and financial condition.

We may fail to attract or retain the qualified technical, sales, marketing, finance and management/executive personnel required to operate our business successfully, which could adversely affect our business, operating results and financial condition.

We may not be able to achieve future growth, and any such growth may place a strain on our management and on our systems and resources, which could adversely affect our business, operating results and financial condition.

Obsolete inventories as a result of changes in demand for our products and change in life cycles of our products could adversely affect our business, operating results and financial condition.

If our direct sales customers do not design our products into their applications, our net sales may be adversely affected.

We are subject to interest rate risk that could have an adverse effect on our cost of working capital and interest expenses, which could adversely affect our business, operating results and financial condition.

Our hedging strategies may not be successful in mitigating our risks associated with interest rates or foreign exchange exposure or our counterparties might not perform as agreed.

We may have a significant amount of debt with various financial institutions worldwide. Any indebtedness could adversely affect our business, operating results, financial condition and our ability to meet payment obligations under such debt.

Restrictions in our credit facilities may limit our business and financial activities, including our ability to obtain additional capital in the future.

Our business benefits from certain Chinese government incentives. Expiration of, or changes to, these incentives could adversely affect our operating results and financial condition.

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We operate a global business through numerous foreign subsidiaries, and there is a risk that tax authorities will challenge our transfer pricing methodologies or legal entity structures, which could adversely affect our operating results and financial condition.

The value of our benefit plan assets and liabilities is based on estimates and assumptions, which may prove inaccurate and the actual amount of expenses recorded in the consolidated financial statements could differ materially from the assumptions used.

Changes in actuarial assumptions for our defined benefit plan could increase the volatility of the plan’s asset value, require us to increase cash contributions to the plan and have a negative impact on our cash flows, operating results and financial condition.

Certain of our customers and suppliers require us to comply with their codes of conduct, which may include certain restrictions that may substantially increase our cost of doing business as well as have an adverse effect on our operating efficiencies, operating results and financial condition.

Compliance with government regulations and customer demands regarding the use of “conflict minerals” may result in increased costs and may have a negative impact on our business, operating results and financial condition.

There are risks associated with previous and future acquisitions. We may ultimately not be successful in overcoming these risks or any other problems encountered in connection with acquisitions.

If we fail to maintain an effective system of internal controls or discover material weaknesses in our internal control over financial reporting, we may not be able to report our financial results accurately or detect fraud, which could harm our business and the trading price of our Common Stock.

Terrorist attacks, or threats or occurrences of other terrorist activities, whether in the U.S. or internationally, may affect the markets in which our Common Stock trades, the markets in which we operate and our operating results and financial condition.

System security risks, data protection breaches, cyber-attacks and other related cybersecurity issues could disrupt our internal operations, and any such disruption could reduce our expected net sales, increase our expenses, damage our reputation and adversely affect our stock price.

RISKS RELATED TO OUR INTERNATIONAL OPERATIONS

Our international operations subject us to risks that could adversely affect our operations.

We have significant operations and assets in China, the U.K., Germany, Hong Kong and Taiwan and, as a result, will be subject to risks inherent in doing business in those jurisdictions, which may adversely affect our financial performance and operating results.

Significant uncertainties related to changes in governmental policies and participation in international trading partnerships or economic unions currently exist, and, depending upon how such uncertainties are resolved, the changes could have a material adverse effect on us.

Tariffs or other restrictions imposed by the United States Trade Representative may affect our operations in the U.S. and may disrupt our activities in the U.S. and may have an adverse impact on our profitability and results of operations.

The U.K.’s referendum to exit from the European Union (“E.U.”) will continue to have uncertain effects and could adversely impact our business, results of operations and financial condition.

A slowdown in the Chinese economy could limit the growth in demand for electronic devices containing our products, which would have a material adverse effect on our business, operating results and prospects.

Economic regulation in China could materially and adversely affect our business, operating results and prospects.

We could be adversely affected by violations of the United States’ Foreign Corrupt Practices Act, the U.K.’s Bribery Act 2010, China’s anti-corruption campaign and similar worldwide anti-bribery laws.

We are subject to foreign currency risk as a result of our international operations.

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China is experiencing rapid social, political and economic change, which has increased labor costs and other related costs that could make doing business in China less advantageous than in prior years. Increased labor costs in China could adversely affect our business, operating results and financial condition.

We may not continue to receive preferential tax treatment in Asia, thereby increasing our income tax expense and reducing our net income.

The distribution of any earnings of certain foreign subsidiaries may be subject to foreign income taxes, thus reducing our net income.

RISKS RELATED TO OUR COMMON STOCK

Variations in our quarterly operating results may cause our stock price to be volatile.

We may enter into future acquisitions and take certain actions in connection with such acquisitions that could adversely affect the price of our Common Stock.

Our directors, executive officers and significant stockholders hold a substantial portion of our Common Stock, which may lead to conflicts with other stockholders over corporate transactions and other corporate matters.

We were formed in 1959, and our early corporate records are incomplete. As a result, we may have difficulty in assessing and defending against claims relating to rights to our Common Stock purporting to arise during periods for which our records are incomplete.

Non-cash tender offers, debt equity swaps or equity exchanges to consummate our business activities are likely to have the effect of diluting the ownership interest of existing stockholders, including qualified stockholders who receive shares of our Common Stock in such business activities.

Anti-takeover effects of certain provisions of Delaware law and our Certificate of Incorporation and Bylaws, may hinder a take-over attempt.

Section 203 of Delaware General Corporation Law may deter a take-over attempt.

Certificate of Incorporation and Bylaw Provisions may deter a take-over attempt.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes to our market risks as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 21, 2019.

Item 4. 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 September 30, 2019, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e).) Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer believe that, as of the end of the period covered by this Quarterly Report on Form 10-Q, 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 on required 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.

Changes in Controls over Financial Reporting

There was no change in our internal control over financial reporting, known to our Chief Executive Officer or Chief Financial Officer, that occurred in the three months ended September 30, 2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

The Company is not a party to any pending litigation that we consider material.

From time to time, we are involved in various legal proceedings that arise in the normal course of business. While we intend to defend any lawsuit vigorously, we presently believe that the ultimate outcome of any pending legal proceeding will not have any material adverse effect on our financial position, cash flows or operating results. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, which could impact our business and operating results for the period in which the ruling occurs or future periods.

Item 1A. Risk Factors.

Except as identified in the modified Risk Factors set out below, there have been no material changes to our risk factors from those disclosed in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission on February 21, 2019.

System security risks, data protection breaches, cyber-attacks and other related cybersecurity issues could disrupt our internal operations, and any such disruption could reduce our expected net sales, increase our expenses, damage our reputation and adversely affect our stock price.

Experienced computer programmers and hackers may be able to penetrate our security controls and misappropriate or compromise our confidential information or that of third parties, create system disruptions, compromise physical assets, intellectual property, or misappropriate monetary assets or cause shutdowns. Computer programmers and hackers also may be able to develop and deploy viruses, worms and other malicious software programs that attack our websites or exploit any security vulnerabilities of our websites and information systems. In September 2019, our anti-virus defenses identified a malware infection and brute force password attack. Recovery was accomplished by our internal IT staff. We do not believe that any confidential or proprietary information was exposed or that there was any material impact on production. In response to this cyber-intrusion, we engaged an information technology security company to assess the timetable and scope of the intrusion, identify any weaknesses in our IT systems, and assist in designing security measures to strengthen our protection against, and preparation for identifying and responding to, such attacks. We are reviewing this assessment and have enhanced and continue to enhance our security measures. Specific measures we have taken include strengthening our global network access control to further prevent unauthorized or non-compliant devices from accessing our internal networks and developing policies and procedures to more timely respond to intrusions.

The costs to the Company to eliminate or alleviate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and our ongoing efforts to prevent and address these problems may not be successful.  Such problems could result in interruptions, delays, cessation of service, extortionate demands to decrypt files and loss of existing or potential customers that may impede our sales, manufacturing, distribution or other critical functions and materially adversely affect our operating results, stock price and reputation.

We manage and store various proprietary information and sensitive or confidential data relating to our business and third party business. Breaches of our security measures or the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data about us or our partners or customers, including the potential loss, encryption or disclosure of such information or data or the unauthorized transfer of monetary assets as a result of fraud, trickery or other forms of deception, could expose us, our partners and customers or the individuals affected to a risk of loss or misuse of this information, extortionate demands to decrypt files, result in litigation and potential liability for us, damage our brand and reputation or otherwise harm our business. In addition, the cost and operational consequences of implementing further data protection measures could be significant. Delayed sales, significant costs or lost customers resulting from these system security risks, data protection breaches, cyber-attacks and other related cyber-security issues could materially adversely affect our operating results, stock price and reputation.

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Tariffs or other restrictions imposed by the United States Trade Representative may affect our operations in the U.S., may disrupt our activities in the U.S., may have an adverse impact on our profitability and results of operations and may encourage the independent development in China of products and electronic components that will compete with ours or displace our products and components, resulting in an adverse impact on our Chinese business.

In May 2019, at the direction of the President, the United States increased the level of tariffs from 10 percent to 25 percent on approximately $200 billion worth of Chinese imports. The President also ordered the U.S. Trade Representative to begin the process of raising tariffs on essentially all remaining imports from China, which are valued at approximately $300 billion. These tariffs are in addition to the recently imposed new or higher tariffs on specified products imported from China in response to what the U.S. characterizes as unfair trade practices. China responded to the earlier increased tariffs by proposing new or higher tariffs on specified products imported from the United States.  Negotiations between the U.S. and China to resolve the issues that precipitated the impositions of these tariffs are reported to be ongoing, but the situation is dynamic and the timing and nature of any ultimate resolution is currently uncertain. In June 2019, President Trump and Chinese President Xi Jinping agreed that they did not plan more tariffs against each other’s countries, but on August 1, 2019, President Trump announced that on September 1, 2019, the U.S. would put an additional tariff of 10% on $300 billion of goods and products coming from China to the U.S.

On August 23, 2019, in response to China announcing additional tariffs on U.S. products, President Trump instructed the U.S. Trade Representative to increase by 5% the tariffs on approximately $550 billion worth of Chinese imports to the U.S. This would increase the tariff rate on $250 billion worth of Chinese imports, effective October 1, 2019 to 30% and raise the tariff rate to 15% on $300 worth of Chinese imports previously announced, but on September 11, 2019 President Trump announced that the effective date would be extended to October 15, 2019 as “a gesture of goodwill.” On October 12, 2019, President Trump announced that the U.S. would halt the October 15, 2019 tariff increase after positive negotiations with the China representatives in Washington, D.C.

Most of our products are manufactured in China and then a portion of those products are imported into the U.S. The impacts on us of the recently imposed and proposed tariffs are uncertain because of the dynamic nature of governmental actions and responses, as well as possible exemptions for certain products. If the U.S. and China are able to negotiate the issues to restore a mutually advantageous and fair trading regime, the increased tariffs could be eliminated, but given the uncertainties, there can be no assurance of whether, or when, this will be accomplished. We have taken actions, and may take additional steps, to mitigate those impacts and protect our competitive position in the marketplace.  If we determine to pass some or all of these new tariff burdens on to our customers, the result may be a degradation of our competitive position and a loss of customers that would adversely affect our operating performance. It is not clear at this time what the ultimate outcome of these tariff actions and our mitigation efforts will be, but given the importance of our Chinese operations and related sales, and the impacts of existing and possible future restrictions with regard to transactions with Chinese entities, it is very possible that our operating results and/or financial condition may be adversely affected.

On or about August 25, 2019, President Trump advised American companies to seek alternatives to China for the manufacture of their products, citing the U.S. “International Emergency Economic Powers Act of 1977” as a possible basis for applying a sanction of this sort. It is not clear at this time when, whether or in what form, this threat will be put into action, but if it does materialize, our results of operations and financial condition likely will be materially adversely affected.

In addition, China is stepping up efforts to design and manufacture semiconductors itself rather than buy from the U.S., amid fears that sanctions might cripple its high-tech industry. U.S. restrictions on exports to Chinese telecoms equipment makers have sharpened Beijing’s focus on semiconductor self-sufficiency. China’s ministry of finance announced tax breaks “to support the development of integrated circuit design and the software industry,” cancelling corporate taxes for some companies for two years. Although the outcome of these efforts is uncertain, the development of such capacity in China would likely have a material adverse effect on our profitability and results of operations.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

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Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. 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 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
10.1	Share Swap Agreement, dated as of August 8, 2019, between the Company and Lite-On Semiconductor Corporation	8-K	August 9, 2019	2.1
31.1	Certification Pursuant to Rule 13a-14(a)/15d-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) /15d-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. 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				X
32.2*	Certification Pursuant to 18 U.S.C. 1350 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.DEF	Inline XBRL Taxonomy Extension Definition Linkbase				X
101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase				X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase				X
104	Cover Page Interactive Data File, formatted in Inline XBRL				X

* A certification furnished pursuant to Item 601(b)(32) 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 Quarterly Report on Form 10-Q. 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 and/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.

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SIGNATURES

Pursuant to the requirements 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)
November 4, 2019	By: /s/ Keh-Shew Lu
Date	KEH-SHEW LU
	President and Chief Executive Officer
	(Principal Executive Officer)
November 4, 2019	By: /s/ Brett R. Whitmire
Date	BRETT R. WHITMIRE
	Chief Financial Officer
	(Principal Financial Officer)

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EX-31.1

Exhibit 31.1

CERTIFICATION

PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Keh-Shew Lu, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Diodes Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 4, 2019

/s/ Keh-Shew Lu

Keh-Shew Lu

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brett R. Whitmire, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Diodes Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 4, 2019

/s/ Brett R. Whitmire

Brett R. Whitmire

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

The undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge, the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019 of Diodes Incorporated (the “Company”) fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in such periodic report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  November 4, 2019

/s/ Keh-Shew Lu

Keh-Shew Lu

Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to Diodes Incorporated and will be furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

The undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge, the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019 of Diodes Incorporated (the “Company”) fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in such periodic report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  November 4, 2019

/s/ Brett R. Whitmire

Brett R. Whitmire

Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Diodes Incorporated and will be furnished to the Securities and Exchange Commission or its staff upon request.

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Acquisitions (Tables)

9 Months Ended

Sep. 30, 2019

Wafer Fabrication Facility ("GFAB")

Summary of Fair Value of Assets and Liabilities Related to Acquisition Recorded in Condensed Consolidated Balance Sheet

The table below sets forth the fair value of the assets and liabilities recorded in the GFAB acquisition and the corresponding line item in which the item is recorded in our condensed consolidated balance sheet.

Property, plant and equipment, net	$	24.4
Inventories		3.6
Prepaid expenses and other		5.2
Goodwill		0.9
Deferred tax liabilities			1.0

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Inventories - Schedule of Inventory Current (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Finished goods	$ 59,721	$ 59,244
Work-in-progress	67,446	59,166
Raw materials	103,648	97,025
Total	$ 230,815	$ 215,435

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Share-Based Compensation

9 Months Ended

Sep. 30, 2019

Share Based Compensation [Abstract]

Share-Based Compensation

NOTE 6 – Share-Based Compensation

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Cost of goods sold	$	281	$	96	$	665	$	267
Selling, general and administrative		4,566		3,993		12,513		13,477
Research and development		742		807		2,186		2,233
Total share-based compensation expense	$	5,589	$	4,896	$	15,364	$	15,977

The table below sets forth share-based compensation expense by type:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Stock options	$	-	$	-	$	-	$	275
Share grants		5,589		4,896		15,364		15,702
Total share-based compensation expense	$	5,589	$	4,896	$	15,364	$	15,977

Stock Options. Approximately $7.2 million in cash proceeds was received from stock option exercises during the nine months ended September 30, 2019.

As of September 30, 2019, we had no unrecognized share-based compensation expense related to unvested stock options.  

Share Grants. Restricted stock awards and restricted stock units generally vest in equal annual installments over a four-year period.   We also have share grants that are performance-based and time-based that vest upon achievement of certain performance criteria over time.             

As of September 30, 2019, total unrecognized share-based compensation expense related to share grants was approximately $44.4 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 2.3 years.          

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Earnings Per Share

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Share

NOTE 2 – Earnings per Share

Earnings per share (“EPS”) is calculated by dividing net income attributable to common stockholders by the weighted-average number of shares of Common Stock outstanding during the period. Diluted EPS is calculated similarly but includes potential dilution from the exercise of stock options and stock awards, except when the effect would be anti-dilutive.  During the three and nine months ended September 30, 2019 and 2018 we paid no dividends on our Common Stock.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Earnings (numerator)
Net income attributable to common stockholders	$	38,060	$	30,908	$	106,060	$	74,502
Shares (denominator)
Weighted average common shares outstanding (basic)		50,998		50,115		50,687		49,713
Dilutive effect of stock options and stock awards outstanding		871		962		1,012		1,170
Adjusted weighted average common shares outstanding (diluted)		51,869		51,077		51,699		50,883
Earnings per share attributable to common stockholders
Basic	$	0.75	$	0.62	$	2.09	$	1.50
Diluted	$	0.73	$	0.61	$	2.05	$	1.46
Stock options and stock awards excluded from EPS   calculation because the effect would be anti-dilutive		3		-		107		94

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Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

NOTE 10 – Leases

The Company leases certain assets used in its business, including land, buildings and equipment.  These leased assets are used for operational and administrative purposes.

The components of lease expense are set forth in the table below:

	Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019
Operating lease expense	$	3,671	$	11,148
Finance lease expense:
Amortization of assets		244		733
Interest on lease liabilities		11		39
Short-term lease expense		89		223
Variable lease expense		681		2,101
Total lease expense	$	4,696	$	14,244

The table below sets forth supplemental balance sheet information related to leases:

	September 30, 2019
Operating leases:
Operating lease ROU assets	$60,217
Current operating lease liabilities	12,235
Noncurrent operating lease liabilities	29,920
Total operating lease liabilities	$42,155
Finance leases:
Finance lease ROU assets	$3,396
Accumulated amortization	(1,680)
Finance lease ROU assets, net	$1,716
Current finance lease liabilities	$896
Non-current finance lease liabilities	367
Total finance lease liabilities	$1,263
Weighted average remaining lease term (in years):
Operating leases	4.6
Finance leases	1.5
Weighted average discount rate:
Operating leases	3.8%
Finance leases	3.6%

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

	Nine Months Ended
	September 30, 2019
Cash paid for the amounts included in the measurements of lease liabilities:
Operating cash outflows from operating leases	$14,728
Operating cash outflows from finance leases	39
Financing cash outflow from finance leases	912
ROU assets obtained in exchange for lease liabilities incurred:
Operating leases	3,611

The table below sets forth information about lease liability maturities:

	September 30, 2019
	Operating Leases		Finance Leases
Remainder of 2019	$	3,535	$	230
2020		13,410		922
2021		9,476		139
2022		8,028		-
2023		4,437		-
2024		2,370		-
2025 and thereafter		4,785	-
Total lease payments		46,041		1,291
Less: imputed interest		(3,886)		(28)
Total lease obligations		42,155		1,263
Less: current obligations		(12,235)		(896)
Long-term lease obligations	$	29,920	$	367

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 218,349	$ 241,053
Short-term investments	7,928	7,499
Accounts receivable, net of allowances of $4,726 and $4,102 at September 30, 2019 and December 31, 2018, respectively	257,421	228,405
Inventories	230,815	215,435
Assets held for sale	4,947
Prepaid expenses and other	43,575	42,446
Total current assets	763,035	734,838
Property, plant and equipment, net	468,122	446,835
Deferred income tax	28,975	31,652
Goodwill	138,020	132,437
Intangible assets, net	125,446	137,935
Other	86,215	42,674
Total assets	1,609,813	1,526,371
Current liabilities:
Line of credit	17,086	10,254
Accounts payable	117,226	117,808
Accrued liabilities and other	106,456	82,605
Income tax payable	25,404	15,744
Current portion of long-term debt	31,532	27,613
Total current liabilities	297,704	254,024
Long-term debt, net of current portion	87,939	186,143
Deferred tax liabilities	18,661	17,993
Other long-term liabilities	128,411	90,779
Total liabilities	532,715	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; 51,012,794 and 50,221,035, issued and outstanding at September 30, 2019 and December 31, 2018, respectively	34,982	34,454
Additional paid-in capital	417,576	399,915
Retained earnings	742,768	636,708
Treasury stock, at cost, 1,457,206 shares held at September 30, 2019 and December 31, 2018	(37,768)	(37,768)
Accumulated other comprehensive loss	(127,705)	(101,846)
Total stockholders' equity	1,029,853	931,463
Noncontrolling interest	47,245	45,969
Total equity	1,077,098	977,432
Total liabilities and stockholders' equity	$ 1,609,813	$ 1,526,371

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Thousands	Total	Common Stock	Treasury Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss	Total Diodes Incorporated Stockholders' Equity	Noncontrolling Interest
BALANCE at Dec. 31, 2017	$ 873,918	$ 33,727	$ (37,768)	$ 386,338	$ 532,687	$ (83,480)	$ 831,504	$ 42,414
Common stock shares beginning at Dec. 31, 2017		50,587,000	(1,457,000)
Total comprehensive income	67,279				74,502	(8,118)	66,384	895
Noncontrolling interests	4,209							4,209
Dividends to noncontrolling interest	(2,735)							(2,735)
Common stock issued for share-based plans	4,861	$ 706		4,155			4,861
Common stock issued for share-based plans, shares		1,061,000
Share-based compensation	15,975			15,975			15,975
Tax related to net share settlement	(11,056)			(11,056)			(11,056)
BALANCE at Sep. 30, 2018	952,451	$ 34,433	$ (37,768)	395,412	607,189	(91,598)	907,668	44,783
Common stock shares ending at Sep. 30, 2018		51,648,000	(1,457,000)
BALANCE at Jun. 30, 2018	922,815	$ 34,204	$ (37,768)	391,332	576,280	(81,633)	882,415	40,400
Common stock shares beginning at Jun. 30, 2018		51,303,000	(1,457,000)
Total comprehensive income	21,246				30,909	(9,965)	20,944	302
Noncontrolling interests	4,209							4,209
Dividends to noncontrolling interest	(128)							(128)
Common stock issued for share-based plans	1,852	$ 229		1,623			1,852
Common stock issued for share-based plans, shares		345,000
Share-based compensation	4,896			4,896			4,896
Tax related to net share settlement	(2,439)			(2,439)			(2,439)
BALANCE at Sep. 30, 2018	952,451	$ 34,433	$ (37,768)	395,412	607,189	(91,598)	907,668	44,783
Common stock shares ending at Sep. 30, 2018		51,648,000	(1,457,000)
BALANCE at Dec. 31, 2018	$ 977,432	$ 34,454	$ (37,768)	399,915	636,708	(101,846)	931,463	45,969
Common stock shares beginning at Dec. 31, 2018	50,221,035	51,678,000	(1,457,000)
Total comprehensive income	$ 80,702				106,060	(25,859)	80,201	501
Noncontrolling interests	3,343							3,343
Dividends to noncontrolling interest	(2,568)							(2,568)
Common stock issued for share-based plans	7,208	$ 528		6,680			7,208
Common stock issued for share-based plans, shares		792,000
Share-based compensation	15,364			15,364			15,364
Tax related to net share settlement	(4,383)			(4,383)			(4,383)
BALANCE at Sep. 30, 2019	$ 1,077,098	$ 34,982	$ (37,768)	417,576	742,768	(127,705)	1,029,853	47,245
Common stock shares ending at Sep. 30, 2019	51,012,794	52,470,000	(1,457,000)
BALANCE at Jun. 30, 2019	$ 1,051,152	$ 34,803	$ (37,768)	414,451	704,708	(112,225)	1,003,969	47,183
Common stock shares beginning at Jun. 30, 2019		52,202,000	(1,457,000)
Total comprehensive income	22,642				38,060	(15,480)	22,580	62
Common stock issued for share-based plans	503	$ 179		324			503
Common stock issued for share-based plans, shares		268,000
Share-based compensation	5,589			5,589			5,589
Tax related to net share settlement	(2,788)			(2,788)			(2,788)
BALANCE at Sep. 30, 2019	$ 1,077,098	$ 34,982	$ (37,768)	$ 417,576	$ 742,768	$ (127,705)	$ 1,029,853	$ 47,245
Common stock shares ending at Sep. 30, 2019	51,012,794	52,470,000	(1,457,000)

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Derivative Financial Instruments - Summary of Effect of Derivative Financial Instruments on the Condensed Consolidated Statements of Operations (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Designated as Hedging Instrument | Interest Rate Swaps and Collars
Derivative Instruments Gain Loss [Line Items]
Amount of Gain or (Loss) Recognized in OCI on Derivative	$ (136)	$ 636	$ (3,145)	$ 4,143
Location of Gain or (Loss) Reclassified from Accumulated OCI into Income	Interest expense		Interest expense
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Net Income	$ 224	299	$ 1,149	526
Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion Excluded from Effectiveness Testing)	N/A		N/A
Designated as Hedging Instrument | Cross Currency Swaps
Derivative Instruments Gain Loss [Line Items]
Amount of Gain or (Loss) Recognized in OCI on Derivative			$ (298)
Location of Gain or (Loss) Reclassified from Accumulated OCI into Income	N/A		N/A
Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion Excluded from Effectiveness Testing)	Interest income		Interest income
Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)			$ 688
Not Designated as Hedging Instrument | Foreign Currency Forward Contracts
Derivative Instruments Gain Loss [Line Items]
Amount of Gain or (Loss) Recognized in Net Income	$ (2,563)	$ (2,200)	$ (3,793)	$ (7,570)
Location of Gain or (Loss) Recognized in Net Income	Foreign currency loss, net		Foreign currency loss, net

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Derivative Financial Instruments - Additional Information (Details) - USD ($)	9 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Derivative [Line Items]
Objectives for using derivative instruments	The Company’s objective in using interest rate swaps and collars is to minimize the risks associated with its floating rate debt. The Company makes use of cross currency swaps to decrease the foreign exchange risk inherent in the Company’s investment in its foreign subsidiaries.
Net derivative gain will be reclassified from AOCI into net income	$ 200,000
Posted collateral related to agreements	0	$ 0
Foreign Currency Forward Contracts
Derivative [Line Items]
Fair value of foreign exchange hedges	$ 0

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Related Parties - Schedule of Account Receivable and Payable of Related Party Transactions (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Lite On Semiconductor
Related Party Transaction [Line Items]
Accounts receivable	$ 337	$ 286
Accounts payable	1,749	2,696
Nuvoton
Related Party Transaction [Line Items]
Accounts payable	1,238	1,939
Keylink
Related Party Transaction [Line Items]
Accounts receivable	15,004	6,264
Accounts payable	11,597	4,656
JCP
Related Party Transaction [Line Items]
Accounts payable	$ 206	$ 151

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Leases - Schedule of Operating and Finance Lease Liability Maturities (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Leases [Abstract]
Operating Leases, Remainder of 2019	$ 3,535
Operating Leases, 2020	13,410
Operating Leases, 2021	9,476
Operating Leases, 2022	8,028
Operating Leases, 2023	4,437
Operating Leases, 2024	2,370
Operating Leases, 2025 and thereafter	4,785
Operating Leases, Total lease payments	46,041
Operating Leases, Less: imputed interest	(3,886)
Total operating lease liabilities	42,155
Operating Leases, Less: current obligations	(12,235)
Noncurrent operating lease liabilities	29,920
Finance Leases, Remainder of 2019	230
Finance Leases, 2020	922
Finance Leases, 2021	139
Finance Leases, Total lease payments	1,291
Finance Leases, Less: imputed interest	(28)
Total finance lease liabilities	1,263
Finance Leases, Less: current obligations	(896)
Non-current finance lease liabilities	$ 367

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Income Tax Provision - Additional Information (Details) $ in Millions	9 Months Ended
	Sep. 30, 2019 USD ($)
Income Tax Disclosure [Abstract]
Unrecognized tax benefits	$ 33.8
Income tax examination, description	We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations by tax authorities for tax years before 2012, or for the 2015 tax year. We are no longer subject to China income tax examinations by tax authorities for tax years before 2009. With respect to state and local jurisdictions and countries outside of the U.S. (other than China), with limited exceptions, the Company is no longer subject to income tax audits for years before 2013. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties, if any, have been provided for in the Company’s reserve for any adjustments that may result from currently pending tax audits. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in interest expense.
Significant change in unrecognized tax benefits, nature of event	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.
Significant change in unrecognized tax benefits is reasonably possible, estimated range not possible	At this time, an estimate of the range of the reasonably possible outcomes cannot be made

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Segment Information and Net Sales - Additional Information (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($) Customer	Sep. 30, 2019 USD ($) Customer	Sep. 30, 2018 USD ($) Customer
Entity Wide Revenue Major Customer [Line Items]
Number of customer accounted for 10.2% or 32.7 million of net sales		1
Percentage of net sales	100.00%	101.00%	100.00%	100.00%
Concentration risk, net sales amount | $	$ 323,674	$ 320,946	$ 947,973	$ 899,543
Number of customer did not account for or greater of outstanding accounts receivable			0	0
Number of customer did not account for 10% or greater of net revenue			0	0
Geographic Concentration Risk
Entity Wide Revenue Major Customer [Line Items]
Percentage of net sales		10.20%	10.00%
Concentration risk, net sales amount | $		$ 32,700

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Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Changes in Goodwill

The table below sets forth the changes in goodwill:

Balance at December 31, 2018	$	132,437
Acquisitions:
Wafer fabrication facility in Greenock, Scotland (a)		931
Canyon investment (b)		1,671
ERIS investment in Yea-Shin (c)		4,320
Foreign currency translation adjustment		(1,339	)
Balance at September 30, 2019	$	138,020

The increase in goodwill is related to:

(a)  The Company’s acquisition accounting for the purchase of a wafer fabrication facility in Greenock, Scotland, (“GFAB”).  (See Note 13 for additional information).

(b)  The Company’s acquisition accounting for the Company’s investment of $3.4 million in Canyon Semiconductor.  This investment brings our ownership of Canyon to 51%.  During the nine months ended September 30 2019, as a measurement period adjustment, we finalized our acquisition accounting with finalization of   the value of non-controlling interest and deferred taxes.   

(c)  The Company’s acquisition accounting related to Eris’ investment of approximately $6.4 million in Yea-Shin Technology Corporation.  During the second quarter of 2019, as a measurement period adjustment, we increased goodwill approximately $4.3 million, related to finalization of deferred taxes. The Company owns approximately 51% of Eris and Eris owns approximately 60% of Yea-Shin.    

Schedule of Intangible Assets Other Than Goodwill

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

	September 30,			December 31,
	2019			2018
Intangible assets subject to amortization:
Gross carrying amount	$	244,554		$	238,867
Accumulated amortization		(119,949	)		(106,410	)
Foreign currency translation adjustment		(8,271	)		(8,281	)
Total		116,334			124,176
Intangible assets with indefinite lives:
Gross carrying amount		10,303			14,883
Foreign currency translation adjustment		(1,191	)		(1,124	)
Total		9,112			13,759
Total intangible assets, net	$	125,446		$	137,935

Schedule of Amortization Expense Related to Intangible Assets

The table below sets forth amortization expense related to intangible assets subject to amortization:

Amortization expense	2019		2018
Three months ended September 30	$	4,519	$	4,418
Nine months ended September 30	$	13,539	$	13,863

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Assets Held for Sale

9 Months Ended

Sep. 30, 2019

Real Estate Assets Held For Development And Sale [Abstract]

Assets Held for Sale

Note 14 – Assets Held for Sale

Assets held for sale consist of approximately 16 acres of raw land located in Plano, Texas, that the Company is in the process of selling.  The land was originally acquired as a site to construct a future corporate headquarters. The Company decided that its existing headquarters is adequate and construction of a new headquarters building is not necessary.  The Company has been actively marketing the land and has a signed contract to sell the land to an unaffiliated third party for cash.  During the second quarter of 2019, the buyer received necessary local zoning approval for its building plans.  We anticipate the sale will close within the next 12 months.  We have not recorded any impairment charges in connection with the land.

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Acquisitions - Additional Information (Details) - USD ($) $ in Millions	Aug. 08, 2019	Apr. 01, 2019
Wafer Fabrication Facility ("GFAB")
Business Acquisition [Line Items]
Acquisition date		Apr. 01, 2019
Accounting allocation of investment		$ 33.2
Wafer Fabrication Facility ("GFAB") | Selling, General and Administrative
Business Acquisition [Line Items]
Acquisition costs		$ 0.6
LSC Acquisition
Business Acquisition [Line Items]
Business acquisition, share swap agreement date	Aug. 08, 2019
Cash payments to acquire business	$ 428.0

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Employee Benefit Plans - Additional Information (Details) - Deferred Compensation Plan - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Defined Benefit Plan Disclosure [Line Items]
Deferred compensation arrangements, overall, description	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 by investing in the actual underlying investments. These investments are classified as trading securities and are carried at fair value. At September 30, 2019 and December 31, 2018, these investments totaled approximately $11.5 million and $10.6 million, respectively. All gains and losses in these investments are materially offset by corresponding gains and losses in the Deferred Compensation Plan liabilities.
Deferred compensation plan assets	$ 11.5	$ 10.6

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Income Tax Provision - Schedule of Information Related to Income Tax Expense (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Tax Disclosure [Abstract]
Domestic pre-tax income (loss)	$ 13,547	$ (7,267)	$ 34,097	$ (11,289)
Foreign pre-tax income	35,188	51,667	104,549	118,412
Income tax provision	$ 10,613	$ 13,190	$ 32,085	$ 31,726
Effective tax rate	21.80%	29.70%	23.10%	29.60%
Impact of tax holidays on tax expense	$ 330	$ 638	$ 1,179	$ (104)
Earnings per share impact of tax holidays:
Basic	$ (0.01)	$ (0.01)	$ (0.02)
Diluted	$ (0.01)	$ (0.01)	$ (0.02)

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Share-Based Compensation - Additional Information (Details)	9 Months Ended
	Sep. 30, 2019 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Cash proceeds received from stock option exercises	$ 7,200,000
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee service share-based compensation, nonvested awards, compensation cost not yet recognized	$ 0
Restricted Stock Awards and Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, award vesting period	4 years
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee service share-based compensation, nonvested awards, compensation cost not yet recognized	$ 44,400,000
Employee service share-based compensation, nonvested awards, compensation cost not yet recognized, period for recognition	2 years 3 months 18 days

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Income Tax Provision (Tables)

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Schedule of Information Related to Income Tax Expense

The table below sets forth information related to our income tax expense:  

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Domestic pre-tax income (loss)	$	13,547		$	(7,267	)	$	34,097		$	(11,289	)
Foreign pre-tax income	$	35,188		$	51,667		$	104,549		$	118,412
Income tax provision	$	10,613		$	13,190		$	32,085		$	31,726
Effective tax rate		21.8	%		29.7	%		23.1	%		29.6	%
Impact of tax holidays on tax expense	$	330		$	638		$	1,179		$	(104	)
Earnings per share impact of tax holidays:
Basic	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	-
Diluted	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	-

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Nature of Operations, Basis of Presentation, Recently Issued Accounting Pronouncements and Updates to Accounting Policies and Estimates (Policies)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Nature of Operations

Nature of Operations

Diodes Incorporated, together with its subsidiaries (collectively, the “Company,” “we” or “our”) (Nasdaq: DIOD), is a leading global manufacturer and supplier of high-quality, application-specific standard products within the broad discrete, logic, analog and mixed-signal semiconductor markets. We serve the consumer electronics, computing, communications, industrial, and automotive markets. Our products include diodes, rectifiers, transistors, MOSFETs, protection devices, function-specific arrays, single gate logic, amplifiers and comparators, Hall-effect and temperature sensors, power management devices, including LED drivers, AC-DC converters and controllers, DC-DC switching and linear voltage regulators, and voltage references along with special function devices, such as USB power switches, load switches, voltage supervisors, and motor controllers. We also have timing, connectivity, switching, and signal integrity solutions for high-speed signals. Our corporate headquarters and Americas’ sales offices are located in Plano, Texas and Milpitas, California. Design, marketing, and engineering centers are located in Plano; Milpitas; Taipei, Taoyuan City and Zhubei City, Taiwan; Oldham, England; and Neuhaus, Germany. Our wafer fabrication facilities are located in Oldham and Shanghai, China and Greenock, Scotland. We have assembly and test facilities located in Shanghai, Jinan and Chengdu, China, as well as in Hong Kong, Neuhaus and Taipei. Additional engineering, research and development, sales, warehouse, and logistics offices are located in Taipei; Hong Kong; Oldham; Shanghai; Shenzhen and Yangzhou, China; Seongnam-si, South Korea; Munich, Germany; and Tokyo, Japan, with support offices throughout the world.

Basis of Presentation

Basis of Presentation

The condensed consolidated financial data at December 31, 2018 is derived from audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission (“SEC”) on February 21, 2019 (“Form 10-K”). The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q. They do not include all information and footnotes necessary for a fair presentation of financial position, operating results and cash flows in conformity with GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in our Form 10-K.  All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair presentation of the operating results for the period presented have been included in the interim period. Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, 2019.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. As permitted under GAAP, interim accounting for certain expenses, including income taxes, are based on full year forecasts. For interim financial reporting purposes, income taxes are recorded based upon estimated annual effective income tax rates taking into consideration discrete items occurring in a quarter.

Dollar amounts and share amounts are presented in thousands, except per share amounts, unless otherwise noted. Certain prior year’s balances may have been reclassified to conform to the current financial statement presentation.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issued the following Accounting Standards Updates (“ASU”) which could have potential impact on the Company’s financial statements:   

Recently Adopted Standards

ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) – In February 2016, the FASB issued ASU 2016-02, which amends the accounting treatment for leases and requires, among other things, lessees to recognize a right-of-use (“ROU”) asset and lease liability for most lease arrangements. The amendments were effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted ASU 2016-02 on January 1, 2019, using the modified retrospective transition approach, under which financial results reported in periods prior to 2018 are unchanged. We elected the following allowed practical expedients as permitted under the transition guidance within the new standard:

• Not record leases with an initial term of 12 months on the balance sheet;

• Not separate non-lease components of leases from the lease components; and

• Not reassess (1) the definition of a lease, (2) lease classification, and (3) initial direct costs for existing leases during transition.

Upon adoption of ASU 2016-02, the Company recorded ROU assets of $68.3 million, including land-use rights of $17.1 million previously recorded in other assets and $2.5 million previously recorded in property, plant and equipment and ROU liabilities of $50.4 million. For additional information related to the Company’s leases, see Note 10.    

ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting ("ASU 2018-07") - In June 2018, the FASB issued ASU 2018-07, which simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation—Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 was effective for the Company on January 1, 2019. The adoption of this standard did not have a material effect on our condensed consolidated financial statements or disclosures.

ASU No. 2017-12 - Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”) -In August 2017, the FASB issued ASU No. 2017-12 to better align hedge accounting with risk management strategies, and as a result, more hedging strategies will be eligible for hedge accounting. Public business entities will have until the end of the first quarter in which a hedge is designated to perform an initial assessment of a hedge’s effectiveness. After initial qualification, the new guidance permits a qualitative effectiveness assessment for certain hedges instead of a quantitative test if the company can reasonably support an expectation of high effectiveness throughout the term of the hedge. An initial quantitative test to establish that the hedge relationship is highly effective is still required. The amendments are effective for fiscal years beginning after December 15, 2018, and the Company adopted the new standard January 1, 2019. The new standard had no impact on the Company’s financial statements.

On January 1, 2019, the Company adopted ASU No. 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes”. The amendments in this ASU permit the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under ASC 815, in addition to the currently permissible benchmark interest rates. This ASU provides the Company the ability to utilize the OIS rate based on SOFR as the benchmark interest rate on certain hedges of interest rate risk. The new standard had no impact on the Company’s financial statements.

Standards Effective in Future Years

The FASB has issued the following relevant standards, effective in future years, which are not expected to have a material impact on our consolidated condensed financial statements:

Standard No.	Standard Name	Standard Effective Date
2018-13	Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement	January 1, 2020
2018-14	Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans	January 1, 2020

In April 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, that clarifies and improves areas of guidance related to the recently issued standards on credit losses (ASU 2016-13), hedging (ASU 2017-12), and recognition and measurement of financial instruments (ASU 2016-01). The amendments generally have the same effective dates as their related standards. If already adopted, the amendments of ASU 2016-01 and ASU

2016-13 are effective for fiscal years beginning after December 15, 2019 and the amendments of ASU 2017-12 are effective as of the beginning of the Company’s next annual reporting period; early adoption is permitted. The Company is currently evaluating the impact this change will have on its consolidated financial statements and disclosures.    

All other issued and not yet effective accounting standards are not expected to be relevant to the Company.

Updates to Accounting Policies and Estimates

Leases

The Company determines if an arrangement is a lease at inception. ROU assets are included in Other assets in the Company’s condensed consolidated balance sheets. Current ROU liabilities are included in Accrued liabilities and other and long-term ROU liabilities are included in Other long-term liabilities, in our condensed consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. To determine the present value of the lease payments, we estimate our incremental borrowing rate based on information available at the lease commencement date.

The Company’s lease term includes options to extend the lease when it is reasonably certain that it will exercise that option. Leases with a term of 12 months or less are not recorded on the balance sheet. Our leases typically do not contain any residual value guarantees.  For real estate, we account for the lease and non-lease components as a single lease component.

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Related Parties (Tables)

9 Months Ended

Sep. 30, 2019

Related Party Transactions [Abstract]

Schedule of Net Sales and Purchases of Related Party Transactions

The table below sets forth net sales to and purchases from related parties:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
LSC
Net sales	$	273	$	304	$	729	$	896
Purchases	$	2,548	$	5,208	$	11,039	$	16,630
Nuvoton
Purchases	$	2,650	$	2,361	$	5,951	$	7,774
Keylink
Net sales	$	4,923	$	4,684	$	11,304	$	8,762
Purchases	$	604	$	907	$	1,794	$	2,646
JCP
Purchases	$	151	$	201	$	462	$	488

Schedule of Account Receivable and Payable of Related Party Transactions

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

	September 30,		December 31,
	2019		2018
LSC
Accounts receivable	$	337	$	286
Accounts payable	$	1,749	$	2,696
Nuvoton
Accounts payable	$	1,238	$	1,939
Keylink
Accounts receivable	$	15,004	$	6,264
Accounts payable	$	11,597	$	4,656
JCP
Accounts payable	$	206	$	151

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Earnings Per Share - Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Earnings (numerator)
Net income attributable to common stockholders	$ 38,060	$ 30,908	$ 106,060	$ 74,502
Shares (denominator)
Weighted average common shares outstanding (basic)	50,998	50,115	50,687	49,713
Dilutive effect of stock options and stock awards outstanding	871	962	1,012	1,170
Adjusted weighted average common shares outstanding (diluted)	51,869	51,077	51,699	50,883
Earnings per share attributable to common stockholders
Basic	$ 0.75	$ 0.62	$ 2.09	$ 1.50
Diluted	$ 0.73	$ 0.61	$ 2.05	$ 1.46
Stock options and stock awards excluded from EPS calculation because the effect would be anti-dilutive	3		107	94

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Employee Benefit Plans

9 Months Ended

Sep. 30, 2019

Compensation And Retirement Disclosure [Abstract]

Employee Benefit Plans

NOTE 11 – Employee Benefit Plans  

Deferred Compensation

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 by investing in the actual underlying investments. These investments are classified as trading securities and are carried at fair value. At September 30, 2019 and December 31, 2018, these investments totaled approximately $11.5 million and $10.6 million, respectively. All gains and losses in these investments are materially offset by corresponding gains and losses in the Deferred Compensation Plan liabilities.

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Segment Information and Net Sales

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Segment Information and Net Sales

NOTE 7 – Segment Information and Net Sales

Segment Reporting. For financial reporting purposes, we operate in a single segment, standard semiconductor products, through our various manufacturing and distribution facilities. We aggregate our products because the products are similar and have similar economic characteristics, use similar production processes and share the same customer type. Our primary operations include operations in Asia, North America and Europe.  During the three months ended September 30, 2018, one customer, a broad-based global distributor that sells to thousands of different end users, accounted for 10.2%, or $32.7 million, respectively, of our net sales.  No customer accounted for 10% or more of our revenue for any other period presented. This customer did not account for 10% or greater of our outstanding accounts receivable at September 30, 2019 or 2018.  

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

Three Months Ended September 30, 2019	Asia			North America			Europe			Consolidated
Total sales	$	323,876		$	175,900		$	63,583		$	563,359
Intercompany elimination		(115,879	)		(96,150	)		(27,656	)		(239,685	)
Net sales	$	207,997		$	79,750		$	35,927		$	323,674
Three Months Ended September 30, 2018	Asia			North America			Europe			Consolidated
Total sales	$	283,635		$	51,640		$	49,209		$	384,484
Intercompany elimination		(40,690	)		(8,773	)		(14,075	)		(63,538	)
Net sales	$	242,945		$	42,867		$	35,134		$	320,946
As of and for the
Nine Months Ended September 30, 2019	Asia			North America			Europe			Consolidated
Total sales	$	917,516		$	450,874		$	180,759		$	1,549,149
Intercompany elimination		(305,581	)		(228,344	)		(67,251	)		(601,176	)
Net sales	$	611,935		$	222,530		$	113,508		$	947,973
Property, plant and equipment, net	$	385,862		$	23,186		$	59,074		$	468,122
Total assets		1,173,683			237,467			198,663		$	1,609,813
As of and for the
Nine Months Ended September 30, 2018	Asia			North America			Europe			Consolidated
Total sales	$	797,455		$	116,868		$	150,382		$	1,064,705
Intercompany elimination		(106,330	)		(16,276	)		(42,556	)		(165,162	)
Net sales	$	691,125		$	100,592		$	107,826		$	899,543
Property, plant and equipment, net	$	399,632		$	30,133		$	24,321		$	454,086
Total assets	$	1,075,840		$	202,024		$	189,920		$	1,467,784

Disaggregation of Net sales. We disaggregate net sales from contracts with customers into direct sales and distribution sales (“Distributors”) and by geographic area. Direct sales customers consist of those customers using our product in their manufacturing process, and Distributors are those customers who resell our products to third parties. We sell our products to customers in multiple areas of the world including Asia, Europe, and North America. Across these regions, we sell products to end users in a variety of markets such as 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.

The tables below set forth the amount of net sales by type (direct sales or Distributor) and the location of the customer based on the location where the products were shipped for the three and nine months ended September 30, 2019 and 2018:

	Net Sales for the Three Months Ended September 30,
	Direct Sales						Distributor
	2019			2018			2019			2018
China	$	57,952		$	60,037		$	105,305		$	113,191
U.S.		2,388			4,409			20,723			30,550
Korea		6,546			4,597			10,594			13,250
Germany		3,079			3,076			16,705			20,912
Singapore		124			637			16,166			16,979
Taiwan		819			621			21,850			17,675
All others (1)		39,405			20,574			22,018			14,438
Total	$	110,313		$	93,951		$	213,361		$	226,995
	Percent of Net Sales by Type for the Three Months Ended September 30,
	Direct Sales						Distributor
	2019			2018			2019			2018
China		53	%		64	%		49	%		50	%
U.S.		2	%		5	%		10	%		13	%
Korea		6	%		5	%		5	%		6	%
Germany		3	%		3	%		8	%		9	%
Singapore		—			1	%		8	%		7	%
Taiwan		1	%		1	%		10	%		8	%
All others (1)		35	%		21	%		10	%		7	%
Total		100	%		100	%		100	%		100	%
	Total Net Sales for the Three Months Ended September 30,
	Dollars						Percent of Net Sales
	2019			2018			2019			2018
China	$	163,257		$	173,228			50	%		54	%
U.S.		23,111			34,959			7	%		11	%
Korea		17,140			17,847			5	%		6	%
Germany		19,784			23,988			6	%		7	%
Singapore		16,290			17,616			5	%		5	%
Taiwan		22,669			18,296			7	%		6	%
All others (1)		61,423			35,012			20	%		11	%
Total	$	323,674		$	320,946			100	%		101	%

	Net Sales for the Nine Months Ended September 30,
	Direct Sales						Distributor
	2019			2018			2019			2018
China	$	169,861		$	164,109		$	305,197		$	323,875
U.S.		8,509			12,866			78,693			78,081
Korea		17,309			12,148			27,588			32,163
Germany		9,536			9,001			53,355			63,343
Singapore		490			1,549			47,022			52,380
Taiwan		1,977			2,399			65,421			52,696
All others (1)		97,920			52,558			65,095			42,375
Total	$	305,602		$	254,630		$	642,371		$	644,913
	Percent of Net Sales by Type for the Nine Months Ended September 30,
	Direct Sales						Distributor
	2019			2018			2019			2018
China		56	%		64	%		48	%		50	%
U.S.		3	%		5	%		12	%		12	%
Korea		6	%		5	%		4	%		5	%
Germany		3	%		4	%		8	%		10	%
Singapore		—			1	%		7	%		8	%
Taiwan		1	%		1	%		10	%		8	%
All others (1)		31	%		20	%		11	%		7	%
Total		100	%		100	%		100	%		100	%
	Total Net Sales for the Nine Months Ended September 30,
	Dollar						Percent of Net Sales
	2019			2018			2019			2018
China	$	475,058		$	487,984			50	%		54	%
U.S.		87,202			90,947			9	%		10	%
Korea		44,897			44,311			5	%		5	%
Germany		62,891			72,344			7	%		8	%
Singapore		47,512			53,929			5	%		6	%
Taiwan		67,398			55,095			7	%		6	%
All others (1)		163,015			94,933			17	%		11	%
Total	$	947,973		$	899,543			100	%		100	%

(1) Represents countries with less than 3% of the total net sales each.

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Inventories

9 Months Ended

Sep. 30, 2019

Inventory Disclosure [Abstract]

Inventories

NOTE 3 – Inventories

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

	September 30, 2019		December 31, 2018
Finished goods	$	59,721	$	59,244
Work-in-progress		67,446		59,166
Raw materials		103,648		97,025
Total	$	230,815	$	215,435

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Statement Of Financial Position [Abstract]
Accounts receivable, allowance	$ 4,726	$ 4,102
Preferred stock par value	$ 1.00	$ 1.00
Preferred stock shares authorized	1,000,000	1,000,000
Preferred stock shares issued	0	0
Preferred stock shares outstanding	0	0
Common stock par value	$ 0.666	$ 0.666
Common stock shares authorized	70,000,000	70,000,000
Common stock shares issued	51,012,794	50,221,035
Common stock shares outstanding	51,012,794	50,221,035
Treasury stock, shares	1,457,206	1,457,206

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Operating Activities
Net income	$ 106,561	$ 75,397
Adjustments to reconcile net income to net cash provided by operating activities, net of effects of acquisitions
Depreciation and amortization	81,302	76,868
Share-based compensation expense	15,364	15,975
Other	(206)	(615)
Changes in operating assets:
Change in accounts receivable	(29,868)	(28,596)
Change in inventory	(9,062)	(5,378)
Change in other operating assets	(3,475)	(11,177)
Changes in operating liabilities:
Change in accrued liabilities	10,206	9,070
Change in income tax payable (refundable)	9,853	(2,388)
Change in other operating liabilities	(2,970)	(5,228)
Net cash flows provided by operating activities	177,705	123,928
Cash flows from investing activities
Acquisitions, net of cash received	(33,029)	(41)
Purchases of property, plant and equipment	(76,128)	(72,159)
Purchases of short-term investments	(15,921)	(13,959)
Proceeds from maturity of short-term investments	15,332	10,831
Other	(430)	1,235
Net cash and cash equivalents used in investing activities	(110,176)	(74,093)
Cash flows from financing activities
Advances on lines of credit and short-term debt	9,954	9,151
Repayments of line of credit and short-term debt	(3,067)
Taxes paid related to net share settlement	(4,383)	(11,056)
Proceeds from long-term debt	278,237	304,656
Repayments of long-term debt	(372,976)	(408,863)
Net proceeds from issuance of common stock	7,208	4,861
Repayment of and proceeds from finance lease obligation	(912)	1,489
Dividend distribution to noncontrolling interests	(2,577)	(2,694)
Capital contribution from noncontrolling interest		5,263
Other	1,524	(764)
Net cash and cash equivalents used in financing activities	(86,992)	(97,957)
Effect of exchange rate changes on cash and cash equivalents	(2,614)	(6,039)
Change in cash and cash equivalents, including restricted cash	(22,077)	(54,161)
Cash and cash equivalents, beginning of period, including restricted cash	241,833	205,262
Cash and cash equivalents, end of period, including restricted cash	219,756	151,101
Supplemental Cash Flow Information
Interest paid during the period	5,781	7,661
Taxes paid during the period	24,422	29,435
Non-cash investing and financing activities:
(Increase) decrease in accounts payable related to the purchase of property, plant and equipment	$ (1,263)	$ 8,093

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Leases - Components of Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Leases [Abstract]
Operating lease expense	$ 3,671	$ 11,148
Finance lease expense:
Amortization of assets	244	733
Interest on lease liabilities	11	39
Short-term lease expense	89	223
Variable lease expense	681	2,101
Total lease expense	$ 4,696	$ 14,244

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Derivative Financial Instruments - Summary of Outstanding Foreign Currency Forward Contracts (Details) - Foreign Currency Forward Contracts - Cash Flow Hedges - Non-designated	9 Months Ended	12 Months Ended
	Sep. 30, 2019 USD ($) € / £ € / $ £ / $ $ / ¥ $ / ¥ $ / $	Dec. 31, 2018 USD ($) € / £ € / $ £ / $ $ / ¥ $ / ¥ $ / $
Derivative [Line Items]
Notional Amount	$ 101,942,000	$ 122,353,000
Derivative One
Derivative [Line Items]
Notional Amount	$ 2,242,000	$ 1,221,000
Effective Date	Sep. 30, 2019	Dec. 31, 2018
Maturity Date	Nov. 30, 2019	Feb. 28, 2019
Index	EUR/GBP	EUR/GBP
Weighted Average Foreign Exchange Rate | € / £	0.88592	0.8981
Derivative Two
Derivative [Line Items]
Notional Amount	$ 2,785,000	$ 12,538,000
Effective Date	Sep. 30, 2019	Dec. 31, 2018
Maturity Date	Nov. 30, 2019	Feb. 28, 2019
Index	EUR/USD	EUR/USD
Weighted Average Foreign Exchange Rate | € / $	1.0939	1.1479
Derivative Three
Derivative [Line Items]
Notional Amount	$ 21,195,000	$ 8,463,000
Effective Date	Sep. 30, 2019	Dec. 31, 2018
Maturity Date	Nov. 30, 2019	Feb. 28, 2019
Index	GBP/USD	GBP/USD
Weighted Average Foreign Exchange Rate | £ / $	1.2328	1.2785
Derivative Four
Derivative [Line Items]
Notional Amount	$ 39,681,000	$ 44,946,000
Effective Date	Sep. 30, 2019	Dec. 31, 2018
Maturity Date	Nov. 30, 2019	Feb. 28, 2019
Index	USD/CNY	USD/CNY
Weighted Average Foreign Exchange Rate | $ / ¥	7.0985	6.8738
Derivative Five
Derivative [Line Items]
Notional Amount	$ 806,000	$ 844,000
Effective Date	Sep. 30, 2019	Dec. 31, 2018
Maturity Date	Nov. 30, 2019	Feb. 28, 2019
Index	USD/JPY	USD/JPY
Weighted Average Foreign Exchange Rate | $ / ¥	108.08	110.14
Derivative Six
Derivative [Line Items]
Notional Amount	$ 33,733,000	$ 54,041,000
Effective Date	Sep. 30, 2019	Dec. 31, 2018
Maturity Date	Nov. 30, 2019	Feb. 28, 2019
Index	USD/TWD	USD/TWD
Weighted Average Foreign Exchange Rate | $ / $	30.925	30.559
Derivative Seven
Derivative [Line Items]
Notional Amount	$ 500,000	$ 300,000
Effective Date	Jan. 31, 2019	Dec. 31, 2018
Maturity Date	Oct. 31, 2019	Jan. 31, 2019
Index	USD/TWD	USD/TWD
Weighted Average Foreign Exchange Rate | $ / $	30.635	30.669
Derivative Eight
Derivative [Line Items]
Notional Amount	$ 500,000
Effective Date	Jan. 31, 2019
Maturity Date	Jan. 31, 2020
Index	USD/TWD
Weighted Average Foreign Exchange Rate | $ / $	30.635
Derivative Nine
Derivative [Line Items]
Notional Amount	$ 500,000
Effective Date	Jan. 31, 2019
Maturity Date	Nov. 30, 2019
Index	USD/TWD
Weighted Average Foreign Exchange Rate | $ / $	30.705

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Segment Information and Net Sales - Schedule of Net Sales from Based on Location of the Subsidiary (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Segment Reporting Information [Line Items]
Net sales	$ 323,674	$ 320,946	$ 947,973	$ 899,543
Property, plant and equipment, net	468,122	454,086	468,122	454,086	$ 446,835
Total assets	1,609,813	1,467,784	1,609,813	1,467,784	$ 1,526,371
Operating Segments
Segment Reporting Information [Line Items]
Net sales	563,359	384,484	1,549,149	1,064,705
Intersegment Eliminations
Segment Reporting Information [Line Items]
Net sales	(239,685)	(63,538)	(601,176)	(165,162)
Asia
Segment Reporting Information [Line Items]
Net sales	207,997	242,945	611,935	691,125
Property, plant and equipment, net	385,862	399,632	385,862	399,632
Total assets	1,173,683	1,075,840	1,173,683	1,075,840
Asia | Operating Segments
Segment Reporting Information [Line Items]
Net sales	323,876	283,635	917,516	797,455
Asia | Intersegment Eliminations
Segment Reporting Information [Line Items]
Net sales	(115,879)	(40,690)	(305,581)	(106,330)
North America
Segment Reporting Information [Line Items]
Net sales	79,750	42,867	222,530	100,592
Property, plant and equipment, net	23,186	30,133	23,186	30,133
Total assets	237,467	202,024	237,467	202,024
North America | Operating Segments
Segment Reporting Information [Line Items]
Net sales	175,900	51,640	450,874	116,868
North America | Intersegment Eliminations
Segment Reporting Information [Line Items]
Net sales	(96,150)	(8,773)	(228,344)	(16,276)
Europe
Segment Reporting Information [Line Items]
Net sales	35,927	35,134	113,508	107,826
Property, plant and equipment, net	59,074	24,321	59,074	24,321
Total assets	198,663	189,920	198,663	189,920
Europe | Operating Segments
Segment Reporting Information [Line Items]
Net sales	63,583	49,209	180,759	150,382
Europe | Intersegment Eliminations
Segment Reporting Information [Line Items]
Net sales	$ (27,656)	$ (14,075)	$ (67,251)	$ (42,556)

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Goodwill and Intangible Assets - Schedule of Intangible Assets Other Than Goodwill (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Intangible assets subject to amortization
Gross carrying amount	$ 244,554	$ 238,867
Accumulated amortization	(119,949)	(106,410)
Foreign currency translation adjustment	(8,271)	(8,281)
Total	116,334	124,176
Intangible assets with indefinite lives
Gross carrying amount	10,303	14,883
Foreign currency translation adjustment	(1,191)	(1,124)
Total	9,112	13,759
Total intangible assets, net	$ 125,446	$ 137,935

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Share-Based Compensation - Schedule of Share-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total share-based compensation expense	$ 5,589	$ 4,896	$ 15,364	$ 15,977
Cost of Goods Sold
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total share-based compensation expense	281	96	665	267
Selling, General and Administrative
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total share-based compensation expense	4,566	3,993	12,513	13,477
Research and Development
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total share-based compensation expense	$ 742	$ 807	$ 2,186	$ 2,233

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Assets Held for Sale - Additional Information (Details)	9 Months Ended
	Sep. 30, 2019 USD ($) a
Long Lived Assets Held For Sale [Line Items]
Impairment charges | $	$ 0
Plano, Texas
Long Lived Assets Held For Sale [Line Items]
Land held for sale | a	16

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Related Parties - Schedule of Net Sales and Purchases of Related Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Lite On Semiconductor
Related Party Transaction [Line Items]
Net sales from related parties	$ 273	$ 304	$ 729	$ 896
Purchases from related parties	2,548	5,208	11,039	16,630
Nuvoton
Related Party Transaction [Line Items]
Purchases from related parties	2,650	2,361	5,951	7,774
Keylink
Related Party Transaction [Line Items]
Net sales from related parties	4,923	4,684	11,304	8,762
Purchases from related parties	604	907	1,794	2,646
JCP
Related Party Transaction [Line Items]
Purchases from related parties	$ 151	$ 201	$ 462	$ 488

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Inventories (Tables)

9 Months Ended

Sep. 30, 2019

Inventory Disclosure [Abstract]

Schedule of Inventory Current

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

	September 30, 2019		December 31, 2018
Finished goods	$	59,721	$	59,244
Work-in-progress		67,446		59,166
Raw materials		103,648		97,025
Total	$	230,815	$	215,435

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Acquisitions

9 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

Acquisitions

Note 13 –Acquisitions

Wafer Fabrication Facility Acquisition

On April 1, 2019, the Company completed the previously announced acquisition of a wafer fabrication facility (“GFAB”) located in Greenock, Scotland.  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, net	$	24.4
Inventories		3.6
Prepaid expenses and other		5.2
Goodwill		0.9
Deferred tax liabilities			1.0

LSC Acquisition

On August 8, 2019, we announced we had entered into a Share Swap Agreement that provides for the acquisition of LSC by the Company for approximately $428 million in cash.  This amount is subject to change, based on Taiwan dollar to United States dollar exchange rates at closing. The acquisition received LSC shareholder approval on October 25, 2019, but is subject to customary closing conditions and regulatory approvals.  We expect to fund the purchase price of the transaction primarily with proceeds from a new bank financing arrangement. We anticipate completing the acquisition in April 2020.

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Segment Information and Net Sales (Tables)

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Schedule of Net Sales from Based on Location of the Subsidiary

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

Three Months Ended September 30, 2019	Asia			North America			Europe			Consolidated
Total sales	$	323,876		$	175,900		$	63,583		$	563,359
Intercompany elimination		(115,879	)		(96,150	)		(27,656	)		(239,685	)
Net sales	$	207,997		$	79,750		$	35,927		$	323,674
Three Months Ended September 30, 2018	Asia			North America			Europe			Consolidated
Total sales	$	283,635		$	51,640		$	49,209		$	384,484
Intercompany elimination		(40,690	)		(8,773	)		(14,075	)		(63,538	)
Net sales	$	242,945		$	42,867		$	35,134		$	320,946
As of and for the
Nine Months Ended September 30, 2019	Asia			North America			Europe			Consolidated
Total sales	$	917,516		$	450,874		$	180,759		$	1,549,149
Intercompany elimination		(305,581	)		(228,344	)		(67,251	)		(601,176	)
Net sales	$	611,935		$	222,530		$	113,508		$	947,973
Property, plant and equipment, net	$	385,862		$	23,186		$	59,074		$	468,122
Total assets		1,173,683			237,467			198,663		$	1,609,813
As of and for the
Nine Months Ended September 30, 2018	Asia			North America			Europe			Consolidated
Total sales	$	797,455		$	116,868		$	150,382		$	1,064,705
Intercompany elimination		(106,330	)		(16,276	)		(42,556	)		(165,162	)
Net sales	$	691,125		$	100,592		$	107,826		$	899,543
Property, plant and equipment, net	$	399,632		$	30,133		$	24,321		$	454,086
Total assets	$	1,075,840		$	202,024		$	189,920		$	1,467,784

Schedule of Net Sales by Direct Sales or Distributor and Location

The tables below set forth the amount of net sales by type (direct sales or Distributor) and the location of the customer based on the location where the products were shipped for the three and nine months ended September 30, 2019 and 2018:

	Net Sales for the Three Months Ended September 30,
	Direct Sales						Distributor
	2019			2018			2019			2018
China	$	57,952		$	60,037		$	105,305		$	113,191
U.S.		2,388			4,409			20,723			30,550
Korea		6,546			4,597			10,594			13,250
Germany		3,079			3,076			16,705			20,912
Singapore		124			637			16,166			16,979
Taiwan		819			621			21,850			17,675
All others (1)		39,405			20,574			22,018			14,438
Total	$	110,313		$	93,951		$	213,361		$	226,995
	Percent of Net Sales by Type for the Three Months Ended September 30,
	Direct Sales						Distributor
	2019			2018			2019			2018
China		53	%		64	%		49	%		50	%
U.S.		2	%		5	%		10	%		13	%
Korea		6	%		5	%		5	%		6	%
Germany		3	%		3	%		8	%		9	%
Singapore		—			1	%		8	%		7	%
Taiwan		1	%		1	%		10	%		8	%
All others (1)		35	%		21	%		10	%		7	%
Total		100	%		100	%		100	%		100	%
	Total Net Sales for the Three Months Ended September 30,
	Dollars						Percent of Net Sales
	2019			2018			2019			2018
China	$	163,257		$	173,228			50	%		54	%
U.S.		23,111			34,959			7	%		11	%
Korea		17,140			17,847			5	%		6	%
Germany		19,784			23,988			6	%		7	%
Singapore		16,290			17,616			5	%		5	%
Taiwan		22,669			18,296			7	%		6	%
All others (1)		61,423			35,012			20	%		11	%
Total	$	323,674		$	320,946			100	%		101	%

	Net Sales for the Nine Months Ended September 30,
	Direct Sales						Distributor
	2019			2018			2019			2018
China	$	169,861		$	164,109		$	305,197		$	323,875
U.S.		8,509			12,866			78,693			78,081
Korea		17,309			12,148			27,588			32,163
Germany		9,536			9,001			53,355			63,343
Singapore		490			1,549			47,022			52,380
Taiwan		1,977			2,399			65,421			52,696
All others (1)		97,920			52,558			65,095			42,375
Total	$	305,602		$	254,630		$	642,371		$	644,913
	Percent of Net Sales by Type for the Nine Months Ended September 30,
	Direct Sales						Distributor
	2019			2018			2019			2018
China		56	%		64	%		48	%		50	%
U.S.		3	%		5	%		12	%		12	%
Korea		6	%		5	%		4	%		5	%
Germany		3	%		4	%		8	%		10	%
Singapore		—			1	%		7	%		8	%
Taiwan		1	%		1	%		10	%		8	%
All others (1)		31	%		20	%		11	%		7	%
Total		100	%		100	%		100	%		100	%
	Total Net Sales for the Nine Months Ended September 30,
	Dollar						Percent of Net Sales
	2019			2018			2019			2018
China	$	475,058		$	487,984			50	%		54	%
U.S.		87,202			90,947			9	%		10	%
Korea		44,897			44,311			5	%		5	%
Germany		62,891			72,344			7	%		8	%
Singapore		47,512			53,929			5	%		6	%
Taiwan		67,398			55,095			7	%		6	%
All others (1)		163,015			94,933			17	%		11	%
Total	$	947,973		$	899,543			100	%		100	%

(1) Represents countries with less than 3% of the total net sales each.

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Derivative Financial Instruments

9 Months Ended

Sep. 30, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Note 9 – Derivative Financial Instruments

We use derivative instruments to manage risks related to foreign currencies, interest rates and the net investment risk in our foreign subsidiaries. Our objectives for holding derivatives include reducing, eliminating, and efficiently managing the economic impact of these exposures as effectively as possible. Our derivative programs include strategies that both qualify and do not qualify for hedge accounting treatment.

Hedges of Foreign Currency Risk - We are exposed to fluctuations in various foreign currencies against our different functional currencies. We use foreign currency forward agreements to manage this exposure. At September 30, 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.  The fair value of these instruments approximates zero. 

The table below sets forth outstanding foreign currency forward contracts at September 30, 2019 and December 31, 2018:

Notional Amount		Effective Date	Maturity Date	Index*	Weighted Average Foreign Exchange Rate	Balance Sheet Hedge Designation
$	2,242	September 2019	November 2019	EUR/GBP	0.88592	Non-designated
	2,785	September 2019	November 2019	EUR/USD	1.0939	Non-designated
	21,195	September 2019	November 2019	GBP/USD	1.2328	Non-designated
	39,681	September 2019	November 2019	USD/CNY	7.0985	Non-designated
	806	September 2019	November 2019	USD/JPY	108.08	Non-designated
	33,733	September 2019	November 2019	USD/TWD	30.925	Non-designated
	500	January 2019	October 2019	USD/TWD	30.635	Non-designated
	500	January 2019	January 2020	USD/TWD	30.635	Non-designated
	500	January 2019	November 2019	USD/TWD	30.705	Non-designated
$	101,942
Notional Amount		Effective Date	Maturity Date	Index*	Weighted Average Foreign Exchange Rate	Balance Sheet Hedge Designation
$	1,221	December 2018	February 2019	EUR/GBP	0.8981	Non-designated
	12,538	December 2018	February 2019	EUR/USD	1.1479	Non-designated
	8,463	December 2018	February 2019	GBP/USD	1.2785	Non-designated
	44,946	December 2018	February 2019	USD/CNY	6.8738	Non-designated
	844	December 2018	February 2019	USD/JPY	110.14	Non-designated
	54,041	December 2018	February 2019	USD/TWD	30.559	Non-designated
	300	December 2018	January 2019	USD/TWD	30.669	Non-designated
$	122,353
*  EUR = Euro
GBP = British Pound Sterling
USD = United States Dollar
CNY = Chinese Yuan Renminbi
JPY =  Japan Yen
TWD = Taiwan dollar

Hedges of Interest Rate and Net Investment Risk - The Company’s objective in using interest rate swaps and collars is to minimize the risks associated with its floating rate debt. The Company makes use of cross currency swaps to decrease the foreign exchange risk inherent in the Company’s investment in its foreign subsidiaries. To accomplish these objectives, the Company uses the instruments detailed in the table below, measured in U.S. dollar equivalents:

	Number of Instruments		Notional Amount
	September 30, 2019	December 31, 2018	September 30, 2019		December 31, 2018
Interest rate swaps and collars	10	12	$	200,000	$	210,000

The table below sets forth the fair value of the Company’s derivative financial instruments, excluding adjustments for performance risk, if any, as well as their classification on our condensed consolidated balance sheets:

	Other Current Assets				Other Assets				Other Current Liabilities				Other Liabilities
	September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
Interest rate swaps and collars	$	299	$	1,936	$	0	$	2,795	$	57	$	-	$	407	$	-

The tables below sets forth the effect of the Company’s derivative financial instruments on the condensed consolidated statements of operations for the three and nine months ended September 30, 2019 and 2018:

	Amount of Gain or (Loss) Recognized in OCI on Derivative					Location of Gain or (Loss) Reclassified from Accumulated OCI into Income	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Net Income				Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion  Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Derivative Instruments Designated as Hedging Instruments	September 30,						September 30,					September 30,
	2019			2018			2019		2018			2019		2018
Three Months Ended
Interest rate swaps and collars	$	(136	)	$	636	Interest expense	$	224	$	299	N/A		-		-
Cross currency swaps	$	-		$	-	N/A		-		-	Interest income		-		-
Nine Months Ended
Interest rate swaps and collars	$	(3,145	)	$	4,143	Interest expense	$	1,149	$	526	N/A		-		-
Cross currency swaps	$	(298	)	$	-	N/A		-		-	Interest income	$	688	$	-

We estimate that $0.2 million of net derivative gains included in accumulated other comprehensive income (“AOCI”) as of September 30, 2019 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 three months ended September 30, 2019 or 2018.

	Amount of Gain or (Loss) Recognized in Net Income						Location of Gain or (Loss) Recognized in Net Income
Derivative Instruments Not Designated as Hedging Instruments
	September 30,
	2019			2018
Three Months Ended
Foreign currency forward contracts	$	(2,563	)	$	(2,200	)	Foreign currency loss, net
Nine Months Ended
Foreign currency forward contracts	$	(3,793	)	$	(7,570	)	Foreign currency loss, net

As of September 30, 2019 and December 31, 2018, the Company had not posted any collateral related to these agreements.

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Income Tax Provision

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income Tax Provision

NOTE 5 – Income Tax Provision

The table below sets forth information related to our income tax expense:  

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Domestic pre-tax income (loss)	$	13,547		$	(7,267	)	$	34,097		$	(11,289	)
Foreign pre-tax income	$	35,188		$	51,667		$	104,549		$	118,412
Income tax provision	$	10,613		$	13,190		$	32,085		$	31,726
Effective tax rate		21.8	%		29.7	%		23.1	%		29.6	%
Impact of tax holidays on tax expense	$	330		$	638		$	1,179		$	(104	)
Earnings per share impact of tax holidays:
Basic	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	-
Diluted	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	-

The decrease in the effective tax rate for the three and nine months ended September 30, 2019 when compared to the three and nine months ended September 30, 2018, is primarily attributable to an increase in estimated full year global pretax book income and a net decrease in unfavorable U.S. permanent differences.         

Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of European and Asian subsidiaries.  Any future distributions of foreign earnings will not be subject to additional U.S. income tax, but may be subject to non-U.S. withholding taxes.

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations by tax authorities for tax years before 2012, or for the 2015 tax year. We are no longer subject to China income tax examinations by tax authorities for tax years before 2009. With respect to state and local jurisdictions and countries outside of the U.S. (other than China), with limited exceptions, the Company is no longer subject to income tax audits for years before 2013. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties, if any, have been provided for in the Company’s reserve for any adjustments that may result from currently pending tax audits. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in interest expense. As of September 30, 2019, the gross amount of unrecognized tax benefits was approximately $33.8   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. At this time, an estimate of the range of the reasonably possible outcomes cannot be made.

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Goodwill and Intangible Assets - Schedule of Changes in Goodwill (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Goodwill
Goodwill beginning balance	$ 132,437
Foreign currency translation adjustment	(1,339)
Goodwill ending balance	138,020
Wafer Fabrication Facility in Greenock, Scotland
Goodwill
Acquisitions	931	[1]
Canyon Investment
Goodwill
Acquisitions	1,671	[2]
ERIS Investment in Yea-Shin
Goodwill
Acquisitions	$ 4,320	[3]

[1] The Company’s acquisition accounting for the purchase of a wafer fabrication facility in Greenock, Scotland, (“GFAB”).  (See Note 13 for additional information).

[2] The Company’s acquisition accounting for the Company’s investment of $3.4 million in Canyon Semiconductor.  This investment brings our ownership of Canyon to 51%.  During the nine months ended September 30 2019, as a measurement period adjustment, we finalized our acquisition accounting with finalization of   the value of non-controlling interest and deferred taxes.

[3] The Company’s acquisition accounting related to Eris’ investment of approximately $6.4 million in Yea-Shin Technology Corporation.  During the second quarter of 2019, as a measurement period adjustment, we increased goodwill approximately $4.3 million, related to finalization of deferred taxes. The Company owns approximately 51% of Eris and Eris owns approximately 60% of Yea-Shin.

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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Summary of Outstanding Foreign Currency Forward Contracts

The table below sets forth outstanding foreign currency forward contracts at September 30, 2019 and December 31, 2018:

Notional Amount		Effective Date	Maturity Date	Index*	Weighted Average Foreign Exchange Rate	Balance Sheet Hedge Designation
$	2,242	September 2019	November 2019	EUR/GBP	0.88592	Non-designated
	2,785	September 2019	November 2019	EUR/USD	1.0939	Non-designated
	21,195	September 2019	November 2019	GBP/USD	1.2328	Non-designated
	39,681	September 2019	November 2019	USD/CNY	7.0985	Non-designated
	806	September 2019	November 2019	USD/JPY	108.08	Non-designated
	33,733	September 2019	November 2019	USD/TWD	30.925	Non-designated
	500	January 2019	October 2019	USD/TWD	30.635	Non-designated
	500	January 2019	January 2020	USD/TWD	30.635	Non-designated
	500	January 2019	November 2019	USD/TWD	30.705	Non-designated
$	101,942
Notional Amount		Effective Date	Maturity Date	Index*	Weighted Average Foreign Exchange Rate	Balance Sheet Hedge Designation
$	1,221	December 2018	February 2019	EUR/GBP	0.8981	Non-designated
	12,538	December 2018	February 2019	EUR/USD	1.1479	Non-designated
	8,463	December 2018	February 2019	GBP/USD	1.2785	Non-designated
	44,946	December 2018	February 2019	USD/CNY	6.8738	Non-designated
	844	December 2018	February 2019	USD/JPY	110.14	Non-designated
	54,041	December 2018	February 2019	USD/TWD	30.559	Non-designated
	300	December 2018	January 2019	USD/TWD	30.669	Non-designated
$	122,353
*  EUR = Euro
GBP = British Pound Sterling
USD = United States Dollar
CNY = Chinese Yuan Renminbi
JPY =  Japan Yen
TWD = Taiwan dollar

Summary of Information Related to Number of and Notional Amount of Interest Rate Related Derivative Instruments

Hedges of Interest Rate and Net Investment Risk - The Company’s objective in using interest rate swaps and collars is to minimize the risks associated with its floating rate debt. The Company makes use of cross currency swaps to decrease the foreign exchange risk inherent in the Company’s investment in its foreign subsidiaries. To accomplish these objectives, the Company uses the instruments detailed in the table below, measured in U.S. dollar equivalents:

	Number of Instruments		Notional Amount
	September 30, 2019	December 31, 2018	September 30, 2019		December 31, 2018
Interest rate swaps and collars	10	12	$	200,000	$	210,000

Summary of Fair Value of Derivative Financial Instruments, Excluding Adjustments for Performance Risk and Their Classification on Condensed Consolidated Balance Sheets

The table below sets forth the fair value of the Company’s derivative financial instruments, excluding adjustments for performance risk, if any, as well as their classification on our condensed consolidated balance sheets:

	Other Current Assets				Other Assets				Other Current Liabilities				Other Liabilities
	September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
Interest rate swaps and collars	$	299	$	1,936	$	0	$	2,795	$	57	$	-	$	407	$	-

Summary of Effect of Derivative Financial Instruments on the Condensed Consolidated Statements of Operations

The tables below sets forth the effect of the Company’s derivative financial instruments on the condensed consolidated statements of operations for the three and nine months ended September 30, 2019 and 2018:

	Amount of Gain or (Loss) Recognized in OCI on Derivative					Location of Gain or (Loss) Reclassified from Accumulated OCI into Income	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Net Income				Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion  Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Derivative Instruments Designated as Hedging Instruments	September 30,						September 30,					September 30,
	2019			2018			2019		2018			2019		2018
Three Months Ended
Interest rate swaps and collars	$	(136	)	$	636	Interest expense	$	224	$	299	N/A		-		-
Cross currency swaps	$	-		$	-	N/A		-		-	Interest income		-		-
Nine Months Ended
Interest rate swaps and collars	$	(3,145	)	$	4,143	Interest expense	$	1,149	$	526	N/A		-		-
Cross currency swaps	$	(298	)	$	-	N/A		-		-	Interest income	$	688	$	-

	Amount of Gain or (Loss) Recognized in Net Income						Location of Gain or (Loss) Recognized in Net Income
Derivative Instruments Not Designated as Hedging Instruments
	September 30,
	2019			2018
Three Months Ended
Foreign currency forward contracts	$	(2,563	)	$	(2,200	)	Foreign currency loss, net
Nine Months Ended
Foreign currency forward contracts	$	(3,793	)	$	(7,570	)	Foreign currency loss, net

XML

Nature of Operations, Basis of Presentation, Recently Issued Accounting Pronouncements and Updates to Accounting Policies and Estimates - Additional Information (Details) - ASU 2016-02 $ in Millions	Jan. 01, 2019 USD ($)
Nature of Operations, Basis of Presentation, Recently Issued Accounting Pronouncements and Updates to Accounting Policies [Line Items]
ROU assets	$ 68.3
ROU liabilities	50.4
Land-use Rights | Other Assets
Nature of Operations, Basis of Presentation, Recently Issued Accounting Pronouncements and Updates to Accounting Policies [Line Items]
ROU assets	17.1
Land-use Rights | Property, Plant and Equipment
Nature of Operations, Basis of Presentation, Recently Issued Accounting Pronouncements and Updates to Accounting Policies [Line Items]
ROU assets	$ 2.5

XML

Derivative Financial Instruments - Summary of Fair Value of Derivative Financial Instruments, Excluding Adjustments for Performance Risk and Their Classification on Condensed Consolidated Balance Sheets (Details) - Interest Rate Swaps and Collars - Designated as Hedging Instrument - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Other Current Assets
Derivative [Line Items]
Fair value of derivative instruments, asset derivatives	$ 299	$ 1,936
Other Assets
Derivative [Line Items]
Fair value of derivative instruments, asset derivatives	0	$ 2,795
Other Current Liabilities
Derivative [Line Items]
Fair value of derivative instruments, liability derivatives	57
Other Liabilities
Derivative [Line Items]
Fair value of derivative instruments, liability derivatives	$ 407

XML

Commitments and Contingencies - Additional Information (Details) £ in Millions, $ in Millions	9 Months Ended
	Sep. 30, 2019 USD ($) $ / £	Sep. 30, 2019 GBP (£) $ / £
Commitments And Contingencies [Line Items]
Purchase Commitments	$ 26.1
Long-term purchase commitment, Amount	$ 72.7
Pension Plan, Defined Benefit
Commitments And Contingencies [Line Items]
Defined benefit plan, estimated future employer contributions in current fiscal year, description	We have a contributory defined benefit plan that covers certain employees in the United Kingdom.  As of September 30, 2019, the unfunded liability for this defined benefit plan was approximately $33.0 million.  We are obligated to make annual contributions, each year through December 2029, of approximately GBP 2 million (approximately $2.6  million based on a GBP: USD exchange rate of 1.3:1).  It is necessary for the Trustees to review the contributions required to fund the benefits promised to the employees at least every three years.  A review as of April 2019 is underway and the outcome of the review could result in a change in the amount of the payment or the period over which payment is required.
Defined benefit plan, expected future benefit payments in year one	$ 2.6	£ 2
Defined benefit plan, expected future benefit payments in year two	2.6	2
Defined benefit plan, expected future benefit payments in year three	2.6	2
Defined benefit plan, expected future benefit payments in year four	2.6	2
Defined benefit plan, expected future benefit payments in year five	2.6	2
Defined benefit plan, expected future benefit payments in eight fiscal years thereafter	$ 2.6	£ 2
GBP:USD exchange rate | $ / £	1.3	1.3
Unfunded liability of defined benefit plan	$ 33.0

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Leases - Supplemental Cash Flow and Other Information Related to Leases (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Cash paid for the amounts included in the measurements of lease liabilities:
Operating cash outflows from operating leases	$ 14,728
Operating cash outflows from finance leases	39
Financing cash outflow from finance leases	912
ROU assets obtained in exchange for lease liabilities incurred:
Operating leases	$ 3,611

XML

Nature of Operations, Basis of Presentation, Recently Issued Accounting Pronouncements and Updates to Accounting Policies and Estimates

9 Months Ended

Sep. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Nature of Operations, Basis of Presentation, Recently Issued Accounting Pronouncements and Updates to Accounting Policies and Estimates

NOTE 1 – Nature of Operations, Basis of Presentation, Recently Issued Accounting Pronouncements and Updates to Accounting Policies and Estimates

Nature of Operations

Diodes Incorporated, together with its subsidiaries (collectively, the “Company,” “we” or “our”) (Nasdaq: DIOD), is a leading global manufacturer and supplier of high-quality, application-specific standard products within the broad discrete, logic, analog and mixed-signal semiconductor markets. We serve the consumer electronics, computing, communications, industrial, and automotive markets. Our products include diodes, rectifiers, transistors, MOSFETs, protection devices, function-specific arrays, single gate logic, amplifiers and comparators, Hall-effect and temperature sensors, power management devices, including LED drivers, AC-DC converters and controllers, DC-DC switching and linear voltage regulators, and voltage references along with special function devices, such as USB power switches, load switches, voltage supervisors, and motor controllers. We also have timing, connectivity, switching, and signal integrity solutions for high-speed signals. Our corporate headquarters and Americas’ sales offices are located in Plano, Texas and Milpitas, California. Design, marketing, and engineering centers are located in Plano; Milpitas; Taipei, Taoyuan City and Zhubei City, Taiwan; Oldham, England; and Neuhaus, Germany. Our wafer fabrication facilities are located in Oldham and Shanghai, China and Greenock, Scotland. We have assembly and test facilities located in Shanghai, Jinan and Chengdu, China, as well as in Hong Kong, Neuhaus and Taipei. Additional engineering, research and development, sales, warehouse, and logistics offices are located in Taipei; Hong Kong; Oldham; Shanghai; Shenzhen and Yangzhou, China; Seongnam-si, South Korea; Munich, Germany; and Tokyo, Japan, with support offices throughout the world.

Basis of Presentation

The condensed consolidated financial data at December 31, 2018 is derived from audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission (“SEC”) on February 21, 2019 (“Form 10-K”). The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q. They do not include all information and footnotes necessary for a fair presentation of financial position, operating results and cash flows in conformity with GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in our Form 10-K.  All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair presentation of the operating results for the period presented have been included in the interim period. Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, 2019.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. As permitted under GAAP, interim accounting for certain expenses, including income taxes, are based on full year forecasts. For interim financial reporting purposes, income taxes are recorded based upon estimated annual effective income tax rates taking into consideration discrete items occurring in a quarter.

Dollar amounts and share amounts are presented in thousands, except per share amounts, unless otherwise noted. Certain prior year’s balances may have been reclassified to conform to the current financial statement presentation.

Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issued the following Accounting Standards Updates (“ASU”) which could have potential impact on the Company’s financial statements:   

Recently Adopted Standards

ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) – In February 2016, the FASB issued ASU 2016-02, which amends the accounting treatment for leases and requires, among other things, lessees to recognize a right-of-use (“ROU”) asset and lease liability for most lease arrangements. The amendments were effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted ASU 2016-02 on January 1, 2019, using the modified retrospective transition approach, under which financial results reported in periods prior to 2018 are unchanged. We elected the following allowed practical expedients as permitted under the transition guidance within the new standard:

• Not record leases with an initial term of 12 months on the balance sheet;

• Not separate non-lease components of leases from the lease components; and

• Not reassess (1) the definition of a lease, (2) lease classification, and (3) initial direct costs for existing leases during transition.

Upon adoption of ASU 2016-02, the Company recorded ROU assets of $68.3 million, including land-use rights of $17.1 million previously recorded in other assets and $2.5 million previously recorded in property, plant and equipment and ROU liabilities of $50.4 million. For additional information related to the Company’s leases, see Note 10.    

ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting ("ASU 2018-07") - In June 2018, the FASB issued ASU 2018-07, which simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation—Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 was effective for the Company on January 1, 2019. The adoption of this standard did not have a material effect on our condensed consolidated financial statements or disclosures.

ASU No. 2017-12 - Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”) -In August 2017, the FASB issued ASU No. 2017-12 to better align hedge accounting with risk management strategies, and as a result, more hedging strategies will be eligible for hedge accounting. Public business entities will have until the end of the first quarter in which a hedge is designated to perform an initial assessment of a hedge’s effectiveness. After initial qualification, the new guidance permits a qualitative effectiveness assessment for certain hedges instead of a quantitative test if the company can reasonably support an expectation of high effectiveness throughout the term of the hedge. An initial quantitative test to establish that the hedge relationship is highly effective is still required. The amendments are effective for fiscal years beginning after December 15, 2018, and the Company adopted the new standard January 1, 2019. The new standard had no impact on the Company’s financial statements.

On January 1, 2019, the Company adopted ASU No. 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes”. The amendments in this ASU permit the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under ASC 815, in addition to the currently permissible benchmark interest rates. This ASU provides the Company the ability to utilize the OIS rate based on SOFR as the benchmark interest rate on certain hedges of interest rate risk. The new standard had no impact on the Company’s financial statements.

Standards Effective in Future Years

The FASB has issued the following relevant standards, effective in future years, which are not expected to have a material impact on our consolidated condensed financial statements:

Standard No.	Standard Name	Standard Effective Date
2018-13	Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement	January 1, 2020
2018-14	Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans	January 1, 2020

In April 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, that clarifies and improves areas of guidance related to the recently issued standards on credit losses (ASU 2016-13), hedging (ASU 2017-12), and recognition and measurement of financial instruments (ASU 2016-01). The amendments generally have the same effective dates as their related standards. If already adopted, the amendments of ASU 2016-01 and ASU

2016-13 are effective for fiscal years beginning after December 15, 2019 and the amendments of ASU 2017-12 are effective as of the beginning of the Company’s next annual reporting period; early adoption is permitted. The Company is currently evaluating the impact this change will have on its consolidated financial statements and disclosures.    

All other issued and not yet effective accounting standards are not expected to be relevant to the Company.

Updates to Accounting Policies and Estimates

Leases

The Company determines if an arrangement is a lease at inception. ROU assets are included in Other assets in the Company’s condensed consolidated balance sheets. Current ROU liabilities are included in Accrued liabilities and other and long-term ROU liabilities are included in Other long-term liabilities, in our condensed consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. To determine the present value of the lease payments, we estimate our incremental borrowing rate based on information available at the lease commencement date.

The Company’s lease term includes options to extend the lease when it is reasonably certain that it will exercise that option. Leases with a term of 12 months or less are not recorded on the balance sheet. Our leases typically do not contain any residual value guarantees.  For real estate, we account for the lease and non-lease components as a single lease component.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Oct. 31, 2019
Cover [Abstract]
Document type	10-Q
Document period end date	Sep. 30, 2019
Amendment flag	false
Entity registrant name	DIODES INC /DEL/
Entity central index key	0000029002
Current fiscal year end date	--12-31
Entity filer category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity common stock shares outstanding		51,041,969
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Trading Symbol	DIOD
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity File Number	002-25577
Entity Tax Identification Number	95-2039518
Entity Address, Address Line One	4949 Hedgcoxe Road
Entity Address, Address Line Two	Suite 200
Entity Address, City or Town	Plano
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	75024
City Area Code	972
Local Phone Number	987-3900
Entity Incorporation, State or Country Code	DE
Entity Interactive Data Current	Yes
Title of 12(b) Security	Common Stock, Par Value $0.66 2/3
Security Exchange Name	NASDAQ
Document Quarterly Report	true
Document Transition Report	false

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Comprehensive Income Net Of Tax Including Portion Attributable To Noncontrolling Interest [Abstract]
Net income	$ 38,122	$ 31,210	$ 106,561	$ 75,397
Unrealized (loss) gain on defined benefit plan, net of tax	(6,553)	(493)	(11,562)	7,207
Unrealized gain (loss) on swaps and collars, net of tax	259	378	(3,146)	3,653
Unrealized foreign currency loss, net of tax	(9,186)	(9,849)	(11,151)	(18,978)
Comprehensive income	22,642	21,246	80,702	67,279
Less: Comprehensive income attributable to noncontrolling interest	(62)	(302)	(501)	(895)
Total comprehensive income attributable to common stockholders	$ 22,580	$ 20,944	$ 80,201	$ 66,384

XML

Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 8 – Commitments and Contingencies

Purchase commitments – As of September 30, 2019, we had approximately $26.1 million in non-cancelable purchase contracts related to capital expenditures, primarily related to our manufacturing facilities in Asia.  As of September 30, 2019, we also had a commitment to purchase approximately $72.7 million of wafers to be used in our manufacturing process.  These wafer purchases will occur during 2019 and 2020.

Defined Benefit Plan - We have a contributory defined benefit plan that covers certain employees in the United Kingdom.  As of September 30, 2019, the unfunded liability for this defined benefit plan was approximately $33.0 million.  We are obligated to make annual contributions, each year through December 2029, of approximately GBP 2 million (approximately $2.6  million based on a GBP: USD exchange rate of 1.3:1).  It is necessary for the Trustees to review the contributions required to fund the benefits promised to the employees at least every three years.  A review as of April 2019 is underway and the outcome of the review could result in a change in the amount of the payment or the period over which payment is required.

Contingencies – From time to time, we are involved in various legal proceedings that arise in the normal course of business. While we intend to defend any lawsuit vigorously, we presently believe that the ultimate outcome of any pending legal proceeding will not have any material adverse effect on our consolidated financial position, cash flows or operating results. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, which could impact our business and operating results for the period in which the ruling occurs or future periods.  Based on information available, we evaluate the likelihood of potential outcomes of all pending disputes. We record an appropriate liability when the amount of any liability associated with a pending dispute is deemed probable and reasonably estimable. In addition, we do not accrue for estimated legal fees and other directly related costs as they are expensed as incurred.  The Company is not currently a party to any pending litigation that the Company considers material.

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Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

NOTE 4 – Goodwill and Intangible Assets

The table below sets forth the changes in goodwill:

Balance at December 31, 2018	$	132,437
Acquisitions:
Wafer fabrication facility in Greenock, Scotland (a)		931
Canyon investment (b)		1,671
ERIS investment in Yea-Shin (c)		4,320
Foreign currency translation adjustment		(1,339	)
Balance at September 30, 2019	$	138,020

The increase in goodwill is related to:

(a)  The Company’s acquisition accounting for the purchase of a wafer fabrication facility in Greenock, Scotland, (“GFAB”).  (See Note 13 for additional information).

(b)  The Company’s acquisition accounting for the Company’s investment of $3.4 million in Canyon Semiconductor.  This investment brings our ownership of Canyon to 51%.  During the nine months ended September 30 2019, as a measurement period adjustment, we finalized our acquisition accounting with finalization of   the value of non-controlling interest and deferred taxes.   

(c)  The Company’s acquisition accounting related to Eris’ investment of approximately $6.4 million in Yea-Shin Technology Corporation.  During the second quarter of 2019, as a measurement period adjustment, we increased goodwill approximately $4.3 million, related to finalization of deferred taxes. The Company owns approximately 51% of Eris and Eris owns approximately 60% of Yea-Shin.    

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

	September 30,			December 31,
	2019			2018
Intangible assets subject to amortization:
Gross carrying amount	$	244,554		$	238,867
Accumulated amortization		(119,949	)		(106,410	)
Foreign currency translation adjustment		(8,271	)		(8,281	)
Total		116,334			124,176
Intangible assets with indefinite lives:
Gross carrying amount		10,303			14,883
Foreign currency translation adjustment		(1,191	)		(1,124	)
Total		9,112			13,759
Total intangible assets, net	$	125,446		$	137,935

The table below sets forth amortization expense related to intangible assets subject to amortization:

Amortization expense	2019		2018
Three months ended September 30	$	4,519	$	4,418
Nine months ended September 30	$	13,539	$	13,863

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Leases (Tables)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Components of Lease Expense

The components of lease expense are set forth in the table below:

	Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019
Operating lease expense	$	3,671	$	11,148
Finance lease expense:
Amortization of assets		244		733
Interest on lease liabilities		11		39
Short-term lease expense		89		223
Variable lease expense		681		2,101
Total lease expense	$	4,696	$	14,244

Supplemental Balance Sheet Information Related to Leases

The table below sets forth supplemental balance sheet information related to leases:

	September 30, 2019
Operating leases:
Operating lease ROU assets	$60,217
Current operating lease liabilities	12,235
Noncurrent operating lease liabilities	29,920
Total operating lease liabilities	$42,155
Finance leases:
Finance lease ROU assets	$3,396
Accumulated amortization	(1,680)
Finance lease ROU assets, net	$1,716
Current finance lease liabilities	$896
Non-current finance lease liabilities	367
Total finance lease liabilities	$1,263
Weighted average remaining lease term (in years):
Operating leases	4.6
Finance leases	1.5
Weighted average discount rate:
Operating leases	3.8%
Finance leases	3.6%

Supplemental Cash Flow and Other Information Related to Leases

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

	Nine Months Ended
	September 30, 2019
Cash paid for the amounts included in the measurements of lease liabilities:
Operating cash outflows from operating leases	$14,728
Operating cash outflows from finance leases	39
Financing cash outflow from finance leases	912
ROU assets obtained in exchange for lease liabilities incurred:
Operating leases	3,611

Schedule of Operating and Finance Lease Liability Maturities

The table below sets forth information about lease liability maturities:

	September 30, 2019
	Operating Leases		Finance Leases
Remainder of 2019	$	3,535	$	230
2020		13,410		922
2021		9,476		139
2022		8,028		-
2023		4,437		-
2024		2,370		-
2025 and thereafter		4,785	-
Total lease payments		46,041		1,291
Less: imputed interest		(3,886)		(28)
Total lease obligations		42,155		1,263
Less: current obligations		(12,235)		(896)
Long-term lease obligations	$	29,920	$	367

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Earnings Per Share - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Earnings Per Share [Abstract]
Earnings per share reconciliation disclosure			Earnings per share (“EPS”) is calculated by dividing net income attributable to common stockholders by the weighted-average number of shares of Common Stock outstanding during the period. Diluted EPS is calculated similarly but includes potential dilution from the exercise of stock options and stock awards, except when the effect would be anti-dilutive.
Common stock dividends paid	$ 0	$ 0	$ 0	$ 0

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Goodwill and Intangible Assets - Schedule of Changes in Goodwill (Parenthetical) (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Jun. 30, 2019	Sep. 30, 2019
Canyon Semiconductor
Goodwill [Line Items]
Accounting allocation of investment		$ 3.4
Canyon
Goodwill [Line Items]
Percentage of ownership		51.00%
ERIS Technology Corporation | Yea-Shin Technology Corporation
Goodwill [Line Items]
Accounting allocation of investment		$ 6.4
Percentage of ownership		51.00%
Yea-Shin Technology Corporation | ERIS Technology Corporation
Goodwill [Line Items]
Percentage of ownership		60.00%
Finalization of Deferred Taxes
Goodwill [Line Items]
Measurement period adjustment in amount of goodwill	$ 4.3

XML

Leases - Supplemental Balance Sheet Information Related to Leases (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Operating leases:
Operating lease ROU assets	$ 60,217
Current operating lease liabilities	12,235
Noncurrent operating lease liabilities	29,920
Total operating lease liabilities	42,155
Finance leases:
Finance lease ROU assets	3,396
Accumulated amortization	(1,680)
Finance lease ROU assets, net	1,716
Current finance lease liabilities	896
Non-current finance lease liabilities	367
Total finance lease liabilities	$ 1,263
Weighted average remaining lease term (in years):
Operating leases	4 years 7 months 6 days
Finance leases	1 year 6 months
Weighted average discount rate:
Operating leases	3.80%
Finance leases	3.60%

XML

Derivative Financial Instruments - Summary of Information Related to Number of and Notional Amount of Interest Rate Related Derivative Instruments (Details) - Designated as Hedging Instrument - Interest Rate Swaps and Collars	Sep. 30, 2019 USD ($) DerivativeInstrument	Dec. 31, 2018 USD ($) DerivativeInstrument
Derivative [Line Items]
Number of Instruments | DerivativeInstrument	10	12
Notional Amount | $	$ 200,000,000	$ 210,000,000

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Segment Information and Net Sales - Schedule of Net Sales by Direct Sales or Distributor and Location (Parenthetical) (Details)		3 Months Ended		9 Months Ended
		Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Segment Reporting Revenue Reconciling Item [Line Items]
Percentage of net sales		100.00%	101.00%	100.00%	100.00%
All Others
Segment Reporting Revenue Reconciling Item [Line Items]
Percentage of net sales	[1]	20.00%	11.00%	17.00%	11.00%
All Others | Maximum
Segment Reporting Revenue Reconciling Item [Line Items]
Percentage of net sales		3.00%	3.00%	3.00%	3.00%

[1] Represents countries with less than 3% of the total net sales each.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Statement [Abstract]
Net sales	$ 323,674	$ 320,946	$ 947,973	$ 899,543
Cost of goods sold	201,628	205,732	591,528	578,466
Gross profit	122,046	115,214	356,445	321,077
Operating expenses
Selling, general and administrative	46,123	42,475	137,143	131,778
Research and development	22,689	22,549	66,566	64,799
Amortization of acquisition related intangible assets	4,519	4,418	13,539	13,863
Other operating (income) expense		(66)	(158)	15
Total operating expense	73,331	69,376	217,090	210,455
Income from operations	48,715	45,838	139,355	110,622
Other income (expense)
Interest income	272	474	1,780	1,431
Interest expense	(2,007)	(2,318)	(6,163)	(7,619)
Foreign currency (loss) gain, net	(822)	(655)	(1,382)	(3,384)
Other income	2,577	1,061	5,056	6,073
Total other income (expense)	20	(1,438)	(709)	(3,499)
Income before income taxes and noncontrolling interest	48,735	44,400	138,646	107,123
Income tax provision	10,613	13,190	32,085	31,726
Net income	38,122	31,210	106,561	75,397
Less net (income) attributable to noncontrolling interest	(62)	(302)	(501)	(895)
Net income attributable to common stockholders	$ 38,060	$ 30,908	$ 106,060	$ 74,502
Earnings per share attributable to common stockholders:
Basic	$ 0.75	$ 0.62	$ 2.09	$ 1.50
Diluted	$ 0.73	$ 0.61	$ 2.05	$ 1.46
Number of shares used in earnings per share computation:
Basic	50,998	50,115	50,687	49,713
Diluted	51,869	51,077	51,699	50,883

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parentheticals) - USD ($) $ in Thousands	Sep. 30, 2019	Sep. 30, 2018
Current assets:
Cash and cash equivalents	$ 218,349	$ 150,274
Restricted cash (included in other current assets)	1,407	827
Total cash, cash equivalents and restricted cash	$ 219,756	$ 151,101

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Goodwill and Intangible Assets - Schedule of Amortization Expense Related to Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Goodwill And Intangible Assets Disclosure [Abstract]
Amortization expense	$ 4,519	$ 4,418	$ 13,539	$ 13,863

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Share-Based Compensation - Schedule of Share-Based Compensation Expense by Type (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total share-based compensation expense	$ 5,589	$ 4,896	$ 15,364	$ 15,977
Stock Options
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total share-based compensation expense				275
Share Grants
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total share-based compensation expense	$ 5,589	$ 4,896	$ 15,364	$ 15,702

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Segment Information and Net Sales - Schedule of Net Sales by Direct Sales or Distributor and Location (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 323,674	$ 320,946	$ 947,973	$ 899,543
Percentage of net sales		100.00%	101.00%	100.00%	100.00%
Direct Sales
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 110,313	$ 93,951	$ 305,602	$ 254,630
Percentage of net sales		100.00%	100.00%	100.00%	100.00%
Distributor
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 213,361	$ 226,995	$ 642,371	$ 644,913
Percentage of net sales		100.00%	100.00%	100.00%	100.00%
China
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 163,257	$ 173,228	$ 475,058	$ 487,984
Percentage of net sales		50.00%	54.00%	50.00%	54.00%
China | Direct Sales
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 57,952	$ 60,037	$ 169,861	$ 164,109
Percentage of net sales		53.00%	64.00%	56.00%	64.00%
China | Distributor
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 105,305	$ 113,191	$ 305,197	$ 323,875
Percentage of net sales		49.00%	50.00%	48.00%	50.00%
United States
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 23,111	$ 34,959	$ 87,202	$ 90,947
Percentage of net sales		7.00%	11.00%	9.00%	10.00%
United States | Direct Sales
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 2,388	$ 4,409	$ 8,509	$ 12,866
Percentage of net sales		2.00%	5.00%	3.00%	5.00%
United States | Distributor
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 20,723	$ 30,550	$ 78,693	$ 78,081
Percentage of net sales		10.00%	13.00%	12.00%	12.00%
Korea
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 17,140	$ 17,847	$ 44,897	$ 44,311
Percentage of net sales		5.00%	6.00%	5.00%	5.00%
Korea | Direct Sales
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 6,546	$ 4,597	$ 17,309	$ 12,148
Percentage of net sales		6.00%	5.00%	6.00%	5.00%
Korea | Distributor
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 10,594	$ 13,250	$ 27,588	$ 32,163
Percentage of net sales		5.00%	6.00%	4.00%	5.00%
Germany
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 19,784	$ 23,988	$ 62,891	$ 72,344
Percentage of net sales		6.00%	7.00%	7.00%	8.00%
Germany | Direct Sales
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 3,079	$ 3,076	$ 9,536	$ 9,001
Percentage of net sales		3.00%	3.00%	3.00%	4.00%
Germany | Distributor
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 16,705	$ 20,912	$ 53,355	$ 63,343
Percentage of net sales		8.00%	9.00%	8.00%	10.00%
Singapore
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 16,290	$ 17,616	$ 47,512	$ 53,929
Percentage of net sales		5.00%	5.00%	5.00%	6.00%
Singapore | Direct Sales
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 124	$ 637	$ 490	$ 1,549
Percentage of net sales			1.00%		1.00%
Singapore | Distributor
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 16,166	$ 16,979	$ 47,022	$ 52,380
Percentage of net sales		8.00%	7.00%	7.00%	8.00%
Taiwan
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 22,669	$ 18,296	$ 67,398	$ 55,095
Percentage of net sales		7.00%	6.00%	7.00%	6.00%
Taiwan | Direct Sales
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 819	$ 621	$ 1,977	$ 2,399
Percentage of net sales		1.00%	1.00%	1.00%	1.00%
Taiwan | Distributor
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales		$ 21,850	$ 17,675	$ 65,421	$ 52,696
Percentage of net sales		10.00%	8.00%	10.00%	8.00%
All Others
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales	[1]	$ 61,423	$ 35,012	$ 163,015	$ 94,933
Percentage of net sales	[1]	20.00%	11.00%	17.00%	11.00%
All Others | Direct Sales
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales	[1]	$ 39,405	$ 20,574	$ 97,920	$ 52,558
Percentage of net sales	[1]	35.00%	21.00%	31.00%	20.00%
All Others | Distributor
Segment Reporting Revenue Reconciling Item [Line Items]
Net sales	[1]	$ 22,018	$ 14,438	$ 65,095	$ 42,375
Percentage of net sales	[1]	10.00%	7.00%	11.00%	7.00%

[1] Represents countries with less than 3% of the total net sales each.

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Acquisitions - Summary of Fair Value of Assets and Liabilities Related to Acquisition Recorded in Condensed Consolidated Balance Sheet (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Apr. 01, 2019	Dec. 31, 2018
Business Acquisition [Line Items]
Goodwill	$ 138,020		$ 132,437
Wafer Fabrication Facility ("GFAB")
Business Acquisition [Line Items]
Property, plant and equipment, net		$ 24,400
Inventories		3,600
Prepaid expenses and other		5,200
Goodwill		900
Deferred tax liabilities		$ 1,000

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Related Parties - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Lite On Semiconductor
Related Party Transaction [Line Items]
Related Party ownership of common stock	15.00%		15.00%
Related Party Transaction, Description of Transaction			LSC is our largest stockholder, owning approximately 15% of our outstanding Common Stock as of September 30, 2019, and is a member of the Lite-On Group of companies.
Keylink
Related Party Transaction [Line Items]
Related Party ownership of common stock	5.00%		5.00%
Related Party Transaction, Description of Transaction			Keylink is our 5% joint venture partner in our Shanghai assembly and test facilities.
Related Party Transaction Consulting Fees from Transactions with Related Party	$ 3.7	$ 3.8	$ 11.5	$ 12.6
Chengdu Ya Guang Electronic Company Limited ("Ya Guang")
Related Party Transaction [Line Items]
Related Party Transaction, Description of Transaction			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 is our 5% joint venture partner in our other Chengdu assembly and test facility
Chengdu Ya Guang Electronic Company Limited ("Ya Guang") | Chengdu | Assembly and Test Facility One
Related Party Transaction [Line Items]
Related Party ownership of common stock	2.00%		2.00%
Chengdu Ya Guang Electronic Company Limited ("Ya Guang") | Chengdu | Assembly and Test Facility Two
Related Party Transaction [Line Items]
Related Party ownership of common stock	5.00%		5.00%

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Share-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2019

Share Based Compensation [Abstract]

Schedule of Share-Based Compensation Expense

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Cost of goods sold	$	281	$	96	$	665	$	267
Selling, general and administrative		4,566		3,993		12,513		13,477
Research and development		742		807		2,186		2,233
Total share-based compensation expense	$	5,589	$	4,896	$	15,364	$	15,977

Schedule of Share-Based Compensation Expense by Type

The table below sets forth share-based compensation expense by type:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Stock options	$	-	$	-	$	-	$	275
Share grants		5,589		4,896		15,364		15,702
Total share-based compensation expense	$	5,589	$	4,896	$	15,364	$	15,977

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Earnings (numerator)
Net income attributable to common stockholders	$	38,060	$	30,908	$	106,060	$	74,502
Shares (denominator)
Weighted average common shares outstanding (basic)		50,998		50,115		50,687		49,713
Dilutive effect of stock options and stock awards outstanding		871		962		1,012		1,170
Adjusted weighted average common shares outstanding (diluted)		51,869		51,077		51,699		50,883
Earnings per share attributable to common stockholders
Basic	$	0.75	$	0.62	$	2.09	$	1.50
Diluted	$	0.73	$	0.61	$	2.05	$	1.46
Stock options and stock awards excluded from EPS   calculation because the effect would be anti-dilutive		3		-		107		94

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Related Parties

9 Months Ended

Sep. 30, 2019

Related Party Transactions [Abstract]

Related Parties

NOTE 12 – Related Parties

We conduct business with a related party company, Lite-On Semiconductor Corporation and its subsidiaries and affiliates (collectively, “LSC”), and Nuvoton Technology Corporation and its subsidiaries and affiliates (collectively, “Nuvoton”). LSC is our largest stockholder, owning approximately 15% of our outstanding Common Stock as of September 30, 2019, and is a member of the Lite-On Group of companies. On August 8, 2019, we announced that we entered into an agreement with LSC pursuant to which the Company shall acquire LSC, see Note 13 for additional information. Raymond Soong, the Chairman of our Board of Directors, is the Chairman of LSC, and is the Chairman of Lite-On Technology Corporation (“LTC”), a significant shareholder of LSC. C.H. Chen, our former President and Chief Executive Officer and currently the Vice Chairman of our Board of Directors, is also Vice Chairman of LSC and a board member of LTC. Dr. Keh-Shew Lu, our President and Chief Executive Officer and a member of our Board of Directors, is a board member of LTC, and a board member of Nuvoton. We consider our relationships with LSC and Nuvoton to be mutually beneficial, and we plan to continue our strategic alliance with LSC and Nuvoton.  We purchase wafers from Nuvoton for use in our production process.

We also conduct business with Keylink International (B.V.I.) Inc. and its subsidiaries and affiliates (collectively, “Keylink”). Keylink is our 5% joint venture partner in our Shanghai assembly and test facilities.  We sell products to, and purchase inventory from Keylink. In addition, our subsidiaries in China lease their manufacturing facilities in Shanghai from, and subcontract a portion of our manufacturing process (metal plating and environmental services) to, Keylink. We also pay fees for plating and rental services and consulting to Keylink. The aggregate amounts paid to Keylink for the three months ended September 30, 2019 and 2018 were approximately $3.7 million and $3.8 million, respectively.   The aggregate amounts paid to Keylink for the nine months ended September 30, 2019 and 2018 were approximately $11.5 million and $12.6 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 is our 5% joint venture partner in our other Chengdu assembly and test facility; however, we have no material transactions with Ya Guang. We also purchase materials from Jiyuan Crystal Photoelectric Frequency Technology Ltd (“JCP”), a frequency control product manufacturing company in which we have made an equity investment and account for that investment using the equity method of accounting.      

The Audit 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 to and purchases from related parties:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
LSC
Net sales	$	273	$	304	$	729	$	896
Purchases	$	2,548	$	5,208	$	11,039	$	16,630
Nuvoton
Purchases	$	2,650	$	2,361	$	5,951	$	7,774
Keylink
Net sales	$	4,923	$	4,684	$	11,304	$	8,762
Purchases	$	604	$	907	$	1,794	$	2,646
JCP
Purchases	$	151	$	201	$	462	$	488

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

	September 30,		December 31,
	2019		2018
LSC
Accounts receivable	$	337	$	286
Accounts payable	$	1,749	$	2,696
Nuvoton
Accounts payable	$	1,238	$	1,939
Keylink
Accounts receivable	$	15,004	$	6,264
Accounts payable	$	11,597	$	4,656
JCP
Accounts payable	$	206	$	151