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Diodes Incorporated Reports Second Quarter 2009 Financial Results
Financial and Business Highlights
-
Revenue was
$103.9 million , an increase of$25.8 million , or 33.1 percent, over first quarter revenue of$78.1 million ; -
Gross profit was
$27.4 million , an increase of 88.9 percent over the first quarter of$14.5 million ; - Gross margin was 26.3 percent, a 770 basis point increase over the first quarter gross margin of 18.6 percent;
-
Income before taxes and noncontrolling interest was
$2.8 million compared to a first quarter loss of$10.3 million ; -
GAAP net loss was
$3.0 million , or($0.07) per share, including a$4.9 million non-cash tax expense related to first quarter of 2009 repatriated earnings; -
Non-GAAP adjusted net income was
$2.5 million , or$0.06 per share, which excluded, among other items, the impact of the$4.9 million , or$0.12 per share, non-cash income tax expense related to repatriated earnings; and -
Achieved
$17.8 million cash flow from operations,$12.8 million free cash flow and$16.3 million net cash flow.
Revenue for the second quarter of 2009 was
Gross profit for the second quarter of 2009 was
Commenting on the quarter, Dr.
Second quarter GAAP net loss was
Non-GAAP adjusted net income was
GAAP net loss | $ | (2,953) | ||
GAAP diluted loss per share | $ | (0.07) | ||
Adjustments to reconcile net loss to adjusted net income: |
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Amortization of debt discount | 1,391 | |||
Taxes on repatriation of earnings | 4,915 | |||
Other | (819) | |||
Non-GAAP adjusted net income | $ | 2,534 | ||
Non-GAAP adjusted diluted earnings per share | $ | 0.06 | ||
See below for further details of the reconciliation.
As of
Dr. Lu further stated, “Also notable in the quarter, operating expenses
were held effectively flat compared to the first quarter level, which
contributed to our achievement of profitability in the second quarter on
a non-GAAP adjusted basis. We also further improved our balance sheet,
including continued debt reduction resulting from our
Business Outlook
Dr. Lu further commented, “For the third quarter of 2009, we expect our business will continue to grow and show further improvements to the strong results achieved in the second quarter. We estimate that third quarter revenue will increase 10 to 15 percent sequentially, and gross margin will continue to improve to approximately 28 to 32 percent as we continue to benefit from improvements in factory utilization. We also expect operating expenses to be comparable to the second quarter on a percent of revenue basis. In terms of our tax rate, we expect income tax expense for the next two quarters to be a relatively nominal amount of zero to four percent due to the fact that we have recorded all of the non-cash tax expense related to the first quarter repatriation of earnings.”
Conference Call
Diodes will host a conference call on
About
Safe Harbor Statement Under the Private Securities Litigation Reform
Act of 1995: Any statements set forth above that are not
historical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from
those in the forward-looking statements. Such statements include
statements regarding our expectation that: for the third quarter of
2009, we expect our business will continue to grow and show further
improvements to the strong results achieved in the second quarter; we
estimate that third quarter revenue will increase 10 to 15 percent
sequentially, and gross margin will continue to improve to approximately
28 to 32 percent as we continue to benefit from improvements in factory
utilization; we also expect operating expenses to be comparable to the
second quarter on a percent of revenue basis; and we expect income tax
expense for the next two quarters to be a relatively nominal amount of
zero to four percent due to the fact that we have recorded all of the
non-cash tax expense related to the first quarter repatriation of
earnings. Potential risks and uncertainties include, but are not
limited to, such factors as: the UBS settlement may not provide us with
the liquidity intended; we may not realize or maintain the anticipated
cost savings or increase loadings in our manufacturing facilities; our
future guidance may be incorrect; the global economic weakness may be
more severe or last longer than we currently anticipated; and other
information detailed from time to time in the Company's filings with the
Recent news releases, annual reports, and
CONSOLIDATED CONDENSED INCOME STATEMENT and BALANCE SHEET FOLLOW
DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) |
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Three Months Ended | Six Months Ended | |||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||
2008 | 2009 | 2008 | 2009 | |||||||||||||||||||||
(As Adjusted) | (As Adjusted) | |||||||||||||||||||||||
NET SALES | $ | 116,018 | $ | 103,898 | $ | 211,598 | $ | 181,948 | ||||||||||||||||
COST OF GOODS SOLD | 76,400 | 76,528 | 140,064 | 140,085 | ||||||||||||||||||||
Gross profit | 39,618 | 27,370 | 71,534 | 41,863 | ||||||||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||||||
Selling, general and administrative | 17,052 | 15,240 | 31,594 | 31,296 | ||||||||||||||||||||
Research and development | 4,832 | 5,385 | 8,406 | 10,660 | ||||||||||||||||||||
Amortization of acquisition related intangible assets | 237 | 1,118 | 471 | 2,209 | ||||||||||||||||||||
Restructuring | - | (248 | ) | - | (149 | ) | ||||||||||||||||||
Total operating expenses | 22,121 | 21,495 | 40,471 | 44,016 | ||||||||||||||||||||
Income (loss) from operations | 17,497 | 5,875 | 31,063 | (2,153 | ) | |||||||||||||||||||
OTHER INCOME (EXPENSES) | ||||||||||||||||||||||||
Interest income | 2,554 | 1,345 | 8,002 | 3,102 | ||||||||||||||||||||
Interest expense | (2,207 | ) | (1,877 | ) | (3,828 | ) | (3,925 | ) | ||||||||||||||||
Amortization of debt discount | (2,691 | ) | (2,281 | ) | (5,325 | ) | (4,490 | ) | ||||||||||||||||
Other | (1,202 | ) | (275 | ) | (1,496 | ) | (12 | ) | ||||||||||||||||
Total other expenses | (3,546 | ) | (3,088 | ) | (2,647 | ) | (5,325 | ) | ||||||||||||||||
Income (loss) before income taxes and noncontrolling interest | 13,951 | 2,787 | 28,416 | (7,478 | ) | |||||||||||||||||||
INCOME TAX PROVISION | 1,762 | 5,156 | 2,980 | 5,553 | ||||||||||||||||||||
NET INCOME (LOSS) | 12,189 | (2,369 | ) | 25,436 | (13,031 | ) | ||||||||||||||||||
Less: NET INCOME attributable to noncontrolling interest | (675 | ) | (584 | ) | (1,279 | ) | (688 | ) | ||||||||||||||||
NET INCOME (LOSS) attributable to common stockholders | $ | 11,514 | $ | (2,953 | ) | $ | 24,157 | $ | (13,719 | ) | ||||||||||||||
EARNINGS (LOSS) PER SHARE attributable to common stockholders | ||||||||||||||||||||||||
Basic | $ | 0.28 | $ | (0.07 | ) | $ | 0.60 | $ | (0.33 | ) | ||||||||||||||
Diluted | $ | 0.27 | $ | (0.07 | ) | $ | 0.57 | $ | (0.33 | ) | ||||||||||||||
Number of shares used in computation | ||||||||||||||||||||||||
Basic | 40,616 | 41,587 | 40,431 | 41,368 | ||||||||||||||||||||
Diluted | 42,843 | 41,587 | 42,695 | 41,368 | ||||||||||||||||||||
Note: The three and six months ended June 30, 2008 amounts were adjusted for the retrospective application of FSP APB 14-1. |
DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS) (in thousands, except per share data) (unaudited) |
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For the three months ended June 30, 2009: |
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Operating |
Other |
Income Tax |
Net Income |
||||||||||||||||||
Per-GAAP | $ | (2,953 | ) | ||||||||||||||||||
Loss per share (Per-GAAP) | |||||||||||||||||||||
Diluted | $ | (0.07 | ) | ||||||||||||||||||
Adjustments to reconcile net loss to adjusted net income: |
|||||||||||||||||||||
Amortization of acquisition related intangible assets | 1,118 | - | (315 | ) | 803 | ||||||||||||||||
Restructuring | (248 | ) | - | (145 | ) | (393 | ) | ||||||||||||||
Loss on extinguishment of debt | - | 137 | (53 | ) | 84 | ||||||||||||||||
Forgiveness of debt | - | (1,501 | ) | 188 | (1,313 | ) | |||||||||||||||
Amortization of debt discount | - | 2,281 | (890 | ) | 1,391 | ||||||||||||||||
Taxes on repatriation of earnings | - | - | 4,915 | 4,915 | |||||||||||||||||
Adjusted (Non-GAAP) | 2,534 | ||||||||||||||||||||
Diluted shares used in computing earnings per share |
$ | 42,792 | |||||||||||||||||||
Adjusted earnings per share (Non-GAAP) | |||||||||||||||||||||
Diluted | $ | 0.06 | |||||||||||||||||||
For the three months ended June 30, 2008: |
|||||||||||||||||||||
Operating |
Other |
Income Tax |
Net Income |
||||||||||||||||||
Per-GAAP | $ | 11,514 | |||||||||||||||||||
Earnings per share (Per-GAAP) | |||||||||||||||||||||
Diluted | $ | (0.27 | ) | ||||||||||||||||||
Adjustments to reconcile net income to adjusted net income: |
|||||||||||||||||||||
Amortization of acquisition related intangible assets | 237 | - | (66 | ) | 171 | ||||||||||||||||
Currency hedge on purchase price | - | 1,540 | (570 | ) | 970 | ||||||||||||||||
Amortization of debt discount | - | 2,691 | (1,049 | ) | 1,642 | ||||||||||||||||
Adjusted (Non-GAAP) | 14,297 | ||||||||||||||||||||
Diluted shares used in computing earnings per share |
$ | 42,843 | |||||||||||||||||||
Adjusted earnings per share (Non-GAAP) | |||||||||||||||||||||
Diluted | $ | 0.33 |
DIODES INCORPORATED AND SUBSIDIARIES |
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For the six months ended June 30, 2009: |
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Operating |
Other |
Income Tax |
Net Loss | ||||||||||||||||||
Per-GAAP | $ | (13,719 | ) | ||||||||||||||||||
Adjusted loss per share (Per-GAAP) | |||||||||||||||||||||
Diluted | $ | (0.33 | ) | ||||||||||||||||||
Adjustments to reconcile net loss to adjusted net loss: |
|||||||||||||||||||||
Amortization of acquisition related intangible assets | 2,209 | - | (619 | ) | 1,590 | ||||||||||||||||
Restructuring | (149 | ) | - | (196 | ) | (345 | ) | ||||||||||||||
Gain on extinguishment of debt | - | (1,353 | ) | 528 | (825 | ) | |||||||||||||||
Forgiveness of debt | - | (1,501 | ) | 188 | (1,313 | ) | |||||||||||||||
Amortization of debt discount | - | 4,490 | (1,751 | ) | 2,739 | ||||||||||||||||
Taxes on repatriation of earnings | - | - | 10,631 | 10,631 | |||||||||||||||||
Adjusted (Non-GAAP) | (1,242 | ) | |||||||||||||||||||
Diluted shares used in computing loss per share |
$ | 41,368 | |||||||||||||||||||
Adjusted loss per share (Non-GAAP) | |||||||||||||||||||||
Diluted | $ | (0.03 | ) | ||||||||||||||||||
For the six months ended June 30, 2008: |
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Operating |
Other |
Income Tax |
Net Income | ||||||||||||||||||
Per-GAAP | $ | 24,157 | |||||||||||||||||||
Adjusted loss per share (Per-GAAP) | |||||||||||||||||||||
Diluted | $ | 0.57 | |||||||||||||||||||
Adjustments to reconcile net income to adjusted net income: |
|||||||||||||||||||||
Amortization of acquisition related intangible assets | 471 | - | (132 | ) | 339 | ||||||||||||||||
Currency hedge on purchase price | - | 1,540 | (570 | ) | 970 | ||||||||||||||||
Amortization of debt discount | - | 5,325 | (2,077 | ) | 3,248 | ||||||||||||||||
Adjusted (Non-GAAP) | 28,715 | ||||||||||||||||||||
Diluted shares used in computing earnings per share |
$ | 42,695 | |||||||||||||||||||
Adjusted earnings per share (Non-GAAP) | |||||||||||||||||||||
Diluted | $ | 0.67 | |||||||||||||||||||
ADJUSTED NET INCOME (LOSS)
This measure consists of generally accepted accounting principles (“GAAP”) net income (loss), which is then adjusted solely for the purpose of adjusting for amortization of acquisition related intangible assets, restructuring, gain (loss) on extinguishment of debt, forgiveness of debt, amortization of debt discount, taxes on repatriation of earnings and currency hedge on purchase price, as discussed below. Excluding restructuring, gain (loss) on extinguishment of debt, forgiveness of debt, taxes on repatriation of earnings and currency hedge on purchase price provides investors with a better depiction of the Company’s operating results and provides a more informed baseline for modeling future earnings expectations. Excluding the amortization of acquisition related intangible assets and amortization of debt discount allows for comparison of the Company’s current and historic operating performance. The Company excludes the above listed items to evaluate the Company’s operating performance, to develop budgets, to determine incentive compensation awards and to manage cash expenditures. Presentation of the above non-GAAP measures allows investors to review the Company’s results of operations from the same view point as the Company’s management and Board of Directors. The Company has historically provided similar non-GAAP financial measures to provide investors an enhanced understanding of its operations, facilitate investors’ analyses and comparisons of its current and past results of operations and provide insight into the prospects of its future performance. The Company also believes the non-GAAP measures are useful to investors because they provide additional information that research analysts use to evaluate semiconductor companies. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results and may differ from measures used by other companies. The Company recommends a review of net income on both a GAAP basis and non-GAAP basis be performed to get a comprehensive view of the Company’s results. The Company provides a reconciliation of GAAP net loss to non-GAAP adjusted net income.
Detail of non-GAAP adjustments:
Amortization of acquisition related intangible assets – The Company has excluded the amortization of its acquisition related intangible assets including developed technologies and customer relationships. The fair value of the acquisition related intangible assets, which was allocated to the assets through purchase accounting, is amortized using straight-line methods which approximate the proportion of future cash flows estimated to be generated each period over the estimated useful lives of the applicable assets. The Company believes the exclusion of the amortization expense of acquisition related assets is appropriate as a significant portion of the purchase price for its acquisitions was allocated to the intangible assets that have short lives and exclusion of the amortization expense allows comparisons of operating results that are consistent over time for both the Company’s newly acquired and long-held businesses. In addition, the Company excluded the amortization expense as there is significant variability and unpredictability across companies with respect to this expense.
Restructuring costs – The Company has recorded various restructuring charges to reduce its cost structure in order to enhance operating effectiveness and improve profitability. These restructuring activities impacted various functional areas of the Company’s operations in several locations and were undertaken to meet specific business objectives in light of the facts and circumstances at the time of each restructuring event. These restructuring charges are excluded from management’s assessment of the Company’s operating performance. The Company believes the exclusion of the restructuring charges provides investors an enhanced view of the cost structure of the Company’s operations and facilitates comparisons with the results of other periods that may not reflect such charges or may reflect different levels of such charges.
Gain (loss) on extinguishment of debt – The Company excluded the gains and losses from extinguishment of debt from the repurchase of its 2.25% Convertible Senior Notes (“Notes”), which was accounted for under FSP APB 14-1. These gains and losses were excluded from management’s assessment of the Company’s core operating performance. The Company believes the exclusion of the gains and losses on extinguishment of debt provides investors an enhanced view of gains and losses the Company may incur from time to time and facilitates comparisons with results of other periods that may not reflect such gains or losses.
Forgiveness of debt –
The Company excluded the forgiveness of debt related to one of its
Amortization of debt discount
– The Company has excluded the amortization of debt discount on its
Notes, which is recorded in accordance with FSP APB 14-1. This
amortization was excluded from management’s assessment of the Company’s
core operating performance. Although the amortization of debt discount
is recurring in nature, the expected life of the Notes is five years as
that is the earliest date in which the Notes can be put back to the
Company at par value. As such, the amortization period ends
Taxes on repatriation of earnings
– The Company has excluded the non-cash income tax expense related to
the repatriation of earnings. During the first quarter of 2009, the
Company repatriated approximately
Currency hedge on purchase price – The Company incurred a one-time, non-cash currency hedge loss related to the Zetex acquisition in the second quarter of 2008. This currency hedge loss is excluded from management's assessment of our operating performance for 2008. The Company believes the exclusion of the non-recurring currency hedge loss provides investors an enhanced view of the one-time adjustment the Company may incur from time to time and facilitates comparisons with the results of other periods that may not reflect such charges.
ADJUSTED EARNINGS (LOSS) PER SHARE
This non-GAAP financial measure is the portion of the Company’s GAAP net
income (loss) assigned to each share of stock, excluding amortization of
acquisition related intangible assets, restructuring, gain (loss) on
extinguishment of debt, forgiveness of debt, amortization of debt
discount, taxes on repatriation of earnings and currency hedge on
purchase price, as described above. Excluding restructuring, gain (loss)
on extinguishment of debt, forgiveness of debt, taxes on repatriation of
earnings and currency hedge on purchase price provides investors with a
better depiction of the Company’s operating results and provides a more
informed baseline for modeling future earnings expectations, as
described in further detail above. Excluding the amortization of
acquisition related intangible assets and amortization of debt discount
allows for comparison of the Company’s current and historic operating
performance, as described in further detail above. This non-GAAP measure
should be considered in addition to results prepared in accordance with
GAAP, but should not be considered a substitute for or superior to GAAP
results and may differ from measures used by other companies. The
Company recommends a review of diluted earnings per share on both a GAAP
basis and non-GAAP basis be performed to obtain a comprehensive view of
the Company’s results. Information on how these share calculations are
made is included in the reconciliation table provided.
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA
EBITDA represents earnings before net interest expense, income tax provision, depreciation and amortization. Management believes EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties, such as financial institutions in extending credit, in evaluating companies in our industry and provides further clarity on our profitability. In addition, management uses EBITDA, along with other GAAP measures, in evaluating our operating performance compared to that of other companies in our industry because the calculation of EBITDA generally eliminates the effects of financing, operating in different income tax jurisdictions, and accounting effects of capital spending, including the impact of our asset base, which can differ depending on the book value of assets and the accounting methods used to compute depreciation and amortization expense. EBITDA is not a recognized measurement under GAAP, and when analyzing our operating performance, investors should use EBITDA in addition to, and not as an alternative for, income from operations and net income, each as determined in accordance with GAAP. Because not all companies use identical calculations, our presentation of EBITDA may not be comparable to similarly titled measures used by other companies. Furthermore, EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as tax and debt service payments.
The following table provides a reconciliation of net income (loss) to EBITDA (in thousands, unaudited): | |||||||||||
Three Months Ended | |||||||||||
June 30, | |||||||||||
2008 | 2009 | ||||||||||
Net income (loss) (per-GAAP) | $ | 11,514 | $ | (2,953 | ) | ||||||
Plus: | |||||||||||
Interest expense (income), net (1) | 2,344 | 2,813 | |||||||||
Income tax provision | 1,762 | 5,156 | |||||||||
Depreciation and amortization | 9,275 | 11,632 | |||||||||
EBITDA (Non-GAAP) | $ | 24,895 | $ | 16,648 | |||||||
Six Months Ended | |||||||||||
June 30, | |||||||||||
2008 | 2009 | ||||||||||
Net income (loss) (per-GAAP) | $ | 24,157 | $ | (13,719 | ) | ||||||
Plus: | |||||||||||
Interest expense (income), net (2) | 1,150 | 5,313 | |||||||||
Income tax provision | 2,980 | 5,553 | |||||||||
Depreciation and amortization | 16,931 | 22,987 | |||||||||
EBITDA (Non-GAAP) | $ | 45,218 | $ | 20,134 | |||||||
(1) Includes
(2) Includes
DIODES INCORPORATED AND SUBSIDIARIES |
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December 31, | June 30, | |||||||||
2008 | 2009 | |||||||||
(As Adjusted) | ||||||||||
CURRENT ASSETS | ||||||||||
Cash and cash equivalents | $ | 103,496 | $ | 109,486 | ||||||
Short-term investment securities | - | 319,825 | ||||||||
Accounts receivable, net | 74,574 | 85,702 | ||||||||
Inventories | 99,118 | 79,784 | ||||||||
Deferred income taxes, current | 6,761 | 6,958 | ||||||||
Prepaid expenses and other | 15,578 | 11,637 | ||||||||
Total current assets | 299,527 | 613,392 | ||||||||
LONG-TERM INVESTMENT SECURITIES | 320,625 | - | ||||||||
PROPERTY, PLANT AND EQUIPMENT, net | 174,667 | 169,019 | ||||||||
OTHER ASSETS | ||||||||||
Goodwill | 56,791 | 68,356 | ||||||||
Intangible assets, net | 35,928 | 37,833 | ||||||||
Other | 5,907 | 4,949 | ||||||||
Total assets | $ | 893,445 | $ | 893,549 | ||||||
Note: The December 31, 2008 amounts were adjusted for the retrospective application of FSP APB 14-1 and SFAS 160. |
DIODES INCORPORATED AND SUBSIDIARIES |
||||||||||||
December 31, | June 30, | |||||||||||
2008 | 2009 | |||||||||||
(As Adjusted) | ||||||||||||
CURRENT LIABILITIES | ||||||||||||
Lines of credit | $ | 6,098 | $ | 215,249 | ||||||||
Accounts payable | 47,561 | 44,029 | ||||||||||
Accrued liabilities | 31,195 | 26,294 | ||||||||||
Income tax payable | 358 | 4,374 | ||||||||||
Current portion of long-term debt | 1,339 | 363 | ||||||||||
Current portion of capital lease obligations | 377 | 349 | ||||||||||
Total current liabilities | 86,928 | 290,658 | ||||||||||
LONG-TERM DEBT, net of current portion | ||||||||||||
Convertible senior notes | 155,451 | 138,687 | ||||||||||
Long-term borrowings | 217,146 | 3,563 | ||||||||||
CAPITAL LEASE OBLIGATIONS, net of current portion | 1,854 | 1,808 | ||||||||||
DEFERRED INCOME TAXES, non-current | 10,753 | 18,520 | ||||||||||
OTHER LONG-TERM LIABILITIES | 22,935 | 48,238 | ||||||||||
Total liabilities | 495,067 | 501,474 | ||||||||||
COMMITMENTS AND CONTINGENCIES | - | - | ||||||||||
EQUITY | ||||||||||||
Diodes Incorporated 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; 41,378,816 and 42,436,009 issued and outstanding at December 31, 2008 and June 30, 2009, respectively |
27,586 | 28,291 | ||||||||||
Additional paid-in capital | 167,964 | 185,134 | ||||||||||
Retained earnings | 241,814 | 228,094 | ||||||||||
Accumulated other comprehensive loss | (48,439 | ) | (58,085 | ) | ||||||||
Total Diodes Incorporated stockholders' equity | 388,925 | 383,434 | ||||||||||
Noncontrolling interest | 9,453 | 8,641 | ||||||||||
Total equity | 398,378 | 392,075 | ||||||||||
Total liabilities and equity | $ | 893,445 | $ | 893,549 | ||||||||
Note: The December 31, 2008 amounts were adjusted for the retrospective application of FSP APB 14-1 and SFAS 160. |
Source:
Company Contact:
Diodes Incorporated
Carl Wertz, 805-446-4800
VP
Finance and Investor Relations
carl_wertz@diodes.com
or
Investor
Contact:
Shelton Group
Leanne K. Sievers, 949-224-3874
EVP,
Investor Relations
lsievers@sheltongroup.com