UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

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

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)
15660 Dallas Parkway, Suite 850
Dallas, Texas		75248
(Address of principal executive offices)		(Zip code)

(972) 385-2810
(Registrant’s telephone number, including area code)

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ No o

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

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

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

The number of shares of the registrant’s Common Stock outstanding as of August 3, 2010 was 44,340,133.

 

 

Table of Contents

		Page
Part I — Financial Information			3
Item 1 — Financial Statements			3
Consolidated Condensed Balance Sheets as of June 30, 2010 and December 31, 2009			3
Consolidated Condensed Statements of Operations for the Three and Six Months Ended June 30, 2010 and 2009			5
Consolidated Condensed Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009			6
Notes to Consolidated Condensed Financial Statements			7
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3 — Quantitative and Qualitative Disclosures About Market Risk			32
Item 4 — Controls and Procedures			33
Part II — Other Information			34
Item 1 — Legal Proceedings			34
Item 1A — Risk Factors			34
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 3 — Defaults Upon Senior Securities			35
Item 4 — (Removed and Reserved)			35
Item 5 — Other Information			35
Item 6 — Exhibits			36
Signature			38
EX-10.1
EX-10.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

PART I — FINANCIAL INFORMATION

Item 1 — Financial Statements

DIODES INCORPORATED AND SUBSIDIARIES

ASSETS

		June 30,				December 31,
		2010				2009
		(Unaudited)
CURRENT ASSETS
Cash and cash equivalents		$	245,640			$	241,953
Short-term investments			—				296,600
Accounts receivable, net			117,302				99,074
Inventories			101,768				89,652
Deferred income taxes, current			9,325				7,834
Prepaid expenses and other			13,124				11,591
Total current assets			487,159				746,704
PROPERTY, PLANT AND EQUIPMENT, net			184,243				162,988
OTHER ASSETS
Goodwill			65,185				68,075
Intangible assets, net			30,729				34,892
Other			5,375				5,324
Total assets		$	772,691			$	1,017,983

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

DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (cont’)

LIABILITIES AND EQUITY
(In thousands, except share data)

		June 30,				December 31,
		2010				2009
		(Unaudited)
CURRENT LIABILITIES
Lines of credit and short-term debt		$	1,555			$	299,414
Accounts payable			67,720				62,448
Accrued liabilities			41,053				27,236
Income tax payable			3,059				2,641
Current portion of long-term debt			373				373
Current portion of capital lease obligations			281				283
Total current liabilities			114,041				392,395
LONG-TERM DEBT, net of current portion
Convertible senior notes			124,312				121,333
Long-term debt			3,266				3,464
CAPITAL LEASE OBLIGATIONS, net of current portion			1,477				1,669
DEFERRED INCOME TAXES, non-current			8,596				7,743
OTHER LONG-TERM LIABILITIES			44,610				40,455
Total liabilities			296,302				567,059
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; 44,263,625 and 43,729,304 issued and outstanding at June 30, 2010 and December 31, 2009, respectively			29,509				29,153
Additional paid-in capital			220,353				211,618
Retained earnings			279,779				248,174
Accumulated other comprehensive loss			(65,094	)			(48,311	)
Total Diodes Incorporated stockholders’ equity			464,547				440,634
Noncontrolling interest			11,842				10,290
Total equity			476,389				450,924
Total liabilities and equity		$	772,691			$	1,017,983

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

DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

(In thousands, except per share data)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
NET SALES		$	149,153			$	103,898			$	286,000			$	181,948
COST OF GOODS SOLD			95,686				76,528				184,750				140,085
Gross profit			53,467				27,370				101,250				41,863
OPERATING EXPENSES
Selling, general and administrative			21,422				15,240				42,841				31,296
Research and development			6,815				5,385				13,191				10,660
Amortization of acquisition related intangible assets			1,078				1,118				2,206				2,209
Impairment of long-lived assets			144				—				144				—
Restructuring			—				(248	)			—				(149	)
Total operating expenses			29,459				21,495				58,382				44,016
Income (loss) from operations			24,008				5,875				42,868				(2,153	)
OTHER INCOME (EXPENSES)
Interest income			996				1,345				2,308				3,102
Interest expense			(1,396	)			(1,877	)			(3,378	)			(3,925	)
Amortization of debt discount			(1,873	)			(2,281	)			(3,707	)			(4,490	)
Other			(1,150	)			(275	)			1,498				(12	)
Total other expenses			(3,423	)			(3,088	)			(3,279	)			(5,325	)
Income (loss) before income taxes and noncontrolling interest			20,585				2,787				39,589				(7,478	)
INCOME TAX PROVISION			3,035				5,156				6,359				5,553
NET INCOME (LOSS)			17,550				(2,369	)			33,230				(13,031	)
Less: NET INCOME attributable to noncontrolling interest			(903	)			(584	)			(1,625	)			(688	)
NET INCOME (LOSS) attributable to common stockholders		$	16,647			$	(2,953	)		$	31,605			$	(13,719	)
EARNINGS (LOSS) PER SHARE attributable to common stockholders
Basic		$	0.38			$	(0.07	)		$	0.72			$	(0.33	)
Diluted		$	0.37			$	(0.07	)		$	0.70			$	(0.33	)
Number of shares used in computation
Basic			43,975				41,587				43,871				41,368
Diluted			45,510				41,587				45,358				41,368

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

DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

(In thousands)

		Six Months Ended
		June 30,
		2010				2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$	33,230			$	(13,031	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation			22,462				20,785
Amortization of intangibles			2,208				2,286
Amortization of convertible bond issuance costs			274				343
Amortization of debt discount			3,707				4,490
Share-based compensation			6,514				4,684
Gain on disposal of property, plant and equipment			(1,547	)			(30	)
Loss (gain) on extinguishment of debt			4				(1,354	)
Investment (gain) loss recognized under equity method			(168	)			53
Deferred income taxes			209				1,445
Changes in operating assets:
Accounts receivable			(15,117	)			(10,037	)
Inventories			(13,855	)			22,624
Prepaid expenses and other current assets			(1,793	)			3,150
Changes in operating liabilities:
Accounts payable			5,621				(4,117	)
Accrued liabilities			4,253				(7,274	)
Other liabilities			513				(3,091	)
Income tax payable			413				3,639
Net cash provided by operating activities		$	46,928			$	24,565
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash acquired		$	—			$	(30	)
Proceeds from sale of short-term investments			296,600				800
Purchases of property, plant and equipment			(41,053	)			(9,375	)
Proceeds from sale of property, plant and equipment			2,141				93
Other assets			(152	)			721
Net cash provided by (used in) investing activities		$	257,536			$	(7,791	)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances on line of credit and short-term debt		$	3,762			$	8,945
Repayments on lines of credit			(301,625	)			(12,600	)
Net proceeds from issuance of common stock			2,634				99
Dividend distribution to noncontrolling interest			—				(1,500	)
Repayments of long-term debt			(969	)			(8,225	)
Repayments of capital lease obligations			(139	)			(193	)
Net cash used in financing activities		$	(296,337	)		$	(13,474	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS			(4,440	)			2,690
INCREASE IN CASH AND CASH EQUIVALENTS			3,687				5,990
CASH AND CASH EQUIVALENTS, beginning of period			241,953				103,496
CASH AND CASH EQUIVALENTS, end of period		$	245,640			$	109,486
SUPPLEMENTAL CASH FLOW INFORMATION:
Non-cash financing activities:
Property, plant and equipment purchased on accounts payable		$	6,292			$	316
Fair value of common stock issued for repayment of long-term debt		$	—			$	(13,236	)

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

DIODES INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

NOTE A – Nature of Operations, Basis of Presentation and Recently Issued Accounting Pronouncements

Nature of Operations

     Diodes Incorporated and its subsidiaries (collectively, the “Company”) is a leading global manufacturer and supplier of high-quality, application specific standard products within the broad discrete, logic and analog semiconductor markets, serving the consumer electronics, computing, communications, industrial and automotive markets. These products include diodes, rectifiers, transistors, MOSFETs, protection devices, functional specific arrays, single gate logic, amplifiers and comparators, Hall-effect and temperature sensors, power management devices including LED drivers, DC-DC switching and linear voltage regulators and voltage references along with special function devices including USB power switches, load switches, voltage supervisors and motor controllers. These products are sold primarily throughout Asia, North America and Europe.

Basis of Presentation

     The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.”) (“GAAP”) for interim financial information and with the instructions to Quarterly Reports on Form 10-Q. They do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with U.S. GAAP for complete financial statements. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. 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 results of operations for the period presented have been included in the interim period. Operating results for the three and six months ended June 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. The consolidated condensed financial data at December 31, 2009 is derived from audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

     The preparation of financial statements in conformity with U.S. 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 U.S. GAAP, interim accounting for certain expenses, including income taxes, are based on full year forecasts. Such amounts are expensed in full in the year incurred. For interim financial reporting purposes, income taxes are recorded based upon estimated annual effective income tax rates.

     Certain prior year’s balances have been reclassified to conform to the current financial statement presentation.

Recently Issued Accounting Pronouncements

     In April 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-13, Compensation – Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in which the Underlying Equity Security Trades. ASU No. 2010-13 clarifies that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity shares trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The provisions of ASU No. 2010-13 are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. Early adoption is permitted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

     In April 2010, the FASB issued ASU No. 2010-17, Revenue Recognition — Milestone Method (Topic 605): Milestone Method of Revenue Recognition (A consensus of the FASB Emerging Issues Task Force). ASU No. 2010-17 provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. The amendments provide guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. An entity can recognize consideration that is contingent upon achievement of a milestone in its entirety as revenue in the period in which the milestone was achieved only if the milestone meets all criteria to be considered substantive. The provisions of ASU No. 2010-17 are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

NOTE B – Functional Currencies, Foreign Currency Translation and Comprehensive Income (Loss)

     Functional Currencies and Foreign Currency Translation – The functional currency for most of the Company’s international operations is the U.S. dollar, while some subsidiaries use their local currency as their functional currency. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are recorded as other income (expense) in the consolidated condensed statements of operations. The Company had foreign exchange transaction losses of approximately $1.3 million and $2.0 million for the three months ended June 30, 2010 and 2009, respectively, and approximately $0.5 million and $3.4 million for the six months ended June 30, 2010 and 2009, respectively.

     Comprehensive Income (Loss) – U.S. GAAP generally requires that recognized revenues, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities are reported as separate components of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income or loss. As of June 30, 2010, the components of other comprehensive income or loss include foreign currency translation adjustments and unrealized gain or loss on defined benefit plan.

     Total comprehensive income (loss) for the three and six months ended June 30, 2010 and 2009 is as follows (in thousands):.

Total Comprehensive Income (Loss)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Net income (loss)		$	17,550			$	(2,369	)		$	33,230			$	(13,031	)
Foreign currency translation adjustment			(2,833	)			15,831				(10,913	)			13,410
Unrealized loss on defined benefit plan, net of tax			(3,177	)			(19,046	)			(5,870	)			(26,287	)
Foreign currency adjustments on forward contracts, net of tax			—				1,667				—				3,231
Comprehensive income (loss)			11,540				(3,917	)			16,447				(22,677	)
Comprehensive income attributable to noncontrolling interest			903				584				1,625				688
Total comprehensive income (loss) attributable to common stockholders		$	10,637			$	(4,501	)		$	14,822			$	(23,365	)

NOTE C – Earnings (Loss) Per Share

     Basic earnings (loss) per share is calculated by dividing net earnings by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is calculated similarly but includes potential dilution from the exercise of stock options and stock awards, except when the effect would be anti-dilutive.

     The computation of basic and diluted earnings (loss) per common share is as follows (in thousands, except per share data):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
BASIC
Weighted average number of common shares outstanding used in computing basic earnings (loss) per share			43,975				41,587				43,871				41,368
Net income (loss) attributable to common stockholders		$	16,647			$	(2,953	)		$	31,605			$	(13,719	)
Earnings (loss) per share attributable to common stockholders		$	0.38			$	(0.07	)		$	0.72			$	(0.33	)
DILUTED
Weighted average number of common shares outstanding used in computing basic earnings (loss) per share			43,975				41,587				43,871				41,368
Add: Assumed exercise of stock options and stock awards			1,535				—				1,487				—
			45,510				41,587				45,358				41,368
Net income (loss) attributable to common stockholders		$	16,647			$	(2,953	)		$	31,605			$	(13,719	)
Earnings (loss) per share attributable to common stockholders		$	0.37			$	(0.07	)		$	0.70			$	(0.33	)

     There are no shares included in the earnings per share calculation related to the Company’s 2.25% convertible senior notes (“Notes”) outstanding as our average stock price did not exceed the conversion price and, therefore, there is no conversion spread.

NOTE D – Short-Term Investments

     On June 30, 2010, the Company put back its auction rate securities (“ARS”) portfolio to UBS AG at par value pursuant to the previously disclosed settlement agreement with UBS AG. Upon exercise of the put option, the Company liquidated its ARS, for cash and used the proceeds to fully repay the related “no net cost” loan with UBS Bank.

NOTE E – Inventories

     Inventories stated at the lower of cost or market value are as follows (in thousands):

		June 30,				December 31,
		2010				2009
Raw materials		$	41,593			$	33,280
Work-in-progress			25,688				24,029
Finished goods			34,487				32,343
Total		$	101,768			$	89,652

NOTE F – Goodwill and Intangible Assets

     Changes in goodwill are as follows (in thousands):

Balance at December 31, 2009		$	68,075
Foreign currency exchange and other			(2,890	)
Balance at June 30, 2010		$	65,185

     Intangible assets are as follows (in thousands):

Balance at June 30, 2010:
Intangible assets subject to amortization:
Gross carrying amount		$	48,649
Accumulated amortization			(12,458	)
Foreign currency exchange and other			(7,856	)
Net value			28,335
Intangible assets with indefinite lives:
Gross carrying amount			3,162
Foreign currency exchange and other			(768	)
Total			2,394
Total intangible assets, net		$	30,729

     Amortization expense related to intangible assets subject to amortization was $1.1 million for the three months ended June 30, 2010 and 2009, and $2.2 million for the six months ended June 30, 2010 and 2009.

NOTE G – Income Tax Provision

     Income tax expense of $3.0 million and $6.4 million was recorded for the three and six months ended June 30, 2010, respectively. This resulted in an effective tax rate of 16.0% for the six months ended June 30, 2010, as compared to (74.3)% for the same period of last year and compared to 11.7% for the full year of 2009. The Company’s effective tax rate for the six months ended June 30, 2010 was lower than the U.S. statutory tax rate of 35%, as it was impacted by higher income in lower-taxed jurisdictions and the noncash tax benefit from reversing valuation allowances on deferred tax assets from U.K. loss carryforwards. In addition, the Company’s effective tax rate for the six months ended June 30, 2009 was impacted by the non-cash income tax expense associated with repatriating earnings of foreign subsidiaries to the U.S. parent.

     For the six months ended June 30, 2010, the Company reported domestic and foreign pre-tax income (loss) of approximately $(11.9) million and $51.5 million, respectively. For the six month ended June 30, 2009, the Company reported domestic and foreign pre-tax income (loss) of approximately $(21.6) million and $14.1 million, respectively.

     The impact of tax holidays decreased the Company’s tax expense by approximately $2.6 million and $3.4 million for the six months ended June 30, 2009 and 2010, respectively. The benefit of the tax holidays on basic and diluted earnings per share for the six months ended June 30, 2010 was $0.08 and $0.07, respectively. The benefit of the tax holidays on both basic and diluted earnings per share for the six months ended June 30, 2009 was $0.06.

     Funds repatriated from foreign subsidiaries to the U.S. may be subject to federal and state income taxes. In the first quarter of 2009, the Company repatriated approximately $28.5 million of accumulated earnings from one of its Chinese subsidiaries, resulting in additional non-cash federal and state income tax expense of approximately $5.3 million. The Company intends to permanently reinvest overseas all of its earnings from its foreign subsidiaries.

     In addition, the Company determined that it was more likely than not that a portion of its federal foreign tax credit carryforwards and net operating loss carryforwards would expire before they could be utilized. Accordingly, the Company has recorded valuation allowances of $11.9 million and $11.3 million as of June 30, 2010 and December 31, 2009, respectively.

     The Company files income tax returns in the U.S. jurisdiction and various state and foreign jurisdictions. The Company is no longer subject to U.S. income tax examinations by tax authorities for tax years before 2007. 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 reserves for any adjustments that may result from future tax audits. The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits in income tax expense. As of June 30, 2010, the gross amount of unrecognized tax benefits was approximately $8.5 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. These changes may be the result of settlement of ongoing audits or competent authority proceedings. At this time, an estimate of the range of the reasonably possible outcomes cannot be determined.

NOTE H – Share-Based Compensation

     The following table shows the total compensation expensed for share-based compensation plans, including stock options and share grants, recognized in the statements of operations (in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Cost of sales		$	82			$	101			$	175			$	182
Selling and administrative expense			2,822				1,894				5,686				3,982
Research and development expense			329				260				653				522
Total share-based compensation expense		$	3,233			$	2,255			$	6,514			$	4,686

     Stock Options. Stock options generally vest in equal annual installments over a four-year period and expire ten years after the grant date, and expense was estimated on the date of grant using the Black-Scholes option pricing model.

     The total net cash proceeds received from stock option exercises during the six months ended June 30, 2010 was $2.6 million. Stock option expense for the three months ended June 30, 2010 and 2009 was $1.0 million and $0.8 million, respectively. Stock option expense for the six months ended June 30, 2010 and 2009 was $2.0 million and $1.5 million, respectively

     A summary of the stock option plans is as follows:

										Weighted Average
										Remaining
						Weighted Average				Contractual Term				Aggregate Intrinsic
Stock Options		Shares (000)				Exercise Price				(yrs)				Value ($000)
Outstanding at January 1, 2010			3,980			$	12.50				5.2			$	34,989
Granted			364				19.29
Exercised			(364	)			7.52								4,339
Forfeited or expired			—				—
Outstanding at June 30, 2010			3,980			$	13.58				5.5			$	17,276
Exercisable at June 30, 2010			3,083			$	11.95				4.5			$	17,011

     The aggregate intrinsic value in the table above is before applicable income taxes and represents the amount optionees would have received if all options had been exercised on the last business day of the period indicated, based on the Company’s closing stock price.

     As of June 30, 2010, total unrecognized stock-based compensation expense related to unvested stock options, net of forfeitures, was approximately $10.3 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 3.0 years.

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

     The total fair value of restricted stock awards vested during the six months ended June 30, 2010 was approximately $3.8 million. Share grant expense for the three months ended June 30, 2010 and 2009 was $2.2 million and $1.4 million, respectively. Share grant expense for the six months ended June 30, 2010 and 2009 was $4.5 million and $3.1 million, respectively.

     A summary of the status of the Company’s non-vested share grants is as follows:

						Weighted-Average
						Grant-Date Fair				Aggregate Intrinsic
Share Grants		Shares (000)				Value				Value ($000)
Nonvested at January 1, 2010			714			$	20.64			$	14,579
Granted			137				19.59
Vested			(170	)			22.49				5,743
Forfeited			(26	)			20.93
Nonvested at June 30, 2010			655			$	19.94			$	10,409

     As of June 30, 2010, total unrecognized share-based compensation expense related to non-vested stock awards, net of forfeitures, was approximately $22.5 million, before income taxes and is expected to be recognized over a weighted average period of approximately 3.7 years.

NOTE I – Segment Information and Enterprise-Wide Disclosure

     For financial reporting purposes, the Company operates in a single segment, standard semiconductor products, through the Company’s various manufacturing and distribution facilities. The Company aggregates its products because the products are similar and have similar economic characteristics, and the products are similar in production process and share the same customer type.

     The Company’s primary operations include the domestic operations in Asia, North America and Europe.

     Revenues are attributed to geographic areas based on the location of subsidiaries producing the revenues (in thousands):

Three Months Ended
June 30, 2010		Asia				North America				Europe				Consolidated
Total sales		$	122,170			$	37,010			$	42,771			$	201,951
Inter-company sales			(12,558	)			(14,099	)			(26,141	)			(52,798	)
Net sales		$	109,612			$	22,911			$	16,630			$	149,153

Three Months Ended
June 30, 2009		Asia				North America				Europe				Consolidated
Total sales		$	86,483			$	19,678			$	25,034			$	131,195
Inter-company sales			(6,252	)			(4,969	)			(16,076	)			(27,297	)
Net sales		$	80,231			$	14,709			$	8,958			$	103,898

Six Months Ended
June 30, 2010		Asia				North America				Europe				Consolidated
Total sales		$	231,231			$	69,611			$	82,643			$	383,485
Inter-company sales			(22,093	)			(25,196	)			(50,196	)			(97,485	)
Net sales		$	209,138			$	44,415			$	32,447			$	286,000
Property, plant and equipment		$	123,614			$	29,783			$	30,846			$	184,243
Total assets		$	427,116			$	161,560			$	184,015			$	772,691

Six Months Ended
June 30, 2009		Asia				North America				Europe				Consolidated
Total sales		$	147,922			$	36,674			$	44,450			$	229,046
Inter-company sales			(9,693	)			(10,117	)			(27,288	)			(47,098	)
Net sales		$	138,229			$	26,557			$	17,162			$	181,948
Property, plant and equipment		$	97,652			$	30,888			$	40,479			$	169,019
Total assets		$	318,916			$	405,233			$	169,400			$	893,549

Geographic Information

     Revenues were derived from (billed to) customers located in the following countries. “All Others” represents countries with less than 10% of the total revenues each (in thousands):

		Net Sales
		for the Three Months								Percentage of
		Ended June 30,								Net Sales
		2010				2009				2010				2009
China		$	46,898			$	30,486				31.4	%			29.3	%
Taiwan			34,803				31,286				23.3	%			30.1	%
United States			32,584				17,370				21.8	%			16.7	%
Germany			10,121				3,623				6.8	%			3.5	%
Korea			8,558				6,792				5.7	%			6.5	%
Singapore			6,018				2,878				4.0	%			2.8	%
United Kingdom			1,817				3,320				1.2	%			3.2	%
All Others			8,354				8,143				5.6	%			7.8	%
Total		$	149,153			$	103,898				100.0	%			100.0	%

		Net Sales
		for the Six Months								Percentage of
		Ended June 30,								Net Sales
		2010				2009				2010				2009
China		$	88,957			$	52,843				31.1	%			29.0	%
Taiwan			67,806				52,729				23.7	%			29.0	%
United States			61,789				31,328				21.6	%			17.2	%
Germany			17,152				8,086				6.0	%			4.4	%
Korea			16,888				11,786				5.9	%			6.5	%
Singapore			11,369				4,948				4.0	%			2.7	%
United Kingdom			6,675				7,100				2.3	%			3.9	%
All Others			15,364				13,128				5.4	%			7.2	%
Total		$	286,000			$	181,948				100.0	%			100.0	%

NOTE J – Convertible Senior Notes

     In October 2006, the Company issued and sold Notes with an aggregate principal amount of $230 million due 2026, which pay 2.25% interest per annum on the principal amount of the Notes, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2007.

     The Notes can be converted into cash or, at the Company’s option, cash and/or shares of the Company’s Common Stock based on an initial conversion rate, subject to adjustment, of 25.6419 shares (stock split adjusted) per $1,000 principal amount of Notes, which represents an initial conversion price of $39.00 per share (stock split adjusted), in certain circumstances. In addition, following a “make-whole fundamental change” that occurs prior to October 1, 2011, the Company will, at its option, increase the conversion rate for a holder who elects to convert its Notes in connection with such “make-whole fundamental change,” in certain circumstances.

     In determining the liability and equity components, the Company determined the expected life of the Notes to be five years as that is the earliest date in which the Notes can be put back to the Company at par value. As of June 30, 2010, 15 months remain over which the discount of the liability will be amortized. As of June 30, 2010, the liability and equity components are as follows (in thousands):

Liability

Liability

Liability

Equity

Component

Component

Component

Component

Principal

Net Carrying

Unamortized

Carrying

Amount

Amount

Discount

Amount

$134,293

$

124,312

$

9,981

$

35,515

     The effective interest rate of the liability component is 8.5%, which is a comparable yield for nonconvertible notes with terms and conditions otherwise comparable to the Company’s Notes as of the date of issuance. The amount of interest expense, including amortization of debt discount for the liability component and debt issuance costs is as follows (in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Notes contractual interest expense		$	792			$	948			$	1,552			$	1,944
Amortization of debt discount			1,873				2,281				3,707				4,490
Amortization of debt issuance costs			136				164				274				343
Total		$	2,801			$	3,393			$	5,533			$	6,777

NOTE K – Commitments

     Purchase Commitments – As of June 30, 2010, the Company had approximately $22.2 million in non-cancelable purchase contracts related to capital expenditures, primarily for manufacturing equipment in China.

NOTE L – Employee Benefit Plans

Defined Benefit Plan

     The Company has a contributory defined benefit plan that covers certain employees in the United Kingdom (“U.K.”) and Germany. The net pension and supplemental retirement benefit obligations and the related periodic costs are based on, among other things, assumptions regarding the discount rate, estimated return on plan assets and mortality rates. These obligations and related periodic costs are measured using actuarial techniques and assumptions. The projected unit credit method is the actuarial cost method used to compute the pension liabilities and related expenses.

     For the six months ended June 30, 2010, net period benefit costs associated with the defined benefit plan were approximately $1.5 million.

     The following tables set forth the benefit obligation, the fair value of plan assets, and the funded status of the Company’s plan (in thousands):

		Defined Benefit Plan
Change in benefit obligation:
Balance at December 31, 2009		$	117,539
Service cost			153
Interest cost			3,148
Actuarial loss			3,850
Benefits paid			(1,842	)
Foreign currency changes			(8,768	)
Benefit obligation at June 30, 2010		$	114,080
Change in plan assets:
Fair value of plan assets at December 31, 2009		$	88,235
Actual return on plan assets			(737	)
Employer contribution			1,453
Benefits paid			(1,842	)
Foreign currency changes			(6,470	)
Fair value of plan assets at June 30, 2010		$	80,639
Underfunded status at June 30, 2010		$	(33,441	)

     Based on an actuarial study performed as of June 30, 2010, the plan is underfunded and a liability of approximately $33.4 million is reflected in the Company’s consolidated financial statements as a long-term liability. The amount recognized in accumulated other comprehensive loss for the six months ended June 30, 2010 was a net loss of $5.9 million and the weighted-average discount rate assumption used to determine benefit obligations as of June 30, 2010 was 5.3%.

     The following are weighted-average assumptions used to determine net periodic benefit costs for the six months ended June 30, 2010:

Discount rate			5.7	%
Expected long-term return on plan assets			6.8	%

     The Company adopted a payment plan with the trustees of the defined benefit plan, in which the Company will pay approximately £1.0 million GBP (approximately $1.6 million based on a USD:GBP exchange rate of 1.6:1) every year from 2009 through 2012.

     The Company also has pension plans in Asia for which the benefit obligation, fair value of the plan assets and the funded status amounts are deemed immaterial and therefore, not included in the figures or assumptions above.

Deferred Compensation

     The Company maintains a Non-Qualified Deferred Compensation Plan (the “Deferred Compensation Plan”) for executive officers, key employees and members of the Board of Directors (the “Board”). The Deferred Compensation Plan allows eligible participants to defer the receipt of eligible compensation, including equity awards, until designated future dates. The Company offsets its 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 June 30, 2010, these investments totaled approximately $2.9 million. All gains and losses in these investments are equally offset by corresponding gains and losses in the Deferred Compensation Plan liabilities.

NOTE M – Related Parties

     The Company conducts business with one related party company, Lite-On Semiconductor Corporation and its subsidiaries and affiliates (collectively, “LSC”), that owned approximately 18.9% of the Company’s outstanding Common Stock as of June 30, 2010. The Company also conducts business with Keylink International (B.V.I.) Inc. and its subsidiaries and affiliates (collectively, “Keylink”). Keylink is the Company’s 5% joint venture partner in the Company’s Shanghai manufacturing subsidiaries.

     The Audit Committee of the Company’s Board reviews all related party transactions for potential conflict of interest situations on an ongoing basis, in accordance with such procedures that the Audit Committee may adopt from time to time.

     Lite-On Semiconductor Corporation – During the six months ended June 30, 2010 and 2009, the Company sold products to LSC totaling 1.6% and 2.2% of its net sales, respectively. Also, for the six months ended June 30, 2010 and 2009, 11.3% and 7.2%, respectively, of the Company’s net sales were from semiconductor products purchased from LSC for subsequent sale, making LSC the Company’s largest supplier.

     Net sales to, and purchases from, LSC are as follows (in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Net sales		$	2,038			$	2,686			$	4,526			$	4,080
Purchases		$	11,623			$	7,559			$	20,888			$	13,127

     Keylink International (B.V.I.) Inc. – During the six months ended June 30, 2010 and 2009, the Company sold products to companies owned by Keylink totaling 2.7% and 3.1% of its net sales, respectively. Also for the six months ended June 30, 2010 and 2009, 3.3% and 1.3%, respectively, of the Company’s net sales were from semiconductor products purchased from companies owned by Keylink. In addition, the Company’s subsidiaries in China lease their manufacturing facilities from, and subcontract a portion of their manufacturing process (metal plating and environmental services) to Keylink. The Company also paid a consulting fee to Keylink. For the six months ended June 30, 2010 and 2009, the Company paid Keylink an aggregate of $7.0 million and $4.4 million, respectively, with respect to these items.

     Net sales to, and purchases from, companies owned by Keylink are as follows (in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Net sales		$	4,129			$	3,150			$	7,742			$	5,556
Purchases		$	2,547			$	1,326			$	5,173			$	2,375

     Accounts receivable from, and accounts payable to, LSC and Keylink are as follows (in thousands):

		June 30,
		2010
Accounts receivable
LSC		$	1,752
Keylink			8,032
		$	9,784
Accounts payable
LSC		$	8,713
Keylink			5,861
		$	14,574

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. 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 the Company’s management. The Private Securities Litigation Reform Act of 1995 (the “Act”) 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 Act. The Company undertakes no obligation to publicly release the results of any revisions to its 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.

     This management’s discussion should be read in conjunction with the management’s discussion included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, previously filed with Securities and Exchange Commission.

Highlights

	•		Net sales for the three months ended June 30, 2010 was $149.2 million, an increase of $45.3 million, or 43.6%, over the same period last year, and a sequential increase of 9.1% over the $136.8 million in the first quarter of 2010;
	•		Net sales for the six months ended June 30, 2010 was $286.0 million, an increase of $104.1 million, or 57.2%, over the same period last year;
	•		Gross profit for the three months ended June 30, 2010 was $53.5 million, an increase of $26.1 million, or 95.3%, over the same period last year, and a sequential increase of 11.9% over the $47.8 million in the first quarter of 2010;
	•		Gross profit for the six months ended June 30, 2010 was $101.3 million, an increase of $59.4 million, or 141.8%, over the same period last year;
	•		Gross profit margin for the three months ended June 30, 2010 was 35.8%, compared to 26.3% for the same period last year, and 34.9% for the first quarter of 2010;
	•		Gross profit margin for the six months ended June 30, 2010 was 35.4%, compared to 23.0% for the same period last year;
	•		Net income attributable to common stockholders for the three months ended June 30, 2010 was $16.6 million, or $0.37 per diluted share, compared to the same period last year, which had a net loss of $(3.0) million, or $(0.07) per share, and first quarter 2010 net income of $15.0 million, or $0.33 per diluted share; and
	•		Net income attributable to common stockholders for the six months ended June 30, 2010 was $31.6 million, or $0.70 per diluted share, compared to the same period last year, which had a net loss of $(13.7) million, or $(0.33) per share.
	•		On June 30, 2010, we put our auction rate securities (“ARS”) back to UBS AG at par value pursuant to the previously disclosed settlement agreement, which liquidated our ARS for cash and the proceeds were used to pay off the “no net cost” loan.

Overview

     We are a leading global manufacturer and supplier of high-quality, application specific standard products within the broad discrete, logic and analog semiconductor markets, serving the consumer electronics, computing, communications, industrial and automotive markets. These products include diodes, rectifiers, transistors, MOSFETs, protection devices, functional specific arrays, single gate logic, amplifiers and comparators, Hall-effect and temperature sensors, power management devices including LED drivers, DC-DC switching and linear voltage regulators and voltage references along with special function devices including USB power switches, load switches, voltage supervisors and motor controllers. The products are sold primarily throughout Asia, North America and Europe.

     We design, manufacture and market these semiconductors for diverse end-use applications. Semiconductors, which provide electronic signal amplification and switching functions, are basic building-block electronic components that are incorporated into almost every electronic device. We believe that our focus on standard semiconductor products provides us with a meaningful competitive advantage relative to other semiconductor companies that provide a wider range of semiconductor products.

     During the first quarter of 2010, we saw an increase in our net sales due to strong demand in all geographic regions led by North America and Europe. During the second quarter of 2010, we saw a further increase in net sales due to a strong demand for our products across all markets with additional growth in North America and Asia, while we continued to experience improvements in Europe. In addition, during the first and second quarters, gross profit margin increased due to improved product mix in North America and Europe, which includes a favorable mix of higher margin new products, as well as our wafer fabrication facilities operating at near full capacity. For the third quarter of 2010, we expect to see continued growth in net sales and gross profit.

     As described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, the principal elements of our strategy include the following:

	•		Continue to rapidly introduce innovative discrete, logic and analog semiconductor products;
	•		Expand our available market opportunities;
	•		Maintain intense customer focus;
	•		Enhance cost competitiveness; and
	•		Pursue selective strategic acquisitions.

     In implementing these strategies, the following factors have affected, and, we believe, will continue to affect, our results of operations:

•

We have experienced substantial pressure from our customers and competitors to reduce the selling price for our standard products, and we expect future improvements in net income to result primarily from increases in sales volume and improvements in product mix as well as manufacturing cost reductions in order to offset any reduced average selling prices (“ASP”) of our products. For 2010, we expect to see increased demand for our products as compared to 2009, and we anticipate continued improvement in order rates.

•

For the six months ended June 30, 2010, our original equipment manufacturers (“OEM”) and electronic manufacturing services (“EMS”) customers together accounted for approximately 48% of our net sales, while our global network of distributors accounted for approximately 52% of our net sales.

•

Net sales for the six months ended June 30, 2010 was $286.0 million compared to $181.9 million in the same period last year. This increase in net sales mainly reflects the increase in demand for our products in all geographic regions.

•

Our gross profit margin was 35.4% for the six months ended June 30, 2010, compared to 23.0% in the same period last year. Our gross margin percentage increased over the same period last year due to higher capacity utilization of our manufacturing and wafer fabrication facilities. Future gross profit margins will depend primarily on our product mix, manufacturing cost savings, and the demand for our products.

•

For the six months ended June 30, 2010, our capital expenditures were approximately 16.5% of our net sales, which is an increase from our historical 10% to 12% of net sales model. We expect capital expenditures for fiscal 2010 to be slightly higher than our historical model.

•

For the six months ended June 30, 2010, the percentage of our net sales derived from our Asia subsidiaries was 73.2%, compared to 76.0% in the same period last year. The decrease was due primarily to improvements in North America and Europe. We expect our net sales to the Asia market to increase as a percentage of our total net sales as a result of our customers’ continuing to shift their manufacturing of electronic products to Asia. In addition, Europe accounted for approximately 11.3% of our revenues for the six months ended June 30, 2010, compared to 9.4% in the same period last year.

•

As of June 30, 2010, we had invested approximately $255.1 million in our Asian manufacturing facilities. For the six months ended June 30, 2010, we invested approximately $41.4 million in these manufacturing facilities, and we expect to continue to invest in our manufacturing facilities, although the amount to be invested will depend on product demand and new product developments.

•

We have increased our investment in research and development from $10.7 million, or 5.9% of net sales, for the six months ended June 30, 2009 to $13.2 million, or 4.6% of net sales, for the six months ended June 30, 2010. For the remainder of 2010, we expect research and development to increase in absolute dollars but remain comparable as a percentage of net sales.

Results of Operations for the Three Months Ended June 30, 2010 and 2009

     The following table sets forth, the percentage that certain items in the statements of operations bear to net sales and the percentage dollar increase (decrease) of such items from period to period.

										Percentage Dollar
		Percent of Net Sales								Increase
		Three months ended June 30,								(Decrease)
		2010				2009				‘09 to ’10
Net sales			100.0	%			100.0	%			43.6
Cost of goods sold			(64.2	)			(73.7	)			25.0
Gross profit			35.8				26.3				95.3
Operating expenses			(19.8	)			(20.7	)			37.1
Income from operations			16.0				5.6				308.6
Interest income			0.7				1.3				(26.0	)
Interest expense and amortization of debt discount			(2.2	)			(4.0	)			(4.7	)
Other expense			(0.8	)			(0.2	)			317.8
Income before income taxes and noncontrolling interest			13.7				2.7				638.6
Income tax provision			2.0				4.9				(41.1	)
Net income (loss)			11.7				(2.2	)			840.8
Less: net income attributable to noncontrolling interest			(0.5	)			(0.6	)			54.6
Net income (loss) attributable to common stockholders			11.2				(2.8	)			663.7

     The following discussion explains in greater detail our consolidated operating results and financial condition for the three months ended June 30, 2010, compared to the three months ended June 30, 2009. This discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this quarterly report (in thousands).

		2010			2009
Net Sales		$	149,153			$	103,898

     Net sales increased approximately $45.3 million for the three months ended June 30, 2010, compared to the same period last year. The 43.6% increase in net sales represented an approximately 38.9% increase in units sold and a 3.4% increase in ASP. The revenue increase for the three months ended June 30, 2010 was attributable to increase in demand for our products in all markets with further growth in North America and Asia, while we continued to experience improvements in Europe.

		2010				2009
Cost of goods sold		$	95,686			$	76,528
Gross profit		$	53,467			$	27,370
Gross profit margin			35.8	%			26.3	%

     Cost of goods sold increased approximately $19.2 million, or 25.0%, for the three months ended June 30, 2010 compared to the same period last year. As a percent of sales, cost of goods sold decreased to 64.2% for the three months ended June 30, 2010 compared to 73.7% in the same period last year, and our average unit cost (“AUP”) decreased approximately 10.0% due primarily to product mix. The decrease in cost of goods sold as a percentage of sales was due to higher net sales, which offset a portion of the fixed costs.

     For the three months ended June 30, 2010, gross profit increased by approximately $26.1 million, or 95.3%, compared to the same period last year. Gross margin increased to 35.8% for the three months ended June 30, 2010, compared to 26.3% for the same period last year, primarily due to higher capacity utilization of our manufacturing and wafer fabrication facilities

		2010				2009
Selling, general and administrative expenses (“SG&A”)		$	21,422			$	15,240

     SG&A for the three months ended June 30, 2010 increased approximately $6.2 million, or 40.6%, compared to the same period last year, primarily due to higher sales commissions related to increased sales, as well as to higher employee related costs including incentives and higher general operating costs. SG&A as a percentage of sales, decreased to 14.4% for the three months ended June 30, 2010, compared to 14.7% in the same period last year due to higher net sales, which offset a portion of the fixed costs. For the remainder of 2010, we expect SG&A to increase in absolute dollars but remain comparable as a percentage of net sales.

		2010				2009
Research and development expenses (“R&D”)		$	6,815			$	5,385

     R&D for the three months ended June 30, 2010 was $6.8 million, an increase of approximately $1.4 million from the same period last year, primarily due to the additional costs incurred, primarily due to increased personnel costs, engineering supplies and material purchases. R&D, as a percentage of sales, decreased to 4.6% for the three months ended June 30, 2010, compared 5.2% in the same period last year due to higher net sales, which offset a portion of the fixed costs. For the remainder of 2010, we expect R&D to increase in absolute dollars but remain comparable as a percentage of net sales.

		2010				2009
Amortization of acquisition-related intangibles		$	1,078			$	1,118

     Amortization of acquisition-related intangibles was approximately $1.1 million for both the three months ended June 30, 2010 and the same period last year.

		2010				2009
Interest income		$	996			$	1,345

     Interest income decreased for the three months ended June 30, 2010 to $1.0 million, compared to $1.3 million in the same period last year, due primarily to a decrease in interest income earned on our short-term investment securities (auction rate securities), which were put back to UBS at par value on June 30, 2010 in accordance with the previously disclosed settlement agreement. For the remainder of 2010, we expect interest income to be lower than in the first half of 2010 since we are no longer earning interest on short-term investment securities.

		2010				2009
Interest expense		$	1,396			$	1,877

     Interest expense for the three months ended June 30, 2010 was approximately $1.4 million, compared to $1.9 million in the same period last year. The $0.5 million decrease in interest expense was due primarily to the repurchase and retirement of $95.7 million par value of Notes since the fourth quarter of 2008, which was offset by the increased interest expense charged in connection with our “no net cost” loan, with the offsetting interest earned being recorded in interest income. For the remainder of 2010, we expect interest expense to be lower than in the first half of 2010 since we are no longer being charged interest for our “no net cost” loan that was paid off on June 30, 2010 in connection with the previously disclosed settlement agreement with UBS.

		2010				2009
Amortization of debt discount		$	1,873			$	2,281

     Amortization of debt discount for the three months ended June 30, 2010 was $1.9 million, compared to $2.3 million in the same period last year. The $0.4 million decrease in amortization of debt discount was due primarily to the repurchase and retirement of Notes in 2009.

		2010				2009
Other expense		$	1,150			$	275