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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

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

For the quarterly period ended September 30, 2023

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 November 2, 2023 was 45,938,233.

 

 


 

 

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

22

Item 3. Quantitative and Qualitative Disclosures About Market Risk

30

Item 4. Controls and Procedures

30

Part II – Other Information

 

Item 1. Legal Proceedings

 

31

Item 1A. Risk Factors

 

31

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

 

31

Item 3. Defaults Upon Senior Securities

 

31

Item 4. Mine Safety Disclosures

 

31

Item 5. Other Information

 

31

Item 6. Exhibits

 

32

Signatures

33

 

 

 

 

 


 

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,

 

 

2023

 

 

2022

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

295,045

 

 

$

336,732

 

Restricted cash

 

2,592

 

 

 

4,367

 

Short-term investments

 

9,872

 

 

 

7,059

 

Accounts receivable, net of allowances of $4,686 and $5,852 at
  September 30, 2023 and December 31, 2022, respectively

 

414,188

 

 

 

369,233

 

Inventories

 

343,694

 

 

 

360,281

 

Prepaid expenses and other

 

117,191

 

 

 

83,999

 

Total current assets

 

1,182,582

 

 

 

1,161,671

 

Property, plant and equipment, net

 

736,126

 

 

 

736,730

 

Deferred income tax

 

35,788

 

 

 

35,308

 

Goodwill

 

143,745

 

 

 

144,757

 

Intangible assets, net

 

67,445

 

 

 

79,137

 

Other long-term assets

 

174,536

 

 

 

130,709

 

Total assets

$

2,340,222

 

 

$

2,288,312

 

 

 

 

 

 

 

Liabilities

 

 

Current liabilities:

 

 

 

 

 

Lines of credit

$

29,429

 

 

$

36,280

 

Accounts payable

 

161,079

 

 

160,442

 

Accrued liabilities and other

 

193,383

 

 

214,433

 

Income tax payable

 

29,892

 

 

19,682

 

Current portion of long-term debt

 

1,124

 

 

 

1,693

 

Total current liabilities

 

414,907

 

 

432,530

 

Long-term debt, net of current portion

 

22,645

 

 

147,470

 

Deferred tax liabilities

 

12,982

 

 

 

12,903

 

Unrecognized tax benefits

 

31,595

 

 

 

31,594

 

Other long-term liabilities

 

99,210

 

 

 

80,896

 

Total liabilities

 

581,339

 

 

705,393

 

 

 

Commitments and contingencies (See Note 9)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

Preferred stock - par value $1.00 per share; 1,000,000 shares authorized; no
  shares issued or outstanding

 

-

 

 

-

 

Common stock - par value $0.66 2/3 per share; 70,000,000 shares
  authorized; and
45,936,090 shares and 45,469,722 shares issued and
  outstanding at September 30, 2023 and December 31, 2022, respectively

 

36,817

 

 

36,503

 

Additional paid-in capital

 

502,482

 

 

 

494,773

 

Retained earnings

 

1,649,982

 

 

 

1,448,092

 

Treasury stock, at cost 9,286,862 shares and 9,281,581 shares at September 30, 2023 and
  December 31, 2022, respectively

 

(337,986

)

 

 

(337,490

)

Accumulated other comprehensive loss

 

(161,633

)

 

(128,233

)

Total stockholders' equity

 

1,689,662

 

 

1,513,645

 

Noncontrolling interest

 

69,221

 

 

 

69,274

 

Total equity

 

1,758,883

 

 

 

1,582,919

 

Total liabilities and stockholders' equity

$

2,340,222

 

$

2,288,312

 

 

 

 

 

 

 

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,

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net sales

$

404,647

 

 

$

521,273

 

 

$

1,339,040

 

 

$

1,504,368

 

Cost of goods sold

 

248,771

 

 

 

303,455

 

 

 

793,334

 

 

 

883,327

 

Gross profit

 

155,876

 

 

 

217,818

 

 

 

545,706

 

 

 

621,041

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

Selling, general and administrative

 

62,964

 

 

 

68,545

 

 

 

201,455

 

 

 

209,055

 

Research and development

 

34,068

 

 

 

32,787

 

 

 

101,911

 

 

 

92,226

 

Amortization of acquisition related intangible assets

 

3,808

 

 

 

3,938

 

 

 

11,476

 

 

 

11,780

 

Restructuring cost

 

2,566

 

 

 

-

 

 

 

2,566

 

 

 

-

 

Other operating (income) expense

 

(1,404

)

 

 

102

 

 

 

(1,570

)

 

 

(3,762

)

Total operating expense

 

102,002

 

 

 

105,372

 

 

 

315,838

 

 

 

309,299

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

53,874

 

 

 

112,446

 

 

 

229,868

 

 

 

311,742

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

4,507

 

 

 

862

 

 

 

8,503

 

 

 

2,549

 

Interest expense

 

(898

)

 

 

(2,724

)

 

 

(5,219

)

 

 

(5,428

)

Foreign currency gain (loss), net

 

1,314

 

 

 

(1,008

)

 

 

(2,796

)

 

 

2,532

 

Unrealized gain (loss) on investments

 

401

 

 

 

(2,648

)

 

 

16,462

 

 

 

(15,960

)

Other income

 

1,309

 

 

 

2,218

 

 

 

3,237

 

 

 

5,741

 

Total other income (expense)

 

6,633

 

 

 

(3,300

)

 

 

20,187

 

 

 

(10,566

)

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes and noncontrolling interest

 

60,507

 

 

 

109,146

 

 

 

250,055

 

 

 

301,176

 

Income tax provision

 

10,674

 

 

 

20,172

 

 

 

44,514

 

 

 

55,279

 

Net income

 

49,833

 

 

 

88,974

 

 

 

205,541

 

 

 

245,897

 

Less net income attributable to noncontrolling interest

 

(1,113

)

 

 

(2,588

)

 

 

(3,651

)

 

 

(6,665

)

Net income attributable to common stockholders

$

48,720

 

 

$

86,386

 

 

$

201,890

 

 

$

239,232

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to common stockholders:

 

 

 

 

 

 

 

Basic

$

1.06

 

 

$

1.90

 

 

$

4.41

 

 

$

5.28

 

Diluted

$

1.05

 

 

$

1.88

 

 

$

4.36

 

 

$

5.21

 

Number of shares used in earnings per share computation:

 

 

 

 

 

 

 

Basic

 

45,936

 

 

 

45,475

 

 

 

45,758

 

 

 

45,283

 

Diluted

 

46,320

 

 

 

46,014

 

 

 

46,296

 

 

 

45,938

 

 

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,

 

2023

 

2022

 

 

2023

 

2022

 

Net income

$

49,833

 

$

88,974

 

 

$

205,541

 

$

245,897

 

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

 

(4,009

)

 

(391

)

 

 

(1,930

)

 

5,209

 

Unrealized (loss) gain on derivative instruments, net of tax

 

(2,464

)

 

 

4,939

 

 

 

(4,143

)

 

 

9,833

 

Unrealized foreign currency loss, net of tax

 

(16,056

)

 

 

(55,054

)

 

 

(27,327

)

 

 

(109,005

)

Comprehensive income

 

27,304

 

 

 

38,468

 

 

 

172,141

 

 

 

151,934

 

Less: Comprehensive income attributable to noncontrolling interest

 

(1,113

)

 

 

(2,588

)

 

 

(3,651

)

 

 

(6,665

)

Total comprehensive income attributable to common stockholders

$

26,191

 

$

35,880

 

 

$

168,490

 

$

145,269

 

 

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, 2023

 

 

55,032

 

 

$

36,690

 

 

 

(9,283

)

 

$

(337,670

)

 

$

501,302

 

 

$

1,601,262

 

 

$

(139,104

)

 

$

1,662,480

 

 

$

68,098

 

 

$

1,730,578

 

Total comprehensive income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

48,720

 

 

 

(22,529

)

 

 

26,191

 

 

 

1,113

 

 

 

27,304

 

Net changes in noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10

 

 

 

10

 

Common stock issued for share-based plans

 

 

191

 

 

 

127

 

 

 

-

 

 

 

-

 

 

 

(127

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,928

 

 

 

-

 

 

 

-

 

 

 

5,928

 

 

 

-

 

 

 

5,928

 

Deferred compensation plan

 

 

-

 

 

 

-

 

 

 

(4

)

 

 

(316

)

 

 

316

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Tax related to net share settlement

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,937

)

 

 

-

 

 

 

-

 

 

 

(4,937

)

 

 

-

 

 

 

(4,937

)

Balance, September 30, 2023

 

 

55,223

 

 

$

36,817

 

 

 

(9,287

)

 

$

(337,986

)

 

$

502,482

 

 

$

1,649,982

 

 

$

(161,633

)

 

$

1,689,662

 

 

$

69,221

 

 

$

1,758,883

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

Treasury stock

 

 

Additional
 paid-in

 

 

Retained

 

 

Accumulated
 other comprehensive

 

 

Total Diodes
 Incorporated stockholders'

 

 

Noncontrolling

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

earnings

 

 

loss

 

 

equity

 

 

interest

 

 

equity

 

Balance, December 31, 2022

 

 

54,751

 

 

$

36,503

 

 

 

(9,282

)

 

$

(337,490

)

 

$

494,773

 

 

$

1,448,092

 

 

$

(128,233

)

 

$

1,513,645

 

 

$

69,274

 

 

$

1,582,919

 

Total comprehensive income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

201,890

 

 

 

(33,400

)

 

 

168,490

 

 

 

3,651

 

 

 

172,141

 

Net changes in noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,704

)

 

 

(3,704

)

Common stock issued for share-based plans

 

 

472

 

 

 

314

 

 

 

-

 

 

 

-

 

 

 

(314

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

23,111

 

 

 

-

 

 

 

-

 

 

 

23,111

 

 

 

-

 

 

 

23,111

 

Deferred compensation plan

 

 

-

 

 

 

-

 

 

 

(5

)

 

 

(496

)

 

 

496

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Tax related to net share settlement

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(15,584

)

 

 

-

 

 

 

-

 

 

 

(15,584

)

 

 

-

 

 

 

(15,584

)

Balance, September 30, 2023

 

 

55,223

 

 

$

36,817

 

 

 

(9,287

)

 

$

(337,986

)

 

$

502,482

 

 

$

1,649,982

 

 

$

(161,633

)

 

$

1,689,662

 

 

$