2021
Annual Report
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(cid:3)
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(cid:3)
(cid:94)(cid:349)(cid:374)(cid:272)(cid:286)(cid:396)(cid:286)(cid:367)(cid:455)(cid:853)(cid:3)
(cid:3)
(cid:3)
(cid:24)(cid:396)(cid:856)(cid:3)(cid:60)(cid:286)(cid:346)(cid:882)(cid:94)(cid:346)(cid:286)(cid:449)(cid:3)(cid:62)(cid:437)(cid:3)(cid:3)
(cid:18)(cid:346)(cid:258)(cid:349)(cid:396)(cid:373)(cid:258)(cid:374)(cid:853)(cid:3)(cid:87)(cid:396)(cid:286)(cid:400)(cid:349)(cid:282)(cid:286)(cid:374)(cid:410)(cid:3)(cid:920)(cid:3)(cid:18)(cid:346)(cid:349)(cid:286)(cid:296)(cid:3)(cid:28)(cid:454)(cid:286)(cid:272)(cid:437)(cid:410)(cid:349)(cid:448)(cid:286)(cid:3)(cid:75)(cid:296)(cid:296)(cid:349)(cid:272)(cid:286)(cid:396)(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
FINANCIAL HIGHLIGHTS
(cid:1006)(cid:1004)(cid:1005)(cid:1011)
(cid:1006)(cid:1004)(cid:1005)(cid:1012)
(cid:1006)(cid:1004)(cid:1005)(cid:1013)
(cid:1006)(cid:1004)(cid:1006)(cid:1004)
(cid:1006)(cid:1004)(cid:1006)(cid:1005)
(cid:1006)(cid:1004)(cid:1005)(cid:1011)
(cid:1006)(cid:1004)(cid:1005)(cid:1012)
(cid:1006)(cid:1004)(cid:1005)(cid:1013)
(cid:1006)(cid:1004)(cid:1006)(cid:1004)
(cid:1006)(cid:1004)(cid:1006)(cid:1005)
(cid:1006)(cid:1004)(cid:1005)(cid:1011)
(cid:1006)(cid:1004)(cid:1005)(cid:1012)
(cid:1006)(cid:1004)(cid:1005)(cid:1013)
(cid:1006)(cid:1004)(cid:1006)(cid:1004)
(cid:1006)(cid:1004)(cid:1006)(cid:1005)
(cid:1006)(cid:1004)(cid:1005)(cid:1011)
(cid:1006)(cid:1004)(cid:1005)(cid:1012)
(cid:1006)(cid:1004)(cid:1005)(cid:1013)
(cid:1006)(cid:1004)(cid:1006)(cid:1004)
(cid:1006)(cid:1004)(cid:1006)(cid:1005)
2017
$1,054
2018
$1,214
2019
$1,249
2020
$1,229
2021
$1,805
NET SALES
in millions
2017 2018 2019 2020 2021
$229
$(2)
$104 $153
$98
2017 2018 2019 2020 2021
$237
$121 $151 $123
$69
2017 2018 2019 2020
$832 $931 $1,106 $964
2021
$1,237
NET INCOME
COMMON STOCKHOLDERS
in millions
NET INCOME
COMMON STOCKHOLDERS
[NON-GAAP ADJUSTED1]
in millions
STOCKHOLDERS’ EQUITY
in millions
(cid:11)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:82)(cid:88)(cid:86)(cid:68)(cid:81)(cid:71)(cid:86)(cid:15)(cid:3)(cid:72)(cid:91)(cid:70)(cid:72)(cid:83)(cid:87)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)(cid:71)(cid:68)(cid:87)(cid:68)(cid:12)
(cid:21)(cid:19)(cid:21)(cid:20)
(cid:21)(cid:19)(cid:21)(cid:19)
(cid:21)(cid:19)(cid:20)(cid:28)
(cid:21)(cid:19)(cid:20)(cid:27)
(cid:21)(cid:19)(cid:20)(cid:26)
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(cid:21)(cid:17)(cid:22)(cid:27)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3) (cid:3)
(cid:20)(cid:17)(cid:22)(cid:26)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:23)(cid:24)(cid:15)(cid:26)(cid:27)(cid:20)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:24)(cid:21)(cid:15)(cid:20)(cid:22)(cid:22)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:24)(cid:20)(cid:15)(cid:27)(cid:25)(cid:19)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:24)(cid:19)(cid:15)(cid:28)(cid:22)(cid:24)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:24)(cid:19)(cid:15)(cid:22)(cid:23)(cid:19)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:21)(cid:15)(cid:20)(cid:28)(cid:23)(cid:15)(cid:23)(cid:28)(cid:24)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:15)(cid:28)(cid:26)(cid:28)(cid:15)(cid:23)(cid:24)(cid:26)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:15)(cid:25)(cid:22)(cid:28)(cid:15)(cid:22)(cid:27)(cid:23)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:15)(cid:24)(cid:21)(cid:25)(cid:15)(cid:22)(cid:26)(cid:20)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:15)(cid:23)(cid:27)(cid:27)(cid:15)(cid:25)(cid:26)(cid:22)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:26)(cid:20)(cid:25)(cid:15)(cid:25)(cid:22)(cid:27)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:24)(cid:20)(cid:23)(cid:15)(cid:21)(cid:21)(cid:24)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:24)(cid:21)(cid:23)(cid:15)(cid:25)(cid:22)(cid:26)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:23)(cid:27)(cid:19)(cid:15)(cid:27)(cid:20)(cid:23)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:23)(cid:20)(cid:24)(cid:15)(cid:20)(cid:25)(cid:21)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:21)(cid:25)(cid:24)(cid:15)(cid:24)(cid:26)(cid:23)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:21)(cid:27)(cid:27)(cid:15)(cid:20)(cid:26)(cid:28)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:25)(cid:23)(cid:15)(cid:23)(cid:19)(cid:20)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:27)(cid:25)(cid:15)(cid:20)(cid:23)(cid:22)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:21)(cid:23)(cid:26)(cid:15)(cid:23)(cid:28)(cid:21)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:15)(cid:21)(cid:22)(cid:26)(cid:15)(cid:21)(cid:23)(cid:21)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:28)(cid:25)(cid:22)(cid:15)(cid:27)(cid:21)(cid:19)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:15)(cid:20)(cid:19)(cid:25)(cid:15)(cid:23)(cid:21)(cid:23)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:28)(cid:22)(cid:20)(cid:15)(cid:23)(cid:25)(cid:22)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:27)(cid:22)(cid:20)(cid:15)(cid:24)(cid:19)(cid:23)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
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
(State or other jurisdiction
of incorporation or organization)
4949 Hedgcoxe Road, Suite 200
Plano, Texas
(Address of principal executive offices)
95-2039518
(I.R.S. Employer
Identification No.)
75024
(Zip Code)
Registrant’s telephone number, including area code: (972) 987-3900
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, Par Value $0.66 2/3
Trading Symbol(s)
DIOD
Securities registered pursuant to Section 12(g) of the Act:
None
Name of each exchange on which registered
The NASDAQ Stock Market LLC
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
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
Non-accelerated filer
☑
☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
The aggregate market value of the 42,101,268 shares of Common Stock held by non-affiliates of the registrant, based on the closing price of $79.77
per share of the Common Stock on the Nasdaq Global Select Market on June 30, 2021, the last business day of the registrant’s most recently completed
second fiscal quarter, was approximately $3.5 billion.
The number of shares of the registrant’s Common Stock outstanding as of February 14, 2022 was 45,021,650.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement to be filed with the United States Securities and Exchange Commission (“SEC”) pursuant to
Regulation 14A in connection with the 2020 annual meeting of stockholders are incorporated by reference into Part III of this Annual Report. The
proxy statement will be filed with the SEC not later than 120 days after the registrant’s fiscal year ended December 31, 2021.
TABLE OF CONTENTS
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
PART I
BUSINESS ...........................................................................................................................................................
RISK FACTORS..................................................................................................................................................
UNRESOLVED STAFF COMMENTS...............................................................................................................
PROPERTIES ......................................................................................................................................................
LEGAL PROCEEDINGS ....................................................................................................................................
MINE SAFETY DISCLOSURES........................................................................................................................
Page
PART II
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES ..........................................................................................
RESERVED .........................................................................................................................................................
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS .....................................................................................................................................................
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ....................................
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ....................................................................
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE...............................................................................................................................
CONTROLS AND PROCEDURES ....................................................................................................................
OTHER INFORMATION....................................................................................................................................
ITEM 9A.
ITEM 9B.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS...................
PART III
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.............................................
EXECUTIVE COMPENSATION .......................................................................................................................
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS..........................................................................................................
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE .
PRINCIPAL ACCOUNTING FEES AND SERVICES ......................................................................................
PART IV
ITEM 15.
ITEM 16. FORM 10-K SUMMARY....................................................................................................................................
EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.............................................................................
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Item 1.
Business.
GENERAL
PART I
Diodes Incorporated, together with its subsidiaries (collectively, the “Company,” “we” or “our”) (Nasdaq: DIOD), a Standard and
Poor's Smallcap 600 and Russell 3000 Index company, is a leading global manufacturer and supplier of high-quality application-specific
standard products within the broad discrete, logic, analog, and mixed-signal semiconductor markets. The Company serves the consumer
electronics, computing, communications, industrial, and automotive markets.
The Company's products include diodes; rectifiers; transistors; MOSFETs; GPP bridges; GPP rectifiers; protection devices;
function-specific arrays; single gate logic; amplifiers and comparators; Hall-effect and temperature sensors; and power management
devices, including LED drivers, AC-DC converters and controllers, DC-DC switching and linear voltage regulators, voltage references
along with special-function devices, such as USB power switches, load switches, voltage supervisors, and motor controllers. The
Company also has timing, connectivity, switching, and signal integrity solutions for high-speed signals.
The Company's corporate headquarters and Americas’ sales offices are located in Plano, Texas, and Milpitas, California,
respectively. Design, marketing, and engineering centers are located in Plano; Milpitas; Taipei, Taoyuan City, Zhubei City, Taiwan;
Shanghai and Yangzhou, China; Oldham, England; and Neuhaus, Germany. The Company's wafer fabrication facilities are located in
Oldham, and Greenock, Scotland; Shanghai and Wuxi, China; and Keelung and Hsinchu, Taiwan. The Company has assembly and test
facilities located in Shanghai, Jinan, Chengdu, and Wuxi, China; Neuhaus; and Jhongli and Keelung, Taiwan. Additional engineering,
sales, warehouse, and logistics offices are located in Taipei; Hong Kong; Oldham; Shanghai, Shenzhen, Wuhan, and Yangzhou, China;
Seongnam-si, South Korea; and Munich and Frankfurt, Germany; with support offices throughout the world.
•
•
•
The Company’s manufacturing facilities have achieved certifications in the internationally recognized standards of
International Organization for Standardization ("ISO") 9001:2015, ISO 14001:2015, and, for automotive products, IATF
16949:2016;
The Company is also Customs Trade Partnership Against Terrorism ("C-TPAT") certified; and
The Company believes these Quality Awards reflect the superior quality-control techniques established at the Company and
further enhance our credibility as a vendor-of-choice to Original Equipment Manufacturers ("OEMs") increasingly
concerned with quality and consistency.
Our market focus is on high-growth, end-user applications in the following areas:
•
•
•
•
•
Industrial: embedded systems, precision controls, and Industrial IoT;
Communications: smartphones, 5G networks, advanced protocols, and charging solutions;
Consumer: IoT, wearables, home automation, and smart infrastructure;
Computing: cloud computing including server, storage, and data center applications; and
Automotive: connected driving, comfort/style/safety, and electrification/powertrain.
Our product line includes over 29,000 products, and we shipped approximately 58 billion units in 2021 and 43 billion units in each
of 2020 and 2019. From 2017 to 2021, our annual net sales grew from $1.1 billion to $1.8 billion, representing a compound annual
growth rate of approximately 14.4%.
BUSINESS OUTLOOK
Our net sales increased approximately $575.9 million, or 46.9%, for the twelve months ended December 31, 2021, compared to
the prior year, due primarily to our content expansion initiatives, improvements in product mix, overall strong demand for our products
(especially in comparison to the negative effect of Covid-19 in 2020), and record revenue in the automotive, industrial, communication
and consumer end-user markets. The 46.9% increase in net sales for the twelve months ended December 31, 2021 was driven, by a
25.5% organic growth attributable to the Company’s legacy business that existed prior to the Lite-On Semiconductor (“LSC”)
acquisition and 21.4% is related to the positive net sales increase from the acquisition of LSC. Contributing to the Company's growth in
net sales has been the success of our focused expansion initiative in the automotive market where revenue grew over 59% when
compared to year 2020, generating an 8-year CAGR of 30%. Additionally, our Pericom product line continued to set new revenue
records, achieving 5 consecutive quarters of growth. The Company has experienced growth in higher-margin end markets which, when
combined with increased manufacturing loading at LSC facilities, has enabled the Company to increase its net sales and margins, even
in the midst of the current supply-constrained environment. For the twelve months ended December 31, 2021, weighted-average sales
1
price of the Company's products increased 9.5% when compared to the same period last year. This represents the improved product mix
across the portfolio, as well as price increases to offset supply chain cost increasing.
We continue to work towards our previously stated goals for 2025 of $1.0 billion in gross profit based upon $2.5 billion in revenue
and a gross margin of 40%. At a high level, tactics we intend to use to accomplish these goals include:
•
•
•
Total systems solutions sales approach and content expansion driving growth:
Increased focus on high-margin automotive, industrial, and Pericom product lines; and
Investment in technology leadership in target products, fab processes, and advanced packaging.
Acquisitions also remain a part of our growth strategy to reach our revenue goal. In November 2020 we acquired LSC and its
subsidiaries. The acquisition of LSC broadened our discrete product offerings, including providing us with a leadership position in
glass-passivated bridges and rectifiers that allows us to further extend our position in the automotive and industrial markets consistent
with our overall growth strategy. Further, the acquisition expands our wafer fabrication and assembly and test capacity. We believe
we have the opportunity to improve LSC’s profitability through operating and manufacturing improvements as well as increased factory
utilization.
We have a solid pipeline of designs and expanded customer relationships across all regions and product lines. The success of our
business depends on, among other factors, the strength of the global economy and the stability of the financial markets, our customers’
demand for our products, the ability of our customers to meet their payment obligations, the likelihood of customers not canceling or
deferring existing orders, and the strength of consumers’ demand for items containing our products in the end-markets we serve. We
believe the long-term outlook for our business remains generally favorable, despite the uncertainties in the global economy, as we
continue to execute on the strategy that has proven successful for us over the years. See “Management’s Discussion and Analysis of
Financial Condition and Results of Operations – Business Outlook” in Part II, Item 7 and “Risk Factors – The success of our business
depends on the strength of the global economy and the stability of the financial markets, and any weaknesses in these areas may have a
material adverse effect on our net sales, operating results and financial condition.” in Part I, Item 1A of this Annual Report for additional
information.
SEGMENT INFORMATION AND ENTERPRISE-WIDE DISCLOSURES
For financial reporting purposes, we operate in a single segment, standard semiconductor products, through our various design,
manufacturing, and distribution facilities. We sell product primarily through our operations in Asia, the Americas, and Europe. See Note
16 of “Notes to Consolidated Financial Statements” of this Annual Report for additional information.
OUR INDUSTRY
Semiconductors are critical components used to manufacture a broad range of electronic products and systems. Since the invention
of the transistor in 1948, continuous improvements in semiconductor processes and design technologies have led to smaller, more
complex, and more reliable devices at a lower cost per function. The availability of low-cost semiconductors, together with increased
consumer demand for sophisticated electronic systems, has led to the proliferation of semiconductors in diverse end-use applications.
OUR COMPETITIVE STRENGTHS
We believe our competitive strengths include the following:
Flexible, scalable and cost-effective manufacturing – Our manufacturing operations are a core element of our success, and we
have designed our manufacturing base to allow us to respond quickly to changes in demand trends in the end-markets we serve. For
example, we have structured our assembly and test facilities to enable us to rapidly and efficiently add capacity and adjust product mix
to meet shifts in customer demand and overall market trends. Our manufacturing facilities provide us with access to a workforce at a
relatively low overall cost base while enabling us to better serve our leading customers, many of which are located in Asia. See “Risk
Factors – During times of difficult market conditions, our fixed costs combined with lower net sales and lower profit margins may have
a negative impact on our business, operating results and financial condition.” in Part I, Item 1A of this Annual Report for additional
information.
Integrated packaging expertise – Our expertise in designing and manufacturing innovative and proprietary packaging solutions
enables us to package a variety of different device functions into an assortment of packages ranging from miniature chip-scale packaging
to packages that integrate multiple separate discrete and/or analog chips into a single semiconductor product called an array. Our ability
to design and manufacture multi-chip semiconductor solutions as well as advanced integrated devices provides our customers with
products of equivalent functionality with fewer individual parts, and at lower overall cost, than alternative products. This combination
of integration, functionality and miniaturization makes our products well suited for the industrial, consumer electronics,
communications, computing and automotive markets.
Broad customer base and diverse end-markets – Our customers are comprised of leading direct sales customers as well as
major electronic manufacturing services (“EMS”) providers. We serve over 50,000 customers worldwide. Although some of these
2
customers are direct, the majority of our customers are served through our more than 50 distributors. Our products are ultimately used
in end-products in a number of markets served by our broad customer base, which we believe makes us less susceptible to market
fluctuations driven by either specific customers or specific end-user applications.
Customer-focused product development – Effective collaboration with our customers and a commitment to customer service
are essential elements of our business. We believe focusing on dependable delivery and support tailored to specific end-user applications
and solution-selling approach has fostered deep customer relationships and created a key competitive advantage for us in the highly
fragmented discrete, logic and analog and mixed-signal semiconductor marketplace. We believe our close relationships with our
customers have provided us with keener insight into our customers’ product needs. This results in a stronger demand for our product
designs and often provides us with insight into additional opportunities for new design wins in our customers’ products. See “Risk
Factors – We are and will continue to be under continuous pressure from our customers and competitors to reduce the price of our
products, which could adversely affect our growth and profit margins” in Part I, Item 1A of this Annual Report for additional
information.
Management experience –The members of our executive team average over 30 years of industry experience, and the length of
their service has created significant institutional insight into our markets, our customers and our operations. See “Risk Factors – We may
fail to attract or retain the qualified technical, sales, marketing, finance and management/executive personnel required to operate our
business successfully, which could adversely affect our business, operating results and financial condition.” in Part I, Item 1A of this
Annual Report for additional information.
OUR STRATEGY
Our strategy is to continue to enhance our position as a leading global designer, manufacturer and supplier of high-quality
application-specific standard semiconductor products, utilizing our innovative and cost-effective assembly and test (packaging)
technology and leveraging our process expertise and design excellence to achieve above-market growth in profitability.
The principal elements of our strategy include the following:
Continue to rapidly introduce innovative discrete, logic and analog and mixed-signal semiconductor products – We intend
to maintain our rapid pace of new product introductions, especially for high-volume, high-growth applications with short design cycles,
such as: IoT, wearables, home automation, and smart infrastructure, portables such as smartphones, tablets and notebooks; other
consumer electronics and computing devices; as well as added emphasis on products for the LED lighting market and the industrial and
automotive markets. During 2021 and 2020, we continued to achieve many significant new design wins with our direct sales customers.
Although a design win from a customer does not necessarily guarantee future sales to that customer, we believe that continued
introduction of new and well-defined product solutions is critically important in maintaining and extending our market share in the
highly competitive semiconductor marketplace. See “Risk Factors – Obsolete inventories as a result of changes in demand for our
products and change in life cycles of our products could adversely affect our business, operating results and financial condition.” in
Part I, Item 1A of this Annual Report for additional information.
Expand our available market opportunities – We believe we have many paths to increasing our addressable market
opportunities. From a product perspective, we intend to continue expanding our product portfolio by developing derivative and enhanced
performance devices that target adjacent markets and end-equipment. We will continue to cultivate new and emerging customers within
our targeted markets, further increasing our already broad customer base. As we focus on new customers, we try to expand our product
portfolio penetration within these new, as well as existing, customers. As we expand our extensive range of high power efficiency and
small form factor packages, we plan to introduce new and existing product functions in these new packages to allow an even greater
market coverage.
Maintain intense customer focus – We intend to continue to strengthen and deepen our customer relationships. We believe that
continued focus on customer service is important and will help to increase our net sales, operating performance and market share. To
accomplish this, we intend to continue to closely collaborate with our customers to design products that meet their specific needs. A
critical element of this strategy is to further reduce our design cycle time in order to quickly provide our customers with innovative
products. Additionally, to support our customer-focused strategy, we continue to expand our sales force and field application engineers,
particularly in Asia and Europe, during periods of growth. See “Risk Factors – We are and will continue to be under continuous pressure
from our customers and competitors to reduce the price of our products, which could adversely affect our growth and profit margins.”
in Part I, Item 1A of this Annual Report for additional information.
Enhance cost competitiveness – A key element of our success is our overall low-cost manufacturing base. While we believe our
manufacturing facilities are among the most efficient in the industry, we will continue to refine our proprietary manufacturing processes
and technology to achieve additional cost efficiencies. We have continued to make capital expenditures to enhance our existing
manufacturing capabilities.
Pursue selective strategic acquisitions – As part of our strategy to expand our semiconductor product offerings and to maximize
our market opportunities, we may acquire technologies, product lines or companies in order to enhance our product portfolio and
accelerate our new product offerings. Since 2006 we have acquired a number of companies that enhanced our product portfolio, including
Pericom Semiconductor Corporation (“Pericom”) in 2015. In 2019, we acquired from Texas Instruments a 200mm wafer fabrication
3
facility and operations located in Greenock, Scotland (“GFAB”). The acquisition of GFAB adds to our existing global footprint, but
also provides expanded wafer capacity to support our product growth, in particular for the automotive market. In November 2020 we
acquired LSC and its subsidiaries. The acquisition of LSC broadened our discrete product offerings, including providing us with a
leadership position in glass-passivated bridges and rectifiers that will allow us to extend our position in the automotive and industrial
market spaces consistent with our overall growth strategy. Further, the acquisition expanded our wafer fabrication and assembly and
test capacity. We believe we have an opportunity to improve LSC’s profitability through operating and manufacturing improvements as
well as increased factory utilization.
See “Risk Factors – Part of our growth strategy involves identifying and acquiring companies. We may be unable to identify
suitable acquisition candidates or consummate desired acquisitions and, if we do make any acquisitions, we may be unable to
successfully integrate any acquired companies with our operations, which could adversely affect our business, operating results and
financial condition” in Part I, Item 1A and Note 19 of “Notes to Consolidated Financial Statements” of this Annual Report for additional
information.
OUR PRODUCTS
Our market focus is on high-growth, end-user applications in the following areas:
Discrete semiconductor products, including: MOSFET, TVS, performance Schottky rectifiers; GPP bridges, GPP rectifiers and
performance Schottky diodes; Zener diodes and performance Zener diodes, including tight tolerance and low operating current types;
standard, fast, super-fast and ultra-fast recovery rectifiers; bridge rectifiers; switching diodes; small signal bipolar transistors; prebiased
transistors; MOSFETs; thyristor surge protection devices; and transient voltage suppressors;
Analog products, including: power management devices such as AC-DC and DC-DC converters, USB power switches, low
dropout and linear voltage regulators; standard linear devices such as operational amplifiers and comparators, current monitors, voltage
references, and reset generators; LED lighting drivers; audio amplifiers; and sensor products including Hall-effect sensors and motor
drivers;
Mixed-signal products including: High speed mux/demux, digital switches, interface, redrivers, universal level shifters/voltage
translators, clock ICs, and packet switches;
Standard logic products including low-voltage complementary metal-oxide-semiconductor (“CMOS”) and advanced high-speed
CMOS devices; ultra-low power CMOS logic; and analog switches;
Multichip products and co-packaged discrete, analog and mixed-signal silicon in miniature packages;
Silicon and silicon epitaxial wafers used in manufacturing these products; and
Frequency Control Products (“FCP”) used in many of today’s advanced electronic systems. FCPs are electronic components that
provide frequency references such as crystals and crystal oscillators for automotive, industrial, computing, communication and consumer
electronic products.
The following table lists the end-markets, some of the applications in which our products are used, and the percentage of net sales
for each end-market for the last three years:
End-Markets *
2021
2020
2019
Industrial
23%
23%
28%
Communications
16%
21%
23%
Consumer
19%
25%
23%
Computing
30%
20%
16%
Automotive
12%
11%
10%
* Amounts in the table may not total 100% due to rounding
4
End product applications
Lighting, power supplies, DC-DC conversion, security
systems, motor controls, DC fans, proximity sensors, solenoid
and relay driving, solar panel, HVAC/LED lighting, retrofit
bulb, smart meters and embedded computers
5G networks, smartphones, IP gateways, routers, switches,
hubs, fiber optics and charging solutions
Digital audio players and cameras, set-top boxes, LCD and
LED TV’s, game consoles, portable GPS, fitness and health
monitors, action cameras, smart watches, wearable IoT, home
automation and smart infrastructure
Notebooks, tablets, LCD monitors, printers, solid state and
hard disk drive, servers, storage, cloud computing, and data
center applications
ADAS (advanced driver assistance systems), telematics,
infotainment, lighting, BLDC motor control, electrification and
powertrain, and battery management
PRODUCT PACKAGING
Our device packaging technology includes a wide variety of innovative surface-mounted packages. Our focus on the development
of smaller, more thermally efficient, and increasingly-integrated packaging, is a critical component of our product development. We
provide a comprehensive offering of miniature high power density packaging, enabling us to fit our components into smaller and more
efficient packages, while maintaining the same device functionality and power handling capabilities. Smaller packaging provides a
reduction in the height, weight and board space required for our components. Our products are well suited for broad applications in the
industrial, communications, consumer electronics, computing and automotive applications as highlighted in the table above.
CUSTOMERS
We serve over 50,000 customers worldwide. Although some of these customers are direct, the majority of our customers are
served through our more than 50 distributors. Our customers represent leading direct sales customers representing a broad range of
industries, leading EMS providers and leading distributors.
For the years 2021, 2020 and 2019, our direct sales and EMS customers together accounted for 34%, 34% and 33%, respectively,
of our net sales. One customer, a broad-based distributor serving thousands of customers, accounted for 10% or more of our net sales in
2019, but not 10% of our outstanding accounts receivable at December 31, 2021 or 2020. In addition, for information concerning our
business with related parties, see “Business – Certain Relationships and Related Party Transactions.”
We believe that our close relationships with our customers have provided us with deeper insight into our customers’ product
needs. In addition to seeking to expand relationships with our existing customers, our strategy is to pursue new customers and diversify
our customer base by focusing on leading global consumer electronics companies and their EMS providers and distributors. See “Risk
Factors – Our customers require our products to undergo a lengthy and expensive qualification process without any assurance of
product sales and may demand to audit our operations from time to time. A failure to qualify a product or a negative audit finding
could adversely affect our net sales, operating results and financial condition.” in Part I, Item 1A of this Annual Report for additional
information.
We generally warrant that products sold to our customers will, at the time of shipment, be free from defects in workmanship and
materials and conform to our approved specifications. Subject to certain exceptions, our standard warranty extends for a period of one
year from the date of shipment. Warranty expense has not been significant. Generally, our customers may cancel orders on short notice
without incurring a penalty. See “Risk Factors – Our customer orders are subject to cancellation or modification usually with no penalty.
High volumes of order cancellation or reduction in quantities ordered could adversely affect our net sales, operating results and
financial condition.” in Part I, Item 1A of this Annual Report for additional information.
The tables below set forth net sales for the Company disaggregated into geographic locations based on shipment and by type
(direct sales or distributor) for the twelve months ended December 31, 2021, 2020 and 2019:
Net Sales by Region
Asia
Europe
Americas
Total net sales
Net Sales by Type
Direct sales
Distributor sales
Total net sales
2021
2020
2019
$
$
$
$
1,439,545
220,772
144,845
1,805,162
2021
607,645
1,197,517
1,805,162
$
$
$
$
961,376
171,985
95,854
1,229,215
2020
419,024
810,191
1,229,215
$
$
$
$
942,576
181,016
125,538
1,249,130
2020
407,851
841,279
1,249,130
Many of our customers are based in Asia or have manufacturing facilities in Asia. Net sales from products shipped to China for
the twelve months ended December 31, 2021, 2020 and 2019, was $938.1 million $649.9 million and $633.8 million, respectively.
SALES AND MARKETING
We market and sell our products worldwide through a combination of direct sales and marketing personnel, independent sales
representatives and distributors. We have direct sales personnel in the U.S., the U.K., France, Germany, Italy, Korea, Japan, Hong Kong,
Taiwan, Turkey, and China. We also have independent sales representatives in the U.S., Asia, and Europe. In addition, we have
distributors in the U.S., Asia, and Europe. As of December 31, 2021, our direct global sales and marketing organization consisted of
approximately 464 employees operating out of 20 offices. We have sales and marketing offices or representatives in Taipei, Taiwan;
Shanghai, Shenzhen, Wuhan, Guangzhou, Jinan, and Qingdao, China; Gyeonggi, South Korea; Munich and Frankfurt, Germany;
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Oldham, England; Tokyo, Japan; Milpitas, California and Plano, Texas, USA. As of December 31, 2021, we also had more than 15
independent sales representative firms marketing our products.
Our marketing group focuses on our product strategy, product development roadmap, new product introduction process, demand
assessment and competitive analysis. Our marketing programs include participation in industry tradeshows, technical conferences and
technology seminars, online marketing including our website, email and social media, sales training and public relations. Our marketing
group works closely with our sales and research and development teams to align our product development roadmap. Our marketing
group coordinates its efforts with our product development, operations and sales groups, as well as with our customers, sales
representatives and distributors. We support our customers through our global field application engineering and customer support
organizations.
Our website, www.diodes.com, features an extensive online product catalog with advanced search capabilities. This, coupled with
a comprehensive competitor cross-reference search, facilitates quick and thorough product selection. Our website also provides easy
access to our worldwide sales contacts and customer support and incorporates a distributor-inventory check to provide component
inventory availability.
MANUFACTURING OPERATIONS AND FACILITIES
We operate nine assembly and test facilities; seven located in China, one located in Taiwan and one located in Germany. We
operate eight wafer fabrication facilities; four located in China, two located in Taiwan and two located in Great Britain.
In 2010, we entered into an agreement with the Management Committee of the Chengdu Hi-Tech Industrial Development Zone
(the “CDHT”). In connection with the agreement with CDHT, we formed a joint venture entity with a Chinese company, Chengdu Ya
Guang Electronic Company Limited (“Ya Guang”), to establish a semiconductor assembly and test manufacturing facility in Chengdu,
China. We currently own approximately 98% of the equity of the joint venture entity. The CDHT granted the joint venture entity a 50-
year land lease, provides corporate and employee tax incentives, tax refunds, subsidies and other financial support. We believe this
arrangement will be a long-term, multi-year project that will provide us additional capacity as needed. As of December 31, 2021, we
have invested in this joint venture approximately $222.9 million, primarily for infrastructure, buildings and equipment-related capital
expenditures. For the years ending December 31, 2021 and 2020, our total cash capital expenditures were approximately $141.2 million
and $75.8 million, respectively.
Our manufacturing processes use many raw materials, including silicon wafers, aluminum and copper lead frames, gold and
copper wire and other metals, molding compounds and various chemicals and gases. We also rely on equipment and finished product
suppliers. We are continuously evaluating our raw material costs in order to reduce our consumption while protecting and maintaining
product performance. We have no material agreements with any of our suppliers that impose minimum or continuing supply obligations.
From time to time, suppliers may extend lead-times, limit supplies or increase prices due to capacity constraints or other factors.
Although we believe that supplies of the raw materials we use are currently and will continue to be available, shortages could occur in
various essential materials due to interruption of supply or increased demand in the industry. See “Risk Factors – We depend on third-
party suppliers for timely deliveries of raw materials, manufacturing services, product and process development, parts and equipment,
as well as finished products from other manufacturers, and our reputation with customers, operating results and financial condition
could be adversely affected if we are unable to obtain adequate supplies in a timely manner.” in Part I, Item 1A of this Annual Report
for additional information.
Our corporate headquarters is located in a facility we own in Plano, Texas. We also lease or own properties around the world for
use as sales and administrative offices, research and development centers, manufacturing facilities, warehouses and logistics centers.
The size or location of these properties can change from time to time based on our business requirements. See “Properties” in Part I,
Item 2 of this Annual Report for additional information.
BACKLOG
The amount of backlog to be shipped during any period is dependent upon various factors, and orders are subject to cancellation
or modification, usually with no penalty to the customer. Orders are generally booked from one month to greater than twelve months in
advance of delivery. The rate of booking of new orders can vary significantly from month to month. We, and the industry as a whole,
continue to experience a trend towards shorter customer-requested lead-times, and we expect this trend to continue. The amount of
backlog at any date depends upon various factors, including the timing of the receipt of orders, fluctuations in orders of existing product
lines, and the introduction of new product lines. Accordingly, we believe that the amount of our backlog at any date is not an accurate
measure of our future sales. We strive to maintain proper inventory levels to support our customers’ just-in-time order expectations.
Our backlog of orders, based on expected ship date, was $793.1 million at December 31, 2021 and $618.3 million at December 31,
2020.
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PATENTS, TRADEMARKS, COPYRIGHTS AND OTHER INTELLECTUAL PROPERTY RIGHTS AND LICENSES
We generally rely on a combination of patents, trademarks, copyrights, trade secrets, confidentiality agreements, license
agreements and policies to protect our intellectual property rights and proprietary technology, and to maintain our competitive position.
Despite these measures, we may not always succeed in protecting our intellectual property or preventing misappropriation of our
intellectual property rights. Other companies may independently develop similar technologies or seek to challenge, invalidate or
circumvent our intellectual property rights. We acquired or licensed or sublicensed numerous intellectual property rights in connection
with our acquisitions over the years. We have registered several of our trademarks in the U.S. and other countries, and seek to strengthen
our brand to distinguish our products in the marketplace. We maintain a patent portfolio comprised of both U.S. and foreign patents
and have patent applications pending in the U.S. and other countries. We expect to continue to file patent applications in the U.S. and
abroad covering technologies and products considered to be important to our business. We do not believe any individual patent, group
of patents, or the expiration thereof would materially affect the operation of our business. For proprietary technology or related know-
how that is not covered by our patent strategy, we seek to protect them as trade secrets through contracts and policies to maintain their
secrecy and confidentiality.
In the ordinary course of business, we may become party to disputes involving intellectual property rights. When we become
aware of companies infringing our intellectual property rights, we seek to enforce our rights through appropriate actions. We may
receive claims of infringement or inquiries regarding possible infringement of the intellectual property rights of others, demands seeking
royalty payments or other remedies, or cease and desist letters. Depending on the situations, we may defend our position, seek to
negotiate a license or engage in other acceptable resolution that is appropriate to our business.
We provide limited intellectual property indemnification for certain customers and may experience financial exposure related to
intellectual property indemnity claims. In certain situations, there are limits on our potential indemnification liability; however, we
cannot reasonably estimate the amount of potential payments, if any. Although to date we have not paid any significant amounts for
intellectual property indemnity claims, there can be no assurance that we will not face significant exposure in the future.
From time to time, we may license our intellectual property rights in connection with the development or sale of our products.
We may license certain product technology from other companies, but we do not consider any particular licensed technology to be
material to our operations or royalties paid by us to be material. We believe the duration and other terms of the licenses are appropriate
for our current needs. See “Risk Factors – We may be subject to claims of infringement of third-party intellectual property rights or
demands that we license third-party technology, which could result in significant expense, reduction in our intellectual property rights
and a negative impact on our business, operating results and financial condition.” in Part I, Item 1A of this Annual Report for additional
information.
Our foreign operations expose us to unique intellectual property technology risks compared to a company with fewer or no
international operations. For example, we are exposed to potential cyber security breaches that may target our employees or
infrastructure outside the United States. See “Risk Factors – Risks Related to Our International Operations” in Part I, Item 1A of this
Annual Report for a more detailed summary of the intellectual property technology risks associated with our international business
operations.
This Annual Report may include trade names and trademarks of other companies. Our use or display of other parties’ trade names,
trademarks or products is not intended to, and does not imply a relationship with, or endorsement or sponsorship of us by, the trade
names or trademark owners. All trademarks appearing in this Annual Report not owned by us are the property of their holders.
COMPETITION
Numerous semiconductor manufacturers and distributors serve the discrete, logic, analog and mixed-signal semiconductor
components market, making competition intense. Some of our larger competitors include Infineon Technologies A.G., Epson, Kyrocera,
NXP Semiconductors N.V., ON Semiconductor Corporation, Renesas Electronics Corporation, Rohm Electronics USA, LLC, Texas
Instruments and Vishay Intertechnology, Inc., many of which have greater financial, marketing, distribution, brand name recognition,
research and development, manufacturing and other resources than we do. Accordingly, we, from time to time, may reposition product
lines or decrease prices, which may affect our sales of, and profit margins on, such product lines. The price, features, availability and
quality of our products, and our ability to design products and deliver customer service in keeping with our customers’ needs, determine
the competitiveness of our products. We believe that our product focus, packaging expertise and our flexibility and ability to quickly
adapt to customer needs affords us competitive advantages. See “Risk Factors – The semiconductor business is highly competitive, and
increased competition may harm our business, operating results and financial condition.” in Part I, Item 1A of this Annual Report for
additional information.
ENGINEERING AND RESEARCH AND DEVELOPMENT
Our engineering and research and development groups consist of applications, circuit design, and product development engineers
who assist in determining the direction of our future product lines. One of their key functions is to work closely with market-leading
customers to further refine, expand and improve our product portfolio within our target product types and packages. In addition, customer
7
requirements and acceptance of new package types are assessed, and we seek to develop new, higher-density and more energy-efficient
packages to satisfy customers’ needs.
Product development engineers work directly with our semiconductor circuit design and layout engineers to develop and design
products that match our customers’ requirements. We seek to capture the customers’ electrical and packaging requirements and translate
those requirements into product specifications which can then be designed and manufactured to support customers’ end-system
applications.
HUMAN CAPITAL MANAGEMENT
As an international semiconductor company with a global footprint, the Company recognizes the important role its human capital
plays in a talent-based economy, and what the impact of effective and efficient human capital management has on its long-term strategic
success and sustainable growth. Our employees are our most critical asset—they contribute to our financial success for the benefit of all
our stakeholders and they are collaborators and contributors to the success of the communities in which we live and work. Human capital
management affects many aspects of our operations, including recruitment and talent acquisition, retention, training, workforce
optimization, performance management, workplace safety, employee health and wellness, employee engagement, and diversity and
inclusion.
Employee Communication - Developing two–way communications and deploying effective feedback mechanisms are critical
components in our employee engagement process. We have an open door policy, and encourage employees to have regular conversations
with their managers to share feedback and express concerns. We also solicit employee feedback informally through regular employee
interactions. We hold our managers accountable for setting clear expectations and goals with their teams, for providing coaching, as
well as identifying professional development opportunities for their teams, and for engaging in periodic performance reviews. We assist
our managers with performance management tools as needed to help them effectively manage their teams and optimize workforce
productivity.
Employee Retention, Training and Coaching - Employee retention is a critical element in our sustainable success. To maintain a
stable workforce, we provide skill advancement training and coaching, where appropriate, to help our employees enhance their existing
skillsets. With our support and preparation, our employees can continue to grow in their current role and maximize the value they
contribute to their current teams. Where a suitable rotation opportunity arises, we provide skill expansion training to equip employees
for these new positions. By honing their skills, our employees can leverage their institutional knowledge and experience to contribute
to the overall success of the organization. The availability of rotational opportunities can also help keep our employees motivated and
engaged.
Employee Safety - As an employer with a global workforce, we seek to provide safe working conditions and encourage our employees
to engage in safe behaviors while completing their assigned job duties. We have programs to enhance the occupational health and safety
of our employees and to promote employee wellness. These initiatives are designed to yield positive business outcomes, such as less
absenteeism, more motivated and engaged workforce, higher productivity, more consistent quality performance, and a better corporate
image in our local communities—which in turn should help us attract talent and maintain a stable workforce.
Employee Demographics - We regularly review our workforce demographics and organizational structure to ensure that we have an
efficient organization positioned to deliver cost-effective, high-quality products to our customers and to serve the markets in which we
operate. Diversity and inclusion considerations are embodied in many aspects of our operations, including pipeline opportunities.
As of December 31, 2021, we employed 8,921 employees (including approximately 984 temporary labor or independent
contractors). 7,863 of our employees were in Asia, 223 were in the Americas. and 835 were in Europe. None of our employees in Asia
or the U.S. are subject to a collective bargaining agreement and in Europe all our employees are covered by individual employment
agreements with some collective bargaining agreements in place. We consider our relations with our employees to be satisfactory. See
“Risk Factors – We may fail to attract or retain the qualified technical, sales, marketing, finance and management/executive personnel
required to operate our business successfully, which could adversely affect our business, operating results and financial condition.” in
Part I, Item 1A of this Annual Report for additional information.
ENVIRONMENTAL MATTERS
We are subject to a variety of U.S. federal, state, local and foreign governmental laws, rules and regulations related to the use,
storage, handling, discharge or disposal of certain toxic, volatile or otherwise hazardous chemicals used in our manufacturing process
in China, Taiwan and the U.K. where our wafer fabrication facilities are located, and in China, Taiwan and Germany where our assembly
and test facilities are located. Any of these regulations could require us to acquire equipment or to incur substantial other costs to comply
with environmental regulations or remediate problems. For the years ended December 31, 2021, 2020 and 2019, our capital expenditures
for environmental controls have not been material. See “Risk Factors – We are subject to many environmental laws and regulations that
could result in significant expenses and could adversely affect our business, operating results and financial condition.” in Part I, Item
1A of this Annual Report for additional information.
8
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
We conduct business with the following related parties: Keylink International (B.V.I.) Inc. and its subsidiaries and affiliates
(“Keylink”), Nuvoton Technology Corporation (“Nuvoton”) and Jiyuan Crystal Photoelectric Frequency Technology Ltd. (“JCP”).
Keylink is a 5% joint venture partner in our Shanghai assembly and test facilities. We sell products to, and purchase inventory
from, companies owned by Keylink. In addition, our subsidiaries in China lease their manufacturing facilities in Shanghai from, and
subcontract a portion of our manufacturing process (metal plating and environmental services) to Keylink. We also pay a consulting fee
to Keylink.
Our Chairman and CEO serves as a member of the Nuvoton board of directors. We purchase wafers from Nuvoton for use in our
production process.
JCP is an FCP manufacturing company from which we purchase material and in which we have made an equity investment. We
account for this investment using the equity method of accounting.
We consider our relationships with Keylink, Nuvoton and JCP to be mutually beneficial and plan to continue these strategic
alliances.
Prior November 30, 2020, LSC was our largest stockholder and a related party. As of November 30, 2020, we acquired LSC and
they are no longer a stockholder or related party.
The Audit Committee of our Board of Directors reviews all related party transactions for potential conflict of interest situations
on an ongoing basis. We believe that all related party transactions are on terms no less favorable to us than would be obtained from
unaffiliated third parties.
OTHER INFORMATION
We were incorporated in 1959 in California and reincorporated in Delaware in 1968.
SEASONALITY
Historically, our net sales have been affected by the cyclical nature of the semiconductor industry, whereby typically the fourth
quarter is the quarter of the calendar year with the smallest revenue. In addition, our net sales have been subject to some additional
seasonal variation with weaker net sales in the first quarter. See Note 20 (unaudited) of “Notes to Consolidated Financial Statements”
of this Annual Report for additional information on our quarterly results.
AVAILABLE INFORMATION
Our website address is http://www.diodes.com. We make available, free of charge through our website, our Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material is electronically
filed with or furnished to the Securities and Exchange Commission (the “SEC”).
The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other
information regarding issuers that file with the SEC.
Our website also provides investors access to financial and corporate governance information including our corporate governance
guidelines, Code of Business Conduct, whistleblower hotline, and press releases. The contents of our website and any other information
accessible through our website are not incorporated by reference into this Annual Report on Form 10-K.
Cautionary Statement for Purposes of the “Safe Harbor” Provision of the Private Securities Litigation Reform Act of 1995
Many of the statements, included in this Annual Report on Form 10-K contain forward-looking statements and forward-looking
information relating to the Company. We generally identify forward-looking statements by the use of terminology such as “may,” “will,”
“could,” “should,” “potential,” “continue,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” “project,” or similar phrases
or the negatives of such terms. We base these statements on our management’s beliefs as well as assumptions we made using information
currently available to us. Such statements are subject to risks, uncertainties and assumptions, including those identified in the “Risk
Factors” section of this Annual Report and the “Risk Factors” section of other documents we file with the SEC, as well as other matters
not yet known to us or not currently considered material by us. Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Given these
risks and uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. Forward-
looking statements do not guarantee future performance and should not be considered as statements of fact.
9
You should not unduly rely on these forward-looking statements, which speak only as of the date of this Annual Report on Form
10-K. Unless required by law, we undertake no obligation to publicly update or revise any forward-looking statements to reflect new
information or future events or otherwise. The Private Securities Litigation Reform Act of 1995 (the “Act”) provides certain “safe
harbor” provisions for forward-looking statements. All forward-looking statements, made on this Annual Report on Form 10-K, are
made pursuant to the Act.
10
Item 1A. Risk Factors.
Investing in our Common Stock involves a high degree of risk. You should carefully consider the following risks and other
information in this Annual Report before you make any trading decisions regarding our Common Stock. Our business, financial
condition or operating results may suffer if any of the following risks are realized. Additional risks and uncertainties not currently known
to us may also adversely affect our business, financial condition or operating results. If any of these risks or uncertainties occurs, the
trading price of our Common Stock could decline and you could lose part or all of your investment.
Summary
RISKS RELATED TO OUR BUSINESS
The impact of the continuing COVID-19 pandemic may have a material adverse effect on our business, financial condition and
results of operations.
During times of difficult market conditions, our fixed costs combined with lower net sales and lower profit margins may have a
negative impact on our business, operating results and financial condition.
Downturns in the highly cyclical semiconductor industry or changes in end-market demand could adversely affect our operating
results and financial condition.
The semiconductor business is highly competitive, and increased competition may harm our business, operating results and financial
condition.
Delays in initiation of production at facilities due to implementing new production techniques or resolving problems associated with
technical equipment malfunctions could adversely affect our manufacturing efficiencies, operating results and financial condition.
We are and will continue to be under continuous pressure from our customers and competitors to reduce the price of our products,
which could adversely affect our growth and profit margins.
Our customers require our products to undergo a lengthy and expensive qualification process without any assurance of product
sales and may demand to audit our operations from time to time. A failure to qualify a product or a negative audit finding could
adversely affect our net sales, operating results and financial condition.
Our customer orders are subject to cancellation or modification usually with no penalty. High volumes of order cancellation or
reduction in quantities ordered could adversely affect our net sales, operating results and financial condition.
Production at our manufacturing facilities could be disrupted for a variety of reasons, including natural disasters and other
extraordinary events, which could prevent us from producing enough of our products to maintain our sales and satisfy our
customers’ demands and could adversely affect our operating results and financial condition.
New technologies could result in the development of new products by our competitors and a decrease in demand for our products,
and we may not be able to develop new products to satisfy changes in demand, which would adversely affect our net sales, market
share, operating results and financial condition.
We may be subject to claims of infringement of third-party intellectual property rights or demands that we license third-party
technology, which could result in significant expense, reduction in our intellectual property rights and a negative impact on our
business, operating results and financial condition.
We depend on third-party suppliers for timely deliveries of raw materials, manufacturing services, product and process development,
parts and equipment, as well as finished products from other manufacturers, and our reputation with customers, operating results
and financial condition could be adversely affected if we are unable to obtain adequate supplies in a timely manner.
A significant part of our growth strategy involves acquiring companies. We may be unable to identify suitable acquisition candidates
or consummate desired acquisitions and, if we do make any acquisitions, we may be unable to successfully integrate any acquired
companies with our operations, which could adversely affect our business, operating results and financial condition.
We are subject to many environmental laws and regulations that could result in significant expenses and could adversely affect our
business, operating results and financial condition.
We may incur additional costs and face emerging risks associated environmental, social and governance (“ESG”) factors impacting
our operations.
Our products, or products we purchase from third parties for resale, may be found to be defective and, as a result, warranty claims
and product liability claims may be asserted against us and we may not have recourse against our suppliers, which may harm our
business, reputation with our customers, operating results and financial condition.
We may fail to attract or retain the qualified technical, sales, marketing, finance and management/executive personnel required to
operate our business successfully, which could adversely affect our business, operating results and financial condition.
11
We may not be able to achieve future growth, and any such growth may place a strain on our management and on our systems and
resources, which could adversely affect our business, operating results and financial condition.
Obsolete inventories as a result of changes in demand for our products and change in life cycles of our products could adversely
affect our business, operating results and financial condition.
If our direct sales customers or our distributors’ customers do not design our products into their applications, our net sales may be
adversely affected.
We are subject to interest rate risk that could have an adverse effect on our cost of working capital and interest expenses, which
could adversely affect our business, operating results and financial condition.
Our hedging strategies may not be successful in mitigating our risks associated with interest rates or foreign exchange exposure or
our counterparties might not perform as agreed.
We may have a significant amount of debt with various financial institutions worldwide. Any indebtedness could adversely affect our
business, operating results, financial condition and our ability to meet payment obligations under such debt.
Restrictions in our credit facilities may limit our business and financial activities, including our ability to obtain additional capital
in the future.
Our business benefits from certain Chinese government incentives. Expiration of, or changes to, these incentives could adversely
affect our operating results and financial condition.
We operate a global business through numerous foreign subsidiaries, and there is a risk that tax authorities will challenge our
transfer pricing methodologies or legal entity structures, which could adversely affect our operating results and financial condition.
Certain of our employees in the U.K. participate in a company-sponsored defined benefit plan which subjects the Company to risks
associated with the estimates and assumptions used in calculating expense and funding requirements recorded in the Company’s
consolidated financial statements. Inaccuracies or changes in these estimates could require material changes in the expense and
funding required.
Compliance with government regulations and customer demands regarding the use of “conflict minerals” may result in increased
costs and may have a negative impact on our business, operating results and financial condition.
If we fail to maintain an effective system of internal controls or discover material weaknesses in our internal control over financial
reporting, we may not be able to report our financial results accurately or detect fraud, which could harm our business and the
trading price of our Common Stock.
RISKS RELATED TO OUR INTERNATIONAL OPERATIONS
Our international operations subject us to risks that could adversely affect our operations.
A slowdown in the Chinese economy could limit the growth in demand for electronic devices containing our products, which would
have a material adverse effect on our business, operating results and prospects.
Economic regulation in China could materially and adversely affect our business, operating results and prospects.
We could be adversely affected by violations of the United States’ Foreign Corrupt Practices Act, the U.K.’s Bribery Act 2010,
China’s anti-corruption campaign and similar worldwide anti-bribery laws.
We are subject to foreign currency risk as a result of our international operations.
China is experiencing rapid social, political and economic change, which has increased labor costs and other related costs that could
make doing business in China less advantageous than in prior years. Increased labor costs in China could adversely affect our
business, operating results and financial condition.
We may not continue to receive preferential tax treatment in Asia, thereby increasing our income tax expense and reducing our net
income.
The distribution of any earnings of certain foreign subsidiaries may be subject to foreign income taxes, thus reducing our net income.
We could be adversely affected by the compromise or theft of our technology, know-how, data or intellectual property or a
requirement that we yield rights in technology, know-how, data stored in foreign jurisdictions or intellectual property that we use in
such foreign jurisdictions.
RISKS RELATED TO OUR COMMON STOCK
Variations in our quarterly operating results may cause our stock price to be volatile.
We may enter into future acquisitions and take certain actions in connection with such acquisitions that could adversely affect the
price of our Common Stock.
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Anti-takeover effects of certain provisions of Delaware law and our Certificate of Incorporation and Bylaws, may hinder a take-over
attempt.
GENERAL RISK FACTORS
The success of our business depends on the strength of the global economy and the stability of the financial markets, and any
weaknesses in these areas may have a material adverse effect on our net sales, operating results and financial condition.
We may be adversely affected by any disruption in our information technology systems, which could adversely affect our cash flows,
operating results and financial condition.
Terrorist attacks, or threats or occurrences of other terrorist activities, whether in the U.S. or internationally, may affect the markets
in which our Common Stock trades, the markets in which we operate and our operating results and financial condition.
System security risks, data protection breaches, cyber-attacks and other related cybersecurity issues could disrupt our internal
operations, and any such disruption could reduce our expected net sales, increase our expenses, damage our reputation and adversely
affect our stock price.
RISKS RELATED TO OUR BUSINESS
The impact of the continuing COVID-19 pandemic may have a material adverse effect on our business, financial condition and
results of operations.
National, state and local governments have responded to the COVID-19 pandemic in a variety of ways including, by declaring
states of emergency, restricting people from gathering in groups or interacting within a certain physical distance (i.e., social distancing),
ordering businesses to close or limit operations and ordering people to stay at home (i.e., shelter in place), and imposing travel restrictions
(including quarantine requirements).
Given these governmental actions, there is no assurance that we will be permitted to operate under every current or future
government order or other restriction and in every location where we maintain operations. Any long-term limitations on, or long-term
closures of, our manufacturing facilities in Asia or Europe would have a negative adverse impact on our ability to manufacture, sell and
ship products and service customers and would have a material adverse impact on our business, financial condition and results of
operations.
In addition, the COVID-19 pandemic may cause disruptions to the business and operations of our suppliers and customers, which
would adversely impact our business, financial condition and results of operations.
During times of difficult market conditions, our fixed costs combined with lower net sales and lower profit margins may have a
negative impact on our business, operating results and financial condition.
The semiconductor industry is characterized by high fixed costs. Notwithstanding our utilization of third-party manufacturing
capacity, most of our production requirements are met by our own manufacturing facilities. In difficult economic environments, we
could be faced with a decline in the utilization rates of our manufacturing facilities due to decreases in product demand. During such
periods, the costs associated with this excess capacity are expensed immediately and not capitalized into inventory, and we generally
experience lower gross margins. The market conditions in the future may adversely affect our utilization rates and consequently our
future gross margins, and this, in turn, could have a material negative impact on our business, operating results and financial condition.
Downturns in the highly cyclical semiconductor industry or changes in end-market demand could adversely affect our operating
results and financial condition.
The semiconductor industry is highly cyclical, and periodically experiences significant economic downturns characterized by
diminished product demand, production overcapacity, excess inventory, which can result in rapid erosion in average selling prices and
significant net sales declines, which may harm our operating results and financial condition.
In addition, we operate in a few narrow markets of the broader semiconductor market and, as a result, cyclical fluctuations may
affect these segments to a greater extent than they affect the broader semiconductor market. This may cause us to experience greater
fluctuations in our operating results and financial condition than compared to some of our broad line semiconductor competitors. In
addition, we may experience significant changes in our profitability as a result of variations in sales, changes in product mix, changes
in end-user markets and the costs associated with the introduction of new products. The markets for our products depend on continued
demand in the consumer electronics, computing, communications, industrial and automotive sectors. These end-user markets also tend
to be cyclical and may also experience changes in demand that could adversely affect our operating results and financial condition.
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The semiconductor business is highly competitive, and increased competition may harm our business, operating results and financial
condition.
The semiconductor industry in which we operate is highly competitive. We expect intensified competition from existing
competitors and new entrants. Competition is based on price, product performance, product availability, quality, reliability, technological
innovation and customer service. We compete in various markets with companies of various sizes, many of which are larger and have
greater resources or capabilities as it relates to financial, marketing, distribution, brand name recognition, research and development,
manufacturing and other resources than we have. As a result, they may be better able to develop new products, market their products,
pursue acquisition candidates and withstand adverse economic or market conditions. Most of our current major competitors are broad
line semiconductor manufacturers who often have a wider range of product types and technologies than we do. In addition, companies
not currently in direct competition with us may introduce competing products in the future. Some of our current major competitors are
Infineon Technologies A.G., Epson, Kyrocera, NXP Semiconductors N.V., ON Semiconductor Corporation, Renesas Electronics
Corporation, Rohm Electronics USA, LLC, Texas Instruments and Vishay Intertechnology, Inc. We may not be able to compete
successfully in the future, and competitive pressures may harm our business, operating results and financial condition.
Delays in initiation of production at facilities due to implementing new production techniques or resolving problems associated with
technical equipment malfunctions could adversely affect our manufacturing efficiencies, operating results and financial condition.
Our manufacturing efficiency has been and will be an important factor in our future profitability, and we may not be able to
maintain or increase our manufacturing efficiency. Our manufacturing and testing processes are complex, require advanced and costly
equipment and are continually being modified in our efforts to improve product performance and cost. Difficulties in the manufacturing
process can lower yields. Technical or other problems could lead to production delays, order cancellations and lost net sales. In addition,
any problems in achieving acceptable yields, construction delays, or other problems in upgrading or expanding existing facilities,
building new facilities, bringing new manufacturing capacity to full production or changing our process technologies, could also result
in capacity constraints, production delays and a loss of future net sales and customers. Our operating results also could be adversely
affected by any increase in fixed costs and operating expenses related to increases in production capacity if net sales do not increase
proportionately, or in the event of a decline in demand for our products. Any disruption at any of our wafer fabrication facilities or
assembly and test facilities could have a material adverse effect on our manufacturing efficiencies, operating results and financial
condition.
We are and will continue to be under continuous pressure from our customers and competitors to reduce the price of our products,
which could adversely affect our growth and profit margins.
Prices for our products tend to decrease over their life cycle. There is substantial and continuing pressure from customers to reduce
the total cost of purchasing our products. To remain competitive and retain our customers and gain new ones, we must continue to reduce
our costs through design, product and manufacturing improvements. We must also strive to minimize our customers’ shipping and
inventory financing costs and to meet their other goals for rationalization of supply and production. Our net sales growth and profit
margins will suffer if we cannot effectively continue to reduce our costs and keep our product prices competitive.
Our customers require our products to undergo a lengthy and expensive qualification process without any assurance of product
sales and may demand to audit our operations from time to time. A failure to qualify a product or a negative audit finding could
adversely affect our net sales, operating results and financial condition.
Prior to purchasing our products, our customers may require our products to undergo an extensive qualification process, which
involves rigorous reliability testing. This qualification process may continue for six months or longer. However, qualification of a
product by a customer does not ensure any sales of the product to that customer. In addition, we are focusing more on the automotive
and industrial markets. These markets, automotive in particular, require higher quality standards. Although we are working to ensure
our organization and products meet the more rigorous quality standards, there can be no assurances we will succeed. Even after
successful qualification and sales of a product to a customer, a subsequent revision to the product, changes in the product’s
manufacturing process or the selection of a new supplier by us may require a requalification process, which may result in delayed net
sales, foregone sales and excess or obsolete inventory. After our products are qualified, it can take an additional six months or more
before the customer commences volume production of components or devices that incorporate our products. Despite these uncertainties,
we devote substantial resources, including design, engineering, sales, marketing and management efforts, toward qualifying our products
with customers in anticipation of sales. If we are unsuccessful or delayed in qualifying any of our products with a customer, such failure
or delay would preclude or delay sales of such product to the customer, which may adversely affect our net sales, operating results and
financial condition.
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In addition, from time to time, our customers may demand an audit of our records, product manufacturing, qualification, and
packaging processes, business practices and other related items to verify that we have complied with our business obligations, standard
processes and procedures, product specifications and certain governing laws and regulations related to our business practices, and in
accordance with the agreed terms and conditions of mutual business agreements. If the audit shows any deficiency in any of these
categories, our customers may require us to implement extensive protocols to remedy the deficiency, assess us significant penalties,
refuse shipments of our products, return existing inventory, cancel orders, or terminate our business relationship, each of which will
adversely affect our net sales, operating results and financial condition.
Our customer orders are subject to cancellation or modification usually with no penalty. High volumes of order cancellation or
reduction in quantities ordered could adversely affect our net sales, operating results and financial condition.
All of our customer orders are subject to cancellation or modification, usually with no penalty to the customer. Orders are generally
made on a purchase order basis, rather than pursuant to long-term supply contracts, and are booked from immediate delivery to twelve
months or more in advance of delivery. The rate of booking new orders can vary significantly from month to month. We, and the
semiconductor industry as a whole, are experiencing a trend towards shorter customer-requested lead times, which is the amount of time
between the date a customer places an order and the date the customer requires shipment. Furthermore, our industry is subject to rapid
changes in customer outlook and periods of excess inventory due to changes in demand in the end-markets our industry serves. As a
result, many of our purchase orders are revised, and may be cancelled, with little or no penalty and with little or no notice. However, we
must still commit production and other resources to fulfilling these purchase orders even though they may ultimately be cancelled. If a
significant number of purchase orders are cancelled or product quantities ordered are reduced, and we are unable to timely generate
replacement orders, we may build up excess inventory and our net sales, operating results and financial condition may suffer.
Production at our manufacturing facilities could be disrupted for a variety of reasons, including natural disasters and other
extraordinary events, which could prevent us from producing enough of our products to maintain our sales and satisfy our
customers’ demands and could adversely affect our operating results and financial condition.
A disruption in production at our manufacturing facilities could have a material adverse effect on our business. Disruptions could
occur for many reasons, including fire, floods, hurricanes, typhoons, droughts, tsunamis, volcanoes, earthquakes, disease or other similar
natural disasters, unplanned maintenance or other manufacturing problems, labor shortages, power outages or shortages,
telecommunications failures, strikes, transportation interruption, government regulation, terrorism or other extraordinary events,
including epidemics (such as the outbreak of the COVID-19 virus) and related travel restrictions,. Such disruptions may cause direct
injury or damage to our employees and property and related internal controls with significant indirect consequences. Alternative facilities
with sufficient capacity or capabilities may not be available, may cost substantially more or may take a significant time to start
production, each of which could negatively affect our business and financial performance. If one of our key manufacturing facilities is
unable to produce our products for an extended period of time, our sales may be reduced by the shortfall caused by the disruption, and
we may not be able to meet our customers’ needs, which could cause our customers to seek other suppliers. Such disruptions could have
an adverse effect on our operating results and financial condition.
New technologies could result in the development of new products by our competitors and a decrease in demand for our
products, and we may not be able to develop new products to satisfy changes in demand, which would adversely affect our net sales,
market share, operating results and financial condition.
Our product range and new product development program are focused on low pin count semiconductor devices with one or more
active or passive components. Our failure to develop new technologies, or anticipate or react to changes in existing technologies, either
within or outside of the semiconductor market, could materially delay development of new products, which could result in a decrease
in our net sales and a loss of market share. The semiconductor industry is characterized by rapidly changing technologies and industry
standards, together with frequent new product introductions. Our financial performance depends on our ability to design, develop,
manufacture, assemble, test, market and support new products and product enhancements on a timely and cost-effective basis. We may
not successfully identify new product opportunities or develop and bring new products to market or succeed in selling them into new
customer applications in a timely and cost-effective manner.
Products or technologies developed by other companies may render our products or technologies obsolete or noncompetitive, and
since we operate primarily in a narrower segment of the broader semiconductor industry, this may have a greater effect on us than it
would if we were a broad-line semiconductor supplier with a wider range of product types and technologies. Many of our competitors
are larger and more established international companies with greater engineering and research and development resources than us. Our
failure to identify or capitalize on any fundamental shifts in technologies in our product markets, relative to our competitors, could harm
our business, have a material adverse effect on our competitive position within our industry and harm our relationships with our
customers. In addition, to remain competitive, we must continue to reduce package sizes, improve manufacturing costs and expand our
sales. We may not be able to accomplish these goals, which would adversely affect our net sales, market share, operating results and
financial condition.
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We may be subject to claims of infringement of third-party intellectual property rights or demands that we license third-party
technology, which could result in significant expense, reduction in our intellectual property rights and a negative impact on our
business, operating results and financial condition.
The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights. From time to time,
third parties have asserted, and may in the future assert, patent, copyright, trademark and other intellectual property rights to technology
that is important to our business and have demanded, and may in the future demand, that we license their patents and technology. Any
litigation to determine the validity of allegations that our products infringe or may infringe these rights, including claims arising through
our contractual indemnification of our customers, or claims challenging the validity of our patents, regardless of its merit or resolution,
could be costly and divert the efforts and attention of our management and technical personnel. We may not prevail in litigation given
the complex technical issues and inherent uncertainties in intellectual property litigation. If litigation results in an adverse ruling, we
could be required to:
• pay substantial damages for past, present and future use of the infringing technology;
• cease manufacture, use or sale of infringing products;
• discontinue the use of infringing technology;
• expend significant resources to develop non-infringing technology;
• pay substantial damages to our customers or end-users to discontinue use or replace infringing technology with non-infringing
technology;
• license technology from the third party claiming infringement, which license may not be available on commercially reasonable
terms, or at all; or
• relinquish intellectual property rights associated with one or more of our patent claims, if such claims are held invalid or
otherwise unenforceable.
We depend on third-party suppliers for timely deliveries of raw materials, manufacturing services, product and process development,
parts and equipment, as well as finished products from other manufacturers, and our reputation with customers, operating results
and financial condition could be adversely affected if we are unable to obtain adequate supplies in a timely manner.
Our manufacturing operations depend upon obtaining adequate supplies of raw materials, manufacturing services, product and
process development, parts and equipment on a timely basis from third parties. In some instances, a supplier may be our sole-source
supplier. Any interruption in, or change in the cost or quality of, the supply of raw materials, manufacturing services, product and process
development, parts or equipment needed to manufacture our products could adversely affect our reputation with customers, operating
results and financial condition.
In addition, we sell finished products from other manufacturers. Our business could also be adversely affected if there are quality
problems with the finished products we sell. From time to time, various suppliers may extend lead-times, limit supplies or increase
prices due to capacity constraints or other factors. We have no long-term purchase contracts with any of these manufacturers and,
therefore, have no contractual assurances of continued supply, pricing or access to finished products that we sell, and any such
manufacturer could discontinue supplying to us at any time. Additionally, some of our suppliers of finished products or wafers compete
directly with us and may, in the future, choose not to supply products to us.
A significant part of our growth strategy involves acquiring companies. We may be unable to identify suitable acquisition candidates
or consummate desired acquisitions and, if we do make any acquisitions, we may be unable to successfully integrate any acquired
companies with our operations, which could adversely affect our business, operating results and financial condition.
A significant part of our growth strategy involves acquiring companies. We may be unsuccessful in identifying suitable acquisition
candidates, or we may be unable to consummate a desired acquisition. To the extent we do make acquisitions, if we are unsuccessful in
integrating these companies or their operations or product lines with our operations, or if integration is more difficult than anticipated,
we may experience disruptions that could have a material adverse effect on our business, operating results and financial condition. In
addition, we may not realize all of the benefits we anticipate from any such acquisitions. Some of the risks that may affect our ability to
integrate or realize any anticipated benefits from acquisitions that we may make include those associated with:
• higher than anticipated acquisition costs and expenses;
• use a significant portion of our cash and incur additional debt;
• issue equity securities, which would dilute current stockholders’ percentage ownership;
• dilute existing shareholders;
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• incur or assume contingent liabilities, known or unknown;
• incur amortization expenses related to intangibles;
• incur large, immediate accounting write-offs;
• incur substantial expense and diversion of management attention, regardless of the success of the acquisition;
• create goodwill and other intangible assets that may require impairment charges in the future;
• unexpected losses of key employees or customers of the acquired company;
• delays in obtaining customer qualification of acquired facilities;
• bringing the acquired company’s standards and processes, including disclosure controls and procedures and internal control
over financial reporting, into conformance with our operations;
• coordinating our new product and process development;
• hiring additional management and other critical personnel;
• increasing the scope, geographic diversity and complexity of our operations;
• difficulties in consolidating facilities and transferring processes and know-how;
• difficulties in reducing costs of the acquired entity’s business;
• diversion of management’s attention from the management of our business; and
• adverse effects on existing business relationships with customers.
We may ultimately not be successful in overcoming these risks or any other problems encountered in connection with acquisitions.
We are subject to many environmental laws and regulations that could result in significant expenses and could adversely affect our
business, operating results and financial condition.
We are subject to a variety of U.S. federal, state, local and foreign governmental laws, rules and regulations related to the use,
storage, handling, discharge or disposal of certain toxic, volatile or otherwise hazardous chemicals used in manufacturing our products
throughout the world. Any of these regulations could require us to acquire equipment or to incur substantial other expenses to comply
with environmental regulations. Any failure to comply with present or future environmental laws, rules and regulations could result in
fines, suspension of production or cessation of operations, any of which could have a material adverse effect on our business, operating
results and financial condition.
We may incur additional costs and face emerging risks associated environmental, social and governance (“ESG”) factors impacting
our operations.
Stakeholders such as investors, employees and the communities in which we operate have increased their focus on our ESG and
sustainability related activities, specifically in the corporate social and environmental responsibility (“CSER”) areas. Some investors
and customers may use our ESG and sustainability related information as well as third party ESG ratings and metrics to guide their
investment strategies and product purchases. If our CSER policies and practices are perceived to be inadequate, we could face
reputational damages or loss of sales and our financial results may be adversely affected.
Our products, or products we purchase from third parties for resale, may be found to be defective and, as a result, warranty claims
and product liability claims may be asserted against us and we may not have recourse against our suppliers, which may harm our
business, reputation with our customers, operating results and financial condition.
Our products, or products we purchase from third parties for resale, are typically sold at prices that are an insignificant portion of
the overall value of the equipment or other goods in which they are incorporated. Since a defect or failure in our products could give
rise to failures in the end-products that incorporate them (and consequential claims for damages against our customers from their
customers), we may face claims for damages that are disproportionate to the net sales and profits we receive from the products involved
and we may not have recourse against our suppliers. Even in cases where we do not believe we have legal liability for such claims, we
may choose to pay for them to retain a customer’s business or goodwill or to settle claims to avoid protracted litigation. Our operating
results and business could be adversely affected as a result of a significant quality or performance issue in our products, if we are required
or choose to pay for the damages that result. We may choose not to carry liability insurance, may not have sufficient insurance coverage,
or may not have sufficient resources, to satisfy all possible warranty claims and product liability claims. In addition, any perception that
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our products are defective would likely result in reduced sales of our products, loss of customers and harm to our business, reputation,
operating results and financial condition.
We may fail to attract or retain the qualified technical, sales, marketing, finance and management/executive personnel required to
operate our business successfully, which could adversely affect our business, operating results and financial condition.
Our future success depends, in part, upon our ability to attract and retain highly qualified technical, sales, marketing, finance and
managerial personnel. Personnel with the necessary expertise are scarce and competition for personnel with these skills is intense. We
may not be able to retain existing key technical, sales, marketing, finance and managerial employees or be successful in attracting,
assimilating or retaining other highly qualified technical, sales, marketing, finance and managerial/executive personnel in the future.
For example, we have faced, and continue to face, intense competition for qualified technical and other personnel in China, where our
assembly and test facilities are located. A number of U.S. and multi-national corporations, both in the semiconductor industry and in
other industries, have recently established and are continuing to establish factories and plants in China, and the competition for qualified
personnel has increased significantly as a result. If we are unable to retain existing key employees or are unsuccessful in attracting new
highly qualified employees, our business, operating results and financial condition could be materially and adversely affected.
We may not be able to achieve future growth, and any such growth may place a strain on our management and on our systems and
resources, which could adversely affect our business, operating results and financial condition.
Our ability to successfully grow our business requires effective planning and management. Our past growth, and our targeted
future growth, may place a significant strain on our management and on our systems and resources, including our financial and
managerial controls, reporting systems and procedures. In addition, we will need to continue to train and manage our workforce
worldwide. If we are unable to effectively plan and manage our growth effectively, our business and prospects will be harmed and we
will not be able to maintain our profitable growth, which could adversely affect our business, operating results and financial condition.
Obsolete inventories as a result of changes in demand for our products and change in life cycles of our products could adversely
affect our business, operating results and financial condition.
The life cycles of some of our products depend heavily upon the life cycles of the end-products into which our products are
designed. End-market products with short life cycles require us to manage closely our production and inventory levels. Inventory may
also become obsolete because of adverse changes in end-market demand. We may in the future be adversely affected by obsolete or
excess inventories, which may result from unanticipated changes in the estimated total demand for our products or the estimated life
cycles of the end-products into which our products are designed. In addition, some customers restrict how far back the date of
manufacture for our products can be and certain customers may stop ordering products from us and go out of business due to adverse
economic conditions; therefore, some of our product inventory may become obsolete and, thus, adversely affect our business, operating
results and financial condition.
If our direct sales customers or our distributors’ customers do not design our products into their applications, our net sales may be
adversely affected.
We expect an increasingly significant portion of net sales will come from products we design specifically for our customers.
However, we may be unable to achieve these design wins. In addition, a design win from a customer does not guarantee future sales to
that customer.
We are subject to interest rate risk that could have an adverse effect on our cost of working capital and interest expenses,
which could adversely affect our business, operating results and financial condition.
We currently have a floating rate debt that is subject to interest rate changes. See “Liquidity and Capital Resources” below and
Note 8 of “Notes to Consolidated Financial Statements” of this Annual Report for additional information. A rise in interest rates could
have an adverse impact upon our cost of working capital and our interest expense. Based on our debt balances at December 31, 2021,
an increase or decrease in interest rates by 1.0% for the year on our long-term debt would increase or decrease our annual interest rate
expense by approximately $2.9 million.
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Our hedging strategies may not be successful in mitigating our risks associated with interest rates or foreign exchange exposure or
our counterparties might not perform as agreed.
We use interest rate swaps and foreign exchange forward contracts to provide a level of protection against interest rate risks and
foreign exchange exposure, but no hedging strategy can protect us completely. The nature and timing of hedging transactions influence
the effectiveness of these strategies. Poorly designed strategies, improperly executed and documented transactions or inaccurate
assumptions could actually increase our risks and losses. In addition, hedging strategies involve transaction and other costs. The hedging
strategies and the derivatives that we use may not be able to adequately offset the risks of interest rate volatility and our hedging
transactions may result in or magnify losses. Furthermore, interest rate and foreign exchange derivatives may not be available on
favorable terms or at all, particularly during economic downturns. Any of the foregoing risks could adversely affect our business,
financial condition and results of operations. We are exposed to counterparty credit risk in the event of non-performance by
counterparties to the interest rate swaps and foreign exchange contracts.
We may have a significant amount of debt with various financial institutions worldwide. Any indebtedness could adversely
affect our business, operating results, financial condition and our ability to meet payment obligations under such debt.
We may have a significant amount of debt and substantial debt service requirements on our borrowings, including our credit
facilities with various financial institutions worldwide. As of December 31, 2021, $285.0 million in long-term debt was outstanding. In
addition and we have short-term foreign credit facilities with borrowing capacities of approximately $122.5 million with an unused
amount of $103.4 million.
Our outstanding debt could have significant consequences on our future operations, including:
• making it more difficult for us to meet our payment and other obligations under our outstanding debt agreements;
• resulting in one or more events of default if we fail to comply with the financial and other restrictive covenants contained in
our debt agreements, which events of default could result in all of our debt becoming immediately due and payable and, in the
case of an event of default under our secured debt could permit the lenders to foreclose on our assets securing that debt;
• reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate
purposes, and limiting our ability to obtain additional financing for these purposes;
• subjecting us to the risks of increased sensitivity to interest rate increases on our indebtedness with variable interest rates;
• limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry
in which we operate and the general economy; and
• placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged.
Any of the above-listed factors could have an adverse effect on our business, operating results, financial condition and our ability
to meet our payment obligations under our debt agreements.
Current interest rates on a significant amount of our outstanding debt are variable and include the use of the London Interbank
Offered Rate (“LIBOR”). On March 5, 2021, the U.K. Financial Conduct Authority, the regulator of LIBOR, announced that USD
LIBOR rates will no longer be published after June 30, 2023. While we expect LIBOR to be available in substantially its current form
until at least the end of June 30, 2023, it is possible that LIBOR will become unavailable prior to that point which may impact our credit
facility and interest rate swaps. The use of an alternative base rate or a benchmark replacement rate as a basis for calculating interest
with respect to any outstanding variable rate indebtedness could lead to an increase in the interest we pay and a corresponding increase
in our costs of capital or otherwise have a material adverse impact on our business, financial condition or results of operations.
Restrictions in our credit facilities may limit our business and financial activities, including our ability to obtain additional capital
in the future.
Our U.S. credit facility contains covenants imposing various restrictions on our business and financial activities. These restrictions
may affect our ability to operate our business and undertake certain financial activities and may limit our ability to take advantage of
potential business or financial opportunities as they arise. The restrictions these covenants place on us include limitations on our ability
to incur liens, incur indebtedness, make investments, dissolve or merge or consolidate with or into another entity, dispose of certain
property, make restricted payments (including dividends and share repurchases), issue or sell equity interests, engage in other different
material lines of business, conduct related party transactions, enter into certain burdensome contractual obligations and use proceeds
from our credit facility to purchase or carry margin stock or to extend credit to others for the same purpose. Our U.S. credit facility also
requires us to meet certain financial ratios, including a minimum consolidated fixed charge coverage ratio and a maximum consolidated
leverage ratio.
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Our ability to comply with the U.S. credit facility may be affected by events beyond our control, including prevailing economic,
financial and industry conditions. The breach of any of these covenants or restrictions could result in an event of default under the
facility. An event of default under the facility would permit the lenders under the facility to declare all amounts owed under such facility
to be immediately due and payable in full. Upon acceleration of our indebtedness, we may be unable to repay the accelerated amount of
principal and interest on the credit facilities that would then be due. See “Management’s Discussion and Analysis of Financial Condition
and Results of Operations – Financial Condition-Debt instruments” in Part II, Item 7 of this Annual Report for additional information.
Our business benefits from certain Chinese government incentives. Expiration of, or changes to, these incentives could adversely
affect our operating results and financial condition.
The Chinese government has provided various incentives to technology companies, including our manufacturing facilities located
in Chengdu, Jinan, Shanghai and Wuxi, China, in order to encourage development of the high-tech industry. These incentives include
reduced tax rates and other measures. As a result, we are entitled to a preferential enterprise income tax rate of 15% so long as our
manufacturing facilities continue to maintain their High and New Technology Enterprise (“HNTE”) status. If we were to no longer meet
the HNTE requirements, our statutory tax rate for our approved Shanghai facilities would increase to 25% for any period in which an
audit shows we were not compliant, which could adversely affect our operating results and financial condition. One of our
manufacturing facilities and one of our wafer fabrication facilities located in Shanghai were approved for HNTE status for the tax years
2018-2020. The Company expects to continue to meet HTND requirements in future years. HNTE qualification requires, but is not
limited to, metrics based on China research and development expenditures as well as research and development headcount and overall
college-degreed headcount. Any prior years that have already been approved are subject to audit requirements. If we were to no longer
meet the HNTE requirements, our statutory tax rate for our approved Shanghai facilities would increase to 25% for any period in which
an audit shows we were not compliant, which could adversely affect our operating results and financial condition.
In connection with our joint venture in Chengdu, China, with Ya Guang, we have qualified for tax incentives offered in the Go
West Initiative (“Go West”), where companies are entitled to a preferential income tax rate of 15% for doing business in western China.
If we were to no longer meet the Go West requirements, our statutory tax rate for this joint venture would increase to 25%, which could
adversely affect our operating results and financial condition.
The impact of our HNTE and Go West status, collectively called tax holidays, decreased our tax expense by approximately ($0.2)
million, $0.9 million and $3.1 million for the years ended December 31, 2021, 2020 and 2019, respectively. The benefit of the tax
holidays on basic and diluted earnings per share for the twelve months ended December 31, 2021, 2020 and 2019 was approximately
$0.00, $0.02 and $0.06, respectively.
We operate a global business through numerous foreign subsidiaries, and there is a risk that tax authorities will challenge our
transfer pricing methodologies or legal entity structures, which could adversely affect our operating results and financial condition.
We conduct operations worldwide through our foreign subsidiaries and are, therefore, subject to complex transfer pricing
regulations in the jurisdictions in which we operate. Transfer pricing regulations generally require that, for tax purposes, transactions
between related parties be priced on a basis that would be comparable to an arm’s length transaction between unrelated parties. There is
uncertainty and inherent subjectivity in complying with these rules. To the extent that any foreign tax authorities disagree with our
transfer pricing policies, we could become subject to significant tax liabilities and penalties. Based on our current knowledge and
probability assessment of potential outcomes, we believe that we have provided for all tax exposures. However, the ultimate outcome
of a tax examination could differ materially from our provisions and could have a material adverse effect on our business, financial
condition, operating results and cash flows.
Our legal organizational structure could result in unanticipated unfavorable tax or other consequences which could have a material
adverse effect on our financial condition and operational results. In some countries, we maintain multiple entities for tax or other
purposes. Changes in tax laws, regulations, future jurisdictional profitability of us and our subsidiaries, and related regulatory
interpretations in the countries in which we operate may impact the taxes we pay or tax provision we record, which could have a material
adverse effect on our operating results. In addition, any challenges to how our entities are structured or realigned or their business
purpose by taxing authorities could result in us becoming subject to significant tax liabilities and penalties which could have a material
adverse effect on our business, financial condition, operating results and cash flows.
Certain of our employees in the U.K. participate in a company-sponsored defined benefit plan (the “Plan”), which subjects the
Company to risks associated with the estimates and assumptions used in calculating expense and funding requirements recorded in
the Company’s consolidated financial statements. Inaccuracies or changes in these estimates could require material changes in the
expense and funding required.
In accounting for the Plan, we are required to make actuarial assumptions that are used to calculate the earning value of the related
assets, where applicable, and liabilities and the amount of expenses to be recorded in our consolidated financial statements. Assumptions
include, but are not limited to, the expected return on plan assets, discount rates, and mortality rates. While we believe the underlying
20
assumptions are appropriate, the carrying value of the related assets and liabilities and the actual amount of expenses recorded in the
consolidated financial statements could differ materially from the assumptions used.
The Plan’s obligation to pay pensions is estimated by using actuarial assumptions. To the extent that the Plan’s assets are not
sufficient to meet the estimated amount of the Plan’s obligations, further funding of the Plan will be required by the Plan's sponsoring
employers, Diodes Zetex Limited and Diodes Zetex Semiconductors Limited, over an agreed upon deficit recovery period.
As of December 31, 2021, the benefit obligation of the plan was approximately $166.8 million and the total assets in such plan
were approximately $155.0 million. Therefore, the plan was underfunded by approximately $11.7 million. The difference between plan
obligations and assets, or the funded status of the plan, is a significant factor in determining the net periodic benefit costs of the plan
and the ongoing funding requirements of the plan.
The trustees under the Plan are required to review the Plan’s funding position every three years, with the next review scheduled in
March 2022. The Plan most recent funding valuation as of March 31, 2019 resulted in a deficit of approximately GBP 26.7 million
(approximately $34.7 million based on a GBP: USD exchange rate of 1:1.3). As a result of this valuation we agreed to a revised schedule
of contributions of GBP 2.0 million (approximately $2.6 million based on a GBP: USD exchange rate of 1:1.3) to be paid in annual
installments with effect from April 1, 2020 to address the deficit revealed by the valuation (with the first payment to be made by March
31, 2021, and payments to be made by December 31 each year thereafter). If we fail to reach an agreement with the Plan trustees, as we
are required to do every three years, the pension regulator in the U.K. could impose contribution requirements on Diodes Zetex Limited
and Diodes Zetex Semiconductors Limited. This could have a material adverse effect on our cash flows, operating results and financial
condition.
Compliance with government regulations and customer demands regarding the use of “conflict minerals” may result in increased
costs and may have a negative impact on our business, operating results and financial condition.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 imposes disclosure requirements regarding the use of
certain minerals, which are mined from the Democratic Republic of Congo and adjoining countries, known as conflict minerals. These
requirements affect the pricing, sourcing and availability of minerals used in the manufacture of semiconductor devices (including our
products). We are incurring additional costs associated with complying with the disclosure requirements, such as costs related to
determining the source of any conflict minerals used in our products. Our supply chain is complex, and we may be unable to verify the
origins for all metals used in our products. Customers may demand that the products they purchase be free of conflict minerals.
Therefore, we may encounter challenges with our customers and stockholders if we are unable to certify that our products are conflict
free. This requirement could affect the sourcing and availability of products we purchase from suppliers. This may reduce the number
of suppliers that may be able to provide conflict-free products, and may affect our ability to obtain products in sufficient quantities to
meet customer demand or at competitive prices.
If we fail to maintain an effective system of internal controls or discover material weaknesses in our internal control over financial
reporting, we may not be able to report our financial results accurately or detect fraud, which could harm our business and the
trading price of our Common Stock.
Effective internal controls are necessary for us to produce reliable financial reports and are important in our effort to prevent
financial fraud. We are required to periodically evaluate the effectiveness of the design and operation of our internal controls. These
evaluations may result in the conclusion that enhancements, modifications or changes to our internal controls are necessary or desirable.
While management evaluates the effectiveness of our internal controls on a regular basis, these controls may not always be effective.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate. If we fail to maintain an effective system
of internal controls or if management or our independent registered public accounting firm were to discover material weaknesses in our
internal controls, we may be unable to produce reliable financial reports or prevent fraud, which could harm our financial condition and
operating results, and could result in a loss of investor confidence and a decline in our stock price.
21
RISKS RELATED TO OUR INTERNATIONAL OPERATIONS
Our international operations subject us to risks that could adversely affect our operations.
The majority of our manufacturing facilities are located in China. For the twelve months ended 2021, 2020 and 2019 our Asian
and European subsidiaries represented approximately 76%, 78% and 77%, respectively, of our net sales. There are risks inherent in
doing business internationally, including the following, any of which could cause harm to our business:
• changes in, or impositions of, legislative or regulatory requirements, including income tax or value added tax laws in the U.S.
and in the countries in which we manufacture or sell our products;
• compliance with trade or other laws in a variety of jurisdictions;
• trade restrictions, transportation delays, work stoppages, and economic and political instability;
• changes in import/export regulations, tariffs and freight rates, environmental regulations and land use rights;
• difficulties in collecting receivables and enforcing contracts;
• currency exchange rate fluctuations;
• restrictions on the transfer of funds from foreign subsidiaries to the U.S.;
• the possibility of international conflict, particularly between or among China, the U.K., Germany, Taiwan and the U.S.;
• legal, regulatory, political and cultural differences among the countries in which we do business;
• longer customer payment terms; and
• changes in U.S. or foreign tax regulations.
We believe that our operations are in compliance with all applicable legal and regulatory requirements in all material respects.
However, changes in the political environment or government policies in those jurisdictions could result in revisions to laws or
regulations or their interpretation and enforcement. In addition, a significant destabilization of relations between or among China, the
U.K., Germany, Hong Kong, Taiwan and the U.S. could result in restrictions on our operations or the sale of our products or the forfeiture
of our assets in these jurisdictions.
In addition to the ongoing issues regarding tariffs, China has been stepping up efforts to design and manufacture semiconductors
itself rather than buy from U.S. companies, amid fears that sanctions might cripple its high-tech industry. U.S. restrictions on exports to
Chinese telecoms equipment makers have sharpened Beijing’s focus on semiconductor self-sufficiency. China’s ministry of finance
announced tax breaks “to support the development of integrated circuit design and the software industry,” cancelling corporate taxes for
some domestic Chinese companies for two years. Although the outcome of these efforts is uncertain, the development of such capacity
in China would likely have a material adverse effect on our profitability and results of operations.
A slowdown in the Chinese economy could limit the growth in demand for electronic devices containing our products, which would
have a material adverse effect on our business, operating results and prospects.
We believe that an increase in demand in China for electronic devices that include our products will be an important factor in our
future growth. Weakness in the Chinese economy could result in a decrease in demand for electronic devices containing our products
and, thereby, materially and adversely affect our business, operating results and prospects.
Economic regulation in China could materially and adversely affect our business, operating results and prospects.
We have a significant portion of our manufacturing capacity in mainland China. In addition, in 2021 approximately 52% of our
total sales were shipped to customers in China. In recent years, the Chinese economy has experienced periods of rapid expansion and
wide fluctuations in the rate of inflation. In response to these factors, the Chinese government has, from time to time, adopted measures
to regulate growth and contain inflation, including measures designed to restrict credit or control prices. Such actions in the future could
increase the cost of doing business in China or decrease the demand for our products in China and, thereby, have a material adverse
effect on our business, operating results and prospects.
We could be adversely affected by violations of the United States’ Foreign Corrupt Practices Act, the U.K.’s Bribery Act 2010,
China’s anti-corruption campaign and similar worldwide anti-bribery laws.
The United States’ Foreign Corrupt Practices Act (“FCPA”), the United Kingdom’s Bribery Act 2010 (the “U.K. Bribery Act”),
China’s anti-corruption campaign and similar anti-bribery laws in other jurisdictions generally prohibit companies and their
intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. Our policies
mandate compliance with these anti-bribery laws. We operate in many parts of the world that may have experienced governmental
corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and
22
practices. We train our staff concerning FCPA, the U.K. Bribery Act and related anti-bribery laws. We have established procedures and
controls to monitor internal and external compliance. There can be no assurance that our internal controls and procedures will protect
us from reckless or criminal acts committed by our employees or agents, and we have no third party attestation to the effectiveness of
our internal controls related to fraud and corruption. If we are found to be liable for FCPA, the U.K. Bribery Act and other anti-bribery
law violations (either due to our own acts or inadvertence, or due to the acts or inadvertence of others), we could incur criminal or civil
penalties or other sanctions, which could have a material adverse effect on our business and operating results.
We are subject to foreign currency risk as a result of our international operations.
We face exposure to adverse movements in foreign currency exchange rates, principally the Chinese Yuan, the Taiwanese dollar,
the Euro and the British Pound Sterling and, to a lesser extent, the Japanese Yen and the Hong Kong dollar. Our income and expenses
are based on a mix of currencies and a decline in one currency relative to the other currencies could adversely affect our operating
results. Furthermore, our operating results are reported in U.S. dollars, which is our reporting currency. In the event the U.S. dollar
weakens against a foreign currency, we will experience a currency transaction loss, which could adversely affect our operating results.
Also, fluctuations in foreign currency exchange rates may have an adverse impact and be increasingly influential to our overall sales,
profits and operating results as amounts that are measured in foreign currency are translated back to U.S. dollars for reporting purposes.
Our foreign currency risk may change over time as the level of activity in foreign markets grows and could have an adverse impact upon
our financial results, especially if the portion of our sales attributable to Europe increases. We have taken, and plan to continue to take,
efforts to mitigate some of our foreign currency exposure by entering into foreign exchange hedging agreements with financial
institutions to reduce exposures to some of the principal currencies in countries in which we conduct sales, acquire raw materials, build
products and make capital investments, but these efforts may not be successful. In this regard, these hedging agreements do not cover
all currencies in which we do business, do not eliminate foreign currency risk entirely for the currencies that they do cover, and involve
costs and risks of their own in the form of transaction costs, credit requirements and counterparty risk.
China is experiencing rapid social, political and economic change, which has increased labor costs and other related costs that could
make doing business in China less advantageous than in prior years. Increased labor costs in China could adversely affect our
business, operating results and financial condition.
Historically, labor in China has been readily available at a lower cost compared to other countries. However, because China is
experiencing rapid social, political and economic change, there can be no assurance that labor will continue to be available in China at
costs consistent with historical levels. Any future increase in labor cost in China is likely to be higher than historical and projected
amounts and may occur multiple times in any given year. As a result of experiencing such rapid social, political and economic change,
China is also likely to enact new, and/or revise its existing, labor laws and regulations on employee compensation and benefits. These
changes in Chinese labor laws and regulations will likely have an adverse effect on product manufacturing costs in China. Furthermore,
if China workers go on strike to demand higher wages, our operations could be disrupted. Many of our suppliers are currently dealing
with labor shortages in China, which may result in future supply delays and disruptions and may drive a substantial increase in their
labor costs that is likely to be shared by us in the form of price increases to us. New or revised government labor laws or regulations,
strikes or labor shortages could cause our product costs to rise and/or could cause manufacturing partners on whom we rely to exit the
business. These events could have a material adverse impact on our product availability and quality, which would affect our business,
operating results and financial condition.
We may not continue to receive preferential tax treatment in Asia, thereby increasing our income tax expense and reducing our net
income.
As an incentive for establishing our manufacturing subsidiaries in China, we receive preferential tax treatment. Governmental
changes in foreign tax law may cause us not to be able to continue receiving these preferential tax treatments in the future, which may
cause an increase in our income tax expense, thereby reducing our net income.
The distribution of any earnings of certain foreign subsidiaries may be subject to foreign income taxes, thus reducing our net income.
Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to
earnings of European and Asian subsidiaries. Any future distributions of foreign earnings will not be subject to additional U.S. income
tax, but may be subject to foreign withholding taxes. As of December 31, 2021, we had undistributed earnings from non-U.S. operations
of approximately $1.5 billion (including approximately $207 million of restricted earnings, which are not available for dividends).
Undistributed earnings of our China subsidiaries comprise $449 million of this total. Additional Chinese withholding taxes of
approximately $45 million would be required should the $449 million of such earnings be distributed out of China as dividends.
We could be adversely affected by the compromise or theft of our technology, know-how, data or intellectual property or a
requirement that we yield rights in technology, know-how, data stored in foreign jurisdictions or intellectual property that we use in
such foreign jurisdictions.
In general, we rely on the intellectual property and unfair competition laws and contractual restrictions to protect our technology,
know-how, data and intellectual property in the foreign jurisdictions in which we operate. We believe our technology, know-how, data
and other intellectual property rights are important to our success. Any unauthorized use of our technology, know-how, data and other
intellectual property rights could harm our competitive advantages and business. For example, some jurisdictions have not protected
23
intellectual property rights to the same extent as the United States, and infringement of intellectual property rights continues to pose a
serious risk of doing business in such jurisdictions. The measures we take to protect our intellectual property rights may not be adequate.
Furthermore, the application of laws governing intellectual property rights in certain foreign jurisdictions is uncertain and evolving, and
could involve substantial risks to us. Infringement of our patents or required technology or know-how transfers to foreign entities could
create competition for us, and such competition could have a material adverse effect on our longer-term profitability and success.
RISKS RELATED TO OUR COMMON STOCK
Variations in our quarterly operating results may cause our stock price to be volatile.
We have experienced substantial variations in net sales, gross profit margin and operating results from quarter to quarter. We
believe that the factors that influence this variability of quarterly results include:
• strength of the global economy and the stability of the financial markets;
• general economic conditions in the countries where we sell our products;
• seasonality and variability in the industrial, consumer electronics, communications, computing, and communications markets;
• the timing of our and our competitors’ new product introductions;
• product obsolescence;
• the scheduling, rescheduling and cancellation of large orders by our customers;
• the cyclical nature of the demand for our customers’ products;
• our ability to develop new process technologies and achieve volume production at our fabrication facilities;
• changes in manufacturing yields;
• adverse movements in exchange rates, interest rates or tax rates; and
• the availability of adequate supply commitments from our outside suppliers or subcontractors.
Accordingly, a comparison of our operating results from period to period is not necessarily meaningful to investors and our
operating results for any period do not necessarily indicate future performance. Variations in our quarterly results may trigger volatile
changes in our stock price.
We may enter into future acquisitions and take certain actions in connection with such acquisitions that could adversely affect the
price of our Common Stock.
As part of our growth strategy, we expect to acquire businesses, products or technologies in the future. In the event of future
acquisitions, we could:
• use a significant portion of our available cash;
• issue equity securities, which would dilute current stockholders’ percentage ownership;
• incur substantial debt;
• incur or assume contingent liabilities, known or unknown;
• incur amortization expenses related to intangibles;
• incur large, immediate accounting write-offs;
• incur substantial expense and diversion of management attention, regardless of the success of the acquisition; and
• create goodwill and other intangible assets that may require impairment charges in the future.
Such actions by us could harm our operating results and adversely affect the price of our Common Stock.
24
Anti-takeover effects of certain provisions of Delaware law and our Certificate of Incorporation, may hinder a take-over attempt.
Some provisions of Delaware law and our certificate of incorporation may delay or prevent a tender offer or takeover attempt,
including those attempts that might result in a premium over the market price for the shares held by stockholders.
Section 203 of the Delaware General Corporation Law prohibits certain transactions, including business combinations, between a
Delaware corporation and an “interested stockholder” for a period of three years after the date the stockholder becomes an interested
stockholder. An "interested stockholder" is defined as a person who, together with any affiliates or associates, beneficially owns, directly
or indirectly, 15.0% or more of the outstanding voting shares of a Delaware corporation.
Our certificate of incorporation authorizes our Board of Directors to issue, without further action by the stockholders, up to 1.0
million shares of preferred stock with rights and preferences, including voting rights, designated from time to time by the Board of
Directors. The existence of authorized but unissued shares of preferred stock enables our Board of Directors to render it more difficult
or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise.
GENERAL RISK FACTORS
The success of our business depends on the strength of the global economy and the stability of the financial markets, and any
weaknesses in these areas may have a material adverse effect on our net sales, operating results and financial condition.
Weaknesses in the global economy and financial markets can lead to lower consumer discretionary spending and demand for
items that incorporate our products in the consumer electronics, computing, industrial, communications and the automotive sectors. A
decline in end-user demand can affect our customers’ demand for our products, the ability of our customers to meet their payment
obligations and the likelihood of customers canceling or deferring existing orders. Our net sales, operating results and financial condition
could be negatively affected by such actions.
Production at our manufacturing facilities could be disrupted for a variety of reasons, including natural disasters and other
extraordinary events, which could prevent us from producing enough of our products to maintain our sales and satisfy our
customers’ demands and could adversely affect our operating results and financial condition.
A disruption in production at our manufacturing facilities could occur for many reasons, including fire, floods, hurricanes,
typhoons, droughts, tsunamis, volcanoes, earthquakes, disease or other similar natural disasters, unplanned maintenance or other
manufacturing problems, labor shortages, power outages or shortages, telecommunications failures, strikes, transportation interruption,
government regulation, terrorism or other extraordinary events, including epidemics (such as the outbreak of the COVID-19 virus) and
related travel restrictions. Alternative facilities with sufficient capacity or capabilities may not be available, may cost substantially more
or may take a significant time to start production. Such disruptions could have an adverse effect on our operating results and financial
condition.
We may be adversely affected by any disruption in our information technology systems, which could adversely affect our cash flows,
operating results and financial condition.
Our operations are dependent upon our information technology systems, which encompass all of our major business functions.
We rely upon such information technology systems to manage and replenish inventory, to fill and ship customer orders on a timely
basis, to coordinate our sales activities across all of our products and services and to coordinate our administrative activities. Our systems
might be damaged or interrupted by natural or man-made events or by computer viruses, physical or electronic break-ins and similar
disruptions affecting the Internet generally. There can be no assurance that such delays, problems, or costs will not have a material
adverse effect on our cash flows, operating results and financial condition.
Terrorist attacks, or threats or occurrences of other terrorist activities, whether in the U.S. or internationally, may affect the markets
in which our Common Stock trades, the markets in which we operate and our operating results and financial condition.
Terrorist attacks, or threats or occurrences of other terrorist or related activities, whether in the U.S. or internationally, may affect
the markets in which our Common Stock trades, the markets in which we operate and our profitability. Future terrorist or related activities
could affect our domestic and international sales, disrupt our supply chains and impair our ability to produce and deliver our products.
Such activities could affect our physical facilities or those of our suppliers or customers. Such terrorist attacks could cause seaports or
airports, to or through which we ship, to be shut down, thereby preventing the delivery of raw materials and finished goods to or from
our manufacturing facilities in China, Taiwan and Germany and our wafer fabrication facilities in China, the U.S. and the U.K., or to
our regional sales offices. Due to the broad and uncertain effects that terrorist attacks have had on financial and economic markets
generally, we cannot provide any estimate of how these activities might negatively affect our future operating results and financial
condition.
25
System security risks, data protection breaches, cyber-attacks and other related cybersecurity issues could disrupt our internal
operations, and any such disruption could reduce our expected net sales, increase our expenses, damage our reputation and adversely
affect our stock price.
Experienced computer programmers and hackers may be able to penetrate our security controls and misappropriate or compromise
our confidential information or those of third parties, create system disruptions, compromise physical assets or intellectual property, or
misappropriate monetary assets or cause shutdowns. Computer programmers and hackers also may be able to develop and deploy
viruses, worms and other malicious software programs that attack our websites or exploit any security vulnerabilities of our websites
and information systems.
Such problems could impede our sales, manufacturing, distribution or other critical functions or result in the loss, encryption or
disclosure of such proprietary information and sensitive or confidential data relating to our business or third-party business or the
unauthorized transfer of monetary assets as a result of fraud, trickery or other forms of deception, and could materially adversely affect
our operating results, stock price and reputation.
26
Item 1B. Unresolved Staff Comments.
None
Item 2.
Properties.
Our corporate headquarters are located in Plano, Texas. As of December 31, 2021, we own approximately 3.3 million square feet
of property and lease approximately 3.2 million square feet of property, with leases expiring at various times between 2022 and 2028
and with land rights expiring in 2056. We also own and lease properties around the world for use as sales offices, design centers,
research and development labs, warehouses, logistic centers, and manufacturing support. The size and/or location of these properties
change from time to time based on business requirements. The table below sets forth the largest of the properties either owned or leased
by the Company:
We believe our current facilities are adequate for the foreseeable future.
Location
USA - Plano, Texas
USA - Milpitas, California
Primary use
Headquarters/R&D center
Regional sales office/Administrative office/R&D center/apartment
Land use right/Manufacturing facilities/Administrative office/R&D center/Logistics China - Chengdu
Regional sales office/R&D center/Warehouse
Administrative office/Land use right/manufacturing facility/R&D center
Manufacturing facility/R&D center/Logistics/Dormitory/Manufacturing
facility/Sales/Administrative office/Land use right
Regional sales office
Administrative office/Logistics/Manufacturing/R&D center
Manufacturing facility/R&D center
Manufacturing facility/R&D center/Logistics/Administrative office
Manufacturing facility/R&D center/Logistics/Administrative office
Regional sales office/Administrative office/Logistics/Regional Sales/Logistics
Regional sales office/Administrative office/Logistics
Manufacturing
Manufacturing
Manufacturing
China - Shanghai
China - Shenzhen
England - Oldham
Germany - Neuhaus
Scotland - Greenock
Taiwan - Hsinbei
Taiwan - Taipei
Taiwan - Taoyuan
China - Wuxi
Taiwan - Keelung
Taiwan - Hsinchu
China - Hong Kong
China - Jinan, Shandong
Sq. Ft.
41,780
86,321
1,689,474
360,395
1,059,907
1,385,960
17,318
156,076
52,508
318,782
145,813
52,348
78,899
548,469
115,798
478,737
Item 3.
Legal Proceedings.
From time to time, we are involved in various legal proceedings that arise in the normal course of business. While we intend to
defend any lawsuit vigorously, we presently believe that the ultimate outcome of any current pending legal proceeding will not have
any material adverse effect on our financial position, cash flows or operating results. However, litigation is subject to inherent
uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, which could impact our
business and operating results for the period in which the ruling occurs or future periods. In addition, our foreign operations expose us
to unique intellectual property technology risks compared to a company with fewer or no international operations. Such risks could lead
to litigation or other disputes that would not be applicable to a company with limited or no international operations and could have a
material and adverse effect on our financial condition and results of operations. See “Risk Factors – Risks Related to Our International
Operations” in Part I, Item 1A of this Annual Report for a more detailed summary of the intellectual property technology risks associated
with our international business operations.
Item 4.
Mine Safety Disclosures.
Not Applicable.
27
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our Common Stock is traded on the Nasdaq Global Select Market (“NasdaqGS”) under the symbol “DIOD.”
Holders
As of February 14, 2022, the approximate number of common stockholders was 3,994.
Dividends
We have never declared or paid dividends on our Common Stock, and currently do not intend to pay dividends in the foreseeable
future as we intend to retain any earnings for future use in our business. Our U.S. banking facility permits us to pay dividends up to
$25.0 million per fiscal year to our stockholders so long as we have not defaulted at the time of such dividend and no default would
result from declaring and paying such dividend. The payment of dividends is within the discretion of our Board of Directors, and will
depend upon, among other things, our earnings, financial condition, capital requirements, and general business conditions.
Securities Authorized for Issuance Under Equity Compensation Plans
The information regarding our equity compensation plans required to be disclosed by Item 201(d) of Regulation S-K is
incorporated by reference from our 2022 definitive proxy statement, which we expect to file with the SEC in April 2022, in Item 12 of
Part III of this Annual Report.
Performance Graph
The following graph compares the yearly percentage change in the cumulative total stockholder return of our Common Stock
against the cumulative total return of the Nasdaq Composite and the Nasdaq Industrial Index for the five calendar years ending December
31, 2021. The graph is not necessarily indicative of future price performance.
The graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report
into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.
Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
December 2021
450
400
350
300
250
200
150
100
50
0
2016
2017
2018
2019
2020
2021
Diodes Incorporated
NASDAQ Industrials Index
NASDAQ Composite-Total Return
Prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980-2022.
Index Data: Copyright NASDAQ OMX, Inc. Used with permission. All rights reserved.
The graph assumes $100 invested on December 31, 2016 in our Common Stock, the stock of the companies in the Nasdaq
Composite Index and the stock of companies in the Nasdaq Industrial Index, and that all dividends received within a quarter, if any,
were reinvested in that quarter.
28
December 2021
Diodes Incorporated
NASDAQ Industrial Index
NASDAQ Composite-Total
Returns
Return %
Cum $
Return %
Cum $
Return %
Cum $
Issuer Purchases of Equity Securities
2016
100
100
100
2017
11.69
111.69
25.21
125.21
2018
12.52
125.67
(1.13)
123.79
2019
74.74
219.59
27.17
157.42
2020
25.07
274.64
52.72
240.42
2021
55.76
427.78
8.81
261.60
29.64
129.64
(2.84)
125.96
36.69
172.18
44.92
249.51
22.18
304.85
There have been no repurchases of our Common Stock during the fourth quarter of 2021.
Item 6. Reserved.
29
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following section discusses management’s view of the financial condition, results of operations and cash flows of Diodes
Incorporated and its subsidiaries (collectively, “the Company,” “our Company,” “we,” “our,” “ours,” or “us”) and should be read
together with the consolidated financial statements and the notes to consolidated financial statements included elsewhere in this Form
10-K.
The following discussion contains forward-looking statements and information relating to our Company. We generally identify
forward-looking statements by the use of terminology such as “may,” “will,” “could,” “should,” “potential,” “continue,” “expect,”
“intend,” “plan,” “estimate,” “anticipate,” “believe,” “project,” or similar phrases or the negatives of such terms. We base these
statements on our beliefs as well as assumptions we made using information currently available to us. Such statements are subject to
risks, uncertainties and assumptions, including those identified in Part I, Item 1A.“Risk Factors,” as well as other matters not yet known
to us or not currently considered material by us. Should one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Given these risks and
uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. Forward-looking
statements do not guarantee future performance and should not be considered as statements of fact.
You should not unduly rely on these forward-looking statements, which speak only as of the date of this Annual Report on Form
10-K. Unless required by law, we undertake no obligation to publicly update or revise any forward-looking statements to reflect new
information or future events or otherwise. 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 Annual Report on Form 10-K are made
pursuant to the Act. \
Changes from Prior Periodic Reports
In this Annual Report on Form 10-K, we have revised our disclosures to comply with SEC Release No. 33-10825, “Modernization
of Regulation S-K Items 101, 103, and 105.” In addition, we have adopted the changes in the disclosure standards included in SEC
Release No. 33-10890, “Management’s Discussion and Analysis, Selected Financial Data, Supplementary Financial Information.”
The SEC issued Release No. 33-10825, “Modernization of Regulation S-K Items 101, 103, and 105,” effective for annual periods
beginning subsequent to November 2020. This release was adopted to modernize the description of business, legal proceedings, and risk
factor disclosures that registrants are required to make pursuant to Regulation S-K. Specifically, this release requires registrants to
provide disclosures relating to their human capital resources and to restructure their risk factor disclosures. Additionally, the release
increases the threshold for disclosure of environmental proceedings to which the government is a party.
The SEC issued Release No. 33-10890, “Management’s Discussion and Analysis, Selected Financial Data, Supplementary
Financial Information” which became fully effective on August 9, 2021. This release was adopted to modernize, simplify, and enhance
certain financial disclosure requirements in Regulation S-K. Specifically, this release eliminated the requirement for selected financial
data, only requiring quarterly disclosure when there are retrospective changes affecting comprehensive income, and amended the matters
required to be presented under Management’s Discussion and Analysis (“MD&A”) to, among other things, eliminate the requirement
of the contractual obligations table.
With our adoption of this release, we have eliminated from this Annual Report on Form 10-K the items discussed above which
were included in our prior Annual Reports on Form 10-K but which are no longer required. For further information on our contractual
obligations see "Contractual Obligations" below.
General
Diodes Incorporated, together with its subsidiaries (collectively, the “Company,” “we,” or “our”) (Nasdaq: DIOD), a Standard and
Poor's Smallcap 600 and Russell 3000 Index company, is a leading global manufacturer and supplier of high-quality application-specific
standard products within the broad discrete, logic, analog, and mixed-signal semiconductor markets. The Company serves the consumer
electronics, computing, communications, industrial, and automotive markets.
The Company's products include discrete semiconductor products, analog products, mixed-signal products, standard logic
products, multichip products, wafers, and frequency control products.
The Company's corporate headquarters and Americas’ sales offices are located in Plano, Texas, and Milpitas, California,
respectively. Design, marketing, and engineering centers are located in Plano; Milpitas; Taipei, Taoyuan City, Zhubei City, Taiwan;
Shanghai and Yangzhou, China; Oldham, England; and Neuhaus, Germany. The Company's wafer fabrication facilities are located in
Oldham, England Greenock, Scotland; Shanghai and Wuxi, China; and Keelung and Hsinchu, Taiwan. The Company has assembly and
test facilities located in Shanghai, Jinan, Chengdu, and Wuxi, China; Neuhaus, Germany; and Jhongli and Keelung, Taiwan. Additional
30
engineering, sales, warehouse, and logistics offices are located in Taipei, Taiwan; Hong Kong; Oldham, England; Shanghai, Shenzhen,
Wuhan, and Yangzhou, China; Seongnam-si, South Korea; and Munich and Frankfurt, Germany; with support offices throughout the
world.
•
•
•
The company’s manufacturing facilities have achieved certifications in the internationally recognized standards of ISO
9001:2015, ISO 14001:2015, and, for automotive products, IATF 16949:2016;
Diodes Incorporated is also C-TPAT certified; and
These Quality Awards reflect the superior quality-control techniques established at Diodes Incorporated and further enhance
our credibility as a vendor-of-choice to OEMs increasingly concerned with quality and consistency.
Our market focus is on high-growth, end-user applications in the following areas:
•
•
•
•
•
Industrial: embedded systems, precision controls, and Industrial IoT;
Communications: smartphones, 5G networks, advanced protocols, and charging solutions;
Consumer: IoT, wearables, home automation, and smart infrastructure;
Computing: cloud computing including server, storage, and data center applications; and
Automotive: connected driving, comfort/style/safety, and electrification/powertrain.
This discussion summarizes the significant factors affecting the consolidated operating results, financial condition and liquidity of
the Company for the twelve months ended December 31 2021. This discussion should be read in conjunction with Item 8, the
consolidated financial statements and the notes to consolidated financial statements. This discussion and analysis does not address
certain items in respect of fiscal 2019 in reliance on amendments to disclosure requirements adopted by the SEC in 2019. A discussion
and analysis of fiscal 2019 may be found in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 22, 2021,
and such discussion and analysis is hereby incorporated into this Form 10-K by this reference .
Summary for the Twelve Months Ended December 31, 2021
• Net sales were $1.81 billion, an increase of 46.9% from the $1.23 billion in 2020;
• Gross profit was $670.4 million, a 55.5% increase, compared to the $431.1 million in 2020;
• Gross margin improved 200 basis points to 37.1% from 35.1% in 2020;
• Operating income increased 105.4% to $276.0 million, or 15.3% of net sales, compared to $134.3 million, or 10.9% of net
sales, in 2020;
• Net income was $228.8 million, or $5.00 per diluted share, compared to $98.1 million, or $1.88 per diluted share, in 2020; and
• We achieved $338.5 million cash flow from operations. We had cash capital expenditures of $141.2 million, or 7.8% of net
sales. Net cash flow was a positive $46.3 million.
Summary for the Twelve Months Ended December 31, 2020
• Net sales were $1.23 billion, a decrease of 1.6% from the $1.25 billion in 2019;
• Gross profit was $431.1 million, a 7.4% decrease, compared to the $465.8 million in 2019;
• Gross margin was 35.1%, a decrease of 220 basis points, compared to 37.3% in 2019;
• Operating income decreased 33.0% to $134.3 million, or 10.9% of net sales, compared to $200.6 million, or 16.1% of net sales,
in 2019;
• Net income was $98.1 million, or $1.88 per diluted share, compared to $153.3 million, or $2.96 per diluted share, in 2019; and
• We achieved $187.2 million cash flow from operations. We had $75.8 million of cash capital expenditures, or 6.2% of revenue.
Net cash flow was a positive $61.0 million.
31
Business Outlook and Factors Relevant to Our Results of Operations
Our record financial performance in 2021 represents a significant step toward our 2025 business targets of $1.0 billion of gross
profit, based upon net sales of $2.5 billion and gross margin of 40%. Acquisitions will continue to be part of our growth strategy to
reach our 2025 revenue and gross profit goal. We have a solid pipeline of designs and expanded customer relationships across all regions
and product lines. The success of our business depends on, among other factors, the strength of the global economy and the stability of
the financial markets, our customers’ demand for our products, the ability of our customers to meet their payment obligations, customers
not canceling or deferring existing orders, and the strength of consumers’ demand for items containing our products in the end-markets
we serve. We believe the long-term outlook for our business remains generally favorable despite the uncertainties in the global economy
as we continue to execute on the strategy that has proven successful for us over the years. See “Risk Factors – The success of our
business depends on the strength of the global economy and the stability of the financial markets, and any weaknesses in these areas
may have a material adverse effect on our net sales, operating results and financial condition.” in Part I, Item 1A of this Annual Report
for additional information.
Description of Sales and Expenses
Net sales
The principal factors that have affected or could affect our net sales from period to period are:
•
•
•
•
•
•
•
•
•
•
•
•
•
The condition of the economy in general and of the semiconductor industry in particular;
Political tension, including the implementation of tariffs, among and between the countries in which we do business;
Our customers’ adjustments in their order levels;
Changes in our pricing policies or the pricing policies of our competitors or suppliers;
The addition or termination of key supplier relationships;
The rate of introduction and acceptance by our customers of new products;
Our ability to compete effectively with our current and future competitors;
Our ability to enter into and renew key corporate and strategic relationships with our customers, vendors and strategic
alliances;
Changes in foreign currency exchange rates;
A major disruption of our information technology infrastructure;
Unforeseen catastrophic events, such as armed conflict, terrorism, fires, typhoons and earthquakes;
Any other disruptions, such as change in the political or governmental policies, labor shortages, unplanned maintenance or
other manufacturing problems; and
Other risks, uncertainties, and assumptions identified in item 1A, "Risk Factors," of this Annual Report on Form 10-K and
risks, uncertainties, and assumptions reflected in other documents we file with the SEC.
Cost of goods sold
Cost of goods sold includes manufacturing costs for our semiconductors and our wafers. These costs include raw materials used
in our manufacturing processes as well as labor costs and overhead expenses. Cost of goods sold is also impacted by yield improvements,
capacity utilization and manufacturing efficiencies. In addition, cost of goods sold includes the cost of products that we purchase from
other manufacturers and sell to our customers. Cost of goods sold is also affected by inventory obsolescence if our inventory management
is not efficient.
Selling, general and administrative
Selling, general and administrative expenses relate primarily to compensation and associated expenses for personnel in general
management, sales and marketing, information technology, engineering, human resources, procurement, planning and finance, and sales
commissions, as well as outside legal, investor relations, accounting, consulting and other operating expenses. Also included in selling,
general and administrative expenses are acquisition costs from business combinations.
Research and development
Research and development expenses consist of compensation and associated costs of employees engaged in research and
development projects, as well as materials and equipment used for new product development and technology qualification. Research
and development expenses are executed on a global basis and primarily associated with where the engineering talent is located, as well
32
as the location of manufacturing sites participating in any required technology or process development. All research and development
expenses are expensed as incurred.
Amortization of acquisition-related intangible assets
Amortization of acquisition-related intangible assets consists of assets such as developed technologies and customer relationships.
Impairment of fixed assets
Impairment of fixed assets consists of the impairment amount recognized as a result of the fair value of an asset being below its
recorded value.
Restructuring
Restructuring are one-time charges that must be paid by the Company due to reorganizing or restructuring a part of the business.
Interest income / expense
Interest income consists of interest earned on our cash and investment balances. Interest expense consists of interest payable on
our outstanding credit facilities and other debt instruments.
Gain (loss) on securities carried at fair value
We may hold investments in the form of common stock or some other similar equivalent and have elected fair value accounting
treatment.
Foreign currency (loss) gain, net
This income account is used to show the amount gained or lost as a result of foreign currency transactions.
Income tax provision
Our global presence requires us to pay income taxes in a number of jurisdictions. See Note 12 of “Notes to Consolidated Financial
Statements” for additional information.
Net income attributable to noncontrolling interest
This represents the minority investors’ share of our subsidiaries’ earnings.
Net income attributable to common stockholders
Net income attributable to common stockholders is net income less net income attributable to noncontrolling interest.
Results of Operations
The following table sets forth, for the periods indicated, the percentage that certain items in the statements of income bear to net
sales:
Percent of Net Sales
Twelve Months Ended December 31,
Net sales
Cost of goods sold
Gross profit
Operating expenses
Income from operations
Interest income
Interest expense
Foreign currency (loss) gain, net
Unrealized gain on investments
Other income (expenses)
Income before income taxes and noncontrolling interest
Income tax provision
Net income
Net (income) loss attributable to noncontrolling interest
Net income attributable to common stockholders
2021
100.0%
(62.9)
37.1
(21.8)
15.3
0.2
(0.4)
(0.1)
1.6
1.0
17.5
4.4
13.1
(0.4)
12.7
2020
100.0%
(64.9)
35.1
(24.1)
10.9
0.1
(1.0)
(0.8)
0.2
0.5
9,8
1.7
8.1
0.1
8.0
The following discussion explains in greater detail our consolidated operating results and financial condition. This discussion
should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Annual Report
on Form 10-K (in thousands).
33
Net sales
Cost of goods sold
Gross profit
Operating expenses
Selling, general and administrative
Research and development
Amortization of acquisition-related intangible assets
Loss (gain) on disposal of fixed assets
Other operating income
Other income (expense)
Interest income
Interest expense
Foreign currency loss
Unrealized gain on investments
Other income
Income tax provision
Net Sales
Twelve Months Ended
December 31,
$
2021
1,805,162 $
1,134,802
670,360
2020
1,229,215
798,094
431,121
$
257,710
119,200
16,216
246
1,003
3,139
(7,491)
(2,107)
28,018
17,551
78,807
185,067
94,288
16,261
106
1,067
1,066
(11,662)
(9,814)
2,083
4,336
21,112
Increase/
(Decrease)
% Change
575,947
336,708
239,239
72,643
24,912
(45)
140
64
2,073
(4,171)
(7,707)
25,935
13,215
57,695
46.9%
42.2%
55.5%
39.3%
26.4%
(0.3%)
132.1%
6.0%
194.5%
(35.8%)
(78.5%)
1245.1%
304.8%
273.3%
Our net sales increased approximately $575.9 million, or 46.9%, for the twelve months ended December 31, 2021, compared to
the prior year, due primarily to our content expansion initiatives, improvements in product mix, overall strong demand for our products
(especially in comparison to the negative effect of Covid-19 in 2020), and record revenue in the automotive, industrial, communication
and consumer end-user markets. The 46.9% increase in net sales for the twelve months ended December 31, 2021 was driven, by a
25.5% organic growth attributable to the Company’s legacy business that existed prior to the LSC acquisition and 21.4% is related to
the positive net sales increase from the acquisition of LSC. Contributing to the Company's growth in net sales has been the success of
our focused expansion initiative in the automotive market where revenue grew over 59% when compared to year 2020, generating an
8-year CAGR of 30%. Additionally, our Pericom product line continued to set new revenue records, achieving 5 consecutive quarters
of growth. The Company has experienced growth in higher-margin end markets which, when combined with increased manufacturing
loading at LSC facilities, has enabled the Company to increase its net sales and margins, even in the midst of the current supply-
constrained environment. For the twelve months ended December 31, 2021, weighted-average sales price of the Company's products
increased 9.5% when compared to the prior year. This represents the improved product mix across the portfolio, as well as price increases
to offset supply chain cost increasing.
The table below sets forth our revenue as a percentage of total revenue by end-user market:
End-Markets *
Industrial
Communications
Consumer
Computing
Automotive
* Amounts in the table may not total 100% due to rounding
Cost of Goods Sold
Twelve Months Ended December 31,
2021
23%
16%
19%
30%
12%
2020
23%
21%
25%
20%
11%
2019
28%
23%
23%
16%
10%
Cost of goods sold increased approximately $336.7 million for the twelve months ended December 31, 2021 compared to the
same period last year, primarily as a result of the 46.9% increase in net revenue. As a percent of sales, cost of goods sold was 62.9% for
the twelve months ended December 31, 2021, compared to 64.9% for the same period last year. Average unit cost increased 6.0% for
the twelve months ended December 31, 2021, compared to the same period last year, due to cost increases from various subcontractors
and foundries, as well as the cost for a more premium mix of products that were sold in 2021. For the twelve months ended December
31, 2021, gross profit increased approximately 55.5% when compared to the prior year. Gross profit margin for the twelve month periods
ended December 31, 2021 and 2020, was 37.1% and 35.1%, respectively.
Operating expenses
Operating expenses for the twelve months ended December 31, 2021 increased approximately $97.6 million, or 32.9%, compared
to the same period last year. Selling, general and administrative expenses (“SG&A”) increased approximately $72.6 million. The
increase in SG&A was driven by increases in wages and benefits, selling expenses and freight and duty charges. Research and
34
development expenses (“R&D”) increased approximately $24.9 million primarily due to increases in wages and benefits, outside
consulting and depreciation, associated with new product and new process development activities. One driver of the operating expense
was a was a full year of LSC related operating expenses in 2021 versus one month in 2020. Amortization of acquisition-related
intangibles decreased approximately 0.3% reflecting the overall reduction in the balance of intangible assets subject to amortization.
SG&A, as a percentage of sales, was 14.3% and 15.1% for the twelve-month periods ended December 31, 2021 and 2020, respectively.
R&D, as a percentage of sales, was 6.6% and 7.7% for the twelve-month periods ended December 31, 2021 and 2020, respectively.
Other (expense)/income
Interest income increased $2.1 million for the twelve months ended December 31, 2021, due to income received from cross
currency swaps. The decrease in interest expense is due to a decrease in the interest rate on our floating rate debt and lower borrowing
levels. Foreign currency losses decreased $7.7 million during the twelve months ended December 31, 2021 due to the effectiveness of
the Company's hedging program. Unrealized gain on investments increased from 2020 due to investment income from investments the
Company acquired in the LSC acquisition.
Income tax provision
We recognized income tax expense of approximately $78.8 million for the twelve months ended December 31, 2021, and income
tax expense of approximately $21.1 million for the twelve months ended December 31, 2020, resulting in effective income tax rates of
25.0 % and 17.5%, respectively. The increase in the effective tax rate for 2021 compared to 2020 is primarily attributable to an increase
in overall pre-tax book income and the impact of changes to the outside basis difference in foreign subsidiaries where the Company
does not assert permanent reinvestment. Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations,
with limited exceptions related to earnings of European and Asian subsidiaries. Any future distributions of foreign earnings will not be
subject to additional U.S. income tax but may be subject to foreign withholding taxes. The Company has recorded outside basis
differences in the limited instances where they do not assert permanent reinvestment. As of December 31, 2021, our foreign subsidiaries
held approximately $231.4 million of cash, cash equivalents and investments of which approximately $36.8 million would be subject to
foreign withholding tax if distributed outside the country in which the related earnings were generated.
Financial Condition
Liquidity and Capital Resources
Our primary sources of liquidity are cash and cash equivalents, short-term investments, funds from operations and, if necessary,
borrowings under our credit facilities.
Liquidity requirements
Our primary liquidity requirements have been to meet our capital expenditure needs and to fund ongoing operations. For 2021
and 2020 our working capital was $716.6 million and $514.2 million, respectively. In 2021, our working capital increased primarily due
to increases in cash and cash equivalents, accounts receivable, and inventories, reflecting the increase in net sales in 2021 compared to
2020. Also contributing was a decrease in the outstanding debt under our lines of credit. We expect cash generated by our operations
together with existing cash, cash equivalents, short-term investments and available credit facilities to be sufficient to satisfy our working
capital needs, capital asset purchases, outstanding commitments and other liquidity requirements associated with our existing operations
for at least the next 12 months.
Short-term investments
As of December 31, 2021, we had short-term investments of approximately $6.5 million. These investments are highly liquid with
maturity dates greater than three months at the date of purchase. We generally can access these investments in a relatively short amount
of time but in doing so we generally forfeit a portion of interest income.
Short-term debt
Our Asia subsidiaries maintain credit facilities with several financial institutions through our foreign entities worldwide totaling
approximately $122.5 million at December 31, 2021. Other than two Taiwanese credit facilities that are collateralized by assets, our
foreign credit lines are unsecured, uncommitted and contain no restrictive covenants. These credit facilities bear interest at LIBOR or
similar indices plus a specified margin. Interest payments are due monthly on outstanding amounts under the credit lines. The unused
and available credit under the various facilities as of December 31, 2021, was approximately $103.4 million, net of $18.1 million
advanced under our foreign credit lines, attributable to our 51% owned subsidiary, Eris Technology Company ("ERIS"), and $1.0 million
credit used for import and export guarantee.
Long-term debt
The Company maintains a long-term credit facility (“Credit Agreement”) consisting of a term loan with a current balance of
$155.1 million and a $200.0 million revolving senior credit facility. Nothing was drawn on the $200.0 million revolving senior credit
facility as of December 31, 2021. The revolving senior credit facility and term loan mature on May 29, 2024. Both the term loan portion
and the revolving portion of the Credit Agreement bear an interest rate at LIBOR or similar other indices plus a specified margin. The
35
Credit Agreement contains certain financial and non-financial covenants, including, but not limited to, a maximum Consolidated
Leverage Ratio, a minimum Consolidated Fixed Charge Coverage Ratio, and restrictions on liens, indebtedness, investments,
fundamental changes, dispositions, and restricted payments (including dividends and share repurchases). Furthermore, under the Credit
Agreement, restricted payments, including dividends and share repurchases, are permitted in certain circumstances, including while the
pro forma Consolidated Leverage Ratio is, both before and after giving effect to any such restricted payment, at least 0.25 to 1.00 less
than the maximum permitted under the Credit Agreement. In addition to the credit facilities described above, ERIS has long-term debt
of $29.8 million from local Taiwan banks. The ERIS debt matures in various periods through 2033.
On January 22, 2021, Diodes Hong Kong Limited, a company incorporated under the laws of Hong Kong and a subsidiary of
the Company, entered into a Facility Agreement (the “Facility Agreement”) with The Hongkong and Shanghai Banking Corporation
Limited and the other parties identified therein pursuant to which Diodes Hong Kong Limited obtained from the lenders a US Dollar
revolving loan facility in an aggregate amount equal to $100.0 million. Diodes Hong Kong Limited used a portion of the proceeds from
such revolving loan facility (i) to refinance certain existing indebtedness and (ii) to finance working capital requirements and its general
corporate purposes.
Capital expenditures and investments
In 2021 and 2020, our total cash capital expenditures were approximately $141.2 million and $75.8 million, respectively, which
includes approximately $29.4 million and $15.4 million of capital expenditures related to the investment agreement with the
Management Committee of the Chengdu Hi-Tech Industrial Development Zone (the “CDHT”) for 2021 and 2021, respectively. Our
capital expenditures for these periods were primarily related to manufacturing expansion in our facilities in China and, to a lesser extent,
our office buildings. Cash capital expenditures in 2021 were approximately 7.8% of our net sales.
We were party to an investment agreement with the Management Committee of the CDHT. Under this agreement, we formed a
joint venture with a Chinese partner, Chengdu Ya Guang Electronic Company Limited (“Ya Guang”), to establish a semiconductor
assembly and test facility in Chengdu, China. We currently own approximately 98% of the joint venture entity. The CDHT granted the
joint venture a 50 year land lease and provides corporate and employee tax incentives, tax refunds, subsidies and other financial support.
The above agreement has expired and we are currently negotiating with CDHT for a new agreement, which we believe will be a long-
term, multi-year project that will provide us additional capacity and support. As of December 31, 2021, we have invested $222.9 million
in this joint venture, primarily for infrastructure, buildings and equipment related capital expenditures.
The Company’s restricted cash primarily consisted of the cash required to be on deposit under contractual agreements with banks
to support outstanding loan and import/export guarantees. As of December 31, 2021, restricted cash of $3.2 million was pledged as
collateral for issuance of bank loans, bank acceptance notes and letters of credit.
Our foreign operations expose us to unique intellectual property technology and other risks compared to a company with fewer or
no international operations. For example, we are exposed to potential cyber security breaches that may target our employees or
infrastructure outside the United States. These risks may result in material and adverse impacts on our financial condition and results
of operations. See “Risk Factors – Risks Related to Our International Operations” in Part I, Item 1A of this Annual Report for a more
detailed summary of the intellectual property technology risks and other associated with our international business operations.
Discussion of Cash Flows
Cash and cash equivalents, including restricted cash, increased approximately $46.3 million to $366.8 million in 2021 from $320.5
million in 2020. The table below sets forth summary information from our statements of cash flows:
Net cash provided by operating activities
Net cash used by investing activities
Net cash used by financing activities
Effect of exchange rates on cash and cash equivalents,
including restricted cash
Net increase in cash and cash equivalents, including restricted cash
$
$
2021
Twelve Months Ended December 31,
2020
187,220
(106,772)
(54,302)
338,543
(144,229)
(158,441)
$
$
Change
151,323
(37,457)
(104,139)
10,416
46,289
$
34,876
61,022
$
(24,460)
(14,733)
Operating Activities
Net cash provided by operating activities for 2021 was approximately $338.5 million, due primarily to $236.3 million of net
income, $122.4 million in depreciation expense and amortization of intangible assets expense, $33.2 million from non-cash share-based
compensation expense and a change in deferred taxes of $21.5 million. These increases were partially offset by a non-cash gain on
investments of $37.9 million and a net decrease in operating capital assets and liabilities of $39.2 million.
36
Investing Activities
Net cash used in investing activities for 2021 was approximately $144.2 million, due primarily to the purchase of property, plant
and equipment of $141.2 million.
Financing Activities
Net cash used in financing activities for 2021 was approximately $158.4 million, due primarily to the net reduction in our
outstanding indebtedness of $152.6 million, taxes on net share settlement of $14.8 million and dividends paid in respect of noncontrolling
interests of $2.2 million. These outflows of cash were partially offset by inflows from capital contributions in respect of noncontrolling
interests of $7.8 million and the net proceeds from the issuance of Common Stock of $4.3 million.
Debt instruments
The U.S. credit facility contains certain financial and non-financial covenants, including, but not limited to, a maximum
consolidated leverage ratio, a minimum consolidated fixed charge coverage ratio, and restrictions on liens, indebtedness, investments,
fundamental changes, dispositions, and restricted payments (including dividends and share repurchases).
As of December 31, 2021, our Asia subsidiaries had unused and available credit lines of up to an aggregate of approximately
$122.5 million, with several financial institutions. Our foreign credit lines are unsecured and uncommitted, except for two Taiwanese
credit facilities that are collateralized by assets. Our foreign credit lines bear interest at LIBOR or similar indices plus a specified margin.
At December 31, 2021, $18.1 million was outstanding under these lines of credit. In addition to our credit lines, our 51% owned
subsidiary, ERIS Technology Corporation (“ERIS”), had long-term debt of $29.8 million, at December 31, 2021, on a long-term basis
from local Taiwan banks. The outstanding ERIS debt matures in various periods from 2022 through 2033. See “Liquidity and Capital
Resources” above and Note 8 of “Notes to Consolidated Financial Statements” of this Annual Report for additional information.
On January 22, 2021, Diodes Hong Kong Limited ,a company incorporated under the laws of Hong Kong and a subsidiary of the
Company, entered into a Facility Agreement (the “Facility Agreement”) with The Hongkong and Shanghai Banking Corporation Limited
and the other parties identified therein pursuant to which Diodes Hong Kong Limited obtained a US Dollar revolving loan facility in an
aggregate amount equal to $100.0 million. Diodes Hong Kong Limited used a portion of the proceeds (i) to refinance certain existing
indebtedness and (ii) to finance working capital requirements and its general corporate purposes. In addition, on January 22, 2021,
Diodes Hong Kong Limited entered into a Hong Kong Debenture (the “Debenture”) with The Hongkong and Shanghai Banking
Corporation Limited, as Security Agent (the “Security Agent”). Pursuant to the Debenture, Diodes Hong Kong Limited granted to the
Security Agent, on behalf of itself and the other secured parties, a security interest over certain assets of Diodes Hong Kong Limited.
The security interest is continuing security for the payment, discharge and performance of all of the secured liabilities, which includes
Diodes Hong Kong Limited’s payment obligations under the Facility Agreement. The Facility Agreement is governed by the laws of
Hong Kong.
Off-Balance Sheet Arrangements
We do not have any transactions, arrangements and other relationships with unconsolidated entities that will affect our liquidity
or capital resources. We have no special purpose entities that provided off-balance sheet financing, liquidity or market or credit risk
support, nor do we engage in leasing, hedging or research and development services, that could expose us to liability that is not reflected
on the face of our financial statements.
Contractual Obligations
Our estimated future obligations consist of debt, interest on long-term debt, leases, defined benefit obligation and purchase
obligations. See Note 8 “Bank Credit Agreements and Other Short-term and Long-term Debt, Note 9 - "Leases", Note 13 - "Employee
Benefit Plans" and Note 17 - "Commitments and Contingencies” of the notes to consolidated financial statements" included elsewhere
in this Annual Report for additional information.
We cannot make reasonable estimates of the amount and period in which our tax liabilities will be paid. See “Accounting for
income taxes” below and Note 12 of “Notes to Consolidated Financial Statements” of this Annual Report for additional information.
Critical Accounting Estimates
The preparation of financial statements in conformity with generally accepted principles in the United States of America (“U.S.
GAAP”) requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses
during the reporting period. On an ongoing basis, we evaluate our estimates, which are based upon historical experiences, market trends
and financial forecasts and projections, and upon various assumptions that management believes to be reasonable under the
circumstances at that certain point in time. Actual results may differ, significantly at times, from these estimates under different
assumptions or conditions.
37
We believe the following critical accounting estimates affect the significant estimates and judgments we use in the preparation of
our consolidated financial statements, and may involve a higher degree of judgment and complexity than others.
Revenue recognition
In relation to our revenue recognition, we record estimated allowances/reserves for the following items;
•
•
•
•
•
Ship and debit reserves, which arise when we, from time to time based on market conditions, issue credit to certain
distributors upon their shipments to their end customers;
Stock rotation reserves, which are contractual obligations that permit certain distributors, up to four times a year, to return
a portion of their inventory based on historical shipments to them in exchange for an equal and offsetting order;
Price protection reserves, which arise when market conditions cause average selling prices to decrease and we issue credit
to certain distributors on their inventory;
Accounts receivable reserves related to our customer's ability to pay; and
Product returns, distributor price adjustments and other allowances.
Our reserve estimates are based upon historical data as well as projections of sales, distributor inventories, price adjustments,
average selling prices and market conditions. Actual returns and adjustments could be significantly different from our estimates and
provisions, resulting in an adjustment to net sales.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined principally by the first-in, first-out method.
On an ongoing basis, we evaluate our inventory for obsolescence and slow-moving items. This evaluation includes analysis of sales
levels, sales projections, and purchases by item, as well as raw material usage related to our manufacturing facilities. If our review
indicates a reduction in utility below carrying value, we reduce our inventory to a new cost basis. If future demand or market conditions
are different than our current estimates, an inventory adjustment may be required, and would be reflected in cost of goods sold in the
period the revision is made.
Accounting for income taxes
As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of
the tax jurisdictions in which we operate. This process involves using an asset and liability approach whereby deferred tax assets and
liabilities are recorded for differences in the financial reporting bases and tax bases of our assets and liabilities. A valuation allowance
is provided against deferred tax assets unless it is more likely than not that such deferred tax assets will be realized. This analysis requires
considerable judgment and is subject to change to reflect future events and changes in the tax laws.
The benefit of a tax position is recognized only if it is more likely than not that the tax position would be sustained based on its
technical merits in a tax examination, using the presumption the tax authority has full knowledge of all relevant facts regarding the
position. The amount of benefit recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on
ultimate settlement with the tax authority. For tax positions not meeting the more likely than not test, no tax benefit is recorded.
Goodwill and other indefinite lived intangible assets
Goodwill and other indefinite lived assets are tested for impairment on an annual basis or when an event or changes in
circumstances indicate that its carrying value may not be recoverable. Goodwill impairment is tested at the reporting unit level, which
is defined as an operating segment or one level below the operating segment. We have one operating segment. Goodwill is reviewed for
impairment using either a qualitative assessment or a quantitative goodwill impairment test. If we choose to perform a qualitative
assessment and determine the fair value more likely than not exceeds the carrying value, no further evaluation is necessary. When we
perform the quantitative goodwill impairment test, we compare fair value to carrying value, which includes goodwill. If fair value of
exceeds carrying value, the goodwill is not considered impaired. If the carrying value is higher than the fair value, the difference would
be recognized as an impairment loss. We determine the fair value of our reporting units based on an income approach, whereby the fair
value of the reporting unit is derived from the present value of estimated future cash flows. The assumptions about estimated cash flows
include factors such as future revenue, gross profit, operating expenses, and industry trends. We consider historical rates and current
market conditions when determining the discount and long-term growth rates to use in its analysis. We consider other valuation methods,
such as the cost approach or market approach, if it is determined that these methods provide a more representative approximation of fair
value.
Business Combinations
Significant judgment is often required in estimating the fair value of assets acquired and liabilities assumed. The Company makes
estimates and assumptions about conditions of the assets, other costs not captured in the base costs, and consideration for entrepreneurial
profit, depreciation, functional obsolescence, and economic obsolescence allocated to the various property, plant and equipment
categories considering the perspective of marketplace participants.
38
Recently Issued Accounting Pronouncements
See Note 1 of “Notes to Consolidated Financial Statements” of this Annual Report for additional information regarding the status
of recently issued accounting pronouncements.
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.
Foreign Currency Risk
We face exposure to adverse movements in foreign currency exchange rates, primarily in Asia and Europe. Our foreign currency
risk may change over time as the level of activity in foreign markets grows and could have a material adverse impact upon our financial
results. Certain of our assets, including certain bank accounts and accounts receivable, and liabilities exist in non–U.S. dollar
denominated currencies, which are sensitive to foreign currency exchange fluctuations. These currencies are principally the Chinese
Yuan, the Taiwanese dollar, the Euro, and the British Pound Sterling and, to a lesser extent, the Japanese Yen and the Hong Kong dollar.
We have entered into hedging arrangements designed to mitigate foreign currency fluctuations. See “Risk Factors – We are subject to
foreign currency risk as a result of our international operations.” in Part I, Item 1A of this Annual Report for additional information.
Foreign Currency Transaction Risk
We are subject to foreign currency risk arising from intercompany transactions that are expected to be settled in cash in the near
term where the cash balances are held in denominations other than our subsidiaries’ functional currency. If exchange rates weaken
against the functional currency, we would incur a remeasurement gain in the value of the cash balances, and if the exchange rates
strengthen against the functional currency, we would incur a remeasurement loss in the value of the cash balances, assuming the net
monetary asset balances remained constant. Our ultimate realized gain or loss with respect to currency fluctuations will generally depend
on the size and type of transaction, the size and currencies of the net monetary assets and the changes in the exchange rates associated
with these currencies. Based on balances at December 31, 2021, if the Chinese Yuan, the Taiwanese dollar, the Euro and the British
Pound Sterling were to weaken (or strengthen) by 1.0% against the U.S. dollar, we would experience currency transaction gain (or loss)
of approximately $1.9 million (partially offset by any foreign currency hedges). Net foreign exchange transaction gains (or losses) are
included in other income and expense.
Foreign Currency Translation Risk
For our subsidiaries that maintain their books in a foreign currency, fluctuations in that foreign currency will impact the amount
of total assets and liabilities that we report for our foreign subsidiaries upon the translation of these amounts into U.S. dollars. All
elements of the subsidiaries’ financial statements, except for stockholders’ equity accounts, are translated using a currency exchange
rate. Assets and liabilities denominated in foreign currencies are translated at the exchange rate on the balance sheet date. Income and
expense accounts denominated in foreign currencies are translated at the weighted-average exchange rate during the period presented.
Resulting translation adjustments are recorded as a separate component of accumulated other comprehensive income or loss within
stockholders’ equity in the consolidated balance sheets, which are accumulated in this account until sale or liquidation of the foreign
entity investment, at which time they are reported as adjustments to the gain or loss on sale of investment.
Foreign Currency Denominated Defined Benefit Plans
We have a contributory defined benefit plan that covers certain employees in the U.K., which is closed to new entrants and frozen
with respect to future benefit accruals. The retirement benefit is based on the final average compensation and service of each eligible
employee. December 31 is our annual measurement date, and on the measurement date, defined benefit plan assets are determined based
on fair value. Defined benefit plan assets consist primarily of high quality corporate bonds and stocks that are denominated in the
currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability.
The net pension and supplemental retirement benefit obligations and the related periodic costs are based on, among other things,
assumptions of 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.
As of December 31, 2021, the plan was underfunded and a liability of approximately $11.7 million was reflected in our
consolidated financial statements as a noncurrent liability. The amount recognized in accumulated other comprehensive income was a
net loss of $39.4 million. If the British Pound Sterling were to (weaken) or strengthen by 1.0% against the U.S. dollar, we would
experience currency translation liability (decrease) or increase of less than $0.5 million. The weighted-average discount rate assumption
used to determine benefit obligations as of December 31, 2021, was 1.9%. A 0.2% increase/(decrease) in the discount rate used to
calculate the net period benefit cost for the year would reduce/increase annual benefit cost by less than $0.5 million. A 0.2%
increase/(decrease) in the discount rate used to calculate the year-end projected benefit obligation would increase/(decrease) the year–
end projected benefit obligation by approximately $5.5 million. The expected return on plan assets is determined based on historical and
expected future returns of the various assets classes and as such, each 1.0% increase/(decrease) in the expected rate of return assumption
would increase/(decrease) the net period benefit cost by approximately $1.5 million. The asset value of the defined benefit plan has been
volatile in recent years due primarily to wide fluctuations in the U.K. equity markets and bond markets. See “Risk Factors – Changes in
actuarial assumptions for our defined benefit plan could increase the volatility of the plan’s asset value, require us to increase cash
39
contributions to the plan and have a negative impact on our cash flows, operating results and financial condition” in Part I, Item 1A of
this Annual Report for additional information.
Interest Rate Risk
We have credit facilities with financial institutions in the U.S., Asia and Europe as well as other debt instruments with interest
rates equal to LIBOR or similar indices plus a negotiated margin. A rise in interest rates could have an adverse impact upon our cost of
working capital and our interest expense. As of December 31, 2021, our outstanding principal long-term debt was $285.0 and
outstanding short-term debt was $18.1 million. Based on our debt balances at December 31, 2021, an increase or decrease in interest
rates by 1.0% for the year on our credit facilities would increase or decrease our annual interest rate expense by approximately $2.9
million, net of the amounts realized from our interest rate swaps. See “Risk Factors,” – “We are subject to interest rate risk that could
have an adverse effect on our cost of working capital and interest expenses, which could adversely affect our business, operating results
and financial condition” in Part I, Item 1A of this Annual Report for additional information.
Political Risk
We have a significant portion of our assets in mainland China, Taiwan and the U.K. The possibility of political conflict between
any of these countries or with the U.S. could have a material adverse impact upon our ability to transact business through these important
business channels and to generate profits. See “Risk Factors” – Risks Related to our International Operations” in Part I, Item 1A of this
Annual Report for additional information.
Inflation Risk
Inflation did not have a material effect on net sales or net income in fiscal year 2021. A significant increase in inflation could
affect future performance.
Credit Risk
The success of our business depends, among other factors, on the strength of the global economy and the stability of the financial
markets, which in turn affect our customers’ demand for our products, the ability of our customers to meet their payment obligations,
the likelihood of customers canceling or deferring existing orders and the strength of consumer demand for items containing our products
in the end-markets we serve. We provide credit to customers in the ordinary course of business and perform ongoing credit evaluations,
while at times providing extended terms. We believe that our exposure to concentrations of credit risk with respect to trade receivables
is largely mitigated by dispersion of our customers over various geographic areas, operating primarily in electronics manufacturing and
distribution. We believe our allowance for doubtful accounts is sufficient to cover customer credit risks.
40
Item 8.
Financial Statements and Supplementary Data.
See Part IV, Item 15 “Exhibits and Financial Statement Schedules” for our consolidated financial statements and the notes and
schedules thereto filed as part of this Annual Report.
Item 9.
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
Not Applicable.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
Our Chief Executive Officer, Keh-Shew Lu, and Chief Financial Officer, Brett R. Whitmire, with the participation of our
management, carried out an evaluation as of December 31, 2021, of the effectiveness of our disclosure controls and procedures (as
defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended). Based upon that evaluation, our
Chief Executive Officer and our Chief Financial Officer believe that, as of the end of the period covered by this report, our disclosure
controls and procedures are effective at the reasonable assurance level to ensure that information required to be included in this report
is:
• recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and
• accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to
allow timely decisions regarding disclosure.
Disclosure controls and procedures, no matter how well designed and implemented, can provide only reasonable assurance of
achieving an entity’s disclosure objectives. The likelihood of achieving such objectives is affected by limitations inherent in disclosure
controls and procedures. These include the fact that human judgment in decision-making can be faulty and that breakdowns in internal
control can occur because of human failures such as simple errors, mistakes or intentional circumvention of the established processes.
Management's Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control
over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer
and implemented by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.
Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts
and expenditures of ours are being made only in accordance with authorizations of our management and directors; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of management, including our Chief Executive Officer and the Chief Financial
Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework and
criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”). This evaluation included review of the documentation of controls, testing of operating effectiveness
of controls and a conclusion on this evaluation.
Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December
31, 2021.
The effectiveness of our internal control over financial reporting as of December 31, 2021, has been audited by Moss Adams LLP,
an independent registered public accounting firm, as stated in their report which appears in Item 8 of this Annual Report on Form 10-K.
41
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting, known to the Chief Executive Officer or the Chief Financial
Officer, that occurred during the last fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None
42
PART III
Item 10.
Directors, Executive Officers and Corporate Governance.
The information concerning our directors, executive officers and corporate governance is incorporated herein by reference from
the section entitled “Proposal One – Election of Directors” contained in our definitive proxy statement to be filed pursuant to Section
14(a) of the Securities Exchange Act of 1934 within 120 days after our fiscal year end of December 31, 2021, for our annual
stockholders’ meeting for 2022 (the “Proxy Statement”).
We have adopted a code of ethics that applies to our Chief Executive Officer and senior financial officers. The code of ethics has
been posted on our website under the Corporate Governance portion of the Investor Relations section at www.diodes.com. We intend
to satisfy disclosure requirements regarding amendments to, or waivers from, any provisions of our code of ethics on our website.
Item 11.
Executive Compensation.
The information concerning executive compensation is incorporated herein by reference from the sections entitled “Compensation
Discussion and Analysis,” “Executive Compensation,” and “Compensation Committee Interlocks and Insider Participation” contained
in the Proxy Statement.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information concerning the security ownership of certain beneficial owners and management and related stockholder matters
is incorporated herein by reference from the sections entitled “General Information – Security Ownership of Certain Beneficial Owners
and Management,” and “Executive Compensation – Equity Compensation Plan Information” contained in the Proxy Statement.
Item 13. Certain Relationships, Related Transactions and Director Independence.
The information concerning certain relationships, related transactions and director independence is incorporated herein by
reference from the sections entitled “Corporate Governance – Certain Relationships and Related Person Transactions” and “Corporate
Governance – Director Independence” and “Proposal One – Election of Directors” contained in the Proxy Statement.
Item 14.
Principal Accounting Fees and Services.
The information concerning our principal accountant’s fees and services is incorporated herein by reference from the section
entitled “Ratification of the Appointment of Independent Registered Public Accounting Firm” contained in the Proxy Statement.
The Company's independent registered accounting firm is Moss Adams LLP, Los Angeles, California. PCAOB ID: 659.
43
Item 15.
Exhibits, Financial Statement Schedules.
(a)
Financial Statements and Schedules
PART IV
Our consolidated financial statements are as set forth under Item 8 of this report on Form 10-K.
(1) Financial statements:
Report of Independent Registered Public Accounting Firm ........................................................................
Consolidated Balance Sheets at December 31, 2021, and 2020...................................................................
Consolidated Statements of Income for the Years Ended December 31, 2021, 2020 and 2019..................
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2021, 2020 and
2019 ..............................................................................................................................................................
Consolidated Statements of Equity for the Years Ended December 31, 2021, 2020 and 2019 ...................
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019 ...........
Notes to Consolidated Financial Statements ................................................................................................
Page
45
47
48
49
50
51
53
(2) Schedules:
None
Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown
in the financial statements and note thereto.
(b) Exhibits
The exhibits listed on the Index to Exhibits are filed as exhibits or incorporated by reference to this Annual Report.
(c)
Financial Statements of Unconsolidated Subsidiaries and Affiliates
Not Applicable.
Item 16. Form 10-K Summary.
None
44
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
Diodes Incorporated
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Diodes Incorporated and Subsidiaries (the “Company”) as of
December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, equity, and cash flows for each
of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial
statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial
position of the Company as of December 31, 2021 and 2020, and the consolidated results of its operations and its cash flows for each
of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Annual Report on Internal Control on Internal Control over Financial Reporting included in Item 9A.
Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s
internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
45
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are
material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or
on the accounts or disclosures to which it relates.
Revenue – Ship and Debit Reserve
As described in Note 1, the Company records reserves related to estimated customer incentives, such as “ship and debit”, which arise
when the Company, from time to time based on market conditions, issue credits to certain distributors upon their shipments to their
end customers. The ship and debit reserve comprehends both claims in process and anticipated claims arising from the eventual sale of
distribution inventory that is subject to claim activity. The Company performs a look-back analysis of revenues and credits issued to
distributors. Using their look-back analysis, the Company adjusts their assumptions and estimated reserves each quarter. The resulting
ship and debit reserve is recorded as a reduction to 2021 net sales with a corresponding reduction to accounts receivable, and
approximated $61.4 million as of December 31, 2021.
Estimating the ship and debit reserve involves the application of models which require management to make certain assumptions
including historical customer ship and debit credit rates and credit lag times on such revenues. These assumptions could be affected by
current and future economic and market conditions. We identified the ship and debit reserve as a critical audit matter because auditing
management’s estimate of the ship and debit reserve was complex and judgmental due to the significant estimation required by
management.
The primary procedures we performed to address this critical audit matter included:
•
•
•
•
•
Obtaining an understanding, evaluating the design and testing the operating effectiveness of internal controls over the
measurement of the ship and debit reserve, including testing controls over management’s review of the reserve calculation
and the underlying assumptions used to develop the estimate.
Testing select distributor balances.
Vouching revenues and ship and debit credits to supporting documents.
Evaluating the reasonableness of management’s assumptions by comparing the significant assumptions (ship and debit
claims percentage history and the relevant time period between when sales are made to distributors and when ship and
debt claims are submitted by distributors) used to historical customer trends and current industry and market trends,
including testing the completeness and accuracy of the underlying data.
Performing sensitivity analyses on the significant assumptions (ship and debit claims percentage history and the relevant
time period between when sales are made to distributors and when ship and debt claims are submitted by distributors) to
evaluate the potential changes in the ship and debit reserve that would result from changes in the assumptions.
/s/ Moss Adams LLP
Los Angeles, California
February 17, 2022
We have served as the Company’s auditor since 1993.Report of Independent Registered Public Accounting Firm
46
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents
Restricted cash
Short-term investments
Accounts receivable, net of allowances of $4,324 and $3,806 at
December 31, 2021 and 2020, respectively
Inventories
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Deferred income tax
Goodwill
Intangible assets, net
Other long-term assets
Total assets
Liabilities
Current liabilities:
Line of credit
Accounts payable
Accrued liabilities
Income tax payable
Current portion of long-term debt
Total current liabilities
Long-term debt, net of current portion
Deferred tax liabilities
Other long-term liabilities
Total liabilities
Commitments and contingencies (See Note 17)
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; 45,017,774 and 44,276,194, issued and outstanding at
December 31, 2021 and 2020, respectively
Additional paid-in capital
Retained earnings
Treasury stock, at cost; 9,272,513 and 9,259,858, issued and outstanding at
December 31, 2021 and 2020, respectively
Accumulated other comprehensive loss
Total stockholders' equity
Noncontrolling interest
Total equity
Total liabilities and stockholders' equity
December 31,
2021
2020
$
363,599
3,219
6,542
358,496
348,622
107,194
1,187,672
582,079
21,256
149,890
94,550
159,048
2,194,495
18,068
221,254
184,649
29,682
17,381
471,034
265,574
32,230
122,933
891,771
$
$
268,065
52,464
6,142
320,061
307,062
70,193
1,023,987
530,815
57,841
158,331
110,591
97,892
1,979,457
140,563
168,045
160,117
19,177
21,860
509,762
288,179
34,598
130,795
963,334
-
-
36,195
471,649
1,116,809
(336,894)
(50,517)
1,237,242
65,482
1,302,724
2,194,495
$
35,692
449,598
888,046
(335,910)
(73,606)
963,820
52,303
1,016,123
1,979,457
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
47
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Net sales
Cost of goods sold
Gross profit
Operating expenses
Selling, general and administrative
Research and development
Amortization of acquisition-related intangible assets
Loss (gain) on disposal of fixed assets
Other operating expense
Total operating expenses
Income from operations
Other income (expense)
Interest income
Interest expense
Foreign currency loss, net
Unrealized gain on investments
Other income
Total other income (expense)
Income before income taxes and noncontrolling interest
Income tax provision
Net income
Less: net income attributable to noncontrolling interest
Net income attributable to common stockholders
Earnings per share attributable to common stockholders
Basic
Diluted
Number of shares used in computation
Basic
Diluted
$
$
$
$
Twelve Months Ended December 31,
2020
1,229,215
798,094
431,121
2021
1,805,162
1,134,802
670,360
$
$
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119,200
16,216
246
1,003
394,375
275,985
3,139
(7,491)
(2,107)
28,018
17,551
39,110
315,095
78,807
236,288
(7,525)
228,763
5.11
5.00
44,772
45,781
$
$
$
185,067
94,288
16,261
106
1,067
296,789
134,332
1,066
(11,662)
(9,814)
2,083
4,336
(13,991)
120,341
21,112
99,229
(1,141)
98,088
1.92
1.88
51,004
52,133
$
$
$
2019
1,249,130
783,323
465,807
181,343
88,517
18,041
(24,429)
1,727
265,199
200,608
2,189
(7,893)
(3,737)
-
7,079
(2,362)
198,246
44,131
154,115
(865)
153,250
3.02
2.96
50,787
51,860
The accompanying notes are an integral part of these consolidated financial statements.
48
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Twelve Months Ended December 31,
2020
2019
2021
Net income
Unrealized gain (loss) on defined benefit plan, net of tax
Unrealized gain (loss) on hedge instruments, net of tax
Unrealized foreign currency gain, net of tax
Comprehensive income
Less: Comprehensive income attributable to noncontrolling interest
Total comprehensive income attributable to common stockholders
$
$
236,288
7,818
1,417
13,854
259,377
(7,525)
251,852
$
$
99,229
(3,723)
(3,183)
41,439
133,762
(1,141)
132,621
$
$
154,115
(4,142)
(3,652)
1,501
147,822
(865)
146,957
The accompanying notes are an integral part of these consolidated financial statements.
49
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5
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities,
net of effects of acquisitions:
Depreciation
Amortization of intangible assets
Amortization of debt issuance costs
Share-based compensation
Loss (gain) on disposal of property, plant and equipment
Deferred income taxes
Investment (gain)
Other
Changes in operating assets:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Changes in operating liabilities:
Accounts payable
Accrued liabilities
Other liabilities
Income taxes payable (refundable)
Net cash and cash equivalents provided by operating activities
Investing Activities
Acquisitions, net of cash acquired
Purchases of short-term investments
Sales of short-term investments
Purchase of equity securities
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Other
Net cash and cash equivalents used by investing activities
Financing Activities
Advances on lines of credit and short-term debt
Repayments on lines of credit and short-term debt
Proceeds from long-term debt
Repayments of long-term debt
Debt issuance costs
Repayments of finance lease obligations
Net proceeds from the issuance of common stock
Capital contribution from noncontrolling interest
Dividend distribution to noncontrolling interest
Repurchase of common stock
Taxes related to net share settlement
Other
Net cash and cash equivalents used by financing activities
Twelve Months Ended December 31,
2019
2020
2021
$
236,288
$
99,229
$
154,115
106,219
16,216
754
33,205
243
21,459
(37,896)
1,239
(52,721)
(43,038)
(25,445)
55,628
29,352
(1,455)
(1,505)
338,543
(157)
(7,567)
7,328
(15,106)
(141,195)
3,207
9,261
(144,229)
21,862
(146,372)
557,882
(586,001)
(673)
(291)
4,337
7,803
(2,172)
-
(14,823)
7
(158,441)
91,747
16,260
1,455
25,260
119
(14,456)
(1,766)
817
(10,501)
(4,560)
(9,067)
7,422
(9,198)
(2,182)
(3,359)
187,220
(24,593)
(11,486)
10,277
(6,131)
(75,813)
232
742
(106,772)
77,483
(40,498)
956,363
(744,237)
(2,477)
(919)
6,830
10
(2,112)
(296,705)
(8,302)
262
(54,302)
91,543
18,041
521
20,535
(24,429)
9,904
(273)
86
(30,775)
(11,325)
(6,630)
3,513
7,369
(2,694)
271
229,772
(33,028)
(19,271)
21,847
-
(98,505)
29,366
(835)
(100,426)
9,954
(7,362)
405,540
(522,860)
(223)
(1,082)
11,901
-
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-
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760
17,674
241,833
259,507
Effect of exchange rate changes on cash and cash equivalents, including restricted cash
Increase in cash and cash equivalents, including restricted cash
Cash and cash equivalents, beginning of year, including restricted cash
Cash and cash equivalents, end of year, including restricted cash
10,416
46,289
320,529
366,818
$
34,876
61,022
259,507
320,529
$
$
The accompanying notes are an integral part of these consolidated financial statements.
51
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)
Supplemental Cash Flow Information
Cash paid during the year for:
Interest
Income taxes
Non-cash activities:
Accounts payable balance related to the purchase of property, plant and equipment
Twelve Months Ended December 31,
2019
2020
2021
$
$
$
6,944
56,077
$
$
10,219
47,891
$
$
7,235
37,158
24,256
$
7,297
$
10,167
The following table provides a reconciliation between cash, cash equivalents and restricted cash reported within the consolidated
balance sheets to the total of the same such amounts shown above:
Twelve Months Ended December 31,
2020
2021
2019
Current Assets:
Cash and cash equivalents
Restricted cash (included in other current assets)
Total cash, cash equivalents and restricted cash
$ 363,599
3,219
$ 366,818
$ 268,065
52,464
$ 320,529
$ 258,390
1,117
$ 259,507
The accompanying notes are an integral part of these consolidated financial statements.
52
DIODES INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
Note 1 – Summary of Operations and Significant Accounting Policies
Nature of operations
Diodes Incorporated, together with its subsidiaries (collectively the “Company,” “we” or “our”(Nasdaq: DIOD)), a Standard and
Poor's Smallcap 600 and Russell 3000 Index company, is a leading global manufacturer and supplier of high-quality application-specific
standard products within the broad discrete, logic, analog, and mixed-signal semiconductor markets. Diodes serves the consumer
electronics, computing, communications, industrial, and automotive markets.
The Company's products include diodes; rectifiers; transistors; MOSFETs; GPP bridges; GPP rectifiers; protection devices;
function-specific arrays; single gate logic; amplifiers and comparators; Hall-effect and temperature sensors; power management devices,
including LED drivers, AC-DC converters and controllers, DC-DC switching and linear voltage regulators, voltage references along
with special-function devices, such as USB power switches, load switches, voltage supervisors, and motor controllers. The Company
also has timing, connectivity, switching, and signal integrity solutions for high-speed signals.
The Company's corporate headquarters and Americas’ sales offices are located in Plano, Texas, and Milpitas, California,
respectively. Design, marketing, and engineering centers are located in Plano; Milpitas; Taipei, Taoyuan City, Zhubei City, Taiwan;
Shanghai, Yangzhou, China; Oldham, England; and Neuhaus, Germany. The Company's wafer fabrication facilities are located in
Oldham, England; Greenock, Scotland; and Shanghai and Wuxi, China; and Keelung and Hsinchu, Taiwan. The Company has assembly
and test facilities located in Shanghai, Jinan, Chengdu, and Wuxi, China; Neuhaus, Germany; and Jhongli and Keelung, Taiwan.
Additional engineering, sales, warehouse, and logistics offices are located in Taipei, Taiwan; Hong Kong; Oldham, England; Shanghai,
Shenzhen, Wuhan, and Yangzhou, China; Seongnam-si, South Korea; and Munich, Frankfurt, Germany; with support offices throughout
the world.
•
•
•
The company’s manufacturing facilities have achieved certifications in the internationally recognized standards of ISO
9001:2015, ISO 14001:2015, and, for automotive products, IATF 16949:2016;
Diodes Incorporated is also C-TPAT certified; and
These Quality Awards reflect the superior quality-control techniques established at Diodes Incorporated and further enhance
our credibility as a vendor-of-choice to OEMs increasingly concerned with quality and consistency.
Our market focus is on high-growth, end-user applications in the following areas:
•
•
•
•
•
Automotive: connected driving, comfort/style/safety, and electrification/powertrain;
Industrial: embedded systems, precision controls, and Industrial IoT;
Consumer: IoT, wearables, home automation, and smart infrastructure;
Communications: smart phones, 5G networks, advanced protocols, and charging solutions; and
Computing: cloud computing including server, storage, and data center applications.
Significant Accounting Policies
Principles of consolidation – The consolidated financial statements include the accounts of Diodes Incorporated, its wholly-
owned subsidiaries and its controlled majority-owned subsidiaries. We account for equity investments in companies over which we have
the ability to exercise significant influence, but do not hold a controlling interest, under the equity method, and we record our
proportionate share of income or losses in Interest and other, net in the consolidated statements of income. All significant intercompany
balances and transactions have been eliminated.
Use of estimates – The preparation of financial statements in conformity with generally accepted accounting principles in the
United States of America (“GAAP”) requires that management make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. The level of uncertainty in estimates and assumptions increases with the
length of time until the underlying transactions are completed. Actual results may differ from these estimates in amounts that may be
material to the consolidated financial statements and accompanying notes.
53
Revenue recognition – We apply the provisions of Accounting Standards Codification ("ASC") 606 in our revenue recognition
practices. ASC 606 defines a performance obligation as a promise in a contract to transfer a distinct good or service to the customer,
and under ASC 606 is the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and
recognized as revenue when, or as, the performance obligation is satisfied. Generally speaking, our performance obligations represent a
promise to transfer various semiconductor products, and have the same pattern of revenue recognition. Our performance obligations are
satisfied at either a point in time, or over time as work progresses. The vast majority of our revenue from products and services is
accounted for at a point in time. Substantially all of our revenue in direct and Distributor sales is recognized at a point in time. Further,
the payment terms on our sales are based on negotiations with our customers.
Our customers can order different types of semiconductors in a single contract (purchase order), and each line on a purchase order
represents a separate performance obligation. Depending on the terms of an arrangement, we may also be responsible for shipping and
handling activities. We have elected to account for shipping and handling as activities to fulfill our promise to transfer the good(s). As
such, shipping and handling activities do not represent a separate performance obligation, and are accrued as a fulfillment cost. Further,
although we offer warranties on our products, our warranties are considered to be assurance-type in nature and do not cover anything
beyond ensuring that the product is functioning as intended. Based on the guidance in ASC 606, assurance-type warranties do not
represent separate performance obligations; therefore, the primary performance obligation in the majority of our contracts is the delivery
of a specific good through the purchase order submitted by our customer.
We record allowances/reserves for a number of items. The following items are the largest dollar items for which we record
allowances/reserves, with ship and debit making up the vast majority: (i) ship and debit, which arise when we issue credit to certain
distributors upon their shipments to their end customers; (ii) stock rotation, which are contractual obligations that permit certain
distributors, up to four times a year, to return a portion of their inventory based on historical shipments to them in exchange for an equal
and offsetting order; and (iii) price protection, which arise when market conditions cause average selling prices to decrease and we issue
credit to certain distributors on their inventory. Ship and debit reserves are recorded as a reduction to net sales with a corresponding
reduction to accounts receivable. Stock rotation reserves and price protection reserves are recorded as a reduction to net sales with a
corresponding increase in accrued liabilities.
We also assess our customer’s ability and intention to pay, which is based on a variety of factors including our customer’s historical
payment experience, their financial condition and the condition of the global economy and financial markets. Payment terms and
conditions typically vary depending on negotiations with the customer.
Net sales are reduced in the period of sale for estimates of product returns and other allowances including distributor adjustments,
which were approximately $220.3 million, $194.7 million and $163.9 million in 2021, 2020 and 2019, respectively.
Product warranty – We generally warrant our products for a period of one year from the date of sale. Historically, warranty
expense has not been material.
Cash, cash equivalents, and short-term investments – We consider all highly liquid investments with maturity of three months
or less at the date of purchase to be cash equivalents. We currently maintain substantially all of our day-to-day operating cash balances
with major financial institutions. We hold short-term investments consisting of time deposits, which are highly liquid with maturity
dates greater than three months at the date of purchase. Generally, we can access these investments in a relatively short amount of time
but in doing so we generally forfeit a portion of interest income. See Note 3 below for additional information regarding fair value of
financial instruments.
Allowance for doubtful accounts – We evaluate the collectability of our accounts receivable based upon a combination of factors,
including the current business environment and historical experience. If we are aware of a customer’s inability to meet its financial
obligations, we record an allowance to reduce the receivable to the amount we reasonably believe will be collected from the customer.
For all other customers, we record an allowance based upon the amount of time the receivables are past due. If actual accounts receivable
collections differ from these estimates, an adjustment to the allowance may be necessary with a resulting effect on operating expense.
Accounts receivable are presented net of valuation allowance, which were approximately $4.3 million at December 31, 2021 and $3.8
million at December 31, 2020.
Inventories – Inventories are stated at the lower of cost or net realizable value. Cost is determined principally by the first-in, first-
out method. Cost includes materials, labor, and manufacturing overhead related to the purchase and production of inventories. Any
write-down of inventory to the lower of cost or net realizable value at the close of a fiscal period creates a new cost basis that
subsequently would not be marked up based on changes in underlying facts and circumstances. On an on-going basis, we evaluate
inventory for obsolescence and slow-moving items. This evaluation includes analysis of sales levels, sales projections, and purchases
by item, as well as raw material usage related to our manufacturing facilities. If our review indicates a reduction in utility below carrying
value, we reduce inventory to a new cost basis. If future demand or market conditions are different than our current estimates, an
54
inventory adjustment to write down inventory may be required, and would be reflected in cost of goods sold in the period the revision
is made.
Property, plant and equipment – Purchased property, plant and equipment is recorded at historical cost, and property, plant and
equipment acquired in a business combination is recorded at fair value on the date of acquisition. Property, plant and equipment is
depreciated using straight-line methods over the estimated useful lives, which range from 20 to 55 years for buildings and 3 to 10 years
for machinery and equipment. The estimated lives of leasehold improvements range from 3 to 5 years, and are amortized over the shorter
of the remaining lease term or their estimated useful lives.
Goodwill and other indefinite lived intangible assets – Goodwill and indefinite lived assets are tested for impairment on an
annual basis or when an event or changes in circumstances indicate that its carrying value may not be recoverable. Goodwill impairment
is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment. Diodes has one
operating segment. No goodwill impairment occurred in 2021, 2020, or 2019. Goodwill is reviewed for impairment using either a
qualitative assessment or a quantitative goodwill impairment test. If we choose to perform a qualitative assessment and determine the
fair value more likely than not exceeds the carrying value, no further evaluation is necessary. When we perform the quantitative goodwill
impairment test, we compare fair value to carrying value, which includes goodwill. If fair value exceeds carrying value, the goodwill is
not considered impaired. If the carrying value is higher than the fair value, the difference would be recognized as an impairment loss.
Impairment of long-lived assets – Our long-lived assets are reviewed whenever events or changes in circumstances indicate that
the carrying value may not be recoverable. We consider assets to be impaired if the carrying value exceeds the undiscounted projected
cash flows from operations. If impairment exists, the assets are written down to fair value or to the projected discounted cash flows from
related operations. As of December 31, 2021, we expect the remaining carrying value of assets to be recoverable.
Business combinations – We account for acquired businesses using the acquisition method of accounting, which requires that
once control of a business is obtained, 100% of the assets acquired and liabilities assumed, including amounts attributed to noncontrolling
interests, be recorded at the date of acquisition at their respective fair values. Any excess of the purchase price over the estimated fair
values of the net assets acquired is recorded as goodwill.
For significant acquisitions we may use independent third-party valuation specialists to assist us in determining the fair value of
assets acquired and liabilities assumed.
Significant judgment is often required in estimating the fair value of assets acquired and liabilities assumed. The Company makes
estimates and assumptions about conditions of the assets, other costs not captured in the base costs, and consideration for entrepreneurial
profit, depreciation, functional obsolescence, and economic obsolescence allocated to the various property, plant and equipment
categories considering the perspective of marketplace participants.
While management believes those expectations and assumptions are reasonable, they are inherently uncertain. Unanticipated
market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and
assumptions, which could result in subsequent impairments.
During the normal course of business the Company pursues acquisitions. See Note 19 for additional information regarding business
acquisitions.
Equity investments – We regularly invest in equity securities of public and private companies to promote business and strategic
objectives. Equity investments are measured and recorded as follows:
Marketable equity securities are equity securities with readily determinable fair value ("RDFV") that are measured and recorded
at fair value on a recurring basis with changes in fair value, whether realized or unrealized, recorded through the income statement.
Non-marketable equity securities are equity securities without RDFV that are measured and recorded using a measurement
alternative that measures the security at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price
changes.
Equity-method investments are equity securities in investees we do not control but over which we have the ability to exercise
significant influence. Equity method investments are measured at cost minus impairment, if any, plus or minus our share of equity
method investee income or loss. Our proportionate share of the income or loss from equity method investments is typically recognized
on a one-quarter lag.
55
Income taxes – Income taxes are accounted for using an asset and liability approach whereby deferred tax assets and liabilities
are recorded for differences in the financial reporting bases and tax bases of our assets and liabilities. If it is more likely than not that
some portion of deferred tax assets will not be realized, a valuation allowance is recorded.
GAAP prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial
statements uncertain tax positions taken or expected to be taken on a tax return. Tax positions shall initially be recognized in the financial
statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions shall
initially and subsequently be measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate
settlement with the tax authority assuming full knowledge of the position and all relevant facts. All deferred income taxes are classified
as noncurrent assets or noncurrent liabilities on the consolidated balance sheet as of December 31, 2021 and 2020, respectively.
Research and development costs – Internally-developed research and development costs are expensed as incurred. Acquired in-
process research and development (“IPR&D”) is capitalized as an indefinite-lived intangible asset and evaluated periodically for
impairment. When the project is completed, an expected life is determined and the IPR&D is amortized as an expense over the expected
life.
Shipping and handling costs – Shipping and handling costs for products shipped to customers, which are included in selling,
general and administrative expenses, were approximately $24.1 million, $16.6 million and $13.9 million for the twelve months ended
December 31, 2021, 2020 and 2019, respectively.
Concentration of credit risk – Financial instruments, which potentially subject us to concentrations of credit risk, include trade
accounts receivable. Credit risk is limited by the dispersion of our customers over various geographic areas, operating primarily in
electronics manufacturing and distribution. We perform a credit evaluation of new customers and monitor the accounts receivable aging
of our existing customers. Generally we require no collateral from our customers and historically credit losses have been insignificant.
We currently maintain substantially all of our day-to-day cash balances and short-term investments with major financial
institutions. Cash balances are usually in excess of Federal and/or foreign deposit insurance limits.
Valuation of financial instruments – The carrying value of our financial instruments, including cash and cash equivalents, short-
term investments, accounts receivable, accounts payable, credit line, and long-term debt approximate fair value due to their current
market conditions, maturity dates and other factors.
Share-based compensation – We use the Black-Scholes-Merton model to determine the fair value of stock options on the date of
grant and recognize compensation expense for stock options on a straight-line basis. Restricted stock grants are measured based on the
fair market value of the underlying stock on the date of grant and compensation expense is recognized on a straight-line basis over the
requisite four-year service period. Performance stock units are measured based on the fair market value of the underlying stock on the
date of grant and compensation expense is recognized over the three-year performance period, with adjustments made to the expense to
recognize the probable payout percentage.
The amount of compensation expense recognized using the Black-Scholes-Merton model requires us to exercise judgment and
make assumptions relating to the factors that determine the fair value of our stock option grants. The fair value calculated by this model
is a function of several factors, including the grant price, the expected future volatility, the expected term of the option and the risk-free
interest rate of the option. The expected term and expected future volatility of the options require judgment. In addition, we estimate the
expected forfeiture rate and only recognize expense for those stock options expected to vest. We estimate the forfeiture rate based on
historical experience, and to the extent our actual forfeiture rate is different from our estimate, share-based compensation expense is
adjusted accordingly.
Treasury stock – We currently have no program authorized by our board of directors to purchase shares of our common stock.
Shares than have been previously acquired recorded as treasury stock, at cost, the measurement date of cost being date of purchase, as
a reduction to stockholder’ equity.
During the fourth quarter of 2020, as part of the Lite-On Semiconductor acquisition, the Company reacquired 7,765,778 shares of
its Common Stock.
56
Functional currencies and foreign currency translation – We translate the assets and liabilities of our non-U.S. dollar functional
currency subsidiaries into U.S. dollars using exchange rates on the balance sheet date. Net sales and expense for these subsidiaries are
translated at the weighted-average exchange rate during the period presented. Resulting translation adjustments are recorded as a separate
component of accumulated other comprehensive income or loss within stockholders’ equity in the consolidated balance sheets. Included
in other income are foreign exchange losses of approximately $2.1 million for the twelve months ended December 31, 2021,
approximately $9.8 million for the twelve months ended December 31, 2020, and approximately $3.7 million for the twelve months
ended December 31, 2019.
Defined benefit plan – We maintain plans covering certain of our employees in the U.K. The overfunded or underfunded status
of pension and postretirement benefit plans are recognized on the balance sheet. Actuarial gains and losses, and prior service costs or
credits, are recognized in other comprehensive income (loss), net of tax effects, until they are amortized as a component of net periodic
benefit cost. For financial reporting purposes, the net pension and supplemental retirement benefit obligations and the related periodic
pension costs are calculated based upon, among other things, assumptions of the discount rate for plan obligations, estimated return on
pension 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.
The expected long-term return on plan assets was determined based on historical and expected future returns of the various asset classes.
The plan’s investment policy includes a mandate to diversify assets and invest in a variety of asset classes to achieve its expected long-
term return and is currently invested in a variety of funds representing most standard equity and debt security classes. Trustees of the
plan may make changes at any time. As part of the LSC acquisition we have assumed the liability associated with a defined benefit plan
for certain LSC employees. The net liability assumed was approximately $4.7 million, as of December 31, 2020.
Noncontrolling interest - Noncontrolling interest primarily relates to the minority investors’ share of the earnings of certain China
and Taiwan subsidiaries. Noncontrolling interests are a separate component of equity and not a liability. Increases or decreases in
noncontrolling interest, due to changes in our ownership interest of the subsidiaries that leave control intact, are recorded as equity
transactions. The noncontrolling interest in our subsidiaries and their equity balances are reported separately in the consolidated financial
statements, and activities of these subsidiaries are included therein.
Contingencies – From time to time, we may be involved in a variety of legal matters that arise in the normal course of business.
Based on information available, we evaluate the likelihood of potential outcomes. We record and disclose the appropriate liability when
the amount is deemed probable and reasonably estimable. In addition, we do not accrue for estimated legal fees and other directly related
costs as they are expensed as incurred.
Comprehensive income (loss) – GAAP generally requires that recognized revenue, 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 consolidated
balance sheet, such items, along with net income, are components of comprehensive income or loss. The components of accumulated
other comprehensive income or loss include foreign currency translation adjustments and unrealized gain or loss on defined benefit plan.
Accumulated other comprehensive loss was approximately $50.5 million, $73.6 million and $108.1 million at December 31, 2021, 2020
and 2019, respectively.
As of December 31, the accumulated balance for each component of comprehensive income is as follows:
Unrealized foreign currency losses
Unrealized gain on cross currency and interest rate swaps, net of tax
Unrealized loss on defined benefit plan
2021
2020
(7,760)
(2,157)
(40,600)
$
$
$
(21,614)
(3,574)
(48,418)
$
$
$
Reclassifications – Certain immaterial amounts from prior periods have been reclassified to conform to the current years’
presentation.
Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board (“FASB”) issued the following Accounting Standards Updates (“ASU”) which could
have potential impact to the Company’s financial statements:
In November 2021, the FASB issued ASU No. 2021-10 Government Assistance (Topic 832), Disclosures by Business Entities
About Government Assistance, which requires entities to provide disclosures on material government assistance transactions for annual
reporting periods. The disclosures include information around the nature of the assistance, the related accounting policies used to account
for government assistance, the effect of government assistance on the entity’s financial statements, and any significant terms and
conditions of the agreements, including commitments and contingencies. The new standard is effective for the Company on January 1,
57
2022 and only impacts annual financial statement footnote disclosures. The adoption will not have a material effect on our consolidated
financial statements.
In March 2020, the FASB issued ASU No. 2020-04 Reference Rate Reform (Topic 848). ASU No. 2020-04 contains practical
expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU No.
2020-04 is optional and may be elected over time as reference rate reform activities occur. During the second quarter of 2020, the
Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-
indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding
derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company
continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
Note 2 – Earnings per Share
Basic earnings per share is calculated by dividing net earnings attributable to common stockholders 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. Earnings per share are
computed using the “treasury stock method.”
Twelve Months Ended December 31,
2020
2019
2021
Earnings (numerator)
Net income (loss) attributable to common stockholders
$
228,763
$
98,088
$
153,250
Shares (denominator)
Weighted average common shares outstanding (basic)
Dilutive effect of stock options and stock awards outstanding
Adjusted weighted average common shares outstanding (diluted)
44,772
1,009
45,781
51,004
1,129
52,133
50,787
1,073
51,860
Earnings (loss) per share attributable to common
stockholders
Basic
Diluted
Stock options and stock awards excluded from EPS
calculation because their inclusion would be
anti-dilutive
Note 3 – Fair Value Measurements
$
$
5.11
5.00
$
$
1.92
1.88
$
$
3.02
2.96
1
-
-
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.
We use valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The
market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets
and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single
present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service
capacity of an asset (replacement costs). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the
assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the
assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent
sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants
would use in pricing the asset or liability developed based on the best information available in the circumstances. These two types of
inputs create a three-tier fair value hierarchy that gives the highest priority to quoted prices in active markets for identical assets or
liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability
to access at the measurement date.
Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or
indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or
58
liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (for example, interest
rates, volatilities, prepayment speeds, loss severities, credit risks and default rates) or inputs that are derived principally from or
corroborated by observable market data by correlation or other means.
Level 3 Inputs - Significant unobservable inputs that reflect an entity’s own assumptions that market participants would use in
pricing the assets or liabilities.
As of December 31, 2021, we had short-term and long-term investments. Long-term investments are included with Other long-
term assets on the consolidated balance sheet. Trading securities held at December 31, 2021, were purchased on the open market and
unrealized gains and losses are included in Other income (expense). The trading securities are valued under the fair value hierarchy
using Level 1 Inputs. Short-term investments consist of investments such as time deposits, which are highly liquid with maturity dates
greater than three months at the date of purchase. Generally, we can access these short-term investments in a relatively short amount of
time but in doing so we generally forfeit a portion of earned and future interest income. Long-term investments consist of certain equity
securities acquired as part of the LSC acquisition. Deferred compensation investments consist of the Company’s stock, mutual funds
and cash. See Note 13 for additional information related to our deferred compensation program and Note 18 for additional information
related to our interest rate swaps and foreign currency hedges. The short-term investments, long-term investments and deferred
compensation investments are valued under the fair value hierarchy using Level 1 and Level 2 Inputs.
Financial assets and liabilities carried at fair value as of December 31, 2021, are classified in the following table:
Description
Short-term investments
Long-term investments
Cross-currency swap liability
Deferred compensation investments
Fair Market
Value
$
6,542
47,001
1,330
15,483
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
6,542
$
47,001
-
904
Significant Other
Observable
Inputs (Level 2)
$
-
-
1,330
14,579
Total
Changes in
Fair Values
Included in
Current
Period
Earnings
Significant
Unobservable Inputs
(Level 3)
$
$
-
-
-
-
-
28,018
-
1,527
Financial assets and liabilities carried at fair value as of December 31, 2020 are classified in the following table:
Description
Short-term investments
Long-term investments
Cross-currency swap liability
Interest-rate swap liability
Deferred compensation investments
Fair Market
Value
$
6,142
18,295
2,305
1,626
12,829
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
6,142
$
18,295
-
-
691
Significant Other
Observable
Inputs (Level 2)
$
-
-
2,305
1,626
12,138
Total Changes
in Fair Values
Included in
Current
Period
Earnings
Significant
Unobservable Inputs
(Level 3)
$
$
-
-
-
-
-
-
2,083
-
-
3,142
Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis; that is, the instruments are not
measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances (for example, when there
is evidence of impairment). We believe our long-term debt under our revolving credit facility approximates fair value and is valued
under the fair value hierarchy using Level 2 Inputs. Financial assets and financial liabilities measured at fair value on a non-recurring
basis were not significant at December 31, 2021 and 2020.
We also are responsible for a pension plan in the U.K. that holds investments carried at fair value. See Note 13 for additional
information related to these pension plan investments.
59
Note 4 – Inventories
Inventories, stated at the lower of cost or market value, at December 31 were:
Finished goods
Work-in-progress
Raw materials
Note 5 – Property, Plant and Equipment
Property, plant and equipment at December 31 were:
Buildings and leasehold improvements
Machinery and equipment
Less: Accumulated depreciation and amortization
Construction in-progress
Land
$
$
$
$
2021
2020
108,557
81,784
158,281
348,622
2021
276,958
962,597
1,239,555
(836,364)
403,191
111,987
66,901
582,079
$
$
$
$
85,506
73,466
148,090
307,062
2020
267,700
942,405
1,210,105
(791,348)
418,757
45,060
66,998
530,815
Depreciation and amortization of property, plant and equipment was $106.2 million, $91.7 million and $91.5 million for the years
ended December 31, 2021, 2020 and 2019, respectively. During the fourth quarter of 2019 the Company recorded a $24.3 million gain
realized upon selling land. The land was acquired in a previous period in anticipation of building a new corporate headquarters building.
Note 6 – Intangible Assets
Intangible assets subject to amortization at December 31 were as follows:
Intangible Assets
Amortized intangible assets
Patents
Developed product technology
Customer relationships
Software license and other
Total amortized intangible assets
Intangible assets with indefinite lives
In process research and development
Trademarks and trade names
Total Intangible assets with indefinite lives
Total intangible assets
December 31, 2021
Useful life
Gross Carrying
Amount
Accumulated
Amortization
Currency
Exchange
Net
5-15 years $
2-10 years
7-12 years
3-4 years
Indefinite
Indefinite
$
16,040
166,819
62,093
2,743
247,695
2,061
10,303
12,364
260,059
$
(15,242) $
(100,248)
(38,760)
(2,677)
(156,927)
-
-
-
$
(156,927) $
(97) $
(5,736)
(1,688)
(61)
(7,582)
-
(1,000)
(1,000)
(8,582) $
701
60,835
21,645
5
83,186
2,061
9,303
11,364
94,550
60
Intangible Assets
Useful life
Gross Carrying
Amount
Accumulated
Amortization
Currency
Exchange
Net
December 31, 2020
Amortized intangible assets
Patents
Developed product technology
Customer relationships
Software license and other
Total amortized intangible assets
Intangible assets with indefinite lives
In process research and development
Trademarks and trade names
Total Intangible assets with indefinite
lives
Total intangible assets
5-15 years $
2-10 years
7-12 years
3-4 years
13,040 $
164,300
62,093
5,743
245,176
(11,409) $
(89,027)
(34,597)
(5,677)
(140,710)
Indefinite
Indefinite
4,580
10,303
14,883
260,059 $
$
-
-
-
(140,710) $
(139) $
(5,891)
(1,688)
(63)
(7,781)
-
(977)
1,492
69,382
25,808
3
96,685
4,580
9,326
(977)
(8,758) $
13,906
110,591
Amortization expense related to intangible assets subject to amortization was $16.2 million, $16.3 million and $18.0 million for
the years ended December 31, 2021, 2020 and 2019, respectively. In process research and development is transferred to amortized
intangible assets at the time the product becomes viable.
The weighted amortization period for intangible assets subject to amortization is 9.9 years. The schedule below sets future
amortization expense of our currently owned intangible assets:
2022
2023
2024
2025
2026
2027 and thereafter
Total
Note 7 – Goodwill
Changes in goodwill for the years ended December 31, were as follows:
Balance at December 31, 2019
Acquisitions:
Savitech
Foreign currency translation adjustment
Balance at December 31, 2020
Acquisitions:
Savitech
Foreign currency translation adjustment
Balance at December 31, 2021
$
$
$
$
15,531
14,976
14,616
13,618
12,055
12,390
83,186
141,318
13,962
3,051
158,331
(9,152)
711
149,890
Note 8 – Bank Credit Agreements and Other Short-term and Long-term Debt
Short-term debt
Our Asia subsidiaries maintain credit facilities with several financial institutions through our foreign entities worldwide totaling
$122.5 million. Other than two Taiwanese credit facilities that are collateralized by assets, our foreign credit lines are unsecured,
uncommitted and contain no restrictive covenants. These credit facilities bear interest at LIBOR or similar indices plus a specified
margin. Interest payments are due monthly on outstanding amounts under the credit lines. The unused and available credit under the
various facilities as of December 31, 2021, was approximately $103.4 million, net of $18.1 million advanced under our foreign credit
lines, attributable to our 51% owned subsidiary, Eris Technology Company ("ERIS"), and $1.0 million credit used for import and export
guarantee.
Long-term debt
On December 29, 2021, the Company entered into Amendment No. 6 to Second Amended and Restated Credit Agreement,
Consent and Incremental Term Assumption Agreement (the “Amendment”) that amends that certain Second Amended and Restated
Credit Agreement dated as of May 29, 2020 (as amended, modified and/or supplemented from time to time prior to the date of the
61
Amendment, the “Existing Credit Agreement”). Certain capitalized terms used in this description of the Amendment have the meanings
given to them in the Amendment or the Existing Credit Agreement.
The Amendment amends and modifies the Company’s existing senior credit facilities under the Existing Credit Agreement as
follows: (x) increases the revolving senior credit facility (“Revolver”) amount from $150.0 million to $200.0 million, (y) provides for
a new $50.0 million tranche of Incremental Term Loans, which were funded in that amount at the closing of the Amendment (and the
proceeds of which were applied to repay $50.0 million of outstanding borrowings under the Revolving Credit Loans), and (z) reduces
the interest rate for a new Pricing Level and unused line fees for certain Pricing Levels. The Amendment contains certain financial and
non-financial covenants, including, but not limited to, a maximum Consolidated Leverage Ratio, a minimum Consolidated Fixed Charge
Coverage Ratio, and restrictions on liens, indebtedness, investments, fundamental changes, dispositions, and restricted payments
(including dividends in excess of $25.0 million and share repurchases). These covenants are generally similar to the corresponding
covenants in the Existing Credit Agreement, except that certain amounts permitted as exceptions to the negative covenant restricting
investments have been increased, and additional exceptions have been added to the negative covenant on indebtedness allowing
unsecured Guarantees by the Company of indebtedness of certain of its Subsidiaries relating to securitization transactions and
receivables facilities. Furthermore, under the Credit Agreement, restricted payments, including dividends and share repurchases, are
permitted in certain circumstances, including while the pro forma Consolidated Leverage Ratio is, both before and after giving effect to
any such restricted payment, at least 0.25 to 1.00 less than the maximum permitted under the Credit Agreement.
On January 22, 2021, Diodes Hong Kong Limited, a company incorporated under the laws of Hong Kong and a subsidiary of
the Company, entered into a Facility Agreement (the “Facility Agreement”) with The Hongkong and Shanghai Banking Corporation
Limited and the other parties identified therein pursuant to which Diodes Hong Kong Limited obtained from the lenders a US Dollar
revolving loan facility in an aggregate amount equal to $100.0 million. Diodes Hong Kong Limited used a portion of the proceeds from
such revolving loan facility (i) to refinance certain existing indebtedness and (ii) to finance working capital requirements and its general
corporate purposes.
Borrowings outstanding as of December 31, 2021 and December 31, 2020, are set forth in the table below:
December 31,
2021
2020
18,068
$
140,567
Interest Rate
Various indices plus
margin
Current Amount Maturity
Various during 2022
$
$
Description
Short-term debt
Long-term debt
Notes payable to Bank of Taiwan
Notes payable to Bank of Taiwan
Notes payable to Bank of China Trust
Company
Notes payable to Bank of China Trust
Company
Notes payable to E Sun Bank
Notes payable to E Sun Bank
2,492
1,807
$
$
16,168
3,614
3,614
371
Notes payable to E Sun Bank
Term loan and revolver
Note payable to HSBC
Total long-term debt
Less: Current portion of long-term debt
Less: Unamortized debt-issuance costs
Total long-term debt, net of current portion $
1,771
155,122
100,000
284,959
(17,381)
(2,004)
265,574
$
16,714
-
3,511
4,154 Variable, 1.3% base
2 year deposit rate
floating
Taibor 3 month rate
+ 0.5%
Taibor 3 month rate
+ 0.5%
1-M deposit rate
plus 0.08%
1-M deposit rate
plus 0.08%
1-M deposit rate
plus 0.08%
Libor plus margin
Libor plus margin
3,511
386
1,721
282,250
-
312,247
(21,860)
(2,208)
288,179
June 2033
September 2023
May 2024
December 2023
December 2023
June 2027
June 2030
May 2024
January 2023
62
The table below sets forth the annual contractual maturities of long-term debt at December 31, 2021:
2022
2023
2024
2025
2026
2027 and thereafter
Total long-term debt
$
$
17,381
126,526
137,780
498
503
2,271
284,959
63
Note 9 – Leases
The Company leases certain assets used in its business, including land, buildings and equipment. These leased assets are used for
operational and administrative purposes.
The table below sets forth the components of lease expense for the years ended December 31:
Operating lease expense
Finance lease expense:
Amortization of assets
Interest on lease liabilities
Short-term lease expense
Variable lease expense
Total lease expense
$
$
2021
2020
2019
16,533
$
15,111
$
221
1
954
4,853
22,562
$
836
14
525
2,940
19,426
$
The table below sets forth supplemental balance sheet information related to leases as of December 31:
2021
2020
Operating leases:
Operating lease ROU assets
Current operating lease liabilities
Noncurrent operating lease liabilities
Total operating lease liabilities
Finance leases:
Finance lease ROU assets
Accumulated amortization
Finance lease ROU assets, net
Current finance lease liabilities
Non-current finance lease liabilities
Total finance lease liabilities
Weighted average remaining lease term (in years):
Operating leases
Finance leases
Weighted average discount rate:
Operating leases
Finance leases
$
$
$
$
$
$
$
$
$
$
$
$
49,703
11,199
22,291
33,490
2,561
(2,524)
37
15
23
38
6.9
2.3
4.0%
3.7%
14,824
978
48
336
2,663
18,849
54,457
10,663
27,041
37,704
2,507
(2,298)
209
149
24
173
7.6
0.6
4.0%
3.1%
The table below sets forth supplemental cash flow and other information related to leases for the twelve months ended December 31:
Cash paid for the amounts included in the measurements of lease
liabilities:
Operating cash outflows from operating leases
Operating cash outflows from finance leases
Financing cash outflow from finance leases
$
2021
2020
2019
$
24,040
1
291
$
15,943
19
919
18,325
48
1,082
ROU assets obtained in exchange for lease liabilities incurred:
Operating leases
13,038
6,339
3,956
64
The table below sets forth information about lease liability maturities:
December 31, 2021
Operating Leases
Finance Leases
2022
2023
2024
2025
2026
2027
2028 and thereafter
Total lease payments
Less: imputed interest
Total lease obligations
Less: current obligations
Long-term lease obligations
$
$
12,285
7,145
4,349
4,205
2,774
676
8,356
39,790
(6,300)
33,490
(11,199)
22,291
$
$
Note 10 – Accrued Liabilities and Other Long-Term Liabilities
Accrued liabilities and other current liabilities at December 31 were:
2021
2020
Accrued expenses
Compensation and payroll taxes
Equipment purchases
Operating lease
Finance lease
Accrued pricing adjustments
Accrued professional services
Tax payable - non-income tax related
Other
Other long-term liabilities at December 31 were:
Accrued defined benefit plan
Unrecognized tax benefits
Operating lease
Finance lease
Deferred grants and subsidy
Deferred compensation
Tax contingencies
Other
Note 11 – Stockholders’ Equity
$
$
$
$
55,480
73,124
24,257
11,199
15
11,401
3,189
2,273
3,711
184,649
19,606
29,652
22,291
23
14,139
20,079
8,787
8,356
122,933
$
$
$
$
2021
2020
14
12
11
2
-
-
-
39
(1)
38
(15)
23
73,273
48,748
7,297
10,663
149
7,891
3,708
7,858
530
160,117
35,316
27,965
27,041
24
11,924
14,833
8,787
4,905
130,795
We have never declared or paid cash dividends on our Common Stock. Our U.S. Credit Facility permits us to pay dividends up to
$25.0 million per fiscal year to its stockholders so long as we have not defaulted under the U.S. Credit Facility at the time of such
dividend and no default would result from declaring or paying such dividend. The payment of dividends is within the discretion of our
Board of Directors. See Note 8 for additional information regarding our credit agreements.
During 2020, in connection with the LSC acquisition, the Company acquired approximately 7.8 million shares of its stock that
was owned by LSC. These shares are reflected as treasury stock in the consolidated balance sheet.
65
Note 12 – Income Taxes
The table below sets forth our (loss) income before taxes for the years ended December 31:
Income (loss) before income taxes
U.S.
Foreign
Total
2021
2020
2019
$
$
122,127
192,968
315,095
$
$
45,526
74,815
120,341
$
$
73,352
124,894
198,246
The table below sets forth the components of our income tax provision (benefit) for the years ended December 31:
Current tax provision
Federal
Foreign
State
Deferred tax provision (benefit)
Federal
Foreign
State
Liability for unrecognized tax benefits
Total income tax provision
Effective Tax Rate Reconciliation
2021
2020
2019
$
$
$
15,691
25,489
(17)
41,163
(1,116)
31,222
-
30,106
$
631
17,115
56
17,802
6,411
(6,210)
65
266
7,538
78,807
$
3,044
21,112
$
259
28,829
92
29,180
886
11,994
30
12,910
2,041
44,131
The table below sets forth a reconciliation between the effective tax rate and the statutory tax rates for the years ended December
31:
2021
2020
2019
Percent
of pretax
earnings*
Percent
of pretax
earnings*
Percent
of pretax
earnings*
Amount
Amount
21.0
$
25,272
21.0
$
41,632
Amount
$
66,170
Federal tax
State income taxes, net of federal tax
provision
Foreign income taxed at different tax rates
U.S. tax impact of foreign operations
Foreign withholding taxes
Research and development
Liability for unrecognized tax benefits
Valuation allowance
Employee stock-based compensation
Other
Income tax provision
$
(474)
(2,018)
(17,375)
33,175
(6,310)
7,538
(1,068)
(812)
(19)
78,807
(0.2)
(0.6)
(5.5)
10.5
(2.0)
2.4
(0.3)
(0.3)
-
25.0
$
(378)
81
(3,031)
(1,798)
(4,210)
3,044
2,199
(660)
593
21,112
(0.3)
0.1
(2.5)
(1.5)
(3.5)
2.5
1.8
(0.5)
0.5
17.5
$
1,389
(5,786)
(3,340)
22,685
(3,686)
2,041
(10,563)
(52)
(189)
44,131
21.0
0.7
(2.9)
(1.7)
11.4
(1.9)
1.0
(5.3)
-
(0.1)
22.3
* The sum of the amounts in the table may not equal to the effective tax rate due to rounding.
66
Uncertain Tax Positions
In accordance with the provisions related to accounting for uncertainty in income taxes, we recognize the benefit of a tax position
if the position is “more likely than not” to prevail upon examination by the relevant tax authority. The table below sets forth a
reconciliation of the beginning and ending amount of unrecognized tax benefits:
Balance at January 1,
Additions based on tax positions related to the
current year
Additions for prior year tax positions
Reductions for prior year tax positions
Balance at December 31,
2021
2020
2019
42,466
$
35,652
$
9,244
138
(8,470)
43,378
$
7,495
4,952
(5,633)
42,466
$
32,209
9,274
39
(5,870)
35,652
$
$
If the $43.4 million of unrecognized tax benefits as of December 31, 2021, is recognized, approximately $41.3 million would
affect the effective tax rate. It is reasonably possible that the amount of the unrecognized benefit with respect to certain of our
unrecognized tax positions will significantly increase or decrease within the next 12 months. These changes may be the result of
settlements of ongoing audits or competent authority proceedings. At this time, an estimate of the range of the reasonably possible
outcomes cannot be made.
We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. We are no longer subject
to U.S. federal income tax examinations by tax authorities for tax years before 2012 or tax year 2015. We are no longer subject to China
income tax examinations by tax authorities for tax years before 2011. With respect to state and local jurisdictions and countries outside
of the U.S., with limited exceptions, we are no longer subject to income tax audits for years before 2016. Although the outcome of tax
audits is always uncertain, we believe that adequate amounts of tax, interest and penalties, if any, have been provided for in our reserve
for any adjustments that may result from future tax audits. We recognize accrued interest and penalties, if any, related to unrecognized
tax benefits in interest expense. We had an immaterial amount of accrued interest and penalties at December 31, 2021, 2020 and 2019.
Deferred Taxes
The table below sets forth our deferred tax assets and liabilities as of December 31:
Deferred tax assets
Inventory cost
Accrued expenses and accounts receivable
Research and development tax credits
Net operating loss carryforwards
Lease obligations
Plant, equipment and intangible assets
Accrued pension
Share based compensation and others
Valuation allowances
Total deferred tax assets, non-current
Deferred tax liabilities
Plant, equipment and intangible assets
Right of use assets
Outside basis differences and others
Total deferred tax liabilities, non-current
Net deferred tax assets
2021
2020
$
$
21,692
5,966
9,613
42,068
2,050
-
3,878
14,809
100,076
(45,232)
54,844
(1,330)
(1,975)
(50,773)
(54,078)
766
$
$
15,154
5,294
15,807
42,734
2,982
162
6,386
8,810
97,329
(45,591)
51,738
-
(2,936)
(13,467)
(16,403)
35,335
ASU No. 2013-11 provides that an entity is required to present an unrecognized tax benefit, or a portion of an unrecognized tax
benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax
credit carryforward. The $11.0 million net deferred tax liabilities presented in the balance sheet as of December 31, 2021, is net of
$11.7 million of unrecognized tax benefits. The $0.8 million and $35.3 million net deferred tax asset presented above for December 31,
2021 and 2020, respectively, is prior to the net balance sheet presentation required by ASU 2013-11.
67
At December 31, 2021, we had no federal research credit carryforward and approximately $10.0 million of state tax credit and
research credit carryforwards, which are available to offset future income tax liabilities. The state tax credit carryforwards will begin to
expire in 2021. Consistent with prior years, we determined that it is more likely than not that our state research credit carryforwards will
expire before they are utilized. The valuation allowances recorded against the related deferred tax assets totaled $9.0 million as of
December 31, 2021 and 2020.
At December 31, 2021, we had state net operating loss (“NOL”) carryforwards of approximately $1 million, and foreign NOL
carryforwards of $210 million which are available to offset future taxable income. The state NOL carryforward will begin to expire in
2021. We determined that it is more likely than not that the state NOL carryforwards will expire before they are fully utilized and
recorded a full valuation allowance on the related deferred tax assets. The foreign NOL carryforwards will begin to expire in 2021. We
determined that it is more likely than not that a portion of the foreign NOL carryforwards will expire before they are fully utilized. The
valuation allowances recorded against the related deferred tax assets totaled $36 million and $32 million as of December 31, 2021 and
2020, respectively.
Supplemental Information
Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to
earnings of European and Asian subsidiaries. As of December 31, 2021, we had undistributed earnings from non-U.S. operations of
approximately $1.5 billion (including approximately $207 million of restricted earnings, which are not available for dividends).
Undistributed earnings of our China subsidiaries comprise $449 million of this total. Additional Chinese withholding taxes of
approximately $45 million would be required should the $449 million of such earnings be distributed out of China as dividends.
The impact of tax holidays decreased our tax expense by approximately ($0.2) million, $0.9 million and $3.1 million for the years
ended December 31, 2021, 2020 and 2019, respectively. The benefit of the tax holidays on basic and diluted earnings per share was
$0.00, $0.02 and $0.06 for the twelve months ended December 31, 2021, 2020 and 2019, respectively.
Note 13 – Employee Benefit Plans
Defined Benefit Plan
In connection with the Zetex acquisition, we adopted a contributory defined benefit plan that covers certain employees in the U.K.
The defined benefit plan is closed to new entrants and frozen with respect to future benefit accruals. The retirement benefit is based on
the final average compensation and service of each eligible employee. We determined the fair value of the defined benefit plan assets
and utilize an annual measurement date of December 31. At subsequent measurement dates, defined benefit plan assets will be
determined based on fair value. Defined benefit plan assets consist of a diverse range of listed and unlisted securities including corporate
bonds and mutual funds and are denominated in the currency in which the benefits will be paid and that have terms to maturity
approximating the terms of the related pension liability. The net pension and supplemental retirement benefit obligations and the related
periodic costs are based on, among other things, assumptions of 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. All unrecognized actuarial gains and losses,
prior service costs and accumulated other comprehensive income are eliminated and the balance sheet liability is set equal to the funded
status of the defined benefit plan at acquisition date.
The table below sets forth net periodic benefit costs of the plan for the twelve months ended December 31:
Components of net periodic benefit cost:
Service cost
Interest cost
Recognized actuarial loss
Expected return on plan assets
Prior service cost
Net periodic benefit cost
Defined Benefit Plan
2021
2020
$
$
275
2,269
2,959
(7,266)
72
(1,691)
$
$
257
3,035
2,100
(7,405)
56
(1,957)
68
The table below sets forth the benefit obligation, the fair value of plan assets, and the funded status as of December 31:
Change in benefit obligation:
Beginning balance
Service cost
Interest cost
Actuarial (gain) loss
Benefits paid
Currency changes
Benefit obligation at December 31
Change in plan assets:
Beginning balance - fair value
Employer contribution
Actual return on plan assets
Benefits paid
Currency changes
Fair value of plan assets at December 31
Underfunded status at December 31
Defined Benefit Plan
2021
2020
$
$
$
$
$
175,292
275
2,269
(4,893)
(4,451)
(1,728)
166,764
147,861
3,027
10,314
(4,451)
(1,722)
155,029
(11,735)
$
$
$
$
$
158,680
257
3,027
12,522
(4,769)
5,575
175,292
132,621
2,822
12,535
(4,769)
4,652
147,861
(27,431)
Based on an actuarial study performed as of December 31, 2021, the plan was underfunded by approximately $11.7 million and
the liability is reflected in our consolidated balance sheets as a noncurrent liability and the amount recognized in accumulated other
comprehensive loss was approximately $39.4 million.
We apply the “10% corridor” approach to amortize unrecognized actuarial gains (losses). Under this approach, only actuarial
gains (losses) that exceed 10% of the greater of the projected benefit obligation or the market-related value of the plan assets are
amortized. For the twelve months ended December 31, 2021, the plan’s accumulated other comprehensive loss increased by
approximately $11.0 million. The variance between the actual and expected return to plan assets during 2021 decreased the total
unrecognized net loss by approximately $3.0 million. The total unrecognized net loss is more than 10% of the projected benefit obligation
and 10% of the plan assets. Therefore, the excess amount will be amortized over the average term to retirement of plan participants, not
yet in receipt of pension, which as of December 31, 2021, was approximately 8.5 years. The following weighted-average assumptions
were used to determine net periodic benefit costs for the twelve months ended December 31:
Discount rate
Expected long-term return on plan assets
2021
2020
1.9%
5.3%
1.3%
4.9%
The following weighted-average assumption was used to determine the benefit obligations at December 31:
Discount rate
2021
2020
1.9%
1.3%
The expected long-term return on plan assets was determined based on historical and expected future returns of the various asset
classes. The plan’s investment policy includes a mandate to diversify assets and invest in a variety of asset classes to achieve its expected
long-term return and is currently invested in a variety of funds representing most standard equity and debt security classes. Trustees of
the plan may make changes at any time. The table below sets forth the plan asset allocations of the assets in the plan and expected long-
term return by asset category:
Asset category
Growth assets
Hedging assets
Cash
Expected long-term
return
Asset allocation
7.0%
1.2%
0.3%
70%
28%
2%
69
Benefit plan payments are primarily made from funded benefit plan trusts and current assets. The table below sets forth the
expected future benefit payments, including future benefit accrual, as of December 31, 2021:
2022
2023
2024
2025
2026
2027-2031
$
4,942
5,354
5,725
5,816
5,946
32,224
The trustees are required to review the funding position every three years. An actuarial valuation was performed as of March 31,
2019, resulting in a deficit of approximately GBP 26.7 million (approximately $34.7 million based on a GBP: USD exchange rate of
1:1.3). As a result of this valuation we have agreed to a revised schedule of contributions of GBP 2.0 million (approximately $2.6 million
based on a GBP: USD exchange rate of 1:1.3 ) to be paid in annual installments with effect from April 1, 2020 to address the deficit
revealed by the valuation (with the first payment made by March 31, 2021, and payments to be made by December 31 each year
thereafter). These contributions, together with the assumed asset outperformance, are expected to eliminate the deficit by December 31,
2028. Further, we will pay GBP 0.2 million in annual installments effective April 1, 2020 to cover expenses.
The defined benefit plan’s investment strategy is to invest 65% in growth strategy assets and 35% in hedging strategy assets. The
growth strategy consists of a highly diversified set of assets, and the hedging component is designed to hedge a significant proportion
of the plan’s interest and inflation rate risks. The overall strategy is designed to return a long-term return of 2.6% p.a. above the liability
benchmark which is broadly equal to changes in the plan’s liabilities.
The plan’s trustees appoint fund managers to carry out all the day-to-day functions relating to the management of the fund and its
administration. The fund managers must invest their portion of the plan’s assets in accordance with their investment manager agreement
agreed by the trustees. The trustees are responsible for agreeing these investment manager agreements and for deciding on the portion
of the plan’s assets that will be invested with each fund manager. When making decisions, the trustees take advice from experts including
the plan’s actuary and also have the option to consult with the Company.
The following table summarizes the major categories of the plan assets:
Asset category
Cash and cash equivalents
Equity securities:
U.K.
Overseas equities
Emerging markets
Fixed income securities:
Government bonds
Non-government bonds
Other types of investments
Hedge funds
Property
Liability-driven investments
Commodities
Other
Total
Level 1
Level 2
Level 3
Total
December 31, 2021
$
9,685
$
-
$
-
-
-
-
-
-
-
-
-
-
9,685
$
1,982
46,447
11,662
6,289
7,702
19,208
-
46,463
5,581
10
145,344
$
$
-
-
-
-
-
-
-
-
-
-
-
-
$
9,685
1,982
46,447
11,662
6,289
7,702
19,208
-
46,463
5,581
10
155,029
$
Fair value is taken to mean the bid value of securities, as supplied by the fund managers. All the plan’s securities are highly liquid.
The plan does not hold any Level 3 securities. See Note 3 for additional information regarding fair value and Levels 1, 2 and 3.
The investment manager agreements require the fund managers to invest in a diverse range of stocks and bonds across each
particular asset class. The stocks held by the plan in a particular asset class should therefore match closely the underlying stocks in the
relevant index. We believe that this leads to minimal concentration of risk within each asset class; although we recognize that some
asset classes are inherently more risky than others.
70
We also have pension plans in Asia for which the benefit obligation, fair value of the plan assets and the funded status amounts
are immaterial and therefore, not included in the amounts or assumptions above. As of December 31, 2021 and 2020, the Company has
recorded a net liability of $6.3 million and $6.2 million, respectively, related to these defined benefit plans in Asia.
401(k) Retirement Plan
We maintain a 401(k) retirement plan (the “Plan”) for the benefit of qualified employees at our U.S. locations. Employees who
participate may elect to make salary deferral contributions to the Plan up to 100% of the employees’ eligible payroll subject to annual
Internal Revenue Code maximum limitations. We currently make a matching contribution of $1 for every $2 contributed by the
participant up to 6% (3% maximum matching) of the participant’s eligible payroll, which vests over an initial four years. In addition,
we may make a discretionary contribution to the entire qualified employee pool, in accordance with the Plan.
As stipulated by the regulations of China, we maintain a retirement plan pursuant to the local municipal government for the
employees in China. We are required to make contributions to the retirement plan at a rate between 10% and 22% of the employee’s
eligible payroll. Pursuant to the Taiwan Labor Standard Law and Factory Law, we maintain a retirement plan for the employees in
Taiwan, whereby we make contributions at a rate of 6% of the employee’s eligible payroll.
For the years ended December 31, 2021, 2020 and 2019, total amounts expensed under these plans were approximately $21.7
million, $10.2 million and $16.3 million, respectively.
Deferred Compensation Plan
We maintain a Non-Qualified Deferred Compensation Plan (the “Deferred Compensation Plan”) for executive officers, key
employees and members of the Board of Directors. The Deferred Compensation Plan allows eligible participants to defer the receipt of
eligible compensation, including equity awards, until designated future dates. We offset our obligations under the Deferred
Compensation Plan primarily by investing in the actual underlying investments. At December 31, 2021 and December 31, 2020, these
investments totaled approximately $15.5 million and $12.8 million, respectively.
Note 14 – Share-Based Compensation
The table below sets forth the line items where share-based compensation expense was recorded for the twelve months ended
December 31:
Cost of goods sold
Selling, general and administrative expense
Research and development expense
Total share-based compensation expense
2021
2020
2019
$
$
1,321
28,188
3,696
33,205
$
$
1,064
21,013
3,183
25,260
$
$
The table below sets forth share-based compensation expense by type for the twelve months ended December 31:
Stock options
Share grants
Total share-based compensation expense
2021
2020
2019
$
$
73
33,132
33,205
$
$
-
25,260
25,260
$
$
925
16,687
2,923
20,535
-
20,535
20,535
In May 2013, our stockholders approved our 2013 Equity Incentive Plan (“2013 Plan”). Since the approval of the 2013 Plan, all
stock options are granted under the 2013 Plan, and we will not grant any further stock options under our 2001 Plan. Stock options under
the 2013 Plan generally vest in equal annual installments over a four-year period and expire eight years after the grant date. The number
of shares originally authorized to be awarded under the 2013 Plan was 6 million shares. In May 2017, our stockholders approved an
amendment to the 2013 Plan, authorizing and additional 6 million shares to be awarded, bringing the total shares authorized to be
awarded under the 2013 Plan to 12 million shares.
71
Share-based compensation expense for stock options granted in previous years was calculated on the date of grant using the Black-
Scholes-Merton option-pricing model. All stock option expense is related to stock options granted by Savitech Corporation (“Savitech”)
in Savitech stock to their employees. We acquired a controlling interest in Savitech in 2020.
Total cash received from option exercises was approximately $4.3 million, $6.8 million and $11.9 million during 2021, 2020 and
2019, respectively.
At December 31, 2021, there was no unrecognized compensation expense related to unvested options.
The table below sets forth a summary of activity in our stock option plan:
Stock Options
Outstanding at December 31, 2018
Exercised
Outstanding and Exercisable at December 31, 2019
Exercised
Outstanding and Exercisable at December 31, 2020
Exercised
Outstanding and Exercisable at December 31, 2021
Weighted
Average
Exercise Price
Weighted Average
Remaining
Contractual Term
(years)
Aggregate
Intrinsic Value
Shares
988
(524)
464
(272)
192
(187)
5
23.47
22.68
24.37
25.11
23.32
23.19
27.92
$
$
$
$
$
$
$
0.4
8,693
10,600
14,849
8,278
9,059
10,631
409
The table below sets forth information about stock options outstanding at December 31, 2021:
Plan
2013 Plan
Range of
Exercise
Prices
$
27.92
Weighted
Average
Remaining
Contractual
Life
(Years)
Number
Exercisable
5,000
0.4
Weighted
Average
Exercise Price
27.92
$
Share Grants – Restricted stock awards and restricted stock units generally vest in equal annual installments over a four-year
period. Restricted stock grants are measured based on the fair market value of the underlying stock on the date of grant and compensation
expense is recognized on a straight-line basis over the requisite four-year service period.
Performance stock units (“PSUs”) are measured based on the fair market value of the underlying stock on the date of grant and
compensation expense is recognized over the three-year performance period, with adjustments made to the expense to recognize the
probable payout percentage. PSUs will vest upon the Company achieving a cumulative 3-year non-GAAP operating income target for
the applicable periods.
The table below sets forth a summary of our non-vested share grants in 2020, 2019 and 2018:
Nonvested at December 31, 2018
Granted
Vested
Forfeited
Nonvested at December 31, 2019
Granted
Vested
Forfeited and other
Nonvested at December 31, 2020
Granted
Vested
Forfeited and other
Nonvested at December 31, 2021
1,667
670
(573)
(67)
1,697
573
(770)
88
1,588
598
(750)
(34)
1,402
26.68
38.15
24.90
30.44
31.71
48.83
27.78
38.31
39.30
79.26
33.39
52.27
54.94
$
$
60,346
153,989
During 2020, in connection with the retirement of a member of the Company’s board of directors, the Company modified that
director’s unvested RSU grants to vest upon his retirement. The shares subject to the modified grants will be released to that board
72
member as if they were vesting under the original vesting timeline. In connection with this modification, the Company recorded
additional expense of approximately $1.7 million.
The total unrecognized share-based compensation expense as of December 31, 2021, was approximately $59.1 million, relating
to share grants, which was expected to be recognized over a weighted average period of approximately 2.2 years.
Note 15 – Related Party Transactions
We conduct business with the following related parties: Keylink International (B.V.I.) Inc. and its subsidiaries and affiliates
(“Keylink”), Nuvoton Technology Corporation (“Nuvoton”) and Jiyuan Crystal Photoelectric Frequency Technology Ltd. (“JCP”).
Keylink is a 5% joint venture partner in our Shanghai assembly and test facilities. We sell products to, and purchase inventory
from, companies owned by Keylink. In addition, our subsidiaries in China lease their manufacturing facilities in Shanghai from, and
subcontract a portion of our manufacturing process (metal plating and environmental services) to Keylink. We also pay a consulting fee
to Keylink.
We purchase wafers from Nuvoton and our Chairman and CEO serves as a member of the Nuvoton board of directors. We purchase
wafers from Nuvoton for use in our production process and consider our relationships Nuvoton to be mutually beneficial. We plan to
continue our strategic alliance with Nuvoton. We have an agreement to purchase approximately $47.0 million of wafers from Nuvoton
that ends in the fourth quarter of 2025.
JCP is an FCP manufacturing company from which we purchase material and in which we have made an equity investment. We
account for using the equity method of accounting.
In addition, Chengdu Ya Guang Electronic Company Limited (“Ya Guang”) is our 2% joint venture partner in one of our Chengdu
assembly and test facilities and our 5% partner in our other Chengdu assembly and test facilities; however, we have no material
transactions with Ya Guang, other than this joint venture.
The tables below set forth the revenues, expenses, accounts receivable and accounts payable with our related parties. The tables
below set forth the net sales, purchases and expenses, for the twelve months ended December 31:
Keylink
Net sales
Purchases
Plating, rental and consulting expense
Nuvoton
Net sales
Purchases
JCP
Purchases
LSC, its subsidiaries and affiliates
Net sales
Purchases
2021
2020
2019
$
$
$
$
$
$
$
$
19,689
2,015
17,922
65
9,764
1,240
-
-
$
$
$
$
$
$
$
$
19,757
1,538
14,647
10
8,418
1,095
518
12,062
$
$
$
$
$
$
$
$
The table below sets forth accounts receivable from and accounts payable to related parties at December 31:
Keylink
Accounts receivable
Accounts payable
Nuvoton
Accounts receivable
Accounts payable
JCP
Accounts payable
2021
2020
$
$
$
$
$
39,530
36,090
-
2,014
235
$
$
$
$
$
15,543
2,399
15,316
-
7,719
625
912
13,799
35,365
31,247
10
796
357
Prior November 30, 2020, LSC was our largest stockholder and a related party. As of November 30, 2020, we acquired LSC and
they are no longer a stockholder or related party. See Note 19 for additional information related to the acquisition of LSC.
73
The Audit Committee of the Board reviews all related party transactions for potential conflict of interest situations on an ongoing
basis, all in accordance with such procedures as the Audit Committee may adopt from time to time.
Note 16 – Segment Information, Revenue and Enterprise-Wide Disclosures
Segment Reporting. For financial reporting purposes, we operate in a single segment, standard semiconductor products, through
our various manufacturing and distribution facilities. We aggregate our products because the products are similar and have similar
economic characteristics, use similar production processes and share the same customer type. Our primary operations include operations
in Asia, North America and Europe. The accounting policies of the operating entities are the same as those described in the summary of
significant accounting policies. No customer accounted for 10% or more or our net sales during the twelve months ended 2021 or 2020.
During the twelve months ended December 31, 2019, one customer, a broad-based global distributor that sells to thousands of different
end users, accounted for approximately 10.0% or $119.6 million of our net sales. No customer accounted for 10% or greater of our
outstanding accounts receivable at December 31, 2021 or 2020.
The tables below set forth net sales based on the location of the subsidiary producing the net sale:
2021
Total sales
Inter-company sales
Net sales
Property, plant and equipment
Assets
2020
Total sales
Inter-company sales
Net sales
Property, plant and equipment
Assets
2019
Total sales
Inter-company sales
Net sales
Property, plant and equipment
Assets
Asia
1,939,540
(730,058)
1,209,482
456,109
1,547,518
Asia
1,399,517
(565,723)
833,794
421,185
1,522,835
Asia
1,234,750
(418,377)
816,373
379,075
1,207,331
Americas
Europe
Consolidated
$
$
$
$
$
$
$
$
$
$
$
$
1,108,460
(678,662)
429,798
22,943
415,133
Americas
807,405
(531,385)
276,020
24,726
229,610
Americas
612,697
(320,746)
291,951
23,104
216,250
$
$
$
$
$
$
$
$
$
$
$
$
278,126
(112,244)
165,882
103,026
231,844
Europe
222,227
(102,826)
119,401
84,904
227,012
Europe
234,092
(93,286)
140,806
67,395
215,803
$
$
$
$
$
$
$
$
$
$
$
$
3,326,126
(1,520,964)
1,805,162
582,079
2,194,495
Consolidated
2,429,149
(1,199,934)
1,229,215
530,815
1,979,457
Consolidated
2,081,539
(832,409)
1,249,130
469,574
1,639,384
$
$
$
$
$
$
$
$
$
$
$
$
Disaggregation of Revenue. We disaggregate net sales from contracts with customers into direct sales and distribution sales
(“Distributors”) and by geographic area. Direct sales customers consist of those customers using our product in their manufacturing
process, and Distributors are those customers who resell our products to third parties. We deliver our products to customers around the
world for use in consumer electronics, computing, communications, industrial and automotive. Further, most of our contracts are fixed-
price arrangements, and are short term in nature, ranging from days to several months.
74
The tables below set forth net sales for the Company disaggregated into geographic locations based on shipment and by type
(direct sales or distributor) for the twelve months ended December 31, 2021, 2020 and 2019:
Net Sales by Region
Asia
Europe
Americas
Total net sales
Net Sales by Type
Direct sales
Distributor sales
Total net sales
2021
2020
2019
$
$
$
$
1,439,545
220,772
144,845
1,805,162
2021
607,645
1,197,517
1,805,162
$
$
$
$
961,376
171,985
95,854
1,229,215
2020
419,024
810,191
1,229,215
$
$
$
$
942,576
181,016
125,538
1,249,130
2020
407,851
841,279
1,249,130
Net sales from products shipped to China for the twelve months ended December 31, 2021, 2020 and 2019, was $938.1 million
$649.9 million and $633.8 million, respectively.
Note 17 – Commitments and Contingencies
Lease commitments – We lease offices, manufacturing plants, equipment, vehicles and warehouses under various lease
agreements expiring through 2028. For information related to our lease commitments see Note 9.
In addition, we have the following land right leases. None of the leases requires a rental payment.
Chengdu, China
Shanghai, China*
Shanghai, China*
Shandong, China
Yangzhou, China
*Separate leases by separate Diodes’ subsidiaries
Term (years)
50
50
50
50
50
Expiration Date
2061
2056
2058
2058
2065
Purchase commitments – We have entered into non-cancelable purchase contracts for capital expenditures, primarily for
manufacturing equipment, for approximately $96.4 million at December 31, 2021. As of December 31, 2021, we also had a commitment
to purchase approximately $239.2 million of wafers to be used in our manufacturing process. These wafer purchases will occur from
2022 to 2025
Contingencies - From time to time, we are involved in various legal proceedings that arise in the normal course of business. While
we intend to defend any lawsuit vigorously, we presently believe that the ultimate outcome of any current pending legal proceeding will
not have any material adverse effect on our financial position, cash flows or operating results. However, litigation is subject to inherent
uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, which could impact on our
business and operating results for the period in which the ruling occurs or future periods. Based on information available, we evaluate
the likelihood of potential outcomes. We record the appropriate liability when the amount is deemed probable and reasonably estimable.
In addition, we do not accrue for estimated legal fees and other directly related costs as they are expensed as incurred. The Company is
not currently a party to any pending litigation that the Company considers material.
75
Note 18 – Derivative Financial Instruments
In accordance with ASC 815 we recognize derivative instruments on our balance sheet, and we measure them at fair value. The
accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate
the derivative as being in a hedging relationship, and whether the hedging relationship has satisfied the criteria necessary to apply hedge
accounting. Derivative instruments that are designated, and qualify as hedges of the exposure to changes in the fair value are considered
fair value hedges. Derivative instruments that are designated, and qualify as hedges of the exposure to variability in expected future cash
flows are considered cash flow hedges. Derivative instruments may also be designated as hedges of the foreign currency exposure of a
net investment in a foreign operation. We currently only utilize cash flow hedges and do not use derivatives for trading or speculative
purposes.
Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with
the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value
hedge, or the earnings effect of the hedged forecasted transactions in a cash flow hedge. We may enter into derivative contracts that are
intended to economically hedge certain risks, even though we elect not to apply hedge accounting under ASC 815. Changes in the fair
value of derivatives not designated in hedging relationships are recorded directly in the consolidated statements of income. Specific
information about the valuations of derivatives is described in Note 1 and classification of derivatives in the fair value hierarchy is
described in Note 3. Currently our interest rate swaps and interest rate collars are designated as hedges while our foreign exchange
contracts are not designated as hedges.
The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in
accumulated other comprehensive loss and is subsequently reclassified into earnings in the period in which the hedged forecasted
transaction affects earnings.
Certain of the Company's agreements with its derivative counterparties contain provisions where if certain merger activity, a
change of control, or a capital structure change occurs that materially changes the Company's creditworthiness in an adverse manner,
the Company’s counterparty may have the right to terminate any derivative transactions under such agreement.
The company has agreements with each of its derivative counterparties that contain a provision where the Company could be
declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the
Company's default on the indebtedness.
Hedges of Foreign Currency Risk
We are exposed to fluctuations in various foreign currencies against our different functional currencies. We use foreign currency
forward agreements to manage this exposure. At December 31, 2021 and 2020, we had outstanding foreign currency forward contracts
that are intended to preserve the economic value of foreign currency denominated monetary assets and liabilities; these instruments are
not designated for hedge accounting treatment in accordance with ASC 815. We have recorded foreign currency forward agreements
with a fair value of less than $0.4 million as a net asset on our consolidated balance sheet.
76
The tables below set forth outstanding foreign currency forward contracts at December 31, 2021 and 2020:
Notional Amount
3,693
5,571
7,867
139,123
3,520
33,883
286
286
286
286
428
195,229
$
1,205
2,202
12,879
213,508
3,189
43,180
276,163
$
Effective Date
December 2021
December 2021
December 2021
December 2021
December 2021
December 2021
November 2021
November 2021
November 2021
November 2021
November 2021
Maturity Date
January 2022
January 2022
January 2022
January 2022
January 2022
January 2022
April 2022
May 2022
June 2022
July 2022
August 2022
December 2020
December 2020
December 2020
April 2020 - December
2020
December 2020
January 2020 - December
2020
February 2021
February 2021
February 2021
January 2021 - May
2021
February 2021
January 2021 - May
2021
Index*
EUR/GPB
EUR/USD
GPB/USD
USD/CNY
USD/JPY
USD/TWD
JPY
JPY
JPY
JPY
JPY
EUR/GPB
EUR/USD
GPB/USD
USD/CNY
USD/JPY
Weighted
Average Strike
Rate
0.8398
1.1346
1.3510
6.3757
115.1230
27.6740
113.7800
113.7300
113.6800
113.6300
113.5600
Cash Flow Hedge
Designation
Non-designated
Non-designated
Non-designated
Non-designated
Non-designated
Non-designated
Non-designated
Non-designated
Non-designated
Non-designated
Non-designated
0.8948
1.2218
1.3654
Non-designated
Non-designated
Non-designated
6.5806
103.3150
Non-designated
Non-designated
USD/TWD
28.1442
Non-designated
* EUR = Euro
GBP = British Pound Sterling
USD = United States Dollar
CNY = Chinese Yuan Renminbi
JPY = Japan Yen
TWD = Taiwan dollar
Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to
interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps, including interest rate collars,
as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable
amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange
of the underlying notional amount.
The table below sets forth information related to the number of and the notional amount of our interest rate related derivative
instruments at December 31 2021 and December 31, 2020:
Interest rate swaps and collars
Number of Instruments
2021
-
2020
6
Notional Amount
2021
2020
$
-
$
140,000
The table below sets forth the fair value of the Company’s interest rate related derivative financial instruments as well as their
classification on the Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020:
Interest rate swaps and collars
$
77
Fair Value
Other Current Liabilities
2021
2020
-
$
1,626
The tables below sets forth the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income
for the years ended December 31 2021, 2020 and 2019:
Amount of Gain or (Loss)
Recognized in OCI on
Derivative
December 31,
2021
2020
2019
Location of
Gain or (Loss)
Reclassified
from
Accumulated
OCI into
Income
Amount of Gain or (Loss)
Reclassified from
Accumulated OCI into Net
Income
December 31,
2021
2020
2019
Location of Gain
or (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion Excluded
from
Effectiveness
Testing)
(13) $ (1,581) $ (2,997)
989
(2,305)
(298) N/A
Interest expense $ (555) $ (445) $ 1,248 N/A
-
-
-
Interest income
Amount of Gain or (Loss)
Recognized in Income on
Derivative (Ineffective
Portion and Amount
Excluded from
Effectiveness Testing)
December 31,
2021
2020
2019
$
-
2,469
$
$
-
-
-
688
Derivative Instruments
Designated as Hedging
Interest rate swaps and
collars
Cross currency swaps
$
We estimate that none of the net derivative losses included in accumulated other comprehensive income (“AOCI”) as of December
31, 2021, will be reclassified into earnings within the following 12 months. No gains or losses were reclassified from AOCI into earnings
as a result of forecasted transactions that failed to occur during fiscal year 2021.
Derivatives Not Designated As Hedging Instruments
Amount of Gain or (Loss) Recognized in Net Income
December 31,
2020
2019
2021
Gain or (Loss)Recognized
in Net Income
Foreign currency forward contracts
$
3,925
$
3,584
$
(3,662)
Foreign currency loss, net
As of December 31, 2021 and 2020, the Company had not posted any collateral related to these agreements.
Note 19 – Acquisitions and Divestitures
Privately Held Wafer Design Company
During July 2021, the Company acquired an interest in an early stage privately held fabless wafer design company by purchasing
$10.0 million of preferred stock and a $5.0 million convertible promissory note. As the investment in preferred stock does not have a
readily determinable fair value, it will be measured at cost less impairment, and adjusted to fair value if there are any observable price
changes for an identical or similar investment of the same issuer. The carrying value of the investment at December 31, 2021 was $10.0
million with no observable price changes occurring during the period. The promissory note is convertible into additional preferred stock,
has an interest rate of 3% and is due in July 2026.
Manufacturing Subsidiary Located in China
In March 2021, the Company entered into an agreement to sell a manufacturing subsidiary in China for total consideration of
approximately $41.5 million, which included a combination of cash and equity. The cash consideration consists of $15.2 million of
agreed upon cash and a $23.3 million working capital adjustment while the equity is valued at $3.1 million, which increases the
Company’s investment in the buyer to approximately 10%. The transaction closed in December 2021. The Company and the purchaser
of the manufacturing facility have entered into an ongoing agreement in which the purchaser will continue to provide wafer -foundry
services, on a preferential basis to the Company.
Management determined that the disposal group met the held-for-sale criteria and reclassified the carrying value of the disposal
group to assets held-for-sale, which were previously included in prepaid expenses and other in the consolidated balance sheet. Upon
closing of the transaction, Management derecognized the amounts previously classified as held-for-sale and recorded a gain on the sale
of $9.5 million. The gain is recorded in other income in the Company's consolidated statement of income. Neither the buyer nor the
manufacturing facility will be considered related parties after the transaction. The table below sets forth the major classes of assets and
liabilities that were previously classified as held-for-sale on the consolidated balance sheet and the gain recognized in other income on
the consolidated statement of income:
78
Assets
Cash and cash equivalents
Accounts receivable, net
Inventories, net
Other current assets
Property, plant and equipment
Deferred income tax
Other long-term assets
Total assets disposed
Liabilities
Accounts payable
Accrued liabilities and other
Other long-term liabilities
Total liabilities disposed
Net assets disposed
LSC Acquisition
$
$
$
8,936
16,347
5,415
1,387
5,598
3,198
4,807
45,688
5,025
4,913
2,471
12,409
33,279
On November 30, 2020, the Company closed its previously announced acquisition of LSC, a Taiwan-based supplier of “green”
power-related discrete and analog semiconductor devices. The Company purchased LSC in order to include LSC’s “green” power-
related semiconductor devices that are designed for power saving and low power dissipation to serve the power supply market, and to
reacquire the 7,765,778 of the Company’s common shares owned by LSC, which was approximately 15% of our outstanding shares
prior to the close of such acquisition. The reacquired shares were treated as a settlement of a pre-existing relationship and as a transaction
separate and apart from the business combination along with the settlement of payables and receivables between the Company and LSC.
The reacquired shares are included in treasury stock on the Company’s balance sheet. There was no gain or loss on the settlement of the
payables and receivables between the Company and LSC.
The Company recorded the purchase of LSC as a business combination, with the Company owning 100% of LSC. LSC has been
consolidated into the operations of the Company. The purchase price per the Share Swap Agreement was 42.50 TWD per outstanding
LSC share. On November 30, 2020, the Company acquired the 307,371,139 outstanding shares of LSC for a total aggregate purchase
price of approximately $453.4 million and total consideration of $154.0 million after adjustments for the settlement of pre-existing
relationships. A portion of the LSC purchase price was funded by borrowings under the Company’s Credit Agreement.
The reacquired shares were treated as a settlement of a pre-existing relationship and as a transaction separate and apart from the
business combination along with the settlement of payables and receivables between Diodes and LSC. There was no gain or loss on the
settlement of the payables and receivables between the Company and LSC. The cash attributed to the reacquisition of the Diodes shares
is presented within the financing section of the statement of cash flows.
Total consideration paid
Less: Settlement of pre-existing relationships
Reacquisition of Diodes stock owned by LSC (1)
Net accounts receivable on LSC books owed by Diodes
Total amount of pre-existing relationship settled
Remaining consideration
$
$
453.4
(296.8)
(2.6)
(299.4)
154.0
The table below sets forth the fair value of the LSC assets acquired and liabilities assumed based on relative fair value at the date
of acquisition, after measurement period adjustments, and the corresponding line item in the Company’s consolidated balance sheet at
the date of acquisition. During the period from January 1, 2021 through November 30, 2021, measurement period adjustments were
made to inventories, property, plant and equipment, income tax payable, and accrued liabilities and other. During the period, the
Company derecognized an estimated liability that was initially recognized on the opening balance sheet related to dividend payable
accrual of approximately $12.8 million, reduced the previously estimated amount of a social insurance liability and an estimated
information technology liability by $1.5 million, and recognized an additional income tax payable related to the reacquired shares in the
amount of approximately $10.7 million. The adjustments to inventory and property, plant, and equipment were a result of refinements
to the preliminary fair value calculation in the amounts of $0.7 million and $4.8 million respectively. The Company also made
adjustments to the preliminary deferred tax calculations as a result of the measurement period adjustments described above. U.S. GAAP
permits companies to complete the final determination of the fair values during the measurement period following the acquisition date.
The size and breadth of the LSC acquisition necessitated the use of this measurement period to adequately analyze and assess a number
79
of the factors used in establishing the asset and liability fair values as of the acquisition date. The Company engaged a third party
valuation specialist to assist with the assessment of any intangible assets acquired as part of the LSC acquisition, and it was determined
that there were no intangible assets as a result of the LSC acquisition. The table below sets forth the fair value of the assets and liabilities
recorded in the acquisition and the corresponding line item in which the item is recorded in our condensed consolidated balance sheet
at the date of acquisition.
Cash and cash equivalents
Accounts receivable
Inventories
Prepaid expenses and other current assets
Property, plant and equipment
Deferred income tax
Other long-term assets
Total assets acquired
Line of credit
Accounts payable
Accrued liabilities and other
Income tax payable
Deferred tax liabilities
Other long-term liabilities
Total liabilities assumed
Non-controlling interest
Net assets acquired
Original Preliminary
Value
Adjustments
Final
Value
$
$
131,046
44,896
55,710
11,447
67,952
15,732
26,037
352,820
88,508
35,245
48,992
6,264
8,941
10,783
198,733
54
154,033
$
$
-
-
(714)
-
4,808
(1,412)
2,682
-
-
(14,297)
10,735
6,244
-
2,682
-
-
$
$
131,046
44,896
54,996
11,447
72,760
14,320
26,037
355,502
88,508
35,245
34,695
16,999
15,185
10,783
201,415
54
154,033
The following unaudited pro forma summary presents consolidated information of the Company as if the acquisition and
consolidation of LSC had occurred on January 1, 2019:
Net revenues
Net income
Net income attributable to common stockholders
Earnings per share - basic
Earnings per share - diluted
$
$
$
$
$
1,421,494
95,908
96,517
2.23
2.18
$
$
$
$
$
1,447,001
140,027
139,603
3.24
3.17
Twelve Months Ended
December 31, 2020
Twelve Months Ended
December 31, 2019
The unaudited pro forma consolidated results of operations do not purport to be indicative of the results that would have been
obtained if the above acquisition had actually occurred as of the dates indicated or of those results that may be obtained in the future.
The unaudited proforma consolidated results for the twelve months ended December 31, 2020, include adjustments that result in a
reduction to amortization and depreciation of $5.5 million, removal of sales to Diodes on the books of LSC and related cost of goods
sold of $12.4 million and $7.9 million, respectively, removal of LSC’s share of Diodes’ profits as a 15% shareholder of $13.1 million,
removal of $2.4 million of transaction costs, additional interest expense of $6.0 million, removal of impairment charges of $6.3 million,
removal of operations of On-Bright, and a tax impact of those adjustments of a reduction to tax expense of $18.6 million.
The unaudited pro forma consolidated results for the twelve months ended December 31, 2019, include adjustments that result in
a reduction to amortization and depreciation of $8.8 million, removal of sales to Diodes on the books of LSC and related COGS of $13.7
million and $9.0 million, respectively, removal of LSC’s share of Diodes’ profits as a 15% shareholder of $23.4 million, removal of
$1.0 million of transaction costs, additional interest expense of $11.1 million, removal of impairment charges of $0.3 million, removal
of the operation of On-Bright, and a tax impact of those adjustments of a reduction to tax expense of $10.7 million. These unaudited pro
forma consolidated results of operations were derived, in part, from the historical consolidated financial statements of LSC and other
available information and assumptions believed to be reasonable under the circumstances. LSC has been conformed to Diodes’ reporting
calendar.
Savitech Acquisition
On February 5, 2020, the Company entered into an agreement to invest up to approximately $14.2 million to acquire at least 51%
of Savitech Corporation (“Savitech”), a fabless semiconductor design company located in Zhubei City, Taiwan. The Company made
the investment in two tranches. The first tranche of $5.6 million, which provided the Company with a 33.6% ownership of Savitech,
80
was made on March 4, 2020. The initial tranche was funded with cash on hand. The second tranche was also funded with cash on hand
and paid in the third quarter ended September 30, 2021, in the amount of $8.5 million which increased the Company’s ownership to
53% of Savitech.
The Company recorded the purchase of Savitech as a business acquisition and consolidates Savitech into its operations, based on
the voting model, with a non-controlling interest related to the interest the Company does not own in Savitech. The Company made its
investment in Savitech in order to increase the Company’s integrated circuit business. Total purchase consideration recorded was $14.2
million. The goodwill will not be tax deductible. The Company also incurred acquisition costs of approximately $0.1 million that were
recognized in selling, general and administrative expense. The table below sets forth the fair value of the assets and liabilities recorded
in the acquisition and the corresponding line item in which the item is recorded in our condensed consolidated balance sheet at the date
of acquisition (in millions).
Cash and cash equivalents
Prepaid expenses and other
Goodwill
Intangible assets, net
Other long-term assets
Accrued liabilities and other
Noncontrolling interest
Other Investment
$
6.2
0.7
13.9
6.1
0.4
10.2
11.8
In August 2021, the Company entered into a joint venture located in Taiwan. The Company's investment will be $5.4 million for
60% ownership and is being consolidated into our consolidated financial statements. The purpose of the joint venture is to engage in
the development of power modules for the automotive markets. The joint venture received Taiwan government approval in October
2021, and the Company made the $5.4 million payment in October 2021.
81
INDEX TO EXHIBITS
Number
Description
Form
Date of First Filing
Exhibit
Number
Filed
Herewith
3.1
3.2
4.1
4.2
10.1*
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9
10.10*
Certificate of Incorporation, as amended
10-K February 20, 2018
Amended By-laws of the Company, amended
as of January 6, 2016
Form of Certificate for Common Stock, par
value $0.66-2/3 per share
Description of Securities Registered Pursuant to
Section 12 of the Securities Exchange Act of
1934
Stock Award Agreement dated as of September
22, 2009, between the Company and Keh-Shew
Lu
8-K
January 11, 2016
S-3
August 25, 2005
10-K February 12, 2020
10-Q
May 9, 2014
Confirmation Agreement dated April 1, 2013,
between the Company and Keh-Shew Lu
8-K
April 3, 2013
Employment Agreement dated as of July 21,
2015, between the Company and Keh-Shew Lu
8-K
July 27, 2015
Stock Unit Agreement, dated as of July 21,
2015, between the Company and Keh-Shew Lu
8-K
July 27, 2015
8-K
February 27, 2017
Amendment No. 1 to Employment Agreement
dated as of February 22, 2017, between the
Company and Keh-Shew Lu.
Form of Indemnification Agreement between
the Company and its directors and executive
officers
Diodes Incorporated Second Amended and
Restated Deferred Compensation Plan effective
January 1, 2009
First Amendment to the Diodes Incorporated
Second Amended and Restated Deferred
Compensation Plan effective June 1, 2013
Diodes Incorporated 2013 Equity Incentive
Plan, as amended and restated on May 3, 2017
Form of Incentive Stock Option Agreement for
the Diodes Incorporated 2013 Equity Incentive
Plan
8-K
September 2, 2005
10.5
10-K
February 27, 2017
10.9
10-K
February 27, 2017
10.10
S-8
August 17, 2017
S-8
June 13, 2013
10.11*
Form of Stock Unit Agreement for the Diodes
Incorporated 2013 Equity Incentive Plan
S-8
June 13, 2013
10.11.1* Form of Restricted Stock Unit Agreement
8-K February 27, 2017
10.11.2*
Form of Performance Stock Unit Agreement
8-K
February 27, 2017
10.12*
Form of Nonstatutory Stock Option Agreement
for the Diodes Incorporated 2013 Equity
Incentive Plan, as amended (Domestic Version)
10-K
February 27, 2014
82
3.1
3.1
4.1
4.2
10.6
99.1
99.1
99.3
99.1
99.1
99.2
99.4
99.2
99.3
10.80
10.13*
10.14*
10.15*
10.16*
10.17*
10.18
10.18.1
10.19
10.19.1
10.20
10.21
10.22
10.23
10.24
Form of Nonstatutory Stock Option Agreement
for the Diodes Incorporated 2013 Equity
Incentive Plan (International Version)
Form of Unit Stock Agreement for the Diodes
Incorporated 2013 Equity Incentive Plan, as
amended (Domestic Version)
Form of Stock Unit Agreement for the Diodes
Incorporated 2013 Equity Incentive Plan
(International Version)
Form of Stock Unit Agreement (Substitute for
Pericom Semiconductor Corporation Domestic
Existing RSUs and Options)
Form of Stock Unit Agreement (Substitute for
Pericom Semiconductor Corporation
International Existing RSUs and Options)
Lease Agreement dated as of September 30,
2003, between Shanghai Kaihong Electronic
Co., Ltd. and Shanghai Ding Hong Electronic
Equipment, LTD.
Supplementary to the Lease Agreement
between Shanghai Kaihong Electronic Co. Ltd.,
and Shanghai Ding Hong Electronic Co., Ltd.
Lease Agreement dated as of June 28, 2004,
between Diodes Shanghai Co., Ltd. and
Shanghai Yuan Hao Electronic Co., Ltd.
Supplementary Agreement dated December 31,
2007, between Shanghai Kai Hong Technology
Co., Ltd. and Shanghai Yuan Hao Electronic
Co., Ltd.
Wafer Purchase Agreement dated January 10,
2006, between Anachip Corporation and Lite-
On Semiconductor Corporation
Supplementary to the Lease Agreement dated
September 5, 2004, between Shanghai Kaihong
Electronic Co., Ltd. and Shanghai Ding Hong
Electronic Co., Ltd.
Supplementary to the Lease Agreement dated
June 28, 2004, between Diodes Shanghai
Company Limited and Shanghai Yuan Hao
Electronic Co., Ltd.
Agreement on Application, Construction and
Transfer of Power Facilities dated as of March
15, 2006, between the Company and Shanghai
Yahong Electronic Co., Ltd.
Supplement dated January 1, 2007 to the Lease
Agreement on Disposal of Waste and Scraps,
between Shanghai Kaihong Electronic Co., Ltd.
and Shanghai Ding Hong Electronic Co., Ltd.
10-K
February 27, 2014
10.81
10-K
February 27, 2014
10.82
10-K
February 27, 2014
10.83
S-8
June 30, 2016
S-8
June 30, 2016
99.2
99.3
10-Q
August 9, 2004
10.52
10-Q August 9, 2004
10.58
10-Q
August 9, 2004
10.57
10-K February 29, 2008
10.53
8-K
January 12, 2006
2.1
10-Q
May 10, 2006
10.14
10-Q
May 10, 2006
10.15
10-Q
May 10, 2006
10.16
10-K
February 29, 2008
10.51
83
10.26
10.27
10.28
10.29
10.30
10.31
10.31.1
10.32
10.33
10.34
10.35
Accommodation Building Fourth and Fifth
Floor Lease Agreement dated December 31,
2007, between Diodes Shanghai Co., Ltd. (a/k/a
Shanghai Kaihong Technology) and Shanghai
Ding Hong Electronic Co., Ltd.
Fourth Floor of the Accommodation Building
Lease Agreement dated January 1, 2008,
between Diodes Shanghai Co., Ltd. (a/k/a
Shanghai Kaihong Technology) and Shanghai
Ding Hong Electronic Co., Ltd.
Distributorship Agreement dated November 1,
2008, between Diodes Shanghai Co., Ltd. (a/k/a
Shanghai Kaihong Technology) and Shanghai
Keylink Logistic Co., Ltd.
Lease Facility Safety Management Agreement
dated December 31, 2008, between Diodes
Shanghai Co., Ltd. (a/k/a Shanghai Kaihong
Technology) and Shanghai Yuan Howe
Electronic Co., Ltd.
Consulting Agreement dated January 1, 2009,
between the Company and Keylink
International (B.V.I.) Co., Ltd.
Power Facility Construction Agreement dated
October 29, 2009, between Diodes Shanghai
Co., Ltd. (a/k/a Shanghai Kaihong Technology)
and Shanghai Yuan Hao Electronic Co., Ltd.
Third Floor of the Accommodation Building
Lease Agreement dated April 12, 2010,
between Diodes Shanghai Co., Ltd. (a/k/a
Shanghai Kaihong Technology) and Shanghai
Ding Hong Electronic Co., Ltd.
Second Floor of the Accommodation Building
Lease Agreement dated September 1, 2010,
between Diodes Shanghai Co., Ltd. (a/k/a
Shanghai Kaihong Technology) and Shanghai
Ding Hong Electronic Company, Ltd.
Investment Cooperation Agreement effective as
of September 10, 2010, between Diodes Hong
Kong Holding Company Limited and the
Management Committee of the Chengdu Hi-
Tech Industrial Development Zone
Supplementary Agreement to the Investment
Cooperation Agreement effective as of
September 10, 2010, between Diodes Hong
Kong Holding Company Limited and the
Management Committee of the Chengdu Hi-
Tech Industrial Development Zone
Joint Venture Agreement effective as of
November 5, 2010, between Diodes Hong Kong
Holding Company Limited and Chengdu Ya
Guang Electronic Company Limited
10-K
February 29, 2008
10.54
10-Q
August 11, 2008
10.5
10-K
February 26, 2009
10.83
10-K
February 26, 2009
10.84
10-Q
May 8, 2009
10.1
10-K
March 1, 2010
10.97
10-Q
May 7, 2010
10.3
10-Q
November 9, 2010
10.1
8-K
September 16, 2010
99.1
8-K
September 16, 2010
99.2
8-K
November 12, 2010
99.1
84
10.36
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
Joint Venture Agreement Supplement
Concerning the Establishment of Diodes
Technology (Chengdu) Company Limited
effective as of November 5, 2010, between
Diodes Hong Kong Holding Company Limited
and Chengdu Ya Guang Electronic Company
Limited
Power Facility Expansion Construction
Contract dated January 24, 2011, between
Diodes Shanghai Co., Ltd. (a/k/a Shanghai
Kaihong Technology) and Shanghai Yuan
Howe Electronics Company, Ltd.
First Floor of the Accommodation Building
Agreement dated June 1, 2011, between Diodes
Shanghai Co., Ltd. (a/k/a Shanghai Kaihong
Technology) and Shanghai Ding Hong
Electronic Company, Ltd.
Third Floor of the Dormitory Building Lease
Agreement dated July 1, 2011, between Diodes
Shanghai Co., Ltd. (a/k/a Shanghai Kaihong
Technology) and Shanghai Ding Hong
Electronic Company, Ltd.
Supplement Agreement to the Power Facility
Construction Application Agreement dated
March 21, 2011, between Diodes Shanghai Co.,
Ltd. (a/k/a Shanghai Kaihong Technology) and
Shanghai Yuan Hao Electronic Company, Ltd.
Plating Process Agreement dated December 31,
2007, among Shanghai Kaihong Electronic Co.,
Ltd., Diodes Shanghai Co., Ltd. (a/k/a Shanghai
Kaihong Technology), Diodes Shanghai,
Shanghai Ding Hong Electronic Co., Ltd. and
Shanghai Micro-Surface Co., Ltd.
Second Supplementary Agreement dated as of
January 23, 2013, to the Investment
Cooperation Agreement effective as of
September 10, 2010, among Diodes Hong Kong
Holding Company Limited, Diodes (Shanghai)
Investment Company Limited, Diodes
Technology (Chengdu) Company Limited, and
the Management Committee of the Chengdu
Hi-Tech Industrial Development Zone
Supplement Agreement to Lease Agreement
dated September 2013, between Shanghai
Kaihong Electronic Co., Ltd and Shanghai Ding
Hong Electronic Co., Ltd.
Amendment to Dinghong Building Lease
Agreements between Shanghai Kaihong
Electronic Co. Ltd. and Shanghai Dinghong
Electronic Co., Ltd.
Termination Agreement to Dinghong Male
Dorm Building Lease Agreement between
Shanghai Kaihong Electronic Co. Ltd. and
Shanghai Dinghong Electronic Co., Ltd.
8-K
November 12, 2010
99.2
10-K
February 28, 2011
10.113
10-Q
November 9, 2011
10.1
10-Q
November 9, 2011
10.2
10-Q
August 9, 2011
10.1
10-K
February 29, 2008
10.52
10-K
February 27, 2013
10.75
10-Q
November 12, 2013
10.6
10-Q November 6, 2018
10.2
10-Q November 6, 2018
10.4
85
10.46
10.47
10.48
10.49
10.50
10.51
10.52
10.53
10.54
10.55
10.56
10.57
10.58
Termination Agreement to Dinghong Female
Dorm Building Lease Agreement between
Shanghai Kaihong Electronic Technology Co.
Limited and Shanghai Dinghong Electronic Co.
Ltd.
Power Account Transfer Agreement between
Shanghai Kaihong Technology Company
Limited and Shanghai YuanHao Co.
Procurement Agreement dated May 3, 2013,
between Diodes Taiwan Inc. and Lite-On
Technology Corporation
Share Transfer Memorandum of Understanding
dated June 18, 2013, among the Company,
Chengdu Ya Guang Electronic Engineering
Factory and Zetex Chengdu Electronics Limited
Equity Transfer Agreement dated April 2014,
between Chengdu Ya Guang Electronic
Engineering Factory and Diodes (Shanghai)
Investment Company Limited
Equity Transfer Agreement Amendment dated
April 2014, between Chengdu Ya Guang
Electronic Engineering Factory and Diodes
(Shanghai) Investment Company Limited
Amended Consulting Agreement dated as of
January 1, 2015, between Diodes Incorporated
and Keylink International (B.V.I) Co., Ltd.
Chemical Warehouse Lease Agreement dated
November 1, 2014, between Shanghai Kaihong
Electronic Co., Ltd. and Shanghai Ding Hong
Electronic Co., Ltd.
Chemical Warehouse Lease Agreement dated
September 22, 2015, between Shanghai
Kaihong Technology Co., Ltd. and Shanghai
Yuan Hao Electronic Co., Ltd.
Amendment to Yuanhao Building Lease
Agreements between Shanghai Kaihong
Technology Company Limited and Shanghai
Yuanhao Electronic Co. Ltd
Property Lease Safety Agreement dated July
2016, between Zetex (Chengdu) Electronics
Ltd. and Chengdu Yaguang Electronic Co., Ltd.
2016 Amendment to Joint Venture Agreement
effective as of December 7, 2016, between
Diodes (Shanghai) Investment Company
Limited and Chengdu Ya Guang Electronic
Company Limited
Diodes Zetex Pension Scheme Recovery Plan
dated February 22, 2017, between Trustees of
the Diodes Zetex Pension Scheme and Diodes
Zetex Limited
10-Q November 6, 2018
10.5
10-Q November 6, 2018
10.6
10-Q
August 8, 2013
10-Q
August 8, 2013
10.2
10.3
10-Q
May 9, 2014
10.1
10-Q
May 9, 2014
10.2
10-K
March 2, 2015
10.78
10-K
March 2, 2015
10.79
10-Q
November 6, 2015
10.1
10-Q November 6, 2018
10.3
10-Q August 9, 2016
99.1
8-K
December 13, 2016
99.1
10-K
February 27, 2017
10.78
86
10.59
10.60
10.61
10.62
10.63
10.64
10.64.1
10.64.2
10.65
10.66
10.67*
10.68*
10.69
10.70
10.71
Diodes Zetex Pension Scheme Schedule of
Contributions dated February 22, 2017,
between Trustees of the Diodes Zetex Pension
Scheme and Diodes Zetex Limited
Framework Agreement dated January 16, 2017,
among Diodes Zetex Limited, Diodes Zetex
Semiconductors Limited, the Company, HR
Trustees Limited and Trustees
Guarantee dated March 26, 2012, among
Diodes Zetex Semiconductors Limited, Diodes
Zetex Limited, HR Trustees Limited and
Trustees
Diodes Zetex Pension Scheme Information
Protocol dated April 10, 2012, among Diodes
Zetex Limited, Diodes Zetex Semiconductors
Limited, the Company, HR Trustees Limited
and Trustees
Legal Charge dated March 26, 2012, among
Zetex Semiconductors Limited, HR Trustees
Limited and Trustees
Amended and Restated Credit Agreement dated
October 26, 2016, among the Company, Diodes
International B.V., Diodes Holding B.V.,
Diodes Investment Company, Diodes FabTech
Inc., Diodes Holdings UK Limited, Diodes
Zetex Limited, Pericom Semiconductor
Corporation, Bank of America, N.A., as
Administrative Agent, Swing Line Lender and
L/C Issuer, and the other Lenders party thereto
Amendment No. 1 and Limited Waiver dated
February 13, 2017, among the parties to the
Amended and Restated Credit Agreement dated
October 26, 2016 (Exhibit 10.87 above)
Amendment No. 2 dated August 24, 2017,
among the parties to the Amended and Restated
Credit Agreement dated October 26, 2016
(Exhibit 10.87 above)
Consent to Credit Agreement
Consent and Amendment No. 3 to Amended
and Restated Credit Agreement dated
December 27, 2018, among the parties to the
Amended and Restated Credit Agreement dated
October 26, 2016 (Exhibit 87 above)
Transition agreement between Diodes
Incorporated and Richard White
Amended Transition Agreement between
Diodes Incorporated and Richard White
Consent to Credit Agreement
Consent to Credit Agreement
Share Swap Agreement between Diodes
Incorporated and Lite-On Semiconductor Corp.
dated as of August 8, 2019
10-K
February 27, 2017
10.79
10-K
February 27, 2017
10.80
10-Q
August 9, 2012
10.5
10-Q
August 9, 2012
10.6
10-Q
August 9, 2012
10.7
8-K
November 1, 2016
10.1
8-K
February 14, 2017
10.1
10-K February 20, 2018
10.80.2
10-Q November 6, 2018
10-K February 21, 2019
10.1
10.89
8-K March 6, 2019
8-K/A April 1, 2019
10-Q May 7, 2019
10-Q August 5, 2019
8-K
August 9, 2019
87
10.1
10.1
10.1
10.1
2.1
10.72
10.73
10.74
10.75
10.76
10.77
10.78
10.79
10.80
10.81
14**
21
23.1
First Amendment to Second Amended and
Restated Credit Agreement dated as of
September 21, 2020
Consent Agreement with Respect to Second
Amended and Restated Credit Agreement and
Foreign Security Agreements dated as of
November 2, 2020
Consent and Amendment No. 2 to Second
Amended and Restated Credit Agreement dated
as of November 17, 2020. Portions of this
Exhibit have been omitted
Facility Agreement, dated January 22, 2021, by
and among Diodes Hong Kong Limited, The
Hongkong and Shanghai Banking Corporation
Limited, as Arranger, the financial institutions
listed in Schedule 1 thereto, The Hongkong and
Shanghai Banking Corporation Limited, as
Agent, and The Hongkong and Shanghai
Banking Corporation Limited, as Security
Agent. Portions of this Exhibit have been
omitted.
Hong Kong Debenture, dated January 22, 2021,
by and between Diodes Hong Kong Limited
and The Hongkong and Shanghai Banking
Corporation Limited, as Security Agent.
Letter, dated January 22, 2021, from Diodes
Incorporated to The Hongkong and Shanghai
Banking Corporation.
Amendment No. 3 to Second Amended and
Restated Credit Agreement, dated as of March
4, 2021, by and among Diodes Incorporated,
Diodes Holdings UK Limited, certain
subsidiaries of Diodes Incorporated identified
therein, the Lenders identified therein, and
Bank of America, N.A.
Amendment No. 4 to Second Amended and
Restated Credit Agreement, Consent and
Incremental Term Assumption Agreement.
Amendment No. 5 to Second Amended and
Restated Credit Agreement, Consent and
Incremental Term Assumption Agreement.
Amendment No. 6 to Second Amended and
Restated Credit Agreement, Consent and
Incremental Term Assumption Agreement.
Code of Ethics for Chief Executive Officer and
Senior Financial Officers
Subsidiaries of the Registrant
Consent of Independent Registered Public
Accounting Firm
10-K February 22, 2021
10.95
10-K February 22, 2021
10.96
10-K February 22, 2021
10.97
8-K
January 26, 2021
10.1
8-K
January 26, 2021
10.2
8-K
January 26, 2021
10.3
10-Q May 6, 2021
10.4
8-K
January 4, 2022
10.1
88
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
31.1
31.2
32.1***
32.2***
101.INS
Certification Pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, adopted
pursuant to Section 302 of the Sarbanes- Oxley
Act of 2002
Certification Pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, adopted
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
Certification Pursuant to 18 U.S.C. adopted
pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
Certification Pursuant to 18 U.S.C. adopted
pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
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Inline XBRL Taxonomy Extension Presentation
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104
*
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***
Cover Page Interactive Data File, formatted in
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Constitute management contracts, or
compensatory plans or arrangements, which are
required to be filed pursuant to Item 601 of
Regulation S-K.
Provided in the Corporate Governance portion
of the Investor Relations section of the
Company’s website at http://www.diodes.com
A certification furnished pursuant to Item 601
of the Regulation S-K will not be deemed
“filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended
(the “Exchange Act”), or otherwise subject to
the liability of that section. Such certification
will not be deemed to be incorporated by
reference into any filing under the Securities
Act of 1933, as amended, or the Exchange Act,
except to the extent that the registrant
specifically incorporates it by reference.
89
PLEASE NOTE: It is inappropriate for investors to assume the accuracy of any covenants, representations or warranties that may be
contained in agreements or other documents filed as exhibits to this Annual Report on Form 10-K. In certain instances the disclosure
schedules to such agreements or documents contain information that modifies, qualifies and creates exceptions to the representations,
warranties and covenants. Moreover, some of the representations and warranties may not be complete or accurate as of a particular date
because they are subject to a contractual standard of materiality that is different from those generally applicable to stockholders or were
used for the purpose of allocating risk among the parties rather than establishing certain matters as facts. Accordingly, you should not
rely on the representations and warranties as characterizations of the actual state of facts at the time they were made or otherwise.
90
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
DIODES INCORPORATED (Registrant)
By: /s/ Keh-Shew Lu
KEH-SHEW LU
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Brett R. Whitmire
Brett R. Whitmire
Chief Financial Officer
(Principal Financial and Accounting Officer)
February 17, 2022
February 17, 2022
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and
appoints Dr. Keh-Shew Lu, President and Chief Executive Officer, and Brett R. Whitmire, Chief Financial Officer, his true and lawful
attorneys-in-fact and agents, with full power of substitution, to sign and execute on behalf of the undersigned any and all amendments
to this report, and to perform any acts necessary in order to file the same, with all exhibits thereto and other documents in connection
therewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requested and necessary to be done in connection therewith, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents, or their or his or her
substitutes, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated on February 17, 2022.
/s/ Keh-Shew Lu
KEH-SHEW LU
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
/s/ Brett R. Whitmire
BRETT R. WHITMIRE
Chief Financial Officer
(Principal Financial Officer)
/s/ Keh-Shew Lu
KEH-SHEW LU
Chairman of the Board of Directors
/s/ C.H. Chen
C.H. CHEN
Director and Vice Chairman
/s/ Angie Chen Button
ANGIE CHEN BUTTON
Director
/s/ Warren Chen
WARREN CHEN
Director
/s/ Michael R. Giordano
MICHAEL R. GIORDANO
Director
/s/ Peter M. Menard
PETER M. MENARD
Director
/s/ Michael K. C. Tsai
MICHAEL K. C. TSAI
Lead Director
/s/ Christina Wen-Chi Sung
CHRISTINA WEN-CHI SUNG
Director
91
SUBSIDIARIES OF THE REGISTRANT
Incorporated
Location
Subsidiary Name
BCD Shanghai Micro-Electronics Company Limited ......................... China
Canyon Semiconductor Inc. ................................................................ Taiwan
Diodes (Shanghai) Investment Company Limited ............................... China
Diodes Electronic (Shenzhen) Company Limited................................ China
Diodes Fast Analog Solutions Limited ................................................ United Kingdom
Diodes Holdings UK Limited .............................................................. United Kingdom
Diodes Hong Kong Limited ................................................................. Hong Kong
Diodes Investments Taiwan Co., Ltd................................................... Taiwan
Diodes Japan K.K. ............................................................................... Japan
Diodes Kaihong (Shanghai) Company Limited ................................... China
Diodes Korea Inc.................................................................................. Korea
Diodes Semiconductors GB Limited ................................................... United Kingdom
Diodes Taiwan S.a. r.l .......................................................................... Luxembourg
Diodes Taiwan S.a. r.l., Hsinchu Branch (Luxembourg)..................... Taiwan
Diodes Taiwan S.a. r.l., Keelung Branch (Luxembourg)..................... Taiwan
Diodes Taiwan S.a. r.l., Taiwan Branch (Luxembourg) ...................... Taiwan
Diodes Technologies Taiwan Co., Ltd. ............................................... Taiwan
Diodes Technology (Chengdu) Company Limited .............................. China
Diodes Zetex GmbH ............................................................................ Germany
Diodes Zetex Limited........................................................................... United Kingdom
Diodes Zetex Neuhaus GmbH ............................................................. Germany
Diodes Zetex Semiconductors Limited ................................................ United Kingdom
DiodSent Green Technology Co., Ltd.................................................. Taiwan
Dyna Image Corp. ............................................................................... Philippines
Dyna Image Corporation ..................................................................... Taiwan
Dyna International Co., Ltd. ............................................................... British Virgin Islands
Dyna International Holding Co., Ltd. ................................................. British Virgin Islands
Eris Technology Corporation............................................................... Taiwan
Jiyuan Crystal Photoelectric Frequency Technology Co. Ltd. ............ China
Lite-On Microelectronics (Wuxi) Co., Ltd. ........................................ China
Lite-On Semiconductor (Wuxi) Co., Ltd. ........................................... China
Lite-On Semiconductor Corp. ............................................................. Taiwan
Lite-On Semiconductor HK Limited .................................................. Hong Kong
Lyra Semiconductor Incorporated ....................................................... Taiwan
Pericom Technology (Shanghai) Company Limited............................ China
Pericom Technology (Yangzhou) Corporation .................................... China
PSE Technology (Shandong) Corporation........................................... China
PSE Technology Corporation .............................................................. Taiwan
Savitech Corp. ..................................................................................... Taiwan
Shanghai Kaihong Electronic Company Limited. ............................... China
Shanghai Kaihong Technology Company Limited.............................. China
Shanghai Seeful Electronic Co., Ltd. .................................................. China
Smart Power Holdings Group Co., Ltd. .............................................. British Virgin Islands
TF Semiconductor Solutions, Inc......................................................... Delaware
WBG Power Systems (Cayman) Co., Ltd. .......................................... Cayman Islands
WBG Power Systems (Hong Kong) Co., Ltd. .................................... Hong Kong
Yea Shin Technology Co., Ltd. ........................................................... Taiwan
Holding Company (1)
or Subsidiary (2)
2
2
1
2
2
1
1
1
2
2
2
2
1
2
2
2
1
2
2
2
2
2
2
2
2
1
1
2
2
2
2
2
1
2
2
2
2
2
2
2
2
2
1
2
1
2
2
Exhibit 21
Percentage
Owned
100%
50.98%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
98.02%
100%
100%
100%
100%
60%
100%
62.79%
100%
100%
51.07%
49%
100%
100%
100%
100%
50.01%
100%
100%
100%
100%
55.56%
95%
95%
100%
100%
57.60%
65%
100%
100%
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements of Diodes Incorporated of our
report dated February 17, 2022, related to the consolidated financial statements of Diodes Incorporated and
Subsidiaries (the “Company”) and the effectiveness of internal control over financial reporting of the Company
appearing in this Annual Report on Form 10-K for the year ended December 31, 2021:
•
Registration Statements on Form S-8 (No. 333-189298, No. 333-212327 and No. 333-220019)
pertaining to the Diodes Incorporated 2013 Equity Incentive Plan.
/s/ Moss Adams LLP
Los Angeles, California
February 17, 2022
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Keh-Shew Lu, certify that:
1. I have reviewed this Annual Report on Form 10-K of Diodes Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
/s/ Keh-Shew Lu
Keh-Shew Lu
Chief Executive Officer
Date: February 17, 2022
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brett R. Whitmire, certify that:
1.I have reviewed this Annual Report on Form 10-K of Diodes Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
/s/ Brett R. Whitmire
Brett R. Whitmire
Chief Financial Officer
Date: February 17, 2022
CERTIFICATION PURSUANT TO 18 U.S.C. 1350 ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002
The undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that, to his knowledge, the Annual Report on Form 10-K for the twelve-month period ended December 31, 2021, of Diodes
Incorporated (the “Company”) fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended, and that the information contained in such Annual Report fairly presents, in all material respects, the financial condition
and results of operations of the Company as of, and for, the periods presented in such report.
Exhibit 32.1
/s/ Keh-Shew Lu
Keh-Shew Lu
Chief Executive Officer
Date: February 17, 2022
A signed original of this written statement required by Section 906 has been provided to Diodes Incorporated and will be retained by
Diodes Incorporated and furnished to the Securities and Exchange Commission or its staff upon request.
1 ECRTI T1 ARTF O NP CUP AOR RF S8 P .U.1 . S350 ADF NRED NP CUP AOR RF UE1 RTF O 906 F I RHE UACBAOEU-F XLEY
A1 R F I 2002
The undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that, to his knowledge, the Annual Report on Form 10-K for the twelve-month period ended December 31, 2021, of Diodes
Incorporated (the “Company”) fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended, and that the information contained in such Annual Report fairly presents, in all material respects, the financial condition
and results of operations of the Company as of, and for, the periods presented in such report.
Exhibit 32.2
/s/ Brett R. Whitmire
Brett R. Whitmire
Chief Financial Officer
Date: February 17, 2022
A signed original of this written statement required by Section 906 has been provided to Diodes Incorporated and will be retained by
Diodes Incorporated and furnished to the Securities and Exchange Commission or its staff upon request.
Additional Information
CONSOLIDATED RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME
(unaudited)
(cid:21)(cid:19)(cid:21)(cid:20)
(cid:11)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:82)(cid:88)(cid:86)(cid:68)(cid:81)(cid:71)(cid:86)(cid:15)(cid:3)(cid:72)(cid:91)(cid:70)(cid:72)(cid:83)(cid:87)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)(cid:71)(cid:68)(cid:87)(cid:68)(cid:12)
(cid:21)(cid:19)(cid:20)(cid:28)
(cid:21)(cid:19)(cid:21)(cid:19)
(cid:21)(cid:19)(cid:20)(cid:27)
(cid:21)(cid:19)(cid:20)(cid:26)
(cid:42)(cid:36)(cid:36)(cid:51)(cid:3)(cid:81)(cid:72)(cid:87)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:11)(cid:79)(cid:82)(cid:86)(cid:86)(cid:12)(cid:3)(cid:16)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:3)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:21)(cid:21)(cid:27)(cid:15)(cid:26)(cid:25)(cid:22)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:28)(cid:27)(cid:15)(cid:19)(cid:27)(cid:27)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:24)(cid:22)(cid:15)(cid:21)(cid:24)(cid:19)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:19)(cid:23)(cid:15)(cid:19)(cid:21)(cid:20)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:11)(cid:20)(cid:15)(cid:27)(cid:19)(cid:24)(cid:12)
(cid:42)(cid:36)(cid:36)(cid:51)(cid:3)(cid:72)(cid:68)(cid:85)(cid:81)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3)(cid:11)(cid:79)(cid:82)(cid:86)(cid:86)(cid:12)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)(cid:16)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:39)(cid:76)(cid:79)(cid:88)(cid:87)(cid:72)(cid:71)(cid:3)
(cid:36)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:81)(cid:70)(cid:76)(cid:79)(cid:72)(cid:3)(cid:81)(cid:72)(cid:87)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:11)(cid:79)(cid:82)(cid:86)(cid:86)(cid:12)(cid:3)(cid:16)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)
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(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:24)(cid:17)(cid:19)(cid:19)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:17)(cid:27)(cid:27)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:21)(cid:17)(cid:28)(cid:25)
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(cid:21)(cid:17)(cid:19)(cid:23)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:11)(cid:19)(cid:17)(cid:19)(cid:23)(cid:12)
(cid:36)(cid:80)(cid:82)(cid:85)(cid:87)(cid:76)(cid:93)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:16)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:87)(cid:68)(cid:81)(cid:74)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:22)(cid:15)(cid:21)(cid:23)(cid:21)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:22)(cid:15)(cid:21)(cid:26)(cid:19)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:23)(cid:15)(cid:26)(cid:26)(cid:28)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:24)(cid:15)(cid:19)(cid:22)(cid:21)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:24)(cid:15)(cid:21)(cid:19)(cid:20)
(cid:36)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:16)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)
(cid:47)(cid:54)(cid:38)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)
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(cid:21)(cid:21)(cid:28)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:16)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:16)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:16)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:16)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:25)
(cid:36)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3)(cid:81)(cid:72)(cid:87)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:16)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:3)(cid:11)(cid:49)(cid:82)(cid:81)(cid:16)(cid:42)(cid:36)(cid:36)(cid:51)(cid:12)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:21)(cid:22)(cid:26)(cid:15)(cid:20)(cid:28)(cid:21)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:21)(cid:21)(cid:15)(cid:25)(cid:28)(cid:26)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:24)(cid:20)(cid:15)(cid:19)(cid:27)(cid:28)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:21)(cid:20)(cid:15)(cid:21)(cid:25)(cid:20)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:25)(cid:28)(cid:15)(cid:20)(cid:21)(cid:20)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:39)(cid:76)(cid:79)(cid:88)(cid:87)(cid:72)(cid:71)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:88)(cid:86)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:88)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:72)(cid:68)(cid:85)(cid:81)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:23)(cid:24)(cid:15)(cid:26)(cid:27)(cid:20)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:24)(cid:21)(cid:15)(cid:20)(cid:22)(cid:22)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:24)(cid:20)(cid:15)(cid:27)(cid:25)(cid:19)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:24)(cid:19)(cid:15)(cid:28)(cid:22)(cid:24)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:24)(cid:19)(cid:15)(cid:22)(cid:23)(cid:19)
(cid:36)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3)(cid:72)(cid:68)(cid:85)(cid:81)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)(cid:16)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:3)(cid:11)(cid:49)(cid:82)(cid:81)(cid:16)(cid:42)(cid:36)(cid:36)(cid:51)(cid:12)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:39)(cid:76)(cid:79)(cid:88)(cid:87)(cid:72)(cid:71)(cid:3)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:24)(cid:17)(cid:20)(cid:27)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:21)(cid:17)(cid:22)(cid:24)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:21)(cid:17)(cid:28)(cid:20)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:21)(cid:17)(cid:22)(cid:27)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:17)(cid:22)(cid:26)
ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE
(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:191)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:3)(cid:81)(cid:72)(cid:87)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:68)(cid:85)(cid:81)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:70)(cid:68)(cid:79)(cid:70)(cid:88)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:88)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:83)(cid:85)(cid:76)(cid:81)(cid:70)(cid:76)(cid:83)(cid:79)(cid:72)(cid:86)(cid:3)(cid:74)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:68)(cid:70)(cid:70)(cid:72)(cid:83)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:56)(cid:81)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)
(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:11)(cid:179)(cid:42)(cid:36)(cid:36)(cid:51)(cid:180)(cid:12)(cid:17)(cid:3)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:80)(cid:68)(cid:78)(cid:72)(cid:86)(cid:3)(cid:68)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:36)(cid:36)(cid:51)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:76)(cid:87)(cid:3)(cid:73)(cid:72)(cid:72)(cid:79)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:81)(cid:72)(cid:70)(cid:72)(cid:86)(cid:86)(cid:68)(cid:85)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:90)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:85)(cid:72)(cid:68)(cid:71)(cid:72)(cid:85)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)
(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:191)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:79)(cid:72)(cid:68)(cid:86)(cid:72)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:89)(cid:76)(cid:72)(cid:90)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:68)(cid:86)(cid:3)(cid:89)(cid:76)(cid:72)(cid:90)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:69)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:86)(cid:72)(cid:68)(cid:85)(cid:70)(cid:75)(cid:3)(cid:68)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:87)(cid:86)(cid:3)
(cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:86)(cid:72)(cid:80)(cid:76)(cid:70)(cid:82)(cid:81)(cid:71)(cid:88)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3) (cid:76)(cid:81)(cid:71)(cid:88)(cid:86)(cid:87)(cid:85)(cid:92)(cid:17)(cid:3) (cid:55)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3) (cid:81)(cid:82)(cid:81)(cid:16)(cid:42)(cid:36)(cid:36)(cid:51)(cid:3) (cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:81)(cid:82)(cid:87)(cid:3) (cid:83)(cid:85)(cid:72)(cid:83)(cid:68)(cid:85)(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3) (cid:68)(cid:70)(cid:70)(cid:82)(cid:85)(cid:71)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:15)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:86)(cid:75)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3) (cid:81)(cid:82)(cid:87)(cid:3) (cid:69)(cid:72)(cid:3) (cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3) (cid:68)(cid:79)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:86)(cid:3) (cid:82)(cid:85)(cid:3) (cid:81)(cid:72)(cid:70)(cid:72)(cid:86)(cid:86)(cid:68)(cid:85)(cid:76)(cid:79)(cid:92)(cid:3)
(cid:86)(cid:88)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:85)(cid:3)(cid:87)(cid:82)(cid:15)(cid:3)(cid:42)(cid:36)(cid:36)(cid:51)(cid:3)(cid:191)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:71)(cid:68)(cid:87)(cid:68)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:69)(cid:72)(cid:3)(cid:71)(cid:76)(cid:73)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:81)(cid:82)(cid:81)(cid:16)(cid:42)(cid:36)(cid:36)(cid:51)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:88)(cid:86)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:76)(cid:72)(cid:86)(cid:17)(cid:3)(cid:37)(cid:72)(cid:70)(cid:68)(cid:88)(cid:86)(cid:72)(cid:3)(cid:81)(cid:82)(cid:81)(cid:16)(cid:42)(cid:36)(cid:36)(cid:51)(cid:3)(cid:191)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)
(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:76)(cid:93)(cid:72)(cid:71)(cid:15)(cid:3)(cid:76)(cid:87)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:69)(cid:72)(cid:3)(cid:83)(cid:82)(cid:86)(cid:86)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:85)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:191)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:76)(cid:72)(cid:86)(cid:182)(cid:3)(cid:81)(cid:82)(cid:81)(cid:16)(cid:42)(cid:36)(cid:36)(cid:51)(cid:3)(cid:191)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:15)(cid:3)(cid:72)(cid:89)(cid:72)(cid:81)(cid:3)(cid:76)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:92)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:86)(cid:76)(cid:80)(cid:76)(cid:79)(cid:68)(cid:85)(cid:3)(cid:81)(cid:68)(cid:80)(cid:72)(cid:86)(cid:17)(cid:3)
(cid:55)(cid:75)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:79)(cid:68)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:80)(cid:68)(cid:71)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:69)(cid:82)(cid:89)(cid:72)(cid:15)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:86)(cid:72)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:87)(cid:75)(cid:3)(cid:69)(cid:72)(cid:79)(cid:82)(cid:90)(cid:29)
Detail of non-GAAP adjustments
Amortization of acquisition-related intangible assets(cid:3)(cid:177)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:76)(cid:87)(cid:72)(cid:80)(cid:15)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:80)(cid:82)(cid:85)(cid:87)(cid:76)(cid:93)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:71)(cid:72)(cid:89)(cid:72)(cid:79)(cid:82)(cid:83)(cid:72)(cid:71)(cid:3)(cid:87)(cid:72)(cid:70)(cid:75)(cid:81)(cid:82)(cid:79)(cid:82)(cid:74)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:3)
(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:75)(cid:76)(cid:83)(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:73)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:16)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:87)(cid:68)(cid:81)(cid:74)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:80)(cid:82)(cid:85)(cid:87)(cid:76)(cid:93)(cid:72)(cid:71)(cid:3)(cid:88)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:86)(cid:87)(cid:85)(cid:68)(cid:76)(cid:74)(cid:75)(cid:87)(cid:16)(cid:79)(cid:76)(cid:81)(cid:72)(cid:3)(cid:80)(cid:72)(cid:87)(cid:75)(cid:82)(cid:71)(cid:86)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:91)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)
(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:192)(cid:82)(cid:90)(cid:86)(cid:3)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:69)(cid:72)(cid:3)(cid:74)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:72)(cid:68)(cid:70)(cid:75)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:88)(cid:86)(cid:72)(cid:73)(cid:88)(cid:79)(cid:3)(cid:79)(cid:76)(cid:73)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:79)(cid:76)(cid:70)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:69)(cid:72)(cid:79)(cid:76)(cid:72)(cid:89)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:76)(cid:87)(cid:72)(cid:80)(cid:3)(cid:76)(cid:86)(cid:3)
(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:83)(cid:85)(cid:76)(cid:68)(cid:87)(cid:72)(cid:3)(cid:69)(cid:72)(cid:70)(cid:68)(cid:88)(cid:86)(cid:72)(cid:3)(cid:68)(cid:3)(cid:86)(cid:76)(cid:74)(cid:81)(cid:76)(cid:191)(cid:70)(cid:68)(cid:81)(cid:87)(cid:3)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3)(cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:87)(cid:68)(cid:81)(cid:74)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:86)(cid:75)(cid:82)(cid:85)(cid:87)(cid:3)(cid:79)(cid:76)(cid:89)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
(cid:68)(cid:80)(cid:82)(cid:85)(cid:87)(cid:76)(cid:93)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:90)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:85)(cid:76)(cid:86)(cid:82)(cid:81)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:86)(cid:87)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:69)(cid:82)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:81)(cid:72)(cid:90)(cid:79)(cid:92)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:82)(cid:81)(cid:74)(cid:16)(cid:75)(cid:72)(cid:79)(cid:71)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:72)(cid:86)(cid:17)(cid:3)(cid:44)(cid:81)(cid:3)
(cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:76)(cid:87)(cid:72)(cid:80)(cid:3)(cid:69)(cid:72)(cid:70)(cid:68)(cid:88)(cid:86)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:86)(cid:76)(cid:74)(cid:81)(cid:76)(cid:191)(cid:70)(cid:68)(cid:81)(cid:87)(cid:3)(cid:89)(cid:68)(cid:85)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:88)(cid:81)(cid:83)(cid:85)(cid:72)(cid:71)(cid:76)(cid:70)(cid:87)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:68)(cid:80)(cid:82)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:76)(cid:72)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:17)
Acquisition related costs(cid:3) (cid:177)(cid:3) (cid:55)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3) (cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3) (cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:86)(cid:3) (cid:68)(cid:86)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:47)(cid:44)(cid:55)(cid:40)(cid:16)(cid:50)(cid:49)(cid:3) (cid:54)(cid:72)(cid:80)(cid:76)(cid:70)(cid:82)(cid:81)(cid:71)(cid:88)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3) (cid:11)(cid:179)(cid:47)(cid:54)(cid:38)(cid:180)(cid:12)(cid:15)(cid:3) (cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3) (cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3) (cid:82)(cid:73)(cid:3)
(cid:68)(cid:71)(cid:89)(cid:76)(cid:86)(cid:82)(cid:85)(cid:92)(cid:15)(cid:3)(cid:79)(cid:72)(cid:74)(cid:68)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:83)(cid:85)(cid:82)(cid:73)(cid:72)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:88)(cid:79)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:72)(cid:72)(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:92)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:76)(cid:81)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:85)(cid:72)(cid:70)(cid:72)(cid:76)(cid:89)(cid:72)(cid:71)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
(cid:70)(cid:82)(cid:85)(cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:68)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:80)(cid:68)(cid:71)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:81)(cid:82)(cid:81)(cid:16)(cid:71)(cid:72)(cid:71)(cid:88)(cid:70)(cid:87)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:69)(cid:72)(cid:79)(cid:76)(cid:72)(cid:89)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)
(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:68)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:68)(cid:70)(cid:70)(cid:88)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:85)(cid:72)(cid:192)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3)(cid:79)(cid:76)(cid:78)(cid:72)(cid:79)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:69)(cid:72)(cid:3)(cid:76)(cid:81)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:69)(cid:86)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:81)(cid:3)(cid:88)(cid:81)(cid:88)(cid:86)(cid:88)(cid:68)(cid:79)(cid:3)(cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)
(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:85)(cid:76)(cid:86)(cid:82)(cid:81)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:85)(cid:72)(cid:192)(cid:72)(cid:70)(cid:87)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:17)
Additional Information – (Continued)
CONSOLIDATED RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME
(unaudited)
LSC investments related(cid:3)(cid:177)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:68)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:82)(cid:81)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:3)(cid:47)(cid:54)(cid:38)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)
(cid:75)(cid:68)(cid:86)(cid:3)(cid:68)(cid:79)(cid:86)(cid:82)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:3)(cid:87)(cid:68)(cid:91)(cid:72)(cid:86)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:74)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:86)(cid:87)(cid:85)(cid:88)(cid:70)(cid:87)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:3)(cid:55)(cid:68)(cid:76)(cid:90)(cid:68)(cid:81)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)(cid:68)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:47)(cid:54)(cid:38)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:69)(cid:72)(cid:79)(cid:76)(cid:72)(cid:89)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)
(cid:76)(cid:86)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:85)(cid:72)(cid:192)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:82)(cid:81)(cid:74)(cid:82)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:3)(cid:72)(cid:81)(cid:75)(cid:68)(cid:81)(cid:70)(cid:72)(cid:71)(cid:3)(cid:89)(cid:76)(cid:72)(cid:90)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:17)
Gain on sale of manufacturing subsidiary(cid:3)(cid:177)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:74)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3)(cid:68)(cid:86)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:3)(cid:80)(cid:68)(cid:81)(cid:88)(cid:73)(cid:68)(cid:70)(cid:87)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)(cid:68)(cid:85)(cid:92)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:70)(cid:79)(cid:82)(cid:86)(cid:72)(cid:71)(cid:3)
(cid:76)(cid:81)(cid:3)(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:21)(cid:19)(cid:21)(cid:20)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:69)(cid:72)(cid:79)(cid:76)(cid:72)(cid:89)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:76)(cid:86)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:85)(cid:72)(cid:192)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:82)(cid:81)(cid:74)(cid:82)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:3)(cid:72)(cid:81)(cid:75)(cid:68)(cid:81)(cid:70)(cid:72)(cid:71)(cid:3)(cid:89)(cid:76)(cid:72)(cid:90)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)
Restructuring costs(cid:3) (cid:177)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3) (cid:75)(cid:68)(cid:86)(cid:3) (cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:72)(cid:71)(cid:3) (cid:85)(cid:72)(cid:86)(cid:87)(cid:85)(cid:88)(cid:70)(cid:87)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3) (cid:70)(cid:75)(cid:68)(cid:85)(cid:74)(cid:72)(cid:86)(cid:3) (cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:86)(cid:75)(cid:88)(cid:87)(cid:71)(cid:82)(cid:90)(cid:81)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:85)(cid:72)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:82)(cid:81)(cid:72)(cid:3) (cid:82)(cid:73)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3) (cid:68)(cid:86)(cid:86)(cid:72)(cid:80)(cid:69)(cid:79)(cid:92)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:87)(cid:72)(cid:86)(cid:87)(cid:3) (cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)
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Board member retirement costs(cid:3)(cid:177)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:70)(cid:82)(cid:81)(cid:81)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:87)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:3)(cid:80)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:69)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)
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(cid:80)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:68)(cid:86)(cid:3)(cid:76)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:92)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:89)(cid:72)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:82)(cid:85)(cid:76)(cid:74)(cid:76)(cid:81)(cid:68)(cid:79)(cid:3)(cid:89)(cid:72)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72)(cid:79)(cid:76)(cid:81)(cid:72)(cid:17)(cid:3)
Land sale inspection extension fee(cid:3)(cid:177)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:85)(cid:72)(cid:70)(cid:72)(cid:76)(cid:83)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:76)(cid:81)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:72)(cid:91)(cid:87)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:73)(cid:72)(cid:72)(cid:86)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:79)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:82)(cid:15)(cid:3)(cid:55)(cid:59)(cid:17)(cid:3)(cid:3)(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)
(cid:73)(cid:72)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:83)(cid:68)(cid:76)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:79)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:85)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:76)(cid:74)(cid:75)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:91)(cid:87)(cid:72)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:3)(cid:70)(cid:79)(cid:82)(cid:86)(cid:72)(cid:3)(cid:71)(cid:68)(cid:87)(cid:72)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:72)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:68)(cid:83)(cid:83)(cid:79)(cid:76)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3)(cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:17)(cid:3)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:73)(cid:72)(cid:72)(cid:79)(cid:86)(cid:3)(cid:76)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:83)(cid:85)(cid:76)(cid:68)(cid:87)(cid:72)(cid:3)
(cid:87)(cid:82)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:73)(cid:72)(cid:72)(cid:86)(cid:3)(cid:86)(cid:76)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:92)(cid:3)(cid:71)(cid:82)(cid:81)(cid:182)(cid:87)(cid:3)(cid:85)(cid:72)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:81)(cid:74)(cid:82)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:76)(cid:85)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:68)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:68)(cid:70)(cid:70)(cid:88)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:76)(cid:81)(cid:71)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)
(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)
Gain on land sale(cid:3)(cid:177)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:74)(cid:68)(cid:76)(cid:81)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:79)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:82)(cid:15)(cid:3)(cid:55)(cid:59)(cid:3)(cid:71)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:21)(cid:19)(cid:20)(cid:28)(cid:17)(cid:3)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:73)(cid:72)(cid:72)(cid:79)(cid:86)(cid:3)(cid:76)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)
(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:83)(cid:85)(cid:76)(cid:68)(cid:87)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:74)(cid:68)(cid:76)(cid:81)(cid:3)(cid:86)(cid:76)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:92)(cid:3)(cid:71)(cid:82)(cid:81)(cid:182)(cid:87)(cid:3)(cid:85)(cid:72)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:81)(cid:74)(cid:82)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:76)(cid:85)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:68)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:68)(cid:70)(cid:70)(cid:88)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:76)(cid:81)(cid:71)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)
(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)
Loss on impairment(cid:3)(cid:177)(cid:44)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:28)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:79)(cid:82)(cid:86)(cid:86)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:74)(cid:81)(cid:76)(cid:93)(cid:72)(cid:71)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:76)(cid:81)(cid:87)(cid:68)(cid:81)(cid:74)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:83)(cid:85)(cid:72)(cid:89)(cid:76)(cid:82)(cid:88)(cid:86)(cid:79)(cid:92)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:55)(cid:41)(cid:54)(cid:54)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:26)(cid:3)
(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:79)(cid:82)(cid:86)(cid:86)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:74)(cid:81)(cid:76)(cid:93)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:79)(cid:82)(cid:81)(cid:74)(cid:16)(cid:79)(cid:76)(cid:89)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:75)(cid:88)(cid:87)(cid:71)(cid:82)(cid:90)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:46)(cid:41)(cid:36)(cid:37)(cid:17)
(cid:50)(cid:73)(cid:191)(cid:70)(cid:72)(cid:85)(cid:3)(cid:85)(cid:72)(cid:87)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:177)(cid:3)(cid:44)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:27)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:87)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:90)(cid:82)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:86)(cid:17)(cid:3)(cid:3)(cid:55)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:83)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:70)(cid:70)(cid:72)(cid:79)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)
(cid:89)(cid:72)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:3)(cid:83)(cid:85)(cid:72)(cid:89)(cid:76)(cid:82)(cid:88)(cid:86)(cid:79)(cid:92)(cid:3)(cid:76)(cid:86)(cid:86)(cid:88)(cid:72)(cid:71)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:68)(cid:90)(cid:68)(cid:85)(cid:71)(cid:86)(cid:17)(cid:3)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:73)(cid:72)(cid:72)(cid:79)(cid:86)(cid:3)(cid:76)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:83)(cid:85)(cid:76)(cid:68)(cid:87)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3)(cid:86)(cid:76)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:92)(cid:3)(cid:71)(cid:82)(cid:81)(cid:182)(cid:87)(cid:3)(cid:85)(cid:72)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:81)(cid:74)(cid:82)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:86)(cid:3)
(cid:68)(cid:81)(cid:71)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:68)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:68)(cid:70)(cid:70)(cid:88)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:76)(cid:81)(cid:71)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)
Impact of Tax Cuts and Job Act(cid:3)(cid:177)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:55)(cid:68)(cid:91)(cid:3)(cid:38)(cid:88)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:45)(cid:82)(cid:69)(cid:3)(cid:36)(cid:70)(cid:87)(cid:3)(cid:11)(cid:179)(cid:55)(cid:38)(cid:45)(cid:36)(cid:180)(cid:12)(cid:3)(cid:79)(cid:68)(cid:90)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:72)(cid:81)(cid:68)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:71)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)
(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:21)(cid:19)(cid:20)(cid:26)(cid:17)(cid:3)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:55)(cid:38)(cid:45)(cid:36)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:69)(cid:72)(cid:72)(cid:81)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:82)(cid:85)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:82)(cid:3)
(cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:68)(cid:87)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:85)(cid:76)(cid:86)(cid:82)(cid:81)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:83)(cid:85)(cid:72)(cid:89)(cid:76)(cid:82)(cid:88)(cid:86)(cid:79)(cid:92)(cid:3)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:71)(cid:82)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:85)(cid:72)(cid:192)(cid:72)(cid:70)(cid:87)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:17)
Shut-down related costs(cid:3)(cid:177)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:72)(cid:71)(cid:3)(cid:86)(cid:75)(cid:88)(cid:87)(cid:16)(cid:71)(cid:82)(cid:90)(cid:81)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3)(cid:71)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:75)(cid:88)(cid:87)(cid:71)(cid:82)(cid:90)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:46)(cid:41)(cid:36)(cid:37)(cid:17)(cid:3)(cid:3)(cid:55)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:86)(cid:75)(cid:88)(cid:87)(cid:16)(cid:71)(cid:82)(cid:90)(cid:81)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3)
(cid:68)(cid:85)(cid:72)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:69)(cid:72)(cid:79)(cid:76)(cid:72)(cid:89)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:75)(cid:88)(cid:87)(cid:16)(cid:71)(cid:82)(cid:90)(cid:81)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3)
(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:68)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:68)(cid:70)(cid:70)(cid:88)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:85)(cid:72)(cid:192)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:85)(cid:76)(cid:86)(cid:82)(cid:81)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:86)(cid:3)
(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:85)(cid:72)(cid:192)(cid:72)(cid:70)(cid:87)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:17)
Retention costs(cid:3)(cid:177)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:3)(cid:85)(cid:72)(cid:87)(cid:72)(cid:81)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:70)(cid:82)(cid:81)(cid:81)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:46)(cid:41)(cid:36)(cid:37)(cid:3)(cid:86)(cid:75)(cid:88)(cid:87)(cid:71)(cid:82)(cid:90)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:51)(cid:72)(cid:85)(cid:76)(cid:70)(cid:82)(cid:80)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:3)
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(cid:81)(cid:82)(cid:85)(cid:80)(cid:68)(cid:79)(cid:3) (cid:68)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3) (cid:86)(cid:68)(cid:79)(cid:68)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:73)(cid:82)(cid:85)(cid:72)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:69)(cid:72)(cid:76)(cid:81)(cid:74)(cid:3) (cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:17)(cid:3) (cid:55)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3) (cid:69)(cid:72)(cid:79)(cid:76)(cid:72)(cid:89)(cid:72)(cid:86)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:85)(cid:72)(cid:87)(cid:72)(cid:81)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3) (cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:46)(cid:41)(cid:36)(cid:37)(cid:3) (cid:86)(cid:75)(cid:88)(cid:87)(cid:71)(cid:82)(cid:90)(cid:81)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
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CORPORATE INFORMATION
BOARD OF DIRECTORS
EXECUTIVE OFFICERS
DR. KEH-SHEW LU
Chairman, President, & Chief
Executive Officer
Employee since 2005
BRETT R. WHITMIRE
Chief Financial Officer
Employee since 2009
JULIE HOLLAND
Senior Vice President,
Corporate Operations
Employee since 2008
FRANCIS TANG
Senior Vice President,
Worldwide Discrete Products
Employee since 2005
EMILY YANG
Senior Vice President,
Worldwide Sales & Marketing
Employee since 2015
EVAN YU
Senior Vice President,
Worldwide Power Products
Employee since 2008
GARY YU
Senior Vice President,
Business Groups
Employee since 2008
JIN ZHAO
Vice President,
Worldwide Analog Products
Employee since 2017
DR. KEH-SHEW LU 4
Chairman, President, &
Chief Executive Officer,
Diodes Incorporated
Former Senior Vice President,
Texas Instruments, Inc.
Director since 2001
C.H. CHEN 3C, 4C
Vice Chairman,
Diodes Incorporated
Board Member,
Lite-On Technology Corporation
Director since 2000
MICHAEL K.C. TSAI 2C, 3
Lead Director,
Diodes Incorporated
Chairman,
AP Memory Technology Corp.
Vice Chairman,
Powerchip Semiconductor
Manufacturing Corp.
Director since 2010
ANGIE CHEN BUTTON
Member, State of Texas House
Of Representatives
Director since 2021
WARREN CHEN 2,3,4
Board Member,
Lite-On Technology Corporation
Director since 2020
MICHAEL R. GIORDANO 1CF
Associate Director,
Senior Wealth Strategy Associate,
UBS Financial Services, Inc.
Director since 1990
PETER M. MENARD 1, 3
Retired Securities Lawyer
Director since 2018
CHRISTINA WEN-CHI SUNG 1, 2
Former Chairman,
Taipei Financial Center Corporation
Director since 2017
1 – Audit Committee Member
2 – Compensation Committee Member
3 – Governance and Stockholder Relations
Committee Member
4 – Risk Oversight Committee Member
C – Committee Chair
F – Audit Committee Financial Expert
SHAREHOLDER INFORMATION
Diodes Incorporated common stock is listed
on the Nasdaq Global Select Market
(Nasdaq-GS: DIOD).
Calendar Ended
2021
Fourth quarter
Third quarter
Second quarter
First quarter
2020
Fourth quarter
Third quarter
Second quarter
First quarter
Closing Sales
Price of
Common Stock
High
Low
$ 112.42 $ 85.49
98.17
72.75
83.79
69.17
90.86
70.78
$ 72.12 $ 57.58
56.45
46.41
53.55
38.20
58.95
33.12
ANNUAL REPORT ON FORM 10-K
A copy of the Company Annual Report on
Form 10-K and other publicly financial reports,
as filed with the United States Securities
and Exchange Commission, are available at
www.diodes.com or www.sec.gov or upon
request of:
INVESTOR RELATIONS
Shelton Group
Contact: Leanne Sievers
19800 MacArthur Blvd., Suite 300
Irvine, California 92612
949-224-3874
LSievers@SheltonGroup.com
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Moss Adams LLP
10960 Wilshire Blvd., Suite 1100
Los Angeles, California 90024
TRANSFER AGENT & REGISTRAR
Continental Stock Transfer & Trust Company
17 Battery Place, 8th Floor
New York, New York 10004
212-509-4000
FINANCIAL INFORMATION ONLINE
World Wide Web users can access Company
information on the Diodes Incorporated
Investor page at www.investor.diodes.com.
DIODES INCORPORATED
Corporate Headquarters
4949 Hedgcoxe Road
Suite 200
Plano, Texas 75024
972.987.3900
AMERICA SALES
Milpitas, California, United States
Plano, Texas, United States
ASIA SALES
Beijing, China
Guangzhou, China
Qingdao, China
Shanghai, China
Shenzhen, China
Wuhan, China
Xiamen, China
Tokyo, Japan
Seongnam-si, South Korea
Suwon, South Korea
Taipei, Taiwan
EUROPE SALES
Frankfurt, Germany
Munich, Germany
MANUFACTURING FACILITIES
Chengdu, China
Shandong, China
Shanghai, China (4)
Wuxi, China (2)
(cid:50)(cid:79)(cid:71)(cid:75)(cid:68)(cid:80)(cid:15)(cid:3)(cid:40)(cid:81)(cid:74)(cid:79)(cid:68)(cid:81)(cid:71)
(cid:49)(cid:72)(cid:88)(cid:75)(cid:68)(cid:88)(cid:86)(cid:15)(cid:3)(cid:42)(cid:72)(cid:85)(cid:80)(cid:68)(cid:81)(cid:92)
(cid:42)(cid:85)(cid:72)(cid:72)(cid:81)(cid:82)(cid:70)(cid:78)(cid:15)(cid:3)(cid:54)(cid:70)(cid:82)(cid:87)(cid:79)(cid:68)(cid:81)(cid:71)(cid:3)
Hsinchu, Taiwan(cid:3)
JhongLi, Taiwan(cid:3)
Keelung, Taiwan(cid:3)(cid:3)
DIODES INCORPORATED
Registered to UL DQS
Certificate Registration No. 10002233
QM08
www.diodes.com
Nasdaq-GS: DIOD