ANALOG DISCRETE
POWER
2023
Annual Report
Diodes Incorporated - 2023 Letter to Stockholders
Year In Review
2023 proved to be a challenging year for Diodes as well as the global semiconductor markets. After a record year in
2022, Diodes’ target end markets of Consumer, Computing and Communications began experiencing a slowdown in
demand that was followed by a longer than expected delay in recovery. Late in the year we also began to see a more
broad-based slowdown globally in the Industrial market as well as softness in certain areas of Automotive, primarily
related to customer inventory adjustments and year-end distributor inventory management. As a result, full year
2023 revenue decreased to $1.7 billion, compared to $2.0 billion in 2022.
Solid Profitability and Balance Sheet
Despite this global market weakness, we continued to make notable progress on improving the quality and mix of our
product portfolio. These mix improvements were especially evident in our ability to maintain full-year gross margin
near 40%, meeting our target model even with the lower annual revenue. Throughout the year, we also continued to
drive manufacturing cost reductions and operating efficiencies, while further developing our process technology for
expansion of our internal facility utilization. Additionally, we continued to make progress ramping our previously
acquired fabs, SPFAB and GFAB, in terms of process and product qualifications, which will support future utilization
and further complement our hybrid manufacturing model.
Also during the year, we maintained strong cash generation that enabled us to reduce total debt by $124 million to
$62 million as of December 31, 2023, maintain a solid cash position over $315 million and increase total cash less debt
by 67% to approximately $253 million. Further, we renewed and expanded our lines of credit to approximately $315
million to provide added financial flexibility.
Focus on Automotive & Industrial Markets
As part of our product mix improvements, we continued to expand our presence in the Automotive and Industrial
markets through increased design wins and further investment in new product development. For the fourth quarter,
revenue from our Automotive and Industrial end markets together increased for the seventh consecutive quarter,
remaining above our target model of 40% of total product revenue. For the full year, the combined revenue from
these markets represented 46% of product revenue as compared to 42% last year.
Since our initial launch into the Automotive market in 2013, which at the time represented only 3% of product
revenue, we have achieved a 28% CAGR through 2023. Also over this time period, our content per vehicle increased
from $28 in 2013 to over $160 in 2023. To further drive future content expansion, we introduced over 350 new
automotive-compliant products in 2023, demonstrating our commitment to this market and contributing to our
improved product mix.
Experienced, Tenured Leadership
Also late in the year, I was pleased to announce the promotion of Gary Yu to President, effective January 2, 2024,
which was part of our multi-year CEO succession plan. Gary has been with Diodes since 2008 and had previously
served as Chief Operating Officer as well as held other leadership roles over the course of his tenure. I plan to continue
serving as Chairman and CEO until at least May 31, 2027, which is consistent with my current employment agreement.
In conclusion, I would like to take this opportunity to thank our employees, customers and partners for your ongoing
contributions to Diodes’ success. Going forward, our team remains focused on driving product mix improvements,
new product introductions, design win momentum as well as a focus on key account development. We have a long
track record of managing through multiple economic cycles, and I believe we will emerge from this current cycle as a
stronger, more resilient company to drive even higher growth, cash generation and profitability for our shareholders.
Sincerely,
Dr. Keh-Shew Lu
Chairman & Chief Executive Officer
FINANCIAL HIGHLIGHTS
(cid:1006)(cid:1004)(cid:1005)(cid:1013)
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(cid:1006)(cid:1004)(cid:1006)(cid:1005)
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2019
$1,249
2020
$1,229
2021
$1,805
2022
$2,001
2023
$1,662
NET SALES
in millions
2019 2020 2021 2022 2023
$153
$227
$229 $331
$98
2019 2020 2021 2022 2023
$151 $123 $237 $339
$223
2019 2020 2021 2022
$1,106 $964 $1,237 $1,514
2023
$1,741
NET INCOME
COMMON STOCKHOLDERS
in millions
NET INCOME
COMMON STOCKHOLDERS
[NON-GAAP ADJUSTED1]
in millions
STOCKHOLDERS’ EQUITY
in millions
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(cid:20)(cid:15)(cid:25)(cid:22)(cid:28)(cid:15)(cid:22)(cid:27)(cid:23)
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(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:3)(cid:3)
(cid:20)(cid:25)(cid:15)(cid:28)(cid:26)(cid:28)
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(cid:20)(cid:23)(cid:26)(cid:15)(cid:23)(cid:26)(cid:19)
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(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)
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(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:15)(cid:26)(cid:23)(cid:19)(cid:15)(cid:26)(cid:23)(cid:20)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
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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, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number: 002-25577
DIODES INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware
(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
Name of each exchange on which registered
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
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. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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 45,288,669 shares of Common Stock held by non-affiliates of the registrant, based on the closing price of $92.49 per share of the
Common Stock on the Nasdaq Global Select Market on June 30, 2023, the last business day of the registrant’s most recently completed second fiscal quarter, was
approximately $4.1 billion.
The number of shares of the registrant’s Common Stock outstanding as of February 2, 2024 was 45,939,804.
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 2024 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, 2023.
TABLE OF CONTENTS
PART I
ITEM 1.
BUSINESS ...........................................................................................................................................................
ITEM 1A. RISK FACTORS..................................................................................................................................................
ITEM 1B. UNRESOLVED STAFF COMMENTS...............................................................................................................
ITEM 1C. CYBERSECURITY .............................................................................................................................................
PROPERTIES ......................................................................................................................................................
ITEM 2.
LEGAL PROCEEDINGS ....................................................................................................................................
ITEM 3.
MINE SAFETY DISCLOSURES........................................................................................................................
ITEM 4.
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ITEM 6.
ITEM 7.
ISSUER PURCHASES OF EQUITY SECURITIES......................................................................................
RESERVED .........................................................................................................................................................
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ................................................................................................................................................
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ....................................
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ....................................................................
ITEM 8.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
ITEM 9.
FINANCIAL DISCLOSURE..........................................................................................................................
ITEM 9A. CONTROLS AND PROCEDURES ....................................................................................................................
ITEM 9B. OTHER INFORMATION....................................................................................................................................
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS...................
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.............................................
EXECUTIVE COMPENSATION .......................................................................................................................
ITEM 11.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
ITEM 12.
RELATED STOCKHOLDER MATTERS.....................................................................................................
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE .
PRINCIPAL ACCOUNTANT FEES AND SERVICES.....................................................................................
ITEM 14.
PART IV
ITEM 15.
ITEM 16.
EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.............................................................................
FORM 10-K SUMMARY....................................................................................................................................
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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 industrial,
automotive, computing, communications and consumer markets.
The Company's products include diodes; rectifiers; transistors; MOSFETs; Silicon Carbide ("SiC") diodes and MOSFETs;
protection devices; logic; photocoupler; voltage translators; amplifiers and comparators; sensors; and power management devices such
as AC-DC converters, DC-DC switching, linear voltage regulators, voltage references, LED drivers, power switches, and voltage
supervisors. We also have timing and connectivity solutions including clock ICs, crystal oscillators, PCIe packet switches, multi-protocol
switches, interface products, and signal integrity solutions for high-speed signals.
Diodes’ corporate headquarters and Americas’ sales offices are located in Plano, Texas, and Milpitas, California. Design,
marketing, and engineering centers are located in Plano, Milpitas, U.S.; Taipei, Taoyuan City, Taiwan; Shanghai, Yangzhou, China;
Oldham, England; and Neuhaus, Germany. Diodes’ wafer fabrication facilities are located in South Portland, Maine, U.S., Oldham,
Greenock, UK; Shanghai and Wuxi, China; and Keelung and Hsinchu, Taiwan. Diodes has assembly and test facilities located in
Shanghai, 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; Milan, Italy; Singapore City, Singapore; Oldham, UK; 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;
The Company is also C-TPAT certified; and
We believe 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 Artificial Intelligence of Things ("AIoT");
Automotive: connected driving, comfort/style/safety, and electrification/powertrain;
Computing: cloud computing including artificial intelligence servers, storage, and data center applications;
Communications: smartphones, 5G networks, advanced protocols, and charging solutions; and
Consumer: IoT, wearables, home automation, and smart infrastructure.
From 2019 to 2023, our annual net sales grew from $1.2 billion to $1.7 billion, representing a compound annual growth rate of
approximately 7.4%. Our product line includes over 28,000 products, and we shipped approximately 42 billion units in 2023, 50 billion
units in 2022 and 58 billion units in 2021. The decrease in units shipped in 2023 was driven by softness in demand and inventory
adjustments related to the computing, communications and consumer markets.
2023 SUMMARY AND BUSINESS OUTLOOK
In 2023 the Company's net sales decreased 16.9% compared to 2022. This decrease was the result of an economic slowdown
resulting in less demand for our products.
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, in which we provide a wide range of products that work together in a system which help simplify
the design process for our customers, sales approach and content expansion driving growth:
Increased focus on high margin market segments (i.e. automotive and industrial) and analog & power discrete product lines;
and
Investment in technology leadership in target products, fab processes, and advanced packaging.
1
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, automotive, computing,
communications and consumer 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. The majority or our customers
are served through our distribution network and some are direct customers who purchase directly from the Company. 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, 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 experience possessed by each member of the Company’s executive team has created significant
institutional insight into our markets, customers and 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.
2
OUR STRATEGY
Our goal is to reach $1.0 billion in gross profit based upon $2.5 billion in revenue and a gross margin of 40% by 2025. At a high
level, strategy we intend to use to accomplish this goal include; continue to enhance our position as a leading global designer,
manufacturer and supplier of high-quality application-specific standard semiconductor products, using 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, analog and mixed-signal semiconductor products – We intend to
maintain our rapid pace of new product introductions across all our markets with continued emphasis in the LED lighting market, the
industrial market and the automotive market. We will also continue to focus on the 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. During 2023 and 2022, 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 our close collaboration 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 and manufacturing flexibility – A key element of our success is our overall low-cost
manufacturing base and our hybrid manufacturing model. 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. We continue to leverage a hybrid
manufacturing model which allows our revenue to be supported with both internally and externally sourced manufacturing. This allows
more flexibility to support customer growth while continuing to enhance cost competitiveness.
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. Examples of recent acquisitions include:
•
•
•
In June 2022, the Company completed the acquisition of onsemi's wafer fabrication facility and operations located in South
Portland, Maine ("SPFAB"). We purchased SPFAB to provide additional 200mm wafer fabrication capacity for analog
products to accelerate the Company's growth initiatives in the automotive and industrial end-markets. This U.S.-based
facility, together with the Company's existing wafer fabrication facilities in Asia and Europe, further enhances the
Company's global manufacturing operations;
In 2020, we acquired Lite-On Semiconductor (“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; and
In 2019, we acquired from Texas Instruments a 200mm wafer fabrication facility and operations located in Greenock,
Scotland (“GFAB”). The acquisition of GFAB added to our existing global footprint and provided expanded wafer capacity
to support our product growth, in particular for the automotive market.
3
See “Risk Factors – A significant part of our growth strategy involves acquiring companies and businesses. 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 20 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: MOSFETs, SiC MOSFETs; protection devices: data line protection, power line
protection, thyristers, USB Type-C protection, transient voltage suppressors; Diodes; Schottky diodes, small signal switching diodes,
Zener diodes, and SiC diodes; Rectifiers: bridges, super barrier rectifiers, Schottky rectifiers, Schottky bridge rectifiers, fast/ultra-fast
rectifiers; bipolar transistors: Avalanche transistors, gate driver transistors, pre-bias transistors;
Analog products, including: power management devices such as AC-DC and DC-DC converters, USB power switches, low
dropout, photocoupler 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;
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; and
Contact Image Sensor (CIS) an input device widely applied on, among other things, high-speed copy machines, check scanners,
banknote identification validators (ATM, banknote detectors ) and industrial inspection equipment (AOI/AVI). We offer integrated
sensor IC, illumination, and rod lenses to form the CIS module.
4
The following table lists the end-markets, some of the applications in which our products are used, and the percentage of product
revenue for each end-market for the last three years:
End-Markets
2023
2022
2021
Industrial
27%
27%
23%
Automotive
19%
15%
12%
Computing
23%
24%
30%
Consumer
18%
19%
19%
Communications
13%
15%
16%
PRODUCT PACKAGING
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
ADAS (advanced driver assistance systems), telematics,
infotainment, lighting, BLDC motor control, electrification and
powertrain, and battery management
Notebooks, tablets, LCD monitors, printers, solid state and
hard disk drive, artificial intelligence servers, storage, cloud
computing, and data center applications
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
5G networks, smartphones, IP gateways, routers, switches,
hubs, fiber optics and charging solutions
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, automotive, computing, communications and consumer applications as highlighted in the table above.
CUSTOMERS
We serve over 50,000 customers worldwide. The majority of our customers are served through our distribution network and some
are direct customers who purchase directly from the Company. Our customers represent leading direct sales customers representing a
broad range of industries, leading EMS providers and leading distributors. For the twelve months ended December 31, 2023, 2022 and
2021, our direct sales and EMS customers together accounted for 32%, 30% and 34%, respectively, of our net sales. 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, 2023, 2022 and 2021:
5
Net Sales by Region
Asia
Europe
Americas
Total net sales
Net Sales by Type
Direct sales
Distributor sales
Total net sales
2023
2022
2021
1,181,519
287,549
192,671
1,661,739
2023
530,446
1,131,293
1,661,739
$
$
$
$
1,480,191
283,900
236,489
2,000,580
2022
590,173
1,410,407
2,000,580
$
$
$
$
1,439,545
220,772
144,845
1,805,162
2021
607,645
1,197,517
1,805,162
$
$
$
$
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, 2023, 2022 and 2021, was $704.8 million $941.3 million and $938.1 million, respectively. The
decline in sales in China is reflective of the overall decrease in demand for semiconductors.
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, South Korea, Japan, Hong
Kong, Taiwan, Turkey, and China. We also have independent sales representatives in the U.S. and Europe. In addition, we have
distributors in the U.S., Asia, and Europe. We have sales and marketing offices or representatives in Taipei, Taiwan; Shanghai,
Shenzhen, Wuhan, Guangzhou, Jinan, and Qingdao, China; Seongnam-si, South Korea; Munich and Frankfurt, Germany; Oldham,
England; Tokyo, Japan; Milpitas, California and Plano, Texas, USA. As of December 31, 2023, 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. We have included our website address in this Annual Report solely as an inactive textual reference. We do not
incorporate the information on, or accessible through, our website into this Annual Report, and you should not consider any information
on or accessible through our website as part of this Annual Report.
MANUFACTURING OPERATIONS AND FACILITIES
We operate assembly and test facilities located in China, Taiwan and Germany. We operate wafer fabrication facilities located in
China, Taiwan, Great Britain and the United States. For the years ending December 31, 2023 and 2022, our total cash capital
expenditures were approximately $150.8 million and $211.7 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.
6
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
Backlog, defined as the amount of product 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.
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, licensed or sublicensed numerous intellectual property rights in connection
with our acquisitions over the years. Several of our trademarks are registered in the U.S. and other countries, and we continually 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 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. We seek to protect our proprietary
technology or related knowledge that is not covered by our patent strategy 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, Kyocera,
Nexperia, NXP Semiconductors N.V., ON Semiconductor Corporation, Renesas Electronics Corporation, 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,
7
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 quick adaptability 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, we
assess customer requirements and acceptance of new package types, 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, translate
those requirements into product specifications and design and manufacture a qualified product to support the 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 programs 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. The positive outcomes of these programs 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.
8
As of December 31, 2023, we employed 8,635 employees (including approximately 655 temporary labor or independent
contractors). 7,282 of our employees were in Asia, 461 were in the Americas and 892 were in Europe. None of our employees in Asia
or the U.S. are subject to a collective bargaining agreement. 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, the U.K and the U.S. 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 twelve month periods ended December 31, 2023, 2022 and
2021, 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.
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.
Warren Chen, a member of the Company's board of directors serves as a member of Nuvoton's 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.
Atlas Magnetics ("Atlas") is an early stage privately held fabless wafer design company in which the Company holds a majority
equity interest. The Company determined that Atlas is a variable interest entity ("VIE") and that Atlas is a related party. The Company
does not have the power to direct the activities that most significantly impact Atlas, and therefore, has determined that the Company is
not the primary beneficiary. While the Company does own more than 50% of Atlas, according to the voting agreement governing the
transaction, the Company does not have the power to direct the activities that most significantly impact Atlas, including obtaining control
of the board of directors, and therefore, has determined that the Company is not the primary beneficiary. For additional information
related to Atlas see Note 19 - Equity Investments - Variable Interest Entities, below.
We consider our relationships with Keylink, Nuvoton, JCP and Atlas to be mutually beneficial and plan to continue these strategic
alliances.
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.
AVAILABLE INFORMATION
Our website address is https://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”).
9
The SEC maintains an Internet site (https://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.
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, set forth in 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.
Shanghai, China experienced government imposed lockdowns due to a resurgence of the COVID-19 virus.
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 and businesses. 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 with 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.
11
We may fail to attract or retain the qualified technical, sales, marketing, finance and management/executive personnel required to
operate our business successfully, which could adversely affect our business, operating results and financial condition.
We may not be able to achieve future growth, and any such growth may place a strain on our management and on our systems and
resources, which could adversely affect our business, operating results and financial condition.
Obsolete inventories as a result of changes in demand for our products and change in life cycles of our products could adversely
affect our business, operating results and financial condition.
If our direct sales customers 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.
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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.
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 invasion of Ukraine by Russia could negatively impact our business.
The success of our business depends on the strength of the global economy and the stability of the financial markets, and any
weaknesses in these areas may have a material adverse effect on our net sales, operating results and financial condition.
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 the U.S., 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.
Shanghai, China experienced government imposed lockdowns due to a resurgence of the COVID-19 virus.
We have manufacturing facilities located in Shanghai, China, where operations are subject to being shut-down by the Chinese
government due to a resurgence in the COVID-19 virus. An extended shut-down of our Shanghai facilities could have a material adverse
effect on the operations, results of operations, financial condition, liquidity and business outlook of our business.
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.
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In addition, we operate in a few narrow markets of the 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 industrial, automotive, computing, communications and consumer 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.
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, Nexperia, NXP Semiconductors N.V., ON Semiconductor Corporation, Renesas
Electronics Corporation, 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 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 pandemics and 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 narrow 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 and businesses. 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 and businesses. 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 businesses 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 companies or businesses;
• 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 with 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 ESG or 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
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.
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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, 2023,
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 $0.2 million.
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,
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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, 2023, $21.4 million in long-term debt was outstanding. In
addition we have short-term foreign credit facilities with borrowing capacities of approximately $147.9 million with an unused amount
of $106.8 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.
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 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.
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 and Shanghai, 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 2021-2023 and we
expect to meet the criteria for 2024 and continue to qualify for the 15% tax rate. The Company expects to continue to meet HNTE
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
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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.
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 $0.7
million, $0.2 million and ($0.2) million for the twelve months ended December 31, 2023, 2022 and 2021, respectively. The benefit of
the tax holidays on basic and diluted earnings per share for the twelve months ended December 31, 2023, 2022 and 2021 was
approximately $0.02, $0.00 and $0.00, 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
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, 2023, the benefit obligation of the Plan was approximately $108.1 million and the total assets in the Plan
were approximately $98.0 million. Therefore, the Plan was underfunded by approximately $10.1 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 Plan's trustees are required to review the funding position every three years. An actuarial valuation was performed as of March
31, 2022, resulting in a deficit of approximately GBP 20 million (approximately $26 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 annually with effect from January 1, 2023 to address the deficit revealed by
the valuation (with the first payment made by December 31, 2023 through December 31, 2028). A final payment of GBP 1.5 million
(approximately $1.95 million based on a GBP: USD rate of 1:1.3) will be made by December 31, 2029. These contributions, together
with the assumed asset outperformance, are expected to eliminate the deficit by December 31, 2029.
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 complying with 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.
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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.
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 2023, 2022 and 2021 our Asian
and European subsidiaries represented approximately 68%, 68% and 76%, 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, including the ongoing conflict between Ukraine and Russia, and between or among
China, the U.K., Germany, Hong Kong, 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
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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 2022 approximately 47% 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
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
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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, 2023, we had undistributed earnings from non-U.S. operations
of approximately $1.3 billion (including approximately $95.7 million of restricted earnings, which are not available for dividends).
Undistributed earnings of our China subsidiaries comprise $511.4 million of this total. Additional Chinese withholding taxes of
approximately $52.0 million would be required should the $511.4 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 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
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, automotive, computing, communications and consumer 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.
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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.
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 invasion of Ukraine by Russia could negatively impact our business.
Russia’s military invasion of Ukraine in February 2022 has led to, and may lead to, additional sanctions being levied by the United
States, European Union and other countries against Russia. Russia’s military invasion and the resulting sanctions have had an adverse
effect on global markets. We cannot predict the progress or outcome of the situation in Ukraine, as the conflict and governmental
reactions are rapidly developing and beyond our control. Prolonged unrest, intensified military activities, or more extensive sanctions
impacting the region could have a material adverse effect on the global economy, and such effect could in turn have a material adverse
effect on the operations, results of operations, financial condition, liquidity and business outlook of our business.
The success of our business depends on the strength of the global economy and the stability of the financial markets, and any
weaknesses in these areas may have a material adverse effect on our net sales, operating results and financial condition.
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 industrial, automotive, computing, communications and consumer 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 pandemics and 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.
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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.
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.
Item 1B. Unresolved Staff Comments.
None
Item 1C. Cybersecurity
Governance
Cybersecurity risk oversight continues to remain a top priority for the Board of Directors. The Board of Directors is responsible
for oversight of the Company’s information security program, including risks of cybersecurity threats. The Risk Oversight Committee
and Audit Committee, which support the Board of Directors in the oversight of the Company's information security program are focused
on risks from cybersecurity threats, including incident response planning, timely identification and assessment of incidents, incident
recovery and business continuity considerations. The Risk Oversight Committee members have varied expertise and experience
including risk management, technology and finance, equipping them to oversee cybersecurity risks effectively. The Risk Oversight
Committee has delegated day-to-day oversight of our information security program to our executive officers, including the Vice
President of Information Technology ("VP of IT") along with our Global Cybersecurity Director ("Director"). Our VP of IT is a 24-year
information technology industry veteran having served in key information technology roles at a Fortune 500 company with over 15
years of direct influence over cybersecurity roadmaps and operations. The Director is a 30-year veteran of the information technology
industry having served in the military and with a Fortune 500 company with over 20 years of cybersecurity experience including leading
incident responses, policy development, and building security architectures. The VP of IT and the Director regularly meet with our
President and Chief Financial Officer to inform them of matters related to cybersecurity risks and incidents. These meetings are designed
to ensure that the highest levels of management are kept abreast of the cybersecurity posture and potential risks facing the Company.
Furthermore, significant known cybersecurity matters, and strategic risk management decisions are escalated to the Board of Directors,
ensuring that the Board of Directors has oversight and can provide guidance on critical cybersecurity issues. We believe our information
security team is well positioned to identify risks from cybersecurity threats based on numerous job qualifications and on-going training.
Our incident response team, headed by the Director and VP of IT, reports material cybersecurity incidents to our executive officers
and to our Board of Directors. The Company has an information security advisory board comprised of senior leaders within the
Company. These senior leaders include representation from functions including product line, sales and marketing, manufacturing, legal,
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finance, human resources, supply chain, information technology and regional representation. Responsibilities of the advisory board
include:
• advise on creation and implementation of information security policy;
• advise on information security strategic roadmap and investments;
• review, advise, and promote security education, training and awareness;
• review and advise on ongoing legal, regulatory, compliance, threat landscape, risks, industry news, and trends concerning cyber
security; and
• review and advise on the mitigation of cybersecurity risks and potential incidents.
The Company has internal disclosure committees made up of members of management to assist in fulfilling its obligations to
maintain disclosure controls and procedures and to coordinate and oversee the process of preparing our periodic securities filings with
the SEC. The disclosure committees are composed of members of management and is chaired by our Vice President and Corporate
Controller. The disclosure committees meet on a quarterly basis and more often if necessary. The Company has policies and procedures
in place to ensure that our disclosure committees are appropriately informed of any matters that should be considered in advance of
applicable public filings, including cybersecurity and data privacy matters, and to address the proper handling and escalation of
information to management and the Board of Directors, the Risk Oversight Committee and/or the Audit Committee.
Management provides cybersecurity-related legal, regulatory, compliance, risk, and relevant industry and internal threat updates
to the Board of Directors on a quarterly basis; or more frequently as needed. The reports provide information regarding the state of the
Company’s information security program, the nature, timing and extent of cybersecurity incidents, if any, and the Company’s resolution
to such matters.
The VP of IT has a monthly meeting with the Company's President to provide an update of cybersecurity incidents and risks,
irrespective of materiality. The Company's Board of Directors is provided a quarterly update on cybersecurity roadmaps and progress.
Risk Management and Strategy
The Company has a robust cybersecurity program that has direct involvement from the Board of Directors and senior management.
Our business operations and relationships with customers and suppliers are heavily reliant on technology, and any failure or disruption
in our technological systems could have significant negative impacts on our business.
Protecting information, including information of our customers, is a top priority. To assess, identify, and manage the risks of
cybersecurity threats to our information systems and the associated costs, we maintain a cybersecurity program that:
• defines cybersecurity risks that threaten the security of customer and employee data or the function of our products and services;
• identify security vulnerabilities across software and hardware environments;
• determine threat likelihood and potential severity of each risk;
• catalog information assets to include hardware, software, and types of data the Company collects, stores, and transmits, as well
as the locations where the data is stored;
• assess the risk to business operations and information protection;
• analyze the risk and prioritize based on financial, operational, strategic, reputational impact, and probability of occurrence;
• establish security controls to eliminate or mitigate identified risks;
• monitor and periodically review security controls; and
• collaborate with HR for employee awareness and training.
Specifically, our information security program, which is led by our Director, establishes and maintains our corporate-wide
cybersecurity program and provides guidance and direction for information security activities and controls at Diodes. Through our
cybersecurity program, we monitor the environment for incidents, classify the activity, and escalate incidents according to Company
procedures. Incidents classified to a level that may significantly impact the Company are escalated to management for monitoring and
action if necessary. The Company also maintains an appropriate system of hygiene for internal and external systems through accepted
information technology practices such as patching, security monitoring, capacity management, availability monitoring, and third-party
vulnerability scanning.
Our Director and VP of IT oversee and manage the Company’s cybersecurity risk monitoring and mitigation processes and
regularly collaborate with other departments, including business units and the information technology department, as necessary, to
facilitate the risk monitoring and mitigation processes and to ensure the policies and procedures for our information security program
are integrated into our overall risk management assessment. The information security team performs a bi-annual third-party assessment
26
using industry standard frameworks of our information security program. Results are shared with the Company's management and with
the Board of Directors.
We have defined policies and procedures for cybersecurity incident detection, containment, response and remediation and have
adopted physical, technological and administrative cybersecurity and data privacy controls. In particular the Company has established
a cybersecurity incident response plan includes classification of cybersecurity incidents, to whom to escalate an incident, and when to
escalate a cybersecurity incident, including direct communication to the VP of IT, Director and President. The Company regularly
conducts vulnerability assessments and tracks remediation to completion. Critical systems are periodically audited against industry
standards.
To minimize our risk and exposure to material cybersecurity incidents, we also conduct company-wide annual and ongoing
cybersecurity awareness training and education of our employees. This includes but not limited to topics such password hygiene,
phishing, and other cybersecurity-related information.
In addition to performing an annual risk assessment and developing a detection and mitigation plan, along with a comprehensive
review and update of our cybersecurity and data privacy policies and procedures, we continuously evaluate new and emerging risks and
ever-changing legal and compliance requirements. Our comprehensive information security program includes agreements with third-
party cybersecurity partners for continuous monitoring, alerting, and response. To supplement our cybersecurity and data privacy risk
assessment, identification, management and mitigation efforts, we regularly consult with third-party experts, which include the following
services:
• conduct annual cybersecurity and data privacy risk assessments;
• conduct external and internal penetration tests;
• monitor critical infrastructure for abnormal behavior; and
• provide validation of the Company’s cybersecurity and operations processes against the National Institute of Standards and
Technology cybersecurity framework.
Impact of cybersecurity risks on business strategy, results of operations or financial condition
Cybersecurity threats, such as threats of attacks from computer hackers, cyber criminals, nation-State actors and other malicious
internet-based activity, continue to increase. Cybersecurity threats may also include threats of attacks involving social engineering and
cyber extortion to induce customers, contractors, business partners, third-party service providers, employees and other third parties to
disclose information, transfer funds or unwittingly provide access to systems or data.
We believe that our current preventative actions and response activities provide adequate measures of protection against security
breaches and generally reduce our cybersecurity risks. However, cybersecurity threats are constantly evolving, are becoming more
frequent and more sophisticated and are being made by groups of individuals with a wide range of expertise and motives, which increases
the difficulty of detecting and successfully defending against them. While we have implemented measures to safeguard our operational
and technology systems and have established a culture of continuous learning, monitoring and improvement, the evolving nature of
cybersecurity attacks and vulnerabilities means that these protections may not always be effective. However, to date, management has
determined that none of the cybersecurity attacks the Company experienced have resulted in a material impact to its financial condition,
results of operations or business strategy. In the ordinary course of our business, we have experienced and expect to continue to
experience cyber-based attacks and other attempts to compromise our information systems, although none, to our knowledge, has had a
material adverse effect on our business, financial condition or results of operations. While we do not believe cybersecurity threats are
reasonably likely to affect us, our business strategy, our results of operations or our financial conditions, like all technology companies,
we face a risks of such threats, the consequences of which could be material. See Item 1A – Risk Factors – “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,” above. In
addition, given the constant and evolving threat of cyber-based attacks, we incur significant costs in an effort to detect and prevent
security breaches and incidents, and these costs may increase in the future.
Item 2. Properties.
Our corporate headquarters are located in Plano, Texas. As of December 31, 2023, we own approximately 4.1 million square feet
of property and lease approximately 5.3 million square feet of property, with leases expiring at various times between 2024 and 2028
and with land rights expiring in 2061. 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.
27
We believe our current facilities are adequate for the foreseeable future.
Primary use
Headquarters/R&D center
Regional sales office/Administrative office/R&D center/apartment
Manufacturing facility/office/chemical warehouse/wellness building
Manufacturing facilities/Administrative office/R&D center/Logistics
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
Regional sales office
Manufacturing facility
R&D center
Regional sales office
Regional sales office
Regional Sales Office
Administrative office/Logistics/Manufacturing/R&D center
Sales office
Manufacturing facility/R&D center
Regional Sales Office
Regional sales office
Regional sales office
Manufacturing facility/R&D center/Logistics/Administrative office
Regional sales office
Manufacturing facility/R&D center/Logistics/Administrative office
Manufacturing facility
Regional sales office
Manufacturing
Office
R&D center
Regional sales office/Administrative office/Logistics/R&D
Regional sales office/Administrative office/Logistics
Regional sales office/Administrative office/Logistics
Regional sales office/Administrative office/R&D center/apartment
Item 3. Legal Proceedings.
Location
USA - Plano, Texas
USA - Milpitas, California
USA - South Portland, Maine
China - Chengdu
China - Hong Kong
China - Jinan, Shandong
China - Shanghai
China - Shenzhen
China - Wuxi
China - Yangzhou
China, Beijing
China, Hubei, WuHan
China, ShanDong, QingDao
England - Oldham
Germany - Munich
Germany - Neuhaus
Japan - Milnato-ku
Japan - Tokyo
Korea - Seongnam-si
Scotland - Greenock
Singapore City, Singapore
Taiwan - Hsinbei
Taiwan - Hsinchu
Taiwan - Kaohsiung
Taiwan - Keelung
Taiwan - Taichung
Taiwan - Tainan
Taiwan - Taipei
Taiwan - Taoyuan
Taiwan - Taoyuan
USA - Milpitas, California
Sq. Ft.
41,835
86,321
323,462
1,660,963
33,777
1,058,324
2,558,968
17,292
1,166,347
6,085
969
1,265
1,469
156,076
6,297
52,508
11,525
145
1,295
1,001,873
1,755
98,752
652,672
108
149,548
11,187
1,927
19,012
266,466
266,466
86,321
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.
28
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.”
PART II
Holders
As of February 2, 2024, there were approximately 201 registered holders of record of the Company's common stock. A
substantially greater number of holders of the Company's common stock are "street name" or beneficial holders, whose shares of record
are held by banks, brokers, and other financial institutions.
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
$75.0 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 2024 definitive proxy statement, which we expect to file with the SEC in April 2024, 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, 2023. 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.
Prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980-2023.
Index Data: Copyright NASDAQ OMX, Inc. Used with permission. All rights reserved.
29
The graph assumes $100 invested on December 31, 2018 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.
December 2023
Diodes Incorporated
NASDAQ Industrial Index
NASDAQ Composite-Total
Returns
Return %
Cum $
Return %
Cum $
Return %
Cum $
2018
100
100
100
2019
74.74
174.74
27.17
127.17
2020
25.07
218.54
52.72
194.22
2021
55.76
340.39
8.81
211.33
2022
(30.67)
235.99
(35.05)
137.26
2023
5.74
249.53
28.93
176.97
36.69
136.69
44.92
198.10
22.18
242.03
(32.54)
163.28
44.64
236.17
Issuer Purchases of Equity Securities
There were no repurchases of our Common Stock during the fourth quarter of 2023.
Item 6. Reserved.
30
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 Annual
Report on 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.
The discussion of our financial condition and results of operations for the year ended December 31, 2021 included in Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the
year ended December 31, 2022 is incorporated by reference into this Management’s Discussion and Analysis of Financial Condition
and Results of Operations.
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 industrial,
automotive, computing, communications and consumer markets.
The Company's products include diodes; rectifiers; transistors; MOSFETs; SiC diodes and MOSFETs; protection devices; logic;
voltage translators; amplifiers and comparators; sensors; and power management devices such as AC-DC converters, DC-DC switching,
photocoupler, linear voltage regulators, voltage references, LED drivers, power switches, and voltage supervisors. We also have timing
and connectivity solutions including clock ICs, crystal oscillators, PCIe packet switches, multi-protocol switches, interface products,
and signal integrity solutions for high-speed signals.
Diodes’ corporate headquarters and Americas’ sales offices are located in Plano, Texas, and Milpitas, California. Design,
marketing, and engineering centers are located in Plano, Milpitas, U.S.; Taipei, Taoyuan City, Taiwan; Shanghai, Yangzhou, China;
Oldham, England; and Neuhaus, Germany. Diodes’ wafer fabrication facilities are located in South Portland, Maine, U.S., Oldham,
Greenock, UK; Shanghai and Wuxi, China; and Keelung and Hsinchu, Taiwan. Diodes has assembly and test facilities located in
Shanghai, 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; Milan, Italy; Singapore City, Singapore; Oldham, UK; 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;
The Company is also C-TPAT certified; and
We believe 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;
Automotive: connected driving, comfort/style/safety, and electrification/powertrain;
Computing: cloud computing including artificial intelligence servers, storage, and data center applications;
31
•
•
Communications: smartphones, 5G networks, advanced protocols, and charging solutions; and
Consumer: IoT, wearables, home automation, and smart infrastructure.
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 2023. This discussion should be read in conjunction with Item 8, the
consolidated financial statements and the notes to consolidated financial statements.
Summary for the Twelve Months Ended December 31, 2023
•
•
•
•
•
•
•
Net sales were $1.7 billion, a decrease of 16.9% over the $2.0 billion in 2022;
Gross profit was $658.2 million, a 20.4% decrease from $827.2 million in 2022;
Gross profit margin declined 170 basis points to 39.6% compared to 41.3% in 2022;
Operating income decreased 38.6% to $250.6 million, or 15.1% of revenue, compared to $408.2 million, or 20.4% of
revenue, in 2022;
Net income was $227.2 million, a decrease of 31.4% from the $331.3 million last year;
Earnings per share was $4.91 per diluted share, a 31.8% decrease from the $7.20 per diluted share in 2022;
We achieved $280.9 million cash flow from operations. We had cash capital expenditures of $150.8 million, or 9.1% of net
sales. Net cash flow was a negative $22.6 million, which includes the net pay-down of $124.3 million of total debt.
Summary for the Twelve Months Ended December 31, 2022
•
•
•
•
•
•
•
Net sales were $2.0 billion, an increase of 10.8% over the $1.81 billion in 2021;
Gross profit was $827.2 million, a 23.4% increase from $670.4 million in 2021;
Gross profit margin improved 420 basis points to a record 41.3% from 37.1% in 2021;
Operating income increased 47.9% to a record $408.2 million, or 20.4% of revenue, compared to $276.0 million, or 15.3%
of revenue, in 2021;
Net income was a record $331.3 million, an increase of 44.8% from the $228.8 million last year;
Earnings per share was $7.20 per diluted share, a 44.0% improvement from the $5.00 per diluted share in 2021;
We achieved $392.5 million cash flow from operations. We had cash capital expenditures of $211.7 million, or 10.6% of
net sales. Net cash flow was a negative $25.7 million, which includes the net pay-down of $112.2 million of total debt.
Business Outlook and Factors Relevant to Our Results of Operations
Fiscal year 2023 proved to be challenging as the consumer, computing and communications markets experienced an extended
slowdown, coupled with an inventory rebalancing in the industrial market in late 2023 as well as softness in certain areas of the
automotive market. Despite this global weakness, we made notable progress on improving the quality and mix of our product portfolio
as we continued to focus on the automotive and industrial markets through expanding design wins and increased investment in new
product development, which resulted in over 350 new automotive-compliant products in 2023. The combined revenue from these two
markets expanded to 46% of product revenue in 2023 compared to 42% in 2022.
The Company's product mix improvements were evident in our ability to maintain full year gross margin near 40% for 2023,
meeting our target model despite the lower annual revenue. Throughout fiscal year 2023, the Company continued to drive manufacturing
cost reductions and operating efficiencies, while also further developing our process technology for expansion of our internal facility
utilization. Overall, we maintained strong cash generation in 2023 that enabled us to reduce total debt by $124.3 million to $62.1 million
as of December 31, 2023.
During 2024 the Company will remain focused on driving further improvements in the quality and mix of our portfolio with our
analog and power discrete products, including our newly introduced SiC product family, especially targeted at the automotive and
industrial markets. We believe our total solutions sales approach that has been successful in the past, along with further emphasis placed
on key account development, will continue to deliver increasing content opportunities, design wins and profitable growth in the future.
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
32
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;
The February 2022 invasion of Ukraine by Russia, the conflict in the Middle East, and the resulting and continuing global
impact;
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 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 are primarily associated with where the engineering talent is located, as
well 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.
Interest income / expense
33
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.
Foreign currency (loss) gain, net
This income account is used to show the amount gained or lost as a result of foreign currency transactions.
Unrealized (loss) gain on investments
We hold investments in the form of common stock or some other similar equivalent accounted for under fair-value accounting.
This account is used to show the necessary mark-to-market adjustments.
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:
Net sales
Cost of goods sold
Gross profit
Operating expenses
Income from operations
Interest income
Interest expense
Foreign currency gain (loss), net
Unrealized gain (loss) on investments
Other income
Income before income taxes and noncontrolling interest
Income tax provision
Net income
Net (income) attributable to noncontrolling interest
Net income attributable to common stockholders
Percent of Net Sales
Twelve Months Ended December 31,
2023
100.0%
(60.4)
39.6
(24.5)
15.1
0.8
(0.3)
(0.3)
1.1
0.4
16.7
(2.8)
13.9
(0.2)
13.7
2022
100.0%
(58.7)
41.4
(21.0)
20.4
0.2
(0.4)
0.1
(0.8)
0.3
19.8
(2.8)
17.0
(0.4)
16.6
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
(in thousands).
$
Net sales
Cost of goods sold
Gross profit
Total operating expense
Interest income
Interest expense
Foreign currency (loss) gain, net
Unrealized gain (loss) on investments
Other income
Income tax provision
Twelve Months Ended December 31,
2023
2022
2,000,580
1,173,343
827,237
419,044
3,672
(8,320)
2,122
(16,514)
6,787
56,685
$
1,661,739
1,003,557
658,182
407,611
13,338
(5,700)
(5,264)
18,267
6,721
47,285
34
Increase/(Decrease) % Change
(338,841)
$
(169,786)
(169,055)
(11,433)
9,666
(2,620)
7,386
34,781
(66)
(9,400)
(16.9%)
(14.5%)
(20.4%)
(2.7%)
263.2%
(31.5%)
348.1%
210.6%
(1.0%)
(16.6%)
Net Sales
Our net sales decreased approximately $338.8 million, or 16.9%, for the twelve months ended December 31, 2023, compared to
the prior year, due to widespread decreased demand for our semiconductor products. The Company has experienced growth in higher-
margin end markets which have 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, 2023, weighted-average sales price of the Company's products
decreased 2.7% when compared to the prior year.
The table below sets forth our revenue as a percentage of product revenue by end-user market:
End-Markets
Industrial
Automotive
Computing
Consumer
Communications
Cost of Goods Sold
Twelve Months Ended December 31,
2023
27%
19%
23%
18%
13%
2022
27%
15%
24%
19%
15%
2021
23%
12%
30%
19%
16%
Cost of goods sold decreased approximately $169.8 million for the twelve months ended December 31, 2023 compared to the
same period last year, reflecting the decrease in revenue. As a percent of sales, cost of goods sold was 60.4% for the twelve months
ended December 31, 2023, compared to 58.7% for the same period last year. Average unit cost increased 0.2% for the twelve months
ended December 31, 2023, 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 2023. For the twelve months ended December 31, 2023, gross
profit decreased approximately 20.4% when compared to the prior year. Gross profit margin for the twelve month periods ended
December 31, 2023 and 2022, was 39.6% and 41.3%, respectively.
Operating expenses
Operating expenses for the twelve months ended December 31, 2023 decreased approximately $11.4 million, or 2.7%, compared
to the same period last year due to product mix changes and lower prices. Selling, general and administrative expenses (“SG&A”)
decreased approximately $22.9 million. The decrease in SG&A was due to lower wages and benefits and freight and duty costs. These
decreases were partially offset by increases in professional services and other selling expenses. SG&A, as a percentage of net sales, was
15.5% and 14.0% for the twelve-month periods ended December 31, 2023 and 2022, respectively. Research and development expenses
(“R&D”) increased approximately $8.6 million primarily due to increases in materials, supplies and depreciation, partially offset by
decreases in professional services fees as compared to the same period last year. R&D, as a percentage of net sales, was 8.1% and 6.3%
for the twelve-month periods ended December 31, 2023 and 2022, respectively. Amortization of acquisition-related intangibles
decreased approximately 2.1% reflecting the overall reduction in the balance of intangible assets subject to amortization.
Other (expense)/income
Interest income increased $9.7 million or 263.2% when compared to 2022 due to increase interest rates on our short-term
investments and income from cross-currency swaps. The decrease in interest expense is due to lower levels of debt partially offset by
increased interest rates on our floating rate debt. Unrealized gain on investments increased from 2022 due to mark to market adjustments
on investments.
Income tax provision
We recognized income tax expense of approximately $47.3 million for the twelve months ended December 31, 2023, and income
tax expense of approximately $56.7 million for the twelve months ended December 31, 2022, resulting in effective income tax rates of
17.0% and 14.3%, respectively. The increase in the effective tax rate for 2023 compared to 2022 is primarily attributable to a decrease
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, 2023, our foreign subsidiaries
held approximately $190.3 million of cash, cash equivalents and investments of which approximately $52.2 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.
35
Liquidity requirements
Our primary liquidity requirements have been to meet our capital expenditure needs and to fund ongoing operations. For 2023
and 2022 our working capital was $793.9 million and $729.1 million, respectively. In 2023, our working capital increased primarily due
to increases in accounts receivable and inventories, and a decrease in our income taxes payable and accounts payable. 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.
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, 2023, restricted cash of $3.0 million was pledged as
collateral for issuance of bank loans, bank acceptance notes and letters of credit.
Short-term investments
As of December 31, 2023, we had short-term investments of approximately $10.2 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
$147.9 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 the Taipei Interbank Offered Rate (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, 2023, was approximately $106.8 million, net of $40.7 million advanced
under our foreign credit lines and $0.4 million credit used for import and export guarantee.
Long-term debt
On May 26, 2023, the Company, Diodes Holding UK Limited (the “Foreign Borrower” and, collectively with the Company, the
“Borrowers”), and certain subsidiaries of the Company as guarantors, entered into a Third Amended and Restated Credit Agreement
(the “Credit Agreement”) that amended and restated 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 Credit Agreement, the “Existing Credit
Agreement”). Certain capitalized terms used in this description of the Credit Agreement have the meanings given to them in the Credit
Agreement.
The Existing Credit Agreement consisted of a term loan with no current balance as of the date of the Credit Agreement and a
$225.0 million revolving senior credit facility with nothing drawn as of the date of the Credit Agreement.
The Credit Agreement, which represents a complete amendment and restatement of the Existing Credit Agreement, consists of a
Revolving Credit Facility in the amount of $225.0 million, including a swing line sublimit equal to the lesser of $50.0 million and the
Revolving Credit Facility, a letter of credit sublimit equal to the lesser of $100.0 million and the Revolving Credit Facility, and an
alternative currency sublimit equal to the lesser of $40.0 million and the Revolving Credit Facility. The Borrowers have the option to
increase the Revolving Facility and/or incur Incremental Term Loans in an aggregate principal amount of up to $350.0 million. The
Revolving Credit Facility bears interest at Term SOFR or similar other indices plus a specified margin. The Credit Agreement contains
certain financial and non-financial covenants, including, but not limited to, a maximum Consolidated Leverage Ratio, a minimum
Consolidated Interest 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. The Revolving Credit Facility matures on May 26, 2028.
In addition to the liquidity provided by the Credit Agreement, our 51% owned subsidiary, Eris Technology Company ("ERIS"),
borrowed $21.4 million on a long-term basis from local Taiwan banks. The ERIS debt matures in periods through 2033.
Diodes Hong Kong Limited, a company incorporated under the laws of Hong Kong and a subsidiary of the Company, has a US
Dollar revolving loan facility in an aggregate amount equal to $105.0 million (the "Facility"). Diodes Hong Kong Limited used a portion
of the proceeds for the Facility (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. The
Facility is governed by the laws of Hong Kong.
36
Capital expenditures and investments
In 2023 and 2022, our total cash capital expenditures were approximately $150.8 million and $211.7 million, respectively. Our
capital expenditures for these periods were primarily related to manufacturing expansion in both our assembly/test and wafer fabrication
facilities. Cash capital expenditures in 2023 were approximately 9.1% of our net sales. The Company's 2023 capital expenditures were
higher than our target model of 5% to 9% of net sales, due to expansion of our wafer fabrication facility in Hsinchu Science Park in
Taiwan. Going forward, over the long term, the Company expects capital expenditures to be within the 5% to 9% of net sales target
model range. The Company also made an additional purchase of $13.9 million of equity in a privately held wafer design company.
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, decreased approximately $22.6 million to $318.5 million in 2023 from $341.1
million in 2022. The table below sets forth summary information from our statements of cash flows:
Net cash flows provided by operating activities
Net cash and cash equivalents used in investing activities
Net cash and cash equivalents used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents, including restricted cash
Operating Activities
Twelve Months Ended December 31,
2023
2022
$
$
280,914
(158,322)
(144,723)
(485)
(22,616)
$
$
392,501
(265,263)
(125,713)
(27,244)
(25,719)
Net cash provided by operating activities for 2023 was approximately $280.9 million, due primarily to $230.6 million of net
income, $137.3 million in depreciation expense and amortization of intangible assets expense and $30.9 million from non-cash share-
based compensation expense. The increases were partially offset by a net decrease in operating capital assets and liabilities of $77.6
million, non-cash gains on investments of $19.4 million and a decrease in deferred income taxes of $13.3 million.
Investing Activities
Net cash used in investing activities for 2023 was approximately $158.3 million, due primarily to the purchase of property, plant
and equipment for $150.8 million, purchases of equity securities of $17.9 million and net purchases of short-term investments of $3.2
million. These uses of cash for investing were partially offset by inflow of $6.3 million related to the disposal of a manufacturing facility
and the receipt of insurance proceeds of $1.4 million related to a casualty loss at one of the Company's manufacturing facilities.
Financing Activities
Net cash used in financing activities for 2023 was approximately $144.7 million, due primarily to the net reduction in our
outstanding indebtedness of $124.3 million and taxes on net share settlements of $15.6 million.
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 Policies and 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 policies and 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. Based on the allowance/reserve balance as of December 31, 2023, a 1% change would
increase or decrease the estimated allowance/reserve and net revenue by approximately $0.7 million.
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.
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.
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.
38
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, 2023, 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 $2.0 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, 2023, the plan was underfunded and a liability of approximately $10.1 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 $43.5 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, 2023, was 4.7%. 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 (decrease)increase the year–
end projected benefit obligation by approximately $2.5 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 $1.2 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
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.
39
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 SOFR 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, 2023, our outstanding principal long-term debt was $21.4 and outstanding
short-term debt was $40.7 million. Based on our debt balances at December 31, 2023, 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 $0.2 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 2023. 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.
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, 2023, 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
40
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, 2023.
The effectiveness of our internal control over financial reporting as of December 31, 2023, 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.
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.
41
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, 2023, for our annual
stockholders’ meeting for 2024 (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 Accountant 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.
42
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 Annual Report on Form 10-K.
(1)
Financial statements:
Report of Independent Registered Public Accounting Firm ........................................................................
Consolidated Balance Sheets at December 31, 2023, and 2022...................................................................
Consolidated Statements of Income for the Twelve Months Ended December 31, 2023, 2022 and 2021 ..
Consolidated Statements of Comprehensive Twelve Months Ended December 31, 2023, 2022 and 2021
Consolidated Statements of Equity for the Twelve Months Ended December 31, 2023, 2022 and 2021 ...
Consolidated Statements of Cash Flows for the Twelve Months Ended December 31, 2023, 2022 and
2021 .........................................................................................................................................................
Notes to Consolidated Financial Statements ................................................................................................
Page
44
46
47
48
49
50
51
(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
43
Report of Independent Registered Public Accounting Firm
To the Shareholders 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, 2023 and 2022, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of
the three years in the period ended December 31, 2023, 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, 2023, 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, 2023 and 2022, and the consolidated results of its operations and its cash flows for each
of the three years in the period ended December 31, 2023, 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, 2023, 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 Report 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.
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,
44
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, issues 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 2023 net sales with a corresponding reduction to accounts receivable, and
approximated $69.3 million as of December 31, 2023.
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.
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 cycle time period between when sales are made by distributors to their end
customers and when ship and debit credit memos are issued by the Company to distributors) used to historical 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
cycle time period between when sales are made by distributors to their end customers and when ship and debit credit memos
are issued by the Company to 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 9, 2024
We have served as the Company’s auditor since 1993.
45
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
December 31,
2023
2022
Assets
Current assets:
Cash and cash equivalents
Restricted cash
Short-term investments
Accounts receivable, net of allowances of $5,641 and $5,852 at
December 31, 2023 and December 31, 2022, respectively
Inventories
Prepaid expenses and other
Total current assets
Property, plant and equipment, net
Deferred income tax
Goodwill
Intangible assets, net
Other long-term assets
Total assets
Liabilities
Current liabilities:
Lines of credit
Accounts payable
Accrued liabilities and other
Income tax payable
Current portion of long-term debt
Total current liabilities
Long-term debt, net of current portion
Deferred tax liabilities
Unrecognized 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; and 45,938,382 shares and 45,469,722 shares issued and
outstanding at December 31, 2023 and December 31, 2022, respectively
Additional paid-in capital
Retained earnings
Treasury stock, at cost, 9,286,862 shares and 9,281,581 shares at December 31, 2023 and
December 31, 2022, respectively
Accumulated other comprehensive loss
Total stockholders' equity
Noncontrolling interest
Total equity
Total liabilities and stockholders' equity
$
$
$
$
$
315,457
3,026
10,174
371,930
389,774
97,024
1,187,385
746,169
51,620
146,558
63,937
171,990
2,367,659
40,685
158,261
179,674
10,459
4,419
393,498
16,979
13,662
34,035
99,808
557,982
$
$
336,732
4,367
7,059
369,233
360,281
83,999
1,161,671
736,730
35,308
144,757
79,137
130,709
2,288,312
36,280
160,442
214,433
19,682
1,693
432,530
147,470
12,903
31,594
80,896
705,393
-
-
36,819
509,861
1,675,274
(337,986)
(143,227)
1,740,741
68,936
1,809,677
2,367,659
$
36,503
494,773
1,448,092
(337,490)
(128,233)
1,513,645
69,274
1,582,919
2,288,312
The accompanying notes are an integral part of these consolidated financial statements.
46
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
Restructuring cost
(Gain) loss on disposal of fixed assets
Other operating (income) expense
Total operating expense
Income from operations
Other (expense) income
Interest income
Interest expense
Foreign currency (loss) gain, net
Unrealized gain (loss) 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 earnings per share computation:
Basic
Diluted
$
$
$
$
Twelve Months Ended December 31,
2022
2,000,580
1,173,343
827,237
2023
1,661,739
1,003,557
658,182
2021
1,805,162
1,134,802
670,360
$
$
257,939
134,868
15,282
1,583
(2,045)
(16)
407,611
250,571
13,338
(5,700)
(5,264)
18,267
6,721
27,362
277,933
47,285
230,648
(3,466)
227,182
4.96
4.91
45,803
46,311
$
$
$
280,877
126,316
15,610
-
(3,651)
(108)
419,044
408,193
3,672
(8,320)
2,122
(16,514)
6,787
(12,253)
395,940
56,685
339,255
(7,972)
331,283
7.31
7.20
45,330
46,036
$
$
$
257,710
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
The accompanying notes are an integral part of these consolidated financial statements.
47
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Net income
Unrealized (loss) gain on defined benefit plan, net of tax
Unrealized (loss) gain on swaps and collars, net of tax
Unrealized foreign currency gain (loss), net of tax
Comprehensive income
Less: Comprehensive income attributable to noncontrolling interest
Total comprehensive income attributable to common stockholders
Twelve Months Ended December 31,
2021
2022
2023
$
$
230,648
(1,466)
(13,619)
91
215,654
(3,466)
212,188
$
$
339,255
(697)
4,279
(81,298)
261,539
(7,972)
253,567
$
$
236,288
7,818
1,417
13,854
259,377
(7,525)
251,852
The accompanying notes are an integral part of these consolidated financial statements.
48
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DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities, net of
effects of acquisitions
$
2023
Twelve Months Ended December 31,
2022
2021
230,648
$
339,255
$
236,288
Depreciation
Amortization of intangible assets
Amortization of debt-issuance costs
Share-based compensation expense
Deferred income taxes
Investment (gain) loss
(Gain) loss on disposal of property, plant and equipment
Other
Changes in operating assets:
Change in accounts receivable
Change in inventory
Change in other operating assets
Changes in operating liabilities:
Change in accounts payable
Change in accrued liabilities
Change in income tax payable
Change in other operating liabilities
Net cash flows provided by operating activities
Cash flows from investing activities
Acquisitions, net of cash received
Proceeds from disposal of wafer fabrication facility
Receipt of cash for termination of cross currency swap
Receipt of insurance recovery
Purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
Proceeds from short-term investments
Purchases of short-term investments
Purchases of equity securities
Other
Net cash and cash equivalents used in investing activities
Cash flows from financing activities
Advances on lines of credit and short-term debt
Repayments of lines of credit and short-term debt
Proceeds from long-term debt
Repayments of long-term debt
Debt issuance costs
Net proceeds from issuance of common stock
Repayment of and proceeds from finance lease obligation
Taxes paid related to net share settlement
Net changes in noncontrolling interests
Other
Net cash and cash equivalents used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents, including restricted cash
Cash and cash equivalents, beginning of period, including restricted cash
Cash and cash equivalents, end of period, including restricted cash
Supplemental Cash Flow Information
Interest paid during the period
Taxes paid during the period
Non-cash investing and financing activities:
Accounts payable balance related to the purchase of
property, plant and equipment
Dividend payable balance to noncontrolling interests
$
$
$
$
$
122,048
15,282
1,117
30,911
(13,349)
(19,398)
(2,045)
(6,713)
(2,611)
(28,947)
(17,971)
(2,165)
(17,749)
(9,307)
1,163
280,914
(3)
6,292
374
1,413
(150,769)
2,769
6,157
(9,323)
(17,901)
2,669
(158,322)
29,036
(24,509)
25,204
(154,019)
(948)
-
(115)
(15,637)
(3,647)
(88)
(144,723)
(485)
(22,616)
341,099
318,483
4,607
97,668
14,602
100
$
$
$
$
$
112,149
15,610
950
36,287
(39,225)
16,225
(3,626)
(4,016)
(20,163)
(29,675)
1,847
(50,076)
31,760
(8,333)
(6,468)
392,501
(83,979)
19,270
9,429
6,067
(211,728)
418
8,002
(9,361)
(4,051)
670
(265,263)
114,291
(93,498)
372,751
(505,746)
(134)
140
(69)
(12,300)
(1,160)
12
(125,713)
(27,244)
(25,719)
366,818
341,099
7,355
88,687
30,486
-
$
$
$
$
$
106,219
16,216
754
33,205
21,459
(37,896)
243
1,239
(52,721)
(43,038)
(25,445)
55,628
29,352
(1,455)
(1,505)
338,543
(157)
9,939
-
-
(141,195)
3,207
7,328
(7,567)
(15,106)
(678)
(144,229)
21,862
(146,372)
557,882
(586,001)
(673)
4,337
(291)
(14,823)
5,631
7
(158,441)
10,416
46,289
320,529
366,818
6,944
56,077
24,256
-
The accompanying notes are an integral part of these consolidated financial statements.
50
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
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 industrial,
automotive, computing, consumer and communications markets.
The Company's diverse product portfolio covers diodes; rectifiers; transistors; MOSFETs; SiC diodes and MOSFETs; protection
devices; logic; voltage translators; amplifiers and comparators; sensors; and power management devices such as AC-DC converters,
DC-DC switching, photocoupler, linear voltage regulators, voltage references, LED drivers, power switches, and voltage supervisors.
We also have timing and connectivity solutions including clock ICs, crystal oscillators, PCIe packet switches, multi-protocol switches,
interface products, 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. Design,
marketing, and engineering centers are located in Plano, Milpitas, U.S.; Taipei, Taoyuan City, Taiwan; Shanghai, Yangzhou, China;
Oldham, England; and Neuhaus, Germany. Diodes’ wafer fabrication facilities are located in South Portland, Maine, U.S., Oldham,
Greenock, UK; Shanghai and Wuxi, China; and Keelung and Hsinchu, Taiwan. Diodes has assembly and test facilities located in
Shanghai, 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; Milan, Italy; Singapore City, Singapore; Oldham, UK; 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;
The Company is also C-TPAT certified; and
We believe 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 AIoT;
Automotive: connected driving, comfort/style/safety, and electrification/powertrain;
Computing: cloud computing including artificial intelligence servers, storage, and data center applications;
Communications: smartphones, 5G networks, advanced protocols, and charging solutions; and
Consumer: IoT, wearables, home automation, and smart infrastructure.
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.
Revenue recognition – The Company generates revenue from sales of its semiconductor products to direct customers and
distributors and recognizes revenue when control is transferred. This transfer generally occurs at a point in time upon shipment or
delivery to the customer or distributor, depending upon the terms of the sales order. The payment terms on our sales are based on
51
negotiations with our customers. For sales to distributors, payment is not contingent upon resale of the products. The vast majority of
our revenue from products and services is accounted for at a point in time.
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 $262.8 million, $190.7 million and $220.3 million in 2023, 2022 and 2021, 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 $5.6 million at December 31, 2023 and $5.9
million at December 31, 2022.
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 from our current estimates, an
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.
Leases – The Company determines if an arrangement is a lease at its inception. Operating and financing lease arrangements are
comprised primarily of real estate and equipment agreements for which the right-of-use ("ROU") assets are included in other assets and
52
the corresponding lease liabilities, depending on their maturity, are included in Accrued liabilities and other current or Other long-term
liabilities in the Consolidated Balance Sheet.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make
lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the
estimated present value of lease payments over the lease term. The lease term includes options to extend the lease when it is reasonably
certain that the option will be exercised. Leases with a term of 12 months or less are not recorded on the Consolidated Balance Sheet.
The Company uses its estimated incremental borrowing rate in determining the present value of lease payments considering the
term of the lease, which is derived from information available at the lease commencement date, giving consideration to publicly available
data for instruments with similar characteristics. The Company accounts for the lease and non-lease components as a single lease
component.
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 2023, 2022, or 2021. 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, 2023, 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 20 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.
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
53
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, 2023 and 2022, 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 $20.8 million, $28.0 million and $24.1 million for the twelve months ended
December 31, 2023, 2022 and 2021, 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 – 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.
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. 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 stockholders’ equity.
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 $5.3 million for the twelve months ended December 31, 2023 and foreign
exchange gains of approximately $2.1 million for the twelve months ended December 31, 2022, and foreign exchanges losses of
approximately $2.1 million for the twelve months ended December 31, 2021.
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.
54
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 $143.2 million, $128.2 million and $50.5 million at December 31, 2023,
2022 and 2021, respectively.
As of December 31, the accumulated balance for each component of comprehensive income is as follows:
Unrealized foreign currency losses
Unrealized (loss) gain on cross currency and interest rate swaps, net of
tax
Unrealized loss on defined benefit plan
$
$
$
2023
2022
2021
(63,171)
(37,294)
(42,762)
$
$
$
(89,059)
2,122
(41,296)
$
$
$
(7,760)
(2,157)
(40,600)
Government assistance - We recognize government grants in our consolidated statements of income on a systematic basis over
the periods which they are intended to benefit. Grants that relate to current expenses are reflected as reductions of the related expenses
in the period in which they are reported. Grants that relate to depreciable property and equipment are recorded as a deferred liability
account and then reflected in income over the useful lives of the related assets. Grants received as compensation for losses, or expenses
already incurred or for the purpose of providing immediate financial support with no future related costs, are recognized as income in
the period they become recognizable. During 2023 and 2022 we recognized approximately $5.2 million and $2.1 million, respectively,
in government subsidies, primarily in China and the United Kingdom. Of this $5.2 million and $2.1 million, approximately $1.1 million
and $1.8 million, respectively, was recognized as reduction in expense or other income and approximately $4.1 million and $0.3 million,
respectively, was related to property, plant and equipment. The Company also has approximately $9.2 million at December 31, 2023
and had $13.3 million at December 31, 2022 of deferred grants and subsidies, that were recognized as a reduction to amortization
expense of $4.9 million and $5.5 million for the twelve months ended December 31, 2023 and 2022, respectively.
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 December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The
amendments in this update require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation
and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is
equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax
rate). For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2024.
The Company will adopt the new standard and comply with the additional disclosure requirements.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures. The purpose of this ASU is to improve reportable segment disclosure requirements, primarily through enhanced disclosures
about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in
which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with
a single reportable segment, and contain other disclosure requirements. The amendments in this Update are effective for fiscal years
beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is
permitted. The Company will adopt the new standard and comply with the additional disclosure requirements.
In August 2023,
the FASB issued ASU 2023-05, Business Combinations-Joint Venture Formations (Subtopic 805-60):
Recognition and Initial Measurement (“ASU 2023-05”). ASU 2023-05 applies to the formation of a joint venture or a corporate joint
venture and requires a joint venture to initially measure all contributions received upon its formation at fair value. The guidance does
not impact accounting by the venturers. The new guidance is applicable to joint venture entities with a formation date on or after January
1, 2025 on a prospective basis. The Company will apply this guidance in future reporting periods after the guidance is effective to any
future arrangements entered into that meet the definition of a joint venture.
55
In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 740): Troubled Debt Restructurings
and Vintage Disclosures. This ASU among other things, updates accounting and disclosures for public business entities to disclose gross
write-offs and gross recoveries by class of financing receivable and major security type in vintage disclosures. This guidance is effective
for annual reporting periods beginning after December 15, 2022, including interim periods therein. The adoption of this guidance did
not have a material impact on our consolidated financial statements.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Acquired Contract
Assets and Contract Liabilities. Under the new guidance, the acquirer should determine what contract assets and/or contract liabilities
it would have recorded under ASC 606 as of the acquisition date, as if the acquirer had entered into the original contract at the same
date and on the same terms as the acquiree. The recognition and measurement of those contract assets and contract liabilities will likely
be comparable to what the acquiree has recorded on its books under ASC 606 as of the acquisition date. ASU 2021-08 is effective for
fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted,
including in an interim period, for any period for which financial statements have not yet been issued. However, adoption in an interim
period other than the first fiscal quarter requires an entity to apply the new guidance to all prior business combinations that have occurred
since the beginning of the annual period in which the new guidance is adopted. The Company does not anticipate this amendment to
have a significant impact on the consolidated 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 was effective for the Company on January
1, 2022 and only impacts annual financial statement footnote disclosures. The adoption did not have a material effect on our consolidated
financial statements.
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.”
Earnings (numerator)
Net income attributable to common stockholders
Twelve Months Ended December 31,
2022
2023
2021
$
227,182
$
331,283
$
228,763
Shares (denominator)
Weighted average common shares outstanding (basic)
Dilutive effect of stock options and stock awards outstanding
Adjusted weighted average common shares outstanding (diluted)
45,803
508
46,311
45,330
706
46,036
Earnings per share attributable to common stockholders
Basic
Diluted
$
$
4.96
4.91
$
$
7.31
7.20
$
$
44,772
1,009
45,781
5.11
5.00
Stock options and stock awards excluded from EPS
calculation because their inclusion would be
anti-dilutive
Note 3 – Fair Value Measurements
138
82
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
56
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
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, 2023, 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, 2023, 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 primarily of life insurance policies, but
may also include investments in 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, 2023, are classified in the following table:
Description
Short-term investments
Long-term investments
Cross-currency swap liability
Foreign-currency forward and collar liability
Deferred compensation investments
Fair Market
Value
$
10,174
25,521
6,936
10,202
14,638
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
10,174
$
25,521
-
-
169
Significant
Other
Observable
Inputs (Level 2)
-
$
-
6,936
10,202
14,469
Total
Changes in
Fair Values
Included in
Current
Period
Earnings
Significant
Unobservable
Inputs
(Level 3)
$
$
-
-
-
-
-
-
3,007
-
-
2,587
Financial assets and liabilities carried at fair value as of December 31, 2022 are classified in the following table:
Description
Short-term investments
Long-term investments
Cross-currency swap asset
Cross-currency swap liability
Deferred compensation investments
Fair Market
Value
$
7,059
22,918
1,427
6,314
12,051
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
7,059
$
22,918
-
-
26
Significant
Other
Observable
Inputs (Level 2)
-
$
-
1,427
6,314
12,025
Total
Changes in
Fair Values
Included in
Current
Period
Earnings
Significant
Unobservable
Inputs
(Level 3)
$
$
-
-
-
-
-
-
(20,386)
-
-
(3,048)
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
57
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, 2023 and 2022.
We also are responsible for a pension plan in the U.K. that holds investments carried at fair value. See Note 13 below for additional
information related to these pension plan investments.
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
$
$
$
$
2023
2022
129,802
72,876
187,096
389,774
2023
340,488
1,201,400
1,541,888
(1,004,270)
537,618
134,333
74,218
746,169
$
$
$
$
96,659
80,616
183,006
360,281
2022
323,941
1,137,737
1,461,678
(913,245)
548,433
120,451
67,846
736,730
58
Depreciation and amortization of property, plant and equipment was $122.0 million, $112.1 million and $106.2 million for the
twelve months ended December 31, 2023, 2022 and 2021, respectively.
Note 6 – Intangible Assets
Intangible assets 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
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, 2023
Gross
Carrying
Amount
Useful life
Accumulated
Amortization
Currency
Exchange
Net
5-15 years $
2-10 years
7-12 years
3-4 years
Indefinite
Indefinite
$
16,040
169,499
62,465
2,743
250,747
-
10,303
10,303
261,050
$
(15,699) $
(122,788)
(46,656)
(2,677)
(187,820)
-
-
-
$
(187,820) $
(245) $
(6,192)
(1,671)
(62)
(8,170)
-
(1,123)
96
40,519
14,138
4
54,757
-
9,180
(1,123)
(9,293) $
9,180
63,937
December 31, 2022
Gross
Carrying
Amount
Useful life
Accumulated
Amortization
Currency
Exchange
Net
5-15 years $
2-10 years
7-12 years
3-4 years
Indefinite
Indefinite
$
16,040
169,499
62,465
2,743
250,747
-
10,303
10,303
261,050
$
(15,437) $
(111,639)
(42,784)
(2,677)
(172,537)
-
-
-
$
(172,537) $
(234) $
(6,176)
(1,672)
(59)
(8,141)
-
(1,235)
369
51,684
18,009
7
70,069
-
9,068
(1,235)
(9,376) $
9,068
79,137
Amortization expense related to intangible assets subject to amortization was $15.3 million, $15.6 million and $16.2 million
for the twelve months ended December 31, 2023, 2022 and 2021, 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:
2024
2025
2026
2027
2028
2029 and thereafter
Total
$
$
14,899
13,904
12,340
11,348
878
1,388
54,757
59
Note 7 – Goodwill
Changes in goodwill for the twelve months ended December 31, were as follows:
Balance at December 31, 2021
Acquisitions
Foreign currency translation adjustment
Balance at December 31, 2022
Foreign currency translation adjustment
Balance at December 31, 2023
$
$
149,890
1,818
(6,951)
144,757
1,801
146,558
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
$147.9 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 the Taipei Interbank Offered Rate (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, 2023, was approximately $106.8 million, net of $40.7 million advanced
under our foreign credit lines and $0.4 million credit used for import and export guarantee.
Long-term debt
On May 26, 2023, the Company, Diodes Holdings UK Limited (the “Foreign Borrower” and, collectively with the Company, the
“Borrowers”), and certain subsidiaries of the Company as guarantors, entered into a Third Amended and Restated Credit Agreement
(the “Credit Agreement”) that amended and restated 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 Credit Agreement, the “Existing Credit
Agreement”). Certain capitalized terms used in this description of the Credit Agreement have the meanings given to them in the Credit
Agreement, which is attached as Exhibit 10.1 to our Current Report on Form 8-K that we filed with the SEC on June 2, 2023.
The Existing Credit Agreement consisted of a term loan with no outstanding balance as of the date of the Credit Agreement and
a $225.0 million revolving senior credit facility with nothing drawn as of the date of the Credit Agreement.
The Credit Agreement, which represented a complete amendment and restatement of the Existing Credit Agreement, consists of
a Revolving Credit Facility in the amount of $225.0 million, including a swing line sublimit equal to the lesser of $50.0 million and the
Revolving Credit Facility, a letter of credit sublimit equal to the lesser of $100.0 million and the Revolving Credit Facility, and an
alternative currency sublimit equal to the lesser of $40.0 million and the Revolving Credit Facility. The Borrowers have the option to
increase the Revolving Facility and/or incur Incremental Term Loans in an aggregate principal amount of up to $350.0 million. The
Revolving Credit Facility bears interest at Term SOFR or similar other indices plus a specified margin. The Credit Agreement contains
certain financial and non-financial covenants, including, but not limited to, a maximum Consolidated Leverage Ratio, a minimum
Consolidated Interest Coverage Ratio, and restrictions on liens, indebtedness, investments, fundamental changes, dispositions, and
restricted payments (including dividends and share repurchases). The Company is permitted to pay dividends up to $75.0 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. 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.
The Revolving Credit Facility matures on May 26, 2028. The Company used a portion of the proceeds available under the Credit
Agreement (i) to refinance certain existing indebtedness of the Borrowers and their subsidiaries under the Existing Credit Agreement
and (ii) for working capital, capital expenditures, and other general corporate purposes, including, without limitation, financing permitted
acquisitions.
60
Borrowings outstanding as of December 31, 2023 and December 31, 2022, are set forth in the table below:
Description
Short-term debt
Long-term debt
December 31,
2023
2022
$
40,685
$
36,280
Interest Rate
Various indices plus margin
Current Amount
Maturity
Various during 2024
Notes payable to Bank of Taiwan
Notes payable to Bank of Taiwan
Notes payable to CTBC Bank
Notes payable to CTBC Bank
Notes payable to E Sun Bank
Notes payable to E Sun Bank
Notes payable to E Sun Bank
Notes payable to HSBC
Notes payable to HSBC
Notes Payable to E Sun Bank
Notes Payable to Taishin International
Bank
Notes Payable to Taishin International
Bank
Notes Payable to Taishin International
Bank
1,880
1,626
3,252
13,098
217
1,325
-
-
-
-
-
-
-
2,063
1,628
3,256
13,840
275
1,516
3,256
105,000
18,558
166
43
11
217
Notes payable to Chang Hwa Bank
Total long-term debt
Less: Current portion of long-term
debt
Less: Unamortized debt-issuance
costs
Total long-term debt, net of current
portion
-
21,398
518
150,348
(4,419)
(1,693)
-
(1,185)
$
16,979
$ 147,470
2-yr deposit rate floating plus
0.1148%
2-yr deposit rate floating plus 0.082%
TAIBOR 3M plus 0.5%
TAIBOR 3M plus 0.5%
1-M deposit rate floating plus 0.08%
1-M deposit rate floating plus 0.08%
1-M deposit rate floating plus 0.08%
1M SOFR+Margin
1M SOFR+Margin
2-yr deposit rate plus annual rate
floating
June 2033
September 2025
December 2024
May 2028
July 2027
July 2027
December 2024
January 2025
January 2025
September 2023
Annual rate plus cost of capital
April 2023
Fixed annual rate
Fixed annual rate
2-yr deposit rate floating plus 1.405%
- 1.655%
April 2023
April 2024
June-July 2026
The table below sets forth the annual contractual maturities of long-term debt at December 31, 2023:
2024
2025
2026
2027
2028
2029 and thereafter
Total long-term debt
$
$
4,419
2,799
1,178
1,159
10,587
1,256
21,398
61
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 twelve months 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
$
$
2023
2022
2021
13,066
$
13,275
$
32
3
1,899
4,350
19,350
$
17
1
975
3,561
17,829
$
The table below sets forth supplemental balance sheet information related to leases as of December 31:
2023
2022
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
$
$
$
$
$
$
$
$
$
$
$
$
50,833
8,840
27,289
36,129
2,717
(2,573)
144
52
94
146
7.8
3.6
4.1%
3.6%
16,533
221
1
954
4,853
22,562
43,907
7,390
20,765
28,155
2,618
(2,542)
76
30
46
76
8.2
2.6
4.2%
3.6%
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
$
2023
2022
2021
$
18,609
3
115
$
17,788
1
69
24,040
1
291
ROU assets obtained in exchange for lease liabilities incurred:
Operating leases
14,251
8,384
13,038
62
The table below sets forth information about lease liability maturities:
Operating Leases
Finance Leases
December 31,
2024
2025
2026
2027
2028
2029
2030 and thereafter
Total lease payments
Less: imputed interest
Total lease obligations
Less: current obligations
Long-term lease obligations
$
$
10,099
8,538
6,579
3,985
1,912
1,446
10,275
42,834
(6,705)
36,129
(8,840)
27,289
$
$
Note 10 – Accrued Liabilities and Other Long-Term Liabilities
Accrued liabilities and other current liabilities at December 31 were:
2023
2022
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
Operating lease
Finance lease
Deferred grants and subsidy
Deferred compensation
Tax contingencies
Other
Note 11 – Dividends
$
$
$
$
60,102
64,000
14,602
8,840
52
26,423
2,300
3,218
137
179,674
14,656
27,289
94
9,103
18,392
8,787
21,487
99,808
$
$
$
$
2023
2022
57
41
21
19
18
-
-
156
(10)
146
(52)
94
66,192
82,349
30,486
7,390
30
18,777
2,825
3,034
3,350
214,433
12,134
20,765
46
9,967
16,009
8,787
13,188
80,896
We have never declared or paid cash dividends on our Common Stock. The Credit Facility permits us to pay dividends up to
$75.0 million per fiscal year to its stockholders so long as we have not defaulted under the Credit Agreement 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.
Note 12 – Income Taxes
The table below sets forth our income before taxes for the twelve months ended December 31:
Income before income taxes
U.S.
Foreign
Total
2023
2022
2021
172,781
105,152
277,933
$
$
221,288
174,652
395,940
$
$
122,127
192,968
315,095
$
$
63
The table below sets forth the components of our income tax provision (benefit) for the twelve months 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
2023
2022
2021
$
$
$
27,028
34,408
54
61,490
(8,273)
(10,463)
(5)
(18,741)
$
46,368
37,598
56
84,022
(6,486)
(25,537)
(8)
(32,031)
4,536
47,285
$
4,694
56,685
$
15,691
25,489
(17)
41,163
(1,116)
31,222
-
30,106
7,538
78,807
The table below sets forth a reconciliation between the effective tax rate and the statutory tax rates for the twelve months ended
December 31:
2023
2022
2021
Amount
$
58,366
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
$
49
834
(14,778)
5,751
(5,497)
4,536
2,109
627
(4,712)
47,285
Percent
of pretax
earnings*
Percent
of pretax
earnings*
Percent
of pretax
earnings*
Amount
Amount
21.0
$
83,147
21.0
$
66,170
-
0.3
(5.3)
2.1
(2.0)
1.6
0.8
0.2
(1.7)
17.0
$
33
(6,527)
(7,369)
(12,441)
(5,865)
4,694
(1,986)
1,784
1,215
56,685
-
(1.6)
(1.9)
(3.1)
(1.5)
1.2
(0.5)
0.4
0.3
14.3
$
(474)
(2,018)
(17,375)
33,175
(6,310)
7,538
(1,068)
(812)
(19)
78,807
21.0
(0.2)
(0.6)
(5.5)
10.5
(2.0)
2.4
(0.3)
(0.3)
-
25.0
*
The sum of the amounts in the table may not equal to the effective tax rate due to rounding.
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,
2023
2022
2021
48,072
$
43,378
$
11,370
110
(10,714)
48,838
$
10,022
75
(5,403)
48,072
$
42,466
9,244
138
(8,470)
43,378
$
$
64
If the $48.8 million of unrecognized tax benefits as of December 31, 2023, is recognized, approximately $46.7 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. We are no longer subject to China income tax
examinations by tax authorities for tax years before 2013. 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 2017. 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, 2023, 2022 and 2021.
Deferred Taxes
The table below sets forth our deferred tax assets and liabilities as of December 31:
2023
2022
Deferred tax assets
Inventory cost
Accrued expenses and accounts receivable
Research and development tax credits
Net operating loss carryforwards
Lease obligations
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
$
$
32,682
6,120
9,613
43,616
3,042
3,164
21,754
119,991
(25,836)
94,155
(8,003)
(6,358)
(28,989)
(43,350)
50,805
$
$
30,322
6,931
9,613
52,599
3,845
2,500
20,088
125,898
(42,405)
83,493
(6,595)
(3,883)
(36,114)
(46,592)
36,901
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 $38.0 million net deferred tax asset presented in the balance sheet as of December 31, 2023, is net of $12.8
million of unrecognized tax benefits. The $50.8 million and $36.9 million net deferred tax asset presented above for December 31, 2023
and 2022, respectively, is prior to the net balance sheet presentation required by ASU 2013-11.
At December 31, 2023, we had no federal research credit carryforward and approximately $9.6 million of state tax credit and
research credit carryforwards, which are available to offset future income tax liabilities. The state tax credit carryforwards will began
expiring in 2023. 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 $8.6 million as of
December 31, 2023 and 2022.
At December 31, 2023, we had state net operating loss (“NOL”) carryforwards of approximately $1.2 million, and foreign NOL
carryforwards of $222.7 million which are available to offset future taxable income. The state NOL carryforward began to expire in
2022. 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 began expiring in 2022. 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 $16.7 million and $33.8 million as of December 31, 2023
and 2022, 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, 2023, we had undistributed earnings from non-U.S. operations of
approximately $1.3 billion (including approximately $95.7 million of restricted earnings, which are not available for dividends).
Undistributed earnings of our China subsidiaries comprise $511.4 million of this total. Additional Chinese withholding taxes of
approximately $52.0 million would be required should the $511.4 million of such earnings be distributed out of China as dividends.
65
The impact of tax holidays decreased our tax expense by approximately $0.7 million, $0.2 million and ($0.2) million for the twelve
months ended December 31, 2023, 2022 and 2021, respectively. The benefit of the tax holidays on basic and diluted earnings per share
was $0.02, $0.00 and $0.00 for the twelve months ended December 31, 2023, 2022 and 2021, respectively.
Note 13 – Employee Benefit Plans
Defined Benefit Plan
We have 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 gain
Expected return on plan assets
Prior service cost
Net periodic benefit cost
Defined Benefit Plan
2023
2022
$
$
373
4,687
3,082
(5,686)
65
2,521
$
$
The table below sets forth the benefit obligation, the fair value of plan assets, and the funded status as of December 31:
Defined Benefit Plan
2023
2022
Change in benefit obligation:
Beginning balance
Service cost
Interest cost
Actuarial loss (gain)
Benefits paid
Settlements
Currency changes
Benefit obligation at December 31
Change in plan assets:
Beginning balance - fair value
Employer contribution
Actual return on plan assets
Benefits paid
Settlements
Currency changes
Fair value of plan assets at December 31
Underfunded status at December 31
$
$
$
$
$
98,797
373
4,687
3,441
(4,918)
-
5,728
108,108
91,307
2,863
3,515
(4,918)
-
5,249
98,016
(10,092)
$
$
$
$
$
245
2,834
2,211
(7,405)
64
(2,051)
166,764
245
2,834
(48,234)
(4,710)
(1,052)
(17,050)
98,797
155,029
2,697
(44,637)
(4,710)
(1,230)
(15,842)
91,307
(7,490)
Based on an actuarial study performed as of December 31, 2023, the plan was underfunded by approximately $10.1 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 $42.8 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, 2023, the plan’s accumulated other comprehensive income increased by
66
approximately $2.4 million. The variance between the actual and expected return on plan assets during the period increased the
accumulated other comprehensive income by $2.2 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, 2023, was approximately 7.5 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
2023
2022
4.7%
6.1%
The following weighted-average assumption was used to determine the benefit obligations at December 31:
Discount rate
2023
2022
4.4%
4.7%
6.1%
4.7%
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
7.5%
4.1%
5.3%
50%
35%
15%
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.
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, 2023:
2024
2025
2026
2027
2028
2029-2033
$
5,310
5,391
5,516
5,658
5,810
30,288
The trustees are required to review the funding position every three years. An actuarial valuation was performed as of March 31,
2022, resulting in a deficit of approximately GBP 20 million (approximately $26 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 annually with effect from January 1, 2023 to address the deficit revealed by the
valuation (with the first payment made by December 31, 2023 through December 31, 2028). A final payment of GBP 1.5 million
(approximately $1.95 million based on a GBP: USD rate of 1:1.3) will be made by December 31, 2029. These contributions, together
with the assumed asset outperformance, are expected to eliminate the deficit by December 31, 2029.
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.
67
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
Liability-driven investments
Commodities
Other
Total
Level 1
Level 2
Level 3
Total
December 31, 2023
$
8,961
$
-
$
-
-
-
-
-
-
-
-
-
8,961
$
$
534
12,424
3,296
87
12,860
18,898
34,681
676
5,599
89,055
$
-
-
-
-
-
-
-
-
-
-
-
$
8,961
534
12,424
3,296
87
12,860
18,898
34,681
676
5,599
98,016
$
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.
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, 2023 and 2022, the Company has
recorded a net liability of $3.2 million 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 and are required to make contributions of 8% 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 8% of the employee’s eligible payroll.
For the twelve months ended December 31, 2023, 2022 and 2021, total amounts expensed under these plans were approximately
$22.3 million, $21.5 million and $21.7 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, 2023 and December 31, 2022, these
investments totaled approximately $14.6 million and $12.1 million, respectively.
Note 14 – Share-Based Compensation
In May 2022, our stockholders approved our 2022 Equity Incentive Plan (“2022 Plan”). Since the approval of the 2022 Plan, all
share-based compensation awards have been granted under and will continue to be granted under the 2022 Plan, no additional share-
based awards will be granted under any previous plan. The number of shares authorized to be awarded under the 2022 Plan is 7.0 million
shares.
68
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
2023
2022
2021
$
$
1,860
24,470
4,581
30,911
$
$
1,630
30,295
4,362
36,287
$
$
The table below sets forth share-based compensation expense by type for the twelve months ended December 31:
Share grants
Stock options
Total share-based compensation expense
2023
2022
2021
30,894
17
30,911
$
36,251
36
36,287
$
$
1,321
28,188
3,696
33,205
33,132
73
33,205
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 2023, 2022 and 2021:
Restricted Stock Grants
Shares
Nonvested at December 31, 2021
Granted
Vested
Forfeited and other
Nonvested at December 31, 2022
Granted
Vested
Forfeited and other
Nonvested at December 31, 2023
Weighted Average
Grant Date Fair
Value ($)
Aggregate
Intrinsic Value
54.94
69.87
45.96
61.87
65.29
84.87
54.20
73.33
81.02
$
$
$
$
46,633
96,634
59,701
98,493
1,402
535
(614)
(55)
1,269
645
(643)
(48)
1,223
The total unrecognized share-based compensation expense as of December 31, 2023, was approximately $62.8 million, relating
to share grants, which was expected to be recognized over a weighted average period of approximately 2.3 years.
Stock Options – 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 $0.0 million, $0.1 million and $4.3 million during 2023, 2022 and 2021, respectively.
At December 31, 2023, there was no unrecognized compensation expense related to unvested options.
The table below sets forth a summary of activity in our stock option plan:
Weighted
Average
Remaining
Contractual
Term
(years)
0.4
0.4
Weighted
Average
Exercise Price
27.92
27.92
Aggregate
Intrinsic Value
409
$
409
$
Stock Options
Outstanding and exercisable at December 31, 2021
Exercised during 2022
Outstanding and exercisable at December 31, 2022 and
2023, respectively
Shares
5
(5)
-
69
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”), Jiyuan Crystal Photoelectric Frequency Technology Ltd. (“JCP”) and
Atlas Magnetics, Co ("Atlas").
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.
Warren Chen, a member of the Company's board of directors 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, and plan to
continue our strategic alliance with Nuvoton. We have an agreement to purchase approximately $18.1 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.
Atlas is an early stage privately held fabless wafer design company in which the Company holds a majority interest. The Company
determined that Atlas is a VIE and the Company does not have the power to direct the activities that most significantly impact Atlas.
The Company has therefore determined that the Company is not the primary beneficiary. For additional information related to Atlas see
Note 19 - Equity Investments - Variable Interest Entities, below.
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:
2023
2022
2021
Keylink
Net sales
Purchases
Plating, rental and consulting expense
Nuvoton
Net sales
Purchases
JCP
Purchases
Atlas
Purchases
$
$
$
$
$
$
$
12,595
1,535
16,916
49
10,454
364
177
$
$
$
$
$
$
$
19,998
1,949
18,176
149
15,068
581
-
$
$
$
$
$
$
$
The table below sets forth accounts receivable from and accounts payable to related parties at December 31:
2023
2022
Keylink
Accounts receivable
Accounts payable
Nuvoton
Accounts receivable
Accounts payable
JCP
Accounts payable
Atlas
Accounts payable
$
$
$
$
$
$
34,774
33,882
26
924
159
133
$
$
$
$
$
$
19,689
2,015
17,922
65
9,764
1,240
-
40,510
33,733
30
2,859
133
-
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. During the twelve months ended December 31, 2023, two customers, both broad-based distributors
serving thousands of customers, accounted for 10% or more of our net sales. During the twelve months ended December 31, 2022 one
customer, a broad-based distributor serving thousands of customers, accounted for 10% or more or our net sales. During the twelve
70
months ended December 31, 2021 no customer accounting for 10% or more of our net sales. At December 31, 2023, one of the customers
that accounted for 10% or more of the Company's 2023 net sales also accounted for approximately 13.8% of our outstanding accounts
receivable. No customer accounted for 10% or greater of our outstanding accounts receivable at December 31, 2022.
The tables below set forth net sales based on the location of the subsidiary producing the net sale:
2023
Total sales
Inter-company sales
Net sales
Property, plant and equipment
Assets
2022
Total sales
Inter-company sales
Net sales
Property, plant and equipment
Assets
2021
Total sales
Inter-company sales
Net sales
Property, plant and equipment
Assets
Asia
1,560,595
(684,927)
875,668
545,865
1,600,858
Asia
1,891,855
(769,630)
1,122,225
529,365
1,599,805
Asia
1,939,540
(730,058)
1,209,482
456,109
1,547,518
Americas
Europe
Consolidated
$
$
$
$
$
$
$
$
$
$
$
$
1,210,561
(670,624)
539,937
85,005
544,247
Americas
1,361,223
(722,872)
638,351
95,584
440,014
Americas
1,108,460
(678,662)
429,798
22,943
415,133
$
$
$
$
$
$
$
$
$
$
$
$
378,442
(132,308)
246,134
115,299
222,554
Europe
358,930
(118,926)
240,004
111,781
248,493
Europe
278,126
(112,244)
165,882
103,026
231,844
$
$
$
$
$
$
$
$
$
$
$
$
3,149,598
(1,487,859)
1,661,739
746,169
2,367,659
Consolidated
3,612,008
(1,611,428)
2,000,580
736,730
2,288,312
Consolidated
3,326,126
(1,520,964)
1,805,162
582,079
2,194,495
$
$
$
$
$
$
$
$
$
$
$
$
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 industrial, automotive, computing, communications and consumer applications. Further, most of our contracts are fixed-
price arrangements, and are short term in nature, ranging from days to several months.
71
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, 2023, 2022 and 2021:
Net Sales by Region
Asia
Europe
Americas
Total net sales
Net Sales by Type
Direct sales
Distributor sales
Total net sales
2023
2022
2021
1,181,519
287,549
192,671
1,661,739
2023
530,446
1,131,293
1,661,739
$
$
$
$
1,480,191
283,900
236,489
2,000,580
2022
590,173
1,410,407
2,000,580
$
$
$
$
1,439,545
220,772
144,845
1,805,162
2021
607,645
1,197,517
1,805,162
$
$
$
$
Net sales from products shipped to China for the twelve months ended December 31, 2023, 2022 and 2021, was $704.8 million
$941.3 million and $938.1 million, respectively.
Note 17 – Commitments and Contingencies
Lease commitments – We lease offices, manufacturing plants, equipment, vehicles and warehouses under various lease
agreements expiring through 2048. 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 $30.5 million at December 31, 2023. As of December 31, 2023, we also had a commitment
to purchase approximately $44.1 million of wafers to be used in our manufacturing process. These wafer purchases are scheduled to
occur through 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.
Note 18 – Derivative Financial Instruments
We use derivative instruments to manage risks related to foreign currencies, interest rates and the net investment risk in our foreign
subsidiaries. Our objectives for holding derivatives include reducing, eliminating, and efficiently managing the economic impact of
these exposures as effectively as possible. Our derivative programs include strategies that both qualify and do not qualify for hedge
accounting treatment.
Hedges of Foreign Currency Risk
We are exposed to fluctuations in various foreign currencies against our different functional currencies. We use foreign currency
forward agreements to manage this exposure. We use foreign currency forward agreements to manage this exposure. At December 31,
2023 and December 31, 2022, we had $230.4 million and $183.1 million, respectively, of outstanding foreign currency forward
agreements 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 Accounting Standards Codification ("ASC") No. 815.
72
Hedges of Interest Rate and Net Investment 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 these objectives, 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 Company makes use of cross currency swaps to decrease the foreign exchange risk inherent in
the Company’s investment in some of its foreign subsidiaries.
The table below sets forth the number of instruments and the notional amounts of the Company's cross currency swaps at
December 31, 2023 and December 31, 2022:
Cross currency swaps
Number of Instruments
2023
2022
2
2
Notional Amount
2023
160,000
2022
160,000
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, 2023 and December 31, 2022:
Other Assets
2023
2022
Other Liabilities
2023
2022
Fair Value
Cross currency swaps
Foreign-currency forward contracts
$
$
-
-
1,427
-
$
6,936
10,202
$
6,314
-
The tables below sets forth the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income
for the twelve months ended December 31 2023, 2022 and 2021:
Location of
Gain or (Loss)
Reclassified
from OCI into
Accumulated
Income
Amount of Gain or
(Loss) Reclassified
from Accumulated
OCI into Net Income
December 31,
2022
2021
2023
Location of Gain
or (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion Excluded
from
Effectiveness
Testing)
Amount of Gain or (Loss)
Recognized in Income on
Derivative (Ineffective
Portion and Amount
Excluded from Effectiveness
Testing)
December 31,
2022
2023
2021
Amount of Gain or (Loss)
Recognized in OCI on
Derivative
December 31,
2022
2023
2021
$
-
(1,442)
$
-
5,383
$
(13)
989
Interest expense
N/A
$
(10,202)
-
-
N/A
-
-
-
$
-
-
-
$ (555) N/A
-
Interest income
$
-
1,653
$
-
2,308
$
-
2,469
-
Interest income
4,304
-
-
Derivative Instruments
Designated as
Hedging Instruments
Interest rate swaps and
collars
Cross currency swaps
Foreign-currency forward
contracts
Derivative Instruments Not Designated as Hedging
Instruments
Foreign currency forward contracts
Amount of Gain or (Loss) Recognized in Net Income
December 31,
2023
2022
2021
Location of Gain or (Loss)
Recognized in Net Income
$
(5,364)
$
(21,188)
$
3,925
Foreign currency loss, net
We estimate that none of the net derivative losses included in accumulated other comprehensive income (“AOCI”) as of December
31, 2023, 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 2023. As of December 31, 2023 and 2022, the Company had
not posted any collateral related to these agreements.
Note 19 - Equity Investments
The Company maintains equity investments in companies which are accounted for under the measurement alternative described
in ASC 321-10-35-2 for equity securities that lack readily determinable fair values. During the twelve months ended December 31, 2023
and 2022, the Company recognized upward adjustments in value of $15.3 million and $3.9 million, respectively, for a cumulative total
of upward adjustments of $19.2 million on these investments. These adjustments were based on the valuation of additional equity issued
by the investee which was deemed to be an observable transaction of a similar investment under ASC 321. The upward adjustments
were recorded within other income, in the condensed consolidated statement of operations. The upward fair value adjustment represents
a nonrecurring fair value measurement based on observable price changes.
Variable Interest Entities
73
The Company determines at the inception of each arrangement whether an entity in which it has made an investment or in which
the Company has other variable interests is considered a variable interest entity (“VIE”). The Company consolidates VIEs when it is the
primary beneficiary. The Company is the primary beneficiary of a VIE when it has the power to direct activities that most significantly
affect the economic performance of the VIE and has the obligation to absorb losses of the VIE that could potentially be significant to
the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. If the Company is not the primary
beneficiary of a VIE, the Company accounts for the investment or other variable interests in a VIE in accordance with applicable GAAP.
The Company will reassess whether they are the primary beneficiary at each reporting date.
Unconsolidated Variable Interest Entity
During July 2021, the Company acquired an interest in Atlas, an early stage privately held fabless wafer design company located
in the western United States. The Company’s initial investment in July 2021 was $10.0 million of preferred stock and a $5.0 million
convertible promissory note. In April 2023, the Company acquired an additional interest in Atlas by purchasing $13.9 million of
preferred stock. The primary purpose for providing the additional investment in Atlas was for continued access to developing technology
with potential future benefit to the Company. As part of the April 2023 agreement, the Company’s previously held convertible note
converted to $5.2 million of preferred stock and at December 31, 2023, the Company owned more than 50% of Atlas. The Company
determined that Atlas is a VIE and a related party. While the Company does own more that 50% of Atlas, according to the voting
agreement governing the transaction, the Company does not have the power to control the board of directors or direct the activities that
most significantly impact Atlas, including:
•
•
•
The hiring and firing of officers (i.e., CEO, CFO, etc.) – The hiring and firing of personnel responsible for making
the key daily decisions and implementing the strategic operating direction will determine the success the Company
has in their initiatives, thereby affecting the economic performance;
Determining the business plan and budget, including incurring additional indebtedness or issuing additional equity
interests – As Atlas is thinly capitalized, the decisions around when and how to obtain cash will influence whether
AM can continue operating; and
Determining the strategic operating direction of Atlas – The decisions made around the significant operating direction
of Atlas will significantly impact the overall performance of the Company by determining where and how Atlas
limited capital is spent without having significant revenues to keep the Company operating.
As the Company is not the primary beneficiary of Atlas, the Company did not consolidate the assets and liabilities of Atlas in our
financial statements and instead accounts for the investment under the measurement alternative described in ASC 321-10-35-2 using
the available measurement alternative for equity securities that lack readily determinable fair value. As such, the Company’s investment
is measured at cost less impairment, and adjusted to fair value if there are any observable price changes for identical or similar investment
of the same issuer.
As a result of acquiring additional equity interest in Atlas in May 2023, the Company recorded an upward adjustment of $15.3
million during the nine months ended December 31, 2023. Atlas is funded through debt and equity. The Company's maximum exposure
to loss is limited to its investment in Atlas and notes receivable and accrued interest owed to the Company from Atlas.
The following is a summary of the Company’s holdings in Atlas, a VIE, in which we are not the primary beneficiary:
Privately Held Wafer Design Company ("PWDC")
VIE total assets
VIE total liabilities
Diodes' preferred equity in VIE
Diodes' note receivable from VIE
Diodes' interest receivable from VIE
Diodes' maximum exposure to loss
Note 20 – Acquisitions and Divestitures
Wafer Fabrication Plant in South Portland, Maine
December 31,
2023
2022
$
$
$
26,445
4,532
44,420
4,000
45
48,465
$
$
$
13,671
6,625
10,000
5,000
222
15,222
On June 3, 2022, the Company completed the acquisition of onsemi's wafer fabrication facility and operations located in South
Portland, Maine ("SPFAB"). SPFAB was purchased to provide additional 200mm wafer fabrication capacity for analog products to
accelerate the Company's growth initiatives in the automotive and industrial end markets. This US-based facility, together with the
Company's existing wafer fabrication facilities in Asia and Europe, will further enhance the Company's global manufacturing operations.
The Company recorded the purchase of SPFAB as a business combination. Total consideration paid by the Company was $80.4 million
74
and was funded by existing cash and advances under the revolving portion of our U.S. Credit Agreement. The SPFAB facility and assets
were wholly acquired, and there is no remaining minority interest. The goodwill is assigned to the standard semiconductor products
segment and will not be tax deductible. The Company also incurred acquisition costs of approximately $0.5 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 SPFAB
acquisition and the corresponding line item in which the item is recorded in our condensed consolidated balance sheet. Due to a lack of
data we are unable to provide historical financial pro forma data.
Assets
Spare parts and inventories
Prepaid expenses
Property, plant and equipment
Goodwill
Total assets purchased
Manufacturing Subsidiary Located in China
$
$
1,257
257
77,825
1,069
80,408
In December 2021, the Company closed a transaction 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 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:
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
Other Investment
$
$
$
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
In August 2021, the Company entered into an agreement to make an investment in Taiwan. The Company's investment is $5.4
million for 60% ownership of a company and is being consolidated into our consolidated financial statements. The purpose of the
investment is to engage in the development of power modules for the automotive markets. The investment received Taiwan government
approval in October 2021, and the Company made the $5.4 million payment in October 2021.
Note 21 – Restructuring costs
During 2023, the Company began the process to consolidate certain activities performed at one of its foreign locations.
The table below sets forth the restructuring costs, recorded in restructuring expense in the condensed consolidated statements of
operations, incurred during the twelve months ended December 31, 2023, 2022 and 2021:
75
For the Twelve Months Ended December 31,
2022
2023
2021
Asset impairment
Contract termination
Employee severance
Other
$
$
200
207
1,139
37
1,583
$
$
-
-
-
-
-
$
$
-
-
-
-
-
The table below sets forth the costs accrued related to the restructuring:
Beginning balance, December 31, 2022
Costs accrued
Costs paid
Ending balance, December 31, 2023
Note 22 - Subsequent Event
Contract
Termination
Employee
Severance
$
$
-
207
-
207
$
$
-
1,139
(1,139)
-
$
$
Other
Total
-
245
(135)
110
$
$
-
1,592
(1,274)
317
During January 2024, Diodes Hong Kong Limited, a company incorporated under the laws of Hong Kong and a subsidiary of the
Company, entered into an amendment of its US Dollar revolving loan facility in an aggregate amount equal to $90.0 million (the
"Facility"). The Facility was previously $105.0 million, with a maturity date of January 2025. In addition the changing the amount of
the Facility, this amendment also changed the maturity date of January 2027. The Facility is governed by the laws of Hong Kong.
76
INDEX TO EXHIBITS
Number
Description
Form
Date of First Filing
Exhibit
Number
Filed
Herewith
Certificate of Incorporation, as amended
10-K February 20, 2018
Amended By-laws of the Company, amended as
of January 6, 2016
8-K
January 11, 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
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
Amendment No. 1 to Employment Agreement
dated as of February 22, 2017, between the
Company and Keh-Shew Lu.
Amendment No. 2 to Employment Agreement
dated as of February 22, 2017, between the
Company and Keh-Shew Lu.
Amendment No. 3 to Employment Agreement
dated as of February 22, 2017, between the
Company and Keh-Shew Lu.
8-K
February 27, 2017
8-K
June 1, 2022
8-K
January 22, 2024
99.1
Form of Indemnification Agreement between the
Company and its directors and executive officers
8-K
September 2, 2005
10-K February 27, 2017
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
10-K February 27, 2017
10.10
3.1
3.2
4.1
4.2
10.1*
10.2*
10.3*
10.4*
10.5*
10.5.1*
10.5.2*
10.6*
10.7*
10.8*
10.9
10.10*
Diodes Incorporated 2013 Equity Incentive Plan,
as amended and restated on May 3, 2017
S-8
August 17, 2017
Form of Incentive Stock Option Agreement for
the Diodes Incorporated 2013 Equity Incentive
Plan
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
10.11.2*
Form of Performance Stock Unit Agreement
February 27, 2017
February 27, 2017
8-K
8-K
77
3.1
3.1
4.1
4.2
10.6
99.1
99.1
99.3
99.1
99.1
10.5
10.9
99.1
99.2
99.4
99.2
99.3
10.12*
10.13*
10.14*
10.15*
10.16*
10.17*
Form of Nonstatutory Stock Option Agreement
for the Diodes Incorporated 2013 Equity
Incentive Plan, as amended (Domestic Version)
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)
10-K
February 27, 2014
10.80
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
99.1
99.2
10.18
Diodes Incorporated 2022 Equity Incentive Plan
S-8 May 26, 2022
10.18.1
10.19
10.19.1
10.20
10.20.1
10.21
10.22
10.23
10.24
Diodes Incorporated 2022 Equity Incentive Plan
– Form of Stock Unit Agreement
S-8 May 26, 2022
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.
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-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-K February 29, 2008
10.51
78
10.25
10.26
10.27
10.28
10.29
10.30
10.31
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.
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
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.
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-Q May 7, 2010
10.1
10.3
10-Q November 9, 2010
10.1
8-K
September 16, 2010
99.1
8-K
September 16, 2010
99.2
10-Q November 9, 2011
10.1
10-Q November 9, 2011
10.2
79
10.36
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
10.47
10.48
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.
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
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.
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
10-Q November 6, 2018
10.5
10-Q November 6, 2018
10.6
10-Q August 8, 2013
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
10.1
Amendment to Yuanhao Building Lease
Agreements
10-Q May 9, 2023
80
10.49
10.50
10.51
10.52
10.53
10.54
10.55
10.56.1
10.56.2
10.56.3
10.57
10.58
Diodes Zetex Pension Scheme Recovery Plan
dated February 22, 2017, between Trustees of
the Diodes Zetex Pension Scheme and Diodes
Zetex Limited
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)
Third Amended and Restated Credit Agreement,
dated as of May 26, 2023, by and among Diodes
Incorporated, Diodes Holding UK Limited,
Diodes Zetex Limited, Diodes US
Manufacturing Incorporated, Bank of America,
N.A., as Administrative Agent, Lender, L/C
Issuer, and Swing Line Lender, and the other
Lenders party thereto.
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)
10-K February 27, 2017
10.78
10-K February 27, 2017
10.79
10-K February 27, 2017
10.80
10-Q August 9, 2012
10-Q August 9, 2012
10.5
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
8-K
June 2, 2023
10.1
10-Q November 6, 2018
10-K February 21, 2019
10.1
10.89
81
Transition agreement between Diodes
Incorporated and Richard White
8-K March 6, 2019
Amended Transition Agreement between Diodes
Incorporated and Richard White
8-K/A April 1, 2019
10.59*
10.60*
10.61
10.62
10.63
10.64
10.65
10.66
10.67
10.68
10.69
10.70
10.71
10.72
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
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.
10.1
10.1
10.1
10.1
2.1
10-Q May 7, 2019
10-Q August 5, 2019
8-K
August 9, 2019
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
10-K February 18, 2022
10.79
10-K February 18, 2022
10.80
82
10.1
10.1
10.1
10.3
10.1
10.73
10.74*
10.75*
10.76
10.77
14**
19
21
23.1
31.1
31.2
32.1***
32.2***
Amendment No. 6 to Second Amended and
Restated Credit Agreement, Consent and
Incremental Term Assumption Agreement.
8-K
January 4, 2022
Letter agreement dated January 13, 2023, by and
between the Company and Evan Yu
8-K
January 17, 2023
Letter agreement dated March 17, 2023, by and
between the Company and Julie Holland
8-K March 17, 2023
Amendment to Yuanhao Building Lease
Agreements
10-Q
May 9, 2023
8-K
June 2, 2023
Third Amended and Restated Credit Agreement,
dated as of May 26, 2023, by and among Diodes
Incorporated, Diodes Holding UK Limited,
Diodes Zetex Limited, Diodes US
Manufacturing Incorporated, Bank of America
N.A., as Administrative Agent, Lender, L/C
Issuer and Swing Line Lender, and the other
Lenders party thereto.
Code of Ethics for Chief Executive Officer and
Senior Financial Officers
Corporate Policy on Insider Trading Adopted
July 6, 2001; updated January 15, 2021
Subsidiaries of the Registrant
Consent of Independent Registered Public
Accounting Firm
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
97*
Recoupment of Executive Compensation Policy
101.INS
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document does not appear in the Interactive Data
File because its XBRL tags are embedded within
the Inline XBRL document.
101.SCH Inline XBRL Taxonomy Extension Schema With
Embedded Linkbases Document
104
*
Cover Page Interactive Data File, formatted in
Inline XBRL
Constitute management contracts, or
compensatory plans or arrangements, which are
83
X
X
X
X
X
X
X
X
X
X
X
**
***
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.
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.
84
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
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Brett R. Whitmire
Brett R. Whitmire
Chief Financial Officer
(Principal Financial and Accounting Officer)
February 9, 2024
February 9, 2024
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and
appoints Dr. Keh-Shew Lu, Chairman 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 9, 2024.
/s/ Keh-Shew Lu
KEH-SHEW LU
Chairman of the Board of Directors and
Chief Executive Officer
(Principal Executive Officer)
/s/ Brett R. Whitmire
BRETT R. WHITMIRE
Chief Financial Officer
(Principal Financial Officer)
/s/ Angie Chen Button
ANGIE CHEN BUTTON
Lead Director
/s/ Elizabeth (Beth) Bull
ELIZABETH (BETH) BULL
Director
/s/ Warren Chen
WARREN CHEN
Director
/s/ Michael R. Giordano
MICHAEL R. GIORDANO
Director
PETER M. MENARD
Director
/s/ Christina Wen-Chi Sung
CHRISTINA WEN-CHI SUNG
Director
/s/ Gary Yu
GARY YU
President and Director
85
[THIS PAGE INTENTIONALLY LEFT BLANK]
Additional Information
CONSOLIDATED RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME
(unaudited)
(cid:21)(cid:19)(cid:21)(cid:22)
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(cid:21)(cid:19)(cid:21)(cid:20)
(cid:21)(cid:19)(cid:21)(cid:19)
(cid:21)(cid:19)(cid:20)(cid:28)
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(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
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(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
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(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)
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(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:11)(cid:21)(cid:15)(cid:27)(cid:26)(cid:24)(cid:12)
(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: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)
(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:11)(cid:22)(cid:15)(cid:21)(cid:24)(cid:26)(cid:12)
(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:15)(cid:24)(cid:28)(cid:20)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:11)(cid:20)(cid:15)(cid:26)(cid:20)(cid:23)(cid:12)
(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:47)(cid:82)(cid:86)(cid:86)(cid:3)(cid:11)(cid:74)(cid:68)(cid:76)(cid:81)(cid:12)(cid:3)(cid:82)(cid:81)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:3)(cid:82)(cid:73)(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: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:24)(cid:26)(cid:24)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:11)(cid:28)(cid:15)(cid:23)(cid:23)(cid:25)(cid:12)
(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: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:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)
(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:16)(cid:80)(cid:72)(cid:80)(cid:69)(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:70)(cid:82)(cid:86)(cid:87)(cid:86)
(cid:47)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(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:73)(cid:72)(cid:72)(cid:86)
(cid:42)(cid:68)(cid:76)(cid:81)(cid:3)(cid:82)(cid:81)(cid:3)(cid:79)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)
(cid:47)(cid:82)(cid:86)(cid:86)(cid:3)(cid:82)(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: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:26)(cid:15)(cid:22)(cid:22)(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:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:16)
(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:20)(cid:15)(cid:22)(cid:23)(cid:26)
(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: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:11)(cid:22)(cid:22)(cid:25)(cid:12)
(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:11)(cid:20)(cid:28)(cid:15)(cid:21)(cid:19)(cid:20)(cid:12)
(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:20)(cid:15)(cid:21)(cid:27)(cid:22)
(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:21)(cid:21)(cid:15)(cid:26)(cid:27)(cid:23)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:22)(cid:22)(cid:27)(cid:15)(cid:28)(cid:24)(cid:28)
(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: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:25)(cid:15)(cid:22)(cid:20)(cid:20)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:23)(cid:25)(cid:15)(cid:19)(cid:22)(cid:25)
(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: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: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:23)(cid:17)(cid:27)(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:26)(cid:17)(cid:22)(cid:25)
(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)
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)
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(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)
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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)
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(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)(cid:3)
(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: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: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: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: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)(cid:3)
Non-cash mark-to-market investment adjustments(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:16)(cid:87)(cid:82)(cid:16)(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:82)(cid:81)(cid:3) (cid:89)(cid:68)(cid:85)(cid:76)(cid:82)(cid:88)(cid:86)(cid:3) (cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3) (cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(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: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)
Investment gain(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:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:74)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:76)(cid:86)(cid:83)(cid:82)(cid:86)(cid:68)(cid:79)(cid:3)(cid:82)(cid:73)(cid:3)(cid:89)(cid:68)(cid:85)(cid:76)(cid:82)(cid:88)(cid:86)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(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: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)
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: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:89)(cid:68)(cid:85)(cid:76)(cid:82)(cid:88)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:86)(cid:72)(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: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: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: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:70)(cid:82)(cid:86)(cid:87)(cid:3)(cid:86)(cid:87)(cid:85)(cid:88)(cid:70)(cid:87)(cid:88)(cid:85)(cid:72)(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:82)(cid:81)(cid:86)(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:75)(cid:68)(cid:85)(cid:74)(cid:72)(cid:86)(cid:3)
(cid:82)(cid:85)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:85)(cid:72)(cid:192)(cid:72)(cid:70)(cid:87)(cid:3)(cid:71)(cid:76)(cid:73)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:79)(cid:72)(cid:89)(cid:72)(cid:79)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:70)(cid:75)(cid:68)(cid:85)(cid:74)(cid:72)(cid:86)(cid:17)
Additional Information – (Continued)
CONSOLIDATED RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME
(unaudited)
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:83)(cid:85)(cid:72)(cid:89)(cid:76)(cid:82)(cid:88)(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:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:87)(cid:92)(cid:83)(cid:76)(cid:70)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3) (cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:86)(cid:87)(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)(cid:3)
Insurance recovery for manufacturing facility(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:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:72)(cid:71)(cid:3) (cid:74)(cid:68)(cid:76)(cid:81)(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:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3) (cid:85)(cid:72)(cid:70)(cid:82)(cid:89)(cid:72)(cid:85)(cid:92)(cid:3) (cid:73)(cid:82)(cid:85)(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:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3) (cid:76)(cid:81)(cid:3)(cid:36)(cid:86)(cid:76)(cid:68)(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:76)(cid:81)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:89)(cid:72)(cid:85)(cid:92)(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:74)(cid:68)(cid:76)(cid:81)(cid:86)(cid:17)
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)
Loss (gain) on sale of manufacturing facilities(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:86)(cid:82)(cid:79)(cid:71)(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:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(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:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:90)(cid:82)(cid:85)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79)(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:75)(cid:68)(cid:87)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:74)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:79)(cid:82)(cid:86)(cid:86)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(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: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)(cid:3)
(cid:36)(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:191)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(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:68)(cid:3)(cid:81)(cid:72)(cid:90)(cid:3)(cid:70)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)(cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:191)(cid:81)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:72)(cid:91)(cid:76)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:71)(cid:72)(cid:69)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:83)(cid:85)(cid:72)(cid:83)(cid:68)(cid:85)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(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:76)(cid:87)(cid:72)(cid:16)(cid:50)(cid:81)(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: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:191)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:81)(cid:74)(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)
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)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:80)(cid:82)(cid:71)(cid:76)(cid:191)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:182)(cid:86)(cid:3)(cid:88)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3)(cid:53)(cid:54)(cid:56)(cid:3)(cid:74)(cid:85)(cid:68)(cid:81)(cid:87)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:89)(cid:72)(cid:86)(cid:87)(cid:3)(cid:88)(cid:83)(cid:82)(cid:81)(cid:3)(cid:75)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:87)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:80)(cid:82)(cid:71)(cid:76)(cid:191)(cid:72)(cid:71)(cid:3)(cid:74)(cid:85)(cid:68)(cid:81)(cid:87)(cid:86)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:69)(cid:72)(cid:3)(cid:85)(cid:72)(cid:79)(cid:72)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:69)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)
(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)
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)(cid:3)
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:3)(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)
CORPORATE INFORMATION
BOARD OF DIRECTORS
EXECUTIVE OFFICERS
DR. KEH-SHEW LU
Chairman, President, & Chief
(cid:44)(cid:95)(cid:76)(cid:74)(cid:92)(cid:91)(cid:80)(cid:93)(cid:76)(cid:3)(cid:54)(cid:1117)(cid:74)(cid:76)(cid:89)
Employee since 2005
GARY YU
Vice President
Employee since 2008
BRETT R. WHITMIRE
(cid:42)(cid:79)(cid:80)(cid:76)(cid:77)(cid:3)(cid:45)(cid:80)(cid:85)(cid:72)(cid:85)(cid:74)(cid:80)(cid:72)(cid:83)(cid:3)(cid:54)(cid:1117)(cid:74)(cid:76)(cid:89)
Employee since 2009
FRANCIS TANG
Senior Vice President,
Worldwide Discrete Products
Employee since 2005
ANDY TSONG
(cid:55)(cid:89)(cid:76)(cid:90)(cid:80)(cid:75)(cid:76)(cid:85)(cid:91)(cid:19)(cid:3)(cid:40)(cid:90)(cid:80)(cid:72)(cid:3)(cid:55)(cid:72)(cid:74)(cid:80)(cid:196)(cid:74)(cid:3)(cid:57)(cid:76)(cid:78)(cid:80)(cid:86)(cid:85)(cid:3)
Employee since 2009
RICHARD D. WHITE
Corporate Secretary
and Special Assistant to the CEO
Employee since 2006
EMILY YANG
Senior Vice President,
(cid:62)(cid:86)(cid:89)(cid:83)(cid:75)(cid:94)(cid:80)(cid:75)(cid:76)(cid:3)(cid:58)(cid:72)(cid:83)(cid:76)(cid:90)(cid:3)(cid:13)(cid:3)(cid:52)(cid:72)(cid:89)(cid:82)(cid:76)(cid:91)(cid:80)(cid:85)(cid:78)
Employee since 2015
JIN ZHAO
Senior Vice President,
(cid:40)(cid:85)(cid:72)(cid:83)(cid:86)(cid:78)(cid:3)(cid:41)(cid:92)(cid:90)(cid:80)(cid:85)(cid:76)(cid:90)(cid:90)(cid:3)(cid:46)(cid:89)(cid:86)(cid:92)(cid:87)
Employee since 2017
DR. KEH-SHEW LU 4
Chairman, President, &
(cid:42)(cid:79)(cid:80)(cid:76)(cid:77)(cid:3)(cid:44)(cid:95)(cid:76)(cid:74)(cid:92)(cid:91)(cid:80)(cid:93)(cid:76)(cid:3)(cid:54)(cid:1117)(cid:74)(cid:76)(cid:89)(cid:19)(cid:3)
Diodes Incorporated
Former Senior Vice President,
Texas Instruments, Inc.
Director since 2001
ANGIE CHEN BUTTON 1, 3
Lead Director
Member, State of Texas House
(cid:54)(cid:77)(cid:3)(cid:57)(cid:76)(cid:87)(cid:89)(cid:76)(cid:90)(cid:76)(cid:85)(cid:91)(cid:72)(cid:91)(cid:80)(cid:93)(cid:76)(cid:90)
Director since 2021
ELIZABETH BULL 1C, F, 3
(cid:45)(cid:86)(cid:89)(cid:84)(cid:76)(cid:89)(cid:3)(cid:42)(cid:79)(cid:80)(cid:76)(cid:77)(cid:3)(cid:45)(cid:80)(cid:85)(cid:72)(cid:85)(cid:74)(cid:80)(cid:72)(cid:83)(cid:3)(cid:54)(cid:1117)(cid:74)(cid:76)(cid:89)(cid:3)(cid:86)(cid:77)
Communities
Foundation of Texas
Director since 2023
WARREN CHEN 2, 3, 4C
(cid:41)(cid:86)(cid:72)(cid:89)(cid:75)(cid:3)(cid:52)(cid:76)(cid:84)(cid:73)(cid:76)(cid:89)(cid:19)(cid:3)
(cid:51)(cid:80)(cid:91)(cid:76)(cid:20)(cid:54)(cid:85)(cid:3)(cid:59)(cid:76)(cid:74)(cid:79)(cid:85)(cid:86)(cid:83)(cid:86)(cid:78)(cid:96)(cid:3)(cid:42)(cid:86)(cid:89)(cid:87)(cid:86)(cid:89)(cid:72)(cid:91)(cid:80)(cid:86)(cid:85)
Director since 2020
MICHAEL R. GIORDANO 1C, F
Associate Director,
(cid:58)(cid:76)(cid:85)(cid:80)(cid:86)(cid:89)(cid:3)(cid:62)(cid:76)(cid:72)(cid:83)(cid:91)(cid:79)(cid:3)(cid:58)(cid:91)(cid:89)(cid:72)(cid:91)(cid:76)(cid:78)(cid:96)(cid:3)(cid:40)(cid:90)(cid:90)(cid:86)(cid:74)(cid:80)(cid:72)(cid:91)(cid:76)(cid:19)
(cid:60)(cid:41)(cid:58)(cid:3)(cid:45)(cid:80)(cid:85)(cid:72)(cid:85)(cid:74)(cid:80)(cid:72)(cid:83)(cid:3)(cid:58)(cid:76)(cid:89)(cid:93)(cid:80)(cid:74)(cid:76)(cid:90)(cid:19)(cid:3)(cid:48)(cid:85)(cid:74)(cid:21)
Director since 1990
PETER M. MENARD 1, 3
(cid:57)(cid:76)(cid:91)(cid:80)(cid:89)(cid:76)(cid:75)(cid:3)(cid:58)(cid:76)(cid:74)(cid:92)(cid:89)(cid:80)(cid:91)(cid:80)(cid:76)(cid:90)(cid:3)(cid:51)(cid:72)(cid:94)(cid:96)(cid:76)(cid:89)
Director since 2018
CHRISTINA WEN-CHI SUNG 1, 2, 4
Former Chairman,
Taipei Financial Center Corporation
Director since 2017
1 – Audit Committee Member
2 – Compensation Committee Member
(cid:26)(cid:3)(cid:182)(cid:3)(cid:3)(cid:46)(cid:86)(cid:93)(cid:76)(cid:89)(cid:85)(cid:72)(cid:85)(cid:74)(cid:76)(cid:3)(cid:72)(cid:85)(cid:75)(cid:3)(cid:58)(cid:91)(cid:86)(cid:74)(cid:82)(cid:79)(cid:86)(cid:83)(cid:75)(cid:76)(cid:89)(cid:3)(cid:57)(cid:76)(cid:83)(cid:72)(cid:91)(cid:80)(cid:86)(cid:85)(cid:90)(cid:3)
Committee Member
(cid:27)(cid:3)(cid:182)(cid:3)(cid:57)(cid:80)(cid:90)(cid:82)(cid:3)(cid:54)(cid:93)(cid:76)(cid:89)(cid:90)(cid:80)(cid:78)(cid:79)(cid:91)(cid:3)(cid:42)(cid:86)(cid:84)(cid:84)(cid:80)(cid:91)(cid:91)(cid:76)(cid:76)(cid:3)(cid:52)(cid:76)(cid:84)(cid:73)(cid:76)(cid:89)
C – Committee Chair
F – Audit Committee Financial Expert
SHAREHOLDER INFORMATION
Diodes Incorporated common stock is listed
(cid:86)(cid:85)(cid:3)(cid:91)(cid:79)(cid:76)(cid:3)(cid:53)(cid:72)(cid:90)(cid:75)(cid:72)(cid:88)(cid:3)(cid:46)(cid:83)(cid:86)(cid:73)(cid:72)(cid:83)(cid:3)(cid:58)(cid:76)(cid:83)(cid:76)(cid:74)(cid:91)(cid:3)(cid:52)(cid:72)(cid:89)(cid:82)(cid:76)(cid:91)(cid:3)
(cid:15)(cid:53)(cid:72)(cid:90)(cid:75)(cid:72)(cid:88)(cid:20)(cid:46)(cid:58)(cid:33)(cid:3)DIOD).
Calendar Ended
2023
Closing Sales
Price of
Common Stock
High
Low
Fourth quarter
$ 82.21 $ 60.74
Third quarter
Second quarter
First quarter
2022
95.67
74.71
95.81
79.02
96.38
75.20
Fourth quarter
$ 92.23 $ 66.44
Third quarter
Second quarter
84.17
60.95
84.76
63.83
First quarter
111.91
79.07
ANNUAL REPORT ON FORM 10-K
(cid:40)(cid:3)(cid:74)(cid:86)(cid:87)(cid:96)(cid:3)(cid:86)(cid:77)(cid:3)(cid:91)(cid:79)(cid:76)(cid:3)(cid:42)(cid:86)(cid:84)(cid:87)(cid:72)(cid:85)(cid:96)(cid:3)(cid:40)(cid:85)(cid:85)(cid:92)(cid:72)(cid:83)(cid:3)(cid:57)(cid:76)(cid:87)(cid:86)(cid:89)(cid:91)(cid:3)(cid:86)(cid:85)(cid:3)
(cid:45)(cid:86)(cid:89)(cid:84)(cid:3)(cid:24)(cid:23)(cid:20)(cid:50)(cid:3)(cid:72)(cid:85)(cid:75)(cid:3)(cid:86)(cid:91)(cid:79)(cid:76)(cid:89)(cid:3)(cid:87)(cid:92)(cid:73)(cid:83)(cid:80)(cid:74)(cid:83)(cid:96)(cid:3)(cid:196)(cid:85)(cid:72)(cid:85)(cid:74)(cid:80)(cid:72)(cid:83)(cid:3)(cid:89)(cid:76)(cid:87)(cid:86)(cid:89)(cid:91)(cid:90)(cid:19)(cid:3)
(cid:72)(cid:90)(cid:3)(cid:196)(cid:83)(cid:76)(cid:75)(cid:3)(cid:94)(cid:80)(cid:91)(cid:79)(cid:3)(cid:91)(cid:79)(cid:76)(cid:3)(cid:60)(cid:85)(cid:80)(cid:91)(cid:76)(cid:75)(cid:3)(cid:58)(cid:91)(cid:72)(cid:91)(cid:76)(cid:90)(cid:3)(cid:58)(cid:76)(cid:74)(cid:92)(cid:89)(cid:80)(cid:91)(cid:80)(cid:76)(cid:90)(cid:3)
(cid:72)(cid:85)(cid:75)(cid:3)(cid:44)(cid:95)(cid:74)(cid:79)(cid:72)(cid:85)(cid:78)(cid:76)(cid:3)(cid:42)(cid:86)(cid:84)(cid:84)(cid:80)(cid:90)(cid:90)(cid:80)(cid:86)(cid:85)(cid:19)(cid:3)(cid:72)(cid:89)(cid:76)(cid:3)(cid:72)(cid:93)(cid:72)(cid:80)(cid:83)(cid:72)(cid:73)(cid:83)(cid:76)(cid:3)
at www.diodes.com(cid:3)(cid:86)(cid:89)(cid:3)(cid:94)(cid:94)(cid:94)(cid:21)(cid:90)(cid:76)(cid:74)(cid:21)(cid:78)(cid:86)(cid:93)(cid:21)(cid:3)(cid:45)(cid:86)(cid:89)(cid:3)
(cid:72)(cid:3)(cid:79)(cid:72)(cid:89)(cid:75)(cid:3)(cid:74)(cid:86)(cid:87)(cid:96)(cid:3)(cid:74)(cid:86)(cid:85)(cid:91)(cid:72)(cid:74)(cid:91)(cid:3)(cid:58)(cid:79)(cid:76)(cid:83)(cid:91)(cid:86)(cid:85)(cid:3)(cid:46)(cid:89)(cid:86)(cid:92)(cid:87)(cid:3)(cid:72)(cid:91)(cid:3)(cid:91)(cid:79)(cid:76)(cid:3)
(cid:72)(cid:75)(cid:75)(cid:89)(cid:76)(cid:90)(cid:90)(cid:3)(cid:73)(cid:76)(cid:83)(cid:86)(cid:94)(cid:33)
INVESTOR RELATIONS
(cid:58)(cid:79)(cid:76)(cid:83)(cid:91)(cid:86)(cid:85)(cid:3)(cid:46)(cid:89)(cid:86)(cid:92)(cid:87)
(cid:42)(cid:86)(cid:85)(cid:91)(cid:72)(cid:74)(cid:91)(cid:33)(cid:3)(cid:51)(cid:76)(cid:72)(cid:85)(cid:85)(cid:76)(cid:3)(cid:58)(cid:80)(cid:76)(cid:93)(cid:76)(cid:89)(cid:90)
(cid:24)(cid:32)(cid:31)(cid:23)(cid:23)(cid:3)(cid:52)(cid:72)(cid:74)(cid:40)(cid:89)(cid:91)(cid:79)(cid:92)(cid:89)(cid:3)(cid:41)(cid:83)(cid:93)(cid:75)(cid:21)(cid:19)(cid:3)(cid:58)(cid:92)(cid:80)(cid:91)(cid:76)(cid:3)(cid:26)(cid:23)(cid:23)
Irvine, California 92612
949-224-3874
(cid:51)(cid:58)(cid:80)(cid:76)(cid:93)(cid:76)(cid:89)(cid:90)(cid:39)(cid:58)(cid:79)(cid:76)(cid:83)(cid:91)(cid:86)(cid:85)(cid:46)(cid:89)(cid:86)(cid:92)(cid:87)(cid:21)(cid:74)(cid:86)(cid:84)
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Moss Adams LLP
(cid:24)(cid:23)(cid:32)(cid:29)(cid:23)(cid:3)(cid:62)(cid:80)(cid:83)(cid:90)(cid:79)(cid:80)(cid:89)(cid:76)(cid:3)(cid:41)(cid:83)(cid:93)(cid:75)(cid:21)(cid:19)(cid:3)(cid:58)(cid:92)(cid:80)(cid:91)(cid:76)(cid:3)(cid:24)(cid:24)(cid:23)(cid:23)
(cid:51)(cid:86)(cid:90)(cid:3)(cid:40)(cid:85)(cid:78)(cid:76)(cid:83)(cid:76)(cid:90)(cid:19)(cid:3)(cid:42)(cid:72)(cid:83)(cid:80)(cid:77)(cid:86)(cid:89)(cid:85)(cid:80)(cid:72)(cid:3)(cid:3)(cid:32)(cid:23)(cid:23)(cid:25)(cid:27)
TRANSFER AGENT & REGISTRAR
Continental Stock Transfer & Trust Company
(cid:24)(cid:30)(cid:3)(cid:41)(cid:72)(cid:91)(cid:91)(cid:76)(cid:89)(cid:96)(cid:3)(cid:55)(cid:83)(cid:72)(cid:74)(cid:76)(cid:19)(cid:3)(cid:31)th Floor
New York, New York 10004
212-509-4000
FINANCIAL INFORMATION ONLINE
World Wide Web users can access Company
information on the Diodes Incorporated
(cid:48)(cid:85)(cid:93)(cid:76)(cid:90)(cid:91)(cid:86)(cid:89)(cid:3)(cid:87)(cid:72)(cid:78)(cid:76)(cid:3)(cid:72)(cid:91)(cid:3)www.investor.diodes.com.
DIODES INCORPORATED
Corporate Headquarters
4949 Hedgcoxe Road
Suite 200
Plano, Texas 75024
972.987.3900
DESIGN, MARKETING AND
ENGINEERING CENTERS
Milpitas, California and Plano, Texas,
United States
Neuhaus, Germany
Oldham, England
Taipei, Tainan and Taoyuan City, Taiwan
Shanghai and Yangzhou, China
WAFER FABRICATION FACILITIES
South Portland, United States
Greenock, Scotland
Oldham, England
Hsinchu and Keelung, Taiwan
Shanghai and Wuxi, China
ASSEMBLY AND TEST FACILITIES
Shanghai, Chengdu and Wuxi, China
Jhongli, Taiwan
Neuhaus, Germany
ENGINEERING, SALES, WAREHOUSE,
AND LOGISTICS OFFICES
Frankfurt and Munich, Germany
Hong Kong, Shanghai, Beijing, Shenzhen,
Wuhan and Yangzhou, Qingdao, China
Milan, Italy
Oldham, England
Seongnam-si, South Korea
Singapore City, Singapore
Taipei and Kaohsiung Taiwan
Tokyo, Japan
DIODES INCORPORATED
Registered to UL DQS
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