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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ 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”~~company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The number of shares of the registrant’s Common Stock outstanding as of ~~November 3, 2017~~July 31, 2019 was ~~49,390,130.~~50,996,162.

	September 30,			December 31,			June 30,			December 31,
	2017			2016			2019			2018
	(Unaudited)						(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	201,226		$	247,802		$	235,352		$	241,053
Short-term investments		12,737			29,842			6,604			7,499
Accounts receivable, net of allowances of $3,218 and $2,141 at September 30, 2017 and December 31, 2016, respectively		230,460			217,217
Accounts receivable, net of allowances of $4,230 and $4,102 at June 30, 2019 and December 31, 2018, respectively								240,056			228,405
Inventories		211,412			193,483			222,969			215,435
Assets held for sale								4,947			-
Prepaid expenses and other		45,644			44,438			46,726			42,446
Total current assets		701,479			732,782			756,654			734,838
Property, plant and equipment, net		446,052			401,988			470,690			446,835
Deferred income tax		64,129			56,047			28,751			31,652
Goodwill		133,538			129,412			138,772			132,437
Intangible assets, net		161,122			174,876			130,035			137,935
Other		34,269			33,447			89,257			42,674
Total assets	$	1,540,589		$	1,528,552		$	1,614,159		$	1,526,371

Liabilities
Current liabilities:
Line of credit							$	15,454		$	10,254
Accounts payable	$	111,689		$	87,600			110,521			117,808
Accrued liabilities and other		94,436			71,562			102,679			82,605
Income tax payable		-			11,855			16,769			15,744
Current portion of long-term debt		19,067			14,356			29,988			27,613
Total current liabilities		225,192			185,373			275,411			254,024
Long-term debt, net of current portion		306,687			413,126			141,919			186,143
Deferred tax liabilities		28,617			28,213			19,048			17,993
Other long-term liabilities		85,209			81,373			126,629			90,779
Total liabilities		645,705			708,085			563,007			548,939

Commitments and contingencies (See Note 8)

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; 49091693 and 48,219,376, issued and outstanding at September 30, 2017 and December 31, 2016, respectively		33,501			32,919
Common stock - par value $0.66 2/3 per share; 70,000,000 shares authorized; 50,744,888 and 50,221,035, issued and outstanding at June 30, 2019 and December 31, 2018, respectively								34,803			34,454
Additional paid-in capital		375,134			354,574			414,451			399,915
Retained earnings		563,338			530,215			704,708			636,708
Treasury stock, at cost, 1,157,206 shares held at September 30, 2017 and December 31, 2016		(29,023	)		(29,023	)
Treasury stock, at cost, 1,457,206 shares held at June 30, 2019 and December 31, 2018								(37,768	)		(37,768	)
Accumulated other comprehensive loss		(89,707	)		(112,666	)		(112,225	)		(101,846	)
Total stockholders' equity		853,243			776,019			1,003,969			931,463
Noncontrolling interest		41,641			44,448			47,183			45,969
Total equity		894,884			820,467			1,051,152			977,432
Total liabilities and stockholders' equity	$	1,540,589		$	1,528,552		$	1,614,159		$	1,526,371


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

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2017			2016			2017			2016			2019			2018			2019			2018
Net sales	$	285,247		$	250,694		$	785,774		$	710,077		$	322,006		$	304,085		$	624,299		$	578,597
Cost of goods sold		188,900			170,071			525,377			490,417			200,018			196,817			389,900			372,734
Gross profit		96,347			80,623			260,397			219,660			121,988			107,268			234,399			205,863

Operating expenses
Selling, general and administrative		43,525			38,321			122,912			119,165			47,333			42,153			91,021			89,303
Research and development		20,379			17,088			58,215			52,247			21,707			22,050			43,877			42,250
Amortization of acquisition related intangible assets		4,694			5,117			14,098			15,379			4,536			4,678			9,020			9,445
Impairment of fixed assets		1,993			-			1,993			-
Restructuring expense		2,039			-			6,108			-
Other operating expenses		-			144			169			184
Total operating expenses		72,630			60,670			203,495			186,975
Other operating (income) expense														(104	)		543			(158	)		81
Total operating expense														73,472			69,424			143,760			141,079

Income from operations		23,717			19,953			56,902			32,685			48,516			37,844			90,639			64,784

Other income (expense)
Interest income		389			321			992			1,075			633			443			1,508			957
Interest expense		(3,561	)		(3,684	)		(10,493	)		(9,880	)		(2,011	)		(2,544	)		(4,156	)		(5,301	)
Foreign currency loss, net		(1,312	)		(1,439	)		(6,734	)		(2,045	)
Foreign currency (loss) gain, net														(496	)		300			(560	)		(2,729	)
Other income		597			480			1,128			551			1,235			377			2,480			5,012
Total other income (expense)		(3,887	)		(4,322	)		(15,107	)		(10,299	)
Total other expense														(639	)		(1,424	)		(728	)		(2,061	)

Income before income taxes and noncontrolling interest		19,830			15,631			41,795			22,386			47,877			36,420			89,911			62,723
Income tax provision		5,052			4,097			11,651			5,941			11,174			10,753			21,472			18,536
Net income		14,778			11,534			30,144			16,445			36,703			25,667			68,439			44,187
Less net income attributable to noncontrolling interest		(328	)		(886	)		(1,298	)		(1,778	)
Less net (income) attributable to noncontrolling interest														(419	)		(599	)		(439	)		(593	)
Net income attributable to common stockholders	$	14,450		$	10,648		$	28,846		$	14,667		$	36,284		$	25,068		$	68,000		$	43,594

Earnings per share attributable to common stockholders:
Basic	$	0.29		$	0.22		$	0.59		$	0.30		$	0.72		$	0.50		$	1.35		$	0.88
Diluted	$	0.29		$	0.21		$	0.58		$	0.30		$	0.70		$	0.49		$	1.32		$	0.86
Number of shares used in earnings per share computation:
Basic		49,057			48,814			48,633			48,496			50,658			49,680			50,529			49,509
Diluted		50,416			49,922			50,061			49,565			51,620			50,792			51,566			50,727

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

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Net income
$
14,778

$
11,534

$
30,144

$
16,445

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

(1,135
)

(9,571
)

(2,517
)

(14,732
)
Unrealized gain on interest rate swap, net of tax

180

-

60

-

Unrealized foreign currency gain (loss), net of tax

8,249

1,187

25,416

(6,588
)
Comprehensive income (loss)

22,072

3,150

53,103

(4,875
)
Less: Comprehensive income attributable to noncontrolling interest

(328
)

(886
)

(1,298
)

(1,778
)
Total comprehensive income attributable to common stockholders
$
21,744

$
2,264

$
51,805

$
(6,653
)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net income	$	36,703		$	25,667		$	68,439		$	44,187
Unrealized gain (loss) on defined benefit plan, net of tax		1,020			7,266			(5,009	)		7,701
Unrealized (loss) gain on swaps and collars, net of tax		503			927			(3,406	)		3,275
Unrealized foreign currency loss, net of tax		(6,900	)		(24,985	)		(1,964	)		(9,130	)
Comprehensive income		31,326			8,875			58,060			46,033
Less: Comprehensive income attributable to noncontrolling interest		(419	)		(599	)		(439	)		(593	)
Total comprehensive income attributable to common stockholders	$	30,907		$	8,276		$	57,621		$	45,440

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

	Common stock				Treasury stock						Additional paid-in			Retained		Accumulated other comprehensive			Total Diodes Incorporated Stockholders'			Noncontrolling			Total
	Shares		Amount		Shares			Amount			capital			earnings		loss			equity			interest			equity
Balance, December 31, 2017		50,587	$	33,727		(1,457	)	$	(37,768	)	$	386,338		$	532,687	$	(83,480	)	$	831,504		$	42,414		$	873,918
Total comprehensive income		-		-		-			-			-			43,593		1,847			45,440			593			46,033
Noncontrolling interests		-		-		-			-			-			-		-			-			-			-
Dividends to noncontrolling interest		-		-		-			-			-			-		-			-			(2,607	)		(2,607	)
Common stock issued for share-based plans		716		477		-			-			2,532			-		-			3,009			-			3,009
Share-based compensation		-		-		-			-			11,079			-		-			11,079			-			11,079
Tax related to net share settlement		-		-		-			-			(8,617	)		-		-			(8,617	)		-			(8,617	)
Balance, June 30, 2018		51,303	$	34,204		(1,457	)	$	(37,768	)	$	391,332		$	576,280	$	(81,633	)	$	882,415		$	40,400		$	922,815

Balance, December 31, 2018		51,678	$	34,454		(1,457	)	$	(37,768	)	$	399,915		$	636,708	$	(101,846	)	$	931,463		$	45,969		$	977,432
Total comprehensive income		-		-		-			-			-			68,000		(10,379	)		57,621			439			58,060
Noncontrolling interests		-		-		-			-			-			-		-			-			3,343			3,343
Dividends to noncontrolling interest		-		-		-			-			-			-		-			-			(2,568	)		(2,568	)
Common stock issued for share-based plans		524		349		-			-			6,356			-		-			6,705			-			6,705
Share-based compensation		-		-		-			-			9,775			-		-			9,775			-			9,775
Tax related to net share settlement		-		-		-			-			(1,595	)		-		-			(1,595	)		-			(1,595	)
Balance, June 30, 2019		52,202	$	34,803		(1,457	)	$	(37,768	)	$	414,451		$	704,708	$	(112,225	)	$	1,003,969		$	47,183		$	1,051,152

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

	Nine Months Ended						Six Months Ended
	September 30,						June 30,
	2017			2016			2019			2018
Cash flows from operating activities	$	106,340		$	74,935
Net cash flows provided by operating activities							$	110,488		$	88,381

Cash flows from investing activities
Decrease (increase) in restricted cash		555			(311	)
Acquisitions, net of cash received								(33,029	)		-
Purchases of property, plant and equipment		(81,877	)		(47,054	)		(50,698	)		(52,990	)
Purchases of short-term investments		(9,744	)		(17,482	)		(9,000	)		(10,171	)
Proceeds from maturity of short-term investments		27,891			46,352			9,843			7,289
Other		(1,238	)		(1,316	)		367			2,245
Net cash and cash equivalents used in investing activities		(64,413	)		(19,811	)		(82,517	)		(53,627	)

Cash flows from financing activities
Advances on lines of credit and short-term debt		2,383			9,000			6,769			3,414
Repayments of line of credit and short-term debt								(1,461	)		-
Taxes paid related to net share settlement		(277	)		(2,528	)		(1,595	)		(8,617	)
Repayments on lines of credit and short-term debt		(395	)		(9,000	)
Debt issuance costs		(99	)		(435	)
Proceeds from long-term debt		7,500			23,500			161,237			189,656
Repayments of long-term debt		(109,607	)		(70,714	)		(203,385	)		(272,170	)
Net proceeds from issuance of common stock		6,880			5			6,706			3,009
Repayment of capital lease obligation		(533	)		(19	)
Dividend distribution to noncontrolling interest		(5,754	)		(4,615	)
Repayment of and proceeds from finance lease obligation								(588	)		1,775
Dividend distribution to noncontrolling interests								(1,180	)		(1,151	)
Other		2,056			518			542			654
Net cash and cash equivalents used in financing activities		(97,846	)		(54,288	)		(32,955	)		(83,430	)

Effect of exchange rate changes on cash and cash equivalents		9,343			1,255			(35	)		(2,753	)
Change in cash and cash equivalents		(46,576	)		2,091
Cash and cash equivalents, beginning of period		247,802			218,435
Cash and cash equivalents, end of period	$	201,226		$	220,526
Change in cash and cash equivalents, including restricted cash								(5,019	)		(51,429	)
Cash and cash equivalents, beginning of period, including restricted cash								241,833			205,202
Cash and cash equivalents, end of period, including restricted cash							$	236,814		$	153,773

Supplemental disclosure
Non-cash financing activities:
Decrease (increase) in accounts payable related to the purchase of property, plant and equipment	$	(10,919	)	$	7,459
Supplemental Cash Flow Information
Interest paid during the period							$	4,107		$	5,334
Taxes paid during the period							$	23,199		$	16,643

Non-cash investing and financing activities:
(Increase) decrease in accounts payable related to the purchase of property, plant and equipment							$	(2,038	)	$	5,452
Increase in dividend accrued for noncontrolling interest							$	(1,400	)	$	(1,427	)

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the total of the same such amounts shown above:

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

NOTE 1 – Nature of Operations, Basis of Presentation, ~~and~~ Recently Issued Accounting Pronouncements and Updates to Accounting Policies and Estimates

Diodes Incorporated, together with its subsidiaries (collectively, the “Company,” “we” or “our”) (Nasdaq: DIOD), 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. We serve the consumer electronics, computing, communications, industrial, and automotive markets. Our products include diodes, rectifiers, transistors, MOSFETs, protection devices, function-specific arrays, single gate logic, amplifiers and comparators, Hall-effect and temperature sensors, power management devices, including LED drivers, AC-DC converters and controllers, DC-DC switching and linear voltage regulators, and voltage references along with special function devices, such as USB power switches, load switches, voltage supervisors, and motor controllers. We also have timing, connectivity, switching, and signal integrity solutions for high-speed signals. Our corporate headquarters and Americas’ sales ~~office~~offices are located in Plano, Texas and Milpitas, California. Design, marketing, and engineering centers are located in Plano; Milpitas; Taipei, Taoyuan City and Zhubei City, Taiwan; ~~Manchester,~~Oldham, England; and Neuhaus, Germany. Our wafer fabrication facilities are located in ~~Manchester, with an additional facility located in~~Oldham and Shanghai, ~~China. We are in the process of shutting down our Lee’s Summit, Missouri wafer fabrication facility (“KFAB”)~~China and ~~transferring its wafer fabrication operation to other Company-owned wafer fabrication plants and external foundries (See Note 11)~~.Greenock, Scotland. We have assembly and test facilities located in Shanghai, Jinan ~~Chengdu,~~ and ~~Yangzhou,~~Chengdu, China, as well as in Hong Kong, Neuhaus and Taipei. Additional engineering, research and development, sales, warehouse, and logistics offices are located in Taipei; Hong Kong; ~~Manchester;~~Oldham; Shanghai; Shenzhen and Yangzhou, China; Seongnam-si, South Korea; Munich, Germany; and ~~Munich, Germany,~~Tokyo, Japan, with support offices throughout the world.

The condensed consolidated financial data at December 31, ~~2016~~2018 is derived from audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2018 filed with the Securities and Exchange Commission (“SEC”) on February ~~27, 2017~~21, 2019 (“Form 10-K”). The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q. They do not include all information and footnotes necessary for a fair presentation of financial position, operating results and cash flows in conformity with GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in our Form 10-K. All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair presentation of the operating results for the period presented have been included in the interim period. Operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, ~~2017.~~2019.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. As permitted under GAAP, interim accounting for certain expenses, including income taxes, are based on full year forecasts. For interim financial reporting purposes, income taxes are recorded based upon estimated annual effective income tax rates taking into consideration discrete items occurring in a quarter.

Dollar amounts and share amounts are presented in thousands, except per share amounts, unless otherwise noted. Certain prior year’s balances may have been reclassified to conform to the current financial statement presentation.

The Financial Accounting Standards Board (“FASB”) issued the following Accounting Standards Updates (“ASU”) which could have potential impact on the Company’s financial statements:

~~ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606).~~ This standard is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard sets forth a five-step revenue recognition model which replaces the current revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance. To further assist with adoption and implementation of ASU 2014-09, the FASB issued the following ASUs:

~~•ASU 2016-08 (Issued March 2016) — Principal versus Agent Consideration (Reporting Revenue Gross versus Net)~~

~~•ASU 2016-10 (Issued April 2016) — Identifying Performance Obligations and Licensing~~

~~•ASU 2016-12 (Issued May 2016) — Narrow-Scope Improvements and Practical Expedients~~

~~•ASU 2016-20 (Issued December 2016) — Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers~~

This standard is effective in the first quarter of 2018. We will adopt this standard using the modified retrospective method. We have established a cross-functional coordinated implementation team to implement ASU 2014-09. We have completed our initial diagnostic assessment and are in the process of identifying and implementing changes to our systems and processes to meet the reporting and disclosure requirements. We continue to engage outside consultants to assist us in determining the effect this standard will have on our financial statements, to assist us in making necessary changes in our accounting practices and to assist us in making certain we are capturing the necessary detail to fulfill the disclosure requirements promulgated in this standard.

Based upon our initial assessment we believe the key revenue streams will be distribution and OEM sales, which combined comprise the majority of our business. The Company has not identified any contracts with customers containing multiple performance obligations. The Company has identified a number of variable consideration components within our contracts with customers and is in process of quantifying the overall impact related to the consideration to which the entity is entitled. The Company expects adoption of this new standard will not have a material impact on its income statement and balance sheet.

ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) - – In February 2016, the FASB issued ASU 2016-02, which amends the accounting treatment for ~~leases.~~leases and requires, among other things, lessees to recognize a right-of-use (“ROU”) asset and lease liability for most lease arrangements. The amendments ~~are~~were effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ~~Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a~~The Company adopted ASU 2016-02 on January 1, 2019, using the modified retrospective transition approach, ~~for leases existing at, or entered into after,~~under which financial results reported in periods prior to 2018 are unchanged. We elected the ~~beginning of~~following allowed practical expedients as permitted under the ~~earliest comparative period presented in~~transition guidance within the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. Early adoption is permitted. The Company is currently evaluating the impact thatnew standard:

Upon adoption of ASU 2016-02, ~~may have on its consolidated financial statements~~the Company recorded ROU assets of $68.3 million, including land-use rights of $17.1 million previously recorded in other assets and ~~has not elected early adoption as~~$2.5 million previously recorded in property, plant and equipment and ROU liabilities of $50.4 million. For additional information related to the period ended September 30, 2017. During the second quarter of 2017 we engaged outside accounting consultants to assist us in the implementation of this new standard. The Company is in the process of assessing its outstanding leases.

ASU No. ~~2016-09,~~ 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to ~~Employee~~Nonemployee Share-Based Payment Accounting ("ASU 2018-07")- In ~~March 2016,~~June 2018, the FASB issued ~~guidance to simplify~~ASU 2018-07, which simplifies several aspects of the accounting for nonemployee share-based payment transactions ~~by requiring all excess tax benefits and deficiencies to be recognized in income tax expense or benefit in earnings, thus eliminating~~resulting from expanding the requirement to classify the excess tax benefit and deficiencies as additional paid-in capital. Under the new guidance, an entity makes an accounting policy election to either estimate the expected forfeiture awards or account for forfeitures as they occur. We adopted ASU No. 2016-09 during the first quarterscope of 2017 and as a result will account for forfeitures as they occur. The effect of the adoption related to the income tax portion was an increase of $4.8 million to retained earnings and to deferred income tax assets. The effect of the adoption related to forfeitures was an increase to additional paid in capital of $0.8 million, an increase to deferred tax assets of $0.3 million and a decrease to retained earnings of $0.5 million.

~~ASU No. 2017-09,~~ ~~Compensation –~~ Topic 718, Compensation—Stock Compensation, ~~(Topic 718) Scope of Modification Accounting~~ - ~~In May 2017, the FASB issued guidance~~ to ~~clarify when to account for a change to the terms or conditions of a~~include share-based payment ~~award as a modification. Under~~transactions for acquiring goods and services from nonemployees. ASU 2018-07 was effective for the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. T~~he guidance is effective prospectively for all companies for annual periods beginning~~Company on ~~or after December 15, 2017. Early~~January 1, 2019. The adoption ~~is permitted. We early adopted this standard in the third quarter of 2017.~~ ~~Adoption~~ of this standard ~~had no impact~~did not have a material effect on ~~the Company’s~~our condensed consolidated financial statements.

ASU No. 2017-12 - Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities – In(“ASU 2017-12”) -In August 2017, the FASB issued ~~guidance that eliminates the requirement~~ASU No. 2017-12 to ~~separately measure~~better align hedge accounting with risk management strategies, and ~~report~~as a result, more hedging strategies will be eligible for hedge ~~ineffectiveness. The guidance is effective for public~~accounting. Public business entities will have until the end of the first quarter in which a hedge is designated to perform an initial assessment of a hedge’s effectiveness. After initial qualification, the new guidance permits a qualitative effectiveness assessment for certain hedges instead of a quantitative test if the company can reasonably support an expectation of high effectiveness throughout the term of the hedge. An initial quantitative test to establish that the hedge relationship is highly effective is still required. The amendments are effective for fiscal years beginning after December 15, 2018, ~~including interim periods within those years. Early adoption is permitted in any interim period or fiscal period before~~and the ~~effective date.~~Company adopted the new standard January 1, 2019. The new standard had no impact on the Company’s financial statements.

On January 1, 2019, the Company adopted ASU No. ~~2017-12 during~~2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the ~~third quarter~~Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes”. The amendments in this ASU permit the use of ~~2017. In accordance with~~the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under ASC 815, in addition to the currently permissible benchmark interest rates. This ASU ~~2017-12,~~provides the Company ~~recognizes all reclassifications out~~the ability to utilize the OIS rate based on SOFR as the benchmark interest rate on certain hedges of other comprehensive income (other than those related to a hedged transaction becoming probable of not occurring) in the same income statement line item in which the earnings effect of the hedged item is being presented, which is consistent with the Company’s current policy. Adoption of thisinterest rate risk. The new standard had no impact on the Company’s financial statements.

The FASB has issued the following relevant standards, effective in future years, which are not expected to have a material impact on our consolidated condensed financial statements:

In April 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, that clarifies and improves areas of guidance related to the recently issued standards on credit losses (ASU 2016-13), hedging (ASU 2017-12), and recognition and measurement of financial instruments (ASU 2016-01). The amendments generally have the same effective dates as their related standards. If already adopted, the amendments of ASU 2016-01 and ASU

2016-13 are effective for fiscal years beginning after December 15, 2019 and the amendments of ASU 2017-12 are effective as of the beginning of the Company’s next annual reporting period; early adoption is permitted. The Company is currently evaluating the impact this change will have on its consolidated financial statements and disclosures.

All other issued and not yet effective accounting standards are not expected to be relevant to the Company.

The Company determines if an arrangement is a lease at inception. ROU assets are included in Other assets in the Company’s condensed consolidated balance sheets. Current ROU liabilities are included in Accrued liabilities and other and long-term ROU liabilities are included in Other long-term liabilities, in our condensed consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. To determine the present value of the lease payments, we estimate our incremental borrowing rate based on information available at the lease commencement date.

The Company’s lease term includes options to extend the lease when it is reasonably certain that it will exercise that option. Leases with a term of 12 months or less are not recorded on the balance sheet. Our leases typically do not contain any residual value guarantees. For real estate, we account for the lease and non-lease components as a single lease component.

Earnings per share (“EPS”) is calculated by dividing net income attributable to common stockholders by the weighted-average number of shares of Common Stock outstanding during the period. Diluted EPS is calculated similarly but includes potential dilution from the exercise of stock options and stock awards, except when the effect would be anti-dilutive. ~~A total of 0.7 million and 1.7 million stock options and stock awards outstanding during~~During the three and six months ended ~~September~~June 30, ~~2017~~2019 and 2016, respectively, and 0.7 million and 1.9 million stock options and stock awards outstanding during the nine months ended September 30, 2017 and 2016, respectively, were excluded from the calculation because the effect was anti-dilutive. 2018 we paid no dividends on our Common Stock.

The table below sets forth the reconciliation between net income ~~(loss)~~ and the weighted average shares outstanding used for calculating basic and diluted ~~EPS for the three and nine months ended September 30, 2017 and 2016:~~EPS:

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2017		2016		2017		2016		2019		2018		2019		2018
Earnings (numerator)
Net income attributable to common stockholders	$	14,450	$	10,648	$	28,846	$	14,667	$	36,284	$	25,068	$	68,000	$	43,594

Shares (denominator)
Weighted average common shares outstanding (basic)		49,057		48,814		48,633		48,496		50,658		49,680		50,529		49,509
Dilutive effect of stock options and stock awards outstanding		1,359		1,108		1,428		1,069		962		1,112		1,037		1,218
Adjusted weighted average common shares outstanding (diluted)		50,416		49,922		50,061		49,565		51,620		50,792		51,566		50,727

Earnings per share attributable to common stockholders
Basic	$	0.29	$	0.22	$	0.59	$	0.30	$	0.72	$	0.50	$	1.35	$	0.88
Diluted	$	0.29	$	0.21	$	0.58	$	0.30	$	0.70	$	0.49	$	1.32	$	0.86

Stock options and stock awards excluded from EPS calculation because the effect would be anti-dilutive										131		24		95		13

The table below sets forth inventories which are stated at the lower of cost or ~~market~~net realizable value:

	September 30, 2017		December 31, 2016		June 30, 2019		December 31, 2018
Finished goods	$	59,403	$	66,930	$	56,939	$	59,244
Work-in-progress		50,881		45,408		67,352		59,166
Raw materials		101,128		81,145		98,678		97,025
Total	$	211,412	$	193,483	$	222,969	$	215,435

(a) The Company’s acquisition accounting for the purchase of a wafer fabrication facility in Greenock, Scotland, (“GFAB”). (See Note 13 for additional information).

(b) The acquisition accounting for the Company’s investment of $3.4 million in Canyon Semiconductor. This investment brings our ownership of Canyon to 51%. During the second quarter of 2019, as a measurement period adjustment, we reduced the amount of goodwill approximately $1.1 million. This reduction in goodwill was related to finalization of the non-controlling interest value. The acquisition accounting is not final as deferred taxes are being finalized. We expect the acquisition accounting to be finalized in the third quarter of 2019.

(c) The acquisition accounting related to Eris’ investment of approximately $6.4 million in Yea-Shin Technology Corporation. During the second quarter of 2019, as a measurement period adjustment, we increased goodwill approximately $4.3 million, related to finalization of deferred taxes. The Company owns approximately 51% of Eris and Eris owns approximately 60% of Yea-Shin.

	September 30,			December 31,			June 30,			December 31,
	2017			2016			2019			2018
Intangible assets subject to amortization:
Gross carrying amount	$	234,533		$	232,747		$	244,554		$	238,867
Accumulated amortization		(83,354	)		(69,247	)		(115,430	)		(106,410	)
Foreign currency translation adjustment		(8,259	)		(8,442	)		(8,262	)		(8,281	)
Total		142,920			155,058			120,862			124,176
Intangible assets with indefinite lives:
Gross carrying amount		19,217			21,003			10,303			14,883
Foreign currency translation adjustment		(1,015	)		(1,185	)		(1,130	)		(1,124	)
Total		18,202			19,818			9,173			13,759
Total intangible assets, net	$	161,122		$	174,876		$	130,035		$	137,935

The table below sets forth amortization expense related to intangible assets subject to ~~amortization for the three and nine months ended September 30, 2017 and 2016:~~amortization:

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2017			2016			2017			2016			2019			2018			2019			2018
Domestic pre-tax income (loss)	$	(27,783	)	$	(7,274	)	$	(63,026	)	$	(25,520	)	$	8,064		$	5,350		$	20,550		$	(4,022	)
Foreign pre-tax income	$	47,613		$	22,905		$	104,821		$	47,906		$	39,813		$	31,070		$	69,361		$	66,745
Income tax provision	$	5,052		$	4,097		$	11,651		$	5,941		$	11,174		$	10,753		$	21,472		$	18,536
Effective tax rate		25.5	%		26.2	%		27.9	%		26.5	%		23.3	%		29.5	%		23.9	%		29.6	%
Impact of tax holidays on tax expense	$	(733	)	$	(2,992	)	$	(2,553	)	$	(5,099	)	$	572		$	70		$	849		$	(742	)
Earnings per share impact of tax holidays
Earnings per share impact of tax holidays:
Basic	$	0.01		$	0.06		$	0.05		$	0.10		$	(0.01	)	$	-		$	(0.02	)	$	0.01
Diluted	$	0.01		$	0.06		$	0.05		$	0.10		$	(0.01	)	$	-		$	(0.02	)	$	0.01

The decrease in the effective tax rate for the three and six months ended ~~September~~June 30, ~~2017~~2019 when compared to the three and six months ended ~~September~~June 30, ~~2016,~~2018, is primarily attributable to an ~~immaterial expense for various discrete items. The~~ increase in ~~the effective tax rate over the nine months ended September 30, 2017 when compared~~estimated full year global pretax book income and a net decrease in unfavorable U.S. permanent differences.

Our undistributed foreign earnings continue to ~~the nine months ended September 30, 2016 is primarily attributable to changes~~be indefinitely reinvested in ~~the proportion of income generated in North America, Europe and Asia, and the impact of ASU 2016-09~~foreign operations, with limited exceptions related to ~~the treatment~~earnings of ~~equity based compensation. In both periods the effective~~European and Asian subsidiaries. Any future distributions of foreign earnings will not be subject to additional U.S. income tax, ~~rates were lower than the U.S. statutory rate of 35%, principally from the impact of income from lower-taxed jurisdictions.~~

~~Funds repatriated from foreign subsidiaries to the U.S.~~but may be subject to ~~federal and state income~~non-U.S. withholding taxes. The Company intends to permanently reinvest overseas all of its earnings from its foreign subsidiaries, except to the extent such undistributed earnings have previously been subject to US tax; accordingly, deferred U.S. taxes are not recorded on undistributed foreign earnings.

~~The Company files~~We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. ~~The Company is~~We are no longer subject to U.S. federal income tax examinations by tax authorities for tax years before ~~2007,~~2008, or for the 2010 and 2011 tax ~~year. The Company is~~years. We are no longer subject to China income tax examinations by tax authorities for tax years before ~~2005.~~2009. With respect to state and local jurisdictions and countries outside of the U.S. (other than China), with limited exceptions, the Company is no longer subject to income tax audits for years before ~~2006.~~2013. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties, if any, have been provided for in the Company’s reserve for any adjustments that may

result from currently pending tax audits. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in interest expense. As of ~~September~~June 30, ~~2017,~~2019, the gross amount of unrecognized tax benefits was approximately ~~$31.5~~$35.9 million.

It is reasonably possible that the amount of the unrecognized benefit with respect to certain of the Company’s unrecognized tax positions will significantly increase or decrease within the next 12 months. At this time, an estimate of the range of the reasonably possible outcomes cannot be made.

The table below sets forth the line items where share-based compensation expense was ~~recorded for the three and nine months ended September 30, 2017 and 2016:~~recorded:

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2017		2016		2017		2016		2019		2018		2019		2018
Cost of goods sold	$	152	$	172	$	462	$	609	$	259	$	80	$	384	$	170
Selling, general and administrative		4,050		2,901		11,348		10,237		4,309		4,031		7,946		9,484
Research and development		760		684		2,117		1,991		730		689		1,445		1,426
Total share-based compensation expense	$	4,962	$	3,757	$	13,927	$	12,837	$	5,298	$	4,800	$	9,775	$	11,080

The table below sets forth share-based compensation expense by ~~type for the three and nine months ended September 30, 2017 and 2016:~~type:

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2017		2016		2017		2016		2019		2018		2019		2018
Stock options	$	168	$	304	$	767	$	1,212	$	-	$	84	$	-	$	275
Share grants		4,794		3,453		13,160		11,625		5,298		4,716		9,775		10,805
Total share-based compensation expense	$	4,962	$	3,757	$	13,927	$	12,837	$	5,298	$	4,800	$	9,775	$	11,080

Stock Options.Approximately ~~$6.9~~$6.7 million in cash proceeds was received from stock option exercises during the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~

As of ~~September~~June 30, ~~2017, total~~2019, we had no unrecognized share-based compensation expense related to unvested stock ~~options was approximately $0.4 million, before income taxes, and is expected to be recognized over a weighted average period of less than 1 year.~~options.

Share Grants. Restricted stock awards and restricted stock units generally vest in equal annual installments over a four-year period. We also have share grants that are ~~performance based~~performance-based and time-based that vest upon achievement of certain performance ~~criteria.~~ During the nine months ended September 30, 2017, the Company modified a performance-based award previously granted to our Chief Executive Officer. The effect was to replace a performance-based grant covering 700,000 shares of the Company’s common stock with a performance-based grant covering 62,905 shares of the Company’s common stock and a restricted stock grant covering 62,905 of the Company’s common stock. If certain performance criteria are met for the performance-based grant, Dr. Lu will receive 200% of that award or 125,810 shares. The incremental expense if Dr. Lu received 200% of the performance-based grant award is approximately $3.3 million. The incremental expense of the restricted stock grant is approximately $1.7 million.over time.

As of ~~September~~June 30, ~~2017,~~2019, total unrecognized share-based compensation expense related to share grants was approximately ~~$36.9~~$38.9 million, before income taxes, and is expected to be recognized over a weighted average period of approximately ~~2.6~~2.2 years.

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. During the three months ended ~~September~~June 30, ~~2017,~~2019 and 2018, one customer, a broad-based global distributor that sells to thousands of different end users, accounted for 10% or $31.5 million and 10.9% or $33.3 million, respectively, of our net sales.During the six months ended June 30, 2018, the same customer accounted for ~~10.3%~~10.7% or ~~$29.3~~$61.7 million of our ~~revenue.~~ net sales.This customer did not account for 10% or greater of our ~~revenue for the nine months ended September 30, 2017 or 10% or greater of our~~ outstanding accounts receivable at ~~September~~June 30, ~~2017.~~2019 or 2018.

The tables below set forth net sales based on the location of the subsidiary producing the net sale.

Three Months Ended
September 30, 2017	Asia			North America			Europe			Consolidated
Three Months Ended June 30, 2019													Asia			North America			Europe			Consolidated
Total sales	$	263,088		$	31,320		$	47,307		$	341,715		$	319,740		$	173,694		$	66,124		$	559,558
Intercompany elimination		(37,475	)		(4,061	)		(14,932	)		(56,468	)		(116,105	)		(94,278	)		(27,169	)		(237,552	)
Net sales	$	225,613		$	27,259		$	32,375		$	285,247		$	203,635		$	79,416		$	38,955		$	322,006

Three Months Ended
September 30, 2016	Asia			North America			Europe			Consolidated
Three Months Ended June 30, 2018													Asia			North America			Europe			Consolidated
Total sales	$	239,447		$	30,067		$	38,451		$	307,965		$	269,290		$	38,392		$	51,175		$	358,857
Intercompany elimination		(37,228	)		(5,726	)		(14,317	)		(57,271	)		(33,813	)		(6,358	)		(14,601	)		(54,772	)
Net sales	$	202,219		$	24,341		$	24,134		$	250,694		$	235,477		$	32,034		$	36,574		$	304,085


As of and for the Nine Months Ended
September 30, 2017	Asia			North America			Europe			Consolidated
As of and for the
Six Months Ended June 30, 2019													Asia			North America			Europe			Consolidated
Total sales	$	731,982		$	122,072		$	134,132		$	988,186		$	593,640		$	274,974		$	117,176		$	985,790
Intercompany elimination		(111,963	)		(44,547	)		(45,902	)		(202,412	)		(189,702	)		(132,194	)		(39,595	)		(361,491	)
Net sales	$	620,019		$	77,525		$	88,230		$	785,774		$	403,938		$	142,780		$	77,581		$	624,299

Property, plant and equipment, net	$	372,153		$	52,737		$	21,162		$	446,052		$	399,378		$	22,450		$	48,862		$	470,690
Total assets	$	1,017,801		$	301,763		$	221,025		$	1,540,589		$	1,190,443		$	235,248		$	188,468		$	1,614,159

As of and for the Nine Months Ended
September 30, 2016	Asia			North America			Europe			Consolidated
As of and for the
Six Months Ended June 30, 2018													Asia			North America			Europe			Consolidated
Total sales	$	671,252		$	91,176		$	121,501		$	883,929		$	513,820		$	65,228		$	101,173		$	680,221
Intercompany elimination		(107,268	)		(21,390	)		(45,194	)		(173,852	)		(65,640	)		(7,503	)		(28,481	)		(101,624	)
Net sales	$	563,984		$	69,786		$	76,307		$	710,077		$	448,180		$	57,725		$	72,692		$	578,597

Property, plant and equipment, net	$	341,320		$	58,408		$	15,890		$	415,618		$	410,207		$	25,540		$	24,490		$	460,237
Total assets	$	956,647		$	422,041		$	173,752		$	1,552,440		$	1,090,931		$	155,395		$	190,446		$	1,436,772

Disaggregation of Net sales.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 sell our products to customers in multiple areas of the world including Asia, Europe, and North America. Across these regions, we sell products to end users in a variety of markets such as consumer electronics, computing, communications, industrial and automotive. Further, most of our contracts are fixed-price arrangements, and are short term in nature, ranging from days to several months.

The tables below set forth the amount of net sales ~~that~~by type (direct sales or Distributor) and the location of the customer based on the location where the products were ~~derived from (shipped to) customers located in~~shipped for the ~~following countries:~~three and six months ended June 30, 2019 and 2018:

	Net Sales for the
	Three Months Ended				Percentage of						Net Sales for the Three Months Ended June 30,
	September 30,				Net Sales						Direct Sales						Distributor
	2017		2016		2017			2016			2019			2018			2019			2018
China	$	156,924	$	148,567		55	%		59	%	$	59,685		$	54,747		$	100,567		$	111,818
United States		25,706		21,802		9	%		9	%
U.S.												2,888			4,772			27,472			26,431
Korea		17,422		15,993		6	%		6	%		5,625			3,474			8,834			10,028
Germany		21,756		14,737		8	%		6	%		3,429			2,820			19,134			20,826
Singapore		17,252		12,497		6	%		5	%		154			624			14,920			19,571
Taiwan		15,966		12,424		6	%		5	%		675			922			20,907			15,828
All others ⁽¹⁾		30,221		24,674		10	%		10	%		36,257			16,663			21,459			15,561
Total	$	285,247	$	250,694		100	%		100	%	$	108,713		$	84,022		$	213,293		$	220,063

	Net Sales for the										Percent of Net Sales by Type for the Three Months Ended June 30,
	Nine Months Ended				Percentage of						Direct Sales						Distributor
	September 30,				Net Sales						2019			2018			2019			2018
	2017		2016		2017			2016
China	$	433,145	$	411,512		55	%		58	%		55	%		65	%		47	%		51	%
United States		70,361		62,460		9	%		9	%
U.S.												3	%		6	%		13	%		12	%
Korea		50,785		43,452		6	%		6	%		5	%		4	%		4	%		5	%
Germany		58,210		47,963		7	%		7	%		3	%		3	%		9	%		9	%
Singapore		43,840		35,657		6	%		5	%		—			1	%		7	%		9	%
Taiwan		49,584		44,413		6	%		6	%		1	%		1	%		10	%		7	%
All others ⁽¹⁾		79,849		64,620		11	%		9	%		33	%		20	%		10	%		7	%
Total	$	785,774	$	710,077		100	%		100	%		100	%		100	%		100	%		100	%

											Total Net Sales for the Three Months Ended June 30,
											Dollars						Percent of Net Sales
											2019			2018			2019			2018
China											$	160,252		$	166,565			50	%		55	%
U.S.												30,360			31,203			9	%		10	%
Korea												14,459			13,502			4	%		4	%
Germany												22,563			23,646			7	%		8	%
Singapore												15,074			20,195			5	%		7	%
Taiwan												21,582			16,750			7	%		6	%
All others ⁽¹⁾												57,716			32,224			18	%		10	%
Total											$	322,006		$	304,085			100	%		100	%

~~(1)~~

	Net Sales for the Six Months Ended June 30,
	Direct Sales						Distributor
	2019			2018			2019			2018
China	$	111,909		$	104,072		$	199,892		$	210,684
U.S.		6,121			8,457			57,970			47,531
Korea		10,763			7,551			16,994			18,913
Germany		6,457			5,925			36,650			42,431
Singapore		366			912			30,856			35,401
Taiwan		1,158			1,778			43,571			35,021
All others ⁽¹⁾		58,515			31,984			43,077			27,937
Total	$	195,289		$	160,679		$	429,010		$	417,918

	Percent of Net Sales by Type for the Six Months Ended June 30,
	Direct Sales						Distributor
	2019			2018			2019			2018
China		57	%		65	%		47	%		50	%
U.S.		3	%		5	%		14	%		11	%
Korea		6	%		5	%		4	%		5	%
Germany		3	%		4	%		9	%		10	%
Singapore		—			1	%		7	%		8	%
Taiwan		1	%		1	%		10	%		8	%
All others ⁽¹⁾		30	%		19	%		9	%		8	%
Total		100	%		100	%		100	%		100	%

	Total Net Sales for the Six Months Ended June 30,
	Dollar						Percent of Net Sales
	2019			2018			2019			2018
China	$	311,801		$	314,756			50	%		54	%
U.S.		64,091			55,988			10	%		10	%
Korea		27,757			26,464			4	%		5	%
Germany		43,107			48,356			7	%		8	%
Singapore		31,222			36,313			5	%		6	%
Taiwan		44,729			36,799			7	%		6	%
All others ⁽¹⁾		101,592			59,921			17	%		11	%
Total	$	624,299		$	578,597			100	%		100	%

(1) Represents countries with less than 3% of the total net sales each.

Purchase commitments – As of ~~September~~June 30, ~~2017,~~2019, we had approximately ~~$36.8~~$18.5 million in non-cancelable purchase contracts related to capital expenditures, primarily related to ~~Asia~~our manufacturing ~~facilities.~~

facilities in Asia. As of June 30, 2019, we also had a commitment to purchase approximately $83.7 million of wafers to be used in our manufacturing process. These wafer purchases will occur during 2019 and 2020.

Defined Benefit Plan - We have a contributory defined benefit plan that covers certain employees in the United Kingdom. As of ~~September~~June 30, ~~2017,~~2019, the unfunded liability for this defined benefit plan was approximately ~~$32.3~~$27.7 million. We are obligated to make annual contributions, each year through December 2029, of approximately GBP 2 million (approximately $2.6 million based on a GBP:USD exchange rate of ~~1.3)~~1.3:1). The trustees are required to review the funding position every three years, and the most recent review was carried out asin April 2019. We anticipate receiving the outcome of the April ~~5, 2016.~~2019 review during the third quarter of 2019. The outcome of ~~a review~~future reviews can result in a change in the amount of the payment.

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 consolidated 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.~~outcomes of all pending disputes. We record ~~the~~an appropriate liability when the amount of any liability associated with a pending dispute 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.

We use derivative instruments to manage risks related to foreign currencies, interest rates and the ~~Company had approximately $40.2 million~~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 ~~hedges, which~~forward agreements to manage this exposure. At June 30, 2019, we had outstanding foreign currency forward contracts that are intended to ~~offset approximately 25%~~preserve the economic value of foreign currency denominated monetary assets and liabilities; these instruments are not designated for hedge accounting treatment in accordance with ASC 815. The fair value of these instruments approximates zero.

The table below sets forth outstanding foreign currency forward contracts at June 30, 2019 and December 31, 2018:

Notional Amount		Effective Date	Maturity Date	Index*	Weighted Average Foreign Exchange Rate	Balance Sheet Hedge Designation
$	1,983	June 2019	August 2019	EUR/GBP	0.896	Non-designated
	5,072	June 2019	August 2019	EUR/USD	1.1415	Non-designated
	7,819	June 2019	August 2019	GBP/USD	1.2725	Non-designated
	38,834	June 2019	August 2019	USD/CNY	6.8648	Non-designated
	1,022	June 2019	August 2019	USD/JPY	107.515	Non-designated
	21,305	June 2019	August 2019	USD/TWD	30.899	Non-designated
	500	January 2019	October 2019	USD/TWD	30.635	Non-designated
	500	January 2019	January 2020	USD/TWD	30.635	Non-designated
	500	January 2019	November 2019	USD/TWD	30.705	Non-designated
$	77,535
Notional Amount		Effective Date	Maturity Date	Index*	Weighted Average Foreign Exchange Rate	Balance Sheet Hedge Designation
$	1,221	December 2018	February 2019	EUR/GBP	0.8981	Non-designated
	12,538	December 2018	February 2019	EUR/USD	1.1479	Non-designated
	8,463	December 2018	February 2019	GBP/USD	1.2785	Non-designated
	44,946	December 2018	February 2019	USD/CNY	6.8738	Non-designated
	844	December 2018	February 2019	USD/JPY	110.14	Non-designated
	54,041	December 2018	February 2019	USD/TWD	30.559	Non-designated
	300	December 2018	January 2019	USD/TWD	30.669	Non-designated
$	122,353
* EUR = Euro
GBP = British Pound Sterling
USD = United States Dollar
CNY = Chinese Yuan Renminbi
JPY = Japan Yen
TWD = Taiwan dollar

The tables below sets forth the effect of ~~income~~the Company’s derivative financial instruments on the condensed consolidated statements of operations for the three months ended June 30, 2019 and ~~nine months ended September 30,~~2018:

	Amount of Gain or (Loss) Recognized in OCI on Derivative					Location of Gain or (Loss) Reclassified from Accumulated OCI into Income	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Net Income				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)
Derivative Instruments Designated as Hedging Instruments	Amount of Gain or (Loss) Recognized in OCI on Derivative
	June 30,						June 30,					June 30,
	2019			2018			2019		2018			2019		2018
Three Months Ended
Interest rate swaps and collars	$	(1,920	)	$	1,103	Interest expense	$	456	$	175	N/A		-		-
Cross currency swaps	$	2,052		$	-	N/A		-		-	Interest income	$	233	$	-
Six Months Ended
Interest rate swaps and collars	$	(3,010	)	$	3,507	Interest expense	$	925	$	227	N/A		-		-
Cross currency swaps	$	(298	)	$	-	N/A		-		-	Interest income	$	688	$	-

~~2017. Currently all~~We estimate that $0.6 million of ~~our foreign currency hedges mature at each month end. The Company then has the option to enter into new foreign currency hedges. The Company plans to continue hedging its foreign currency risk.~~

~~The Company also has interest rate~~net derivative agreements with a notional amount of $150.0 million and $220.0 million as of December 31, 2016 and September 30, 2017, respectively. During the third quarter of 2017, the Company entered into additional agreements to further hedge against the risk of interest rate volatility. The entire $220.0 million notional amount is accounted for as an effective cash flow hedge, with $2.4 million and $3.1 million recorded as assetsgains included in ~~the condensed consolidated balance sheets as of September 30, 2017 and December 31, 2016, respectively and$2.4 million and $2.3 million accrued in the~~ accumulated other comprehensive income (“AOCI”) as of ~~September~~June 30, ~~2017~~2019 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 three months ended June 30, 2019 or 2018.

As of June 30, 2019 and December 31, ~~2016, respectively. For~~2018, the ~~three~~Company had not posted any collateral related to these agreements.

The Company leases certain assets used in its business, including land, buildings and ~~nine month ended September 30, 2017, $0.2 million~~equipment. These leased assets are used for operational and ~~$0.6 million have been recorded~~administrative purposes.

The table below sets forth supplemental balance sheet information related to ~~the interest expense account, respectively.~~ leases:

The table below sets forth supplemental cash flow and other information related to leases:

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 by investing in the actual underlying investments. These investments are classified as trading securities and are carried at fair value. At ~~September~~June 30, ~~2017,~~2019 and December 31, 2018, these investments totaled approximately ~~$8.0 million.~~$10.1 million and $10.6 million, respectively. All gains and losses in these investments are materially offset by corresponding gains and losses in the Deferred Compensation Plan liabilities.

We conduct business with a related party company, Lite-On Semiconductor Corporation and its subsidiaries and affiliates (collectively, “LSC”), and Nuvoton Technology Corporation and its subsidiaries and affiliates (collectively, “Nuvoton”). LSC is our largest stockholder, owning approximately ~~16%~~ 15%ofouroutstandingCommonStockasof~~September~~June 30,2~~017~~019,andisamemberoftheLite-On Groupofcompanies.Raymond Soong, the Chairman of ~~the~~our Board of Directors, is the Chairman of LSC, and is the Chairman of Lite-On Technology Corporation (“LTC”), a significant shareholder of LSC. C.H. Chen, our former President and Chief Executive Officer and currently the Vice Chairman of ~~the~~our Board of Directors, is also Vice Chairman of LSC and a board member of LTC. Dr. Keh-Shew Lu, our President and Chief Executive Officer and a member of our Board of Directors, is a board member of LTC, and a board member of Nuvoton. ~~L.P. Hsu, a former member of our Board of Directors serves as a consultant to LTC, and is a supervisor of the board of Nuvoton.~~ We consider our relationships with LSC and Nuvoton to be mutually beneficial, and we plan to continue our strategic alliance with LSC and Nuvoton. We purchase wafers from Nuvoton for use in our production process.

We also conduct business with Keylink International (B.V.I.) Inc. and its subsidiaries and affiliates (collectively, “Keylink”). Keylink is our 5% joint venture partner in our Shanghai assembly and test facilities. We sell products to, and purchase inventory from 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 afees for plating and rental services and consulting ~~fee~~ to Keylink. The aggregate amounts paid to Keylink for the three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 were approximately ~~$4.5~~$3.9 million and ~~$4.1~~$4.2 million, respectively. The aggregate amounts ~~for these services~~paid to Keylink for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 were approximately ~~$12.4~~$7.8 million and ~~$12.5~~$8.8 million, respectively. Inaddition, Chengdu Ya Guang Electronic Company Limited (“YaGuang”)is our 2% joint venture partner in one of our Chengdu assembly and test facilities and isour5%5%jointventurepartnerinourotherChengduassemblyandtest~~facilities~~facility;however, we have no material transactions with Ya Guang. We also purchase materials from Jiyuan Crystal Photoelectric Frequency Technology Ltd (“JCP”), a frequency control product manufacturing company in which we have made an equity investment and account for that investment using the equity method of accounting.

TheAuditCommitteeoftheBoardreviewsallrelatedpartytransactionsfor potentialconflictofinterestsituationsonanongoingbasis,allinaccordancewithsuchproceduresastheAuditCommitteemayadopt fromtime totime.

The table below sets forth net sales to and purchases from ~~LSC, Nuvoton and Keylink:~~related parties:

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2017		2016		2017		2016		2019		2018		2019		2018
LSC
Net sales	$	329	$	275	$	1,064	$	552	$	268	$	225	$	456	$	592
Purchases	$	6,097	$	4,867	$	19,258	$	16,794	$	4,079	$	4,954	$	8,491	$	11,422

Nuvoton
Purchases	$	3,202	$	2,827	$	9,487	$	8,449	$	2,034	$	2,359	$	3,301	$	5,413

Keylink
Net sales	$	2,690	$	2,712	$	6,925	$	6,689	$	3,566	$	2,257	$	6,381	$	4,078
Purchases	$	1,069	$	1,254	$	3,090	$	4,089	$	585	$	881	$	1,190	$	1,739

JCP
Purchases									$	151	$	97	$	311	$	287

The table below sets forth accounts receivable from, and accounts payable to, ~~LSC, Nuvoton and Keylink:~~related parties:

	September 30,		December 31,		June 30,		December 31,
	2017		2016		2019		2018
LSC
Accounts receivable	$	381	$	301	$	269	$	286
Accounts payable	$	4,645	$	4,333	$	2,736	$	2,696
Nuvoton
Accounts payable					$	551	$	1,939
Keylink
Accounts receivable	$	5,176	$	5,394	$	5,070	$	6,264
Accounts payable	$	5,172	$	4,295	$	3,887	$	4,656
Nuvoton
JCP
Accounts payable	$	542	$	950	$	165	$	151

~~NOTE 11~~Note 13 – ~~Restructuring Costs~~Wafer Fabrication Plant Acquisition

On April 1, 2019, the Company completed the previously announced ~~its plan to transfer its~~acquisition of a wafer fabrication ~~operation at~~ ~~KFAB~~ ~~to other Company-owned wafer fabrication plants and external foundries.~~facility (“GFAB”) located in Greenock, Scotland. The Company ~~ceased~~recorded the purchase of GFAB as a business acquisition. The Company purchased GFAB in order to increase the Company’s wafer production operations at KFAB late in third quarter 2017 and plans to vacate the premises no later than November 15, 2017. Employees have been offered retention and standard severance packages. During the quarter ended March 2017,capacity. Total consideration paid by the Company ~~received $6.0~~was $33.2 million and was funded by advances under the revolving portion of ~~insurance proceeds as~~our long-term credit facility. The facility and assets were wholly acquired, and there is no remaining minority interest. The goodwill will not be tax deductible. The Company also incurred acquisition costs of approximately $0.6 million that were recognized in selling, general and administrative expense. Due to a ~~result~~lack of the fires sustained at the KFAB facility during 2016 of which $4.2 million is recorded in Cost of Goods Sold and $1.8 million is recorded in Other Income. During the third quarter of 2017, the Company recorded $2.0 million of asset impairment relateddata we are unable to ~~the shut-down of KFAB.~~

~~Total KFAB shutdown costs are expected to be approximately $10 million to $12 million, on a pretax basis, which will be expensed and paid throughout 2017.~~provide historical financial pro forma data. The table below sets forth the ~~restructuring costs,~~fair value of the assets and liabilities recorded in ~~restructuring expense~~the GFAB acquisition and the corresponding line item in which the ~~Condensed Consolidated Statements of Operations,~~ ~~incurred during the three months and nine months ended September 30, 2017:~~item is recorded in our condensed consolidated balance sheet.

Assets held for sale consist of approximately 16 acres of raw land located in Plano, Texas, that the Company is in the process of selling. The land was originally acquired as a site to construct a future corporate headquarters. The Company decided that its existing headquarters is adequate and construction of a new headquarters building is not necessary. The Company has been actively marketing the land and has a signed contract to sell the land to an unaffiliated third party for cash. During the second quarter of 2019, the buyer received necessary local zoning approval for its building plans. We anticipate the sale will close within the next 12 months. We have not recorded any impairment charges in connection with the land.

~~The table below sets forth the costs accrued related to the KFAB restructuring:~~

Based on continued negotiations with the landlord, we recorded an additional $1.4 million of asset retirement obligations related the KFAB restructuring. This asset retirement obligation is for the estimated amounts to be paid to contractors to remediate the KFAB facility upon vacating the property. The table below sets forth the asset retirement obligation related to the KFAB restructuring:

In connection with the asset retirement obligation as of September 30, 2017, we have an asset with a net book value of $0.4 million in property, plant and equipment. During the three months and nine months ended September 30, 2017 amortization of the asset was $0.7 million and $0.9 million, respectively. The remaining balance will be amortized through the end of the lease.

I~~tem~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Except for the historical information contained herein, the matters addressed in this Item 2 constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as identified under the heading “Cautionary Statement for Purposes of the “Safe Harbor” Provision of the Private Securities Litigation Reform Act of 1995” herein. Such forward-looking statements are subject to a variety of risks and uncertainties, including those discussed below under the heading “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, that could cause actual results to differ materially from those anticipated by our management. The Private Securities Litigation Reform Act of 1995 (the ~~“Act”~~“PSLRA”) provides certain “safe harbor” provisions for forward-looking statements. All forward-looking statements made in this Quarterly Report on Form 10-Q are made pursuant to the ~~Act.~~PSLRA. We undertake no obligation to publicly release the results of any revisions to our forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unexpected events. Unless the context otherwise requires, the words “Diodes,” the “Company,” “we,” “us” and “our” refer to Diodes Incorporated and its subsidiaries. Dollar amounts and share amounts are presented in thousands, except per share amounts, unless otherwise noted.

This management’s discussion should be read in conjunction with the management’s discussion included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2018 (“Form 10-K”), previously filed with Securities and Exchange Commission (“SEC”) on February ~~27, 2017.~~21, 2019.

~~Factors Relevant to Our Results of Operations for the Three Months Ended September 30, 2017~~

We are a leading global manufacturer and supplier of high-quality, application-specific standard products within the broad discrete, logic, analog and mixed-signal semiconductor markets. For detailed information, see Note 1 – Nature of Operations, Basis of Presentation, ~~and~~ Recently Issued Accounting Pronouncements and Updates to Accounting Policies and Estimates, included in the condensed consolidated financial statements in Item 1 above. Our products are sold primarily throughout Asia, North America and Europe. We believe that our focus on application-specific standard products utilizing innovative, highly efficient packaging and cost-effective process technologies, coupled with our collaborative, customer-focused product development, provides us with a meaningful competitive advantage relative to other semiconductor companies.

Factors Relevant to Our Results of Operations for the Three Months Ended June 30, 2019

April 1,2019, we announced the closing of the previously announced agreement to acquire Texas Instruments’ (“TI”) wafer fabrication facility and operation located in Greenock, Scotland (“GFAB”). We are in the process of installing Diodes’ processes to fully use the additional 8” capacity and capability of GFAB, which we believe will support our growth expansion initiatives and future cost reduction initiatives.

Results of Operations for the Three Months Ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~

The ~~following~~ table below sets forth the ~~percentage that certain items in the statements~~consolidated statement of operations ~~bear to~~line items as a percentage of net sales.

	Percent of Net Sales						Percent of Net Sales
	Three Months Ended September 30,						Three Months Ended June 30,
	2017			2016			2019			2018
Net sales		100	%		100	%		100	%		100	%
Cost of goods sold		(66	)		(68	)		(62	)		(65	)
Gross profit		34			32			38			35
Total operating expenses		26			24
Total operating expense								23			23
Income from operations		8			8			15			12
Total other expense		(1	)		(2	)		-			-
Income before income taxes and noncontrolling interest		7			6			15			12
Income tax provision		(2	)		(2	)		(3	)		(4	)
Net income		5			4			12			8
Net income attributable to common stockholders		5			4			12			8

The following table and discussion explains in greater detail our consolidated operating results and financial condition for the three months ended ~~September~~June 30, ~~2017,~~2019, compared to the three months ended ~~September~~June 30, ~~2016.~~2018. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this ~~quarterly report~~ ~~(in thousands)~~.Quarterly Report on Form 10-Q.

	Three Months Ended												Three Months Ended
	September 30,												June 30,
	2017			2016			Increase/(Decrease)			% Change			2019			2018			Increase/(Decrease)			% Change
Net sales	$	285,247		$	250,694		$	34,553			13.8	%	$	322,006		$	304,085		$	17,921			5.9	%
Cost of goods sold		188,900			170,071			18,829			11.1	%		200,018			196,817			3,201			1.6	%
Gross profit		96,347			80,623			15,724			19.5	%		121,988			107,268			14,720			13.7	%
Total operating expenses		72,630			60,670			11,960			19.7	%
Total operating expense														73,472			69,424			4,048			5.8	%
Interest income		389			321			68			21.2	%		633			443			190			42.9	%
Interest expense		(3,561	)		(3,684	)		(123	)		(3.3	%)		(2,011	)		(2,544	)		(533	)		(21.0	%)
Foreign currency loss, net		(1,312	)		(1,439	)		(127	)		(8.8	%)
Foreign currency (loss) gain, net														(496	)		300			796			(265.3	%)
Other income		597			480			117			24.3	%		1,235			377			858			227.6	%
Income tax provision		5,052			4,097			955			23.3	%		11,174			10,753			421			3.9	%

Net sales increased approximately ~~$34.6~~$17.9 million for the three months ended ~~September~~June 30, ~~2017,~~2019, compared to the same period last year due to ~~growth across all regions~~continued strong performance in Europe and North America as well as the automotive and industrial end markets. For the three months ended June 30, 2019, combined net sales in the automotive and industrial markets ~~continued growth at Pericom~~represented 39% of total sales. Excluding the frequency control business, our serial-connectivity business reached record levels of net sales in the first three months of 2019.

The table below sets forth our revenue as a percentage of total revenue by end-user market for the three months ended June 30, 2019 and ~~continued improvements in product mix and utilization across the Company’s facilities.~~ 2018:

Cost of goods sold increased approximately ~~$18.8~~$3.2 million for the three months ended ~~September~~June 30, ~~2017,~~2019, compared to the same period last year. ~~A portion of the increase in cost of goods sold was $2.7 million of KFAB inventory that was expensed, as it will not be used in the future, as well as other inventory that was scrapped.~~ As a percent of sales, cost of goods sold was ~~66%~~62.0% for the three months ended ~~September~~June 30, ~~2017~~2019, compared to ~~68%~~64.7% for the same period last year. Average unit cost increased ~~11%~~approximately 4.7% for the three months ended ~~September~~June 30, ~~2017,~~2019, compared to the same period last ~~year, partially due to inventory write-offs.~~year. For the three months ended ~~September~~June 30, ~~2017,~~2019, gross profit increased approximately ~~19.5%~~13.7% when compared to the same period last year. Gross profit margin for the three month periods ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 was ~~33.8%~~37.9% and ~~32.2%~~35.3%, respectively. The increase in gross

profit margin was ~~related~~due to ~~improved utilization and product mix, specifically~~ higher revenue contribution from ~~North America, Europe~~the automotive and ~~Pericom products.~~

industrial markets as well as serial-connectivity products, which typically have higher gross profit margins.

Operating expenses for the three months ended ~~September~~June 30, ~~2017~~2019, increased approximately ~~$12.0~~$4.0 million, or ~~19.7%~~5.8%, compared to the ~~same period last year.~~three months ended June 30, 2018. Selling, general and administrative expenses (“SG&A”) increased approximately $5.2 million and research and development expenses ~~increased~~ (“R&D”) decreased approximately ~~$3.3~~$0.3 million. Amortization of acquisition related intangibles decreased ~~approximately $0.4 million reflecting the full amortization of a portion of our intangible assets.~~$0.1 million. SG&A, as a percentage of sales, was ~~15.3%~~14.7% and 13.9% for the three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016.~~2018, respectively. R&D, as a percentage of sales, was ~~7.1%~~6.7% and ~~6.8%~~7.3% for the three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, respectively. ~~The three months ended September 30, 2017 included $4.0 million of restructuring and asset impairment related to the shut down and relocation of the KFAB facility.~~

Interest income ~~was relatively flat~~increased 42.9% for the three months ended ~~September~~June 30, ~~2017~~2019, compared to the same period last year, due to interest received on cross currency swaps. Interest expense decreased 21.0% for the three months ended June 30, 2019, compared to the same period last year. The decrease in interest expense for the three months ended ~~September~~June 30, ~~2017~~2019 was due to lower levels of debt partially offset by higher interest rates on the floating rate portion of the borrowings used to effect the Pericom ~~acquisition. Expense related to foreign~~acquisition in the fourth quarter of 2015. Foreign currency ~~changes decreased $0.1 million reflecting currency hedges partially offset by losses due to stronger European currencies and the Taiwan dollar, when compared to the U.S. dollar.~~

~~We recognized an income tax expense~~(loss) gain, net was a net loss of ~~approximately $5.1 million and $4.1~~$0.5 million for the three months ended ~~September~~June 30, ~~2017~~2019, compared to a net gain of $0.3 million for the same period last year, reflecting the effectiveness of our currency hedges.

We recognized income tax expense of approximately $11.1 million and ~~2016,~~$10.8 million for the three months ended June 30, 2019 and 2018, respectively. The increase in income taxes for ~~2017~~2019 compared to ~~2016 is~~2018 was primarily attributable to ~~the~~an increase in pretax book income, partially offset by a net ~~income.~~

Results of Operations for the ~~Nine months~~Six Months Ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~

The ~~following~~ table below sets forth the ~~percentage that certain items in the statements~~consolidated statement of operations ~~bear to~~line items as a percentage of net sales.

	Percent of Net Sales		Percent of Net Sales
	Nine Months Ended September 30,		Six Months Ended June 30,
	2017	2016	2019			2018
Net sales	100%	100%		100	%		100	%
Cost of goods sold	(67)	(69)		(62	)		(64	)
Gross profit	33	31		38			36
Total operating expenses	26	26
Total operating expense				23			25
Income from operations	7	5		15			11
Total other income (expense)	(2)	(2)
Total other expense				-			-
Income before income taxes and noncontrolling interest	5	3		15			11
Income tax provision	(1)	(1)		(3	)		(3	)
Net income	4	2		12			8
Net income attributable to common stockholders	4	2		12			8

The following table and discussion explains in greater detail our consolidated operating results and financial condition for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2018. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this ~~quarterly report~~ ~~(in thousands)~~.Quarterly Report on Form 10-Q.

	Nine Months Ended				Six Months Ended
	September 30,				June 30,
	2017	2016	Increase/(Decrease)	% Change	2019			2018			Increase/(Decrease)			% Change
Net sales	$ 785,774	$ 710,077	$ 75,697	10.7%	$	624,299		$	578,597		$	45,702			7.9	%
Cost of goods sold	525,377	490,417	34,960	7.1%		389,900			372,734			17,166			4.6	%
Gross profit	260,397	219,660	40,737	18.5%		234,399			205,863			28,536			13.9	%
Total operating expenses	203,495	186,975	16,520	8.8%
Total operating expense						143,760			141,079			2,681			1.9	%
Interest income	992	1,075	(83)	(7.7%)		1,508			957			551			57.6	%
Interest expense	(10,493)	(9,880)	613	6.2%		(4,156	)		(5,301	)		(1,145	)		(21.6	%)
Foreign currency loss, net	(6,734)	(2,045)	4,689	229.3%
Foreign currency (loss) gain, net						(560	)		(2,729	)		(2,169	)		(79.5	%)
Other income	1,128	551	577	104.8%		2,480			5,012			(2,532	)		(50.5	%)
Income tax provision	11,651	5,941	5,710	96.1%		21,472			18,536			2,936			15.8	%

Net sales increased approximately ~~$75.7~~$45.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, compared to the same period last year due to ~~growth across all regions~~continued market share gains. We experienced record net sales in Europe and record net sales in both the automotive and industrial end markets. For the six months ended June 30, 2019, combined net sales in the automotive and industrial markets ~~continued growth at Pericom~~represented 39% of total sales. Excluding the frequency control business, our serial-connectivity business reached record levels of net sales in the first three months of 2019.

The table below sets forth our revenue as a percentage of total revenue by end-user market for the six months ended June 30, 2019 and ~~continued improvements in product mix and utilization across the Company’s facilities.~~ 2018:

Cost of goods sold increased approximately ~~$35.0~~$17.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, compared to the same period last year. A portion of the increase in cost of goods sold was $2.7 million of KFAB inventory that was expensed, as it will not be used in the future, and other inventory that was scrapped. Cost of goods was positively impacted in 2017 by receipt of $3.7 million of business interruption insurance and $0.5 million of inventory insurance recovery received related to the fire at KFAB. As a percent of sales, cost of goods sold was ~~66.9%~~62.1% for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 compared to ~~69.1%~~64.4% for the same period last year. Average unit cost increased 3%approximately 6.0% for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, compared to the same period last ~~year, partially due to inventory write-off costs at KFAB.~~year. For the ~~nine~~three months ended ~~September~~June 30, ~~2017,~~2019, gross profit increased approximately ~~18.5%~~13.9% when compared to the same period last year. Gross profit margin for the ~~nine~~six month periods ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 was ~~33.1%~~37.6% and ~~30.9%~~35.6%, respectively.

The increase in gross profit margin was due to higher revenue contribution from the automotive and industrial markets as well as serial-connectivity products, which typically have higher gross profit margins.

Operating expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019, increased approximately ~~$16.5~~$2.7 million, or ~~8.8%~~1.9%, compared to the ~~same period last year.~~ three months ended June 30, 2018. Selling, general and administrative expenses (“SG~~&A and~~&A”) increased approximately ~~$3.7~~$1.7 million and research and development expenses (“R&D&D”) increased approximately ~~$6.0~~$1.6 million. Amortization of acquisition related intangibles decreased ~~approximately $1.3 million reflecting the full amortization of a portion of our intangible assets.~~$0.4 million. SG&A, as a percentage of sales, was ~~15.6%~~14.6% and ~~16.8%~~15.4% for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, respectively. R&D, as a percentage of sales, was ~~7.4%~~7.0% and 7.3% for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016. The nine months ended September 30, 2017, included $8.1 million of restructuring and asset impairment related to the shut down and relocation of the KFAB facility.~~2018, respectively.

Interest income ~~decreased~~increased 57.6% for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019, compared to the same period last year, due to ~~a lower amount of invested funds.~~interest received on cross currency swaps. Interest expense decreased 21.6% for the six months ended June 30, 2019, compared to the same period last year. The ~~increase~~decrease in interest expense for the ~~nine~~six months ended ~~September~~June 30, ~~2017 is~~2019 was due to lower levels of debt partially offset by higher interest rates ~~partially offset by lower amounts~~on the floating rate portion of ~~borrowed funds. Expense related~~the borrowings used to ~~foreign~~effect the Pericom acquisition in the fourth quarter of 2015. Foreign currency ~~changes increased $4.7~~(loss) gain, net was a net loss of $0.6 million ~~due to stronger European currencies and~~for the Ta~~iwan dollar, when~~six months ended June 30, 2019, compared to a net loss of $2.7 million for the ~~U.S. dollar, partially offset by foreign~~same period last year, reflecting the effectiveness of our currency ~~hedges~~.hedges.

We recognized an income tax expense of approximately ~~$11.7~~$21.4 million and $18.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~approximately $5.9 million for the nine months ended September 30, 2016.~~2018, respectively. The increase in income taxes for ~~2017~~2019 compared to ~~2016~~2018 is primarily attributable to ~~the~~an increase in pretax book income, partially offset by a net ~~income.~~

Our primary sources of liquidity are cash and cash equivalents, funds from operations and, if necessary, borrowings under our credit facilities.

Our Asia subsidiaries maintain credit facilities with several financial institutions through our foreign entities worldwide totaling $121.4 million. At June 30, 2019, borrowings were $15.5 million and letters of credit were $0.4 million under the Asia credit facilities. Other than two Taiwanese credit facilities that are collateralized by assets, our foreign credit lines are unsecured, uncommitted, repayable on demand, terminable by the lender at any time and contain no restrictive covenants. These credit facilities bear interest at LIBOR or similar indices plus a specified margin. Interest payments are due quarterly on outstanding amounts under the credit lines. In addition to our credit lines, our 51% owned subsidiary, ERIS Technology Corporation (“ERIS”), borrowed $19.6 million on a long-term basis from local Taiwan banks in order to make an investment. The first loan of $4.3 million matures in 2033, while the second loan of $15.3 million matures in 2024.

We currently have a U.S. banking credit facility (the “U.S. Credit Facility”) under which we may draw up to $250 million on a revolving basis, in addition to a $250 million term ~~loan included in the U.S. Credit Facility.~~loan. The U.S. Credit Facility matures October 26, 2021. The remaining portion of the term loan ~~portion~~ of the U.S. Credit Facility is repayable in part through quarterly installments that increase over time from ~~$3.1~~$6.3 million ~~per quarter~~ in the ~~current year~~first three quarters of ~~the U.S. Credit Facility~~2019 to $9.4 million per quarter in the final year of the U.S. Credit Facility. We may, from time to time, request increases in the aggregate commitments under the U.S. Credit Facility of up to $200 million, subject to the lenders electing to increase their commitments or by means of the addition of new lenders, and subject to at least half of each increase in aggregate commitments being in the form of term loans, with the remaining amount of each increase being an increase in the amount of the revolving portion of the U.S. Credit Facility. The U.S. Credit Facility ~~bears interest at LIBOR or similar indices plus a specified margin. The U.S. Credit Facility~~ contains certain financial and non-financial covenants, including, but not limited to, a maximum consolidated leverage ratio, a minimum consolidated fixed charge coverage ratio, and restrictions on liens, indebtedness, investments, fundamental changes, dispositions, and restricted payments (including dividends and share repurchases). ~~At September 30, 2017, we owed $326.5 million~~The obligations of the Company and the other borrowers under the U.S. Credit Facility ~~$145.0 million~~are secured by substantially all of ~~which was drawn under~~ the ~~revolving portion~~assets of the Company, including controlling interests in its first-tier subsidiaries, and ~~$181.5 million~~by specified assets of ~~which was outstanding under the term loan.~~certain of its subsidiaries.

In addition to our U.S. Credit Facility, we maintain credit facilities with several financial institutions through our foreign entities worldwide totaling $66.1 million. As of September 30, 2017, in addition to the U.S. Credit Facility, our Asia subsidiaries had unused and available credit lines of up to an aggregate of approximately $63.2 million, with several financial institutions. In some cases, our foreign credit lines are unsecured, uncommitted and may be repayable on demand. Our foreign credit lines include two Taiwanese credit facilities that are collateralized by assets. Our foreign credit lines bear interest at LIBOR or similar indices plus a specified margin. At September 30, 2017, $1.9 million was outstanding on these credit lines. We also have a note payable to a bank located in Taiwan with a variable interest rate maturing July 6, 2021. At September 30, 2017, approximately $1.3 million was outstanding under this loan.

The details of our borrowings outstanding as of June 30, 2019 are set forth in the table below:

Our primary liquidity requirements have been to meet our inventory and capital expenditure needs and to fund on-going operations. At ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, our working capital was ~~$476.3~~$481.2 million and ~~$547.4~~$480.8 million, respectively. We expect cash generated by our operations together with existing cash, cash equivalents, short-term investments and available credit facilities to be sufficient to cover cash needs for working capital and capital expenditures for at least the next 12 months.

Capital expenditures for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 were ~~$81.9~~$52.7 million and ~~$47.1~~$47.5 million, respectively. Capital expenditures in 2017 relate to capacity expansion in our Shanghai and Chengdu assembly and test facilities as well as the eight inch fabrication equipment upgrade in our wafer fabrication facility in Shanghai. For the first ~~nine~~six months of ~~2017~~2019 capital expenditures were approximately ~~10.4%~~8.4% of our net sales, which is ~~above~~in line with our capital spending target range of 5% to 9% of net ~~sales, due to increased capital expenditures in our Asian operations.~~sales.

We intend to permanently reinvest overseas all of our earnings from our foreign subsidiaries, except to the extent such undistributed earnings have previously been subject to U.S. tax; accordingly, deferred U.S. taxes are not recorded onOur undistributed foreign ~~earnings.~~earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of European subsidiaries. As of ~~September~~June 30, ~~2017,~~2019, our foreign subsidiaries held approximately ~~$203.8~~$128.0 million of cash, cash equivalents and investments of which approximately ~~$129.6~~$21.4 million would be subject to a potential non-U.S. withholding ~~and/or U.S. income~~ tax if ~~repatriated to~~distributed outside the ~~U.S. as dividends.~~country in which the cash is currently held. Of this total, $11.6 million is held in China.

As of ~~September~~June 30, ~~2017,~~2019, we had short-term investments totaling ~~$12.7~~$6.6 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 time frame but in doing so we generally forfeit all earned and future interest income.

During 2015, our Board of Directors (“Board”) approved a stock repurchase program. The Board authorized the repurchase of up to an aggregate of $100.0 million of our outstanding Common ~~Stock, $0.66 2/3 par value per share.~~Stock. The share repurchase program is expected to continue through the end of 2019 unless extended or shortened by the Board. Currently there is approximately ~~$71.0~~$62.3 million available for repurchase of outstanding ~~common stock~~Common Stock under this publicly announced repurchase program. No shares were repurchased during the three months ended ~~September~~June 30, ~~2017.~~ 2019.

Our primary source of liquidity is cash flow from operations. Additional sources of liquidity are cash and cash equivalents, short-term investments and our credit facilities. Our ~~primary~~ cash and cash equivalents decreased from ~~$247.8~~$241.1 million at December 31, ~~2016~~2018 to ~~$201.2~~$235.4 million at ~~September~~June 30, ~~2017.~~

The table below sets forth a summary of the condensed consolidated statements of cash flows:

	Nine Months Ended September 30,			Six Months Ended June 30,
	2017	2016	Change	2019			2018			Change
Cash flows from operating activities	$ 106,340	$ 74,935	$ 31,405
Net cash flows provided by operating activities				$	110,488		$	88,381		$	22,107
Net cash and cash equivalents used in investing activities	(64,413)	(19,811)	(44,602)		(82,517	)		(53,627	)		(28,890	)
Net cash and cash equivalents used in financing activities	(97,846)	(54,288)	(43,558)		(32,955	)		(83,430	)		50,475
Effect of exchange rate changes on cash and cash equivalents	9,343	1,255	8,088		(35	)		(2,753	)		2,718
Net increase (decrease) in cash and cash equivalents	$ (46,576)	$ 2,091	$ (48,667)
Net decrease in cash and cash equivalents, including restricted cash				$	(5,019	)	$	(51,429	)	$	46,410

Net cash flows provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 was ~~$106.3~~$110.5 million. Net cash ~~flow~~flows provided by operating activities resulted from net income of ~~$30.1~~$68.4 million, depreciation and amortization of ~~$70.2~~intangible assets of $54.4 million, share-based compensation of ~~$13.9~~$9.8 million and a decrease in noncash working capital accounts of ~~$7.7~~$21.5 million. ~~Net cash provided by~~Cash flows from operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2018 was ~~$74.9~~$88.4 million. ~~Net cash flow provided by~~Cash flows from operating activities resulted from net income of ~~$16.4~~$44.2 million, depreciation and amortization of ~~$74.4~~$51.3 million, ~~and~~ share-based compensation of ~~$12.8~~$11.1 million and a decrease in noncash working capital accounts of $17.6 million. ~~These~~

Net cash and cash equivalents ~~provided by operations were partially offset by a decrease in working capital.~~

~~Net cash~~ used in investing activities was ~~$64.4~~$82.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017, compared to net~~2019. Net cash ~~used in investing activities of $19.8 million for the same period last year. Net~~and cash equivalents used in investing activities was primarily due to the purchase of property, plant and equipment of ~~$81.9~~$50.7 and the acquisition of GFAB for $33.2 million ~~and purchases of short-term investments of $9.7 million, partially offset~~

~~by $27.9 million of proceeds received upon~~during the ~~maturity of short-term investments.~~ six months ended June 30, 2019. Net cash and cash equivalents used in investing activities ~~during~~was $53.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2018. Net cash and cash equivalents used in investing activities was primarily due to the purchase of property, plant and equipment of ~~$47.1~~$53.0 million ~~and purchases of short-term investments of $17.5 million, partially offset by proceeds received on~~during the ~~maturity of short-term investments of $46.4 million.~~

Net cash and cash equivalents used in financing activities was $33.0 million for the six months ended June 30, 2019. Net cash used in financing activities ~~was $97.8 million for~~in the ~~nine~~six months ended ~~September~~June 30, ~~2017, compared~~2019 consisted primarily of $42.1 million net repayments of long-term debt, taxes paid on net share settlement of $1.6 million and dividend distributions to noncontrolling interests of $1.2 million. These uses of cash were partially offset by inflows of $6.7 million related to stock option exercises and $5.3 million of net increases in lines of credit and short-term debt.Net cash and cash equivalents used in financing activities ~~of $54.3~~was $83.4 million for the six months ended June 30, 2018. Net cash and cash equivalents used in the ~~same period last year. Net cash used in 2017~~six months ended June 30, 2018 consisted primarily of repayments of long-term debt, net of ~~$109.6~~$82.5 million and ~~payment~~taxes paid on net share settlement of ~~dividends to noncontrolling interests of $5.8~~$8.6 million, partially offset by proceeds from short-term line of credit of $3.4 million.

We use interest rate swaps, foreign exchange forward contracts and cross currency swaps to provide a level of protection against interest rate risks and foreign exchange exposure.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movements. To accomplish this objective, the ~~issuance~~Company primarily uses interest rate swaps, including interest rate collars, as part of ~~common stock~~its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of ~~$6.9~~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.

We are exposed to fluctuations in various foreign currencies against our different functional currencies. We use foreign currency forward agreements to manage this exposure and to preserve the economic value of foreign currency denominated monetary assets and liabilities; these instruments are not designated for hedge accounting treatment in accordance with ASC 815. The fair value of our foreign exchange hedges approximates zero.

During 2019, we used cross currency swaps to hedge our foreign exchange exposure related to our investment in our foreign subsidiaries. These instruments were subject to market fluctuations due to changes in foreign exchange rates and at times may be in a loss position. Market fluctuations were recorded to other comprehensive income/loss since these instruments are subject to hedge accounting. If these instruments are in a loss position at maturity, or if we decided to exit these instruments while they are in a loss position, we would have to make a cash payment in the amount of the loss position. During the second quarter of 2019, we decided to exit our positions in cross currency swaps. As a result of exiting this position we were required to make a cash payment of approximately $0.3 million.~~Net cash used in 2016 consisted primarily of repayments of long-term debt.~~

We do not have any transactions, arrangements ~~and~~or other relationships with unconsolidated entities that will affect our liquidity or capital resources. We have no special purpose entities that provide off-balance sheet financing, liquidity or market or credit risk support, nor do we engage in leasing, swap agreements, or outsourcing of research and development services that could expose us to liability that is not reflected on the face of our financial statements.

There have been no material changes in ~~any of~~ our ~~contractual obligations~~Contractual Obligations as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2018, filed with the SEC on February ~~27, 2016.~~

~~No material changes were made to the Company’s~~Our critical accounting policies ~~as set forth~~are described in ~~“Item 7.~~Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations,~~” included~~ and in the notes to our consolidated financial statements contained in our Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2016,~~2018 filed with the SEC on February ~~27, 2016.~~

21, 2019. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been discussed in the notes to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q in Note 1 – Nature of Operations, Basis of Presentation, Recently Issued Accounting Pronouncements and Updates to Accounting Policies and Estimates. The application of our critical accounting policies may require management to make judgments and estimates about the amounts reflected in the condensed consolidated financial statements. Management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates.

See Note 1 - Nature of Operations, Basis of Presentation, ~~and~~ Recently Issued Accounting Pronouncements and Updates to Accounting Policies and Estimates, of the Notes to Condensed Consolidated Financial Statements, for detailed information regarding the status of recently issued accounting pronouncements.

Our Internet address is http://www.diodes.com. Information included on, or accessible through, our website shall not be deemed to form a part of the Quarterly Report on Form 10-Q. We make available, free of charge through our Internet 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 Securities Exchange Act of 1934 (“Exchange Act”) as soon as reasonably practicable after such material is electronically filed with or furnished to the ~~Securities and Exchange Commission (the “SEC”).~~SEC. Our website also provides access to investor financial information, including SEC filings and press releases, as well as stock quotes and information on corporate governance compliance.

Cautionary Statement for Purposes of the “Safe Harbor” Provision of the Private Securities Litigation Reform Act of 1995

Except for the historical information contained herein, the matters addressed in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the ~~Securities~~ Exchange Act of ~~1934, as amended.~~1934. 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,” or similar phrases or the negatives of such terms. Such forward-looking statements are subject to a variety of risks and uncertainties, including those discussed under ~~“Risks~~“Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, and in other reports we file with the SEC from time to time, that could cause actual results to differ materially from those anticipated by our management. The ~~Private Securities Litigation Reform Act of 1995 (the “Act”)~~PSLRA provides certain “safe harbor” provisions for forward-looking statements. All forward-looking statements made in this Quarterly Report on Form 10-Q are made pursuant to the ~~Act.~~PSLRA.

All forward-looking statements contained in this Quarterly Report on Form 10-Q are subject to, in addition to the other matters described in this Quarterly Report on Form 10-Q, a variety of significant risks and uncertainties. The following discussion

highlights some of these risks and uncertainties. Further, from time to time, information provided by us or statements made by our employees may contain forward-looking information. There can be no assurance that actual results or business conditions will not differ materially from those set forth or suggested in such forward-looking statements as a result of various factors, including those discussed below.

For more detailed discussion of these factors, see the “Risk Factors” discussion in Item 1A of our most recent Annual Report on Form 10-K as filed with the SEC and in Part II, Item 1A of this ~~report.~~report The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this report, and we undertake no obligation to update the forward-looking statements to reflect subsequent events or circumstances.

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.

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.

One of our external suppliers is also a related party. The loss of this supplier could 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 adversely affected by any disruption in our information technology systems, which could adversely affect our cash flows, 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.

If we do not succeed in continuing to vertically integrate our business, we will not realize the cost and other efficiencies we anticipate, which could adversely affect our ability to compete, our operating results and financial condition.

Part of our growth strategy involves identifying and acquiring companies. We may be unable to identify suitable acquisition candidates or consummate desired acquisitions and, if we do make any acquisitions, we may be unable to successfully integrate any acquired companies with our operations, which could adversely affect our business, operating results and financial condition.

We are subject to litigation risks, including securities class action litigation and intellectual property litigation, which may be costly to defend and the outcome of which is uncertain and could adversely affect our business 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.

Our products, or products we purchase from third parties for resale, may be found to be defective and, as a result, warranty claims and product liability claims may be asserted against us and we may not have recourse against our suppliers, which may harm our business, reputation with our customers, operating results and financial condition.

We may fail to attract or retain the qualified technical, sales, marketing, finance and management/executive personnel required to operate our business successfully, which could adversely affect our business, operating results and financial condition.

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 ~~OEMs~~our direct sales 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.

The value of our benefit plan assets and liabilities is based on estimates and assumptions, which may prove inaccurate and the actual amount of expenses recorded in the consolidated financial statements could differ materially from the assumptions used.

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.

Certain of our customers and suppliers require us to comply with their codes of conduct, which may include certain restrictions that may substantially increase our cost of doing business as well as have an adverse effect on our operating efficiencies, operating results and financial condition.

Compliance with government regulations and customer demands regarding the use of “~~conflict minerals~~” “conflict minerals” may result in increased costs and may have a negative impact on our business, operating results and financial condition.

There are risks associated with previous and future acquisitions. We may ultimately not be successful in overcoming these risks or any other problems encountered in connection with acquisitions.

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.

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.

Our international operations subject us to risks that could adversely affect our operations.

We have significant operations and assets in China, the U.K., Germany, Hong Kong and Taiwan and, as a result, will be subject to risks inherent in doing business in those jurisdictions, which may adversely affect our financial performance and operating results.

Significant uncertainties related to changes in governmental policies and participation in international trading partnerships or economic unions currently exist, and, depending upon how such uncertainties are resolved, the changes could have a material adverse effect on us.

Tariffs or other restrictions imposed by the United States Trade Representative may affect our operations in the U.S. and may disrupt our activities in the U.S. and may have an adverse impact on our profitability and results of operations.

The U.K.’s referendum to exit from the European Union (“E.U.”) will continue to have uncertain effects and could adversely impact our business, results of operations and financial condition.

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 ~~our~~certain foreign subsidiaries ~~to the U.S.~~ may be subject to ~~U.S. federal and state~~foreign income taxes, thus reducing our net income.

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.

Our directors, executive officers and significant stockholders hold a substantial portion of our Common Stock, which may lead to conflicts with other stockholders over corporate transactions and other corporate matters.

We were formed in 1959, and our early corporate records are incomplete. As a result, we may have difficulty in assessing and defending against claims relating to rights to our Common Stock purporting to arise during periods for which our records are incomplete.

Non-cash tender offers, debt equity swaps or equity exchanges to consummate our business activities are likely to have the effect of diluting the ownership interest of existing stockholders, including qualified stockholders who receive shares of our Common Stock in such business activities.

Anti-takeover effects of certain provisions of Delaware law and our Certificate of Incorporation and Bylaws, may hinder a take-over attempt.

Certificate of Incorporation and Bylaw Provisions may deter a take-over attempt.

There have been no material changes to our market risks as disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2018, filed with the SEC on February ~~27, 2017.~~21, 2019.

Our Chief Executive Officer, Keh-Shew Lu, and Chief Financial Officer, ~~Richard D. White,~~Brett R. Whitmire, with the participation of our management, carried out an evaluation, as of ~~September~~June 30, ~~2017,~~2019, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e).) Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer believe that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures are effective at the reasonable assurance level to ensure that information required to be included in this report is:

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.

There was no change in our internal control over financial reporting, known to our Chief Executive Officer or Chief Financial Officer, that occurred in the three months ended ~~September~~June 30, ~~2017, which~~2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The Company is not ~~currently~~ a party to any pending litigation that we consider material.

Fromtimetotime,weareinvolvedinvariouslegalproceedingsthatariseinthenormalcourseofbusiness.Whileweintendto defendanylawsuitvigorously,wepresentlybelievethattheultimateoutcomeofanypendinglegalproceedingwillnothave anymaterialadverseeffectonourfinancialposition,cashflowsoroperatingresults.However,litigationissubjecttoinherent uncertainties,andunfat the vorableru~~lti~~lingscouldoccur.Anunfavorablerulingcouldincludemonetarydamat~~e ou~~tcges,whichcouldimpactom~~e of~~ any cu~~rrent p~~ending lega~~l p~~ro~~cee~~ding ~~will not h~~ave any ma~~teria~~l adverse ~~effect on~~ our financia~~l positio~~n, ~~cas~~h fl~~ows~~ or op~~eratin~~g ~~res~~ults. However, ~~liti~~g~~ati~~on busis subject to inher~~ent~~ ~~unc~~er~~tai~~n~~ties, and~~ unfavorable ru~~lings c~~ould occu~~r. An unfa~~vorabl~~e ruling c~~ould include m~~one~~ta~~ry d~~ama~~ges,~~ whic~~h cou~~ld im~~pact o~~ur business and operating results for theperiodinwhich the period in which the ulingoccuruli~~ng oc~~curs orfutureperiods.

~~There~~Except as identified in the modified Risk Factor set out below, there have been no material changes ~~from the~~to our risk factors from those disclosed in the ~~“Risk Factors”~~"Risk Factors" section of our Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2016,~~2018, filed with the ~~SEC~~Securities and Exchange Commission on February ~~27, 2017,~~21, 2019.

Tariffs or other ~~than~~restrictions imposed by the ~~modification of the following risk factor to reflect the use of foreign currency hedges intended to mitigate our exposures to foreign currency fluctuations.~~

~~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 adverselyUnited States Trade Representative may affect our ~~operating results. Furthermore,~~operations in the U.S., may disrupt our ~~operating results are reported~~activities 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 on our profitability and ~~be increasingly influential to~~results of operations and may encourage the independent development in China of products and electronic components that will compete with ours or displace our ~~overall sales, profits~~products and ~~operating results as amounts that are measured~~components, resulting in ~~foreign currency are translated back to U.S. dollars for reporting purposes. Our foreign currency risk may change over time as~~an adverse impact on our Chinese business.

In May 2019, at the direction of the President, the United States increased the level of ~~activity~~tariffs from 10 percent to 25 percent on approximately $200 billion worth of Chinese imports. The President also ordered the U.S. Trade Representative to begin the process of raising tariffs on essentially all remaining imports from China, which are valued at approximately $300 billion. These tariffs are in ~~foreign markets grows~~addition to the recently imposed new or higher tariffs on specified products imported from China in response to what the U.S. characterizes as unfair trade practices. China responded to the earlier increased tariffs by proposing new or higher tariffs on specified products imported from the United States. Negotiations between the U.S. and ~~could have~~China to resolve the issues that precipitated the impositions of these tariffs are reported to be ongoing, but the situation is dynamic and the timing and nature of any ultimate resolution is currently uncertain. In June 2019, President Trump and Chinese President Xi Jinping agreed that they did not plan more tariffs against each other’s countries, but on August 1, 2019, President Trump announced that on September 1, 2019, the U.S. would put an ~~adverse impact upon~~additional tariff of 10% on $300 billion of goods and products coming from China to the U.S.

Most of our ~~financial results, especially if the~~products are manufactured in China and then a portion of ~~our sales attributable~~those products are imported into the U.S. The impacts on us of the recently imposed and proposed tariffs are uncertain because of the dynamic nature of governmental actions and responses, as well as possible exemptions for certain products. If the U.S. and China are able to ~~Europe increases.~~negotiate the issues to restore a mutually advantageous and fair trading regime, the increased tariffs could be eliminated, but given the uncertainties, there can be no assurance of whether, or when, this will be accomplished. We have taken actions, and ~~plan~~may take additional steps, to ~~continue~~mitigate those impacts and protect our competitive position in the marketplace. If we determine to ~~take,~~pass some or all of these new tariff burdens on to our customers, the result may be a degradation of our competitive position and a loss of customers that would adversely affect our operating performance. It is not clear at this time what the ultimate outcome of these tariff actions and our mitigation efforts will be, but given the importance of our Chinese operations and related sales, and the impacts of existing and possible future restrictions with regard to transactions with Chinese entities, it is very possible that our operating results and/or financial condition may be adversely affected.

In addition, China is stepping up efforts to ~~mitigate~~design and manufacture semiconductors itself rather than buy from the U.S., amid fears that sanctions might cripple its high-tech industry. U.S. restrictions on exports to Chinese telecoms equipment makers have sharpened Beijing’s focus on semiconductor self-sufficiency. China’s ministry of finance announced tax breaks “to support the development of integrated circuit design and the software industry,” cancelling corporate taxes for some ~~of our foreign currency exposure by entering into foreign exchange hedging agreements with financial institutions to reduce exposures to some of~~companies for two years. Although the ~~principal currencies in countries in which we conduct sales, acquire raw materials, build products and make capital investments but~~outcome of these efforts ~~may not be successful. In this regard, these hedging agreements do not cover all currencies~~is uncertain, the development of such capacity in ~~which we do business, do not eliminate foreign currency risk entirely for the currencies that they do cover,~~China would likely have a material adverse effect on our profitability and ~~involve costs and risks~~results of ~~their own in the form of transaction costs, credit requirements and counterparty risk.~~operations.

Number

Description

Form

Date of First Filing

Exhibit
Number

Filed
Herewith

Description

Form

Date of First Filing

Exhibit
Number

Filed
Herewith

3.1

Certificate of Incorporation, as amended

10-Q

May 10, 2013

3.1

Certificate of Incorporation, as amended

10-K

February 20, 2018

3.1

3.2

Amended By-laws of the Company as of January 6, 2016

8-K

January 11, 2016

3.1

Amended By-laws of the Company as of January 6, 2016

8-K

January 11, 2016

3.1

4.1

Form of Certificate for Common Stock, par value $0.66 2/3 per share

S-3

August 25, 2005

4.1

Form of Certificate for Common Stock, par value $0.66 2/3 per share

S-3

August 25, 2005

4.1

10.1*

2013 Equity Incentive Plan (As Amended and Restated on May 3, 2017)

S-8

August 12, 2017

99.1

10.1

Consent to Credit Agreement

31.1

Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification Pursuant to Rule 13a-14(a) /15d-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) /15d-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**

Certification Pursuant to 18 U.S.C. 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**

Certification Pursuant to 18 U.S.C. 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

XBRL Instance Document

32.1*

Certification Pursuant to 18 U.S.C. 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*

Certification Pursuant to 18 U.S.C. 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.SCH

XBRL Taxonomy Extension Schema

Inline XBRL Taxonomy Extension Schema

101.CAL

XBRL Taxonomy Extension Calculation Linkbase

Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Labels Linkbase

Inline XBRL Taxonomy Extension Labels Linkbase

101.PRE

XBRL Taxonomy Extension Presentation Linkbase

Inline XBRL Taxonomy Extension Presentation Linkbase

104

Cover Page Interactive Data File, formatted in Inline XBRL

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 Quarterly Report on Form 10-Q. 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 and/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.

Pursuant to the requirements 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.

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, Par Value $0.66 2/3		DIOD		The NASDAQ Stock Market LLC

		Page
Part I – Financial Information
Item 1. Financial Statements		3
~~Item 1. Financial Statements~~		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1723
Item 3. Quantitative and Qualitative Disclosures About Market Risk		35
Item 4. Controls and Procedures		35
Part II – Other Information		27
Item ~~4. Controls and Procedures~~1. Legal Proceedings		2736
~~Part II – Other Information~~Item 1A. Risk Factors		2836
~~Item 1. Legal Proceedings~~		28
~~Item 1A. Risk Factors~~		28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		2836
Item 3. Defaults Upon Senior Securities		2837
Item 4. Mine Safety Disclosures		2837
Item 5. Other Information		2837
Item 6. Exhibits		2938
Signatures		3039

	Six Months Ended
	June 30,
	2019	2018
Current assets:
Cash and cash equivalents	$235,352	$152,403
Restricted cash (included in other current assets)	1,462	1,370
Total cash, cash equivalents and restricted cash	$236,814	$153,773

Standard No.	Standard Name	Standard Effective Date
2018-13	Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement	January 1, 2020
2018-14	Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans	January 1, 2020

Balance at December 31, 2016	$	129,412
Foreign currency translation adjustment		4,126
Balance at September 30, 2017	$	133,538

Balance at December 31, 2018	$	132,437
Acquisitions:
Wafer fabrication facility in Greenock, Scotland ^(a)		931
Canyon investment ^(b)		1,443
ERIS investment in Yea-Shin ^(c)		4,320
Foreign currency translation adjustment		(359	)
Balance at June 30, 2019	$	138,772

Amortization expense	2017		2016
Three months ended September 30,	$	4,694	$	5,117
Nine months ended September 30, 2017	$	14,098	$	15,379

	Number of Instruments		Notional Amount
	June 30, 2019	December 31, 2018	June 30, 2019		December 31, 2018
Interest rate swaps and collars	12	12	$	210,000	$	210,000

	Other Current Assets				Other Assets				Other Current Liabilities				Other Liabilities
	June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018
Interest rate swaps and collars	$	643	$	1,936	$	96	$	2,795	$	23	$	-	$	207	$	-

	Amount of Gain or (Loss) Recognized in Net Income						Location of Gain or (Loss) Recognized in Net Income

Derivative Instruments Not Designated as Hedging Instruments
	June 30,
	2019			2018
Three Months Ended
Foreign currency forward contracts	$	1,660		$	(6,764	)	Foreign currency loss, net
Six Months Ended
Foreign currency forward contracts	$	(1,230	)	$	(5,370	)	Foreign currency loss, net

		June 30, 2019
Operating leases:
Operating lease ROU assets		$63,919

Current operating lease liabilities		12,268
Noncurrent operating lease liabilities		33,506
Total operating lease liabilities		$45,774

Finance leases:
Finance lease ROU assets		$3,396
Accumulated amortization		(1,436)
Finance lease ROU assets, net		$1,960

Current finance lease liabilities		$941
Non-current finance lease liabilities		593
Total finance lease liabilities		$1,534

Weighted average remaining lease term (in years):
Operating leases		4.8
Finance leases		1.7

Weighted average discount rate:
Operating leases		3.8%
Finance leases		3.6%

		Six Months Ended
		June 30, 2019
Cash paid for the amounts included in the measurements of lease liabilities:
Operating cash outflows from operating leases		$10,154
Operating cash outflows from finance leases		28
Financing cash outflow from finance leases		588

ROU assets obtained in exchange for lease liabilities incurred:
Operating leases		3,198

	Three Months Ended	Nine Months Ended
Early supply contract termination	$ -	$ 1,985
Cost of equipment relocation	429	501
Asset retirement obligation	701	935
Retention costs	909	2,687
	$ 2,039	$ 6,108

Property, plant and equipment, net	$	24.4
Inventories		3.6
Prepaid expenses and other		5.2
Goodwill		0.9
Deferred tax liabilities			1.0

	Early Contract Termination	Retention Costs	Equipment Relocation	Total
Beginning balance, January 1, 2017	$ -	$ -	$ -	$ -
Costs accrued	1,985	2,687	501	5,173
Restructuring costs paid	(1,985)	(14)	(501)	(2,500)
Balance at September 30, 2017	$ -	$ 2,673	$ -	$ 2,673

~~Asset retirement obligation, January 1, 2017~~					~~$ 486~~
~~Accrual of additional asset retirement obligation~~					~~1,403~~
~~Amount paid~~					~~(1,125)~~
~~Asset retirement obligation, September 30, 2017~~					~~$ 764~~

Description	Amount outstanding	Interest Rate	Maturity Date
Short-term debt:
Foreign credit lines	$15,454	Libor or other similar indices plus a specified margin	Various during 2019 - 2020

Long-term debt
Notes payable to Bank of Taiwan	4,256	Two-year savings rate +0.1148%	June 2033
Notes payable to CTBC Bank	15,325	TAIBOR 3 month rate +.05%	May 2024
U.S. Credit facility;
Revolving portion	41,500	Libor + a specified margin	October 2021
Term portion	112,000	Libor + a specified margin	October 2021
Total long-term debt	173,081
Less: Current portion of long-term debt	(29,988)
Less: Unamortized debt issuance costs	(1,174)
Total long-term debt, net of current portion	$141,919

	DIODES INCORPORATED
	(Registrant)

~~November 7, 2017~~ August 5, 2019	By: /s/ Keh-Shew Lu
Date	~~KEH SHEW~~KEH-SHEW LU
	President and Chief Executive Officer
	(Principal Executive Officer)



~~November 7, 2017~~August 5, 2019	By: /s/ ~~Richard D. White~~ Brett R. Whitmire
Date	~~RICHARD D. WHITE~~BRETT R. WHITMIRE
	Chief Financial Officer ~~and Secretary~~
	(Principal Financial Officer)



~~November 7, 2017~~	~~By: /s/ Brett R. Whitmire~~
~~Date~~	~~BRETT R. WHITMIRE~~ ~~Corporate Controller~~
	~~(Principal Accounting Officer)~~

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Smaller reporting company

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