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” 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 ~~August~~May 3, ~~2018~~2019 was ~~50,088,309.~~50,613,957.

	June 30,			December 31,			March 31,			December 31,
	2018			2017			2019			2018
	(Unaudited)						(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	152,403		$	203,820		$	301,167		$	241,053
Short-term investments		7,225			4,558			6,751			7,499
Accounts receivable, net of allowances of $3,687 and $4,480 at June 30, 2018 and December 31, 2017, respectively		199,949			200,112
Accounts receivable, net of allowances of $4,258 and $4,102 at March 31, 2019 and December 31, 2018, respectively								215,229			228,405
Inventories		222,786			216,506			216,569			215,435
Prepaid expenses and other		36,177			37,328			41,274			42,446
Total current assets		618,540			662,324			780,990			734,838
Property, plant and equipment, net		460,237			459,169			441,215			446,835
Deferred income tax		39,811			40,580			31,830			31,652
Goodwill		132,829			134,187			135,669			132,437
Intangible assets, net		146,941			156,445			133,506			137,935
Other		38,414			35,968			89,788			42,674
Total assets	$	1,436,772		$	1,488,673		$	1,612,998		$	1,526,371

Liabilities
Current liabilities:
Line of credit	$	4,268		$	1,008		$	12,330		$	10,254
Accounts payable		104,575			108,001			107,078			117,808
Accrued liabilities and other		88,225			99,301			86,880			82,605
Income tax payable		16,920			18,216			21,452			15,744
Current portion of long-term debt		23,717			20,636			28,403			27,613
Total current liabilities		237,705			247,162			256,143			254,024
Long-term debt, net of current portion		162,121			247,492			187,378			186,143
Deferred tax liabilities		26,322			25,176			18,003			17,993
Other long-term liabilities		87,809			94,925			134,176			90,779
Total liabilities		513,957			614,755			595,700			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; 49,846,164 and 49,130,090, issued and outstanding at June 30, 2018 and December 31, 2017, respectively		34,204			33,727
Common stock - par value $0.66 2/3 per share; 70,000,000 shares authorized; 50,596,756 and 50,221,035, issued and outstanding at March 31, 2019 and December 31, 2018, respectively								34,704			34,454
Additional paid-in capital		391,332			386,338			410,163			399,915
Retained earnings		576,280			532,687			668,424			636,708
Treasury stock, at cost, 1,457,206 shares held at June 30, 2018 and December 31, 2017		(37,768	)		(37,768	)
Treasury stock, at cost, 1,457,206 shares held at March 31, 2019 and December 31, 2018								(37,768	)		(37,768	)
Accumulated other comprehensive loss		(81,633	)		(83,480	)		(106,848	)		(101,846	)
Total stockholders' equity		882,415			831,504			968,675			931,463
Noncontrolling interest		40,400			42,414			48,623			45,969
Total equity		922,815			873,918			1,017,298			977,432
Total liabilities and stockholders' equity	$	1,436,772		$	1,488,673		$	1,612,998		$	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						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2018			2017			2018			2017			2019			2018
Net sales	$	304,085		$	264,224		$	578,597		$	500,527		$	302,293		$	274,512
Cost of goods sold		196,817			174,085			372,734			336,477			189,882			175,917
Gross profit		107,268			90,139			205,863			164,050			112,411			98,595

Operating expenses
Selling, general and administrative		42,153			39,697			89,303			79,387			43,688			47,150
Research and development		22,050			19,796			42,250			37,836			22,170			20,200
Amortization of acquisition related intangible assets		4,678			4,646			9,445			9,404			4,484			4,767
Restructuring		526			1,838			206			4,069
Other operating expense (income)		17			334			(125	)		169
Other operating income														(54	)		(462	)
Total operating expense		69,424			66,311			141,079			130,865			70,288			71,655

Income from operations		37,844			23,828			64,784			33,185			42,123			26,940

Other income (expense)
Interest income		443			308			957			603			875			514
Interest expense		(2,544	)		(3,447	)		(5,301	)		(6,932	)		(2,145	)		(2,757	)
Foreign currency gain (loss), net		300			(1,628	)		(2,729	)		(5,422	)
Foreign currency loss, net														(64	)		(3,029	)
Other income		377			802			5,012			531			1,245			4,635
Total other expense		(1,424	)		(3,965	)		(2,061	)		(11,220	)		(89	)		(637	)

Income before income taxes and noncontrolling interest		36,420			19,863			62,723			21,965			42,034			26,303
Income tax provision		10,753			6,039			18,536			6,599			10,298			7,783
Net income		25,667			13,824			44,187			15,366			31,736			18,520
Less net income attributable to noncontrolling interest		(599	)		(645	)		(593	)		(970	)
Less net (income) loss attributable to noncontrolling interest														(20	)		6
Net income attributable to common stockholders	$	25,068		$	13,179		$	43,594		$	14,396		$	31,716		$	18,526

Earnings per share attributable to common stockholders:
Basic	$	0.50		$	0.27		$	0.88		$	0.30		$	0.63		$	0.38
Diluted	$	0.49		$	0.26		$	0.86		$	0.29		$	0.62		$	0.37
Number of shares used in earnings per share computation:
Basic		49,680			48,518			49,509			48,418			50,398			49,337
Diluted		50,792			49,944			50,727			49,807			51,462			50,622

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

	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2018			2017			2018			2017			2019			2018
Net income	$	25,667		$	13,824		$	44,187		$	15,366		$	31,736		$	18,520
Unrealized gain (loss) on defined benefit plan, net of tax		7,266			(2,238	)		7,701			(1,382	)
Unrealized gain (loss) on interest rate swap, net of tax		927			(647	)		3,275			(120	)
Unrealized foreign currency (loss) gain, net of tax		(24,985	)		7,725			(9,130	)		17,167
Unrealized (loss) gain on defined benefit plan, net of tax														(6,029	)		435
Unrealized (loss) gain on swaps and collars, net of tax														(3,909	)		2,348
Unrealized foreign currency gain, net of tax														4,936			15,856
Comprehensive income		8,875			18,664			46,033			31,031			26,734			37,159
Less: Comprehensive income attributable to noncontrolling interest		(599	)		(645	)		(593	)		(970	)		(20	)		6
Total comprehensive income attributable to common stockholders	$	8,276		$	18,019		$	45,440		$	30,061		$	26,714		$	37,165

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
(Amounts in thousands)	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		-		-		-			-			-			18,526		18,639			37,165			(6	)		37,159
Noncontrolling interests		-		-		-			-			-			-		-			-			-			-
Dividends to noncontrolling interest		-		-		-			-			-			-		-			-			(1,152	)		(1,152	)
Common stock issued for share-based plans		441		294		-			-			574			-		-			868			-			868
Share-based compensation		-		-		-			-			6,280			-		-			6,280			-			6,280
Tax related to net share settlement		-		-		-			-			(7,264	)		-		-			(7,264	)		-			(7,264	)
Balance, March 31, 2018		51,028	$	34,021		(1,457	)	$	(37,768	)	$	385,928		$	551,213	$	(64,841	)	$	868,553		$	41,256		$	909,809

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		-		-		-			-			-			31,716		(5,002	)		26,714			20			26,734
Noncontrolling interests		-		-		-			-			-			-		-			-			2,755			2,755
Dividends to noncontrolling interest		-		-		-			-			-			-		-			-			(121	)		(121	)
Common stock issued for share-based plans		376		250		-			-			6,417			-		-			6,667			-			6,667
Share-based compensation		-		-		-			-			4,476			-		-			4,476			-			4,476
Tax related to net share settlement		-		-		-			-			(645	)		-		-			(645	)		-			(645	)
Balance, March 31, 2019		52,054	$	34,704		(1,457	)	$	(37,768	)	$	410,163		$	668,424	$	(106,848	)	$	968,675		$	48,623		$	1,017,298

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

	Six Months Ended						Three Months Ended
	June 30,						March 31,
	2018			2017			2019			2018
Cash flows from operating activities	$	88,381		$	65,437
Net cash flows provided by operating activities							$	69,889		$	53,959

Cash flows from investing activities
Purchases of property, plant and equipment		(52,990	)		(43,883	)		(18,639	)		(31,636	)
Purchases of short-term investments		(10,171	)		(9,821	)		(3,153	)		(237	)
Proceeds from maturity of short-term investments		7,289			24,108			3,982			1,027
Other		2,245			(554	)		658			1,411
Net cash and cash equivalents used in investing activities		(53,627	)		(30,150	)		(17,152	)		(29,435	)

Cash flows from financing activities
Advances on lines of credit and short-term debt		3,414			392			3,568			3,414
Repayments of line of credit and short-term debt								(1,461	)		-
Taxes paid related to net share settlement		(8,617	)		(128	)		(645	)		(7,264	)
Proceeds from long-term debt		189,656			7,500			85,000			91,000
Repayments of long-term debt		(272,170	)		(34,404	)		(83,089	)		(137,482	)
Net proceeds from issuance of common stock		3,009			6,666			6,667			866
Proceeds from and repayment of capital lease obligation		1,775			(378	)
Dividend distribution to noncontrolling interest		(1,151	)		(3,282	)
Repayment of finance lease obligation								(293	)		(603	)
Other		654			225			(120	)		227
Net cash and cash equivalents used in financing activities		(83,430	)		(23,409	)
Net cash and cash equivalents provided by (used in) financing activities								9,627			(49,842	)

Effect of exchange rate changes on cash and cash equivalents		(2,753	)		6,331			(1,890	)		3,971
Change in cash and cash equivalents, including restricted cash		(51,429	)		18,209			60,474			(21,347	)
Cash and cash equivalents, beginning of period, including restricted cash		205,202			249,712			241,833			205,202
Cash and cash equivalents, end of period, including restricted cash	$	153,773		$	267,921		$	302,307		$	183,855

Supplemental Cash Flow Information
Interest	$	5,334		$	7,079
Taxes	$	16,643		$	20,036
Interest paid during the period							$	2,095		$	2,790
Taxes paid during the period							$	4,323		$	4,139

Non-cash financing activities:
Decrease/(increase) in accounts payable related to the purchase of property, plant and equipment	$	5,452		$	(13,840	)
Non-cash investing and financing activities:
Decrease in accounts payable related to the purchase of property, plant and equipment							$	2,366		$	6,917
Increase in dividend accrued for noncontrolling interest	$	(1,427	)	$	(1,449	)	$	-		$	(1,000	)

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

				Three Months Ended
	Six Months Ended			March 31,
		June 30, 2018	June 30, 2017	2019	2018
Current assets:
Cash and cash equivalents		$ 152,403	$ 266,605	$301,167	$182,411
Restricted cash (included in other current assets)		1,370	1,316	1,140	1,444
Total cash, cash equivalents and restricted cash		$ 153,773	$ 267,921	$302,307	$183,855

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. 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~~Oldham and in Shanghai, ~~China.~~China and Greenock, Scotland. We have assembly and test facilities located in Shanghai, Jinan and 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, ~~2017~~2018 is derived from audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 filed with the Securities and Exchange Commission (“SEC”) on February ~~20, 2018~~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 six~~ months ended ~~June 30, 2018~~March 31, 2019 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, ~~2018.~~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) -~~ On January 1, 2018, we adopted the comprehensive new revenue recognition standard issued by the FASB. 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 previous revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance. The adoption of this standard did not have a material impact on our condensed consolidated financial position, reported revenue, results of operations or cash flows as of and for the three or six months ended June 30, 2018. See Note 7 for our expanded revenue disclosures required by the new standard.

~~ASU No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments~~ – In November 2016, the FASB issued guidance on the presentation of restricted cash which requires that on the statement of cash flows, amounts generally described as restricted cash or restricted cash equivalents should be included within the beginning and ending balances of cash and cash equivalents. We adopted this guidance in the first quarter of 2018 on a retrospective basis. As a result, restricted cash amounts that have historically been included in prepaid expenses on our consolidated balance sheets are now included with cash and cash equivalents on the consolidated statements of cash flows. As of June 30, 2018 and December 31, 2017 we had restricted cash of approximately $1.4 million. Restricted cash is pledged as collateral when we enter into agreements with banks for certain banking facilities.

~~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 and requires, among other things, lessees to recognize a right-of-use (“ROU”) asset and lease liability for most lease ~~arrangements .~~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 the earliest comparative period presented in the financial statements.~~ ~~The ASU will become effective for the Company for interim and annual reporting periods in fiscal years beginning after December 15, 2018. The standard offers a number of~~following allowed practical expedients ~~for transition and certain expedients specific to lessees or lessors. Both lessees and lessors are~~as permitted ~~to make an election to apply a package of practical expedients available for implementation~~ under the ~~standard. For~~ transition guidance within the ~~Company will recognize all effects~~new standard:

~~The Company will continue its implementation work~~ of ASU 2016-02, the Company recorded ROU assets of $68.3 million, including land-use rights of $17.1 million previously recorded in ~~2018, including enhancements~~other assets and $2.5 million previously recorded in property, plant and equipment and ROU liabilities of $50.4 million. For additional information related to the Company’s ~~internal control framework, accounting systems and related documentation surrounding its lease accounting processes and the preparation of any additional disclosures that will be required.~~leases, see Note 10.

~~ASU 2018-10,~~ ~~Codification Improvements to Topic 842, Leases (“ASU 2016-02”) -~~ In July 2018 the FASB issued ASU 2018-10, to add clarity to certain areas within ASU 2016-02. The effective date and transition requirements will be the same as ASU 2016-02. The Company will evaluate and adopt this ASU in conjunction with ASU 2016-02.

~~ASU 2018-11,~~ ~~Leases (Topic 842): Targeted Improvements (“ASU 2018-11”) -~~ In July 2018, the FASB issued ASU 2018-11, which now allows entities the option of recognizing the cumulative effect of applying the new standard as an adjustment to the opening balance of retained earnings in the year of adoption (January 1, 2019) while continuing to present all prior periods under previous lease accounting guidance. ~~The Company will evaluate and adopt this ASU in conjunction with ASU 2016-02.~~

ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting ("ASU 2018-07") - In June 2018, the FASB issued ASU 2018-07, which simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation—Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 iswas effective for ~~public~~the Company on January 1, 2019. The adoption of this standard did not have a material effect on our condensed consolidated financial statements or disclosures.

ASU No. 2017-12 - Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”) -In August 2017, the FASB issued ASU No. 2017-12 to better align hedge accounting with risk management strategies, and as a result, more hedging strategies will be eligible for hedge 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 that fiscal year. We~~and the 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. 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the 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 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 provides the Company the ability to utilize the OIS rate based on SOFR as the benchmark interest rate on certain hedges of interest 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 ~~currently assessing the effect this guidance may~~not expected to have a material impact on our consolidated condensed financial ~~statements.~~ 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. During the three months ended March 31, 2019 and 2018 we paid no dividends on our Common Stock.

The table below sets forth the reconciliation between net income and the weighted average shares outstanding used for calculating basic and diluted EPS:

	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2018		2017		2018		2017		2019		2018
Earnings (numerator)
Net income attributable to common stockholders	$	25,068	$	13,179	$	43,594	$	14,396	$	31,716	$	18,526

Shares (denominator)
Weighted average common shares outstanding (basic)		49,680		48,518		49,509		48,418		50,398		49,337
Dilutive effect of stock options and stock awards outstanding		1,112		1,426		1,218		1,389		1,064		1,285
Adjusted weighted average common shares outstanding (diluted)		50,792		49,944		50,727		49,807		51,462		50,622

Earnings per share attributable to common stockholders
Basic	$	0.50	$	0.27	$	0.88	$	0.30	$	0.63	$	0.38
Diluted	$	0.49	$	0.26	$	0.86	$	0.29	$	0.62	$	0.37

Stock options and stock awards excluded from EPS calculation because the effect would be anti-dilutive		24		854		13		801		58		6

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

	June 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Finished goods	$	73,179	$	81,194	$	55,493	$	59,244
Work-in-progress		55,475		52,578		64,243		59,166
Raw materials		94,132		82,734		96,833		97,025
Total	$	222,786	$	216,506	$	216,569	$	215,435

The increase in goodwill is related to the preliminary purchase price accounting allocation of an investment in Canyon Semiconductor. This amount possibly will be changed when the purchase price allocation becomes final later in 2019.

	June 30,			December 31,			March 31,			December 31,
	2018			2017			2019			2018
Intangible assets subject to amortization:
Gross carrying amount	$	238,867		$	234,533		$	243,447		$	238,867
Accumulated amortization		(97,505	)		(88,059	)		(110,894	)		(106,410	)
Foreign currency translation adjustment		(8,254	)		(8,249	)		(8,270	)		(8,281	)
Total		133,108			138,225			124,283			124,176
Intangible assets with indefinite lives:
Gross carrying amount		14,883			19,217			10,303			14,883
Foreign currency translation adjustment		(1,050	)		(997	)		(1,080	)		(1,124	)
Total		13,833			18,220			9,223			13,759
Total intangible assets, net	$	146,941		$	156,445		$	133,506		$	137,935

The table below sets forth amortization expense related to intangible assets subject to amortization:

The Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017. The Tax Act reduced the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, provided an exemption from U.S. federal tax for dividends received from foreign subsidiaries, and created new taxes on certain foreign sourced earnings. As of the completion of these financial statements and related disclosures, we have not completed our accounting for the tax effects of the Tax Act on our 2017 tax year. We have not made any adjustments to the provisional tax expense of $45.9 million we recorded in the fourth quarter of 2017 to account for the tax effects of the Tax Act. The Company expects to finalize the accounting for the effects of the Tax Act on the 2017 tax year no later than the fourth quarter of 2018, in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 118. Future adjustments made to the provisional effects will be reported as a component of income tax expense from continuing operations in the reporting period in which any such adjustments are determined.

We incorporated the effects of the Tax Act into our 29.9% estimated annual effective tax rate for 2018. As shown below, the actual 29.5% effective tax rate for the quarter ended June 30, 2018, varies from the estimated annual tax rate due to discrete items related to stock-based compensation activity during the quarter (accounted for under ASU 2016-09).

	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2018			2017			2018			2017			2019			2018
Domestic pre-tax income (loss)	$	5,350		$	(22,032	)	$	(4,022	)	$	(35,243	)
Domestic pre-tax loss													$	12,486		$	(9,372	)
Foreign pre-tax income	$	31,070		$	41,895		$	66,745		$	57,208		$	29,548		$	35,675
Income tax provision	$	10,753		$	6,039		$	18,536		$	6,599		$	10,298		$	7,783
Effective tax rate		29.5	%		30.4	%		29.6	%		30.0	%		24.5	%		29.6	%
Impact of tax holidays on tax expense	$	70		$	(857	)	$	(742	)	$	(1,820	)	$	277		$	(812	)
Earnings per share impact of tax holidays:
Basic	$	-		$	0.02		$	0.01		$	0.04		$	(0.01	)	$	0.02
Diluted	$	-		$	0.02		$	0.01		$	0.04		$	(0.01	)	$	0.02

The decrease in the effective tax rate for the three ~~and six~~ months ended ~~June 30, 2018~~March 31, 2019 when compared to the three ~~and six~~ months ended ~~June 30, 2017,~~March 31, 2018, is primarily attributable to ~~a decrease due to differences in stock-based compensation activity during the comparable periods, offset by~~ an increase ~~due to the “GILTI” tax, which is~~in estimated full year global pretax book income and a ~~new tax on global intangible low-taxed income of non-U.S. subsidiaries that was created by the Tax Act and to which the Company is subject effective January 1, 2018.~~net decrease in unfavorable U.S. permanent differences.

Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of European and Asian subsidiaries. Any future distributions of for~~foreign~~eign earnings will not be subject to additional U.S. income tax, but may be subject to non-U.S. withholding taxes.

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations by tax authorities for tax years before 2008, or for the 2010 and 2011 tax years. We are no longer subject to China income tax examinations by tax authorities for tax years before ~~2007.~~2008. 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 ~~2012.~~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 ~~June 30, 2018,~~March 31, 2019, the gross amount of unrecognized tax benefits was approximately ~~$32.3~~$34.0 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~~recorded:

	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2018		2017		2018		2017		2019		2018
Cost of goods sold	$	80	$	153	$	170	$	311	$	125	$	90
Selling, general and administrative		4,031		3,993		9,484		7,297		3,637		5,454
Research and development		689		688		1,426		1,357		715		736
Total share-based compensation expense	$	4,800	$	4,834	$	11,080	$	8,965	$	4,477	$	6,280

	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2018		2017		2018		2017		2019		2018
Stock options	$	84	$	301	$	275	$	598	$	-	$	191
Share grants		4,716		4,533		10,805		8,367		4,477		6,089
Total share-based compensation expense	$	4,800	$	4,834	$	11,080	$	8,965	$	4,477	$	6,280

Stock Options. Approximately ~~$3.0~~$6.7 million in cash proceeds was received from stock option exercises during the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019.

As of ~~June 30, 2018, there was~~March 31, 2019, we had no unrecognized share-based compensation expense related to unvested stock 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.~~criteria over time. Our Chief Executive Officer had a grant of 600,000 performance-based stock units that vested upon the Company reaching $1.0 billion in revenue. Based on the Company reaching approximately $1.1 billion in revenue in 2017, our Chief Executive Officer’s grant of 600,000 performance-based stock units were released to the Chief Executive Officer, upon filing of the Company’s Annual Report on Form 10-K, in February 2018. The expense related to the 600,000 performance-based units was all recognized in previous periods. During the six months ended June 30, 2018, we issued 357,520 stock awards. This was primarily made up of the annual grant for officers and directors.

As of ~~June 30, 2018,~~March 31, 2019, total unrecognized share-based compensation expense related to share grants was approximately ~~$15.1~~$40.1 million, before income taxes, and is expected to be recognized over a weighted average period of approximately ~~2.3~~2.1 years.

~~Stock Modification.~~ During the six months ended June 30, 2018 we modified previously granted stock option and stock awards for two corporate officers who retired. The result of the modification was the acceleration of the vesting of 7,500 stock options and 79,720 stock awards for the corporate officers. The incremental expense recorded for this modification was approximately $1.8 million, which was expensed in SG&A in the six months ended June 30, 2018.

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 ~~and six~~ months ended ~~June 30,~~March 31, 2019, no customer accounted for 10% or more or our net sales.During the three months ended March 31, 2018, one customer, a broad-based global distributor that sells to thousands of different end users, accounted for ~~10.9% and 10.7%~~10.3% or ~~$33.3 million and $61.7 million, respectively, of our revenue. For the three months ended June 30, 2017, the same customer accounted for 10.0% or $26.6~~$28.4 million of our ~~revenue. The~~net sales. This customer did not account for 10% or greater of our outstanding accounts receivable at ~~June 30, 2018 or 2017. No customers accounted for 10% or greater of our revenue for the six months ended June 30, 2017.~~March 31, 2018.

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

Three Months Ended
June 30, 2018	Asia			North America			Europe			Consolidated
March 31, 2019													Asia			North America			Europe			Consolidated
Total sales	$	269,290		$	38,392		$	51,175		$	358,857		$	273,900		$	101,280		$	51,052		$	426,232
Intercompany elimination		(33,813	)		(6,358	)		(14,601	)		(54,772	)		(73,597	)		(37,916	)		(12,426	)		(123,939	)
Net sales	$	235,477		$	32,034		$	36,574		$	304,085		$	200,303		$	63,364		$	38,626		$	302,293

Three Months Ended
June 30, 2017	Asia			North America			Europe			Consolidated
March 31, 2018													Asia			North America			Europe			Consolidated
Total sales	$	250,551		$	47,873		$	45,807		$	344,231		$	244,530		$	26,836		$	49,998		$	321,364
Intercompany elimination		(41,149	)		(22,946	)		(15,912	)		(80,007	)		(31,827	)		(1,145	)		(13,880	)		(46,852	)
Net sales	$	209,402		$	24,927		$	29,895		$	264,224		$	212,703		$	25,691		$	36,118		$	274,512


As of and for the Six Months Ended
June 30, 2018	Asia			North America			Europe			Consolidated
Total sales	$	513,820		$	65,228		$	101,173		$	680,221
Intercompany elimination		(65,640	)		(7,503	)		(28,481	)		(101,624	)
Net sales	$	448,180		$	57,725		$	72,692		$	578,597

Property, plant and equipment, net	$	410,207		$	25,540		$	24,490		$	460,237
Total assets	$	1,090,931		$	155,395		$	190,446		$	1,436,772

As of and for the Six Months Ended
June 30, 2017	Asia			North America			Europe			Consolidated
Total sales	$	468,894		$	90,752		$	86,825		$	646,471
Intercompany elimination		(74,488	)		(40,486	)		(30,970	)		(145,944	)
Net sales	$	394,406		$	50,266		$	55,855		$	500,527

Property, plant and equipment, net	$	350,297		$	56,691		$	20,080		$	427,068
Total assets	$	993,324		$	378,736		$	207,069		$	1,579,129

~~Changes in Accounting Policies.~~ Effective January 1, 2018, we adopted a comprehensive new revenue recognition standard. The details of the significant changes to our accounting policies resulting from the adoption of the new standard are set out below. We adopted the standard using a modified retrospective method. There was no change in our revenue reported for the three and six months ended June 30, 2017. The adoption of this standard did not have a material impact on our condensed consolidated financial position, reported revenue, results of operations or cash flows as of and for the three or six months ended June 30, 2018.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account under ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Generally speaking, our performance obligations represent a promise to transfer various semiconductor products, and have the same pattern of revenue recognition. Our performance obligations are satisfied at either a point in time, or over time as work progresses. The vast majority of our revenue from products and services is accounted for at a

~~point in time. Substantially all of our revenue in direct and Distributor sales is recognized at a point in time. Further, the payment terms on our sales are based on negotiations with our customers.~~

Customers can order different types of semiconductors in a single contract (purchase order), and each line on a purchase order represents a separate performance obligation. Depending on the terms of an arrangement, we may also be responsible for shipping and handling activities. In accordance with ASC 606-10-25-18B, we have elected to account for shipping and handling as activities to fulfill our promise to transfer the good(s). As such, shipping and handling activities do not represent a separate performance obligation, and are accrued as a fulfillment cost. Further, although we offer warranties on our products, our warranties are considered to be assurance-type in nature and do not cover anything beyond ensuring that the product is functioning as intended. Based on the guidance in ASC 606, assurance-type warranties do not represent separate performance obligations; therefore, the primary performance obligation in the majority of our contracts is the delivery of a specific good through the purchase order submitted by our customer.

We record allowances/reserves for a number of items. The following items are the largest dollar items for which we record allowances/reserves with ship and debit making up the vast majority: (i) ship and debit, which arise when we issue credit to certain distributors upon their shipments to their end customers; (ii) stock rotation, which are contractual obligations that permit certain distributors, up to four times a year, to return a portion of their inventory based on historical shipments to them in exchange for an equal and offsetting order; and (iii) price protection, which arise when market conditions cause average selling prices to decrease and we issue credit to certain distributors on their inventory. Ship and debit reserves are recorded as a reduction to net sales with a corresponding reduction to accounts receivable. Stock rotation reserves are recorded as a reduction to net sales. Price protection reserves are recorded as a reduction to net sales with a corresponding increase in accrued liabilities.

We also assess our customer’s ability and intention to pay, which is based on a variety of factors including our customer’s historical payment experience, their financial condition and the condition of the global economy and financial markets. Payment terms and conditions typically vary depending on negotiations with the customer.

Disaggregation of ~~Revenue.~~Net sales. We disaggregate ~~revenue~~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 by type (direct sales or Distributor) and the location of the customer based on the location to where the products were shipped for the three ~~and six~~ months ended ~~June 30, 2018~~March 31, 2019 and ~~2017:~~2018:

Net Sales for the Three Months Ended June 30,

Direct Sales

Distributor

2018

2017

2018

2017
China

$54,747

$54,855

$111,818

$91,529
U.S.

4,772

4,404

26,431

19,372
Korea

3,474

4,626

10,028

11,179
Germany

2,820

2,434

20,826

16,597
Singapore

624

60

19,571

15,037
Taiwan

922

1,741

15,828

16,370
All others ⁽¹⁾

16,663

15,799

15,561

10,221
Total

$84,022

$83,919

$220,063

$180,305

Percent of Net Sales by Type for the Three Months Ended June 30,

Direct Sales

Distributor

2018

2017

2018

2017
China

65%

65%

51%

51%
U.S.

6%

5%

12%

11%
Korea

4%

6%

5%

6%
Germany

3%

3%

9%

9%
Singapore

1%

-

9%

8%
Taiwan

1%

2%

7%

9%
All others ⁽¹⁾

20%

19%

7%

6%
Total

100%

100%

100%

100%

Total Net Sales for the Three Months Ended June 30,

Dollar

Percent of Net Sales

2018

2017

2018

2017
China

$166,565

$146,386

55%

55%
U.S.

31,203

23,776

10%

9%
Korea

13,502

15,804

4%

6%
Germany

23,646

19,031

8%

7%
Singapore

20,195

15,097

7%

6%
Taiwan

16,750

18,110

6%

7%
All others ⁽¹⁾

32,224

26,020

10%

10%
Total

$304,085

$264,224

100%

100%

	Net Sales for the Six Months Ended June 30,				Net Sales for the Three Months Ended March 31,
	Direct Sales		Distributor		Direct Sales		Distributor
	2018	2017	2018	2017	2019	2018	2019	2018
China	$104,072	$108,189	$210,684	$167,721	$52,224	$49,325	$99,325	$98,866
U.S.	8,457	8,461	47,531	36,514	3,233	3,685	30,498	21,100
Korea	7,551	8,958	18,913	24,406	5,138	4,077	8,160	8,885
Germany	5,925	5,170	42,431	31,284	3,028	3,105	17,516	21,605
Singapore	912	174	35,401	25,765	212	288	15,936	15,830
Taiwan	1,778	4,554	35,021	29,704	483	856	22,664	19,193
All others ⁽¹⁾	31,984	30,528	27,937	19,099	22,258	15,320	21,618	12,377
Total	$160,679	$166,034	$417,918	$334,493	$86,576	$76,656	$215,717	$197,856

	Percent of Net Sales by Type for the Six Months Ended June 30,				Percent of Net Sales by Type for the Three Months Ended March 31,
	Direct Sales		Distributor		Direct Sales		Distributor
	2018	2017	2018	2017	2019	2018	2019	2018
China	65%	65%	50%	50%	60%	64%	46%	50%
U.S.	5%	5%	11%	11%	4%	5%	14%	11%
Korea	5%	5%	5%	7%	6%	5%	4%	4%
Germany	4%	3%	10%	9%	4%	4%	8%	11%
Singapore	1%	-	8%	8%	—	—	7%	8%
Taiwan	1%	3%	8%	9%	1%	1%	11%	10%
All others ⁽¹⁾	19%	19%	8%	6%	25%	21%	10%	6%
Total	100%	100%	100%	100%	100%	100%	100%	100%

	Total Net Sales for the Six Months Ended June 30,				Total Net Sales for the Three Months Ended March 31,
	Dollar		Percent of Net Sales		Dollars		Percent of Net Sales
	2018	2017	2018	2017	2019	2018	2019	2018
China	$314,756	$275,911	54%	55%	$151,549	$148,191	50%	54%
U.S.	55,988	44,975	10%	9%	33,731	24,785	11%	9%
Korea	26,464	33,363	5%	7%	13,298	12,962	4%	5%
Germany	48,356	36,454	8%	7%	20,544	24,710	7%	9%
Singapore	36,313	25,939	6%	5%	16,148	16,118	5%	6%
Taiwan	36,799	34,258	6%	7%	23,147	20,049	8%	7%
All others ⁽¹⁾	59,921	49,627	11%	10%	43,876	27,697	15%	10%
Total	$578,597	$500,527	100%	100%	$302,293	$274,512	100%	100%

~~Contract Balances.~~ The timing of revenue recognition, billings, and cash collections can result in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the condensed consolidated balance sheets. However, billing generally occurs at or near the same time as revenue recognition, resulting in limited activity related to contract assets and liabilities. Contract asset and liability balances for the periods ended June 30, 2018, and December 31, 2017 were immaterial to our condensed consolidated financial statements.

~~Other Practical Expedients Elected.~~ ~~The Company decided to make use of the following practical expedients available under ASC 606:~~

Purchase commitments – As of ~~June 30, 2018,~~March 31, 2019, we had approximately ~~$20.8~~$36.3 million in non-cancelable purchase contracts related to capital expenditures, primarily related to our manufacturing facilities in Asia. As of March 31, 2019, we also had a commitment to purchase approximately $103.0 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 ~~June 30, 2018,~~March 31, 2019, the unfunded liability for this defined benefit plan was approximately ~~$25.2~~$29.8 million. We are obligated to make annual contributions, each year through December 2029, of approximately GBP 2 million (approximately ~~$2.8~~$2.6 million based on a GBP: USD exchange rate of ~~1.4:~~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 should receive the outcome of the April ~~5, 2016.~~2019 review during June 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 of all pending disputes. We record 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 net investment risk in our foreign subsidiaries. Our objectives for holding derivatives include reducing, eliminating, and efficiently managing the economic impact of these exposures as effectively as possible. Our derivative programs include strategies that both qualify and do not qualify for hedge accounting treatment.

Hedges of Foreign Currency Risk - We are exposed to fluctuations in various foreign currencies against our different functional currencies. We use foreign currency forward agreements to manage this exposure. At ~~June 30, 2018,~~March 31, 2019, we had outstanding foreign currency forward contracts that are intended to preserve the economic value of foreign currency denominated monetary assets and liabilities; these instruments are not designated for hedge accounting treatment in accordance with ASC 815. ~~There is no~~The fair value of ~~our foreign exchange hedges and therefore they are not recorded in our condensed consolidated balance sheets.~~ these instruments approximates zero.

The table below sets forth outstanding foreign currency forward contracts at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:

Notional Amount		Effective Date	Maturity Date	Index*	Weighted Average Foreign Exchange Rate	Balance Sheet Hedge Designation
$	1,014	March 2019	May 2019	EUR/GPB	0.8637	Non-designated
	3,014	March 2019	May 2019	EUR/USD	1.1271	Non-designated
	8,241	March 2019	May 2019	GBP/USD	1.3038	Non-designated
	30,670	March 2019	May 2019	USD/CNY	6.7339	Non-designated
	617	March 2019	May 2019	USD/JPY	110.533	Non-designated
	66,480	March 2019	May 2019	USD/TWD	30.78	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
$	111,536
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

Notional Amount

Effective Date

Maturity Date

Index*
Weighted Average Fx Rate

Balance Sheet Hedge Designation
$
1,199

June 2018

August 2018

EUR/GPB
0.8854

Non-designated

26,760

June 2018

August 2018

EUR/USD
1.1708

Non-designated

9,817

June 2018

August 2018

GBP/USD
1.3224

Non-designated

41,127

June 2018

August 2018

USD/CNY
6.6391

Non-designated

923

June 2018

August 2018

USD/JPY
110.444

Non-designated

38,601

June 2018

August 2018

USD/TWD
30.46

Non-designated

Notional Amount

Effective Date

Maturity Date

Index*
Weighted Average Fx Rate

Balance Sheet Hedge Designation
$
2,494

December 2017

January 2018

EUR/GBP
1.2009

Non-designated

10,514

December 2017

January 2018

EUR/USD
1.2009

Non-designated

10,612

December 2017

January 2018

GBP/USD
1.3541

Non-designated

31,834

December 2017

January 2018

USD/CNY
6.5343

Non-designated

1,594

December 2017

January 2018

USD/JPY
112.35

Non-designated

30,594

December 2017

January 2018

USD/TWD
29.406

Non-designated

*  EUR = Euro

    GBP = British Pound Sterling

    USD = United States Dollar

    CNY = Chinese Yuan Renminbi

    JPY =  Japan Yen

    TWD = Taiwan dollar

Hedges of Interest Rate and Net Investment Risk - The Company’s ~~objectives~~objective in using interest rate ~~derivatives are~~swaps and collars is to ~~add stability~~minimize the risks associated with its floating rate debt. The Company makes use of cross currency swaps to ~~interest expense and to manage~~decrease the foreign exchange risk inherent in the Company’s investment in its ~~exposure to interest rate movements.~~foreign subsidiaries. To accomplish these objectives, the Company ~~primarily~~ uses ~~interest rate swaps, including interest rate collars, as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve~~ the ~~receipt of variable amounts from a counterparty~~instruments detailed in ~~exchange for~~ the ~~Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.~~

~~The~~ table below, ~~sets forth information related to the number of and the notional amount of our interest rate related derivative instruments:~~measured in U.S. dollar equivalents:

The table below sets forth the fair value of the Company’s ~~interest rate related~~ derivative financial instruments, excluding adjustments for performance risk, if any, as well as their classification on our condensed consolidated balance sheets:

The tables below sets forth the effect of the Company’s derivative financial instruments on the condensed consolidated statements of operations for the three ~~and six~~ months ended ~~June 30, 2018~~March 31, 2019 and ~~2017:~~2018:

	Amount of Gain or (Loss) Recognized in OCI on Derivative					Location of Gain or (Loss) Reclassified from	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Net Income					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 and Amount Excluded from Effectiveness Testing)		Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Derivatives Designated as Hedging Instruments	June 30, 2018		June 30, 2017			Accumulated OCI into Income	June 30, 2018		June 30, 2017
Derivative Instruments Designated as Hedging Instruments												Amount of Gain or (Loss) Recognized in OCI on Derivative					Amount of Gain or (Loss) Recognized in OCI on Derivative							Amount of Gain or (Loss) Reclassified from Accumulated OCI into Net Income						Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
														Location of Gain or (Loss) Reclassified from Accumulated OCI into Income		Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in OCI on Derivative
												2019					2018				2019			2018				2019		2018
Three Months Ended																															��
Interest rate swaps and collars	$	1,103	$	(817	)	Interest expense	$	175	$	(170	)	$	(1,090		)		$	2,404		Interest expense	$	(469	)	$	52		N/A	$	-	$	-
Six Months Ended
Interest rate swaps and collars	$	3,507	$	(544	)	Interest expense	$	227	$	(423	)
Cross currency swaps													(2,350	)		-			N/A		-			-		Interest Income			455		-

We estimate that $1.6 million of net derivative gains included in accumulated other comprehensive income (“AOCI”) as of ~~June 30, 2018~~March 31, 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 ~~or six~~ months ended ~~June 30, 2018~~March 31, 2019 or ~~2017.~~

Derivatives Not Designated as Hedging	Amount of Gain or (Loss) Recognized in Net Income						Location of Gain or (Loss) Recognized in Net
Instruments	June 30, 2018			June 30, 2017			Income
								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
												Amount of Gain or (Loss) Recognized in Net Income
								March 31,
								2019		2018
Three Months Ended
Foreign currency forward contracts	$	(6,764	)	$	(70	)	Foreign currency (loss) gain, net	$	430	$	1,394		Foreign currency loss, net
Six Months Ended
Foreign currency forward contracts	$	(5,370	)	$	(70	)	Foreign currency (loss) gain, net

~~At June 30, 2018~~ As of March 31, 2019 and December 31, 2017, the fair value of derivatives in a net asset position, which includes accrued interest but excludes any adjustments for nonperformance risk, related to these agreements was $7.2 million and $3.9 million, respectively. As of June 30, 2018, ~~and December 31, 2017,~~ the Company had not posted any collateral related to these agreements.

The Company leases certain assets used in its business, including land, buildings and equipment. These leased assets are used for operational and administrative purposes.

The table below sets forth supplemental balance sheet information related to 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 ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, these investments totaled approximately ~~$9.5~~$10.1 million and ~~$8.8~~$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% of our outstanding Common Stock as of ~~June 30,~~March 31, 2~~018~~019, and is a member of the Lite-On Group of companies. Raymond Soong, the Chairman of 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 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. 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 ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~ were approximately ~~$4.2~~$3.9 million and $4.5 ~~million, respectively. The aggregate amounts for these services for the six months ended June 30, 2018 and 2017 were approximately $8.8 million and $7.9~~ million, respectively. In addition, Chengdu Ya Guang Electronic Company Limited (“Ya Guang”)

is our 2% joint venture partner in one of our Chengdu assembly and test facilities and is our 5% joint venture partner in our other Chengdu assembly and test facility; however, we have no material transactions with Ya Guang. We also purchase materials from Jiyuan Crystal

Photoelectric Frequency Technology Ltd., 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.

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

	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2018		2017		2018		2017		2019		2018
LSC
Net sales	$	225	$	504	$	592	$	735	$	188	$	258
Purchases	$	4,954	$	7,142	$	11,422	$	13,161	$	4,412	$	6,468

Nuvoton
Purchases	$	2,359	$	3,376	$	5,413	$	6,285	$	1,267	$	3,054

Keylink
Net sales	$	2,257	$	2,413	$	4,078	$	4,235	$	2,815	$	1,821
Purchases	$	881	$	943	$	1,739	$	2,021	$	605	$	858

JCP
Purchases	$	97	$	321	$	287	$	522	$	160	$	190

The table below sets forth accounts receivable from, and accounts payable to, related parties:

	June 30,		December 31,		March 31,		December 31,
	2018		2017		2019		2018
LSC
Accounts receivable	$	335	$	342	$	188	$	286
Accounts payable	$	3,124	$	3,308	$	2,923	$	2,696
Keylink
Accounts receivable	$	3,361	$	4,089	$	4,583	$	6,264
Accounts payable	$	4,578	$	5,016	$	3,796	$	4,656
Nuvoton
Accounts payable	$	701	$	1,121	$	313	$	1,939
JCP
Accounts payable	$	145	$	317	$	178	$	151

~~In February 2017, the Company announced its plan to transfer its wafer fabrication operation located in Lee’s Summit, MO. (“KFAB”)~~ to other Company-owned wafer fabrication plants and external foundries. The Company ceased production operations at KFAB late in third quarter 2017 and vacated the premises in November 2017. Employees were provided retention and standard severance packages. During the six months ended June 2017, the Company received $6.0 million of insurance proceeds as a result 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 six months ended June 30, 2018, the Company received $2.9 million of insurance proceeds as a result of the aforementioned fire. This $2.9 million is recorded in other income.

The table below sets forth the restructuring costs, recorded in restructuring expense in the condensed consolidated statements of operations, incurred during the three and six months ended June 30, 2018 and 2017:

In connection with the KFAB closure, during the six months ended June 30, 2017, the Company also recorded separation costs of $0.5 million in cost of goods sold, $0.09 million in selling, general and administrative expense and $0.02 million in research and development expense.

~~The table below sets forth the costs accrued and paid related to 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 June 30, 2018, the offsetting asset has been fully amortized.~~

~~In July 2018, our 60% owned subsidiary, ERIS Technology Corporation (“Eris”), acquired from Yea Shin Technology Corporation ("Yea Shin") and its shareholders 60%~~

On April 1, 2019, the Company closed the previously announced acquisition of ~~Yea Shin’s outstanding shares for 193.9 million Taiwan dollars (or approximately $6.4 million) in cash. Yea Shin operates a~~Texas Instruments’ 200mm wafer fabrication facility and operations located in ~~Tao Yuan county, Taiwan that was established in May 1993. The purpose of the acquisition is to expand the current wafer production capacity of Eris.~~

Eris also entered into a property purchase agreement with Yong Xiang Development Corporation ("Yong Xiang") to purchase the plant and facility leased by it to Yea Shin. The total purchase price of the property is approximately 776 million Taiwan dollars (or approximately $25.5 million). Eris expects to complete the purchase of the facility no later than December 31, 2020.

Eris has leased from Yong Xiang the plant and facility until the purchase has been completed. The monthly lease payment is approximately 1.2 million Taiwan dollars (or approximately $0.04 million) for the first 8.5 months and approximately 1.0 million Taiwan dollars (or approximately $0.03 million) for the remaining period. Total lease commitment is approximately $1.1 million assuming the lease term is through December 31, 2020.

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”) 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. 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, ~~2017~~2018 (“Form 10-K”), previously filed with Securities and Exchange Commission (“SEC”) on February ~~20, 2018.~~21, 2019.

~~Factors Relevant to Our Results of Operations for the Three Months Ended June 30, 2018~~

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,~~March 31, 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.

The following table sets forth the percentage that certain items in the consolidated statements of operations bear to net sales.

	Percent of Net Sales						Percent of Net Sales
	Three Months Ended June 30,						Three Months Ended March 31,
	2018			2017			2019			2018
Net sales		100	%		100	%		100	%		100	%
Cost of goods sold		(65	)		(66	)		(63	)		(64	)
Gross profit		35			34			37			36
Total operating expense		23			25			23			26
Income from operations		12			9			14			10
Total other expense		-			(2	)		-			-
Income before income taxes and noncontrolling interest		12			7			14			10
Income tax provision		(4	)		(2	)		(3	)		(3	)
Net income		8			5			11			7
Net income attributable to common stockholders		8			5			11			7

The following table and discussion explains in greater detail our consolidated operating results and financial condition for the three months ended ~~June 30, 2018,~~March 31, 2019, compared to the three months ended ~~June 30, 2017.~~March 31, 2018. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.

	Three Months Ended												Three Months Ended
	June 30,												March 31,
	2018			2017			Increase/(Decrease)			% Change			2019			2018			Increase/(Decrease)			% Change
Net sales	$	304,085		$	264,224		$	39,861			15.1	%	$	302,293		$	274,512		$	27,781			10.1	%
Cost of goods sold		196,817			174,085			22,732			13.1	%		189,882			175,917			13,965			7.9	%
Gross profit		107,268			90,139			17,129			19.0	%		112,411			98,595			13,816			14.0	%
Total operating expense		69,424			66,311			3,113			4.7	%		70,288			71,655			(1,367	)		(1.9	%)
Interest income		443			308			135			43.8	%		875			514			361			70.2	%
Interest expense		(2,544	)		(3,447	)		(903	)		(26.2	%)		(2,145	)		(2,757	)		(612	)		(22.2	%)
Foreign currency gain (loss), net		300			(1,628	)		(1,928	)		(118.4	%)
Foreign currency loss, net														(64	)		(3,029	)		(2,965	)		(97.9	%)
Other income		377			802			(425	)		(53.0	%)		1,245			4,635			(3,390	)		(73.1	%)
Income tax provision		10,753			6,039			4,714			78.1	%		10,298			7,783			2,515			32.3	%

Net sales increased approximately ~~$39.9~~$27.8 million for the three months ended ~~June 30, 2018,~~March 31, 2019, compared to the same period last year ~~primarily~~ due to ~~strong growth~~continued market share gains. We experienced record net sales in Europe and record net sales in both the automotive and industrial end markets. Net sales in the automotive market increased 23% for the three months ended March 31, 2019, when compared to the same period of 2018. For the three months ended March 31, 2019, combined net sales in the automotive and industrial markets represented 39% of total sales. Excluding the frequency control business, our Pericom business reached record levels of net sales in the first three months of 2019. In terms of our end markets, ~~which contributed to new record revenue levels being achieved across all regions.~~our net sales were 29% industrial, consumer and communications each 23%, computing 15% and automotive 10%,

Cost of goods sold increased approximately ~~$22.7~~$14.0 million for the three months ended ~~June 30, 2018,~~March 31, 2019, compared to the same period last year. As a percent of sales, cost of goods sold was ~~65%~~62.8% for the three months ended ~~June 30, 2018~~March 31, 2019 compared to ~~66%~~64.1% for the same period last year. Average unit cost increased approximately ~~25.2%~~8% for the three months ended ~~June 30, 2018,~~March 31, 2019, compared to the same period last year. For the three months ended ~~June 30, 2018,~~March 31, 2019, gross profit increased approximately ~~19.0%~~14.0% when compared to the same period last year. Gross profit margin for the three month periods ended ~~June 30,~~March 31, 2019 and 2018 was 37.2% and ~~2017 was 35.3% and 34.1%~~35.9%, respectively. The increase in gross profit margin was related to ~~favorable product mix, increased~~higher revenue contribution from the ~~Pericom products~~automotive and industrial markets as well ~~improved capacity utilization.~~as serial-connectivity products, which typically have higher gross profit margins.

Operating expenses for the three months ended ~~June 30, 2018 increased~~March 31, 2019, decreased approximately ~~$3.1~~$1.4 million, or ~~4.7%~~1.9%, compared to the ~~same period last year.~~three months ended March 31, 2018. Selling, general and administrative expenses (“SG&A”) ~~increased~~decreased approximately ~~$2.5~~$3.5 million and research and development expenses (“R&D”) increased approximately ~~$2.3~~$2.0 million. Amortization of acquisition related intangibles ~~was~~

~~relatively flat.~~decreased $0.3 million. SG&A, as a percentage of sales, was ~~13.9%~~14.5% and ~~15.0%~~17.2% for the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively. R&D, as a percentage of sales, was 7.3% and ~~7.5%~~7.4% for the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively.

Interest income increased ~~43%~~70.2% for the three months ended ~~June 30, 2018~~March 31, 2019, compared to the same period last year, due to ~~the investment of excess cash in short-term investments.~~interest received on cross currency swaps. Interest expense decreased ~~26.2%~~22.2% for the three months ended ~~June 30, 2018~~March 31, 2019, compared to the same period last year. The decrease in interest expense for the three months ended ~~June 30, 2018~~March 31, 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.~~acquisition in the fourth quarter of 2015. Foreign currency ~~gain (loss),~~loss, net was a net ~~gain~~loss of ~~$0.3~~$0.06 million for the three months ended ~~June 30, 2018~~March 31, 2019, compared to a net loss of ~~($1.6)~~$3.1 million for the same period last year, reflecting the effectiveness of our currency ~~hedges partially offset by losses due to stronger European and Great Britain currencies and the Taiwan dollar, when compared to the U.S. dollar.~~hedges.

We recognized an income tax expense of approximately ~~$10.8~~$10.3 million and ~~$6.0~~$7.8 million for the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively. The increase in income taxes for ~~2018~~2019 compared to ~~2017 is~~2018 was primarily attributable to ~~the~~an increase in ~~pretax net income.~~

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

Net sales increased approximately $78.1 million for the six months ended June 30, 2018, compared to the same period last year, due to strong growth in the automotive and industrial markets, contributing to record revenue levels being reached in Europe and North America.

Cost of goods sold increased approximately $36.3 million for the six months ended June 30, 2018, compared to the same period last year. As a percent of sales, cost of goods sold was 64% for the six months ended June 30, 2018 compared to 67% for the same period last year. Average unit cost increased approximately 19.2% for the six months ended June 30, 2018, compared to the same period last year. For the six months ended June 30, 2018, gross profit increased approximately 25.5% when compared to the same period last year. Gross profit margin for the three month periods ended June 30, 2018 and 2017 was 35.6% and 32.8%,

~~respectively. The increase in gross profit margin was related to favorable product mix, increased contribution from the Pericom products as well improved capacity utilization.~~

Operating expenses for the six months ended June 30, 2018 increased approximately $10.2 million, or 7.8%, compared to the same period last year. SG&A increased approximately $9.9 million and R&D increased approximately $4.4 million. The increase in SG&A was partially driven by $2.6 million of expenses related to officer retirements, including cash payments and the costs from the acceleration of share-based vesting. Amortization of acquisition related intangibles was relatively flat. SG&A, as a percentage of sales, was 15.4% and 15.9% for the six months ended June 30, 2018 and 2017, respectively. R&D, as a percentage of sales, was 7.3% and 7.6% for the six months ended June 30, 2018 and 2017, respectively.

~~Interest~~pre-tax book income, increased $0.4 million for the six month ended June 30, 2018 compared to the same period last year, due to higher amounts of cash invested on a short-term basis. The decrease in interest expense for the six months ended June 30, 2018 was due to lower levels of debt partially offset by higher interest rates on the floating rate portion of the borrowings to effect the Pericom acquisition. Expense related to foreign currency decreased $2.7 million, reflecting the effectiveness of our currency hedges.

~~We recognized an income tax expense of approximately $18.5 million and $6.6 million for the six months ended June 30, 2018 and 2017, respectively. The increase~~a net decrease in ~~income taxes for 2018 compared to 2017 is attributable to the increase in pretax net income.~~unfavorable U.S. permanent differences.

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 $123.8 million. The amount available under the Asia credit facilities is reduced by current borrowings of $12.3 million and letters of credit of $0.4 million. 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 $4.3 million on a long-term basis in order to make an investment. The $4.3 million loan matures in 2033, but will be increasing over time to as much as $19.7 million as the amount of investment grows.

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 ~~$4.7~~$6.3 million in the first three quarters of ~~2018~~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 based on our consolidated leverage ratio. 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 June 30, 2018, we owed $182.9 million~~The obligations of the Company and the other borrowers under the U.S. Credit Facility ~~$47.5 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 ~~$135.4 million~~by specified assets of ~~which was~~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 $116.9 million~~ as of June 30, 2018. As of June 30, 2018, in addition to the U.S. Credit Facility, our Asia subsidiaries had unused and available credit lines of up to an aggregate of approximately $112.2 million, with several financial institutions. In some cases, our foreign credit linesMarch 31, 2019 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 June 30, 2018, $4.7 million was outstanding on these credit lines. In addition to our credit lines, during the second quarter of 2018, our 60% owned subsidiary, ERIS Technology Corporation, borrowed $4.3 million on a long-term basis in order to make an investment. That investment was madeset forth in the third quarter of July 2018. The $4.3 million loan matures in 2033, but will be increasing over time as the amount of investment grows. (See Note 13 - Subsequent Events in the “Notes to the Condensed Consolidated Financial Statements” for additional information related to this investment).table below:

Our primary liquidity requirements have been to meet our inventory and capital expenditure needs and to fund on-going operations. At ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, our working capital was ~~$380.8~~$524.8 million and ~~$415.2~~$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 ~~six~~three months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~ were ~~$47.5~~$16.3 million and ~~$57.7~~$24.7 million, respectively. For the first ~~six~~three months of ~~2018~~2019 capital expenditures were approximately ~~8.2%~~5.4% of our net sales, which is ~~at the high end of~~in-line with our capital spending target range of 5% to 9% of net sales. ~~This increase in capital expenditures was to put capacity in place for the expected strong revenue growth in the remainder of 2018.~~

Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of European subsidiaries. As of ~~June 30, 2018,~~March 31, 2019, our foreign subsidiaries held approximately ~~$149.7~~$137.6 million of cash, cash equivalents and investments of which approximately ~~$88.3~~$81.5 million would be subject to a potential non-U.S. withholding tax if distributed outside the country in which the cash is currently held. Of this total ~~$79.9~~of $137.6 million, $70.5 million is held in China.

As of ~~June 30, 2018,~~March 31, 2019, we had short-term investments totaling ~~$7.2~~$6.8 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. The share repurchase program is expected to continue through the end of 2019 unless extended or shortened by the Board. Currently there is approximately $62.3 million available for repurchase of outstanding Common Stock under this publicly announced repurchase program. No shares were repurchased during the three months ended ~~June 30, 2018.~~March 31, 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 cash and cash equivalents ~~decreased~~increased from ~~$203.8~~$241.1 million at December 31, ~~2017~~2018 to ~~$152.4~~$301.2 million at ~~June 30, 2018.~~March 31, 2019.

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

Six Months Ended June 30,

2018

2017

Change

Cash flows from operating activities
$
88,381

$
65,437

$
22,944

Net cash and cash equivalents used in investing activities

(53,627
)

(30,150
)

(23,477
)
Net cash and cash equivalents used in financing activities

(83,430
)

(23,409
)

(60,021
)
Effect of exchange rate changes on cash and cash equivalents

(2,753
)

6,331

(9,084
)
Net (decrease) increase in cash and cash equivalents,
including restricted cash
$
(51,429
)

$
18,209

$
(69,638
)

	Three Months Ended March 31,
	2019			2018			Change
Net cash flows provided by operating activities	$	69,889		$	53,959		$	15,930
Net cash and cash equivalents used in investing activities		(17,152	)		(29,435	)		12,283
Net cash and cash equivalents provided by (used in) financing activities		9,627			(49,842	)		59,469
Effect of exchange rate changes on cash and cash equivalents		(1,890	)		3,971			(5,861	)
Net increase (decrease) in cash and cash equivalents, including restricted cash	$	60,474		$	(21,347	)	$	81,821

Cash flows from operating activities for the six months ended June 30, 2018 was $88.4 million. Cash flows from operating activities resulted from net income of $44.2 million, depreciation and amortization of $51.3 million, share-based compensation of $11.1 million and a decrease in noncash working capital accounts of $17.6 million. Net cash flows provided by operating activities for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2019 was ~~$65.4~~$69.9 million. ~~For the six months ended June 30, 2017, net~~Net cash ~~flow~~flows provided by operating activities resulted from net income of ~~$15.4~~$31.7 million, depreciation and amortization of ~~$46.4~~intangible assets of $26.6 million, share-based compensation of ~~$9.0~~$4.5 million and ~~a decrease~~an increase in noncash working capital accounts of ~~$5.7~~$7.3 million. Net cash flows from operating activities for the three months ended March 31, 2018 was $54.0 million. Net cash flows provided by operating activities resulted from net income of $18.5 million, depreciation and amortization of $25.2 million, share-based compensation of $6.3 million and an increase in noncash working capital accounts of $5.5 million.

Net cash and cash equivalents used in investing activities was ~~$53.6~~$17.2 million for the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019. Net cash and cash equivalents used in investing activities was primarily due to the purchase of property, plant and equipment of ~~$53.0~~$18.6 million during the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019, partially offset by net proceeds received by the sale of short-term investments of $0.8 million. Net cash and cash equivalents used in investing activities was ~~$30.2~~$29.4 million for the ~~six~~three months ended ~~June 30, 2017,~~March 31, 2018. Net cash and cash equivalents used in investing activities for the three months ended March 31, 2018, was primarily ~~for~~due to the purchase of property, plant and equipment of ~~$43.9~~$31.6 million, ~~and for purchases of short-term investments of $9.8 million during the six months ended June 30, 2017,~~ partially offset by ~~$24.1~~$1.0 million of proceeds received upon the maturity of short-term investments.

Net cash and cash equivalents provided by financing activities was $9.6 million for the three months ended March 31, 2019. Net cash and cash equivalents provided in the three months ended March 31, 2019 consisted primarily of proceeds from the issuance of Common Stock related to stock option exercises of $6.7 million and increases under our line of credit and short-term debt of $3.6 million. Net cash and cash equivalents used in financing activities was ~~$83.4~~$49.8 million for the ~~six~~three months ended ~~June 30,~~March 31, 2018. Net cash and cash equivalents used in ~~the six months ended June 30,~~ 2018 consisted primarily of repayments of long-term debt, net of ~~$82.5~~$46.5 million and taxes paid on net share settlement of ~~$8.6~~$7.3 million, partially offset by proceeds from short-term line of credit of $3.4 million. Net

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 its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps, including interest rate collars, as part of its interest rate risk management strategy. Interest rate swaps designated as cash ~~and cash equivalents used~~flow hedges involve the receipt of variable amounts from a counterparty in ~~financing activities was $23.4 million~~exchange for the ~~six months ended June 30, 2017 and consisting primarily~~Company making fixed-rate payments over the life of ~~repayments on lines~~the agreements without exchange of ~~credit and long-term debt, partially offset by proceeds from~~ the ~~issuance of Common Stock.~~ 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.

We use cross currency swaps to hedge our foreign exchange exposure related to our investment in our foreign subsidiaries. These instruments are subject to market fluctuations due to changes in foreign exchange rates and at times may be in a loss position. Market fluctuations are 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 at a loss position, we would have to make a cash payment in the amount of the loss position.

We do not have any transactions, arrangements and other relationships with unconsolidated entities that will affect our liquidity or capital resources. We have no special purpose entities that 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.

Other than as disclosed in Note 13-Subsequent Events in the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q, and other than additional purchase obligations in the total amount of $91.3 million with $12.1 million remaining in 2018 and with $79.2 million payable in years 2-3, thereThere have been no material changes in our Contractual Obligations as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017,~~2018, filed with the SEC on February ~~20, 2018.~~21, 2019.

~~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, ~~2017,~~2018 filed with the SEC on February ~~20, 2018.~~19, 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 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 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 Exchange Act of 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”) 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.

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 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” 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 certain foreign subsidiaries may be subject to 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, ~~2017,~~2018, filed with the SEC on February ~~20, 2018.~~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 ~~June 30, 2018,~~March 31, 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 ~~June 30, 2018, which~~March 31, 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.

From time to time, we are involved in various legal proceedings that arise in the normal course of business. While we intend to defend any lawsuit vigorously, we presently believe that the ultimate outcome of any current pending legal proceeding will not have any material adverse effect on our financial position, cash flows or operating results. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, which could impact our business and operating results for the period in which the ruling occurs or future periods.

~~Other than the following, there~~There have been no material changes from the risk factors disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017,~~2018, filed with the SEC on February ~~20, 2018.~~21, 2019.

The U.S. government has recently imposed new or higher tariffs on specified products imported from China in response to what it characterizes as unfair trade practices, and has proposed tariffs on additional products from China. China has responded by proposing new or higher tariffs on specified products imported from the United States.

Most of our products are manufactured in China and a portion are then imported into the U.S. The Office of the United States Trade Representative (“USTR”) on June 20, 2018 published notice of the imposition of an additional 25 percent ~~ad valorem~~ ~~duty on products from China with an annual trade value of approximately $34 billion. The June 20 notice also sought public comments on another proposed action in the form of an additional 25 percent~~ ~~ad valorem~~ duty on products of China with an annual trade value of $16 billion, the public comment process is ongoing. On July 10, 2018, the USTR published a request for comments on a proposal to take further action in the form of an additional 10 percent ~~ad valorem~~ duty on products from China with an additional annual trade value of approximately $200 billion, with public hearings on this matter scheduled for August 22-23, 2018. 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 negotiate the issues to restore a mutually advantageous and fair trading regime, the increased duties should be eliminated, but given the uncertainties, there can be no assurance of whether, or when, this will be accomplished. We are endeavoring to understand the impacts of the recently imposed and proposed U.S. duties on products imported from China, and our review is in the preliminary stage. Once we have a reasonable basis to assess the impacts, we intend to take whatever actions we deem appropriate to mitigate those impacts and protect our competitive position in the marketplace.

It is not clear at this time what the ultimate outcome of this will be, but given the importance of our Chinese operations and related sales, and 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.

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-K

February 20, 2018

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

Consent to Credit Agreement (Portions of this Exhibit have been omitted)

10.2⁺

Transition Agreement between Diodes Incorporated and Richard D. White

8-K

March 6, 2019

10.1

10.3 ⁺

Amended transition agreement between Diodes Incorporated and Richard D. White

8-K/A

April 1,2019

10.1

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.

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

101.SCH

XBRL Taxonomy Extension Schema

101.CAL

XBRL Taxonomy Extension Calculation Linkbase

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Labels Linkbase

101.PRE

XBRL Taxonomy Extension Presentation Linkbase

+ Constitute management contracts, or compensatory plans or arrangements that are required to be file pursuant to Item 606 of Regulation S-K.

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		3
Item 1. Financial Statements		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2220
Item 3. Quantitative and Qualitative Disclosures About Market Risk		3130
Item 4. Controls and Procedures		3130
Part II – Other Information		32
Item 1. Legal Proceedings		3231
Item 1A. Risk Factors		3231
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		3231
Item 3. Defaults Upon Senior Securities		3231
Item 4. Mine Safety Disclosures		3231
Item 5. Other Information		3231
Item 6. Exhibits		3332
Signatures		3433

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

	Other Current Assets				Other Assets				Other Liabilities
	March 31, 2019		December 31, 2018		March 31, 2019		December 31, 2018		March 31, 2019		December 31, 2018
Interest rate swaps and collars	$	1,617	$	1,936	$	1,472	$	2,795	$	-	$	-
Cross currency swaps		-		-		859		-		3,129		-

Balance at December 31, 2017	$	134,187
Foreign currency translation adjustment		(1,358	)
Balance at June 30, 2018	$	132,829

Balance at December 31, 2018	$	132,437
Acquisition		2,570
Foreign currency translation adjustment		662
Balance at March 31, 2019	$	135,669

Amortization expense	2018		2017
Three months ended June 30	$	4,678	$	4,646
Six months ended June 30,	$	9,445	$	9,404

	Number of Instruments		Notional Amount
	June 30, 2018	December 31, 2017	June 30, 2018		December 31, 2017
Interest rate swaps and collars	14	14	$	220,000	$	220,000

	Fair Value
	Other Current Assets				Other Assets
	June 30, 2018		December 31, 2017		June 30, 2018		December 31, 2017
Interest rate swaps and collars	$	1,639	$	486	$	5,530	$	3,398

	Three Months Ended
	March 31, 2019
Operating lease expense	$	3,704
Finance lease expense:
Amortization of assets		244
Interest on lease liabilities		15
Short-term lease expense		36
Variable lease expense		618
Total lease expense	$	4,617

		March 31, 2019
Operating leases:
Operating lease ROU assets		$64,277

Current operating lease liabilities		11,738
Noncurrent operating lease liabilities		34,817
Total operating lease liabilities		$46,555

Finance leases:
Finance lease ROU assets		$3,395
Accumulated amortization		(1,191)
Finance lease ROU assets, net		$2,204

Current finance lease liabilities		$1,012
Non-current finance lease liabilities		818
Total finance lease obligations		$1,830

Weighted average remaining lease term (in years):
Operating leases		5.0
Finance leases		1.9

Weighted average discount rate:
Operating leases		3.8%
Finance leases		3.7%

		Three Months Ended
		March 31, 2019
Cash paid for the amounts included in the measurements of lease liabilities:
Operating cash outflows from operating leases		$4,277
Operating cash outflows from finance leases		15
Financing cash outflow from finance leases		293

ROU assets obtained in exchange for lease liabilities incurred:
Operating leases		86

	Retention Costs			Equipment Relocation			Total
Beginning balance, January 1, 2018	$	659		$	645		$	1,304
Costs accrued		(14	)		526			512
Restructuring costs paid		(645	)		(1,171	)		(1,816	)
Balance at June 30, 2018	$	-		$	-		$	-

Asset retirement obligation, January 1, 2018	$	389
Reversal of accrual		(389	)
Asset retirement obligation, June 30, 2018	$	-

Description	Amount outstanding	Interest Rate	Maturity Date
Short-term debt:
Foreign credit lines	$12,330	Libor or other similar indices + a specified margin	Various during 2019

Long-term debt
Notes payable to Taiwan Bank	4,336	1.3%	June 2033
U.S. Credit facility;
Revolving portion	94,500	Libor + a specified margin	October 2021
Term portion	118,250	Libor + a specified margin	October 2021
Total long-term debt	217,086
Less: Current portion of long-term debt	(28,403)
Less: Unamortized debt issuance costs	(1,305)
Total long-term debt, net of current portion	$187,378

	DIODES INCORPORATED
	(Registrant)

~~August~~May 7, ~~2018~~ 2019	By: /s/ Keh-Shew Lu
Date	~~KEH SHEW~~KEH-SHEW LU
	President and Chief Executive Officer
	(Principal Executive Officer)



~~August~~May 7, ~~2018~~2019	By: /s/ ~~Richard D. White~~ Brett R. Whitmire
Date	~~RICHARD D. WHITE~~BRETT R. WHITMIRE
	Chief Financial Officer ~~and Secretary~~
	(Principal Financial Officer)



~~August 7, 2018~~	~~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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