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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2001
Or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______ to ________.
COMMISSION FILE NUMBER: 1-5740
DIODES INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 95-2039518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3050 EAST HILLCREST DRIVE
WESTLAKE VILLAGE, CALIFORNIA 91362
(Address of principal executive offices) (Zip code)
(805) 446-4800
(Registrant's telephone number, including area code)
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 [X] No [ ]
The number of shares of the registrant's Common Stock, $0.66 2/3 par value,
outstanding as of May 4, 2001 was 9,222,205, including 1,075,672 shares of
treasury stock.
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INDEPENDENT ACCOUNTANT'S REPORT
Board of Directors and Shareholders
Diodes Incorporated and Subsidiaries
We have reviewed the accompanying consolidated condensed balance sheet of Diodes
Incorporated and subsidiaries as of March 31, 2001, and the related consolidated
condensed statements of income and cash flows for the three months ended March
31, 2001. These financial statements are the responsibility of the management of
Diodes Incorporated and Subsidiaries.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated condensed financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Diodes Incorporated and
Subsidiaries as of December 31, 2000, and the related consolidated statements of
income, stockholders' equity and cash flows for the year then ended not
presented herein; and in our report dated January 30, 2001, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated condensed balance
sheet as of December 31, 2000, is fairly presented, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ Moss Adams LLP
Los Angeles, CA
April 26, 2001
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PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
ASSETS
DECEMBER 31, MARCH 31,
2000 2001
------------ ------------
(UNAUDITED)
CURRENT ASSETS
Cash $ 4,476,000 $ 3,593,000
Accounts receivable
Customers 19,723,000 20,880,000
Related parties 615,000 1,850,000
Other 26,000 8,000
------------ ------------
20,364,000 22,738,000
Less allowance for doubtful receivables 311,000 255,000
------------ ------------
20,053,000 22,483,000
Inventories 31,788,000 26,775,000
Deferred income taxes, current 4,387,000 4,388,000
Prepaid expenses and other current assets 686,000 684,000
------------ ------------
Total current assets 61,390,000 57,923,000
PROPERTY, PLANT AND EQUIPMENT, at cost, net
of accumulated depreciation and amortization 45,129,000 45,847,000
DEFERRED INCOME TAXES, non-current 616,000 1,641,000
OTHER ASSETS
Goodwill, net 5,318,000 5,518,000
Other 497,000 461,000
------------ ------------
TOTAL ASSETS $112,950,000 $111,390,000
============ ============
The accompanying notes are an integral part of these financial statements.
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DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31, MARCH 31,
2000 2001
------------ ------------
(UNAUDITED)
CURRENT LIABILITIES
Line of credit $ 7,750,000 $ 8,416,000
Accounts payable
Trade 10,710,000 6,212,000
Related parties 1,008,000 2,705,000
Accrued liabilities 8,401,000 5,884,000
Income taxes payable 1,370,000 1,777,000
Current portion of long-term debt
Related party 11,049,000 11,049,000
Other 3,811,000 4,138,000
------------ ------------
Total current liabilities 44,099,000 40,181,000
LONG-TERM DEBT, net of current portion
Related party 2,500,000 2,500,000
Other 13,497,000 14,975,000
------------ ------------
MINORITY INTEREST IN JOINT VENTURE 1,601,000 1,676,000
STOCKHOLDERS' EQUITY
Class A convertible preferred stock par value $1.00 per share;
1,000,000 shares authorized;
no shares issued and outstanding -- --
Common stock - par value $0.66 2/3 per share;
30,000,000 shares authorized; 9,201,704 and 9,214,705 shares
issued and outstanding at December 31, 2000
and March 31, 2001, respectively 6,134,000 6,143,000
Additional paid-in capital 7,143,000 7,192,000
Retained earnings 39,758,000 40,505,000
------------ ------------
53,035,000 53,840,000
Less:
Treasury stock - 1,075,672 shares of common stock, at cost 1,782,000 1,782,000
------------ ------------
Total stockholders' equity 51,253,000 52,058,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $112,950,000 $111,390,000
============ ============
The accompanying notes are an integral part of these financial statements.
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DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
----------------------------------
2000 2001
------------ ------------
NET SALES $ 27,437,000 $ 25,748,000
COST OF GOODS SOLD 19,000,000 21,627,000
------------ ------------
Gross profit 8,437,000 4,121,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 4,542,000 3,184,000
------------ ------------
Income from operations 3,895,000 937,000
OTHER INCOME (EXPENSE)
Interest income 52,000 66,000
Interest expense (216,000) (740,000)
Other 6,000 (96,000)
------------ ------------
(158,000) (770,000)
Income before income taxes and minority interest 3,737,000 167,000
INCOME TAX BENEFIT (PROVISION) (492,000) 429,000
------------ ------------
Income before minority interest 3,245,000 596,000
MINORITY INTEREST IN JOINT VENTURE EARNINGS (105,000) (75,000)
------------ ------------
NET INCOME $ 3,140,000 $ 521,000
============ ============
EARNINGS PER SHARE
Basic $ 0.39 $ 0.06
============ ============
Diluted $ 0.34 $ 0.06
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 7,985,945 8,132,559
============ ============
Diluted 9,204,491 9,029,628
============ ============
The accompanying notes are an integral part of these financial statements.
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DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
--------------------------------
2000 2001
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,140,000 $ 521,000
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 998,000 2,083,000
Minority interest earnings 105,000 75,000
Interest income accrued on advances to vendor (47,000) --
Changes in operating assets:
Accounts receivable (2,650,000) (2,430,000)
Inventories (2,340,000) 5,013,000
Prepaid expenses and other assets (161,000) (988,000)
Changes in operating liabilities:
Accounts payable 1,099,000 (2,801,000)
Accrued liabilities (1,043,000) (2,517,000)
Income taxes payable (535,000) 407,000
----------- -----------
Net cash used by operating activities (1,434,000) (637,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (3,042,000) (2,801,000)
----------- -----------
Net cash used by investing activities (3,042,000) (2,801,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances on line of credit, net 4,488,000 2,966,000
Net proceeds from the issuance of capital stock 305,000 58,000
Repayments of long-term obligations (747,000) (495,000)
Other -- 26,000
----------- -----------
Net cash provided by financing activities 4,046,000 2,555,000
----------- -----------
DECREASE IN CASH (430,000) (883,000)
CASH AT BEGINNING OF PERIOD 3,557,000 4,476,000
----------- -----------
CASH AT END OF PERIOD $ 3,127,000 $ 3,593,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 216,000 $ 677,000
=========== ===========
Income taxes $ 1,030,000 $ 190,000
=========== ===========
The accompanying notes are an integral part of these financial statements.
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DIODES INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q. They do not include
all information and footnotes necessary for a fair presentation of financial
position and results of operations and cash flows in conformity with generally
accepted accounting principles. These consolidated financial statements should
be read in conjunction with the consolidated financial statements and related
notes contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 2000. In the opinion of Management, all adjustments (consisting of
normal recurring adjustments and accruals) considered necessary for a fair
presentation have been included in the interim period. Operating results for the
three months ended March 31, 2001 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2001.
The consolidated financial statements include the accounts of the
Company and its wholly-owned foreign subsidiary, Diodes Taiwan Co., Ltd.
("Diodes-Taiwan"), the accounts of Shanghai KaiHong Electronics Co., Ltd.
("Diodes-China") in which the Company has a 95% interest, and the accounts of
FabTech Incorporated ("FabTech" or "Diodes-FabTech"), which the Company acquired
in December 2000. All significant intercompany balances and transactions have
been eliminated.
NOTE B - INVENTORIES
Inventories are stated at the lower of cost or market value. Cost is
determined principally by the first-in, first-out method.
12/31/00 3/31/01
---------- ----------
Finished goods......................... $18,603,000 $14,954,000
Work-in-progress....................... 2,683,000 2,122,000
Raw materials.......................... 10,502,000 9,699,000
----------- -----------
$31,788,000 $26,775,000
NOTE C - INCOME TAXES
The Company accounts for income taxes using an asset and liability
method. Under this method, deferred tax assets and liabilities are recognized
for the tax effect of differences between the financial statement and tax basis
of assets and liabilities. Accordingly, the Company has recorded a net deferred
tax asset of $6.0 million resulting from temporary differences in bases of
assets and liabilities. This deferred tax asset results primarily from inventory
reserves and certain expense accruals, which are not currently deductible for
income tax purposes.
The reported income tax rate as a percentage of pretax income differs
from the statutory combined federal and state tax rates of approximately 40%.
The primary reasons for this difference are; (i) earnings of Diodes-China are
currently taxed at 13.5%, and as discussed below, deferred U.S. federal and
state income taxes are not provided on these earnings, and (ii) deferred income
tax benefits at a rate of 37.5% have been recognized on losses incurred at
FabTech.
As of March 31, 2001, accumulated and undistributed earnings of
Diodes-China are approximately $19.3 million. The Company has not recorded a
deferred tax liability (estimated to be $7.8 million) on these earnings since
the Company considers this investment to be permanent, and has no plans,
intentions or obligation to distribute all or part of that amount from China to
the United States. The Company will consider the need to provide deferred taxes
on future earnings of Diodes-China as further investment strategies with
respect to Diodes-China are determined.
NOTE D - STOCK SPLIT
On July 14, 2000, the Company effected a three-for-two stock split for
shareholders of record as of June 28, 2000. All share and per share amounts in
the accompanying financial statements reflect the effect of this stock split.
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NOTE E - SEGMENT INFORMATION
Information about the Company's operations in the United States and the
Far East are presented below. Items transferred among the Company and its
subsidiaries are transferred at prices to recover costs plus an appropriate mark
up for profit. Inter-company revenues, profits and assets have been eliminated
to arrive at the consolidated amounts.
Operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated regularly by
the chief decision maker, or decision making group, in deciding how to allocate
resources and in assessing performance. The Company's chief decision-making
group consists of the President and Chief Executive Officer, Vice President of
Sales and Marketing, Chief Financial Officer and Vice President of Far East
Operations. The operating segments are managed separately because each operating
segment represents a strategic business unit whose function and purpose differs
from the other segments.
The Company's reportable operating segments include the domestic
operations (Diodes and FabTech) located in the United States and the Far East
operations (Diodes-Taiwan located in Taipei, Taiwan; and Diodes-China located in
Shanghai, China). Diodes-North America procures and distributes products
primarily throughout North America and provides management, warehousing,
engineering and logistics support. FabTech, Inc. manufactures and distributes
5-inch silicon wafers for use in the Company's internal manufacturing processes
at Diodes-China, as well as to trade customers. Diodes-Taiwan markets and sells
discrete semiconductor devices throughout the Far East and to Diodes
Incorporated. Diodes-China manufactures discrete semiconductor devices for sale
to Diodes Incorporated, Diodes-Taiwan and third-party customers in the Far East.
THREE MONTHS ENDED Consolidated
MARCH 31, 2000 Far East North America Segments
------------------ ------------ ------------- ------------
Total sales $ 22,313,000 $ 15,691,000 $ 38,004,000
Inter-segment sales (9,898,000) (669,000) (10,567,000)
------------ ------------ ------------
Net sales $ 12,415,000 $ 15,022,000 $ 27,437,000
Depreciation and amortization $ 903,000 $ 95,000 $ 998,000
Operating income $ 4,055,000 $ (160,000) $ 3,895,000
Assets $ 47,075,000 $ 22,144,000 $ 69,219,000
Capital expenditures $ 2,599,000 $ 443,000 $ 3,042,000
============ ============ ============
THREE MONTHS ENDED Consolidated
MARCH 31, 2000 Far East North America Segments
------------------ ------------ ------------- ------------
Total sales $ 16,726,000 $ 16,128,000 $ 32,854,000
Inter-segment sales (6,773,000) (332,000) (7,105,000)
------------ ------------ ------------
Net sales $ 9,953,000 $ 15,796,000 $ 25,749,000
Depreciation and amortization $ 1,491,000 $ 592,000 $ 2,083,000
Operating income $ 2,451,000 $ (1,514,000) $ 937,000
Assets $ 63,054,000 $ 48,336,000 $111,390,000
Capital expenditures $ 2,385,000 $ 416,000 $ 2,801,000
============ ============ ============
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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. Such forward-looking
statements are subject to a variety of risks and uncertainties, including those
discussed below under the heading "Factors That May Affect Future Results" and
elsewhere in this Quarterly Report on Form 10-Q, that could cause actual results
to differ materially from those anticipated by the Company's 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 on this Quarterly Report on Form 10-Q are made pursuant to the
Act.
GENERAL
Diodes Incorporated (the "Company") is a manufacturer and distributor of
high-quality discrete semiconductor devices to leading manufacturers in the
communications, computer, electronics, and automotive industries, and to
distributors of electronic components. The Company's products include small
signal transistors and MOSFETs, transient voltage suppressors (TVSs), zeners,
diodes, rectifiers and bridges, as well as silicon wafers used in manufacturing
these products.
For financial reporting purposes, the Company is deemed to engage in two
industry segments: North America and the Far East. Both segments focus on
discrete semiconductor devices. The North American segment includes the
corporate offices in California ("Diodes-North America") as well as FabTech,
Inc. ("FabTech" or "Diodes-FabTech"), the newly acquired 5-inch wafer foundry
located in Missouri. Diodes-North America procures and distributes products
primarily throughout North America and provides management, warehousing,
engineering and logistics support. Diodes-FabTech manufactures silicon wafers
for use by Diodes-China as well as for sale to its customer base. The Far East
segment includes the operations of Diodes-China (QS-9000 and ISO-14001
certified) in Shanghai, and Diodes-Taiwan (ISO-9000 certified) in Taipei.
Diodes-China manufactures product for, and distributes product to, both
Diodes-North America and Diodes-Taiwan, as well as to trade customers.
Diodes-Taiwan is the Company's Asia-Pacific sales, logistics and distribution
center, and procures product from, and distributes product primarily to,
customers in Taiwan, Korea, Singapore and Hong Kong, and to Diodes-North
America.
The discrete semiconductor industry, in which the Company competes, has
historically been subject to severe pricing pressures. Although manufacturing
costs have been falling, excess manufacturing capacity and over-inventory has
caused selling prices to fall to a greater extent than manufacturing cost. To
compete in this highly competitive industry, in recent years, the Company has
committed substantial resources to the development and implementation of two
areas of operation: (i) sales and marketing, and (ii) manufacturing. Emphasizing
the Company's focus on customer service, additional personnel and programs have
been added. In order to meet customers' needs at the design stage of end-product
development, the Company has employed additional applications engineers. These
applications engineers work directly with customers to assist them in "designing
in" the correct products to produce optimum results. Regional sales managers,
working closely with manufacturers' representatives and distributors, have also
been added in North America and the Far East to help satisfy customers'
requirements. In addition, the Company has continued to develop relationships
with major distributors who inventory and sell the Company's products. For a
description of the Company's manufacturing capacity, see "Manufacturing and
Vendors."
SALES
The Company's products are sold primarily in North America and the Far
East, both directly to end users and through electronic component distributors.
Beginning in 1998, the Company has increased the amount of product shipped to
larger distributors. Although these sales are significant in terms of total
sales dollars and gross margin dollars, they generally are under agreements that
resulted in lower gross profit margins for the Company when compared to sales to
smaller distributors and OEM customers. As the consolidation of electronic
component distributors continues, the Company anticipates that a greater portion
of its distributor sales will be to the larger distributors, and thus may result
in lower gross profit margins for this sales channel.
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In 1999, Diodes-Taiwan began purchasing silicon wafers, a new product
line, from FabTech for resale to customers in the Far East. The gross margin
percentage on sales of silicon wafers is currently far below that of the
Company's standard product line. Initially a complementary service for some
customers rather than a focused product line, silicon wafers will now be a
focused product line supplied by FabTech to its current customer base, as well
as to Diodes-China for use in its manufacturing process. Silicon wafer sales
were $4.8 million and $2.2 million, for the three months ended March 31, 2001
and 2000, respectively.
The Company has recently expanded its Far East sales force to be able to
expand sales and more effectively service accounts in Taiwan, Hong Kong,
Mainland China and other areas that are positioned for rapid growth. In
addition, the Company has initiated a sales organization in Europe to serve the
UK, France, Germany, Italy and Israel, among others, and is actively sampling
customers and taking orders.
MANUFACTURING AND VENDORS
The Company's Far East manufacturing subsidiary, Diodes-China,
manufactures product for sale primarily to customers in North America and the
Far East. Diodes-China's manufacturing focuses on SOT-23 and SOD-123 products,
as well as sub-miniature packages such as SOT-363, SOT-563, and SC-75. These
surface-mount devices ("SMD") are much smaller in size and are used primarily in
the computer and communication industries, destined for wireless devices,
notebook computers, pagers, PCMCIA cards and modems, as well as in consumer
products such as garage door transmitters, among others. Diodes-China's
state-of-the-art facilities have been designed to develop even smaller,
higher-density products as electronic industry trends to portable and hand-held
devices continue. Although Diodes-China purchases processed silicon wafers from
FabTech for use in its manufacturing process, the majority currently are
purchased from other wafer vendors. The Company intends to increase the use of
FabTech's wafers in Diodes-China's manufacturing processes.
Since 1997, the Company's manufacturing focus has primarily been in the
development and expansion of Diodes-China. To date, the Company and its 5%
minority partner have increased property, plant and equipment at the facility to
approximately $41.2 million. The equipment expansion allows for the manufacture
of additional SOT-23 packaged components as well as other surface-mount
packaging, including the smaller SOD packages. As the industry requires
manufacturing of smaller and more efficient products that meet the technical
requirements of customers seeking to integrate multiple technologies within one
package, the Company will continue to increase manufacturing capacity as
worldwide demand warrants.
In addition, the Company will continue its strategic plan of locating
alternate sources of its products and raw materials, including those provided by
its major suppliers. Alternate sources include, but are not limited to,
Diodes-China and other sourcing agreements in place, as well as those in
negotiation. The Company anticipates that the effect of the loss of any one of
its major suppliers will not have a material adverse effect on the Company's
operations, provided that alternate sources remain available. The Company
continually evaluates alternative sources of its products to assure its ability
to deliver high-quality, cost-effective products.
FABTECH
Acquired on December 1, 2000 from Lite-On Semiconductor Corporation
("LSC"), FabTech's wafer foundry is located in Lee's Summit, Missouri. FabTech
manufactures primarily 5-inch silicon wafers that are the building blocks for
semiconductors. FabTech has full foundry capabilities including processes such
as silicon epitaxy, silicon oxidation, photolithography and etching, ion
implantation and diffusion, low pressure and plasma enhanced chemical vapor
deposition, sputtered and evaporated metal deposition, wafer backgrinding, and
wafer probe and ink. LSC owns approximately 37.7% of the outstanding common
stock of the Company.
The FabTech purchase price consisted of approximately $6 million in cash
and an earnout of up to $30 million if FabTech meets specified earnings targets
over a four-year period. In addition, FabTech is obligated to repay an aggregate
of approximately $19 million, consisting of (i) approximately $13.6 million
payable, together with interest at LIBOR plus 1%, to LSC through March 31, 2002,
(ii) approximately $2.6 million payable, together with interest at LIBOR plus
1.1%, to the Company through February 28, 2001 and (iii) approximately $3.0
million payable to a financial institution, which amount was repaid on December
4, 2000 with the proceeds of a capital contribution by the Company. The
acquisition was financed internally and through bank credit facilities.
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FabTech purchases polished silicon wafers, and then by using the various
technologies listed above, in conjunction with many chemicals and gases,
fabricates several layers on the wafers, including epitaxial silicon, ion
implants, dielectrics, and metals, with various patterns. Depending upon these
layers and the die size (which is determined during the photolithography process
and completed at the customer's packaging site where the wafer is sawed into
square or rectangular die), different types of wafers with various currents,
voltages, and switching speeds are produced.
RECENT RESULTS
Starting in the second half of 1999, and continuing through the first
three quarters of 2000, industry demand exceeded industry capacity. In addition,
OEM customers and distributors increased their inventory levels. As a result,
the Company's gross profit margins reached a peak of 34.4% in the third quarter
of 2000.
As semiconductor manufacturers, including the Company, rapidly invested
in plant and equipment to increase their capacity, the semiconductor industry
experienced a sharp inventory correction primarily in two key markets,
communications and computers. Compounding this inventory correction, economies
(primarily the U.S. and the Far East) slowed, causing a sharp decline in sales
in the fourth quarter of 2000.
The excess capacity, combined with the decreased demand and higher
customer inventory levels, has continued into 2001. Although the Company's
market share has remained stable, market conditions have not improved. Because
of this, the Company expects lower gross profit margins until such a time as
demand increases and the Company utilizes more of its available manufacturing
capacity.
The impact to earnings is largely attributable to reduced capacity
utilization of the Company's manufacturing assets and demand-induced product mix
changes, both of which have had a negative impact on gross margins. Due to
market conditions, capacity utilization at Diodes-FabTech has decreased 45% as
compared to the previous year, while Diodes-China's utilization has decreased
15%.
The risks of becoming a fully integrated manufacturer are amplified in
an industry-wide slowdown because of the fixed costs associated with
manufacturing facilities. The Company has responded to this cyclical downturn by
implementing programs to cut operating costs, including reducing its worldwide
workforce by 26%, primarily at the FabTech and Diodes-China manufacturing
facilities. The Company will continue to actively adjust its cost structure as
dictated by market conditions.
Although no clear short-term change in market conditions exist, the
Company believes that long term it will continue to generate value for
shareholders and customers, not just from its expanded Diodes-China
manufacturing and FabTech's foundry assets, but also by the addition of a true
technology component to the Company. Although market conditions changed just as
the new initiative started, the Company will continue to pursue its goal of
becoming a total solution provider. This is a multi-year initiative that will
increase the Company's ability to serve its customers' needs, while establishing
the Company at the forefront of the next generation of discrete technologies.
TAXES
The reported income tax rate as a percentage of pretax income differs
from the statutory combined federal and state tax rates of approximately 40%.
The primary reasons for this difference are; 1) earnings of Diodes-China are
currently taxed at 13.5%, and as discussed below, deferred U.S. federal and
state income taxes are not provided on these earnings, and 2) deferred income
tax benefits at a rate of 37.5% have been recognized on losses incurred at
FabTech.
From 2001 through 2003, the tax rate at Diodes-China is expected to be
13.5% (one-half of the normal tax rate of 27%). The Company, however, has
received indications from the local taxing authority in Shanghai that the 0% tax
holiday may be extended beyond 2000, but currently, no assurances can be made
regarding the preferential tax treatment extension. In addition, it is currently
not known whether the taxing authority for the central government of the
People's Republic of China ("PRC") will participate in this extended tax holiday
arrangement. Based upon expected tax rates in the U.S., Taiwan and China, and
the expected profitability of each of
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the Company's operating entities during the balance of the year, it is
anticipated that for 2001 the consolidated provision for income taxes should be
in the range of 10% to 20% of pre-tax income.
In accordance with tax treaty arrangements, the Company receives full
credit against its U.S. federal tax liability for corporate taxes paid in Taiwan
and China. The repatriation of funds from Taiwan and China to the Company may be
subject to state income taxes. In the years ending December 31, 1999 and 2000,
Diodes-Taiwan distributed dividends of approximately $1.5 million and $2.6
million, respectively, which is included in federal and state taxable income.
Deferred taxes have been provided for all remaining undistributed earnings of
Diodes-Taiwan. As of March 31, 2001, accumulated and undistributed earnings of
Diodes-China is approximately $19.3 million. The Company has not recorded
deferred federal or state tax liabilities (estimated to be $7.8 million) on
these earnings since the Company considers its investment in Diodes-China to be
permanent.
Each quarter the Company assesses its position with respect to its
investment plans and monetary policies as they relate to the recognition of
deferred tax liabilities on the earnings at Diodes-China. At such time the
Company plans to cease reinvesting its earnings in Diodes-China, deferred income
taxes would be provided on incremental earnings of Diodes-China thereafter.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001
The following table sets forth, for the periods indicated, the
percentage that certain items in the statement of income bear to net sales and
the percentage dollar increase (decrease) of such items from period to period.
PERCENTAGE DOLLAR
PERCENT OF NET SALES INCREASE
THREE MONTHS ENDED MARCH 31, (DECREASE)
----------------------------------- -----------------
2000 2001 `00 TO `01
------------ ------------ -----------------
Net sales 100.0% 100.0% (6.2)%
Cost of goods sold (69.2) (84.0) 13.8
------------ ------------ ------------
Gross profit 30.8 16.0 (51.2)
Selling, general & administrative
expenses ("SG&A") (16.6) (12.4) (29.9)
------------ ------------ ------------
Income from operations 14.2 3.6 (75.9)
Interest expense, net (0.6) (2.6) 311.0
Other income 0.0 (0.4) (1,700.0)
------------ ------------ ------------
Income before taxes and minority 13.6 0.6 (95.5)
Income taxes (1.8) 1.7 (187.2)
Minority interest (0.4) (0.3) (28.6)
------------ ------------ ------------
Net income 11.4 2.0 (83.4)
============ ============ ============
The following discussion explains in greater detail the consolidated
operating results and financial condition of the Company for the three months
ended March 31, 2001 compared to the three months ended March 31, 2000. This
discussion should be read in conjunction with the consolidated financial
statements and notes thereto appearing elsewhere in this quarterly report.
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2000 2001
----------- -----------
NET SALES $27,437,000 $25,748,000
Net sales decreased approximately $1.7 million, or 6.2%, for the three
months ended March 31, 2001, compared to the same period last year, due
primarily to a 6.1% decrease in units sold as a result of excess inventory and
decreased demand. Acquired in December 2000, Diodes-FabTech contributed trade
sales of $4.7 million in the first quarter of 2001. As the operations of
Diodes-FabTech are integrated, the Company plans to increase the use of FabTech
wafers in the Company's products, thus decreasing the sales of silicon wafers to
trade customers. The Company's average selling price decreased approximately
15%, primarily in the Far East.
2000 2001
----------- -----------
COST OF GOODS SOLD $19,000,000 $21,627,000
GROSS PROFIT $ 8,437,000 $ 4,121,000
GROSS PROFIT MARGIN PERCENTAGE 30.8% 16.0%
Gross profit decreased approximately $4.3 million, or 51.2%, for the
three months ended March 31, 2001 compared to the year ago period. Of the $4.3
million decrease, approximately $500,000 was due to the 6.2% decrease in net
sales, while $3.8 million was due to the decrease in gross margin percentage
from 30.8% to 16.0%. Excess capacity, primarily at Diodes-FabTech, contributed
to the decrease in gross margin percentage. The excess capacity, coupled with
the decreased demand and higher customer inventory levels, has continued.
Although the Company's market share has remained stable, market conditions have
not improved. Because of this, the Company expects lower gross profit margins
until such a time as demand increases and the Company utilizes more of its
available manufacturing capacity.
2000 2001
----------- -----------
SG&A $ 4,542,000 $ 3,184,000
SG&A for the three months ended March 31, 2001 decreased approximately
$1.4 million, or 29.9%, compared to the same period last year, due primarily to
lower wage and benefits expenses resulting from a 26% work-force reduction which
began in the fourth quarter of 2000. SG&A also decreased due to lower marketing
expenses and lower sales commissions associated with decreased sales. Lower
corporate and administrative expenses, including legal expenses, were partly
offset by an increase in goodwill amortization associated with the December 2000
FabTech acquisition. SG&A as a percentage of sales decreased to 12.4% from 16.6%
in the comparable period last year.
2000 2001
----------- -----------
INTEREST INCOME $ 52,000 $ 66,000
INTEREST EXPENSE $ 216,000 $ 740,000
NET INTEREST EXPENSE $ 164,000 $ 674,000
Net interest expense for the three months ended March 31, 2001 increased
$510,000 versus the same period last year, due primarily to an increased use of
the Company's credit facility at higher interest rates. The Company's interest
expense is primarily the result of the Company's financing of the FabTech
acquisition, as well as the investment in the Diodes-China manufacturing
facility. The Company expects interest expense to increase significantly in
2001, compared to 2000, as a result of additional debt, primarily associated
with its acquisition of FabTech.
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2000 2001
----------- -----------
OTHER INCOME (EXPENSE) $ 6,000 $ (96,000)
Other expense for the three months ended March 31, 2001 increased
approximately $102,000 compared to the same period last year, due primarily to
the management incentive associated with the FabTech acquisition. As per the
terms of the stock purchase agreement, the Company has entered into several
management incentive agreements with members of FabTech's management. The
agreements provide members of management guaranteed annual compensation as well
as contingent compensation based on the annual profitability of FabTech, subject
to a maximum annual amount. For the year 2001, the guaranteed commitment is
$375,000.
2000 2001
----------- -----------
INCOME TAX BENEFIT (PROVISION) $ (492,000) $ 429,000
The reported income tax rate as a percentage of pretax income differs
from the statutory combined federal and state tax rates of approximately 40%.
The primary reasons for this difference are; 1) earnings of Diodes-China are
currently taxed at 13.5%, and deferred U.S. federal and state income taxes are
not provided on these earnings, and 2) deferred income tax benefits at a rate of
37.5% have been recognized on losses incurred at FabTech.
2000 2001
----------- -----------
MINORITY INTEREST IN JOINT VENTURE $ (105,000) $ (75,000)
Minority interest in joint venture represents the minority investor's
share of the Diodes-China joint venture's income for the period. The decrease in
the joint venture earnings for the three months ended March 31, 2001 is
primarily the result of decreased gross margins due to excess capacity and
demand-induced product mix changes, both internally and to external customers.
The joint venture investment is eliminated in consolidation of the Company's
financial statements, and the activities of Diodes-China are included therein.
As of March 31, 2001, the Company had a 95% controlling interest in the joint
venture.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Cash used by operating activities for the three months ended March 31,
2001 was $637,000 compared to cash used of $1.4 million for the same period in
2000. The primary sources of cash flows from operating activities in 2001 were a
decrease in inventories of $5.0 million and depreciation and amortization of
$2.1 million. The primary use of cash flows from operating activities in 2001
was a decrease in accounts payable of $2.8 million and a decrease in accrued
liabilities of $2.5 million. The primary sources of cash flows from operating
activities for the three months ended March 31, 2000 were net income of $3.1
million and an increase in accounts payable of $1.1 million, while the primary
uses were a $2.7 million increase in accounts receivable and a $2.3 million
increase in inventories. Inventory turns at March 31, 2001 were 3.5 times
compared to 2.5 times at December 31, 2000. Accounts receivable days at March
31, 2001 were 73 days compared to 72 days at December 31, 2000. The ratio of the
Company's current assets to current liabilities on March 31, 2001 was 1.4 to 1,
equal to that as of December 31, 2000.
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Cash used by investing activities for the three months ended March 31,
2001 was $2.8 million, compared to $3.0 million during the same period in 2000.
The primary investment in both years was for additional manufacturing equipment
at the Diodes-China manufacturing facility.
Cash provided by financing activities was $2.6 million for the three
months ended March 31, 2001, compared to $4.0 million for the same period in
2000. The Company has a $26.5 million credit facility with a major bank
consisting of: a working capital line of credit up to $9 million and term
commitment notes providing up to $10.0 million for plant expansion and financing
the acquisition of FabTech, and $7.6 million for Diodes-China operations.
Interest on outstanding borrowings under the credit agreement is payable monthly
at LIBOR plus a negotiated margin. Fixed borrowings require fixed principal plus
interest payments for sixty months thereafter. The agreement has certain
covenants and restrictions, which, among other matters, require the maintenance
of certain financial ratios and operating results, as defined in the agreement.
The Company was in compliance as of March 31, 2001. The Company has extended its
working capital line of credit through June 30, 2002, and has obtained an
additional $10 million in term commitment notes. As of March 31, 2001,
approximately $14.0 million is outstanding under the term note commitment, and
the average interest rate on outstanding borrowings was approximately 7.4%.
Diodes-China operates with two unsecured working capital credit
facilities. One credit facility provides for advances of up to $3.0 million
while the second credit facility provides for advances of approximately $1.0
million, both with variable interest rates between 5% and 7%.
The Company, as part of the FabTech acquisition from LSC (its majority
shareholder), also has a note payable to LSC for approximately $13.5 million.
The unsecured note bears interest at LIBOR plus 1% and is subordinated to the
interest of the Company's primary lender.
The Company has used its credit facility primarily to fund the plant and
equipment expansion at Diodes-China, as well as the acquisition of FabTech, and
to support its operations. The Company believes that the continued availability
of this credit facility, together with internally generated funds, will be
sufficient to meet the Company's currently foreseeable operating cash
requirements.
Total working capital increased approximately 2.3% to $17.7 million as
of March 31, 2001 from $17.3 million as of December 31, 2000. The Company
believes that its working capital position will be sufficient for growth
opportunities.
The Company's long-term debt to equity ratio increased to 0.37 at March
31, 2001, from 0.34 at December 31, 2000. The Company's total debt to equity
ratio decreased to 0.53 at March 31, 2001, from 0.55 at December 31, 2000. It is
anticipated that these ratios may increase as the Company continues to use its
credit facilities to fund additional sourcing and manufacturing opportunities.
As of March 31, 2001, the Company has no material plans or commitments
for capital expenditures other than in connection with the expansion at
Diodes-China and the Company's implementation of an Oracle Enterprise Resource
Planning software package, planned for late 2001. However, to ensure that the
Company can secure reliable and cost effective inventory sourcing to support and
better position itself for growth, the Company is continuously evaluating
additional internal manufacturing expansion, as well as additional outside
sources of products. The Company believes its financial position will provide
sufficient funds should an appropriate investment opportunity arise and,
thereby, assist the Company in improving customer satisfaction and in
maintaining or increasing market share.
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CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISION OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Except for the historical information contained herein, the matters
addressed in this Quarterly Report on Form 10-Q constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Such forward-looking statements are subject to a variety of risks and
uncertainties, including those discussed below and elsewhere in this Quarterly
Report on Form 10-Q that could cause actual results to differ materially from
those anticipated by the Company's 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 on this
Quarterly Report on Form 10-Q are made pursuant to the Act.
FACTORS THAT MAY AFFECT FUTURE RESULTS
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 the Company or statements
made by its 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.
RISK FACTORS
VERTICAL INTEGRATION
We are in the process of vertically integrating our business. Key
elements of this strategy include (i) expanding our manufacturing capacity, (ii)
establishing wafer foundry and research and development capability through the
acquisition of FabTech and (iii) establishing sales, marketing, product
development, package development and assembly/testing operations in
company-owned facilities or through the acquisition of established contractors.
We have a limited history upon which an evaluation of the prospects of our
vertical integration strategy can be based. There are certain risks associated
with our vertical integration strategy, including:
- difficulties associated with owning a manufacturing business,
including, but not limited to, the maintenance and management of
manufacturing facilities, equipment, employees and inventories
and limitations on the flexibility of controlling overhead;
- difficulties implementing our Oracle Enterprise Resource
Planning system;
- difficulties expanding our operations in the Far East and
developing new operations in Europe;
- difficulties developing and implementing a successful research
and development team; and
- difficulties developing proprietary technology.
ECONOMIC CONDITIONS
The discrete segment of the semiconductor industry is highly cyclical,
and the value of our business may decline during the "down" portion of these
cycles. During recent years, we, as well as many others in our industry,
experienced significant declines in the pricing of, as well as demand for, our
products and lower facilities utilization. The market for discrete
semiconductors may experience renewed, possibly more severe and prolonged,
downturns in the future. The markets for our products depend on continued demand
in the communications, computer, electronic and automotive markets, and these
end-markets may experience changes in demand that could adversely affect our
operating results and financial condition.
COMPETITION
The discrete semiconductor industry is highly competitive. We expect
intensified competition from existing competitors and new entrants. Competition
is based on price, product performance, product availability, quality,
reliability and customer service. We compete in various markets with companies
of various sizes, many of which are larger and have greater financial,
marketing, distribution, brand names and other resources
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than we have, and thus may be better able to pursue acquisition candidates and
to withstand adverse economic or market conditions. In addition, companies not
currently in direct competition with us may introduce competing products in the
future. Some of our current major competitors are On Semiconductor, General
Semiconductor, Inc., Fairchild Semiconductor Corporation, International
Rectifier Corporation, Rohm, and Phillips. We may not be able to compete
successfully in the future, or competitive pressures may harm our financial
condition or our operating results.
FOREIGN OPERATIONS
We expect revenues from foreign markets to continue to represent a
significant portion of our total revenues. In addition, we maintain facilities
or contract with entities in the Philippines, Taiwan, Germany, Japan, England,
India, and China, among others. There are risks inherent in doing business
internationally, including:
- changes in, or impositions of, legislative or regulatory
requirements, including tax laws in the United States and in the
countries in which we manufacture or sell our products;
- trade restrictions; transportation delays; work stoppages;
economic and political instability;
- changes in import/export regulations, tariffs and freight rates;
- difficulties in collecting receivables and enforcing contracts
generally; and
- currency exchange rate fluctuations.
VARIABILITY OF QUARTERLY RESULTS
We have experienced, and expect to continue to experience, a substantial
variation in net sales and operating results from quarter to quarter. We believe
that the factors which influence this variability of quarterly results include:
- general economic conditions in the countries where we sell our
products;
- seasonality and variability in the computer market and our other
end markets;
- the timing of our and our competitors' new product
introductions;
- product obsolescence;
- the scheduling, rescheduling and cancellation of large orders by
our customers;
- the cyclical nature of demand for our customers' products;
- our ability to develop new process technologies and achieve
volume production at our fabrication facilities;
- changes in manufacturing yields;
- adverse movements in exchange rates, interest rates or tax
rates; and
- the availability of adequate supply commitments from our outside
suppliers or subcontractors.
Accordingly, a comparison of the Company's results of operations from
period to period is not necessarily meaningful and the Company's results of
operations for any period are not necessarily indicative of future performance.
NEW TECHNOLOGIES
We cannot assure you that we will successfully identify new product
opportunities and develop and bring products to market in a timely and
cost-effective manner, or that products or technologies developed by others will
not render our products or technologies obsolete or noncompetitive. In addition,
to remain competitive, we must continue to reduce package sizes, improve
manufacturing yields and expand our sales. We may not be able to accomplish
these goals.
PRODUCTION
Our manufacturing efficiency will be an important factor in our future
profitability, and we cannot assure you that we will be able to maintain or
increase our manufacturing efficiency. Our manufacturing processes require
advanced and costly equipment and are continually being modified in an effort to
improve yields and product performance. We may experience manufacturing problems
in achieving acceptable yields or experience product delivery delays in the
future as a result of, among other things, capacity constraints, construction
delays, upgrading or expanding existing facilities or changing our process
technologies, any of which could result in a loss of future
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revenues. Our operating results also could be adversely affected by the increase
in fixed costs and operating expenses related to increases in production
capacity if revenues do not increase proportionately.
FUTURE ACQUISITIONS
As part of our business strategy, we expect to review acquisition
prospects that would implement our vertical integration strategy or offer other
growth opportunities. While we have no current agreements and no active
negotiations underway with respect to any acquisitions, we may acquire
businesses, products or technologies in the future. In the event of future
acquisitions, we could:
- use a significant portion of our available cash;
- issue equity securities, which would dilute current
stockholders' percentage ownership;
- incur substantial debt;
- incur or assume contingent liabilities, known or unknown; o
incur amortization expenses related to goodwill or other
intangibles; and
- incur large, immediate accounting write-offs.
Such actions by us could harm our operating results and/or adversely
influence the price of our common stock.
INTEGRATION OF ACQUISITIONS
During fiscal year 2000, we acquired FabTech. We may continue to expand
and diversify our operations with additional acquisitions. If we are
unsuccessful in integrating these companies or product lines with our
operations, or if integration is more difficult than anticipated, we may
experience disruptions that could have a material adverse effect on our
business, financial condition and results of operations. Some of the risks that
may affect our ability to integrate or realize any anticipated benefits from
companies we acquire include those associated with:
- unexpected losses of key employees or customers of the acquired
company;
- conforming the acquired company's standards, processes,
procedures and controls with our operations;
- coordinating our new product and process development;
- hiring additional management and other critical personnel;
- increasing the scope, geographic diversity and complexity of our
operations;
- difficulties in consolidating facilities and transferring
processes and know-how;
- diversion of management's attention from other business
concerns; and
- adverse effects on existing business relationships with
customers.
BACKLOG
The amount of backlog to be shipped during any period is dependent upon
various factors and all orders are subject to cancellation or modification,
usually without penalty to the customer. Orders are generally booked from one to
twelve months in advance of delivery. The rate of booking new orders can vary
significantly from month to month. The Company and the industry as a whole are
experiencing a trend towards shorter lead-times (the amount of time between the
date a customer places an order and the date the customer requires shipment).
The amount of backlog at any date depends upon various factors, including the
timing of the receipt of orders, fluctuations in orders of existing product
lines, and the introduction of any new lines. Accordingly, the Company believes
that the amount of backlog at any date is not meaningful and is not necessarily
indicative of actual future shipments. The Company strives to maintain proper
inventory levels to support customers' just-in-time order expectations.
PRODUCT RESOURCES
We sell products primarily pursuant to purchase orders for current
delivery, rather than pursuant to long-term supply contracts. Many of these
purchase orders may be revised or canceled without penalty. As a result, we must
commit resources to the production of products without any advance purchase
commitments from customers. Our inability to sell, or delays in selling,
products after we devote significant resources to them could have a material
adverse effect on our business, financial condition and results of operations.
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QUALIFIED PERSONNEL
Our future success depends, in part, upon our ability to attract and
retain highly qualified technical, sales, marketing and managerial personnel.
Personnel with the necessary expertise are scarce and competition for personnel
with these skills is intense. We may not be able to retain existing key
technical, sales, marketing and managerial employees or be successful in
attracting, assimilating or retaining other highly qualified technical, sales,
marketing and managerial personnel in the future. If we are unable to retain
existing key employees or are unsuccessful in attracting new highly qualified
employees, our business, financial condition and results of operations could be
materially and adversely affected.
EXPANSION
Our ability to successfully offer our products in the discrete
semiconductor market requires effective planning and management processes. Our
past growth, and our targeted future growth, may place a significant strain on
our management systems and resources, including our financial and managerial
controls, reporting systems and procedures. In addition, we will need to
continue to train and manage our workforce worldwide.
SUPPLIERS
Our manufacturing operations depend upon obtaining adequate supplies of
materials, parts and equipment on a timely basis from third parties. Our results
of operations could be adversely affected if we are unable to obtain adequate
supplies of materials, parts and equipment in a timely manner or if the costs of
materials, parts or equipment increase significantly. In addition, a significant
portion of our total sales is from parts manufactured by outside vendors. From
time to time, suppliers may extend lead times, limit supplies or increase prices
due to capacity constraints or other factors. Although we generally use
products, materials, parts and equipment available from multiple suppliers, we
have a limited number of suppliers for some products, materials, parts and
equipment. While we believe that alternate suppliers for these products,
materials, parts and equipment are available, an interruption could materially
impair our operations.
ENVIRONMENTAL REGULATIONS
We are subject to a variety of United States federal, foreign, state and
local governmental laws, rules and regulations related to the use, storage,
handling, discharge or disposal of certain toxic, volatile or otherwise
hazardous chemicals used in our manufacturing process. Any of these regulations
could require us to acquire equipment or to incur substantial other expenses to
comply with environmental regulations. If we were to incur substantial
additional expenses, product costs could significantly increase, thus materially
and adversely affecting our business, financial condition and results of
operations. Any failure to comply with present or future environmental laws,
rules and regulations could result in fines, suspension of production or
cessation of operations, any of which could have a material adverse effect on
our business, financial condition and results of operations.
PRODUCT LIABILITY
One or more of our products may be found to be defective after we have
already shipped such products in volume, requiring a product replacement or
recall. We may also be subject to product returns which could impose substantial
costs and have a material and adverse effect on our business, financial
condition and results of operations. Product liability claims may be asserted
with respect to our technology or products. Although we currently have product
liability insurance, there can be no assurance that we have obtained sufficient
insurance coverage, or that we will have sufficient resources, to satisfy all
possible product liability claims.
SYSTEM OUTAGES
Risks are presented by electrical or telecommunications outages,
computer hacking or other general system failure. To try to manage our
operations efficiently and effectively, we rely heavily on our internal
information and communications systems and on systems or support services from
third parties. Any of these are subject to failure. System-wide or local
failures that affect our information processing could have material adverse
effects on our business, financial condition, results of operations and cash
flows. In addition, insurance coverage for the risks described above may be
unavailable.
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DOWNWARD PRICE TRENDS
Our industry is intensely competitive and prices for existing products
tend to decrease steadily over their life cycle. There is substantial and
continuing pressure from customers to reduce the total cost of using our parts.
To remain competitive, we must achieve continuous cost reductions through
process and product improvements. We must also be in a position to minimize our
customers' shipping and inventory financing costs and to meet their other goals
for rationalization of supply and production. Our growth and the profit margins
of our products will suffer if our competitors are more successful in reducing
the total cost to customers of their products than we are.
OBSOLETE INVENTORIES
The life cycles of some of our products depend heavily upon the life
cycles of the end products into which our products are designed. Products with
short life cycles require us to manage closely our production and inventory
levels. Inventory may also become obsolete because of adverse changes in end
market demand. We may in the future be adversely affected by obsolete or excess
inventories which may result from unanticipated changes in the estimated total
demand for our products or the estimated life cycles of the end products into
which our products are designed.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no matters to be reported under this heading.
ITEM 2. CHANGES IN SECURITIES
There are no matters to be reported under this heading.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There are no matters to be reported under this heading.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There are no matters to be reported under this heading.
ITEM 5. OTHER INFORMATION
There are no matters to be reported under this heading.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11 Computation of Earnings Per Share
Exhibit 99.22 Press release; Diodes, Inc. Introduces
Low Barrier Schottky Rectifier
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Exhibit 99.23 Press release; Diodes, Inc. Announces
Conference Call To Discuss First
Quarter FY 2001 Financial Results
Exhibit 99.24 Press release; Diodes, Inc. Reports
First Quarter 2001 Results
(b) Reports on Form 8-K
None
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SIGNATURE
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.
DIODES INCORPORATED (Registrant)
By: /s/ Carl Wertz May 11, 2001
- ------------------------------------
CARL WERTZ
Chief Financial Officer,
Treasurer and Secretary
(Duly Authorized Officer and
Principal Financial and
Chief Accounting Officer)
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INDEX TO EXHIBITS
Exhibit 11 Computation of Earnings Per Share
Exhibit 99.22 Press release; Diodes, Inc. Introduces
Low Barrier Schottky Rectifier
Exhibit 99.23 Press release; Diodes, Inc. Announces Conference
Call To Discuss First Quarter FY 2001
Financial Results
Exhibit 99.24 Press release; Diodes, Inc. Reports
First Quarter 2001 Results
23