<PAGE> 1
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, 1997
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)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
COMMON STOCK, PAR VALUE $0.66 2/3 AMERICAN STOCK EXCHANGE
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
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 outstanding as of March
31, 1997, was 5,675,794 including 717,115 shares of treasury stock.
THIS REPORT INCLUDES A TOTAL OF 18 PAGES
THE EXHIBIT INDEX IS ON PAGE 16
<PAGE> 2
DIODES INCORPORATED
INDEX
<TABLE>
<CAPTION>
Page
----
PART I - FINANCIAL INFORMATION
<S> <C> <C>
Item 1 - Consolidated Financial Statements
Consolidated Condensed Balance Sheets at March 31, 1997 and December 31,
1996 3-4
Consolidated Condensed Statements of Income for the three months ended
March 31, 1997 and March 31, 1996 5
Consolidated Condensed Statements of Cash Flows for the three months
ended March 31, 1997 and March 31, 1996 6
Notes to Consolidated Condensed Statements for the three months ended
March 31, 1997 and March 31, 1996 7
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations 8-13
PART II - OTHER INFORMATION
Items 1 through 6 14
Signature 15
Index to Exhibits 16
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL INFORMATION
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 5,422,000 $ 1,820,000
Accounts receivable
Customers 9,752,000 7,901,000
Related party 358,000 376,000
Other 387,000 352,000
----------- -----------
10,497,000 8,629,000
Less allowance for doubtful receivables 246,000 253,000
----------- -----------
10,251,000 8,376,000
Inventories 12,082,000 13,268,000
Deferred income taxes 1,426,000 1,426,000
Prepaid expenses and other 266,000 345,000
----------- -----------
Total current assets 29,447,000 25,235,000
PROPERTY, PLANT, AND EQUIPMENT, at cost, net
of accumulated depreciation and amortization 5,449,000 4,628,000
ADVANCES TO RELATED PARTY VENDOR 2,676,000 2,631,000
OTHER ASSETS 101,000 52,000
----------- -----------
TOTAL ASSETS $37,673,000 $32,546,000
=========== ===========
</TABLE>
3
<PAGE> 4
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
CURRENT LIABILITIES
Due to bank $ 1,000,000 $ --
Accounts payable
Trade 3,363,000 2,303,000
Related party 2,246,000 2,250,000
Accrued liabilities 3,472,000 2,102,000
Income taxes payable 646,000 223,000
Current portion of long-term debt 1,037,000 954,000
----------- -----------
Total current liabilities 11,764,000 7,832,000
LONG-TERM DEBT, net of current portion 4,196,000 4,288,000
MINORITY INTEREST IN JOINT VENTURE 1,065,000 962,000
STOCKHOLDERS' EQUITY
Class A convertible preferred stock par value $1.00 per share;
1,000,000 shares authorized; no shares
issued and outstanding at December 31, 1996 and
March 31, 1997 -- --
Common stock - par value $0.66 2/3 per share;
9,000,000 shares authorized; 5,675,794 shares
at December 31, 1996 and March 31, 1997
issued and outstanding 3,784,000 3,784,000
Additional paid-in capital 5,768,000 5,768,000
Retained earnings 12,878,000 11,694,000
----------- -----------
22,430,000 21,246,000
Less:
Treasury stock - 717,115 shares of common stock at cost 1,782,000 1,782,000
----------- -----------
Total stockholders' equity 20,648,000 19,464,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $37,673,000 $32,546,000
=========== ===========
</TABLE>
4
<PAGE> 5
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------
1997 1996
------------ ------------
<S> <C> <C>
NET SALES $ 16,490,000 $ 13,206,000
COST OF GOODS SOLD 11,789,000 9,493,000
------------ ------------
Gross profit 4,701,000 3,713,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,028,000 2,457,000
------------ ------------
Income from operations 1,673,000 1,256,000
OTHER INCOME (EXPENSE)
Interest income 45,000 47,000
Interest expense (103,000) (123,000)
Minority interest in joint venture earnings (90,000) --
Commissions and other 89,000 121,000
------------ ------------
(59,000) 45,000
INCOME BEFORE INCOME TAXES 1,614,000 1,301,000
PROVISION FOR INCOME TAXES 430,000 453,000
------------ ------------
NET INCOME $ 1,184,000 $ 848,000
============ ============
EARNINGS PER COMMON SHARE $ 0.22 $ 0.16
============ ============
Number of shares used in computation 5,341,469 5,228,123
============ ============
</TABLE>
5
<PAGE> 6
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,184,000 $ 848,000
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 235,000 82,000
Increase (decrease) in allowance for doubtful accounts (7,000) 15,000
(Increase) decrease in operating assets:
Accounts receivable (1,868,000) 23,000
Inventories 1,186,000 151,000
Prepaid expenses and other 79,000 (36,000)
(Decrease) increase in operating liabilities:
Trade accounts payable 1,060,000 (2,418,000)
Related party accounts payable (4,000) (1,000)
Accrued liabilities 641,000 302,000
Income taxes payable 423,000 (582,000)
Minority interest 103,000 740,000
----------- -----------
Net cash provided (used) by operating activities 3,032,000 (876,000)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (327,000) (588,000)
Acquisition of other assets (94,000) (1,869,000)
----------- -----------
Net cash (used) by investing activities (421,000) (2,457,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances (payments) on line of credit, net 1,083,000 3,461,000
Repayments of long-term obligations (92,000) (9,000)
----------- -----------
Net cash provided (used) by financing activities 991,000 3,452,000
----------- -----------
INCREASE (DECREASE) IN CASH $ 3,602,000 $ 119,000
CASH AT BEGINNING OF PERIOD $ 1,820,000 $ 478,000
----------- -----------
CASH AT END OF PERIOD $ 5,422,000 $ 597,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-Cash Investing Activities
Purchase of equipment on accounts payable $ 729,000 $ 822,000
=========== ===========
Conversion of joint venture investment to plant
and equipment $ -- $ 1,878,000
=========== ===========
</TABLE>
6
<PAGE> 7
DIODES INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated, condensed financial
statements have been prepared in accordance with the instruction to Form 10-Q
and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of the financial position and results of operations have been
included. Operating results for interim periods are not necessarily indicative
of the results that may be expected for the full year. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's annual report in Form 10-K for the calendar year ended December
31, 1996.
The consolidated financial statements include the accounts of
the Company, its wholly-owned subsidiary, Diodes Taiwan Co., Ltd. (a foreign
subsidiary), and the accounts of the Kai Hong joint venture in which the Company
has a 70% controlling interest. All significant intercompany balances and
transactions have been eliminated.
NOTE B - INCOME TAXES
Effective January 1, 1993, the Company adopted Financial
Accounting Standards Board's Statement of Financial Accounting Standards No. 109
("SFAS No. 109"), "Accounting for Income Taxes." This pronouncement requires
that taxes be provided based upon the tax rate at which the items of income and
expense are expected to be settled in the Company's tax return.
SFAS No. 109 requires the recognition of deferred tax assets
and liabilities for both the expected future tax impact of differences between
the financial statement and tax basis of assets and liabilities, and for the
expected future tax benefit to be derived from tax loss carryforwards. SFAS No.
109 additionally requires the establishment of a valuation allowance to reflect
the likelihood of realization of deferred tax assets.
Accordingly, the Company has recorded a net deferred tax asset
resulting from net deductible temporary differences in the amount of $1,426,000.
This deferred tax asset results primarily from inventory reserves and expense
accruals which are not currently deductible for federal income tax purposes.
7
<PAGE> 8
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 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
The Company's net sales increased 24.9% to $16.5 million for
the three months ended March 31, 1997 from $13.2 million in the same period
ended March 31, 1996 and primarily due to an increase in customer demand
resulting in an increase in the number of units shipped. Throughout most of
1996, the industry experienced a substantial decrease in demand, combined with
excess inventory among the Company's customers which negatively affected the
Company's net sales and gross profit margins. The Company's net sales for the
first quarter of 1997 increased 10.2% over the fourth quarter of 1996, however
there can be no assurance that such results will continue or be maintained.
The Company was able to increase its gross profit margin to
28.5% for the three months ended March 31, 1997 compared to 28.1% for the same
period a year ago, as a result of increased demand and improved inventory
control.
In March 1997, as a result of the Company's total commitment
to customer satisfaction and product quality, the Company's corporate
headquarters received official ISO 9002 Certification of Registration from
Underwriters Laboratories, the leading third-party certification organization in
the United States and the largest in North America. ISO 9000 certifications
consist of a series of paradigms for the establishment of systems and protocols
to facilitate the creation and maintenance of superior quality-control
techniques. With its underlying premise that true product quality requires a
total quality system, ISO certification is often required of vendors seeking to
establish relationships with OEMs doing business in intensely competitive global
markets.
The Company's Kai Hong joint venture, through which the
Company has invested $2.8 million in a SOT-23 manufacturing facility on mainland
China, has begun to contribute positively to the Company's bottom line in the
first quarter of 1997.
The Company's net income increased 39.6% to $1.2 million for
the three months ended March 31, 1997 from $848,000 in the same period ended
March 31, 1996. This was due primarily to the 24.9% increase in net sales
combined with a 0.4 percentage point increase in gross profit margin, and 0.2
percentage point decrease in selling, general, and administrative expenses
("SG&A") as a percentage of net sales.
8
<PAGE> 9
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
The following table sets forth, for the periods indicated, the
percentage which certain items in the statement of income bear to net sales and
the percentage dollar increase (decrease) of such items from period to period.
<TABLE>
<CAPTION>
PERCENT OF NET SALES PERCENTAGE DOLLAR
THREE MONTHS ENDED MARCH 31, INCREASE (DECREASE)
---------------------------- ---------------------
1997 1996 '96 TO '97
------------- ------------ ---------------------
<S> <C> <C> <C>
Net sales 100.0 % 100.0 % 24.9 %
Cost of goods sold (71.5) (71.9) 24.2
------ ------ -----
Gross profit 28.5 28.1 26.6
SG&A (18.4) (18.6) 23.2
------ ------ -----
Income from operations 10.1 9.5 33.2
Interest expense, net (0.3) (0.6) (23.7)
Other income 0.0 1.0 (100.8)
------ ------ ------
Income before taxes 9.8 9.9 24.1
Income taxes 2.6 3.5 (5.1)
------ ------ ------
Net income 7.2 6.4 39.6
====== ====== ======
</TABLE>
The following discussion explains in greater detail the
consolidated operating results and financial condition of the Company. This
discussion should be read in conjunction with the consolidated financial
statements and notes thereto appearing elsewhere in this quarterly report.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
NET SALES $ 16,490,000 $ 13,206,000
- ---------
</TABLE>
The Company's net sales increased approximately $3.3 million
or 24.9% for the three months ended March 31, 1997 compared to the same period
last year and was primarily attributed to an increase in customer demand
resulting in an increase in the number of units shipped. Throughout most of
1996, the industry experienced a substantial decrease in demand, combined with
excess inventory among the Company's customers which negatively affected the
Company's net sales and gross profit margins. The Company's net sales for the
first quarter of 1997 increased 10.2% over the fourth quarter of 1996, however
there can be no assurance that such results will continue.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
GROSS PROFIT $ 4,701,000 $ 3,713,000
GROSS MARGIN PERCENTAGE 28.5% 28.1%
</TABLE>
9
<PAGE> 10
The Company's gross profit for the three months ended March
31, 1997 increased approximately $988,000 or 26.6% compared to the same period
last year, primarily due to the 24.9% increase in net sales, as well as
increased demand and improved inventory control. The gross margin percentage
increased 0.4 percentage points.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
SG&A $ 3,028,000 $ 2,457,000
</TABLE>
The Company's SG&A for the three months ended March 31, 1997
increased approximately $571,000 or 23.2% compared to the same period last year,
due primarily to: (i) an increase of approximately $164,000 in sales commissions
paid on the 24.9% increase in net sales, (ii) approximately $130,000 in
operating expenses associated with the Kai Hong manufacturing facility which
commenced operations in the second quarter of 1996, and (iii) $115,000
associated with new marketing programs. The Company's SG&A as a percentage of
net sales decreased to 18.4% for the three months ended March 31, 1997 from
18.6% for the same period last year, and from 20.0% in the fourth quarter of
1996.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
INCOME FROM OPERATIONS $ 1,673,000 $ 1,256,000
</TABLE>
The Company's 1997 comparative increase in operating profit of
approximately $417,000, or 33.2%, is primarily the result of the Company's 24.9%
increase in net sales, 26.6% increase in gross profit, and 0.2 percentage point
decrease in SG&A as a percentage of net sales.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
INTEREST INCOME $ 45,000 $ 47,000
INTEREST EXPENSE $ 103,000 $ 123,000
</TABLE>
The Company's interest income for the three months ended March
31, 1997, remained substantially unchanged compared to the same period last year
as the Company is advancing funds under its sourcing agreements. Interest income
is primarily the interest charged to FabTech under the Company's loan agreement.
The Company's interest expense for 1996 decreased $20,000 or 16.3%. Interest
expense is primarily the result of the $2.8 million investment in the Kai Hong
joint venture.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
MINORITY INTEREST IN JOINT VENTURE $ (90,000) --
</TABLE>
The Company's minority interest in joint venture for the three
months ended March 31, 1997 is the minority investor's share of the joint
venture's net income for the period. The joint venture investment is eliminated
in consolidation of the Company's financial statements and the activities of Kai
Hong are included therein. The minority interest in joint venture for the three
months ended March 31, 1996 is zero because the Kai Hong joint venture did not
commence operations until June 1996.
10
<PAGE> 11
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
OTHER INCOME $ 89,000 $ 121,000
</TABLE>
The Company's other income for the three months ended March
31, 1997 decreased approximately $32,000, or 26.4%, compared to other income for
the same period in 1996 primarily as a result of decreased commissions earned by
the Company's Taiwan subsidiary on drop shipment sales in Asia.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
INCOME TAXES $ 430,000 $ 453,000
</TABLE>
The Company's income taxes for the three months ended March
31, 1997 decreased approximately $23,000, or 5.1%, compared to income taxes for
the same period last year. The Company's effective tax rate in the current
quarter decreased to 26.6% from 34.8% as a result of the joint venture net
income in China, which under Chinese tax law is not taxed for the first two
years upon commencing profitable operation.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
NET INCOME $ 1,184,000 $ 848,000
EARNINGS PER SHARE $ 0.22 $ 0.16
</TABLE>
The Company's net income for the three months ended March 31,
1997 increased approximately $336,000 or 39.6% compared to the same period in
1996 due to the 24.9% and 26.6% increases in net sales and gross profit,
respectively, as well as a decrease in SG&A as a percentage of net sales of 0.2
percentage points. Earnings per share increased approximately 37.5% for the
three months ended March 31, 1997, compared to the same period in 1996. The
number of common and common equivalent shares outstanding for the three months
ended March 31, 1997 increased 2.2% compared to the same period last year, due
primarily to stock options issued.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities for the three months
ended March 31, 1997 was $3.0 million compared to cash used by operating
activities of $876,000 as of March 31, 1996. The primary sources of cash flows
from operations for the three months ended March 31, 1997 were net income of
$1.2 million and a decrease in inventories which resulted in an increase in cash
flows of $1.2 million. The Company believes this reduced level of inventory is
adequate to effectively service current and new customers as well as to provide
for managed growth. The primary use of cash flow from operations was a $1.9
million increase in accounts receivable. Accounts receivable increased 21.6% on
a 24.9% increase in net sales as the Company continues to closely monitor its
credit policy while, at times, providing more flexible terms when necessary. The
ratio of the Company's current assets to current liabilities on March 31, 1997,
was 2.5 to 1 compared to a ratio of 3.2 to 1 as of December 31, 1996.
Cash used by investing activities was $421,000 for the three
months ended March 31, 1997, compared to $2.5 million for the same period in
1996. The Company has provided approximately $2.8 million to Kai Hong - for the
construction of a new facility for the manufacture of SOT-23s; and approximately
$1.2 million to FabTech - to be used in upgrading, reconfiguring, and starting
up operations at an existing wafer fabrication facility.
The Company has a 70% interest in the Kai Hong joint venture,
is responsible for production and management, and currently receives 100% of the
production. The venture parties have made a significant equity contribution to
the joint venture and a portion of the cost of developing the project is debt
financed. The Kai Hong
11
<PAGE> 12
operation is now in full production with its existing equipment and, beginning
in the first quarter of 1997, is making a positive contribution to the Company's
bottom line. During the three months ended March 31, 1997, the Company purchased
equipment for approximately $729,000 for further capacity expansion. The joint
venture agreement allows for additional production expansion in phases according
to market demand.
The Company's Taiwan and Kai Hong manufacturing facilities
receive wafers from FabTech, among others. Output from the FabTech facility
includes wafers, which may be used in the production of such products as
Schottky barrier diodes, fast recovery epitaxial diodes (FREDs), and other
widely used value-added products. Schottky barrier diodes are employed in the
manufacture of the power supplies found in personal computers,
telecommunications devices and myriad other applications where high frequency,
low forward voltage and fast recovery are required.
Both the Kai Hong and FabTech alliances are indicative of the
Company's desire to participate in the sourcing of advanced-technology discrete
components, and to enhance its ability to procure products in a timely fashion
and at reasonable costs.
Cash provided by financing activities was $1.0 million as of
March 31, 1997, compared to cash provided of $3.5 million for the same period in
1996. The Company uses its credit facility to fund the advances to FabTech and
Kai Hong as well as 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 current foreseeable
operating cash requirements. The Company's cash balance at March 31, 1997
increased approximately $3.6 million, or 197.9%, compared to the December 31,
1996 cash balance.
In August 1996, the Company obtained a new $22.6 million
credit facility with a major bank consisting of: a working capital line of
credit up to $9 million, term commitment notes providing up to $9.5 million for
plant expansion and advances to vendors, and letters of credit of $4.1 million
for Kai Hong. Interest on outstanding borrowings under the credit agreement is
payable monthly at LIBOR plus a negotiated margin. Fixed borrowings require
payments of interest only for six months from the date of distribution and fixed
principal plus interest payments for sixty months thereafter. The agreement has
certain covenants and restrictions which, among other matters requires the
maintenance of certain financial ratios and operating results, as defined in the
agreement. The Company was in compliance as of March 31, 1997. The working
capital line of credit expires August 3, 1998 and contains a sublimit of $2
million for issuance of commercial and stand-by letters of credit. During 1996,
average and maximum borrowings outstanding on the line of credit were $2,975,000
and $8,382,000, respectively. The weighted average interest rate on outstanding
borrowings was 7.4% for the year ended December 31, 1996.
As of March 31, 1997, $5.0 million is outstanding under the
term note commitment. The Company may borrow the remaining $4.5 million
available under the term note commitment through September 7, 1997. The Company
also has two guaranty agreements which guarantee term loans made by a major bank
to Shanghai Kaihong Electronics Co., Ltd. (in order to assist in establishing a
credit record with the bank) and the minority investor of the Kai Hong joint
venture (as per the Kai Hong joint venture agreement) for $1.0 million and
$850,000, respectively. In the event that the Company shall be required to pay
any amount whatsoever to any person pursuant to, in connection with or as a
result of or relating to the guaranty, the Company shall have the right, in its
sole and absolute discretion, to purchase from the minority investor, and the
minority investor hereby sells and assigns to the Company, that portion of the
minority investor's shares of the capital stock of Shanghai Kaihong Electronics
Co., Ltd. obtained by dividing (x) the amount so paid by the Company by (v) the
aggregate amount theretofor required to be paid by the minority investor to
Shanghai Kaihong Electronics Co., Ltd. for the purchase of such shares, in
cancellation of the minority investor's obligations to reimburse for the Company
for such amount so paid by the Company.
The Company's total working capital increased 1.7% to $17.7
million as of March 31, 1997 from $17.4 million as of December 31, 1996. The
Company believes that its working capital position will be sufficient for its
requirements in the foreseeable future.
As of March 31, 1997, the Company has no material plans or
commitments for capital expenditures other than disclosed in the Kai Hong and
FabTech agreements previously mentioned. However, to ensure that the Company can
secure reliable and cost effective sourcing to support and better position
itself for
12
<PAGE> 13
growth, the Company is continuously evaluating additional sources of products.
The Company believes its credit and financial position will provide sufficient
access to funds should an appropriate investment opportunity arise and thereby,
assist the Company in improving customer satisfaction and in maintaining or
increasing product market penetration. The Company's debt to equity ratio
increased to 0.77 at March 31, 1997 from 0.62 at December 31, 1996. The Company
anticipates this ratio may increase as the Company continues to use its credit
facilities to fund additional sourcing opportunities.
Factors That May Affect Future Results
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 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.
All forward-looking statements contained in this Form 10-Q are
subject to, in addition to the other matters described in this 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.
There are many factors that could cause the events in such
forward looking statements to not occur, including, but not limited to, general
or specific economic conditions, fluctuations in product demand, the
introduction of new products, the Company's ability to maintain customer
relationships, technological advancements, impact of competitive products and
pricing, growth in targeted markets, risks of foreign operations, the ability
and willingness of the Company's customers to purchase products provided by the
Company, the perceived absolute or relative overall value of these products by
the purchasers, including the features, quality, and price in comparison to
other competitive products, the level of availability of products and
substitutes and the ability and willingness of purchasers to acquire new or
advanced products, and pricing, purchasing, financing, operating, advertising
and promotional decisions by intermediaries in the distribution channels which
could affect the supply of or end-user demands for the Company's products, the
amount and rate of sales growth and the Company's selling, general and
administrative expenses, difficulties in obtaining materials, supplies and
equipment, difficulties of delays in the development, production, testing and
marketing of products including, but not limited to, failure to ship new
products and technologies when anticipated, the failure of customers to accept
these products or technologies when planned, defects in products, any failure of
economies to develop when planned, the acquisition of fixed assets and other
assets, including inventories and receivables, the making or incurring of any
expenditures, the effects of and changes in trade, monetary and fiscal policies,
laws and regulations, other activities of governments, agencies and similar
organizations and social and economic conditions, such as trade restriction or
prohibition, inflation and monetary fluctuation, import and other charges or
taxes, the ability or inability of the Company to obtain or hedge against
foreign currency, foreign exchange rates and fluctuations in those rates,
intergovernmental disputes as well as actions affecting frequency, use and
availability, the costs and other effects of legal investigations, claims and
changes in those items, developments or assertions by or against the Company
relating to intellectual property rights, adaptations of new, or changes in,
accounting policies and practices in the application of such policies and
practices and the effects of changes within the Company's organization or in
compensation benefit plans, and activities of parties with which the Company has
an agreement or understanding, including any issues affecting any investment or
joint venture in which the Company has an investment, and the amount, and the
cost of financing which the Company has, and any changes to that financing, and
any other information detailed from time to time in the Company's filings with
the United States Securities and Exchange Commission.
13
<PAGE> 14
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
On April 25, 1997, the Company announced that definitive
agreements have been executed pursuant to which a controlling interest in its
major shareholder, Lite-On Power Semiconductor Corporation ("LPSC"), part of the
Lite-On Group of the Republic of China, will be transferred to Vishay
Intertechnology, Inc. ("Vishay") through a newly formed joint venture. LPSC
currently holds 40.2% of the outstanding shares of Diodes Incorporated. The
closing of the transaction is subject to regulatory approvals in the Republic of
China, the United States, and certain other customary closing conditions, and is
expected to occur in mid-summer.
The transfer was made in connection with a new joint venture
between Vishay and the Lite-On Group involving the worldwide discrete power
semiconductor business of LPSC and the Asian passive component business of
Vishay. Vishay will hold a 65% controlling interest in the joint venture, and
the Lite-On Group will hold the other 35%. The joint venture will own 100% of
LPSC.
The Company believes that this strategic alliance between the
Lite-On Group and Vishay creates one of the premier power semiconductor and
passive component companies in the world, with Diodes Incorporated being an
integral part of such company. The relative strengths of Diodes Incorporated and
Vishay are complementary, and the Company is looking forward to being part of
this alliance.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11 - Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
14
<PAGE> 15
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)
/s/ JOSEPH LIU May 13, 1997
- ---------------------------------------------
JOSEPH LIU
Vice President,
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
15
<PAGE> 16
INDEX TO EXHIBITS
EXHIBIT - 11 COMPUTATION OF EARNINGS PER SHARE
EXHIBIT - 27 FINANCIAL DATA SCHEDULE
16
<PAGE> 1
DIODES INCORPORATED AND SUBSIDIARIES
EXHIBIT - 11
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1997 1996
---------- ----------
<S> <C> <C>
PRIMARY
Weighted average number of common shares outstanding 4,958,679 4,958,596
Assumed exercise of stock options 382,790 269,527
---------- ---------
5,341,469 5,228,123
Net income $1,184,000 $ 848,000
========== ==========
Primary earnings per share $ 0.22 $ 0.16
========== ==========
FULLY-DILUTED
Weighted average number of common shares outstanding 4,958,679 4,958,596
Assumed exercise of stock options * 382,790 * 269,527
---------- ----------
5,341,469 5,228,123
Net income $1,184,000 $ 848,000
========== ==========
Fully diluted earnings per share $ 0.22 $ 0.16
========== ==========
</TABLE>
* No further effect given to common stock equivalents as their effect would be
anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000029002
<NAME> DIODES INCORPORATED
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,422,000
<SECURITIES> 0
<RECEIVABLES> 10,497,000
<ALLOWANCES> 246,000
<INVENTORY> 12,082,000
<CURRENT-ASSETS> 29,447,000
<PP&E> 7,519,000
<DEPRECIATION> 2,070,000
<TOTAL-ASSETS> 37,673,000
<CURRENT-LIABILITIES> 11,763,000
<BONDS> 0
0
0
<COMMON> 3,784,000
<OTHER-SE> 16,864,000
<TOTAL-LIABILITY-AND-EQUITY> 37,673,000
<SALES> 16,490,000
<TOTAL-REVENUES> 16,490,000
<CGS> 11,789,000
<TOTAL-COSTS> 3,029,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,000
<INCOME-PRETAX> 1,614,000
<INCOME-TAX> 430,000
<INCOME-CONTINUING> 1,184,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,184,000
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
