<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, 2000
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 (I.R.S. Employer
jurisdiction of Identification
incorporation or Number)
organization)
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 April 21, 2000 was 6,078,356, including 717,115 shares of
treasury stock.
THIS REPORT INCLUDES A TOTAL OF 27 PAGES
THE EXHIBIT INDEX IS ON PAGE 20
<PAGE> 2
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, 2000, and the related consolidated
condensed statements of income and cash flows for the three months ended March
31, 2000. 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, 1999, 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 28, 2000, 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, 1999, 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
May 4, 2000
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL INFORMATION
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
----------- -----------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash $ 3,557,000 $ 3,127,000
Accounts receivable
Customers 14,962,000 17,381,000
Related party 90,000 52,000
Other 300,000 592,000
----------- -----------
15,352,000 18,025,000
Less allowance for doubtful receivables 297,000 320,000
----------- -----------
15,055,000 17,705,000
Inventories 16,575,000 18,915,000
Deferred income taxes, current 1,700,000 1,703,000
Prepaid expenses and other current assets 762,000 957,000
----------- -----------
Total current assets 37,649,000 42,407,000
PROPERTY, PLANT AND EQUIPMENT, at cost, net
of accumulated depreciation and amortization 20,909,000 22,953,000
ADVANCES TO RELATED PARTY VENDOR 2,561,000 2,608,000
DEFERRED INCOME TAXES, non-current 146,000 146,000
OTHER ASSETS
Goodwill, net 969,000 958,000
Other 173,000 147,000
----------- -----------
TOTAL ASSETS $62,407,000 $69,219,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
------------ -----------
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES
Line of credit $ 3,237,000 $ 7,725,000
Accounts payable
Trade 7,716,000 8,347,000
Related party 1,821,000 2,289,000
Accrued liabilities 5,782,000 4,782,000
Income taxes payable 878,000 343,000
Current portion of long-term debt 2,312,000 2,313,000
----------- -----------
Total current liabilities 21,746,000 25,799,000
DEFERRED COMPENSATION 57,000 59,000
LONG-TERM DEBT, net of current portion 4,672,000 3,924,000
MINORITY INTEREST IN JOINT VENTURE 959,000 1,064,000
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;
9,000,000 shares authorized; 6,005,521 and 6,076,856
shares issued and outstanding at December 31, 1999
and March 31, 2000, respectively 4,004,000 4,052,000
Additional paid-in capital 7,888,000 8,145,000
Retained earnings 24,863,000 27,958,000
----------- -----------
36,755,000 40,155,000
Less:
Treasury stock - 717,115 shares of common stock at cost 1,782,000 1,782,000
----------- -----------
Total stockholders' equity 34,973,000 38,373,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $62,407,000 $69,219,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------------
1999 2000
------------ ------------
<S> <C> <C>
NET SALES $ 16,032,000 $ 27,437,000
COST OF GOODS SOLD 12,122,000 19,000,000
------------ ------------
Gross profit 3,910,000 8,437,000
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 3,121,000 4,542,000
------------ ------------
Income from operations 789,000 3,895,000
OTHER INCOME (EXPENSE)
Interest income 62,000 52,000
Interest expense (160,000) (216,000)
Other 48,000 6,000
------------ ------------
(50,000) (158,000)
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST 740,000 3,737,000
PROVISION FOR INCOME TAXES 17,000 492,000
MINORITY INTEREST IN JOINT VENTURE (33,000) (105,000)
EARNINGS
------------ ------------
NET INCOME $ 690,000 $ 3,140,000
============ ============
EARNINGS PER SHARE
BASIC $ 0.14 $ 0.59
DILUTED $ 0.13 $ 0.51
============ ============
Number of shares used in computation
Basic 5,047,237 5,323,963
Diluted 5,233,425 6,136,327
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------
1999 2000
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 690,000 $ 3,140,000
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 552,000 998,000
Minority interest earnings 129,000 105,000
Interest income accrued on advances to vendor (48,000) (47,000)
Changes in operating assets:
Accounts receivable (2,018,000) (2,650,000)
Inventories 1,744,000 (2,340,000)
Prepaid expenses and other assets (632,000) (161,000)
Changes in operating liabilities:
Accounts payable 974,000 1,099,000
Accrued liabilities (265,000) (1,043,000)
Income taxes payable (169,000) (535,000)
----------- -----------
Net cash provided (used) by operating activities 957,000 (1,434,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (314,000) (3,042,000)
----------- -----------
Net cash used by investing activities (314,000) (3,042,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances on line of credit, net (362,000) 4,488,000
Net proceeds from the issuance of capital stock -- 305,000
Proceeds from (repayments of) long-term obligations 592,000 (747,000)
----------- -----------
Net cash provided by financing activities 230,000 4,046,000
----------- -----------
INCREASE (DECREASE) IN CASH 873,000 (430,000)
CASH AT BEGINNING OF PERIOD 2,415,000 3,557,000
----------- -----------
CASH AT END OF PERIOD $ 3,288,000 $ 3,127,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 99,000 $ 216,000
=========== ===========
Income taxes $ 580,000 $ 1,030,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
DIODES INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying 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 on Form 10-K for the calendar year ended December 31,
1999.
The consolidated financial statements include the accounts of the
Company and its wholly-owned foreign subsidiary, Diodes Taiwan Co., Ltd.
("Diodes-Taiwan"), and the accounts of Shanghai KaiHong Electronics Co., Ltd.
("Diodes-China") in which the Company has a 95% interest. All significant
intercompany balances and transactions have been eliminated.
NOTE B - 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 $1,703,000 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 income tax expense as a percentage of pre-tax income differs from
the statutory combined federal and state tax rates. The primary reasons for this
difference are (i) in accordance with Chinese tax policy, earnings of
Diodes-China are not subject to tax for the first two years upon commencement of
cumulative profitable operations, and (ii) earnings of Diodes-Taiwan are not
subject to State income tax in the U.S.
Under Federal tax law, foreign earnings are taxed when funds are
distributed by foreign subsidiaries to the parent Company. Through December 31,
1997, the Company had undistributed earnings at Diodes-Taiwan for which no
deferred income tax liability had been recorded since, at that time, management
considered this investment to be permanent, and no plans or intentions existed
to distribute the capital of its Taiwan subsidiary. Changes in Taiwan income tax
policies in 1998 caused management to reconsider its investment strategies in
the fourth quarter of 1998 for current and future earnings at Diodes-Taiwan.
While a portion of its investment will remain in Taiwan, a total distribution of
approximately $4.5 million will be made by Diodes-Taiwan to the Company.
Approximately $1.5 million was distributed in 1999, and the remaining is
scheduled to be distributed in 2000. The decision was made, in part, because the
changes in Taiwan income tax policies made it less favorable to accumulate
earnings at Diodes-Taiwan and, in part, to allow the Company to redirect its
financial resources from Diodes-Taiwan to its expansion of Diodes-China.
NOTE C - ADVANCES TO RELATED PARTY VENDOR
Under a compensation-trade agreement the Company has advanced $2.5
million in cash to a related party vendor, FabTech Incorporated ("FabTech"), a
wholly owned subsidiary of Lite-On Power Semiconductor Corporation ("LPSC").
Interest accrues monthly at LIBOR plus 1.1%. Outstanding principal and accrued
interest as of March 31, 2000 totaled $2,608,000.
7
<PAGE> 8
Amounts advanced, including interest, are payable through February 2001
when any outstanding balances become due on demand, and are secured by FabTech's
accounts receivable. The compensation-trade agreement allows the Company to
recover interest and principal due by deducting a fixed amount ($10.00) per unit
for products (silicon wafers) purchased from FabTech. FabTech may also repay its
debt in cash. As of March 31, 2000, the Company has collected $600,000 in cash
on the note, and expects this note to be collected, including interest, no later
than February 2001, according to the terms of the agreement.
NOTE D - SEGMENT INFORMATION
Information about the Company's operations in the United States, Taiwan,
and China 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, 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.
For financial reporting purposes, the Company is deemed to operate in
three separate segments: North America, Taiwan, and China. All three segments
focus on discrete semiconductor devices. The North American segment procures and
distributes products primarily throughout North America and provides management,
warehousing and engineering support to the other two segments. The Taiwan
segment procures product from, and manufactures and distributes product
primarily to, companies in Taiwan, Korea, Singapore, and Hong Kong. This segment
also procures product for, and manufactures and distributes product to, the
Company's North American operations. The China segment manufactures product for,
and distributes product to, both the North American and Taiwan segments. In
1997, the China segment began manufacturing product for, and distributing
product to, customers in China and the U.S.
The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies. The Company
evaluates performance based on stand-alone operating segment income. Revenues
are attributed to geographic areas based on the location of the market producing
the revenues.
<TABLE>
<CAPTION>
Shanghai
KaiHong Diodes-Taiwan Diodes
THREE MONTHS ENDED Electronics Corporation, Ltd. Incorporated Consolidated
MARCH 31, 1999 (China) (Taiwan) (United States) Segments
------------------ ------------ ----------------- --------------- ------------
<S> <C> <C> <C> <C>
Total sales $ 2,014,000 $ 8,084,000 $ 10,099,000 $ 20,197,000
Inter-segment sales (1,450,000) (2,071,000) (644,000) (4,165,000)
------------ ------------ ------------ ------------
Net sales $ 564,000 $ 6,013,000 $ 9,455,000 $ 16,032,000
Depreciation and
amortization $ 467,000 $ 14,000 $ 71,000 $ 552,000
Interest expense (income),
net $ 12,000 $ 2,000 $ 84,000 $ 98,000
Income tax provision
(benefit) $ -- $ 304,000 $ (287,000) $ 17,000
Net income (loss) $ 624,000 $ 474,000 $ (408,000) $ 690,000
Segment assets $ 15,472,000 $ 12,875,000 $ 18,631,000 $ 46,978,000
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
Shanghai
KaiHong Diodes-Taiwan Diodes
THREE MONTHS ENDED Electronics Corporation, Ltd. Incorporated Consolidated
MARCH 31, 2000 (China) (Taiwan) (United States) Segments
------------------ ------------ ----------------- --------------- ------------
<S> <C> <C> <C> <C>
Total sales $ 6,629,000 $ 15,684,000 $ 15,691,000 $ 38,004,000
Inter-segment sales (5,280,000) (4,618,000) (669,000) (10,567,000)
------------ ------------ ------------ ------------
Net sales $ 1,349,000 $ 11,066,000 $ 15,022,000 $ 27,437,000
Depreciation and $ 857,000 $ 46,000 $ 95,000 $ 998,000
amortization
Interest expense (income), net $ (3,000) $ 2,000 $ 165,000 $ 164,000
Income tax provision $ -- $ 655,000 $ (163,000) $ 492,000
(benefit)
Net income (loss) $ 1,990,000 $ 1,390,000 $ (240,000) $ 3,140,000
Segment assets $ 28,119,000 $ 18,956,000 $ 22,144,000 $ 69,219,000
</TABLE>
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
automotive, electronics, computing and telecommunications industries. The
Company's products include small signal transistors and MOSFETs, transient
voltage suppressors (TVSs), zeners, diodes, rectifiers and bridges.
The Company's products are sold primarily in North America and Asia,
both directly to original equipment manufacturers ("OEMs") (55% of total sales
for the three months ended March 31, 2000) and through electronic component
distributors (45% of total sales for the three months ended March 31, 2000). For
the three months ended March 31, 2000, approximately 55% and 45% of the
Company's products were sold in North America and the Far East, respectively.
For the twelve months ended December 31, 1999, approximately 56% and 44% of the
Company's products were sold in North America and the Far East, respectively,
compared to 71% and 29% in 1998, respectively. The increase in the percentage of
sales in the Far East is expected to continue, as the Company believes there is
greater potential to increase market share in that region.
For financial reporting purposes, the Company is deemed to engage in
three industry segments: North America, Taiwan, and China. All three segments
focus on discrete semiconductor devices. The North American segment procures and
distributes products primarily throughout North America and provides management,
warehousing and engineering support. The Taiwan segment procures product from,
and manufactures and distributes product primarily to, companies in Taiwan,
Korea, Singapore, and Hong Kong. This segment also procures product for, and
manufactures and distributes product to the Company's North American operations.
The China segment manufactures product for, and distributes product to, both the
North American and Taiwan segments. In 1997, the China segment began
manufacturing product for, and distributing product to, customers in China and
North America.
9
<PAGE> 10
See Note D of "Notes to Consolidated Financial Statements" for a description of
the Company's adoption of SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information.
In July 1997, Vishay Intertechnology, Inc. ("Vishay") and the Lite-On
Group, a Taiwanese consortium, formed a joint venture -- Vishay/Lite-On Power
Semiconductor Pte., LTD. ("Vishay/LPSC") -- to acquire Lite-On Power
Semiconductor Corp. ("LPSC"), the Company's largest shareholder and a member of
the Lite-On Group of the Republic of China. Vishay is the largest U.S. and
European manufacturer of passive electronic components and a major producer of
discrete semiconductors and power integrated circuits. The Lite-On Group, with
worldwide sales of almost $2 billion, is a leading manufacturer of power
semiconductors, computer peripherals, and communication products.
In March 2000, Vishay agreed to sell its 65% interest in the Vishay/LPSC
joint venture to the Lite-On Group, the 35% owner. Because of this transaction,
the Lite-On Group, through LPSC, its wholly-owned subsidiary, indirectly owns
approximately 38% of the Company's Common Stock. The Company considers its
relationship with LPSC to be mutually beneficial and the Company and LPSC will
continue its strategic alliance as it has since 1991. The Company will continue
to compete, as it always has, with Vishay's Telefunken division. The overlap in
comparable products is insignificant and is not expected to have any material
impact on the financial results of the Company.
Products are currently sold under two brand names: Diodes, Inc. and
Vishay/Lite-On Power Semiconductor. The Company is unifying product lines under
a limited number of brand names in order to establish brand name unity and
consistency of product, and to capitalize on brand name recognition, where
possible. Although customers continue to recognize Diodes brand products and
view the Company as a separate vendor from Vishay, at this time it is uncertain
as to the effect that the Vishay/LPSC transaction will have on brand recognition
or major distributors. However, management believes that with the Company's
competitive pricing, internal manufacturing capabilities and capacity,
customer/applications engineering, and strong customer service reputation, it
has proven itself to be a valuable supplier, and as such the impact of the
Vishay/LPSC transaction is not anticipated to have a material adverse impact on
customer relations.
In March 2000, the Company appointed C.H. Chen as President and Chief
Executive Officer, replacing Michael Rosenberg who left the Company to pursue
other interests. From 1969 to 1990, Mr. Chen held various positions at Texas
Instruments, most recently as Vice President of Texas Instruments-Taiwan. In
1990, he left Texas Instruments to found Dyna Image Corp., a Lite-On Group
company (now listed on the Taiwan OTC market) that has become the world's
leading supplier of contact image sensors (CISs), which are key components in
facsimile machines and scanners. Mr. Chen is currently the Vice Chairman and
President of Dyna Image Corp.
The Company's Far East subsidiaries, Diodes-Taiwan and Diodes-China,
both manufacture product for sale to North America and the Far East.
Diodes-Taiwan's manufacturing focuses on products such as axial Schottky and
MELF rectifiers. These "general use" products are destined for end products in
the automotive industry as well as for use in commercial appliances, household
lighting, and electric hand tools, among others. Diodes-China's manufacturing
primarily focuses on SOT-23 and SOD-123 products. These surface mount devices
("SMDs") are used in the computer and telecommunications industries and are
destined for notebook computers, pagers, PCMCIA cards, modems, and 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.
The discrete semiconductor industry has, for the last several years,
been subject to severe pricing pressures, compounded by the Asian economic
situation. Although manufacturing costs generally decreased during this period,
excess manufacturing capacity and over-inventory caused selling prices to fall
at a greater rate than manufacturing costs. Because of this competitive
environment, gross profit margins declined from 28.3% in 1995 to 26.4% in 1999.
Beginning in the second half of 1999, manufacturing profit from Diodes-China
coupled with an apparent easing of pricing pressures contributed to a gross
profit margin of 30.8% as of March 31, 2000. There can be no assurance that
these improved margins can be maintained or improved upon in the future.
10
<PAGE> 11
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'
representative firms and distributors, have also been added in the U.S. and the
Far East to help satisfy customers' requirements. In addition, the Company has
developed relationships with major distributors who inventory and sell the
Company's products.
Beginning in 1998, the Company increased the amount of product shipped
to larger distributors. Although these sales were significant in terms of total
sales dollars and gross margin dollars, they generally were 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.
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 $25 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.
In December 1999, the Company announced it would invest an additional
$6.5 million in Diodes-China to expand its manufacturing capacity by
approximately 65%. The additional expansion, to be financed with cash flow and
existing credit facilities, is expected to be completed by mid-2000. In April
2000, the Company announced an additional investment of $9 million in
Diodes-China that is expected to be in full production by the first quarter of
2001. These investments will bring the total property, plant and equipment at
the manufacturing facility to approximately $40 million. Approximately $8.0
million of the Company's existing credit facility has been used to finance the
additional manufacturing capacity. 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.
The Company intends to 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.
In 1999, Diodes-Taiwan began purchasing silicon wafers, a new product
line, from FabTech for resale to customers in the Far East. Diodes-Taiwan also
purchases wafers from LPSC. Silicon wafer sales for the three months ended March
31, 2000 were $2,406,000 compared to $495,000 for the same period in 1999. Wafer
sales for the twelve months ended December 31, 1999 were $4,005,000. The gross
margin percentage on sales of silicon wafers, though still profitable, is far
below that of the Company's standard product lines. Silicon wafer sales are a
complementary service for some customers, rather than a focused product line. It
is anticipated that sales of silicon wafers may not continue beyond the second
half of 2000 as the Company evaluates other, more profitable complementary
products.
Products from foreign suppliers are purchased primarily in United States
dollars. To a limited extent, and from time to time, the Company contracts in
foreign currencies (e.g., a portion of the equipment purchases for the
Diodes-China expansion), and, accordingly, its results of operations could be
materially affected by fluctuations in currency exchange rates. Due to the
limited number of contracts denominated in foreign currencies and the
complexities of currency hedges, the Company has not engaged in hedging to date.
If the
11
<PAGE> 12
volume of contracts written in foreign currencies increases, and the Company
does not engage in currency hedging, a substantial increase in the relative
value of such currencies could have a material adverse effect on the Company's
results of operations. Management believes that the current contracts written in
foreign currencies are not significant enough to justify the costs inherent in
currency hedging.
The Company's effective tax rate decreased to 13.2% for the three months
ended March 31, 2000 from 19.3% for the twelve months ended December 31, 1999
and from 36.0% for the same period in 1998. The decrease in the Company's
effective tax rate is due primarily to the increase in Diodes-China's
contribution to net income at a tax rate of 0% through year 2000. From 2001
through 2003, Diodes-China will be taxed at 13.5% (one-half of the current
Chinese tax rate) and then at 27% thereafter. Based upon tax rates in the U.S.
and Taiwan and the expected profitability of each of the Company's three
business segments during the balance of the year, it is anticipated that for the
twelve months of 2000, the consolidated provision for income taxes will be in
the range of 10-20% of pre-tax income.
The Company has conducted a comprehensive review of its computer systems
to identify the systems that could be affected by the Year 2000 Issue ("Y2K").
The total cost of Y2K compliance was not considered a material expense, and
currently, no significant operational problems for the Company's computer
systems occurred as a result of Y2K. However, if problems surface that have not
yet been identified that will require substantial time and resources to remedy,
they could have a material adverse effect on the Company's business.
Net Sales, Cost of Goods Sold and Other Income for the three months
ended March 31, 1999 have been restated to be consistent with the current
presentation of certain transactions. In the past, profit realized on drop
shipments from Diodes-Taiwan was accounted for as "Commission Income" under
"Other Income". These shipments (which are expected to become an increasingly
significant part of the Company's business) are now included in "Net Sales",
with an appropriate charge to "Cost of Goods Sold". The income derived from
these transactions is now included in Gross Profit. These changes have no effect
on Net Income and Earnings per Share. The increase to Net Sales and Gross
Profit, and the decrease in Other Income for the three months ended March 31,
1999 was $420,000, $104,000, and $104,000, respectively. In addition, Minority
Interest in Joint Venture Earnings is presented after Provision for Income Taxes
as per Rule 5-03(b)12 of Regulation S-X.
12
<PAGE> 13
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000
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.
<TABLE>
<CAPTION>
PERCENTAGE
PERCENT OF NET SALES DOLLAR INCREASE
THREE MONTHS ENDED MARCH 31, (DECREASE)
---------------------------- ---------------
1999 2000 `99 TO `00
----- ----- ----------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 71.1%
Cost of goods sold (75.6) (69.2) 56.7
----- ----- -------
Gross profit 24.4 30.8 115.8
Selling, general & administrative
expenses ("SG&A") (19.5) (16.6) 45.5
----- ----- -------
Income from operations 4.9 14.2 393.7
Interest expense, net (0.6) (0.6) 67.3
Other income 0.3 0.0 (87.5)
----- ----- -------
Income before taxes 4.6 13.6 405.0
Income taxes 0.1 1.8 2,794.1
Minority interest (0.2) (0.4) 218.2
----- ----- -------
Net income 4.3 11.4 355.1
===== ===== =======
</TABLE>
The following discussion explains in greater detail the consolidated
operating results and financial condition of the Company for the three months
ended March 31, 2000 compared to the three months ended March 31, 1999. This
discussion should be read in conjunction with the consolidated financial
statements and notes thereto appearing elsewhere in this quarterly report.
<TABLE>
<CAPTION>
1999 2000
----------- -----------
<S> <C> <C>
NET SALES $16,032,000 $27,437,000
</TABLE>
Net sales increased approximately $11.4 million, or 71.1%, for the three
months ended March 31, 2000 compared to the same period last year, due primarily
to a 59.3% increase in units sold, as a result of an increased demand for the
Company's products, primarily in North America. Diodes-China contributed trade
sales of $1.3 million, compared to $564,000 in the same period last year. The
Company's average selling price ("ASP") increased 6.6% over the same period,
primarily in the Far East, but decreased 3.1% from the fourth quarter of 1999.
The Company anticipates these pricing pressures could continue for the balance
of the year, though the severity should slowly diminish. In 1999, Diodes-Taiwan
began purchasing silicon wafers, a new product line, from FabTech, among others,
for resale in the Far East. Sales totaling $2.2 million of silicon wafers
compared to $495,000 in the same period last year also contributed to the
increase in sales. It is anticipated that sales of silicon wafers may not
continue beyond the second half of 2000 as the Company evaluates other, more
profitable complementary products.
13
<PAGE> 14
<TABLE>
<CAPTION>
1999 2000
----------- -----------
<S> <C> <C>
COST OF GOODS SOLD $12,122,000 $19,000,000
GROSS PROFIT $3,910,000 $ 8,437,000
GROSS PROFIT MARGIN PERCENTAGE 24.4% 30.8%
</TABLE>
Gross profit increased approximately $4.5 million, or 115.8%, for the
three months ended March 31, 2000 compared to the same period last year. Of the
$4.5 million increase, approximately $2.7 million was due to the 71.1% increase
in sales, while $1.8 million was due to the increase in gross margin percentage
from 24.4% to 30.8%. Manufacturing profit at Diodes-China contributed to the
increase in gross margin percentage. Although gross profit margins strengthened
in the first quarter of 2000, pricing pressures continue to exist on many of the
Company's product lines, and there can be no assurance that margins will
continue to improve or be maintained.
<TABLE>
<CAPTION>
1999 2000
---------- ----------
<S> <C> <C>
SG&A $3,121,000 $4,542,000
</TABLE>
SG&A for the three months ended March 31, 2000 increased approximately
$1.4 million, or 45.5%, compared to the same period last year, due primarily to
separation compensation paid to the former President and Chief Executive Officer
in March 2000. Increases in wage/benefits expenses due to additional sales and
engineering personnel, higher marketing and advertising expenses, and increased
sales commissions also contributed to the increase in SG&A. SG&A as a percentage
of sales decreased to 16.6% from 19.5% in the comparable period last year.
<TABLE>
<CAPTION>
1999 2000
-------- --------
<S> <C> <C>
INTEREST INCOME $ 62,000 $ 52,000
INTEREST EXPENSE $160,000 $216,000
NET INTEREST EXPENSE $ 98,000 $164,000
</TABLE>
Net interest expense for the three months ended March 31, 2000 increased
$66,000 versus the same period last year, due primarily to an increase use of
the Company's credit facility (at higher interest rates) to support the
expansion of Diodes-China. The Company's interest expense is primarily the
result of the term loan by which the Company is financing (i) the investment in
the Diodes-China manufacturing facility and (ii) the $2.6 million, including
accrued interest, advanced to FabTech. Interest income is primarily the interest
charged to FabTech, under the Company's formal loan agreement, as well as
earnings on its cash balances.
<TABLE>
<CAPTION>
1999 2000
------- ------
<S> <C> <C>
OTHER INCOME $48,000 $6,000
</TABLE>
Other income for the three months ended March 31, 2000 decreased
approximately $42,000 compared to the same period last year, due primarily to
currency exchange fluctuation at the Company's subsidiaries in Taiwan and China.
<TABLE>
<CAPTION>
1999 2000
------- --------
<S> <C> <C>
PROVISION FOR INCOME TAXES $17,000 $492,000
</TABLE>
The Company's overall effective federal, state, and foreign tax rate increased
to 13.2% for the three months ended March 31, 2000 from 2.3% in the comparable
period last year. Diodes-China will continue to benefit from 0% tax for the
remainder of year 2000. From 2001 through 2003, Diodes-China will be taxed at
13.5% (one-half of the current Chinese tax rate) and at 27% thereafter. Based
upon tax rates in the U.S. and Taiwan and the expected profitability of each of
the Company's three business segments during the balance of the year, it is
14
<PAGE> 15
anticipated that for the twelve months of 2000, the consolidated provision for
income taxes will be in the range of 10-20% of pre-tax income.
<TABLE>
<CAPTION>
1999 2000
--------- ----------
<S> <C> <C>
MINORITY INTEREST IN JOINT VENTURE $(33,000) $(105,000)
</TABLE>
Minority interest in joint venture represents the minority investor's
share of the Diodes-China joint venture's income for the period. The increase in
the joint venture earnings for the three months ended March 31, 2000 is
primarily the result of increased sales, both internal 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, 2000, 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,
2000 was $1.4 million compared to cash provided of $957,000 for the same period
in 1999. The primary sources of cash flows from operating activities in 2000
were net income of $3.1 million and an increase in accounts payable of $1.1
million. The primary use of cash flows from operating activities in 2000 was an
increase in accounts receivable of $2.7 million and an increase in inventories
of $2.3 million. The primary sources of cash flows from operating activities for
the three months ended March 31, 1999 were a decrease in inventories of $1.7
million and an increase in accounts payable of $974,000, while the primary use
was a $2.0 million increase in accounts receivable.
Since December 31, 1999, accounts receivable from customers has
increased 16.2% due primarily to a slowing trend in payments from major
distributors. The Company does not expect this trend to result in additional bad
debt expense. The Company continues to closely monitor its credit policies,
while at times providing more flexible terms, primarily to its Asian customers,
when necessary. The ratio of the Company's current assets to current liabilities
on March 31, 2000 was 1.64 to 1, compared to a ratio of 1.73 to 1 on December
31, 1999.
Cash used by investing activities was $3.0 million as of March 31, 2000,
compared to $314,000 during the same period in 1999. The primary investment in
both years was for additional manufacturing equipment at the Diodes-China
manufacturing facility.
Cash provided by financing activities was $4.0 million for the three
months ended March 31, 2000, compared to $230,000 for the same period in 1999.
In March 1998, the Company amended an August 1996 loan agreement whereby the
Company obtained a $23.1 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 $14 million for plant expansion, advances to vendors, and
letters of credit for Diodes-China. 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, 2000. The Company is in the process of extending its working capital line of
credit, which expires June 30, 2000. As of March 31, 2000, approximately $6.1
million is outstanding under the term note commitment, and the average interest
rate on outstanding borrowings was approximately 7.1%.
The Company has used its credit facility primarily to fund the advances
to Diodes-China and FabTech as well as to support its operations. At March 31,
2000, amounts due from FabTech, including accrued interest, are approximately
$2.6 million, and the entire amount is due February 2001. 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.
15
<PAGE> 16
In January 2000, the Company entered into an intercompany loan agreement
with Diodes-China for up to $6.0 million. The interest rate charged by the
Company will be equal to the Company's borrowing rate. Diodes-China will repay
the loan by installment payments as cash flow allows, however, the total
outstanding balance, including accrued interest, will be payable in full on or
before December 31, 2003.
Total working capital increased approximately 4.4% to $16.6 million as
of March 31, 2000, from $15.9 million as of December 31, 1999. The Company
believes that such working capital position will be sufficient for growth
opportunities.
The Company's long-term debt to equity ratio decreased to 0.16 at March
31, 2000, from 0.20 at December 31, 1999. The Company's total debt to equity
ratio increased to 0.78 at March 31, 2000, from 0.77 at December 31, 1999. 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, 2000, the Company has no material plans or commitments
for capital expenditures other than in connection with the expansion at
Diodes-China. However, to ensure that the Company can secure reliable and cost
effective sourcing to support and better position itself for growth, the Company
is continuously evaluating additional 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.
FACTORS THAT MAY AFFECT FUTURE RESULTS
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.
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.
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
- - introduction of new products
- - Company's ability to maintain customer relationships
- - technological advancements
- - impact of competitive products and pricing
- - change in growth in targeted markets
16
<PAGE> 17
- - risks of foreign operations such as Diodes-China and Diodes-Taiwan
- - ability and willingness of the Company's customers to purchase products
provided by the Company
- - perceived absolute or relative overall value of these products by the
purchasers, including the features, quality, and price in comparison to other
competitive products
- - level of availability of products and substitutes and the ability and
willingness of purchasers to acquire new or advanced products
- - pricing, purchasing, financing, operational, 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
- - amount and rate of growth of the Company's selling, general and administrative
expenses
- - difficulties in obtaining materials, supplies and equipment
- - difficulties or delays in the development, production, testing and marketing
of products
- - failure to ship new products and technologies when anticipated
- - failure of customers to accept these products or technologies when planned
- - defects in products
- - any failure of economies to develop when planned
- - acquisition of fixed assets and other assets, including inventories and
receivables
- - making or incurring of any expenditures
- - effects of and changes in trade, monetary and fiscal policies, laws and
regulations
- - other activities of governments, agencies and similar organizations
- - changes in social and economic conditions, such as trade restrictio or
prohibition, inflation and monetary fluctuation, import and other charges or
taxes, especially at Diodes-China and Diodes-Taiwan
- - ability or inability of the Company to obtain or hedge against foreign
currency
- - foreign exchange rates and fluctuations in those rates
- - intergovernmental disputes
- - 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
- - changes in compensation benefit plans
- - 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
- - amount, and the cost of financing which the Company has, and any changes to
that financing
- - the sale of Vishay's 65% ownership in Vishay/LPSC to LPSC
- - any other information detailed from time to time in the Company's filings with
the United States Securities and Exchange Commission.
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.
17
<PAGE> 18
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 27 Financial Data Schedule
Exhibit 99.1 Press release; Diodes Comments on Vishay/
LPSC Announcement
Exhibit 99.2 Press release; Diodes Incorporated
Announces Appointment of New President
and Chief Executive Officer
Exhibit 99.3 Press release; Diodes Incorporated to
Invest Additional $9 Million in
Manufacturing Facility
Exhibit 99.4 Press release; Diodes Incorporated
Reports Record Quarterly Revenues and
Earnings
(b) Reports on Form 8-K
None
18
<PAGE> 19
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 10, 2000
- ----------------------------------------------------
CARL WERTZ
Chief Financial Officer, Treasurer and Secretary
(Duly Authorized Officer and Principal Financial and
Chief Accounting Officer)
19
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<S> <C> <C>
EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE Page 21
EXHIBIT 27 FINANCIAL DATA SCHEDULE Page 22
EXHIBIT 99.1 PRESS RELEASE; DIODES COMMENTS ON VISHAY/LPSC
ANNOUNCEMENT Page 23
EXHIBIT 99.2 PRESS RELEASE; DIODES INCORPORATED ANNOUNCES
APPOINTMENT OF NEW PRESIDENT AND CHIEF
EXECUTIVE OFFICER Page 24
EXHIBIT 99.3 PRESS RELEASE; DIODES INCORPORATED TO INVEST Page 25
ADDITIONAL $9 MILLION IN MANUFACTURING FACILITY
EXHIBIT 99.4 PRESS RELEASE; DIODES INCORPORATED REPORTS
RECORD QUARTERLY REVENUES AND EARNINGS Page 26
</TABLE>
20
<PAGE> 1
EXHIBIT - 11
DIODES INCORPORATED AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1999 2000
---------- ----------
<S> <C> <C>
BASIC
Weighted average number of common
shares outstanding used in computing
basic earnings per share 5,047,237 5,323,963
Net income $ 690,000 $3,140,000
---------- ----------
Basic earnings per share $ 0.14 $ 0.59
========== ==========
DILUTED
Weighted average number of common
shares outstanding used in computing
basic earnings per share 5,047,237 5,323,963
Assumed exercise of stock options 186,188 812,364
---------- ----------
5,233,425 6,136,327
Net income $ 690,000 $3,140,000
---------- ----------
Diluted earnings per share $ 0.13 $ 0.51
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,127,000
<SECURITIES> 0
<RECEIVABLES> 18,025,000
<ALLOWANCES> 320,000
<INVENTORY> 18,915,000
<CURRENT-ASSETS> 42,407,000
<PP&E> 29,666,000
<DEPRECIATION> 6,713,000
<TOTAL-ASSETS> 69,219,000
<CURRENT-LIABILITIES> 25,799,000
<BONDS> 0
4,052,000
0
<COMMON> 0
<OTHER-SE> 34,321,000
<TOTAL-LIABILITY-AND-EQUITY> 69,219,000
<SALES> 27,437,000
<TOTAL-REVENUES> 27,437,000
<CGS> 19,000,000
<TOTAL-COSTS> 4,542,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 164,000
<INCOME-PRETAX> 3,737,000
<INCOME-TAX> 492,000
<INCOME-CONTINUING> 3,140,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,140,000
<EPS-BASIC> 0.59
<EPS-DILUTED> 0.51
</TABLE>
<PAGE> 1
EXHIBIT 99.1
Michael Rosenberg, President Philip Bourdillon
Diodes Incorporated Silverman Heller Associates
(805) 446-4800 (310) 208-2550
DIODES COMMENTS ON VISHAY/LPSC ANNOUNCEMENT
Westlake Village, California -- March 28, 2000 -- Diodes Incorporated (Amex:
DIO), a manufacturer of discrete semiconductors, today commented on yesterday's
announcement by Vishay Intertechnology, Inc. (NYSE: VSH) that it has agreed to
sell its 65% interest in Lite-On Power Semiconductor Corporation ("LPSC") to
Lite-On JV Corporation ("Lite-On Group") in a transaction that is expected to
close before September 30, 2000.
LPSC has been Diodes' largest shareholder since 1991 and is member of the
Lite-On Group, a leading manufacturer of power semiconductors, computer
peripherals, and communication products. In July 1997, Vishay and the Lite-On
Group, a Taiwanese consortium, formed a joint venture ("Vishay/LPSC") to acquire
LPSC.
Diodes' long-standing relationship with LPSC, which currently holds
approximately 38% of the Company's Common Stock, is anticipated to be unaffected
by the transaction, said Michael Rosenberg, President and CEO of Diodes
Incorporated. "Although we have enjoyed the relationship with Vishay and believe
it to have been mutually beneficial," said Rosenberg, "we are looking forward to
continued support from the manufacturing base of the Lite-On Group."
"Our customers continue to recognize Diodes' brand products and view the Company
as a separate vendor from Vishay," Mr. Rosenberg continued, "and management
believes that with the Company's competitive pricing, internal manufacturing
capabilities and capacity, customer/applications engineering, and strong
customer service reputation, it has proven itself to be a valuable supplier.
Accordingly, the Vishay/LPSC transaction is not anticipated to have a materially
adverse impact on customer relations."
Pursuant to the Vishay/Lite-On transaction, three members of the Company's Board
of Directors Eugene R. Conahan, Erich E. Schaedlich, and William J. Spires, each
an employee of Vishay have resigned effective March 27, 2000.
Mr. Rosenberg added that first-quarter 2000 financial results are expected to
substantially exceed fourth-quarter 1999 results, which were the strongest in
the Company's history.
Diodes Incorporated (Amex: DIO) manufactures high-quality discrete semiconductor
devices and provides customer support to leading manufacturers in the
automotive, electronics, computing and telecommunications industries. Through
the Company's ISO-9000 and QS-9000 certified manufacturing facilities located in
Shanghai, China and Taipei, Taiwan, Diodes' products include small signal
transistors and MOSFETs, transient voltage suppressors (TVSs), zeners,
Schottkys, diodes, rectifiers and bridges. The Company's ISO-9000 corporate
sales, marketing, engineering and logistics headquarters is located in Southern
California.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995: Any statements set forth above that are not historical facts are
forward-looking statements that involve risks and uncertainties that could cause
actual results to differ materially from those in the forward-looking
statements. Potential risks and uncertainties include, but are not limited to,
such factors as fluctuations in product demand, the introduction of new
products, the Company's ability to maintain customer and vendor relationships,
technological advancements, impact of competitive products and pricing, growth
in targeted markets, risks of foreign operations, and other information detailed
from time to time in the Company's filings with the United States Securities and
Exchange Commission.
Recent news releases, annual reports, and SEC filings are available at the
Company's web site: http://www.diodes.com. Written requests may be sent directly
to the Company, or they may be e-mailed to: [email protected].
<PAGE> 1
EXHIBIT 99.2
For Immediate Release
Contact: Philip Bourdillon
Silverman Heller Associates
(310) 208-2550
DIODES INCORPORATED ANNOUNCES APPOINTMENT OF NEW PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Westlake Village, California -- March 30, 2000 --- Diodes Incorporated (Amex:
DIO) today announced that it has appointed C.H. Chen as president and chief
executive officer of the Company.
The appointment of Mr. Chen, who has more than three decades experience in the
semiconductor industry, follows the resignation of Michael Rosenberg, who has
left the Company to pursue other interests. While expressing regret at Mr.
Rosenberg's departure, Raymond Soong, chairman of Diodes Incorporated, said he
was delighted that an individual of Mr. Chen's caliber and experience has
accepted the position. With his extensive experience, said Mr. Soong, Mr. Chen
is superbly qualified to oversee the continuing advancement of the Company's
technology and the enhancement of its customer base.
From 1969 to 1990, Mr. Chen held various positions at Texas Instruments, most
recently as vice president of Texas Instruments-Taiwan. In 1990, he left Texas
Instruments to found Dyna Image Corp., a Lite-On Group company (now listed on
the Taiwan OTC market) that has become the world's leading supplier of contact
image sensors (CISs), which are key components in fax machines and scanners. Mr.
Chen is currently the vice chairman and president of Dyna Image Corp.
As recently announced, the Lite-On Group (a Taiwanese consortium with business
interests worldwide) has agreed to repurchase from Vishay Intertechnology, Inc.
(NYSE: VSH) the latter's interest in Lite-On Power Semiconductor Corporation
("LPSC"). Since 1991, LPSC, which currently owns approximately 38% of Diodes'
common stock, has been a major shareholder in the Company.
Diodes Incorporated manufactures high-quality discrete semiconductor devices and
provides customer support to leading manufacturers in the automotive,
electronics, computing and telecommunications industries. Through the Company's
ISO-9000 and QS-9000 certified manufacturing facilities located in Shanghai,
China and Taipei, Taiwan, Diodes' products include small signal transistors and
MOSFETs, transient voltage suppressors (TVSs), zeners, diodes, rectifiers and
bridges. The Company's ISO-9000 corporate sales, marketing, engineering and
logistics headquarters is located in Southern California.
<PAGE> 1
EXHIBIT 99.3
Philip Bourdillon Carl Wertz, CFO
Silverman Heller Associates Diodes Incorporated
(310) 208-2550 (805) 446-4800
DIODES INCORPORATED TO INVEST ADDITIONAL $9 MILLION IN MANUFACTURING FACILITY
Westlake Village, California -- April 6, 2000 --- Diodes Incorporated (Amex:
DIO) today reported that it will invest an additional $9 million in its
manufacturing facility in China.
Today's announcement, which brings the Company's total investment in plant and
equipment in Diodes-China to almost $40 million, will be financed with cash flow
and existing credit facilities. Based upon the current backlog experienced by
equipment manufacturers, the expansion is scheduled for completion by the end of
2000, with full production expected in the first quarter 2001.
C.H. Chen, President and Chief Executive Officer of Diodes, noted that this
additional expansion is expected to increase capacity by an additional 30% and
will include "next generation" sub-miniature components such as SC-70, SC-75,
and SC-79. Mr. Chen stated: "Demand is such that our 1999 expansion of $11
million is sold-out, thus requiring this $9 million expansion. In addition, I am
pleased to confirm that our 1999 expansion is on target and is expected to be at
full capacity by mid-year 2000."
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.
Diodes Incorporated manufactures high-quality discrete semiconductor devices and
provides customer support to leading manufacturers in the automotive,
electronics, computing and telecommunications industries. Through the Company's
ISO-9000 and QS-9000 certified manufacturing facilities located in Shanghai,
China and Taipei, Taiwan, Diodes' products include small signal transistors and
MOSFETs, transient voltage suppressors (TVSs), zeners, diodes, rectifiers and
bridges. The Company's ISO-9000 corporate sales, marketing, engineering, and
logistics headquarters is located in Southern California.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995: Any statements set forth above that are not historical facts are
forward-looking statements that involve risks and uncertainties that could cause
actual results to differ materially from those in the forward-looking
statements. Potential risks and uncertainties include, but are not limited to,
such factors as fluctuations in product demand, the introduction of new
products, the Company's ability to maintain customer and vendor relationships,
technological advancements, impact of competitive products and pricing, growth
in targeted markets, risks of foreign operations, and other information detailed
from time to time in the Company's filings with the United States Securities and
Exchange Commission.
Recent news releases, annual reports, and SEC filings are available at the
Company's web site: http://www.diodes.com. Written requests may be sent directly
to the Company, or they may be e-mailed to: [email protected].
<PAGE> 1
EXHIBIT 99.4
For Immediate Release
Philip Bourdillon Carl Wertz, CFO
Silverman Heller Associates Diodes Incorporated
(310) 208-2550 (805) 446-4800
DIODES INCORPORATED REPORTS RECORD QUARTERLY REVENUES AND EARNINGS
Westlake Village, California - April 27, 2000 - Diodes Incorporated (Amex: DIO),
a manufacturer and supplier of discrete semiconductors to the automotive,
electronics, computing and telecommunications industries, today reported record
revenues and net income for its first quarter ended March 31, 2000.
Net sales for the quarter ended March 31, 2000 increased 71% to $27.3 million,
the highest quarterly sales in the Company's history, compared to $16.0 million
in the same period last year. Net income rose 349% to $3.1 million, or $0.51 per
diluted share, also the highest quarterly results in the Company's history,
compared to $690,000, or $0.13 per diluted share, in the first quarter of 1999.
C.H. Chen, President and CEO of Diodes Incorporated, credited the record sales
to a combination of stronger unit demand and more stable average sales prices.
Mr. Chen attributed the improvement in gross margin to 31.0% from 24.4% a year
ago to strengthened sales prices and the $4.5 million expansion announced last
summer in the Company's manufacturing facility in Shanghai, China. "We are
pleased with the success of the $4.5 million investment," said Mr. Chen, "and we
look forward to the contribution to margins when our $6.5 million expansion,
announced in December, comes on-line by mid 2000."
Selling, general and administrative expenses at 16.6% of sales reflect
separation compensation (equivalent to approximately $0.04 per share) paid to
the former President and Chief Executive Officer in March 2000. Absent the
separation compensation, said Mr. Chen, SG&A would have been 15.1% of sales,
compared to 19.5% a year ago.
"In light of the continued strong demand for the Company's products and the
increased output of the $6.5 million expansion, the growth outlook for year 2000
remains favorable," stated Mr. Chen. "Furthermore, we look forward to the
performance of our most recent $9 million expansion expected to be operational
at year-end," Mr. Chen concluded.
Diodes Incorporated (Amex: DIO) manufactures high-quality discrete semiconductor
devices and provides customer support to leading manufacturers in the
automotive, electronics, computing and telecommunications industries. Through
the Company's ISO-9000 and QS-9000 certified manufacturing facilities located in
Shanghai, China and Taipei, Taiwan, Diodes' products include small signal
transistors and MOSFETs, transient voltage suppressors (TVSs), zeners, diodes,
rectifiers and bridges. The Company's ISO-9000 corporate sales, marketing,
engineering and logistics headquarters is located in Southern California.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995: Any statements set forth above that are not historical facts are
forward-looking statements that involve risks and uncertainties that could cause
actual results to differ materially from those in the forward-looking
statements. Potential risks and uncertainties include, but are not limited to,
such factors as fluctuations in product demand, the introduction of new
products, the Company's ability to maintain customer and vendor relationships,
technological advancements, impact of competitive products and pricing, growth
in targeted markets, risks of foreign operations, and other information detailed
from time to time in the Company's filings with the United States Securities and
Exchange Commission.
Recent news releases, annual reports, and SEC filings are available at the
Company's web site: http://www.diodes.com. Written requests may be sent directly
to the Company, or they may be e-mailed to: [email protected].
(Statement of Income Follows)
<PAGE> 2
Diodes Incorporated and Subsidiaries
Consolidated Statement of Income
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1999 2000
------------ ------------
<S> <C> <C>
Net sales $ 16,032,000 $ 27,437,000
Cost of goods sold 12,122,000 19,000,000
------------ ------------
Gross profit 3,910,000 8,437,000
Selling, general and
administrative expenses 3,121,000 4,542,000
------------ ------------
Income from operations 789,000 3,895,000
Other income (expense)
Interest income 62,000 52,000
Interest expense (160,000) (216,000)
Other 48,000 6,000
------------ ------------
(50,000) (158,000)
Income before income taxes and
minority interest 740,000 3,737,000
Provision for income taxes 17,000 492,000
Minority interest in joint venture (33,000) (105,000)
earnings
------------ ------------
Net income $ 690,000 $ 3,140,000
============ ============
Earnings per share
Basic $ 0.14 $ 0.59
Diluted $ 0.13 $ 0.51
============ ============
Weighted average shares outstanding
Basic 5,047,237 5,323,963
Diluted 5,233,425 6,136,327
============ ============
</TABLE>
