10-Q 1 diod-20240331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

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: 002-25577

DIODES INCORPORATED

(Exact name of registrant as specified in its charter)

Delaware

95-2039518

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

4949 Hedgcoxe Road, Suite 200, Plano, Texas

75024

(Address of principal executive offices)

(Zip code)

(972) 987-3900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, Par Value $0.66 2/3

 

DIOD

 

The NASDAQ Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

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

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

The number of shares of the registrant’s Common Stock outstanding as of May 6, 2024 was 46,122,904.

 

 


 

 

DIODES INCORPORATED AND SUBSIDIARIES

Table of Contents

Page

Part I – Financial Information

 

Item 1. Financial Statements (Unaudited)

3

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

18

Item 3. Quantitative and Qualitative Disclosures About Market Risk

25

Item 4. Controls and Procedures

25

Part II – Other Information

 

Item 1. Legal Proceedings

 

26

Item 1A. Risk Factors

 

26

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

26

Item 3. Defaults Upon Senior Securities

 

26

Item 4. Mine Safety Disclosures

 

26

Item 5. Other Information

 

26

Item 6. Exhibits

 

27

Signatures

28

 

 

 

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)

 

 

 

March 31,

 

 

December 31,

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

266,202

 

 

$

315,457

 

Restricted cash

 

4,358

 

 

 

3,026

 

Short-term investments

 

9,782

 

 

 

10,174

 

Accounts receivable, net of allowances of $8,254 and $5,641 at
  March 31, 2024 and December 31, 2023, respectively

 

391,508

 

 

 

371,930

 

Inventories

 

429,363

 

 

 

389,774

 

Prepaid expenses and other

 

100,016

 

 

 

97,024

 

Total current assets

 

1,201,229

 

 

 

1,187,385

 

Property, plant and equipment, net

 

723,478

 

 

 

746,169

 

Deferred tax assets

 

50,912

 

 

 

51,620

 

Goodwill

 

146,941

 

 

 

146,558

 

Intangible assets, net

 

59,952

 

 

 

63,937

 

Other long-term assets

 

173,660

 

 

 

171,990

 

Total assets

$

2,356,172

 

 

$

2,367,659

 

 

 

 

 

 

 

Liabilities

 

 

Current liabilities:

 

 

 

 

 

Lines of credit

$

48,928

 

 

$

40,685

 

Accounts payable

 

149,228

 

 

158,261

 

Accrued liabilities and other

 

164,570

 

 

179,674

 

Income tax payable

 

13,283

 

 

10,459

 

Current portion of long-term debt

 

1,270

 

 

 

4,419

 

Total current liabilities

 

377,279

 

 

393,498

 

Long-term debt, net of current portion

 

19,639

 

 

16,979

 

Deferred tax liabilities

 

10,509

 

 

 

13,662

 

Unrecognized tax benefits

 

34,035

 

 

 

34,035

 

Other long-term liabilities

 

89,899

 

 

 

99,808

 

Total liabilities

 

531,361

 

 

557,982

 

 

 

Commitments and contingencies (See Note 9)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

Preferred stock - par value $1.00 per share; 1,000,000 shares authorized; no
  shares issued or outstanding

 

-

 

 

-

 

Common stock - par value $0.66 2/3 per share; 70,000,000 shares
  authorized; and
46,114,753 shares and 45,938,383 shares issued and
  outstanding at March 31, 2024 and December 31, 2023, respectively

 

36,936

 

 

36,819

 

Additional paid-in capital

 

509,401

 

 

 

509,861

 

Retained earnings

 

1,689,312

 

 

 

1,675,274

 

Treasury stock, at cost, 9,286,862 shares and 9,286,862 shares at March 31, 2024 and
  December 31, 2023, respectively

 

(337,986

)

 

 

(337,986

)

Accumulated other comprehensive loss

 

(149,073

)

 

(143,227

)

Stockholders' equity

 

1,748,590

 

 

1,740,741

 

Noncontrolling interest

 

76,221

 

 

 

68,936

 

Total equity

 

1,824,811

 

 

 

1,809,677

 

Total liabilities and stockholders' equity

$

2,356,172

 

$

2,367,659

 

 

 

 

 

 

 

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

 

 

-3-


 

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

 

 

 

 

 

 

Three Months Ended

 

 

March 31,

 

2024

 

 

2023

 

Net sales

$

301,972

 

 

$

467,241

 

Cost of goods sold

 

202,388

 

 

 

272,787

 

Gross profit

 

99,584

 

 

 

194,454

 

 

 

 

 

 

 

Operating expenses

 

 

 

Selling, general and administrative

 

53,735

 

 

 

70,991

 

Research and development

 

33,964

 

 

 

33,232

 

Amortization of acquisition related intangible assets

 

3,810

 

 

 

3,852

 

Gain on disposal of fixed assets

 

(4,872

)

 

 

(48

)

Other operating income

 

(1

)

 

 

-

 

Total operating expense

 

86,636

 

 

 

108,027

 

 

 

 

 

 

 

Income from operations

 

12,948

 

 

 

86,427

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

Interest income

 

4,614

 

 

 

1,772

 

Interest expense

 

(532

)

 

 

(2,132

)

Foreign currency gain (loss), net

 

972

 

 

 

(1,893

)

Unrealized gain on investments

 

370

 

 

 

3,889

 

Other income

 

434

 

 

 

530

 

Total other income (expense)

 

5,858

 

 

 

2,166

 

 

 

 

 

 

 

Income before income taxes and noncontrolling interest

 

18,806

 

 

 

88,593

 

Income tax provision

 

3,537

 

 

 

16,616

 

Net income

 

15,269

 

 

 

71,977

 

Less net income attributable to noncontrolling interest

 

(1,231

)

 

 

(827

)

Net income attributable to common stockholders

$

14,038

 

 

$

71,150

 

 

 

 

 

 

 

Earnings per share attributable to common stockholders:

 

 

 

Basic

$

0.30

 

 

$

1.56

 

Diluted

$

0.30

 

 

$

1.54

 

Number of shares used in earnings per share computation:

 

 

 

Basic

 

46,032

 

 

 

45,600

 

Diluted

 

46,285

 

 

 

46,161

 

 

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

 

-4-


 

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

Three Months Ended

 

 

March 31,

 

2024

 

2023

 

Net income

$

15,269

 

$

71,977

 

Unrealized gain on defined benefit plan, net of tax

 

1,648

 

 

2,706

 

Unrealized gain (loss) on derivative instruments, net of tax

 

8,814

 

 

 

(3,342

)

Unrealized foreign currency (loss) gain, net of tax

 

(16,308

)

 

 

11,323

 

Comprehensive income

 

9,423

 

 

 

82,664

 

Less: Comprehensive income attributable to noncontrolling interest

 

(1,231

)

 

 

(827

)

Total comprehensive income attributable to common stockholders

$

8,192

 

$

81,837

 

 

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

 

-5-


 

 

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)

 

 

 

Common stock

 

 

Treasury stock

 

 

Additional
 paid-in

 

 

Retained

 

 

Accumulated
 other comprehensive

 

 

Total Diodes
 Incorporated stockholders'

 

 

Noncontrolling

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

earnings

 

 

loss

 

 

equity

 

 

interest

 

 

equity

 

Balance, December 31, 2023

 

 

55,225

 

 

$

36,819

 

 

 

(9,287

)

 

$

(337,986

)

 

$

509,861

 

 

$

1,675,274

 

 

$

(143,227

)

 

$

1,740,741

 

 

$

68,936

 

 

$

1,809,677

 

Total comprehensive income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14,038

 

 

 

(5,846

)

 

 

8,192

 

 

 

1,231

 

 

 

9,423

 

Net changes in noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

 

 

6,054

 

 

 

6,054

 

Common stock issued for share-based plans

 

 

176

 

 

 

117

 

 

 

-

 

 

 

-

 

 

 

(117

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,049

 

 

 

-

 

 

 

-

 

 

 

5,049

 

 

 

-

 

 

 

5,049

 

Tax related to net share settlement

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,392

)

 

 

-

 

 

 

-

 

 

 

(5,392

)

 

 

-

 

 

 

(5,392

)

Balance, March 31, 2024

 

 

55,401

 

 

$

36,936

 

 

 

(9,287

)

 

$

(337,986

)

 

$

509,401

 

 

$

1,689,312

 

 

$

(149,073

)

 

$

1,748,590

 

 

$

76,221

 

 

$

1,824,811

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

Treasury stock

 

 

Additional
 paid-in

 

 

Retained

 

 

Accumulated
 other comprehensive

 

 

Total Diodes
 Incorporated stockholders'

 

 

Noncontrolling

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

earnings

 

 

loss

 

 

equity

 

 

interest

 

 

equity

 

Balance, December 31, 2022

 

 

54,751

 

 

$

36,503

 

 

 

(9,282

)

 

$

(337,490

)

 

$

494,773

 

 

$

1,448,092

 

 

$

(128,233

)

 

$

1,513,645

 

 

$

69,274

 

 

$

1,582,919

 

Total comprehensive income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

71,150

 

 

 

10,687

 

 

 

81,837

 

 

 

827

 

 

 

82,664

 

Net changes in noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

 

 

107

 

 

 

107

 

Common stock issued for share-based plans

 

 

237

 

 

 

158

 

 

 

-

 

 

 

-

 

 

 

(158

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9,652

 

 

 

-

 

 

 

-

 

 

 

9,652

 

 

 

-

 

 

 

9,652

 

Tax related to net share settlement

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(9,669

)

 

 

-

 

 

 

-

 

 

 

(9,669

)

 

 

-

 

 

 

(9,669

)

Balance, March 31, 2023

 

 

54,988

 

 

$

36,661

 

 

 

(9,282

)

 

$

(337,490

)

 

$

494,598

 

 

$

1,519,242

 

 

$

(117,546

)

 

$

1,595,465

 

 

$

70,208

 

 

$

1,665,673

 

 

 

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

 

-6-


 

DIODES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

Three Months Ended

 

 

March 31,

 

 

2024

 

 

2023

 

Cash flows from operating activities

 

 

 

 

 

Net income

$

15,269

 

 

$

71,977

 

Adjustments to reconcile net income to net cash flows from operating activities, net of effects of acquisitions

 

 

 

 

 

Depreciation

 

31,031

 

 

 

29,793

 

Amortization of intangible assets

 

3,810

 

 

 

3,852

 

Share-based compensation expense

 

5,072

 

 

 

9,820

 

Deferred income taxes

 

(318

)

 

 

(404

)

Investment gain

 

(376

)

 

 

(3,829

)

Gain on disposal of property, plant, and equipment

 

(4,872

)

 

 

(48

)

Other

 

(3,334

)

 

 

347

 

Changes in operating assets:

 

 

 

 

 

Change in accounts receivable

 

(17,731

)

 

 

1,544

 

Change in inventory

 

(40,435

)

 

 

20,759

 

Change in other operating assets

 

3,478

 

 

 

4,964

 

Changes in operating liabilities:

 

 

 

 

 

Change in accounts payable

 

(9,117

)

 

 

(17,718

)

Change in accrued liabilities

 

(15,469

)

 

 

(36,289

)

Change in income tax payable

 

2,857

 

 

 

13,932

 

Change in other operating liabilities

 

(1,008

)

 

 

1,111

 

Net cash flows from operating activities

 

(31,143

)

 

 

99,811

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchases of property, plant, and equipment

 

(20,381

)

 

 

(48,003

)

Proceeds from sale of property, plant, and equipment

 

122

 

 

 

99

 

Proceeds from short-term investments

 

1,563

 

 

 

807

 

Purchases of short-term investments

 

(1,483

)

 

 

(2,469

)

Proceeds from sales of securities

 

-

 

 

 

417

 

Other

 

1,900

 

 

 

1,018

 

Net cash flows from investing activities

 

(18,279

)

 

 

(48,131

)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Advances on lines of credit and short-term debt

 

8,926

 

 

 

8,173

 

Repayments of lines of credit and short-term debt

 

-

 

 

 

(10,139

)

Proceeds from long-term debt

 

3,155

 

 

 

263

 

Repayments of long-term debt

 

(3,439

)

 

 

(59,061

)

Repayment of and proceeds from finance lease obligation

 

(14

)

 

 

(7

)

Taxes paid related to net share settlement

 

(5,392

)

 

 

(9,669

)

Net changes in noncontrolling interest

 

171

 

 

 

107

 

Other

 

(225

)

 

 

15

 

Net cash flows from financing activities

 

3,182

 

 

 

(70,318

)

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(1,683

)

 

 

3,446

 

Change in cash and cash equivalents, including restricted cash

 

(47,923

)

 

 

(15,192

)

Cash and cash equivalents, beginning of period, including restricted cash

 

318,483

 

 

 

341,099

 

Cash and cash equivalents, end of period, including restricted cash

$

270,560

 

 

$

325,907

 

 

-7-


 

 

 

Supplemental Cash Flow Information

 

 

 

 

 

Interest paid during the period

$

463

 

 

$

1,941

 

Taxes paid during the period

$

2,562

 

 

$

5,388

 

Non-cash investing and financing activities:

 

 

 

 

 

Accounts payable balance related to the purchase of
   property, plant, and equipment

$

11,717

 

 

$

27,113

 

 

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

-8-


 

DIODES INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 – Summary of Operations and Significant Accounting Policies

Summary of Operations

Diodes Incorporated, together with its subsidiaries (collectively the “Company,” “we,” or “our” (Nasdaq: DIOD)), a Standard and Poor’s Smallcap 600 and Russell 3000 Index company, is a leading global manufacturer and supplier of high-quality application-specific standard products within the broad discrete, logic, analog, and mixed-signal semiconductor markets. The Company serves the industrial, automotive, computing, communications, and consumer markets.

The Company’s products include diodes; rectifiers; transistors; MOSFETs; Silicon Carbide (“SiC”) diodes and MOSFETs; protection devices; logic; photocoupler; voltage translators; amplifiers and comparators; sensors; and power management devices such as AC-DC converters, DC-DC switching, linear voltage regulators, voltage references, LED drivers, power switches, and voltage supervisors. We also have timing and connectivity solutions including clock ICs, crystal oscillators, PCIe packet switches, multi-protocol switches, interface products, and signal integrity solutions for high-speed signals.

Diodes’ corporate headquarters and Americas’ sales offices are located in Plano, Texas and Milpitas, California. Design, marketing, and engineering centers are located in Plano and Milpitas, U.S.; Taipei and Taoyuan City, Taiwan; Shanghai and Yangzhou, China; Oldham, England; and Neuhaus, Germany. Diodes’ wafer fabrication facilities are located in South Portland, Maine, U.S., Oldham, England, and Greenock, Scotland; Shanghai and Wuxi, China; and Keelung and Hsinchu, Taiwan. Diodes has assembly and test facilities located in Shanghai, Chengdu, and Wuxi, China; Neuhaus, Germany; and Jhongli, Taiwan. Additional engineering, sales, warehouse, and logistics offices are located in Frankfurt and Munich, Germany; Hong Kong, Shanghai, Beijing, Shenzhen, Wuhan, Yangzhou, and Qingdao, China; Milan, Italy; Oldham, England; Seongnam-si, South Korea; Singapore City, Singapore; Taipei and Kaohsiung, Taiwan; and Tokyo, Japan; with support offices throughout the world.

The Company’s manufacturing facilities have achieved certifications in the internationally recognized standards of ISO 9001:2015, ISO 14001:2015, and, for automotive products, IATF 16949:2016 and the Company is also C-TPAT certified. We believe these quality awards reflect the superior quality-control techniques established at the Company and further enhance our credibility as a vendor-of-choice to original equipment manufacturers ("OEMs") increasingly concerned with quality and consistency.

Our market focus is on high-growth, end-user applications in the following areas:

Industrial: embedded systems, precision controls, and Artificial Intelligence of Things;
Automotive: connected driving, comfort/style/safety, and electrification/powertrain;
Computing: cloud computing including artificial intelligence servers, storage, and data center applications;
Communications: smartphones, 5G networks, advanced protocols, and charging solutions; and
Consumer: IoT, wearables, home automation, and smart infrastructure.

Basis of Presentation

The condensed consolidated financial data at December 31, 2023 are derived from audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (“SEC”) on February 9, 2024 (“Form 10-K”). The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q. They do not include all information and footnotes necessary for a fair presentation of financial position, operating results, and cash flows in conformity with GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in our Form 10-K. All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair presentation of the operating results for the period presented have been included in the interim period. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, 2024.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. As permitted under GAAP, interim accounting for certain expenses, including income taxes, are based on full year forecasts. For interim

-9-


 

financial reporting purposes, income taxes are recorded based upon estimated annual effective income tax rates taking into consideration discrete items occurring in a quarter.

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

 

NOTE 2 – Earnings per Share

Earnings per share (“EPS”) is calculated by dividing net income attributable to common stockholders by the weighted-average number of shares of Common Stock outstanding during the period. Diluted EPS is calculated similarly but includes potential dilution from the exercise of stock options and stock awards, except when the effect would be anti-dilutive. During the three month periods ended March 31, 2024 and March 31, 2023, we paid no dividends on our Common Stock.

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

 

Three Months Ended

 

March 31,

 

2024

 

2023

 

Earnings (numerator)

 

 

Net income attributable to common stockholders

$

14,038

 

$

71,150

 

 

 

 

 

 

 

Shares (denominator)

 

 

 

 

 

Weighted average common shares outstanding (basic)

 

46,032

 

 

45,600

 

Dilutive effect of stock options and stock awards outstanding

 

253

 

 

561

 

Adjusted weighted average common shares outstanding (diluted)

 

46,285

 

 

46,161

 

 

 

Earnings per share attributable to common stockholders

 

 

 

 

 

Basic

$

0.30

 

 

$

1.56

 

Diluted

$

0.30

 

 

$

1.54

 

 

 

 

 

 

 

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

 

326

 

 

 

75

 

 

NOTE 3 – Inventories

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

 

March 31, 2024

 

 

December 31, 2023

 

Finished goods

$

169,980

 

 

$

129,802

 

Work-in-progress

 

74,432

 

 

 

72,876

 

Raw materials

 

184,951

 

 

 

187,096

 

Total

$

429,363

 

 

$

389,774

 

 

NOTE 4 – Goodwill and Intangible Assets

The table below sets forth the changes in goodwill:

Balance at December 31, 2023

$

146,558

 

Acquisition

 

1,857

 

Foreign currency translation adjustment

 

(1,474

)

Balance at March 31, 2024

$

146,941

 

 

-10-


 

The table below sets forth the value of intangible assets, other than goodwill:

 

March 31,

 

 

December 31,

 

 

2024

 

 

2023

 

Intangible assets subject to amortization:

 

 

 

 

 

Gross carrying amount

$

250,747

 

 

$

250,747

 

Accumulated amortization

 

(191,630

)

 

 

(187,820

)

Foreign currency translation adjustment

 

(8,333

)

 

 

(8,170

)

Total intangible assets subject amortization

 

50,784

 

 

 

54,757

 

Intangible assets with indefinite lives:

 

 

 

 

 

Gross carrying amount

 

10,303

 

 

 

10,303

 

Foreign currency translation adjustment

 

(1,135

)

 

 

(1,123

)

Total intangible assets with indefinite lives

 

9,168

 

 

 

9,180

 

Total intangible assets, net

$

59,952

 

 

$

63,937

 

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

Amortization expense

 

2024

 

 

2023

 

Three Months Ended March 31,

 

$

3,810

 

 

$

3,852

 

 

NOTE 5 – Income Tax Provision

The table below sets forth information related to our income tax expense:

 

Three Months Ended

 

 

March 31,

 

 

2024

 

 

2023

 

Domestic pre-tax income

$

(1,574

)

 

$

54,724

 

Foreign pre-tax income

$

20,380

 

 

$

33,869

 

Income tax provision

$

3,537

 

 

$

16,616

 

Effective tax rate

 

18.8

%

 

 

18.8

%

Impact of tax holidays on tax expense

$

(93

)

 

$

(74

)

Earnings per share impact of tax holidays:

 

 

 

 

 

Basic

$

-

 

 

$

-

 

Diluted

$

-

 

 

$

-

 

The effective tax rate for the three months ended March 31, 2024 is consistent when compared to the three months ended March 31, 2023, primarily due to the impact of the geographical mix of pre-tax income and loss across tax jurisdictions relative to the Company’s consolidated pre-tax income on the estimated annual effective income tax rate.

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

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations by tax authorities for tax years before 2012. We are no longer subject to China income tax examinations by tax authorities for tax years before 2013. With respect to state and local jurisdictions and countries outside of the U.S. (other than China), with limited exceptions, the Company is no longer subject to income tax audits for years before 2017. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest, and penalties, if any, have been provided for in the Company’s reserve for any adjustments that may result from currently pending tax audits. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in interest expense. As of March 31, 2024, the gross amount of unrecognized tax benefits was approximately $50.5 million.

Several jurisdictions in which we operate have either enacted, or announced plans to enact, legislation consistent with the Organization for Economic Co-operation and Development Global Anti-Base Erosion Model Rules (“Pillar Two”) which introduced a global minimum effective tax rate of 15% applied on a jurisdiction-by-jurisdiction basis. We have analyzed enacted legislation and do not anticipate that it will have a material impact on our effective tax rate for 2024; however, we continue to monitor future tax legislative changes in the jurisdictions in which we operate in order to evaluate the impacts on the consolidated financial statements.

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

-11-


 

NOTE 6 – Share-Based Compensation

The table below sets forth information related to our share-based compensation expense:

Three Months Ended

 

March 31,

 

2024

 

2023

 

Cost of goods sold

$

450

 

$

452

 

Selling, general and administrative

 

3,354

 

 

8,362

 

Research and development

 

1,268

 

 

1,006

 

Total share-based compensation expense

$

5,072

 

$

9,820

 

Share Grants. Share grants consist of restricted stock awards, restricted stock units (“RSUs”) and performance stock units (“PSUs”). Restricted stock awards and RSUs generally vest in equal annual installments over a four-year period and are measured based on the fair market value of the underlying stock on the date of grant. Compensation expense is recognized on a straight-line basis over the requisite four-year service period. All new grants are awarded under the Company’s 2022 Equity Incentive Plan.

PSUs are measured based on the fair market value of the underlying stock on the date of grant, and compensation expense is recognized over the three-year performance period, with adjustments made to the expense to recognize the probable payout percentage.

As of March 31, 2024, total unrecognized share-based compensation expense related to share grants was approximately $61.6 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 2.3 years.

Stock Modification. During the three months ended March 31, 2023 we modified previously granted stock awards for two corporate officers who retired. The result of the modifications resulted in the acceleration of the vesting of 54,525 stock awards for the corporate officers. The incremental expense recorded for this modification was approximately $2.1 million, which was expensed in selling, general, and administrative (“SG&A”) expense in the three months ended March 31, 2023.

NOTE 7 – Enterprise Wide Segment Information and Net Sales

Segment Reporting. For financial reporting purposes, we operate in a single segment, standard semiconductor products, through our various manufacturing and distribution facilities. We aggregate our products because the products are similar and have similar economic characteristics, use similar production processes and share similar customer type. Our primary operations include operations in Asia, the Americas, and Europe. During the three months ended March 31, 2024, one customer accounted for approximately $42.7 million or 14.2% of our net sales. During the three months ended March 31, 2023, two customers accounted for $51.8 million, or 11.1%, and $51.6 million, or 11.0%, of our net sales. One customer accounted for approximately 17.3% of our outstanding accounts receivable at March 31, 2024. All customers that accounted for 10% or more of our net sales during any period presented in this Quarterly Report on Form 10-Q are broad-based global distributors that sell to thousands of different end users.

Disaggregation of Net Sales. We disaggregate net sales with customers into direct sales to end customers and distribution sales to distributors (“Distributors”) and by geographic area. Direct sales customers consist of those customers using our product in their manufacturing process, and Distributors are those customers who resell our products to third parties. We deliver our products to customers around the world for use in the industrial, automotive, computing, consumer, and communications markets. Further, most of our contracts are fixed-price arrangements, and are short term in nature, ranging from days to several months. The tables below set forth net sales based on the location of the subsidiary producing the net sale:

As of and for the

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2024

 

Asia

 

Americas

 

Europe

 

Consolidated

 

Total sales

 

$

329,426

 

 

223,773

 

 

$

66,387

 

 

$

619,586

 

Intercompany elimination

 

 

(148,884

)

 

(136,430

)

 

 

(32,300

)

 

 

(317,614

)

Net sales

 

$

180,542

 

 

$

87,343

 

 

$

34,087

 

 

$

301,972

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and, equipment, net

 

$

529,187

 

 

$

82,838

 

 

$

111,453

 

 

$

723,478

 

Total assets

 

$

1,617,774

 

 

$

502,459

 

 

$

235,939

 

 

$

2,356,172

 

 

 

 

 

 

 

As of and for the

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2023

 

Asia

 

Americas

 

Europe

 

Consolidated

 

Total sales

 

$

424,162

 

$

331,407

 

 

$

100,045

 

 

$

855,614

 

Intercompany elimination

 

 

(181,465

)

 

(175,151

)

 

 

(31,757

)

 

 

(388,373

)

Net sales

 

$

242,697

 

 

$

156,256

 

 

$

68,288

 

 

$

467,241

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and, equipment, net

 

$

550,373

 

 

$

92,729

 

 

$

112,605

 

 

$

755,707

 

Total assets

 

$

1,590,485

 

 

$

442,763

 

 

$

252,313

 

 

$

2,285,561

 

 

-12-


 

The tables below set forth net sales for the Company disaggregated into geographic locations based on shipment destination and by type (direct sales or Distributor):

 

 

For the Three Months Ended March 31,

Net Sales by Region

 

2024

 

 

2023

 

 

Asia

 

$

228,420

 

 

$

324,167

 

 

Europe

 

 

47,450

 

 

 

76,990

 

 

Americas

 

 

26,102

 

 

 

66,084

 

 

Total net sales

 

$

301,972

 

 

$

467,241

 

 

 

 

 

 

 

 

 

 

Net Sales by Type

 

 

 

 

 

 

 

Direct sales

 

$

118,164

 

 

$

134,945

 

 

Distributor sales

 

 

183,808

 

 

 

332,296

 

 

Total net sales

 

$

301,972

 

 

$

467,241