Delaware
|
95-2039518
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
Number)
|
15660
North Dallas Parkway Suite 850
|
||
Dallas,
Texas
|
75248
|
|
(Address
of principal executive offices)
|
(Zip
code)
|
Page
|
||||
Part
I - Financial Information
|
3
|
|||
Item
1 - Financial Statements
|
3
|
|||
Consolidated
Condensed Balance Sheets as of September 30, 2007
|
||||
and
December 31, 2006
|
3
|
|||
Consolidated
Condensed Statements of Income for the Three and Nine
Months
|
||||
ended
September 30, 2007 and 2006
|
5
|
|||
Consolidated
Condensed Statements of Cash Flows for the Nine Months
|
||||
ended
September 30, 2007 and 2006
|
6
|
|||
Notes
to Consolidated Condensed Financial Statements
|
8
|
|||
Item
2 - Management’s Discussion and Analysis of Financial Condition and
Results of Operations
|
22
|
|||
Item
3 - Quantitative and Qualitative Disclosures about Market
Risk
|
41
|
|||
Item
4 - Controls and Procedures
|
41
|
|||
Part
II - Other Information
|
41
|
|||
Item
1 - Legal Proceedings
|
41
|
|||
Item
1A - Risk Factors
|
41
|
|||
Item
2 - Unregistered Sales of Equity Securities and Use of
Proceeds
|
41
|
|||
Item
3 - Defaults Upon Senior Securities
|
41
|
|||
Item
4 - Submission of Matters to a Vote of Security Holders
|
41
|
|||
Item
5 - Other Information
|
41
|
|||
Item
6 - Exhibits
|
42
|
|||
Signature
|
43
|
December
31,
|
|
September
30,
|
|
||||
|
|
2006
|
|
2007
|
|||
(unaudited)
|
|||||||
CURRENT
ASSETS
|
|||||||
Cash
and cash equivalents
|
$
|
48,888
|
$
|
45,144
|
|||
Short-term
investments
|
291,008
|
317,726
|
|||||
Total
cash and short-term investments
|
339,896
|
362,870
|
|||||
Accounts
receivable
|
|||||||
Trade
customers
|
72,175
|
82,779
|
|||||
Related
parties
|
6,147
|
7,186
|
|||||
78,322
|
89,965
|
||||||
Allowance
for doubtful accounts
|
(617
|
)
|
(485
|
)
|
|||
Accounts
receivable, net of allowances
|
77,705
|
89,480
|
|||||
Inventories
|
48,202
|
48,379
|
|||||
Deferred
income taxes, current
|
4,650
|
8,195
|
|||||
Prepaid
expenses and other
|
8,393
|
10,778
|
|||||
Total
current assets
|
478,846
|
519,702
|
|||||
PROPERTY,
PLANT AND EQUIPMENT,
net
|
95,469
|
119,218
|
|||||
DEFERRED
INCOME TAXES, non-current
|
5,428
|
6,735
|
|||||
OTHER
ASSETS
|
|||||||
Intangible
assets, net
|
10,669
|
9,842
|
|||||
Goodwill
|
25,030
|
25,018
|
|||||
Other
|
6,697
|
6,387
|
|||||
Total
assets
|
$
|
622,139
|
$
|
686,902
|
December
31,
|
|
September
30,
|
|
||||
|
|
2006
|
|
2007
|
|
||
|
|
|
|
(unaudited)
|
|||
CURRENT
LIABILITIES
|
|||||||
Line
of credit
|
$
|
-
|
$
|
920
|
|||
Accounts
payable
|
|||||||
Trade
|
40,029
|
37,198
|
|||||
Related
parties
|
12,120
|
13,383
|
|||||
Accrued
liabilities
|
24,967
|
26,580
|
|||||
Income
tax payable
|
3,433
|
3,355
|
|||||
Long-term
debt, current portion
|
2,802
|
2,111
|
|||||
Capital
lease obligations, current portion
|
141
|
144
|
|||||
Total
current liabilities
|
83,492
|
83,691
|
|||||
LONG-TERM
DEBT,
net of current portion
|
|||||||
2.25%
convertible senior notes due 2026
|
230,000
|
230,000
|
|||||
Others
|
7,115
|
6,125
|
|||||
CAPITAL
LEASE OBLIGATIONS,
net of current portion
|
1,477
|
1,363
|
|||||
OTHER
LONG-TERM LIABILITIES
|
1,101
|
5,610
|
|||||
MINORITY
INTEREST
|
4,787
|
6,389
|
|||||
Total
liabilities
|
327,972
|
333,178
|
|||||
CONTINGENCIES
AND COMMITMENTS
|
-
|
-
|
|||||
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; 38,941,901 and 39,962,300
|
|||||||
issued
at December 31, 2006 and September 30, 2007, respectively
|
25,962
|
26,642
|
|||||
Additional
paid-in capital
|
104,795
|
124,155
|
|||||
Retained
earnings
|
162,802
|
202,205
|
|||||
Accumulated
other comprehensive income
|
608
|
722
|
|||||
Total
stockholders' equity
|
294,167
|
353,724
|
|||||
Total
liabilities and stockholders' equity
|
$
|
622,139
|
$
|
686,902
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
September
30,
|
September
30,
|
||||||||||||
2006
|
2007
|
2006
|
2007
|
||||||||||
NET
SALES
|
$
|
92,575
|
$
|
105,264
|
$
|
248,876
|
$
|
293,567
|
|||||
COST
OF GOODS SOLD
|
61,879
|
71,112
|
166,532
|
199,214
|
|||||||||
Gross
profit
|
30,696
|
34,152
|
82,344
|
94,353
|
|||||||||
OPERATING
EXPENSES
|
|||||||||||||
Selling,
general and administrative
|
11,825
|
14,607
|
34,883
|
40,682
|
|||||||||
Research
and development
|
1,941
|
3,554
|
5,985
|
9,654
|
|||||||||
Restucturing
costs and fixed asset impairment
|
32
|
-
|
152
|
1,771
|
|||||||||
Total
operating expenses
|
13,798
|
18,161
|
41,020
|
52,107
|
|||||||||
Income
from operations
|
16,898
|
15,991
|
41,324
|
42,246
|
|||||||||
OTHER
INCOME (EXPENSES)
|
|||||||||||||
Interest
income
|
1,069
|
4,712
|
2,807
|
13,032
|
|||||||||
Interest
expense
|
(89
|
)
|
(1,706
|
)
|
(363
|
)
|
(5,127
|
)
|
|||||
Other
|
(1,563
|
)
|
(13
|
)
|
(1,699
|
)
|
(70
|
)
|
|||||
Total
other income
|
(583
|
)
|
2,993
|
745
|
7,835
|
||||||||
Income
before income taxes
|
|||||||||||||
and
minority interest
|
16,315
|
18,984
|
42,069
|
50,081
|
|||||||||
INCOME
TAX PROVISION
|
(3,212
|
)
|
(2,243
|
)
|
(7,778
|
)
|
(7,122
|
)
|
|||||
Income
before minority interest
|
13,103
|
16,741
|
34,291
|
42,959
|
|||||||||
Minority
interest
|
(333
|
)
|
(640
|
)
|
(824
|
)
|
(1,601
|
)
|
|||||
NET
INCOME
|
$
|
12,770
|
$
|
16,101
|
$
|
33,467
|
$
|
41,358
|
|||||
EARNINGS
PER SHARE
|
|||||||||||||
Basic
|
$
|
0.33
|
$
|
0.40
|
$
|
0.87
|
$
|
1.05
|
|||||
Diluted
|
$
|
0.30
|
$
|
0.38
|
$
|
0.80
|
$
|
0.98
|
|||||
Number
of shares used in computation
|
|||||||||||||
Basic
|
38,530,370
|
39,844,587
|
38,280,234
|
39,430,422
|
|||||||||
Diluted
|
42,228,888
|
42,445,255
|
42,082,731
|
42,098,668
|
Nine
Months Ended
September
30,
|
|||||||
2006
|
2007
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|||||||
Net
income
|
$
|
33,467
|
$
|
41,358
|
|||
Adjustments
to reconcile net income to net cash
|
|||||||
provided
by operating activities:
|
|||||||
Depreciation
and amortization
|
14,053
|
20,417
|
|||||
Minority
interest earnings
|
824
|
1,602
|
|||||
Share-based
compensation
|
5,826
|
7,253
|
|||||
Loss
on disposal of property, plant and equipment
|
221
|
305
|
|||||
Changes
in operating assets:
|
|||||||
Accounts
receivable
|
(9,017
|
)
|
(11,821
|
)
|
|||
Inventories
|
(14,227
|
)
|
(19
|
)
|
|||
Prepaid
expenses and other current assets
|
(1,493
|
)
|
(3,044
|
)
|
|||
Deferred
income taxes
|
(2,601
|
)
|
(4,851
|
)
|
|||
Changes
in operating liabilities:
|
|||||||
Accounts
payable
|
13,352
|
(1,550
|
)
|
||||
Accrued
liabilities
|
5,038
|
381
|
|||||
Other
liabilities
|
-
|
2,554
|
|||||
Income
taxes payable
|
1,040
|
(89
|
)
|
||||
Net
cash provided by operating activities
|
46,483
|
52,496
|
|||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|||||||
Purchases
of property, plant and equipment
|
(34,768
|
)
|
(41,642
|
)
|
|||
Purchases
of short-term investments
|
(15,791
|
)
|
(26,718
|
)
|
|||
Acquisitions,
net of cash acquired
|
(18,411
|
)
|
-
|
||||
Proceeds
from sale of property, plant and equipment
|
54
|
99
|
|||||
Net
cash used by investing activities
|
(68,916
|
)
|
(68,261
|
)
|
|||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|||||||
Advances
(repayments) on line of credit, net
|
(5,717
|
)
|
934
|
||||
Net
proceeds from issuance of common stock
|
4,111
|
6,120
|
|||||
Excess
tax benefits
|
7,274
|
6,667
|
|||||
Repayments
of long-term debt
|
(4,125
|
)
|
(1,681
|
)
|
|||
Repayments
of capital lease obligations
|
(107
|
)
|
(111
|
)
|
|||
Net
cash provided by financing activities
|
1,436
|
11,929
|
|||||
EFFECT
OF EXCHANGE RATE CHANGES
|
|||||||
ON
CASH AND CASH EQUIVALENTS
|
866
|
92
|
|||||
DECREASE
IN CASH
|
(20,131
|
)
|
(3,744
|
)
|
|||
CASH
AND CASH EQUIVALENTS,
beginning of period
|
73,288
|
48,888
|
|||||
CASH
AND CASH EQUIVALENTS,
end of period
|
$
|
53,157
|
$
|
45,144
|
Nine
Months Ended
|
|||||||
September
30,
|
|||||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
2006
|
2007
|
|||||
Cash
paid during the year for:
|
|||||||
Interest
|
$
|
334
|
$
|
5,594
|
|||
Income
taxes
|
$
|
2,142
|
$
|
3,581
|
|||
Non-cash
activities:
|
|||||||
Property,
plant and equipment purchased on accounts payable
|
$
|
(2,699
|
)
|
$
|
(1,268
|
)
|
|
Liabilities
for unrecognized tax benefits recorded as cumulative effect
|
|||||||
adjustment
to equity
|
$
|
-
|
$
|
1,955
|
Total
Comprehensive Income
|
|||||||||||||
Three
Months Ended
September
30,
|
|
Nine
Months Ended
September 30, |
|
||||||||||
|
|
2006
|
|
2007
|
|
2006
|
|
2007
|
|||||
Net
income
|
$
|
12,770
|
$
|
16,101
|
$
|
33,467
|
$
|
41,358
|
|||||
Translation
adjustment
|
429
|
304
|
866
|
114
|
|||||||||
Comprehensive
income
|
$
|
13,199
|
$
|
16,405
|
$
|
34,333
|
$
|
41,472
|
Three
Months Ended
|
|
Nine
Months Ended
|
|
||||||||||
|
|
September
30,
|
|
September
30,
|
|
||||||||
|
|
2006
|
|
2007
|
|
2006
|
|
2007
|
|||||
BASIC
|
|||||||||||||
Weighted
average number of common
|
|||||||||||||
shares
outstanding used in computing
|
|||||||||||||
basic
earnings per share (1)
|
38,530
|
39,845
|
38,280
|
39,430
|
|||||||||
Net
income
|
$
|
12,770
|
$
|
16,101
|
$
|
33,467
|
$
|
41,358
|
|||||
Earnings
per share (1)
|
$
|
0.33
|
$
|
0.40
|
$
|
0.87
|
$
|
1.05
|
|||||
DILUTED
|
|||||||||||||
Weighted
average number of common
|
|||||||||||||
shares
outstanding used in computing
|
|||||||||||||
basic
earnings per share (1)
|
38,530
|
39,845
|
38,280
|
39,430
|
|||||||||
Add:
Assumed exercise of stock options and stock awards (1)
|
3,699
|
2,601
|
3,802
|
2,668
|
|||||||||
42,229
|
42,445
|
42,083
|
42,099
|
||||||||||
Net
income
|
$
|
12,770
|
$
|
16,101
|
$
|
33,467
|
$
|
41,358
|
|||||
Earnings
per share (1)
|
$
|
0.30
|
$
|
0.38
|
$
|
0.80
|
$
|
0.98
|
|||||
Cost
Basis
|
Unrealized
Gains
|
Unrealized
Losses
|
Recorded
Basis
|
||||||||||
State
and local government obligations
|
$
|
317,306
|
$
|
-
|
$
|
-
|
$
|
317,306
|
|||||
Money
market mutual funds
|
420
|
-
|
-
|
$
|
420
|
||||||||
Total
short-term investments
|
$
|
317,726
|
$
|
-
|
$
|
-
|
$
|
317,726
|
December
31,
|
September
30,
|
|
|||||
|
|
2006
|
|
2007
|
|||
Finished
goods
|
$
|
24,421
|
$
|
21,213
|
|||
Work-in-progress
|
10,104
|
9,723
|
|||||
Raw
materials
|
13,677
|
17,443
|
|||||
$
|
48,202
|
$
|
48,379
|
2006
|
2007
|
|||||||||||||||||||||
Balance,
January 1
|
|
Acquisitions/
purchase accounting adjustments
|
|
Currency
exchange and other
|
|
Balance,
December 31
|
|
Acquisitions/
purchase accounting adjustments
|
|
Currency
exchange and other
|
|
Balance,
September
30
|
||||||||||
Goodwill-China
|
$
|
881
|
$
|
-
|
$
|
-
|
$
|
881
|
$
|
-
|
$
|
-
|
$
|
881
|
||||||||
Goodwill-FabTech
|
4,209
|
-
|
-
|
4,209
|
-
|
-
|
4,209
|
|||||||||||||||
Goodwill-Anachip
|
-
|
19,675
|
265
|
19,940
|
-
|
(12
|
)
|
19,928
|
||||||||||||||
Total
|
$
|
5,090
|
$
|
19,675
|
$
|
265
|
$
|
25,030
|
$
|
-
|
$
|
(12
|
)
|
$
|
25,018
|
As
of September 30, 2007
|
||||||||||||||||
Amortized
Intangible Assets
|
Useful
life
|
Gross
Carrying Amount
|
Accumulated
Amortization
|
Currency
exchange and other
|
Net
|
|||||||||||
APD:
|
||||||||||||||||
Patents
|
15
years
|
$
|
8,402
|
$
|
(499
|
)
|
$
|
-
|
$
|
7,903
|
||||||
Anachip:
|
||||||||||||||||
Patents
and trademarks
|
3-10
years
|
$
|
2,430
|
$
|
(625
|
)
|
$
|
134
|
$
|
1,939
|
||||||
Total:
|
$
|
10,832
|
$
|
(1,124
|
)
|
$
|
134
|
$
|
9,842
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
September
30,
|
September
30,
|
||||||||||||
2006
|
2007
|
2006
|
2007
|
||||||||||
Cost
of goods sold
|
$
|
133
|
$
|
59
|
$
|
398
|
$
|
219
|
|||||
Selling
and administrative expense
|
1,355
|
1,173
|
4,112
|
3,680
|
|||||||||
Research
and development expense
|
146
|
112
|
438
|
355
|
|||||||||
Total
stock option expense
|
$
|
1,634
|
$
|
1,344
|
$
|
4,948
|
$
|
4,254
|
Nine
Months Ended September 30,
|
|||||||
2006
|
2007
|
||||||
Expected
volatility
|
53.85
|
%
|
54.52
|
%
|
|||
Expected
term (in years)
|
5.86
|
6.63
|
|||||
Risk-free
interest rate
|
4.70
|
%
|
4.91
|
%
|
|||
Expected
forfeitures
|
2.56
|
%
|
2.56
|
%
|
|||
Expected
dividends
|
N/A
|
N/A
|
Stock
options
|
Shares
(000)
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Contractual Term (yrs)
|
Aggregate
Intrinsic Value ($000)
|
|||||||||
Outstanding
at January 1, 2007
|
5,316
|
$
|
8.46
|
6.4
|
$
|
80,974
|
|||||||
Granted
|
265
|
$
|
24.96
|
||||||||||
Exercised
|
(1,045
|
)
|
$
|
5.93
|
|||||||||
Forfeited
or expired
|
(47
|
)
|
$
|
18.19
|
|||||||||
Outstanding
at September 30, 2007
|
4,489
|
$
|
9.92
|
6.1
|
$
|
99,586
|
|||||||
Exercisable
at September 30, 2007
|
3,625
|
$
|
7.47
|
5.6
|
$
|
89,295
|
Weighted-Average
|
|||||||
Restricted
stock awards and restricted stock units
|
Shares
(000)
|
Grant-Date
Fair Value
|
|||||
Nonvested
at January 1, 2007
|
848
|
$
|
16.41
|
||||
Granted
|
288
|
25.81
|
|||||
Vested
|
(75
|
)
|
22.58
|
||||
Forfeited
|
(41
|
)
|
23.72
|
||||
Nonvested
at September 30, 2007
|
1,020
|
$
|
18.32
|
Three
Months Ended
September
30, 2006
|
Far
East
|
North
America
|
Total
|
|||||||
Total
sales
|
$
|
113,717
|
$
|
30,636
|
$
|
144,353
|
||||
Inter-company
sales
|
(46,559
|
)
|
(5,219
|
)
|
(51,778
|
)
|
||||
Net
sales
|
$
|
67,158
|
$
|
25,417
|
$
|
92,575
|
||||
Property,
plant and equipment
|
$
|
76,161
|
$
|
13,007
|
$
|
89,168
|
||||
Assets
|
$
|
227,454
|
$
|
139,416
|
$
|
366,870
|
||||
Three
Months Ended
September
30, 2007
|
Far
East
|
|
|
North
America
|
|
|
Total
|
|||
Total
sales
|
$
|
135,597
|
$
|
31,629
|
$
|
167,226
|
||||
Inter-company
sales
|
(56,777
|
)
|
(5,185
|
)
|
(61,962
|
)
|
||||
Net
sales
|
$
|
78,820
|
$
|
26,444
|
$
|
105,264
|
||||
Property,
plant and equipment
|
$
|
104,044
|
$
|
15,174
|
$
|
119,218
|
||||
Assets
|
$
|
214,990
|
$
|
471,912
|
$
|
686,902
|
||||
Nine
Months Ended
September
30, 2006
|
Far
East
|
North
America
|
Total
|
|||||||
Total
sales
|
$
|
287,102
|
$
|
89,248
|
$
|
376,350
|
||||
Inter-company
sales
|
(110,825
|
)
|
(16,649
|
)
|
(127,474
|
)
|
||||
Net
sales
|
$
|
176,277
|
$
|
72,599
|
$
|
248,876
|
||||
Property,
plant and equipment
|
$
|
76,161
|
$
|
13,007
|
$
|
89,168
|
||||
Assets
|
$
|
227,454
|
$
|
139,416
|
$
|
366,870
|
||||
Nine
Months Ended
September
30, 2007
|
Far
East
|
North
America
|
Total
|
|||||||
Total
sales
|
$
|
367,504
|
$
|
92,295
|
$
|
459,799
|
||||
Inter-company
sales
|
(150,172
|
)
|
(16,060
|
)
|
(166,232
|
)
|
||||
Net
sales
|
$
|
217,332
|
$
|
76,235
|
$
|
293,567
|
||||
Property,
plant and equipment
|
$
|
104,044
|
$
|
15,174
|
$
|
119,218
|
||||
Assets
|
$
|
214,990
|
$
|
471,912
|
$
|
686,902
|
Net
Sales
|
|||||||||||||
for
the Three Months
|
Percentage
of
|
||||||||||||
Ended
September 30,
|
Net
Sales
|
||||||||||||
2006
|
2007
|
2006
|
2007
|
||||||||||
China
|
$
|
35,014
|
$
|
42,451
|
37.8
|
%
|
40.3
|
%
|
|||||
Taiwan
|
24,840
|
23,267
|
26.8
|
%
|
22.1
|
%
|
|||||||
United
States
|
20,038
|
21,930
|
21.6
|
%
|
20.8
|
%
|
|||||||
All
Others
|
12,683
|
17,616
|
13.8
|
%
|
16.8
|
%
|
|||||||
Total
|
$
|
92,575
|
$
|
105,264
|
100.0
|
%
|
100.0
|
%
|
Net
Sales
|
|||||||||||||
for
the Nine Months
|
Percentage
of
|
||||||||||||
Ended
September 30,
|
Net
Sales
|
||||||||||||
2006
|
2007
|
2006
|
2007
|
||||||||||
China
|
$
|
78,209
|
$
|
104,490
|
31.4
|
%
|
35.6
|
%
|
|||||
Taiwan
|
73,993
|
80,087
|
29.7
|
%
|
27.3
|
%
|
|||||||
United
States
|
57,600
|
62,759
|
23.1
|
%
|
21.4
|
%
|
|||||||
All
Others
|
39,074
|
46,231
|
15.8
|
%
|
15.7
|
%
|
|||||||
Total
|
$
|
248,876
|
$
|
293,567
|
100.0
|
%
|
100.0
|
%
|
Total
Allocation
|
||||
Assets
acquired
|
||||
Accounts
receivable
|
$
|
299
|
||
Inventory
|
923
|
|||
Fixed
assets
|
125
|
|||
Patents
|
8,399
|
|||
Liabilities
assumed
|
||||
Accounts
payable
|
(338
|
)
|
||
Contingent
consideration
|
(1,000
|
)
|
||
Net
assets acquired
|
$
|
8,408
|
· |
the
condition of the economy in general and of the semiconductor industry
in
particular;
|
· |
our
customers’ adjustments in their order
levels;
|
· |
changes
in our pricing policies or the pricing policies of our competitors
or
suppliers;
|
· |
the
termination of key supplier
relationships;
|
· |
the
rate of introduction of new products to, and acceptance by, our
customers;
|
· |
our
ability to compete effectively with our current and future
competitors;
|
· |
our
ability to enter into and renew key corporate and strategic relationships
with our customers, vendors and strategic
alliances;
|
· |
changes
in foreign currency exchange rates;
|
· |
a
major disruption of our information technology
infrastructure; and
|
· |
unforeseen
catastrophic events, such as armed conflict, terrorism, fires, typhoons
and earthquakes.
|
Percent
of Net Sales
|
Percentage
Dollar
|
|||||||||
Three
Months Ended
September
30,
|
Increase
(Decrease)
|
|||||||||
2006
|
2007
|
'06
to '07
|
||||||||
Net
sales
|
100
|
100
|
13.7
|
|||||||
Cost
of goods sold
|
(66.8
|
)
|
(67.6
|
)
|
14.9
|
|||||
Gross
profit
|
33.2
|
32.4
|
11.3
|
|||||||
Operating
expenses
|
(14.9
|
)
|
(17.3
|
)
|
31.6
|
|||||
Operating
income
|
18.3
|
15.1
|
(5.4
|
)
|
||||||
Interest
income, net
|
1.1
|
2.9
|
197.2
|
|||||||
Other
income (expense)
|
(1.7
|
)
|
-
|
(99.2
|
)
|
|||||
Income
before taxes and minority interest
|
17.7
|
18.0
|
16.4
|
|||||||
Income
tax provision
|
(3.5
|
)
|
(2.1
|
)
|
(30.2
|
)
|
||||
Income
before minority interest
|
14.2
|
15.9
|
27.8
|
|||||||
Minority
interest
|
(0.4
|
)
|
(0.6
|
)
|
92.2
|
|||||
Net
income
|
13.8
|
15.3
|
26.1
|
2006
|
2007
|
||||||
Net
sales
|
$
|
92,575
|
$
|
105,264
|
2006
|
2007
|
||||||
Cost
of goods sold
|
$
|
61,879
|
$
|
71,112
|
|||
Gross
profit
|
$
|
30,696
|
$
|
34,152
|
|||
Gross
profit margin percentage
|
33.2
|
%
|
32.4
|
%
|
2006
|
2007
|
||||||
Selling,
general and administrative expenses
(“SG&A”)
|
$
|
11,825
|
$
|
14,607
|
2006
|
2007
|
||||||
Research
and development expenses (“R&D”)
|
$
|
1,941
|
$
|
3,554
|
2006
|
2007
|
||||||
Interest
income
|
$
|
1,069
|
$
|
4,712
|
2006
|
2007
|
||||||
Interest
expense
|
$
|
89
|
$
|
1,706
|
2006
|
2007
|
||||||
Other
loss
|
$
|
1,563
|
$
|
13
|
2006
|
2007
|
||||||
Income
tax provision
|
$
|
3,212
|
$
|
2,243
|
2006
|
2007
|
||||||
Minority
interest
|
$
|
333
|
$
|
640
|
Percent
of Net Sales
|
Percentage
Dollar
|
|||||||||
Nine
Months Ended
September
30,
|
Increase
(Decrease)
|
|||||||||
2006
|
2007
|
'06
to '07
|
||||||||
Net
sales
|
100
|
100
|
18.0
|
|||||||
Cost
of goods sold
|
(66.9
|
)
|
(67.9
|
)
|
19.6
|
|||||
Gross
profit
|
33.1
|
32.1
|
14.6
|
|||||||
Operating
expenses
|
(16.5
|
)
|
(17.7
|
)
|
27.0
|
|||||
Operating
income
|
16.6
|
14.4
|
2.2
|
|||||||
Interest
income, net
|
1.0
|
2.7
|
234.5
|
|||||||
Other
income (expense)
|
(0.7
|
)
|
(0.1
|
)
|
(95.9
|
)
|
||||
Income
before taxes and minority interest
|
16.9
|
17.0
|
19.0
|
|||||||
Income
tax provision
|
(3.1
|
)
|
(2.4
|
)
|
(8.4
|
)
|
||||
Income
before minority interest
|
13.8
|
14.6
|
25.3
|
|||||||
Minority
interest
|
(0.3
|
)
|
(0.5
|
)
|
94.3
|
|||||
Net
income
|
13.5
|
14.1
|
23.6
|
2006
|
2007
|
||||||
Net
sales
|
$
|
248,876
|
$
|
293,567
|
2006
|
2007
|
||||||
Cost
of goods sold
|
$
|
166,532
|
$
|
199,214
|
|||
Gross
profit
|
$
|
82,344
|
$
|
94,353
|
|||
Gross
profit margin percentage
|
33.1
|
%
|
32.1
|
%
|
2006
|
2007
|
||||||
SG&A
|
$
|
34,883
|
$
|
40,682
|
2006
|
2007
|
||||||
R&D
|
$
|
5,985
|
$
|
9,654
|
2006
|
2007
|
||||||
Restructuring
costs and impairment of fixed assets
|
$
|
152
|
$
|
1,770
|
2006
|
2007
|
||||||
Interest
income
|
$
|
2,807
|
$
|
13,032
|
2006
|
2007
|
||||||
Interest
expense
|
$
|
363
|
$
|
5,127
|
2006
|
2007
|
||||||
Other
loss
|
$
|
1,699
|
$
|
70
|
2006
|
2007
|
||||||
Income
tax provision
|
$
|
7,778
|
$
|
7,122
|
· |
Downturns
in the highly cyclical semiconductor industry or changes in end-market
demand could affect our operating results and financial
condition.
|
·
|
The
semiconductor business is highly competitive, and increased competition
may harm our business and our operating
results.
|
·
|
We
receive a significant portion of our net sales from a single customer.
In
addition, this customer is also our largest external supplier and
is a
related party. The loss of this customer or supplier could harm our
business and results of
operations.
|
·
|
Delays
in initiation of production at new facilities, implementing new production
techniques or resolving problems associated with technical equipment
malfunctions could adversely affect our manufacturing
efficiencies.
|
·
|
We
are and will continue to be under continuous pressure from our customers
and competitors to reduce the price of our products, which could
adversely
affect our growth and profit
margins.
|
·
|
Our
customer orders are subject to cancellation or modification usually
with
no penalty. High volumes of order cancellation or reductions in quantities
ordered could adversely affect our results of operations and financial
condition.
|
·
|
New
technologies could result in the development of new products by our
competitors and a decrease in demand for our products, and we may
not be
able to develop new products to satisfy changes in demand, which
could
result in a decrease in net sales and loss of market
share.
|
·
|
We
may be subject to claims of infringement of third-party intellectual
property rights or demands that we license third-party technology,
which
could result in significant expense and reduction in our intellectual
property rights.
|
·
|
We
depend on third-party suppliers for timely deliveries of raw materials,
parts and equipment, as well as finished products from other
manufacturers, and our results of operations could be adversely affected
if we are unable to obtain adequate supplies in a timely
manner.
|
·
|
If
we do not succeed in continuing to vertically integrate our business,
we
will not realize the cost and other efficiencies we anticipate and
our
ability to compete, profit margins and results of operations may
suffer.
|
·
|
Part
of our growth strategy involves identifying and acquiring companies
with
complementary product lines or customers. We may be unable to identify
suitable acquisition candidates or consummate desired acquisitions
and, if
we do make any acquisitions, we may be unable to successfully integrate
any acquired companies with our
operations.
|
·
|
We
are subject to many environmental laws and regulations that could
affect
our operations or result in significant
expenses.
|
·
|
Our
products may be found to be defective and, as a result, product liability
claims may be asserted against us, which may harm our business and
our
reputation with our customers.
|
·
|
We
may fail to attract or retain the qualified technical, sales, marketing
and management personnel required to operate our business
successfully.
|
·
|
We
may not be able to maintain our growth or achieve future growth and
such
growth may place a strain on our management and on our systems and
resources.
|
·
|
Our
business may be adversely affected by obsolete inventories as a result
of
changes in demand for our products and change in life cycles of our
products.
|
·
|
If
OEMs do not design our products into their applications, a portion
of our
net sales may be adversely
affected.
|
·
|
We
rely heavily on our internal electronic information and communications
systems, and any system outage could adversely affect our business
and
results of operations.
|
·
|
We
are subject to interest rate risk that could have an adverse effect
on our
cost of working capital and interest
expenses.
|
·
|
If
we fail to maintain an effective system of internal controls or discover
material weaknesses in our internal controls over financial reporting,
we
may not be able to report our financial results accurately or detect
fraud, which could harm our business and the trading price of our
Common
Stock.
|
·
|
Terrorist
attacks, or threats or occurrences of other terrorist activities
whether
in the United States or internationally may affect the markets in
which
our Common Stock trades, the markets in which we operate and our
profitability.
|
·
|
We
currently have a significant amount of debt following our convertible
senior notes offering. Our substantial indebtedness could adversely
affect
our business, financial condition and results of operations and our
ability to meet our payment obligations under the notes and our other
debt.
|
·
|
Our
international operations subject us to risks that could adversely
affect
our operations.
|
·
|
We
have significant operations and assets in China, Taiwan and Hong
Kong and,
as a result, will be subject to risks inherent in doing business
in those
jurisdictions, which may adversely affect our financial
performance.
|
·
|
We
are subject to foreign currency risk as a result of our international
operations.
|
·
|
We
may not continue to receive preferential tax treatment in China,
thereby
increasing our income tax expense and reducing our net
income.
|
·
|
The
distribution of any earnings of our foreign subsidiaries to the United
States may be subject to U.S. income taxes, thus reducing our net
income.
|
·
|
Variations
in our quarterly operating results may cause our stock price to be
volatile.
|
·
|
We
may enter into future acquisitions and take certain actions in connection
with such acquisitions that could affect the price of our Common
Stock.
|
·
|
Our
directors, executive officers and significant stockholders hold a
substantial portion of our Common Stock, which may lead to conflicts
with
other stockholders over corporate transactions and other corporate
matters.
|
·
|
Our
early corporate records are incomplete. As a result, we may have
difficulty in assessing and defending against claims relating to
rights to
our Common Stock purporting to arise during periods for which our
records
are incomplete.
|
·
|
Conversion
of our convertible senior notes will dilute the ownership interest
of
existing shareholders, including holders who had previously converted
their notes.
|
3.1 |
Certificate
of Incorporation, as amended (incorporated by reference to Exhibit
3.1 of
Amendment No.
1 to the Company's Registration Statement on Form S-3 (File No.
333-127833) filed on September
8, 2006).
|
3.2 |
Amended
Bylaws of the Company dated July 19, 2007 (incorporated by reference
to
Exhibit 3 on
Form 8-K filed with the Commission on July 23,
2007).
|
31.1 |
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
31.2 |
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
32.1
|
Certification
Pursuant to 18 U.S.C. 1350 Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
32.2
|
Certification
Pursuant to 18 U.S.C. 1350 Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
DIODES INCORPORATED (Registrant) | |||
By: /s/ Carl C. Wertz |
November
8,
2007
|
||
CARL
C. WERTZ
Chief
Financial Officer, Treasurer and Secretary
(Duly
Authorized Officer and Principal Financial and
Chief
Accounting Officer)
|
3.1 |
Certificate
of Incorporation, as amended (incorporated by reference to Exhibit
3.1 of
Amendment No.
1 to the Company's Registration Statement on Form S-3 (File No.
333-127833) filed on September
8, 2006).
|
3.2 |
Amended
Bylaws of the Company dated July 19, 2007 (incorporated by reference
to
Exhibit 3 on
Form 8-K filed with the Commission on July 23,
2007).
|
31.1 |
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
31.2 |
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
32.1
|
Certification
Pursuant to 18 U.S.C. 1350 Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
32.2
|
Certification
Pursuant to 18 U.S.C. 1350 Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|