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EX-32.1 - EX-32.1 - DIODES INC /DEL/diod-ex321_9.htm
EX-31.1 - EX-31.1 - DIODES INC /DEL/diod-ex311_7.htm

 

 

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 June 30, 2015

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)

 

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   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x    No   ¨

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

 

Large accelerated filer

 

x

  

Accelerated filer

 

¨

 

 

 

 

Non-accelerated filer

 

¨  (Do not check if a smaller reporting company)

  

Smaller reporting company

 

¨

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

The number of shares of the registrant’s Common Stock outstanding as of August 4, 2015 was 48,601,019.

 

 

 


Table of Contents

 

 

  

Page

 

Part I – Financial Information

  

-1-

 

Item 1 – Financial Statements

  

-1-

 

Consolidated Condensed Balance Sheets as of June 30, 2015 and December 31, 2014

  

-1-

 

Consolidated Condensed Statements of Operations for the Three and Six Months Ended June 30, 2015 and 2014

  

-3-

 

Consolidated Condensed Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2015 and 2014

  

-4-

 

Consolidated Condensed Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014

  

-5-

 

Notes to Consolidated Condensed Financial Statements

  

-6-

 

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

  

-15-

 

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

  

-24-

 

Item 4 – Controls and Procedures

  

-25-

 

Part II – Other Information

  

-26-

 

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-

 

Signature

  

-28-

 

 

 

 


PART I—FINANCIAL INFORMATION

Item 1—Financial Statements

DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands)

ASSETS

 

 

June 30,

 

 

December 31,

 

 

2015

 

 

2014

 

 

(Unaudited)

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

$

194,592

 

 

$

243,000

 

Short-term investments

 

25,844

 

 

 

11,726

 

Accounts receivable, net

 

206,637

 

 

 

188,248

 

Inventories

 

195,274

 

 

 

182,026

 

Deferred income taxes, current

 

11,317

 

 

 

11,295

 

Prepaid expenses and other

 

47,882

 

 

 

50,510

 

Total current assets

 

681,546

 

 

 

686,805

 

 

 

 

 

 

 

 

 

PROPERTY, PLANT AND EQUIPMENT, net

 

341,538

 

 

 

309,931

 

 

 

 

 

 

 

 

 

DEFERRED INCOME TAXES, non-current

 

32,474

 

 

 

32,550

 

 

 

 

 

 

 

 

 

OTHER ASSETS

 

 

 

 

 

 

 

Goodwill

 

82,067

 

 

 

81,229

 

Intangible assets, net

 

41,278

 

 

 

45,028

 

Other

 

26,281

 

 

 

23,614

 

Total assets

$

1,205,184

 

 

$

1,179,157

 

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

 

 

 

-1-


DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS (continued)

LIABILITIES AND EQUITY

(In thousands, except share data)

 

 

June 30,

 

 

December 31,

 

 

2015

 

 

2014

 

 

(Unaudited)

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

Lines of credit and short-term debt

$

979

 

 

$

1,064

 

Accounts payable

 

88,321

 

 

 

79,390

 

Accrued liabilities

 

76,957

 

 

 

60,436

 

Income tax payable

 

7,187

 

 

 

8,381

 

Total current liabilities

 

173,444

 

 

 

149,271

 

 

 

 

 

 

 

 

 

LONG-TERM DEBT, net of current portion

 

99,684

 

 

 

140,787

 

 

 

 

 

 

 

 

 

OTHER LONG-TERM LIABILITIES

 

77,115

 

 

 

78,932

 

Total liabilities

 

350,243

 

 

 

368,990

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES (See Note H)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

Diodes Incorporated 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; 48,241,281 and 47,591,092 issued and outstanding at June 30, 2015 and December 31, 2014, respectively

 

32,162

 

 

 

31,729

 

Additional paid-in capital

 

330,339

 

 

 

314,942

 

Retained earnings

 

516,216

 

 

 

490,006

 

Accumulated other comprehensive loss

 

(67,118

)

 

 

(68,402

)

Total Diodes Incorporated stockholders' equity

 

811,599

 

 

 

768,275

 

Noncontrolling interest

 

43,342

 

 

 

41,892

 

Total equity

 

854,941

 

 

 

810,167

 

Total liabilities and equity

$

1,205,184

 

 

$

1,179,157

 

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

 

 

 

-2-


DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

NET SALES

$

219,453

 

 

$

223,217

 

 

$

425,634

 

 

$

433,203

 

COST OF GOODS SOLD

 

150,016

 

 

 

152,913

 

 

 

292,284

 

 

 

301,318

 

Gross profit

 

69,437

 

 

 

70,304

 

 

 

133,350

 

 

 

131,885

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

31,882

 

 

 

33,291

 

 

 

63,613

 

 

 

65,621

 

Research and development

 

13,590

 

 

 

12,781

 

 

 

26,899

 

 

 

25,701

 

Other operating expenses

 

1,967

 

 

 

1,089

 

 

 

3,937

 

 

 

3,077

 

Total operating expenses

 

47,439

 

 

 

47,161

 

 

 

94,449

 

 

 

94,399

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

21,998

 

 

 

23,143

 

 

 

38,901

 

 

 

37,486

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSES)

 

(741

)

 

 

359

 

 

 

(1,681

)

 

 

(991

)

Income before income taxes and noncontrolling interest

 

21,257

 

 

 

23,502

 

 

 

37,220

 

 

 

36,495

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME TAX PROVISION

 

5,399

 

 

 

5,651

 

 

 

9,586

 

 

 

8,198

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

15,858

 

 

 

17,851

 

 

 

27,634

 

 

 

28,297

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: NET INCOME attributable to noncontrolling interest

 

(780

)

 

 

(466

)

 

 

(1,424

)

 

 

(710

)

NET INCOME attributable to common stockholders

$

15,078

 

 

$

17,385

 

 

$

26,210

 

 

$

27,587

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE attributable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.31

 

 

$

0.37

 

 

$

0.55

 

 

$

0.59

 

Diluted

$

0.31

 

 

$

0.36

 

 

$

0.53

 

 

$

0.57

 

Number of shares used in computation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

48,076

 

 

 

46,889

 

 

 

47,872

 

 

 

46,794

 

Diluted

 

49,250

 

 

 

48,423

 

 

 

49,091

 

 

 

48,223

 

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

 

 

 

-3-


DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Net income

$

15,858

 

 

$

17,851

 

 

$

27,634

 

 

$

28,297

 

Foreign currency translation adjustment

 

4,909

 

 

 

3,340

 

 

 

(1,251

)

 

 

(595

)

Unrealized gain (loss) on defined benefit plan, net of tax

 

4,448

 

 

 

(1,816

)

 

 

2,635

 

 

 

(550

)

Unrealized foreign currency gain (loss), net of tax

 

397

 

 

 

372

 

 

 

(101

)

 

 

450

 

Comprehensive income

 

25,612

 

 

 

19,747

 

 

 

28,917

 

 

 

27,602

 

Less: Comprehensive income attributable to noncontrolling interest

 

(780

)

 

 

(466

)

 

 

(1,424

)

 

 

(710

)

Total comprehensive income attributable to common stockholders

$

24,832

 

 

$

19,281

 

 

$

27,493

 

 

$

26,892

 

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

 

 

 

-4-


DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

Six Months Ended

 

 

June 30,

 

 

2015

 

 

2014

 

CASH FLOWS FROM OPERATING ACTIVITIES

$

52,951

 

 

$

80,066

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

Decrease (increase) in restricted cash

 

(2,611

)

 

 

972

 

Purchases of property, plant and equipment

 

(46,877

)

 

 

(23,668

)

Proceeds from sales of property, plant, and equipment

 

19

 

 

 

1,428

 

Purchases of equity securities

 

(3,241

)

 

 

(1,842

)

Purchases of short-term investments

 

(35,095

)

 

 

-

 

Proceeds from sale of equity securities and short-term investments

 

21,135

 

 

 

5,380

 

Other

 

(94

)

 

 

308

 

Net cash used in investing activities

 

(66,764

)

 

 

(17,422

)

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

Advances on lines of credit and short-term debt

 

1,449

 

 

 

4,335

 

Repayments on lines of credit and short-term debt

 

(1,550

)

 

 

(7,622

)

Repayments of long-term debt

 

(41,145

)

 

 

(20,710

)

Net proceeds from issuance of common stock

 

8,274

 

 

 

2,913

 

Other

 

(139

)

 

 

(147

)

Net cash used in financing activities

 

(33,111

)

 

 

(21,231

)

 

 

 

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

(1,484

)

 

 

(2,583

)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

(48,408

)

 

 

38,830

 

CASH AND CASH EQUIVALENTS, beginning of period

 

243,000

 

 

 

196,635

 

CASH AND CASH EQUIVALENTS, end of period

$

194,592

 

 

$

235,465

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

Non-cash financing activities:

 

 

 

 

 

 

 

Property, plant and equipment purchased on accounts payable

$

(18,963

)

 

$

(1,968

)

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

 

 

 

-5-


 

DIODES INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE A – Nature of Operations, Basis of Presentation and Recently Issued Accounting Pronouncements

Nature of Operations

Diodes Incorporated, together with its subsidiaries (collectively, the “Company,” “we” or “our”), is a leading global manufacturer and supplier of high-quality, application specific standard products within the broad discrete, logic and analog semiconductor markets, serving the consumer electronics, computing, communications, industrial and automotive markets throughout Asia, North America and Europe.

Basis of Presentation

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.”) (“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 U.S. GAAP for complete financial statements. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the our Annual Report on Form 10-K for the year ended December 31, 2014. 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 and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, 2015. The consolidated condensed financial data at December 31, 2014 is derived from audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014, filed on March 2, 2015.

The preparation of financial statements in conformity with U.S. 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 U.S. GAAP, interim accounting for certain expenses, including income taxes, are based on full year forecasts. For interim financial reporting purposes, income taxes are recorded based upon estimated annual effective income tax rates taking into consideration discrete items occurring in a quarter.

Certain prior year’s balances have been reclassified to conform to the current financial statement presentation.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606).  ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  ASU 2014-09 was originally effective for us in the first quarter of 2017, but in July 2015 the FASB approved a proposal to defer the effective date to the first quarter of 2018.  Under this proposal, early adoption is permitted as of the original effective time period of first quarter of 2017 and requires either a retrospective or a modified retrospective approach to adoption.  The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures.

 

-6-


 

NOTE B – Earnings Per Share

Basic earnings per share 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 earnings per share is calculated similarly but includes potential dilution from the exercise of stock options and stock awards, except when the effect would be anti-dilutive.

The computation of basic and diluted earnings per common share is as follows (in thousands, except per share data):

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

BASIC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

  used in computing basic earnings per share

 

48,076

 

 

 

46,889

 

 

 

47,872

 

 

 

46,794

 

Net income attributable to common stockholders

$

15,078

 

 

$

17,385

 

 

$

26,210

 

 

$

27,587

 

Earnings per share attributable to common stockholders

$

0.31

 

 

$

0.37

 

 

$

0.55

 

 

$

0.59

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DILUTED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

  used in computing basic earnings per share

 

48,076

 

 

 

46,889

 

 

 

47,872

 

 

 

46,794

 

Add:  Dilutive effect of stock options and stock awards outstanding

 

1,174

 

 

 

1,534

 

 

 

1,219

 

 

 

1,429

 

 

 

49,250

 

 

 

48,423

 

 

 

49,091

 

 

 

48,223

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

$

15,078

 

 

$

17,385

 

 

$

26,210

 

 

$

27,587

 

Earnings per share attributable to common stockholders

$

0.31

 

 

$

0.36

 

 

$

0.53

 

 

$

0.57

 

 

 

 

NOTE C – Inventories

Inventories stated at the lower of cost or market value are as follows (in thousands):

 

 

June 30,

2015

 

 

December 31,

2014

 

Raw materials

$

85,715

 

 

$

73,564

 

Work-in-progress

 

45,645

 

 

 

42,417

 

Finished goods

 

63,914

 

 

 

66,045

 

Total

$

195,274

 

 

$

182,026

 

 

 

 

NOTE D – Goodwill and Intangible Assets

Changes in goodwill are as follows (in thousands):

 

Balance at December 31, 2014

$

81,229

 

Foreign currency translation adjustment

 

838

 

Balance at June 30, 2015

$

82,067

 

-7-


 

Intangible assets are as follows (in thousands):

 

 

June 30,

 

 

December 31,

 

 

2015

 

 

2014

 

Intangible assets subject to amortization:

 

 

 

 

 

 

 

Gross carrying amount

$

86,928

 

 

$

86,928

 

Accumulated amortization

 

(43,968

)

 

 

(40,164

)

Foreign currency translation adjustment

 

(7,439

)

 

 

(7,471

)

Total

 

35,521

 

 

 

39,293

 

Intangible assets with indefinite lives:

 

 

 

 

 

 

 

Gross carrying amount

 

6,403

 

 

 

6,403

 

Foreign currency translation adjustment

 

(646

)

 

 

(668

)

Total

 

5,757

 

 

 

5,735

 

Total intangible assets, net

$

41,278

 

 

$

45,028

 

 

Amortization expense related to intangible assets subject to amortization was approximately $2 million for both the three months ended June 30, 2015 and 2014, and approximately $4 million for both the six months ended June 30, 2015 and 2014.

 

NOTE E – Income Tax Provision

Income tax expense of approximately $5 million and $6 million was recorded for the three months ended June 30, 2015 and 2014, respectively, and income tax expense of approximately $10 million and $8 million was recorded for the six months ended June 30, 2015 and 2014, respectively. This resulted in an effective tax rate of 25.8% for the six months ended June 30, 2015, as compared to 22.5% in the same period last year and compared to 23.7% for the full year of 2014.    The effective tax rate for the six months ended June 30, 2015 includes an immaterial charge for various discrete items. The estimated annual tax rate for 2015 is expected to be approximately 25%, excluding discrete items.  Our effective tax rates for the six months ended June 30, 2015 and 2014, excluding discrete items, were lower than the U.S. statutory tax rate of 35%, principally from the impact of income in lower-taxed jurisdictions.

For the three months ended June 30, 2015, we reported domestic and foreign pre-tax income of approximately $3 million and $18 million, respectively.  For the six months ended June 30, 2015, we reported domestic and foreign pre-tax income/(loss) of approximately $(3) million and $40 million, respectively. Funds repatriated from foreign subsidiaries to the U.S. may be subject to federal and state income taxes. We intend to permanently reinvest overseas all of our earnings from our foreign subsidiaries, except to the extent such undistributed earnings have previously been subject to US tax; accordingly, deferred U.S. taxes are not recorded on undistributed foreign earnings.

The impact of tax holidays decreased our tax expense by approximately $2 million and $1 million for the six months ended June 30, 2015 and 2014, respectively. The benefit of the tax holidays on both basic and diluted earnings per share for the six months ended June 30, 2015 and 2014 was approximately $0.04 and $0.03, respectively.  

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 2007, or for the 2010 tax year.  We are no longer subject to China income tax examinations by tax authorities for tax years before 2005. With respect to state and local jurisdictions and countries outside of the U.S. (other than China), with limited exceptions, we are no longer subject to income tax audits for years before 2006. Although the outcome of tax audits is always uncertain, we believe that adequate amounts of tax, interest and penalties, if any, have been provided for in our reserve for any adjustments that may result from tax audits. We recognize accrued interest and penalties related to unrecognized tax benefits in interest expense. As of June 30, 2015, the gross amount of unrecognized tax benefits was approximately $19 million.

It is reasonably possible that the amount of the unrecognized benefit with respect to certain of our 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.

 

-8-


 

NOTE F – Share-Based Compensation

The following table shows the total compensation expensed for share-based compensation plans, including stock options and share grants, recognized in the statements of operations (in thousands):

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Cost of goods sold

$

122

 

 

$

107

 

 

$

245

 

 

$

203

 

Selling, general and administrative

 

3,389

 

 

 

2,979

 

 

 

6,594

 

 

 

5,829

 

Research and development

 

364

 

 

 

305

 

 

 

716

 

 

 

578

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total share-based compensation expense

$

3,875

 

 

$

3,391

 

 

$

7,555

 

 

$

6,610

 

 

Stock Options. Stock options generally vest in equal annual installments over a four-year period and expire eight years after the grant date, and expense was estimated on the date of grant using the Black-Scholes-Merton option pricing model.

The total net cash proceeds received from stock option exercises during the six months ended June 30, 2015 was approximately $8 million. Stock option expense was approximately $1 million for both the three months ended June 30, 2015 and 2014, and $3 million and $2 million for the six months ended June 30, 2015 and 2014, respectively.

A summary of the stock option grants is as follows:

 

Stock Options

 

Shares (000)

 

 

Weighted Average Exercise Price

 

 

Weighted Average Remaining Contractual Term (yrs)

 

 

Aggregate Intrinsic Value ($000)

 

Outstanding at January 1, 2015

 

 

2,736

 

 

$

21.26

 

 

 

4

 

 

$

17,840

 

Granted

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

Exercised

 

 

(534

)

 

 

15.49

 

 

 

 

 

 

 

6,976

 

Forfeited or expired

 

 

(16

)

 

 

-

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2015

 

 

2,186

 

 

$

22.65

 

 

 

4

 

 

$

6,309

 

Exercisable at June 30,  2015

 

 

1,849

 

 

$

22.37

 

 

 

4

 

 

$

5,833

 

 

The aggregate intrinsic value in the table above is before applicable income taxes and represents the amount option holders would have received if all options had been exercised on the last business day of the period indicated, based on our closing stock price.

As of June 30, 2015, total unrecognized share-based compensation expense related to unvested stock options, net of forfeitures, was approximately $4 million, before income taxes, and is expected to be recognized over a weighted average period of approximately two years.

Share Grants. Restricted stock awards and restricted stock units generally vest in equal annual installments over a four-year period.

Share grant expense for both the three months ended June 30, 2015 and 2014 was approximately $3 million, and share grant expense for the six months ended June 30, 2015 and 2014 was approximately $6 million and $5 million, respectively.


-9-


 

A summary of our non-vested share grants is as follows:

 

Share Grants

 

Shares (000)

 

 

Weighted Average Grant-Date Fair Value

 

 

Aggregate Intrinsic Value ($000)

 

Non-vested at January 1, 2015

 

 

1,535

 

 

$

23.32

 

 

$

42,324

 

Granted

 

 

312

 

 

 

26.19

 

 

 

 

 

Vested

 

 

(116

)

 

 

25.72

 

 

 

3,016

 

Forfeited

 

 

(27

)

 

 

26.00

 

 

 

 

 

Non-vested at June 30, 2015

 

 

1,704

 

 

$

23.70

 

 

$

40,936

 

 

As of June 30, 2015, total unrecognized share-based compensation expense related to non-vested stock awards, net of forfeitures, was approximately $22 million, before income taxes, and is expected to be recognized over a weighted average period of approximately three years.

 

NOTE G – Segment Information and Enterprise-Wide Disclosure

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 the same customer type.

Our primary operations include operations in Asia, North America and Europe.

Net sales are attributed to geographic areas based on the location of subsidiaries producing the net sales (in thousands):

 

Three Months Ended

Asia

 

 

North America

 

 

Europe

 

 

Consolidated

 

June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

$

202,731

 

 

$

39,921

 

 

$

45,115

 

 

$

287,767

 

Inter-company sales

 

(30,718

)

 

 

(17,402

)

 

 

(20,194

)

 

 

(68,314

)

Net sales

$

172,013

 

 

$

22,519

 

 

$

24,921

 

 

$

219,453

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

Asia

 

 

North America

 

 

Europe

 

 

Consolidated

 

June 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

$

200,955

 

 

$

38,304

 

 

$

47,383

 

 

$

286,642

 

Inter-company sales

 

(25,518

)

 

 

(15,650

)

 

 

(22,257

)

 

 

(63,425

)

Net sales

$

175,437

 

 

$

22,654

 

 

$

25,126

 

 

$

223,217

 

 

As of and for the Six Months Ended

Asia

 

 

North America

 

 

Europe

 

 

Consolidated

 

June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

$

394,019

 

 

$

79,162

 

 

$

88,236

 

 

$

561,417

 

Inter-company sales

 

(61,557

)

 

 

(34,042

)

 

 

(40,184

)

 

 

(135,783

)

Net sales

$

332,462

 

 

$

45,120

 

 

$

48,052

 

 

$

425,634

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

$

295,555

 

 

$

25,600

 

 

$

20,383

 

 

$

341,538

 

Total assets

$

894,645

 

 

$

131,885

 

 

$

178,654

 

 

$

1,205,184

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of and for the Six Months Ended

Asia

 

 

North America

 

 

Europe

 

 

Consolidated

 

June 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

$

390,322

 

 

$

75,089

 

 

$

88,929

 

 

$

554,340

 

Inter-company sales

 

(48,802

)

 

 

(30,387

)

 

 

(41,948

)

 

 

(121,137

)

Net sales

$

341,520

 

 

$

44,702

 

 

$

46,981

 

 

$

433,203

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

$

262,186

 

 

$

28,016

 

 

$

22,340

 

 

$

312,542

 

Total assets

$

866,715

 

 

$

130,085

 

 

$

188,935

 

 

$

1,185,735

 

 

-10-


 

Geographic Information

Net sales were derived from (shipped to) customers located in the following countries (in thousands):

 

 

Net Sales