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:

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 ~~July 31, 2019~~May 4, 2020 was ~~50,996,162.~~51,486,679.

	June 30,			December 31,			March 31,			December 31,
	2019			2018			2020			2019
	(Unaudited)						(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	235,352		$	241,053		$	269,516		$	258,390
Short-term investments		6,604			7,499			2,859			4,825
Accounts receivable, net of allowances of $4,230 and $4,102 at June 30, 2019 and December 31, 2018, respectively		240,056			228,405
Accounts receivable, net of allowances of $4,855 and $4,866 at March 31, 2020 and December 31, 2019, respectively								243,746			260,322
Inventories		222,969			215,435			232,184			236,472
Assets held for sale		4,947			-
Prepaid expenses and other		46,726			42,446			48,141			49,950
Total current assets		756,654			734,838			796,446			809,959
Property, plant and equipment, net		470,690			446,835			456,122			469,574
Deferred income tax		28,751			31,652			16,994			17,516
Goodwill		138,772			132,437			149,666			141,318
Intangible assets, net		130,035			137,935			121,218			119,523
Other		89,257			42,674
Other long-term assets								79,820			81,494
Total assets	$	1,614,159		$	1,526,371		$	1,620,266		$	1,639,384

Liabilities
Current liabilities:
Line of credit	$	15,454		$	10,254		$	13,397		$	13,342
Accounts payable		110,521			117,808			112,075			122,148
Accrued liabilities and other		102,679			82,605			88,327			100,571
Income tax payable		16,769			15,744			15,642			16,156
Current portion of long-term debt		29,988			27,613			34,676			33,105
Total current liabilities		275,411			254,024			264,117			285,322
Long-term debt, net of current portion		141,919			186,143			46,011			64,401
Deferred tax liabilities		19,048			17,993			16,348			16,333
Other long-term liabilities		126,629			90,779			111,501			120,545
Total liabilities		563,007			548,939			437,977			486,601

Commitments and contingencies (See Note 8)

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; 50,744,888 and 50,221,035, issued and outstanding at June 30, 2019 and December 31, 2018, respectively		34,803			34,454
Preferred stock - par value $1.00 per share; 1,000,000 shares authorized; 0 shares issued or outstanding								-			-
Common stock - par value $0.66 2/3 per share; 70,000,000 shares authorized; 51,450,808 and 51,206,969, issued and outstanding at March 31, 2020 and December 31, 2019, respectively								35,289			35,111
Additional paid-in capital		414,451			399,915			427,543			427,262
Retained earnings		704,708			636,708			810,126			789,958
Treasury stock, at cost, 1,457,206 shares held at June 30, 2019 and December 31, 2018		(37,768	)		(37,768	)
Treasury stock at cost, 1,480,840 and 1,457,206, issued and outstanding at March 31, 2020 and December 31, 2019, respectively								(38,457	)		(37,768	)
Accumulated other comprehensive loss		(112,225	)		(101,846	)		(109,472	)		(108,139	)
Total stockholders' equity		1,003,969			931,463			1,125,029			1,106,424
Noncontrolling interest		47,183			45,969			57,260			46,359
Total equity		1,051,152			977,432			1,182,289			1,152,783
Total liabilities and stockholders' equity	$	1,614,159		$	1,526,371		$	1,620,266		$	1,639,384

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

	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2019			2018			2019			2018			2020			2019
Net sales	$	322,006		$	304,085		$	624,299		$	578,597		$	280,717		$	302,293
Cost of goods sold		200,018			196,817			389,900			372,734			184,875			189,882
Gross profit		121,988			107,268			234,399			205,863			95,842			112,411

Operating expenses
Selling, general and administrative		47,333			42,153			91,021			89,303			42,215			43,688
Research and development		21,707			22,050			43,877			42,250			23,678			22,170
Amortization of acquisition related intangible assets		4,536			4,678			9,020			9,445			4,221			4,484
Other operating (income) expense		(104	)		543			(158	)		81
Other operating (income)														(124	)		(54	)
Total operating expense		73,472			69,424			143,760			141,079			69,990			70,288

Income from operations		48,516			37,844			90,639			64,784			25,852			42,123

Other income (expense)
Interest income		633			443			1,508			957			273			875
Interest expense		(2,011	)		(2,544	)		(4,156	)		(5,301	)		(1,245	)		(2,145	)
Foreign currency (loss) gain, net		(496	)		300			(560	)		(2,729	)
Foreign currency gain (loss), net														75			(64	)
Other income		1,235			377			2,480			5,012			1			1,245
Total other expense		(639	)		(1,424	)		(728	)		(2,061	)
Total other income (expense)														(896	)		(89	)

Income before income taxes and noncontrolling interest		47,877			36,420			89,911			62,723			24,956			42,034
Income tax provision		11,174			10,753			21,472			18,536			4,556			10,298
Net income		36,703			25,667			68,439			44,187			20,400			31,736
Less net (income) attributable to noncontrolling interest		(419	)		(599	)		(439	)		(593	)		(232	)		(20	)
Net income attributable to common stockholders	$	36,284		$	25,068		$	68,000		$	43,594		$	20,168		$	31,716

Earnings per share attributable to common stockholders:
Basic	$	0.72		$	0.50		$	1.35		$	0.88		$	0.39		$	0.63
Diluted	$	0.70		$	0.49		$	1.32		$	0.86		$	0.38		$	0.62
Number of shares used in earnings per share computation:
Basic		50,658			49,680			50,529			49,509			51,335			50,398
Diluted		51,620			50,792			51,566			50,727			52,422			51,462

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

	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2019			2018			2019			2018			2020			2019
Net income	$	36,703		$	25,667		$	68,439		$	44,187		$	20,400		$	31,736
Unrealized gain (loss) on defined benefit plan, net of tax		1,020			7,266			(5,009	)		7,701			9,719			(6,029	)
Unrealized (loss) gain on swaps and collars, net of tax		503			927			(3,406	)		3,275
Unrealized foreign currency loss, net of tax		(6,900	)		(24,985	)		(1,964	)		(9,130	)
Unrealized loss on swaps and collars, net of tax														(1,438	)		(3,909	)
Unrealized foreign currency (loss) gain, net of tax														(9,614	)		4,936
Comprehensive income		31,326			8,875			58,060			46,033			19,067			26,734
Less: Comprehensive income attributable to noncontrolling interest		(419	)		(599	)		(439	)		(593	)		(232	)		(20	)
Total comprehensive income attributable to common stockholders	$	30,907		$	8,276		$	57,621		$	45,440		$	18,835		$	26,714

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

	Common stock				Treasury stock						Additional paid-in			Retained		Accumulated other comprehensive			Total Diodes Incorporated Stockholders'			Noncontrolling			Total			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, 2017		50,587	$	33,727		(1,457	)	$	(37,768	)	$	386,338		$	532,687	$	(83,480	)	$	831,504		$	42,414		$	873,918
Total comprehensive income		-		-		-			-			-			43,593		1,847			45,440			593			46,033
Noncontrolling interests		-		-		-			-			-			-		-			-			-			-
Dividends to noncontrolling interest		-		-		-			-			-			-		-			-			(2,607	)		(2,607	)
Common stock issued for share-based plans		716		477		-			-			2,532			-		-			3,009			-			3,009
Share-based compensation		-		-		-			-			11,079			-		-			11,079			-			11,079
Tax related to net share settlement		-		-		-			-			(8,617	)		-		-			(8,617	)		-			(8,617	)
Balance, June 30, 2018		51,303	$	34,204		(1,457	)	$	(37,768	)	$	391,332		$	576,280	$	(81,633	)	$	882,415		$	40,400		$	922,815
																												Shares		Amount		Shares			Amount			capital			earnings		loss			equity			interest			equity
Balance, December 31, 2018		51,678	$	34,454		(1,457	)	$	(37,768	)	$	399,915		$	636,708	$	(101,846	)	$	931,463		$	45,969		$	977,432			51,678	$	34,454		(1,457	)	$	(37,768	)	$	399,915		$	636,708	$	(101,846	)	$	931,463		$	45,969		$	977,432
Total comprehensive income		-		-		-			-			-			68,000		(10,379	)		57,621			439			58,060			-		-		-			-			-			31,716		(5,002	)		26,714			20			26,734
Noncontrolling interests		-		-		-			-			-			-		-			-			3,343			3,343			-		-		-			-			-			-		-			-			2,755			2,755
Dividends to noncontrolling interest		-		-		-			-			-			-		-			-			(2,568	)		(2,568	)		-		-		-			-			-			-		-			-			(121	)		(121	)
Common stock issued for share-based plans		524		349		-			-			6,356			-		-			6,705			-			6,705			376		250		-			-			6,417			-		-			6,667			-			6,667
Share-based compensation		-		-		-			-			9,775			-		-			9,775			-			9,775			-		-		-			-			4,476			-		-			4,476			-			4,476
Tax related to net share settlement		-		-		-			-			(1,595	)		-		-			(1,595	)		-			(1,595	)		-		-		-			-			(645	)		-		-			(645	)		-			(645	)
Balance, June 30, 2019		52,202	$	34,803		(1,457	)	$	(37,768	)	$	414,451		$	704,708	$	(112,225	)	$	1,003,969		$	47,183		$	1,051,152
Balance, March 31, 2019																													52,054	$	34,704		(1,457	)	$	(37,768	)	$	410,163		$	668,424	$	(106,848	)	$	968,675		$	48,623		$	1,017,298

Balance, December 31, 2019																													52,664	$	35,111		(1,457	)	$	(37,768	)	$	427,262		$	789,958	$	(108,139	)	$	1,106,424		$	46,359		$	1,152,783
Total comprehensive income																													-		-		-			-			-			20,168		(1,333	)		18,835			232			19,067
Contributions from noncontrolling interests																													-		-		-			-			-			-		-			-			10,777			10,777
Dividends to noncontrolling interest																													-		-		-			-			-			-		-			-			(108	)		(108	)
Common stock issued for share-based plans																													268		178		-			-			(178	)		-		-			-			-			-
Share-based compensation																													-		-		-			-			4,237			-		-			4,237			-			4,237
Deferred compensation plan																													-		-		(24	)		(689	)		689			-		-			-			-			-
Tax related to net share settlement																													-		-		-			-			(4,467	)		-		-			(4,467	)		-			(4,467	)
Balance, March 31, 2020																													52,932	$	35,289		(1,481	)	$	(38,457	)	$	427,543		$	810,126	$	(109,472	)	$	1,125,029		$	57,260		$	1,182,289

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

	Six Months Ended						Three Months Ended
	June 30,						March 31,
	2019			2018			2020			2019
Operating Activities
Net income							$	20,400		$	31,736
Adjustments to reconcile net income to net cash provided by operating activities, net of effects of acquisitions
Depreciation								22,809			22,157
Amortization of intangible assets								4,221			4,484
Share-based compensation expense								4,693			4,476
Deferred income taxes								17			31
Other								741			(221	)
Changes in operating assets:
Change in accounts receivable								16,139			12,874
Change in inventory								2,550			(200	)
Change in other operating assets								(1,022	)		2,605
Changes in operating liabilities:
Change in accounts payable								(9,160	)		(11,201	)
Change in accrued liabilities								(12,105	)		(4,874	)
Change in income tax payable								3,853			5,678
Change in other operating liabilities								539			2,344
Net cash flows provided by operating activities	$	110,488		$	88,381			53,675			69,889

Cash flows from investing activities
Acquisitions, net of cash received		(33,029	)		-			591			-
Purchases of property, plant and equipment		(50,698	)		(52,990	)		(14,208	)		(18,639	)
Purchases of short-term investments		(9,000	)		(10,171	)		(1,523	)		(3,153	)
Purchase of equity securities								(6,129	)		-
Proceeds from maturity of short-term investments		9,843			7,289			3,467			3,982
Other		367			2,245			244			658
Net cash and cash equivalents used in investing activities		(82,517	)		(53,627	)		(17,558	)		(17,152	)

Cash flows from financing activities
Advances on lines of credit and short-term debt		6,769			3,414			3,647			3,568
Repayments of line of credit and short-term debt		(1,461	)		-			(3,498	)		(1,461	)
Taxes paid related to net share settlement		(1,595	)		(8,617	)		(4,467	)		(645	)
Proceeds from long-term debt		161,237			189,656			82,331			85,000
Repayments of long-term debt		(203,385	)		(272,170	)		(98,884	)		(83,089	)
Net proceeds from issuance of common stock		6,706			3,009			-			6,667
Repayment of and proceeds from finance lease obligation		(588	)		1,775			(223	)		(293	)
Dividend distribution to noncontrolling interests		(1,180	)		(1,151	)		(108	)		-
Other		542			654			(195	)		(120	)
Net cash and cash equivalents used in financing activities		(32,955	)		(83,430	)
Net cash and cash equivalents (used in) provided by financing activities								(21,397	)		9,627

Effect of exchange rate changes on cash and cash equivalents		(35	)		(2,753	)		(3,315	)		(1,890	)
Change in cash and cash equivalents, including restricted cash		(5,019	)		(51,429	)		11,405			60,474
Cash and cash equivalents, beginning of period, including restricted cash		241,833			205,202			259,507			241,833
Cash and cash equivalents, end of period, including restricted cash	$	236,814		$	153,773			270,912		$	302,307

Supplemental Cash Flow Information
Interest paid during the period	$	4,107		$	5,334
Taxes paid during the period	$	23,199		$	16,643

Non-cash investing and financing activities:
(Increase) decrease in accounts payable related to the purchase of property, plant and equipment	$	(2,038	)	$	5,452
Increase in dividend accrued for noncontrolling interest	$	(1,400	)	$	(1,427	)

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the total of the same such amounts shown above:

	Six Months Ended		Three Months Ended
	June 30,		March 31,
	2019	2018	2020	2019
Current assets:
Cash and cash equivalents	$235,352	$152,403	$269,516	$301,167
Restricted cash (included in other current assets)	1,462	1,370	1,396	1,140
Total cash, cash equivalents and restricted cash	$236,814	$153,773	$270,912	$302,307

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

NOTE 1 – ~~Nature~~Summary of Operations ~~Basis of Presentation, Recently Issued~~and Significant Accounting ~~Pronouncements and Updates to Accounting~~ Policies ~~and Estimates~~

Diodes Incorporated, together with its subsidiaries (collectively, the “Company,” “we” or “our”) (Nasdaq: DIOD), 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. We serve the consumer electronics, computing, communications, industrial, and automotive markets. Our products include diodes, rectifiers, transistors, MOSFETs, protection devices, function-specific arrays, single gate logic, amplifiers and comparators, Hall-effect and temperature sensors, power management devices, including LED drivers, AC-DC converters and controllers, DC-DC switching and linear voltage regulators, and voltage references along with special function devices, such as USB power switches, load switches, voltage supervisors, and motor controllers. We also have timing, connectivity, switching, and signal integrity solutions for high-speed signals. Our corporate headquarters and Americas’ sales offices are located in Plano, Texas and Milpitas, California. Design, marketing, and engineering centers are located in Plano; Milpitas; Taipei, Taoyuan City and Zhubei City, Taiwan; Oldham, England; and Neuhaus, Germany. Our wafer fabrication facilities are located in Oldham and Shanghai, China and Greenock, Scotland. We have assembly and test facilities located in Shanghai, Jinan and Chengdu, China, as well as in Hong Kong, Neuhaus and Taipei. Additional engineering, research and development, sales, warehouse, and logistics offices are located in Taipei; Hong Kong; Oldham; Shanghai; Shenzhen and Yangzhou, China; Seongnam-si, South Korea; Munich, Germany; and Tokyo, Japan, with support offices throughout the world.

The condensed consolidated financial data at December 31, ~~2018~~2019 is derived from audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 filed with the Securities and Exchange Commission (“SEC”) on February ~~21, 2019~~12, 2020 (“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 ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, ~~2019.~~2020.

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 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 financial statement presentation.

~~The Financial Accounting Standards Board (“FASB”) issued the following Accounting Standards Updates (“ASU”) which could have potential impact on the Company’s financial statements:~~

~~ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”)~~ – In February 2016, the FASB issued ASU 2016-02, which amends the accounting treatment for leases and requires, among other things, lessees to recognize a right-of-use (“ROU”) asset and lease liability for most lease arrangements. The amendments were effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted ASU 2016-02 on January 1, 2019, using the modified retrospective transition approach, under which financial results reported in periods prior to 2018 are unchanged. We elected the following allowed practical expedients as permitted under the transition guidance within the new standard:

Upon adoption of ASU 2016-02, the Company recorded ROU assets of $68.3 million, including land-use rights of $17.1 million previously recorded in other assets and $2.5 million previously recorded in property, plant and equipment and ROU liabilities of $50.4 million. For additional information related to the Company’s leases, see Note 10.

~~ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting ("ASU 2018-07")~~ - In June 2018, the FASB issued ASU 2018-07, which simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation—Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 was effective for the Company on January 1, 2019. The adoption of this standard did not have a material effect on our condensed consolidated financial statements or disclosures.

~~ASU No. 2017-12 - Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”)~~ -In August 2017, the FASB issued ASU No. 2017-12 to better align hedge accounting with risk management strategies, and as a result, more hedging strategies will be eligible for hedge accounting. Public business entities will have until the end of the first quarter in which a hedge is designated to perform an initial assessment of a hedge’s effectiveness. After initial qualification, the new guidance permits a qualitative effectiveness assessment for certain hedges instead of a quantitative test if the company can reasonably support an expectation of high effectiveness throughout the term of the hedge. An initial quantitative test to establish that the hedge relationship is highly effective is still required. The amendments are effective for fiscal years beginning after December 15, 2018, and the Company adopted the new standard January 1, 2019. The new standard had no impact on the Company’s financial statements.

On January 1, 2019, the Company adopted ASU No. 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes”. The amendments in this ASU permit the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under ASC 815, in addition to the currently permissible benchmark interest rates. This ASU provides the Company the ability to utilize the OIS rate based on SOFR as the benchmark interest rate on certain hedges of interest rate risk. The new standard had no impact on the Company’s financial statements.

~~The FASB has issued the following relevant standards, effective in future years, which are not expected to have a material impact on our consolidated condensed financial statements:~~

~~In April 2019,~~2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives~~No. 2016-13, which requires measurement and ~~Hedging, and Topic 825, Financial Instruments, that clarifies and improves areas~~recognition of ~~guidance related to the recently issued standards on~~expected credit losses ~~(ASU 2016-13), hedging (ASU 2017-12), and recognition and measurement of~~for financial ~~instruments (ASU 2016-01).~~assets held. We adopted ASU No. 2016-13 effective January 1, 2020. The ~~amendments generally have the same effective dates as their related standards. If already adopted, the amendments~~adoption of ASU ~~2016-01~~No 2016-13 did not have a material impact on our consolidated financial statements and ~~ASU~~related disclosures.

~~2016-13 are~~In March 2020, the FASB issued optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The guidance is effective for ~~fiscal years beginning after December 15, 2019 and the amendments of ASU 2017-12 are effective~~all entities as of ~~the beginning of the Company’s next annual reporting period; early adoption is permitted.~~March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact that this ~~change~~guidance will have on its ~~consolidated~~ financial statements and related disclosures.

~~All other issued and not yet effective accounting standards are not expected to be relevant to the Company.~~-9-

The Company determines if an arrangement is a lease at inception. ROU assets are included in Other assets in the Company’s condensed consolidated balance sheets. Current ROU liabilities are included in Accrued liabilities and other and long-term ROU liabilities are included in Other long-term liabilities, in our condensed consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. To determine the present value of the lease payments, we estimate our incremental borrowing rate based on information available at the lease commencement date.

The Company’s lease term includes options to extend the lease when it is reasonably certain that it will exercise that option. Leases with a term of 12 months or less are not recorded on the balance sheet. Our leases typically do not contain any residual value guarantees. For real estate, we account for the lease and non-lease components as a single lease component.

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 ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ we paid no0 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				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2019		2018		2019		2018		2020		2019
Earnings (numerator)
Net income attributable to common stockholders	$	36,284	$	25,068	$	68,000	$	43,594	$	20,168	$	31,716

Shares (denominator)
Weighted average common shares outstanding (basic)		50,658		49,680		50,529		49,509		51,335		50,398
Dilutive effect of stock options and stock awards outstanding		962		1,112		1,037		1,218		1,087		1,064
Adjusted weighted average common shares outstanding (diluted)		51,620		50,792		51,566		50,727		52,422		51,462

Earnings per share attributable to common stockholders
Basic	$	0.72	$	0.50	$	1.35	$	0.88	$	0.39	$	0.63
Diluted	$	0.70	$	0.49	$	1.32	$	0.86	$	0.38	$	0.62

Stock options and stock awards excluded from EPS calculation because the effect would be anti-dilutive		131		24		95		13		58		58

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

	June 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Finished goods	$	56,939	$	59,244	$	53,747	$	62,900
Work-in-progress		67,352		59,166		48,684		55,082
Raw materials		98,678		97,025		129,753		118,490
Total	$	222,969	$	215,435	$	232,184	$	236,472

~~(a) The Company’s acquisition accounting for the purchase of a wafer fabrication facility in Greenock, Scotland, (“GFAB”). (See Note 13 for additional information).~~

(b) The acquisition accounting for the Company’s investment of $3.4 million in Canyon Semiconductor. This investment brings our ownership of Canyon to 51%. During the second quarter of 2019, as a measurement period adjustment, we reduced the amount of goodwill approximately $1.1 million. This reduction in goodwill was related to finalization of the non-controlling interest value. The acquisition accounting is not final as deferred taxes are being finalized. We expect the acquisition accounting to be finalized in the third quarter of 2019.

(c) The acquisition accounting related to Eris’ investment of approximately $6.4 million in Yea-Shin Technology Corporation. During the second quarter of 2019, as a measurement period adjustment, we increased goodwill approximately $4.3 million, related to finalization of deferred taxes. The Company owns approximately 51% of Eris and Eris owns approximately 60% of Yea-Shin.

	June 30,			December 31,			March 31,			December 31,
	2019			2018			2020			2019
Intangible assets subject to amortization:
Gross carrying amount	$	244,554		$	238,867		$	248,897		$	239,975
Accumulated amortization		(115,430	)		(106,410	)		(128,672	)		(124,452	)
Foreign currency translation adjustment		(8,262	)		(8,281	)		(8,247	)		(9,842	)
Total		120,862			124,176			111,978			105,681
Intangible assets with indefinite lives:
Gross carrying amount		10,303			14,883			10,412			14,883
Foreign currency translation adjustment		(1,130	)		(1,124	)		(1,172	)		(1,041	)
Total		9,173			13,759			9,240			13,842
Total intangible assets, net	$	130,035		$	137,935		$	121,218		$	119,523

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

	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2019			2018			2019			2018			2020			2019
Domestic pre-tax income (loss)	$	8,064		$	5,350		$	20,550		$	(4,022	)
Domestic pre-tax income													$	5,268		$	12,486
Foreign pre-tax income	$	39,813		$	31,070		$	69,361		$	66,745		$	19,688		$	29,548
Income tax provision	$	11,174		$	10,753		$	21,472		$	18,536		$	4,556		$	10,298
Effective tax rate		23.3	%		29.5	%		23.9	%		29.6	%		18.3	%		24.5	%
Impact of tax holidays on tax expense	$	572		$	70		$	849		$	(742	)	$	(1,074	)	$	277
Earnings per share impact of tax holidays:
Basic	$	(0.01	)	$	-		$	(0.02	)	$	0.01		$	0.02		$	(0.01	)
Diluted	$	(0.01	)	$	-		$	(0.02	)	$	0.01		$	0.02		$	(0.01	)

The decrease in the effective tax rate for the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 when compared to the three ~~and six~~ months ended ~~June 30, 2018,~~March 31, 2019, is primarily attributable to ~~an increase~~a decrease in ~~estimated full year global pretax book income~~non-U.S. withholding taxes and a net ~~decrease~~increase in ~~unfavorable~~favorable U.S. permanent differences.

Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of certain 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 ~~2008,~~2012, or for the ~~2010 and 2011~~2015 tax ~~years.~~year. We are no longer subject to China income tax examinations by tax authorities for tax years before 2009. 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 ~~2013.~~2014. 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 ~~June 30, 2019,~~March 31, 2020, the gross amount of unrecognized tax benefits was approximately ~~$35.9~~$38.4 million.

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.

In response to the outbreak of the novel strain of coronavirus (“COVID-19”) pandemic, the United States Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted on March 27, 2020. We do not expect the CARES Act to have a material impact on our financial statements because we do not qualify for most of the relief provisions prescribed in the Cares Act. We will continue to assess the impacts of the CARES Act and any other legislation adopted by the United States government or other applicable governmental agencies in response to COVID-19 as additional guidance is published by the relevant authorities.

All share-based compensation is for share grants. All outstanding stock options are fully vested, and all expense related to stock options has been recognized in previous periods. NaN cash proceeds were received from stock option exercises during the three months ended March 31, 2020. The table below sets forth the line items where share-based compensation expense was recorded:

	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2019		2018		2019		2018		2020		2019
Cost of goods sold	$	259	$	80	$	384	$	170	$	273	$	125
Selling, general and administrative		4,309		4,031		7,946		9,484		3,711		3,637
Research and development		730		689		1,445		1,426		709		715
Total share-based compensation expense	$	5,298	$	4,800	$	9,775	$	11,080	$	4,693	$	4,477

~~Stock Options.~~ ~~Approximately $6.7 million in cash proceeds was received from stock option exercises during the six months ended June 30, 2019.~~

~~As of June 30, 2019, we had no unrecognized share-based compensation expense related to unvested stock options.~~

Share ~~Grants.~~Grants – Restricted stock awards and restricted stock units generally vest in equal annual installments over a four-year period. ~~We also have~~All new grants are granted under the Company’s 2013 Equity Incentive Plan, and there will be 0 additional share grants ~~that~~under the 2001 Omnibus Equity Incentive Plan. Restricted stock grants are ~~performance-based~~measured based on the fair market value of the underlying stock on the date of grant, and ~~time-based that~~compensation expense is recognized on a straight-line basis over the requisite four-year service period.

Performance stock units (“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. PSUs will vest upon ~~achievement of certain performance criteria over time.~~the Company achieving a cumulative 3-year non-GAAP operating income target for the applicable periods.

As of ~~June 30, 2019,~~March 31, 2020, total unrecognized share-based compensation expense related to share grants was approximately ~~$38.9~~$45.4 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 2.2 years.

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 the same customer type. Our primary operations include operations in Asia, North America and Europe. During the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018, one~~0 customer ~~a broad-based global distributor that sells to thousands of different end users,~~ accounted for 10% or ~~$31.5 million and 10.9% or $33.3 million, respectively,~~more of our ~~net sales.During the six months ended June 30, 2018, the same~~revenue. NaN customer accounted for ~~10.7% or $61.7 million of our net sales.This customer did not account for~~ 10% or ~~greater~~more of our outstanding accounts receivable at ~~June 30, 2019 or 2018.~~any point in the periods presented in this report.

The tables below set forth net sales based on the location of the subsidiary producing the net sale.

Three Months Ended June 30, 2019	Asia			North America			Europe			Consolidated
Total sales	$	319,740		$	173,694		$	66,124		$	559,558
Intercompany elimination		(116,105	)		(94,278	)		(27,169	)		(237,552	)
Net sales	$	203,635		$	79,416		$	38,955		$	322,006

Three Months Ended June 30, 2018	Asia			North America			Europe			Consolidated
Total sales	$	269,290		$	38,392		$	51,175		$	358,857
Intercompany elimination		(33,813	)		(6,358	)		(14,601	)		(54,772	)
Net sales	$	235,477		$	32,034		$	36,574		$	304,085


As of and for the
Six Months Ended June 30, 2019	Asia			North America			Europe			Consolidated
Three Months Ended March 31, 2020													Asia			North America			Europe			Consolidated
Total sales	$	593,640		$	274,974		$	117,176		$	985,790		$	301,863		$	168,172		$	59,001		$	529,036
Intercompany elimination		(189,702	)		(132,194	)		(39,595	)		(361,491	)		(116,921	)		(104,464	)		(26,934	)		(248,319	)
Net sales	$	403,938		$	142,780		$	77,581		$	624,299		$	184,942		$	63,708		$	32,067		$	280,717

Property, plant and equipment, net	$	399,378		$	22,450		$	48,862		$	470,690		$	364,624		$	24,110		$	67,388		$	456,122
Total assets	$	1,190,443		$	235,248		$	188,468		$	1,614,159			1,208,572			197,178			214,516		$	1,620,266

As of and for the
Six Months Ended June 30, 2018	Asia			North America			Europe			Consolidated
Three Months Ended March 31, 2019													Asia			North America			Europe			Consolidated
Total sales	$	513,820		$	65,228		$	101,173		$	680,221		$	273,900		$	101,280		$	51,052		$	426,232
Intercompany elimination		(65,640	)		(7,503	)		(28,481	)		(101,624	)		(73,597	)		(37,916	)		(12,426	)		(123,939	)
Net sales	$	448,180		$	57,725		$	72,692		$	578,597		$	200,303		$	63,364		$	38,626		$	302,293

Property, plant and equipment, net	$	410,207		$	25,540		$	24,490		$	460,237		$	387,264		$	28,402		$	25,549		$	441,215
Total assets	$	1,090,931		$	155,395		$	190,446		$	1,436,772		$	1,163,989		$	222,696		$	226,313		$	1,612,998

Disaggregation of Net ~~sales.~~Sales. We disaggregate net sales from contracts with customers into direct sales and distribution sales (“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 ~~sell~~deliver our products to customers ~~in multiple areas of~~around the world ~~including Asia, Europe, and North America. Across these regions, we sell products to end users~~for use in ~~a variety of markets such as~~ consumer electronics, computing, communications, industrial and automotive. 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 revenue for the ~~amount of net sales~~Company disaggregated into geographic locations based on shipment and by type (direct sales or Distributor) ~~and the location of the customer based on the location where the products were shipped~~ for the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 and ~~2018:~~2019:

Net Sales for the Three Months Ended June 30,

Direct Sales

Distributor

2019

2018

2019

2018

China

$
59,685

$
54,747

$
100,567

$
111,818

U.S.

2,888

4,772

27,472

26,431

Korea

5,625

3,474

8,834

10,028

Germany

3,429

2,820

19,134

20,826

Singapore

154

624

14,920

19,571

Taiwan

675

922

20,907

15,828

All others ⁽¹⁾

36,257

16,663

21,459

15,561

Total

$
108,713

$
84,022

$
213,293

$
220,063

Percent of Net Sales by Type for the Three Months Ended June 30,

Direct Sales

Distributor

2019

2018

2019

2018

China

55
%

65
%

47
%

51
%
U.S.

3
%

6
%

13
%

12
%
Korea

5
%

4
%

4
%

5
%
Germany

3
%

3
%

9
%

9
%
Singapore

—

1
%

7
%

9
%
Taiwan

1
%

1
%

10
%

7
%
All others ⁽¹⁾

33
%

20
%

10
%

7
%
Total

100
%

100
%

100
%

100
%

Total Net Sales for the Three Months Ended June 30,

Dollars

Percent of Net Sales

2019

2018

2019

2018

China

$
160,252

$
166,565

50
%

55
%
U.S.

30,360

31,203

9
%

10
%
Korea

14,459

13,502

4
%

4
%
Germany

22,563

23,646

7
%

8
%
Singapore

15,074

20,195

5
%

7
%
Taiwan

21,582

16,750

7
%

6
%
All others ⁽¹⁾

57,716

32,224

18
%

10
%
Total

$
322,006

$
304,085

100
%

100
%

	Three Months Ended
Net Sales by Region	March 31, 2020		March 31, 2019
Asia	$	210,805	$	224,289
Europe		46,931		38,394
Americas		22,981		39,610
Total net sales	$	280,717	$	302,293

Net Sales by Type
Direct sales	$	99,544	$	86,358
Distributor sales		181,173		215,935
Total net sales	$	280,717	$	302,293

Revenue from products shipped to China was $138.9 million and $151.5 million for the three months ended March 31, 2020 and 2019, respectively.

Net Sales for the Six Months Ended June 30,

Direct Sales

Distributor

2019

2018

2019

2018

China

$
111,909

$
104,072

$
199,892

$
210,684

U.S.

6,121

8,457

57,970

47,531

Korea

10,763

7,551

16,994

18,913

Germany

6,457

5,925

36,650

42,431

Singapore

366

912

30,856

35,401

Taiwan

1,158

1,778

43,571

35,021

All others ⁽¹⁾

58,515

31,984

43,077

27,937

Total

$
195,289

$
160,679

$
429,010

$
417,918

Percent of Net Sales by Type for the Six Months Ended June 30,

Direct Sales

Distributor

2019

2018

2019

2018

China

57
%

65
%

47
%

50
%
U.S.

3
%

5
%

14
%

11
%
Korea

6
%

5
%

4
%

5
%
Germany

3
%

4
%

9
%

10
%
Singapore

—

1
%

7
%

8
%
Taiwan

1
%

1
%

10
%

8
%
All others ⁽¹⁾

30
%

19
%

9
%

8
%
Total

100
%

100
%

100
%

100
%

Total Net Sales for the Six Months Ended June 30,

Dollar

Percent of Net Sales

2019

2018

2019

2018

China

$
311,801

$
314,756

50
%

54
%
U.S.

64,091

55,988

10
%

10
%
Korea

27,757

26,464

4
%

5
%
Germany

43,107

48,356

7
%

8
%
Singapore

31,222

36,313

5
%

6
%
Taiwan

44,729

36,799

7
%

6
%
All others ⁽¹⁾

101,592

59,921

17
%

11
%
Total

$
624,299

$
578,597

100
%

100
%

Purchase commitments – As of ~~June 30, 2019,~~March 31, 2020, we had approximately ~~$18.5~~$38.7 million in non-cancelable purchase contracts related to capital expenditures, primarily related to our manufacturing facilities in Asia. As of ~~June 30, 2019,~~March 31, 2020, we also had a commitment to purchase approximately ~~$83.7~~$52.5 million of wafers to be used in our manufacturing process. These wafer purchases will occur during ~~2019 and~~ 2020.

Defined Benefit Plan - We have a contributory defined benefit plan that covers certain employees in the United Kingdom. As of ~~June 30, 2019,~~March 31, 2020, the unfunded liability for this defined benefit plan was approximately ~~$27.7~~$14.0 million. We are obligated to make annual contributions, each year through December 2029, of approximately GBP 2 million (approximately ~~$2.6~~$2.4 million based on a GBP: USD exchange rate of ~~1.3:~~1.2:1). The ~~trustees are required~~current annual contributions were set with regard to ~~review~~ the funding position as of April 2016, and must be reviewed by the Trustees at least every three ~~years,~~years. A review as of April 2019 is underway and ~~the most recent review was carried out in April 2019. We anticipate receiving~~ the outcome of the ~~April 2019~~ review ~~during the third quarter of 2019. The outcome of future reviews can~~could result in a change in the amount of the ~~payment.~~payment or the period over which payment is required.

Contingencies – From time to time, we are involved in various legal proceedings that arise in the normal course of business. While we intend to defend any lawsuit vigorously, we presently believe that the ultimate outcome of any pending legal proceeding will not have any material adverse effect on our consolidated financial position, cash flows or operating results. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, which could impact our business and operating results for the period in which the ruling occurs or future periods. Based on information available, we evaluate the likelihood of potential outcomes of all pending disputes. We record an appropriate liability when the amount of any liability associated with a pending dispute is deemed probable and reasonably estimable. In addition, we do not accrue for estimated legal fees and other directly related costs as they are expensed as incurred. The Company is not currently a party to any pending litigation that the Company considers material.

We use derivative instruments to manage risks related to foreign currencies, interest rates and the net investment risk in our foreign subsidiaries. Our objectives for holding derivatives include reducing, eliminating, and efficiently managing the economic impact of these exposures as effectively as possible. Our derivative programs include strategies that both qualify and do not qualify for hedge accounting treatment.

Hedges of Foreign Currency Risk - We are exposed to fluctuations in various foreign currencies against our different functional currencies. We use foreign currency forward agreements to manage this exposure. At ~~June 30, 2019,~~March 31, 2020, we had outstanding foreign currency forward contracts that are intended to preserve the economic value of foreign currency denominated monetary assets and liabilities; these instruments are not designated for hedge accounting treatment in accordance with ASC 815. The fair value of these instruments approximates ~~zero.~~0.

The table below sets forth outstanding foreign currency forward contracts at ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:

Notional Amount

Effective Date

Maturity Date

Index*

Weighted Average Foreign Exchange Rate

Balance Sheet Hedge Designation

Notional Amount

Effective Date

Maturity Date

Index*

Weighted Average Foreign Exchange Rate

Balance Sheet Hedge Designation

1,983

June 2019

August 2019

EUR/GBP

0.896

Non-designated

2,961

March 2020

May 2020

EUR/GBP

0.8848

Non-designated

5,072

June 2019

August 2019

EUR/USD

1.1415

Non-designated

4,009

March 2020

May 2020

EUR/USD

1.1009

Non-designated

7,819

June 2019

August 2019

GBP/USD

1.2725

Non-designated

10,445

March 2020

May 2020

GBP/USD

1.2453

Non-designated

38,834

June 2019

August 2019

USD/CNY

6.8648

Non-designated

37,850

March 2020

May 2020

USD/CNY

7.1036

Non-designated

1,022

June 2019

August 2019

USD/JPY

107.515

Non-designated

1,136

March 2020

May 2020

USD/JPY

107.2520

Non-designated

21,305

June 2019

August 2019

USD/TWD

30.899

Non-designated

42,028

March 2020

May 2020

USD/TWD

29.9560

Non-designated

500

January 2019

October 2019

USD/TWD

30.635

Non-designated

500

January 2020

July 2020

USD/TWD

Non-designated

500

January 2019

January 2020

USD/TWD

30.635

Non-designated

500

January 2020

January 2021

USD/TWD

29.976

Non-designated

500

January 2019

November 2019

USD/TWD

30.705

Non-designated

500

March 2020

May 2020

USD/TWD

30.355

Non-designated

77,535

99,929

Notional Amount

Effective Date

Maturity Date

Index*

Weighted Average Foreign Exchange Rate

Balance Sheet Hedge Designation

Notional Amount

Effective Date

Maturity Date

Index*

Weighted Average Foreign Exchange Rate

Balance Sheet Hedge Designation

1,221

December 2018

February 2019

EUR/GBP

0.8981

Non-designated

1,844

December 2019

February 2020

EUR/GBP

0.8471

Non-designated

12,538

December 2018

February 2019

EUR/USD

1.1479

Non-designated

3,375

December 2019

February 2020

EUR/USD

1.123

Non-designated

8,463

December 2018

February 2019

GBP/USD

1.2785

Non-designated

25,957

December 2019

February 2020

GBP/USD

1.3257

Non-designated

44,946

December 2018

February 2019

USD/CNY

6.8738

Non-designated

39,340

December 2019

February 2020

USD/CNY

6.9762

Non-designated

844

December 2018

February 2019

USD/JPY

110.14

Non-designated

763

December 2019

February 2020

USD/JPY

108.732

Non-designated

54,041

December 2018

February 2019

USD/TWD

30.559

Non-designated

33,621

December 2019

February 2020

USD/TWD

20.988

Non-designated

300

December 2018

January 2019

USD/TWD

30.669

Non-designated

500

January 2019

January 2020

USD/TWD

30.635

Non-designated

500

October 2019

February 2020

USD/TWD

30.571

Non-designated

122,353

105,900

* EUR = Euro

GBP = British Pound Sterling

USD = United States Dollar

CNY = Chinese Yuan Renminbi

JPY = Japan Yen

TWD = Taiwan dollar

Hedges of Interest Rate and Net Investment Risk -The Company’s ~~objective~~objectives in using interest rate ~~swaps~~derivatives are to add stability to interest expense and ~~collars is~~ to ~~minimize the risks associated with~~manage its ~~floating~~exposure to interest rate ~~debt. The Company makes use of cross currency swaps to decrease the foreign exchange risk inherent in the Company’s investment in its foreign subsidiaries.~~movements. To accomplish these objectives, the Company primarily uses interest rate swaps, including interest rate collars, as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the ~~instruments detailed~~receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.The table below ~~measured in U.S. dollar equivalents:~~sets forth information related to the number and the notional amount of our interest rate related derivative instruments at March 31, 2020 and December 31, 2019:

The table below sets forth the fair value of the Company’s interest rate related derivative financial instruments ~~excluding adjustments for performance risk, if any,~~ as well as their classification on our condensed consolidated balance ~~sheets:~~sheets as of March 31, 2020 and December 31, 2019:

The tables below ~~sets~~set forth the effect of the Company’s derivative financial instruments on ~~the~~our condensed consolidated statements of ~~operations~~income for the three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018:~~2019:

	Amount of Gain or (Loss) Recognized in OCI on Derivative					Location of Gain or (Loss) Reclassified from Accumulated OCI into Income		Amount of Gain or (Loss) Reclassified from Accumulated OCI into Net Income				Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion Excluded from Effectiveness Testing)		Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)				Amount of Gain or (Loss) Recognized in OCI on Derivative						Location of Gain or (Loss) Reclassified from Accumulated OCI into Income		Amount of Gain or (Loss) Reclassified from Accumulated OCI into Net Income						Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion Excluded from Effectiveness Testing)		Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Derivative Instruments Designated as Hedging Instruments	Amount of Gain or (Loss) Recognized in OCI on Derivative																	Amount of Gain or (Loss) Recognized in OCI on Derivative
	June 30,						Location of Gain or (Loss) Reclassified from Accumulated OCI into Income	June 30,					Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion Excluded from Effectiveness Testing)	June 30,				March 31,							Location of Gain or (Loss) Reclassified from Accumulated OCI into Income	March 31,							Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion Excluded from Effectiveness Testing)	March 31,
	2019			2018				2019		2018				2019		2018		2020			2019					2020			2019					2020		2019
Three Months Ended
Interest rate swaps and collars	$	(1,920	)	$	1,103	Interest expense		$	456	$	175	N/A			-		-	$	(1,390	)	$	(1,090	)	Interest expense		$	(71	)	$	(469	)	Interest expense		$	-	$	-
Cross currency swaps	$	2,052		$	-	N/A			-		-	Interest income		$	233	$	-	$	-		$	(2,350	)	N/A		$	-		$	-		Interest income		$	-	$	455
Six Months Ended
Interest rate swaps and collars	$	(3,010	)	$	3,507	Interest expense		$	925	$	227	N/A			-		-
Cross currency swaps	$	(298	)	$	-	N/A			-		-	Interest income		$	688	$	-

We estimate that $0.6 million of net derivative gains included in accumulated other comprehensive income (“AOCI”) as of ~~June 30, 2019~~March 31, 2020 will be reclassified into ~~earnings~~expense within the following 12 months. No gains or losses were reclassified from AOCI into earnings as a result of forecasted transactions that failed to occur during three months ended ~~June 30, 2019~~March 31, 2020 or ~~2018.~~2019.

	Amount of Gain or (Loss) Recognized in Net Income						Location of Gain or (Loss) Recognized in Net Income		Amount of (Loss) or Gain Recognized in Net Income					Location of Gain or (Loss) Recognized in Net Income

Derivative Instruments Not Designated as Hedging Instruments
			Amount of Gain or (Loss) Recognized in Net Income								Amount of (Loss) or Gain Recognized in Net Income

							Location of Gain or (Loss) Recognized in Net Income	2020		Location of Gain or (Loss) Recognized in Net Income
Three Months Ended
Foreign currency forward contracts	$	1,660		$	(6,764	)			(2,147		)	$	430
Six Months Ended
Foreign currency forward contracts	$	(1,230	)	$	(5,370	)

As of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the Company had ~~not~~0t posted any collateral related to these agreements.

The Company leases certain assets used in its business, including land, buildings and equipment. These leased assets are used for operational and administrative purposes.

	Three Months Ended		Six Months Ended		Three Months Ended		Three Months Ended
	June 30, 2019		June 30, 2019		March 31, 2020		March 31, 2019
Operating lease expense	$	3,773	$	7,477	$	3,730	$	3,704
Finance lease expense:
Amortization of assets		245		489		209		244
Interest on lease liabilities		13		28		7		15
Short-term lease expense		98		134		94		36
Variable lease expense		802		1,420		711		618
Total lease expense	$	4,931	$	9,548	$	4,751	$	4,617

The table below sets forth supplemental balance sheet information related to leases:

The table below sets forth supplemental cash flow and other information related to leases:

	June 30, 2019				March 31, 2020
	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Remainder of 2019	$	7,002	$	513
2020		13,469		922
Remainder of 2020					$	10,129	$	691
2021		9,522		138		9,674		139
2022		8,245		-		8,000		-
2023		4,566		-		4,452		-
2024		2,439		-		2,379		-
2025 and thereafter		4,922	-
2025						2,286		-
2026 and thereafter						2,579	-
Total lease payments		50,165		1,573		39,499		830
Less: imputed interest		(4,391)		(39)		(3,153)		(12)
Total lease obligations		45,774		1,534		36,346		818
Less: current obligations		(12,268)		(941)		(11,633)		(818)
Long-term lease obligations	$	33,506	$	593	$	24,713	$	-

We maintain a Non-Qualified Deferred Compensation Plan (the “Deferred Compensation Plan”) for executive officers, key employees and members of the Board of Directors. The Deferred Compensation Plan allows eligible participants to defer the receipt of eligible compensation, including equity awards, until designated future dates. We offset our obligations under the Deferred Compensation Plan primarily by investing in the actual underlying investments. ~~These investments are classified as trading securities and are carried at fair value.~~ At ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, these investments totaled approximately ~~$10.1~~$10.0 million and ~~$10.6~~$12.9 million, respectively. ~~All gains and losses in these investments are materially offset by corresponding gains and losses in the Deferred Compensation Plan liabilities.~~

We conduct business with a related party company, Lite-On Semiconductor Corporation and its subsidiaries and affiliates (collectively, “LSC”), and Nuvoton Technology Corporation and its subsidiaries and affiliates (collectively, “Nuvoton”). LSC is our largest stockholder, owning approximately 15% of our outstanding Common Stock as of ~~June 30,~~2~~019~~,March 31, 2020, and is a member of the Lite-On Group of companies. On August 8, 2019, we announced that we entered into an agreement with LSC pursuant to which the Company shall acquire LSC. The aggregate consideration payable by the Company, based on the December 31, 2019 exchange rate, is approximately $437 million. This amount is subject to change, based on the Taiwan dollar to United States dollar exchange rate at closing. The acquisition received LSC stockholder approval on October 25, 2019, and we anticipate completing the acquisition in the second half of 2020, subject to customary closing conditions and regulatory approvals. We expect to fund the purchase price of the transaction primarily with proceeds from an anticipated new bank financing arrangement. Raymond Soong, the Chairman of our Board of Directors, is the Chairman of LSC, and is the Chairman of Lite-On Technology Corporation (“LTC”), a significant shareholder of LSC. C.H. Chen, our former President and Chief Executive Officer and currently the Vice Chairman of our Board of Directors, is also Vice Chairman of LSC and a board member of LTC. Dr. Keh-Shew Lu, our President and Chief Executive Officer and a member of our Board of Directors, is a board member of LTC, and a board member of Nuvoton. We consider our relationships with LSC and Nuvoton to be mutually beneficial, and we plan to continue our strategic alliance with LSC and Nuvoton. We purchase wafers from Nuvoton for use in our production process.

We also conduct business with Keylink International (B.V.I.) Inc. and its subsidiaries and affiliates (collectively, “Keylink”). Keylink is our 5% joint venture partner in our Shanghai assembly and test facilities. We sell products to, and purchase inventory from Keylink. In addition, our subsidiaries in China lease their manufacturing facilities in Shanghai from, and subcontract a portion of our manufacturing process (metal plating and environmental services) to, Keylink. We also pay fees for plating and rental services and consulting to Keylink. The aggregate amounts paid to Keylink for the three months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ were approximately ~~$3.9~~$3.1 million and ~~$4.2 million, respectively. The aggregate amounts paid to Keylink for the six months ended June 30, 2019 and 2018 were approximately $7.8 million and $8.8~~$3.9 million, respectively. In addition, Chengdu Ya Guang Electronic Company Limited (“Ya Guang”) is our 2% joint venture partner in one of our Chengdu assembly and test facilities and is our 5% joint venture partner in our other Chengdu assembly and test facility; however, we have no material transactions with Ya Guang. We also purchase materials from Jiyuan Crystal Photoelectric Frequency Technology Ltd (“JCP”), a frequency control product manufacturing company in which we have made an equity investment and account for that investment using the equity method of accounting.

The ~~Audit~~Audit C~~ommittee~~ommittee ofof the Board re~~views~~views ~~all~~all ~~related~~related ~~party~~party ~~transactions~~transactions for pote~~ntial~~ntial ~~conflict~~conflict ofof i~~nterest~~nterest si~~tuations~~tuations onon an ~~ongoing~~ongoing basis, ~~all~~all inin accorda~~nce~~nce ~~with~~with such ~~procedures~~procedures asas thehe ~~Audit~~Audit ~~Committee~~Committee may ~~adopt from~~adopt from ~~time to~~time to time.

	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2019		2018		2019		2018		2020		2019
LSC
Net sales	$	268	$	225	$	456	$	592	$	128	$	188
Purchases	$	4,079	$	4,954	$	8,491	$	11,422	$	2,748	$	4,412

Nuvoton
Purchases	$	2,034	$	2,359	$	3,301	$	5,413	$	1,644	$	1,267

Keylink
Net sales	$	3,566	$	2,257	$	6,381	$	4,078	$	3,985	$	2,815
Purchases	$	585	$	881	$	1,190	$	1,739	$	405	$	605

JCP
Purchases	$	151	$	97	$	311	$	287	$	156	$	160

The table below sets forth accounts receivable from, and accounts payable to, related parties:

	June 30,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
LSC
Accounts receivable	$	269	$	286	$	128	$	184
Accounts payable	$	2,736	$	2,696	$	2,055	$	2,154
Nuvoton
Accounts payable	$	551	$	1,939	$	875	$	1,055
Keylink
Accounts receivable	$	5,070	$	6,264	$	25,536	$	31,598
Accounts payable	$	3,887	$	4,656	$	22,100	$	28,244
JCP
Accounts payable	$	165	$	151	$	181	$	173

On February 5, 2020, the Company entered into an agreement to invest up to approximately $14.2 million to acquire at least 51% of Savitech Corporation (“Savitech”), a fabless semiconductor design company located in Zhubei City, Taiwan. The Company will make the investment in 2 tranches. The first tranche of $5.6 million, which provided the Company with a 33.6% ownership of Savitech, was made on March 4, 2020. The initial tranche was funded with cash on hand. The second tranche, currently recorded in other long-term liabilities, as shown in the table below, and currently valued at $7.3 million will increase the Company’s ownership to at least 51% of Savitech. The second tranche will be paid on June 30, 2021, provided Savitech achieves previously agreed-to revenue levels. If revenue levels are not achieved the Company will pay less than the maximum $8.6 million, but regardless of the amount paid, will still acquire at least 51% of Savitech.

~~Note 13 –~~ The Company recorded the purchase of Savitech as a business acquisition and will consolidate Savitech into their operations, based on the voting model, with a non-controlling interest related to the interest Diodes does not own in Savitech. The Company purchased Savitech in order to increase the Company’s integrated circuit business. Total purchase consideration recorded was $12.9 million. The goodwill will not be tax deductible. The Company also incurred acquisition costs of approximately $0.1 million that were recognized in selling, general and administrative expense. The table below sets forth the preliminary fair value of the assets and liabilities recorded in the acquisition and the corresponding line item in which the item is recorded in our condensed consolidated balance sheet at the date of acquisition. The acquisition accounting is not final as deferred taxes, the contingent consideration payment and goodwill are being finalized. We expect the acquisition accounting to be finalized in the second or third quarter of 2020.

On April 1, 2019, the Company completed the previously announced acquisition of a wafer fabrication facility ~~(“GFAB”)~~ located in Greenock, ~~Scotland.~~Scotland (“GFAB”). The Company recorded the purchase of GFAB as a business acquisition. The Company purchased GFAB in order to increase the Company’s wafer production capacity. Total consideration paid by the Company was $33.2 million and was funded by advances under the revolving portion of our long-term credit facility. The facility and assets were wholly acquired, and there is no remaining minority interest. The goodwill will not be tax deductible. The Company also incurred acquisition costs of approximately $0.6 million that were recognized in selling, general and administrative expense. Due to a lack of available data we are unable to provide historical financial pro forma data. The table below sets forth the fair value of the assets and liabilities recorded in the GFAB acquisition and the corresponding line item in which the item is recorded in our condensed consolidated balance sheet.

Assets held for sale consist of approximately 16 acres of raw land located in Plano, Texas, that the Company is in the process of selling. The land was originally acquired as a site to construct a future corporate headquarters. The Company decided that its existing headquarters is adequate and construction of a new headquarters building is not necessary. The Company has been actively marketing the land and has a signed contract to sell the land to an unaffiliated third party for cash. During the second quarter of 2019, the buyer received necessary local zoning approval for its building plans. We anticipate the sale will close within the next 12 months. We have not recorded any impairment charges in connection with the land.

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, and as identified under the heading “Cautionary Statement for Purposes of the “Safe Harbor” Provision of the Private Securities Litigation Reform Act of 1995” herein. Such forward-looking statements are subject to a variety of risks and uncertainties, including those discussed below under the heading “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, that could cause actual results to differ materially from those anticipated by our management. The Private Securities Litigation Reform Act of 1995 (the “PSLRA”) provides certain “safe harbor” provisions for forward-looking statements. All forward-looking statements made in this Quarterly Report on Form 10-Q are made pursuant to the PSLRA. We undertake no obligation to publicly release the results of any revisions to our forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unexpected events. Unless the context otherwise requires, the words “Diodes,” the “Company,” “we,” “us” and “our” refer to Diodes Incorporated and its subsidiaries. Dollar amounts and share amounts are presented in thousands, except per share amounts, unless otherwise noted.

This management’s discussion should be read in conjunction with the management’s discussion included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019 (“Form 10-K”), previously filed with Securities and Exchange Commission (“SEC”) on February ~~21, 2019.~~12, 2020.

We are a leading global manufacturer and supplier of high-quality, application-specific standard products within the broad discrete, logic, analog and mixed-signal semiconductor markets. For detailed information, see Note 1 – ~~Nature~~Summary of Operations ~~Basis of Presentation, Recently Issued~~and Significant Accounting ~~Pronouncements and Updates to Accounting~~ Policies, ~~and Estimates,~~ included in the condensed consolidated financial statements in Item 1 above. Our products are sold primarily throughout Asia, North America and Europe. We believe that our focus on application-specific standard products utilizing innovative, highly efficient packaging and cost-effective process technologies, coupled with our collaborative, customer-focused product development, provides us with a meaningful competitive advantage relative to other semiconductor companies.

Factors Relevant to Our Results of Operations for the Three Months Ended ~~June 30, 2019~~March 31, 2020

In the third quarter of 2019 we ~~announced~~entered into a Share Swap Agreement that provides for the ~~closing~~acquisition of Lite-On Semiconductor Corporation (“LSC”) and its subsidiaries by the Company. At the effective date of the ~~previously announced agreement~~transaction, each share of LSC will be converted into the right to ~~acquire Texas Instruments’ (“TI”)~~receive TWD $42.50 per share in cash, or approximately US $1.39 per share based on March 31, 2020 exchange rates. The aggregate consideration payable by the Company, based on the March 31, 2020 exchange rate, is approximately $426 million. This amount is subject to change, based on the Taiwan dollar to United States dollar exchange rate at closing. The acquisition received LSC shareholder approval in October 2019, and Taiwan regulatory approval in March 2020. We anticipate completing the acquisition in the second half of 2020, subject to customary closing conditions and remaining regulatory approvals. We expect to fund the purchase price of the transaction primarily with proceeds from an anticipated new bank financing arrangement.

Developments have been occurring rapidly with respect to the spread of COVID-19 and its impact on human health and businesses. New and changing government actions to address the COVID-19 pandemic have been occurring on a daily basis. We have been closely monitoring the COVID-19 pandemic and its impacts and potential impacts on our business. However, because developments with respect to the spread of COVID-19 and its impacts have been occurring so rapidly and because of the unprecedented nature of the pandemic, we are unable to predict the extent and duration of any possible adverse financial impact of COVID-19 on our business, financial condition and results of operations.

We remain focused on the safety and well-being of our stakeholders and on the service of our customers. We will continuously review and assess the rapidly-changing COVID-19 pandemic and its impacts on our customers, our suppliers and our business so that we can seek to address those impacts. In the first quarter of 2020, following the extended Chinese New Year, we delayed the start of our manufacturing production in China and at the end of the first quarter of 2020 we temporarily closed our wafer fabrication ~~facility and operation~~facilities located in ~~Greenock, Scotland (“GFAB”). We are~~the United Kingdom. Our operations in China and the ~~process~~United Kingdom have both resumed full production.

As of ~~installing Diodes’ processes~~March 31, 2020, our cash, cash equivalents, and short-term investments were $272.4 million, and we had access to ~~fully use~~additional borrowing capacity of $250 million under the ~~additional 8” capacity and capability of GFAB,~~revolving portion our U.S. Credit Facility, which we believe ~~will support~~assures us adequate liquidity to manage the impacts of the COVID-19 pandemic on our ~~growth expansion initiatives~~business to cover cash needs for working capital and ~~future cost reduction initiatives.~~capital expenditures for at least the next 12 months.

Please see “Risk Factors -23The ultimate impact of the COVID-19 pandemic outbreak cannot be estimated at this time, but it may have a material adverse effect on our business, financial condition and results of operations.”-

in Item 1A of this Quarterly Report on Form 10-Q for an additional discussion of risks and potential risks of the COVID-19 pandemic on our business, financial condition and results of operations.

Results of Operations for the Three Months Ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~

The table below sets forth the condensed consolidated statement of operations line items as a percentage of net sales.

The following table and discussion explains in greater detail our consolidated operating results and financial condition for the three months ended June 30, 2019, compared to the three months ended June 30, 2018. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.

Net sales increased approximately $17.9 million for the three months ended June 30, 2019, compared to the same period last year due to continued strong performance in Europe and North America as well as the automotive and industrial end markets. For the three months ended June 30, 2019, combined net sales in the automotive and industrial markets represented 39% of total sales. Excluding the frequency control business, our serial-connectivity business reached record levels of net sales in the first three months of 2019.

~~The table below sets forth our revenue as a percentage of total revenue by end-user market for the three months ended June 30, 2019 and 2018:~~

Cost of goods sold increased approximately $3.2 million for the three months ended June 30, 2019, compared to the same period last year. As a percent of sales, cost of goods sold was 62.0% for the three months ended June 30, 2019, compared to 64.7% for the same period last year. Average unit cost increased approximately 4.7% for the three months ended June 30, 2019, compared to the same period last year. For the three months ended June 30, 2019, gross profit increased approximately 13.7% when compared to the same period last year. Gross profit margin for the three month periods ended June 30, 2019 and 2018 was 37.9% and 35.3%, respectively. The increase in gross profit margin was due to higher revenue contribution from the automotive and industrial markets as well as serial-connectivity products, which typically have higher gross profit margins.

Operating expenses for the three months ended June 30, 2019, increased approximately $4.0 million, or 5.8%, compared to the three months ended June 30, 2018. Selling, general and administrative expenses (“SG&A”) increased approximately $5.2 million and research and development expenses (“R&D”) decreased approximately $0.3 million. Amortization of acquisition related intangibles decreased $0.1 million. SG&A, as a percentage of sales, was 14.7% and 13.9% for the three months ended June 30, 2019 and 2018, respectively. R&D, as a percentage of sales, was 6.7% and 7.3% for the three months ended June 30, 2019 and 2018, respectively.

Interest income increased 42.9% for the three months ended June 30, 2019, compared to the same period last year, due to interest received on cross currency swaps. Interest expense decreased 21.0% for the three months ended June 30, 2019, compared to the same period last year. The decrease in interest expense for the three months ended June 30, 2019 was due to lower levels of debt partially offset by higher interest rates on the floating rate portion of the borrowings used to effect the Pericom acquisition in the fourth quarter of 2015. Foreign currency (loss) gain, net was a net loss of $0.5 million for the three months ended June 30, 2019, compared to a net gain of $0.3 million for the same period last year, reflecting the effectiveness of our currency hedges.

We recognized income tax expense of approximately $11.1 million and $10.8 million for the three months ended June 30, 2019 and 2018, respectively. The increase in income taxes for 2019 compared to 2018 was primarily attributable to an increase in pretax book income, partially offset by a net decrease in unfavorable U.S. permanent differences.

~~The table below sets forth the consolidated statement of operations line items as a percentage of net sales.~~

The following table and discussion explains in greater detail our consolidated operating results and financial condition for the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, compared to the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.

	Six Months Ended												Three Months Ended
	June 30,												March 31,
	2019			2018			Increase/(Decrease)			% Change			2020			2019			Increase/(Decrease)			% Change
Net sales	$	624,299		$	578,597		$	45,702			7.9	%	$	280,717		$	302,293		$	(21,576	)		(7.1	%)
Cost of goods sold		389,900			372,734			17,166			4.6	%		184,875			189,882			(5,007	)		(2.6	%)
Gross profit		234,399			205,863			28,536			13.9	%		95,842			112,411			(16,569	)		(14.7	%)
Total operating expense		143,760			141,079			2,681			1.9	%		69,990			70,288			(298	)		(0.4	%)
Interest income		1,508			957			551			57.6	%		273			875			(602	)		(68.8	%)
Interest expense		(4,156	)		(5,301	)		(1,145	)		(21.6	%)		(1,245	)		(2,145	)		(900	)		(42.0	%)
Foreign currency (loss) gain, net		(560	)		(2,729	)		(2,169	)		(79.5	%)
Foreign currency gain (loss), net														75			(64	)		(139	)		(217.2	%)
Other income		2,480			5,012			(2,532	)		(50.5	%)		1			1,245			(1,244	)		(99.9	%)
Income tax provision		21,472			18,536			2,936			15.8	%		4,556			10,298			(5,742	)		(55.8	%)

Net sales ~~increased~~decreased approximately ~~$45.7~~$21.6 million for the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, compared to the same period last year. This decrease in net sales reflects the global economic slowdown caused by the COVID-19 pandemic. During the three months ended March 31, 2020, the Company delayed reopening its manufacturing facilities in China after the Chinese New Year period that was extended due to the COVID-19 pandemic. Our revenues are also negatively impacted during the first quarter of each year due to ~~continued market share gains. We experienced record~~seasonality. Also as a result of the COVID-19 pandemic, late in March 2020, the Company temporarily shut down its manufacturing facilities in the United Kingdom. Despite the overall decrease in net sales, ~~in Europe and record net sales in both~~ the ~~automotive and industrial end markets. For the six months ended June 30, 2019, combined net sales~~Company experienced continued growth in the automotive and ~~industrial~~computing end markets during the three months ended March 31, 2020. For the three months ended March 31, 2020, the automotive market represented ~~39%~~11% of total sales. ~~Excluding the frequency control business, our serial-connectivity business reached record levels of net sales in the first three months of 2019.~~

The table below sets forth our revenue as a percentage of total revenue by end-user market for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018:~~2019:

	Six Months Ended						Three Months Ended
	June 30,						March 31,
	2019			2018			2020	2019
Industrial		29.0	%		25.1	%	26%	29%
Communications		23.0	%		23.5	%	23%	23%
Consumer		22.5	%		25.9	%	23%	23%
Computing		15.5	%		16.5	%	17%	15%
Automotive		10.0	%		9.0	%	11%	10%

Cost of goods sold ~~increased~~decreased approximately ~~$17.2~~$5.0 million for the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, compared to the same period last ~~year.~~year, due, in part, to the decreased net sales during the first quarter of 2020. As a percent of sales, cost of goods sold was ~~62.1%~~65.9% for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020, compared to ~~64.4%~~62.8% for the same period last year. Average unit cost increased approximately ~~6.0%~~13.0% for the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, compared to the same period last ~~year.~~year, in part due to the shutdown of our manufacturing facilities due to the extended Chinese New Year period. For the three months ended ~~June 30, 2019,~~March 31, 2020, gross profit ~~increased~~decreased approximately ~~13.9%~~14.7% when compared to the same period last year. Gross profit margin for the ~~six~~three month periods ended ~~June 30,~~March 31, 2020 and 2019 was 34.1% and ~~2018 was 37.6% and 35.6%~~37.2%, respectively. The ~~increase~~decrease in gross profit margin ~~was due to higher revenue contribution from~~reflects the ~~automotive and industrial markets as well as serial-connectivity products, which typically have higher gross profit margins.~~7.1% decrease in revenue.

Operating expenses for the ~~six~~three months ended ~~June 30, 2019, increased~~March 31, 2020, decreased approximately ~~$2.7~~$0.3 million, or ~~1.9%~~0.4%, compared to the three months ended ~~June 30, 2018.~~March 31, 2019. Selling, general and administrative expenses (“SG&A”) ~~increased~~decreased approximately ~~$1.7~~$1.5 million and research and development expenses (“R&D”) increased approximately ~~$1.6 million.~~$1.5 million, each as compared to the same period last year. Amortization of acquisition related intangibles decreased ~~$0.4 million.~~$0.3 million, compared to the same period last year. SG&A, as a percentage of sales, was ~~14.6%~~15.0% and ~~15.4%~~14.5% for the ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. R&D, as a percentage of sales, was ~~7.0%~~8.4% and 7.3% for the ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively.

Interest income ~~increased 57.6%~~decreased 68.8% for the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, compared to the same period last year, due to ~~interest received on cross currency swaps.~~a reduction in short-term investments. Interest expense decreased ~~21.6%~~42.0% for the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, compared to the same period last year. The decrease in interest expense for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 was due to lower levels of debt partially ~~offset by higher~~along with lower interest rates on the floating rate portion of the borrowings used to effect the Pericom acquisition in the fourth quarter of 2015. Foreign currency (loss) gain, net was a net loss of $0.6 million for the six months ended June 30, 2019, compared to a net loss of $2.7 million for the same period last year, reflecting the effectiveness of our ~~currency hedges.~~debt.

We recognized an income tax expense of approximately ~~$21.4~~$4.6 million and ~~$18.6~~$10.3 million for the ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. The ~~increase~~decrease in income taxes for ~~2019~~2020 compared to ~~2018 is~~2019 was primarily attributable to ~~an increase~~a decrease in pretax book income, ~~partially offset by~~a decrease in non-U.S. withholding taxes and a net ~~decrease~~increase in ~~unfavorable~~favorable U.S. permanent differences.

Our primary sources of liquidity are cash and cash equivalents, funds from operations and, if necessary, borrowings under our credit facilities.

Our Asia subsidiaries maintain credit facilities with several financial institutions through our foreign entities worldwide totaling ~~$121.4~~$162.8 million. At ~~June 30, 2019,~~March 31, 2020, outstanding borrowings were ~~$15.5~~$13.4 million and outstanding letters of credit were $0.4 million under the Asia credit facilities. Other than two Taiwanese credit facilities that are collateralized by assets, our foreign credit lines are unsecured, uncommitted, repayable on demand, terminable by the lender at any time and contain no restrictive covenants. These credit facilities bear interest at LIBOR or similar indices plus a specified margin. Interest payments are due ~~quarterly~~monthly on outstanding amounts under the credit lines. In addition to our credit lines, our 51% owned subsidiary, ERIS Technology Corporation (“ERIS”), borrowed $19.6 million on a long-term basis from local Taiwan banks in order to make an investment. The first loan of $4.3 million matures in 2033, while the second loan of $15.3 million matures in 2024.

We currently have a U.S. banking credit facility (the “U.S. Credit Facility”) under which we may draw up to $250 million on a revolving basis, in addition to a $250 million term loan. The U.S. Credit Facility matures October 26, 2021. The remaining portion of the term loan of the U.S. Credit Facility is repayable in part through quarterly installments that increase over time from ~~$6.3~~$7.8 million in the first three quarters of ~~2019~~2020 to $9.4 million per quarter in the final year of the U.S. Credit Facility. We may, from time to time, request increases in the aggregate commitments under the U.S. Credit Facility of up to $200 million, subject to the lenders electing to increase their commitments or by means of the addition of new lenders, and subject to at least half of each increase in aggregate commitments being in the form of term loans, with the remaining amount of each increase being an increase in the amount of the revolving portion of the U.S. Credit Facility. The U.S. Credit Facility contains certain financial and non-financial covenants, including, but not limited to, a maximum consolidated leverage ratio, a minimum consolidated fixed charge coverage ratio, and restrictions on liens, indebtedness, investments, fundamental changes, dispositions, and restricted payments (including dividends and share repurchases). The obligations of the Company and the other borrowers under the U.S. Credit Facility are secured by substantially all of the assets of the Company, including controlling interests in its first-tier subsidiaries, and by specified assets of certain of its subsidiaries.

In addition to our U.S. credit facilities, our 51% owned subsidiary, ERIS Technology Corporation (“ERIS”), borrowed $13.4 million through a short term loan and $26.5 million on a long-term basis from local Taiwan banks in order to make an investment. The ERIS debt has the following maturities: $0.2 million in 2020, $4.5 million in 2021, $4.9 million in 2022, $1.6 million in 2023, $12.6 million in 2024 and $2.7 million thereafter.

The details of our borrowings outstanding as of ~~June 30, 2019~~March 31, 2020 are set forth in the table below:

Our primary liquidity requirements have been to meet our inventory and capital expenditure needs and to fund on-going operations. At ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, our working capital was ~~$481.2~~$532.3 million and ~~$480.8~~$524.6 million, respectively. We expect cash generated by our operations together with existing cash, cash equivalents, short-term investments and available credit facilities to be sufficient to cover cash needs for working capital and capital expenditures for at least the next 12 months.

Capital expenditures (including accrued capital expenditures) for the ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ were ~~$52.7~~$12.6 million and ~~$47.5~~$16.3 million, respectively. For the first ~~six~~three months of ~~2019~~2020 capital expenditures were approximately ~~8.4%~~4.5% of our net sales, which is in ~~line with~~slightly below our capital spending target range of 5% to 9% of net sales.

Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of certain European and Asian subsidiaries. As of ~~June 30, 2019,~~March 31, 2020, our foreign subsidiaries held approximately ~~$128.0~~$143.6 million of cash, cash equivalents and investments of which approximately $21.4 million would be subject to a potential non-U.S. withholding tax if distributed outside the country in which the cash is currently held. Of this total, ~~$11.6~~$9.2 million is held in China.

As of ~~June 30, 2019,~~March 31, 2020, we had short-term investments totaling ~~$6.6~~$2.9 million. These investments are highly liquid with maturity dates greater than three months at the date of purchase. We generally can access these investments in a relatively short time frame but in doing so we generally forfeit all earned and future interest income.

During 2015, our Board of Directors (“Board”) approved a stock repurchase program. The Board authorized the repurchase of up to an aggregate of $100.0 million of our outstanding Common Stock. The share repurchase program is expected to continue through the end of 2019 unless extended or shortened by the Board. Currently there is approximately $62.3 million available for repurchase of outstanding Common Stock under this publicly announced repurchase program. No shares were repurchased during the three months ended June 30, 2019.

Our primary source of liquidity is cash flow from operations. Additional sources of liquidity are cash and cash equivalents, short-term investments and our credit facilities. Our cash and cash equivalents ~~decreased~~increased from ~~$241.1~~$258.4 million at December 31, ~~2018~~2019 to ~~$235.4~~$269.5 million at ~~June 30, 2019.~~March 31, 2020.

The table below sets forth a summary of the condensed consolidated statements of cash flows:

	Six Months Ended June 30,									Three Months Ended March 31,
	2019			2018			Change			2020			2019			Change
Net cash flows provided by operating activities	$	110,488		$	88,381		$	22,107		$	53,675		$	69,889		$	(16,214	)
Net cash and cash equivalents used in investing activities		(82,517	)		(53,627	)		(28,890	)		(17,558	)		(17,152	)		(406	)
Net cash and cash equivalents used in financing activities		(32,955	)		(83,430	)		50,475
Net cash and cash equivalents (used in) provided by financing activities											(21,397	)		9,627			(31,024	)
Effect of exchange rate changes on cash and cash equivalents		(35	)		(2,753	)		2,718			(3,315	)		(1,890	)		(1,425	)
Net decrease in cash and cash equivalents, including restricted cash	$	(5,019	)	$	(51,429	)	$	46,410
Net increase in cash and cash equivalents, including restricted cash										$	11,405		$	60,474		$	(49,069	)

Net cash flows provided by operating activities for the ~~six~~three months ended ~~June 30,~~March 31, 2020 was $53.7 million. Net cash flows provided by operating activities for the three months ended March 31, 2020 resulted from net income of $20.4 million, depreciation and amortization of intangible assets of $27.0 million, share-based compensation of $4.7 million and an increase in noncash working capital accounts of $0.8 million. Net cash flows provided by operating activities for the three months ended March 31, 2019 was ~~$110.5~~$69.9 million. Net cash flows provided by operating activities resulted from net income of ~~$68.4~~$31.7 million, depreciation and amortization of intangible assets of ~~$54.4~~$26.6 million, share-based compensation of ~~$9.8~~$4.5 million and ~~a decrease~~an increase in noncash working capital accounts of ~~$21.5~~$7.3 million. Cash flows from operating activities for the six months ended June 30, 2018 was $88.4 million. Cash flows from operating activities resulted from net income of $44.2 million, depreciation and amortization of $51.3 million, share-based compensation of $11.1 million and a decrease in noncash working capital accounts of $17.6 million.

Net cash and cash equivalents used in investing activities was ~~$82.5~~$17.6 million for the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. Net cash and cash equivalents used in investing activities was primarily due to the purchase of property, plant and equipment of ~~$50.7~~$14.2 million and the ~~acquisition~~additional investment by the Company’s subsidiary ERIS in Yea-Shin of ~~GFAB~~$6.1 million, bring ERIS’ ownership of Yea-Shin to approximately 97%. These outflows of cash were partially offset by net proceeds from the maturity of short-term investments of $1.9 million for ~~$33.2 million during~~ the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. Net cash and cash equivalents used in investing activities ~~was $53.6 million~~ for the ~~six~~three months ended ~~June 30, 2018. Net cash and cash equivalents used in investing activities~~March 31, 2019 was primarily due to the purchase of property, plant and equipment of ~~$53.0~~$18.6 million, ~~during~~partially offset by net proceeds received by the ~~six months ended June 30, 2018.~~sale of short-term investments of $0.8 million.

Net cash and cash equivalents used in financing activities was ~~$33.0~~$21.4 million for the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. Net cash used in financing activities in the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 consisted primarily of ~~$42.1~~$16.6 million net repayments of long-term debt taxes paid on net share settlement of $1.6 million and dividend distributions to noncontrolling interests of $1.2 million. These uses of cash were partially offset by inflows of $6.7 million related to stock option exercises and $5.3 million of net increases in lines of credit and short-term debt.Net cash and cash equivalents used in financing activities was $83.4 million for the six months ended June 30, 2018. Net cash and cash equivalents used in the six months ended June 30, 2018 consisted primarily of repayments of long-term debt, net of $82.5 million and taxes paid on net share settlement of ~~$8.6~~$4.5 million. Net cash and cash equivalents provided by financing activities was $9.6 million ~~partially offset by~~for the three months ended March 31, 2019. Net cash and cash equivalents provided in the three months ended March 31, 2019 consisted primarily of proceeds from ~~short-term~~the issuance of Common Stock related to stock option exercises of $6.7 million and increases under our line of credit and short-term debt of ~~$3.4~~$3.6 million.

We use interest rate swaps, foreign exchange forward contracts and cross currency swaps to provide a level of protection against interest rate risks and foreign exchange exposure.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps, including interest rate collars, as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

We are exposed to fluctuations in various foreign currencies against our different functional currencies. We use foreign currency forward agreements to manage this exposure and to preserve the economic value of foreign currency denominated monetary assets and liabilities; these instruments are not designated for hedge accounting treatment in accordance with ASC 815. The fair value of our foreign exchange hedges approximates zero.

During 2019, we used cross currency swaps to hedge our foreign exchange exposure related to our investment in our foreign subsidiaries. These instruments were subject to market fluctuations due to changes in foreign exchange rates and at times may be in a loss position. Market fluctuations were recorded to other comprehensive income/loss since these instruments are subject to hedge accounting. If these instruments are in a loss position at maturity, or if we decided to exit these instruments while they are in a loss position, we would have to make a cash payment in the amount of the loss position. During the second quarter of 2019, we decided to exit our positions in cross currency swaps. As a result of exiting this position we were required to make a cash payment of approximately $0.3 million.

We do not have any transactions, arrangements or other relationships with unconsolidated entities that will affect our liquidity or capital resources. We have no special purpose entities that provide off-balance sheet financing, liquidity or market or credit risk support, nor do we engage in leasing, swap agreements, or outsourcing of research and development services that could expose us to liability that is not reflected on the face of our financial statements.

There have been no material changes in our Contractual Obligations as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018,~~2019, filed with the SEC on February ~~21, 2019.~~12, 2020.

Our critical accounting policies are described in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in the notes to our consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 filed with the SEC on February ~~21, 2019.~~12, 2020. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been discussed in the notes to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q in Note 1 – ~~Nature~~Summary of Operations ~~Basis of Presentation, Recently Issued~~and Significant Accounting ~~Pronouncements and Updates to Accounting Policies and Estimates.~~Policies. The application of our critical accounting policies may require management to make judgments and estimates about the amounts reflected in the condensed consolidated financial statements. Management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates.

See Note 1 - ~~Nature~~Summary of Operations ~~Basis of Presentation, Recently Issued~~and Significant Accounting ~~Pronouncements and Updates to Accounting~~ Policies, ~~and Estimates,~~ of the Notes to Condensed Consolidated Financial Statements, for detailed information regarding the status of recently issued accounting pronouncements.

Our Internet address is http://www.diodes.com. Information included on, or accessible through, our website shall not be deemed to form a part of the Quarterly Report on Form 10-Q. We make available, free of charge through our Internet website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Our website also provides access to investor financial information, including SEC filings and press releases, as well as stock quotes and information on corporate governance compliance.

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 Exchange Act of 1934. We generally identify forward-looking statements by the use of terminology such as “may,” “will,” “could,” “should,” “potential,” “continue,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” or similar phrases or the negatives of such terms. Such forward-looking statements are subject to a variety of risks and uncertainties, including those discussed under “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, and in other reports we file with the SEC from time to time, that could cause actual results to differ materially from those anticipated by our management. The PSLRA provides certain “safe harbor” provisions for forward-looking statements. All forward-looking statements made in this Quarterly Report on Form 10-Q are made pursuant to the PSLRA.

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 us or statements made by our 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.

For more detailed discussion of these factors, see the “Risk Factors” discussion in Item 1A of our most recent Annual Report on Form 10-K as filed with the SEC and in Part II, Item 1A of this report The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this report, and we undertake no obligation to update the forward-looking statements to reflect subsequent events or circumstances.

The success of our business depends on the strength of the global economy and the stability of the financial markets, and any weaknesses in these areas may have a material adverse effect on our net sales, operating results and financial condition.

During times of difficult market conditions, our fixed costs combined with lower net sales and lower profit margins may have a negative impact on our business, operating results and financial condition.

Downturns in the highly cyclical semiconductor industry or changes in end-market demand could adversely affect our operating results and financial condition.

The semiconductor business is highly competitive, and increased competition may harm our business, operating results and financial condition.

One of our external suppliers is also a related party. The loss of this supplier could harm our business, operating results and financial condition.

Delays in initiation of production at facilities due to implementing new production techniques or resolving problems associated with technical equipment malfunctions could adversely affect our manufacturing efficiencies, operating results and financial condition.

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 customers require our products to undergo a lengthy and expensive qualification process without any assurance of product sales and may demand to audit our operations from time to time. A failure to qualify a product or a negative audit finding could adversely affect our net sales, operating results and financial condition.

Our customer orders are subject to cancellation or modification usually with no penalty. High volumes of order cancellation or reduction in quantities ordered could adversely affect our net sales, operating results and financial condition.

Production at our manufacturing facilities could be disrupted for a variety of reasons, including natural disasters and other extraordinary events, which could prevent us from producing enough of our products to maintain our sales and satisfy our customers’ demands and could adversely affect our operating results 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 would adversely affect our net sales, market share, operating results and financial condition.

We may be adversely affected by any disruption in our information technology systems, which could adversely affect our cash flows, operating results and financial condition.

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, reduction in our intellectual property rights and a negative impact on our business, operating results and financial condition.

We depend on third-party suppliers for timely deliveries of raw materials, manufacturing services, product and process development, parts and equipment, as well as finished products from other manufacturers, and our reputation with customers, operating results and financial condition 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, which could adversely affect our ability to compete, our operating results and financial condition.

Part of our growth strategy involves identifying and acquiring companies. 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, which could adversely affect our business, operating results and financial condition.

We are subject to litigation risks, including securities class action litigation and intellectual property litigation, which may be costly to defend and the outcome of which is uncertain and could adversely affect our business and financial condition.

We are subject to many environmental laws and regulations that could result in significant expenses and could adversely affect our business, operating results and financial condition.

Our products, or products we purchase from third parties for resale, may be found to be defective and, as a result, warranty claims and product liability claims may be asserted against us and we may not have recourse against our suppliers, which may harm our business, reputation with our customers, operating results and financial condition.

We may fail to attract or retain the qualified technical, sales, marketing, finance and management/executive personnel required to operate our business successfully, which could adversely affect our business, operating results and financial condition.

We may not be able to achieve future growth, and any such growth may place a strain on our management and on our systems and resources, which could adversely affect our business, operating results and financial condition.

Obsolete inventories as a result of changes in demand for our products and change in life cycles of our products could adversely affect our business, operating results and financial condition.

If our direct sales customers do not design our products into their applications, our net sales may be adversely affected.

We are subject to interest rate risk that could have an adverse effect on our cost of working capital and interest expenses, which could adversely affect our business, operating results and financial condition.

Our hedging strategies may not be successful in mitigating our risks associated with interest rates or foreign exchange exposure or our counterparties might not perform as agreed.

We may have a significant amount of debt with various financial institutions worldwide. Any indebtedness could adversely affect our business, operating results, financial condition and our ability to meet payment obligations under such debt.

Restrictions in our credit facilities may limit our business and financial activities, including our ability to obtain additional capital in the future.

Our business benefits from certain Chinese government incentives. Expiration of, or changes to, these incentives could adversely affect our operating results and financial condition.

We operate a global business through numerous foreign subsidiaries, and there is a risk that tax authorities will challenge our transfer pricing methodologies or legal entity structures, which could adversely affect our operating results and financial condition.

The value of our benefit plan assets and liabilities is based on estimates and assumptions, which may prove inaccurate and the actual amount of expenses recorded in the consolidated financial statements could differ materially from the assumptions used.

Changes in actuarial assumptions for our defined benefit plan could increase the volatility of the plan’s asset value, require us to increase cash contributions to the plan and have a negative impact on our cash flows, operating results and financial condition.

Certain of our customers and suppliers require us to comply with their codes of conduct, which may include certain restrictions that may substantially increase our cost of doing business as well as have an adverse effect on our operating efficiencies, operating results and financial condition.

Compliance with government regulations and customer demands regarding the use of “conflict minerals” may result in increased costs and may have a negative impact on our business, operating results and financial condition.

There are risks associated with previous and future acquisitions. We may ultimately not be successful in overcoming these risks or any other problems encountered in connection with acquisitions.

If we fail to maintain an effective system of internal controls or discover material weaknesses in our internal control 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 U.S. or internationally, may affect the markets in which our Common Stock trades, the markets in which we operate and our operating results and financial condition.

System security risks, data protection breaches, cyber-attacks and other related cybersecurity issues could disrupt our internal operations, and any such disruption could reduce our expected net sales, increase our expenses, damage our reputation and adversely affect our stock price.

Our international operations subject us to risks that could adversely affect our operations.

We have significant operations and assets in China, the U.K., Germany, Hong Kong and Taiwan and, as a result, will be subject to risks inherent in doing business in those jurisdictions, which may adversely affect our financial performance and operating results.

Significant uncertainties related to changes in governmental policies and participation in international trading partnerships or economic unions currently exist, and, depending upon how such uncertainties are resolved, the changes could have a material adverse effect on us.

Tariffs or other restrictions imposed by the United States Trade Representative may affect our operations in the U.S. ~~and~~, may disrupt our activities in the U.S. ~~and~~, may have an adverse impact on our profitability and results of ~~operations.~~operations and may encourage the independent development in China of products and electronic components that will compete with or displace our products and components, resulting in an adverse impact on our Chinese business.

The U.K.’s ~~referendum to~~ exit from the European Union (“E.U.”) will continue to have uncertain effects and could adversely impact our business, results of operations and financial condition.

A slowdown in the Chinese economy could limit the growth in demand for electronic devices containing our products, which would have a material adverse effect on our business, operating results and prospects.

Economic regulation in China could materially and adversely affect our business, operating results and prospects.

We could be adversely affected by violations of the United States’ Foreign Corrupt Practices Act, the U.K.’s Bribery Act 2010, China’s anti-corruption campaign and similar worldwide anti-bribery laws.

We are subject to foreign currency risk as a result of our international operations.

China is experiencing rapid social, political and economic change, which has increased labor costs and other related costs that could make doing business in China less advantageous than in prior years. Increased labor costs in China could adversely affect our business, operating results and financial condition.

We may not continue to receive preferential tax treatment in Asia, thereby increasing our income tax expense and reducing our net income.

The distribution of any earnings of certain foreign subsidiaries may be subject to foreign income taxes, thus reducing our net income.

We could be adversely affected by the compromise or theft of our technology, know-how, data or intellectual property or a requirement that we yield rights in technology, know-how, data stored in foreign jurisdictions or intellectual property that we use in such foreign jurisdictions.

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 adversely 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.

We were formed in 1959, and 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.

Non-cash tender offers, debt equity swaps or equity exchanges to consummate our business activities are likely to have the effect of diluting the ownership interest of existing stockholders, including qualified stockholders who receive shares of our Common Stock in such business activities.

Anti-takeover effects of certain provisions of Delaware law and our Certificate of Incorporation and Bylaws, may hinder a take-over attempt.

Certificate of Incorporation and Bylaw Provisions may deter a take-over attempt.

There have been no material changes to our market risks as disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, filed with the SEC on February ~~21, 2019.~~12, 2020.

Our Chief Executive Officer, Keh-Shew Lu, and Chief Financial Officer, Brett R. Whitmire, with the participation of our management, carried out an evaluation, as of ~~June 30, 2019,~~March 31, 2020, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)).) Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer believe that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures are effective at the reasonable assurance level to ensure that information required to be included in this report is:

Disclosure controls and procedures, no matter how well designed and implemented, can provide only reasonable assurance of achieving an entity’s disclosure objectives. The likelihood of achieving such objectives is affected by limitations inherent in disclosure controls and procedures. These include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures such as simple errors, mistakes or intentional circumvention of the established processes.

There was no change in our internal control over financial reporting, known to our Chief Executive Officer or Chief Financial Officer, that occurred in the three months ended ~~June 30, 2019,~~March 31, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

From time to time, we are involved in various legal proceedings that arise in the normal course of business. While we intend to defend any lawsuit vigorously, we presently believe that the ultimate outcome of any pending legal proceeding will not have any material adverse effect on our financial position, cash flows or operating results. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, which could impact our business and operating results for the period in which the ruling occurs or future periods.

Except as identified in the ~~modified~~additional Risk Factor set out below, there have been no material changes to our risk factors from those disclosed in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, filed with the Securities and Exchange Commission on February ~~21, 2019.~~12, 2020.

~~Tariffs or other restrictions imposed by the United States Trade Representative may affect our operations in the U.S., may disrupt our activities in the U.S., may have an adverse~~The ultimate impact on our profitability and results of operations and may encourage the independent development in China of products and electronic components that will compete with ours or displace our products and components, resulting in an adverse impact on our Chinese business.

~~In May 2019, at the direction~~ of the President, the United States increased the level of tariffs from 10 percent to 25 percent on approximately $200 billion worth of Chinese imports. The President also ordered the U.S. Trade Representative to begin the process of raising tariffs on essentially all remaining imports from China, which are valued at approximately $300 billion. These tariffs are in addition to the recently imposed new or higher tariffs on specified products imported from China in response to what the U.S. characterizes as unfair trade practices. China responded to the earlier increased tariffs by proposing new or higher tariffs on specified products imported from the United States. Negotiations between the U.S. and China to resolve the issues that precipitated the impositions of these tariffs are reported toCOVID-19 pandemic outbreak cannot be ongoing, but the situation is dynamic and the timing and nature of any ultimate resolution is currently uncertain. In June 2019, President Trump and Chinese President Xi Jinping agreed that they did not plan more tariffs against each other’s countries, but on August 1, 2019, President Trump announced that on September 1, 2019, the U.S. would put an additional tariff of 10% on $300 billion of goods and products coming from China to the U.S.

Most of our products are manufactured in China and then a portion of those products are imported into the U.S. The impacts on us of the recently imposed and proposed tariffs are uncertain because of the dynamic nature of governmental actions and responses, as well as possible exemptions for certain products. If the U.S. and China are able to negotiate the issues to restore a mutually advantageous and fair trading regime, the increased tariffs could be eliminated, but given the uncertainties, there can be no assurance of whether, or when, this will be accomplished. We have taken actions, and may take additional steps, to mitigate those impacts and protect our competitive position in the marketplace. If we determine to pass some or all of these new tariff burdens on to our customers, the result may be a degradation of our competitive position and a loss of customers that would adversely affect our operating performance. It is not clearestimated at this time, ~~what the ultimate outcome of these tariff actions and our mitigation efforts will be,~~ but ~~given the importance of our Chinese operations and related sales, and the impacts of existing and possible future restrictions with regard to transactions with Chinese entities,~~ it ~~is very possible that our operating results and/or financial condition~~ may ~~be adversely affected.~~

In addition, China is stepping up efforts to design and manufacture semiconductors itself rather than buy from the U.S., amid fears that sanctions might cripple its high-tech industry. U.S. restrictions on exports to Chinese telecoms equipment makers have sharpened Beijing’s focus on semiconductor self-sufficiency. China’s ministry of finance announced tax breaks “to support the development of integrated circuit design and the software industry,” cancelling corporate taxes for some companies for two years. Although the outcome of these efforts is uncertain, the development of such capacity in China would likely have a material adverse effect on our ~~profitability~~business, financial condition and results of operations.

In March 2020, the World Health Organization categorized COVID-19 as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. COVID-19 continues to spread throughout the United States and other countries across the world, and the duration, severity of its effects and ultimate impact to the world’s population and financial impact are currently unknown. National, state and local governments have responded to the COVID-19 pandemic in a variety of ways, including, without limitation, by declaring states of emergency, restricting people from gathering in groups or interacting within a certain physical distance (i.e., social distancing), and ordering businesses to close or limit operations and ordering people to stay at home (i.e., shelter in place).

Given these governmental actions, there is no assurance that we will be permitted to operate under every future government order or other restriction and in every location where we maintain operations and may be required to limit our operations at, or close, certain locations in the future. Any such long-term limitations or closures would have a material adverse impact on our ability to service our customers and on our business, financial condition and results of operations. In particular, any long-term limitations on, or long-term closures of, our manufacturing facilities in Asia or Europe would have a negative adverse impact on our ability to manufacture, sell and ship products and service customers and would have a material adverse impact on our business, financial condition and results of operations.In the first quarter of 2020, following the extended Chinese New Year, we delayed the start of our manufacturing production in China and at the end of the first quarter of 2020 we temporarily closed our wafer fabrication facilities located in the United Kingdom. As of the date of this report, our operations in China and the United Kingdom have both resumed full production. However, we can provide no assurances that those facilities or any of our other facilities may not suffer similar closures or disruptions in the future.

While the Company has already experienced negative impacts from the COVID-19 pandemic to its results of operations, cash flows and financial condition, in light of the current level of uncertainty over the economic and operational impacts of COVID-19 we cannot reasonably estimate the total impact that COVID-19 will have on our results of operations, cash flows or financial condition at this time. Risks and complications in the Company’s business from COVID-19 include, but are not limited to, changes in ordering patterns and demand for our products and losses in efficiency due to travel limitations and regulations compelling employees to work from home. While the Company has not experienced a material increase in technology spending, if employees are forced to continue working remotely it could become necessary to increase information technology spending. Although the Company has not experienced a significant business disruption due to teleworking arrangements, the imposition of increased self-isolation protocols could negatively impact the ability of employees to travel to the Company’s production facilities and possibly create ongoing business disruptions. The limitations could negatively affect the Company’s ability to produce, sell and transport its products. The Company’s consolidated financial statements presented herein reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. Such estimates and assumptions affect, among other things, the Company’s goodwill, long-lived asset and indefinite-lived intangible asset valuation; inventory valuation; equity investment valuation; assessment of the annual effective tax rate; valuation of deferred income taxes and income tax contingencies; the allowance for doubtful accounts; measurement of compensation cost for certain share-based awards and cash bonus plans; and pension plan assumptions. In addition, depending on the extent and duration of the COVID-19 pandemic, healthcare insurance premiums could increase, increasing our healthcare costs.

In addition, the COVID-19 pandemic may cause disruptions, and in some cases severe disruptions, to the business and operations of our suppliers and customers as a result of quarantines, worker absenteeism as a result of illness or other factors, social distancing measures and other travel, health-related, business or other restrictions. Certain of our customers and suppliers may in the future be required to close down or operate at a lower capacity, which would adversely impact our business, financial condition and results of operations. Because of the rapid onset of the COVID-19 pandemic, some of our customers could experience financial difficulties resulting in such customers being unable to pay for products they ordered from us before the COVID-19 pandemic emerged. There can be no assurance that any decrease in sales resulting from the COVID-19 pandemic will be offset by increased sales in the future.

PLEASE NOTE: It is inappropriate for investors to assume the accuracy of any covenants, representations or warranties that may be contained in agreements or other documents filed as exhibits to this Quarterly Report on Form 10-Q. In certain instances the disclosure schedules to such agreements or documents contain information that modifies, qualifies and creates exceptions to the representations, warranties and covenants. Moreover, some of the representations and warranties may not be complete or accurate as of a particular date because they are subject to a contractual standard of materiality that is different from those generally applicable to stockholders and/or were used for the purpose of allocating risk among the parties rather than establishing certain matters as facts. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts at the time they were made or otherwise.

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.

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)

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

		Page
Part I – Financial Information
Item 1. Financial Statements		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2321
Item 3. Quantitative and Qualitative Disclosures About Market Risk		3532
Item 4. Controls and Procedures		3532
Part II – Other Information
Item 1. Legal Proceedings		3633
Item 1A. Risk Factors		3633
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		3634
Item 3. Defaults Upon Senior Securities		3734
Item 4. Mine Safety Disclosures		3734
Item 5. Other Information		3734
Item 6. Exhibits		3835
Signatures		3936

Supplemental Cash Flow Information
Interest paid during the period		1,068	$	2,095
Taxes paid during the period		6,091	$	4,323
Non-cash investing and financing activities:
Accounts payable balance related to the purchase of property, plant and equipment	$	8,847	$	9,886

~~Standard No.~~	~~Standard Name~~	~~Standard Effective Date~~
~~2018-13~~	~~Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement~~	~~January 1, 2020~~
~~2018-14~~	~~Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans~~	~~January 1, 2020~~

Balance at December 31, 2018	$	132,437
Acquisitions:
Wafer fabrication facility in Greenock, Scotland ^(a)		931
Canyon investment ^(b)		1,443
ERIS investment in Yea-Shin ^(c)		4,320
Foreign currency translation adjustment		(359	)
Balance at June 30, 2019	$	138,772

Balance at December 31, 2019	$	141,318
Savitech acquisition (see Note 13 for additional information)		10,755
Foreign currency translation adjustment		(2,407	)
Balance at March 31, 2020	$	149,666

Amortization expense	2019		2018
Three months ended June 30	$	4,536	$	4,678
Six months ended June 30	$	9,020	$	9,445

	Net Sales for the Three Months Ended June 30,
	Direct Sales						Distributor
	2019			2018			2019			2018
China	$	59,685		$	54,747		$	100,567		$	111,818
U.S.		2,888			4,772			27,472			26,431
Korea		5,625			3,474			8,834			10,028
Germany		3,429			2,820			19,134			20,826
Singapore		154			624			14,920			19,571
Taiwan		675			922			20,907			15,828
All others ⁽¹⁾		36,257			16,663			21,459			15,561
Total	$	108,713		$	84,022		$	213,293		$	220,063

	Percent of Net Sales by Type for the Three Months Ended June 30,
	Direct Sales						Distributor
	2019			2018			2019			2018
China		55	%		65	%		47	%		51	%
U.S.		3	%		6	%		13	%		12	%
Korea		5	%		4	%		4	%		5	%
Germany		3	%		3	%		9	%		9	%
Singapore		—			1	%		7	%		9	%
Taiwan		1	%		1	%		10	%		7	%
All others ⁽¹⁾		33	%		20	%		10	%		7	%
Total		100	%		100	%		100	%		100	%

	Total Net Sales for the Three Months Ended June 30,
	Dollars						Percent of Net Sales
	2019			2018			2019			2018
China	$	160,252		$	166,565			50	%		55	%
U.S.		30,360			31,203			9	%		10	%
Korea		14,459			13,502			4	%		4	%
Germany		22,563			23,646			7	%		8	%
Singapore		15,074			20,195			5	%		7	%
Taiwan		21,582			16,750			7	%		6	%
All others ⁽¹⁾		57,716			32,224			18	%		10	%
Total	$	322,006		$	304,085			100	%		100	%

	Number of Instruments		Notional Amount
	June 30, 2019	December 31, 2018	June 30, 2019		December 31, 2018
Interest rate swaps and collars	12	12	$	210,000	$	210,000

	Other Current Assets				Other Assets				Other Current Liabilities				Other Liabilities
	June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018
Interest rate swaps and collars	$	643	$	1,936	$	96	$	2,795	$	23	$	-	$	207	$	-

		~~June 30, 2019~~
~~Operating leases:~~
~~Operating lease ROU assets~~		~~$63,919~~

~~Current operating lease liabilities~~		~~12,268~~
~~Noncurrent operating lease liabilities~~		~~33,506~~
~~Total operating lease liabilities~~		~~$45,774~~

~~Finance leases:~~
~~Finance lease ROU assets~~		~~$3,396~~
~~Accumulated amortization~~		~~(1,436)~~
~~Finance lease ROU assets, net~~		~~$1,960~~

~~Current finance lease liabilities~~		~~$941~~
~~Non-current finance lease liabilities~~		~~593~~
~~Total finance lease liabilities~~		~~$1,534~~

~~Weighted average remaining lease term (in years):~~
~~Operating leases~~		~~4.8~~
~~Finance leases~~		~~1.7~~

~~Weighted average discount rate:~~
~~Operating leases~~		~~3.8%~~
~~Finance leases~~		~~3.6%~~

	March 31, 2020	December 31, 2019
Operating leases:
Operating lease ROU assets	$53,933	$57,427

Current operating lease liabilities	11,633	12,554
Noncurrent operating lease liabilities	24,713	27,545
Total operating lease liabilities	$36,346	$40,099

Finance leases:
Finance lease ROU assets	$2,507	$3,396
Accumulated amortization	(1,671)	(1,924)
Finance lease ROU assets, net	$836	$1,472

Current finance lease liabilities	$818	$903
Non-current finance lease liabilities	–	138
Total finance lease liabilities	$818	$1,041

Weighted average remaining lease term (in years):
Operating leases	4.3	4.4
Finance leases	1.0	1.3

Weighted average discount rate:
Operating leases	3.8%	3.8%
Finance leases	3.0%	3.0%

Property, plant and equipment, net	$	24.4
Inventories		3.6
Prepaid expenses and other		5.2
Goodwill		0.9
Deferred tax liabilities			1.0

	Percent of Net Sales
	Three Months Ended June 30,
	2019			2018
Net sales		100	%		100	%
Cost of goods sold		(62	)		(65	)
Gross profit		38			35
Total operating expense		23			23
Income from operations		15			12
Total other expense		-			-
Income before income taxes and noncontrolling interest		15			12
Income tax provision		(3	)		(4	)
Net income		12			8
Net income attributable to common stockholders		12			8

Description	Amount outstanding	Interest Rate	Maturity Date
Short-term debt:
Foreign credit lines	$~~15,454~~13,397	Libor or other similar indices plus a specified margin	Various during ~~2019~~2020 - ~~2020~~2021

Long-term debt
Notes payable to Bank of Taiwan	~~4,256~~4,135	Two-year savings rate ~~+0.1148%~~+1..3%	June 2033
Notes payable to CTBC Bank	~~15,325~~19,054	TAIBOR 3 month rate +.05%	May 2024
Notes payable to East Sun Bank	3,308	1-M deposit rate + 0.08%	December 2022
U.S. Credit ~~facility;~~facility:
Revolving portion	~~41,500~~-	Libor + a specified margin	October 2021
Term portion	~~112,000~~55,375	Libor + a specified margin	October 2021
Total long-term debt	~~173,081~~81,872
Less: Current portion of long-term debt	~~(29,988)~~(34,676)
Less: Unamortized debt issuance costs	~~(1,174)~~(1,185)
Total long-term debt, net of current portion	$~~141,919~~46,011

Number	Description	Form	Date of First Filing	Exhibit Number	Filed Herewith
3.1	Certificate of Incorporation, as amended	10-K	February 20, 2018	3.1
3.2	Amended By-laws of the Company as of January 6, 2016	8-K	January 11, 2016	3.1
4.1	Form of Certificate for Common Stock, par value $0.66 2/3 per share	S-3	August 25, 2005	4.1
10.1	Consent to Credit Agreement				X
31.1	Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X
31.2	Certification Pursuant to Rule 13a-14(a) /15d-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X
32.1*	Certification Pursuant to 18 U.S.C. 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				X
32.2*	Certification Pursuant to 18 U.S.C. 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				X
101.SCH	Inline XBRL Taxonomy Extension Schema				X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase				X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document				X
101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase				X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase				X
104	Cover Page Interactive Data File, formatted in Inline XBRL				X

	DIODES INCORPORATED
	(Registrant)

~~August 5, 2019~~May 11, 2020	By: /s/ Keh-Shew Lu
Date	KEH-SHEW LU
	President and Chief Executive Officer
	(Principal Executive Officer)



~~August 5, 2019~~May 11, 2020	By: /s/ Brett R. Whitmire
Date	BRETT R. WHITMIRE
	Chief Financial Officer
	(Principal Financial Officer)

Large accelerated filer

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Smaller reporting company

Emerging growth company