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

o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

(Exact name of registrant as specified in its charter)

Delaware		95-2039518
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

15660 North Dallas Parkway, Suite 850
Dallas, Texas		75248
(Address of principal executive offices)		(Zip code)

(972) 385-2810
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ      No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o      No o

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

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o     No þ

The number of shares of the registrant’s Common Stock outstanding as of August 4, 2009 was 42,489,550.

 

 

Table of Contents

		Page
Part I — Financial Information		3
Item 1 — Financial Statements		3
Consolidated Condensed Balance Sheets as of December 31, 2008 and June 30, 2009		3
Consolidated Condensed Statements of Operations for the Three and Six Months Ended June 30, 2008 and 2009		5
Consolidated Condensed Statements of Cash Flows for the Six Months Ended June 30, 2008 and 2009		6
Notes to Consolidated Condensed Financial Statements		7
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3 — Quantitative and Qualitative Disclosures About Market Risk		38
Item 4 — Controls and Procedures		38
Part II — Other Information		39
Item 1 — Legal Proceedings		39
Item 1A — Risk Factors		39
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds		39
Item 3 — Defaults Upon Senior Securities		39
Item 4 — Submission of Matters to a Vote of Security Holders		39
Item 5 — Other Information		39
Item 6 — Exhibits		40
Signature		41
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I — FINANCIAL INFORMATION

Item 1 — Financial Statements

DIODES INCORPORATED AND SUBSIDIARIES

ASSETS

		December 31,				June 30,
		2008				2009
		(As Adjusted)
CURRENT ASSETS
Cash and cash equivalents		$	103,496			$	109,486
Short-term investment securities			—				319,825
Accounts receivable, net			74,574				85,702
Inventories			99,118				79,784
Deferred income taxes, current			6,761				6,958
Prepaid expenses and other			15,578				11,637
Total current assets			299,527				613,392
LONG-TERM INVESTMENT SECURITIES			320,625				—
PROPERTY, PLANT AND EQUIPMENT, net			174,667				169,019
OTHER ASSETS
Goodwill			56,791				68,356
Intangible assets, net			35,928				37,833
Other			5,907				4,949
Total assets		$	893,445			$	893,549

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

DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS(cont’)

LIABILITIES AND EQUITY
(Unaudited)
(In thousands, except share data)

		December 31,				June 30,
		2008				2009
		(As Adjusted)
CURRENT LIABILITIES
Lines of credit		$	6,098			$	215,249
Accounts payable			47,561				44,029
Accrued liabilities			31,195				26,294
Income tax payable			358				4,374
Current portion of long-term debt			1,339				363
Current portion of capital lease obligations			377				349
Total current liabilities			86,928				290,658
LONG-TERM DEBT, net of current portion
Convertible senior notes			155,451				138,687
Long-term borrowings			217,146				3,563
CAPITAL LEASE OBLIGATIONS, net of current portion			1,854				1,808
DEFERRED INCOME TAXES, non-current			10,753				18,520
OTHER LONG-TERM LIABILITIES			22,935				48,238
Total liabilities			495,067				501,474
COMMITMENTS AND CONTINGENCIES			—				—
EQUITY
Diodes Incorporated stockholders’ equity
Preferred stock — par value $1.00 per share; 1,000,000 shares authorized; no shares issued or outstanding			—				—
Common stock — par value $0.66 2/3 per share; 70,000,000 shares authorized; 41,378,816 and 42,436,009 issued and outstanding at December 31, 2008 and June 30, 2009, respectively			27,586				28,291
Additional paid-in capital			167,964				185,134
Retained earnings			241,814				228,094
Accumulated other comprehensive loss			(48,439	)			(58,085	)
Total Diodes Incorporated stockholders’ equity			388,925				383,434
Noncontrolling interest			9,453				8,641
Total equity			398,378				392,075
Total liabilities and equity		$	893,445			$	893,549

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

DIODES INCORPORATED AND SUBSIDIARIES

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2008				2009				2008				2009
		(As Adjusted)								(As Adjusted)
NET SALES		$	116,018			$	103,898			$	211,598			$	181,948
COST OF GOODS SOLD			76,400				76,528				140,064				140,085
Gross profit			39,618				27,370				71,534				41,863
OPERATING EXPENSES
Selling, general and administrative			17,052				15,240				31,594				31,296
Research and development			4,832				5,385				8,406				10,660
Amortization of acquisition related intangible assets			237				1,118				471				2,209
Restructuring			—				(248	)			—				(149	)
Total operating expenses			22,121				21,495				40,471				44,016
Income (loss) from operations			17,497				5,875				31,063				(2,153	)
OTHER INCOME (EXPENSES)
Interest income			2,554				1,345				8,002				3,102
Interest expense			(2,207	)			(1,877	)			(3,828	)			(3,925	)
Amortization of debt discount			(2,691	)			(2,281	)			(5,325	)			(4,490	)
Other			(1,202	)			(275	)			(1,496	)			(12	)
Total other expenses			(3,546	)			(3,088	)			(2,647	)			(5,325	)
Income (loss) before income taxes and noncontrolling interest			13,951				2,787				28,416				(7,478	)
INCOME TAX PROVISION			1,762				5,156				2,980				5,553
NET INCOME (LOSS)			12,189				(2,369	)			25,436				(13,031	)
Less: NET INCOME attributable to noncontrolling interest			(675	)			(584	)			(1,279	)			(688	)
NET INCOME (LOSS) attributable to common stockholders		$	11,514			$	(2,953	)		$	24,157			$	(13,719	)
EARNINGS (LOSS) PER SHARE attributable to common stockholders
Basic		$	0.28			$	(0.07	)		$	0.60			$	(0.33	)
Diluted		$	0.27			$	(0.07	)		$	0.57			$	(0.33	)
Number of shares used in computation
Basic			40,616				41,587				40,431				41,368
Diluted			42,843				41,587				42,695				41,368

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

		Six Months Ended
		June 30,
		2008				2009
		(As Adjusted)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$	25,436			$	(13,031	)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation			16,465				20,785
Amortization of intangibles			466				2,286
Amortization of convertible bond issuance costs			467				343
Amortization of discount on convertible bond			5,325				4,490
Share-based compensation			5,133				4,684
Gain on disposal of property, plant and equipment			(37	)			(30	)
Gain on extinguishment of debt			—				(1,354	)
Investment gain recognized under equity method			—				53
Changes in operating assets:
Accounts receivable			(7,347	)			(10,037	)
Inventories			(16,652	)			22,624
Prepaid expenses and other current assets			(1,237	)			3,150
Deferred income taxes			(973	)			(35	)
Changes in operating liabilities:
Accounts payable			(3,502	)			(4,117	)
Accrued liabilities			(1,248	)			(7,274	)
Deferred income taxes			(2,077	)			1,480
Other liabilities			(104	)			(3,091	)
Income taxes payable			3,064				3,639
Net cash provided by operating activities		$	23,179			$	24,565
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash acquired		$	(152,934	)		$	(30	)
Acquired intangibles			(66	)			—
Purchases of securities			(3,963	)			—
Proceeds from sale of securities			6,760				800
Purchases of property, plant and equipment			(25,092	)			(9,375	)
Proceeds from sale of property, plant and equipment			45				93
Purchases of other assets			—				721
Net cash used in investing activities		$	(175,250	)		$	(7,791	)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances (repayments) on line of credit		$	16,463			$	(3,655	)
Net proceeds from issuance of common stock			1,147				99
Proceeds from long-term debt			165,000				—
Dividend distribution to noncontrolling interest			—				(1,500	)
Repayments of long-term debt			(1,062	)			(8,225	)
Repayments of capital lease obligations			(156	)			(193	)
Net cash provided by (used in) financing activities		$	181,392			$	(13,474	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS			632				2,690
INCREASE IN CASH AND CASH EQUIVALENTS			29,953				5,990
CASH AND CASH EQUIVALENTS, beginning of period			56,179				103,496
CASH AND CASH EQUIVALENTS, end of period		$	86,132			$	109,486
SUPPLEMENTAL CASH FLOW INFORMATION:
Non-cash financing activities:
Fair value of common stock issued for repayment of long-term debt		$	—			$	(13,236	)

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

DIODES INCORPORATED AND SUBSIDIARIES

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

Nature of Operations

          Diodes Incorporated and its subsidiaries (collectively, the “Company”) is a leading global designer, manufacturer and supplier of high-quality, application specific standard products within the broad discrete and analog semiconductor markets, serving the consumer electronics, computing, communications, industrial and automotive markets. These products include diodes, rectifiers, transistors, MOSFETs, protection devices, functional specific arrays, amplifiers and comparators, Hall effect sensors and temperature sensors, power management devices (including LED drivers), DC-DC switching and linear voltage regulators, voltage references, special function devices (including USB power switch, load switch, voltage supervisor and motor controllers) and silicon wafers used to manufacture these products. These products are sold primarily throughout North America, Asia and Europe.

Basis of Presentation

          The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.”) (“GAAP”) for interim financial information and with the instructions to Form 10-Q. They do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with GAAP for complete financial statements. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. 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 results of operations for the period presented have been included in the interim period. Operating results for the three and six months ended June 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. The consolidated condensed financial data at December 31, 2008 is derived from audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 and subsequently adjusted for a change in accounting principle on January 1, 2009. See Note B for additional information regarding the change in accounting principle. Subsequent events were evaluated through August 7, 2009, the date these consolidated condensed financial statements were issued.

          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 are based on full year forecasts. Such amounts are expensed in full in the year incurred.

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

Recently Issued Accounting Pronouncements

          In December 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) FAS 132R-1, Employers’ Disclosures about Postretirement Benefit Plan Assets. This pronouncement provides additional guidance regarding disclosures about plan assets of defined benefit pensions or other postretirement plans. FSP FAS 132R-1 is effective for financial statements issued for fiscal years beginning after December 15, 2009. The Company is currently evaluating the future impacts and required disclosures of this pronouncement.

          In April 2009, the FASB issued FSP FAS 107-1 and Accounting Principles Board (“APB”) 28-1, Interim Disclosures about Fair Value of Financial Instruments. These pronouncements amend FASB Statement of Financial Accounting Standards (“SFAS”) No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments, including method(s) and significant assumptions used to estimate the fair value in interim financial statements as well as in annual financial statements. FSP FAS 107-1 and APB 28-1 are effective for interim and annual periods ending after June 15, 2009. The Company adopted these pronouncements in the second quarter of 2009; they did not have a material impact on its consolidated financial statements.

          In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. This pronouncement provides additional guidance on determining whether a market for a financial asset is not active and a transaction is not distressed for fair value measurements under SFAS No. 157, Fair Value Measurements. FSP FAS 157-4 will be applied prospectively and is effective for

interim and annual periods ending after June 15, 2009. The Company adopted this pronouncement in the second quarter of 2009; it did not have a material impact on its consolidated financial statements.

          In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. These pronouncements are intended to provide greater clarity to investors about the credit and noncredit component of an other-than-temporary impairment (“OTTI”) event and to more effectively communicate when an OTTI event has occurred. FSP FAS 115-2 and FAS 124-2 apply to debt securities and require that the total OTTI be presented in the statement of earnings with an offset for the amount of impairment that is recognized in other comprehensive income, which is the noncredit component. Noncredit component losses are to be recorded in other comprehensive income if an investor can assess that (a) it does not have the intent to sell or (b) it is not more likely than not that it will have to sell the security prior to its anticipated recovery. FSP FAS 115-2 and FAS 124-2 are effective for interim and annual periods ending after June 15, 2009. FSP FAS 115-2 and FAS 124-2 will be applied prospectively with a cumulative effect transition adjustment as of the beginning of the period in which they are adopted. The Company adopted these pronouncements in the second quarter of 2009; they did not have a material impact on its consolidated financial statements.

          In April 2009, the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination that Arise from Contingencies. This pronouncement amends SFAS No. 141 (revised 2007), Business Combinations, to require that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value, in accordance with SFAS No. 157, Fair Value Measurements, if the fair value can be determined during the measurement period. FSP FAS 141(R)-1 is effective for business combinations occurring after December 31, 2008. The Company is currently evaluating the future impacts and required disclosures of this pronouncement.

          In May 2009, the FASB issued SFAS No. 165, Subsequent Events. This pronouncement is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, this pronouncement sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS No. 165 is effective for fiscal years and interim periods ended after June 15, 2009 and will be applied prospectively. The Company adopted this pronouncement in the second quarter of 2009; it did not have a material impact on its consolidated financial statements.

          In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment to SFAS No. 140. This pronouncement eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures in order to enhance information reported to users of financial statements by providing greater transparency about transfers of financial assets, including securitization transactions, and an entity’s continuing involvement in and exposure to the risks related to transferred financial assets. SFAS No. 166 is effective for fiscal years beginning after November 15, 2009. The Company is currently evaluating the future impacts and required disclosures of this pronouncement.

          In June 2009, the FASB issued SFAS No. 168, The “FASB Accounting Standards Codification” and the Hierarchy of Generally Accepted Accounting Principles. This pronouncement replaces SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, and establishes only two levels of GAAP, authoritative and non-authoritative. The FASB Accounting Standards Codification (the “ASC”) will become the source of authoritative, nongovernmental GAAP, except for rules and interpretive releases of the Securities and Exchange Commission (“SEC”), which are sources of authoritative GAAP for SEC registrants. All other non-grandfathered, non-SEC accounting literature not included in the ASC will become non-authoritative. This pronouncement is effective for financial statements for interim or annual reporting periods ending after September 15, 2009. The Company will begin to use the new guidelines and numbering system prescribed by the ASC when referring to GAAP in the third quarter of 2009. As the ASC is not intended to change or alter existing GAAP, the Company is currently evaluating the effect on financial statement disclosures as all future references to authoritative accounting literature will be referenced in accordance with the ASC and the Company believes it will not have any impact on its consolidated financial statements.

NOTE B — Change in Accounting Principle

          In accordance with the adoption of FSP APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement), the Company adjusted the December 31, 2008 consolidated condensed balance sheet and the consolidated condensed statement of operations for the three and six months ended June 30, 2008 and the consolidated condensed statement of cash flows for the six months ended June 30, 2008 to reflect the retrospective application of this pronouncement. This pronouncement clarifies that convertible debt instruments that may be settled in cash upon conversion are not addressed by paragraph 12 of Accounting Principles Board Opinion No. 14, Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants. FSP APB 14-1 also specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate. All adjustments were made

retrospectively as of the date of issuance of the Company’s 2.25% Convertible Senior Notes due 2026 (“Notes”) and therefore, the financial statements are presented as if the Notes have always been accounted for in accordance with this pronouncement. The material retrospective adjustments to the Company’s December 31, 2008 consolidated condensed balance sheet were to adjust; long-term debt from $183.5 million to $155.5 million; additional paid-in capital of approximately $34.3 million to reflect the initial recognition of the equity component, deferred taxes and debt issuance costs; deferred taxes associated with the convertible debt instrument; retained earnings to reflect the additional non-cash, pre-tax interest expense retrospectively recorded for 2006, 2007 and 2008 by approximately $1.7 million, $10.0 million and $10.7 million, respectively, and to reflect the $15.7 million pre-tax reduction to the gain on extinguishment of debt for the repurchase of $46.5 million par value Notes in December 2008. The material retrospective adjustments to the Company’s consolidated condensed statement of operations for the three and six months ended June 30, 2008 were to recognize the additional non-cash interest expense of approximately $2.7 million and $5.3 million, respectively, and the related tax effects to the tax provision. The retrospective adjustments to the Company’s consolidated condensed statement of cash flows for the six months ended June 30, 2008 were to adjust separate line items within cash flows from operating activities, which did not affect the original net reported amounts for operating activities, investing activities or financing activities. See Note N for additional information regarding FSP APB 14-1.

          In addition, in accordance with the adoption of SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51, the Company adjusted the December 31, 2008 consolidated condensed balance sheet to reflect the retrospective application of this pronouncement. This pronouncement established new standards governing the accounting for and reporting of noncontrolling interests (“NCIs”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this pronouncement indicate, among other things, that: NCIs (previously referred to as minority interests) be treated as a separate component of equity, not as a liability; increases and decreases in the parent’s ownership interest, that leaves control intact, be treated as equity transactions, rather than as step acquisitions or dilution gains or losses; and losses of a partially owned consolidated subsidiary be allocated to the NCIs even when such allocation might result in a deficit balance. This pronouncement also requires changes to certain presentation and disclosure requirements. The provisions of the standard are to be applied to all NCIs prospectively, except for the presentation and disclosure requirements, which are to be applied retrospectively to all periods presented. Upon adoption, NCIs of $9.5 million as of December 31, 2008 were reclassified to equity, a change from its previous classification between liabilities and stockholders’ equity.

          The adjustments made to the December 31, 2008 consolidated condensed balance sheet are as follows (in thousands):

		December 31,
		2008
						FSP APB 14-1				SFAS 160				Reclass
		As Reported				Adjustments				Adjustment				Adjustment				Adjusted
ASSETS
Deferred income taxes, current		$	3,994			$	2,767			$	—			$	—			$	6,761
Deferred income taxes, non-current			2,745				(13,498	)			—				10,753				—
Other assets			6,627				(720	)			—				—				5,907
LIABILITIES AND EQUITY
2.25% Convertible Senior Notes due 2026			183,500				(28,049	)			—				—				155,451
Deferred income taxes, non-current			—				—				—				10,753				10,753
Noncontrolling interest (previously referred to as minority interests)			9,453				—				(9,453	)			—				—
Additional paid-in capital			133,701				34,263				—				—				167,964
Retained earnings			259,479				(17,665	)			—				—				241,814
Noncontrolling interest			—				—				9,453				—				9,453

          The adjustments made to the three and six months ended June 30, 2008 consolidated condensed statement of operations are as follows (in thousands, except per share data):

		Three Months Ended June 30, 2008												Six Months Ended June 30, 2008
		As				APB 14-1								As				APB 14-1
		Reported				Adjustments				Adjusted				Reported				Adjustments				Adjusted
Interest expense		$	(2,285	)		$	78			$	(2,207	)		$	(3,983	)		$	155			$	(3,828	)
Amortization of debt discount			—				(2,691	)			(2,691	)			—				(5,325	)			(5,325	)
Income tax provision			2,781				(1,019	)			1,762				4,996				(2,016	)			2,980
Net income attributable to common stockholders			13,108				(1,594	)			11,514				27,311				(3,154	)			24,157
Earnings per share attributable to common stockholders
Basic		$	0.32			$	(0.04	)		$	0.28			$	0.68			$	(0.08	)		$	0.60
Diluted		$	0.31			$	(0.04	)		$	0.27			$	0.64			$	(0.07	)		$	0.57
Number of shares used in computation
Basic			40,616								40,616				40,431								40,431
Diluted			42,843								42,843				42,695								42,695

          Functional Currencies and Foreign Currency Translation - The functional currency for most of our international operations is the U.S. dollar, while some subsidiaries use their local currency as their functional currency. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are recorded as other income (expense) in the consolidated condensed statements of operations. The Company had foreign exchange transaction losses of approximately $1.2 million and $2.0 million for the three months ended June 30, 2008 and 2009, respectively and approximately $1.7 million and $3.4 million for the six months ended June 30, 2008 and 2009, respectively.

          Comprehensive Income (Loss) - GAAP generally requires that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities are reported as separate components of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income or loss. As of June 30, 2009, the components of other comprehensive income or loss include foreign currency translation adjustments, unrealized gain or loss on defined benefit plan and foreign currency loss on forward contracts. Accumulated other comprehensive loss was $58.1 million at June 30, 2009.

          Total comprehensive income (loss) for the three and six months ended June 30, 2008 and 2009 is as follows (in thousands):

Total Comprehensive Income (Loss)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2008				2009				2008				2009
Net income (loss)		$	12,189			$	(2,369	)		$	25,436			$	(13,031	)
Translation adjustment			1,622				15,831				4,681				13,410
Unrealized loss on securities			(5,031	)			—				(16,524	)			—
Unrealized loss on defined benefit plan, net of tax			(8,540	)			(19,046	)			(8,540	)			(26,287	)
Foreign currency adjustments on forward contracts, net of tax			425				1,667				425				3,231
Comprehensive income (loss)			665				(3,917	)			5,478				(22,677	)
Comprehensive income attributable to noncontrolling interest			675				584				1,279				688
Total comprehensive income (loss) attributable to common stockholders		$	(10	)		$	(4,501	)		$	4,199			$	(23,365	)

NOTE D — Hedging

          As of June 30, 2009, the Company had forward contracts, primarily relating to its United Kingdom (“U.K.”) operations, of approximately $6.6 million that mature monthly over the next six months. For the six months ended June 30, 2009, the Company had deferred net unrealized gains on outstanding forward exchange contracts recorded within other comprehensive income (loss) (“OCI”) of $3.2 million (net of tax). For the six months ended June 30, 2009, the Company had no material ineffective hedges because forward foreign currency contract amounts were less than the specifically identified anticipated transactions.

          The following details the location and amount of derivative instrument fair values in the consolidated condensed balance sheets as of June 30, 2009 (in thousands):

Asset Derivatives

Liability Derivatives

Balance sheet

Balance sheet

location

Fair value

location

Fair value

Derivatives designated as hedging instruments under SFAS 133:

Foreign exchange contracts

Other assets

$

—

Other liabilities

$

745

          The following details the location and amount of gains and losses on derivative instruments in the consolidated condensed statement of operations for the six months ended June 30, 2009 (in thousands):

Amount of

Gain (Loss)

Location of Gain (Loss)

Recognized in

Amount of Gain

Recognized in

Income on

Amount of

Amount of Gain (Loss)

Income on

Derivative

Gain (Loss)

Location of Gain

Reclassified

Derivative

(Ineffective

Recognized

(Loss)

from

(Ineffective

Portion and

in OCI on

Reclassified from

Accumulated

Portion and Amount

Amount

Derivatives in SFAS 133

Derivative

Accumulated OCI into

OCI into Income

Excluded from

Excluded from

Cash Flow Hedging

(Effective

Income (Effective

(Effective

Effectiveness

Effectiveness

Relationships

Portion)

Portion)

Portion)

Testing)

Testing)

Foreign exchange contracts

$

785

Other income (expense)

$

(2,446

)

Other income (expense)

$

—

          Basic net earnings (loss) per share is calculated by dividing net earnings by the weighted-average number of shares of common stock outstanding during the period. Diluted net earnings per share is calculated similarly but includes potential dilution from the exercise of stock options and stock awards, except when the effect would be anti-dilutive.

          The shares used in the computation of basic and diluted earnings (loss) per common share are as follows (in thousands, except per share data):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2008				2009				2008				2009
BASIC
Weighted average number of common shares outstanding used in computing basic earnings (loss) per share			40,616				41,587				40,431				41,368
Net income (loss) attributable to common stockholders		$	11,514			$	(2,953	)		$	24,157			$	(13,719	)
Earnings (loss) per share attributable to common stockholders		$	0.28			$	(0.07	)		$	0.60			$	(0.33	)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2008				2009				2008				2009
DILUTED
Weighted average number of common shares outstanding used in computing basic earnings (loss) per share			40,616				41,587				40,431				41,368
Add: Assumed exercise of stock options and stock awards			2,227				—				2,264				—
			42,843				41,587				42,695				41,368
Net income (loss) attributable to common stockholders		$	11,514			$	(2,953	)		$	24,157			$	(13,719	)
Earnings (loss) per share attributable to common stockholders		$	0.27			$	(0.07	)		$	0.57			$	(0.33	)

          There are no shares in the earnings per share calculation related to the Notes outstanding as our average stock price did not exceed the conversion price of $39.00 and, therefore, there is no conversion spread. For the three and six months ended June 30, 2009, the Company has excluded the assumed exercise of stock options and stock awards from the calculation of diluted loss per share as these securities are anti-dilutive.

NOTE F — Fair Value Measurements

          Financial assets and liabilities carried at fair value as of June 30, 2009 are classified in the following table (in thousands):

Description		Level 1				Level 2				Level 3				Total
Short-term — trading securities		$	—			$	—			$	293,056			$	293,056
Short-term — put option			—				—				26,769				26,769
Total		$	—			$	—			$	319,825			$	319,825

          There has been no change in the balances for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 30, 2009.

          Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets and financial liabilities measured at fair value on a non-recurring basis were not significant at June 30, 2009.

NOTE G — Short-Term Investments

          As of June 30, 2009, the Company had $319.8 million invested in auction rate securities (“ARS”), classified as trading securities. In connection with the settlement with UBS AG, the Company was given the option to “put” the ARS portfolio back to UBS AG at any time between June 30, 2010 and July 2, 2012 at par value. Upon settlement, the Company elected the fair value option for the “put” option and recorded an asset and a gain for the fair value of the “put” option. The Company classified the “put” option as a short-term investment as it is a free standing instrument tied to the ARS portfolio, which are also classified as short-term investments.

          Short-term investments at June 30, 2009 are as follows (in thousands):

						Cumulative				Cumulative
						Realized				Realized
As of June 30, 2009		Cost Basis				Gains				Losses				Fair Value
Short-term investments
Short-term — trading securities		$	319,825			$	—			$	(26,769	)		$	293,056
Short-term — put option			—				26,769				—				26,769
Total short-term investments		$	319,825			$	26,769			$	(26,769	)		$	319,825

          The Company’s ARS are primarily backed by student loan association bonds. None of the Company’s investments are collateralized mortgage obligations or are any other type of mortgage-backed or real estate-backed securities. The Company continues

to earn interest on its ARS at a weighted average rate of 1.6% of as June 30, 2009, which it is currently collecting. The weighted average maximum contractual default rate is 17.3%.

          As of June 30, 2009, approximately 85.7%, or $274.0 million, of the $319.8 million par value ARS are collateralized by higher education funded student loans that are supported by the federal government as part of the Federal Family Education Loan Program (“FFELP”). The following table shows a natural grouping of the FFELP guaranteed securities, as well as the percentage of the ARS portfolio guaranteed by FFELP (in thousands).

% of FFELP guaranty		Par Value				% of Total
Greater than 99.0%		$	194,200				60.8	%
Between 81.2% and 82.1%			86,825				27.1	%
50.50%			17,000				5.3	%
10.00%			3,800				1.2	%
Non-FFELP guaranteed			18,000				5.6	%
Total		$	319,825				100.0	%

          As of June 30, 2009, the Company’s portfolio of ARS was valued using a valuation model that relies exclusively on Level 3 inputs. The discount on the total ARS portfolio was 8.4% of par value, or a $26.8 million loss.

NOTE H — Inventories

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

		December 31,				June 30,
		2008				2009
Raw materials		$	28,690			$	23,379
Work-in-progress			23,436				22,804
Finished goods			46,992				33,601
Total		$	99,118			$	79,784

NOTE I — Goodwill and Other Intangible Assets

          Changes in goodwill for the six months ended June 30, 2009 are as follows (in thousands):

Balance at December 31, 2008		$	56,791
Acquisitions and purchase price adjustments			9,587
Currency exchange and other			1,978
Balance at June 30, 2009		$	68,356

          Intangible assets at June 30, 2009 are as follows (in thousands):

Balance at June 30, 2009:
Intangible assets subject to amortization:
Gross carrying amount		$	48,616
Accumulated amortization			(7,525	)
Currency exchange and other			(5,893	)
Net value			35,198
Intangible assets with indefinite lives:
Gross carrying amount			3,162
Currency exchange and other			(527	)
Total			2,635
Total intangible assets, net		$	37,833

          Amortization expense related to intangible assets subject to amortization was $0.3 million and $1.1 million for the three months ended June 30, 2008 and 2009, respectively.

          Amortization expense related to intangible assets subject to amortization was $0.5 million and $2.2 million for the six months ended June 30, 2008 and 2009, respectively.

NOTE J — Income Tax Provision

          Income tax expense of $5.2 million and $5.6 million was recorded for the three and six months ended June 30, 2009, respectively. This resulted in an effective tax rate of (74.3%) for the six months ended June 30, 2009, as compared to 10.5% in the same period of last year and compared to (7.6)% for the full year of 2008. The Company’s effective tax rate for the six months ended June 30, 2009 was impacted by the non-cash income tax expense associated with repatriating earnings of foreign subsidiaries to the U.S. parent. In addition, amounts for the three and six months ended June 30, 2008 and full year 2008 have been retrospectively adjusted for the adoption of APB 14-1. See Note B for this retrospective treatment and the impacts on previously issued financial statements.

          Generally, income taxes are recorded based upon estimated annual effective income tax rates. Other methods may be used in situations where small changes in the company’s estimated annual income could produce large changes in the estimated effective income tax rates used for interim financial reporting. Under these circumstances, the Company has elected to use its actual year-to-date effective income tax rate.

          For the six months ended June 30, 2009, the Company reported domestic and foreign pre-tax income (loss) of approximately $(21.6) million and $14.1 million, respectively. For the six month ended June 30, 2008, the Company reported domestic and foreign pre-tax income (loss) of approximately $(6.1) million and $39.7 million, respectively.

          The impact of tax holidays decreased the Company’s tax expense by approximately $3.2 million and $2.6 million for the six months ended June 30, 2008 and 2009, respectively. The benefit of the tax holidays on basic and diluted earnings per share for the six months ended June 30, 2008 was $0.08 and $0.07, respectively. The benefit of the tax holidays on both basic and diluted earnings per share for the six months ended June 30, 2009 was $0.06.

          Funds repatriated from foreign subsidiaries to the U.S. may be subject to federal and state income taxes. During the six months ended June 30, 2009, the Company repatriated approximately $28.5 million of accumulated earnings from one of its Chinese subsidiaries, resulting in additional non-cash federal and state income tax expense of approximately $10.6 million. The Company intends to permanently reinvest overseas all of its remaining earnings from its foreign subsidiaries. The Company determined that it was more likely than not that a portion of its federal foreign tax credit carryforwards would expire before they could be utilized. Accordingly, the Company has recorded valuation allowances of $5.6 million and $8.6 million as of December 31, 2008 and June 30, 2009.

          The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for tax years before 2006. 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 FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes reserve for any adjustments that may result from future tax audits. The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits in income tax expense. As of June 30, 2009, the gross amount of unrecognized tax benefits was approximately $4.4 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. These changes may be the result of settlement of ongoing audits or competent authority proceedings. At this time, an estimate of the range of the reasonably possible outcomes cannot be determined.

NOTE K — Share-Based Compensation

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

		Three Months Ended June 30,								Six Months Ended June 30,
		2008				2009				2008				2009
Cost of sales		$	128			$	101			$	250			$	182
Selling and administrative expense			2,214				1,894				4,415				3,982
Research and development expense			241				260				468				522
Total share-based compensation expense		$	2,583			$	2,255			$	5,133			$	4,686

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

          The total intrinsic value (actual gain) of options exercised during the six months ended June 30, 2009 was approximately $0.5 million. The total net cash proceeds received from stock option exercises during the six months ended June 30, 2009 was $0.1 million. Stock option expense for the three months ended June 30, 2008 and 2009 was $1.2 million and $0.8 million, respectively. Stock option expense for the six months ended June 30, 2008 and 2009 was $2.5 million and $1.5 million, respectively.

          A summary of the stock option plans as of June 30, 2009 are as follows:

										Weighted
						Weighted				Average				Aggregate
						Average				Remaining				Intrinsic
		Shares				Exercise				Contractual				Value
Stock options		(000)				Price				Term (yrs)				($000)
Outstanding at January 1, 2009			3,895			$	11.61				5.3			$	2,327
Granted			461				15.05				—				—
Exercised			(62	)			5.73				—				538
Forfeited or expired			(46	)			14.76				—				—
Outstanding at June 30, 2009			4,248			$	12.03				5.4			$	22,464
Exercisable at June 30, 2009			3,418			$	10.11				4.5			$	22,192

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

          As of June 30, 2009, total unrecognized stock-based compensation expense related to unvested stock options, net of forfeitures, was approximately $9.8 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 3.2 years.

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

          The total fair value of restricted stock awards vested during the six months ended June 30, 2009 was approximately $6.4 million. Share grant expense for the three months ended June 30, 2008 and 2009 was $1.3 million and $1.4 million, respectively. Share grant expense for the six months ended June 30, 2008 and 2009 was $2.7 million and $3.1 million, respectively.

          A summary of the status of the Company’s non-vested share grants as of June 30, 2009 are as follows:

						Weighted-				Aggregate
						Average				Intrinsic
		Shares				Grant-Date				Value
Share Grants		(000)				Fair Value				($000)
Nonvested at January 1, 2009			846			$	21.41			$	5,125
Granted			151				14.78				—
Vested			(390	)			16.34				5,043
Forfeited			(27	)			25.87				—
Nonvested at June 30, 2009			580			$	22.89			$	9,076

          As of June 30, 2009, total unrecognized share-based compensation expense related to non-vested stock awards, net of forfeitures, was approximately $12.9 million, before income taxes and is expected to be recognized over a weighted average period of approximately 2.8 years.

NOTE L — Segment Information and Enterprise-Wide Disclosure

          For financial reporting purposes, the Company operates in a single segment, standard semiconductor products, through the Company’s various manufacturing and distribution facilities. The Company aggregated its products since the products are similar and have similar economic characteristics, and the products are similar in production process and share the same customer type.

          The Company’s primary operations include the domestic operations in Asia, North America and Europe.

          Revenues are attributed to geographic areas based on the location of subsidiaries producing the revenues (in thousands):

Three Months Ended						North								Consolidated
June 30, 2008		Asia				America				Europe				Segments
Total sales		$	94,675			$	30,558			$	5,248			$	130,481
Inter-company sales			(6,814	)			(7,649	)			—				(14,463	)
Net sales		$	87,861			$	22,909			$	5,248			$	116,018
Property, plant and equipment		$	107,323			$	26,311			$	49,781			$	183,415
Assets		$	344,715			$	386,095			$	223,122			$	953,932

Three Months Ended						North								Consolidated
June 30, 2009		Asia				America				Europe				Segments
Total sales		$	86,483			$	19,678			$	25,034			$	131,195
Inter-company sales			(6,252	)			(4,969	)			(16,076	)			(27,297	)
Net sales		$	80,231			$	14,709			$	8,958			$	103,898
Property, plant and equipment		$	97,652			$	30,888			$	40,479			$	169,019
Assets		$	318,916			$	405,233			$	169,400			$	893,549

Six Months Ended						North								Consolidated
June 30, 2008		Asia				America				Europe				Segments
Total sales		$	175,555			$	60,486			$	5,248			$	241,289
Inter-company sales			(13,771	)			(15,920	)			—				(29,691	)
Net sales		$	161,784			$	44,566			$	5,248			$	211,598
Property, plant and equipment		$	107,323			$	26,311			$	49,781			$	183,415
Assets		$	344,715			$	386,095			$	223,122			$	953,932

Six Months Ended						North								Consolidated
June 30, 2009		Asia				America				Europe				Segments
Total sales		$	147,922			$	36,674			$	44,450			$	229,046
Inter-company sales			(9,693	)			(10,117	)			(27,288	)			(47,098	)
Net sales		$	138,229			$	26,557			$	17,162			$	181,948
Property, plant and equipment		$	97,652			$	30,888			$	40,479			$	169,019
Assets		$	318,916			$	405,233			$	169,400			$	893,549

Geographic Information

          Revenues were derived from (billed to) customers located in the following countries. “All Others” represents countries with less than 10% of the total revenues each (in thousands):

		Net Sales
		for the Three Months								Percentage of
		Ended June 30,								Net Sales
		2008				2009				2008				2009
China		$	34,983			$	30,486				30.2	%			29.3	%
Taiwan			33,433				31,286				28.8	%			30.1	%
United States			21,923				17,370				18.9	%			16.7	%
Korea			5,832				6,792				5.0	%			6.5	%
Germany			3,865				3,623				3.3	%			3.5	%
England			3,779				3,320				3.3	%			3.2	%
Singapore			4,099				2,878				3.5	%			2.8	%
All Others			8,104				8,143				7.0	%			7.9	%
Total		$	116,018			$	103,898				100.0	%			100.0	%

		Net Sales
		for the Six Months								Percentage of
		Ended June 30,								Net Sales
		2008				2009				2008				2009
China		$	61,085			$	52,843				28.9	%			29.0	%
Taiwan			66,048				52,729				31.2	%			29.0	%
United States			41,239				31,328				19.5	%			17.2	%
Korea			11,090				11,786				5.2	%			6.5	%
Germany			5,613				8,086				2.7	%			4.4	%
England			6,000				7,100				2.8	%			3.9	%
Singapore			6,867				4,948				3.2	%			2.7	%
All Others			13,656				13,128				6.5	%			7.3	%
Total		$	211,598			$	181,948				100.0	%			100.0	%

          Zetex Acquisition - On June 9, 2008, the Company completed the acquisition of all the outstanding ordinary capital stock of Zetex, a company incorporated under the laws of England and Wales. The Zetex shareholders received 85.45 pence in cash per ordinary share, valuing the fully diluted share capital of Zetex at approximately $176.1 million (based on a USD:GBP exchange rate of 1.9778), excluding acquisition costs, fees and expenses

          As consideration for Zetex, the Company paid the following (in thousands):

Purchase price (cost of shares)		$	176,138
Acquisition related costs			4,054
Total purchase price		$	180,192

          In addition, in order to finance the acquisition, the Company entered into a margin loan agreement with UBS Financial Services Inc. for $165 million, collateralized by the Company’s ARS portfolio. On November 4, 2008, the Company entered into a no net cost credit line (“no net cost loan”)with UBS BANK USA, which replaced the margin loan.

          The results of operations of the Zetex acquisition have been included in the consolidated financial statements from June 1, 2008. The purpose of this acquisition was to create revenue, operating and cost synergies and to enhance the Company’s leadership in discrete and analog solutions. In addition, the Company believes the acquisition will strengthen and broaden the Company’s product offerings, including entry into the light-emitting diode (“LED”) lighting and automotive markets and expand the Company’s geographical footprint in the European markets.

          The following summarizes the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):

		Revised
		purchase price
		allocation as of				Changes in				Revised purchase
		March 31,				purchase price				price allocation on
		2009				allocation				acquisition date
Assets acquired:
Accounts receivable, net		$	13,445			$	—			$	13,445
Inventory			35,991				—				35,991
Prepaid expenses and other current assets			4,363				—				4,363
Property, plant and equipment, net			52,045				—				52,045
Other long-term assets			136				—				136
Intangible assets			48,274				—				48,274
Goodwill			49,714				1,631				51,345
Total assets acquired		$	203,968			$	1,631			$	205,599
Liabilities assumed:
Accounts payable		$	6,057			$	—			$	6,057
Accrued expenses and other liabilities			16,806				1,172				17,978
Pension liability			10,873				—				10,873
Deferred tax liabilities			13,649				—				13,649
Other liabilities			3,846				—				3,846
Total liabilities assumed			51,231				1,172				52,403
Total net assets acquired		$	152,737			$	459			$	153,196