29002--2/26/2009--DIODES_INC

related topics

{customer, product, revenue}

{acquisition, growth, future}

{stock, price, share}

{provision, law, control}

{tax, income, asset}

{product, market, service}

{operation, international, foreign}

{stock, price, operating}

{control, financial, internal}

{cost, operation, labor}

{cost, contract, operation}

{debt, indebtedness, cash}

{regulation, change, law}

{operation, natural, condition}

{financial, litigation, operation}

{competitive, industry, competition}

{property, intellectual, protect}

{product, liability, claim}

{personnel, key, retain}

{system, service, information}

{loss, insurance, financial}

{cost, regulation, environmental}

{capital, credit, financial}

We receive a significant portion of our net sales from a single customer. In addition, this customer is also our largest external supplier and is a related party. The loss of this customer or supplier could harm our business and results of operations. Delays in initiation of production at new facilities, implementing new production techniques or resolving problems associated with technical equipment malfunctions could adversely affect our manufacturing efficiencies. We are and will continue to be under continuous pressure from our customers and competitors to reduce the price of our products, which could adversely affect our growth and profit margins. Our customers require our products to undergo a lengthy and expensive qualification process without any assurance of product sales Our customer orders are subject to cancellation or modification usually with no penalty. High volumes of order cancellation or reductions in quantities ordered could adversely affect our results of operations and financial condition. Production at our manufacturing facilities could be disrupted for a variety of reasons, which could prevent us from producing enough of our products to maintain our sales and satisfy our customers demands. New technologies could result in the development of new products by our competitors and a decrease in demand for our products, and we may not be able to develop new products to satisfy changes in demand, which could result in a decrease in net sales and loss of market share. We may be adversely affected by any disruption in our information technology systems. We may be subject to claims of infringement of third-party intellectual property rights or demands that we license third-party technology, which could result in significant expense and reduction in our intellectual property rights. We depend on third-party suppliers for timely deliveries of raw materials, parts and equipment, as well as finished products from other manufacturers, and our results of operations could be adversely affected if we are unable to obtain adequate supplies in a timely manner. If we do not succeed in continuing to vertically integrate our business, we will not realize the cost and other efficiencies we anticipate and our ability to compete, profit margins and results of operations may suffer. Part of our growth strategy involves identifying and acquiring companies with complementary product lines or customers. We may be unable to identify suitable acquisition candidates or consummate desired acquisitions and, if we do make any acquisitions, we may be unable to successfully integrate any acquired companies with our operations. We are subject to many environmental laws and regulations that could affect our operations or result in significant expenses. Our products may be found to be defective and, as a result, product liability claims may be asserted against us, which may harm our business and our reputation with our customers. We may fail to attract or retain the qualified technical, sales, marketing and management personnel required to operate our business successfully. We may not be able to maintain our growth or achieve future growth and such growth may place a strain on our management and on our systems and resources. Our business may be adversely affected by obsolete inventories as a result of changes in demand for our products and change in life cycles of our products. If OEMs do not design our products into their applications, a portion of our net sales may be adversely affected. We are subject to interest rate risk that could have an adverse effect on our cost of working capital and interest expenses. We had a significant amount of debt following the offering of convertible notes. Our substantial indebtedness could adversely affect our business, financial condition and results of operations and our ability to meet our payment obligations under the notes and or other debt. Our Auction Rate Securities ( ARS ) are currently illiquid and we cancelled our bank credit facility in the U.S.; therefore, we must rely solely upon existing cash reserves, available foreign credit facilities and funds from existing operations to finance future operations. UBS AG may not honor its part of the settlement agreement with us to purchase our entire ARS portfolio at any time beginning from June 30, 2010 to July 2, 2012 at par value. UBS BANK USA ( UBS Bank ) may demand full or partial repayment of our no net cost loan with the UBS Bank at any time at UBS Bank s sole option and without cause, and UBS Financial Services Inc. may be unable to provide us any alternative financing on substantially same terms and conditions as those of the no net cost loan. The value of our benefit plan assets and liabilities is based on estimates and assumptions, which may prove inaccurate. Due to the recent and ongoing fluctuations in the United Kingdom s equity markets and bond markets, 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 results of operations and profitability. There are risks associated with our acquisition of Zetex. If we fail to maintain an effective system of internal controls or discover material weaknesses in our internal controls over financial reporting, we may not be able to report our financial results accurately or detect fraud, which could harm our business and the trading price of our Common Stock. Our management certification and auditor attestation regarding the effectiveness of our internal control over financial reporting as of December 31, 2008 excluded the operations of Zetex. If we are not able to integrate Zetex operations into our internal control over financial reporting, our internal control over financial reporting may not be effective. Terrorist attacks, or threats or occurrences of other terrorist activities whether in the United States or internationally may affect the markets in which our Common Stock trades, the markets in which we operate and our profitability. RISKS RELATED TO OUR INTERNATIONAL OPERATIONS Our international operations subject us to risks that could adversely affect our operations. We have significant operations and assets in China, Taiwan, Hong Kong and England and, as a result, will be subject to risks inherent in doing business in those jurisdictions, which may adversely affect our financial performance. We could be adversely affected by violations of the United States Foreign Corrupt Practices Act and similar worldwide anti-bribery laws. We are subject to foreign currency risk as a result of our international operations. 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 our foreign subsidiaries to the United States may be subject to U.S. income taxes, thus reducing our net income. RISKS RELATED TO OUR COMMON STOCK Variations in our quarterly operating results may cause our stock price to be volatile. We may enter into future acquisitions and take certain actions in connection with such acquisitions that could affect the price of our Common Stock. Our directors, executive officers and significant stockholders hold a substantial portion of our Common Stock, which may lead to conflicts with other stockholders over corporate transactions and other corporate matters. 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. Conversion of our convertible senior notes will dilute the ownership interest of existing stockholders, including holders who had previously converted their notes. The repurchase rights and the increased conversion rate triggered by a make-whole fundamental change could discourage a potential acquirer. Anti-takeover effects of certain provisions of Delaware law and our Certificate of Incorporation and Bylaws Section 203 of Delaware General Corporation Law

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29002--2/26/2009--DIODES_INC_/DEL/