DIODES INC /DEL/

Previous wording

We currently have a floating rate debt that is subject to interest rate changes. See “Liquidity and Capital Resources” below and Note 8 of “Notes to Consolidated Financial Statements” of this Annual Report for additional information. A rise in interest rates could have an adverse impact upon our cost of working capital and our interest expense. Based on our debt balances at December 31, 2024, an increase or decrease in interest rates by 1.0% for the year on our long-term debt would increase or decrease our annual interest rate expense by approximately $0.2 million.

Current wording

We currently have a floating rate debt that is subject to interest rate changes. See “Liquidity and Capital Resources” below and Note 8 of “Notes to Consolidated Financial Statements” of this Annual Report for additional information. A rise in interest rates could have an adverse impact upon our cost of working capital and our interest expense. Based on our debt balances at December 31, 2025, an increase or decrease in interest rates by 1.0% for the year on our long-term debt would increase or decrease our annual interest rate expense by approximately $0.6 million.

Previous wording

We may have a significant amount of debt and substantial debt service requirements on our borrowings, including our credit facilities with various financial institutions worldwide. As of December 31, 2024, $20.7 million in long-term debt was outstanding. In addition we have short-term foreign credit facilities with borrowing capacities of approximately $146.0 million with an unused amount of $114.0 million.

Current wording

We may have a significant amount of debt and substantial debt service requirements on our borrowings, including our credit facilities with various financial institutions worldwide. As of December 31, 2025, $25.7 million in long-term debt was outstanding. In addition we have short-term foreign credit facilities with borrowing capacities of approximately $150.3 million with an unused amount of $119.6 million.

Previous wording

The Chinese government has provided various incentives to technology companies, including our manufacturing facilities located in Chengdu and Shanghai, China, in order to encourage development of the high-tech industry. These incentives include reduced tax rates and other measures. As a result, we are entitled to a preferential enterprise income tax rate of 15% so long as our manufacturing facilities continue to maintain their High and New Technology Enterprise (“HNTE”) status. If we were to no longer meet the HNTE requirements, our statutory tax rate for our approved Shanghai facilities would increase to 25% for any period in which an audit shows we were not compliant, which could adversely affect our operating results and financial condition. Two of our manufacturing facilities and one of our wafer fabrication facilities located in Shanghai were approved for HNTE status for the tax years 2024-2026 and continue to qualify for the 15% tax rate. The Company expects to continue to meet HNTE requirements in future years. HNTE qualification requires, but is not limited to, metrics based on China research and development expenditures as well as research and development headcount and overall college-degreed headcount. Any prior years that have already been approved are subject to audit requirements. If we were to no longer meet the HNTE requirements, our statutory tax rate for our approved Shanghai facilities would increase to 25% for any period in which an audit shows we were not compliant, which could adversely affect our operating results and financial condition.

Current wording

The Chinese government has provided various incentives to technology companies to encourage development of the high-tech industry. We have three manufacturing facilities located in China that were approved for High and New Technology Enterprise (“HNTE”) status for the tax years 2024-2026 and one manufacturing facility approved for the tax years 2025-2027. As a result, we are entitled to a preferential enterprise income tax rate of 15% and other measures so long as our manufacturing facilities continue to maintain their HNTE status. If we were to no longer meet the HNTE requirements, our statutory tax rate for our approved China facilities would increase to 25% for any period in which an audit shows we were not compliant, which could adversely affect our operating results and financial condition. The Company expects to continue to meet HNTE requirements in future years. HNTE qualification requires, but is not limited to, metrics based on China research and development expenditures as well as research and development headcount and overall college-degreed headcount. Any prior years that have already been approved are subject to audit requirements.

Previous wording

We have qualified for tax incentives offered in the Go West Initiative (“Go West”), where companies are entitled to a preferential income tax rate of 15% for doing business in western China. If we were to no longer meet the Go West requirements, our statutory tax rate for this joint venture would increase to 25%, which could adversely affect our operating results and financial condition.

Current wording

We have qualified for tax incentives offered in the Go West Initiative (“Go West”), where companies are entitled to a preferential income tax rate of 15% for doing business in western China. If we were to no longer meet the Go West requirements, our statutory tax rate on applicable income would increase to 25%, which could adversely affect our operating results and financial condition.

Previous wording

The impact of our HNTE and Go West status, collectively called tax holidays, decreased our tax expense by approximately $1.1 million, $0.7 million, and $0.2 million for the twelve months ended December 31, 2024, 2023, and 2022, respectively. The benefit of the tax holidays on basic and diluted earnings per share for the twelve months ended December 31, 2024, 2023, and 2022 was approximately $0.02, $0.02, and $0.00, respectively.

Current wording

Exclusive of one-time deferred tax charges of $0.9 million and $1.6 million for the twelve months ended December 31, 2025 and 2024, the impact of tax holidays decreased our tax expense by approximately $1.3 million, $1.1 million, and $0.7 million for the twelve months ended December 31, 2025, 2024, and 2023, respectively. There were no one-time deferred tax charges for the twelve months ended December 31, 2023. Exclusive of the deferred tax charges, the benefit of the tax holidays on basic and diluted earnings per share was $0.03, $0.02, and $0.02 for the twelve months ended December 31, 2025, 2024, and 2023, respectively.

Previous wording

As of December 31, 2024, the benefit obligation of the Plan was approximately $95.6 million and the total assets in the Plan were approximately $88.3 million. Therefore, the Plan was underfunded by approximately $7.3 million. The difference between Plan obligations and assets, or the funded status of the Plan, is a significant factor in determining the net periodic benefit costs of the Plan and the ongoing funding requirements of the Plan.

Current wording

As of December 31, 2025, the benefit obligation of the Plan was approximately $98.6 million and the total assets in the Plan were approximately $97.4 million. Therefore, the Plan was underfunded by approximately $1.2 million. The difference between Plan obligations and assets, or the funded status of the Plan, is a significant factor in determining the net periodic benefit costs of the Plan and the ongoing funding requirements of the Plan.

Previous wording

The Plan’s trustees are required to review the funding position every three years. An actuarial valuation was performed as of March 31, 2022, resulting in a deficit of approximately GBP 20 million (approximately $24 million based on a GBP: USD exchange rate of 1:1.2). As a result of this valuation we have agreed to a revised schedule of contributions of GBP 2.0 million (approximately $2.4 million based on a GBP: USD exchange rate of 1:1.2) to be paid annually with effect from January 1, 2023 to address the deficit revealed by the valuation (with the first payment made by December 31, 2023 through December 31, 2028). A final payment of GBP 1.5 million (approximately $1.8 million based on a GBP: USD rate of 1:1.2) will be made by December 31, 2029. These contributions, together with the assumed asset outperformance, are expected to eliminate the deficit by December 31, 2029.

Current wording

The Plan’s trustees are required to review the funding position every three years. An actuarial valuation was performed as of March 31, 2022, resulting in a deficit of approximately GBP 20 million (approximately $26 million based on a GBP: USD exchange rate of 1:1.3). As a result of this valuation we have agreed to a revised schedule of contributions of GBP 2.0 million (approximately $2.6 million based on a GBP: USD exchange rate of 1:1.3) to be paid annually with effect from January 1, 2023 to address the deficit revealed by the valuation (with the first payment made by December 31, 2023 through December 31, 2028). A final payment of GBP 1.5 million (approximately $2.0 million based on a GBP: USD rate of 1:1.3) will be made by December 31, 2029. These contributions, together with the assumed asset outperformance, are expected to eliminate the deficit by December 31, 2029.

Previous wording

The majority of our manufacturing facilities are located in China. For the twelve months ended 2024, 2023 and 2022 our Asian and European subsidiaries represented approximately 72%, 68%, and 68%, respectively, of our net sales. There are risks inherent in doing business internationally, including the following, any of which could cause harm to our business:

Current wording

The majority of our manufacturing facilities are located in China. For the twelve months ended 2025, 2024, and 2023 our Asian and European subsidiaries represented approximately 68%, 72%, and 68%, respectively, of our net sales. There are risks inherent in doing business internationally, including the following, any of which could cause harm to our business:

Previous wording

In addition to the ongoing issues regarding tariffs, China has been stepping up efforts to design and manufacture semiconductors itself rather than buy from U.S. companies, amid fears that sanctions might cripple its high-tech industry. U.S. restrictions on exports to Chinese telecom 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,” canceling corporate taxes for some domestic Chinese 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 and results of operations.

Current wording

Chinese telecom 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,” canceling corporate taxes for some domestic Chinese 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 and results of operations.

Previous wording

Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of 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 foreign withholding taxes. As of December 31, 2024, we had undistributed earnings from non-U.S. operations of approximately $1.3 billion (including approximately $93.6 million of restricted earnings, which are not available for dividends). Undistributed earnings of our China subsidiaries comprise $437.6 million of this total. Additional Chinese withholding taxes of approximately $50.1 million would be required should the $437.6 million of such earnings be distributed out of China as dividends.

Current wording

Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of 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 foreign withholding taxes. As of December 31, 2025, we had undistributed earnings from non-U.S. operations of approximately $1.3 billion (including approximately $112.7 million of restricted earnings, which are not available for dividends). Undistributed earnings of our China subsidiaries comprise $449.6 million of this total. Additional Chinese withholding taxes of approximately $49.2 million would be required should the $449.6 million of such earnings be distributed out of China as dividends.