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USA Tax Reform impact on LSC   2018-02-08

(Taipei News : Feb 8th, 2018) Diodes Inc. (Nasdaq :DIOD) reported its 4th quarter earnings on Feb 7th  USA time, impacted by the recently passed tax reform act, as its tax rate reduced to 21% from 35%, Diodes Inc expects to record an estimated USD46 million charge to account for taxes and a lower valuation of the Balance Sheet’s Deferred tax assets. Lite-On Semiconductor (TWSE:5305), its biggest shareholders, holding about 16% will need to realize an estimated NTD180 million after tax charges simultaneously. As this was a Diodes Inc. preliminary report, the actual impact on LSC’s income statement will be finalized upon Diodes Inc. to be published audited financial report at a later date.

After several years of operational adjustment, LSC managed to turn its core business around finally in year 2016.Our published financial report for the first 9 months of 2017 also demonstrated a continuous improvement; including a stable contribution from subsidiary On Bright Electronics, our consolidated revenue improved 7% on a YoY basis, both our gross and operating profit margin improved by 1% respectively on a YoY basis. EPS for the 1st 9 months was NTD1.7, an over 50% growth on a YoY basis.The massive one time charge realized is the result of the tax reform (IAC 12) act which impact Diodes Inc GAAP tax and has no cash impact.

Diodes Inc has always been LSC’s major other income source, it injected over NTD400 million other income twice within the past ten years.  Besides 2012 till 2016, impacted by merger of BCD, Pericom and KFab explosion etc lowering its contribution to LSC; it injected over NTD300 million to LSC in year 2014 when there is no merger or accidents. Diodes Inc has a proven track record of strong operation ability, being one of those few companies that managed to be profitable in 2009 after financial crisis. Diodes Inc was awarded by Business Week Magazine as global best 30 small cap companies in 2006, ranked 7th position as the best return of investment in 20 years by Forbes in 2008 and ranked 22nd position in global fastest growing Tech companies by Smart Money in 2012.

The tax reform reduces Diodes Inc’s tax rate to 21% from the original 35%, thus lowering the offset tax amount and simultaneously lowering its Deferred Tax Asset value. The 14% tax reduction is expected to have a future tax saving advantage and LSC therefore expects Diodes Inc. to be able to generate more profit in future and is therefore optimistic about Diodes Inc’s future injection.  Our company’s major focus in 2018 is to strictly execute the company’s new product, new application, and new market strategies so as to ensure our company’s continuous growth and improvement.
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