Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. VISHAY INTERTECHNOLOGY INC (103730) 10-Q published on May 09, 2019 at 4:03 pm
Reporting Period: Mar 29, 2019
On December 20, 2018, the Company received sale proceeds of $45,500 and concurrently leased-back its former manufacturing site in Santa Clara, California, under a short-term arrangement, to raze the buildings. Upon adoption of ASC Topic 842, the Company was required to reassess the accounting for these transactions. The transactions did not qualify as a completed sale and leaseback under previous GAAP. However, pursuant to ASC Topic 842’s sale and leaseback guidance, the transaction would qualify as a completed sale. The Company recognized a cumulative-effect adjustment to retained earnings (accumulated deficit) of $23,013, to recognize the sale as of the date of adoption, and derecognized the land, building, and related deferred proceeds, which had been recorded in other accrued expenses.
The Company recognizes right of use assets and lease liabilities for leases greater than twelve months in duration based on the contract consideration for lease components through the term of the lease and the applicable discount rate. Leases with a duration less than or equal to twelve months are considered short-term leases. The Company does not recognize right of use assets or lease liabilities for short-term leases and classifies the expense as short-term lease expense. Variable lease payments based on an index or rate are included in the right of use assets and lease liabilities based on the effective rates at lease commencement. Changes in the rates or indices do not impact the right of use asset or lease liability and are recognized as a component of lease expense in the statement of operations. Variable lease payments not based on an index or rate are not included in the initial right of use asset and lease liability and are recognized when incurred as a component of lease expense in the statement of operations.
The Company has elected to not separate contract consideration for lease and non-lease components for its building leases. In addition to the noncancellable period of a lease, the Company includes periods covered by extension options it is reasonably certain to exercise, termination options that it is reasonably certain not to exercise, and extension and termination options controlled by the lessor in its determination of the lease term. The Company uses the rate implicit in the contract whenever possible when determining the applicable discount rate. When the implicit rate is not used, the Company employs a portfolio approach based on the duration of the lease. The portfolio lease rates are calculated monthly.
During 2018 we reacted quickly to the opportunities created by the enactment of the U.S. Tax Cuts and Jobs Act (“TCJA”) in December 2017. During 2018 we repatriated approximately $724.0 million of cash to the U.S., net of taxes, and further simplified our balance sheet by refinancing some of our debt. In June 2018, we used the net proceeds from issuing $600 million principal amount of new convertible senior notes to repurchase some of our outstanding convertible senior debentures, which had become less tax-efficient because of the TCJA. During the fourth quarter of 2018, we utilized repatriated cash to repurchase additional convertible senior debentures in open market and privately-negotiated transactions with holders. As a result of these transactions, we reduced the principal amount of outstanding convertible senior debentures due 2040, 2041, and 2042 from $575 million to $36.6 million. During the first quarter of 2019, we continued to repurchase convertible senior debentures in open market and privately-negotiated transactions with holders, further reducing the principal amount of outstanding convertible senior debentures to $21.1 million.
Net revenues of the Capacitors segment for the first fiscal quarter of 2019 decreased significantly versus the prior fiscal quarter, but increased significantly versus the prior year quarter. The increase in net revenues from the European region versus the prior fiscal quarter was offset by decreases from the Asia and American regions. Increases in net revenues from the European and American regions versus the prior year quarter were only partially offset by decreases from the Asia region. The decrease in net revenues versus the prior fiscal quarter is primarily due to distribution customers. Distribution customers contributed the most to the revenue increase versus the prior year quarter.
As previously reported, the Korean Ministry of Justice conducted a review of the conduct of Vishay Polytech Co., Ltd., a wholly owned subsidiary of the Company (“VPC”), at the request of the Korean Fair Trade Commission. At the conclusion of that review, the Seoul Central District Prosecutors’ Office issued a summary indictment of VPC, along with other respondents, for alleged violations of applicable antitrust laws. On March 4, 2019, the Seoul Central District Court issued a summary order finding that VPC had violated South Korea’s Monopoly Regulation and Fair Trade Law and imposed a penalty of approximately $44,000 against VPC. VPC waived its opportunity for a trial.