SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE YEAR ENDED MARCH 31, 1997 Commission File No. 1-10431
AVX CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 33-0379007
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
801 17th Avenue South
Myrtle Beach, South Carolina 29577
(803) 448-9411
(address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name Of Each Exchange
On Which Registered
Common Stock, New York Stock Exchange
$.01 par value per share
Securities Registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 of 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 [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
Based on the closing sales price of $26.875 on May 23, 1997,
the aggregate market value of the voting stock held by non-affiliates of the
registrant was $587,219,000.
As of May 23, 1997, the number of shares outstanding of the
registrant's Common Stock, par value $.01 per share, was 88,000,000 shares.
DOCUMENTS INCORPORATED BY REFERENCE
There is incorporated by reference in Part III on this Annual
Report on Form 10-K the information contained in the registrant's proxy
statement for its annual meeting of stockholders to be held on July 17, 1997.
<PAGE>
PART I
Item 1. Business
AVX Corporation (together with its consolidated subsidiaries,
"AVX" or the "Company") is a leading worldwide manufacturer and
supplier of a broad line of passive electronic components and
related products. A substantial portion of the Company's
passive electronic component sales are of ceramic and tantalum
capacitors, both in "leaded" and "surface-mount" versions.
Capacitors are used in virtually all electronic products to
store, filter or regulate electric energy. Ceramic capacitors
and tantalum capacitors are among the fastest growing types of
capacitors. The Company also manufactures and sells electronic
connectors and distributes and sells certain passive components
and connectors manufactured by Kyocera Corporation of Japan, a
public company, ("Kyocera").
The Company's strategy is to focus on:
* customer service, through the breadth and quality of its
product line, as well as its ability to respond in a timely
manner to its customers' component design and delivery
requirements;
* low-cost, high-quality manufacturing, through utilization of
state-of-the-art facilities and skilled labor around the world;
* global coordination of marketing and manufacturing, through
manufacturing operations located worldwide and the assignment of
global customer account executives to cover the Company's major
multi-national customers; and
* innovative and unique products and manufacturing processes,
developed through emphasis on advanced technologies at the
Company's research laboratories and participation in its
customers' long-range product development programs.
The Company's customers include leading OEMs in such industries
as telecommunications, computers, automotive electronics,
medical devices and instrumentation, industrial instrumentation,
military and aerospace electronic systems, and consumer
electronics. Sales of Company products are made by
Company-employed direct sales personnel, independent
manufacturers' representatives, and independent electronic
component distributors.
The overall growth in the electronics industry over the past
several years can be particularly attributed to:
* the development of new products and applications in
established electronics markets, such as cellular telephones and
personal computers;
* the proliferating use of electronic systems in products in
which such use had been historically absent or limited, such as
automobiles, home appliances, and medical equipment; and
* the increase in the number of capacitors required in certain
electronic products with higher levels of complexity and
functionality, such as those that use state-of-the-art
microprocessors.
The Company's executive offices are located in Myrtle Beach,
South Carolina and its manufacturing facilities are located in
North America, Europe and Asia.
Public Offering
From January 1990 through August 15, 1995, the Company was
wholly-owned by Kyocera. On August 15, 1995, Kyocera sold 22.9%,
or 19,650,000 of the Company's common shares, and the Company
sold an additional 2,200,000 common shares, in a public
offering. As a result, Kyocera currently owns 75.2% of the
Company's common shares.
1
<PAGE>
Products
AVX offers an extensive line of passive components, designed to
provide its customers with "one-stop shopping" for substantially
all of their passive component needs. Ceramic and tantalum
capacitors accounted for approximately 59% of the Company's net
sales in fiscal 1997. Advanced products, which are designed and
manufactured by the Company in cooperation with customers to
meet the requirements of specific applications, represented
about 13% of the Company's net sales in fiscal 1997. Connectors
accounted for approximately 8% of net sales and the remaining
20% of AVX's net sales in fiscal 1997 came from its sales of
certain products manufactured by Kyocera, for which the Company
has a non-exclusive license to distribute and sell everywhere in
the world except Japan.
Capacitors
AVX manufactures a full line of multi-layered ceramic and solid
tantalum capacitors in many different sizes and configurations.
The Company's strategic focus on the growing use of ceramic and
tantalum capacitors is reflected in its investment during the
past three years of approximately $225 million primarily to
increase its capacitor manufacturing capacity. The Company
believes that sales of ceramic and tantalum capacitors will
continue to be among the most rapidly growing in the worldwide
capacitor market because technological advances have been
constantly expanding the number and type of applications for
these products.
Tantalum and ceramic capacitors commonly are used in
conjunction with integrated circuits and are best suited for
applications requiring lower to medium capacitance values.
Generally, ceramic capacitors are more cost-effective at lower
capacitance values, and tantalum capacitors are more
cost-effective at medium capacitance values. Capacitance is the
measure of the capacitor's ability to store energy.
Ceramic and tantalum capacitors are produced by the Company in
two basic versions: leaded and surface-mount. Leaded capacitors
are attached to a circuit board using lead wires while
surface-mount capacitors are attached directly to a circuit
board. In recent years there has been significant industry-wide
growth in the use of surface-mount capacitors, and industry
analysts have predicted that this would cause the market for
leaded capacitors to decline significantly. In certain
applications, however, leaded capacitors continue to be the
component of choice.
Advanced Products
To fill the needs of its customers, the Company's advanced
products engineers work with certain customers' in-house
technical staffs to design, produce and manufacture special
products to meet the specifications of particular applications.
The manufacture of special products permits AVX, through its
research and development activities, to make technological
advances, provide the customer with a design solution to fit its
needs, gain a marketing inroad with the customer with respect to
AVX's complete product line and, in some cases, develop products
that can be sold to additional customers in the future. AVX's
advanced products division presently has significant ongoing
projects with a variety of key customers in the computer,
telecommunications, automotive and medical fields as well as
some other new areas of use.
Connectors
The connector division of the Company manufactures high-quality
electronic connectors and inter-connect systems for use in the
computer, telecommunications, automotive electronics, medical
device, military and aerospace industries. The Company's
product line includes a variety of industry-standard connectors
as well as products designed specifically for its customers'
unique applications. The Company produces fine pitch, or small
centerline, connectors, many of which have been selected by
leading OEMs for applications in cellular phones, pagers,
printers and notebook computers. The Company also has developed
a value-added business in flat ribbon cable assembly and in
backpanel, and card edge assemblies.
Kyocera Products
The Company's distribution and sale of certain Kyocera products
throughout the world, except in Japan, broaden the Company's
range of products and further facilitate its ability to offer
"one-stop shopping" for its customers' electronic components
needs. Kyocera's product lines sold by the Company include
ceramic capacitors, hybrids, oscillators, saw devices, resistor
networks, trimmers, chip resistors, ceramic filters, resonators,
connectors and piezo acoustic devices.
2
<PAGE>
Marketing, Sales and Distribution
The Company places a high priority on solving customers'
electronic component problems and responding to their needs.
AVX frequently forms teams of its marketing, research and
development, and manufacturing personnel to work with customers
to design and manufacture products to suit their specific
requirements.
The Company's products are sold primarily to manufacturers and,
to a much lesser extent, to United States and foreign government
agencies. The Company has also qualified products under various
military specifications, approved and monitored by the United
States Defense Electronic Supply Center ("DESC"), and under
certain foreign military specifications.
Approximately 47%, 22% and 31% of the Company's net sales for
fiscal 1997, were to customers in North America, Europe, and
Asia, respectively. Financial information relating to geographic
operations is set forth in Part IV, item 14(a), of this report.
The Company's products are marketed worldwide by the Company's
own sales personnel, as well as through independent
manufacturers' representatives who are compensated solely on a
commission basis, and independent electronic component
distributors. The Company has regional sales personnel in
strategic locations to provide technical and sales support for
independent manufacturers' representatives and independent
electronic component distributors. The Company believes that
this combination of distribution channels provides a high level
of market penetration and efficient coverage of its customers on
a cost-effective basis.
Among the Company's customers are Motorola Inc., Lucent
Technologies, American Telephone and Telegraph Corporation, L.M.
Ericsson Telefonaktiebolaget, OY Nokia AB., Northern
Telecom,Uniden and Siemens AG in the telecommunications
industry; International Business Machines Corporation, Compaq
Computer Corp., Seagate Technology International, Western
Digital Corp., Acer Incorporated, Intel Corp., Sony Corporation,
and Samsung Co. Limited in the computer industry; and Ford Motor
Co., Robert Bosch GmbH, General Motors Corp. and Magneti Marelli
S.p.A. in the automotive industry. The Company's largest
customers vary on a year-to-year basis, and no customer has a
long-term commitment to purchase products of the Company. No
one customer has accounted for more than 10% of net sales for
the past three years.
AVX had a backlog of orders of approximately $240 million at
March 31, 1997, $250 million at March 31, 1996 and $317 million
on March 31, 1995. Orders may be canceled by a customer at any
time, subject to cancellation charges under certain
circumstances. The backlog reduction since March 31, 1995,
reflects the electronic components industry's tight supply
situation in calendar 1995. The reduction in delivery lead times
in 1996 has decreased customers' long-term ordering patterns,
such that orders are currently placed more on an as needed
basis. The backlog outstanding at any time is not necessarily
indicative of the level of business to be expected in any
ensuing period since certain orders are placed and delivered
within the same period.
Research,Development and Engineering
AVX's emphasis on research and development is reflected by the
fact that most of the Company's manufactured products and
manufacturing processes have been designed and developed by its
own engineers and scientists. The Company's 60,000 square-foot
facility, dedicated entirely to pure research and development, in Myrtle Beach,
South Carolina, was constructed in fiscal
1995 and provides centralized coordination of AVX's global research
and development efforts. The Company also maintains significant
research and development staffs at its facilities in Coleraine,
Northern Ireland, Jerusalem, Israel, and Paignton, England.
The Company's research, development and engineering effort
places a priority on the design and development of innovative
products and manufacturing processes and engineering advances in
existing product lines and manufacturing operations. Other areas
of emphasis include material synthesis and the integration of
passive components for applications requiring reduced size, and
lower manufacturing costs associated with board assembly.
Research, development and engineering expenditures were
approximately $34 million, $30 million and $25 million during
fiscal 1997, 1996 and 1995, respectively.
While AVX owns United States patents as well as corresponding
patents in various other countries, and also has patent
applications pending, its patents are not in the aggregate
material to the successful operation of its business.
3
<PAGE>
Transactions with Kyocera
Since January 1990, Kyocera and AVX have engaged in a
significant number and variety of related company transactions,
including, without limitation, the transactions referred to in
footnote 9 to the financial statements set forth in Part IV,
item 14(a), of this report.
The Company also has established several ongoing arrangements
with Kyocera and has executed several agreements, the more
significant of which are described below. Except for the Buzzer
Assembly Agreement, each of the agreements described below
contains provisions requiring that the terms of any transaction
under such agreement be equivalent to that which an independent
unrelated party would agree at arm's-length and is subject to
the approval of the Special Advisory Committee of the AVX Board
of Directors. The Special Advisory Committee is comprised of
the independent directors of the Company and is required to
review and approve such agreements and any significant
transactions between the Company and Kyocera not covered by such
agreements.
Products Supply and Distribution Agreement. Pursuant to the
Products Supply and Distribution Agreement (the "Distribution
Agreement") (i) AVX will act as the non-exclusive distributor of
certain Kyocera-manufactured products in territories outside of
Japan, and (ii) Kyocera will act as the non-exclusive
distributor of certain AVX-manufactured products within Japan.
The Distribution Agreement has a term of one year, with
automatic one-year renewals, subject to the right of termination
by either party at the end of the then current term upon at
least three months prior written notice.
Disclosure and Option to License Agreement. Pursuant to the
Disclosure and Option to License Agreement (the "License
Agreement"), the Company and Kyocera agree to exchange
confidential information relating to the development and
manufacture of multi-layered ceramic capacitors and various
other ceramic products. The expiration date of the License
Agreement is March 31, 2005.
Materials Supply Agreement. Pursuant to the Materials Supply
Agreement (the "Supply Agreement"), AVX and Kyocera will from
time to time supply the other party with certain raw and
semi-processed materials used in the manufacture of ceramic
capacitors and other ceramic products. The expiration date of
the Supply Agreement is March 31, 2000.
Buzzer Assembly Agreement. Pursuant to the Buzzer Assembly
Agreement, AVX assembles certain electronic components for
Kyocera in the Company's Juarez, Mexico facility. Kyocera pays
AVX a fixed cost mutually agreed upon by the parties for each
component assembled plus a profit margin. The Agreement will
terminate on March 31, 2000, subject to the right of either
party to terminate upon six months written notice.
Machinery and Equipment Purchase Agreement. Pursuant to the
Machinery and Equipment Purchase Agreement (the "Machinery
Purchase Agreement"), AVX and Kyocera will from time to time
design and manufacture for the other party certain equipment and
machinery of a proprietary and confidential nature used in the
manufacture of capacitors and other electrical components. The
agreement will terminate on March 31, 2000.
Raw Materials
Although most materials incorporated in the Company's products
are available from a number of sources, certain materials
(particularly palladium and tantalum) are available only from a
relatively limited number of suppliers.
Palladium, a principal raw material used in the manufacture of
ceramic capacitors, is primarily purchased from various
companies in the form of palladium sponge and ingot. The main
areas of mining of palladium are in Russia and South Africa.
Palladium is considered a commodity and is subject to price
volatility and has fluctuated in a range of approximately $120
to $180 per troy ounce during the last three years. An
inability of the Company to pass on an increase in palladium
cost through to its customers could have a material adverse
effect on the Company's results of operations. The Company is
presently using substitutes for palladium in certain product
applications.
4
<PAGE>
Tantalum powder is a principal material used in the manufacture
of tantalum capacitor products. This product is purchased under
annual contracts with suppliers from various parts of the world
at prices that are subject to periodic adjustment. The Company
is a major consumer of the world's annual tantalum production.
Although the Company believes that there is currently no problem
with the procurement of tantalum powder and that the tantalum
required by the Company has generally been available in
sufficient quantity to meet requirements, the limited number of
tantalum powder suppliers could lead to higher prices. An
inability of the Company to pass on an increase in tantalum cost
to its customers could have a material adverse effect on the
Company's results of operations.
AVX internally develops and produces a majority of the ceramic
raw materials used in its production processes and is expanding
its ceramic production operations in order to meet increased
demand. The Company believes that it is the only United States
capacitor manufacturer that processes its own ceramic materials.
Competition
The Company encounters strong competition in its various
product lines from both domestic and foreign manufacturers.
Competitive factors in the markets of the Company's products
include product quality and reliability, breadth of product
line, customer service, technological innovation, timely
delivery, and price. The Company believes that it competes
favorably on the basis of each of these factors. The breadth of
the Company's product offering enables AVX to strengthen its
market position by providing its customers with one of the
broadest selections of passive electronic components available
from one source. The Company's major competitors are Murata
Manufacturing Company Ltd, KEMET Corporation, NEC Corporation,
TDK Corporation and Vishay Intertechnology, Inc.
Employees
As of March 31, 1997, AVX employed approximately 13,000 full
time employees. Approximately 4,000 of these employees are
employed in the United States. Of the employees located in the
United States, approximately 2,000 are covered by
collective-bargaining arrangements. In addition, some foreign
employees are members of various trade and government-affiliated
unions. The Company believes that its relationship with its
employees is good, and the Company has not had a work stoppage
as a result of collective bargaining difficulties during the
past 20 years.
Environmental Matters
The Company is subject in the United States to federal, state
and local laws and regulations concerning the environment and to
the environmental laws and regulations of the other countries in
which it has manufacturing facilities. Based on the Company's
periodic review of the operating policies and practices at all
its facilities, the Company believes that its operations
currently comply in all material respects with all such laws and
regulations.
The Company has been identified by the federal Environmental
Protection Agency ("EPA"), state governmental agencies or other
private parties as a potentially responsible party ("PRP") under
the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") or equivalent state or local laws for
clean-up and response costs associated with ten sites at which
remediation is required. Because CERCLA has been construed to
authorize joint and several liability, EPA could seek to recover
all clean-up costs from any one of the PRPs at a site despite
the involvement of other PRPs. At all but one site, financially
responsible PRPs other than the Company also are, or have been,
involved in site investigation and clean-up activities.
Therefore, the Company believes that any liability resulting
from these sites will be apportioned between the Company and
other PRPs.
To resolve its liability at each of the sites at which it has
been named a PRP, the Company has entered into various
administrative orders and consent decrees (collectively,
"Decrees") with federal and state regulatory agencies, governing
the timing and nature of investigation and remediation. The
Company has paid, or reserved for, all amounts required under
the terms of these Decrees corresponding to its apportioned
share of the liabilities. Such reserves for remediation,
compliance and legal costs totaled $5,025 at March 31, 1997. As
is customary, the Decrees at sites where the PRPs are not
themselves implementing the chosen remedy contain provisions
allowing EPA to reopen the agreement and seek additional amounts
from settling PRPs in the event that certain contingencies
occur, such as the discovery of significant new information
about site conditions during clean-up or substantial cost
overruns for the chosen remedy. The existence of such reopener
provisions, combined with the difficulties of reliably
estimating clean-up costs and the joint and several nature of
CERCLA liability, makes it difficult to predict the ultimate
liability at any site with certainty. While no assurance can be
given, the Company does not believe that any additional costs to
be incurred by the Company at any of the sites will have a
material adverse effect on the Company's financial condition or
results of operations.
In addition, the Company does not believe that any
investigation or clean-up that may be required at any other
locations will have a material adverse effect on the Company's
financial condition or results of operations.
5
<PAGE>
Executive Officers of the Registrant
The following table provides certain information regarding the
executive officers of the Company as of May 23, 1997.
Name Age Position
Benedict P. Rosen 61 President, Chief Executive Officer, and Director
John S. Gilbertson 53 Executive Vice President, Chief Operating
Officer, Corporate Secretary and Director
Donald B. Christiansen 58 Chief Financial Officer, Vice President,
Treasurer, and Director
C. Marshall Jackson 48 Senior Vice President of Marketing
Ernie Chilton 53 Senior Vice President--Tantalum
S. M. Chan 41 Vice President of Marketing and Sales--Asia
Allan Cole 54 Vice President of Sales
Alan Gordon 48 Vice President of European Sales/Marketing
John L. Mann 54 Vice President of Quality
James Patterson 62 Vice President of Leaded Division
Benedict P. Rosen has served as President and Chief Executive
Officer of the Company since April 1993 and as a member of the
Board of Directors since January 1990. From February 1985 to
March 1993, Mr. Rosen has served as Executive Vice President of
AVX and has been employed by the Company since 1972. Mr. Rosen
has been a Senior Managing and Representative Director of
Kyocera since June 1995, and previously served as a Managing
Director of Kyocera from 1992 to June 1995. Mr. Rosen is a
Director of Nitzanim-AVX/Kyocera-Venture Capital Fund Ltd. and
Aerovox Corporation.
John S. Gilbertson has served as Executive Vice President and
Chief Operating Officer of the Company since April 1994, as
Corporate Secretary since April 1996, and as a member of the
Board of Directors since January 1990. From April 1992 until
present, Mr. Gilbertson served as the Executive Vice President
of AVX. From September 1990 to March 1992, Mr. Gilbertson
served as Senior Vice President of AVX. Mr. Gilbertson has been
employed by AVX since 1981. Mr. Gilbertson has been a Director
of Kyocera since June 1995.
Donald B. Christiansen has served as Vice President of Finance,
Chief Financial Officer and Treasurer since April 1994, and as a
member of the Board of Directors since April 1992. From March
1992 until April 1994, Mr. Christiansen served as the Chief
Financial Officer of AVX.
C. Marshall Jackson has served as Senior Vice President of
Marketing since April 1994. From January 1990 until March 1994,
Mr. Jackson was Vice President of AVX and has been employed by
the Company since 1969.
6
<PAGE>
Ernie Chilton has served as Senior Vice President--Tantalum of
AVX since April 1994 and as a member of the Board of Directors
from February 1993 to July 1995. From January 1990 until
February 1993, Mr. Chilton served as Vice President of AVX. From
January 1990 until 1993, Mr. Chilton served as Vice President of
AVX. Mr. Chilton has been employed by the Company since 1980.
S. M. Chan has served as Vice President of Marketing and
Sales--Asia since April 1994. From April 1992 until March 1994,
Mr. Chan served as the Director of Marketing of AVX. Mr. Chan
has been employed by AVX since October 1990.
Allan Cole has served as Vice President of Sales of the Company
since May 1987. Mr. Cole has been employed by AVX since 1977
serving in several sales management positions, both domestic and
international.
Alan Gordon has served as Vice President--European
Sales/Marketing of AVX since February 1993. From January 1991
until February 1993, Mr. Gordon served as the Director of
Marketing of AVX. Mr. Gordon has been employed by AVX since
1991.
John L. Mann has served as Vice President of Quality of the
Company since May 1986. From March 1984 until May 1986, Mr.
Mann served as the Corporate Director of Quality.
James Patterson has served as Vice President of the Leaded
Division of AVX since February 1993. From June 1992 until
February 1993, Mr. Patterson served as the Division Vice
President of SMP. Mr. Patterson has been employed by the
Company since 1963.
Item 2. Properties
The Company conducts manufacturing operations throughout the
world. All the Company's operations around the world are
certified to the ISO 9000 international quality control
standards. ISO 9000 is a comprehensive set of quality program
standards developed by the International Organization for
Standardization. Certain facilities have also been qualified
under a new set of stringent QS 9000 quality standards developed
by the US automotive industry. A list of the Company's
facilities, their square footage, whether they are leased or
owned and a description of their use, follows:
Type
Square of Description
Location Footage Interest of Use
UNITED STATES
Myrtle Beach,SC 451,005 Owned Research/Manufacturing/Headquarters
Myrtle Beach, SC 46,631 Leased Warehouse
Conway, SC 70,408 Owned Manufacturing
Biddeford, ME 72,000 Owned Manufacturing
Colorado Springs, CO 15,000 Owned Manufacturing
El Paso, TX 17,760 Leased Warehouse
New Orleans, LA 16,440 Leased Warehouse
Olean, NY 107,400 Owned Manufacturing
Raleigh, NC 206,000 Owned Manufacturing/Warehouse
Sun Valley, CA 25,000 Leased Manufacturing
Vancouver, WA 87,048 Leased Manufacturing
Vancouver, WA 10,024 Leased Warehouse
OUTSIDE THE UNITED STATES
Betzdorf, Germany 101,671 Owned Manufacturing
Biggleswade, England 10,000 Leased Manufacturing
Chihuahua, Mexico 104,848 Owned Manufacturing
Coleraine, N. Ireland 105,000 Owned Research/Manufacturing
Hong Kong 30,257 Owned Warehouse
Jerusalem, Israel 42,470 Leased Research/Manufacturing
Juarez, Mexico 84,000 Owned Manufacturing
Lanskroun, Czech
Republic 179,000 Leased Manufacturing
Uherske Hradiste,Czech
Republic 128,000 Leased Manufacturing
Larne, N. Ireland 120,000 Owned Manufacturing/Warehouse
Newmarket, England 52,000 Leased Manufacturing
Paignton, England 150,000 Owned Research/Manufacturing
San Salvador,
El Salvador 232,981 Owned Manufacturing
Singapore 49,500 Leased Manufacturing/Warehouse
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<PAGE>
In addition to the foregoing, the Company owns and leases a
number of sales offices throughout the world.
Management believes that all its property, plant and equipment
is in good operating condition. The Company is constantly
upgrading its equipment and adding capacity through greater use
of automation. The Company's capital expenditures for plant and
equipment were $93.9 million for fiscal 1997 and $110.5 million
in fiscal 1996.
Item 3. Legal Proceedings
The Company is a party to various legal proceedings and
administrative actions, all of which are of an ordinary or
routine nature incidental to the operations of the Company.
Although it is difficult to predict the outcome of any legal
proceeding, in the opinion of the Company's management, such
procedures and actions should not, individually or in the
aggregate, have a material adverse effect on the Company's
financial condition or results of operations.
Item 4. Submission of Matters to a Vote of Securities Holders
During the fourth quarter of the fiscal year covered by this
report, no matter was submitted to a vote of security holders of
the Company.
PART II
Item 5. Market for the Registrant's Securities and Related
Stockholder Matters
Market for Common Stock
The Company's Common Stock is listed on the New York Stock
Exchange and trades under the symbol AVX. The following presents
the high and low sale prices for the Company's Common Stock for
each quarter since the IPO in August 1995 as reported on the New
York Stock Exchange Composite Tape.
<TABLE>
<CAPTION>
1997 1996
High Low High Low
<S> <C> <C> <C> <C>
First Quarter $ 25 1/2 $ 17 $ $
Second Quarter 23 16 38 29 3/4
Third Quarter 24 1/8 18 1/4 34 1/4 21 1/8
Fourth Quarter 25 1/4 19 3/4 27 1/2 20 7/8
</TABLE>
Holders of Record
At May 23, 1997, there were approximately 22,500 holders of
record of the Company's common stock.
Dividends
The Company has declared and paid cash dividends of $.06 per
share of common stock for the quarter ended March 31, 1997. The
Company declared and paid cash dividends for the quarters ended
December 31, 1996, September 30, 1996, June 30, 1996 and March
31, 1996 of $.055 per share of common stock. The Company
declared and paid cash dividends for the quarters ended
September 30, 1995 and December 31, 1995 of $.05 per share of
common stock. The Company declared and paid cash dividends in
the fiscal year ended March 31, 1995 and the quarter ended June
30, 1995 equal to approximately 35% of its net income. Future
dividends, if any, will depend on the Company's profitability
and anticipated operating requirements.
8
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Item 6. Selected Financial Data
The following table sets forth selected financial data for the
Company for the five years ended March 31, 1997. The financial
data set forth below should be read in conjunction with the
Company's Financial Statements and the Notes thereto included
elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
Year ended March 31,
(dollars in thousands, except share data)
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales $1,126,178 $1,207,761 $ 988,893 $ 795,515 $ 718,235
Cost of sales 851,863 886,494 777,687 639,058 569,583
--------- --------- ------- ------- -------
Gross profit 274,315 321,267 211,206 156,457 148,652
Selling, general and
administrative expenses 102,369 116,586 101,013 100,875 99,862
--------- --------- ------- ------- -------
Profit from operations 171,946 204,681 110,193 55,582 48,790
Interest income 7,536 5,096 2,018 749 510
Interest expense (2,049) (2,352) (2,229) (2,792) (3,474)
Other, net 1,010 1,655 1,218 1,439 3,282
--------- --------- ------- ------- -------
Income before income
taxes, extraordinary
item and cumulative
effect of accounting
change for income taxes 178,443 209,080 111,200 54,978 49,108
Provision for income
taxes 57,102 71,344 36,329 19,817 20,221
-------- ------- ------- ------ ------
Income before extra-
ordinary item and
cumulative effect of
accounting change for
income taxes 121,341 137,736 74,871 35,161 28,887
Extraordinary item-
utilization of foreign
tax loss carryforwards 2,536
Cumulative effect of
accounting change for
income taxes 5,000
--------- ------- ------- ------- -------
Net income $ 121,341 $ 137,736 $ 74,871 $ 40,161 $ 31,423
========== ========== ========== ========= =========
Income per share:
Before extraordinary
item and cumulative
effect of accounting
change for income taxes $ 1.38 $ 1.58 $ .87 $ .41 $ .34
Extraordinary item .03
Cumulative effect
of accounting change
for income taxes .06
------- ------- ------- ------ -------
Net income $ 1.38 $ 1.58 $ .87 $ .47 $ .37
======= ======= ======= ====== =======
Average common shares
outstanding 88,000,000 87,175,000 85,800,000 85,800,000 85,800,000
Cash dividends per
common share $ .22 $ .22 $ .31 $ .17 $ .13
</TABLE>
<TABLE>
<CAPTION>
As of March 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital $ 456,672 $ 357,930 $ 224,999 $ 189,528 $ 177,555
Total assets 949,307 867,516 670,697 573,966 550,487
Long-term debt 12,170 8,507 9,544 10,427 15,529
Stockholders' equity 731,969 624,000 456,266 400,834 378,502
</TABLE>
9
<PAGE>
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition
General
The Company's 1997 net sales decreased 6.8% compared to 1996
while the previous three years increased 22.1%, 24.3% and 10.8%,
respectively. The growth in sales from 1994 to 1997 is
primarily the result of the Company increasing its production
capacity and the expansion of the electronic components
industry. This expansion has been due primarily to the growth
of computer, telecommunications and automotive manufacturers'
usage of passive electronic components. During the first half of
fiscal 1997, the industry experienced a temporary slowdown and
customers reduced their level of inventory .
With the exception of this industry-wide order pattern
correction, the growth in sales, in units and dollars, coupled
with operating efficiencies and control of selling, general and
administrative expenses, have contributed to the enhanced
profitability of the Company over the past three years. In
order to lower the costs of production, the Company continues to
increase automation of its manufacturing processes and transfer
certain labor intensive manufacturing processes from countries
with high labor costs to lower labor cost areas (such as the
Czech Republic, El Salvador, and Mexico).
During the fourth quarter of fiscal 1997, the Company
experienced a more traditional pricing environment as customers'
inventories returned to normal levels. Increased orders resulted
in the Company's manufacturing capacity being more fully
utilized.
The following table sets forth the percentage relationships to
net sales of certain income statement items for the periods
presented
<TABLE>
<CAPTION>
Year Ended March 31,
1997 1996 1995
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 75.6 73.4 78.6
Gross profit 24.4 26.6 21.4
Selling, general and
administrative expenses 9.1 9.6 10.3
Profit from operations 15.3 17.0 11.1
Income before income taxes 15.8 17.3 11.2
Provision for income taxes 5.0 5.9 3.6
Net income 10.8 11.4 7.6
Results of Operations
Year Ended March 31, 1997 Compared to Year Ended March 31, 1996
Net sales for the year ended March 31, 1997 decreased 6.8% to
$1,126.2 million from $1,207.7 million for the year ended March
31, 1996. The decrease was attributable to a combination of
factors including, (a) the residual effect of the softened order
and delivery demand experienced by the electronic component
industry throughout the latter portion of calendar 1995 and the
first half of calendar 1996 (as customers reduced their level of
inventory and suppliers reduced lead times), (b) a continuation of
the trend toward surface-mount products and smaller part sizes,
which traditionally have lower average selling prices, (c) an
overall reduction in selling prices, and (d) the strengthening
of the U.S. dollar and certain European currencies, which had a
modest dampening effect on reported U.S. dollar sales.
Gross profit as a percentage of net sales for the year ended
March 31, 1997 decreased 2.2% to $274.3 million (24.4% of net
sales) from $321.3 million (26.6% of net sales) in the year
ended March 31, 1996. Due in part to the industry wide
inventory correction discussed above, overall sales prices in
the 1997 year were lower compared to the 1996 year. Continued
automation of the manufacturing processes and higher volumes of
through-put in the factories have resulted in lower
manufacturing costs for products sold and have enabled the
Company to maintain strong gross profit levels despite the
decline in sales. As a result of the Company's strategy to
manufacture in the various regions in which it sells products,
the strengthening of the U.S. dollar and certain European
currencies acted to reduce the overall cost of manufacturing
when reported in U.S. dollars. Cost of sales in fiscal 1996
include approximately $3.5 million of costs associated with the
closure of a plant in the United States.
10
<PAGE>
Selling, general and administrative expenses in the year ended
March 31, 1997 were $102.4 million (9.1% of net sales), compared
with $116.6 million (9.6% of net sales) in the year ended March
31, 1996. The decrease in selling, general, and administrative
expenses is due to (a) cost containment programs, (b) lower
sales commissions, (c) the benefit of adjustments to
environmental remediation accruals, and (d) charges related to
the closing of the Company's previous headquarters recorded in
1996.
Research, development and engineering expenditures, which
encompass the personnel and related expenses devoted to
developing new products, processes and technical innovations,
were $34 million and $30 million in fiscal 1997 and 1996,
respectively.
As a result of the above factors, profit from operations as a
percentage of net sales in the year ended March 31, 1997
decreased 1.7% to $171.9 million from $204.7 million in the year
ended March 31, 1996.
The effective tax rate in the year ended March 31, 1997 was
32.0%, compared to 34.1% in the year ended March 31, 1996. The
decrease in the 1997 year primarily results from the benefit of
lower tax rates on foreign earnings and the realization of
certain foreign net operating losses.
For the reasons set forth above, net income in the year ended
March 31, 1997 decreased 11.9% to $121.3 million (10.8% of net
sales) from $137.7 million (11.4% of net sales) in the year
ended March 31, 1996.
Year Ended March 31, 1996 Compared to Year Ended March 31, 1995
Net sales for the year ended March 31, 1996 increased 22.1% to
$1,207.7 million from $988.9 million for the year ended March
31, 1995. The increase was primarily attributable to the growth
in the ceramic and tantalum products, particularly surface-mount
capacitors, and special products.
Gross profit for the year ended March 31, 1996 increased 52.1%
to $321.3 million (26.6% of net sales) from $211.2 million
(21.4% of net sales) in the year ended March 31, 1995. As a
result of increased worldwide demand for ceramic and tantalum
capacitors, overall sales prices in the 1996 year were more
stable compared to the 1995 year. Continued automation of the
manufacturing processes and higher volumes of through-put in the
factories have resulted in lower manufacturing costs for
products sold. Lower production costs were achieved despite an
increase in palladium prices. The cost of palladium, which is
used in the manufacture of ceramic capacitors, increased
approximately 6.0% in the 1996 year compared to the 1995 year.
This increased cost of sales by approximately $2.7 million. Cost
of sales in fiscal 1996 include approximately $3.5 million of
costs associated with the closure of a plant in the United
States which manufactured connector products and the relocation
of the production to the Company's existing facilities in
Europe. Cost of sales in fiscal 1995 included approximately $2.5
million of costs associated with the closure of the Company's
ceramic production facility in Rouen, France, and relocation of
the related production to Northern Ireland.
Selling, general and administrative expenses in the year ended
March 31, 1996 were $116.6 million (9.6% of net sales), compared
with $101.0 million (10.3% of net sales) in the year ended March
31, 1995. The increase in expenses resulted primarily from
higher research and development spending, adjustments to
environmental remediation accruals based on revised estimates,
charges related to the Company's previous headquarters and
additional sales commissions due to increased sales volume.
Research, development and engineering expenditures were $30
million and $25 million in fiscal 1996 and 1995, respectively.
As a result of the above factors, profit from operations in the
year ended March 31, 1996 increased 85.7% to $204.7 million from
$110.2 million in the year ended March 31, 1995.
11
<PAGE>
The effective tax rate in the year ended March 31, 1996 was
34.1%, compared to 32.7% in the year ended March 31, 1995. The
increase in the 1996 year primarily results from higher foreign
income taxes.
For the reasons set forth above, net income in the year ended
March 31, 1996 increased 84.0% to $137.7 million (11.4% of net
sales) from $74.9 million (7.6% of net sales) in the year ended
March 31, 1995.
Financial Condition
Liquidity and Capital Resources
The Company's liquidity needs arise primarily from working
capital requirements, dividends and capital expenditures.
Historically, the Company has satisfied its liquidity
requirements through internally generated funds. As of March
31, 1997, the Company had a current ratio of 3.5 to 1, $188.6
million of cash and cash equivalents, $731.9 million of
stockholders' equity and an insignificant amount of long-term
debt.
Net cash from operating activities was $167.9 million in the
year ended March 31, 1997, compared to $155.7 million in the
year ended March 31, 1996 and $126.2 million in the year ended
March 31, 1995. The Company's control over the growth of
working capital contributed to the increase.
Purchases of property and equipment were $93.9 million in
fiscal 1997, $110.5 million in fiscal 1996, and $77.3 million in
fiscal 1995. Expenditures for fiscal 1995 included approximately
$8.1 million for the purchase of property and construction of
the new research laboratory adjacent to the Myrtle Beach
production facility and corporate headquarters. The remaining
expenditures for fiscal 1995 and virtually all expenditures for
fiscal 1997 and 1996 were for expanding the production
capabilities of the ceramic and tantalum surface-mount and
advanced product lines. The Company's carrying value of its
equipment reflects the fact that depreciation expense for
machinery and equipment is generally computed using the
accelerated double-declining balance method. The Company expects
to construct facilities and purchase equipment totaling
approximately $110 to $130 million to increase production
capacity in fiscal 1998.
Although the majority of the Company's funding is internally
generated, certain European subsidiaries of the Company borrowed
deutschmarks under various bank agreements. These borrowings
were used for working capital requirements and to repay an
intercompany loan with AVX in the United States and other
outstanding obligations. In fiscal 1997, 1996 and 1995,
dividends of $19.4 million, $19.4 million and $26.2 million,
respectively, were paid to stockholders.
In August 1995, the Company completed an initial public
offering of 2,200,000 shares of common stock at a price of
$25.50 per share resulting in proceeds (net of underwriting
commissions and offering costs) of $52.9 million. The proceeds
were used for general corporate purposes, including capital
expenditures and working capital.
The Company has established reserves in the three years ended
March 31, 1997 for its projected share of costs associated with
the remediation of, and compliance with, environmental matters
at various sites. Adjustments to such provisions and related
expenditures have not been material in any of these periods.
Based on the financial condition of the Company as of March 31,
1997, the Company believes that cash expected to be generated
from operating activities will be sufficient to satisfy the
Company's anticipated financing needs for working capital,
capital expenditures, environmental clean-up costs, research and
development expenses and any dividends to be paid for the
foreseeable future.
Foreign Currency
The Company's European sales generally are denominated in local
currencies whereas those in North America and Asia generally are
denominated in U.S. dollars. Approximately one quarter of the
Company's revenues are generated in Europe. Also, certain
manufacturing and operating costs denominated in local
currencies are incurred in Europe, Asia, Mexico and Latin
America. As a result, fluctuations in currency exchange rates
affect the Company's results and cash flow. In order to
minimize the effect of movements in currency exchange rates, the
Company periodically enters into forward exchange contracts to
hedge existing and anticipated external and intercompany foreign
currency transactions. Currency exchange gains and losses have
been immaterial during the three years ended March 31, 1997.
The Company also enters into forward delivery contracts for
certain precious metals used in its production processes. The
Company does not hold or issue derivative financial instruments
for speculative purposes.
12
<PAGE>
New Accounting Standards
Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation", allows companies to
record compensation cost for stock-based compensation plans at
fair value or provide pro forma disclosures. The Company has
chosen to continue to account for stock-based compensation using
the method whereby compensation cost for stock options is
measured as the excess, if any, of the quoted market price of
the Company's stock at the date of grant over the amount an
employee must pay to acquire the stock. The Company has adopted
Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of". The adoption did not materially
affect the Company's financial condition or results of
operations.
In February 1997, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No.
128("SFAS 128"). The new standard replaces primary and fully
diluted earnings per share with basic and diluted earnings per
share. SFAS 128 is required to be adopted by the Company for
periods ending after December 15, 1997. Had the Company been
required to adopt SFAS 128 earlier, the adoption would not have
impacted diluted or primary earnings per share.
Cautionary Statement Pursuant to Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995
This report may contain "forward-looking" information within
the meaning of the federal securities laws. The forward-looking
information may include, among other information, statements
concerning the Company's outlook for fiscal 1998, overall volume
and pricing trends, cost reduction strategies and their
anticipated results, and expectations for research and capital
expenditures. There may also be other statements of exceptions,
beliefs, future plans and strategies, anticipated events or
trends, and similar expressions concerning matters that are not
historical facts. The forward-looking information and statements
in this report are subject to risks and uncertainties that could
cause actual results to differ materially from those expressed
in or implied by the information or statements.
Item 8. Financial Statements and Supplementary Data
The following Consolidated Financial Statements of the Company
and its subsidiaries, together with the report of independent
auditors thereon, are presented under Item 14 of this report:
Consolidated Balance Sheets, March 31, 1997 and 1996 F-15
Consolidated Statements of Income, Years Ended March 31, 1997,
1996 and 1995 F-16
Consolidated Statements of Stockholders' Equity, Years Ended
March 31, 1997,1996 and 1995 F-17
Consolidated Statements of Cash Flows, Years Ended March 31,
1997, 1996 and 1995 F-18
Notes to Consolidated Financial Statements F-19
Report of Independent Accountants F-30
All financial schedules are omitted because of the abscence of the conditions
under which they are required or because the information required is shown in
the financial statements or notes thereto.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial
Disclosure
None.
PART III
Information with respect to Items 10, 11, 12 and 13 on Form
10-K is set forth in the Company's definitive proxy statement
filed with the Commission in June 1997.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) Financial Statements and Financial Statement Schedules -
See Index to Consolidated Financial Statements at Item 8 of this
report.
(b) Reports on Form 8-K
None.
(c) Exhibits:
13
<PAGE>
Documents Incorporated by Reference from Form S-1 Registration
Statement No. 33-94310 filed in August, 1995:
3.1 Restated Certificate of Incorporation of the Company
3.2 By-laws of the Company
10.1 1995 Stock Option Plan
10.2 Non-Employee Directors Stock Option Plan
10.3 Form of Employment Agreement between AVX Corporation and
Benedict P. Rosen
10.4 Products Supply and Distribution Agreement by and between
Kyocera Corporation and AVX Corporation
10.5 Disclosure and Option to License Agreement by and between
Kyocera Corporation and AVX Corporation
10.6 Management Incentive Plan
10.7 Deferred Compensation Plan
Documents Submitted Herewith:
10.8 Directors Deferred Compensation Plan
21.1 Subsidiaries of the Registrant
23.1 Consent of Coopers & Lybrand L.L.P.
24.1 Power of Attorney
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AVX Corporation
by: /s/ Donald B. Christiansen
----------------------
DONALD B. CHRISTIANSEN
Dated: June 9, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
Signature Title
Kazuo Inamori Chairman of the Board and Director
Benedict P. Rosen President and Chief Executive
Officer and Director
John S. Gilbertson Executive Vice President and
Chief Operating Officer
and Corporate Secretary and Director
Donald B. Christiansen Vice President of Finance,
Chief Financial Officer and
Treasurer and Director
Marshall D. Butler Director
Carroll A. Campbell Director
Richard Tressler Director
Kensuke Itoh Director
Rodney N. Lanthorne Director
Masato Takeda Director
Masahiro Umemura Director
Masahiro Yamamoto Director
Yuzo Yamamura Director
By: /s/ Donald B. Christiansen
-----------------------
DONALD B. CHRISTIANSEN, Attorney-in-Fact
June 9, 1997
14
</TABLE>
AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
March 31,
1997 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 188,574 $ 131,601
Accounts receivable, net 155,358 139,545
Inventories 247,895 243,155
Deferred income taxes 21,145 30,853
Other receivables - affiliate 3,131 2,429
Prepaid and other 22,365 13,562
------- -------
Total current assets 638,468 561,145
Property and equipment:
Land 10,028 9,370
Buildings and improvements 113,614 109,574
Machinery and equipment 588,880 506,004
Construction in progress 34,040 46,030
------- -------
746,562 670,978
Accumulated depreciation (474,970) (404,432)
--------- ---------
271,592 266,546
Goodwill, net 34,913 36,067
Other assets 4,334 3,758
--------- ---------
TOTAL ASSETS $ 949,307 $ 867,516
========= =========
Current liabilities:
Short-term bank debt $ 12,216 $ 19,398
Current maturities of long-term debt 1,362 1,398
Accounts payable:
Trade 39,399 31,755
Affiliates 38,621 33,040
Income taxes payable 25,405 35,546
Accrued payroll and benefits 34,328 40,481
Accrued expenses 30,465 41,597
-------- --------
Total current liabilities 181,796 203,215
Long-term debt 12,170 8,507
Deferred income taxes 12,190 22,818
Other liabilities 11,182 8,976
------- -------
TOTAL LIABILITIES 217,338 243,516
Commitments and Contingencies (Notes 8 and 11)
Stockholders' Equity:
Preferred stock, par value $.01 per share:
Authorized, 20,000,000 shares; None issued
or outstanding
Common stock, par value $.01 per share: 880 880
Authorized, 300,000,000 shares; issued and
outstanding,
88,000,000 shares
Additional paid-in capital 319,909 319,909
Retained earnings 408,904 306,923
Foreign currency translation adjustment 2,276 (3,712)
------- --------
TOTAL STOCKHOLDERS' EQUITY 731,969 624,000
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $949,307 $867,516
======= =======
</TABLE>
<PAGE>
See accompanying notes to consolidated financial statements.
F-15
<PAGE>
AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
Years Ended March 31,
1997 1996 1995
<S> <C> <C> <C>
Net sales $1,126,178 $1,207,761 $988,893
Cost of sales 851,863 886,494 777,687
--------- --------- -------
Gross profit 274,315 321,267 211,206
Selling, general and
administrative expenses 102,369 116,586 101,013
------- ------- -------
Profit from operations 171,946 204,681 110,193
Other income (expense):
Interest income 7,536 5,096 2,018
Interest expense (2,049) (2,352) (2,229)
Other, net 1,010 1,655 1,218
------- ------- -------
Income before income taxes 178,443 209,080 111,200
Provision for income taxes 57,102 71,344 36,329
Net income $ 121,341 $ 137,736 $ 74,871
Income per share $ 1.38 $ 1.58 $ .87
Weighted average shares
outstanding 88,000,000 87,175,000 85,800,000
</TABLE>
See accompanying notes to consolidated financial statements.
F-16
<PAGE>
AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Foreign
Additional Currency
Number Paid-In Retained Translation
of Shares Amount Capital Earnings Adjustment Total
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1994 85,800,000 $858 $267,043 $140,010 $(7,077) $400,834
Net income 74,871 74,871
Dividends (26,250) (26,250)
Current year's adjustment 6,811 6,811
---------- ---- ------- ------- ------- --------
Balance, March 31,1995 85,800,000 858 267,043 188,631 (266) 456,266
Issuance of common stock 2,200,000 22 52,866 52,888
Net income 137,736 137,736
Dividends (19,444) (19,444)
Current year's adjustment (3,446) (3,446)
---------- --- ------- ------- ------ -------
Balance, March 31, 1996 88,000,000 880 319,909 306,923 (3,712) 624,000
Net income 121,341 121,341
Dividends (19,360) (19,360)
Current year's adjustment 5,988 5,988
---------- ---- -------- -------- ------ --------
Balance, March 31, 1997 88,000,000 $880 $319,909 $408,904 $2,276 $731,969
========== ==== ======== ======= ===== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-17
<PAGE>
AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Years Ended March 31,
1997 1996 1995
<S> <C> <C> <C>
Operating Activities:
Net income $121,341 $137,736 $74,871
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization 82,242 69,910 60,608
Deferred income taxes (911) (15,680) (6,023)
Changes in operating assets and liabilities:
Accounts receivable (9,745) (26,564) (13,579)
Inventories (2,912) (44,862) (36,957)
Accounts payable and accrued expenses (5,730) 12,416 28,471
Income taxes payable (11,093) 20,351 13,425
Other assets and liabilities (5,266) 2,380 5,342
------- ------- -------
Net cash from operating activities 167,926 155,687 126,158
Investing Activities:
Purchases of property and equipment (93,954) (110,487) (77,308)
Proceeds from sale of operations to affiliate 3,973
Other 2,347 (79) 680
------- -------- -------
Net cash used in investing activities (91,607) (106,593) (76,628)
Financing Activities:
Repayment of debt (10,043) (3,308) (10,736)
Dividends paid (19,360) (19,444) (26,250)
Proceeds from issuance of debt 9,738 8,696 4,167
Proceeds from issuance of common stock 52,888
------- ------ -------
Net cash from (used in) financing activities (19,665) 38,832 (32,819)
Effect of exchange rate changes on cash 319 (138) 244
------- -------- -------
Increase (decrease) in cash and cash equivalents 56,973 87,788 16,955
Cash and cash equivalents at beginning of year 131,601 43,813 26,858
-------- -------- -------
Cash and cash equivalents at end of year $188,574 $131,601 $43,813
======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-18
<PAGE>
AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
1. Summary of Significant Accounting Policies:
General:
AVX Corporation is a leading worldwide manufacturer and
supplier of a broad line of passive electronic components and
related products. Components sold by the Company are used in
virtually all types of electronic products for industries such
as telecommunications, computers, automotive, medical and
consumer electronics. The consolidated financial statements of
AVX Corporation and subsidiaries (the "Company" or "AVX")
include the accounts of the Company and its subsidiaries. All
significant intercompany transactions and accounts have been
eliminated.
Public Offering:
From January 1990 through August 15, 1995, the Company was
wholly-owned by Kyocera Corporation ("Kyocera"). On August 15,
1995, Kyocera sold 22.9%, or 19,650,000 of the Company's common
shares, and the Company sold an additional 2,200,000 common
shares, in a public offering. As a result, Kyocera currently
owns 75.2% of the Company's common shares.
Cash Equivalents:
The Company considers all highly liquid investments purchased
with an original maturity of three months or less to be cash
equivalents.
Inventories:
Inventories are valued at the lower of cost (first-in,
first-out method) or market. Inventory costs include material,
labor and manufacturing overhead.
Property and Equipment:
Property and equipment are recorded at cost. Machinery and
equipment is depreciated on the double-declining balance method
for assets placed in service after April 1, 1991, and the
straight-line method for assets placed in service before that
date. Buildings are depreciated on the straight-line method.
The estimated useful lives used for computing depreciation are
as follows: buildings and improvements--10 to 31.5 years, and
machinery and equipment--3 to 10 years. Depreciation expense
was $80,120, $67,508 and $58,476 for the years ended March 31,
1997, 1996, and 1995, respectively.
The cost of maintenance and repairs is charged to expense as
incurred. Upon disposal or retirement, the cost and accumulated
depreciation of assets are eliminated from the respective
accounts. Any gain or loss is reflected in income.
F-19
<PAGE>
Goodwill:
Assets and liabilities related to business combinations
accounted for as purchase transactions were recorded at their
respective fair values on the dates of acquisition. Any excess
of purchase price over such fair value ("Goodwill") is amortized
on a straight-line basis over periods ranging from 20 to 40
years. The accumulated amortization as of March 31, 1997 and
1996 was $17,289 and $14,409, respectively. The carrying value
of Goodwill is evaluated quarterly in relation to the operating
performance and estimated future undiscounted cash flows of the
related operating unit. Adjustments are made if the sum of
expected future net cash flows is less than carrying value.
Income Taxes:
The Company does not provide for U.S. taxes on the
undistributed earnings of foreign subsidiaries which are
considered to be reinvested indefinitely. As of March 31, 1997,
the amount of U.S. taxes on such undistributed earnings would
have been approximately $27,000.
Foreign Currency Activity:
Assets and liabilities of foreign subsidiaries are translated
into U.S. dollars at the exchange rate in effect at the balance
sheet date. Operating accounts are translated at an average
rate of exchange for the respective accounting periods.
Translation adjustments result from the process of translating
foreign currency financial statements into U.S. dollars and are
reported separately as a component of stockholders' equity.
The Company enters into foreign currency exchange contracts and
options to manage exposure to currency rate fluctuations on
anticipated sales, purchases and intercompany transactions.
These exchange agreements generally qualify for accounting as
designated hedges. The realized and unrealized gains and losses
on these contracts are deferred and included as a component of
the related transaction. Any contracts that do not qualify as
hedges for accounting purposes are marked to market with the
resulting gains and losses recognized in other income or expense.
Revenue Recognition:
Sales are recorded upon shipment of related goods to customers.
Certain sales to distributors are under terms which allow for
the affected distributors to receive price protection from the
Company for actual sales at prices below anticipated sales
prices. A portion of sales is made to distributors under
agreements allowing limited rights of return. The Company
provides an allowance for distributor adjustments based on
historical experience.
Grants:
The Company's manufacturing and research facilities in the
Republic of Ireland and Israel have received capital, employment
and research grants from various governmental agencies.
Employment and research grants, which are recognized in earnings
in the period in which the related expenditures are incurred,
were $750 for the year ended March 31, 1997 and were immaterial
for the years ended March 31, 1996 and 1995. Capital grants for
the acquisition of equipment are recorded as reductions of the
related equipment cost and reduce future depreciation expense.
Use of Estimates:
Use of estimates and assumptions as determined by
management is required in the preparation of consolidated
financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those
estimates and assumptions.
F-20
<PAGE>
Research, Development and Engineering:
Research and development expenditures are expensed when
incurred. Research, development and engineering expenses totaled
approximately $34,000, $30,000, and $25,000 for the years ended
March 31, 1997, 1996, and 1995, respectively, while research and
development expenses included in these amounts totaled $18,500,
$16,000 and $10,000 for the years ended March 31, 1997, 1996 and
1995, respectively.
Stock-Based Compensation:
Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation", allows companies to
record compensation cost for stock-based compensation plans at
fair value or provide pro forma disclosures. The Company has
chosen to continue to account for stock-based compensation using
the method whereby compensation cost for stock options is
measured as the excess, if any, of the quoted market price of
the Company's stock at the date of grant over the amount an
employee must pay to acquire the stock.
Reclassifications:
Certain prior year amounts have been reclassified to conform
to the 1997 presentation.
New Accounting Standards:
The Company has adopted the Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of", which is
effective for fiscal years beginning after December 15, 1995.
The adoption did not materially affect the Company's financial
condition or results of operations.
In February 1997, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No.
128("SFAS 128"). The new standard replaces primary and fully
diluted earnings per share with basic and diluted earnings per
share. SFAS 128 is required to be adopted by the Company for
periods ending after December 15, 1997. Had the Company been
required to adopt SFAS 128 for the periods presented, the
adoption would not have impacted diluted or primary earnings per
share.
2. Accounts Receivable:
Accounts receivable at March 31 consisted of:
1997 1996
Trade $173,414 $159,798
Less, allowance for doubtful accounts, sales returns,
distributor adjustments and discounts (18,056) (20,253)
-------- --------
$155,358 $139,545
Charges to expense related to such allowances were
approximately $58,543, $53,117 and $42,055, and applications to
such allowances were approximately $60,991, $50,078 and $37,915
for the years ended March 31, 1997, 1996 and 1995, respectively.
F-20
<PAGE>
3. Inventories:
Inventories at March 31 consisted of:
1997 1996
Finished goods $83,711 $75,235
Work in process 89,146 77,256
Raw materials and supplies 75,038 90,664
------- ------
$247,895 $243,155
4. Debt:
Long-term debt at March 31 consisted of:
1997 1996
Deutschmark loans at 3.37% to 6.25% due through
2000 $13,532 $6,182
Other - 3,723
------- -------
13,532 9,905
Less--current maturities (1,362) (1,398)
------- -------
$12,170 $8,507
The aggregate annual maturities of long-term debt are as
follows:
1998 $ 1,362
1999 3,139
2000 9,031
-------
$13,532
Long-term debt includes a 15 million deutchmark loan which has
a variable rate of interest based on a market rate plus .25%. At March 31, 1997,
this loan had a rate of 3.37%. The remaining loans carry a fixed
rate of 6.25%
Short-term bank debt at March 31, 1997 consists primarily of
borrowings incurred by the Company's European subsidiaries under
two DM 10.0 million working capital bank facilities and a DM 1.5
million short-term bank facility bearing interest at market
rates (between 4.05% and 4.45% at March 31, 1997) which extend
through December 1997.
Interest paid totaled $1,639, $2,452 and $1,881 during the
years ended March 31, 1997, 1996, and 1995, respectively.
F-21
<PAGE>
5. Income Taxes:
For financial reporting purposes, after adjustments for certain
corporate items, income before income taxes includes the
following components:
Years Ended March 31,
1997 1996 1995
Domestic $102,717 $114,011 $ 57,197
Foreign 75,726 95,069 54,003
-------- -------- --------
$178,443 $209,080 $111,200
The provision (benefit) for income taxes consisted of:
Years Ended March 31,
1997 1996 1995
Current:
Federal/State $38,186 $55,480 $ 29,754
Foreign 20,084 31,544 12,598
------ ------- --------
58,270 87,024 42,352
Deferred: ------ ------ ------
Federal/State 4,031 (15,680) (10,006)
Foreign (5,199) 3,983
------ ------ ------
(1,168) (15,680) (6,023)
----- ------ ------
$57,102 $71,344 $ 36,329
====== ======= =======
Deferred taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
March 31,
1997 1996
Current: Assets Liabilities Assets Liabilities
<S> <C> <C> <C> <C>
Sales and receivable reserves $5,317 $ -- $ 6,625 $ --
Inventory reserves 4,989 -- 8,073 --
Accrued expenses 10,839 -- 16,155 --
------ ------- ------ -----
$21,145 $ -- $30,853 $ --
</TABLE>
<TABLE>
<CAPTION>
March 31,
1997 1996
Non-Current: Assets Liabilities Assets Liabilities
<S> <C> <C> <C> <C>
Property and equipment
depreciation $ 471 $6,147 $ 797 $12,879
Accrued expenses 1,100 1,251 709 1,252
Other 10,674 14,591
Foreign income tax loss
carryforwards 7,246 8,792
----- ------ ----- ------
8,817 18,072 10,298 28,722
Valuation allowance (2,935) (4,394)
------- ------ ------ ------
$ 5,882 $18,072 $ 5,904 $28,722
======= ======= ======= =======
</TABLE>
F-22
<PAGE>
A reconciliation between the U.S. Federal statutory income tax
rate and the Company's effective rate for income tax is as
follows:
Years Ended March 31,
1997 1996 1995
U.S. Federal statutory rate 35.0% 35.0% 35.0%
Increase (decrease) in tax rate resulting from:
State income taxes, net of federal tax benefit 2.4 .9 1.8
Taxes at different tax rates on foreign earnings (2.9) (1.5)( 2.8)
Change in valuation allowance (.8) (2.5) 1.9
Other, net (1.7) 2.2 (3.2)
---- ----- -----
Effective tax rate 32.0 34.1% 32.7%
===== ===== =====
At March 31, 1997, certain of the Company's foreign
subsidiaries in Europe had tax net operating loss carryforwards
totaling approximately $16,457, most with no expiration date. A
portion of the loss carryforwards are in jurisdictions where the
Company has ceased or sharply curtailed its operations, thereby
limiting its ability to generate future taxable income and
utilize such loss carryforwards. Accordingly, the Company's
valuation allowances relate to deferred tax assets which are the
result of the loss carryforwards in these jurisdictions. The
valuation allowance decreased $1,459 during the year ended March
31, 1997 and $5,297 during the year ended March 31, 1996. During
fiscal 1997, the Company reached resolution on all outstanding
issues related to U.S. income tax returns for the years 1990
through 1994.
Income taxes paid totaled $72,096, $66,500 and $29,329 during
the years ended March 31, 1997, 1996 and 1995, respectively.
6. Employee Retirement Plans:
Pension Plans
The Company sponsors non-contributory, defined benefit pension
plans covering certain employees. Pension benefits provided to
U.S. employees covered under collective bargaining agreements
are based on a flat benefit formula. Effective December 31,
1995, the Company froze benefit accruals under its domestic
non-contributory defined benefit pension plan for a significant
portion of the employees covered under collective bargaining
agreements. This change resulted in the Company recognizing a
curtailment gain of $500 for the year ended March 31, 1996. The
Company's pension plans for European salaried employees and
certain hourly employees provide for benefits based on a
percentage of final pay. The Company's funding policy is to
contribute the statutory required amount to appropriate trust or
government funds.
The following table sets forth the plans' funded status and
amounts recognized in the Company's balance sheet at March 31:
F-23
<PAGE>
<TABLE>
<CAPTION>
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefits $ (49,019) $(30,295) $ (6,779) $(23,840)
Non-vested benefits (295) (104) - (507)
Accumulated benefit obligation (49,314) (30,399) (6,779) (24,347)
Effect of projected future salary
increases (10,882) (8,069) - (917)
Projected benefit obligation (60,196) (38,468) (6,779) (25,264)
Plan assets at fair value, primarily
stocks and bonds 65,695 45,830 2,068 15,003
Projected benefit obligation (in excess
of) less than plan assets 5,499 7,362 (4,711) (10,261)
Unrecognized net (gain) loss (5,009) (3,765) 455 967
Prior service cost not yet recognized 631 (209) - 92
Unrecognized net transition obligation 90 (14) - 131
(Accrued) prepaid pension cost
recognized in the balance sheets $ 1,211 $3,374 $ (4,256) $(9,071)
</TABLE>
The Company's assumptions used in determining the pension
assets (liabilities) shown above were as follows:
Years Ended March 31,
1997 1996
Assumptions:
Discount rates 6.75-7.75% 7.0%
Increase in compensation 3.0 - 4.0% 3.0 - 4.0%
Expected long-term rate of return on plan assets 8.0 - 9.0% 7.0 - 9.0%
Net pension costs related to these pension plans, exclusive of
the curtailment gain referred to above, include the following
components:
Years Ended March 31,
1997 1996 1995
Service cost $ 1,873 $ 2,030 $ 2,253
Interest cost 4,384 4,412 3,988
Actual loss (return) on plan assets (6,911) (10,423) 1,683
Net amortization (deferral) 2,063 6,400 (5,707)
Net periodic pension cost $ 1,409 $ 2,419 $ 2,217
Savings Plans
The Company maintains retirement savings plans which allow
substantially all U.S. employees to defer part of their annual
compensation. Certain contributions by the Company are
discretionary and are determined by the Company's Board of
Directors each year. The Company's contributions to the savings
plans for the years ended March 31, 1997, 1996, and 1995, were
approximately $5,800, $5,300, and $5,000, respectively.
F-24
<PAGE>
The Company sponsors a nonqualified deferred compensation
program which permits key employees to annually elect to defer a
portion of their compensation until retirement. A portion of
the deferral is subject to a matching contribution by the
Company. The employees select among various investment
alternatives, with the investments held in a separate trust.
The value of the participant's balance fluctuates based on the
performance of the investments. At March 31, 1997, the market
value of the trust ($1,300) is included as an asset and a
liability of the Company in the accompanying balance sheets
because the trust assets are available to AVX's general
creditors in the event of the Company's insolvency.
7. Stock Option Plans:
The Company has two fixed option plans. Under the 1995 Stock
Option Plan, the Company may grant options to employees for the
purchase of up to an aggregate of 1,550,000 shares of common
stock. Under the Non-Employee Directors Stock Option Plan, the
Company may grant options for the purchase of up to an aggregate
of 100,000 shares of common stock. Under both plans, the
exercise price of each option equals the market price of the
Company's stock on the date of grant and an option's maximum
term is 10 years. All options granted under the 1995 Stock
Option Plan and the Non-Employee Directors Stock Option Plan
vest as to 25% annually commencing on the first anniversary of
the date of grant.
A summary of the status of the stock option plans as of March
31, 1997 is as follows:
Grant Options Options Exercise Remaining
Date Outstanding Exercisable Price Life (Years)
8/14/95 1,110,000 277,500 $25.500 8 1/2
8/12/96 528,500 0 $18.125 9 1/2
A total of 21,500 and 17,000 options were forfeited during the
years ended March 31, 1997 and 1996, respectively, and none were
exercised. The calculated fair value at date of grant for each
option granted during the years ended March 31, 1997 and 1996
was $6.82 and $8.96, respectively. The fair value of options at
date of grant was estimated using the Black-Scholes model with
the following weighted average assumptions:
Year Ended March 31,
1997 1996
Expected life (years) 5 5
Interest rate 6.70% 6.25%
Volatility 35% 30%
Dividend yield 1.21% 0.78%
If the estimated fair value of the options had been recognized
as compensation expense over the vesting periods, income before
income taxes would have been reduced by $3,099 ($2,523 after
income taxes, or $.03 per share) and $1,787 ($1,460 after income
taxes, or $.02 per share) for the years ended March 31, 1997 and
1996, respectively.
8. Commitments and Financial Instruments:
Commitments
At March 31, 1997 and 1996, the Company had contractual
obligations for the acquisition or construction of plant and
equipment aggregating approximately $24,422 and $42,600,
respectively. In connection with an expansion at the Company's
manufacturing facility in the Republic of Ireland, capital
grants totaling $11,500 have been approved, $8,600 of which had
not been received as of March 31, 1997 and are contingent upon the
Company spending approximately $28,600 for plant and equipment.
The Company is a lessee under long-term operating leases
primarily for office space, plant and equipment. Future minimum
lease commitments under non-cancelable operating leases as of
March 31, 1997, were as follows:
F-25
<PAGE>
Years Ending
March 31,
1998 $ 6,120
1999 5,656
2000 3,486
2001 2,685
2002 2,763
Thereafter 5,053
$25,763
Rental expense for operating leases was $6,390, $4,682, and
$3,996 for the years ended March 31, 1997, 1996, and 1995,
respectively.
Financial Instruments
At March 31, 1997, $25,000 of the Company's intercompany
borrowings were denominated in foreign currencies. To reduce
the exposure to foreign currency fluctuations, the Company
entered into foreign currency swaps which at March 31, 1997 fix
a portion of the principal balance of one intercompany loan at
$21,000 over a four year period.
In addition to the U.S. dollar, the Company conducts business
in most European currencies and the Japanese yen. The Company's
foreign currency contracts related to anticipated sales and
purchases generally have maturities that do not exceed six
months.
The Company enters into forward delivery contracts with certain
suppliers for certain precious metals used in its production
processes.
The Company's financial instruments that are exposed to
concentrations of credit risk consist primarily of cash and cash
equivalents and trade accounts receivable. The Company places
its cash and cash equivalents with high credit quality
institutions. At times, such investments may be in excess of
the Federal Deposit Insurance Corporation insurance limit.
Concentrations of credit risk with respect to trade accounts
receivable are limited due to the large number of entities
comprising the Company's customer base and their dispersion
across many different industries and countries. As of March 31,
1997, the Company believes that its credit risk exposure is not
significant.
The following disclosure of the estimated fair value of
financial instruments has been determined by the Company, using
available market information and appropriate valuation
methodologies.
The fair value of financial instruments classified as current
assets or liabilities including cash and cash equivalents,
receivables and accounts payable approximate carrying value due
to the short-term maturity of the instruments. The fair value
of short-term and long-term debt approximate carrying value
based on their effective interest rates compared to current
market rates.
<TABLE>
<CAPTION>
March 31, 1997 March 31, 1996
Contract Carrying Unrealized Contract Carrying Unrealized
Amount Amount Gain (Loss) Amount Amount Gain (Loss)
<S> <C> <C> <C> <C> <C> <C>
Off-Balance Sheet
Financial Instruments:
Foreign currency contracts $81,510 $ - $ 2,887 $77,738 $ - $ 562
Foreign currency swaps 21,000 (1,166) (1,166) 30,317 681
Metal delivery contracts 6,225 - 1,225 23,440 616
</TABLE>
F-26
<PAGE>
9. Transactions With Affiliate:
The Company's primary businesses include the design,
manufacture and sale of ceramic and tantalum capacitors and
electronic connectors and the sale and distribution of
electronic products manufactured by Kyocera.
The Company entered into transactions with Kyocera as follows:
<TABLE>
<CAPTION>
Years Ended March 31,
1997 1996 1995
<S> <C> <C> <C>
Sales:
Product and equipment sales to affiliates $ 23,120 $ 9,240 $ 4,460
Subcontracting activities 2,111 2,365 2,100
Commissions received 236 252 95
Service fee income 120 400
Purchases:
Purchases of resale inventories, raw materials
supplies, equipment and services 234,434 234,612 214,950
Commissions paid 202 171 360
Rent paid 959 909 865
Cost Reimbursements:
Subcontracting expenses 10,400
Advertising and promotional expenditures 230
Research and development 442 480
Other:
Dividends 14,553 17,491 26,250
Sale of assembly operation in Indonesia 3,973
</TABLE>
Effective April 1, 1995, the Company sold to Kyocera an
assembly operation in Indonesia for $3,973, the equivalent of
the Company's net carrying value of such operation. Consistent
with Kyocera's arrangements with its other worldwide direct
reporting subsidiaries, the Company paid cash dividends equal to
approximately 35% of estimated net income during the year
ended March 31, 1995 and the quarter ended June 30, 1995.
Thereafter, quarterly cash dividends have been paid as approved
by the Board of Directors on a per common share basis.
F-27
<PAGE>
10. Segment and Geographic Information:
AVX's manufacture and sale of electronic components is
considered one business segment. Information about the
Company's operations in different geographic areas is as follows:
<TABLE>
<CAPTION>
United
Year Ended March 31, States Europe Asia Other Elimination Total
1997:
<S> <C> <C> <C> <C> <C> <C>
Net sales to
customers $524,990 $253,493 $345,262 $2,433 $ - $1,126,178
Net sales between
geographic areas 96,952 138,260 214 40,186 (275,612)
-------- -------- -------- ------ --------- ---------
Total net sales 621,942 391,753 345,476 42,619 (275,612) $1,126,178
Profit from operations 107,634 28,105 29,406 6,801 $171,946
Interest income, net 5,487
Other, net 1,010
Income before income taxes $178,443
Identifiable assets 517,563 274,726 88,123 68,895 $949,307
</TABLE>
<TABLE>
1996:
<S> <C> <C> <C> <C> <C> <C>
Net sales to
customers $562,994 $301,509 $341,760 $1,498 $ - $1,207,761
Net sales between
geographic areas 89,560 104,425 610 66,380 (260,975)
-------- -------- -------- ------ --------- ----------
Total net sales 652,554 405,934 342,370 67,878 (260,975) $1,207,761
Profit from operations 98,526 52,575 43,724 9,856 $204,681
Interest income, net 2,744
Other, net 1,655
Income before income taxes $209,080
Identifiable assets 483,186 261,154 77,231 45,945 $867,516
</TABLE>
<TABLE>
<CAPTION>
1995:
<S> <C> <C> <C> <C> <C> <C>
Net sales to
customers $466,696 $230,153 $290,333 $1,711 $ - $988,893
Net sales between
geographic areas 73,751 84,458 487 59,155 (217,851)
------- ------- ------- ------ -------- -------
Total net sales 540,447 314,611 290,820 60,866 (217,851) $988,893
Profit from operations 53,278 21,789 26,195 8,931 $110,193
Interest expense, net (211)
Other, net 1,218
Income before income taxes $111,200
Identifiable assets 338,321 213,983 79,048 39,345 $670,697
</TABLE>
The other category consists of Mexico, El Salvador and Israel
operations. Sales between geographic areas are priced based on a
percentage over cost which allows the selling organization to
earn a reasonable profit. Operating profit is total revenue
less operating expenses and allocated general corporate
expenses. In computing operating profit, interest expenses,
interest income, miscellaneous other non-operating income and
expenses and income taxes were not deducted.
F-28
<PAGE>
11. Environmental Matters and Contingencies:
The Company has been named as a potentially responsible party
in state and federal administrative proceedings seeking
contribution for costs associated with the correction and
remediation of environmental conditions at various hazardous
waste disposal sites. The Company continues to monitor these
actions and proceedings and to vigorously defend its interests.
The Company's ultimate liability in connection with
environmental claims will depend on many factors, including its
volumetric share of waste, the total cost of remediation and the
financial viability of other companies that also sent waste to a
given site. Once it becomes probable that the Company will
incur costs in connection with remediation of a site and such
costs can be reasonably estimated, the Company establishes or
adjusts its reserves for its projected share of these costs.
These reserves do not reflect any possible future insurance
recoveries, which are not expected to be significant, but do
reflect a reasonable estimate of cost sharing at multiple party
sites. Based upon information known to the Company concerning
the size of these sites, their years of operations and the
number of past users, management believes that it has adequate
reserves with respect to these matters. Such reserves for
remediation, compliance and legal costs totaled $5,025 at March
31, 1997. Actual costs may vary from these estimated reserves,
but such costs are not expected to have a material adverse
effect on the Company's financial condition or results of
operations.
12. Summary of Quarterly Financial Information (Unaudited):
Quarterly financial information for the years ended March 31,
1997 and 1996 is as follows:
First Quarter Second Quarter
1997 1996 1997 1996
Net sales $268,211 $304,556 $267,909 $307,637
Gross profit 73,286 78,115 65,795 82,289
Net income 32,467 30,408 28,153 36,435
Per share .37 .35 .32 .42
Third Quarter Fourth Quarter
1997 1996 1997 1996
Net sales $289,574 $302,716 $300,484 $292,852
Gross profit 64,633 79,828 70,601 81,035
Net income 30,051 34,198 30,670 36,695
Per share .34 .39 .35 .42
F-29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of AVX Corporation
We have audited the accompanying consolidated balance sheets of
AVX Corporation and Subsidiaries as of March 31, 1997 and 1996,
and the related consolidated statements of income, cash flows
and stockholders' equity for each of the three years in the
period ended March 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of AVX Corporation and Subsidiaries as of
March 31, 1997 and 1996, and the consolidated results of their
operations and their cash flows for each of the three years in
the period ended March 31, 1997, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
May 13, 1997
F-30
AVX Corporation Subsidiaries Exhibit 21.1
As of June 5, 1997 , active subsidiaries, all 100% owned
directly or indirectly, consist of the following.
Country or State of incorporation
AVX CORPORATION Myrtle Beach, SC, USA
AVX TANTALUM CORPORATION Maine
AVX FILTERS CORPORATION California
AVX VANCOUVER CORPORATION Washington
ELCO USA, INC. Delaware
AVX ISRAEL LTD. Israel
AVX DEVELOPMENT Delaware
AVX LIMITED United Kingdom
AVX GmbH Republicof Germany
AVX ELECTRONISCH BAUELEMENTE GmbH Republic of Germany
AVX SRL Italy
AVX SA France
AVX CZECH REPUBLIC sro Czech Republic
ELCO EUROPE LTD. United Kingdom
ELCO EUROPE GmbH Republic of Germany
ELCO EUROPE APS Denmark
ELCO EUROPE SARL France
AVX/KYOCERA ASIA LTD. Hong Kong
AVX/KYOCERA HONG KONG LTD. Hong Kong
AVX/KYOCERA (S) PTE LTD. Singapore
AVX INDUSTRIES PTE LTD. Singapore
AVX/KYOCERA (MALAYSIA) SDM BHD Malaysia
AVX/KYOCERA (SINGAPORE) PTE LTD. Singapore
AVIO EXITO de Chihuahua, S.A. de C.V. United Mexican States
AVIO EXCELENTE, S.A. de C.V. "
AVIO EXCELENTE de Chihuahua, S.A. de C.V. "
AVX S.A. (El Salvador) "
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of AVX Corporation on Form S-8 (File Nos. 33-97628,
33-98114, 33-98094, 33-99574, 333-00890 and 333-02808) of our
report dated May 13, 1997, on our audits of the consolidated
financial statements of AVX Corporation as of March 31, 1997 and
1996, and for the years ended March 31, 1997, 1996, and 1995,
which report is included in this Annual Report on Form 10-K.
/s/ COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
June 6, 1997
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the
undersigned directors and officers of AVX Corporation, a
Delaware corporation, which will file with the Securities and
Exchange Commission, Washington, D.C., under the provisions of
the Securities Law, an Annual Report for fiscal year ended March
31, 1997 on Form 10-K, hereby constitutes and appoints Benedict
P. Rosen, John S. Gilbertson and Donald B. Christiansen his true
and lawful attorneys-in-fact and agents, and each of them with
full power to act without the others, for him and in his name,
place and stead, in any and all capacities, to sign said 10-K
Annual Report and any and all amendments thereto, and any and
all other documents in connection therewith, with the Securities
and Exchange Commission, hereby granting unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this
Power-of Attorney on the date set opposite his respective name.
Signature Title Date
/s/Kazuo Inamori Chairman of the Board of Directors April 25, 1997
- ---------------
Kazuo Inamori
/s/Yuzo Yamamura Director April 25, 1997
- ---------------
Yuzo Yamamura
/s/Kensuke Itoh Director April 25, 1997
- ---------------
Kensuke Itoh
/s/Masato Takeda Director April 25, 1997
- ----------------
Masato Takeda
/s/Masahiro Umemura Director April 25, 1997
- -------------------
Masahiro Umemura
/s/Masahiro Yamamoto Director April 25, 1997
- -------------------
Masahiro Yamamoto
/s/Benedict P. Rosen President, Chief Executive Officer April 25, 1997
- -------------------- and Director
Benedict P. Rosen
/s/John S. Gilbertson Executive Vice President, Chief April 25, 1997
- --------------------- Operating Officer and Director
John S. Gilbertson
/s/Donald B. Christiansen Chief Financial Officer, Vicec April 25, 1997
- ------------------------- President, Treasurer and Director
Donald B. Christiansen
/s/Carroll A. Campbell, Jr. Director April 25, 1997
- ---------------------------
Carroll A. Campbell, Jr.
/s/Marshall D. Butler Director April 25, 1997
- ---------------------
Marshall D. Butler
/s/Rodney N. Lanthorne Director April 25, 1997
- ----------------------
Rodney N. Lanthorne
/s/Richard Tressler Director April 25, 1997
- -------------------
Richard Tressler
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Exhibit 10.8
AVX CORPORATION
DEFERRED COMPENSATION PLAN
FOR ELIGIBLE BOARD MEMBERS
EFFECTIVE AS OF JANUARY 1, 1997
1. Purpose. The purpose of the Plan is to provide
Eligible Board Members of AVX Corporation with an opportunity to
defer payment of certain portions of their compensation, at their
election, in accordance with the provisions hereof.
2. Definitions. As used herein, the following terms shall have the
following meanings:
"Account" shall mean the Account established for a Participant pursuant to
Section 4.
"Beneficiary" shall mean the person or persons designated
by a Participant in accordance with Section 7 to receive any amount, or any
common stock, payable under the Plan by reason of the Eligible Board Member's
death.
"Board of Directors" shall mean the Board of Directors of the Corporation.
"Committee" shall mean the persons appointed the Board of
Directors to administer the Plan in accordance with Section 10.
"Common Stock" shall mean the common stock which the Corporation is currently
authorized to issue or may in the future be authorized to
issue (as long as the Common Stock varies from that currently authorized,
if at all, only in amount of par value).
"Corporation" shall mean AVX Corporation, a Delaware corporation.
"Eligible Board Member" shall mean any individual who is a member of the
Board of Directors and who is entitled to receive compensation for
services rendered in such capacity other than an individual who is also an
employee of the Corporation, its parent, any subsidiary or any affiliate of
the Corporation.
"Eligible Compensation" shall mean, with respect to any Eligible Board
Member for any Plan Year, all fees payable to such Eligible Board Member
during such year for attendance at meetings of the Board of Directors or
committees thereof, and all fees payable to such Eligible Board Member
during such year by way of retainer for service as a member or chairman of
the Board of Directors or committees thereof regardless of the number of
meetings attended.
"Fair Market Value" means the average of the high and the low sales prices of
a share of Common Stock on any specified date (or, if not a trading
day, on the last preceding trading day) as reported on the New York Stock
Exchange Composite Transactions Tape or, if not listed on the New York Stock
Exchange, the principal stock exchange or the NASDAQ National Market on which
the Common Stock is then listed or traded;
provided, however, that if the Common Stock is not so
listed or traded then the Fair
Market Value shall be determined in good faith by the
Board of Directors.
"Participant" shall mean any Eligible Board Member who has
made an election under
Section 3 to defer any portion of his or her Eligible
Compensation for any Plan Year.
"Phantom Share Unit" shall mean a unit of measurement
equivalent to one share of
Common Stock, with none of the attendant rights of a
holder of such share, including,
without limitation, the right to vote such share and the
right to receive dividends thereon, except to the extent
otherwise specifically provided herein.
"Plan" shall mean the AVX Corporation Deferred
Compensation Plan for Eligible Board
Members as set forth herein and as amended from
time to time.
"Plan Year" shall mean the calendar year.
3. Deferral Elections. With respect to each Plan
Year beginning on or after January 1,
1997, an Eligible Board Member may elect to have
payment of any part or all of his or
her Eligible Compensation for such year deferred,
and to have payment of such portion
made under the terms of this Plan. Any such
election shall be made in accordance with
the following rules:
(a) A deferral election shall be made
in writing, on a form provided by the
Committee for such purpose.
(b) In the election form, the Eligible
Board Member shall (i) specify, by percentage
(which must be an even multiple of [5]%), the portion of his or
her Eligible
Compensation that the Eligible Board Member
wishes to defer hereunder (the amounts
so deferred are hereinafter referred to as the
Eligible Board Member's "Deferred
Amounts"), (ii) specify, by percentage (which
must be an even multiple of [5]%), the
portion of his Deferred Amounts that shall be
invested in each investment option
available under the Plan which shall include, but
shall not be limited to, a Phantom Share
Unit Fund, and (iii) specify whether his Deferred
Amount shall become payable upon the
Participant's ceasing to be a member of the Board
of Directors for any reason or as soon
as practicable following the 10th anniversary of
the first day of the Plan Year following
the Plan Year in which the Deferred Amount would
have been paid were it not for the
deferred election (or the later of the two
alternatives).
(c) An Eligible Board Member's election to defer Eligible
Compensation for any Plan
Year shall be filed with the Committee (i) by no later than
January 31, 1997, in the case of
an election to defer Eligible Compensation for the Plan Year
beginning on January), 1,
1997; or (ii) in the case of an election to defer Eligible
Compensation for any Plan Year
beginning on or after January 1, 1998, by no later than
December 31. of the preceding
Plan Year.
(d) Notwithstanding the provisions of paragraph (b)
above, a newly elected Eligible
Board Member may make an initial deferral election
hereunder with respect to Eligible
Compensation for the Plan Year in which he or she is first
elected to serve as a member
of any Board by filing his or her election form with the
Committee by no later than 30
days after the date on which he or she commences to serve
as a member of such Board.
Any deferral election so made shall be effective only with
respect to Eligible
Compensation earned for services performed after the date
on which the Eligible Board
Member's deferral election has been filed with the
Committee.
(e) Any deferral election made by an
Eligible Board Member with respect to his or
her Eligible Compensation (including the date of
distribution) for a Plan Year shall be
irrevocable.
4. Accounts. For each Participant,
there shall be established on the books and
records of the Corporation, for bookkeeping purposes
only, an Account, to reflect the
Participant's interest under the Plan. The Account
so established for each Participant shall
be maintained in accordance with the following
provisions:
(a) Each Participant's Account shall be credited with
the Participant's Deferred
Amounts as of the first day of the calendar month following the
month in which the
amounts in question would have been paid to the Participant had
the Participant not
elected under Section 3 to have payment of such amounts deferred
under this Plan
(hereafter referred to as the "Credit Date").
(b) Each Participant's Account shall be credited (or
debited) as of the. last
business day of each calendar quarter with gains, income (or
loss) based on a
hypothetical investment in any one or more of the! investment
options available under
the Plan, as determined and applied in the manner deemed
appropriate by the Committee.
(c) If a Participant elects to invest all or any
port-ion of his or her Deferred
Amounts in the Phantom Share Unit Fund, that portion of the
Participant's Account
shall be credited on each Credit Date with Phantom Share Units
equal to the number of shares of Common Stock (including
fractions of a share) that could have been purchased
with such Deferred Amounts at the Fair Market Value on the
Credit Date. As of any
dividend payment date for the Common Stock, the portion of a
Participant's Account
invested in the Phantom Share Unit Fund as of the dividend
record date shall be credited
with additional Phantom Share Units. The number of Phantom
Share Units credited to
the Phantom Share Unit Fund will be determined by dividing (i)
the product of (a) the
dollar value of the dividend declared in respect of a share of
Common Stock multiplied
by (b) the number of Phantom Shares Units credited to the
Participant's Phantom Share
Unit Fund account as of the dividend record date by (ii) the
Fair Market Value of a share
of Common Stock on the dividend payment date.
(d) A Participant's interest in his or her Account
shall be fully vested and
nonforfeitable at all times.
5. Adjustment of Phantom Share Units. In the event
of any change in the
Corporation's common shares by reason of any stock dividend,
recapitalization,
reorganization, merger, consolidation, split-up, combination or
exchange of shares, or
any rights offering to purchase such shares at a price
substantially below fair market
value, or any similar change affecting the Corporation common
shares, the number
and kind of shares represented by Phantom Share Units shall be
appropriately adjusted
consistent with such change in such manner as the Committee, in
its sole discretion,
may deem equitable to prevent substantial dilution or
enlargement of the rights granted
to, or available for, the Participants hereunder. The
Committee shall give notice to each
Participant of any adjustment made pursuant to this Section 5
and, upon such notice,
such adjustment shall be effective and binding for all purposes
of the Plan.
6. Payment of Account Balances. Payment
with respect to a Participant's Account
shall be made in accordance with the following
provisions:
(a) The balance of a Participant's Account shall
become payable upon the
Participant's ceasing to be a member of the Board of
Directors, for any reason, or as
soon as practicable following the tenth anniversary of the
first day of the Plan Year
following the Plan Year in which the Deferred Amounts would
have been paid were it not
for the deferral election (or the later of the two
alternatives) in accordance with the
Participant's election made under Section 3.
(b) Amounts credited to a Participant's Account
shall be paid in a lump sum to the
Participant or, in the event of his death, to his
Beneficiary. All distributions shall be made
in cash except that payment with respect to the portion of
the Participant's Account that is
invested in the Phantom Share Unit Fund shall be made in
the form of (i) a number of
shares of Common Stock equal to the number of whole Phantom
Share Units credited to
such portion of the Account as of the last day of the month
preceding the month in which
such payment is made, and (ii) a cash payment in an amount
determined by multiplying (x) the fractional part of
a Phantom Share Unit credited to such balance as of such last
day by
(y) the Fair Market Value of one share of Common Stock as
of such last day. In the event
of the Participant's death, the payments to be made
hereunder to the Participant's
Beneficiary shall be made as soon as practicable after the
date of the Participant's death.
(c) Notwithstanding any other provision in this
Section 6 to the contrary, payment
with respect to any part or all of the Participant's
Account may be matched to the
Participant on any date earlier than the date on which such
payment is to be made
pursuant to such other provisions of this Section 6 if (i)
the Participant requests such early
payment in writing and (ii) the Committee, in its sole
discretion, determines that such early
payment is necessary to help the Participant meet an
"unforeseeable mergency" within the
meaning of Section 1.457-2(h)(4) of the Federal Income Tax
Regulations. The amount
that may be so paid may not exceed the amount necessary to
meet such emergency. The
committee may request that the Participant provide such
evidence of the unforeseeable
emergency as it deems appropriate.
7. Designation and Change of Beneficiary. Each
Participant shall file with the
Committee a written designation of one or more persons as the
Beneficiary who shall be
entitled to receive any amount, or any Common :stock payable
under the Plan by reason
of his or her death. A Participant may, from time to time,
revoke or change his or her
Beneficiary designation without the consent of any previously
designated Beneficiary by
filing a new designation with the Committee. The last such
designation received by the
Committee shall be controlling; provided, however, that no
designation, or change or
revocation thereof, shall be effective unless received by the
Committee prior to the
Participant's death, and in no event shall it be effective as of
a date prior to such receipt.
If at the date of a Participant's death, there is no designation
of a Beneficiary in effect for
the Participant pursuant to the provisions of this Section 7, or
if no Beneficiary
designated by the Participant in accordance with the provisions
hereof survives to
receive any amount payable under the Plan by reason of the
Participant's death, the
Participant's estate shall be treated as the Participant's
Beneficiary for purposes of the
Plan.
8. Payments to Persons Other Than
Participants.
If the Committee shall find that any Participant
or Beneficiary to whom any amount (or
any Common Stock) is payable under the Plan is
unable to care for his or her affairs
because of illness, accident or legal incapacity,
then, if the Committee so directs, such
amount, or such Common Stock, may be paid to such
Participant's or Beneficiary's
spouse, child or other relative, an institution
maintaining or having custody of such
person, or any person deemed by the Committee to
be a proper recipient on behalf of
such Participant or Beneficiary, unless prior
claim therefor has been made by a duly
appointed legal representative of the Participant
or Beneficiary.
Any payment made under this Section 8 shall he a complete
discharge of the liability of
the Corporation with respect to such payment.
9. Rights of Participants. A
Participant's rights and interests under the Plan shall
be subject to the following provisions:
(a) A Participant shall have the status of a, general
unsecured creditor of the
Corporation with, respect to his or her right to receive any
payment. under the Plan.
The Plan shall constitute a mere promise by the Corporation to
make payments in the
future of the benefits provided for herein. It is intended
that the arrangements reflected
in this Plan be treated as unfunded for tax purposes.
(b) A Participant's rights to payments
under- the Plan shall not be subject in any
manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors of the
Participant or his or her Beneficiary.
10. Administration. The Plan shall be administered by a
Committee composed of at
least two members of the Board of Directors who are not
Eligible Board Members and
who shall be appointed by the Board of Directors. If at any
time there are less than two
such members on the Board of Directors, additional members of
the Committee shall
be appointed from among those members of the Board of Directors
who have never
participated in the Plan or, in the absence of any such members
of the Board of
Directors, from among any senior officers of the Corporation or
any of its affiliated
companies.
All decisions, actions or interpretations of the Committee under
the Plan shall be final,
conclusive and binding upon all parties.
No member of the Committee shall be personally liable by reason
of any contract or
other instrument executed by such member or on his or her behalf
in his or her capacity
as a member of the Committee nor for any mistake of judgment
made in good faith, and
the Corporation shall indemnify and hold harmless each member of
the Committee, and
each employee, officer, director or trustee of the Corporation
or any of its affiliated
companies to whom any duty or power relating to the
administration or interpretation
of the Plan may be delegated, against any cost or expense
(including counsel fees) or
liability (including any sum paid in settlement of a claim with
tie approval of the Board
of Directors) arising out of any act or omission to act in
connection with the Plan unless
arising out such person's own fraud or bad faith.
11. Amendment or Termination. The Board of Directors
may, with prospective or
retroactive effect, amend, suspend or terminate the Plan or any
portion thereof at any
time; provided, however, that no amendment of the Plan shall
deprive any Participant of
any rights to receive payment of any amounts due him or her
under the terms of the Plan
as in effect prior to such amendment without his or her written
consent.
Any amendment that the Board of Directors would be
permitted to make pursuant to
the preceding paragraph may also be made by the Committee where
appropriate to
facilitate the administration of the Plan or to comply with
applicable law or any
applicable rules and regulations of governing authorities
provided that the cost of the
Plan to the Corporation is not materially increased by such
amendment.
12. Successor Corporation. The obligations
of the Corporation under the Plan shall be binding
upon any successor corporation or organization resulting from
the merger,
consolidation or other reorganization of the
Corporation, or upon any successor
corporation or organization succeeding to
substantially all of the assets and business of
the Corporation. The Corporation agrees that it
will make appropriate provision for the
preservation of Participants' rights under the Plan
in any agreement or plan which it may
enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of
assets.
13. Governing Law. The provisions of the Plan shall be
governed by and construed
in accordance with the laws of the State of (New York].
14. Withholding Taxes. If required by applicable law, the
Committee shall withhold
from any payment such amount as shall be legally required to pay
any Federal, state or
local taxes.
