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, 1998 Commission File No. 110431
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) IdentificationNumber)
801 17th Avenue South
Myrtle Beach, South Carolina 29577
(843) 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 $19 1/16 on May 22, 1998, the
aggregate market value of the voting stock held by non-affiliates of the
registrant was $412,004,007.
As of May 22, 1998, the number of shares outstanding of the registrant's
Common Stock, par value $.01 per share, was 87,763,325 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
shareholders to be held on July 16, 1998.
<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. 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,
Latin America, Mexico, Europe and Asia.
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 57% of the Company's net sales in fiscal 1998.
Advanced products, which are designed and manufactured by the Company in
cooperation with customers to meet the requirements of specific applications,
represented about 15% of the Company's net sales in fiscal 1998.
Connectors accounted for approximately 9% of net sales and the remaining 19%
of AVX's net sales in fiscal 1998 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.
<PAGE> 2
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 $273 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 passive components
sold by the Company include ceramic capacitors, hybrids, oscillators, saw
devices, resistor networks, trimmers, chip resistors, ceramic filters,
resonators, connectors and piezo acoustic devices.
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.
<PAGE> 3
Approximately 48%, 23% and 29% of the Company's net sales for fiscal
1998, 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 $196 million at March 31,
1998, $240 million at March 31, 1997, and $250 million at March 31, 1996.
Orders may be canceled by a customer at any time, subject to cancellation
charges under certain circumstances. The backlog reduction since March 31,
1996, reflects the reduction in delivery lead times which 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, 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 $36 million, $33
million and $30 million during fiscal 1998, 1997 and 1996, 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.
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 approximately
75% of the Company's common shares.
<PAGE 4>
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 10 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 $400 per
troy ounce during the last three years. The Company is
presently, and expanding the use of, substitutes, such as
nickel and copper, for palladium in certain product applications.
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.
<PAGE>5
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 May 31, 1998, AVX employed approximately 13,500 full
time employees. Approximately 3,800 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 $4.1 million at March 31, 1998. 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.
<PAGE>6
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.
Executive Officers of the Registrant
The following table provides certain information regarding
the executive officers of the Company as of May 22, 1998.
Name Age Position
Benedict P. Rosen 62 Chief Executive Officer
John S. Gilbertson 54 President and Chief
Operating Officer
Donald B. Christiansen 59 Senior Vice President,
Chief Financial Officer and Treasurer
C. Marshall Jackson 49 Senior Vice President of Sales and
Marketing
Ernie Chilton 54 Senior Vice President-Tantalum
S. M. Chan 42 Vice President of Marketing and
Sales-Asia
Allan Cole 55 Vice President of Sales
Alan Gordon 49 Vice President of European
Sales/Marketing
John L. Mann 55 Vice President of
Quality
Roberto E. Salazar 43 Vice President of Latin America
Operations
Carl L. Eggerding 48 Vice President of Advanced Products
and Technology Center
Kurt P. Cummings 42 Corporate Controller and Secretary
Benedict P. Rosen
Chairman of the Board and Chief Executive Officer
effective July 1997. Chief Executive Officer and
President of the Company from April 1993 until July 1997
and a member of the Board since January 1990. Executive
Vice President from February 1985 to March 1993 and
employed by the Company since 1972. Senior Managing and
Representative Director of Kyocera since June 1995 and
previously served as a Managing Director of Kyocera from
1992 to June 1995. Director of Nitzanim-AVX/Kyocera-
Venture Capital Fund Ltd. and Aerovox Corporation.
John S. Gilbertson
President since July 1997. Chief Operating Officer of the
Company since April 1994, and a member of the Board since
January 1990. Executive Vice President from April 1992 to
July 1997, Senior Vice President from September 1990 to
March 1992 and employed by the Company since 1981.
Director of Kyocera since June 1995
Donald B. Christian
Senior Vice President of Finance, Chief Financial Officer
and Treasurer of the Company since July 1997 and a member
of the Board since April 1992. Vice President of Finance,
Chief Financial Officer and Treasurer from April 1994 to
July 1997 and Chief Financial Officer from March 1992 to
April 1994.
C. Marshall Jackson
Senior Vice President of Sales and 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.
Ernie Chilton
Senior Vice President-Tantalum of AVX since April 1994.
From January 1990 until February 1993, Mr. Chilton served
as Vice President of AVX. Mr. Chilton has been employed by
the Company since 1980.
S. M. Chan
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
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
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
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.
Carl L. Eggerding
Vice President of Advanced Products and Technology Center
since July 1997. Employed by the Company since April
1996. Prior to April 1996, employed by IBM as
Director of Development for Organic Packaging
Technology.
Roberto E. Salazar
Vice President of Latin America Operations since July
1997. Served as General Manager of El Salvador Operations
from 1990 until 1993 and as Division Vice President for
El Salvador and the Mexican operations until July 1997.
Kurt P. Cummings
Secretary of the Company since July 1997. Corporate
Controller of the Company since June 1992.
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 505,09 Owned Research/Manufacturing /Headquarters
Myrtle Beach, SC 15,000 Leased Warehouse
Conway, SC 70,408 Owned Manufacturing
Biddeford, ME 72,000 Owned Manufacturing
Colorado Springs, CO 15,000 Owned Manufacturing
El Paso, TX 24,960 Leased Warehouse
New Orleans, LA 18,840 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 10,800 Leased Warehouse/Office
OUTSIDE THE UNITED STATES
Betzdorf, Germany 101,671 Owned Manufacturing
Biggleswade, England 10,000 Leased Manufacturing
Chihuahua, Mexico 393,952 Owned Manufacturing
Coleraine, N. Ireland 167,000 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 179,050 Leased Manufacturing
Uherske Hradiste,Czech
Republic 148,910 Leased Manufacturing
Larne, N. Ireland 120,000 Owned Manufacturing/Warehouse
Newmarket, England 52,000 Leased Manufacturing
Paignton, England 160,909 Owned Research/Manufacturing
San Salvador,
El Salvador 232,981 Owned Manufacturing
Singapore 49,500 Leased Manufacturing/Warehouse
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 $100.4 million
for fiscal 1998 and $93.9 million in fiscal 1997.
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 June 30,
1996 as reported on the New York Stock Exchange Composite Tape.
1998 1997
High Low High Low
First Quarter $291/8 $ 193/4 $251/2 $17
Second Quarter 395/8 265/8 23 16
Third Quarter 341/2 1711/16 241/8 181/4
Fourth Quarter 233/8 181/4 251/4 193/4
Holders of Record
At May 22, 1998, there were approximately 13,000 holders
of record of the Company's common stock.
Dividends
The Company has declared and paid cash dividends of $.065
per share of common stock for the quarter ended March 31, 1998. The
Company declared and paid cash
dividends for the quarters ended December 31, 1997,
September 30, 1997, June 30, 1997 and March 31, 1997 of
$.06 per share of common stock. The Company declared and
paid cash dividends for the quarters ended December 31,
1996, September 30, 1996 and June 30, 1996 of $.055 per
share of common stock. Future dividends, if any, will
depend on the Company's profitability and anticipated
operating requirements.
Item 6. Selected Financial Data
The following table sets forth selected financial
data for the Company for the five years ended March 31,
1998. The financial data set forth below should be read
in conjunction with the Company's Consolidated Financial Statements
and the Notes thereto included elsewhere in this Form 10-K.
Year ended March 31,
(dollars in 1998 1997 1996 1995 1994
thousands, except
share data)
Income Statement
Data:
Net sales $1,267,653 $1,126,178 $1,207,761 $988,893 $795,515
Cost of sales 970,216 851,863 886,494 777,687 639,058
Gross profit 297,437 274,315 321,267 211,206 156,457
Selling, general and
administrative expenses 110,737 102,369 116,586 101,013 100,875
Profit from operations 186,700 171,946 204,681 110,193 55,582
Interest income 11,268 7,536 5,096 2,018 749
Interest expense (1,921) (2,049) (2,352) (2,229) (2,792)
Other, net 1,377 1,010 1,655 1,218 1,439
Income before income
taxes and cumulative
effect of accounting
change for income taxes 197,424 178,443 209,080 111,200 54,978
Provision for income taxes 62,773 57,102 71,344 36,329 19,817
Income before
cumulative effect of
accounting change
for income taxes 134,651 121,341 137,736 74,871 35,161
Cumulative effect of
accounting change
for income taxes 5,000
Net income $ 134,651 $ 121,341 $ 137,736 $ 74,871 $ 40,161
Basic and diluted
income per share:
Before cumulative
effect of accounting
change for income
taxes $ 1.53 $ 1.38 $ 1.58 $ 0.87 $ 0.41
Cumulative effect of
accounting change
for income taxes 0.06
Net income $ 1.53 $ 1.38 $ 1.58 $ 0.87 $ 0.47
Weighted average
common shares
outstanding 88,109,643 88,000,000 87,175,000 85,800,000 85,800,000
Cash dividends declared
per common share $ 0.245 $ 0.225 $ 0.229 $ 0.305 $ 0.17
As of March 31, 1998 1997 1996 1995 1994
Balance Sheet Data:
Working capital $ 552,787 $ 456,672 $ 357,930 $ 224,999 $ 189,528
Total assets 1,048,653 949,307 867,516 670,697 573,966
Long-term debt 8,376 12,170 8,507 9,544 10,427
Stockholders'equity 850,884 731,969 624,000 456,266 400,834
Item 7. Management's Discussion and Analysis of Results of Operations
and Financial Condition
General
The Compan's 1998 net sales increased 12.6% compared to 1997,
while 1997 reflected a 6.8% decrease from 1996 levels and the
previous two years increased 22.1% and 24.3%,
respectively. The growth in sales from 1994 to 1998 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, as the use of electronics in all walks of life
become more widespread and sophisticated.
During this period of growth in the industry, the average
selling prices of electronic components, as well as the
selling prices of the end use products which rely on
passive components, have declined. 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).
The following table sets forth the percentage
relationships to net sales of certain income statement
items for the periods presented.
Years Ended March 31, 1998 1997 1996
Net sales
100.0% 100.0% 100.0%
Cost of sales 76.5 75.6 73.4
Gross profit 23.5 24.4 26.6
Selling, general and
administrative expenses 8.7 9.1 9.6
Profit from operations 14.7 15.3 17.0
Income before income taxes 15.6 15.8 17.3
Provision for income taxes 5.0 5.0 5.9
Net income 10.6 10.8 11.4
Results of Operations Year Ended March 31, 1998 Compared to Year
Ended March 31, 1997
Net sales for the year ended March 31, 1998 increased
12.6% to $1,267.7 million from $1,126.2 million for the
year ended March 31, 1997. The increase was primarily
attributable to the growth in the ceramic and tantalum
products, particularly surface-mount and advanced
products. Despite the overall increase in sales, the
Company's results continue to be impacted by several
factors including, (a) the shortening of lead times 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, (d) the uncertainties
surrounding the Asian economic crisis, and (e) 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, 1998 decreased 0.9% to $297.4 million (23.5% of
net sales) from $274.3 million (24.4% of net sales) for
the year ended March 31, 1997. Overall sales prices in
the 1998 year were lower compared to the 1997 year. Gross
profit was also negatively impacted by the rising cost of
palladium, a principle raw material used in the
manufacture of ceramic capacitors. Continued automation of
the manufacturing processes and higher volumes of through-
put in the factories have helped to reduce manufacturing
costs for products sold and have enabled the Company to
maintain strong gross profit levels. As a result of the
Company's strategy to manufacture in the various regions
in which it sells products, and 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.
Selling, general and administrative expenses for the year
ended March 31, 1998 were $110.7 million (8.7% of net
sales), compared with $102.4 million (9.1% of net sales) in the year ended
March 31, 1997. The increase in selling, general, and
administrative expenses is due to higher research and
development spending, higher sales commissions, and the
benefit of adjustments to environmental remediation
accruals in 1997. As a percentage of sales, such expenses
have declined due to the Company's stringent cost control
measures.
Research, development and engineering expenditures, which
encompass the personnel and related expenses devoted to
developing new products, processes and technical
innovations, were $36 million and $33 million in fiscal
1998 and 1997, respectively.
As a result of the above factors, profit from operations
for the year ended March 31, 1998 increased 8.6% to $186.7 million from
$171.9 million for the year ended March 31, 1997.
For the reasons set forth above, higher interest income on
invested cash and a $3.1 million dividend from a nonmarketable
equity investment, net income in the year ended March 31,
1998 increased 11.0% to $134.6 million (10.6% of net
sales) from $121.3 million (10.8% of net sales) for the
year ended March 31, 1997.
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.
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 $33 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.
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, 1998, the Company had a current ratio of
4.3 to 1, $201.9 million of cash and cash equivalents,
$850.9 million of stockholders' equity and an
insignificant amount of long-term debt.
Net cash from operating activities was $136.8 million in
the year ended March 31, 1998, compared to $167.9 million
in the year ended March 31, 1997 and $155.7 million in the
year ended March 31, 1996. The decrease is primarily a
result of higher inventories which is due to the industry
trend toward shorter lead times which require the Company
to maintain higher levels of inventories in order to
support customers.
Purchases of property and equipment were $100.4 million
in fiscal 1998, $93.9 million in fiscal 1997, and $110.5
million in fiscal 1996. Virtually all expenditures 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 continues to add additional
capacity as the overall volume of produced units continues
to increase. The Company expects to construct facilities
and purchase equipment totaling approximately $100 to $150
million to increase production capacity in fiscal 1999.
During fiscal 1998, the Company invested $5.3 million in
a research and development company (Electro-Chemical
Research Ltd. "ECR"). ECR has developed and patented a
technology for high capacity electrical storage devices.
Although the majority of the Company's funding is
internally generated, certain European subsidiaries of the
Company borrowed deutsche marks under various bank
agreements. These borrowings were used for working capital
requirements and to repay other outstanding obligations.
In fiscal 1998, 1997 and 1996, dividends of $21.1
million, $19.4 million and $19.4 million, respectively,
were paid to stockholders.
The Company has established reserves in the three years
ended March 31, 1998 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, 1998, 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.
In April 1998, the Company agreed to acquire the passive
component businesses of Thomson-CSF for $15 million in
addition to approximately $50 million of intercompany debt
repayments. The businesses include film capacitors,
ferrites, high energy and high voltage power capacitors,
ceramic capacitors, varistors, and non-linear resistors.
Annual sales for last year for these businesses were
approximately $135 million. The operations include
production facilities in France, Malaysia, Taiwan, and Brazil. AVX
believes that some of the TPC products offer unique
opportunities to expand and grow the business using our
marketing and sales expertise.
Year 2000
The Year 2000 issue is the result of computer programs
being written using two digits rather than four to define
the applicable year. As a result, those computer programs
having time sensitive software would recognize a date
using "00" as the year 1900 rather than the year 2000.
Based on a recent assessment of the Company's date
sensitive systems, the Company has determined that certain
systems will need to be updated, replaced or modified.
This will be accomplished through software vendors and
internal resources. The Company does not expect any
material cost to be incurred as a result of these
modifications or any significant disruption to its
operations.
Foreign Currency and Precious Metals
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. Currency
exchange gains and losses have been immaterial during the
three years ended March 31, 1998. 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 operating
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. 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.
New Accounting Standards
In February 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 132,
Employers' Disclosure about Pension and Other
Postretirement Benefits ("SFAS No. 132"). SFAS No. 132
standardizes the disclosure requirements for pensions and
other postretirement benefits and amends SFAS 87, 88 and
106. The Company will be required to adopt SFAS No. 132
for the year ended March 31, 1999. Currently, the Company
is evaluating this standard and is uncertain as to the
impact it will have on the Company's consolidated
financial statements disclosures.
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 131,
Disclosure about Segments of an Enterprise and Related
Information ("SFAS No. 131"). SFAS No. 131 establishes
standards for disclosure of segment information about
products and services, geographic areas, major customers
and certain interim disclosures of segment information
which are not required by accounting standards currently
applied by the Company. The Company will be required to
adopt SFAS No. 131 for the year ended March 31, 1999.
Currently, the Company is evaluating this standard and the
timing of adoption and is uncertain as to the impact it
will have on the Company's consolidated financial
statements disclosures.
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income ("SFAS No. 130").
SFAS No. 130 established standards for reporting and
presenting comprehensive income and its components in a
full set of general purpose financial statements.
SFAS No. 130 is effective for both interim and annual
periods beginning after December 15, 1997. The adoption is
not expected to have a material impact on the consolidated
financial statements.
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
1999, 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 Accountants thereon,
are presented under Item 14 of this report:
Consolidated Balance Sheets, March 31, 1998 and 1997
Consolidated Statements of Income, Years Ended March 31, 1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity, Years Ended
March 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows, Years Ended March 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
Report of Independent Accountants
All financial statement schedules are omitted because of
the absence 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 1998.
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8K
(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
Item 5. Other events dated March 24, 1998. Avx Corporation announces
proposed acquisition of the Passive Component business of Thomson CSF.
Item 2. Acquisition and Disposition of Assets dated June 2, 1998. AVX
completes Acquisition of Thomson CSF Passive Component business.
(c) Exhibits:
None
Documents Incorporated by Reference from previously filed registration
statements and Form 10-K's.
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
10.8 Directors Deferred Compensation Plan
Documents Submitted Herewith:
10.9 AVX corporation Supplemental Employee Retirement 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, 1998
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 Emeritus of the Board
Benedict P. Rosen Chairman of the Board and Chief Executive Officer
John S. Gilbertson President and Chief Operating Officer and Director
Donald B. Christiansen Senior 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
Michihisa Yamaoto Director
Masahiro Umemura Director
Masahiro Yamamoto Director
Yuzo Yamamura Director
By: /s/ Donald B. Christiansen
DONALD B. CHRISTIANSEN, Attorney-in-Fact
June 9, 1998
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AVX Corporation and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands, except share data)
March 31, 1998 1997
Assets
Current assets:
Cash and cash equivalents $201,887 $188,574
Accounts receivable, net 139,812 155,358
Inventories 326,787 247,895
Deferred income taxes 20,039 21,145
Other receivables - affiliate 3,707 3,131
Prepaid and other 29,980 22,365
Total current assets 722,212 638,468
Property and equipment:
Land 10,110 10,028
Buildings and improvements 123,668 113,614
Machinery and equipment 663,594 588,880
Construction in progress 44,313 34,040
841,685 746,562
Accumulated depreciation (559,431) (474,970)
282,254 271,592
Goodwill, net 33,479 34,913
Other assets 10,708 4,334
Total Assets $1,048,653 $949,307
Liabilities and Stockholders' Equity
Current liabilities:
Short-term bank debt $ 9,887 $ 12,216
Current maturities of long-term debt 2,911 1,362
Accounts payable:
Trade 39,507 39,399
Affiliates 37,800 38,621
Income taxes payable 15,650 25,405
Accrued payroll and benefits 36,361 34,328
Accrued expenses 27,309 30,465
Total current liabilities 169,425 181,796
Long-term debt 8,376 12,170
Deferred income taxes 8,563 12,190
Other liabilities 11,405 11,182
Total Liabilities 197,769 217,338
Commitments and Contingencies
(Notes 9 and 12)
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: 882 880
Authorized, 300,000,000 shares; issued
and outstanding,
88,183,500 and 88,000,000 shares for 1998
and 1997, respectively
Additional paid-in capital 325,017 319,909
Retained earnings 522,410 408,904
Foreign currency translation adjustment 2,575 2,276
Total Stockholders' Equity 850,884 731,969
Total Liabilities and Stockholders'
Equity $1,048,653 $949,307
See accompanying notes to consolidated financial statements.
AVX Corporation and Subsidiaries Consolidated
Statements of Income
(dollars in thousands, except share data)
Years Ended March 31, 1998 1997 1996
Net sales $1,267,653 $1,126,178 $1,207,761
Cost of sales 970,216 851,863 886,494
Gross profit 297,437 274,315 321,267
Selling, general and
administrative expenses 110,737 102,369 116,586
Profit from operations 186,700 171,946 204,681
Other income (expense):
Interest income 11,268 7,536 5,096
Interest expense (1,921) (2,049) (2,352)
Other, net 1,377 1,010 1,655
Income before income taxes 197,424 178,443 209,080
Provision for income taxes 62,773 57,102 71,344
Net income $134,651 $121,341 $137,736
Basic and diluted
income per share: $ 1.53 $ 1.38 $ 1.58
Weighted average shares
outstanding 88,109,643 88,000,000 87,175,000
See accompanying notes to consolidated financial statements.
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, 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
Net income 134,651 134,651
Dividends (21,145) (21,145)
Current year's adjustment 299 299
Exercise of stock options 183,500 2 4,482 4,484
Tax benefit of stock
options exercises 626 626
Balance, March 31, 1998 88,183,500 $882 $325,017 $522,410 $2,575 $850,884
</TABLE>
See accompanying notes to consolidated financial statements.
AVX Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(dollars in thousands)
Years Ended March 31, 1998 1997 1996
Operating Activities:
Net income $134,651 $121,341 $137,736
Adjustments to reconcile
net income to net cash from
operating activities:
Depreciation and amortization 87,668 82,242 69,910
Deferred income taxes (2,520) (911) (15,680)
Changes in operating assets
and liabilities:
Accounts receivable 11,621 (9,745) (26,564)
Inventories (77,053) (2,912) (44,862)
Accounts payable and
accrued expenses (3,772) (5,730) 12,416
Income taxes payable (9,507) (11,093) 20,351
Other assets and liabilities (4,327) (5,266) 2,380
Net cash from operating activities 136,761 167,926 155,687
Investing Activities:
Purchases of property and equipment (100,374) (93,954) (110,487)
Proceeds from sale of operations
to affiliate 3,973
Equity investment (5,300)
Other 142 2,347 (79)
Net cash used in investing activities (105,532) (91,607) (106,593)
Financing Activities:
Repayment of debt (3,464) (10,043) (3,308)
Dividends paid (21,145) (19,360) (19,444)
Proceeds from issuance of debt 2,197 9,738 8,696
Exercise of stock options 4,482
Proceeds from issuance of common stock 52,888
Net cash from (used in) financing activities (17,930) (19,665) 38,832
Effect of exchange rate changes on cash 14 319 (138)
Increase in cash and cash equivalents 13,313 56,973 87,788
Cash and cash equivalents at beginning
of year 188,574 131,601 43,813
Cash and cash equivalents at end of year $201,887 $188,574 $131,601
See accompanying notes to consolidated financial statements.
AVX Corporation and Subsidiaries
Notes to Consolidated Financila Statements
(dollars in thoudands, 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 whollyowned 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 approximately 75% 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 are generally depreciated on the double-
declining balance method. 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
$85,858, $80,120 and $67,508 for the years ended March 31,
1998, 1997 and 1996, 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.
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, 1998 and 1997 was $19,099 and
$17,289, 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,
1998, the amount of U.S. taxes on such undistributed
earnings would have been approximately $27,700.
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 receives employment and research grants from
various governmental agencies which are recognized in
earnings in the period in which the related expenditures
are incurred. 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.
Research, Development and Engineering:
Research, development and engineering expenses totaled
approximately $36,000, $33,000 and $30,000 for the years
ended March 31, 1998, 1997 and 1996, respectively, while
research and development expenses included in these
amounts totaled $21,000, $18,500 and $16,000 for the years
ended March 31, 1998, 1997 and 1996, respectively.
Research and development expenditures are expensed when
incurred.
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 stockbased 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.
New Accounting Standards:
In February 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard No. 132,
Employers' Disclosure about Pension and Other
Postretirement Benefits ("SFAS No. 132"). SFAS No. 132
standardizes the disclosure requirements for pensions and
other postretirement benefits and amends SFAS 87, 88 and
106. The Company will be required to adopt SFAS No. 132
for the year ended March 31, 1999. Currently, the Company
is evaluating this standard and is uncertain as to the
impact it will have on the Company's consolidated
financial statements disclosures.
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard No. 131,
Disclosure about Segments of an Enterprise and Related
Information ("SFAS No. 131"). SFAS No. 131 establishes
standards for disclosure of segment information about
products and services, geographic areas, major customers
and certain interim disclosures of segment information
which are not required by accounting standards currently
applied by the Company. The Company will be required to
adopt SFAS No. 131 for the year ended March 31, 1999.
Currently, the Company is evaluating this standard and the
timing of adoption and is uncertain as to the impact it
will have on the Company's consolidated financial
statements disclosures.
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income ("SFAS No. 130").
SFAS No. 130 established standards for reporting and
presenting comprehensive income and its components. SFAS
No. 130 is effective for both interim and annual periods
beginning after December 15, 1997. The adoption is not
expected to have a material impact on the Company's
consolidated financial statements.
2. Earnings Per Share:
The Company has adopted 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. The adoption did not
result in a difference between basic and diluted earnings
per share for the periods presented.
Basic earnings per share are computed by dividing net
income by the weighted average number of shares of
common stock outstanding for the period which were
88,109,643, 88,000,000 and 87,175,000 for the years ended
March 31, 1998, 1997 and 1996, respectively.
Diluted earnings per share are computed by dividing net
income by the weighted average number of shares of common
stock and potential common stock equivalents outstanding
for the period which were 88,279,846, 88,038,950 and
87,216,077 for the years ended March 31, 1998, 1997 and
1996, respectively. Stock options are the only common
stock equivalents and are therefore considered in the
diluted earnings per share calculations. Common stock
equivalents are computed using the treasury stock method.
3. Accounts Receivable:
Accounts receivable at March 31 consisted of:
1998 1997
Trade $163,348 $173,414
Less, allowance for doubtful
accounts, sales returns
distributor adjustments and discounts (23,536) (18,056)
$139,812 $155,358
Charges to expense related to such allowances were approximately $93,059,
$58,543 and $53,117, and applications to such allowances were approximately
$87,746, $60,991 and $50,078 for the years ended March 31,
1998, 1997 and 1996, respectively.
4. Inventories:
Inventories at March 31 consisted of:
1998 1997
Finished goods $116,811 $ 83,711
Work in process 114,827 89,146
Raw materials and supplies 95,149 75,038
$326,787 $247,895
5. Debt:
Long-term debt at March 31
consisted of:
1998 1997
Deutsche mark loans at 3.875% to
6.25% due through 2000 $11,287 $13,532
Less - current maturities (2,911) (1,362)
$ 8,376 $12,170
The aggregate annual maturities of long-term
debt are as follows:
1999 $ 2,911
2000 8,376
$11,287
Long-term debt includes a 15.0 million deutsche mark loan
which has a variable rate of interest based on a market
rate plus .25%. At March 31, 1998, this loan had a rate of
3.875%. The remaining loans carry a fixed rate of 6.25%.
Short-term bank debt at March 31, 1998, consists
primarily of borrowings incurred by the Company's European
subsidiaries under two 10.0 million deutsche mark working
capital bank facilities and a 5.0 million deutsche mark
short-term bank facility bearing interest at market rates
(between 4.05% and 5.25% at March 31, 1998) which extend
through December 1998.
Interest paid totaled $1,426, $1,639 and $2,452 during
the years ended March 31, 1998, 1997 and 1996,
respectively.
6. Income Taxes:
For financial reporting purposes, after adjustments for
certain corporate items, income before income taxes
includes the following components:
Years Ended March 31,
1998 1997 1996
Domestic $126,236 $102,717 $114,011
Foreign 71,188 75,726 95,069
$197,424 $178,443 $209,080
The provision (benefit) for income taxes
consisted of:
Years Ended March 31,
1998 1997 1996
Current:
Federal/State $49,075 $38,186 $ 55,480
Foreign 17,487 20,084 31,544
66,562 58,270 87,024
Deferred:
Federal/State (4,362) 4,031 (15,680)
Foreign 573 (5,199)
(3,789) (1,168) (15,680)
$62,773 $57,102 $ 71,344
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:
March 31, 1998 1997
Current: Assets Liabilities Assets Liabilities
Sales and receivable reserves $ 7,626 $ $ 5,317 $
Inventory reserves 2,990 4,989
Accrued expenses 9,423 10,839
$20,039 $ $21,145 $
March 31, 1998 1997
Non-
Current: Assets Liabilities Assets Liabilities
Property and equipment
depreciation $ 1,123 $ 2,707 $ 471 $ 6,147
Accrued expenses 1,330 1,260 1,100 1,251
Other 11,638 10,674
Foreign income tax
loss carryforwards 4,964 7,246
7,417 15,605 8,817 18,072
Valuation allowance (375) (2,935)
$ 7,042 $ 15,605 $5,882 $18,072
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,
1998 1997 1996
U.S. Federal statutory rate 35.0% 35.0% 35.0%
Increase (decrease) in taxrate resulting from:
State income taxes, net of federal tax benefit 1.7 2.4 .9
Taxes at different tax rates on foreign earnings (3.6) (2.9) (1.5)
Change in valuation allowance (.8) (2.5)
Other, net (1.3) (1.7) 2.2
Effective tax rate 31.8% 32.0% 34.1%
At March 31, 1998, certain of the Company's foreign
subsidiaries in Europe had tax net operating loss
carryforwards totaling approximately $11,013, most with no
expiration date. 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 $2,560 during the year
ended March 31, 1998 and $1,459 during the year ended
March 31, 1997.
Income taxes paid totaled $76,013, $72,096 and $66,500
during the years ended March 31, 1998, 1997 and 1996, respectively.
7. Employee Retirement Plans:
Pension Plans
The Company sponsors non-contributory, defined benefit
pension plans covering certain employees. Pension benefits provided to
certain 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 certain 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:
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
1998 1997 1998 1997
Actuarial present value of
benefit obligations:
Vested benefits $(44,089) $(49,019) $(20,024) $(6,779)
Non-vested benefits (295) (407) -
Accumulated benefit obligation (44,089) (49,314) (20,431) (6,779)
Effect of projected future
salary increases (8,237) (10,882) (901) -
Projected benefit obligation (52,326) (60,196) (21,332) (6,779)
Plan assets at fair value,primarily
stocks and bonds 61,638 65,695 15,505 2,068
Projected benefit obligation
(in excess of) less than plan assets 9,312 5,499 (5,827) (4,711)
Unrecognized net (gain) loss (6,482) (5,009) (1,082) 455
Prior service cost not yet recognized 477 631 196 -
Unrecognized net transition obligation (48 ) 90 87 -
(Accrued) prepaid pension
cost recognized in the balance sheets $ 3,259 $ 1,211 $ (6,626) $(4,256)
The Company's assumptions used in determining the pension
assets (liabilities) shown above were as follows:
Years Ended March 31,
1998 1997
Assumptions:
Discount rates 6.75-7.0% 6.75-7.75%
Increase in compensation 3.0-4.0% 3.0-4.0%
Expected long-term rate of return on plan assets 8.0-9.0% 8.0-9.0%
Net pension costs related to these pension plans,
exclusive of the curtailment gain referred to above,
include the following components:
Years Ended March 31,
1998 1997 1996
Service cost $ 1,613 $ 1,873 $ 2,030
Interest cost 4,613 4,384 4,412
Actual loss (return) on plan assets (9,234) (6,911) (10,423)
Net amortization 3,876 2,063 6,400
Net periodic pension cost $ 868 $ 1,409 $ 2,419
Savings Plans
The Company maintains retirement savings plans which
allow eligible 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, 1998, 1997 and 1996, were
approximately $6,302, $5,800 and $5,300, respectively.
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, 1998, the market value of the
trust $2,058 is included as an asset and a liability of
the Company in the accompanying balance sheet because
the trust assets are available to AVX's general creditors
in the event of the Company's insolvency.
8. Stock Option Plans:
The Company has two fixed option plans. Under the
1995 Stock Option Plan, as amended, the Company may grant
options to employees for the purchase of up to an
aggregate of 2,650,000 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.
The following table summarizes the transactions of the
Company's stock option plans for the three year period
ended March 31, 1998:
Number of Weighted Average
Shares Exercise Price
Unexercised options outstanding March 31, 1995 - -
Options granted 1,143,000 $25.50
Options exercised - -
Options forfeited (17,000) $25.50
Unexercised options outstanding March 31, 1996 1,126,000 $25.50
Options granted 534,000 $18.13
Options exercised - -
Options forfeited (21,500) $23.61
Unexercised options outstanding March 31, 1997 1,638,500 $23.12
Options granted 633,000 $22.09
Options exercised (183,500) $24.42
Options forfeited (14,325) $22.54
Unexercised options outstanding March 31, 1998 2,073,675 $22.69
Price Range $25.50-$31.813
(weighted average contractual life of 7.6 years) 1,079,550 $26.26
Price Range $18.13-$19.50
(weighted average contractual life of 9.1 years )994,125 $18.82
Exercisable options:
March 31, 1996 - -
March 31, 1997 277,500 $25.50
March 31, 1998 534,250 $24.07
The calculated fair value at date of grant for each
option granted during the years ended March 31, 1998,
1997 and 1996 was $8.59 to $14.48, $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, 1998 1997 1996
Expected life (years) 5 5 5
Interest rate 6.6% 6.7% 6.25%
Volatility 45% 35% 30%
Dividend yield 0.75-1.23% 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 $4,127 ($3,408 after income taxes or $.04 per
share), $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, 1998, 1997 and 1996,
respectively.
9. Commitments and Financial Instruments:
Commitments
At March 31, 1998 and 1997, the Company had contractual
obligations for the acquisition or construction of plant
and equipment aggregating approximately $26,188 and
$24,422, respectively. In connection with an expansion at
the Company's manufacturing facility in the Northern
Ireland, capital grants totaling $11,500 have been
approved, $3,000 of which had not been received as of
March 31, 1998 and are contingent upon the Company
spending approximately $12,100 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, 1998, were as follows:
Years Ending March 31,
1999 $ 6,059
2000 5,492
2001 5,162
2002 4,443
2003 3,299
Thereafter 7,861
$32,316
Rental expense for operating leases was $6,440, $6,390 and
$4,682 for the years ended March 31, 1998, 1997 and 1996,
respectively.
Financial Instruments
At March 31, 1997, $20,000 of the Company's intercompany
borrowings by a European subsidiary were denominated in
U.S. dollars. To reduce the exposure to foreign currency
fluctuations, the subsidiary entered into foreign currency
swaps which at March 31, 1998 fixed approximately 80% of
the principal balance of the intercompany borrowings in
U.K. sterling.
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, 1998, 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 longterm
debt approximate carrying value based on their effective interest
rates compared to current market rates.
March 31, 1998 March 31, 1997
Contract Carrying Unrealized Contract Carrying Unrealized
Amount Amount Gain (Loss) Amount Amount Gain (Loss)
Off-Balance Sheet
Financial Instruments:
Foreign currency
contracts $26,541 $ - $ 259 $81,510 $ - $2,887
Foreign currency
swaps 16,000 (1,474) (1,474) 21,000 (1,166) (1,166)
Metal delivery
contracts 25,014 - 8,016 6,225 - 1,225
10. 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:
Years Ended March 31,
1998 1997 1996
Sales:
Product and equipment sales to affiliates $ 25,725 $ 23,120 $ 9,240
Subcontracting activities 1,679 2,111 2,365
Commissions received 438 236 252
Service fee income 120
Purchases:
Purchases of resale inventories, raw materials
supplies, equipment and services 266,568 234,434 234,612
Commissions paid 87 202 171
Rent paid 1,137 959 909
Other:
Research and development reimbursements 442
Dividends paid 15,883 14,553 17,491
Sale of assembly operation in Indonesia 3,973
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
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.
11. 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:
Year Ended
March 31, United States Europe Asia Other Elimination Total
1998:
Net sales to
customers $607,064 $291,709 $364,300 $ 4,580 $ - $1,267,653
Net sales between
geographic areas 120,951 156,839 51,209 (328,999)
Total net sales 728,015 448,548 364,300 55,789 (328,999) $1,267,653
Profit from
operations 133,986 14,125 26,205 12,384 $ 186,700
Interest income,
net 9,347
Other, net 1,377
Income before
income taxes $ 197,424
Identifiable assets 536,458 337,263 96,274 78,658 $1,048,653
Year Ended
March 31, United States Europe Asia Other Elimination Total
1997:
Net sales to
customers $522,879 $253,493 $345,262 $ 4,544 $ - $1,126,178
Net sales between
geographic areas 96,952 138,260 214 40,186 (275,612)
Total net sales 619,831 391,753 345,476 44,730 (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
Year Ended
March 31, United States Europe Asia Other Elimination Total
1996:
Net sales to
customers $561,162 $301,509 $341,760 $ 3,330 $ - $1,207,761
Net sales between
geographic areas 89,560 104,425 610 66,380 (260,975)
Total net sales 650,722 405,934 342,370 69,710 (260,975) $1,207,761
Profit from
operations 102,858 58,099 43,724 $ 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
The other category consists of the 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.
12. 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 $4.1
million at March 31, 1998. 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.
13. Subsequent Event:
In April 1998, the Company agreed to acquire the passive
component businesses of Thomson-CSF for $15 million in
addition to approximately $50 million of intercompany debt
repayments. The businesses include film capacitors,
ferrites, high energy and high voltage power capacitors,
ceramic capacitors, varistors and non-linear resistors.
Annual sales for last year for these businesses were
approximately $135 million. The operations include
production facilities in France, Malaysia, Taiwan and
Brazil. AVX believes that some of the TPC products offer
unique opportunities to expand and grow the business using
our marketing and sales expertise.
14. Summary of Quarterly Financial Information
(Unaudited):
Quarterly financial information for the years ended March 31,
1998
and 1997 is as follows:
First Quarter Second Quarter
1998 1997 1998 1997
Net sales $313,807 $268,211 $329,224 $267,909
Gross profit 78,080 73,286 79,318 65,795
Net income 34,935 32,467 36,730 28,153
Basic and diluted earnings per share .40 .37 .41 .32
Third Quarter Fourth Quarter
1998 1997 1998 1997
Net sales $319,651 $289,574 $304,971 $300,484
Gross profit 74,173 64,633 65,866 70,601
Net income 33,329 30,051 29,657 30,670
Basic and diluted earnings per share .38 .34 .34 .35
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, 1998 and 1997,
and the related consolidated statements of income, cash flows and
stockholders' equity for each of the three years in the
period ended March 31, 1998. 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, 1998 and 1997, and the
consolidated results of their operations and their cash
flows for each of the three years in the period ended
March 31, 1998, in conformity with generally accepted
accounting principles.
Atlanta, Georgia
May 13, 1998
AVX Corporation Subsidiaries Exhibit 21.1
As of June 9, 1998 , active subsidiaries, all 100% owned directly
or indirectly, consist of the following:
Country or State of incorporation
1 AVX CORPORATION Delaware
2 AVX TANTALUM CORPORATION Maine
3 AVX FILTERS CORPORATION California
4 AVX VANCOUVER CORPORATION Washington
5 ELCO USA, INC Delaware
6 AVX ISRAEL Israel
7 AVX LIMITED United Kingdom
8 AVX Gmbh Republic of Germany
9 AVX ELECTRONISCH BAUELEMENTE GmbH Republic of Germany
10 AVX SRL Italy
11 AVX SA France
12 AVX CZECH REPUBLIC sro Czech Republic
13 ELCO EUROPE United Kingdom
14 ELCO EUROPE GMBH Republic of Germany
15 AVX/KYOCERA ASIA LTD. Hong Kong
16 AVX/KYOCERA HONG KONG LTD. Hong Kong
17. AVX/KYOCERA (S) PTE LTD. Singapore
18. AVX INDUSTRIES PTE LTD. Singapore
19. AVX/KYOCERA (MALAYSIA) SDM BHD Malaysia
20. AVX/KYOCERA (SINGAPORE) PTE LTD. Singapore
21 AVIO EXITO de Chihuahua, S.A. de C.V. United Mexican States
22 AVIO EXCELENTE, S.A. de C.V. "
23 AVIO EXCELENTE de Chihuahua, S.A. de C.V. "
24 AVX S.A. (El Salvador) "
CONSENT OF INDEPENDENT ACCOUNTANTS
EXHIBIT 23.1
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, 333-02808, and 33-0379007) of our report dated
May 13, 1998, on our audits of the consolidated financial statements of
AVX Corporation as of March 31, 1998 and 1997, and for the each of three
years and period ended March 31, 1998, 1997, and 1996, which report is
included in this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Atlanta, Georgia
June 9, 1998
POWER OF ATTORNEY
Exhibit 24.1
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, 1998 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 ChairmanEmeritus of the Board of Directors April 23, 1998
Kazuo Inamori
/s/Yuzo Yamamura Director April 23, 1998
Yuzo Yamamura
/s/Kensuke Itoh Director April 23, 1998
Kensuke Itoh
/s/Michihisa Yamamoto Director April 23, 1998
Michihisa Yamamoto
/s/Masahiro Umemura Director April 23, 1998
Masahiro Umemura
/s/Masahiro Yamamoto Director April 23, 1998
Masahiro Yamamoto
/s/Benedict P. Rosen Chairman of the Board, April 23, 1998
Benedict P. Rosen Chief Executive Officer
/s/John S. Gilbertson President, Cief Operating Officer
John S. Gilbertson and Director April 23, 1998
/s/Donald B. Christiansen Chief Financial Officer, Senior
Donald B. Christiansen Vice President, Treasurer and
Director April 23, 1998
/s/Carroll A. Campbell, Jr. Director April 23, 1998
Carroll A. Campbell, Jr.
/s/Marshall D. Butler Director April 23, 1998
Marshall D. Butler
/s/Rodney N. Lanthorne Director April 23, 1998
Rodney N. Lanthorne
/s/Richard Tressler Director April 23, 1998
Richard Tressler
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AVX CORPORATION Supplemental Employee Retirement Plan ("SERP")
Exhibit 10.9
Section 1 Purpose of the Plan
The purpose of the AVX Corporation SERP (the "Plan") is to provide certain
management or highly compensated employees of AVX Corporation (the "Company")
with supplemental retirement benefits. The Plan is effective as of January 1,
1998.
Section 2 Eligibility to Participate
The Chief Executive Officer of the Company shall have the right
in his sole and complete discretion to designate which, if any,
management or highly compensated employees shall be eligible to
participate in the Plan. An employee who is designated as being
eligible to participate and elects to do so is hereinafter referred
to as a "Participant."
Section 3 Benefits
3.1 Each employee who is designated as being eligible to
participate in the Plan shall be entitled to make an irrevocable
election, as specified in Section 3.2, to defer receipt of all or
a portion of compensation otherwise payable by the Company to such
employee. For purposes of the Plan, compensation shall include any
amounts not includible in the gross income of the Participant due
to any salary reduction agreement maintained with the Company under
Sections 125 or 401(k) of the Internal Revenue Code of 1986, as
amended (the "Code") and any compensation deferred under the AVX
Nonqualified Supplemental Retirement Plan (the "Supplemental Plan").
3.2 A Participant may elect to defer compensation pursuant to
Section 3.1 by giving written notice to the Company. Such notice must
be received by the Company prior to January1,1998, and thereafter
prior to the first day of the calendar year to which such election
is applicable. Notwithstanding the preceding sentence, for each
employee who enters the Plan after January 1, 1998, in the first
year in which such employee becomes eligible to participate, such
newly eligible employee may make an election to defer compensation
for services to be performed subsequent to such election within 30
days after the date such employee becomes eligible.
A Participant's initial election to defer compensation shall also
include an election as to themanner of payment which shall be (i)
a lump sum distribution, or (ii) installment payments over a period
of years (not to exceed 10 years). The time of payment shall be in
accordance with Section 5.2.
Section 4 Deferred Compensation Accounts
4.1 In furtherance of the purposes of this Plan, the Company has
established the Trust Under the AVX Corporation Deferred Compensation
Plans (the "Trust") which is intended to be a "grantor trust" within
the meaning of Subpart E, Part I, Subchapter J, Chapter 1, Subtitle A
of the Code. The trustee of the Trust (the "Trustee") shall hold,
invest and distribute any assets contributed to the Trust in
accordance with the provisions thereof.
The AVX Stock Fund is an investment option under the Trust.
Notwithstanding anything contained in the Plan or Trust to the
contrary, the purchase price to be paid for shares of AVX Stock
acquired by the Trust shall be equal to the fair market value of
such shares and the maximum number of such shares that may be
purchased during the existence of the Plan shall not exceed one
(1) million shares.
Section 5 Distribution of Benefits
5.1 Each Participant shall be fully vested and shall have a
nonforfeitable interest in his/her account.
5.2 Benefits under the Plan shall be payable to a Participant
or beneficiary, as the case may be, upon the earlier of such
Participant's termination of employment (for any reason), or
death.
5.3 In the event a Participant dies before all amounts
credited to such Participant's account have been distributed
to him/her, then the beneficiary designated by the Participant
shall be paid the balance of such account. If a Participant
shall fail to designate a beneficiary or if the beneficiary
designated does not survive the Participant, then the beneficiary
shall be deemed to be one of the following, in the order
named: (i) spouse, (ii) children, per stirpes and (iii) estate of
the Participant. Such designation of beneficiary may be changed
from time to time by the Participant filing a new designation with
the Company.
5.4 The Trustee shall deduct from each payment under the Plan,
any federal, state or local withholding or other taxes or charges
which the Trustee may be required to deduct under applicable laws.
5.5 Notwithstanding anything contained in this Plan or Trust
to the contrary, if at any time the Trust is determined by the
Internal Revenue Service ("IRS") not to be a "grantor trust" with
the result that the income of the Trust is not treated as income of
the Company pursuant to Subpart E of Subchapter J of the Code, or
if a tax is finally determined by the IRS to be payable by the
Participants or their beneficiaries in respect of any vested
interests in their accounts prior to payment of such interest to
the Participants or their beneficiaries, then the Board of Directors
of the Company or the Chief Executive Officer of the Company shall
have the right in its or his sole and complete discretion (i) to
permit the distribution of the amount of such tax or (ii) terminate
the Plan and Trust and the full fair market value of the assets in
the Trust distributed to the Participants. For purposes of this
Section 5.5, a final determination of the IRS shall be a decision
rendered by the IRS which is no longer subject to administrative
appeal within the IRS.
5.6 Notwithstanding anything contained herein to the contrary,
a "derivative security" (as defined in rules issued by the Securities
and Exchange Commission under Section 16 of the Securities Exchange
Act of 1934) issued under the Plan shall not be transferrable by a
Participant other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order
as defined under the Code.
Section 6 Status of Plan Assets
6.1 The Trust assets are and shall remain at all time subject
to the claims of the general creditors of the Company. Accordingly,
the Company shall not create a security interest in the Trust assets
in favor of the Participants (or their beneficiaries).
6.2 Except insofar as applicable law may otherwise require and
subject to the provisions of the Trust, (i) no amount payable to
or in respect of the Participants or their beneficiaries at any
time under the Plan shall be subject in any manner to alienation
by anticipation, sale, transfer, assignment, bankruptcy, pledge,
attachment, charge or encumbrance of any kind, and any attempt to
so alienate, sell, transfer, assign, pledge, attach, charge or
otherwise encumber any such amount, whether presently or thereafter
payable, shall be void; and (ii) the Plan shall in no manner be
liablefor or subject to the debts or liabilities of the Participants
or their beneficiaries.
Section 7 Amendment and Termination
The Plan may, at any time or from time to time, be amended, modified
or terminated by the Company. However, no amendment, modification or
termination of the Plan shall, without the consent of a Participant,
adversely affect such Participant's rights with respect to amounts
then accrued in his/her account.
Section 8 Miscellaneous
8.1 If the Company shall find that any person to whom any payment
is payable under the Plan is unable to care for his affairs because of
illness or accident, or is a minor, any payment due (unless a prior
claim therefore shall have been made by a duly appointed guardian,
committee or other legal representative) may be paid to a spouse,
a child, a parent, or a brother or sister, or to any person deemed
by the Company to have incurred expense for such person otherwise
entitled to payment, in such manner and proportions as the Company
may determine. Any such payment shall be a complete discharge of the
liabilities of the Company under the Plan.
8.2 Nothing contained herein shall be construed as conferring upo
n a Participant the right to continue in the employ of the Company as
an executive or in any other capacity.
8.3 The Company (or such party or committee as the Company may
designate) shall have full power and authority to interpret, construe
and administer the Plan (except to the extent authority has been
explicitly granted to the Chief Executive Officer or to the Trustee
under the Trust) and such interpretation, construction, and actions
hereunder, shall be binding and conclusive on all persons for all
purposes. The Company, Chief Executive Officer (or such party or
committee as the Company may designate) shall not be liable to any
person for any action taken or omitted in connection with the
interpretation and administration of this Plan unless attributable
to willful misconduct or lack of good faith.
8.4 Titles to the Sections of the Plan are included for
convenience only and shall not control the meaning or interpretation
of any provision of the Plan.
8.5 Except to the extent preempted by federal law, this Plan
and the Trust established hereunder shall be governed by and
construed, enforced, and administered in accordance with thelaws
of the State of New York and the Trustee shall be liable to account
only in the courts of the State of New York.
8.6 All expenses of administering the Plan and Trust shall be
borne by the Company.
8.7 For Participants of the Plan who are subject to Section 16(b)
of the Securities Exchange Act of 1934, the Company (or such party
or committee as the Company may designate) may adopt such rules and
procedures as it considers appropriate.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed
this day of December, 1997.
AVX CORPORATION
/s/Donald B. Christiansen
DONALD B. CHRISTIANSEN
