UNITED STATES
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 fiscal year ended March 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________ to__________
Commission File Number: 1-10431
AVX CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 33-0379007
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
801 17th Avenue South
Myrtle Beach, South Carolina 29577
(Address of principal executive offices) (Zip Code)
(843) 448-9411
(Registrant's telephone number, including area code)
_______________________
Securities registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name of each exchange on which registered
Common Stock, $.01par value per share New York Stock Exchange
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 $20 15/16 on May 21, 1999, the aggregate
market value of the voting stock held by non-affiliates of the registrant as
of that date was $420,948,960.
As of May 21, 1999, the number of shares outstanding of the registrant's
Common Stock, par value $.01 per share, was 86,255,025 shares.
DOCUMENTS INCORPORATED BY REFERENCE
There is incorporated by reference in Part III of 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 15, 1999.
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TABLE OF CONTENTS
Part I Page
Item 1. Business 3
Item 2. Properties 11
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters 12
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Results of Operations
and Financial Condition 13
Item 7A.Quantitative and Qualitative Disclosures About Market Risk 18
Item 8. Financial Statements and Supplemental Data 20
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 20
Part III
Item 10.Directors and Executive Officers of the Registrant 20
Item 11.Executive Compensation. 20
Item 12 Security Ownership of Certain Beneficial Owners and Management 20
Item 13.Certain Relationship and Related Transactions 20
Part IV
Item 14.Exhibits, Financial Statements Schedules, and Reports on
Form 8-K 20
Signatures 22
Cautionary Statement Pursuant to Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements, including the Notes thereto, appearing
elsewhere herein. Statements in this Annual Report on Form 10-K that
reflect projections or expectations of future financial or economic
performance of the Company, and statements of the Company's plans and
objectives for future operations, including those contained in "Business,"
"Management's Discussion and Analysis of Results of Operations and Financial
Condition, " and "Quantitative and Qualitative Disclosure about Market Risk,"
or relating to the Company's outlook for fiscal 2000, overall volume and
pricing trends, cost reduction strategies and their anticipated results, and
expectations for research, capital expenditures and Year 2000 issues, are
"forward-looking" statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Words
such as "expects," "anticipates," "approximates," "believes," "estimates,"
"intends," and "hopes" and variations of such words and similar expressions
are intended to identify such forward-looking statements. No assurance can
be given that actual results or events will not differ materially from those
projected, estimated, assumed or anticipated in any such forward-looking
statements. Important factors that could result in such differences, in
addition to the other factors noted with such forward-looking statements,
include: general economic conditions in the Company's market, including
inflation recession, interest rates and other economic factors; casualty to
or other disruption of the Company's facilities and equipment; and other
factors that generally affect the business of manufacturing and supplying
electronic components and related products.
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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. The Company's passive
electronic component sales include ceramic and tantalum capacitors, both in
"leaded" and "surface-mount" versions, film capacitors, ferrites, varistors
and non-linear resistors manufactured in the Company's facilities located
throughout the world and passive components manufactured by Kyocera
Corporation of Japan, a public company, and the Company's majority
stockholder ("Kyocera"). These products 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 connectors manufactured by 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 original equipment manufacturers in
such industries as telecommunications, data processing, automotive electronics,
medical devices and instrumentation, industrial instrumentation, military and
aerospace electronic systems, and consumer electronics. Sales are
coordinated 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 devices; 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,
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. Passive components represented approximately 91% of the
Company's net sales and connectors accounted for approximately 9% of net
sales in fiscal 1999.
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* Passive Components
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 $264.4
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 are commonly 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. The net sales of surface-mount and
leaded ceramic and tantalum capacitors accounted for approximately 53% of
the Company's passive component net sales in fiscal 1999.
The Company also offers a line of advanced passive component products in
order to fill the special 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.
Sales of advanced products accounted for approximately 19% of passive
component net sales in fiscal 1999.
With the acquisition of Thomson-CSF's passive component business ("TPC") in
June of 1998, the Company expanded its family of passive components to included
film capacitors, ferrites, high-energy/voltage power capacitors, varistors
and non-linear resistors. These products share the same distribution and
market channels as the Company's historical product base and further enhance
the Company's product offerings. The sale of TPC products accounted for
approximately 8% of passive component net sales in fiscal 1999.
The Company has a non-exclusive license to distribute and sell Kyocera
products everywhere in the world except Japan. The Company's distribution and
sale of certain Kyocera products 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 and piezo
acoustic devices. Sales of these Kyocera products accounted for approximately
20% of passive component net sales in fiscal 1999.
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* Connectors
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
lines include 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. The Company also sells certain connectors manufactured by Kyocera.
Marketing, Sales and Distribution
The Company places a high priority on solving customers' electronic
component problems and responding to their needs. AVX frequently forms
teams of its marketing, research and development, and manufacturing
personnel to work with customers to design and manufacture products to suit
their specific requirements.
The Company's products are sold primarily to manufacturers and, to a much
lesser extent, to United States and foreign government agencies. The Company
has also qualified products under various military specifications, approved
and monitored by the United States Defense Electronic Supply Center ("DESC"),
and under certain foreign military specifications.
Approximately 42%, 28% and 30% of the Company's net sales for fiscal 1999,
were to customers in North America, Europe, and Asia, respectively. Financial
information relating to geographic operations is set forth in the Company's
consolidated financial statements contained elsewhere here in. 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, Sony Corporation, and Samsung Co. Limited in the
data processing industry; and Ford Motor Co., Robert Bosch GmbH, Siemens AG,
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 $228 million at March 31, 1999,
$196 million at March 31, 1998, and $240 million at March 31, 1997. Orders
may be canceled by a customer at any time, subject to cancellation charges
under certain circumstances. Backlog fluctuates year to year in part due to
the changes in customer order patterns and the utilization of capacity in the
industry. Generally, there has been a trend toward more orders being placed by
customers 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.
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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 in Myrtle Beach, South Carolina dedicated
entirely to pure research and development, and provides centralized
coordination of AVX's global research and development efforts. The Company
also maintains significant research and development staffs at its facilities
in Northern Ireland, Israel and 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 $42
million, $36 million and $33 million during fiscal 1999, 1998 and 1997,
respectively.
AVX owns United States patents as well as corresponding patents in various
other countries, and also has patent applications pending, although patents
are not in the aggregate material to the successful operation of the 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 shares of the
Company's Common Stock, and the Company sold an additional 2,200,000 shares, in
a public offering. Kyocera currently owns approximately 77% of the Company's
outstanding Common Stock.
Transactions with Kyocera
Since January 1990, Kyocera and AVX have engaged in a significant number and
variety of related party transactions, including, without limitation, the
transactions referred to in the Consolidated Financial Statements of the
Company set forth elsewhere in 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 other 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.
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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( the
"Buzzer 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 Buzzer 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
$417 per troy ounce during the last three years. The Company is presently
expanding the development and use of base metals, such as nickel, in place of
palladium in certain multilayer ceramic 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,
the limited number of tantalum powder suppliers could lead to higher prices.
An inability of the Company to pass on an increase in palladium and tantalum
cost to its customers could have a material adverse effect on the Company's
results of operations.
AVX internally develops and produces a majority of the ceramic raw materials
used in its production processes and is expanding its ceramic production
operations in order to meet increased demand. The Company believes that it
is the only United States capacitor manufacturer that processes its own
ceramic materials.
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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 and connector products
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, 1999, AVX employed approximately 15,100 full time employees.
Approximately 3,400 of these employees are employed in the United States. Of
the employees located in the United States, approximately 1,600 are covered
by collective-bargaining arrangements. In addition, some foreign employees
are members of various trade and government-affiliated unions.
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 thirteen sites
at which remediation is required. Because CERCLA has been construed to
authorize joint and several liability, the 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 $2.6 million at
March 31, 1999. As is customary, the Decrees at sites where the PRPs are not
themselves implementing the chosen remedy contain provisions allowing the 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, results of operations or cash flows.
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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, results of operations or cash
flows.
Executive Officers of the Registrant
The following table provides certain information regarding the executive
officers of the Company as of May 21, 1999:
Name Age Position
Benedict P. Rosen 63 Chief Executive Officer
John S. Gilbertson 55 President and Chief Operating Officer
Donald B. Christiansen 60 Senior Vice President of Finance, Chief Financial
Officer and Treasurer
C. Marshall Jackson 50 Senior Vice President of Sales and Marketing
Ernie Chilton 55 Senior Vice President of Tantalum
S. M. Chan 43 Vice President of Sales and Marketing -Asia
Allan Cole 56 Vice President of Sales
Alan Gordon 50 Vice President of Sales and Marketing - Europe
John L. Mann 56 Vice President of Quality
Roberto E. Salazar 44 Vice President of Latin America Operations
Carl L. Eggerding 49 Vice President of Advanced Products and Technology
Center
Kurt P. Cummings 43 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., Aerovox
Corporation and the Nordson 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. Christiansen
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.
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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 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 1979.
S. M. Chan
Vice President of Sales and Marketing 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 of European Sales and Marketing of Europe 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 1980 until 1993. Division President
for El Salvador and later Chihuahua Mexico operations. Business manager for
the radial conformed coated devices with worldwide responsibility since 1986.
Kurt P. Cummings
Secretary of the Company since July 1997. Corporate Controller of the Company
since June 1992.
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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. Many facilities have also been qualified under a new set of
stringent QS 9000 quality standards developed by the US automotive industry.
Virtually all manufacturing, research and development and warehousing
facilities could at any time be involved in the manufacturing, sale or
distribution of passive components (PC) and connector products (CP) .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 546,098 Owned Manufacturing/Research/
Headquarters -PC - CP
Myrtle Beach, SC 69,000 Owned Office/Warehouse - PC, CP
Conway, SC 70,408 Owned Manufacturing - PC
Biddeford, ME 72,000 Owned Manufacturing - PC
Colorado Springs, CO 15,000 Owned Manufacturing - PC
El Paso, TX 24,460 Leased Warehouse - PC - CP
New Orleans, LA 18,840 Leased Warehouse - PC
Olean, NY 107,400 Owned Manufacturing - PC
Raleigh, NC 206,000 Owned Manufacturing/Warehouse - PC - CP
Sun Valley, CA 25,000 Leased Manufacturing - PC
Vancouver, WA 87,048 Leased Manufacturing - PC
Vancouver, WA 10,800 Leased Warehouse/Office - PC
OUTSIDE THE UNITED STATES
Beaune, France 235,210 Leased Manufacturing - PC
Betzdorf, Germany 101,671 Owned Manufacturing - CP
Biggleswade, England 10,000 Leased Manufacturing - CP
Chihuahua, Mexico 393,952 Owned Manufacturing - PC
Coleraine, N. Ireland 167,000 Owned Manufacturing/Research - PC
Hong Kong 30,257 Owned Warehouse - PC - CP
Jerusalem, Israel 98,200 Leased Manufacturing/Research - PC
Juarez, Mexico 84,000 Owned Manufacturing - PC - CP
Lanskroun, Czech
Republic 197,593 Leased Manufacturing - PC
Lanskroun, Czech
Republic 201,586 Owned Manufacturing - PC
Manaus, Brazil 78,500 Owned Manufacturing - PC - CP
Uherske Hradiste,
Czech Republic 148,910 Leased Manufacturing - PC - CP
Larne, N. Ireland 120,000 Owned Manufacturing/Warehouse PC - CP
Newmarket, England 52,000 Leased Manufacturing - CP
Penang, Malaysia 140,825 Owned Manufacturing - PC
Paignton, England 154,909 Owned Manufacturing/Research -PC
Saint-Apollinaire,
France 321,535 Leased Manufacturing - PC
Seurre, France 134,333 Leased Manufacturing - PC
San Salvador,
El Salvador 232,981 Owned Manufacturing - PC
Singapore 49,500 Leased Manufacturing/Warehouse -PC - CP
Taipei, Taiwan 52,500 Owned Manufacturing - PC
In addition to the foregoing, the Company owns and leases a number of sales
offices throughout the world.
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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 $97.7 million for fiscal 1999 and
$100.4 million in fiscal 1998.
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
proceedings and actions should not, individually or in the aggregate, have a
material adverse effect on the Company's financial condition, results of
operations or cash flows.
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 Common Equity 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, 1997 as
reported on the New York Stock Exchange Composite Tape.
1999 1998
High Low High Low
First quarter $21 5/16 $15 5/8 $29 1/8 $19 3/4
Second Quarter 17 15/16 13 5/8 39 5/8 26 5/8
Third Quarter 20 3/4 13 1/2 34 1/2 17 11/16
Fourth Quarter 17 15/16 12 9/16 23 3/8 18 1/4
Holders of Record
At May 21, 1999, 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 quarters ended March 31, 1999, December 31, 1998,
September 30, 1998, June 30, 1998 and 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.
Future dividends, if any, will depend on the Company's future profitability
and anticipated operating cash requirements.
12
<PAGE>
Item 6. Selected Financial Data
The following table sets forth selected financial data for the Company for
the five years ended March 31, 1999. 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.
Selected Financial Data
(dollars in thousands, except share data)
Income Statement data:
Year Ended March 31, 1999 1998 1997 1996 1995
Net sales $1,245,473 $1,267,653 $1,126,178 $1,207,761 $988,893
Cost of sales 1,078,064 970,216 851,863 886,494 777,687
Gross profit 167,409 297,437 274,315 321,267 211,206
Selling, general and
administrative expenses 114,104 110,737 102,369 116,586 101,013
Profit from operations 53,305 186,700 171,946 204,681 110,193
Interest income 7,946 11,268 7,536 5,096 2,018
Interest expense (2,228) (1,921) (2,049) (2,352) (2,229)
Other, net 1,719 1,377 1,010 1,655 1,218
Income before income
taxes 60,742 197,424 178,443 209,080 111,200
Provision for income
taxes 19,226 62,773 57,102 71,344 36,329
Net income $41,516 $134,651 $121,341 $137,736 $74,871
Basic and diluted
income per share $0.48 $1.53 $1.38 $1.58 $0.87
Weighted average common
shares outstanding 87,066,028 88,109,643 88,000,000 87,175,000 85,800,000
Cash dividends
declared per common share $0.26 $0.245 $0.225 $0.229 $0.305
As of March 31, 1999 1998 1997 1996 1995
Balance sheet data:
Working capital $471,253 $552,787 $456,672 $357,930 $224,999
Total assets 1,058,040 1,048,653 949,307 867,516 670,697
Long-term debt 12,714 8,376 12,170 8,507 9,544
Stockholders' equity 830,641 850,884 731,969 624,000 456,266
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition
General
The modest growth in sales from 1997 to 1999 is primarily the result of the
Company increasing its production capacity to meet the unit expansion of the
electronic components industry and the inclusion of approximately $85 million
of net sales in 1999 as a result of the acquisition of TPC, effective
June 1998. 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 has become more
widespread and sophisticated.
13
<PAGE>
During this period of unit growth in the industry, the average selling
prices of electronic components, as well as the selling prices of 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, substitute base metals for precious metals in
the manufacture of ceramic capacitors and transfer certain labor intensive
manufacturing processes from countries with higher labor costs to lower
labor cost areas (such as the Czech Republic, El Salvador, Malaysia and
Mexico). The Company also places emphasis on the development of specialty
advanced and connector products in order to take advantage of higher margin
sales growth.
The following table sets forth the percentage relationships to net sales of
certain income statement items for the periods presented.
Year Ended March 31, 1999 1998 1997
Net Sales 100.0% 100.0% 100.0%
Cost of sales 86.6 76.5 75.6
Gross profit 13.4 23.5 24.4
Selling, general and
administrative expenses 9.2 8.7 9.1
Profit from operations 4.3 14.7 15.3
Income before income taxes 4.9 15.6 15.8
Provision for income taxes 1.5 5.0 5.0
Net income 3.3 10.6 10.8
Outlook
Precious metal costs coupled with selling price pressures continue to
create difficult market conditions, although the Company has recently
experienced strengthened demand and firmer selling prices. The Company
believes that there are several factors which may lead to improved
profitability during the next year, including: (a) the expanding use of
electronics and the resulting increased demand for passive components and
interconnect products, (b) the Company's ongoing efforts to substitute
base metals for precious metals in the manufacture of ceramic capacitors,
(c) continued improvements in production processes, (d) the growth of
advanced products through innovation and component design in conjunction
with our customers, and (e) expanded product offerings resulting from the
TPC acquisition.
Results of Operations
Year Ended March 31, 1999 Compared to Year Ended March 31, 1998
Net sales for the year ended March 31, 1999 decreased 1.7% to $1,245.5
million from $1,267.7 million for the year ended March 31, 1998. Sales for
the year ended March 31, 1999 include approximately $85 million of sales from
TPC, a passive component manufacturing business acquired on June 2, 1998.
Exclusive of the acquisition of TPC , sales declined 8.5%, although global
unit sales increased year over year. The decrease in revenue was attributable
to a combination of factors, including, the negative impact of the Asian
economic crisis on worldwide demand and prices, a softening of demand in the
electronic components industry as customers reduced their level of inventory
and suppliers reduced their lead times, and the continued trend toward smaller
part sizes, all of which contributed to lower average selling prices. Partially
offsetting these overall effects was a 6.8% increase in sales of advanced
products within the passive components group and an 8% increase in sales of
connector products.
14
<PAGE>
Gross profit as a percentage of net sales for the year ended March 31, 1999
decreased 10.1% to $167.4 million (13.4% of net sales) from $297.4 million
(23.5% of net sales) for the year ended March 31, 1998. As indicated above,
overall sales prices in fiscal1999 were lower compared to fiscal 1998. Gross
profit was also negatively impacted by the rising cost of palladium, a
precious metal used in the manufacture of ceramic capacitors. Compared to
fiscal 1998, the average market price for palladium during fiscal 1999
increased 152% to $315 per troy ounce. The overall impact of rising
palladium prices is estimated to have reduced gross profit for fiscal 1999
by $16.7 million. Slightly lower throughput, which negatively impacts cost
absorption, reflects soft demand and the intentional reduction in the
Company's inventory levels, also contributed to the decline in gross profit.
Partially offsetting these factors were continued production efficiencies and
improvements in production processes, as well as the impact of relatively
higher sales of better margin advanced and connector products. Gross profit
was also negatively impacted by costs associated with the integration of the
recently acquired TPC operation into the Company's organization. . The
benefit of cost cutting measures and organizational changes initiated since
the TPC acquisition is expected to be realized during fiscal 2000.
Selling, general and administrative expenses for the year ended March 31,
1999 were $114.1 million (9.2% of net sales), compared with $110.7 million
(8.7% of net sales) in the year ended March 31, 1998. The increase is
primarily attributable to the integration of the TPC operations and the
amortization of goodwill related to the acquisition.
Research, development and engineering expenditures, which encompass the
personnel and related expenses devoted to developing new products, processes
and technical innovations, were $42 million and $36 million in fiscal 1999
and 1998, respectively. These cost are incurred as the Company continues to
enhance existing product lines and develop new products.
As a result of the above factors, profit from operations for the year ended
March 31, 1999, decreased to $53.3 million from $186.7 million for the year
ended March 31, 1998.
For the reasons set forth above and lower interest income on invested cash,
net income in the year ended March 31, 1999 decreased to $41.5 million (3.3%
of net sales) from $134.6 million (10.6% of net sales) for the year ended March
31, 1998.
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.
15
<PAGE>
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, 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 $186.7million 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.
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, 1999, the Company had a current ratio of 3.4 to 1, $173.1
million of cash and cash equivalents, $830.6 million of stockholders' equity
and an insignificant amount of long-term debt.
Net cash from operating activities was $184.4 million for the year ended
March 31, 1999, compared to $136.8 million for the year ended March 31, 1998
and $167.9 million for the year ended March 31, 1997. The increase is primarily
a result of an intentional reduction of inventories, partially offset by lower
earnings before depreciation and amortization.
Purchases of property and equipment were $97.7 million in fiscal 1999, $100.4
million in fiscal 1998, and $93.9 million in fiscal 1997. Virtually all
expenditures related to expanding the production capabilities of the ceramic
and tantalum surface-mount, advanced and interconnect product lines. The
carrying value for the Company's 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. The Company expects to construct additional facilities and purchase
equipment totaling from $80 million to $150 million in fiscal 2000.
On June 2, 1998, the Company purchased the passive component business of
Thomson-CSF ("TPC") for $74.0 million, including the assumption of debt. The
Company's net cash outlay was $58.0 million
16
<PAGE>
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 have borrowed German deutsche
marks and French francs under various bank agreements. These borrowings were
used for working capital requirements and to repay other outstanding
obligations.
In fiscal 1999, 1998 and 1997, dividends of $22.7 million, $21.1 million
and $19.4 million, respectively, were paid to stockholders.
In accordance with the Company's stock repurchase program, the Company is
authorized to purchase 2.2 million shares. As of March 31, 1999 the Company
had purchased 1,929,100 shares at a cost of $31.7 million during fiscal 1999.
The repurchased shares are held as treasury stock.
The Company has established reserves in the three years ended March 31, 1999
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, 1999, 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, stock repurchases and any dividends to be paid for
the foreseeable future.
Year 2000
The Year 2000 issue concerns the inability of information systems to properly
recognize and process date-sensitive information beginning January 1, 2000.
The Company has determined that it will be required to modify or replace some
of its hardware and software so that those systems will properly process
dates beyond December 31, 1999. However, if such modifications and replacements
are not made, or are not completed on a timely basis, the Year 2000 issue
could have a material impact on the financial position, results of operations
or cash flows of the Company.
The Company's procedures to resolve the Year 2000 issue have involved four
phases: assessment, remediation, testing and implementation. The Company has
completed its assessment of all major systems that could be affected by the
Year 2000 issue. The assessment indicated that most of the Company's
significant systems, such as customer order, manufacturing and accounting
systems, could be affected.
For its information technology systems, the Company is currently 100%
complete with the remediation phase for all major systems and expects to
complete software reprogramming and replacement no later than June 1, 1999.
After completing portions of the reprogramming and replacement of software,
the Company performs integrated testing and implementation. The Company has
completed 90% of its testing and has implemented 80% of its remediated
systems. The testing and remediation of all major systems is expected to be
completed by the quarter ending June 1999 and other systems should be completed
by September 1999.
17
<PAGE>
For operating equipment systems, the Company is currently 95% complete with
the remediation phase of the resolution process. The Company has completed
85% of its testing and has implemented 75% of its remediated equipment systems.
The testing and remediation of all critical equipment systems is expected to
be completed by the quarter ending June 1999 and any other systems should be
completed by September 1999.
The Company has queried its important raw material and service suppliers
relative to their resolution of the Year 2000 issue. The Company is not aware
of any supplier problems that would materially impact results of operations,
liquidity or capital resources. The Company has no means of ensuring that
these entities will be Year 2000 ready. If important suppliers or customers
are unable to complete their Year 2000 resolution, it could materially impact
the Company.
The Company does not yet have a comprehensive contingency plan with respect
to the Year 2000 issue, but intends to establish such a plan in the near
future as part of its ongoing Year 2000 effort.
The Company is using both internal and external resources to reprogram, or
replace, test and implement, its software and operating equipment systems.
The total cost of the Year 2000 project is estimated at $5.7 million and is
being funded through operating cash flows. To date, the Company has incurred
approximately $4.4 million ($2.0 million of which has been expensed and $2.4
million capitalized for new software and equipment), related to all phases of
the Year 2000 project.
Of the remaining estimated project costs, approximately $0.5 million is
allocated to the purchase of new software and equipment, which will be
capitalized. The remaining $0.8 million relates to anticipated remediation,
testing and implementation of hardware and software and will be expensed as
incurred.
The Company's plan to complete the Year 2000 project discussed above is
based on management's best estimates, which were derived utilizing numerous
assumptions of future events, including the continued availability of certain
resources and other factors. Estimates concerning the status of completion
and expected completion dates are based on costs incurred to date compared to
total expected costs. However, there can be no guarantee that these estimates
will be achieved and actual results could differ materially from those
estimates.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("SFAS No. 133"). This statement establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. The Company will be required to adopt SFAS No. 133 for the
quarter ended June 30, 2000. Currently, the Company is evaluating this
standard and ithe impact it will have on the Company's consolidated financial
statements
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
18
<PAGE>
Foreign Currency
The Company's European sales, which account for approximately one-third of
Company's revenues, generally are denominated in local currencies whereas
those in North America and Asia generally are denominated in U.S. dollars.
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 external and intercompany foreign currency transactions.
The Company does not hold or issue derivative financial instruments for
speculative purposes. Currency exchange gains and losses have been immaterial
during the three years ended March 31, 1999.
Assuming a 10% hypothetical adverse change in all foreign currencies, with
the resulting functional currency gains and losses translated into U.S.
dollars at the spot rate, the resulting net loss in fair value of exchange
contracts held would not be material to the results, financial position or
cash flows of the Company.
Euro
On January 1, 1999 certain member countries of the European Union established
fixed conversion rates between their existing currencies and the European
Union's common currency, the Euro. The Company has successfully completed all
the necessary enhancements to its sales order, banking arrangements and
operational procedures to ensure Euro compliance. The Company is able to
process orders, invoice customers and accept payment in Euros throughout
Europe. The introduction of the Euro has not had any material adverse impact
upon the Company. The Company continues to monitor the risk of price erosion
which could result from increased price transparency among countries using the
Euro.
Precious Metals
The Company is exposed to risk from fluctuations in prices for commodities
used to manufacture its products, primarily palladium and tantalum.
Palladium, a precious metal used in the manufacture of multilayer 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 $417
per troy ounce during the past three years. The Company has managed, through
the use of forward purchase agreements and strategic spot buying, to purchase
palladium at below average market cost each year. The Company is aggressively
stepping up its efforts to substitute base metals for precious metals in the
manufacture of ceramic capacitors. If the conversion to base metals occurs as
planned, the Company anticipates that, by the end of fiscal 2000, it will
have reduced its annual usage of palladium by 80%.
Assuming a 10% hypothetical increase in the average cost of palladium
purchased by the Company, gross profit for the year ended March 31, 1999
would have been negatively impacted by approximately $9.6 million.
Tantalum powder is a principal material used in the manufacture of solid
tantalum capacitors. This product is purchased under annual contracts through
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.
Assuming a 10% hypothetical increase in the average cost of tantalum
purchased by the Company, gross profit for the year ended March 31, 1999
would have been negatively impacted by approximately $6.6 million.
19
<PAGE>
Interest Rate Exposure
Interest rate exposure is centrally managed by offsetting surplus cash and
deposits against borrowings on a currency-by-currency basis. The Company
maintains an insignificant amount of foreign currency denominated long-term
and short-term debt. The term of these borrowings range from 3 months to 36
months, with both fixed and variable interest rates. A 10% adverse movement
in interest rates would not have a material impact on the Company's operating
results, financial position or cash flows.
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 beginning on page 44 of this report:
Page
Consolidated Balance Sheets, March 31, 1999 and 1998 23
Consolidated Statements of Income, Years Ended March 31, 1999, 1998 and 1997 24
Consolidated Statements of Stockholders' Equity, Years Ended March 31,
1999, 1998 and 1997 25
Consolidated Statements of Cash Flows, Years Ended March 31, 1999, 1998
and 1997 26
Notes to Consolidated Financial Statements 27
Report of Independent Accountants 44
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 consolidated 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 Security and
Exchange Commission in June of 1999, which information is incorporated herein
by reference.
PART IV
Item 14. Exhibits, Financial Statements and Financial Statement Schedules and
Reports on Form 8-K
(a) Financial Statements and Financial Statement Schedules - See Index to
Consolidated Financial Statements at Item 8 of this report.
(b) Reports on Form 8-K
None for the quarter ended March 31,1999
20
<PAGE>
(c) Exhibits:
Certain of the exhibits to this report, indicated by an asterisk, are
hereby incorporated by reference to other documents on file with the
Securities and Exchange Commission with which they are physically filed,
to be a part hereof as of their respective dates.
*3.1 Restated Certificate of Incorporation (incorporated by reference
to Exhibit 3.1 to Registration statement on Form S-1 (File No.
33-94310 of the Company (the "Form S-1"))).
3.2 By-laws of the Company as amended.
*10.1 Amended AVX Corporation 1995 Stock Option Plan (incorporated by
reference to Exhibit 4.1 to the Registration Statement on Form S-8
(File No. 333-37201) of the Company).
10.2 Non-Employee Directors Stock Option Plan as amended.
*10.3 Form of Employment Agreement between AVX Corporation and Benedict
P. Rosen (incorporated by reference to Exhibit 10.3 to the Form S-1).
*10.4 Products Supply and Distribution Agreement by and between Kyocera
Corporation and AVX Corporation (incorporated by reference to Exhibit
10.4 to the Form S-1).
*10.5 Disclosure and Option to License Agreement by and between Kyocera
Corporation and AVX Corporation (incorporated by reference to Exhibit
10.5 to the Form S-1).
*10.6 Management Incentive Plan (incorporated by reference to Exhibit
10.6
to the Form S-1).
10.7 AVX Nonqualified Supplemental Retirement Plan (formerly known as
Deferred Compensation Plan).
*10.8 Directors Deferred Compensation Plan (incorporated by reference to
Exhibit 10.8 to the Annual Report on Form 10-K of the Company for the
year ended March 31, 1997 (the "1997 Form 10-K")).
*10.9 AVX Corporation SERP (incorporated by reference to Exhibit 10.9 To
the Annual Report on Form 10-K of the Company for the year ended March
31, 1998 (the "1998 Form 10-K")).
21.1 Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney.
27.1 Financial Data Schedule.
21
<PAGE>
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
Senior Vice President of Finance, Chief Financial Officer and Treasurer
Dated: June 10, 1999
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 Date
*
- -------------
Kazuo Inamori Chairman Emeritus of the Board June 10,1999
*
- -------------
Benedict P. Rosen Chairman of the Board and Chief
Executive Officer June 10,1999
*
- -------------
John S. Gilbertson President and Chief Operating
Officer and Director June 10,1999
*
- -------------
Donald B. Christiansen Senior Vice President of Finance,
Chief Financial Officer and Treasurer
and Director June 10,1999
*
- -------------
Marshall D. Butler Director June 10,1999
*
- ------------
Carroll A. Campbell Director June 10,1999
*
- ------------
Richard Tressler Director June 10,1999
*
- ------------
Kensuke Itoh Director June 10,1999
*
- ------------
Rodney N. Lanthorne Director June 10,1999
*
- ------------
Michihisa Yamamoto Director June 10,1999
*
- ------------
Masahiro Umemura Director June 10,1999
*
- ------------
Masahiro Yamamoto Director June 10,1999
*
- ------------
Yuzo Yamamura Director June 10,1999
* by: /s/ Donald B. Christiansen
DONALD B. CHRISTIANSEN, Attorney-in-Fact for each of
the persons indicated
22
<PAGE>
AVX Corporation and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands, except share data)
March 31, 1999 1998
Assets
Current assets:
Cash and cash equivalents $ 173,106 $ 201,887
Accounts receivable, net 157,331 139,812
Inventories 277,393 326,787
Deferred income taxes 21,895 20,039
Other receivables 2,738 3,707
Prepaid and other 31,072 29,980
Total current assets 663,535 722,212
Property and equipment:
Land 12,287 10,110
Buildings and improvements 142,661 123,668
Machinery and equipment 730,574 663,594
Construction in progress 58,692 44,313
944,214 841,685
Accumulated depreciation (639,966) (559,431)
304,248 282,254
Goodwill, net 78,790 33,479
Other assets 11,467 10,708
Total Assets $ 1,058,040 $ 1,048,653
Liabilities and Stockholders' Equity
Current liabilities:
Short-term bank debt $ 20,944 $ 9,887
Current maturities of long-term debt 148 2,911
Accounts payable:
Trade 46,737 39,507
Affiliates 30,689 37,800
Income taxes payable 11,995 15,650
Accrued payroll and benefits 23,112 36,361
Accrued expenses 58,657 27,309
Total current liabilities 192,282 169,425
Long-term debt 12,714 8,376
Deferred income taxes 6,115 8,563
Other liabilities 16,288 11,405
Total Liabilities 227,399 197,769
Commitments and contingencies (Notes 10 and 13)
Stockholders' Equity
Preferred stock, par value $.01 per share: - -
Authorized, 20,000,000 shares; None issued and
outstanding
Common stock, par value $.01 per share: 882 882
Authorized, 300,000,000 shares; issued and
outstanding, 88,184,125 and 88,183,500 shares
for 1999 and 1998, respectively
Additional paid-in capital 325,028 325,017
Retained earnings 541,267 522,410
Accumulated other comprehensive income (loss)
(4,789) 2,575
Common stock in treasury, at cost, 1,929,100 shares (31,747) -
Total Stockholders' Equity 830,641 850,884
Total Liabilities and Stockholders' Equity $ 1,058,040 $ 1,048,653
See accompanying notes to consolidated financial statements.
23
<PAGE>
AVX Corporation and Subsidiaries
Consolidated Statements of Income
(dollars in thousands, except share data)
Years Ended March 31, 1999 1998 1997
Net sales $ 1,245,473 $ 1,267,653 $ 1,126,178
Cost of sales 1,078,064 970,216 851,863
Gross profit 167,409 297,437 274,315
Selling, general and
administrative expenses 114,104 110,737 102,369
Profit from operations 53,305 186,700 171,946
Other income (expense):
Interest income 7,946 11,268 7,536
Interest expense (2,228) (1,921) (2,049)
Other, net 1,719 1,377 1,010
Income before income taxes 60,742 197,424 178,443
Provision for income taxes 19,226 62,773 57,102
Net income $ 41,516 $ 134,651 $ 121,341
Basic and diluted income per share $ 0.48 $ 1.53 $ 1.38
Weighted average common shares
outstanding 87,066,028 88,109,643 88,000,000
See accompanying notes to consolidated financial statements.
24
<PAGE>
AVX Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity
(dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Accumulated
Additional Other Current Year's
Number Treasury Paid-In Retained Comprehensive Comprehensive
Of Shares Amount Stock Capital Earnings Income(Loss) Total Income
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1996 88,000,000 $ 880 $ - $ 319,909 $ 306,923 $ (3,712) $ 624,000
Net income 121,341 121,341 $121,341
Other comprehensive
income 5,988 5,988 5,988
Dividends (19,360) (19,360)
Balance, March 31, 1997 88,000,000 880 - 319,909 408,904 2,276 731,969 $127,329
Net income 134,651 134,651 $134,651
Other comprehensive
income 299 299 299
Dividends (21,145) (21,145)
Exercise of stock
options 183,500 2 4,482 4,484
Tax benefit of stock
option exercises 626 626
Balance, March 31, 1998 88,183,500 882 - 325,017 522,410 2,575 850,884 $134,950
Net income 41,516 41,516 $ 41,516
Other comprehensive
income (loss) (7,364) (7,364) (7,364)
Dividends (22,659) (22,659)
Exercise of stock
options 625 11 11
Treasury stock purchased (1,929,100) (31,747) (31,747)
Balance, March 31, 1999 86,255,025 $ 882 $ (31,747) $ 325,028 $ 541,267 $ (4,789) $830,641 $ 34,152
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE>
AVX Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(dollars in thousands)
Years Ended March 31, 1999 1998 1997
Operating Activities:
Net income $ 41,516 $ 134,651 $ 121,341
Adjustment to reconcile net income to net
cash from operating activities:
Depreciation and amortization 94,728 87,668 82,242
Deferred income taxes (4,305) (2,520) (911)
Changes in operating assets and liabilities,
net of effects of business acquired:
Accounts receivable 2,269 11,621 (9,745)
Inventories 70,256 (77,053) (2,912)
Accounts payable and accrued expenses (20,804) (3,772) (5,730)
Income taxes payable (3,318) (9,507) (11,093)
Other assets and liabilities 4,061 (4,327) (5,266)
Net cash from operating activities 184,403 136,761 167,926
Investing Activities:
Purchases of property and equipment (97,715) (100,374) (93,954)
Equity investments (5,300)
Business acquired, net of cash (58,027)
Other 65 142 2,347
Net cash used in investing activities (155,677) (105,532) (91,607)
Financing Activities:
Proceeds from issuance of debt 19,596 2,197 9,738
Repayment of debt (22,675) (3,464) (10,043)
Dividends paid (22,659) (21,145) (19,360)
Purchase of treasury stock (31,747)
Exercise of stock options 11 4,482
Net cash used in financing activities (57,474) (17,930) (19,665)
Effect of exchange rate on cash (33) 14 319
Increase (decrease) in cash and cash
equivalents (28,781) 13,313 56,973
Cash and cash equivalents at beginning
of period 201,887 188,574 131,601
Cash and cash equivalents at end of period $ 173,106 $ 201,887 $ 188,574
See accompanying notes to consolidated financial statements.
26
<PAGE>
AVX Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands, except share data)
1. Summary of Significant Accounting Policies:
General:
AVX Corporation is a leading worldwide manufacturer and supplier of a broad
line of passive electronic components and interconnect 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 its subsidiaries (the "Company" or "AVX") include the accounts of the
Company and its subsidiaries. All significant intercompany transactions and
accounts have been eliminated.
Other investments for which the Company does not control the financial and
operational direction, are either accounted for using the equity method or
are recorded at cost.
Public Offering:
From January 1990 through August 15, 1995, the Company was wholly-owned by
Kyocera Corporation ("Kyocera"). On August 15, 1995, Kyocera sold 22.9%, or
19,650,000 of the Company's common shares, and the Company sold an additional
2,200,000 common shares, in a public offering. Kyocera currently owns
approximately 77% of the Company's outstanding 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.
27
<PAGE>
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
$90,858, $85,858 and $80,120 for the years ended March 31, 1999, 1998 and 1997,
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, 1999 and 1998
was $22,972 and $19,099, 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:
Deferred tax liabilities and assets are determined based on temporary
differences between the bases of certain assets and liabilities for income
tax and financial reporting purposes. The deferred tax assets and liabilities
are classified according to the financial statement classification of the
assets and liabilities generating the differences. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized. 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, 1999, the amount of U.S. taxes on
such undistributed earnings would have been approximately $39,178.
28
<PAGE>
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 accumulated comprehensive income.
The Company enters into foreign currency exchange contracts and swaps 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 non-US
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:
The consolidated financial statements are prepared on the basis of generally
accepted accounting principles. The preparation of financial statements in
conformity with general accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at March 31, 1999 and 1997 and reported amounts of revenues and
expenses for each of the three years in the period ended March 31, 1999.
Actual results could differ from those estimates and assumptions.
Research, Development and Engineering:
Research, development and engineering expenses totaled approximately
$42,000, $36,000 and $33,000 for the years ended March 31, 1999, 1998 and
1997, respectively, while research and development expenses included in these
amounts totaled $20,622, $21,001 and $18,558 for the years ended March 31,
1999, 1998 and 1997, 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 stock-based compensation
using the method whereby compensation cost for stock options is measured as
the excess, if any, of the quoted market price of the Company's stock at the
date of grant over the amount an employee must pay to acquire the stock.
Treasury Stock:
In January 1998, the Company's Board of Directors approved a stock repurchase
program whereby up to 2.2 million shares of common stock may be purchased
from time to time at the discretion of management. As of March 31, 1999 the
Company had purchased 1,929,100 shares at a cost of $31,747. The repurchased
shares are held as treasury stock and are available for general corporate
purposes.
New Accounting Standards:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("SFAS No. 133"). This statement establishes accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
The Company will be required to adopt SFAS No. 133 for the quarter ended June
30, 2000. Currently, the Company is evaluating this standard and the impact
it will have on the Company's consolidated financial statements.
2. Earnings Per Share:
Basic earnings per share are computed by dividing net earnings by the
weighted average number of shares of common stock outstanding during the
period. Diluted earnings per share are computed by dividing net earnings by
the sum of (a) the weighted average number of shares of common stock
outstanding during the period and (b) the dilutive effect of potential common
stock equivalents during the period.
The basic weighted average number of shares of common stock outstanding for
the period were 87,066,028, 88,109,643 and 88,000,000 for the years ended March
31, 1999, 1998 and 1997, respectively.
The diluted weighted average number of shares of common stock and potential
common stock equivalents outstanding for the period were 87,083,500, 88,279,846
and 88,038,950 for the years ended March 31, 1999, 1998 and 1997, 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. Comprehensive Income:
The Company has adopted Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income ("SFAS No. 130"). The statement requires
disclosure of total non-shareowner changes in equity. Total non-shareowner
changes in equity include all changes in equity during a period except those
resulting from investments by and distributions to shareowners.
The Company's total comprehensive income was $34,152, $134,950 and $127,329
for the years ended March 31, 1999, 1998 and 1997, respectively. The only
adjustment to net income in the periods was for foreign currency translation
adjustments.
4. Accounts Receivable:
Accounts receivable at March 31 consisted of: 1999 1998
Trade $183,033 $163,348
Less: allowances for doubtful accounts, sales
returns distributor adjustments and discounts (25,702) (23,536)
$157,331 $139,812
Charges to expense related to such allowances were approximately $111,813,
$93,059 and $58,543, and applications to such allowances were approximately
$109,558, $87,746 and $60,991 for the years ended March 31, 1999, 1998 and
1997, respectively.
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<PAGE>
5. Inventories:
Inventories at March 31 consisted of: 1999 1998
Finished goods $ 91,551 $116,811
Work in process 96,604 114,827
Raw materials and supplies 89,238 95,149
$277,393 $326,787
6. Debt:
Long-term debt at March 31 consisted of: 1999 1998
Deutsche mark loans at 3.29-6.25% due through 2001 $12,862 $11,287
Less - current maturities (148) (2,911)
$12,714 $8,376
As of March 31, 1999, $8.3 million of long-term deutsche mark debt
originally scheduled to mature on January 1, 2000 has been excluded from
current maturities of long-term debt based on the Company's intent and
ability to extend the facilities.
The aggregate annual maturities of long-term debt are as follows:
2000 $ 148
2001 11,080
2002 1,634
$12,862
Long-term debt includes 15.0 million and 5.0 million of deutsche mark loans
which have variable rates of interest based on a market rate plus .25%. At
March 31, 1999, these loans had a rate of 3.29%. The remaining loans of 3.0
million and .25 million deutsche marks carry fixed rates of 4.5% and 6.25%,
respectively.
Short-term bank debt at March 31, 1999, consists primarily of borrowings
incurred by the Company's European subsidiaries under 15.0 million and 10.0
million deutsche mark short-term working capital bank facilities bearing
interest at market rates (between 3.09% and 4.4% at March 31, 1999) which
extend through April 1999 and June 1999, respectively. In addition, the
Company has two 50.0 million French franc working capital bank facilities
bearing interest at market rates (3.42% as of March 31, 1999) which extended
through June 1999.
32
<PAGE>
Interest paid totaled $1,575, $1,426 and $1,639 during the years ended
March 31, 1999, 1998 and 1997, respectively.
7. Income Taxes:
For financial reporting purposes, after adjustments for certain corporate
items, income before income taxes includes the following components:
Years Ended March 31,
1999 1998 1997
Domestic $24,089 $126,236 $102,717
Foreign 36,653 71,188 75,726
$60,742 $197,424 $178,443
The provision (benefit) for income taxes consisted of:
Years Ended March 31, 1999 1998 1997
Current:
Federal/State $13,573 $49,075 $38,186
Foreign 13,096 17,487 20,084
26,669 66,562 58,270
Deferred:
Federal/State (7,709) (4,362) 4,031
Foreign 266 573 (5,199)
(7,443) (3,789) (1,168)
$19,226 $62,773 $57,102
33
<PAGE>
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, 1999 1998
Current:
Assets Liabilities Assets Liabilities
Sales and receivable reserves $ 9,489 $ -- $ 7,626 $ --
Inventory reserves 3,441 -- 2,990 --
Accrued expenses 8,965 -- 9,423 --
$ 21,895 $ -- $ 20,039 $ --
Non-current:
Property and equipment
depreciation $ 690 $ 2,002 $ 1,123 $ 2,707
Accrued expenses 2,422 1,252 1,330 1,260
Other -- 7,934 -- 11,638
Foreign income tax loss
carryforwards 18,412 -- 4,964 --
21,524 11,188 7,417 15,605
Valuation allowance (16,451) -- (375) --
$ 5,073 $ 11,188 $ 7,042 $ 15,605
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, 1999 1998 1997
U.S. Federal statutory rate 35.0% 35.0% 35.0%
Increase (decrease) in tax rate
resulting from:
State income taxes, net of federal benefit 1.0 1.7 2.4
Taxes at different tax rates on foreign earnings (9.5) (3.6) (2.9)
Change in valuation allowance 10.4 (.8)
Other, net (5.2) (1.3) (1.7)
Effective tax rate 31.7% 31.8% 32.0%
34
<PAGE>
At March 31, 1999, certain of the Company's foreign subsidiaries in Europe
had tax net operating loss carryforwards totaling approximately $53,428, 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 increased $16,076 during the
year ended March 31, 1999, $8,500 of which was due to the pre-acquisition
operating loss carryforwardsof TPC, and decreased $2,560 during the year
ended March 31, 1998.
Income taxes paid totaled $26,084, $76,013 and $72,096 during the years
ended March 31, 1999, 1998 and 1997, respectively.
8. Employee Retirement Plans:
Pension Plans:
The Company sponsors various 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. The Company's pension plans for certain European employees
provide for benefits based on a percentage of final pay. The Company's
funding policy is to contribute the statutory required amount to the
appropriate trust or government funds.
The change in the benefit obligation and plan assets of the U.S. and
non-U.S. defined benefit plans for 1999 and 1998 were as follows:
U.S. Plans International Plans
Years ended March 31, 1999 1998 1999 1998
Change in benefit obligation:
Benefit obligation at beginning
of year $23,187 $21,442 $50,471 $43,483
Service cost 306 181 2,438 2,358
Interest cost 1,538 1,511 3,517 3,102
Plan participants' contributions 0 0 942 926
Actuarial loss (gain) (854) 1,055 2,303 1,971
Benefits paid (1,074) (1,002) (1,904) (1,369)
Benefit obligation at end of year 23,103 23,187 57,767 50,471
35
<PAGE>
Change in plan assets:
Fair value of plan assets at
beginning of year 23,813 19,702 53,330 46,306
Actual return on assets 2,652 4,903 4,331 7,124
Employer contributions 0 252 1,485 561
Plan participants' contributions 0 0 942 926
Benefits paid (1,074) (1,002) (1,904) (1,369)
Other expenses 0 (42) (370) (218)
Fair value of plan assets at
end of year 25,391 23,813 57,814 53,330
Funded status 2,288 626 47 2,859
Unrecognized actuary loss (gain) (3,613) (2,249) (2,093) (5,314)
Unrecognized prior service cost 174 196 426 477
Unrecognized transition obligation 65 87 54 (49)
Prepaid (accrued) benefit cost $(1,086) $(1,340) $(1,566) $(2,027)
The Company's assumptions used in determining the pension assets (liabilities)
shown were as follows:
March 31, 1999 1998 1997
Assumptions:
Discount rates 6.00-7.0% 6.75-7.0% 6.75%-7.75%
Increase in compensation 2.50-3.50% 3.0-4.0% 3.0-4.0%
Expected long-term rate of
return on plan assets 7.50-9.0% 8.0-9.0% 8.0-9.0%
Net pension cost related to these pension plans include the following
components:
Years ended March 31, 1999 1998 1997
Service cost $ 2,744 $ 2,539 $ 2,745
Plan participants' contributions (942) (926) (872)
Interest cost 5,055 4,613 4,384
Expected return on plan assets (6,748) (7,816) (4,837)
Amortization of prior service cost 51 73 10
Amortization of transition obligation 43 43 22
Recognized actuarial loss (gain) 364 2,342 (43)
Net periodic pension cost $ 567 $ 868 $ 1,409
Savings Plans:
The Company sponsors 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 in the
United States and Europe for the years ended March 31, 1999, 1998 and 1997,
were approximately $6,272, $6,302 and $5,800, respectively.
36
<PAGE>
The Company sponsors nonqualified deferred compensation programs which
permit 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, 1999, the market value of the trust, $2,503, 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.
9. Stock Based Compensation:
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, as amended, the Company may grant options for
the purchase of up to an aggregate of 250,000 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.
Options granted under the 1995 Stock Option Plan vest as to 25% annually and
options granted under the Non-Employee Directors' Stock Option Plan vest as
to one third annually.
The following table summarizes the transactions of the Company's stock
option plans for the three year period ended March 31, 1999:
Number of Weighted Average
Shares Exercise Price
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
Options granted 458,300 $16.09
Options exercised (625) $18.13
Options forfeited (203,275) $20.26
Unexercised options outstanding - March 31, 1999 2,328,075 $21.20
37
<PAGE>
Price Range $25.50-$31.813 (weighted average
contractual life 6.5 years) 951,250 $25.80
Price Range $15.0-$19.94 (weighted average
contractual life 8.5 years) 1,376,825 $18.02
Exercisable options:
March 31, 1997 277,500 $25.50
March 31, 1998 534,250 $24.07
March 31, 1999 1,051,881 $23.20
The calculated fair value at date of grant for each option granted during
the years ended March 31, 1999, 1998 and 1997 was $6.35 to $8.59, $8.59 to
$14.48 and $6.82, 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 1999 1998 1997
Expected life (years) 5 5 5
Interest rate 6.6% 6.6% 6.7%
Volatility 45% 45% 35%
Dividend yield 1.23-1.63% 0.75-1.23% 1.21%
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 $4,839 ($3,980 after income taxes or $.05 per
share), $4,127 ($3,408 after income taxes, or $.04 per share) and $3,099
($2,523 after income taxes, or $.03 per share) for the years ended March 31,
1999, 1998 and 1997, respectively.
10. Commitments and Financial Instruments:
Commitments:
At March 31, 1999, the Company had contractual obligations for the
acquisition or construction of plant and equipment aggregating approximately
$21,840 . In connection with an expansion at the Company's manufacturing
facility in the Northern Ireland, capital grants totaling $11,500 have been
approved, $1,700 of which had not been received as of March 31, 1999 and are
contingent upon the Company spending approximately $5,700 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, 1999, were as follows:
38
<PAGE>
Years Ending March 31,
2000 $8,532
2001 6,848
2002 6,228
2003 6,214
2004 6,724
Thereafter 13,825
Rental expense for operating leases was $9,634, $6,440 and $6,390 for the
years ended March 31, 1999, 1998 and 1997, respectively.
Financial Instruments:
At March 31, 1999, $11,000 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, 1999 fixed 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, 1999, the Company believes that its credit risk exposure is not
significant.
39
<PAGE>
The following disclosure of the estimated fair value of financial
instruments has been determined by the Company, using available market
information and appropriate valuation methodologies. The fair value of
financial instruments classified as current assets or liabilities including
cash and cash equivalents, receivables and accounts payable approximate
carrying value due to the short-term maturity of the instruments. The fair
value of short-term and long-term debt approximate carrying value based on
their effective interest rates compared to current market rates.
March 31, 1999 March 31, 1998
Contract Carrying Unrealized Contract Carrying Unrealized
Amount Amount Gain (Loss) Amount Amount Gain (Loss)
Off-Balance Sheet
Financial Instruments:
Foreign currency
contracts $46,968 $ - $ (266) $26,541 $ - $ 259
Foreign currency swaps 11,000 (570) (570) 16,000 (1,474) (1,474)
Metal delivery
contracts - - - 25,014 - 8,016
11. Transactions With Affiliate:
The Company's businesses include the sale and distribution of electronic
products manufactured by Kyocera.
The Company entered into transactions with Kyocera as follows:
Years Ended March 31,
1999 1998 1997
Sales:
Product and equipment sales to affiliates $14,247 $25,725 $23,120
Subcontracting activities 2,103 1,679 2,111
Commissions received 78 438 236
Purchases:
Purchases of resale inventories,
raw materials supplies, equipment and services 245,504 266,568 234,434
Commissions paid 72 87 202
Rent paid 1,141 1,137 959
Other:
Dividends paid 17,200 15,883 14,553
12. Segment and Geographic Information:
The Company has three reportable operating segments: Passive Components,
Connectors and Research and Development. The Company is organized, exclusive
of research and development, on the basis of products being separated into
six units. Five of the units which manufacture or distribute ceramic,
tantalum, film and power capacitors, ferrites and other passive devices have
been aggregated into the segment "Passive Components".
40
<PAGE>
The Company evaluates performance of its segments based upon sales and
operating profit. There are no intersegment revenues. For determining segment
assets, cash and accounts receivable, which are centrally managed, are not
readily allocable to operating segments.
The tables below present information about reported segments for the years
ended March 31,
1999 1998 1997
Net sales:
Passive components $1,129,714 $1,160,428 $1,036,096
Connectors 115,759 107,225 90,082
Research & development - - -
Total $1,245,473 $1,267,653 $1,126,178
Operating profit:
Passive components $67,257 $211,416 $196,104
Connectors 18,806 10,950 3,745
Research & development (20,622) (21,001) (18,558)
Corporate administration (12,136) (14,665) (9,345)
Total $53,305 $186,700 $171,946
Depreciation:
Passive components $79,493 $74,938 $70,112
Connectors 7,545 7,329 6,250
Research & development 2,435 2,401 2,173
Corporate administration
Research & Development 1,385 1,190 1,585
Total $90,858 $85,858 $80,120
Assets:
Passive components $560,982 $570,335 $492,234
Connectors 33,809 45,799 47,408
Research & development 19,475 17,252 15,480
Cash and accounts receivable 330,438 341,699 343,932
Goodwill 78,790 33,479 34,913
Corporate administration
Research & Development 34,546 40,089 15,340
Total $1,058,040 $1,048,653 $949,307
Capital expenditures:
Passive components $90,952 $89,790 $83,686
Connectors 3,244 5,971 6,908
Research & development 3,519 4,613 3,360
Total $97,715 $100,374 $93,954
41
<PAGE>
The following geographic data is based upon net sales generated by
operations located within that geographic area and long lived assets based
upon physical location. The Other category consists of Latin America and
Israel.
For the year ended March 31, 1999 1998 1997
Net sales:
United States $520,195 $607,064 $522,879
Europe 345,055 291,709 253,493
Asia 369,974 364,300 345,262
Other 10,249 4,580 4,544
Total $1,245,473 $1,267,653 $1,126,178
Property, plant and
equipment, net:
United States $129,937 $127,360 $122,390
Europe 129,016 119,869 116,571
Asia 10,384 2,818 3,226
Other 34,911 32,207 29,405
Total $304,248 $282,254 $271,592
No one customer has accounted for more than 10% of net sales in the past
three years.
13. 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 cost
s totaled $2,600 at March 31, 1999. 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.
42
<PAGE>
14. Acquisition:
On June 2, 1998, the Company purchased the passive component business of
Thomson-CSF ("TPC") for $74,000 ($58,000 in cash and $16,000 of assumed
debt). The acquisition was accounted for as a purchase and funded through the
use of working capital. Based upon market valuations of the fair values of
the assets acquired and liabilities assumed the purchase price exceeded the
fair value of net assets acquired by approximately $49,600, which is being
amortized on a straight-line basis over 20 years. The results of operations
of TPC are included in the accompanying financial statements from the date of
acquisition.
15. Summary of Quarterly Financial Information (Unaudited):
Quarterly financial information for the years ended March 31, 1999 and 1998
is as follows:
First Quarter Second Quarter
1999 1998 1999 1998
Net sales $292,000 $313,807 $324,144 $329,224
Gross profit 51,460 78,080 42,604 79,318
Net income 17,402 34,935 10,514 36,730
Basic and diluted
earnings per share .20 .40 .12 .41
Third Quarter Fourth Quarter
1999 1998 1999 1998
Net sales $310,718 $319,651 $318,611 $304,971
Gross profit 36,914 74,173 36,431 65,866
Net income 6,052 33,329 7,548 29,657
Basic and diluted
earnings per share .07 .38 .09 .34
43
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders of
AVX Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of cash flows and of stockholders' equity
present fairly, in all material respects, the financial position of AVX
Corporation and Subsidiaries at March 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the
period ended March 31, 1999, in conformity with generally accepted accounting
principles. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting
principles used and significant estimates made by management and evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Atlanta, Georgia
May 14, 1999
44
<PAGE>
AVX Corporation
Subsidiaries of the Registrant
Exhibit 21.1
As of March 31, 1999, active subsidiaries, all 100% owned directly or
indirectly, consist of the following:
1 AVX Corporation
2 AVX Tantalum Corporation
3 AVX Filters Corporation
4 AVX Vancouver Corporation
5 Elco USA, Inc.
6 AVX Israel Limited
7 AVX Limited
8 AVX GmbH
9 AVX SRL
10 AVX SA
11 AVX Czech Republic sro
12 Elco Europe GmbH
13 AVX/Kyocera Asia Limited
14 AVX/Kyocera Hong Kong Limited
15 AVX Industries Pte Ltd
16 AVX/Kyocera (Malaysia) Sdm Bhd
17 AVX/Kyocera (Singapore) Pte Ltd
18 Avio Exito de Chihuahua, S.A. de C.V.
19 Avio Excelente, S.A. de C.V.
20 Avio Excelente de Chihuahua, S.A. de C.V.
21 TPC - SA
22 TPC do Brasil Limitada
23 AVX Componentes da Amazonia Limitada
24 TPC Malaysia Sdn Bhd
25 AVX Asia Pte Ltd
26 AVX Asia Limited
27 TPC Passive Components Taiwan Liimited
28 TPC FerriteTaiwan Limited
29 AVX Hong Kong Limited
30 AVX Guadalajaria S.A. De CV
31 Tianjin AVX/Kyocera International Trading Company Ltd
32 AVX Israel Holding Company (1998) Ltd
33 AVX Electronisch Baulemente GmbH
34 Thomson -CSF Passive Components, Corp.
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,
333-00890, 333-02808, and 333-37201) of our report dated May 14, 1999, on
our audits of the consolidated financial statements of AVX Corporation as of
March 31, 1999 and 1998, and for the years ended March 31, 1999, 1998 and
1997, which report is included in this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Atlanta, Georgia
June 11, 1999
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, 1999 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.
Director Title Date
Signature
/s/Kazuo Inamori Chairman Emeritus of the Board of Directors January 28, 1999
Kazuo Inamori
/s/Yuzo Yamamura Director January 28, 1999
Yuzo Yamamura
/s/Kensuke Itoh Director January 28, 1999
Kensuke Itoh
/s/Michihisa Yamamoto Director January 28, 1999
Michihisa Yamamoto
/s/Masahiro Umemura Director January 28, 1999
Masahiro Umemura
/s/Masahiro Yamamoto Director January 28, 1999
Masahiro Yamamoto
/s/Benedict P. Rosen Chairman of the Board, January 28, 1999
Benedict P. Rosen Chief Executive Officer
/s/John S. Gilbertson President, Chief Operating Officer January 28, 1999
John S. Gilbertson and Director
/s/Donald B. Christiansen Chief Financial Officer, Senior Vice January 28, 1999
Donald B. Christiansen President, Treasurerand Director
/s/Carroll A. Campbell, Jr. Director January 28, 1999
Carroll A. Campbell, Jr.
/s/Marshall D. Butler Director January 28, 1999
Marshall D. Butler
/s/Rodney N. Lanthorne Director January 28, 1999
Rodney N. Lanthorne
/s/Richard Tressler Director January 28, 1999
Richard Tressler
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000859163
<NAME> AVX CORPORATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 173106
<SECURITIES> 0
<RECEIVABLES> 183033
<ALLOWANCES> 25702
<INVENTORY> 277393
<CURRENT-ASSETS> 663535
<PP&E> 304248
<DEPRECIATION> 94728
<TOTAL-ASSETS> 1058040
<CURRENT-LIABILITIES> 192282
<BONDS> 0
0
0
<COMMON> 882
<OTHER-SE> 342759
<TOTAL-LIABILITY-AND-EQUITY> 1058040
<SALES> 1245473
<TOTAL-REVENUES> 1245473
<CGS> 1078064
<TOTAL-COSTS> 1192168
<OTHER-EXPENSES> (1719)
<LOSS-PROVISION> 1058040
<INTEREST-EXPENSE> (5718)
<INCOME-PRETAX> 60742
<INCOME-TAX> 19226
<INCOME-CONTINUING> 41516
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41516
<EPS-BASIC> .48
<EPS-DILUTED> .48
</TABLE>
AVX CORPORATION
Exhibit 10.2
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
AS AMENDED JULY 16, 1998
1. Adoption and Purpose. The AVX Corporation (the "Company")
hereby adopts the AVX Corporation Non-Employee Directors' Stock Option Plan
(the "Plan") to secure for the Company and its stockholders the benefits of
the incentive inherent in increased common stock ownership by the members of
the Board of Directors (the "Board") of the Company who are not employees of
the Company or any of its subsidiaries (a "Non-Employee Director").
2. Administration. The Plan shall be administered by the
Board. The Board shall have all the powers vested in it by the terms of the
Plan, such powers to include authority (within the limitations described
herein) to prescribe the form of the agreement embodying awards of stock
options made under the Plan (the "Options") and the power to determine the
restrictions, if any, on the ability of participants to earn-out and to
dispose of any stock issued in connection with the exercise of any Options
granted pursuant to the Plan. The Board shall, subject to the provisions of
the Plan, have the power to interpret the Plan and to prescribe, amend and
rescind rules and regulations for the administration of the Plan as it may
deem desirable. Any decisions of the Board in the administration of the
Plan, as described herein, shall be final and conclusive. The Board may
authorize any one or more of their number (each, a "Director") or the
Secretary or any other officer of the Company to execute and deliver
documents on behalf of the Board. The Board hereby authorizes the Secretary
to execute and deliver all documents to be delivered by the Board pursuant
to the Plan. No member of the Board shall be liable for anything done or
omitted to be done by such member or by any other member of the Board in
connection with the Plan, except for such member's own willful misconduct or
as expressly provided by statute.
3. Shares Subject to Plan. The stock which may be issued
and sold under the Plan will be the Common Stock (par value $1.00 per share)
of the Company. The total amount of stock for which Options may be granted
under the Plan shall not exceed 250,000 shares of Common Stock, subject to
adjustment as provided in Paragraph 6 below. The stock to be issued may be
either authorized and unissued shares or shares held by the Company in its
treasury. Shares that by reason of the expiration of an option or otherwise
are no longer subject to purchase pursuant to an Option granted under the
Plan may be reoffered under the Plan.
4. Participants. Each Non-Employee Director shall be
eligible to receive an Option in accordance with Paragraph 5 below.
5. Terms and Conditions of Options. Each Option granted
under the Plan shall be evidenced by an agreement in such form as the Board
shall prescribe from time to time in accordance with the Plan, and shall
comply with the following terms and conditions:
(a) The Option exercise price shall be the Fair Market Value of the
Common Stock shares subject to such Option on the date the Option is
granted, which, except as provided in paragraph (b) of this Section,
shall be the average of the high and the low sales prices of a share
of Common Stock on the date of grant (or, if not a trading day, on
the last preceding trading day) as reported on the New York Stock
Exchange Composite Transactions Tape or, if not listed on the New
York Stock Exchange, the principal stock exchange or the NASDAQ
National Market on which the Common Stock is then listed or traded;
provided, however, that if the Common Stock is not so listed or
traded then the Fair Market Value shall be determined in good faith
by the Board.
(b) Each Non-Employee Director serving on the date of the initial
public offering of the Common Stock in 1995 and each other
Non-Employee Director subsequently elected for the first time shall
automatically receive an Option for 7,500 shares of Common Stock
(each, an "Initial Option"); provided, however, that the Option price
for the Non-Employee Director serving at the date of the initial
public offering shall be the public offering price.
(c) Each Non-Employee Director serving on the date of the Annual
Meeting of Stockholders of the Company in 1998 shall automatically
receive an Option in 1998 shall automatically receive an Option for
7,500 shares of Common Stock (each, a "1998 Grant") as of the first
day of the month following such annual meeting. Beginning in the
year in which the third anniversary of the 1998 Grant occurs, and in
every year in which a subsequent third anniversary occurs, as of the
first day of the month following the Annual Meeting of Stockholders
of the Company, each Non-Employee Director who is entitled to a 1998
Grant and who has been re-elected as a Non-Employee Director shall
automatically receive an additional Option for 7,500 shares of Common
Stock in the year in which the third anniversary of his or her
Initial Option occurs and in every year in which a subsequent third
anniversary of his or her Initial Option occurs provided that he/she
has been re-elected as a Non-Employee Director in such year. Such
Option shall be granted as of the first day of the month following
the Annual Meeting of Stockholders of the Company in such year.
(d) The Option shall not be transferable by the optionee otherwise
than by will or the laws of descent and distribution and shall be
exercisable during the lifetime of the optionee only by the optionee.
(e) No Option or any part of an Option shall be exercisable:
(i) after the expiration of ten years from the date the Option was
granted,
(ii) unless written notice of the exercise is delivered to the Company
specifying the number of shares to be purchased and payment in full is made
for the shares of Common Stock being acquired thereunder at the time of
exercise; such payment shall be made
(A) in cash or by check,
(B) by tendering to the Company Common Stock shares owned by the person
exercising the Option and having a Fair Market Value equal to the cash
exercise price applicable to such Option, it being understood that the Board
shall determine acceptable methods for tendering Common Stock shares and may
impose such conditions on the use of Common Stock shares to exercise Options
as it deems appropriate, or
(C) by a combination of cash or check and Common Stock shares as
aforesaid; and
(iii) unless the person exercising the Option has been, at all times
during the period beginning with the date of grant of the Option and ending
on the date of such exercise, a Director of the Company, except that if such
person shall cease to be such a Director by reason of Retirement (as defined
below), Incapacity (as defined below) or death while holding an Option that
has not expired and has not been fully exercised, such person, or in the case of
death, the executors, administrators, or distributees, as the case may be,
may at any time after the date such person ceased to be such a Director
(but in no event after the Option has expired under the provisions of
subparagraph 5(e)(i) above) exercise the Option (to the extent exercisable
by the Director on the date he ceased to be a Director) with respect to any
shares of Common Stock as to which such person has not exercise
If any person who has ceased to be a Director for any reason other than
death, shall die holding an Option that has not expired and has not been
fully exercised, such person's executors, administrators, or distributees,
as the case may be, may exercise the Option (to the extent exercisable by the
decedent on his date of death) provided that in no event may the Option be
exercised after it has expired pursuant to subparagraph 5(e)(i).
graph 5(e)(i).
In the event any Option is exercised by the executors, administrators,
legatees, or distributees of the estate of a deceased optionee, the Company
shall be under no obligation to issue stock thereunder unless and until the
Company is satisfied that the person or persons exercising the Option are the
duly appointed legal representatives of the deceased optionee's estate or
the proper legatees or distributees thereof.
(f) One-third of the total number of shares of Common Stock covered
by all Options shall become exercisable beginning with the first
anniversary date of the grant of the Option; thereafter an additional
one-third of the total number of shares of Common Stock covered by
the Option shall become exercisable on each subsequent anniversary
date of the grant of the Option until on the third anniversary date
of the grant of the Option the total number of shares of Common Stock
covered by the Option shall become exercisable. The preceding
sentence shall apply to Options granted prior to 1998; provided,
however that it shall not effect the vesting of any such Option
prior to the anniversary date of the grant of such Option occurring
in 1998, In the event the Non-Employee Director ceases to be a
Director by reason of Retirement, Incapacity or death, the total
number of shares of Common Stock covered by the Option shall
thereupon become exercisable.
(g) Options granted to a person shall automatically be forfeited by
such person if such person shall cease to be a Director for reasons
other than Retirement, Incapacity or death.
(h) As used in this Paragraph 5, the term "Retirement" means the
termination of a Director's service on the Board, including
resignation from the Board upon reaching retirement age or otherwise
resigning or not standing for reelection with the approval of the
Board, but shall not include any termination of service resulting
from an act of (i) fraud or intentional misrepresentation or (ii
) embezzlement, misappropriation or conversion of assets or
opportunities of the Company or any direct or indirect majority-owned
subsidiary of the Company, by such Director. The determination of
whether termination results from any such act shall be made by the
Board, whose determination shall be conclusive.
(i) As used in this paragraph 5, the term "Incapacity" means any
material physical, mental or other disability rendering the Director
incapable of substantially performing his or her services hereunder
that is not cured within 180 days of the first occurrence of such
incapacity. In the event of any dispute between the Company and the
Director as to whether he or she is incapacitated as defined herein,
the determination of whether the Director is so incapacitated shall
be made by an independent physician selected by the Board and the
decision of such physician shall be binding upon the Company and the
Director.
6. Adjustment in the Event of Certain Changes in Stock.
(a) If there is any change in the number of outstanding
shares of Common Stock by reason of any stock dividend,
stock split, recapitalization, combination, exchange of
shares, merger, consolidation, liquidation, split-up,
spin-off or other similar change in capitalization, any
distribution to common shareholders, including a rights
offering, other than cash dividends, or any like change,
then the number of shares of Common Stock available for
options, the number of such shares covered by outstanding
options, and the price per share of such options shall be
proportionately adjusted by the Board to reflect such change
or distribution; provided, however, that any fractional
shares resulting from such adjustment shall be eliminated.
(b) In the event of change in the Common Stock of the
Company as presently constituted, the shares resulting from
any such change shall be deemed to be the Common Stock within
the meaning of the Plan.
(c) In the event of a reorganization, recapitalization,
merger, consolidation, acquisition of property or stock,
extraordinary dividend or distribution (other than as covered
by Section 6(a) hereof), separation or liquidation of the
Company, or any other event similarly affecting the Company,
the Board shall have the right, but not the obligation,
notwithstanding anything to the contrary in this Plan, to
provide that outstanding options granted under this Plan
shall (i) be canceled in respect of a cash payment or the
payment of securities or property, or any combination thereof
, with a per share value determined by the Board in good
faith to be equal to the value received by the stockholders
of the Company in such event in the respect of each share of
Common Stock, with appropriate deductions of exercise prices, or (ii) be
adjusted to represent options to receive cash, securities, property, or any
combination thereof, with a per share value determined by the Board in good
faith to be equal to the value received by the stockholders of the Company in
such event in respect of each share of Common Stock, at such exercise prices
as the Board in its discretion may determine is appropriate.
(d) To the extent that the foregoing adjustments relate to
stock or securities of the Company, such adjustments shall
be made by the Board, whose determination in that respect
shall be final, binding and conclusive.
7. Nonexclusive Plan. Neither the adoption of the Plan by
the Board nor the submission of the Plan to the stockholders of the Company
for approval shall be construed as creating any limitations on the power of
the Board to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan, and such arrangements may be either generally
applicable or applicable only in specific cases.
8. Section 16 Persons. Transactions under the Plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors under Section 16 of the Securities Exchange Act of 1934 (the
"Exchange Act"). To the extent any provision of the Plan or action by the
Committee fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Committee.
9. Nonassignability. Options may not be transferred
other than by will or by the laws of descent and distribution. During a
Director's lifetime, options granted to a Director may be exercised only by
the Director or by his or her guardian or legal representative.
10. Amendment or Discontinuance. The Plan may be amended
or discontinued by the Board without the approval of the stockholders of the
Company, except that (a) stockholder approval shall be required for any
amendment that would (i) increase (except as provided in Section 6 hereof)
the maximum number of shares of Common Stock for which Options may be granted
under the Plan, (ii) change the class of persons eligible to participate in
the Plan or (iii) adopt any other amendments to the Plan that are considered
material for purposes of Rule 16b-3(b) under the Exchange Act and (b) to the
extent required by Rule 16b-3 under Section 16 of the Securities Exchange Act
of 1934 in effect from time to time, Plan provisions relating to the amount
, price and timing of Options shall not be amended more than once every six
months, except to comply with changes in the Internal Revenue Code of 1986
or the rules thereunder in effect from time to time. No termination,
modification
or amendment of the Plan may, without the consent of the Director to whom any
Option shall theretofore have been granted, adversely affect the rights of
such Director (or his or her transferee) under such Option.
11. Effect of Plan. Neither the adoption of the Plan nor
any action of the Board shall be deemed to give any Non-Employee Director any
right to be granted an option to purchase Common Stock or any other rights
except as may be evidenced by a stock option agreement, or any amendment
thereto, duly authorized by the Board and executed on behalf of the Company,
and then only to the extent and on the terms and conditions expressly set
forth therein.
12. Term. Unless sooner terminated by action of the Board,
this Plan will terminate on August 1, 2005. The Board may not grant Options
under the Plan after that date, but Options granted before that date will
continue to be effective in accordance with their terms.
13. Effectiveness; Approval of Stockholders. The Plan shall
take effect upon its adoption by the Board, but its effectiveness and the
exercise of any options shall be subject to the approval of the holders of a
majority of the voting shares of the Company, which approval must occur
within twelve months after the date on which the Plan is adopted by the
Board.
14. Withholding Taxes. If the Board shall so require, as a
condition of exercise, each Non-Employee Director shall agree that (a) no
later than the date of exercise of any Option, such Non-Employee Director
will pay to the Company or make arrangements satisfactory to the Board
regarding payment of any Federal, state or local taxes of any kind required
by law to be withheld upon the exercise of such option (any such tax, a
"Withholding Tax"); and (b) the Company shall, to the extent permitted or
required by law, have the right to deduct from any payment of any kind
otherwise due to such Non-Employee Director, any such Withholding Tax.
7
By-laws of the Company as amended
Exhibit 3.2
AVX CORPORATION
Incorporated under the laws
of the State of Delaware
BY-LAWS
AS AMENDED JULY 16, 1998
BY-LAWS
of
AVX CORPORATION
ARTICLE I
Offices
SECTION 1. Principal Office. The principal office of the
Corporation in the State of Delaware shall be in the City of Wilmington,
County of New Castle, and the resident agent in charge thereof shall be The
Corporation Trust Company.
SECTION 2. Other Offices. The Corporation may have offices
at such other place or places as from time to time the Board of Directors may
determine or the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 1. Annual Meetings. The annual meeting of the
stockholders for the election of directors and for the transaction of such
other business as may come before the meeting shall be held at ten o'clock
in the forenoon on the third Friday in July in each year, if not a legal
holiday under the laws of the state where such meeting is to be held, and if
a legal holiday under the laws of said state then on the next succeeding
business day not a legal holiday under the laws of said state, unless a
different time is fixed by the Board of Directors in the notice or waiver of
notice of said meeting.
SECTION 2. Special Meetings. A special meeting of the
stockholders for any purpose or purposes, unless otherwise prescribed by
statute, may be called at any time by the Chairman of the Board or by order
of the Board of Directors and shall be called by the Chairman of the Board
or Secretary upon the request in writing of a stockholder or
stockholders holding of record at least one-half of the outstanding shares
of stock of the Corporation entitled to vote at such meeting.
SECTION 3. Place of Meetings. Each meeting of stockholders
of the Corporation shall be held at such place, within or outside the State
of Delaware, and at such hour as shall be fixed by the Board of Directors
and specified in the notice or waiver of notice of said meeting.
Page 1
SECTION 4. Notice of Meetings. Except as otherwise provided
by law, notice of each meeting of the stockholders shall
be given to each stockholder of record entitled to vote at such meeting,
whether annual or special, not less than ten nor more than sixty days before
the day on which the meeting is to be held, by delivering a written or
printed notice thereof to the stockholder personally, or by mailing such
notice in a postage prepaid envelope addressed to the stockholder at the
post office address furnished to the Secretary of the Corporation for such
purpose, or, if the stockholder shall not have furnished to the Secretary of
the Corporation an address for such purpose, then at the post office address
last known to the Secretary of the Corporation. Except where expressly
required by law, no publication of any notice of a meeting of stockholders
shall be required. Notice of any meeting of stockholders shall not be
required to be given to any stockholder who shall attend such meeting in
person or by proxy or who shall in person or by attorney thereunto
authorized, waive such notice in writing, either before or after such
meeting. Notice of any adjourned meeting of the stockholders shall not be
required to be given, except where expressly required by law.
SECTION 5. Quorum. At each meeting of the stockholders,
except where other provision is made by law, the holders of a majority of the
issued and outstanding stock of the Corporation entitled to vote at such
meeting shall constitute a quorum for the transaction of business. In the
absence of a quorum, a majority in interest of the stockholders of the
Corporation present in person or by proxy and entitled to vote, or, in the
absence of all the stockholders entitled to vote, any officer entitled to
preside at, or act as Secretary of, such meeting, shall have the power to
adjourn the meeting from time to time, until stockholders holding the
requisite amount of stock shall be present or represented. At any such
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
called.
SECTION 6. Voting. Each stockholder shall, subject to the
provisions of the Certificate of Incorporation, at each meeting of the
stockholders, be entitled to one vote in person or by proxy for each share
of the stock of the Corporation which has voting power on the matter in
question and which shall have been held by the stockholder and registered in
the stockholder's name on the books of the Corporation:
(a) on the date fixed pursuant to the provisions of Section 4 of
Article VII of these By-laws as the record date for the determination
of stockholders who shall be entitled to notice of and to vote at
such meeting, or
(b) if no such record date shall have been so fixed, then (i) at the
close of business on the date next preceding the date on which notice
of the meeting shall be given, or (ii) if notice of the meeting shall
be waived, at the close of business on the date next preceding the
day on which the meeting shall be held.
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Any vote on stock of the Corporation may be given by the
stockholder entitled thereto in person or by proxy appointed
by an instrument in writing, subscribed by such stockholder
or by an attorney thereunto authorized and delivered to the
Secretary of the meeting; provided, however, that no proxy shall be voted on
after three years from its date unless said proxy provides for a longer
period. At all meetings of the stockholders, all matters (except where other
provision is made by law or by the Certificate of Incorporation of the
Corporation) shall be decided by a majority of the votes cast by the holders
of the stock present in person or by proxy and entitled to vote thereat, a
quorum being present.
SECTION 7. List of Stockholders. It shall be the duty of
the Secretary or other officer of the Corporation who shall have charge of
its stock ledger, either directly or through another designated officer of
the Corporation or through a transfer agent or transfer clerk appointed by
the Board of Directors, to prepare and make, at least ten days before every
meeting of the stockholders for the election of directors of the Corporation,
a complete list of the stockholders entitled to vote thereat, arranged in
alphabetical order, and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder during ordinary business hours,
for a period of at least ten days prior to the election, either at a place
within the city, town or village where the election is to be held and which
place shall be specified in the notice of meeting, or, if not so specified,
at the place where said meeting is to be held, and the list shall be produced
and kept at the time and place of said meeting during the whole time thereof
and subject to the inspection of any stockholder who shall be present thereat.
Upon the willful neglect or refusal of the directors to produce such list at
any election, they shall be ineligible for election to any office at such
election. The original or duplicate stock ledger shall be the only evidence
as to who are the stockholders entitled to examine such list or the books of
the Corporation, or to vote in person or by proxy at such election.
SECTION 8. Consent of Stockholders in Lieu of Meeting.
Anything in these By-laws to the contrary notwithstanding,
any action required by the General Corporation Law of the State of Delaware
to be, or which may be, taken at any annual or special meeting of the
stockholders may be taken without a meeting, without prior notice and without
a vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted. In
connection with any such action without a meeting by consent in writing, (i)
notice of the proposal to take such action shall be given, as provided in
Section 4 of this Article II, to each stockholder of record of the
Corporation who would be entitled to notice if such action were to be taken
at a meeting; (ii) such action shall be deemed to have been taken upon
receipt by the Corporation of the
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requisite consents or, if so specified in the notice, upon the later of a
specified date or receipt of the requisite consents; and (iii) the record of
stockholders provided for in Section 1 of Article VII shall be opened to the
examination of any stockholder, for purposes germane to such action to be
taken, during ordinary business hours, from the time of giving notice of the
meeting until the action shall have been taken. Prompt notice of the taking
of the corporate action without a meeting by less than a
stockholders who have not consented in writing.
SECTION 9. Advance Notice of Stockholder Business. At an
annual meeting of the stockholders, only such business shall be conducted as
shall have been properly brought before the meeting. To be properly brought
before an annual meeting business must be (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely,
a stockholder's notice must be delivered to or mailed and received at the
principal offices of the Corporation, not less than sixty days nor more than
ninety days prior to the meeting; provided, however, that in the event that
less than seventy days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the tenth
day following the day on which such notice of the date of the meeting was
mailed or such public disclosure was made. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (a) a brief description of the business desired to
be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (b) the name and address, as they appear on
the Corporation's books, of the stockholder proposing such business, (c) the
class and number of shares of the Corporation which are beneficially owned by
such stockholder and (d) any material interest of the stockholder in such
business. Notwithstanding anything in the By-Laws to the contrary, no business
shall be conducted at any annual meeting except in accordance with the
procedures set forth in this Section 9. The Chairman of the annual meeting
shall, if the facts warrant, determine and declare to the meeting that
business was not properly brought before the meeting and in accordance with
the provisions of this Section 9, and if the Chairman should so determine,
the Chairman shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted. Business
transacted at any special meeting of the stockholders shall be limited to
the purposes stated in the notice of such special meeting.
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ARTICLE III
Board of Directors
SECTION 1. General Powers. The property, affairs and
business of the Corporation shall be managed by the Board of Directors.
SECTION 2. Number, Election, Qualification and Term of
Office. The number of directors shall be as fixed from time to time by
resolution of the Board of Directors or of the stockholders but in no case
shall the number be less than three. Beginning on July 16, 1998, the Board
of Directors shall be divided into three classes of numbers as equal as
possible. The term of office of one of such classes shall expire each year.
At each annual meeting of shareholders, there shall be elected (i) the
directors of the class the term of office of which shall then expire; (ii)
directors to fill any vacancies in any other class; (iii) directors to
succeed any directors who shall have been elected to fill vacancies in any
other class since the next preceding annual meeting; and (iv) directors to
be added to a respective class as a result of an increase in the number of
directors. Directors to be elected as provided in clauses (ii) and (iii)
shall be elected for the unexpired portions of the original terms of the
respective classes. Directors to be elected as provided in clause (iv) shall
be elected to the class recommended by the Board of Directors. Except as
otherwise provided in the Certificate of Incorporation or in these By-laws,
directors shall be elected by a plurality of the votes of the stockholders
entitled to vote at each meeting of stockholders for the election of a
director or directors. At any meeting of shareholders where directors of
more than one class are to be elected, the directors of the class or classes
being elected for the shortest terms shall be elected first.
Election of directors need not be by ballot. Directors need not be
stockholders. Each director shall hold office until a successor
shall have been duly elected and qualified, or until death, or until the
director shall resign, or until such director shall have been removed in the
manner hereinafter provided.
SECTION 3. Resignation. Any director of the Corporation
may resign at any time by giving written notice to the Chairman of the Board
or to the Secretary of the Corporation. The resignation of any director
shall take effect at the time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary
to make it effective.
SECTION 4. Vacancies. Any vacancy in the Board of Directors
caused by death, resignation, disqualification, removal, an increase in the
number of directors, or any other cause, may be filled by a majority of the
remaining directors (though less than a quorum), or by a majority of the
stockholders at a special meeting of the stockholders
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called for such purpose and each director so chosen shall hold office until
the next annual election and until a successor shall be duly elected and
qualified, unless sooner displaced.
SECTION 5. Place of Meetings. Except as otherwise
specifically provided by law, the Board of Directors may hold its meetings,
have one or more offices, and keep the books and records of the Corporation,
at such place or places within or without the State of Delaware, as the Board
may from time to time determine.
SECTION 6. Annual Organizational Meeting. After each annual
election of directors and on the same day, the Board of Directors shall meet
for the purpose of organization, the election of officers and the transaction
of other business at the place where regular meetings of the Board of
Directors are held. Notice of such meeting need not be given. Such meeting
may be held at any other time or place which shall be specified in a notice
given as hereinafter provided for special meetings of the Board of Directors
or in a consent and waiver of notice thereof signed by all the directors.
SECTION 7. Regular Meetings. Regular meetings of the Board
of Directors may be held at such places and at such times as
the Board shall determine. If any day fixed for a regular meeting shall be a
legal holiday at the place where the meeting is to be held, then the meeting
which would otherwise be held on that day shall be held at such place at the
same hour and on the next succeeding business day not a legal holiday.
Notice of regular meetings need not be given.
SECTION 8. Special Meetings; Notice. A special meeting of
the Board of Directors shall be held whenever called by the Chairman of the
Board or by two of the directors. Notice of each such meeting shall be
mailed (by airmail if not within 100 miles of the place of mailing) to each
director, addressed to the director at the director's residence or usual
place of business at least ten calendar days before the day on which the
meeting is to be held, or shall be sent to the director at such place by
facsimile transmission or comparable medium or shall be delivered personally
or by telephone at least seven calendar days before the day on which the
meeting is to be held. Each such notice shall state the time and place of
the meeting but need not state the purposes thereof, except as otherwise
herein expressly provided. Notice of any meeting of the Board need not be
given to any director if waived by such director in writing, whether before
or after such meeting shall be held.
SECTION 9. Quorum and Manner of Acting. Except as otherwise
provided by statute or by these By-laws, a majority of the total number of
directors (but not less than two) shall be required to constitute a quorum
for the transaction of business at any meeting, and the act of a majority of
the directors present at any meeting at which a quorum shall be present shall
be the act of the Board of Directors. In the absence of a
Page 6
quorum, a majority of the directors present may adjourn any meeting from time
to time until a quorum be had. Notice of any adjourned meeting need not be
given. The Directors shall act only as a board and the individual Directors
shall have no power as such. Participation by the Director in a meeting of
the Board or committee held by means of conference telephone or similar
communications equipment in which all persons so participating can hear each
other constitutes presence of such Director in person at such meeting for
purposes of this Section.
SECTION 10. Remuneration. In addition to reimbursement of
the reasonable expenses incurred in attending meetings or otherwise in
connection with attention to the affairs of the Corporation, each director as
such, and as a member of any committee of the Board of Directors shall be
entitled to receive such remuneration as may be fixed from time to time by
the Board of Directors, no such payments shall preclude any director from
serving the Corporation in any other capacity and receiving remuneration
therefor.
SECTION 11. Action by Consent. Unless otherwise restricted
by the Certificate of Incorporation or these By-laws, any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting, if prior to such action a
written consent thereto is signed by all members of the Board or of such
committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board or Committee.
ARTICLE IV
Executive and Other Committees
SECTION 1. Executive Committee. The Board of Directors,
by resolution adopted by a majority of the whole Board, may designate not
less than four of the directors then in office to constitute an Executive
Committee, each member of which unless otherwise determined by resolution
adopted by a majority of the whole Board, shall continue to be a member of
such Committee until the annual meeting of the stockholders which shall be
held next after designation as a member of such Committee or until the earlier
termination as a director. The President shall always be designated as a
member of the Executive Committee. The Board may by resolution appoint one
member as the Chairman of the Executive Committee who shall preside at all
meetings of such Committee. In the absence of said Chairman, the President
shall preside at all such meetings. In the absence of both the Chairman of
the Executive Committee and the President, a majority of the members of the
Executive Committee present shall choose a chairman to preside at such
meetings. The Secretary, or if the Secretary shall be absent
Page 7
from such meeting, any person (who shall be an Assistant Secretary, if any of
them shall be present at such meeting) appointed by the chairman, shall act
as secretary of the meeting and keep the minutes thereof.
SECTION 2. Powers of the Executive Committee. To the extent
permitted by law, the Executive Committee may exercise all the powers of the
Board in the management of specified matters where such authority is
delegated to it by the Board, and also, to the extent permitted by law, the
Executive Committee shall have, and may exercise, all the powers of the Board
in the management of the business and affairs of the Corporation, including,
if such Committee is so empowered and authorized by resolution adopted by a
majority of the entire Board, the power and authority to declare a dividend
and to authorize the issuance of stock, and may authorize the seal of the
Corporation to be affixed to all papers which may require it, except that the
Executive Committee shall not have such power or authority to amend the
Certificate of Incorporation or these By-laws, to adopt an agreement of
merger or consolidation, to recommend to the stockholders the sale, lease or
exchange of all or substantially all of the property and assets of the
Corporation, or to recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution. An act of the Executive
Committee taken within the scope of its authority shall be an act of the
Board. The Executive Committee shall render in the form of minutes a report
of its several acts at each regular meeting of the Board and at any other
time when so directed by the Board.
SECTION 3. Meetings of the Executive Committee. Regular
meetings of the Executive Committee shall be held at such times, on such
dates and at such places as shall be fixed by resolution adopted by a
majority of the Executive Committee, of which regular meetings notice need
not be given, or as shall be fixed by the Chairman of the Executive Committee
or in the absence of the Chairman of the Executive Committee the President
and specified in the notice of such meeting. Special meetings of the
Executive Committee may be called by the Chairman of the Executive Committee
or by the President. Notice of each such special meeting of the Executive
Committee (and of each regular meeting for which notice shall be required),
stating the time and place thereof shall be mailed (by airmail if not within
100 miles of the place of mailing) to each member of the Executive Committee
at least ten calendar days before the day on which such meeting is to be
held, or shall be sent by facsimile transmission or comparable medium, or be
delivered personally or by telephone, at least seven calendar days before
the time at which such meeting is to be held; but notice need not be given to
a member of the Executive Committee who shall waive notice in writing,
whether before or after such meeting shall be held.
SECTION 4. Quorum and Manner of Acting of the Executive
Committee. Four members of the Executive Committee shall
constitute a quorum for the transaction of
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business, and the act of a majority of the members of the Executive Committee
present at a meeting at which a quorum shall be present shall be the act of
the Executive Committee. In the absence or disqualification of a member of
the Executive Committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not the member or members
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or
disqualified member. The members of the Executive Committee shall act only
as a committee and individual members shall have no power as such.
SECTION 5. Other Committees. The Board of Directors may, by
resolution adopted by a majority of the Board, designate members of the Board
to constitute other committees, which shall have, and may exercise, such
powers as the Board may by resolution delegate to them, and shall in each
case consist of such number of directors as the Board may determine; provided,
however, that each such committee shall have at least three directors as
members thereof. Such a committee may either be constituted for a specified
term or may be constituted as a standing committee which does not require
annual or periodic reconstitution. A majority of all the members of any such
committee may determine its action and its quorum requirements and may fix
the time and place of its meetings, unless the Board shall otherwise provide.
SECTION 6. Changes in Committees; Resignations; Removals;
Vacancies. The Board of Directors shall have power, by resolution adopted by
a majority of the Board, at any time to change or remove the members of, to
fill vacancies in, and to discharge any committee created pursuant to these
By-laws, either with or without cause. Any member of any such committee may
resign at any time by giving written notice to the Board, the Chairman of the
Board or the Secretary. Such resignation shall take effect upon receipt of
such notice or at any later time specified therein; and, unless otherwise
specified therein, acceptance of such resignation shall not be necessary to
make it effective. Any vacancy in any committee, whether arising from death,
resignation, and increase in the number of committee members or any other
cause, shall be filled by the Board of Directors in the manner prescribed in
these By-laws for the original appointment of the members of such committee.
ARTICLE V
Officers
SECTION 1. Number. The Officers of the Corporation shall be
a Chairman of the Board, a President, one or more Vice Presidents (one or
more of whom may be designated Executive Vice Presidents), a Secretary, a
Treasurer, and, if the Board
Page 9
shall so elect, such other officers and agents as may be appointed by the
Board of Directors pursuant to Section 3 of this Article V. Any two or more
offices may be held by the same person.
SECTION 2. Election, Term of Office and Qualifications. The
officers shall be elected annually by the Board of Directors, and except in
the case of officers appointed in accordance with the provisions of Section 3
of this Article V, each shall hold office until the next annual election of
officers and until a successor shall have been duly elected and qualified, or
until death, or until the officer shall resign, or until the officer shall
have been removed in the manner hereinafter provided.
SECTION 3. Other Officers. The Corporation may have such
other officers and agents as may be deemed necessary by the
Board of Directors. Such other officers and agents shall be appointed in
such manner, have such duties and hold their offices for such terms as may be
determined by the Board of Directors. The Board may delegate to any
principal officer the power to appoint or remove any such other officers or
agents.
SECTION 4. Resignations. Any officer may resign at any time
by giving written notice of such resignation to the Board of Directors, to
the Chairman of the Board or to the Secretary of the Corporation. Any such
resignation shall take effect at the time of acceptance by the Corporation.
SECTION 5. Removal. Any officer may be removed, either with
or without cause, by a vote of a majority of the whole Board
of Directors at a special meeting called for the purpose.
SECTION 6. Vacancies. A vacancy in any office because of
death, resignation, removal or any other cause shall be filled for the
unexpired portion of the term in the manner prescribed in these By-laws for
election or appointment to such office.
SECTION 7. The Chairman of the Board. The Chairman of the
Board shall, if present, preside at all meetings of the Board of Directors
and, if present, at all meetings of the stockholders. The Chairman of the
Board shall perform such other duties and may exercise such other powers as
may from time to time be assigned by these By-laws or the Board of Directors.
In the absence or disability of the Chairman of the Board, the powers of the
Chairman of the Board may be exercised by the President.
SECTION 8. The President. The President shall be the chief
executive officer of the Corporation and have, subject to the direction of
the Board, general and active supervision over the business and affairs of
the Corporation and over its several
Page 10
officers. The President shall perform such duties and may exercise such
power as from time to time may be assigned by these By-laws, the Board of
Directors or the Chairman of the Board.
SECTION 9. The Vice Presidents. Any Vice President shall
perform such duties and may exercise such powers as from time to time may be
assigned by these By-laws, the Board of Directors or the Chairman of the
Board.
SECTION 10. The Secretary and the Assistant Secretaries.
The Secretary shall record or cause to be recorded in books provided for the
purpose the minutes of the meetings of the stockholders, the Board of
Directors and all committees, if any; shall see that all notices are duly
given in accordance with the provisions of these By-laws and as required by
law; shall be custodian of all corporate records (other than financial) and
of the seal of the Corporation and see that the seal is affixed to all
documents the execution of which on behalf of the Corporation under its seal
is duly authorized in accordance with the provisions of these By-laws; shall
keep the record of stockholders as required by Article VII of these By-laws,
which shall include the post office address of each stockholder, and make all
proper changes therein, retaining the documents relied upon for all such
changes; shall see that the books, reports, statements, certificates and all
other documents and records required by law are properly kept and filed; and,
in general, shall perform all duties incident to the office of Secretary and
such other duties as may, from time to time, be assigned by the Board of
Directors or by the Chairman of the Board.
At the request of the Secretary, or in the absence of the
Secretary, any Assistant Secretary shall perform any of the duties of the
Secretary and, when so acting, shall have all the powers of, and be subject
to all the restrictions upon, the Secretary. Except where by law the
signature of the Secretary is required, each of the Assistant Secretaries
shall possess the same power as the Secretary to sign certificates, contracts,
obligations and other instruments of the Corporation, and to affix the seal
of the Corporation to such instruments, and attest the same.
SECTION 11. The Treasurer and the Assistant Treasurers. The
Treasurer shall have charge and custody of, and be responsible for, all funds
and securities of the Corporation, and shall deposit all such funds in the
name of the Corporation in such banks, trust companies or other depositaries
as shall be selected in accordance with the provisions of these By-laws;
shall render to the Board of Directors, whenever the Board may so require
, and shall present at the annual meeting of the stockholders, if called upon
so to do, a report of all transactions as Treasurer; and, in general, shall
perform all duties incident to the office of Treasurer and such other duties
as may, from time to time, be assigned by the Board of Directors or by the
Chairman of the Board.
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At the request of the Treasurer, or in the absence of the
Treasurer, the Assistant Treasurer, or in case there shall be more than one
Assistant Treasurer, the Assistant Treasurer designated by the Board of
Directors or by the Chairman of the Board shall perform any of the duties of
the Treasurer and, when so acting, shall have all the powers of, and be
subject to all the restrictions upon, the Treasurer. Except where by law the
signature of the Treasurer is required, each of the Assistant Treasurers
shall possess the same power as the Treasurer to sign all certificates,
contracts, obligations and other instruments of the Corporation.
SECTION 12. Salaries. The salaries of the officers shall be
fixed from time to time by the Board of Directors. No
officer shall be prevented from receiving such salary by
reason of the fact that the officer is also a director of the
Corporation.
ARTICLE VI
Contracts, Checks, Loans and Deposits
SECTION 1. Contracts, Checks, etc. All contracts and
agreements authorized by the Board of Directors and all checks, drafts, bills
of exchange or other orders for the payment of money, notes, or other
evidences of indebtedness issued in the name of the Corporation, shall be
signed by such officer or officers, or agent or agents, as may from time to
time be designated by the Board of Directors, which designation may be
general or confined to specific instances.
SECTION 2. Proxies in Respect of Securities of Other
Corporations. Unless otherwise provided by resolution adopted by the Board
of Directors, the Chairman of the Board, the President or a Vice President
may from time to time appoint an attorney or attorneys, or an agent or agents,
to exercise in the name and on behalf of the Corporation the powers and
rights which the Corporation may have as the holder of stock or other
securities in any other corporation to vote or to consent in respect of such
stock or other securities; the Chairman of the Board, the President or any
Vice President may instruct the person or persons so appointed as to the
manner of exercising such powers and rights and the Chairman of the Board,
the President or any Vice President may execute or cause to be executed in
the name and on behalf of the Corporation and under its corporate seal, or
otherwise, all such written proxies, powers of attorney or other written
instruments as such officer may deem necessary in order that the Corporation
may exercise such powers and rights.
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ARTICLE VII
Certificates of Stock, Books and Records
SECTION 1. Certificates for Stock. Every owner of stock of
the Corporation shall be entitled to have a certificate or certificates, in
such form as the Board shall prescribe, certifying the number, class and
series, if any, of shares of stock of the Corporation owned by such person.
The certificates representing shares of the respective classes and series,
if any, of such stock shall be numbered in the order in which they shall be
issued and shall be signed in the name of the Corporation by the person who
was at the time of signing the Chairman of the Board, the President or a Vice
President and by the person who was at the time of signing the Secretary or
an Assistant Secretary, and the seal of the Corporation shall be affixed
thereto; provided, however, that if any such certificate is countersigned by
a transfer agent other than the Corporation or its employee, or, (b) by a
registrar other than the Corporation or its employee, the signatures thereon
of such Chairman of the Board, President or Vice President and of such
Secretary or Assistant Secretary and the seal of the Corporation affixed
thereto may be facsimiles. In case any officer or the officers of the
Corporation who shall have signed, or whose facsimile signature or signatures
shall have been placed upon, any such certificate or certificates shall
cease to be such officer or officers before such certificate or certificates
shall have been issued, such certificate or certificates may nevertheless be
issued by the Corporation with the same effect as though the person or
persons who signed such certificate or certificates or whose facsimile
signature or signatures shall have been placed thereof were such officer or
officers at the date of issuance. A record shall be kept of the respective
names of the persons, firms or corporations owning the stock represented by
certificates for stock of the Corporation, the number, class and series, if
any, of shares represented by such certificates, respectively, the respective
dates thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange
or transfer shall be canceled, and a new certificate or certificates shall
not be issued in exchange for any existing certificate until such existing
certificate shall have been so canceled, except in cases provided for in
Section 6 of this Article.
SECTION 2. Transfers of Stock. Transfers of shares of the
stock of the Corporation shall be made only on the books of the Corporation
by the registered holder thereof, or by an attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary or with a
transfer clerk or a transfer agent appointed as in Section 3 of this Article
provided, and upon surrender of the certificate or certificates for such
shares properly endorsed and payment of all taxes thereon. The person in
whose name shares of stock stand on the books of the Corporation shall be
deemed the owner thereof for all purposes as regards the Corporation.
Whenever any transfer of shares shall be made for collateral security, and
not absolutely, such fact shall be so expressed in the
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entry of transfer if, when the certificate or certificates shall be presented
to the Corporation for transfer, both the transferor and the transferee
request the Corporation to do so.
SECTION 3. Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these By-laws,
concerning the issue, transfer and registration of certificate for stock of
the Corporation. The Board may appoint or authorize any officer or officers
to appoint one or more transfer clerks or one or more transfer agents and one
or more registrars and may require all certificates for stock to bear the
signature or signatures of any of them.
SECTION 4. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights
in respect of any other change, conversion or exchange of stock of for the
purpose of any other lawful action, the Board may fix, in advance, a record
date, which shall not be more than sixty nor less than 10 days before the
date of such meeting, nor more than 60 days prior to any other action. If in
any case involving the determination of stockholders for any purpose other
than (i) notice of or voting at a meeting of stockholders or (ii) expressing
consent to corporate action in writing without a meeting, the Board shall not
fix such a record date, the record date for determining stockholders for
such purpose shall be the close of business on the day on which the Board
shall adopt the resolution relating thereto. A determination of stockholders
entitled to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board may fix a
new record date for the adjourned meeting.
SECTION 5. Lost Certificates. Any person claiming a
certificate of stock to be lost or destroyed shall make an affidavit or
affirmation of that fact and advertise the same in such manner as the Board
of Directors may require, and shall if the directors so require give the
Corporation a bond of indemnity, in form and with one or more sureties
satisfactory to the Board, in at least double the value of the stock
represented by said certificate, whereupon a new certificate may be issued of
the same tenor and for the same number of shares as the one alleged to be
lost or destroyed.
SECTION 6. Books and Records. The books and records of the
Corporation may be kept at such places within or without the State of
Delaware as the Board of Directors may from time to time determine.
Page 14
ARTICLE VIII
Dividends
Dividends upon the capital stock of the Corporation when
earned may be declared by the Board of Directors at any regular or special
meeting.
Before payment of any dividend or making any distribution of
profits, there may be set aside out of the surplus or net profits of the
Corporation such sum or sums as the directors from time to time, in their
absolute discretion, think proper as a reserve fund to meet contingencies,
or for equalizing dividends, or for repairing or maintaining any property of
the Corporation, or for such other purpose as the directors shall think
conducive to the interests of the Corporation.
ARTICLE IX
Seal
The corporate seal shall be in the form of a circle and shall
bear the name of the Corporation, the year in which the Corporation was
incorporated and the words "CORPORATE SEAL-DELAWARE".
ARTICLE X
Fiscal Year
The fiscal year of the Corporation shall end on March 31 in
each year, unless otherwise fixed by the Board of Directors.
ARTICLE XI
Indemnification
SECTION 1. Indemnification. (a) The Corporation shall to
the fullest extent permitted by applicable law as then in effect indemnify
any person who is or was a director or officer of the Corporation (the
"Indemnitee") who was or is involved in any manner (including, without
limitation, as a party or a witness) or is threatened to be made so involved
in any threatened, pending or completed investigation, claim, action, suit
or proceeding, whether civil, criminal, administrative or investigative
(including without limitation, any action, suit or proceeding by or in the
right of the Corporation to procure a
Page 15
judgment in its favor) (a "Proceeding") by reason of the fact that the
Indemnitee (i) is or was a director, officer, employee or agent of the
Corporation, or (ii) is or was serving at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise (including, without limitation, any
employee benefit plan) against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such Proceeding; provided, however,
that except as provided in Section 4(d), the foregoing shall not apply to a
director or officer of the Corporation with respect to a Proceeding that was
commenced by such director or officer prior to a Change in Control (as
hereinafter defined), but only in the case of clause (ii) to the extent the
Indemnitee is not fully indemnified therefor by such other corporation,
partnership, joint venture, trust or other enterprise. Such indemnification
shall be a contract right and shall include the right to receive payment in
advance of a final determination of entitlement thereto pursuant to the
provisions of this Article of any expenses incurred by the Indemnitee in
connection with such Proceeding, consistent with the provisions of applicable
law as then in effect.
(b) The Corporation may to the extent authorized at any
time or from time to time by the Board of Directors and permitted by
applicable law as then in effect indemnify any person who is not or was not a
director or officer of the Corporation but is or was an employee or agent of
the Corporation or a director, officer, employee or agent of any subsidiary
of the Corporation who was or is involved in any Proceeding by reason of the
fact that such person (i) is or was an employee or agent of the Corporation,
(ii) is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (including, without limitation, any
employee benefit plan), or (iii) is or was a director, officer, employee or
agent of any subsidiary of the Corporation against any expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by such person in connection with such Proceeding.
SECTION 2. Insurance, etc. The Corporation may purchase and
maintain insurance or use any other method that may be available from time to
time to protect itself, and any Indemnitee and any other person permitted to
be indemnified pursuant to this Article against any expenses, judgments,
fines and amounts paid in settlement as specified in Section 1 of this
Article or incurred by any Indemnitee or other such person in connection with
any Proceeding referred to in Section 1 of this Article, to the fullest
extent permitted by applicable law as then in effect.
SECTION 3. Indemnification; Not Exclusive Right. The
indemnification provided for in this Article shall not be
exclusive of any other rights to which those seeking indemnification may
otherwise be entitled, and the provisions of this Article shall
Page 16
inure to the benefit of the heirs and legal representatives of any person
entitled to indemnity under this Article and shall be applicable to Proceedings
commenced or continuing after the adoption of this Article, whether arising
from acts or omissions occurring before or after such adoption.
SECTION 4. Advancement of Expenses; Procedures; Presumptions
and Effect of Certain Proceedings; Remedies. In furtherance, but not in
limitation of the foregoing provisions, the following procedures,
presumptions and remedies shall apply with respect to advancement of expenses
and the right to indemnification under this Article:
(a) Advancement of Expenses. All reasonable expenses incurred by
or on behalf of the Indemnitee in connection with any Proceeding shall be
advanced to the Indemnitee by the Corporation within 20 days after the
receipt by the Corporation of a statement or statements from the Indemnitee
or the Indemnitee's agent requesting such advance or advances from time to
time, whether prior to or after final disposition of such Proceeding. Such
statement or statements shall reasonably evidence the expenses incurred by
the Indemnitee and, if required by law at the time of such advance, shall
include or be accompanied by an undertaking by or on behalf of the Indemnitee
to repay the amounts advanced if it should ultimately be determined that the
Indemnitee is not entitled to be indemnified against such expenses pursuant
to this Article.
(b) Procedure for Determination of Entitlement to Indemnification.
(i) To obtain indemnification under this Article, an Indemnitee shall submit
to the Secretary of the Corporation a written request, including such
documentation and information as is reasonably available to the Indemnitee
and reasonably necessary to determine whether and to what extent the
Indemnitee is entitled to indemnification (the "Supporting Documentation").
The determination of the Indemnitee's entitlement to indemnification shall be
made not later than 90 days (or such greater number of days to which the
Indemnitee shall have agreed) after receipt by the Corporation of the written
request for indemnification together with the Supporting Documentation.
The Secretary of the Corporation shall, promptly upon receipt of such a
request for indemnification, advise the Board of Directors in writing that
the Indemnitee has requested indemnification.
(ii) The Indemnitee's entitlement to indemnification under this
Article shall be determined in one of the following ways: (A) by a majority
vote of the Disinterested Directors (as hereinafter defined), if they
constitute a quorum of the Board of Directors; (B) by a written opinion of
Independent Counsel (as hereafter defined) if (x) a Change of Control
(as hereinafter defined) shall have occurred and
Page 17
the Indemnitee so requests or (y) a quorum of the Board of Directors
consisting of Disinterested Directors is not obtainable or, even if obtainable,
a majority of such Disinterested Directors so directs; (C) by the
stockholders of the Corporation (but only if a majority of the Disinterested
Directors, if they constitute a quorum of the Board of Directors, presents
the issue of entitlement to indemnification to the stockholders for their
determination); or (D) as provided in Section 4(c).
(iii) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section
4(b)(ii), a majority of the Disinterested Directors shall select the
Independent Counsel, but only an Independent Counsel to which the Indemnitee
does not reasonably object; provided, however, that if a Change of Control
shall have occurred, the Indemnitee shall select such Independent Counsel,
but only an Independent Counsel to which the Board of Directors does not
reasonably object.
(c) Presumptions and Effect of Certain Proceedings. Except as
otherwise expressly provided in this Article, if a Change of Control shall
have occurred the Indemnitee shall be presumed to be entitled to
indemnification under this Article upon submission of a request for
indemnification together with the Supporting Documentation in accordance
with Section 4(b)(i), and thereafter the Corporation shall have the burden of
proof to overcome that presumption in reaching a contrary determination. In
any event, if the person or persons empowered under Section 4(b) to determine
entitlement to indemnification shall not have been appointed or shall not
have made a determination within 90 days (or such greater number of days to
which the Indemnitee shall have agreed) after receipt by the Corporation of
the request therefor together with the Supporting Documentation, the
Indemnitee shall be deemed to be entitled to indemnification. The
termination of any Proceeding, or of any claim, issue or matter therein, by
judgment, order, settlement or conviction, or upon a plea of nolo contendere
or its equivalent, shall not, of itself, adversely affect the right of the
Indemnitee to indemnification or create a presumption that the Indemnitee did
not act in good faith and in a manner which the Indemnitee reasonably
believed to be in or not opposed to the best interests of the Corporation or,
with respect to any criminal Proceeding, that the Indemnitee had reasonable
cause to believe that such conduct was unlawful.
(d) Remedies of Indemnitee. (i) In the event that a determination
is made pursuant to Section 4(b) that the Indemnitee is not entitled
to indemnification under this Article, (A) the Indemnitee shall be entitled
to seek an adjudication of entitlement to such indemnification either, at the
Indemnitee's sole option, in (x) an appropriate court of the State of
Delaware or any other court of competent jurisdiction or (y) an arbitration
to be conducted by a single arbitrator pursuant to
Page 18
the rules of the American Arbitration Association; (B) any such judicial
proceeding or arbitration shall be de novo and the Indemnitee shall not be
prejudiced by reason of such adverse determination; and (C) if a Change of
Control shall have occurred, in any such judicial proceeding or arbitration
the Corporation shall have the burden or proving that the Indemnitee is not
entitled to indemnification under this Article.
(ii) If a determination shall have been made or deemed to have been
made, pursuant to Section 4(b) or (c), that the Indemnitee is entitled to
indemnification, the Corporation shall be obligated to pay the amounts
constituting such indemnification within five days after such determination
has been made or deemed to have been made and shall be conclusively bound by
such determination unless (A) the Indemnitee misrepresented or failed to
disclose a material fact in making the request for indemnification or in the
Supporting Documentation or (B) such indemnification is prohibited by law.
In the event that (x) advancement of expenses is not timely made pursuant to
Section 4(a) or (y) payment of indemnification is not made within five days
after a determination of entitlement to indemnification has been made or
deemed to have been made pursuant to Section 4(b) or (c), the Indemnitee
shall be entitled to seek judicial enforcement of the Corporation's
obligation to pay to the Indemnitee such advancement of expenses or
indemnification. Notwithstanding the foregoing, the Corporation may bring an
action, in an appropriate court in the State of Delaware or any other court
of competent jurisdiction, contesting the right of the Indemnitee to receive
indemnification hereunder due to the occurrence of an event described in
subclause (A) or (B) of this clause (ii) (a "Disqualifying Event"); provided,
however, that in any such action the Corporation shall have the burden of
proving the occurrence of such Disqualifying Event.
(iii) The Corporation shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section 4(d)
that the procedures and presumptions of this Article are not valid, binding
and enforceable and shall stipulate in any such court or before any such
arbitrator that the Corporation is bound by all the provisions of this
Article.
(iv) In the event that the Indemnitee, pursuant to this Section
4(d), seeks a judicial adjudication of or an award in arbitration to enforce
rights under, or to recover damages for breach of, this Article, the
Indemnitee shall be entitled to recover from the Corporation, and shall be
indemnified by the Corporation against, any expenses actually and reasonably
incurred by the Indemnitee in connection with such judicial adjudication or
arbitration. If it shall be determined in such judicial adjudication or
arbitration that the Indemnitee is entitled to receive part but not all the
indemnification or advancement of expenses sought, the expenses
Page 19
incurred by the Indemnitee in connection with such judicial adjudication or
arbitration shall be prorated accordingly.
(e) Indemnification by Another Enterprise. Notwithstanding anything
to the contrary contained in this Section 4, if the Indemnitee shall receive
indemnification in connection with any Proceeding from another corporation,
partnership, joint venture, trust or other enterprise of which the Indemnitee
is serving as a director, officer, employee or agent at the request of the
Corporation, the Indemnitee shall promptly refund to the Corporation amounts
advanced or paid to the Indemnitee pursuant to Section 4(a) or 4(d)(ii) in
connection with such Proceeding to the extent such other corporation,
partnership, joint venture, trust or other enterprise has indemnified the
Indemnitee for such amounts.
(f) Definitions. For purposes of this Section 4: (i) "Change in
Control" means a change in control of the Corporation of a nature that would
be required to be reported in response to Item 6(e) (or any successor
provision) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934 (the "Act"), whether or not the Corporation is then
subject to such reporting requirement; provided that, without limitation,
such a change in control shall be deemed to have occurred if (A) any "person"
(as such term is used in Sections 13(d) and 14(d) of the Act) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Corporation representing 30% or more of the
combined voting power of the corporation's then outstanding securities
without the prior approval of at least two-thirds of the members of the Board
of Directors in office immediately prior to such acquisition; (B) the
Corporation is a party to any merger or consolidation in which the
corporation is not the continuing or surviving corporation or pursuant to
which shares of the Corporation's Common Stock would be converted into cash,
securities or other property, other than a merger of the Corporation in
which the holders of the Corporation's Common Stock immediately prior to the
merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger; (C) there is a sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, the assets of the Corporation,
or a liquidation or dissolution of the Corporation; or (D) during any period
of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors (including for this purpose any new
director whose election or nomination for election by the Corporation's
stockholders was approved by a vote of at least a majority of the directors
then still in office who were directors at the beginning of such period)
cease for any reason to constitute at least a majority of the Board of
Directors.
Page 20
(ii) "Disinterested Director" means a director of the Corporation
who is not or was not a party to the Proceeding in respect of which
indemnification is sought by the Indemnitee.
(iii) "Independent Counsel" means a law firm or a member of a law
firm that neither presently is, nor in the past five years has been, retained
to represent: (x) the Corporation or the Indemnitee in any matter material
to either such party or (y) any other party to the Proceeding giving rise to
a claim for indemnification under this Article. Notwithstanding the
foregoing, the term "Independent Counsel" shall not include any person who,
under the applicable standards of professional conduct then prevailing under
the law of the State of Delaware, would have a conflict of interest in
representing either the Corporation or the Indemnitee in an action to
determine the Indemnitee's rights under this Article.
SECTION 5. Effect of Amendments. Neither the amendment or
repeal of, nor the adoption of a provision inconsistent with, any provision
of this Article (including, without limitation, this Section 5) shall
adversely affect the rights of any director or officer under this Article
(x) with respect to any Proceeding commenced or threatened prior to such
amendment, repeal or adoption of any inconsistent provision or (y) if such
amendment, repeal or adoption occurs after a Change in Control, with respect
to any Proceeding arising out of any action or omission occurring prior to
such amendment, repeal or adoption of any inconsistent provision, in either
case without the written consent of such director or officer.
SECTION 6. Severability. If any provision or provisions of
this Article shall be held to be invalid, illegal or unenforceable for any
reason whatsoever: (a) the validity, legality and enforceability of the
remaining provisions of this Article (including, without limitation, all
portions of any paragraph of this Article containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall not in any way be affected or impaired
thereby; and (b) to the fullest extent possible, the provisions of this
Article (including, without limitation, all portions of any paragraph of
this Article containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable.
Page 21
ARTICLE XII
Amendments
These By-laws may be altered or repealed by the vote of a
majority of the whole Board, subject to the power of the holders of a
majority of the outstanding stock of the Corporation entitled to vote in
respect thereof, by their vote given at an annual meeting or at any special
meeting, to alter or repeal any By-law made by the Board.
Page 22
Exhibit 10.7
AVX NONQUALIFIED SUPPLEMENTAL
RETIREMENT PLAN
Restated as of January 1, 1998
AGREEMENT made as of January 1, 1998 by AVX Corporation (hereinafter referred
to as the "Company").
WI T N E S S E T H:
WHEREAS, the Company implemented the AVX Corporation Deferred Compensation
Plan (the "Original Plan") for the benefit of certain management or highly
compensated employees, effective August 1, 1994; and
WHEREAS, the Company restated the Original Plan, effective July 1, 1995;
and
WHEREAS, the restated Original Plan has been amended four times;
and
WHEREAS, it is now desired to again amend and restate the Original Plan,
effective January 1, 1998;
NOW, THEREFORE, the Original Plan is hereby amended and renamed the AVX
Nonqualified Supplemental Retirement Plan (the "Plan") effective January 1,
1998 to read as follows:
Section 1 Purpose of the Plan
The purpose of the Plan is to provide certain management or highly
compensated employees of the Company with supplemental retirement benefits
that would otherwise be lost due to the limitation on covered compensation
under plans intended to qualify under Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
Section 2 Eligibility to Participate
Each employee of the Company on January 1, 1998 who at any time participated
in the Original Plan shall continue to be eligible to participate in this
Plan. Every other employee of the Company on January 1, 1998 and thereafter
who is eligible to participate in the AVX Corporation Stock Bonus Plan and
whose annual compensation is in excess of $160,000 (or such higher amount as
determined under Section 401(a)(17) of the Code), shall participate in the
Plan as of the date his/her annual compensation exceeds $160,000 (or such
higher amount as determined under Section 401(a)(17) of the Code). An
eligible employee who participates in the Plan is hereinafter referred to as
a "Participant."
Section 3 Benefits
3.1 Each Participant shall be entitled to make an irrevocable election,
as specified in Section 3.2, to defer receipt of compensation otherwise
payable by the Company to such Participant for the calendar year commencing
January 1, 1998, and each calendar year thereafter. The deferred amount may
range from 1% of compensation to 3% of compensation in excess of $160,000 (or
such higher amount as determined under Section 401(a)(17) of the Code). 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 Code and any
compensation deferred under the AVX Corporation SERP (the "SERP").
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 January 1, 1998, and thereafter prior to the first day of
the calendar year to which such election is applicable.
Notwithstanding anything contained in Sections 3.1 or 3.2 to the contrary,
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.
Any compensation deferred under this Section 3.2 shall be invested
in accordance with Section 4.2.
A Participant's initial election to defer compensation shall also include an
election as to the manner 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.
3.3 In addition to any compensation deferred by a Participant under
Section 3.2, the Company shall also defer an amount for each Participant,
which amount shall be equal to the sum of the following:
a. A Company matching contribution equal to 100% of the amount deferred
under Section 3.2 by such Participant on compensation between $160,000 and
$600,000; and
b. Provided such Participant is an employee of the Company on December
31 of such year (unless employment terminated during such year due to
retirement, disability or death as determined under the AVX Corporation
Retirement Plan), an amount equal to the aggregate amount that would have
been contributed on such Participant's compensation between $160,000 and
$300,000 under profit sharing and between $160,000 and $600,000 under money
purchase of the AVX Corporation Retirement Plan (had there been no limit on
compensation in said plan, as required by Section 401(a)(17) of the Code).
For the purpose of determining the Company's contribution under this Section
3.3, the $160,000 shall be increased in order to reflect any cost-of-living
adjustment for each calendar year pursuant to Code Section 401(a)(17).
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.
4.2 Any compensation deferred by a Participant pursuant to Section 3.2
and the matching Company contribution thereon shall be invested in the AVX
Stock Fund.
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 liable for
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 upon a
Participant the right to continue in the employ of the Company as an employee
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
Trustee under the Trust) and such interpretation, construction, and actions
hereunder, shall be binding and conclusive on all persons for all purposes.
The Company (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 the laws 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.
