-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OUAUaX/knrgM6JtvUIvYuJTHjxVE3e4QxwsRfeN6iP4p+qXaAr56kANmeoDby5Oe VBHR5hzUANs1NMKkqxTMMw== 0000859163-97-000007.txt : 19970610 0000859163-97-000007.hdr.sgml : 19970610 ACCESSION NUMBER: 0000859163-97-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970609 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AVX CORP /DE CENTRAL INDEX KEY: 0000859163 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [3670] IRS NUMBER: 330379007 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07201 FILM NUMBER: 97621022 BUSINESS ADDRESS: STREET 1: 801 17TH AVE S CITY: MYRTLE BEACH STATE: SC ZIP: 29577 BUSINESS PHONE: 8034499411 MAIL ADDRESS: STREET 1: PO BOX 867 STREET 2: PO BOX 867 CITY: MYRTLE BEACH STATE: SC ZIP: 29578 FORMER COMPANY: FORMER CONFORMED NAME: KC SUBSIDIARY CORP DATE OF NAME CHANGE: 19900212 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE YEAR ENDED MARCH 31, 1997 Commission File No. 1-10431 AVX CORPORATION (Exact Name of Registrant as Specified in its Charter) Delaware 33-0379007 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 801 17th Avenue South Myrtle Beach, South Carolina 29577 (803) 448-9411 (address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Securities Registered Pursuant to Section 12(b) of the Act: Title of Each Class Name Of Each Exchange On Which Registered Common Stock, New York Stock Exchange $.01 par value per share Securities Registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Based on the closing sales price of $26.875 on May 23, 1997, the aggregate market value of the voting stock held by non-affiliates of the registrant was $587,219,000. As of May 23, 1997, the number of shares outstanding of the registrant's Common Stock, par value $.01 per share, was 88,000,000 shares. DOCUMENTS INCORPORATED BY REFERENCE There is incorporated by reference in Part III on this Annual Report on Form 10-K the information contained in the registrant's proxy statement for its annual meeting of stockholders to be held on July 17, 1997. PART I Item 1. Business AVX Corporation (together with its consolidated subsidiaries, "AVX" or the "Company") is a leading worldwide manufacturer and supplier of a broad line of passive electronic components and related products. A substantial portion of the Company's passive electronic component sales are of ceramic and tantalum capacitors, both in "leaded" and "surface-mount" versions. Capacitors are used in virtually all electronic products to store, filter or regulate electric energy. Ceramic capacitors and tantalum capacitors are among the fastest growing types of capacitors. The Company also manufactures and sells electronic connectors and distributes and sells certain passive components and connectors manufactured by Kyocera Corporation of Japan, a public company, ("Kyocera"). The Company's strategy is to focus on: * customer service, through the breadth and quality of its product line, as well as its ability to respond in a timely manner to its customers' component design and delivery requirements; * low-cost, high-quality manufacturing, through utilization of state-of-the-art facilities and skilled labor around the world; * global coordination of marketing and manufacturing, through manufacturing operations located worldwide and the assignment of global customer account executives to cover the Company's major multi-national customers; and * innovative and unique products and manufacturing processes, developed through emphasis on advanced technologies at the Company's research laboratories and participation in its customers' long-range product development programs. The Company's customers include leading OEMs in such industries as telecommunications, computers, automotive electronics, medical devices and instrumentation, industrial instrumentation, military and aerospace electronic systems, and consumer electronics. Sales of Company products are made by Company-employed direct sales personnel, independent manufacturers' representatives, and independent electronic component distributors. The overall growth in the electronics industry over the past several years can be particularly attributed to: * the development of new products and applications in established electronics markets, such as cellular telephones and personal computers; * the proliferating use of electronic systems in products in which such use had been historically absent or limited, such as automobiles, home appliances, and medical equipment; and * the increase in the number of capacitors required in certain electronic products with higher levels of complexity and functionality, such as those that use state-of-the-art microprocessors. The Company's executive offices are located in Myrtle Beach, South Carolina and its manufacturing facilities are located in North America, Europe and Asia. Public Offering From January 1990 through August 15, 1995, the Company was wholly-owned by Kyocera. On August 15, 1995, Kyocera sold 22.9%, or 19,650,000 of the Company's common shares, and the Company sold an additional 2,200,000 common shares, in a public offering. As a result, Kyocera currently owns 75.2% of the Company's common shares. 1 Products AVX offers an extensive line of passive components, designed to provide its customers with "one-stop shopping" for substantially all of their passive component needs. Ceramic and tantalum capacitors accounted for approximately 59% of the Company's net sales in fiscal 1997. Advanced products, which are designed and manufactured by the Company in cooperation with customers to meet the requirements of specific applications, represented about 13% of the Company's net sales in fiscal 1997. Connectors accounted for approximately 8% of net sales and the remaining 20% of AVX's net sales in fiscal 1997 came from its sales of certain products manufactured by Kyocera, for which the Company has a non-exclusive license to distribute and sell everywhere in the world except Japan. Capacitors AVX manufactures a full line of multi-layered ceramic and solid tantalum capacitors in many different sizes and configurations. The Company's strategic focus on the growing use of ceramic and tantalum capacitors is reflected in its investment during the past three years of approximately $225 million primarily to increase its capacitor manufacturing capacity. The Company believes that sales of ceramic and tantalum capacitors will continue to be among the most rapidly growing in the worldwide capacitor market because technological advances have been constantly expanding the number and type of applications for these products. Tantalum and ceramic capacitors commonly are used in conjunction with integrated circuits and are best suited for applications requiring lower to medium capacitance values. Generally, ceramic capacitors are more cost-effective at lower capacitance values, and tantalum capacitors are more cost-effective at medium capacitance values. Capacitance is the measure of the capacitor's ability to store energy. Ceramic and tantalum capacitors are produced by the Company in two basic versions: leaded and surface-mount. Leaded capacitors are attached to a circuit board using lead wires while surface-mount capacitors are attached directly to a circuit board. In recent years there has been significant industry-wide growth in the use of surface-mount capacitors, and industry analysts have predicted that this would cause the market for leaded capacitors to decline significantly. In certain applications, however, leaded capacitors continue to be the component of choice. Advanced Products To fill the needs of its customers, the Company's advanced products engineers work with certain customers' in-house technical staffs to design, produce and manufacture special products to meet the specifications of particular applications. The manufacture of special products permits AVX, through its research and development activities, to make technological advances, provide the customer with a design solution to fit its needs, gain a marketing inroad with the customer with respect to AVX's complete product line and, in some cases, develop products that can be sold to additional customers in the future. AVX's advanced products division presently has significant ongoing projects with a variety of key customers in the computer, telecommunications, automotive and medical fields as well as some other new areas of use. Connectors The connector division of the Company manufactures high-quality electronic connectors and inter-connect systems for use in the computer, telecommunications, automotive electronics, medical device, military and aerospace industries. The Company's product line includes a variety of industry-standard connectors as well as products designed specifically for its customers' unique applications. The Company produces fine pitch, or small centerline, connectors, many of which have been selected by leading OEMs for applications in cellular phones, pagers, printers and notebook computers. The Company also has developed a value-added business in flat ribbon cable assembly and in backpanel, and card edge assemblies. Kyocera Products The Company's distribution and sale of certain Kyocera products throughout the world, except in Japan, broaden the Company's range of products and further facilitate its ability to offer "one-stop shopping" for its customers' electronic components needs. Kyocera's product lines sold by the Company include ceramic capacitors, hybrids, oscillators, saw devices, resistor networks, trimmers, chip resistors, ceramic filters, resonators, connectors and piezo acoustic devices. 2 Marketing, Sales and Distribution The Company places a high priority on solving customers' electronic component problems and responding to their needs. AVX frequently forms teams of its marketing, research and development, and manufacturing personnel to work with customers to design and manufacture products to suit their specific requirements. The Company's products are sold primarily to manufacturers and, to a much lesser extent, to United States and foreign government agencies. The Company has also qualified products under various military specifications, approved and monitored by the United States Defense Electronic Supply Center ("DESC"), and under certain foreign military specifications. Approximately 47%, 22% and 31% of the Company's net sales for fiscal 1997, were to customers in North America, Europe, and Asia, respectively. Financial information relating to geographic operations is set forth in Part IV, item 14(a), of this report. The Company's products are marketed worldwide by the Company's own sales personnel, as well as through independent manufacturers' representatives who are compensated solely on a commission basis, and independent electronic component distributors. The Company has regional sales personnel in strategic locations to provide technical and sales support for independent manufacturers' representatives and independent electronic component distributors. The Company believes that this combination of distribution channels provides a high level of market penetration and efficient coverage of its customers on a cost-effective basis. Among the Company's customers are Motorola Inc., Lucent Technologies, American Telephone and Telegraph Corporation, L.M. Ericsson Telefonaktiebolaget, OY Nokia AB., Northern Telecom,Uniden and Siemens AG in the telecommunications industry; International Business Machines Corporation, Compaq Computer Corp., Seagate Technology International, Western Digital Corp., Acer Incorporated, Intel Corp., Sony Corporation, and Samsung Co. Limited in the computer industry; and Ford Motor Co., Robert Bosch GmbH, General Motors Corp. and Magneti Marelli S.p.A. in the automotive industry. The Company's largest customers vary on a year-to-year basis, and no customer has a long-term commitment to purchase products of the Company. No one customer has accounted for more than 10% of net sales for the past three years. AVX had a backlog of orders of approximately $240 million at March 31, 1997, $250 million at March 31, 1996 and $317 million on March 31, 1995. Orders may be canceled by a customer at any time, subject to cancellation charges under certain circumstances. The backlog reduction since March 31, 1995, reflects the electronic components industry's tight supply situation in calendar 1995. The reduction in delivery lead times in 1996 has decreased customers' long-term ordering patterns, such that orders are currently placed more on an as needed basis. The backlog outstanding at any time is not necessarily indicative of the level of business to be expected in any ensuing period since certain orders are placed and delivered within the same period. Research,Development and Engineering AVX's emphasis on research and development is reflected by the fact that most of the Company's manufactured products and manufacturing processes have been designed and developed by its own engineers and scientists. The Company's 60,000 square-foot facility, dedicated entirely to pure research and development, in Myrtle Beach, South Carolina, was constructed in fiscal 1995 and provides centralized coordination of AVX's global research and development efforts. The Company also maintains significant research and development staffs at its facilities in Coleraine, Northern Ireland, Jerusalem, Israel, and Paignton, England. The Company's research, development and engineering effort places a priority on the design and development of innovative products and manufacturing processes and engineering advances in existing product lines and manufacturing operations. Other areas of emphasis include material synthesis and the integration of passive components for applications requiring reduced size, and lower manufacturing costs associated with board assembly. Research, development and engineering expenditures were approximately $34 million, $30 million and $25 million during fiscal 1997, 1996 and 1995, respectively. While AVX owns United States patents as well as corresponding patents in various other countries, and also has patent applications pending, its patents are not in the aggregate material to the successful operation of its business. 3 Transactions with Kyocera Since January 1990, Kyocera and AVX have engaged in a significant number and variety of related company transactions, including, without limitation, the transactions referred to in footnote 9 to the financial statements set forth in Part IV, item 14(a), of this report. The Company also has established several ongoing arrangements with Kyocera and has executed several agreements, the more significant of which are described below. Except for the Buzzer Assembly Agreement, each of the agreements described below contains provisions requiring that the terms of any transaction under such agreement be equivalent to that which an independent unrelated party would agree at arm's-length and is subject to the approval of the Special Advisory Committee of the AVX Board of Directors. The Special Advisory Committee is comprised of the independent directors of the Company and is required to review and approve such agreements and any significant transactions between the Company and Kyocera not covered by such agreements. Products Supply and Distribution Agreement. Pursuant to the Products Supply and Distribution Agreement (the "Distribution Agreement") (i) AVX will act as the non-exclusive distributor of certain Kyocera-manufactured products in territories outside of Japan, and (ii) Kyocera will act as the non-exclusive distributor of certain AVX-manufactured products within Japan. The Distribution Agreement has a term of one year, with automatic one-year renewals, subject to the right of termination by either party at the end of the then current term upon at least three months prior written notice. Disclosure and Option to License Agreement. Pursuant to the Disclosure and Option to License Agreement (the "License Agreement"), the Company and Kyocera agree to exchange confidential information relating to the development and manufacture of multi-layered ceramic capacitors and various other ceramic products. The expiration date of the License Agreement is March 31, 2005. Materials Supply Agreement. Pursuant to the Materials Supply Agreement (the "Supply Agreement"), AVX and Kyocera will from time to time supply the other party with certain raw and semi-processed materials used in the manufacture of ceramic capacitors and other ceramic products. The expiration date of the Supply Agreement is March 31, 2000. Buzzer Assembly Agreement. Pursuant to the Buzzer Assembly Agreement, AVX assembles certain electronic components for Kyocera in the Company's Juarez, Mexico facility. Kyocera pays AVX a fixed cost mutually agreed upon by the parties for each component assembled plus a profit margin. The Agreement will terminate on March 31, 2000, subject to the right of either party to terminate upon six months written notice. Machinery and Equipment Purchase Agreement. Pursuant to the Machinery and Equipment Purchase Agreement (the "Machinery Purchase Agreement"), AVX and Kyocera will from time to time design and manufacture for the other party certain equipment and machinery of a proprietary and confidential nature used in the manufacture of capacitors and other electrical components. The agreement will terminate on March 31, 2000. Raw Materials Although most materials incorporated in the Company's products are available from a number of sources, certain materials (particularly palladium and tantalum) are available only from a relatively limited number of suppliers. Palladium, a principal raw material used in the manufacture of ceramic capacitors, is primarily purchased from various companies in the form of palladium sponge and ingot. The main areas of mining of palladium are in Russia and South Africa. Palladium is considered a commodity and is subject to price volatility and has fluctuated in a range of approximately $120 to $180 per troy ounce during the last three years. An inability of the Company to pass on an increase in palladium cost through to its customers could have a material adverse effect on the Company's results of operations. The Company is presently using substitutes for palladium in certain product applications. 4 Tantalum powder is a principal material used in the manufacture of tantalum capacitor products. This product is purchased under annual contracts with suppliers from various parts of the world at prices that are subject to periodic adjustment. The Company is a major consumer of the world's annual tantalum production. Although the Company believes that there is currently no problem with the procurement of tantalum powder and that the tantalum required by the Company has generally been available in sufficient quantity to meet requirements, the limited number of tantalum powder suppliers could lead to higher prices. An inability of the Company to pass on an increase in tantalum cost to its customers could have a material adverse effect on the Company's results of operations. AVX internally develops and produces a majority of the ceramic raw materials used in its production processes and is expanding its ceramic production operations in order to meet increased demand. The Company believes that it is the only United States capacitor manufacturer that processes its own ceramic materials. Competition The Company encounters strong competition in its various product lines from both domestic and foreign manufacturers. Competitive factors in the markets of the Company's products include product quality and reliability, breadth of product line, customer service, technological innovation, timely delivery, and price. The Company believes that it competes favorably on the basis of each of these factors. The breadth of the Company's product offering enables AVX to strengthen its market position by providing its customers with one of the broadest selections of passive electronic components available from one source. The Company's major competitors are Murata Manufacturing Company Ltd, KEMET Corporation, NEC Corporation, TDK Corporation and Vishay Intertechnology, Inc. Employees As of March 31, 1997, AVX employed approximately 13,000 full time employees. Approximately 4,000 of these employees are employed in the United States. Of the employees located in the United States, approximately 2,000 are covered by collective-bargaining arrangements. In addition, some foreign employees are members of various trade and government-affiliated unions. The Company believes that its relationship with its employees is good, and the Company has not had a work stoppage as a result of collective bargaining difficulties during the past 20 years. Environmental Matters The Company is subject in the United States to federal, state and local laws and regulations concerning the environment and to the environmental laws and regulations of the other countries in which it has manufacturing facilities. Based on the Company's periodic review of the operating policies and practices at all its facilities, the Company believes that its operations currently comply in all material respects with all such laws and regulations. The Company has been identified by the federal Environmental Protection Agency ("EPA"), state governmental agencies or other private parties as a potentially responsible party ("PRP") under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") or equivalent state or local laws for clean-up and response costs associated with ten sites at which remediation is required. Because CERCLA has been construed to authorize joint and several liability, EPA could seek to recover all clean-up costs from any one of the PRPs at a site despite the involvement of other PRPs. At all but one site, financially responsible PRPs other than the Company also are, or have been, involved in site investigation and clean-up activities. Therefore, the Company believes that any liability resulting from these sites will be apportioned between the Company and other PRPs. To resolve its liability at each of the sites at which it has been named a PRP, the Company has entered into various administrative orders and consent decrees (collectively, "Decrees") with federal and state regulatory agencies, governing the timing and nature of investigation and remediation. The Company has paid, or reserved for, all amounts required under the terms of these Decrees corresponding to its apportioned share of the liabilities. Such reserves for remediation, compliance and legal costs totaled $5,025 at March 31, 1997. As is customary, the Decrees at sites where the PRPs are not themselves implementing the chosen remedy contain provisions allowing EPA to reopen the agreement and seek additional amounts from settling PRPs in the event that certain contingencies occur, such as the discovery of significant new information about site conditions during clean-up or substantial cost overruns for the chosen remedy. The existence of such reopener provisions, combined with the difficulties of reliably estimating clean-up costs and the joint and several nature of CERCLA liability, makes it difficult to predict the ultimate liability at any site with certainty. While no assurance can be given, the Company does not believe that any additional costs to be incurred by the Company at any of the sites will have a material adverse effect on the Company's financial condition or results of operations. In addition, the Company does not believe that any investigation or clean-up that may be required at any other locations will have a material adverse effect on the Company's financial condition or results of operations. 5 Executive Officers of the Registrant The following table provides certain information regarding the executive officers of the Company as of May 23, 1997. Name Age Position Benedict P. Rosen 61 President, Chief Executive Officer, and Director John S. Gilbertson 53 Executive Vice President, Chief Operating Officer, Corporate Secretary and Director Donald B. Christiansen 58 Chief Financial Officer, Vice President, Treasurer, and Director C. Marshall Jackson 48 Senior Vice President of Marketing Ernie Chilton 53 Senior Vice President--Tantalum S. M. Chan 41 Vice President of Marketing and Sales--Asia Allan Cole 54 Vice President of Sales Alan Gordon 48 Vice President of European Sales/Marketing John L. Mann 54 Vice President of Quality James Patterson 62 Vice President of Leaded Division Benedict P. Rosen has served as President and Chief Executive Officer of the Company since April 1993 and as a member of the Board of Directors since January 1990. From February 1985 to March 1993, Mr. Rosen has served as Executive Vice President of AVX and has been employed by the Company since 1972. Mr. Rosen has been a Senior Managing and Representative Director of Kyocera since June 1995, and previously served as a Managing Director of Kyocera from 1992 to June 1995. Mr. Rosen is a Director of Nitzanim-AVX/Kyocera-Venture Capital Fund Ltd. and Aerovox Corporation. John S. Gilbertson has served as Executive Vice President and Chief Operating Officer of the Company since April 1994, as Corporate Secretary since April 1996, and as a member of the Board of Directors since January 1990. From April 1992 until present, Mr. Gilbertson served as the Executive Vice President of AVX. From September 1990 to March 1992, Mr. Gilbertson served as Senior Vice President of AVX. Mr. Gilbertson has been employed by AVX since 1981. Mr. Gilbertson has been a Director of Kyocera since June 1995. Donald B. Christiansen has served as Vice President of Finance, Chief Financial Officer and Treasurer since April 1994, and as a member of the Board of Directors since April 1992. From March 1992 until April 1994, Mr. Christiansen served as the Chief Financial Officer of AVX. C. Marshall Jackson has served as Senior Vice President of Marketing since April 1994. From January 1990 until March 1994, Mr. Jackson was Vice President of AVX and has been employed by the Company since 1969. 6 Ernie Chilton has served as Senior Vice President--Tantalum of AVX since April 1994 and as a member of the Board of Directors from February 1993 to July 1995. From January 1990 until February 1993, Mr. Chilton served as Vice President of AVX. From January 1990 until 1993, Mr. Chilton served as Vice President of AVX. Mr. Chilton has been employed by the Company since 1980. S. M. Chan has served as Vice President of Marketing and Sales--Asia since April 1994. From April 1992 until March 1994, Mr. Chan served as the Director of Marketing of AVX. Mr. Chan has been employed by AVX since October 1990. Allan Cole has served as Vice President of Sales of the Company since May 1987. Mr. Cole has been employed by AVX since 1977 serving in several sales management positions, both domestic and international. Alan Gordon has served as Vice President--European Sales/Marketing of AVX since February 1993. From January 1991 until February 1993, Mr. Gordon served as the Director of Marketing of AVX. Mr. Gordon has been employed by AVX since 1991. John L. Mann has served as Vice President of Quality of the Company since May 1986. From March 1984 until May 1986, Mr. Mann served as the Corporate Director of Quality. James Patterson has served as Vice President of the Leaded Division of AVX since February 1993. From June 1992 until February 1993, Mr. Patterson served as the Division Vice President of SMP. Mr. Patterson has been employed by the Company since 1963. Item 2. Properties The Company conducts manufacturing operations throughout the world. All the Company's operations around the world are certified to the ISO 9000 international quality control standards. ISO 9000 is a comprehensive set of quality program standards developed by the International Organization for Standardization. Certain facilities have also been qualified under a new set of stringent QS 9000 quality standards developed by the US automotive industry. A list of the Company's facilities, their square footage, whether they are leased or owned and a description of their use, follows: Type Square of Description Location Footage Interest of Use UNITED STATES Myrtle Beach,SC 451,005 Owned Research/Manufacturing/Headquarters Myrtle Beach, SC 46,631 Leased Warehouse Conway, SC 70,408 Owned Manufacturing Biddeford, ME 72,000 Owned Manufacturing Colorado Springs, CO 15,000 Owned Manufacturing El Paso, TX 17,760 Leased Warehouse New Orleans, LA 16,440 Leased Warehouse Olean, NY 107,400 Owned Manufacturing Raleigh, NC 206,000 Owned Manufacturing/Warehouse Sun Valley, CA 25,000 Leased Manufacturing Vancouver, WA 87,048 Leased Manufacturing Vancouver, WA 10,024 Leased Warehouse OUTSIDE THE UNITED STATES Betzdorf, Germany 101,671 Owned Manufacturing Biggleswade, England 10,000 Leased Manufacturing Chihuahua, Mexico 104,848 Owned Manufacturing Coleraine, N. Ireland 105,000 Owned Research/Manufacturing Hong Kong 30,257 Owned Warehouse Jerusalem, Israel 42,470 Leased Research/Manufacturing Juarez, Mexico 84,000 Owned Manufacturing Lanskroun, Czech Republic 179,000 Leased Manufacturing Uherske Hradiste,Czech Republic 128,000 Leased Manufacturing Larne, N. Ireland 120,000 Owned Manufacturing/Warehouse Newmarket, England 52,000 Leased Manufacturing Paignton, England 150,000 Owned Research/Manufacturing San Salvador, El Salvador 232,981 Owned Manufacturing Singapore 49,500 Leased Manufacturing/Warehouse 7 In addition to the foregoing, the Company owns and leases a number of sales offices throughout the world. Management believes that all its property, plant and equipment is in good operating condition. The Company is constantly upgrading its equipment and adding capacity through greater use of automation. The Company's capital expenditures for plant and equipment were $93.9 million for fiscal 1997 and $110.5 million in fiscal 1996. Item 3. Legal Proceedings The Company is a party to various legal proceedings and administrative actions, all of which are of an ordinary or routine nature incidental to the operations of the Company. Although it is difficult to predict the outcome of any legal proceeding, in the opinion of the Company's management, such procedures and actions should not, individually or in the aggregate, have a material adverse effect on the Company's financial condition or results of operations. Item 4. Submission of Matters to a Vote of Securities Holders During the fourth quarter of the fiscal year covered by this report, no matter was submitted to a vote of security holders of the Company. PART II Item 5. Market for the Registrant's Securities and Related Stockholder Matters Market for Common Stock The Company's Common Stock is listed on the New York Stock Exchange and trades under the symbol AVX. The following presents the high and low sale prices for the Company's Common Stock for each quarter since the IPO in August 1995 as reported on the New York Stock Exchange Composite Tape.
1997 1996 High Low High Low First Quarter $ 25 1/2 $ 17 $ $ Second Quarter 23 16 38 29 3/4 Third Quarter 24 1/8 18 1/4 34 1/4 21 1/8 Fourth Quarter 25 1/4 19 3/4 27 1/2 20 7/8
Holders of Record At May 23, 1997, there were approximately 22,500 holders of record of the Company's common stock. Dividends The Company has declared and paid cash dividends of $.06 per share of common stock for the quarter ended March 31, 1997. The Company declared and paid cash dividends for the quarters ended December 31, 1996, September 30, 1996, June 30, 1996 and March 31, 1996 of $.055 per share of common stock. The Company declared and paid cash dividends for the quarters ended September 30, 1995 and December 31, 1995 of $.05 per share of common stock. The Company declared and paid cash dividends in the fiscal year ended March 31, 1995 and the quarter ended June 30, 1995 equal to approximately 35% of its net income. Future dividends, if any, will depend on the Company's profitability and anticipated operating requirements. 8 Item 6. Selected Financial Data The following table sets forth selected financial data for the Company for the five years ended March 31, 1997. The financial data set forth below should be read in conjunction with the Company's Financial Statements and the Notes thereto included elsewhere in this Form 10-K.
Year ended March 31, (dollars in thousands, except share data) 1997 1996 1995 1994 1993 Income Statement Data: Net sales $1,126,178 $1,207,761 $ 988,893 $ 795,515 $ 718,235 Cost of sales 851,863 886,494 777,687 639,058 569,583 --------- --------- ------- ------- ------- Gross profit 274,315 321,267 211,206 156,457 148,652 Selling, general and administrative expenses 102,369 116,586 101,013 100,875 99,862 --------- --------- ------- ------- ------- Profit from operations 171,946 204,681 110,193 55,582 48,790 Interest income 7,536 5,096 2,018 749 510 Interest expense (2,049) (2,352) (2,229) (2,792) (3,474) Other, net 1,010 1,655 1,218 1,439 3,282 --------- --------- ------- ------- ------- Income before income taxes, extraordinary item and cumulative effect of accounting change for income taxes 178,443 209,080 111,200 54,978 49,108 Provision for income taxes 57,102 71,344 36,329 19,817 20,221 -------- ------- ------- ------ ------ Income before extra- ordinary item and cumulative effect of accounting change for income taxes 121,341 137,736 74,871 35,161 28,887 Extraordinary item- utilization of foreign tax loss carryforwards 2,536 Cumulative effect of accounting change for income taxes 5,000 --------- ------- ------- ------- ------- Net income $ 121,341 $ 137,736 $ 74,871 $ 40,161 $ 31,423 ========== ========== ========== ========= ========= Income per share: Before extraordinary item and cumulative effect of accounting change for income taxes $ 1.38 $ 1.58 $ .87 $ .41 $ .34 Extraordinary item .03 Cumulative effect of accounting change for income taxes .06 ------- ------- ------- ------ ------- Net income $ 1.38 $ 1.58 $ .87 $ .47 $ .37 ======= ======= ======= ====== ======= Average common shares outstanding 88,000,000 87,175,000 85,800,000 85,800,000 85,800,000 Cash dividends per common share $ .22 $ .22 $ .31 $ .17 $ .13
As of March 31, 1997 1996 1995 1994 1993 Balance Sheet Data: Working capital $ 456,672 $ 357,930 $ 224,999 $ 189,528 $ 177,555 Total assets 949,307 867,516 670,697 573,966 550,487 Long-term debt 12,170 8,507 9,544 10,427 15,529 Stockholders' equity 731,969 624,000 456,266 400,834 378,502
9 Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition General The Company's 1997 net sales decreased 6.8% compared to 1996 while the previous three years increased 22.1%, 24.3% and 10.8%, respectively. The growth in sales from 1994 to 1997 is primarily the result of the Company increasing its production capacity and the expansion of the electronic components industry. This expansion has been due primarily to the growth of computer, telecommunications and automotive manufacturers' usage of passive electronic components. During the first half of fiscal 1997, the industry experienced a temporary slowdown and customers reduced their level of inventory . With the exception of this industry-wide order pattern correction, the growth in sales, in units and dollars, coupled with operating efficiencies and control of selling, general and administrative expenses, have contributed to the enhanced profitability of the Company over the past three years. In order to lower the costs of production, the Company continues to increase automation of its manufacturing processes and transfer certain labor intensive manufacturing processes from countries with high labor costs to lower labor cost areas (such as the Czech Republic, El Salvador, and Mexico). During the fourth quarter of fiscal 1997, the Company experienced a more traditional pricing environment as customers' inventories returned to normal levels. Increased orders resulted in the Company's manufacturing capacity being more fully utilized. The following table sets forth the percentage relationships to net sales of certain income statement items for the periods presented
Year Ended March 31, 1997 1996 1995 Net sales 100.0% 100.0% 100.0% Cost of sales 75.6 73.4 78.6 Gross profit 24.4 26.6 21.4 Selling, general and administrative expenses 9.1 9.6 10.3 Profit from operations 15.3 17.0 11.1 Income before income taxes 15.8 17.3 11.2 Provision for income taxes 5.0 5.9 3.6 Net income 10.8 11.4 7.6 Results of Operations Year Ended March 31, 1997 Compared to Year Ended March 31, 1996 Net sales for the year ended March 31, 1997 decreased 6.8% to $1,126.2 million from $1,207.7 million for the year ended March 31, 1996. The decrease was attributable to a combination of factors including, (a) the residual effect of the softened order and delivery demand experienced by the electronic component industry throughout the latter portion of calendar 1995 and the first half of calendar 1996 (as customers reduced their level of inventory and suppliers reduced lead times), (b) a continuation of the trend toward surface-mount products and smaller part sizes, which traditionally have lower average selling prices, (c) an overall reduction in selling prices, and (d) the strengthening of the U.S. dollar and certain European currencies, which had a modest dampening effect on reported U.S. dollar sales. Gross profit as a percentage of net sales for the year ended March 31, 1997 decreased 2.2% to $274.3 million (24.4% of net sales) from $321.3 million (26.6% of net sales) in the year ended March 31, 1996. Due in part to the industry wide inventory correction discussed above, overall sales prices in the 1997 year were lower compared to the 1996 year. Continued automation of the manufacturing processes and higher volumes of through-put in the factories have resulted in lower manufacturing costs for products sold and have enabled the Company to maintain strong gross profit levels despite the decline in sales. As a result of the Company's strategy to manufacture in the various regions in which it sells products, the strengthening of the U.S. dollar and certain European currencies acted to reduce the overall cost of manufacturing when reported in U.S. dollars. Cost of sales in fiscal 1996 include approximately $3.5 million of costs associated with the closure of a plant in the United States. 10 Selling, general and administrative expenses in the year ended March 31, 1997 were $102.4 million (9.1% of net sales), compared with $116.6 million (9.6% of net sales) in the year ended March 31, 1996. The decrease in selling, general, and administrative expenses is due to (a) cost containment programs, (b) lower sales commissions, (c) the benefit of adjustments to environmental remediation accruals, and (d) charges related to the closing of the Company's previous headquarters recorded in 1996. Research, development and engineering expenditures, which encompass the personnel and related expenses devoted to developing new products, processes and technical innovations, were $34 million and $30 million in fiscal 1997 and 1996, respectively. As a result of the above factors, profit from operations as a percentage of net sales in the year ended March 31, 1997 decreased 1.7% to $171.9 million from $204.7 million in the year ended March 31, 1996. The effective tax rate in the year ended March 31, 1997 was 32.0%, compared to 34.1% in the year ended March 31, 1996. The decrease in the 1997 year primarily results from the benefit of lower tax rates on foreign earnings and the realization of certain foreign net operating losses. For the reasons set forth above, net income in the year ended March 31, 1997 decreased 11.9% to $121.3 million (10.8% of net sales) from $137.7 million (11.4% of net sales) in the year ended March 31, 1996. Year Ended March 31, 1996 Compared to Year Ended March 31, 1995 Net sales for the year ended March 31, 1996 increased 22.1% to $1,207.7 million from $988.9 million for the year ended March 31, 1995. The increase was primarily attributable to the growth in the ceramic and tantalum products, particularly surface-mount capacitors, and special products. Gross profit for the year ended March 31, 1996 increased 52.1% to $321.3 million (26.6% of net sales) from $211.2 million (21.4% of net sales) in the year ended March 31, 1995. As a result of increased worldwide demand for ceramic and tantalum capacitors, overall sales prices in the 1996 year were more stable compared to the 1995 year. Continued automation of the manufacturing processes and higher volumes of through-put in the factories have resulted in lower manufacturing costs for products sold. Lower production costs were achieved despite an increase in palladium prices. The cost of palladium, which is used in the manufacture of ceramic capacitors, increased approximately 6.0% in the 1996 year compared to the 1995 year. This increased cost of sales by approximately $2.7 million. Cost of sales in fiscal 1996 include approximately $3.5 million of costs associated with the closure of a plant in the United States which manufactured connector products and the relocation of the production to the Company's existing facilities in Europe. Cost of sales in fiscal 1995 included approximately $2.5 million of costs associated with the closure of the Company's ceramic production facility in Rouen, France, and relocation of the related production to Northern Ireland. Selling, general and administrative expenses in the year ended March 31, 1996 were $116.6 million (9.6% of net sales), compared with $101.0 million (10.3% of net sales) in the year ended March 31, 1995. The increase in expenses resulted primarily from higher research and development spending, adjustments to environmental remediation accruals based on revised estimates, charges related to the Company's previous headquarters and additional sales commissions due to increased sales volume. Research, development and engineering expenditures were $30 million and $25 million in fiscal 1996 and 1995, respectively. As a result of the above factors, profit from operations in the year ended March 31, 1996 increased 85.7% to $204.7 million from $110.2 million in the year ended March 31, 1995. 11 The effective tax rate in the year ended March 31, 1996 was 34.1%, compared to 32.7% in the year ended March 31, 1995. The increase in the 1996 year primarily results from higher foreign income taxes. For the reasons set forth above, net income in the year ended March 31, 1996 increased 84.0% to $137.7 million (11.4% of net sales) from $74.9 million (7.6% of net sales) in the year ended March 31, 1995. Financial Condition Liquidity and Capital Resources The Company's liquidity needs arise primarily from working capital requirements, dividends and capital expenditures. Historically, the Company has satisfied its liquidity requirements through internally generated funds. As of March 31, 1997, the Company had a current ratio of 3.5 to 1, $188.6 million of cash and cash equivalents, $731.9 million of stockholders' equity and an insignificant amount of long-term debt. Net cash from operating activities was $167.9 million in the year ended March 31, 1997, compared to $155.7 million in the year ended March 31, 1996 and $126.2 million in the year ended March 31, 1995. The Company's control over the growth of working capital contributed to the increase. Purchases of property and equipment were $93.9 million in fiscal 1997, $110.5 million in fiscal 1996, and $77.3 million in fiscal 1995. Expenditures for fiscal 1995 included approximately $8.1 million for the purchase of property and construction of the new research laboratory adjacent to the Myrtle Beach production facility and corporate headquarters. The remaining expenditures for fiscal 1995 and virtually all expenditures for fiscal 1997 and 1996 were for expanding the production capabilities of the ceramic and tantalum surface-mount and advanced product lines. The Company's carrying value of its equipment reflects the fact that depreciation expense for machinery and equipment is generally computed using the accelerated double-declining balance method. The Company expects to construct facilities and purchase equipment totaling approximately $110 to $130 million to increase production capacity in fiscal 1998. Although the majority of the Company's funding is internally generated, certain European subsidiaries of the Company borrowed deutschmarks under various bank agreements. These borrowings were used for working capital requirements and to repay an intercompany loan with AVX in the United States and other outstanding obligations. In fiscal 1997, 1996 and 1995, dividends of $19.4 million, $19.4 million and $26.2 million, respectively, were paid to stockholders. In August 1995, the Company completed an initial public offering of 2,200,000 shares of common stock at a price of $25.50 per share resulting in proceeds (net of underwriting commissions and offering costs) of $52.9 million. The proceeds were used for general corporate purposes, including capital expenditures and working capital. The Company has established reserves in the three years ended March 31, 1997 for its projected share of costs associated with the remediation of, and compliance with, environmental matters at various sites. Adjustments to such provisions and related expenditures have not been material in any of these periods. Based on the financial condition of the Company as of March 31, 1997, the Company believes that cash expected to be generated from operating activities will be sufficient to satisfy the Company's anticipated financing needs for working capital, capital expenditures, environmental clean-up costs, research and development expenses and any dividends to be paid for the foreseeable future. Foreign Currency The Company's European sales generally are denominated in local currencies whereas those in North America and Asia generally are denominated in U.S. dollars. Approximately one quarter of the Company's revenues are generated in Europe. Also, certain manufacturing and operating costs denominated in local currencies are incurred in Europe, Asia, Mexico and Latin America. As a result, fluctuations in currency exchange rates affect the Company's results and cash flow. In order to minimize the effect of movements in currency exchange rates, the Company periodically enters into forward exchange contracts to hedge existing and anticipated external and intercompany foreign currency transactions. Currency exchange gains and losses have been immaterial during the three years ended March 31, 1997. The Company also enters into forward delivery contracts for certain precious metals used in its production processes. The Company does not hold or issue derivative financial instruments for speculative purposes. 12 New Accounting Standards Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", allows companies to record compensation cost for stock-based compensation plans at fair value or provide pro forma disclosures. The Company has chosen to continue to account for stock-based compensation using the method whereby compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of grant over the amount an employee must pay to acquire the stock. The Company has adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". The adoption did not materially affect the Company's financial condition or results of operations. In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128("SFAS 128"). The new standard replaces primary and fully diluted earnings per share with basic and diluted earnings per share. SFAS 128 is required to be adopted by the Company for periods ending after December 15, 1997. Had the Company been required to adopt SFAS 128 earlier, the adoption would not have impacted diluted or primary earnings per share. Cautionary Statement Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 This report may contain "forward-looking" information within the meaning of the federal securities laws. The forward-looking information may include, among other information, statements concerning the Company's outlook for fiscal 1998, overall volume and pricing trends, cost reduction strategies and their anticipated results, and expectations for research and capital expenditures. There may also be other statements of exceptions, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. The forward-looking information and statements in this report are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the information or statements. Item 8. Financial Statements and Supplementary Data The following Consolidated Financial Statements of the Company and its subsidiaries, together with the report of independent auditors thereon, are presented under Item 14 of this report: Consolidated Balance Sheets, March 31, 1997 and 1996 F-15 Consolidated Statements of Income, Years Ended March 31, 1997, 1996 and 1995 F-16 Consolidated Statements of Stockholders' Equity, Years Ended March 31, 1997,1996 and 1995 F-17 Consolidated Statements of Cash Flows, Years Ended March 31, 1997, 1996 and 1995 F-18 Notes to Consolidated Financial Statements F-19 Report of Independent Accountants F-30 All financial schedules are omitted because of the abscence of the conditions under which they are required or because the information required is shown in the financial statements or notes thereto. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Information with respect to Items 10, 11, 12 and 13 on Form 10-K is set forth in the Company's definitive proxy statement filed with the Commission in June 1997. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) Financial Statements and Financial Statement Schedules - See Index to Consolidated Financial Statements at Item 8 of this report. (b) Reports on Form 8-K None. (c) Exhibits: 13 Documents Incorporated by Reference from Form S-1 Registration Statement No. 33-94310 filed in August, 1995: 3.1 Restated Certificate of Incorporation of the Company 3.2 By-laws of the Company 10.1 1995 Stock Option Plan 10.2 Non-Employee Directors Stock Option Plan 10.3 Form of Employment Agreement between AVX Corporation and Benedict P. Rosen 10.4 Products Supply and Distribution Agreement by and between Kyocera Corporation and AVX Corporation 10.5 Disclosure and Option to License Agreement by and between Kyocera Corporation and AVX Corporation 10.6 Management Incentive Plan 10.7 Deferred Compensation Plan Documents Submitted Herewith: 10.8 Directors Deferred Compensation Plan 21.1 Subsidiaries of the Registrant 23.1 Consent of Coopers & Lybrand L.L.P. 24.1 Power of Attorney SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AVX Corporation by: /s/ Donald B. Christiansen ---------------------- DONALD B. CHRISTIANSEN Dated: June 9, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Kazuo Inamori Chairman of the Board and Director Benedict P. Rosen President and Chief Executive Officer and Director John S. Gilbertson Executive Vice President and Chief Operating Officer and Corporate Secretary and Director Donald B. Christiansen Vice President of Finance, Chief Financial Officer and Treasurer and Director Marshall D. Butler Director Carroll A. Campbell Director Richard Tressler Director Kensuke Itoh Director Rodney N. Lanthorne Director Masato Takeda Director Masahiro Umemura Director Masahiro Yamamoto Director Yuzo Yamamura Director By: /s/ Donald B. Christiansen ----------------------- DONALD B. CHRISTIANSEN, Attorney-in-Fact June 9, 1997 14
EX-13 2 AVX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands, except share data)
March 31, 1997 1996 Current assets: Cash and cash equivalents $ 188,574 $ 131,601 Accounts receivable, net 155,358 139,545 Inventories 247,895 243,155 Deferred income taxes 21,145 30,853 Other receivables - affiliate 3,131 2,429 Prepaid and other 22,365 13,562 ------- ------- Total current assets 638,468 561,145 Property and equipment: Land 10,028 9,370 Buildings and improvements 113,614 109,574 Machinery and equipment 588,880 506,004 Construction in progress 34,040 46,030 ------- ------- 746,562 670,978 Accumulated depreciation (474,970) (404,432) --------- --------- 271,592 266,546 Goodwill, net 34,913 36,067 Other assets 4,334 3,758 --------- --------- TOTAL ASSETS $ 949,307 $ 867,516 ========= ========= Current liabilities: Short-term bank debt $ 12,216 $ 19,398 Current maturities of long-term debt 1,362 1,398 Accounts payable: Trade 39,399 31,755 Affiliates 38,621 33,040 Income taxes payable 25,405 35,546 Accrued payroll and benefits 34,328 40,481 Accrued expenses 30,465 41,597 -------- -------- Total current liabilities 181,796 203,215 Long-term debt 12,170 8,507 Deferred income taxes 12,190 22,818 Other liabilities 11,182 8,976 ------- ------- TOTAL LIABILITIES 217,338 243,516 Commitments and Contingencies (Notes 8 and 11) Stockholders' Equity: Preferred stock, par value $.01 per share: Authorized, 20,000,000 shares; None issued or outstanding Common stock, par value $.01 per share: 880 880 Authorized, 300,000,000 shares; issued and outstanding, 88,000,000 shares Additional paid-in capital 319,909 319,909 Retained earnings 408,904 306,923 Foreign currency translation adjustment 2,276 (3,712) ------- -------- TOTAL STOCKHOLDERS' EQUITY 731,969 624,000 ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $949,307 $867,516 ======= =======
See accompanying notes to consolidated financial statements. F-15 AVX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except share data)
Years Ended March 31, 1997 1996 1995 Net sales $1,126,178 $1,207,761 $988,893 Cost of sales 851,863 886,494 777,687 --------- --------- ------- Gross profit 274,315 321,267 211,206 Selling, general and administrative expenses 102,369 116,586 101,013 ------- ------- ------- Profit from operations 171,946 204,681 110,193 Other income (expense): Interest income 7,536 5,096 2,018 Interest expense (2,049) (2,352) (2,229) Other, net 1,010 1,655 1,218 ------- ------- ------- Income before income taxes 178,443 209,080 111,200 Provision for income taxes 57,102 71,344 36,329 Net income $ 121,341 $ 137,736 $ 74,871 Income per share $ 1.38 $ 1.58 $ .87 Weighted average shares outstanding 88,000,000 87,175,000 85,800,000
See accompanying notes to consolidated financial statements. F-16 AVX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (dollars in thousands)
Common Stock Foreign Additional Currency Number Paid-In Retained Translation of Shares Amount Capital Earnings Adjustment Total Balance, March 31, 1994 85,800,000 $858 $267,043 $140,010 $(7,077) $400,834 Net income 74,871 74,871 Dividends (26,250) (26,250) Current year's adjustment 6,811 6,811 ---------- ---- ------- ------- ------- -------- Balance, March 31,1995 85,800,000 858 267,043 188,631 (266) 456,266 Issuance of common stock 2,200,000 22 52,866 52,888 Net income 137,736 137,736 Dividends (19,444) (19,444) Current year's adjustment (3,446) (3,446) ---------- --- ------- ------- ------ ------- Balance, March 31, 1996 88,000,000 880 319,909 306,923 (3,712) 624,000 Net income 121,341 121,341 Dividends (19,360) (19,360) Current year's adjustment 5,988 5,988 ---------- ---- -------- -------- ------ -------- Balance, March 31, 1997 88,000,000 $880 $319,909 $408,904 $2,276 $731,969 ========== ==== ======== ======= ===== =======
See accompanying notes to consolidated financial statements. F-17 AVX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
Years Ended March 31, 1997 1996 1995 Operating Activities: Net income $121,341 $137,736 $74,871 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 82,242 69,910 60,608 Deferred income taxes (911) (15,680) (6,023) Changes in operating assets and liabilities: Accounts receivable (9,745) (26,564) (13,579) Inventories (2,912) (44,862) (36,957) Accounts payable and accrued expenses (5,730) 12,416 28,471 Income taxes payable (11,093) 20,351 13,425 Other assets and liabilities (5,266) 2,380 5,342 ------- ------- ------- Net cash from operating activities 167,926 155,687 126,158 Investing Activities: Purchases of property and equipment (93,954) (110,487) (77,308) Proceeds from sale of operations to affiliate 3,973 Other 2,347 (79) 680 ------- -------- ------- Net cash used in investing activities (91,607) (106,593) (76,628) Financing Activities: Repayment of debt (10,043) (3,308) (10,736) Dividends paid (19,360) (19,444) (26,250) Proceeds from issuance of debt 9,738 8,696 4,167 Proceeds from issuance of common stock 52,888 ------- ------ ------- Net cash from (used in) financing activities (19,665) 38,832 (32,819) Effect of exchange rate changes on cash 319 (138) 244 ------- -------- ------- Increase (decrease) in cash and cash equivalents 56,973 87,788 16,955 Cash and cash equivalents at beginning of year 131,601 43,813 26,858 -------- -------- ------- Cash and cash equivalents at end of year $188,574 $131,601 $43,813 ======== ======== =======
See accompanying notes to consolidated financial statements. F-18 AVX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except share data) 1. Summary of Significant Accounting Policies: General: AVX Corporation is a leading worldwide manufacturer and supplier of a broad line of passive electronic components and related products. Components sold by the Company are used in virtually all types of electronic products for industries such as telecommunications, computers, automotive, medical and consumer electronics. The consolidated financial statements of AVX Corporation and subsidiaries (the "Company" or "AVX") include the accounts of the Company and its subsidiaries. All significant intercompany transactions and accounts have been eliminated. Public Offering: From January 1990 through August 15, 1995, the Company was wholly-owned by Kyocera Corporation ("Kyocera"). On August 15, 1995, Kyocera sold 22.9%, or 19,650,000 of the Company's common shares, and the Company sold an additional 2,200,000 common shares, in a public offering. As a result, Kyocera currently owns 75.2% of the Company's common shares. Cash Equivalents: The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Inventories: Inventories are valued at the lower of cost (first-in, first-out method) or market. Inventory costs include material, labor and manufacturing overhead. Property and Equipment: Property and equipment are recorded at cost. Machinery and equipment is depreciated on the double-declining balance method for assets placed in service after April 1, 1991, and the straight-line method for assets placed in service before that date. Buildings are depreciated on the straight-line method. The estimated useful lives used for computing depreciation are as follows: buildings and improvements--10 to 31.5 years, and machinery and equipment--3 to 10 years. Depreciation expense was $80,120, $67,508 and $58,476 for the years ended March 31, 1997, 1996, and 1995, respectively. The cost of maintenance and repairs is charged to expense as incurred. Upon disposal or retirement, the cost and accumulated depreciation of assets are eliminated from the respective accounts. Any gain or loss is reflected in income. F-19 Goodwill: Assets and liabilities related to business combinations accounted for as purchase transactions were recorded at their respective fair values on the dates of acquisition. Any excess of purchase price over such fair value ("Goodwill") is amortized on a straight-line basis over periods ranging from 20 to 40 years. The accumulated amortization as of March 31, 1997 and 1996 was $17,289 and $14,409, respectively. The carrying value of Goodwill is evaluated quarterly in relation to the operating performance and estimated future undiscounted cash flows of the related operating unit. Adjustments are made if the sum of expected future net cash flows is less than carrying value. Income Taxes: The Company does not provide for U.S. taxes on the undistributed earnings of foreign subsidiaries which are considered to be reinvested indefinitely. As of March 31, 1997, the amount of U.S. taxes on such undistributed earnings would have been approximately $27,000. Foreign Currency Activity: Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at the exchange rate in effect at the balance sheet date. Operating accounts are translated at an average rate of exchange for the respective accounting periods. Translation adjustments result from the process of translating foreign currency financial statements into U.S. dollars and are reported separately as a component of stockholders' equity. The Company enters into foreign currency exchange contracts and options to manage exposure to currency rate fluctuations on anticipated sales, purchases and intercompany transactions. These exchange agreements generally qualify for accounting as designated hedges. The realized and unrealized gains and losses on these contracts are deferred and included as a component of the related transaction. Any contracts that do not qualify as hedges for accounting purposes are marked to market with the resulting gains and losses recognized in other income or expense. Revenue Recognition: Sales are recorded upon shipment of related goods to customers. Certain sales to distributors are under terms which allow for the affected distributors to receive price protection from the Company for actual sales at prices below anticipated sales prices. A portion of sales is made to distributors under agreements allowing limited rights of return. The Company provides an allowance for distributor adjustments based on historical experience. Grants: The Company's manufacturing and research facilities in the Republic of Ireland and Israel have received capital, employment and research grants from various governmental agencies. Employment and research grants, which are recognized in earnings in the period in which the related expenditures are incurred, were $750 for the year ended March 31, 1997 and were immaterial for the years ended March 31, 1996 and 1995. Capital grants for the acquisition of equipment are recorded as reductions of the related equipment cost and reduce future depreciation expense. Use of Estimates: Use of estimates and assumptions as determined by management is required in the preparation of consolidated financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates and assumptions. F-20 Research, Development and Engineering: Research and development expenditures are expensed when incurred. Research, development and engineering expenses totaled approximately $34,000, $30,000, and $25,000 for the years ended March 31, 1997, 1996, and 1995, respectively, while research and development expenses included in these amounts totaled $18,500, $16,000 and $10,000 for the years ended March 31, 1997, 1996 and 1995, respectively. Stock-Based Compensation: Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", allows companies to record compensation cost for stock-based compensation plans at fair value or provide pro forma disclosures. The Company has chosen to continue to account for stock-based compensation using the method whereby compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of grant over the amount an employee must pay to acquire the stock. Reclassifications: Certain prior year amounts have been reclassified to conform to the 1997 presentation. New Accounting Standards: The Company has adopted the Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", which is effective for fiscal years beginning after December 15, 1995. The adoption did not materially affect the Company's financial condition or results of operations. In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128("SFAS 128"). The new standard replaces primary and fully diluted earnings per share with basic and diluted earnings per share. SFAS 128 is required to be adopted by the Company for periods ending after December 15, 1997. Had the Company been required to adopt SFAS 128 for the periods presented, the adoption would not have impacted diluted or primary earnings per share. 2. Accounts Receivable: Accounts receivable at March 31 consisted of: 1997 1996 Trade $173,414 $159,798 Less, allowance for doubtful accounts, sales returns, distributor adjustments and discounts (18,056) (20,253) -------- -------- $155,358 $139,545 Charges to expense related to such allowances were approximately $58,543, $53,117 and $42,055, and applications to such allowances were approximately $60,991, $50,078 and $37,915 for the years ended March 31, 1997, 1996 and 1995, respectively. F-20 3. Inventories: Inventories at March 31 consisted of: 1997 1996 Finished goods $83,711 $75,235 Work in process 89,146 77,256 Raw materials and supplies 75,038 90,664 ------- ------ $247,895 $243,155 4. Debt: Long-term debt at March 31 consisted of: 1997 1996 Deutschmark loans at 3.37% to 6.25% due through 2000 $13,532 $6,182 Other - 3,723 ------- ------- 13,532 9,905 Less--current maturities (1,362) (1,398) ------- ------- $12,170 $8,507 The aggregate annual maturities of long-term debt are as follows: 1998 $ 1,362 1999 3,139 2000 9,031 ------- $13,532 Long-term debt includes a 15 million deutchmark loan which has a variable rate of interest based on a market rate plus .25%. At March 31, 1997, this loan had a rate of 3.37%. The remaining loans carry a fixed rate of 6.25% Short-term bank debt at March 31, 1997 consists primarily of borrowings incurred by the Company's European subsidiaries under two DM 10.0 million working capital bank facilities and a DM 1.5 million short-term bank facility bearing interest at market rates (between 4.05% and 4.45% at March 31, 1997) which extend through December 1997. Interest paid totaled $1,639, $2,452 and $1,881 during the years ended March 31, 1997, 1996, and 1995, respectively. F-21 5. Income Taxes: For financial reporting purposes, after adjustments for certain corporate items, income before income taxes includes the following components: Years Ended March 31, 1997 1996 1995 Domestic $102,717 $114,011 $ 57,197 Foreign 75,726 95,069 54,003 -------- -------- -------- $178,443 $209,080 $111,200 The provision (benefit) for income taxes consisted of: Years Ended March 31, 1997 1996 1995 Current: Federal/State $38,186 $55,480 $ 29,754 Foreign 20,084 31,544 12,598 ------ ------- -------- 58,270 87,024 42,352 Deferred: ------ ------ ------ Federal/State 4,031 (15,680) (10,006) Foreign (5,199) 3,983 ------ ------ ------ (1,168) (15,680) (6,023) ----- ------ ------ $57,102 $71,344 $ 36,329 ====== ======= ======= Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:
March 31, 1997 1996 Current: Assets Liabilities Assets Liabilities Sales and receivable reserves $5,317 $ -- $ 6,625 $ -- Inventory reserves 4,989 -- 8,073 -- Accrued expenses 10,839 -- 16,155 -- ------ ------- ------ ----- $21,145 $ -- $30,853 $ --
March 31, 1997 1996 Non-Current: Assets Liabilities Assets Liabilities Property and equipment depreciation $ 471 $6,147 $ 797 $12,879 Accrued expenses 1,100 1,251 709 1,252 Other 10,674 14,591 Foreign income tax loss carryforwards 7,246 8,792 ----- ------ ----- ------ 8,817 18,072 10,298 28,722 Valuation allowance (2,935) (4,394) ------- ------ ------ ------ $ 5,882 $18,072 $ 5,904 $28,722 ======= ======= ======= =======
F-22 A reconciliation between the U.S. Federal statutory income tax rate and the Company's effective rate for income tax is as follows: Years Ended March 31, 1997 1996 1995 U.S. Federal statutory rate 35.0% 35.0% 35.0% Increase (decrease) in tax rate resulting from: State income taxes, net of federal tax benefit 2.4 .9 1.8 Taxes at different tax rates on foreign earnings (2.9) (1.5)( 2.8) Change in valuation allowance (.8) (2.5) 1.9 Other, net (1.7) 2.2 (3.2) ---- ----- ----- Effective tax rate 32.0 34.1% 32.7% ===== ===== ===== At March 31, 1997, certain of the Company's foreign subsidiaries in Europe had tax net operating loss carryforwards totaling approximately $16,457, most with no expiration date. A portion of the loss carryforwards are in jurisdictions where the Company has ceased or sharply curtailed its operations, thereby limiting its ability to generate future taxable income and utilize such loss carryforwards. Accordingly, the Company's valuation allowances relate to deferred tax assets which are the result of the loss carryforwards in these jurisdictions. The valuation allowance decreased $1,459 during the year ended March 31, 1997 and $5,297 during the year ended March 31, 1996. During fiscal 1997, the Company reached resolution on all outstanding issues related to U.S. income tax returns for the years 1990 through 1994. Income taxes paid totaled $72,096, $66,500 and $29,329 during the years ended March 31, 1997, 1996 and 1995, respectively. 6. Employee Retirement Plans: Pension Plans The Company sponsors non-contributory, defined benefit pension plans covering certain employees. Pension benefits provided to U.S. employees covered under collective bargaining agreements are based on a flat benefit formula. Effective December 31, 1995, the Company froze benefit accruals under its domestic non-contributory defined benefit pension plan for a significant portion of the employees covered under collective bargaining agreements. This change resulted in the Company recognizing a curtailment gain of $500 for the year ended March 31, 1996. The Company's pension plans for European salaried employees and certain hourly employees provide for benefits based on a percentage of final pay. The Company's funding policy is to contribute the statutory required amount to appropriate trust or government funds. The following table sets forth the plans' funded status and amounts recognized in the Company's balance sheet at March 31: F-23
Assets Exceed Accumulated Accumulated Benefits Benefits Exceed Assets 1997 1996 1997 1996 Actuarial present value of benefit obligations: Vested benefits $ (49,019) $(30,295) $ (6,779) $(23,840) Non-vested benefits (295) (104) - (507) Accumulated benefit obligation (49,314) (30,399) (6,779) (24,347) Effect of projected future salary increases (10,882) (8,069) - (917) Projected benefit obligation (60,196) (38,468) (6,779) (25,264) Plan assets at fair value, primarily stocks and bonds 65,695 45,830 2,068 15,003 Projected benefit obligation (in excess of) less than plan assets 5,499 7,362 (4,711) (10,261) Unrecognized net (gain) loss (5,009) (3,765) 455 967 Prior service cost not yet recognized 631 (209) - 92 Unrecognized net transition obligation 90 (14) - 131 (Accrued) prepaid pension cost recognized in the balance sheets $ 1,211 $3,374 $ (4,256) $(9,071)
The Company's assumptions used in determining the pension assets (liabilities) shown above were as follows: Years Ended March 31, 1997 1996 Assumptions: Discount rates 6.75-7.75% 7.0% Increase in compensation 3.0 - 4.0% 3.0 - 4.0% Expected long-term rate of return on plan assets 8.0 - 9.0% 7.0 - 9.0% Net pension costs related to these pension plans, exclusive of the curtailment gain referred to above, include the following components: Years Ended March 31, 1997 1996 1995 Service cost $ 1,873 $ 2,030 $ 2,253 Interest cost 4,384 4,412 3,988 Actual loss (return) on plan assets (6,911) (10,423) 1,683 Net amortization (deferral) 2,063 6,400 (5,707) Net periodic pension cost $ 1,409 $ 2,419 $ 2,217 Savings Plans The Company maintains retirement savings plans which allow substantially all U.S. employees to defer part of their annual compensation. Certain contributions by the Company are discretionary and are determined by the Company's Board of Directors each year. The Company's contributions to the savings plans for the years ended March 31, 1997, 1996, and 1995, were approximately $5,800, $5,300, and $5,000, respectively. F-24 The Company sponsors a nonqualified deferred compensation program which permits key employees to annually elect to defer a portion of their compensation until retirement. A portion of the deferral is subject to a matching contribution by the Company. The employees select among various investment alternatives, with the investments held in a separate trust. The value of the participant's balance fluctuates based on the performance of the investments. At March 31, 1997, the market value of the trust ($1,300) is included as an asset and a liability of the Company in the accompanying balance sheets because the trust assets are available to AVX's general creditors in the event of the Company's insolvency. 7. Stock Option Plans: The Company has two fixed option plans. Under the 1995 Stock Option Plan, the Company may grant options to employees for the purchase of up to an aggregate of 1,550,000 shares of common stock. Under the Non-Employee Directors Stock Option Plan, the Company may grant options for the purchase of up to an aggregate of 100,000 shares of common stock. Under both plans, the exercise price of each option equals the market price of the Company's stock on the date of grant and an option's maximum term is 10 years. All options granted under the 1995 Stock Option Plan and the Non-Employee Directors Stock Option Plan vest as to 25% annually commencing on the first anniversary of the date of grant. A summary of the status of the stock option plans as of March 31, 1997 is as follows: Grant Options Options Exercise Remaining Date Outstanding Exercisable Price Life (Years) 8/14/95 1,110,000 277,500 $25.500 8 1/2 8/12/96 528,500 0 $18.125 9 1/2 A total of 21,500 and 17,000 options were forfeited during the years ended March 31, 1997 and 1996, respectively, and none were exercised. The calculated fair value at date of grant for each option granted during the years ended March 31, 1997 and 1996 was $6.82 and $8.96, respectively. The fair value of options at date of grant was estimated using the Black-Scholes model with the following weighted average assumptions: Year Ended March 31, 1997 1996 Expected life (years) 5 5 Interest rate 6.70% 6.25% Volatility 35% 30% Dividend yield 1.21% 0.78% If the estimated fair value of the options had been recognized as compensation expense over the vesting periods, income before income taxes would have been reduced by $3,099 ($2,523 after income taxes, or $.03 per share) and $1,787 ($1,460 after income taxes, or $.02 per share) for the years ended March 31, 1997 and 1996, respectively. 8. Commitments and Financial Instruments: Commitments At March 31, 1997 and 1996, the Company had contractual obligations for the acquisition or construction of plant and equipment aggregating approximately $24,422 and $42,600, respectively. In connection with an expansion at the Company's manufacturing facility in the Republic of Ireland, capital grants totaling $11,500 have been approved, $8,600 of which had not been received as of March 31, 1997 and are contingent upon the Company spending approximately $28,600 for plant and equipment. The Company is a lessee under long-term operating leases primarily for office space, plant and equipment. Future minimum lease commitments under non-cancelable operating leases as of March 31, 1997, were as follows: F-25 Years Ending March 31, 1998 $ 6,120 1999 5,656 2000 3,486 2001 2,685 2002 2,763 Thereafter 5,053 $25,763 Rental expense for operating leases was $6,390, $4,682, and $3,996 for the years ended March 31, 1997, 1996, and 1995, respectively. Financial Instruments At March 31, 1997, $25,000 of the Company's intercompany borrowings were denominated in foreign currencies. To reduce the exposure to foreign currency fluctuations, the Company entered into foreign currency swaps which at March 31, 1997 fix a portion of the principal balance of one intercompany loan at $21,000 over a four year period. In addition to the U.S. dollar, the Company conducts business in most European currencies and the Japanese yen. The Company's foreign currency contracts related to anticipated sales and purchases generally have maturities that do not exceed six months. The Company enters into forward delivery contracts with certain suppliers for certain precious metals used in its production processes. The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and trade accounts receivable. The Company places its cash and cash equivalents with high credit quality institutions. At times, such investments may be in excess of the Federal Deposit Insurance Corporation insurance limit. Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of entities comprising the Company's customer base and their dispersion across many different industries and countries. As of March 31, 1997, the Company believes that its credit risk exposure is not significant. The following disclosure of the estimated fair value of financial instruments has been determined by the Company, using available market information and appropriate valuation methodologies. The fair value of financial instruments classified as current assets or liabilities including cash and cash equivalents, receivables and accounts payable approximate carrying value due to the short-term maturity of the instruments. The fair value of short-term and long-term debt approximate carrying value based on their effective interest rates compared to current market rates.
March 31, 1997 March 31, 1996 Contract Carrying Unrealized Contract Carrying Unrealized Amount Amount Gain (Loss) Amount Amount Gain (Loss) Off-Balance Sheet Financial Instruments: Foreign currency contracts $81,510 $ - $ 2,887 $77,738 $ - $ 562 Foreign currency swaps 21,000 (1,166) (1,166) 30,317 681 Metal delivery contracts 6,225 - 1,225 23,440 616
F-26 9. Transactions With Affiliate: The Company's primary businesses include the design, manufacture and sale of ceramic and tantalum capacitors and electronic connectors and the sale and distribution of electronic products manufactured by Kyocera. The Company entered into transactions with Kyocera as follows:
Years Ended March 31, 1997 1996 1995 Sales: Product and equipment sales to affiliates $ 23,120 $ 9,240 $ 4,460 Subcontracting activities 2,111 2,365 2,100 Commissions received 236 252 95 Service fee income 120 400 Purchases: Purchases of resale inventories, raw materials supplies, equipment and services 234,434 234,612 214,950 Commissions paid 202 171 360 Rent paid 959 909 865 Cost Reimbursements: Subcontracting expenses 10,400 Advertising and promotional expenditures 230 Research and development 442 480 Other: Dividends 14,553 17,491 26,250 Sale of assembly operation in Indonesia 3,973
Effective April 1, 1995, the Company sold to Kyocera an assembly operation in Indonesia for $3,973, the equivalent of the Company's net carrying value of such operation. Consistent with Kyocera's arrangements with its other worldwide direct reporting subsidiaries, the Company paid cash dividends equal to approximately 35% of estimated net income during the year ended March 31, 1995 and the quarter ended June 30, 1995. Thereafter, quarterly cash dividends have been paid as approved by the Board of Directors on a per common share basis. F-27 10. Segment and Geographic Information: AVX's manufacture and sale of electronic components is considered one business segment. Information about the Company's operations in different geographic areas is as follows:
United Year Ended March 31, States Europe Asia Other Elimination Total 1997: Net sales to customers $524,990 $253,493 $345,262 $2,433 $ - $1,126,178 Net sales between geographic areas 96,952 138,260 214 40,186 (275,612) -------- -------- -------- ------ --------- --------- Total net sales 621,942 391,753 345,476 42,619 (275,612) $1,126,178 Profit from operations 107,634 28,105 29,406 6,801 $171,946 Interest income, net 5,487 Other, net 1,010 Income before income taxes $178,443 Identifiable assets 517,563 274,726 88,123 68,895 $949,307
1996: Net sales to customers $562,994 $301,509 $341,760 $1,498 $ - $1,207,761 Net sales between geographic areas 89,560 104,425 610 66,380 (260,975) -------- -------- -------- ------ --------- ---------- Total net sales 652,554 405,934 342,370 67,878 (260,975) $1,207,761 Profit from operations 98,526 52,575 43,724 9,856 $204,681 Interest income, net 2,744 Other, net 1,655 Income before income taxes $209,080 Identifiable assets 483,186 261,154 77,231 45,945 $867,516
1995: Net sales to customers $466,696 $230,153 $290,333 $1,711 $ - $988,893 Net sales between geographic areas 73,751 84,458 487 59,155 (217,851) ------- ------- ------- ------ -------- ------- Total net sales 540,447 314,611 290,820 60,866 (217,851) $988,893 Profit from operations 53,278 21,789 26,195 8,931 $110,193 Interest expense, net (211) Other, net 1,218 Income before income taxes $111,200 Identifiable assets 338,321 213,983 79,048 39,345 $670,697
The other category consists of Mexico, El Salvador and Israel operations. Sales between geographic areas are priced based on a percentage over cost which allows the selling organization to earn a reasonable profit. Operating profit is total revenue less operating expenses and allocated general corporate expenses. In computing operating profit, interest expenses, interest income, miscellaneous other non-operating income and expenses and income taxes were not deducted. F-28 11. Environmental Matters and Contingencies: The Company has been named as a potentially responsible party in state and federal administrative proceedings seeking contribution for costs associated with the correction and remediation of environmental conditions at various hazardous waste disposal sites. The Company continues to monitor these actions and proceedings and to vigorously defend its interests. The Company's ultimate liability in connection with environmental claims will depend on many factors, including its volumetric share of waste, the total cost of remediation and the financial viability of other companies that also sent waste to a given site. Once it becomes probable that the Company will incur costs in connection with remediation of a site and such costs can be reasonably estimated, the Company establishes or adjusts its reserves for its projected share of these costs. These reserves do not reflect any possible future insurance recoveries, which are not expected to be significant, but do reflect a reasonable estimate of cost sharing at multiple party sites. Based upon information known to the Company concerning the size of these sites, their years of operations and the number of past users, management believes that it has adequate reserves with respect to these matters. Such reserves for remediation, compliance and legal costs totaled $5,025 at March 31, 1997. Actual costs may vary from these estimated reserves, but such costs are not expected to have a material adverse effect on the Company's financial condition or results of operations. 12. Summary of Quarterly Financial Information (Unaudited): Quarterly financial information for the years ended March 31, 1997 and 1996 is as follows: First Quarter Second Quarter 1997 1996 1997 1996 Net sales $268,211 $304,556 $267,909 $307,637 Gross profit 73,286 78,115 65,795 82,289 Net income 32,467 30,408 28,153 36,435 Per share .37 .35 .32 .42 Third Quarter Fourth Quarter 1997 1996 1997 1996 Net sales $289,574 $302,716 $300,484 $292,852 Gross profit 64,633 79,828 70,601 81,035 Net income 30,051 34,198 30,670 36,695 Per share .34 .39 .35 .42 F-29 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of AVX Corporation We have audited the accompanying consolidated balance sheets of AVX Corporation and Subsidiaries as of March 31, 1997 and 1996, and the related consolidated statements of income, cash flows and stockholders' equity for each of the three years in the period ended March 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AVX Corporation and Subsidiaries as of March 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended March 31, 1997, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Atlanta, Georgia May 13, 1997 F-30 EX-21.1 3 AVX Corporation Subsidiaries Exhibit 21.1 As of June 5, 1997 , active subsidiaries, all 100% owned directly or indirectly, consist of the following. Country or State of incorporation AVX CORPORATION Myrtle Beach, SC, USA AVX TANTALUM CORPORATION Maine AVX FILTERS CORPORATION California AVX VANCOUVER CORPORATION Washington ELCO USA, INC. Delaware AVX ISRAEL LTD. Israel AVX DEVELOPMENT Delaware AVX LIMITED United Kingdom AVX GmbH Republicof Germany AVX ELECTRONISCH BAUELEMENTE GmbH Republic of Germany AVX SRL Italy AVX SA France AVX CZECH REPUBLIC sro Czech Republic ELCO EUROPE LTD. United Kingdom ELCO EUROPE GmbH Republic of Germany ELCO EUROPE APS Denmark ELCO EUROPE SARL France AVX/KYOCERA ASIA LTD. Hong Kong AVX/KYOCERA HONG KONG LTD. Hong Kong AVX/KYOCERA (S) PTE LTD. Singapore AVX INDUSTRIES PTE LTD. Singapore AVX/KYOCERA (MALAYSIA) SDM BHD Malaysia AVX/KYOCERA (SINGAPORE) PTE LTD. Singapore AVIO EXITO de Chihuahua, S.A. de C.V. United Mexican States AVIO EXCELENTE, S.A. de C.V. " AVIO EXCELENTE de Chihuahua, S.A. de C.V. " AVX S.A. (El Salvador) " EX-23.1 4 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of AVX Corporation on Form S-8 (File Nos. 33-97628, 33-98114, 33-98094, 33-99574, 333-00890 and 333-02808) of our report dated May 13, 1997, on our audits of the consolidated financial statements of AVX Corporation as of March 31, 1997 and 1996, and for the years ended March 31, 1997, 1996, and 1995, which report is included in this Annual Report on Form 10-K. /s/ COOPERS & LYBRAND L.L.P. Atlanta, Georgia June 6, 1997 EX-24.1 5 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned directors and officers of AVX Corporation, a Delaware corporation, which will file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Law, an Annual Report for fiscal year ended March 31, 1997 on Form 10-K, hereby constitutes and appoints Benedict P. Rosen, John S. Gilbertson and Donald B. Christiansen his true and lawful attorneys-in-fact and agents, and each of them with full power to act without the others, for him and in his name, place and stead, in any and all capacities, to sign said 10-K Annual Report and any and all amendments thereto, and any and all other documents in connection therewith, with the Securities and Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power-of Attorney on the date set opposite his respective name. Signature Title Date /s/Kazuo Inamori Chairman of the Board of Directors April 25, 1997 - --------------- Kazuo Inamori /s/Yuzo Yamamura Director April 25, 1997 - --------------- Yuzo Yamamura /s/Kensuke Itoh Director April 25, 1997 - --------------- Kensuke Itoh /s/Masato Takeda Director April 25, 1997 - ---------------- Masato Takeda /s/Masahiro Umemura Director April 25, 1997 - ------------------- Masahiro Umemura /s/Masahiro Yamamoto Director April 25, 1997 - ------------------- Masahiro Yamamoto /s/Benedict P. Rosen President, Chief Executive Officer April 25, 1997 - -------------------- and Director Benedict P. Rosen /s/John S. Gilbertson Executive Vice President, Chief April 25, 1997 - --------------------- Operating Officer and Director John S. Gilbertson /s/Donald B. Christiansen Chief Financial Officer, Vicec April 25, 1997 - ------------------------- President, Treasurer and Director Donald B. Christiansen /s/Carroll A. Campbell, Jr. Director April 25, 1997 - --------------------------- Carroll A. Campbell, Jr. /s/Marshall D. Butler Director April 25, 1997 - --------------------- Marshall D. Butler /s/Rodney N. Lanthorne Director April 25, 1997 - ---------------------- Rodney N. Lanthorne /s/Richard Tressler Director April 25, 1997 - ------------------- Richard Tressler EX-27 6
5 0000859163 AVX CORPORATION 1000 12-MOS MAR-31-1997 MAR-31-1997 188574 0 173414 18056 247895 638468 746562 474970 949307 181796 0 0 0 880 731089 949307 1126178 1126178 851863 954232 101359 0 (5487) 178443 57102 121341 0 0 0 121341 1.38 1.38
EX-10.8 7 Exhibit 10.8 AVX CORPORATION DEFERRED COMPENSATION PLAN FOR ELIGIBLE BOARD MEMBERS EFFECTIVE AS OF JANUARY 1, 1997 1. Purpose. The purpose of the Plan is to provide Eligible Board Members of AVX Corporation with an opportunity to defer payment of certain portions of their compensation, at their election, in accordance with the provisions hereof. 2. Definitions. As used herein, the following terms shall have the following meanings: "Account" shall mean the Account established for a Participant pursuant to Section 4. "Beneficiary" shall mean the person or persons designated by a Participant in accordance with Section 7 to receive any amount, or any common stock, payable under the Plan by reason of the Eligible Board Member's death. "Board of Directors" shall mean the Board of Directors of the Corporation. "Committee" shall mean the persons appointed the Board of Directors to administer the Plan in accordance with Section 10. "Common Stock" shall mean the common stock which the Corporation is currently authorized to issue or may in the future be authorized to issue (as long as the Common Stock varies from that currently authorized, if at all, only in amount of par value). "Corporation" shall mean AVX Corporation, a Delaware corporation. "Eligible Board Member" shall mean any individual who is a member of the Board of Directors and who is entitled to receive compensation for services rendered in such capacity other than an individual who is also an employee of the Corporation, its parent, any subsidiary or any affiliate of the Corporation. "Eligible Compensation" shall mean, with respect to any Eligible Board Member for any Plan Year, all fees payable to such Eligible Board Member during such year for attendance at meetings of the Board of Directors or committees thereof, and all fees payable to such Eligible Board Member during such year by way of retainer for service as a member or chairman of the Board of Directors or committees thereof regardless of the number of meetings attended. "Fair Market Value" means the average of the high and the low sales prices of a share of Common Stock on any specified date (or, if not a trading day, on the last preceding trading day) as reported on the New York Stock Exchange Composite Transactions Tape or, if not listed on the New York Stock Exchange, the principal stock exchange or the NASDAQ National Market on which the Common Stock is then listed or traded; provided, however, that if the Common Stock is not so listed or traded then the Fair Market Value shall be determined in good faith by the Board of Directors. "Participant" shall mean any Eligible Board Member who has made an election under Section 3 to defer any portion of his or her Eligible Compensation for any Plan Year. "Phantom Share Unit" shall mean a unit of measurement equivalent to one share of Common Stock, with none of the attendant rights of a holder of such share, including, without limitation, the right to vote such share and the right to receive dividends thereon, except to the extent otherwise specifically provided herein. "Plan" shall mean the AVX Corporation Deferred Compensation Plan for Eligible Board Members as set forth herein and as amended from time to time. "Plan Year" shall mean the calendar year. 3. Deferral Elections. With respect to each Plan Year beginning on or after January 1, 1997, an Eligible Board Member may elect to have payment of any part or all of his or her Eligible Compensation for such year deferred, and to have payment of such portion made under the terms of this Plan. Any such election shall be made in accordance with the following rules: (a) A deferral election shall be made in writing, on a form provided by the Committee for such purpose. (b) In the election form, the Eligible Board Member shall (i) specify, by percentage (which must be an even multiple of [5]%), the portion of his or her Eligible Compensation that the Eligible Board Member wishes to defer hereunder (the amounts so deferred are hereinafter referred to as the Eligible Board Member's "Deferred Amounts"), (ii) specify, by percentage (which must be an even multiple of [5]%), the portion of his Deferred Amounts that shall be invested in each investment option available under the Plan which shall include, but shall not be limited to, a Phantom Share Unit Fund, and (iii) specify whether his Deferred Amount shall become payable upon the Participant's ceasing to be a member of the Board of Directors for any reason or as soon as practicable following the 10th anniversary of the first day of the Plan Year following the Plan Year in which the Deferred Amount would have been paid were it not for the deferred election (or the later of the two alternatives). (c) An Eligible Board Member's election to defer Eligible Compensation for any Plan Year shall be filed with the Committee (i) by no later than January 31, 1997, in the case of an election to defer Eligible Compensation for the Plan Year beginning on January), 1, 1997; or (ii) in the case of an election to defer Eligible Compensation for any Plan Year beginning on or after January 1, 1998, by no later than December 31. of the preceding Plan Year. (d) Notwithstanding the provisions of paragraph (b) above, a newly elected Eligible Board Member may make an initial deferral election hereunder with respect to Eligible Compensation for the Plan Year in which he or she is first elected to serve as a member of any Board by filing his or her election form with the Committee by no later than 30 days after the date on which he or she commences to serve as a member of such Board. Any deferral election so made shall be effective only with respect to Eligible Compensation earned for services performed after the date on which the Eligible Board Member's deferral election has been filed with the Committee. (e) Any deferral election made by an Eligible Board Member with respect to his or her Eligible Compensation (including the date of distribution) for a Plan Year shall be irrevocable. 4. Accounts. For each Participant, there shall be established on the books and records of the Corporation, for bookkeeping purposes only, an Account, to reflect the Participant's interest under the Plan. The Account so established for each Participant shall be maintained in accordance with the following provisions: (a) Each Participant's Account shall be credited with the Participant's Deferred Amounts as of the first day of the calendar month following the month in which the amounts in question would have been paid to the Participant had the Participant not elected under Section 3 to have payment of such amounts deferred under this Plan (hereafter referred to as the "Credit Date"). (b) Each Participant's Account shall be credited (or debited) as of the. last business day of each calendar quarter with gains, income (or loss) based on a hypothetical investment in any one or more of the! investment options available under the Plan, as determined and applied in the manner deemed appropriate by the Committee. (c) If a Participant elects to invest all or any port-ion of his or her Deferred Amounts in the Phantom Share Unit Fund, that portion of the Participant's Account shall be credited on each Credit Date with Phantom Share Units equal to the number of shares of Common Stock (including fractions of a share) that could have been purchased with such Deferred Amounts at the Fair Market Value on the Credit Date. As of any dividend payment date for the Common Stock, the portion of a Participant's Account invested in the Phantom Share Unit Fund as of the dividend record date shall be credited with additional Phantom Share Units. The number of Phantom Share Units credited to the Phantom Share Unit Fund will be determined by dividing (i) the product of (a) the dollar value of the dividend declared in respect of a share of Common Stock multiplied by (b) the number of Phantom Shares Units credited to the Participant's Phantom Share Unit Fund account as of the dividend record date by (ii) the Fair Market Value of a share of Common Stock on the dividend payment date. (d) A Participant's interest in his or her Account shall be fully vested and nonforfeitable at all times. 5. Adjustment of Phantom Share Units. In the event of any change in the Corporation's common shares by reason of any stock dividend, recapitalization, reorganization, merger, consolidation, split-up, combination or exchange of shares, or any rights offering to purchase such shares at a price substantially below fair market value, or any similar change affecting the Corporation common shares, the number and kind of shares represented by Phantom Share Units shall be appropriately adjusted consistent with such change in such manner as the Committee, in its sole discretion, may deem equitable to prevent substantial dilution or enlargement of the rights granted to, or available for, the Participants hereunder. The Committee shall give notice to each Participant of any adjustment made pursuant to this Section 5 and, upon such notice, such adjustment shall be effective and binding for all purposes of the Plan. 6. Payment of Account Balances. Payment with respect to a Participant's Account shall be made in accordance with the following provisions: (a) The balance of a Participant's Account shall become payable upon the Participant's ceasing to be a member of the Board of Directors, for any reason, or as soon as practicable following the tenth anniversary of the first day of the Plan Year following the Plan Year in which the Deferred Amounts would have been paid were it not for the deferral election (or the later of the two alternatives) in accordance with the Participant's election made under Section 3. (b) Amounts credited to a Participant's Account shall be paid in a lump sum to the Participant or, in the event of his death, to his Beneficiary. All distributions shall be made in cash except that payment with respect to the portion of the Participant's Account that is invested in the Phantom Share Unit Fund shall be made in the form of (i) a number of shares of Common Stock equal to the number of whole Phantom Share Units credited to such portion of the Account as of the last day of the month preceding the month in which such payment is made, and (ii) a cash payment in an amount determined by multiplying (x) the fractional part of a Phantom Share Unit credited to such balance as of such last day by (y) the Fair Market Value of one share of Common Stock as of such last day. In the event of the Participant's death, the payments to be made hereunder to the Participant's Beneficiary shall be made as soon as practicable after the date of the Participant's death. (c) Notwithstanding any other provision in this Section 6 to the contrary, payment with respect to any part or all of the Participant's Account may be matched to the Participant on any date earlier than the date on which such payment is to be made pursuant to such other provisions of this Section 6 if (i) the Participant requests such early payment in writing and (ii) the Committee, in its sole discretion, determines that such early payment is necessary to help the Participant meet an "unforeseeable mergency" within the meaning of Section 1.457-2(h)(4) of the Federal Income Tax Regulations. The amount that may be so paid may not exceed the amount necessary to meet such emergency. The committee may request that the Participant provide such evidence of the unforeseeable emergency as it deems appropriate. 7. Designation and Change of Beneficiary. Each Participant shall file with the Committee a written designation of one or more persons as the Beneficiary who shall be entitled to receive any amount, or any Common :stock payable under the Plan by reason of his or her death. A Participant may, from time to time, revoke or change his or her Beneficiary designation without the consent of any previously designated Beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participant's death, and in no event shall it be effective as of a date prior to such receipt. If at the date of a Participant's death, there is no designation of a Beneficiary in effect for the Participant pursuant to the provisions of this Section 7, or if no Beneficiary designated by the Participant in accordance with the provisions hereof survives to receive any amount payable under the Plan by reason of the Participant's death, the Participant's estate shall be treated as the Participant's Beneficiary for purposes of the Plan. 8. Payments to Persons Other Than Participants. If the Committee shall find that any Participant or Beneficiary to whom any amount (or any Common Stock) is payable under the Plan is unable to care for his or her affairs because of illness, accident or legal incapacity, then, if the Committee so directs, such amount, or such Common Stock, may be paid to such Participant's or Beneficiary's spouse, child or other relative, an institution maintaining or having custody of such person, or any person deemed by the Committee to be a proper recipient on behalf of such Participant or Beneficiary, unless prior claim therefor has been made by a duly appointed legal representative of the Participant or Beneficiary. Any payment made under this Section 8 shall he a complete discharge of the liability of the Corporation with respect to such payment. 9. Rights of Participants. A Participant's rights and interests under the Plan shall be subject to the following provisions: (a) A Participant shall have the status of a, general unsecured creditor of the Corporation with, respect to his or her right to receive any payment. under the Plan. The Plan shall constitute a mere promise by the Corporation to make payments in the future of the benefits provided for herein. It is intended that the arrangements reflected in this Plan be treated as unfunded for tax purposes. (b) A Participant's rights to payments under- the Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or his or her Beneficiary. 10. Administration. The Plan shall be administered by a Committee composed of at least two members of the Board of Directors who are not Eligible Board Members and who shall be appointed by the Board of Directors. If at any time there are less than two such members on the Board of Directors, additional members of the Committee shall be appointed from among those members of the Board of Directors who have never participated in the Plan or, in the absence of any such members of the Board of Directors, from among any senior officers of the Corporation or any of its affiliated companies. All decisions, actions or interpretations of the Committee under the Plan shall be final, conclusive and binding upon all parties. No member of the Committee shall be personally liable by reason of any contract or other instrument executed by such member or on his or her behalf in his or her capacity as a member of the Committee nor for any mistake of judgment made in good faith, and the Corporation shall indemnify and hold harmless each member of the Committee, and each employee, officer, director or trustee of the Corporation or any of its affiliated companies to whom any duty or power relating to the administration or interpretation of the Plan may be delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with tie approval of the Board of Directors) arising out of any act or omission to act in connection with the Plan unless arising out such person's own fraud or bad faith. 11. Amendment or Termination. The Board of Directors may, with prospective or retroactive effect, amend, suspend or terminate the Plan or any portion thereof at any time; provided, however, that no amendment of the Plan shall deprive any Participant of any rights to receive payment of any amounts due him or her under the terms of the Plan as in effect prior to such amendment without his or her written consent. Any amendment that the Board of Directors would be permitted to make pursuant to the preceding paragraph may also be made by the Committee where appropriate to facilitate the administration of the Plan or to comply with applicable law or any applicable rules and regulations of governing authorities provided that the cost of the Plan to the Corporation is not materially increased by such amendment. 12. Successor Corporation. The obligations of the Corporation under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Corporation, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Corporation. The Corporation agrees that it will make appropriate provision for the preservation of Participants' rights under the Plan in any agreement or plan which it may enter into or adopt to effect any such merger, consolidation, reorganization or transfer of assets. 13. Governing Law. The provisions of the Plan shall be governed by and construed in accordance with the laws of the State of (New York]. 14. Withholding Taxes. If required by applicable law, the Committee shall withhold from any payment such amount as shall be legally required to pay any Federal, state or local taxes. -----END PRIVACY-ENHANCED MESSAGE-----