UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

SCHEDULE 14A

(RULE 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

 

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[X]Definitive Proxy Statement

[   ]Definitive Additional Materials

[   ]Soliciting Material Pursuant to § 240.14a-12

 

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1 AVX Boulevard    •     Fountain Inn, South Carolina 29644

 

To our Shareholders:

The Annual Meeting of Shareholders of AVX Corporation (the “Company”), a Delaware corporation, will be held at the Warwick New York Hotel, 65 West 54th Street, New York, NY 10019 on Wednesday, July 23, 2014, at 10:00 a.m., for the following purposes as described in the accompanying proxy statement:

 

 

 

 

 

 

Only shareholders of record of the Company on May 30, 2014, will be entitled to notice of, and to vote at, the Annual Meeting or any adjournment or postponement thereof. Please vote in one of the following ways:

 

The Company is providing an Annual Report on Form 10-K to shareholders in lieu of a separate annual report.  Our Annual Report on Form 10-K is also available electronically to shareholders on the Company’s website at www.avx.com.

Whether or not you plan to attend the meeting, you are urged to promptly complete, sign, date and return the enclosed proxy card in the envelope provided (or follow the instructions set forth in the enclosed proxy to vote by telephone or the Internet).  Returning your proxy card as described above does not deprive you of your right to attend the meeting and to vote your shares in person.  However, in order to vote your shares in person at the meeting, you must be a shareholder of record or hold a valid proxy from your broker permitting you to vote at the meeting. 

 

Greenville, South Carolina
June 6,  2014

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YOUR VOTE IS IMPORTANT

PLEASE COMPLETE, DATE AND SIGN YOUR PROXY CARD AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE, OR USE TELEPHONE OR INTERNET VOTING BEFORE THE ANNUAL MEETING.

THE PROXY STATEMENT OF AVX CORPORATION IS ALSO AVAILABLE AT WWW.PROXYVOTE.COM.

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TABLE OF CONTENTS

 

 

 

 

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AVX Corporation
1 AVX Boulevard, Fountain Inn, SC 29644

 

PROXY STATEMENT
Annual Meeting of Shareholders
To be held  Wednesday, July 23,  2014

 

 

INTRODUCTION

 

This Proxy Statement is furnished to the shareholders of AVX Corporation (“AVX” or the “Company”) in connection with the solicitation on behalf of the Board of Directors (the “Board”) of proxies to be used at the Annual Meeting of Shareholders (as may be adjourned or postponed, the “Annual Meeting”) to be held on Wednesday, July 23, 2014, at 10:00 a.m., at Warwick New York Hotel, 65 West 54th Street, New York, NY 10019, and any adjournment or postponement thereof. The Company expects that this Proxy Statement, with the accompanying Notice of Annual Meeting and form of proxy and the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2014, will be mailed to shareholders on or about June 10, 2014. The Annual Report on Form 10-K for the fiscal year ended March 31, 2014 is also available to shareholders on the Company’s website at www.avx.com.

 

Each share of AVX common stock, par value $0.01 per share (the “Common Stock”), outstanding at the close of business on May 30, 2014, will be entitled to one vote on all matters acted upon at the Annual Meeting.  On May 30,  2014,  168,157,105 shares of Common Stock were outstanding.

 

Shares will be voted in accordance with the instructions indicated in a properly executed proxy.  In the event that voting instructions are omitted on any such proxy, the shares represented by such proxy will be voted as recommended by the Board.  Shareholders have the right to revoke their proxies at any time prior to a vote being taken by: (i) delivering written notice of revocation before the Annual Meeting to the Corporate Secretary at the Company’s principal offices; (ii) delivering a proxy bearing a later date or time than the proxy being revoked; (iii) resubmitting a vote by telephone or Internet (as explained in the proxy voting instructions attached to the proxy card); or (iv) voting in person at the Annual Meeting. You may attend the Annual Meeting and vote in person if you are a shareholder of record on May 30, 2014.  If your shares are held in “street name” by your broker or bank, you may vote your shares in person only if you have a legal proxy from the entity that holds your shares giving you the right to vote the shares.  A legal proxy is a written document from your brokerage firm or bank authorizing you to vote the shares it holds in its name. 

 

The presence at the Annual Meeting, in person or by proxy, of shareholders holding in the aggregate a majority of the outstanding shares of the Company’s Common Stock entitled to vote shall constitute a quorum for the transaction of business.  The election of directors shall be determined by a plurality of the votes of shareholders of the Company present in person or represented by proxy and entitled to vote at the Annual Meeting.  The approval of the AVX Corporation 2014 Management Incentive Plan, the AVX Corporation 2014 Restricted Stock Unit Plan, the advisory vote on the compensation of the Company’s named executive officers, and the ratification of the appointment of PricewaterhouseCoopers, LLP shall be decided by a majority of the votes cast by the holders of the Common Stock present in person or by proxy and entitled to vote at the Annual Meeting.  Proxies indicating shareholder abstentions will, in accordance with Delaware law, be counted as represented at the Annual Meeting for purposes of determining whether there is a quorum present. Abstentions will also be counted as a vote cast on any proposal (other than the election of directors) and, accordingly, will have the effect of a vote against the proposal.  Shares represented by “broker non-votes” (i.e., shares held by brokers or nominees that are represented at a meeting, but with respect to which the broker or nominee is not empowered to vote on a particular proposal) will be counted for purposes of determining whether there is a quorum, but will not be voted on such matter and will not be counted for purposes of determining the number of votes cast on such matter. 

 

The Company has been informed by the Trustee for the Company’s retirement plans that shares of Common Stock held by the Trustee for such plans will be voted by the Trustee in accordance with instructions received from the participants, and if no instructions are received with respect to any shares, such shares will be voted in the same proportion as shares for which instructions are received from other participants in the plan.

 

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At the date of this Proxy Statement, management does not know of any matter to be brought before the Annual Meeting for action other than the matters described in the Notice of Annual Meeting and matters incident thereto.  If any other matters should properly come before the Annual Meeting, the holders of the proxies will vote and act with respect to such matters in accordance with their best judgment.  Discretionary authority to do so is conferred by the proxy.

 

Holders of our Common Stock are not entitled to dissenters’ rights or appraisal rights with respect to the proposals to be considered at the Annual Meeting.

 

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PROPOSAL I
ELECTION OF DIRECTORS

 

NOMINATIONS FOR THE BOARD OF DIRECTORS

 

The Board has fixed the size of the Board at nine (9).  It is currently divided into three classes elected for staggered three year terms.  Each director holds office until a successor has been duly elected and qualified, or until such director’s death, resignation, or removal in the manner provided in the Company’s Bylaws.  The Board believes that the nominees identified below have the industry experience, qualifications, attributes and skills to be effective Directors and be elected as directors to serve for the terms indicated.

Directors Standing for Election

CLASS III

 

Terms expiring at the Annual Meeting in 2017

 

 

 

 

 

The three persons listed above have been nominated for election by the Board.  Unless contrary instructions are given, it is intended that the votes represented by the proxies will be cast FOR the election of each of the three persons listed above as directors.  In the event that any of the nominees should become unavailable to stand for election, the Board may designate a substitute.  It is intended that all properly executed and returned proxies will be voted FOR such substitute nominee.

 

THE BOARD OF DIRECTORS RECOMMENDS

A  VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES LISTED ABOVE.

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Directors Continuing in Office

 

CLASS I

 

Terms expiring at the Annual Meeting in 2016

 

 

 

 

 

 

CLASS II

 

Terms expiring at the Annual Meeting in 2015

 

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PROPOSAL II
APPROVAL OF THE AVX CORPORATION 2014 MANAGEMENT INCENTIVE PLAN

 

In May 2014, the Board adopted, subject to shareholder approval, the 2014 AVX Corporation Management Incentive Plan (the "MIP"), to supersede the 2009 AVX Corporation Management Incentive Plan (the "Predecessor Plan") previously approved.

 

If the MIP is approved by the shareholders at the Annual Meeting, it will become effective as of April 1, 2014. If not approved by the shareholders at the Annual Meeting, the MIP will not be implemented.

 

Background

 

The Company is seeking shareholder approval of the MIP to preserve its ability to grant certain fully deductible performance-based awards. Pursuant to Section 162(m) of the U.S. tax code, the Company may not deduct compensation in excess of $1 million paid to its Chief Executive Officer and its three next most highly compensated executive officers other than the Chief Executive Officer and the Chief Financial Officer as of the end of any fiscal year (the “covered employees”).  Certain qualifying performance-based compensation is not subject to the $1 million deduction limit. The MIP is designed to comply with Section 162(m) so that payment of performance awards that are conditioned on the performance goals set forth in the MIP will be excluded from the calculation of annual compensation for purposes of Section 162(m) and will be fully deductible.  For compensation to qualify for the performance-based compensation exclusion under Section 162(m), the material terms pursuant to which the performance-based compensation is to be paid, including the performance criteria and

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the maximum amount payable under the MIP to any one individual in respect of any plan year must be disclosed to, and approved by, the shareholders prior to the payment.

 

While the MIP is designed to provide qualified performance-based compensation in accordance with Section 162(m), the Compensation Committee may, in its discretion, grant awards under the MIP that are not exempt from Section 162(m).

 

Description of the MIP

 

The following is a summary of the provisions of the MIP, as proposed to be adopted, and is qualified in its entirety by reference to the plan document, which is attached to this Proxy Statement as Appendix A, and will be furnished without charge to any shareholder of the Company upon written request made to the Secretary of the Company.

 

The purpose of the MIP is to promote the interests of the Company and its subsidiaries by providing selected officers and key employees (6 participants as of June 1, 2014) incentives to continue and increase their efforts with respect to, and remain in the employ of, the Company and its subsidiaries.

 

The Compensation Committee is responsible for administering the MIP and has the authority to:

 

 

Participants in the MIP will be eligible to receive a bonus award if the Company achieves specified performance goals based on the Company's profit before taxes (defined as income before special, unusual, restructuring or extraordinary items and income taxes) included in the Company’s annual budget.  Performance goals under the MIP are established by the Compensation Committee no later than 90 days after the beginning of each fiscal year during the term of the MIP.  The Compensation Committee has the discretion to later revise the performance goals solely for the purpose of reducing or eliminating the amount of compensation otherwise payable upon attainment of the performance goals. The amount of any bonus award paid to any participant with respect to any one fiscal year may not exceed 200% of the employee's base salary for such year and in no event may a bonus award to any employee with respect to any one fiscal year exceed $5,000,000.  The bonus award opportunity will take into account an employee's responsibility level, performance, cash compensation level, incentive compensation awards and such other considerations as the Compensation Committee deems appropriate.

 

A performance award will terminate for all purposes if a participant does not remain continuously employed and in good standing with the Company.  An employee (or in the event of the employee's death, his or her beneficiaries or estate) whose employment was terminated because of death, incapacity or retirement will be paid a pro rata bonus award (based upon the portion of the performance period during which he or she was so employed) determined by actual performance levels.  Such bonuses will be paid at the normal time for payment of bonus awards under the MIP.

 

Following the end of the applicable performance period, the Compensation Committee will certify the attainment of the performance goals, and calculate the bonus award, if any, payable to each participant.  Awards will be paid, in cash, after appropriate tax withholdings.

 

The Chief Executive Officer will receive payment of his bonus award, if any, following the end of the applicable performance period. A participant other than the Chief Executive Officer will receive 75% of his or her awards, if any, following the end of the applicable performance period, and 25% of his or her award, if any, within 30 days after the end of the fiscal year following the applicable performance period, provided the participant is employed by the Company at the end of the fiscal year.

 

No awards may be transferred or assigned other than by will or by the laws of descent and distribution.

 

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The MIP may be amended or discontinued by the Compensation Committee without the approval of the Board.

 

Benefits to Named Executive Officers and Others

No awards have been granted under the MIP.  If shareholders approve the MIP, all future awards will be granted in the discretion of the Compensation Committee, and any benefits or amounts to any individuals or groups are not presently determinable.

 

Vote Required

 

The affirmative vote of a majority of the votes cast on this proposal is required for approval of the MIP as it relates to the Company’s covered employees.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AVX CORPORATION 2014 MANAGEMENT INCENTIVE PLAN.

 

PROPOSAL III
APPROVAL OF THE AVX CORPORATION 2014 RESTRICTED STOCK UNIT PLAN

 

In May 2014, the Board adopted, subject to shareholder approval, the AVX Corporation 2014
Restricted Stock Unit Plan (the “2014 RSU Plan”). 

 

Pursuant to the 2014 RSU Plan, Restricted Stock Unit Awards may be granted to employees and directors of the Company and its subsidiaries representing an aggregate of 3,000,000 shares of Common Stock.  The 2014 RSU Plan is administered by the Compensation Committee of the Board.

 

The following is a summary of the provisions of the 2014 RSU Plan, as proposed to be adopted, and is qualified in its entirety by reference to the plan document, which is attached to this Proxy Statement as Appendix B, and will be furnished without charge to any shareholder of the Company upon written request made to the Secretary of the Company.

 

Summary of the 2014 Restricted Stock Unit Plan

 

Purpose and Eligibility.  The general purpose of the 2014 RSU Plan is to promote the interests of the Company and its subsidiaries by linking the personal interests of its employees and directors to those of the Company’s shareholders, and by providing participants with an incentive for outstanding performance.  As of May 30, 2014, approximately 65 employees and 8 non-employee directors would be eligible to participate in the 2014 RSU Plan.

 

Permissible Awards.  The plan authorizes the granting of awards in the form of restricted stock units granting the participant the right to receive shares of Common Stock, or the equivalent value in cash or other property, as determined by the Compensation Committee.

 

Shares Available for Awards; Limitation on Awards.  The number of shares reserved and available for issuance under the plan is 3,000,000.  The maximum number of shares of Common Stock that may be subject to awards granted to any one participant during any one calendar year is 250,000.

 

Administration

 

The 2014 RSU Plan is administered by the Compensation Committee of the Board.  The Board may, from time to time, also administer the 2014 RSU Plan.  The Compensation Committee or the Board has the authority to:

 

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Awards.  The Compensation Committee is authorized to make awards of restricted stock units to participants in such amounts and subject to such terms and conditions as may be selected by the committee.

 

Issuance and Restrictions.  The Compensation Committee may provide for such restrictions on transferability and others restrictions as the committee may impose.  These restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, upon the passage of time, satisfaction of performance goals or otherwise.  Upon the lapse of such restrictions, the restricted stock units will be converted to shares of Common Stock.

 

Acceleration Upon Certain Events.  Upon the occurrence of a change in control by the Company, or in the event of a participant’s death or incapacity, all restriction on the participant’s outstanding awards will lapse.

 

Forfeiture. Except as otherwise determined by the Compensation Committee at the time of grant of an award, if a participant voluntarily terminates his or her employment or his or her employment is terminated for cause (as defined in the plan), the Company will not have any further obligations to the participant under the 2014 RSU Plan, and his or her restricted stock units shall immediately be forfeited. 

 

Performance Goals.  The Committee may determine that any Award granted under the 2014 RSU Plan will be determined solely on the basis of (a) the achievement of a specified sales or pre-tax profit (excluding special, unusual, restructuring or extraordinary items) target result (b) the Corporation's stock price, (c) the Corporation’s total shareholder return (stock price appreciation plus reinvested dividends) relative to a defined comparison group or target over a specific performance period, or (d) any combination of the goals set forth in (a) through (c) above.  If an Award is made on such basis, the Compensation Committee shall establish goals prior to the beginning of the period for which such performance goal relates (or such later date as may be permitted under Code Section 162(m) or the regulations thereunder), and the Compensation Committee has the right for any reason to reduce (but not increase) the Award, notwithstanding the achievement of a specified goal.  Any payment of an Award granted with performance goals shall be conditioned on the written certification by the Compensation Committee in each case that the performance goals and any other material conditions were satisfied.

 

If a participant’s employment is terminated due to death, retirement or incapacity prior to the termination of his or her right to receive shares of Common Stock, all restrictions on his outstanding awards shall lapse.

 

Adjustments.    In the event of a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the share authorization limits and annual award limits will be adjusted proportionately, and the Compensation Committee may adjust outstanding awards to preserve the benefits or potential benefits of the awards.

 

Termination and Amendment.  The Board or Compensation Committee may at any time amend, modify or terminate the 2014 RSU Plan without shareholder approval, provided however, that the Board or Compensation Committee may condition any amendment or modification on the approval of shareholders if such approval is necessary  or deemed advisable with respect to tax, securities or other applicable laws, policies or regulations.

 

Certain Federal Income Tax Consequences

 

A participant will not recognize income, and the Company will not be allowed a tax deduction, at the time a restricted stock unit award is granted. Upon receipt of shares of stock (or the equivalent value in cash or other property) in settlement of a restricted stock unit award, a participant will recognize ordinary income equal to the fair market value of the stock or other property as of that date (less any amount he or she paid for the stock or property), and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m).

 

Benefits to Named Executive Officers and Others

 

As of May 30, 2014, no awards had been granted under the 2014 RSU Plan.  All awards under the 2014 RSU Plan will be made at the discretion of the Compensation Committee, the Board or under delegated authority.  Therefore, it is not

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presently possible to determine the benefits or amounts that will be received by or allocated to any individuals or groups.  As of May 30, 2014, the Common Stock had a closing sales price of $13.48 per share.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF

THE AVX CORPORATION 2014 RESTRICTED STOCK UNIT PLAN.

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PROPOSAL IV
ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

As required by Section 14A of the Securities Exchange Act, the Company is providing shareholders with an advisory (non-binding) vote on compensation (sometimes referred to as “say on pay”) for our Named Executive Officers (as defined below in “Executive Compensation”) as disclosed in this proxy statement in accordance with the compensation disclosure rules of the Securities and Exchange Commission (“SEC”).  Accordingly, we are asking the shareholders to approve the compensation of our Named Executive Officers as disclosed herein by adopting the following advisory resolution at the 2014 Annual Meeting of Shareholders:

 

“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the Named Executive Officers, as disclosed in the Company’s proxy statement for the 2014 Annual Meeting of Shareholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the fiscal year 2014 Summary Compensation Table and the other related tables and disclosure.”

 

This vote is nonbinding.  The Board and the Compensation Committee expect to take into account the outcome of the vote when considering future executive compensation decisions to the extent there is any significant vote against our Named Executive Officer compensation.

 

Currently, say-on-pay votes are held by the Company every three years, and the next advisory vote will occur at the 2017 annual meeting of shareholders.

 

As described in detail under the heading “Compensation Discussion and Analysis,” the objective of the Company’s executive compensation programs is to enable the Company to attract, retain and motivate highly qualified management professionals who are encouraged to work as a team to accomplish the Company’s goals and objectives.  The Company's compensation philosophy is to directly align executive compensation with the financial performance of the organization.

 

We encourage you to review the “Compensation Discussion and Analysis” and the accompanying compensation tables and disclosure and believe that you will find the disclosures demonstrate that in fiscal year 2014, as well as other years presented, AVX’s compensation achieved our goal of relating pay to performance.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE COMPENSATION OF NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THE PROXY STATEMENT.

 

PROPOSAL V
RATIFICATION OF
APPOINTMENT OF INDEPENDENT ACCOUNTANTS

 

The Audit Committee of the Company’s Board of Directors has appointed PricewaterhouseCoopers LLP (“PwC”), an independent registered public accounting firm, as the independent accountants to examine and audit the accounts of the Company for the fiscal year ending March 31, 2015.  Although the Company’s Bylaws do not require that shareholders ratify the appointment of PwC as outside auditors, the Board determined that annual selection of the outside auditors would be submitted as a matter of good corporate governance.  In the event that ratification of this selection of independent accountants is not approved by the shareholders, the Audit Committee will reconsider the selection of independent accountants.  Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of different independent accountants at any time during the year.

 

A representative of PwC is expected to be in attendance at the Annual Meeting and will have an opportunity to make a statement and to respond to appropriate questions from shareholders.

 

See “Report of the Audit Committee – Principal Independent Registered Public Accounting Firm Fees” for information relating to the fees of PwC during fiscal 2013 and fiscal 2014.

 

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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR NEXT FISCAL YEAR.

 

Ownership of Securities by Directors, Director Nominees and Executive Officers

 

The Common Stock is the only class of equity securities of the Company outstanding.  As of March 31, 2014, the directors, director nominees and each executive officer currently named in the Summary Compensation Table below, individually, and all directors, director nominees and executive officers of the Company as a group, beneficially owned (i) shares of Common Stock of the Company and (ii) equity securities of Kyocera, as follows:

 

 

 

* Less than 1% 

 

 

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The information provided in the above chart as to each director and Named Executive Officer, individually, and all directors and executive officers as a group, is based, in part, on information received from such individuals.

 

Security Ownership of Certain Beneficial Owners

 

Set forth below is a table indicating those persons whom the management of the Company believes to be beneficial owners of more than 5% of the Company’s Common Stock as of March 31, 2014.

 

 

 

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors, officers and persons who own more than 10% of the Common Stock, to file reports of ownership and changes in ownership of any class of the Company’s equity securities.  To the Company’s knowledge, during the fiscal year ended March 31, 2014, all of its directors, officers and persons who hold more than 10% of the Common Stock complied on a timely basis with all applicable Section 16(a) filing requirements, other than four late reports for each of John Gilbertson, Kurt Cummings, Keith Thomas, Peter Venuto, and Carl Eggerding regarding, in each case, three de minimis acquisitions under a Company payroll deduction plan and one grant of stock options; and one late report for each of Peter Collis, Kathleen Kelly, John Lawing, John Sarvis, and Goro Yamaguchi regarding a grant of stock options.

 

Board of Directors – Governance

 

The Board has adopted Corporate Governance Guidelines to assist it in the performance of its duties and the exercise of its responsibilities and in accordance with the listing requirements of the New York Stock Exchange (“NYSE”).  The guidelines are available on the Company’s website at www.avx.com in the “Corporate Information – Corporate Governance” section.  The Board has also adopted a Code of Business Conduct and Ethics that applies to all of our directors and employees.  The code is available on the Company’s website at www.avx.com in the “Corporate Information – Corporate Governance” section. 

 

Because a majority of the Company’s shares are owned by Kyocera, the Company is considered a “controlled company” under the applicable rules of the NYSE.  Accordingly, the Company is not required to, and does not have a Board of Directors with a majority of independent directors or Nominating/Corporate Governance and Compensation Committees composed entirely of independent directors.  Nevertheless, the Board has determined that Messrs. Christiansen, DeCenzo and Stach are independent under NYSE listing standards.  In addition to the NYSE’s standards, the Board has determined

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that an independent director is one who is free from any relationship that would interfere with his or her exercise of independent business judgment, receives no compensation from the Company or its subsidiaries other than director’s fees and is not an affiliate of the Company or its subsidiaries.  The AVX/Kyocera Foundation, which may be considered an affiliate of the Company, donated $56,500 to CCU during the fiscal year ended March 31, 2014 and $33,000 during the fiscal year ended March 31, 2013 for educational purposes.  The Board considered Mr. DeCenzo’s position at CCU, and has determined that such donations do not impair Mr. DeCenzo’s independence.

 

Board of Directors – Leadership Structure

 

The Board of Directors of AVX Corporation is responsible for overseeing the business, property and affairs of the Company.  Members of the Board are kept informed of the Company’s business through discussions with the Chief Executive Officer, participating in presentations regarding the operations made by the business managers, by reviewing materials provided to them and by participating in meetings of the Board and its Committees.

 

The Board is currently composed of John S. Gilbertson, who serves as Chairman of the Board and Chief Executive Officer of the Company, and eight additional Directors, three of whom are independent.    The Board has determined that Messrs. Christiansen, Stach and DeCenzo are independent under the applicable rules of the NYSE.  Donald Christiansen, one of the independent Directors, has served as Presiding Director since 2008.   The Chairman conducts the actual Board meetings. The Presiding Director organizes and presides over all executive sessions of the Non-Management Directors, which are those attended solely by independent directors.  The other principal responsibilities of the Presiding Director include:

 

 

The Board is composed of qualified and experienced leaders with the ability to provide oversight to the Company.  We believe that all directors have demonstrated seasoned leadership and are familiar with Board processes.

 

 The Board believes that there is no single best organizational model that is the most effective in all circumstances and that the shareholders’ interests are best served by allowing the Board to retain the flexibility to determine the optimal organizational structure for the Company at a given time, including whether the Chairman’s role should be held by an independent director or a senior executive who serves on the Board. The members of the Board possess considerable experience and unique knowledge of the challenges and opportunities the Company faces and are in the best position to evaluate the needs of the Company, the risks facing the Company and how best to maximize the capabilities of the directors and management to meet those needs.

 

We believe that at this time with the current management and Board composition, the Company, like many companies, is best served by having one person serve as both Chief Executive Officer and Chairman of the Board.  The Board believes that through this leadership structure, John S. Gilbertson is able to draw on his intimate knowledge of the daily operations of the Company and its relationships with customers and employees to provide the Board with leadership in setting its agenda and properly focusing its discussions.  As the individual with primary responsibility for managing our day to day operations, Mr.  Gilbertson is also best-positioned to chair regular Board meetings and ensure that key business issues are brought to the Board’s attention.  The combined role as Chairman and Chief Executive Officer also ensures that the Company presents its message and strategy to shareholders, employees, customers and other stakeholders with a unified, single voice.  The appointment by the Board of an experienced independent Presiding Director provides additional strength and balance to our Board leadership structure.

 

Board of Directors – Director Nomination Process

 

The Company’s Corporate Governance Guidelines provide that the Board as a whole is responsible for nominating and considering individuals for election to the Board by the shareholders based on candidates suggested by members of the Board, management and shareholders.  As indicated above, the Company has not established a separate Nominating and Governance committee because it is a “controlled company” under the applicable rules of the NYSE.  The Board does not

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currently operate under a formal written charter when discharging its nominating functions.  Although the Board considers diversity of business, academic and leadership experience as factors in assessing the appropriate skills and characteristics required of Board members, the Board does not have a formal policy with regard to diversity in identifying director nominees.

 

The Board has not adopted specific objective requirements for service on the Board.  Instead, the Board will consider various factors in determining whether to nominate an individual for election by the shareholders.  Among other things, the Board expects each director to:

 

 

The Board will consider candidates recommended by shareholders in the same manner as other candidates.

 

Shareholders and other interested parties who wish to communicate with the Board (including, in the case of shareholders, in order to recommend or nominate director candidates to the Board), individual Board members, the Chairman of the Board,  the Presiding Director or the Non-Management Directors as a group may do so by either of the following means:

 

 

All questions and concerns will be received and processed by the Corporate Compliance Office.  Questions and concerns relating to AVX’s accounting, internal accounting controls or auditing matters will be referred to the Chairman of the Audit Committee.  Questions and concerns addressed to the Board will be referred to the Presiding Director.  Other questions and concerns will be processed by the Corporate Compliance Office and forwarded to the addressees or distributed at the next scheduled Board meeting, as appropriate.

 

To be timely, a shareholder’s proposal for the recommendation or nomination of directors must be received by the Company in the timeframes described under “Shareholder Proposals” elsewhere in this Proxy Statement.  A shareholder’s proposal for nomination must comply with the requirements of the Bylaws of the Company.  Among other things, the Bylaws require that a shareholder’s notice of a director nomination must include a representation that the nominee will not have any undisclosed voting arrangements with respect to such nominee’s actions as director and an agreement to complete a nominee questionnaire relating to such nominee’s independence and other information to be included in a proxy statement pursuant to Regulation 14A under the Exchange Act of 1934, as amended or otherwise requested by the Company.  Such notice of intent to make a nomination shall be accompanied by the written consent of each nominee to serve as director of the Company if so elected.  

 

Board of Directors – Risk Oversight

 

The Board takes an active role in risk oversight of the Company both as a full Board and through its Committees. Through detailed reviews, discussions and presentations by the heads of the Company’s various businesses, the Board reviews and advises with respect to the Company’s business strategies and financial plans, with attention and focus on the risks to achievement of these strategies and plans. Such risks include those involving the leadership structure, those inherent in the Company’s businesses and compensation programs as well as the risks from external sources such as competitors, the economy and regulatory and legislative developments.

 

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These reviews, discussions and presentations are intended to assist the Board and management in its evaluation of the Company’s risk management practices and to promote a culture that actively identifies and manages risk.

 

The Audit Committee meets regularly with Company management with regard to the Company’s financial risk management processes, controls and capabilities and with the Company’s Chief Internal Auditor with regard to significant control matters. In addition, the Audit Committee reviews the Company’s procedures regarding the receipt, retention and treatment of complaints regarding internal accounting, accounting controls or audit matters.

 

The Compensation Committee oversees the Company’s executive compensation arrangements.  Company management considers the risks arising from the Company’s overall senior management and other employee compensation policies and practices in connection with administering the Management Incentive Plans and other Employee Benefit Plans.

 

The Special Advisory Committee reviews and approves all material agreements and transactions not covered by such agreements between the Company and related parties.  The Special Advisory Committee operates under a written charter which sets forth the policies and procedures for such approvals.  In approving any such agreement or transaction pursuant to those procedures, the Special Advisory Committee must determine that, in its judgment, the terms thereof are equivalent to those to which an independent unrelated party would agree at arm’s-length or are otherwise in the best interests of the Company and its shareholders generally.  See “Relationship With Kyocera” below for more information.

 

Board of Directors - Meetings Held and Committees

 

The Board held four meetings during the fiscal year ended March 31, 2014.  During that period, all of the directors attended at least 75% of the meetings of the Board and meetings of the Committees of the Board on which they served except for Mr. Inamori. The directors are encouraged and expected to attend the Annual Meeting of Shareholders if reasonably possible.  All of the directors attended the Company’s Annual Meeting of Shareholders held on July 24, 2013. 

 

As of May 30, 2014,  the Board had the following standing committees and no nominating committee:

 

Executive Committee.  The Executive Committee has been delegated authority by the Board to exercise the powers of the Board in matters pertaining to the management of the business.  The Executive Committee held no meetings during the fiscal year ended March 31, 2014.  The members of the Executive Committee are Messrs. Inamori (Chairman), Gilbertson, Kuba, Yamaguchi, and Maeda.

 

Audit Committee.  The Audit Committee has been established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act and operates under a written charter adopted by the Board of Directors.  The Audit Committee is appointed by the Board of Directors to provide assistance to the Board in fulfilling its oversight responsibility relating to the integrity of the Company’s consolidated financial statements and the financial reporting processes; the systems of internal accounting and financial controls; the annual independent audit of the Company’s consolidated financial statements; the independent registered public accounting firm’s qualifications and independence; the performance of the Company’s internal audit function and independent registered public accounting firm and any other areas of potential financial risks to the Company specified by the Board of Directors.  The Audit Committee is also responsible for hiring, retaining and terminating the Company’s independent registered public accounting firm.  The Audit Committee met eight times during the fiscal year ended March 31, 2014.

 

The Audit Committee is composed of three members.  The members of the Audit Committee are Messrs. Christiansen (Chairman), Stach and DeCenzo.  Each member of the Audit Committee is financially literate, knowledgeable and qualified to review financial statements.  The Board of Directors has determined that the Company has at least one “audit committee financial expert”, as defined by the SEC, serving on the Audit Committee.  The “audit committee financial expert” designated by the Board is Mr. Christiansen.  The Board of Directors has determined that all members of the Audit Committee are “independent” under the applicable rules of the NYSE.

 

Compensation Committee.  The Compensation Committee has the full power and authority of the Board with respect to the determination of compensation for all executive officers of the Company.  The Compensation Committee, operating under a written charter adopted by the Board of Directors, also has full power and authority over any executive compensation plan approved by the Board for the Company and its subsidiaries, including the issuance of shares of Common Stock, as the Compensation Committee may deem necessary or desirable in accordance with such compensation plans.  The

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Compensation Committee held four meetings during the fiscal year ended March 31, 2014.  As indicated above, the Company is not required to, and does not have, a Compensation Committee composed entirely of independent directors because it is a “controlled company” under the applicable rules of the NYSE.  The members of the Compensation Committee are Messrs. Kuba (Chairman), Yamaguchi, Aoki, Stach and DeCenzo.  Additional information regarding the Compensation Committee and its processes and procedures for the consideration and determination of executive compensation can be found in the Compensation Discussion and Analysis section in this Proxy Statement.

 

Special Advisory Committee.  The Special Advisory Committee is composed of independent directors.  The committee is required to review and approve all material agreements and significant transactions not covered by such agreements between the Company and related parties (including any agreements and transactions between the Company and any related party that are or may be within the scope of applicable rules, regulations and guidance of the NYSE and Item 404 of Regulation S-K) and to meet periodically in an executive session without management.  The Board has adopted a written charter for the Special Advisory Committee.  The Special Advisory Committee held four meetings during the fiscal year ended March 31, 2014.  The members of the Special Advisory Committee are Messrs. Stach (Chairman), DeCenzo and Christiansen.

 

The Board of Directors has adopted written charters for the Audit, Compensation, and Special Advisory Committees.  The charters, as amended, are available on the Company’s website at www.avx.com in the “Corporate Information – Corporate Governance” section.

 

Director Compensation

 

The Board of Directors determines compensation for all directors. The following table and narrative provides information related to the compensation of directors during fiscal 2014.

 

 

 

 

 

 

During the year ended March 31, 2014, each director who was not an employee of the Company or Kyocera was paid an annual director’s fee of $32,500, an attendance fee of $2,700 per Board or committee meeting and reimbursement of travel expenses.  The Chairman of the Audit Committee also received an additional $5,500 per year.   Each director who was an employee of Kyocera was paid an attendance fee of $2,700 per Board or committee meeting and reimbursement of travel

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expenses.   In addition, each director who is not an employee of the Company is eligible to receive stock options pursuant to the Non-Employee Directors’ Stock Option Plans, as described below.  

 

AVX feels that it is important for members of the Board to be shareholders of the Company, to have an incentive to help the Company grow and prosper, and to share in that prosperity.  The 2004 Non-Employee Directors’ Stock Option Plan authorizes the issuance of up to 1,000,000 shares of Common Stock, and provides for the grant of an option to purchase 15,000 shares of Common Stock to each director not employed by AVX (a “Non-Employee Director”) as of the date on which a Non-Employee Director is elected to the Board for the first time and every third anniversary thereafter.  In addition, options to purchase shares of Common Stock may also be granted from time to time upon prior approval by the Board.  The options become exercisable 33 1/3% one year after the date of the grant and an additional 33 1/3% at the end of each of the following two years, provided that in order to exercise the options, the Non-Employee Director must continue to be a director at the date of exercise.  However, if such Non-Employee Director’s service terminates due to retirement, death or disability, his options shall thereupon become fully vested and remain outstanding and exercisable for their original term.  Options have an exercise price equal to the Fair Market Value (as defined in the plan) of the Common Stock on the date of grant.  The 2014 Non-Employee Directors’ Stock Option Plan, authorizes the issuance of up to an additional 1,000,000 shares of Common Stock, on terms consistent with the 2004 Non-Employee Directors’ Stock Option Plan.

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Equity Compensation Plan Information

 

The following table provides information as of March 31, 2014 about the Common Stock that may be issued under all of the Company’s existing equity compensation plans.

 

 

 

Compensation Committee Interlocks and Insider Participation

 

During the fiscal year ended March 31, 2014, the Compensation Committee was composed of Messrs. Kuba, Yamaguchi, Aoki, Stach and DeCenzo. During the fiscal year ended March 31, 2014, Mr. Kuba was Chairman of the Board of Kyocera, Mr. Yamaguchi was President and Representative Director of Kyocera and Mr. Aoki was a Managing Executive Officer and Director of Kyocera.  Kyocera owns 121,800,000 shares, or approximately 72%, of the Company’s outstanding Common Stock as of March 31, 2014, and has engaged in a significant number and variety of related company transactions with the Company.  The significant agreements between the Company and Kyocera are described under the caption “Relationship with Kyocera” below.  For additional information concerning positions with Kyocera held by executive officers and directors of the Company, see “Proposal I – Election of Directors” above.  Except as described above (or in other sections of this Proxy Statement indicated), during the fiscal year ended March 31, 2013, no member of the Board or the Compensation Committee and none of our executive officers served as a member of a board of directors or compensation committee of any entity whose executive officers served on the Board or Compensation Committee.

 

Report of the Audit Committee

 

In accordance with its written charter, as adopted by the Board, the Audit Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and financial reporting practices of the Company.  During the fiscal year ended March 31, 2014, the Audit Committee met eight times, and the Audit Committee discussed the interim financial information contained in each quarterly earnings announcement with the Chief Financial Officer and independent registered public accounting firm prior to each public release.

 

In discharging its oversight responsibility as to the audit process, the Audit Committee received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm its independence.  The Audit Committee also discussed with management and the independent registered public accounting firm the quality and adequacy of the Company’s internal controls.  The Audit Committee reviewed with the independent registered public accounting firm its audit plans, audit scope, and identification of audit risks.

 

The Audit Committee reviewed and discussed with the independent registered public accounting firm all matters required to be discussed in accordance with standards adopted by the Public Company Accounting Oversight Board and, with and without management present, discussed and reviewed the results of the independent registered public accounting firm’s examination of the financial statements.

 

The Audit Committee reviewed and discussed the audited financial statements of the Company as of and for the fiscal year ended March 31, 2014, with management and the independent registered public accounting firm.  Management has the responsibility for the preparation of the Company’s financial statements, and the independent registered public accounting firm has the responsibility for the examination of those statements.

 

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Based on the above-mentioned review and discussions with management and the independent registered public accounting firm, the Audit Committee recommended to the Board that the Company’s audited financial statements be included in its Annual Report on Form 10-K for the fiscal year ended March 31, 2014, for filing with the SEC.   The Audit Committee also reappointed the independent registered public accounting firm, PricewaterhouseCoopers LLP, for the fiscal year ending March 31, 2015.

 

SUBMITTED BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS:

 

Donald B. Christiansen, Chairman

Joseph Stach

David DeCenzo 

 

Principal Independent Registered Public Accounting Firm Fees

As reflected in the table below, the Company incurred fees of $3,849,785 and $4,101,004 in fiscal 2013 and 2014, respectively, for services performed by PwC. Of these sums, $3,370,074 in fiscal 2013 and $3,403,051 in fiscal 2014 were for audit and audit related services.  PwC did not perform any financial system consulting services in fiscal 2013 or 2014.

 

 

 

 

 

 

 

The Audit Committee of the Company’s Board of Directors determined that the provision of non-audit services by PwC to the Company during fiscal 2013 and fiscal 2014 was compatible with maintaining the independent registered public accounting firm’s independence.

 

It is the policy of the Audit Committee to pre-approve all audit and permitted non-audit services (and the related fees and terms) to be provided to the Company by the independent registered public accounting firm.  The authority to pre-approve non-audit services may be delegated by the Audit Committee to one or more members of the such Committee, who shall present any decision to pre-approve an activity to the full Audit Committee at the first meeting following such decision.  None of the services described above were approved by the Audit Committee pursuant to the exception provided by Rule 2-01(c)(7)(i)(C) under Regulation S-X. 

 

Relationship With Kyocera

Relationship With Kyocera

 

Since January 1990, the Company’s business has included transactions with Kyocera.  During the three years ended March 31, 2014, such transactions have involved the purchase of resale inventories, raw materials, supplies, and equipment, the sale of products for resale, raw materials, supplies and equipment, and the payment of commissions and dividends, as set forth in the table below (in thousands):

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One principal strategic advantage for the Company is its ability to provide a broad product offering to its customers.  The inclusion of products manufactured by Kyocera in that product offering is a significant component of this advantage.  In addition, the exchange of information with Kyocera relating to the development and manufacture of multi-layer capacitors and various other ceramic products benefits the Company.  An adverse change in the Company’s relationship with Kyocera could have a negative impact on the Company’s results of operations.  AVX and Kyocera have executed several agreements which govern the foregoing transactions and which are described below.

 

Kyocera gave notice to AVX in February 2014 of its intent, effective April 1, 2015 to market its connector products in Asia using Kyocera’s sales force rather than continuing to have AVX resell such products in Asia.  Sales of Kyocera connector products in Asia were approximately $44 million with operating profit of approximately $3 million for the fiscal year ended March 31, 2014.

 

The Special Advisory Committee of the Board, composed of our independent directors (currently Messrs. Stach, DeCenzo, and Christiansen), reviews and approves any material agreements between AVX and Kyocera and any significant transactions between AVX and Kyocera not covered by such agreements.  The committee is also responsible for reviewing and approving any other agreements and transactions between the Company and any related party that are or may be within the scope of applicable rules, regulations and guidance of the NYSE and Item 404 of Regulation S-K, if they arise.  The Special Advisory Committee operates under a written charter which sets forth the policies and procedures for such approvals.  In approving any such agreement or transaction pursuant to those procedures, the Special Advisory Committee must determine that, in its judgment, the terms thereof are equivalent to those to which an independent unrelated party would agree at arm’s-length or are otherwise in the best interests of the Company and its shareholders generally.  Each of the agreements described below contains provisions requiring that the terms of any transaction under such agreement be equivalent to those to which an independent unrelated party would agree at arm’s-length. 

 

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 to certain customers in certain 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”), AVX and Kyocera exchange confidential information relating to the development and manufacture of multi-layered ceramic capacitors and various other ceramic products, as well as the license of technologies in certain circumstances.  The License 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 six months prior written notice.

 

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 capacitors and other electronic components.  The Supply 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 six months prior written notice.

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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 electronic components.  The Machinery Purchase 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 six months prior written notice.

 

Compensation Committee Report

 

The Compensation Committee believes the executive compensation program is appropriate to accomplish the program’s goal of attracting, retaining and motivating highly qualified management professionals.  The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and based on the review and discussions, the Compensation Committee recommends to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference in the Company’s Annual Report on Form 10-K for the year and March 31, 2014.

 

SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS:

 

Tetsuo Kuba, Chairman of Compensation Committee

Goro Yamaguchi

Shoichi Aoki
Joseph Stach

David DeCenzo

 

Compensation Discussion and Analysis

 

The Company’s executive compensation program is designed to enable the Company to attract, retain and motivate highly qualified management professionals who are encouraged to work as a team to accomplish the Company’s goals and objectives.  The Company’s compensation philosophy is to directly align executive compensation with the financial performance of the organization.  The Company believes that the relationship between executive compensation and Company performance will create a benefit for all shareholders.

 

The executive compensation program has been developed by the Compensation Committee using various factors over time, although the Committee does not set compensation levels based on any particular benchmarking against a peer group.  No outside consultant review of executive compensation was performed during the last three fiscal years.  The Chief Executive Officer has historically played a significant role in the recommendation of the amounts of base salary, salary adjustments, incentive compensation and equity-based compensation to be paid to other members of executive management.  The key elements of the executive compensation program are base salary, annual incentive bonus and stock options, in addition to those benefits provided under the Company’s retirement and deferred compensation plans.

 

The Compensation Committee reviews and approves each element of the Company’s executive compensation program and periodically assesses the effectiveness of the program as a whole.  The program covers the Chief Executive Officer, other Named Executive Officers, and all other senior management of the Company.  Specifically, the Committee approves the salaries of all Named Executive Officers, cash awards under the Company’s Management Incentive Plan (“MIP”), the grant of stock options under the Stock Option Plans, and the provision of any significant special benefits or perquisites to the Named Executive Officers. Each component of compensation for them, including those established for fiscal 2014, is set on a discretionary, not formulaic, basis taking into account a subjective assessment of the individual’s overall responsibilities and performance rather than specific corporate performance goals for all Named Executive Officers.

 

 Base Salary Program

The base salary program is, in general and for fiscal 2014 in particular, intended to provide base salary levels that are externally competitive and internally equitable, and to reflect each individual’s sustained performance and cumulative contribution to the Company.  Each of the other senior management’s individual performance is reviewed by the Chief Executive Officer to arrive at annual merit increase recommendations taking into account the results of operations for the

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Officer’s area of responsibility.   These merit increase recommendations for the Named Executive Officers are then reviewed by the Compensation Committee for reasonableness based on general economic factors, such as increases in the cost of living.  The Chief Executive Officer’s base salary and merit increases from year to year are established by the Compensation Committee taking these same considerations into account.  The salary increases for the Named Executive Officers effective April 1, 2013 took into account the Company’s operating performance in addition to the factors noted above.

 

Annual Cash Incentives - Management Incentive Plan

The MIP is intended to provide the Named Executive Officers and other senior management incentive to continue and increase their efforts with respect to, and remain in the employ of, the Company.  The MIP provides for annual cash incentive compensation based on the Company’s pre-tax financial results and a subjective analysis of each person’s individual performance.  Bonus awards are generally paid under the MIP during the summer following each fiscal year end if the Company’s financial results, excluding special, unusual, restructuring or extraordinary items, exceed 90% of a pre-determined annual profit target.  The annual pre-tax profit target is established by the Compensation Committee.  The target profits are typically based on improving on the prior year’s actual results taking into account general economic conditions.  For the fiscal year ended March 31, 2012, 93% of the pre-tax profit target of $302 million was achieved after taking into account the special environmental charge and limited bonus awards were earned under the MIP.  For the fiscal year ended March 31, 2013, 87% of the pre-tax profit target of $175 million was achieved after taking into account the special environmental charge and limited bonus awards were earned under the MIP.  For the fiscal year ended March 31, 2014, the pre-tax profit target of $152 million was exceeded by 7% and bonus awards have not yet been determined.

 

The bonus awards for the Chief Executive Officer are determined as a percentage of salary (up to 150% of base salary) based on the Company’s financial results related to target profits and are paid currently in the summer when they are determined.  The other Named Executive Officers and other Corporate Officers’ individual bonuses are determined by the Chief Executive Officer based on a subjective evaluation of each person’s annual performance.  These bonuses are derived from a pool determined as a percentage of combined named Executive Officers and other Corporate Officers’ salaries (up to 100% of combined base salaries) based on the Company’s financial results related to target profits.  These bonuses are paid 75% currently in the summer when they are determined and 25% of the bonuses are earned and paid at the end of the following fiscal year, provided the officer is employed by the Company at the end of the fiscal year.   The deferral element for such officers is intended to foster management continuity.   

 

Long-Term Equity Incentives - Stock Option Plans

The Stock Option Plans are designed to reward Named Executive Officers, senior managers, and other key employees directly for increases in the long-term price of the Common Stock.  Each of the Stock Option Plans directly links the compensation of such officers, senior managers, and key employees to gains by the shareholders and encourages adoption of a strong stakeholder orientation in their work. 

The Compensation Committee approves option grants generally following each fiscal year end, but will consider grants at other times of the year if deemed necessary.  The Chief Executive Officer recommends to the Committee the potential recipients and the number of options for each other key employee’s grant on a discretionary basis generally based on a subjective evaluation of that individual’s responsibilities and performance.  The Chief Executive Officer’s grants are established from year to year (including fiscal 2014) by the Compensation Committee taking these same considerations into account.  The Committee reviews and approves the final grant awards.  The grant awards in fiscal 20104 were generally consistent, for each employee and in total, with the prior year grant awards.  The grant price is the fair market value on the date of grant approval, which is defined in the plans as the closing price on that date.  The Company does not have any program or practice to time option grants to take advantage of the release of material, non-public information.  The vesting feature of the option awards is intended to address and mitigate the risk associated with employees giving undue attention to short-term business goals.

 

Family Income Assurance Plan

The Company has in effect a Family Income Assurance Plan for officers.   Coverage under this Company self-insured plan provides that, in the event of the death of an officer while employed by the Company, the officer’s surviving spouse, or estate, is entitled to receive the equivalent of two years base salary during the following 24 months.

 

Retirement and Other Benefits

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Retirement, medical benefits and Board approved discretionary cash awards for the Named Executive Officers and other senior management are largely the same as those provided to the general salaried employee population applicable to each geographic region.  The AVX Nonqualified Supplemental Retirement Plan was established to provide certain U.S. based senior management with supplemental retirement benefits, primarily to promote tax efficiency and replacement of benefit opportunities lost due to regulatory limits.  Amounts contributed to this plan’s separate trust earn market-based returns depending upon the investment choices made by the participant.  The investment choices are generally the same as available under the AVX Corporation Retirement Plan.

 

Miscellaneous benefits offered to officers and other senior management are designed to provide a safety net of protection against the financial catastrophes that can result from liability suits, illness, disability or death.

 

Chief Executive Officer Employment Agreement

In addition to participation in the executive compensation programs, Mr. Gilbertson has an employment agreement that provides for a two-year advisory period upon retirement from the Company in order to assist with Chief Executive Officer transition issues.  During this advisory period, he will receive total advisory payments equal to two times the amount of his base salary in effect on the last day of his full time employment.  Such payments shall commence six months following his retirement and be paid thereafter in 18 equal monthly installments through the end of the advisory period.  If Mr. Gilbertson dies prior to or during the advisory period, his heirs will be entitled to the payments he would have received.

 

Tax and Accounting Considerations 

The accounting and tax treatment of compensation generally has not been a factor in determining the amounts or types of compensation for our executive officers.  Section 162(m) of the Internal Revenue Code (the “Code”) generally disallows a tax deduction to public companies for some forms of compensation over $1 million paid to executive officers unless certain conditions are met.  Certain compensation, including qualified performance-based compensation, will not be subject to the deduction limit if certain requirements are met.  We intend to use our best efforts to structure future compensation so that executive compensation paid by the Company is fully deductible in accordance with Section 162(m) of the Code.  However, the Compensation Committee reserves the right to approve compensation that may prove not to be deductible when it believes such payments are appropriate and in the best interests of our shareholders, after taking into consideration changing business conditions and the performance of our employees.

 

EXECUTIVE COMPENSATION

 

The following table shows cash compensation paid and certain other compensation paid or accrued by the Company for the last three fiscal years to each of the Company’s Chief Executive Officer, Chief Financial Officer and the next three most highly compensated executive officers (“Named Executive Officers”) in all capacities in which they served.

 

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Summary Compensation Table

Fiscal Year Ended March 31, 2014

 

 

 

 

 

 

 

 

 

 

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The investments in the Supplemental Plan have no above-market or preferential earnings. See the Nonqualified Deferred Compensation table and related narrative herein for information related to the Supplemental Plan.

 

Also reflects the value of automobile allowances and Company contributions to group life, disability, or excess liability insurance programs, respectively, as follows for fiscal 2014:  John S. Gilbertson - $24,000 and $26,158; Peter Venuto - $10,200 and $5,481;  Keith Thomas - $10,200 and $3,660; Kurt Cummings - $12,000 and $4,301; and John Lawing - $12,000 and $5,550. The Company also provides the Named Executive Officers with certain medical benefits generally available to all salaried employees. 

 

 

 

 

The following table sets forth information regarding grants of plan-based awards, including bonus opportunities under the MIP and options to acquire shares of Common Stock, granted to the Named Executive Officers during fiscal 2014.

 

Grants of Plan-Based Awards

Fiscal Year Ended March 31, 2014

 

 

 

 

 

 

 

 

 

The following tables set forth information regarding unexercised options, both vested and unvested, for each Named Executive Officer outstanding at March 31, 2014.  The Named Executive Officers do not hold any stock awards.

 

Outstanding Equity Awards at Fiscal Year Ended March 31, 2014

 

 

 

 

 

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All option awards vest 25% on each of the first four anniversaries of the date of grant.

 

 

The following table and narrative provides information related to the Company’s Supplemental Plan for fiscal 2014.

 

Nonqualified Deferred Compensation

Fiscal Year Ended March 31, 2014

 

 

 

 

 

   

Under the Supplemental Plan,  the participants select among the various investment options that are also currently available to employees of the Company participating in the Retirement Plan.  The value of the participants’ balance fluctuates based on the performance of the investments. The market value of the trust is included as an asset and a liability on the Company’s Consolidated Balance Sheet as of March 31, 2014 as disclosed  in the Annual Report on Form 10-K for the fiscal year ended March 31, 2014 because the trust’s assets are available to the Company’s general creditors in the event of the Company’s insolvency.

 

Additional Plan information is detailed as follows:

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Deferred Compensation Contribution

A participant may elect to defer all or a portion of his eligible compensation otherwise payable by the Company to such participant.  The participant can choose to have his deferrals credited to his Retirement Account and/or an In-Service Account.  The deferred amount will be withheld from each paycheck throughout the year. 

 

Company Matching Contribution

On an annual basis, the Company will match participant contributions equal to 100% of the first 3% of the amount that is deferred in the Plan.  To receive any matching contributions, a participant must have received the maximum matching contribution available under the AVX Retirement Plan.  A participant’s eligible compensation for the purposes of receiving a Company Matching Contribution in the Plan cannot exceed the annual dollar limit established by the Plan Administrator. 

 

Non-discretionary Contribution

The Company will make an annual contribution equal to 5% of eligible compensation between $255,000 (i.e., the IRS Compensation Limit for 2013) and $600,000.

 

Discretionary Contribution

The Company may make an annual contribution between 0% - 5% of eligible compensation between $255,000 (i.e., the IRS Compensation Limit for 2013) and $600,000.  The contribution amount is subject to approval by the Company’s Board of Directors.

 

Vesting

Each participant shall be fully vested and have a non-forfeitable interest in his account.

 

Payment of Benefits

A participant’s Retirement Account balance shall be payable to the participant or beneficiary upon the earlier of such participant’s separation from service, disability or death in a lump-sum payment or in installments over a period not to exceed 10 years, as selected by the participant.  A participant’s In-Service Account balance will be paid to the participant in a single lump-sum on a date previously elected by the participant.

 

Potential Payments Upon Termination

 

The Company has an employment agreement with its Chief Executive Officer, Mr. Gilbertson.  The Company does not have any employment or severance agreements with the other Named Executive Officers.  The following discussion summarizes the value of payments and benefits that the Named Executive Officers would be entitled to receive assuming that a termination of employment under various circumstances had occurred on March 31, 2014.

 

In the event of a termination of employment due to death, disability or retirement, all outstanding stock options held by the Named Executive Officers would become fully vested.  The intrinsic value of the stock options that would become vested upon such termination (calculated based on the excess of the fair market value of the underlying shares as of March 31, 2014 over the exercise price of the options) is as follows:  Mr. Gilbertson, $364,000; Mr. Cummings, $95,520;  Mr. Lawing, $108,590; Mr. Venuto, $91,000; and Mr. Thomas, $52,890.  In the event of a termination of employment for any reason, the Named Executive Officers would be entitled to a payout of their vested balance under the Company’s Supplemental Plan, which amounts are reflected in the Nonqualified Deferred Compensation table.  In the event of the death of a Named Executive Officer while actively employed, the person’s spouse or estate would continue to receive that person’s base salary for the ensuing two years.  In addition, upon his retirement from the Company, Mr. Gilbertson would be entitled to receive payments during a two-year advisory period equal to his most recent base salary as a full-time employee.  Assuming Mr. Gilbertson had retired as of March 31, 2014, the sum of these payments would have been approximately $1,799,718.   

 

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Shareholder Proposals

 

If any shareholder intends to present a proposal to the Company for inclusion in its proxy statement relating to the annual meeting of shareholders expected to be held in July 2015 or wishes to recommend nominees to the Board, such proposal, in writing and addressed to the Corporate Secretary, must be received by the Company no later than February 6, 2015.

 

In general, in order to be considered timely under the Bylaws of the Company, shareholder proposals intended to be presented at an annual shareholders meeting, including proposals for the nomination of directors, must be received by the Company no earlier than April 24, 2015 and no later than May 25, 2015 (not earlier than 90 days nor later than 60 days prior  to the anniversary of the preceding year’s annual meeting of shareholders); provided, however, in the event that the date of the annual meeting is advanced more than 30 days prior to such anniversary date or delayed more than 60 days after such anniversary date then to be timely such notice must be received by the Company no later than the later of 70 days prior to the date of the meeting or the 10th day following the day on which public announcement of the date of the meeting was made.

 

Proxy Solicitation

 

The entire cost of this solicitation will be borne by the Company, including reimbursement of banks, brokerage firms, custodians, nominees and fiduciaries for their reasonable expenses in sending proxy materials to the beneficial owners of the Common Stock.  Solicitation will primarily be made by mail, but proxies may be solicited personally by the Company’s officers, directors or employees, by telephone or by facsimile.  The costs and expenditures in connection with the solicitation of security holders are only those normally expended for a solicitation for an election of Directors in the absence of a contest.

 

The Company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments filed with or furnished to the SEC pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act are available free of charge on the Company’s website at www.avx.com as soon as reasonably practicable after being filed with the SEC.  To view the reports from the Company’s website, go to “Corporate Information,” then “Investor Relations,” then “SEC Filings.”

 

 

By order of the Board,

                           

Kurt Cummings

Corporate Secretary