UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
|
X
|
Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934
|
For
the quarterly period ended June 30, 2007.
or
|
Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934
|
For
the
transition period from __________ to __________
Commission
file number 1-7201
(Exact
name of registrant as specified in its charter)
|
Delaware
|
33-0379007
|
|
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer ID No.)
|
|
|
801
17th Avenue South, Myrtle Beach, South Carolina
|
29577
|
|
|
(Address
of principle executive offices)
|
(Zip
Code)
|
|
|
(843)
448-9411
|
||
|
(Registrant's
phone number, including area code)
|
||
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 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 whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See the definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act. (Check one):
|
Large
accelerated filer
|
X
|
Accelerated
filer
|
Non-accelerated
filer
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
|
Yes
|
No
|
X
|
Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
|
Class
|
Outstanding
at August 1, 2007
|
|
|
Common
Stock, par value $0.01 per share
|
171,903,670
|
AVX
CORPORATION
INDEX
|
Page
Number
|
||
|
PART
I:
|
Financial
Information:
|
|
|
ITEM
1.
|
Financial
Statements:
|
|
|
|
3
|
|
|
|
4
|
|
|
|
5
|
|
|
|
6
|
|
|
ITEM
2.
|
|
13
|
|
ITEM
3.
|
|
19
|
|
ITEM
4.
|
|
19
|
|
PART
II:
|
|
|
|
ITEM
1.
|
|
20
|
|
ITEM
4.
|
|
20
|
|
ITEM
6.
|
|
21
|
|
22
|
||
-2-
Consolidated
Balance Sheets (Unaudited)
(in
thousands, except per share data)
|
March
31,
|
June
30,
|
|||
|
ASSETS
|
2007
|
2007
|
||
|
Current
assets:
|
||||
|
Cash
and cash equivalents
|
$
|
684,382
|
$
|
763,384
|
|
Short-term
investments in securities
|
|
145,000
|
|
130,000
|
|
Accounts
receivable - trade
|
|
191,106
|
|
194,719
|
|
Accounts
receivable - affiliates
|
|
5,059
|
|
4,959
|
|
Inventories
|
|
330,141
|
|
335,530
|
|
Deferred
income taxes
|
|
26,941
|
|
26,947
|
|
Prepaid
and other
|
|
38,766
|
|
40,396
|
|
Total
current assets
|
|
1,421,395
|
|
1,495,935
|
|
Long-term
investments in securities
|
|
139,000
|
|
99,000
|
|
Property
and equipment
|
|
1,593,282
|
|
1,615,493
|
|
Accumulated
depreciation
|
|
(1,349,409)
|
|
(1,370,326)
|
|
|
|
243,873
|
|
245,167
|
|
Goodwill
|
|
71,166
|
|
73,130
|
|
Other
assets
|
|
24,102
|
|
22,549
|
|
Total
Assets
|
$
|
1,899,536
|
$
|
1,935,781
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||
|
Current
liabilities:
|
||||
|
Accounts
payable - trade
|
$
|
50,903
|
$
|
52,271
|
|
Accounts
payable - affiliates
|
|
75,786
|
|
66,934
|
|
Income
taxes payable
|
|
14,668
|
|
16,487
|
|
Accrued
payroll and benefits
|
|
38,965
|
|
37,511
|
|
Accrued
expenses
|
|
27,038
|
|
24,775
|
|
Total
current liabilities
|
|
207,360
|
|
197,978
|
|
Other
liabilities
|
|
56,897
|
|
58,401
|
|
Total
Liabilities
|
|
264,257
|
|
256,379
|
|
Commitments
and contingencies (Note 6)
|
||||
|
Stockholders'
Equity:
|
||||
|
Preferred
stock, par value $.01 per share:
|
-
|
-
|
||
|
Authorized, 20,000 shares; None issued and outstanding
|
|
|
|
|
|
Common
stock, par value $.01 per share:
|
1,764
|
1,764
|
||
|
Authorized,
300,000 shares; issued, 176,368 shares
|
|
|
||
|
Additional
paid-in capital
|
|
340,911
|
|
341,480
|
|
Retained
earnings
|
|
1,226,283
|
|
1,259,630
|
|
Accumulated
other comprehensive income
|
|
128,812
|
|
135,995
|
|
Treasury
stock, at cost:
|
(62,491)
|
(59,467)
|
||
|
4,694
and 4,467 shares at March 31 and June 30, 2007,
respectively
|
|
|
||
|
Total
Stockholders' Equity
|
|
1,635,279
|
|
1,679,402
|
|
Total
Liabilities and Stockholders' Equity
|
$
|
1,899,536
|
$
|
1,935,781
|
See
accompanying notes to consolidated
financial statements.
-3-
Consolidated
Statements of Operations (Unaudited)
(in
thousands, except per share data)
|
Three
Months Ended June 30,
|
||||
|
|
|
2006
|
2007
|
|
|
Net
sales
|
$
|
366,408
|
$
|
383,158
|
|
Cost
of sales
|
|
291,081
|
|
308,433
|
|
Gross
profit
|
|
75,327
|
|
74,725
|
|
Selling,
general and administrative expenses
|
|
28,374
|
|
30,568
|
|
Profit
from operations
|
|
46,953
|
|
44,157
|
|
Other
income (expense):
|
||||
|
Interest
income
|
|
7,994
|
|
12,082
|
|
Interest
expense
|
|
-
|
|
(242)
|
|
Other,
net
|
|
(1,269)
|
|
(844)
|
|
Income
before income taxes
|
|
53,678
|
|
55,153
|
|
Provision
for income taxes
|
|
17,445
|
|
15,994
|
|
Net
income
|
$
|
36,233
|
$
|
39,159
|
|
Income
per share:
|
||||
|
Basic
|
$
|
0.21
|
$
|
0.23
|
|
Diluted
|
$
|
0.21
|
$
|
0.23
|
|
Weighted
average common shares outstanding:
|
||||
|
Basic
|
|
172,281
|
|
171,797
|
|
Diluted
|
|
173,096
|
|
172,587
|
See
accompanying notes to consolidated
financial statements.
-4-
Consolidated
Statements of Cash Flows (Unaudited)
(in
thousands)
|
Three
Months Ended June 30,
|
||||
|
|
2006
|
2007
|
||
|
Operating
Activities:
|
||||
|
Net
income
|
$
|
36,233
|
$
|
39,159
|
|
Adjustment
to reconcile net income to net cash from operating
activities:
|
||||
|
Depreciation
|
14,111
|
12,036
|
||
|
Stock-based
compensation expense
|
700
|
732
|
||
|
Deferred
income taxes
|
2,971
|
2,687
|
||
|
Changes
in operating assets and liabilities:
|
||||
|
Accounts
receivable
|
(12,464)
|
(2,501)
|
||
|
Inventories
|
5,788
|
(5,380)
|
||
|
Accounts
payable and accrued expenses
|
20,169
|
(8,475)
|
||
|
Income
taxes payable
|
10,087
|
6,149
|
||
|
Other
assets
|
(854)
|
(3,158)
|
||
|
Other
liabilities
|
(90)
|
(2,146)
|
||
|
Net
cash provided by (used in) operating activities
|
76,651
|
39,103
|
||
|
Investing
Activities:
|
||||
|
Purchases
of property and equipment
|
(9,160)
|
(13,673)
|
||
|
Purchases
of investment securities
|
(39,000)
|
(59,000)
|
||
|
Redemption
of investment securities
|
39,000
|
114,000
|
||
|
Net
cash provided by (used in) investing activities
|
(9,160)
|
41,327
|
||
|
Financing
Activities:
|
||||
|
Dividends
paid
|
(6,462)
|
(6,871)
|
||
|
Purchase
of treasury stock
|
(2,378)
|
-
|
||
|
Proceeds
from exercise of stock options
|
1,570
|
2,442
|
||
|
Excess
tax benefit from stock-based payment arrangements
|
140
|
417
|
||
|
Net
cash provided by (used in) financing activities
|
(7,130)
|
(4,012)
|
||
|
Effect
of exchange rate on cash
|
3,166
|
2,584
|
||
|
Increase
(decrease) in cash and cash equivalents
|
63,527
|
79,002
|
||
|
Cash
and cash equivalents at beginning of period
|
505,326
|
684,382
|
||
|
Cash
and cash equivalents at end of period
|
$
|
568,853
|
$
|
763,384
|
See
accompanying notes to consolidated
financial statements.
-5-
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in
thousands, except per share data)
|
1.
|
Basis
of Presentation:
|
The
consolidated financial statements of AVX Corporation and subsidiaries ("AVX"
or
the "Company") include all accounts of the Company and its
subsidiaries. All significant intercompany transactions and accounts
have been eliminated. The accompanying financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission ("SEC") for interim financial
reporting. These consolidated financial statements are unaudited, and
in the opinion of management, include all adjustments, consisting of normal
recurring adjustments and accruals, necessary for the fair presentation of
the
consolidated balance sheets, operating results and cash flows for the periods
presented. Operating results for the three months ended June 30, 2007
are not necessarily indicative of the results that may be expected for the
fiscal year ending March 31, 2008 due to cyclical and other
factors. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been omitted in
accordance with the rules and regulations of the SEC. These
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and accompanying notes included in the
Company's Annual Report on Form 10-K for the fiscal year ended March 31,
2007.
Critical
Accounting Policies and Estimates:
The
Company has identified the accounting policies and estimates that are critical
to our business operations and understanding the Company's results of
operations. Those policies and estimates can be found in Note 1,
"Summary of Significant Accounting Policies", of the Notes to Consolidated
Financial Statements and in "Critical Accounting Policies and Estimates", in
“Management's Discussion and Analysis of Financial Condition and Results of
Operations” contained in the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 2007 and in Note 1, "Critical Accounting Policies and
Estimates", in the Notes to Consolidated Financial Statements in this Form
10-Q. Accordingly, this Quarterly Report on Form 10-Q
should be read in conjunction with the Company's Annual Report on Form 10-K
for
the fiscal year ended March 31, 2007. During the three month
period ended June 30, 2007, except as noted below, there were no significant
changes to any critical accounting policies, judgments involved in applying
those policies or to the methodology used in determining estimates including
those related to revenue recognition, inventories, property and equipment,
income taxes and contingencies.
New
Accounting Standards
In
June
2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation
No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48") which clarifies
the accounting for uncertainty in income taxes recognized in the financial
statements in accordance with FASB Statement No. 109, “Accounting for Income
Taxes.” FIN 48 provides guidance on the financial statement
recognition and measurement of a tax position taken or expected to be taken
in a
tax return. FIN 48 requires that we recognize in our financial
statements, the impact of a tax position, if that position is “more likely than
not” of being sustained on audit, based on the technical merits of the position.
The Company adopted the provisions of FIN 48 effective April 1, 2007. The
cumulative effect of the change in retained earnings as of the date of adoption,
which represents the difference between the net amount of assets and liabilities
recognized in the Company’s consolidated balance sheet prior to the application
of FIN 48 and the net amount of assets and liabilities recognized as a result
of
applying FIN 48, is an increase of approximately $1,100.
The
amount of unrecognized tax benefits recorded on the Company’s balance sheet at
the date of adoption, and that, if recognized, would affect the effective tax
rate is approximately $5,500. This amount excludes an accrual for estimated
interest and penalties in the amount of approximately $240 which has been
recorded as a component of interest expense.
The
Company does not expect that the balances with respect to its uncertain tax
positions will significantly increase or decrease within the next 12
months. For its more significant locations, the Company is subject to
income tax examinations generally for the year 2001 and for the years 2004
and
forward in the United States, 2004 and forward in Singapore, 2001 and forward
in
Hong Kong, and 2001 and forward in the United Kingdom.
-6-
In
September 2006, the FASB issued Statement of Financial Accounting Standard
No.
157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, provides
guidance for measuring fair value and requires additional
disclosures. This statement does not require any new fair value
measurements, but rather applies to all other accounting pronouncements that
require or permit fair value measurements. SFAS 157 is effective for
financial statements issued for fiscal years beginning after November 15,
2007. The Company is currently evaluating the impact of SFAS 157 on
the consolidated financial statements.
In
February 2007, the FASB issued Statement of Financial Accounting Standard No.
159, “The Fair Value Option for Financial Assets and Financial Liabilities -
Including an amendment of FASB Statement No. 115” (“SFAS 159”), which permits
entities to choose to measure many financial instruments and certain other
items
at fair value. In accordance with SFAS 159, entities will report
unrealized gains and losses for which the tax value option has been elected
in
earnings at each subsequent reporting date. SFAS 159 is effective for
financial statements issued for fiscal years beginning after November 15,
2007. Early adoption is permitted provided SFAS 157 provisions are
applied. The Company is currently evaluating the impact of SFAS 159
on the consolidated financial statements.
|
2.
|
Earnings
Per Share:
|
Basic
earnings per share are computed by dividing net earnings by the weighted average
number of shares of common stock outstanding for the period. Diluted
earnings per share are computed by dividing net earnings by the sum of (a)
the
weighted average number of shares of common stock outstanding during the period
and (b) the dilutive effect of potential common stock equivalents during the
period. Stock options are the only common stock equivalents currently
used by the Company and are computed using the treasury stock
method.
The
table
below represents the basic and diluted weighted average number of shares of
common stock and potential common stock equivalents:
|
|
|
Three
Months Ended June 30,
|
||
|
|
|
2006
|
2007
|
|
|
Net
Income
|
$
|
36,233
|
$
|
39,159
|
|
Computation
of Basic EPS:
|
||||
|
Weighted
Average Shares Outstanding used
in
computing
Basic EPS
|
|
172,281
|
|
171,797
|
|
Basic
earnings per share
|
$
|
0.21
|
$
|
0.23
|
|
Computation
of Diluted EPS:
|
||||
|
Weighted
Average Shares Outstanding
|
|
172,281
|
|
171,797
|
|
Effect
of stock options
|
|
815
|
|
790
|
|
Shares
used in computing Diluted EPS (1)
|
|
173,096
|
|
172,587
|
|
Diluted
Income per share
|
$
|
0.21
|
$
|
0.23
|
(1)
Common stock equivalents, not included in the computation of diluted earnings
per share because the impact would have been antidilutive were 2,403 shares
and
2,779 shares for the three months ended June 30, 2006 and 2007,
respectively.
-7-
|
3.
|
Trade
Accounts Receivable:
|
|
March
31, 2007
|
June
30, 2007
|
||||
|
Gross
Accounts Receivable - Trade
|
$
|
213,869
|
$
|
219,273
|
|
|
Less:
|
|
|
|
|
|
|
|
Allowances
for doubtful accounts
|
|
1,705
|
|
1,643
|
|
|
Stock
rotation and ship from stock and debit
|
|
11,918
|
|
13,082
|
|
|
Sales
returns and discounts
|
|
9,140
|
|
9,829
|
|
|
Total
allowances
|
|
22,763
|
|
24,554
|
|
|
Net
Accounts Receivable - Trade
|
$
|
191,106
|
$
|
194,719
|
Charges
related to allowances for doubtful accounts are charged to selling, general
and
administrative expenses. Charges related to stock rotation, ship from
stock and debit, sales returns and sales discounts are reported as deductions
from revenue.
|
Three
Months Ended June 30,
|
|||||
|
|
|
2006
|
2007
|
|
|
|
Allowances
for doubtful accounts:
|
|
|
|||
|
Beginning
Balance
|
$
|
1,772
|
$
|
1,705
|
|
|
Charges
|
|
(255)
|
-
|
|
|
|
Applications
|
|
-
|
(75)
|
|
|
|
Translation
and other
|
|
16
|
13
|
|
|
|
Ending
Balance
|
$
|
1,533
|
$
|
1,643
|
|
|
Stock
rotation and ship from stock and debit:
|
|
|
|||
|
Beginning
Balance
|
|
14,292
|
11,918
|
|
|
|
Charges
|
|
10,964
|
10,824
|
|
|
|
Applications
|
|
(10,010)
|
(9,677)
|
|
|
|
Translation
and other
|
|
43
|
17
|
|
|
|
Ending
Balance
|
$
|
15,289
|
$
|
13,082
|
|
|
Sales
returns and discounts:
|
|
|
|||
|
Beginning
Balance
|
|
8,496
|
9,140
|
|
|
|
Charges
|
|
5,063
|
8,488
|
|
|
|
Applications
|
|
(4,673)
|
(7,816)
|
|
|
|
Translation
and other
|
|
59
|
17
|
|
|
|
Ending
Balance
|
$
|
8,945
|
$
|
9,829
|
|
-8-
|
4.
|
Inventories:
|
|
|
|
March
31, 2007
|
June
30, 2007
|
|
|
Finished
goods
|
$
|
100,266
|
$
|
97,907
|
|
Work
in process
|
|
98,147
|
|
95,115
|
|
Raw
materials and supplies
|
|
131,728
|
|
142,508
|
|
|
$
|
330,141
|
$
|
335,530
|
|
5.
|
Stock-Based
Compensation:
|
In
May
2007, the Company granted 496 options to employees pursuant to the 2004 Stock
Option Plan described in Note 9, “Stock Based Compensation”, of the Notes to
Consolidated Financial Statements contained in the Company’s Annual Report on
Form 10-K for the fiscal year ended March 31, 2007. The weighted average grant
date fair value per share and the weighted average exercise price per share
for
these options is $5.99 and $17.88, respectively.
|
6.
|
Commitments
and Contingencies:
|
The
Company has entered into a definitive agreement, dated as of June 15, 2007,
to acquire American Technical Ceramics Corp. In accordance with the
agreement, the Company would acquire by merger all of the outstanding capital
stock of American Technical Ceramics Corp. in exchange for approximately
$231,000 in cash, or $24.75 per share. The transaction is subject to
approval of the American Technical Ceramics Corp. shareholders, and other
conditions, including regulatory approvals, that are customary for transactions
of this type.
The
amount of unrecognized tax benefits recorded on the Company's
balance sheet at the date of adoption is approximately $5,500. The
Company is unable to reasonably estimate in which future periods these amounts
will ultimately be settled.
The
Company has been named as a potentially responsible party (“PRP”) in state and
federal administrative proceedings seeking contribution for costs associated
with the correction and remediation of environmental conditions at various
waste
disposal and operating sites. To resolve the Company’s liability at each of the
sites at which the Company has been named a PRP, the Company has entered
into various administrative orders and consent decrees with federal and state
regulatory agencies governing the timing and nature of investigation and
remediation. The Company has paid, or reserved for, all estimated
amounts required under the terms of these orders and decrees corresponding
to
the Company’s apportioned share of the liabilities. As is customary,
the orders and decrees regarding sites where the PRPs are not themselves
implementing the chosen remedy contain provisions allowing the EPA to reopen
the
agreement and seek additional amounts from settling PRPs in the event that
certain contingencies occur, such as the discovery of significant new
information about site conditions during remediation or substantial cost
overruns for the chosen remedy. The existence of these reopener
provisions, combined with the difficulties of reliably estimating remediation
costs and the joint and several nature of such liabilities, makes it difficult
to predict the ultimate liability at any site with certainty.
In
July
2007, the Company received oral notification from the EPA indicating that it
is
considering exercising the reopener provision under a 1991 consent decree
relating to the environmental conditions at, and remediation of, New Bedford
Harbor, Massachusetts. Under that consent decree, the Company paid
$66,000, plus interest, toward the environmental conditions at, and remediation
of, the harbor in settlement with the EPA and the Commonwealth of Massachusetts,
subject to reopener provisions, including a reopener if certain remediation
costs for the site exceed $130,500. The EPA has indicated that
remediation costs through April 2007 (which remediation is ongoing) are
approximately $302,000. The Company has not yet undertaken discussions with
the
EPA regarding this matter, the monies spent or any evaluation of the merits
or
applicability of the reopener provisions to the current status of the site.
The
Company has also not yet determined the extent to which other parties may bear
responsibility for these costs. Accordingly, the potential
impact of this matter on the Company’s financial position, results of
operations and cash flows cannot be determined at this time.
-9-
On
June
2, 2006, the Company received a “Confirmation of Potential Liability; Demand and
Notice of Decision Not to Use Special Notice Procedures” dated May 31, 2006 from
the EPA with regard to the purported release of hazardous substances at a
facility referred to as the “Aerovox Facility” (the “Facility”), located at 740
Belleville Avenue, New Bedford, Massachusetts. The EPA sought $1,600
(subsequently modified to $900) of past costs, as well as future costs
associated with the demolition of the Facility. A predecessor of AVX sold this
Facility to an unrelated third party in 1973. The Company has investigated
the
claim as well as potential defenses and other actions, including the engagement
of environmental engineering consultants to study and analyze documentation
made
available by the EPA with respect to the Facility. In August 2006,
the Company provided a written response to the EPA, denying liability. The
EPA
has recently indicated orally that the proposed plan of remediation has been
modified, and that its present provisional estimate of future costs for such
remediation is $13,700. The Company anticipates further discussions with the
EPA. The potential impact on the Company’s financial position,
results of operations and cash flows cannot be determined at this
time.
The
Company also currently operates on sites that may have environmental issues
in
the future. 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 reserves or adjusts its reserve for its
projected share of these costs. Management believes that, as of June
30, 2007, its reserves of approximately $2,699 are appropriate with respect
to
these matters, although actual costs may vary from these estimated
reserves.
The
Company is also involved in other disputes and legal proceedings arising in
the
normal course of business. While the Company cannot predict the
outcome of these disputes and proceedings, the Company believes, based upon
a
review with legal counsel, that none of these disputes or proceedings will
have
a material impact on the Company’s financial position, results of operations, or
cash flows. However, the Company cannot be certain of the eventual
outcome of any particular proceeding and any adverse potential impact on the
Company’s financial position, results of operations and cash flows from these or
other matters that may arise from time to time.
|
7.
|
Comprehensive
Income:
|
Comprehensive
income represents changes in equity during a period except those resulting
from
investments by and distributions to shareholders. The specific
components include net income, pension liability adjustments, deferred gains
and
losses resulting from foreign currency translation adjustments and qualified
foreign currency cash flow hedges.
Comprehensive
income includes the following components:
|
Three
Months Ended June 30,
|
|||||
|
|
|
2006
|
2007
|
||
|
Net
income
|
$
|
36,233
|
$
|
39,159
|
|
|
Other
comprehensive income:
|
|||||
|
|
Pension
liability adjustment, net of tax
|
|
-
|
|
426
|
|
|
Foreign
currency translation adjustment
|
|
24,978
|
|
8,119
|
|
|
Foreign
currency cash flow hedges
|
|
(975)
|
|
(1,362)
|
|
Comprehensive
income
|
$
|
60,236
|
$
|
46,342
|
|
-10-
|
8.
|
Segment
and Geographic Information:
|
The
Company has three reportable segments: Passive Components, KED Resale and
Connectors. The Passive Components segment consists primarily of surface mount
and leaded ceramic and tantalum capacitors, film and power capacitors and
varistors. The KED Resale segment consists primarily of ceramic capacitors,
crystal oscillators, SAW devices, resistive products, RF modules, actuators,
acoustic devices and connectors produced by Kyocera Corporation of Japan
(“Kyocera”) and resold by AVX. The Connectors segment consists
primarily of Elco automotive, telecom and memory connectors manufactured by
AVX. Sales and operating results from these reportable segments are
shown in the tables below. In addition, the Company has a corporate
administration group consisting of finance and administrative activities and
a
separate research and development group.
The
Company evaluates performance of its segments based upon sales and operating
profit. There are no intersegment revenues. The Company
allocates the costs of shared resources between segments based on each segment's
usage of the shared resources. Cash, accounts receivable, investments
in securities and certain other assets, which are centrally managed, are not
readily allocable to operating segments.
The
tables below present information about reported segments:
|
Three
Months Ended June 30,
|
||||
|
|
|
2006
|
2007
|
|
|
Net
sales:
|
||||
|
Passive
Components
|
$
|
228,039
|
$
|
226,426
|
|
KED
Resale
|
|
115,993
|
|
131,154
|
|
Connectors
|
|
22,376
|
|
25,578
|
|
Total
|
$
|
366,408
|
$
|
383,158
|
|
Three
Months Ended June 30,
|
||||
|
|
|
2006
|
2007
|
|
|
Operating
profit:
|
||||
|
Passive
Components
|
$
|
48,657
|
$
|
47,150
|
|
KED
Resale
|
|
9,265
|
|
11,479
|
|
Connectors
|
|
1,715
|
|
2,293
|
|
Research
& development
|
|
(2,547)
|
|
(2,864)
|
|
Corporate
administration
|
|
(10,137)
|
|
(13,901)
|
|
Total
|
$
|
46,953
|
$
|
44,157
|
|
|
|
March
31, 2007
|
June
30, 2007
|
|
|
Assets:
|
||||
|
Passive
Components
|
$
|
498,343
|
$
|
504,609
|
|
KED
Resale
|
|
39,943
|
|
36,178
|
|
Connectors
|
|
44,913
|
|
46,129
|
|
Research
& development
|
|
7,133
|
|
7,042
|
|
Cash,
A/R and investments in securities
|
|
1,164,547
|
|
1,192,062
|
|
Goodwill
- Passive components
|
|
60,889
|
|
62,853
|
|
Goodwill
- Connectors
|
|
10,277
|
|
10,277
|
|
Corporate
administration
|
|
73,491
|
|
76,631
|
|
Total
|
$
|
1,899,536
|
$
|
1,935,781
|
-11-
The
following geographic data is based upon net sales generated by operations
located within particular geographic areas:
|
Three
Months Ended June 30,
|
||||
|
|
|
2006
|
2007
|
|
|
Net
sales:
|
||||
|
Americas
|
$
|
112,455
|
$
|
102,633
|
|
Europe
|
|
85,717
|
|
92,628
|
|
Asia
|
|
168,236
|
|
187,897
|
|
Total
|
$
|
366,408
|
$
|
383,158
|
|
9.
|
Pension
Plans:
|
The
following table shows the components of the net periodic pension cost for the
three months ended June 30, 2006 and 2007 for the Company’s defined benefit
plans:
|
U.S.
Plans
|
International
Plans
|
|||||||
|
Three
Months Ended June 30,
|
Three
Months Ended June 30,
|
|||||||
|
|
|
2006
|
2007
|
2006
|
2007
|
|||
|
Service
cost
|
$
|
100
|
$
|
107
|
$
|
342
|
$
|
373
|
|
Interest
cost
|
|
406
|
|
409
|
|
1,375
|
|
1,513
|
|
Expected
return on plan assets
|
|
(399)
|
|
(426)
|
|
(1,252)
|
|
(1,366)
|
|
Amortization
of prior service cost
|
|
18
|
|
21
|
|
15
|
|
17
|
|
Recognized
actuarial loss
|
|
45
|
|
66
|
|
316
|
|
371
|
|
Net
periodic pension cost
|
$
|
170
|
$
|
177
|
$
|
796
|
$
|
908
|
Based
on
current actuarial computations, in fiscal year 2008, the Company expects to
make contributions of approximately $2,800 to the U.S. plans, and expects to
make contributions of approximately $6,400 to the international plans as
previously disclosed in our Form 10-K for the fiscal year ended March 31,
2007.
|
10.
|
Subsequent
Event:
|
On
July
18, 2007, the Board of Directors of the Company declared a $0.04 dividend per
share of common stock with respect to the quarter ended June 30,
2007. The dividend will be paid to stockholders of record on July 31,
2007 and will be disbursed on August 13, 2007.
-12-
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
|
|
|
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|
Forward-Looking
Statements
This
Quarterly Report on Form 10-Q contains "forward-looking" information within
the
meaning of the Private Securities Litigation Reform Act of 1995. All
statements other than statements of historical fact, including statements
regarding industry prospects and future results of operations or financial
position, made in this Quarterly Report on Form 10-Q are
forward-looking. The forward-looking information may include, among
other information, statements concerning the Company's outlook for fiscal year
2008, overall volume and pricing trends, cost reduction strategies and their
anticipated results, expectations for research and development, and capital
expenditures. There may also be other statements of expectations,
beliefs, future plans and strategies, anticipated events or trends, and similar
expressions concerning matters that are not historical
facts. Forward-looking statements reflect management's expectations
and are inherently uncertain. The forward-looking information and
statements in this report are subject to risks and uncertainties, including
those discussed in the Company's Annual Report on Form 10-K for fiscal year
ended March 31, 2007, that could cause actual results to differ materially
from
those expressed in or implied by the information or statements
herein. Forward-looking statements should be read in context with,
and with the understanding of, the various other disclosures concerning the
Company and its business made elsewhere in this quarterly report as well as
other public reports filed by the Company with the SEC. You should
not place undue reliance on any forward-looking statements as a prediction
of
actual results or developments.
The
Company does not intend to update or revise any forward-looking statement
contained in this quarterly report to reflect new events or circumstances unless
and to the extent required by applicable law. All forward-looking
statements contained in this quarterly report constitute "forward-looking
statements" within the meaning of Section 21E of the United States Securities
Exchange Act of 1934 and, to the extent it may be applicable by way of
incorporation of statements contained in this quarterly report by reference
or
otherwise, Section 27A of the United States Securities Act of 1933, each of
which establishes a safe-harbor from private actions for forward-looking
statements as defined in those statutes.
Critical
Accounting Policies and Estimates
"Management's
Discussion and Analysis of Financial Condition and Results of Operations" is
based upon the Company's Consolidated Financial Statements and Notes thereto,
which have been prepared in accordance with generally accepted accounting
principles in the United States. The preparation of these financial
statements requires management to make estimates and judgments that affect
the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reported periods. On an
ongoing basis, management evaluates its estimates and judgments, including
those
related to revenue recognition, inventories, property and equipment, goodwill,
income taxes and contingencies. Management bases its estimates and
judgments on historical experience and on various other factors that are
believed to be reasonable under the circumstances, the results of which form
the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. There can be no
assurance that actual results will not differ from those estimates.
The
Company has identified the accounting policies and estimates that are critical
to our business operations and understanding the Company's results of
operations. Those policies and estimates can be found in Note 1,
"Summary of Significant Accounting Policies", of the Notes to Consolidated
Financial Statements and in "Critical Accounting Policies and Estimates", in
“Management's Discussion and Analysis of Financial Condition and Results of
Operations” contained in the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 2007 and in Note 1, "Critical Accounting Policies and
Estimates", in the Notes to Consolidated Financial Statements in this Form
10-Q. Accordingly, this Quarterly Report on Form 10-Q should be read
in conjunction with the Company's Annual Report on Form 10-K for the fiscal
year
ended March 31, 2007. During the three month period ended June
30, 2007, except as noted in Note 1, “Critical Accounting Policies and
Estimates”, of the Company’s Notes to Consolidated Financial Statements
contained in this Quarterly Report on Form 10-Q, there were no significant
changes to any critical accounting policies, judgments involved in applying
those policies or the methodology used in determining estimates with respect
to
those related to revenue recognition, inventories, property and equipment,
income taxes and contingencies.
-13-
Business
Overview
AVX
is a
leading worldwide manufacturer and supplier of a broad line of passive
electronic components. Virtually all types of electronic devices use our passive
component products to store, filter or regulate electric energy. We
also manufacture and supply high-quality electronic connectors and inter-connect
systems for use in electronic products.
We
have
manufacturing, sales and distribution facilities located throughout the world
which are divided into three main geographic regions: the Americas, Asia and
Europe. AVX is organized into five main product groups with three
reportable segments: Passive Components, KED Resale and
Connectors. The Passive Components segment consists primarily of
surface mount and leaded ceramic and tantalum capacitors, film and power
capacitors and varistors. The KED Resale segment consists primarily
of ceramic capacitors, crystal oscillators, SAW devices, resistive products,
RF
modules, actuators, acoustic devices and connectors produced by Kyocera, and
resold by AVX. The Connectors segment consists primarily of Elco
automotive, telecom and memory connectors manufactured by AVX.
Our
customers are multi-national original equipment manufacturers, or OEMs,
independent electronic component distributors and electronic manufacturing
service providers, or EMSs. We market our products through our own
direct sales force and independent manufacturers' representatives, based upon
market characteristics and demands. We coordinate our sales,
marketing and manufacturing organizations by strategic customer account and
globally by region.
We
sell
our products to customers in a broad array of industries, such as
telecommunications, information technology hardware, automotive electronics,
medical devices and instrumentation, industrial instrumentation, defense and
aerospace electronic systems and consumer electronics.
Results
of Operations - Three Months Ended June 30, 2007 and
2006
Net
income for the quarter ended June 30, 2007 was $39.2 million, or diluted
earnings per share of $0.23, compared to $36.2 million, or $0.21 diluted
earnings per share for the quarter ended June 30, 2006. This increase is a
result of the factors set forth below.
|
in
thousands, except per share data
|
Three
Months Ended June 30,
|
|||
|
|
|
2006
|
2007
|
|
|
Net
Sales
|
$
|
366,408
|
$
|
383,158
|
|
Gross
Profit
|
|
75,327
|
|
74,725
|
|
Operating
Income
|
|
46,953
|
|
44,157
|
|
Net
Income
|
|
36,233
|
|
39,159
|
|
Diluted
Earnings per Share
|
$
|
0.21
|
$
|
0.23
|
Net
sales
in the three months ended June 30, 2007 increased $16.8 million, or 4.6%, to
$383.2 million compared to $366.4 million in the three months ended June 30,
2006. This increase is primarily a result of continued end-market growth and
demand for new products, and increased consumer demand for more sophisticated
electronic devices. Supply chain inventory levels have remained
stable. Overall sales prices have remained stable during the current
quarter as a result of the continued high production capacity utilization needed
to meet the strong end-market demand for electronics which may be influenced
by
continued favorable economic conditions.
-14-
The
table
below represents product group revenues for the three month periods ended June
30, 2006 and June 30, 2007.
|
Sales
Revenue
|
Three
Months Ended June 30,
|
|||
|
$(000's)
|
|
2006
|
2007
|
|
|
Ceramic
Components
|
$
|
61,970
|
$
|
54,077
|
|
Tantalum
Components
|
|
74,326
|
|
79,677
|
|
Advanced
Components
|
|
91,743
|
|
92,672
|
|
Total
Passive Components
|
|
228,039
|
|
226,426
|
|
KDP
and KKC Resale
|
|
98,564
|
|
110,061
|
|
KEC
Resale
|
|
17,429
|
|
21,093
|
|
Total
KED Resale
|
|
115,993
|
|
131,154
|
|
Connectors
|
|
22,376
|
|
25,578
|
|
Total
Revenue
|
$
|
366,408
|
$
|
383,158
|
Passive
Component sales decreased $1.6 million, or 0.7%, to $226.4 million in the three
months ended June 30, 2007 from $228.0 million during the same quarter last
year. The sales decrease in Passive Components was primarily due to a
decrease in overall ceramic unit sales volume and the Company’s strategy to
focus on a higher mix of value added products. The increases in sales of
Tantalum Components and Advanced Components reflect the continuing end-market
demand for new and value added products that provide unique solutions necessary
for today’s more sophisticated electronic devices.
KDP
and
KKC Resale sales increased 11.7% to $110.1 million in the three months ended
June 30, 2007 compared to $98.6 million during the same period last
year. When compared to the same period last year, the increase during
the quarter ended June 30, 2007 is primarily attributable to a 20.7%
increase in unit sales volume resulting from increased customer demand for
these
products.
Total
Connector sales, including AVX manufactured and KEC Resale connectors, increased
$6.9 million, or 17.2%, to $46.7 million in the three months ended June 30,
2007
compared to $39.8 million during the same period last year. When
compared to the same period last year, this increase was primarily attributable
to customer demand and new programs, particularly in the automotive sector,
as
more electronic functionality is being built into today’s vehicles.
The
Company's sales to independent electronic distributor customers represented
43.9% of total sales for the three months ended June 30, 2007, compared to
43.4%
for the three months ended June 30, 2006. The Company's sales to
distributor customers involve specific ship and debit and stock rotation
programs for which sales allowances are recorded as reductions in
sales. Such allowance charges were $10.8 million, or 6.0% of gross
sales to distributor customers, for the three months ended June 30, 2007 and
$11.0 million, or 6.5% of gross sales to distributor customers, for the three
months ended June 30, 2006. Applications under such programs for the quarters
ended June 30, 2007 and 2006 were approximately $9.7 million and $10.0 million,
respectively.
Geographically,
compared to the same period last year, sales increased 11.7% in Asia, and 8.1%
in Europe. This reflects the continued trend of movement of customer production
to the Asian region and improved demand in Europe. These increases were
partially offset by lower demand in the Americas, where sales decreased 8.7%
compared to the same period last year. In addition, the weakening of the U.S.
dollar against certain foreign currencies positively impacted sales by $3.6
million, when compared to the same quarter last year.
-15-
Gross
profit in the three months ended June 30, 2007 was 19.5% of sales or $74.7
million compared to a gross profit margin of 20.6% or $75.3 million in the
three
months ended June 30, 2006. This decrease is a result of the
increases in material costs chiefly related to the increased cost of metals
and
plastics used in production in addition to currency translation as the U.S.
dollar weakened against certain foreign currencies during the twelve months
ended June 30, 2007. The negative effect of currency movement on costs was
approximately $5.0 million when compared to the same quarter last year. These
increases in costs were partially offset by the Company’s continued efforts to
enhance production capabilities and lower costs and by increases in sales of
value added products. Compared to the same period last year,
depreciation expense was $2.1 million lower as a result of lower capital
spending over the past several years.
Selling,
general and administrative expenses in the three months ended June 30, 2007
were
$30.6 million, or 8.0% of net sales, compared to $28.4 million, or 7.7% of
net
sales, in the three months ended June 30, 2006. The overall increase
in selling, general and administrative expenses was due to higher selling and
other costs resulting principally from higher sales.
As
a
result of the above factors, income from operations declined $2.8 million to
$44.2 million in the three months ended June 30, 2007 compared to $47.0 million
in the three months ended June 30, 2006.
Other
income increased $4.3 million to $11.0 million in the three months ended June
30, 2007 compared to $6.7 million in the same period last year. This increase
is
primarily due to higher interest income resulting from higher interest rates
and
higher cash and securities investment balances.
The
Company's effective tax rate for the period ended June 30, 2007 was 29.0%
compared to 32.5% for the same period last year. This lower effective tax rate
is primarily due to higher profits in certain low tax jurisdictions in the
current period when compared to the same period last year. In
addition, the effective tax rate was favorably impacted from the benefit of
our
foreign branch losses taken as deductions in prior years’ U.S. tax returns
no longer subject to U.S. income tax recapture regulations.
Outlook
Near-Term:
The
electronic component industry in which we operate is cyclical. Near-term results
for us will depend on growth in the economy and resulting expansion in the
telecommunications, information technology hardware, automotive, consumer
electronics and other electronic markets. We expect a continued,
stable pricing environment as we believe that the industry demand for our
products is in line with component manufacturing
capacity. Additionally, we expect to continue to focus on cost
reductions through process improvements and enhanced production capabilities
in
conjunction with our focus on the sales of value added electronic components
to
support today’s advanced electronic devices. We believe that the acquisition of
ATC, anticipated to occur by early October, will also further enhance our
product offerings in the Advanced Component Group and contribute to our sales
growth during the second half of this fiscal year.
Long-Term:
We
continue to be optimistic that opportunities for long-term growth and
profitability will continue due to: (a) the continued increase as a long-term
trend in worldwide demand for electronic devices which require our electronic
components, (b) cost reductions and improvements in our production processes
and
(c) opportunities for growth in our Advanced Component and Connector product
lines due to advances in component design and increased end-user demand for
more
sophisticated electronics.
-16-
Liquidity
and Capital Resources
The
Company's liquidity needs arise primarily from working capital requirements,
dividend payments, capital expenditures and
acquisitions. Historically, the Company has satisfied its liquidity
requirements through funds from operations and investment income from cash
and
investments in securities. As of June 30, 2007, the Company had a
current ratio of 7.6 to 1, $992.4 million of cash, cash equivalents and
short-term and long-term investments in securities, $1.7 billion of
stockholders' equity and no debt.
Net
cash
provided by operating activities was $39.1 million in the three months ended
June 30, 2007 compared to $76.7 million of cash provided by operating activities
in the three months ended June 30, 2006. The decrease in cash flow
from operating activities compared to the same period last year was primarily
a
result of a reduction of accounts payable and income taxes payable as well
as an
increase in inventories offset by lower accounts receivable and higher net
income.
Purchases
of property and equipment were $13.7 million in the three month period ended
June 30, 2007 compared to $9.2 million in the three month period ended June
30,
2006. Expenditures for both periods were primarily in connection with
the expansion of passive component manufacturing operations in lower cost
regions, process improvements in passive component product lines and expansion
of production of certain advanced component and connector product
lines. The carrying value for our equipment reflects the use of the
accelerated double-declining balance method to compute depreciation expense
for
machinery and equipment. We continue to add additional capacity for
advanced passive component and connector products and expect to incur capital
expenditures of approximately $60 million to $65 million in fiscal
2008. The actual amount of capital expenditures will depend upon the
outlook for end-market demand.
The
majority of the Company's funding is internally generated through operations
and
investment income from cash and investments in securities. Since
March 31, 2007, there have been no significant changes in the Company's
contractual obligations or commitments for the acquisition or construction
of
plant and equipment or future minimum lease commitments under noncancellable
operating leases, except for the definitive acquisition agreement described
below. Based on the financial condition of the Company as of June 30,
2007, the Company believes that cash on hand and cash expected to be generated
from operating activities and investment income from cash and investments in
securities will be sufficient to satisfy the Company's anticipated financing
needs for working capital, capital expenditures, environmental clean-up costs,
research, development and engineering expenses, any acquisitions of businesses
and any dividend payments or stock repurchases to be made during the
year. While changes in customer demand have an impact on the
Company's future cash requirements, changes in those requirements are mitigated
by the Company's ability to adjust manufacturing capabilities to meet increases
or decreases in customer demand. The Company does not anticipate any
significant changes in its ability to generate or meet its liquidity needs
in
the long-term.
We
have
entered into a definitive agreement, dated as of June 15, 2007, to acquire
American Technical Ceramics Corp. In accordance with the agreement,
we would acquire by merger all of the outstanding capital stock of American
Technical Ceramics Corp. in exchange for approximately $231 million in cash,
or
$24.75 per share. The transaction is subject to approval of the
American Technical Ceramics Corp. shareholders, and other conditions, including
regulatory approvals, that are customary for transactions of this type. This
transaction is expected to close in October 2007.
From
time
to time we enter into delivery contracts with selected suppliers for certain
precious metals used in our production processes. The delivery
contracts represent routine purchase orders for delivery within three months
and
payment is due upon receipt. As of June 30, 2007, we did not have any
of these delivery contracts outstanding.
-17-
We
have
been named as a potentially responsible party (“PRP”) in state and federal
administrative proceedings seeking contribution for costs associated with the
correction and remediation of environmental conditions at various waste disposal
and operating sites. To resolve our liability at each of the sites at which
we have been named a PRP, we have entered into various administrative orders
and
consent decrees with federal and state regulatory agencies governing the timing
and nature of investigation and remediation. We have paid, or
reserved for, all estimated amounts required under the terms of these orders
and
decrees corresponding to our apportioned share of the liabilities. As
is customary, the orders and decrees regarding sites where the PRPs are not
themselves implementing the chosen remedy contain provisions allowing the EPA
to
reopen the agreement and seek additional amounts from settling PRPs in the
event
that certain contingencies occur, such as the discovery of significant new
information about site conditions during remediation or substantial cost
overruns for the chosen remedy. The existence of these reopener
provisions, combined with the difficulties of reliably estimating remediation
costs and the joint and several nature of such liabilities, makes it difficult
to predict the ultimate liability at any site with certainty.
In
July
2007, we received oral notification from the EPA indicating that it is
considering exercising the reopener provision under a 1991 consent decree
relating to the environmental conditions at, and remediation of, New Bedford
Harbor, Massachusetts. Under that consent decree, we paid $66.0
million, plus interest, toward the environmental conditions at, and the
remediation of, the harbor in settlement with the EPA and the Commonwealth
of
Massachusetts, subject to reopener provisions, including a reopener
if certain remediation costs for the site exceed $130.5
million. The EPA has indicated that remediation costs through April
2007 (which remediation is ongoing) are approximately $302.0
million. We have not yet undertaken discussions with the EPA
regarding this matter, the monies spent or any evaluation of the merits or
applicability of the reopener provisions to the current status of the site.
We
have also not yet determined the extent to which other parties may bear
responsibility for these costs. Accordingly, the potential impact of
this matter on our financial position, results of operations and cash flows
cannot be determined at this time.
On
June
2, 2006, we received a “Confirmation of Potential Liability; Demand and Notice
of Decision Not to Use Special Notice Procedures” dated May 31, 2006 from the
EPA with regard to the purported release of hazardous substances at a facility
referred to as the “Aerovox Facility” (the “Facility”), located at 740
Belleville Avenue, New Bedford, Massachusetts. The EPA sought $1.6 million
(subsequently modified to $0.9 million) of past costs, as well as future costs
associated with the demolition of the Facility. A predecessor of AVX sold this
Facility to an unrelated third party in 1973. We have investigated the claim
as
well as potential defenses and other actions, including the engagement of
environmental engineering consultants to study and analyze documentation made
available by the EPA with respect to the Facility. In August 2006, we
provided a written response to the EPA, denying liability. The EPA has recently
indicated orally that the proposed plan of remediation has been modified, and
that its present provisional estimate of future costs for such remediation
is
$13.7 million. We anticipate further discussions with the EPA. The
potential impact on our financial position, results of operations and cash
flows
cannot be determined at this time.
We
also
currently operate on sites that may have environmental issues in the future.
Once it becomes probable that we will incur costs in connection with remediation
of a site and such costs can be reasonably estimated, we establish reserves
or
adjust our reserve for our projected share of these costs. Management
believes that, as of June 30, 2007, its reserves of approximately $2.7 million
are appropriate with respect to these matters, although actual costs may vary
from these estimated reserves.
We
are
involved in other disputes and legal proceedings arising in the normal course
of
business. While we cannot predict the outcome of these disputes and proceedings,
we believe, based upon a review with legal counsel, that none of these disputes
or proceedings will have a material impact on our financial position, results
of
operations, or cash flows. However, we cannot be certain of the eventual outcome
of any particular proceeding and any adverse potential impact on our financial
position, results of operations and cash flows from these or other matters
that
may arise from time to time.
-18-
New
Accounting Standards
In
June
2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation
No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48") which clarifies
the accounting for uncertainty in income taxes recognized in the financial
statements in accordance with FASB Statement No. 109, “Accounting for Income
Taxes.” FIN 48 provides guidance on the financial statement
recognition and measurement of a tax position taken or expected to be taken
in a
tax return. FIN 48 requires that we recognize in our financial
statements, the impact of a tax position, if that position is “more likely than
not” of being sustained on audit, based on the technical merits of the
position. We adopted the provisions of FIN 48 effective April 1,
2007. See Note 1, “Critical Accounting Policies and Estimates”, of
the Company’s Notes to Consolidated Financial Statements contained in this
Quarterly Report on Form 10-Q for additional information regarding the impact
of
our adoption of FIN 48.
In
September 2006, the FASB issued Statement of Financial Accounting Standard
No.
157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, provides
guidance for measuring fair value and requires additional
disclosures. This statement does not require any new fair value
measurements, but rather applies to all other accounting pronouncements that
require or permit fair value measurements. SFAS 157 is effective for
financial statements issued for fiscal years beginning after November 15,
2007. We are currently evaluating the impact of SFAS 157 on the
consolidated financial statements.
In
February 2007, the FASB issued Statement of Financial Accounting Standard No.
159, “The Fair Value Option for Financial Assets and Financial Liabilities -
Including an amendment of FASB Statement No. 115” (“SFAS 159”), which permits
entities to choose to measure many financial instruments and certain other
items
at fair value. In accordance with SFAS 159, entities will report
unrealized gains and losses for which the tax value option has been elected
in
earnings at each subsequent reporting date. SFAS 159 is effective for
financial statements issued for fiscal years beginning after November 15,
2007. Early adoption is permitted provided SFAS 157 provisions are
applied. We are currently evaluating the impact of SFAS 159 on the
consolidated financial statements.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
The
Company’s sales are denominated in various foreign currencies in addition to the
U.S. dollar. Certain manufacturing and operating costs denominated in local
currencies are incurred in Europe, Asia, Mexico and Central and South America.
Additionally, purchases of resale products from Kyocera may be denominated
in
Yen. As a result, fluctuations in currency exchange rates affect our
operating results and cash flow. In order to minimize the effect of movements
in
currency exchange rates, we periodically enter into forward exchange contracts
to hedge external and intercompany foreign currency transactions. We do not
hold
or issue derivative financial instruments for speculative
purposes. Accordingly, we have hedging commitments to cover our
exchange risk on purchases, operating expenses and sales. Currency exchange
gains and losses on foreign currency hedge contracts have been immaterial during
the periods presented.
|
CONTROLS
AND PROCEDURES
|
The
Company maintains disclosure controls and procedures that are designed to ensure
that information required to be disclosed in the Company’s reports under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded,
processed, summarized and reported within the time periods specified in the
SEC’s rules and forms, and that such information is accumulated and communicated
to management, including the Company’s Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and
procedures, management recognized that any controls and procedures, no matter
how well designed and operated, can only provide reasonable assurance of
achieving the desired control objectives, as the Company’s are designed to do,
and management necessarily was required to apply its judgment in evaluating
the
cost-benefit relationship of possible controls and procedures.
-19-
As
of the
end of the period covered in this report, the Company carried out an evaluation,
under the supervision and with the participation of management, including the
Chief Executive Officer and Chief Financial Officer, of the effectiveness of
the
design and operation of our disclosure controls and procedures, as such term
is
defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that as of the end of the period covered by this report, the Company’s
disclosure controls and procedures were effective to ensure that information
required to be disclosed in reports the Company files or submits under the
Exchange Act are (1) recorded, processed, summarized and reported within the
time periods specified in Securities and Exchange Commission rules and forms,
and (2) accumulated and communicated to the Company’s management including the
Chief Executive Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure.
In
addition, there were no changes in the Company’s internal control over financial
reporting during the Company’s first quarter of fiscal 2008 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
|
PART
II:
|
|
ITEM
1.
|
See
Note
6, “Commitments and Contingencies”, in our Notes to Consolidated Financial
Statements in Part I, Item 1 to this Form 10-Q for a discussion of our
involvement as a PRP at certain environmental remediation sites.
The
Company held its Annual Meeting of Stockholders on July 18, 2007 for the purpose
of electing four directors. Proxies for the meeting were solicited
pursuant to Regulation 14A of the Securities Exchange Act of 1934, and there
was
no solicitation in opposition to management's solicitations.
Proposal:
Class
I
directors with terms expiring at the Annual Meeting in July of 2010 were elected
with the following votes:
|
|
|
|
|
Shares Voted
"For"
|
Shares
"Withheld"
|
|
|
Class
I
|
|
Kazuo
Inamori
|
|
146,699,438
|
|
21,999,814
|
|
Class
I
|
|
Noboru
Nakamura
|
|
153,725,206
|
|
14,974,046
|
|
Class
I
|
|
Benedict
P. Rosen
|
|
150,322,989
|
|
18,376,263
|
|
Class
I
|
|
David
A. DeCenzo
|
|
152,902,643
|
|
15,796,609
|
The
following is a summary of directors who were not up for election and continue
in
office:
|
Class
II
|
|
John
S. Gilbertson
|
|
Class
II
|
|
Makoto
Kawamura
|
|
Class
II
|
|
Rodney
N. Lanthorne
|
|
Class
II
|
|
Joseph
Stach
|
|
Class
III
|
|
Masahiro
Umemura
|
|
Class
III
|
|
Yuzo
Yamamura
|
|
Class
III
|
|
Donald
B. Christiansen
|
-20-
|
ITEM
6.
|
|
|
10.1
|
Agreement
and Plan of Merger, dated as of June 15, 2007, by and among AVX
Corporation, Admiral Byrd Acquisition Sub, Inc. and American Technical
Ceramics Corp. (incorporated by reference to Exhibit 2 to the Schedule
13D
filed by the Company with the SEC on June 25, 2007)
|
|
10.2
|
Voting
Agreement, dated as of June 15, 2007, by and among Admiral Byrd
Acquisition Sub, Inc., AVX Corporation and the stockholders named
therein
(incorporated by reference to Exhibit 3 to the Schedule 13D filed by
the Company with the SEC on June 25, 2007)
|
|
|
|
|
|
|
|
|
|
-21-
Pursuant
to the requirements 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.
Date: August 8,
2007
|
AVX
Corporation
|
|
|
By:
|
/s/ Kurt P. Cummings |
|
Kurt
P. Cummings
|
|
|
Vice
President,
|
|
|
Chief
Financial Officer,
|
|
|
Treasurer
and Secretary
|