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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE YEAR ENDED MARCH 31, 1997 Commission File No. 1-10431
AVX CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 33-0379007
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
801 17th Avenue South
Myrtle Beach, South Carolina 29577
(803) 448-9411
(address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name Of Each Exchange
On Which Registered
Common Stock, New York Stock Exchange
$.01 par value per share
Securities Registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 of 15(d) of the
Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
Based on the closing sales price of $26.875 on May 23, 1997,
the aggregate market value of the voting stock held by non-affiliates of the
registrant was $587,219,000.
As of May 23, 1997, the number of shares outstanding of the
registrant's Common Stock, par value $.01 per share, was 88,000,000 shares.
DOCUMENTS INCORPORATED BY REFERENCE
There is incorporated by reference in Part III on this Annual
Report on Form 10-K the information contained in the registrant's proxy
statement for its annual meeting of stockholders to be held on July 17, 1997.
PART I
Item 1. Business
AVX Corporation (together with its consolidated subsidiaries,
"AVX" or the "Company") is a leading worldwide manufacturer and
supplier of a broad line of passive electronic components and
related products. A substantial portion of the Company's
passive electronic component sales are of ceramic and tantalum
capacitors, both in "leaded" and "surface-mount" versions.
Capacitors are used in virtually all electronic products to
store, filter or regulate electric energy. Ceramic capacitors
and tantalum capacitors are among the fastest growing types of
capacitors. The Company also manufactures and sells electronic
connectors and distributes and sells certain passive components
and connectors manufactured by Kyocera Corporation of Japan, a
public company, ("Kyocera").
The Company's strategy is to focus on:
* customer service, through the breadth and quality of its
product line, as well as its ability to respond in a timely
manner to its customers' component design and delivery
requirements;
* low-cost, high-quality manufacturing, through utilization of
state-of-the-art facilities and skilled labor around the world;
* global coordination of marketing and manufacturing, through
manufacturing operations located worldwide and the assignment of
global customer account executives to cover the Company's major
multi-national customers; and
* innovative and unique products and manufacturing processes,
developed through emphasis on advanced technologies at the
Company's research laboratories and participation in its
customers' long-range product development programs.
The Company's customers include leading OEMs in such industries
as telecommunications, computers, automotive electronics,
medical devices and instrumentation, industrial instrumentation,
military and aerospace electronic systems, and consumer
electronics. Sales of Company products are made by
Company-employed direct sales personnel, independent
manufacturers' representatives, and independent electronic
component distributors.
The overall growth in the electronics industry over the past
several years can be particularly attributed to:
* the development of new products and applications in
established electronics markets, such as cellular telephones and
personal computers;
* the proliferating use of electronic systems in products in
which such use had been historically absent or limited, such as
automobiles, home appliances, and medical equipment; and
* the increase in the number of capacitors required in certain
electronic products with higher levels of complexity and
functionality, such as those that use state-of-the-art
microprocessors.
The Company's executive offices are located in Myrtle Beach,
South Carolina and its manufacturing facilities are located in
North America, Europe and Asia.
Public Offering
From January 1990 through August 15, 1995, the Company was
wholly-owned by Kyocera. On August 15, 1995, Kyocera sold 22.9%,
or 19,650,000 of the Company's common shares, and the Company
sold an additional 2,200,000 common shares, in a public
offering. As a result, Kyocera currently owns 75.2% of the
Company's common shares.
1
Products
AVX offers an extensive line of passive components, designed to
provide its customers with "one-stop shopping" for substantially
all of their passive component needs. Ceramic and tantalum
capacitors accounted for approximately 59% of the Company's net
sales in fiscal 1997. Advanced products, which are designed and
manufactured by the Company in cooperation with customers to
meet the requirements of specific applications, represented
about 13% of the Company's net sales in fiscal 1997. Connectors
accounted for approximately 8% of net sales and the remaining
20% of AVX's net sales in fiscal 1997 came from its sales of
certain products manufactured by Kyocera, for which the Company
has a non-exclusive license to distribute and sell everywhere in
the world except Japan.
Capacitors
AVX manufactures a full line of multi-layered ceramic and solid
tantalum capacitors in many different sizes and configurations.
The Company's strategic focus on the growing use of ceramic and
tantalum capacitors is reflected in its investment during the
past three years of approximately $225 million primarily to
increase its capacitor manufacturing capacity. The Company
believes that sales of ceramic and tantalum capacitors will
continue to be among the most rapidly growing in the worldwide
capacitor market because technological advances have been
constantly expanding the number and type of applications for
these products.
Tantalum and ceramic capacitors commonly are used in
conjunction with integrated circuits and are best suited for
applications requiring lower to medium capacitance values.
Generally, ceramic capacitors are more cost-effective at lower
capacitance values, and tantalum capacitors are more
cost-effective at medium capacitance values. Capacitance is the
measure of the capacitor's ability to store energy.
Ceramic and tantalum capacitors are produced by the Company in
two basic versions: leaded and surface-mount. Leaded capacitors
are attached to a circuit board using lead wires while
surface-mount capacitors are attached directly to a circuit
board. In recent years there has been significant industry-wide
growth in the use of surface-mount capacitors, and industry
analysts have predicted that this would cause the market for
leaded capacitors to decline significantly. In certain
applications, however, leaded capacitors continue to be the
component of choice.
Advanced Products
To fill the needs of its customers, the Company's advanced
products engineers work with certain customers' in-house
technical staffs to design, produce and manufacture special
products to meet the specifications of particular applications.
The manufacture of special products permits AVX, through its
research and development activities, to make technological
advances, provide the customer with a design solution to fit its
needs, gain a marketing inroad with the customer with respect to
AVX's complete product line and, in some cases, develop products
that can be sold to additional customers in the future. AVX's
advanced products division presently has significant ongoing
projects with a variety of key customers in the computer,
telecommunications, automotive and medical fields as well as
some other new areas of use.
Connectors
The connector division of the Company manufactures high-quality
electronic connectors and inter-connect systems for use in the
computer, telecommunications, automotive electronics, medical
device, military and aerospace industries. The Company's
product line includes a variety of industry-standard connectors
as well as products designed specifically for its customers'
unique applications. The Company produces fine pitch, or small
centerline, connectors, many of which have been selected by
leading OEMs for applications in cellular phones, pagers,
printers and notebook computers. The Company also has developed
a value-added business in flat ribbon cable assembly and in
backpanel, and card edge assemblies.
Kyocera Products
The Company's distribution and sale of certain Kyocera products
throughout the world, except in Japan, broaden the Company's
range of products and further facilitate its ability to offer
"one-stop shopping" for its customers' electronic components
needs. Kyocera's product lines sold by the Company include
ceramic capacitors, hybrids, oscillators, saw devices, resistor
networks, trimmers, chip resistors, ceramic filters, resonators,
connectors and piezo acoustic devices.
2
Marketing, Sales and Distribution
The Company places a high priority on solving customers'
electronic component problems and responding to their needs.
AVX frequently forms teams of its marketing, research and
development, and manufacturing personnel to work with customers
to design and manufacture products to suit their specific
requirements.
The Company's products are sold primarily to manufacturers and,
to a much lesser extent, to United States and foreign government
agencies. The Company has also qualified products under various
military specifications, approved and monitored by the United
States Defense Electronic Supply Center ("DESC"), and under
certain foreign military specifications.
Approximately 47%, 22% and 31% of the Company's net sales for
fiscal 1997, were to customers in North America, Europe, and
Asia, respectively. Financial information relating to geographic
operations is set forth in Part IV, item 14(a), of this report.
The Company's products are marketed worldwide by the Company's
own sales personnel, as well as through independent
manufacturers' representatives who are compensated solely on a
commission basis, and independent electronic component
distributors. The Company has regional sales personnel in
strategic locations to provide technical and sales support for
independent manufacturers' representatives and independent
electronic component distributors. The Company believes that
this combination of distribution channels provides a high level
of market penetration and efficient coverage of its customers on
a cost-effective basis.
Among the Company's customers are Motorola Inc., Lucent
Technologies, American Telephone and Telegraph Corporation, L.M.
Ericsson Telefonaktiebolaget, OY Nokia AB., Northern
Telecom,Uniden and Siemens AG in the telecommunications
industry; International Business Machines Corporation, Compaq
Computer Corp., Seagate Technology International, Western
Digital Corp., Acer Incorporated, Intel Corp., Sony Corporation,
and Samsung Co. Limited in the computer industry; and Ford Motor
Co., Robert Bosch GmbH, General Motors Corp. and Magneti Marelli
S.p.A. in the automotive industry. The Company's largest
customers vary on a year-to-year basis, and no customer has a
long-term commitment to purchase products of the Company. No
one customer has accounted for more than 10% of net sales for
the past three years.
AVX had a backlog of orders of approximately $240 million at
March 31, 1997, $250 million at March 31, 1996 and $317 million
on March 31, 1995. Orders may be canceled by a customer at any
time, subject to cancellation charges under certain
circumstances. The backlog reduction since March 31, 1995,
reflects the electronic components industry's tight supply
situation in calendar 1995. The reduction in delivery lead times
in 1996 has decreased customers' long-term ordering patterns,
such that orders are currently placed more on an as needed
basis. The backlog outstanding at any time is not necessarily
indicative of the level of business to be expected in any
ensuing period since certain orders are placed and delivered
within the same period.
Research,Development and Engineering
AVX's emphasis on research and development is reflected by the
fact that most of the Company's manufactured products and
manufacturing processes have been designed and developed by its
own engineers and scientists. The Company's 60,000 square-foot
facility, dedicated entirely to pure research and development, in Myrtle Beach,
South Carolina, was constructed in fiscal
1995 and provides centralized coordination of AVX's global research
and development efforts. The Company also maintains significant
research and development staffs at its facilities in Coleraine,
Northern Ireland, Jerusalem, Israel, and Paignton, England.
The Company's research, development and engineering effort
places a priority on the design and development of innovative
products and manufacturing processes and engineering advances in
existing product lines and manufacturing operations. Other areas
of emphasis include material synthesis and the integration of
passive components for applications requiring reduced size, and
lower manufacturing costs associated with board assembly.
Research, development and engineering expenditures were
approximately $34 million, $30 million and $25 million during
fiscal 1997, 1996 and 1995, respectively.
While AVX owns United States patents as well as corresponding
patents in various other countries, and also has patent
applications pending, its patents are not in the aggregate
material to the successful operation of its business.
3
Transactions with Kyocera
Since January 1990, Kyocera and AVX have engaged in a
significant number and variety of related company transactions,
including, without limitation, the transactions referred to in
footnote 9 to the financial statements set forth in Part IV,
item 14(a), of this report.
The Company also has established several ongoing arrangements
with Kyocera and has executed several agreements, the more
significant of which are described below. Except for the Buzzer
Assembly Agreement, each of the agreements described below
contains provisions requiring that the terms of any transaction
under such agreement be equivalent to that which an independent
unrelated party would agree at arm's-length and is subject to
the approval of the Special Advisory Committee of the AVX Board
of Directors. The Special Advisory Committee is comprised of
the independent directors of the Company and is required to
review and approve such agreements and any significant
transactions between the Company and Kyocera not covered by such
agreements.
Products Supply and Distribution Agreement. Pursuant to the
Products Supply and Distribution Agreement (the "Distribution
Agreement") (i) AVX will act as the non-exclusive distributor of
certain Kyocera-manufactured products in territories outside of
Japan, and (ii) Kyocera will act as the non-exclusive
distributor of certain AVX-manufactured products within Japan.
The Distribution Agreement has a term of one year, with
automatic one-year renewals, subject to the right of termination
by either party at the end of the then current term upon at
least three months prior written notice.
Disclosure and Option to License Agreement. Pursuant to the
Disclosure and Option to License Agreement (the "License
Agreement"), the Company and Kyocera agree to exchange
confidential information relating to the development and
manufacture of multi-layered ceramic capacitors and various
other ceramic products. The expiration date of the License
Agreement is March 31, 2005.
Materials Supply Agreement. Pursuant to the Materials Supply
Agreement (the "Supply Agreement"), AVX and Kyocera will from
time to time supply the other party with certain raw and
semi-processed materials used in the manufacture of ceramic
capacitors and other ceramic products. The expiration date of
the Supply Agreement is March 31, 2000.
Buzzer Assembly Agreement. Pursuant to the Buzzer Assembly
Agreement, AVX assembles certain electronic components for
Kyocera in the Company's Juarez, Mexico facility. Kyocera pays
AVX a fixed cost mutually agreed upon by the parties for each
component assembled plus a profit margin. The Agreement will
terminate on March 31, 2000, subject to the right of either
party to terminate upon six months written notice.
Machinery and Equipment Purchase Agreement. Pursuant to the
Machinery and Equipment Purchase Agreement (the "Machinery
Purchase Agreement"), AVX and Kyocera will from time to time
design and manufacture for the other party certain equipment and
machinery of a proprietary and confidential nature used in the
manufacture of capacitors and other electrical components. The
agreement will terminate on March 31, 2000.
Raw Materials
Although most materials incorporated in the Company's products
are available from a number of sources, certain materials
(particularly palladium and tantalum) are available only from a
relatively limited number of suppliers.
Palladium, a principal raw material used in the manufacture of
ceramic capacitors, is primarily purchased from various
companies in the form of palladium sponge and ingot. The main
areas of mining of palladium are in Russia and South Africa.
Palladium is considered a commodity and is subject to price
volatility and has fluctuated in a range of approximately $120
to $180 per troy ounce during the last three years. An
inability of the Company to pass on an increase in palladium
cost through to its customers could have a material adverse
effect on the Company's results of operations. The Company is
presently using substitutes for palladium in certain product
applications.
4
Tantalum powder is a principal material used in the manufacture
of tantalum capacitor products. This product is purchased under
annual contracts with suppliers from various parts of the world
at prices that are subject to periodic adjustment. The Company
is a major consumer of the world's annual tantalum production.
Although the Company believes that there is currently no problem
with the procurement of tantalum powder and that the tantalum
required by the Company has generally been available in
sufficient quantity to meet requirements, the limited number of
tantalum powder suppliers could lead to higher prices. An
inability of the Company to pass on an increase in tantalum cost
to its customers could have a material adverse effect on the
Company's results of operations.
AVX internally develops and produces a majority of the ceramic
raw materials used in its production processes and is expanding
its ceramic production operations in order to meet increased
demand. The Company believes that it is the only United States
capacitor manufacturer that processes its own ceramic materials.
Competition
The Company encounters strong competition in its various
product lines from both domestic and foreign manufacturers.
Competitive factors in the markets of the Company's products
include product quality and reliability, breadth of product
line, customer service, technological innovation, timely
delivery, and price. The Company believes that it competes
favorably on the basis of each of these factors. The breadth of
the Company's product offering enables AVX to strengthen its
market position by providing its customers with one of the
broadest selections of passive electronic components available
from one source. The Company's major competitors are Murata
Manufacturing Company Ltd, KEMET Corporation, NEC Corporation,
TDK Corporation and Vishay Intertechnology, Inc.
Employees
As of March 31, 1997, AVX employed approximately 13,000 full
time employees. Approximately 4,000 of these employees are
employed in the United States. Of the employees located in the
United States, approximately 2,000 are covered by
collective-bargaining arrangements. In addition, some foreign
employees are members of various trade and government-affiliated
unions. The Company believes that its relationship with its
employees is good, and the Company has not had a work stoppage
as a result of collective bargaining difficulties during the
past 20 years.
Environmental Matters
The Company is subject in the United States to federal, state
and local laws and regulations concerning the environment and to
the environmental laws and regulations of the other countries in
which it has manufacturing facilities. Based on the Company's
periodic review of the operating policies and practices at all
its facilities, the Company believes that its operations
currently comply in all material respects with all such laws and
regulations.
The Company has been identified by the federal Environmental
Protection Agency ("EPA"), state governmental agencies or other
private parties as a potentially responsible party ("PRP") under
the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") or equivalent state or local laws for
clean-up and response costs associated with ten sites at which
remediation is required. Because CERCLA has been construed to
authorize joint and several liability, EPA could seek to recover
all clean-up costs from any one of the PRPs at a site despite
the involvement of other PRPs. At all but one site, financially
responsible PRPs other than the Company also are, or have been,
involved in site investigation and clean-up activities.
Therefore, the Company believes that any liability resulting
from these sites will be apportioned between the Company and
other PRPs.
To resolve its liability at each of the sites at which it has
been named a PRP, the Company has entered into various
administrative orders and consent decrees (collectively,
"Decrees") with federal and state regulatory agencies, governing
the timing and nature of investigation and remediation. The
Company has paid, or reserved for, all amounts required under
the terms of these Decrees corresponding to its apportioned
share of the liabilities. Such reserves for remediation,
compliance and legal costs totaled $5,025 at March 31, 1997. As
is customary, the Decrees at sites where the PRPs are not
themselves implementing the chosen remedy contain provisions
allowing EPA to reopen the agreement and seek additional amounts
from settling PRPs in the event that certain contingencies
occur, such as the discovery of significant new information
about site conditions during clean-up or substantial cost
overruns for the chosen remedy. The existence of such reopener
provisions, combined with the difficulties of reliably
estimating clean-up costs and the joint and several nature of
CERCLA liability, makes it difficult to predict the ultimate
liability at any site with certainty. While no assurance can be
given, the Company does not believe that any additional costs to
be incurred by the Company at any of the sites will have a
material adverse effect on the Company's financial condition or
results of operations.
In addition, the Company does not believe that any
investigation or clean-up that may be required at any other
locations will have a material adverse effect on the Company's
financial condition or results of operations.
5
Executive Officers of the Registrant
The following table provides certain information regarding the
executive officers of the Company as of May 23, 1997.
Name Age Position
Benedict P. Rosen 61 President, Chief Executive Officer, and Director
John S. Gilbertson 53 Executive Vice President, Chief Operating
Officer, Corporate Secretary and Director
Donald B. Christiansen 58 Chief Financial Officer, Vice President,
Treasurer, and Director
C. Marshall Jackson 48 Senior Vice President of Marketing
Ernie Chilton 53 Senior Vice President--Tantalum
S. M. Chan 41 Vice President of Marketing and Sales--Asia
Allan Cole 54 Vice President of Sales
Alan Gordon 48 Vice President of European Sales/Marketing
John L. Mann 54 Vice President of Quality
James Patterson 62 Vice President of Leaded Division
Benedict P. Rosen has served as President and Chief Executive
Officer of the Company since April 1993 and as a member of the
Board of Directors since January 1990. From February 1985 to
March 1993, Mr. Rosen has served as Executive Vice President of
AVX and has been employed by the Company since 1972. Mr. Rosen
has been a Senior Managing and Representative Director of
Kyocera since June 1995, and previously served as a Managing
Director of Kyocera from 1992 to June 1995. Mr. Rosen is a
Director of Nitzanim-AVX/Kyocera-Venture Capital Fund Ltd. and
Aerovox Corporation.
John S. Gilbertson has served as Executive Vice President and
Chief Operating Officer of the Company since April 1994, as
Corporate Secretary since April 1996, and as a member of the
Board of Directors since January 1990. From April 1992 until
present, Mr. Gilbertson served as the Executive Vice President
of AVX. From September 1990 to March 1992, Mr. Gilbertson
served as Senior Vice President of AVX. Mr. Gilbertson has been
employed by AVX since 1981. Mr. Gilbertson has been a Director
of Kyocera since June 1995.
Donald B. Christiansen has served as Vice President of Finance,
Chief Financial Officer and Treasurer since April 1994, and as a
member of the Board of Directors since April 1992. From March
1992 until April 1994, Mr. Christiansen served as the Chief
Financial Officer of AVX.
C. Marshall Jackson has served as Senior Vice President of
Marketing since April 1994. From January 1990 until March 1994,
Mr. Jackson was Vice President of AVX and has been employed by
the Company since 1969.
6
Ernie Chilton has served as Senior Vice President--Tantalum of
AVX since April 1994 and as a member of the Board of Directors
from February 1993 to July 1995. From January 1990 until
February 1993, Mr. Chilton served as Vice President of AVX. From
January 1990 until 1993, Mr. Chilton served as Vice President of
AVX. Mr. Chilton has been employed by the Company since 1980.
S. M. Chan has served as Vice President of Marketing and
Sales--Asia since April 1994. From April 1992 until March 1994,
Mr. Chan served as the Director of Marketing of AVX. Mr. Chan
has been employed by AVX since October 1990.
Allan Cole has served as Vice President of Sales of the Company
since May 1987. Mr. Cole has been employed by AVX since 1977
serving in several sales management positions, both domestic and
international.
Alan Gordon has served as Vice President--European
Sales/Marketing of AVX since February 1993. From January 1991
until February 1993, Mr. Gordon served as the Director of
Marketing of AVX. Mr. Gordon has been employed by AVX since
1991.
John L. Mann has served as Vice President of Quality of the
Company since May 1986. From March 1984 until May 1986, Mr.
Mann served as the Corporate Director of Quality.
James Patterson has served as Vice President of the Leaded
Division of AVX since February 1993. From June 1992 until
February 1993, Mr. Patterson served as the Division Vice
President of SMP. Mr. Patterson has been employed by the
Company since 1963.
Item 2. Properties
The Company conducts manufacturing operations throughout the
world. All the Company's operations around the world are
certified to the ISO 9000 international quality control
standards. ISO 9000 is a comprehensive set of quality program
standards developed by the International Organization for
Standardization. Certain facilities have also been qualified
under a new set of stringent QS 9000 quality standards developed
by the US automotive industry. A list of the Company's
facilities, their square footage, whether they are leased or
owned and a description of their use, follows:
Type
Square of Description
Location Footage Interest of Use
UNITED STATES
Myrtle Beach,SC 451,005 Owned Research/Manufacturing/Headquarters
Myrtle Beach, SC 46,631 Leased Warehouse
Conway, SC 70,408 Owned Manufacturing
Biddeford, ME 72,000 Owned Manufacturing
Colorado Springs, CO 15,000 Owned Manufacturing
El Paso, TX 17,760 Leased Warehouse
New Orleans, LA 16,440 Leased Warehouse
Olean, NY 107,400 Owned Manufacturing
Raleigh, NC 206,000 Owned Manufacturing/Warehouse
Sun Valley, CA 25,000 Leased Manufacturing
Vancouver, WA 87,048 Leased Manufacturing
Vancouver, WA 10,024 Leased Warehouse
OUTSIDE THE UNITED STATES
Betzdorf, Germany 101,671 Owned Manufacturing
Biggleswade, England 10,000 Leased Manufacturing
Chihuahua, Mexico 104,848 Owned Manufacturing
Coleraine, N. Ireland 105,000 Owned Research/Manufacturing
Hong Kong 30,257 Owned Warehouse
Jerusalem, Israel 42,470 Leased Research/Manufacturing
Juarez, Mexico 84,000 Owned Manufacturing
Lanskroun, Czech
Republic 179,000 Leased Manufacturing
Uherske Hradiste,Czech
Republic 128,000 Leased Manufacturing
Larne, N. Ireland 120,000 Owned Manufacturing/Warehouse
Newmarket, England 52,000 Leased Manufacturing
Paignton, England 150,000 Owned Research/Manufacturing
San Salvador,
El Salvador 232,981 Owned Manufacturing
Singapore 49,500 Leased Manufacturing/Warehouse
7
In addition to the foregoing, the Company owns and leases a
number of sales offices throughout the world.
Management believes that all its property, plant and equipment
is in good operating condition. The Company is constantly
upgrading its equipment and adding capacity through greater use
of automation. The Company's capital expenditures for plant and
equipment were $93.9 million for fiscal 1997 and $110.5 million
in fiscal 1996.
Item 3. Legal Proceedings
The Company is a party to various legal proceedings and
administrative actions, all of which are of an ordinary or
routine nature incidental to the operations of the Company.
Although it is difficult to predict the outcome of any legal
proceeding, in the opinion of the Company's management, such
procedures and actions should not, individually or in the
aggregate, have a material adverse effect on the Company's
financial condition or results of operations.
Item 4. Submission of Matters to a Vote of Securities Holders
During the fourth quarter of the fiscal year covered by this
report, no matter was submitted to a vote of security holders of
the Company.
PART II
Item 5. Market for the Registrant's Securities and Related
Stockholder Matters
Market for Common Stock
The Company's Common Stock is listed on the New York Stock
Exchange and trades under the symbol AVX. The following presents
the high and low sale prices for the Company's Common Stock for
each quarter since the IPO in August 1995 as reported on the New
York Stock Exchange Composite Tape.
1997 1996
High Low High Low
First Quarter $ 25 1/2 $ 17 $ $
Second Quarter 23 16 38 29 3/4
Third Quarter 24 1/8 18 1/4 34 1/4 21 1/8
Fourth Quarter 25 1/4 19 3/4 27 1/2 20 7/8
Holders of Record
At May 23, 1997, there were approximately 22,500 holders of
record of the Company's common stock.
Dividends
The Company has declared and paid cash dividends of $.06 per
share of common stock for the quarter ended March 31, 1997. The
Company declared and paid cash dividends for the quarters ended
December 31, 1996, September 30, 1996, June 30, 1996 and March
31, 1996 of $.055 per share of common stock. The Company
declared and paid cash dividends for the quarters ended
September 30, 1995 and December 31, 1995 of $.05 per share of
common stock. The Company declared and paid cash dividends in
the fiscal year ended March 31, 1995 and the quarter ended June
30, 1995 equal to approximately 35% of its net income. Future
dividends, if any, will depend on the Company's profitability
and anticipated operating requirements.
8
Item 6. Selected Financial Data
The following table sets forth selected financial data for the
Company for the five years ended March 31, 1997. The financial
data set forth below should be read in conjunction with the
Company's Financial Statements and the Notes thereto included
elsewhere in this Form 10-K.
Year ended March 31,
(dollars in thousands, except share data)
1997 1996 1995 1994 1993
Income Statement Data:
Net sales $1,126,178 $1,207,761 $ 988,893 $ 795,515 $ 718,235
Cost of sales 851,863 886,494 777,687 639,058 569,583
--------- --------- ------- ------- -------
Gross profit 274,315 321,267 211,206 156,457 148,652
Selling, general and
administrative expenses 102,369 116,586 101,013 100,875 99,862
--------- --------- ------- ------- -------
Profit from operations 171,946 204,681 110,193 55,582 48,790
Interest income 7,536 5,096 2,018 749 510
Interest expense (2,049) (2,352) (2,229) (2,792) (3,474)
Other, net 1,010 1,655 1,218 1,439 3,282
--------- --------- ------- ------- -------
Income before income
taxes, extraordinary
item and cumulative
effect of accounting
change for income taxes 178,443 209,080 111,200 54,978 49,108
Provision for income
taxes 57,102 71,344 36,329 19,817 20,221
-------- ------- ------- ------ ------
Income before extra-
ordinary item and
cumulative effect of
accounting change for
income taxes 121,341 137,736 74,871 35,161 28,887
Extraordinary item-
utilization of foreign
tax loss carryforwards 2,536
Cumulative effect of
accounting change for
income taxes 5,000
--------- ------- ------- ------- -------
Net income $ 121,341 $ 137,736 $ 74,871 $ 40,161 $ 31,423
========== ========== ========== ========= =========
Income per share:
Before extraordinary
item and cumulative
effect of accounting
change for income taxes $ 1.38 $ 1.58 $ .87 $ .41 $ .34
Extraordinary item .03
Cumulative effect
of accounting change
for income taxes .06
------- ------- ------- ------ -------
Net income $ 1.38 $ 1.58 $ .87 $ .47 $ .37
======= ======= ======= ====== =======
Average common shares
outstanding 88,000,000 87,175,000 85,800,000 85,800,000 85,800,000
Cash dividends per
common share $ .22 $ .22 $ .31 $ .17 $ .13
As of March 31,
1997 1996 1995 1994 1993
Balance Sheet Data:
Working capital $ 456,672 $ 357,930 $ 224,999 $ 189,528 $ 177,555
Total assets 949,307 867,516 670,697 573,966 550,487
Long-term debt 12,170 8,507 9,544 10,427 15,529
Stockholders' equity 731,969 624,000 456,266 400,834 378,502
9
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition
General
The Company's 1997 net sales decreased 6.8% compared to 1996
while the previous three years increased 22.1%, 24.3% and 10.8%,
respectively. The growth in sales from 1994 to 1997 is
primarily the result of the Company increasing its production
capacity and the expansion of the electronic components
industry. This expansion has been due primarily to the growth
of computer, telecommunications and automotive manufacturers'
usage of passive electronic components. During the first half of
fiscal 1997, the industry experienced a temporary slowdown and
customers reduced their level of inventory .
With the exception of this industry-wide order pattern
correction, the growth in sales, in units and dollars, coupled
with operating efficiencies and control of selling, general and
administrative expenses, have contributed to the enhanced
profitability of the Company over the past three years. In
order to lower the costs of production, the Company continues to
increase automation of its manufacturing processes and transfer
certain labor intensive manufacturing processes from countries
with high labor costs to lower labor cost areas (such as the
Czech Republic, El Salvador, and Mexico).
During the fourth quarter of fiscal 1997, the Company
experienced a more traditional pricing environment as customers'
inventories returned to normal levels. Increased orders resulted
in the Company's manufacturing capacity being more fully
utilized.
The following table sets forth the percentage relationships to
net sales of certain income statement items for the periods
presented
Year Ended March 31,
1997 1996 1995
Net sales 100.0% 100.0% 100.0%
Cost of sales 75.6 73.4 78.6
Gross profit 24.4 26.6 21.4
Selling, general and
administrative expenses 9.1 9.6 10.3
Profit from operations 15.3 17.0 11.1
Income before income taxes 15.8 17.3 11.2
Provision for income taxes 5.0 5.9 3.6
Net income 10.8 11.4 7.6
Results of Operations
Year Ended March 31, 1997 Compared to Year Ended March 31, 1996
Net sales for the year ended March 31, 1997 decreased 6.8% to
$1,126.2 million from $1,207.7 million for the year ended March
31, 1996. The decrease was attributable to a combination of
factors including, (a) the residual effect of the softened order
and delivery demand experienced by the electronic component
industry throughout the latter portion of calendar 1995 and the
first half of calendar 1996 (as customers reduced their level of
inventory and suppliers reduced lead times), (b) a continuation of
the trend toward surface-mount products and smaller part sizes,
which traditionally have lower average selling prices, (c) an
overall reduction in selling prices, and (d) the strengthening
of the U.S. dollar and certain European currencies, which had a
modest dampening effect on reported U.S. dollar sales.
Gross profit as a percentage of net sales for the year ended
March 31, 1997 decreased 2.2% to $274.3 million (24.4% of net
sales) from $321.3 million (26.6% of net sales) in the year
ended March 31, 1996. Due in part to the industry wide
inventory correction discussed above, overall sales prices in
the 1997 year were lower compared to the 1996 year. Continued
automation of the manufacturing processes and higher volumes of
through-put in the factories have resulted in lower
manufacturing costs for products sold and have enabled the
Company to maintain strong gross profit levels despite the
decline in sales. As a result of the Company's strategy to
manufacture in the various regions in which it sells products,
the strengthening of the U.S. dollar and certain European
currencies acted to reduce the overall cost of manufacturing
when reported in U.S. dollars. Cost of sales in fiscal 1996
include approximately $3.5 million of costs associated with the
closure of a plant in the United States.
10
Selling, general and administrative expenses in the year ended
March 31, 1997 were $102.4 million (9.1% of net sales), compared
with $116.6 million (9.6% of net sales) in the year ended March
31, 1996. The decrease in selling, general, and administrative
expenses is due to (a) cost containment programs, (b) lower
sales commissions, (c) the benefit of adjustments to
environmental remediation accruals, and (d) charges related to
the closing of the Company's previous headquarters recorded in
1996.
Research, development and engineering expenditures, which
encompass the personnel and related expenses devoted to
developing new products, processes and technical innovations,
were $34 million and $30 million in fiscal 1997 and 1996,
respectively.
As a result of the above factors, profit from operations as a
percentage of net sales in the year ended March 31, 1997
decreased 1.7% to $171.9 million from $204.7 million in the year
ended March 31, 1996.
The effective tax rate in the year ended March 31, 1997 was
32.0%, compared to 34.1% in the year ended March 31, 1996. The
decrease in the 1997 year primarily results from the benefit of
lower tax rates on foreign earnings and the realization of
certain foreign net operating losses.
For the reasons set forth above, net income in the year ended
March 31, 1997 decreased 11.9% to $121.3 million (10.8% of net
sales) from $137.7 million (11.4% of net sales) in the year
ended March 31, 1996.
Year Ended March 31, 1996 Compared to Year Ended March 31, 1995
Net sales for the year ended March 31, 1996 increased 22.1% to
$1,207.7 million from $988.9 million for the year ended March
31, 1995. The increase was primarily attributable to the growth
in the ceramic and tantalum products, particularly surface-mount
capacitors, and special products.
Gross profit for the year ended March 31, 1996 increased 52.1%
to $321.3 million (26.6% of net sales) from $211.2 million
(21.4% of net sales) in the year ended March 31, 1995. As a
result of increased worldwide demand for ceramic and tantalum
capacitors, overall sales prices in the 1996 year were more
stable compared to the 1995 year. Continued automation of the
manufacturing processes and higher volumes of through-put in the
factories have resulted in lower manufacturing costs for
products sold. Lower production costs were achieved despite an
increase in palladium prices. The cost of palladium, which is
used in the manufacture of ceramic capacitors, increased
approximately 6.0% in the 1996 year compared to the 1995 year.
This increased cost of sales by approximately $2.7 million. Cost
of sales in fiscal 1996 include approximately $3.5 million of
costs associated with the closure of a plant in the United
States which manufactured connector products and the relocation
of the production to the Company's existing facilities in
Europe. Cost of sales in fiscal 1995 included approximately $2.5
million of costs associated with the closure of the Company's
ceramic production facility in Rouen, France, and relocation of
the related production to Northern Ireland.
Selling, general and administrative expenses in the year ended
March 31, 1996 were $116.6 million (9.6% of net sales), compared
with $101.0 million (10.3% of net sales) in the year ended March
31, 1995. The increase in expenses resulted primarily from
higher research and development spending, adjustments to
environmental remediation accruals based on revised estimates,
charges related to the Company's previous headquarters and
additional sales commissions due to increased sales volume.
Research, development and engineering expenditures were $30
million and $25 million in fiscal 1996 and 1995, respectively.
As a result of the above factors, profit from operations in the
year ended March 31, 1996 increased 85.7% to $204.7 million from
$110.2 million in the year ended March 31, 1995.
11
The effective tax rate in the year ended March 31, 1996 was
34.1%, compared to 32.7% in the year ended March 31, 1995. The
increase in the 1996 year primarily results from higher foreign
income taxes.
For the reasons set forth above, net income in the year ended
March 31, 1996 increased 84.0% to $137.7 million (11.4% of net
sales) from $74.9 million (7.6% of net sales) in the year ended
March 31, 1995.
Financial Condition
Liquidity and Capital Resources
The Company's liquidity needs arise primarily from working
capital requirements, dividends and capital expenditures.
Historically, the Company has satisfied its liquidity
requirements through internally generated funds. As of March
31, 1997, the Company had a current ratio of 3.5 to 1, $188.6
million of cash and cash equivalents, $731.9 million of
stockholders' equity and an insignificant amount of long-term
debt.
Net cash from operating activities was $167.9 million in the
year ended March 31, 1997, compared to $155.7 million in the
year ended March 31, 1996 and $126.2 million in the year ended
March 31, 1995. The Company's control over the growth of
working capital contributed to the increase.
Purchases of property and equipment were $93.9 million in
fiscal 1997, $110.5 million in fiscal 1996, and $77.3 million in
fiscal 1995. Expenditures for fiscal 1995 included approximately
$8.1 million for the purchase of property and construction of
the new research laboratory adjacent to the Myrtle Beach
production facility and corporate headquarters. The remaining
expenditures for fiscal 1995 and virtually all expenditures for
fiscal 1997 and 1996 were for expanding the production
capabilities of the ceramic and tantalum surface-mount and
advanced product lines. The Company's carrying value of its
equipment reflects the fact that depreciation expense for
machinery and equipment is generally computed using the
accelerated double-declining balance method. The Company expects
to construct facilities and purchase equipment totaling
approximately $110 to $130 million to increase production
capacity in fiscal 1998.
Although the majority of the Company's funding is internally
generated, certain European subsidiaries of the Company borrowed
deutschmarks under various bank agreements. These borrowings
were used for working capital requirements and to repay an
intercompany loan with AVX in the United States and other
outstanding obligations. In fiscal 1997, 1996 and 1995,
dividends of $19.4 million, $19.4 million and $26.2 million,
respectively, were paid to stockholders.
In August 1995, the Company completed an initial public
offering of 2,200,000 shares of common stock at a price of
$25.50 per share resulting in proceeds (net of underwriting
commissions and offering costs) of $52.9 million. The proceeds
were used for general corporate purposes, including capital
expenditures and working capital.
The Company has established reserves in the three years ended
March 31, 1997 for its projected share of costs associated with
the remediation of, and compliance with, environmental matters
at various sites. Adjustments to such provisions and related
expenditures have not been material in any of these periods.
Based on the financial condition of the Company as of March 31,
1997, the Company believes that cash expected to be generated
from operating activities will be sufficient to satisfy the
Company's anticipated financing needs for working capital,
capital expenditures, environmental clean-up costs, research and
development expenses and any dividends to be paid for the
foreseeable future.
Foreign Currency
The Company's European sales generally are denominated in local
currencies whereas those in North America and Asia generally are
denominated in U.S. dollars. Approximately one quarter of the
Company's revenues are generated in Europe. Also, certain
manufacturing and operating costs denominated in local
currencies are incurred in Europe, Asia, Mexico and Latin
America. As a result, fluctuations in currency exchange rates
affect the Company's results and cash flow. In order to
minimize the effect of movements in currency exchange rates, the
Company periodically enters into forward exchange contracts to
hedge existing and anticipated external and intercompany foreign
currency transactions. Currency exchange gains and losses have
been immaterial during the three years ended March 31, 1997.
The Company also enters into forward delivery contracts for
certain precious metals used in its production processes. The
Company does not hold or issue derivative financial instruments
for speculative purposes.
12
New Accounting Standards
Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation", allows companies to
record compensation cost for stock-based compensation plans at
fair value or provide pro forma disclosures. The Company has
chosen to continue to account for stock-based compensation using
the method whereby compensation cost for stock options is
measured as the excess, if any, of the quoted market price of
the Company's stock at the date of grant over the amount an
employee must pay to acquire the stock. The Company has adopted
Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of". The adoption did not materially
affect the Company's financial condition or results of
operations.
In February 1997, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No.
128("SFAS 128"). The new standard replaces primary and fully
diluted earnings per share with basic and diluted earnings per
share. SFAS 128 is required to be adopted by the Company for
periods ending after December 15, 1997. Had the Company been
required to adopt SFAS 128 earlier, the adoption would not have
impacted diluted or primary earnings per share.
Cautionary Statement Pursuant to Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995
This report may contain "forward-looking" information within
the meaning of the federal securities laws. The forward-looking
information may include, among other information, statements
concerning the Company's outlook for fiscal 1998, overall volume
and pricing trends, cost reduction strategies and their
anticipated results, and expectations for research and capital
expenditures. There may also be other statements of exceptions,
beliefs, future plans and strategies, anticipated events or
trends, and similar expressions concerning matters that are not
historical facts. The forward-looking information and statements
in this report are subject to risks and uncertainties that could
cause actual results to differ materially from those expressed
in or implied by the information or statements.
Item 8. Financial Statements and Supplementary Data
The following Consolidated Financial Statements of the Company
and its subsidiaries, together with the report of independent
auditors thereon, are presented under Item 14 of this report:
Consolidated Balance Sheets, March 31, 1997 and 1996 F-15
Consolidated Statements of Income, Years Ended March 31, 1997,
1996 and 1995 F-16
Consolidated Statements of Stockholders' Equity, Years Ended
March 31, 1997,1996 and 1995 F-17
Consolidated Statements of Cash Flows, Years Ended March 31,
1997, 1996 and 1995 F-18
Notes to Consolidated Financial Statements F-19
Report of Independent Accountants F-30
All financial schedules are omitted because of the abscence of the conditions
under which they are required or because the information required is shown in
the financial statements or notes thereto.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial
Disclosure
None.
PART III
Information with respect to Items 10, 11, 12 and 13 on Form
10-K is set forth in the Company's definitive proxy statement
filed with the Commission in June 1997.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) Financial Statements and Financial Statement Schedules -
See Index to Consolidated Financial Statements at Item 8 of this
report.
(b) Reports on Form 8-K
None.
(c) Exhibits:
13
Documents Incorporated by Reference from Form S-1 Registration
Statement No. 33-94310 filed in August, 1995:
3.1 Restated Certificate of Incorporation of the Company
3.2 By-laws of the Company
10.1 1995 Stock Option Plan
10.2 Non-Employee Directors Stock Option Plan
10.3 Form of Employment Agreement between AVX Corporation and
Benedict P. Rosen
10.4 Products Supply and Distribution Agreement by and between
Kyocera Corporation and AVX Corporation
10.5 Disclosure and Option to License Agreement by and between
Kyocera Corporation and AVX Corporation
10.6 Management Incentive Plan
10.7 Deferred Compensation Plan
Documents Submitted Herewith:
10.8 Directors Deferred Compensation Plan
21.1 Subsidiaries of the Registrant
23.1 Consent of Coopers & Lybrand L.L.P.
24.1 Power of Attorney
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AVX Corporation
by: /s/ Donald B. Christiansen
----------------------
DONALD B. CHRISTIANSEN
Dated: June 9, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
Signature Title
Kazuo Inamori Chairman of the Board and Director
Benedict P. Rosen President and Chief Executive
Officer and Director
John S. Gilbertson Executive Vice President and
Chief Operating Officer
and Corporate Secretary and Director
Donald B. Christiansen Vice President of Finance,
Chief Financial Officer and
Treasurer and Director
Marshall D. Butler Director
Carroll A. Campbell Director
Richard Tressler Director
Kensuke Itoh Director
Rodney N. Lanthorne Director
Masato Takeda Director
Masahiro Umemura Director
Masahiro Yamamoto Director
Yuzo Yamamura Director
By: /s/ Donald B. Christiansen
-----------------------
DONALD B. CHRISTIANSEN, Attorney-in-Fact
June 9, 1997
14