The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to value the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:
The following describes valuation techniques used to appropriately value our assets held in the non-qualified deferred compensation plan and derivatives.
Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. If the cost of an investment exceeds its fair value, among other factors, we evaluate general market conditions, the duration and extent to which the fair value is less than cost, and whether or not we expect to recover the security's entire amortized cost. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established.
9.8. Commitments and Contingencies:
We have been identified by the United States 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 non-U.S., state or local laws, for clean-up and response costs associated with certain sites at which remediation is required with respect to prior contamination. Because CERCLA or such state statutes authorize joint and several liability, the EPA or non-U.S., state or local regulatory authorities could seek to recover all clean-up costs from any one of the PRPs at a site despite the involvement of other PRPs. At certain sites, financially responsible PRPs other than AVX also are, or have been, involved in site investigation and clean-up activities. We believe that liability resulting from these sites will be apportioned between AVX and other PRPs.
To resolve our liability at 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. 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.
On June 3, 2010, AVX entered into an agreement with the EPA and the City of New Bedford, pursuant to which AVX is required to perform environmental remediation at a site referred to as the “Aerovox Site” (the “Site”), located in New Bedford, Massachusetts. AVX has substantially completed its obligations pursuant to such agreement with the EPA and the City of New Bedford with respect to the satisfaction of AVX’s federal law requirements. The Massachusetts Department of Environmental Protection has jurisdiction over the balance of the environmental remediation at the Site. AVX has submitted its proposed remedy, but until the state has approved such proposal, AVX cannot determine if additional groundwater and soil remediation will be required, if substantial material will have to be disposed of offsite, or if additional remediation techniques will be required, any of which could result in a more extensive and costly plan of remediation. Further, the Site and the remediation may be subject to additional scrutiny under other statutory procedures which could also add to the cost of remediation. During the year ended March 31, 2019 we increased our estimated accrual for work to be done at the Site by $8,312 pursuant to discussions with the Massachusetts Department of Environmental Protection and our environmental engineers. We have a remaining accrual of $14,020$21,279 at September 30, 2018, 2019, representing our current estimate of the potential liability related to the remaining performance of environmental remediation actions at the Site and neighboring properties using certain assumptions regarding the plan of remediation. Until all parties agree and remediation is complete, we cannot be certain there will be no additional cost relating to the Site.
We had total reserves of approximately $18,618$26,371 and $18,729$25,329 at March 31, 2018 2019 and September 30, 2018, 2019, respectively, related to various environmental matters and sites, including those discussed above. These reserves are classified in the Consolidated Balance Sheets as $3,329$5,749 and $6,040$4,507 in accrued expenses at March 31, 2018 2019 and September 30, 2018, 2019, respectively, and $15,289$20,622 and $12,689$20,822 in other non-current liabilities at March 31, 2018 2019 and September 30, 2018, 2019, respectively. The amounts recorded for identified environmental liabilities are based on estimates. Periodically, we review amounts recorded and adjust them to reflect additional legal and technical information that becomes available. Uncertainties about the status of laws, regulations, regulatory actions, technology, and information related to individual sites make it difficult to develop an estimate of the reasonably possible aggregate environmental remediation exposure. Accordingly, these costs could differ significantly from our current estimates.
On April 19, 2016, the Canadian Ministry of the Environment and Climate Change (the “MoE”) issued a Director’s Order naming AVX Corporation, and others, as responsible parties with respect to a location in Hamilton, Ontario that was at one time the site of operations of Aerovox Canada, a former subsidiary of Aerovox Corporation, a predecessor of AVX. This Director’s Order follows a draft order issued on November 4, 2015. AVX has taken the position that any liability of Aerovox Canada for such site under the laws of Canada cannot be imposed on AVX. At present, it is unclear whether the MoE will seek to enforce such Canadian order against AVX, and whether, in the event it does so, AVX will have any liability under applicable law. AVX intends to contest any such course of action that may be taken by the MoE.
In connection with the same location, Union Gas Limited and Coca-Cola Refreshments Canada Company filed suits in the Superior Court of Justice for Ontario, Canada, against AVX Corporation, Aerovox Corp. and Cooper Industries, LLC seeking to recover the costs of remediation of the site and for damages associated with alleged contamination of the site. Those suits were filed on April 18, 2018, but not served on AVX until October 11, 2018, and are in their initial stages. AVX is considering its legal options but intends to vigorously defend these matters.
We also operate, or did at one time, on other sites that may have potential future environmental issues as a result of activities at sites during AVX’s long history of manufacturing operations or prior to the start of operations by AVX. Even though we may have rights of indemnity for such environmental matters at certain sites, regulatory agencies in those jurisdictions may require us to address such issues. 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 reserves for our projected share of these costs. A separate account receivable is recorded for any indemnified costs. Our environmental reserves are not discounted and do not reflect any possible future insurance recoveries, which are not expected to be significant, but do reflect a reasonable estimate of cost sharing at multiple party sites or indemnification of our liability by a third party.
We are not involved in any pending or threatened environmental proceedings that would require curtailment of our operations. We continually expend funds to ensure that our facilities comply with applicable environmental regulations. While we believe that we are in compliance with applicable environmental laws, we cannot accurately predict future developments and do not necessarily have knowledge of all past occurrences on sites that we currently occupy. New environmental regulations may be enacted and we cannot determine the modifications, if any, in our operations that any such future regulations might require, or the cost of compliance with such regulations. Moreover, the risk of environmental liability and remediation costs is inherent in the nature of our business and, therefore, there can be no assurance that material environmental costs, including remediation costs, will not arise in the future.
On April 25, 2013, AVX was named as a defendant in a patent infringement case filed in the United States District Court for the District of Delaware captioned Greatbatch, Inc. v. AVX Corporation. This case alleged that certain AVX products infringe on one1 or more of six6 Greatbatch patents. On January 26, 2016, the jury returned a verdict in favor of the plaintiff in the first phase of a segmented trial and a mixed verdict in the second phase of a segmented trial, and found damages to Greatbatch in the amount of $ 37,500,$37,500, which was recorded in fiscal 2016. That verdict was later vacated by the court on March 30, 2018. TheIn fiscal 2018, we recorded a favorable accrual adjustment of $1,500 related to this patent infringement case. In a new trial, the amount of damages will(excluding interest) was determined by a jury to be subject$22,100 on January 15, 2019 resulting in a favorable accrual adjustment of $13,900 for the year ended in March 31, 2019. During the year ended March 31, 2019 the Company made a payment of $22,100 to further legal proceedings includingan escrow account which is classified within “Other assets”. Additionally, during the three months ended September 30, 2019, the Company made a potential trialpayment of $5,646, representing pre-judgement interest, to an escrow account which is classified within "Other assets". However, the matter is now on damages,appeal which we expectcould result in a material impact to occurthe accrual for this case in fiscal 2019. AVX is continuing to litigate the case.future.
On September 2, 2014, a subsidiary of AVX, American Technical Ceramics (“ATC”), was named as a defendant in a patent infringement case filed in the United States District Court of the Southern District of California captionedPresidio Components, Inc. v. American Technical Ceramics Corp. Corp. This case alleged that certain ATC products infringe on a Presidio patent. On April 18, 2016, the jury returned a verdict in favor of the plaintiff and found damages to Presidio. On August 17, 2016, the court issued a permanent injunction prohibiting ATC from manufacturing or selling the related products after November 16, 2016. Subsequently, on October 21, 2016, the Federal Circuit Court granted AVX’s request for a stay of the permanent injunction whereby ATC was allowed to continue to sell the disputed product until March 17, 2017 to anyone who was a customer prior to June 17, 2016. Any sales subsequent to November 16, 2016 pursuant to the stay of the permanent injunction were subject to court mandated intellectual property damages for each product sold. In December 2017, a panel of the Federal Circuit vacated the damage award to Presidio, vacated the injunction, and remanded the case for further proceedings to determine damages limited to “reasonable royalties” and to reconsider the requested injunction in light of its opinion and any additional facts. In June 2018, the District Court set the amount of royalties and re-issued the injunction. An appeal has been filed from both decisions.
As of September 30, 2018, 2019, we had total reserves of $73,392$59,752 plus accrued interest in accrued expenses with respect to the two2 intellectual property cases discussed above. The amounts recorded are based on estimated outcomes. Amounts recorded are reviewed periodically and adjusted to reflect additional information that becomes available. Accordingly, these costs could differ significantly from our current estimates.
During calendar year 2014, AVX was named as a co-defendant in a series of cases filed in the United States and in the Canadian provinces of Quebec, Ontario, British Columbia, Saskatchewan and Manitoba alleging violations of United States, state and Canadian antitrust laws and asserting that AVX and numerous other companies were participants in alleged price-fixing in the capacitor market. The cases in the United States were consolidated into the Northern District of California on October 2, 2014. However, someSome plaintiffs have broken off from the United States class action and filed actions on their own, although AVX is not named in all of these independent actions. The cases in Canada have not been consolidated. These cases are still in progress. AVX believes it has meritorious defenses and intends to vigorously defend the cases.
We are involved in other disputes, warranty, and legal proceedings arising in the normal course of business. While we cannot predict the outcome of these other disputes and proceedings, we believe, based upon a review with legal counsel, that none of these other disputes or proceedings will have a material impact on our financial position, results of operations, comprehensive income (loss), or cash flows. However, we cannot be certain of the eventual outcome in these or other matters that may arise and their potential impact on our financial position, results of operations, comprehensive income (loss), or cash flows.
13.12. Derivative Financial Instruments:
We are exposed to foreign currency exchange rate fluctuations in the normal course of business. We use derivative instruments (forward contracts) to hedge certain foreign currency exposures as part of our risk management strategy. The objective is to offset gains and losses resulting from these exposures with gains and losses on the forward contracts used to hedge them, thereby reducing volatility of earnings or protecting fair values of assets and liabilities. We do not enter into any derivative financial instruments for trading or speculative positions with regard to derivative instruments.purposes.
We primarily use forward contracts, with maturities less than four months, to protect against the foreign currency exchange rate risks inherent in our forecasted transactions related to purchase commitments and sales denominated in various currencies. These derivative instruments are designated and qualify as cash flow hedges.
The effectiveness of the cash flow hedges is determined by comparing the cumulative change in the fair value of the hedge contract with the cumulative change in the fair value of the hedged transaction, both of which are based on forward rates. The effective portion of the gain or loss on these cash flow hedges is initially recorded in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity. Once the hedged transaction is recognized, the gain or loss is recognized in our statement of operations. At March 31, 2018 2019 and September 30, 2018, 2019, respectively, the following forward contracts were entered into to hedge against the volatility of foreign currency exchange rates for certain forecasted sales and purchases:
| | March 31, 2018 | |
| | Fair Value of Derivative Instruments | |
| | Asset Derivatives | | Liability Derivatives | |
| | Balance | | | | | Balance | | | | |
| | Sheet | | Fair | | Sheet | | Fair | |
| | Caption | | Value | | Caption | | Value | |
| | | | | | | | | | | |
Foreign exchange contracts | Prepaid and other | | $ | 212 | | Accrued expenses | | $ | 377 | |
| | March 31, 2019 | |
| | Fair Value of Derivative Instruments | |
| | Asset Derivatives | | Liability Derivatives | |
| | Balance | | | | | Balance | | | | |
| | Sheet | | Fair | | Sheet | | Fair | |
| | Caption | | Value | | Caption | | Value | |
| | | | | | | | | | | |
Foreign exchange contracts | Prepaid and other | | $ | 570 | | Accrued expenses | | $ | 318 | |
| | September 30, 2018 | |
| | Fair Value of Derivative Instruments | |
| | Asset Derivatives | | Liability Derivatives | |
| | Balance | | | | | Balance | | | | |
| | Sheet | | Fair | | Sheet | | Fair | |
| | Caption | | Value | | Caption | | Value | |
| | | | | | | | | | | |
Foreign exchange contracts | Prepaid and other | | $ | 222 | | Accrued expenses | | $ | 139 | |
21
| | September 30, 2019 | |
| | Fair Value of Derivative Instruments | |
| | Asset Derivatives | | Liability Derivatives | |
| | Balance | | | | | Balance | | | | |
| | Sheet | | Fair | | Sheet | | Fair | |
| | Caption | | Value | | Caption | | Value | |
| | | | | | | | | | | |
Foreign exchange contracts | Prepaid and other | | $ | 591 | | Accrued expenses | | $ | 428 | |
For these derivatives designated as cash flow hedging instruments, during the three and six month periods ended September 30, 2018, a 2019, net pre-tax gaingains of $715$116 and a net pre-tax loss of $118$628, respectively, were recognized in other comprehensive income (loss). In addition, during the three and six month periods ended September 30, 2018, 2019, net pre-tax gainslosses of $545$1,026 and $2,590,$1,418, respectively, were reclassified from accumulated other comprehensive income (loss) into cost of sales (for hedging purchases), and net pretaxpre-tax gains of $32$531 and $1,403$1,224, respectively, were reclassified from accumulated other comprehensive income (loss) into sales (for hedging sales) in the accompanying statement of operations.
Derivatives not designated as cash flow hedging instruments consist primarily of forwards used to hedge foreign currency balance sheet exposures. These hedging instruments are used to offset foreign currency changes in the fair values of the underlying assets and liabilities. The gains and losses on these foreign currency forward contracts are recognized in other income (loss) in the same period as the re-measurementremeasurement gains and losses of the related foreign currency denominated assets and liabilities and thus naturally offset these gains and losses. At March 31, 2018 2019 and September 30, 2018, 2019, we had the following forward contracts that were entered into to hedge against these exposures.
| | March 31, 2019 | |
| | Fair Value of Derivative Instruments | |
| | Asset Derivatives | | Liability Derivatives | |
| | Balance | | | | | Balance | | | | |
| | Sheet | | Fair | | Sheet | | Fair | |
| | Caption | | Value | | Caption | | Value | |
| | | | | | | | | | | |
Foreign exchange contracts | Prepaid and other | | $ | 283 | | Accrued expenses | | $ | 270 | |
| | September 30, 2019 | |
| | Fair Value of Derivative Instruments | |
| | Asset Derivatives | | Liability Derivatives | |
| | Balance | | | | | Balance | | | | |
| | Sheet | | Fair | | Sheet | | Fair | |
| | Caption | | Value | | Caption | | Value | |
| | | | | | | | | | | |
Foreign exchange contracts | Prepaid and other | | $ | 515 | | Accrued expenses | | $ | 1,232 | |
| | March 31, 2018 | |
| | Fair Value of Derivative Instruments | |
| | Asset Derivatives | | Liability Derivatives | |
| | Balance | | | | | Balance | | | | |
| | Sheet | | Fair | | Sheet | | Fair | |
| | Caption | | Value | | Caption | | Value | |
| | | | | | | | | | | |
Foreign exchange contracts | Prepaid and other | | $ | 45 | | Accrued expenses | | $ | 137 | |
| | September 30, 2018 | |
| | Fair Value of Derivative Instruments | |
| | Asset Derivatives | | Liability Derivatives | |
| | Balance | | | | | Balance | | | | |
| | Sheet | | Fair | | Sheet | | Fair | |
| | Caption | | Value | | Caption | | Value | |
| | | | | | | | | | | |
Foreign exchange contracts | Prepaid and other | | $ | 133 | | Accrued expenses | | $ | 68 | |
For these derivatives not designated as cash flow hedging instruments during the three month and six month periods ended September 30, 2018, gains2019, losses of $66$716 and $773, respectively, on hedging contracts were recognized in other income (loss), along with the approximately $1,245$503 and $780, respectively, in exchange gainslosses that were recognized in other income (loss) in the accompanying statement of operations.
At March 31, 2018 2019 and September 30, 2018, 2019, we had outstanding foreign exchange contracts with notional amounts totaling $156,238$216,555 and $175,751,$239,603, respectively, denominated primarily in Euros, Czech Korunas, British Pounds, and Japanese Yen.
14.13. Subsequent Events:
On October 17, 2018, 23, 2019, the Board of Directors of the Company declared a $0.115 dividend per share of common stock with respect to the quarter ended September 30, 2018. 2019. The dividend will be paid to stockholders of record on November 2, 2018 8, 2019 and will be disbursed on November 16, 2018.22, 2019.
ITEM 2. | 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, trends 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 our outlook for fiscal year 2019,2020, overall volume and pricing trends, cost reduction and acquisition strategies and their anticipated results, and 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. Our expectations and assumptions are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that such forward-looking statements will materialize or prove to be correct as forward-looking statements are inherently subject to known and unknown risks, uncertainties and other factors which may cause actual future results, performance or achievements to differ materially from the future results, performance or achievements expressed in or implied by such forward-looking statements. Because these forward-looking statements involve risks and uncertainties, actual results could differ materially from those expressed or implied by the forward-looking statements for a variety of reasons, including without limitation, changes in the global economy or the economy of any locality in which we conduct business; changes in general industry and market conditions or regional growth or declines; loss of business from increased competition; higher raw material costs or raw material shortages; changes in consumer and customer preferences for end products; customer or supplier losses; changes in regulatory conditions; changes to import/export regulations and tariffs; unfavorable fluctuations in currencies or interest rates among the various jurisdictions in which we operate; market acceptance of our new products; possible adverse results of pending or future litigation or infringement claims; our ability to successfully integrate and realize expected synergies from acquired businesses; our ability to protect our intellectual property rights; negative impacts of environmental investigations or other governmental investigations and any associated litigation; tax assessments by governmental authorities and changes in our effective tax rate; dependence on and relationships with customers and suppliers; and other risks and uncertainties discussed in our Annual Report on Form 10-K for fiscal year ended March 31, 2018.2019. 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.
Any forward-looking statements by the Company are intended to speak only as of the date thereof. We do 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, as amended (the "Exchange Act"), 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, as amended, 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 our unaudited Consolidated Financial Statements and Notes thereto contained in this Form 10-Q, 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 investment securities, revenue recognition, inventories, property and equipment, goodwill, intangible assets, 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.
We have 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 our Annual Report on Form 10-K for the fiscal year ended March 31, 2018,2019, and in Note 1, “Summary of Significant Accounting Policies,” and in Note 3, "Revenue Recognition"Policies” 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 our Annual Report on Form 10-K for the fiscal year ended March 31, 2018.2019. There were no significant changes to other critical accounting policies, judgments involved in applying those policies, or the methodology used in determining estimates with respect to those related to investment securities, inventories, goodwill, intangible assets, property and equipment, and contingencies, during the three and six month periods ended September 30, 2018 other than those discussed in Note 1, "Basis of Presentation," and Note 3, "Revenue Recognition," in the Notes to Consolidated Financial Statements in this Form 10-Q related to revenue recognition.2019.
Business Overview
AVX is a leading worldwide manufacturer, supplier, and reseller of a broad line of electronic components, interconnect, sensing and control devices, and related products. Electronic components and connector, sensing and control productsdevices manufactured or resold by AVX are used in many types of end-use products, including those in telecommunications, automotive, transportation, energy harvesting, consumer electronics, military/aerospace, medical, computer, and industrial markets.
We have manufacturing, sales, and distribution facilities located throughout the world, which are divided into three geographic regions: the Americas, Asia, and Europe. AVX is organized into four product groups with two reportable segments: Electronic ComponentsComponents; and Interconnect, Sensing and Control Devices. The Electronic Components segment consists primarily of surface mount and leaded ceramic capacitors, RF thick and thin film components, surface mount and leaded tantalum capacitors, polymer tantalum capacitors, surface mount and leaded film capacitors, ceramic and film power capacitors, super capacitors, EMI filters (bolt in and surface mount), thick and thin film packages of multiple integrated components, varistors, thermistors, inductors, resistive products, and passive and active electronic antennas and antenna systems manufactured by us or purchased from other manufacturers for resale. The Interconnect, Sensing and Control Devices segment consists primarily of automotive sensing and control devices and automotive, telecom, and memory connectors manufactured by, or for, AVX.
Our customers consist of 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.
Results of Operations - Three Months Ended September 30, 20172018 and 20182019
Our net income for the three months ended September 30, 20182019 was $72.1$33.5 million, or $0.43$0.20 per share, compared to net income of $34.8$72.1 million, or $0.21$0.43 per share, for the three months ended September 30, 2017.2018.
| | | Three Months Ended | | | Three Months Ended | |
| | | September 30, | | | September 30, | |
(in thousands, except per share data) | | 2017 | | | 2018 | | | 2018 | | | 2019 | |
Net sales | | $ | 352,693 | | | $ | 456,328 | | | $ | 456,328 | | | $ | 377,286 | |
Gross profit | | | 77,273 | | | | 126,476 | | | 126,476 | | | 79,539 | |
Operating income | | | 44,786 | | | | 85,637 | | | 85,637 | | | 37,446 | |
Net income | | | 34,818 | | | | 72,069 | | | 72,069 | | | 33,456 | |
Diluted earnings per share | | $ | 0.21 | | | $ | 0.43 | | | $ | 0.43 | | | $ | 0.20 | |
Net sales in the three month period ended September 30, 2018 increased $103.62019 decreased $79.0 million or 29.4%17.3%, to $456.3$377.3 million compared to $352.7$456.3 million in the three month period ended September 30, 2017. Global2018. The decrease in revenue was attributable to lower sales volumes resulting from weaker global market conditions, remained healthy,and reflects a slowdown in the Asian markets resulting from a weaker Chinese economy in addition to reduced automotive manufacturing across all regions. Additionally, inventory levels in the sales channel remain high, particularly at our distribution customers in the Americas and Europe, contributing to stronglower overall demand, primarily in the automotive, medical,cellular, and consumer markets. The market demand remains strong for certain advanced products in the aerospace, defense, and aerospacemedical markets. MarketOverall demand for our products is being driven in part by the power of electronics to enhance the user experience in automotive, wearables, smartphones, drones, solid state drives, personal and industrial robots, virtual reality devices, smart home control and security devices enabled through the internet within a broad category called IoT, or Internet of Things. The increase in revenue for the three month period ended September 30, 2018 includes sales of $89.4 million in our Interconnect, Sensing and Control Devices segment that are attributable to our acquisition of the AB Electronic sensing and control (“S&C”) business and $31.8 million in our Electronic Components segment attributable to our acquisition of Ethertronics, Inc., ("AVX Antenna"). The increased sales were partially offset by the loss of Kyocera Resale sales in our Electronic Components segment, due to Kyocera's decision to market and sell certain of its products globally using its own sales force rather than have AVX resell such products in various geographies, which were $1.4 million for the three month period ended September 30, 2018 compared to $85.2 million for the three month period ended September 30, 2017. Sales were unfavorably impacted by approximately $8.8$2.1 million as a result of currency movement due to the strongerstrengthening of the U.S. Dollar as compared to the Japanese Yen and Euro when compared to the same period last year.
The table below represents product group revenues for the quartersthree months ended September 30, 20172018 and 2018.2019.
| | | Three Months Ended | | | Three Months Ended | |
(in thousands) | | September 30, | | | September 30, | |
Sales Revenue | | 2017 | | | 2018 | | | 2018 | | | 2019 | |
Ceramic Components | | $ | 57,319 | | | $ | 102,678 | | | $ | 102,678 | | | $ | 87,897 | |
Tantalum Components | | | 93,987 | | | | 105,702 | | | 105,702 | | | 59,450 | |
Advanced Components | | | 168,810 | | | | 123,849 | | | | 123,849 | | | | 109,295 | |
Total Electronic Components | | | 320,116 | | | | 332,229 | | | | 332,229 | | | | 256,642 | |
Interconnect, Sensing and Control Devices | | | 32,577 | | | | 124,100 | | | | 124,100 | | | | 120,644 | |
Total Revenue | | $ | 352,693 | | | $ | 456,328 | | | $ | 456,328 | | | $ | 377,286 | |
Electronic Components sales increased $12.1decreased $75.6 million, or 3.8%22.8% to $332.2$256.6 million in the three month period ended September 30, 20182019 compared to sales of $320.1$332.2 million during the same period last year driven by favorableunfavorable global macro-economic conditions partially offset by increased electronic content in automobiles, increased global defense spending, and technological advances across a broad range of IoT products and smart home devices driving increased sales in all of our Electronic Components groups.products. The sales increases in our Advanced Component group were offset by lower Kyocera Resale product salesdecrease is due to lower demand, primarily in Asia, resulting from the previously announced decision by Kyoceraslowdown in the Chinese economy, in addition to weaker demand in the distribution channel as distributors realign their inventories to meet current market and sell certain of its products globally using Kyocera’s salesforce as discussed above. Ceramic Components sales for the three months ended September 30, 2018 were favorably impacted by sales of $31.8 million related to our acquisition of AVX Antenna in February 2018.conditions.
Interconnect, Sensing and Control Devices product sales increased $91.5decreased $3.5 million to $124.1$120.6 million in the three month period ended September 30, 20182019 compared to $32.6$124.1 million during the same period last year. This increasedecrease is primarily attributable to increased salesa decrease of $89.4 million resulting from the addition of the S&C business,automotive manufacturing across all regions in addition to increased demand inunfavorable currency movement due to the European automotive markets for our interconnect, sensing and control products.stronger U.S. Dollar compared to the Euro.
Geographically,Overall sales decreased as a result of the weaker Chinese economy and weaker automotive markets compared to the same period last year, sales increased in Americas and Europe, primarily reflecting higher demand resulting from steadily improving global market conditions in the electronics market. Sales decreased in Asia primarily from the reduction of Kyocera Resale product sales partially offset by higher demand in the electronics market. With the addition of S&C, whose sales are concentrated in Europe, overall sales percentages decreased in the Asian and American regions while sales increased in our European region compared to the same three-monththree month period last year. Sales in the Asian, American, and European markets represented 32%30%, 28% and 40%42% of total sales, respectively, for the three month period ended September 30, 2018.2019. This compares to 42%32%, 29%28% and 29%40% of total sales for the Asian, American, and European regions in the same period last year, respectively.
Our sales to independent electronic distributor customers represented 43%36% of total sales for the three month period ended September 30, 2018,2019, compared to 49%43% for the three month period ended September 30, 2017. Our S&C sales are primarily direct to OEM customers, which led to the decrease in our distributor sales percentage when compared to the same period last year.2018. Overall, distributor sales activity increaseddecreased when compared to the same period last year as inventory remains higher than normal within the distribution channel resulting from the slower global economy and shortened lead times for certain products making distributors increased order activity duringreluctant to take on additional inventory particularly in the past several quarters in response to improved end-market demandAmericas and extended product delivery lead times.Europe. Our 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 $5.3 million, or 3.9% of gross sales to distributor customers for the three month period ended September 30, 2019, and $7.1 million, or 3.7% of gross sales to distributor customers, for the three month period ended September 30, 2018, and $7.5 million, or 4.4% of gross sales to distributor customers, for the three month period ended September 30, 2017.2018. Applications under such programs for the three month periods ended September 30, 20172019 and 2018 were approximately $7.3$4.9 million and $6.7 million, respectively. The decrease in both percentage and dollars compared to the prior year is reflective of the increased demand and improved pricing environment in the marketplace.
Gross profit in the three month period ended September 30, 20182019 was $126.5$79.5 million, compared to a gross profit of $77.3$126.5 million in the three month period ended September 30, 2017.2018. Gross profit as a percentage of sales for the three month period ended September 30, 20182019 was 27.7%21.1% compared to 21.9%27.7% for the three month period ended September 30, 2017.2018. This increase in gross profitoverall decrease in dollars andis primarily the result of weaker demand for our products from the slower global economy when compared to the same quarter last year. In addition, margin as a percentage of sales is reflective of our continued focusdeclined due to a lower margin mix and pricing pressure on the sale of value-added components with better margin opportunities, increased operational efficiencies,commercial ceramic and an improved pricing environment in the global marketplace.tantalum components. Costs due to currency movement were favorably impacted by $5.8$11.4 million when compared to the same period last year.
Selling, general and administrative expenses in the three month period ended September 30, 20182019 were $40.8$42.1 million, or 8.9%11.2% of net sales, compared to $32.5$40.8 million, or 9.2%8.9% of net sales, in the three month period ended September 30, 2017.2018. When compared to the same quarter last year, the overall increase in these expenses is primarily due to higher legal fees partially offset by lower selling expenses resulting fromas a result of the increase in sales as well as the effectslower sales.
Income from operations was $37.4 million in the three month period ended September 30, 2019 compared to $85.6 million in the three month period ended September 30, 2018 compared to $44.8 million in the three month period ended September 30, 2017.2018. This increasedecrease was a result of the factors described above.
Other income, net, was $3.3$3.6 million for the three month period ended September 30, 20182019 compared to $4.3$3.3 million for the same three month period last year.year reflecting higher interest income.
The provision for income tax for the three month period ended September 30, 20182019 was $16.9$7.6 million compared to $14.2$16.9 million for the three month period ended September 30, 2017. On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted in the U.S. Among numerous other provisions, the Act reduced the statutory U.S. corporation income tax rate from 35% to 21%, effective January 1, 2018. Our effective tax rate for the quarter ended September 30, 20182019 was approximately 20.9%, reflective of the lower income tax rates arising from the Act. The Company will continue to assess all relevant aspects of the Act, including additional guidance under the Act, among other things which may impact our income tax provision.19%.
As a result of the factors discussed above, net income for the three month period ended September 30, 20182019 was $72.1$33.5 million compared to net income of $34.8$72.1 million for the same three month period last year.
Results of Operations – Six Months EndedEnded September 30, 20172018 and 20182019
Our net income for the six months ended September 30, 20182019 was $88.1 million, or $0.52 per share, compared to $128.0 million, or $0.76 per share, compared to $66.3 million, or $0.39 per share, for the six months ended September 30, 2017.2018.
| | | Six Months Ended | | | Six Months Ended | |
| | | September 30, | | | September 30, | |
(in thousands, except per share data) | | 2017 | | | 2018 | | | 2018 | | | 2019 | |
Net sales | | $ | 684,047 | | | $ | 910,444 | | | $ | 910,444 | | | 779,055 | |
Gross profit | | | 151,119 | | | | 234,809 | | | 234,809 | | | 180,184 | |
Operating income | | | 87,217 | | | | 153,655 | | | 153,655 | | | 96,159 | |
Net income | | | 66,302 | | | | 128,032 | | | 128,032 | | | 88,133 | |
Diluted earnings per share | | $ | 0.39 | | | $ | 0.76 | | | $ | 0.76 | | | 0.52 | |
Net sales in the six month period ended September 30, 2018 increased $226.42019 decreased $131.3 million, or 33.1%14.4%, to $910.4$779.1 million compared to $684.0$910.4 million in the six month period ended September 30, 2017.2018. The increasedecrease in revenue was attributable to higherlower sales volumes across most of our markets resulting from steadily improvingweaker global market conditions, reflecting higher overall demand, primarilywhich reflect a slowdown in the automotive, medical, and consumerAsian markets driven by the power of electronics to enhance the user experience such as in automotive, wearables, smartphones, drones, solid state drives, personal and industrial robots, virtual reality devices, smart home control, and security devices enabled through the IoT. The increase in revenue for the six month period ended September 30, 2018 includes sales of $187.1 million in our Interconnect, Sensing and Control Devices segment that are attributable to our acquisition of S&C and $63.7 million in our Electronic Components segment attributable to our acquisition of AVX Antenna. The increased sales were partially offset by the loss of Kyocera Resale sales in our Electronic Components segment, due to Kyocera's decisiona weaker Chinese economy, in addition to market and sell certain of its products globally using its own sales force rather than have AVX resell such products in various geographies, which were $18.6 million for the six month period ended September 30, 2018 compared to $161.9 million for the six month period ended September 30, 2017.reduced automotive manufacturing across all regions.
The table below represents product group revenues for the six months ended September 30, 20172018 and 2018.2019.
| | | Six Months Ended | | | Six Months Ended | |
(in thousands) | | September 30, | | | September 30, | |
Sales Revenue | | 2017 | | | 2018 | | | 2018 | | | 2019 | |
Ceramic Components | | $ | 108,375 | | | $ | 181,514 | | | $ | 181,514 | | | 194,520 | |
Tantalum Components | | | 182,940 | | | | 206,734 | | | 206,734 | | | 122,174 | |
Advanced Components | | | 330,471 | | | | 263,193 | | | | 263,193 | | | | 217,428 | |
Total Electronic Components | | | 621,786 | | | | 651,441 | | | | 651,441 | | | | 534,122 | |
Interconnect, Sensing and Control Devices | | | 62,261 | | | | 259,004 | | | | 259,004 | | | | 244,933 | |
Total Revenue | | $ | 684,047 | | | $ | 910,444 | | | $ | 910,444 | | | | 779,055 | |
Electronic Component sales increased $29.7decreased $117.3 million, or 4.8%18.0% to $651.4$534.1 million in the six month period ended September 30, 20182019 compared to sales of $621.8$651.4 million during the same six month period last year as a result of steadily improvingdriven by unfavorable global marketmacro-economic conditions drivenpartially offset by increased electronic content in automobiles, increased global defense spending, and technological advances across a broad range of IoT products and smart home devices driving the increased sales in all of our Electronic Components groups.products. The sales increases in our Advanced Component group were offset by lower Kyocera Resale product salesdecrease is due to lower demand, primarily in Asia, resulting from the previously announced decision by Kyoceraslowdown in the Chinese economy, in addition to weaker demand in the distribution channel as distributors realign their inventories to meet current market and sell certain of its products globally using Kyocera’s salesforce as discussed above.conditions.
Total Interconnect, Sensing and Control Devices increased $196.7decreased $14.0 million, or 316.0%5.4%, to $259.0$245.0 million in the six month period ended September 30, 20182019 compared to $62.3$259.0 million during the same period last year. This increasedecrease is primarily attributable to increased salesa decrease of $187.1 million resulting from the addition of the S&C business,automotive manufacturing across all regions in addition to increased demand inunfavorable currency movement due to the European automotive markets for our interconnect, sensing and control products.stronger U.S. Dollar compared to Euro.
Geographically, compared to the same period last year, sales increaseddecreased in all regions, primarily reflecting higherlower demand resulting from steadily improvingdeclining global market conditions in the electronics market. With the addition of S&C, whose sales are concentrated in Europe, overall sales percentages decreased in the Asian and American regions while sales increased in our European region compared to the same six-month period last year. Sales in the Asian, American, and European markets represented 32%30%, 26%28% and 42% of total sales, respectively, for the six month period ended September 30, 2018.2019. This compares to 41%32%, 30%26% and 29%42% of total sales for the Asian, American, and European regions in the same period last year, respectively.
Our sales to independent electronic distributor customers represented 41.2%37.0% of total sales for the six month period ended September 30, 2018,2019, compared to 48.8%41.2% for the six month period ended September 30, 2017.2018. Overall, distributor sales activity increaseddecreased when compared to the same period last year as distributors increased order activity in responseinventory levels remained high and our distribution customers realign their inventories to good endmeet current market demand during the period.conditions. Our 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 $10.6 million, or 3.7% of gross sales to distributor customers, for the six month period ended September 30, 2019, and $13.5 million, or 3.6% of gross sales to distributor customers, for the six month period ended September 30, 2018, and $14.3 million, or 4.3% of gross sales to distributor customers, for the six month period ended September 30, 2017.2018. Applications under such programs for the six month period ended September 30, 20172018 and 20182019 were approximately $14.0$12.9 million and $12.9$10.0 million, respectively.
Gross profit in the six month period ended September 30, 20182019 was 25.8%23.1% of sales, or $234.8$180.2 million, compared to a gross profit of 22.1%25.8% of sales, or $151.1$234.8 million, in the six month period ended September 30, 2017.2018. This increase in gross profitoverall decrease in dollars and margin percentage is primarily the result of weaker demand for our products from the slower global economy when compared to the same quarter last year. In addition, margin as a percentage of sales is reflective of our continued focusdeclined due to a lower margin mix and pricing pressure on the sale of value added components with better margin opportunities, increased operational efficiencies,commercial ceramic and an improved pricing environment in the global marketplace.tantalum components. Costs due to currency movement were favorably impacted by $1.4$19.4 million when compared to the same period last year.
Selling, general and administrative expenses in the six month period ended September 30, 20182019 were $81.2$84.0 million, or 8.9%10.8% of net sales, compared to $63.9$81.2 million, or 9.3%8.9% of net sales, in the six month period ended September 30, 2017.2018. The overall increase in these expenses is primarily due to higher legal fees partially offset by lower selling expenses resulting fromas a result of the increase in sales when compared to the same period last year.lower sales.
Income from operations was $96.2 million in the six month period ended September 30, 2019 compared to $153.7 million in the six month period ended September 30, 2018 compared to $87.2 million in the six month period ended September 30, 2017.2018. This increasedecrease was a result of the factors described above.
Other income, net was $6.0$8.1 million for the six month period ended September 30, 20182019 compared to $6.2$6.0 million for the same six month period last year. This slight decreaseincrease was primarily due to higher interest income and lower foreign exchange losses resulting from currency fluctuations.
The provision for income tax for the six month period ended September 30, 20182019 was $31.7$16.1 million compared to $27.1$31.7 million for the six month period ended September 30, 2017.2018. Our effective tax rate for the six month period ended September 30, 20182019 was 20.9%approximately 15% compared to 29.0%approximately 18% for the six months ended September 30, 2017. The reduction2018. This decrease in the effective tax rate is primarily due to discrete tax benefits occurring during the enactmentsix months ended September 30, 2019. This benefit is principally due to an increase in foreign tax credits on foreign withholding obligations and the release of a partial valuation allowance of a subsidiary in Korea. Excluding these adjustments, the Act on December 22, 2017, as discussed above. The Company will continue to assess all relevant aspects ofeffective tax rate would have been approximately 20% for the Act, including additional guidance under the Act, among other things which may impact our income tax provision.six months ended September 30, 2019.
As a result of the factors discussed above, net income for the six month period ended September 30, 20182019 was $128.0$88.1 million compared to $66.3$128.0 million for the same six month period last year.
Outlook
Near-Term:
With ever changing and unpredictable global geopolitical and economic conditions, it is difficult to quantify expectations for the remainder of fiscal 2019.2020. Near-term results for us will depend on the impact of the overall global geopolitical and economic conditions and their impact on telecommunications, information technology hardware, automotive, consumer electronics, and other electronic markets. Looking ahead, visibility is low and forecasting is a challenge in this uncertain and volatile market. We expect to see lower than normal sales price pressure in the markets we serve due to the weaker economic picture, partially offset by increasing demand combinedfor certain electronic components with lower product availability. In response to anticipated market conditions, we expect to continue to focus on cost management and product linemanufacturing facilities rationalization to maximize earnings potential. We also continue to focus on process improvements and enhanced production capabilities in conjunction with our focus on the salesales of value-added electronic components to support today’s advanced electronic use products. If current global geopolitical and economic conditions worsen, the overall impact on our customers as well as end-user demand for electronic products could have a significant adverse impact on our near-term results.
Long-Term:
Although there is uncertainty and unpredictability in the near-term market as a result of the current global geopolitical and economic conditions, we continue to seebe optimistic about opportunities for long-term growth and profitability improvement due to: (a) a projected increase in the long-term worldwide demand for more sophisticated electronic end use products, based on new IoT applications, the increase of electronic content in cars, smart home devices that are connected to the internet and new consumer wireless devices, which require electronic components and interconnect, sensing and control devices such as the ones we sell, (b) cost reductions and improvements in our production processes, (c) opportunities for growth in our Electronic Component and Interconnect, Sensing and Control Devices product lines due to advances in component design and our production capabilities. We have fostered our financial health and the strength of our balance sheet putting us in a good position to react to changes in the marketplace as they occur. We remain confident that our strategies will enable our continued long-term success.
Liquidity and Capital Resources
Our liquidity needs arise primarily from working capital requirements, dividends, capital expenditures, and acquisitions. Historically, we have satisfied our liquidity requirements through funds from operations, investment income from cash and investments in securities, and cash on hand. As of September 30, 2018,2019, we had a current ratio of 5.56.0 to 1, $844.7$774.5 million of cash, cash equivalents, and investments in securities, $2.3$2.4 billion of stockholders’ equity, and no borrowings. On December 22, 2017, the Act was enacted in the U.S. Among numerous other provisions, the Act reduced or eliminated certain corporate tax deductions and provided for a transition from a worldwide to a territorial tax system for resident corporations and related corporate group members. As a result of the Act we will have greater flexibility to redirect our global cash resources where they are needed.
Net cash provided by operating activities was $138.5$58.6 million in the six month period ended September 30, 20182019 compared to $128.4$138.5 million of cash provided by operating activities in the six month period ended September 30, 2017.2018.
Purchases of property and equipment were $71.6 million in the six month period ended September 30, 2019 and $65.0 million in the six month period ended September 30, 2018 and $38.9 million in the six month period ended September 30, 2017.2018. Expenditures in the current quarterperiod were primarily made in connection with strategic building expansion and equipment purchase activities in our Fountain Inn, South Carolina facilities and our plants in El Salvador the Czech Republic, Germany and Malaysia. We expect to continue making strategic capital investments in our Electronic Component and Interconnect, Sensing and Control Devices product lines and estimate that we will incur total capital expenditures of approximately $100$130 million in fiscal 2019.2020. The actual amount of capital expenditures will depend upon the outlook for end-market demand and timing of capital projects.
On April 30, 2018,September 10, 2019, AVX completed its purchase of KumatecChengdu OK New Energy ("COKNE") for $12.9$9.9 million in cash, net of cash acquired and debt assumed. Kumatecacquired. COKNE develops constructs and manufactures automation equipment and manufactures plastic components.supercapacitors.
Historically, our operating funding is internally generated through operations, investment income from cash, cash equivalents, and investments in securities and cash on hand. We have assessed the condition of our financial resources and our current business and believe that, based on our financial condition as of September 30, 2018,2019, cash on hand and cash expected to be generated from operating activities and investment income from cash, cash equivalents, and investments in securities will be sufficient to satisfy our anticipated financing needs for working capital, capital expenditures, environmental clean-up costs, expenses related to ongoing litigation, pension plan funding, research, development, and engineering expenses, and dividend payments or stock repurchases to be made during the next twelve months. While changes in customer demand have an impact on our future cash requirements, changes in those requirements are mitigated by our ability to adjust manufacturing capabilities to meet increases or decreases in customer demand. We do not anticipate any significant changes in our ability to generate capital or meet our liquidity needs in the foreseeable future.
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 September 30, 2018,2019, we did not have any significant delivery contracts outstanding.
Commitments and Contingencies
Information related to commitments and contingencies can be found in Note 13,14, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in ourthe Annual Report on Form 10-K for the fiscal year ended March 31, 2018,2019, as well as in Note 9,8, “Commitments and Contingencies,” in the Notes to the Consolidated Financial Statements in this Form 10-Q. Accordingly, this Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended March 31, 2018.2019.
New Accounting Standards
Information related to new Statements of Financial Accounting Standards and Financial Accounting Standards Board Staff Positions that we have recently adopted or are currently reviewing 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 ourthe Annual Report on Form 10-K for the fiscal year ended March 31, 2018,2019, as well as in Note 1, “Summary of Significant Accounting Policies,” in the Notes to the Consolidated Financial Statements in this Form 10-Q. Accordingly, this Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended March 31, 2018.2019.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Our 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 trading or speculative purposes. Accordingly, we have hedging commitments to cover a portion of our exchange risk on purchases, operating expenses, and sales. There have been no material net changes in our exposure to foreign currency exchange rates as reflected in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2018.2019. See Note 1312 of our Notes to Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q for further discussion of derivative financial instruments.
ITEM 4. | CONTROLS AND PROCEDURES |
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our 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 our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide reasonable assurance that the controls and procedures will meet their objectives. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
As of the end of the period covered in this report, we 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, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
In addition, there were no changes in our internal control over financial reporting during the second quarter of fiscal 20192020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II: | OTHER INFORMATION |
| |
Please refer to Note 9,8, “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 in certain environmental and other pending legal proceedings.
Please refer to Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended March 31, 20182019 for information regarding factors that could affect our results of operations, financial condition, and liquidity. There have been no material changes to the risk factors affecting the companyCompany as reported in our Annual Report on Form 10-K for the fiscal year ended March 31, 2018.
2019.
ITEM 2.
| UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Issuer Purchases of Equity Securities
The following table shows our purchases of common stock during the quarter.
| | | | | | | | | | Total number of
| | | Maximum number
| |
| | | | | | | | | | shares purchased
| | | of shares that may
| |
| | Total number
| | | | | | | as part of publicly
| | | yet be purchased
| |
| | of shares
| | | Average price
| | | announced plans
| | | under the plans or
| |
Period
| | purchased
| | | paid per share
| | | or programs (1)
| | | programs (1)
| |
7/1/18 - 7/31/18
| | | - | | | $ | - | | | | - | | | | 3,012,074 | |
8/1/18 - 8/31/18
| | | - | | | | - | | | | - | | | | 3,012,074 | |
9/1/18 - 9/30/18
| | | - | | | | - | | | | - | | | | 3,012,074 | |
Total
| | | - | | | $ | - | | | | - | | | | 3,012,074 | |
(1)
| On October 17, 2007, the Board of Directors of the Company authorized the repurchase of 5,000,000 shares of our common stock from time to time in the open market. The repurchased shares are held as treasury stock and are available for general corporate purposes. As of September 30, 2018, there were 3,012,074 shares that may yet be repurchased under this program. There is no expiration date for this repurchase program.
|
| ITEM 6. | EXHIBITS |
| | |
| Exhibit 3.1 | Amended and Restated Bylaws of the Company, effective October 17, 2018 (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed with the SEC on October 24, 2018). |
| | |
| Exhibit 31.1 | Certification of John Sarvis, Chairman, Chief Executive Officer and President, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated AugustNovember 6, 2018.2019. |
| |
| |
| Exhibit 31.2 | Certification of Michael Hufnagel, Senior Vice President, Chief Financial Officer and Treasurer, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated AugustNovember 6, 2018.2019. |
| | |
| Exhibit 32.1 | Certification Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - John Sarvis and Michael Hufnagel. |
| | |
| 101 | The following financial information from our Quarterly Report on Form 10-Q forInteractive data files pursuant to Rule 405 of Regulation S-T: (i) the quarter ended September 30, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at March 31, 2019 and September 30, 2019, (ii) the Consolidated Statements of Operation for the three and six month periods ended September 30, 2019 and 2018, (iii) the Consolidated Statement of Comprehensive Income (Loss) for the three and six month periods ended September 30, 2019 and 2018, (iv) the Consolidated Statements of Comprehensive Income (Loss), (iv)Changes in Stockholders’ Equity for the three and six month periods ended September 30, 2019 and 2018, (v) the Consolidated Statements of Cash Flows for the six month periods ended September 30, 2019 and (v)2018 and (vi) the Notesnotes to the Condensed Consolidated Financial Statements.
|
| |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
Signature
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, and the undersigned also has signed this report in his capacity as the registrant’s Chief Financial Officer.
Date: November 6, 20182019
AVX Corporation | | |
| | | |
By: | /s/ Michael Hufnagel | | |
| Michael Hufnagel | | |
| Michael HufnagelSenior Vice President, Chief Financial Officer, and Treasurer
| | |
| Senior Vice President, Chief Financial Officer, and Treasurer
| | |
32
