. March 31,
1996 1995
(dollars in thousands, except share data)
Current assets:
Cash and cash equivalents $131,601 $ 43,813
Accounts receivable, net 139,545 118,709
Inventories 243,155 200,469
Deferred income taxes 30,853 20,475
Other receivables-affiliate 2,429 2,354
Prepaid and other 13,562 11,174
Total current assets 561,145 396,994
Property and equipment:
Land 9,370 9,141
Buildings and improvements 109,574 107,436
Machinery and equipment 506,004 441,193
Construction in progress 46,030 26,737
670,978 584,507
Accumulated depreciation (404,432) (352,524)
266,546 231,983
Goodwill, net 36,067 38,595
Other assets 3,758 3,125
TOTAL ASSETS $867,516 $670,697
Current liabilities:
Short-term debt banks $ 19,398 $ 12,967
Current maturities of long-term debt 1,398 3,082
Accounts payable:
Trade 31,755 32,174
Affiliates 33,040 33,262
Income taxes payable 35,546 16,050
Accrued payroll and benefits 40,481 38,495
Other payables-affiliates 403
Accrued expenses 41,597 35,562
Total current liabilities 203,215 171,995
Long-term debt 8,507 9,544
Deferred income taxes 22,818 28,242
Other liabilities 8,976 4,650
TOTAL LIABILITIES 243,516 214,431
Commitments and Contingencies (Notes 8 and 11)
Stockholders' Equity:
Preferred stock, par value $.01 per share:
Authorized, 20,000,000 shares;
None issued or outstanding
Common stock, par value $.01 per share: 880 858
Authorized, 300,000,000 shares;
issued and outstanding,
88,000,000 shares (85,800,000 in 1995)
Additional paid-in capital 319,909 267,043
Retained earnings 306,923 188,631
Foreign currency translation adjustment (3,712) (266)
TOTAL STOCKHOLDERS' EQUITY 624,000 456,266
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $867,516 $670,697
See accompanying notes to consolidated financial statements.
. -16-
. AVX CORPORATION AND SUBSIDIARIES
. CONSOLIDATED STATEMENTS OF INCOME
Years Ended March 31,
1996 1995 1994
(dollars in thousands,except share data)
Net sales $1,207,761 $988,893 $795,515
Cost of sales 886,494 777,687 639,058
Gross Profit 321,267 211,206 156,457
Selling, general and
administrative expenses 116,586 101,013 100,875
Profit from operations 204,681 110,193 55,582
Other income (expense):
Interest income 5,096 2,018 749
Interest expense (2,352) (2,229) (2,792)
Other, net 1,655 1,218 1,439
Income before income taxes and cumulative
effect of accounting change for income
taxes 209,080 111,200 54,978
Provision for income taxes 71,344 36,329 19,817
Income before cumulative effect
of accounting change for income taxes 137,736 74,871 35,161
Cumulative effect of accounting change
for income taxes 5,000
Net income $ 137,736 $ 74,871 $ 40,161
Income per share:
Before cumulative effect of
accounting change for income taxes $ 1.58 $ .87 $ .41
Cumulative effect of accounting change
for income taxes .06
Net income $ 1.58 $ .87 $ .47
Weighted average shares
outstanding 87,175,000 85,800,000 85,800,000
See accompanying notes to consolidated financial statements.
. -17-
. AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
. Common Stock Foreign
Additional Currency
Number Paid-In Retained Translation
ofShares Amount Capital Earnings Adjustment Total
(dollars in thousands)
Balance, March 31, 1993 85,800,000 $858 $267,043 $114,273 $(3,672) $378,502
Net income 40,161 40,161
Dividends (14,424) (14,424)
Current year's
adjustment (3,405) (3,405)
Balance, March 31, 1994 85,800,000 858 267,043 140,010 (7,077) 400,834
Net income 74,871 74,871
Dividends (26,250) (26,250)
Current year's
adjustment 6,811 6,811
Balance, March 31, 1995 85,800,000 858 267,043 188,631 (266) 456,266
Issuance of common
stock 2,200,000 22 52,866 52,888
Net income 137,736 137,736
Dividends (19,444) (19,444)
Current year's
adjustment (3,446) (3,446)
Balance, March 31, 1996 88,000,000 $880 $319,909 $306,923 $(3,712) $624,000
See accompanying notes to consolidated financial statements.
. -18-
. AVX CORPORATION AND SUBSIDIARIES
. CONSOLIDATED STATEMENTS OF CASH FLOWS
. Years Ended March 31,
1996 1995 1994
(dollars in thousands)
Operating Activities:
Net income $137,736 $ 74,871 $ 40,161
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 69,910 60,608 55,195
Deferred income taxes (15,680) (6,023) (4,018)
Changes in operating assets
and liabilities:
Accounts receivable (26,564) (13,579) (27,673)
Inventories (44,862) (36,957) (15,605)
Accounts payable and
accrued expenses 12,416 28,471 6,812
Income taxes payable 20,351 13,425 2,331
Other assets and liabilities 2,380 5,342 2,976
Net cash from operating activities 155,687 126,158 60,179
Investing Activities:
Purchases of property and equipment (110,487) (77,308) (61,098)
Proceeds from sale of operations
to affiliate 3,973
Other (79) 680 39
Net cash used in investing activities (106,593) (76,628) (61,059)
Financing Activities:
Repayment of debt (3,308) (10,736) (2,110)
Dividends paid (19,444) (26,250) (14,424)
Proceeds from issuance of debt 8,696 4,167 2,921
Proceeds from issuance of common stock 52,888
Net cash from (used in) financing activities 38,832 (32,819) (13,613)
Effect of exchange rate changes on cash (138) 244 (33)
Increase (decrease) in cash and cash
equivalents 87,788 16,955 (14,526)
Cash and cash equivalents at beginning of year 43,813 26,858 41,384
Cash and cash equivalents at end of year $131,601 $ 43,813 $ 26,858
See accompanying notes to consolidated financial statements.
. -19-
. AVX CORPORATION AND SUBSIDIARIES
. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
. (dollars in thousands, except share data)
1. Summary of Significant Accounting Policies:
General:
AVX Corporation is a leading worldwide manufacturer and
supplier of a broad line of passive electronic components and
related products. Components sold by the Company are used in
virtually all types of electronic products for industries such
as telecommunication, components, automotive, medical and
consumer electronics. The consolidated financial statements of
AVX Corporation and subsidiaries (the "Company" or "AVX")
include the accounts of the Company and its subsidiaries. All
significant intercompany transactions and accounts have been
eliminated.
Public Offering:
From January 1990 through August 15, 1995, the Company was
wholly-owned by Kyocera Corporation ("Kyocera"). On August 15,
1995, Kyocera sold 22.9%, or 19,650,000 of the Company's common
shares, and the Company sold an additional 2,200,000 common
shares, in a public offering. As a result, Kyocera currently
owns 75.2% of the Company's common shares.
Cash Equivalents:
The Company considers all highly liquid investments purchased
with an original maturity of three months or less to be cash
equivalents.
Inventories:
Inventories are valued at the lower of cost (first-in,
first-out method) or market. Inventory costs include material,
labor and manufacturing overhead.
Property and Equipment:
Property and equipment are recorded at cost. Machinery and
equipment is depreciated on the double declining-balance method
for assets placed in service after April 1, 1991, and the
straight-line method for assets placed in service before that
date. Buildings are depreciated on the straight-line method.
The estimated useful lives used for computing depreciation are
as follows: buildings and improvements--10 to 31.5 years, and
machinery and equipment--3 to 10 years. Depreciation expense
was $67,508, $58,476 and $53,153 for the years ended March 31,
1996, 1995, and 1994, respectively.
The cost of maintenance and repairs is charged to expense as
incurred. Upon disposal or retirement, the cost and accumulated
depreciation of assets are eliminated from the respective
accounts. Any gain or loss is reflected in income.
Grants received from governments by certain foreign
subsidiaries principally relate to incentives for the
acquisition of property and equipment. Such grants are recorded
as reductions to the related assets and reduce future
depreciation expenses.
Goodwill:
Assets and liabilities related to business combinations
accounted for as purchase transactions were recorded at their
respective fair values on the dates of acquisition. Any excess
of purchase price over such fair value ("Goodwill") is amortized
on a straight-line basis over periods ranging from 20 to 40
years. The accumulated amortization as of March 31, 1996 and
1995 was $14,409 and $12,328, respectively. The carrying value
of Goodwill is evaluated quarterly in relation to the operating
performance and estimated future undiscounted cash flows of the
related operating unit. Adjustments are made if the sum of
expected future net cash flows is less than carrying value.
. -20-
Income Taxes:
The Company does not provide for U.S. taxes on the
undistributed earnings of foreign subsidiaries which are
considered to be reinvested indefinitely. As of March 31, 1996,
the amount of U.S. taxes on such undistributed earnings would
have been approximately $18,600.
Effective April 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which requires the use of the liability method for
accounting for deferred income taxes. The effect of adoption
was to decrease deferred tax liabilities as of that date by
$5,000 and is reflected in net income for the year ended March
31, 1994, as the cumulative effect of accounting change for
income taxes.
Foreign Currency Activity:
Assets and liabilities of foreign subsidiaries are translated
into U.S. dollars at the exchange rate in effect at the balance
sheet date. Operating accounts are translated at an average
rate of exchange for the respective accounting periods.
Translation adjustments result from the process of translating
foreign currency financial statements into U.S. dollars and are
reported separately as a component of stockholders' equity.
The Company enters into foreign currency exchange contracts and
options to manage exposure to currency rate fluctuations on
anticipated sales, purchases and intercompany transactions.
These exchange agreements generally qualify for accounting as
designated hedges. The realized and unrealized gains and losses
on these contracts are deferred and included as a component of
the related transaction. Any contracts that do not qualify as
hedges for accounting purposes are marked to market with the
resulting gains and losses recognized in other income or expense.
Revenue Recognition:
Sales are recorded upon shipment of related goods to customers.
Certain sales to distributors are under terms which allow for
the affected distributors to receive price protection from the
Company for actual sales at prices below anticipated sales
prices. A portion of sales is made to distributors under
agreements allowing limited rights of return. The Company
provides an allowance for distributor adjustments based on
historical experience.
Use of Estimates:
Use of estimates and assumptions as determined by
management is required in the preparation of consolidated
financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those
estimates and assumptions.
Research and Development:
Research and development expenditures are expensed when
incurred. Such expenses totaled approximately $18,100, $14,900,
and $12,700 for the years ended March 31, 1996, 1995, and 1994,
respectively.
New Accounting Standards:
The Financial Accounting Standards Board has issued Statement
of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", which is effective for transactions
entered into in fiscal years that begin after December 15, 1995.
The Statement allows all companies to either record in the
statement of income, the fair value of stock options, as defined
in the Statement, as compensation expense or provide only pro
forma disclosures of the fair value based method of accounting.
The Company has not determined which accounting method it will
adopt.
The Financial Accounting Standards Board has issued Statement
of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of", which is effective for fiscal years beginning
after December 15, 1995. Management believes that the effect of
adoption will not materially affect the Company's financial
condition or results of operations.
. -21-
2. Accounts Receivable:
Accounts receivable at March 31 consisted of:
. 1996 1995
Trade $159,798 $135,839
Less, allowance for doubtful accounts,
sales returns, distributor adjustments
and discounts (20,253) (17,130)
. $139,545 $118,709
Charges to expense related to such allowances were
approximately $53,117, $42,055 and $28,361, and applications to
such allowances were approximately $50,078, $37,915 and $27,415
for the years ended March 31, 1996, 1995 and 1994, respectively.
3. Inventories:
Inventories at March 31 consisted of: 1996 1995
Finished goods $75,235 $68,487
Work in process 77,256 76,555
Raw materials and supplies 90,664 55,427
. $243,155 $200,46
4. Debt:
Long-term debt at March 31 consisted of:
. 1996 1995
Deutschmark loans at 5.70% to 6.25%
due through 1999 $ 6,182 $ 8,237
Pounds Sterling loan at 9.87%
due through 2002 2,676 3,069
Other 1,047 1,320
. 9,905 12,626
Less--current maturities (1,398) (3,082)
. $ 8,507 $ 9,544
The aggregate annual maturities of long-term debt are as
follows:
1997 $ 1,398
1998 2,096
1999 4,158
2000 805
2001 674
Thereafter 774
. $9,905
Short-term bank debt consists primarily of borrowings incurred
by the Company's European subsidiaries under two DM 10.0 million
working capital bank facilities and a DM 2.5 million short-term
bank facility bearing interest at market rates (between 4.37%
and 5.05% at March 31, 1996) which extend through July 1996, and
a DM 7.5 million short-term bank facility bearing interest tied
to Libor (4.05% at March 31, 1996) which extends through May
1996.
. -22-
Interest paid totaled $2,452, $1,881 and $2,691 during the
years ended March 31, 1996, 1995, and 1994, respectively.
5. Income Taxes:
For financial reporting purposes, income before income taxes
and cumulative effect of accounting change for income taxes
includes the following components:
.
. Years Ended March 31,
. 1996 1995 1994
Domestic $114,011 $ 57,197 $34,688
Foreign 95,069 54,003 20,290
. $209,080 $111,200 $54,978
The provision (benefit) for income taxes consisted of:
. Years Ended March 31,
. 1996 1995 1994
Current:
Federal/State $55,480 $ 29,754 $15,615
Foreign 31,544 12,598 3,138
. 87,024 42,352 18,753
Deferred:
Federal/State (15,680) (10,006) 1,319
Foreign 3,983 (255)
. (15,680) (6,023) 1,064
. $71,344 $ 36,329 $19,817
Deferred taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities are as follows:
. March 31,
. 1996 1995
Current: Assets Liabilities Assets Liabilities
Sales and receivable reserves $6,625 $ -- $ 4,651 $ --
Inventory reserves 8,073 -- 3,972 --
Accrued expenses 16,155 -- 11,852 --
. $30,853 $ -- $20,475 $ --
. March 31,
. 1996 1995
Non-Current: Assets Liabilities Assets Liabilities
Property and equipment
depreciation $ 797 $12,879 $ 797 $22,863
Accrued expenses 709 1,252 1,076
Other 14,591 8,451
Foreign income tax loss
carryforwards 8,792 10,890
. 10,298 28,722 12,763 31,314
Valuation allowance (4,394) (9,691)
. $ 5,904 $28,722 $ 3,072 $31,314
. -23-
A reconciliation between the U.S. Federal statutory income tax
rate and the Company's effective rate for income tax is as
follows:
. Years Ended March 31,
. 1996 1995 1994
U.S. Federal statutory rate 35.0% 35.0% 35.0%
Increase (decrease) in tax rate resulting from:
State income taxes, net of federal tax benefit .9 1.8 4.9
Taxes at different tax rates on foreign earnings (1.5) (2.8) (2.6)
Change in valuation allowance (2.5) 1.9 (.7)
Other, net 2.2 (3.2) (.6)
Effective tax rate 34.1% 32.7% 36.0%
At March 31, 1996, certain of the Company's foreign
subsidiaries in Europe had tax net operating loss carryforwards
totaling approximately $19,951, most with no expiration date. A
portion of the loss carryforwards are in jurisdictions where the
Company has ceased or sharply curtailed its operations, thereby
limiting its ability to generate future taxable income and
utilize such loss carryforwards. Accordingly, the Company's
valuation allowances relate to deferred tax assets which are the
result of the loss carryforwards in these jurisdictions. The
valuation allowance decreased $5,297 and increased $2,241 during
the years ended March 31, 1996 and 1995, respectively.
Income taxes paid totaled $66,500, $29,329 and $17,106 during
the years ended March 31, 1996, 1995 and 1994, respectively.
6. Employee Retirement Plans:
Pension Plans
The Company sponsors non-contributory, defined benefit pension
plans covering certain employees. Pension benefits provided to
U.S. employees covered under collective bargaining agreements
are based on a flat benefit formula. Effective December 31,
1995, the Company froze benefit accruals under its domestic
non-contributory defined benefit pension plan for a significant
portion of the employees covered under collective bargaining
agreements. This change resulted in the Company recognizing a
curtailment gain of $500 for the year ended March 31, 1996. The
Company's pension plans for European salaried employees and
certain hourly employees provide for benefits based on a
percentage of final pay. The Company's funding policy is to
contribute the statutory required amount to appropriate trust or
government funds.
. -24-
The following table sets forth the plans' funded status and
amounts recognized in the Company's balance sheet at March 31:
. Assets Exceed Accumulated
. Accumulated Benefits
Benefits Exceed Assets
. 1996 1995 1996 1995
Actuarial present value of
benefit obligations:
Vested benefits $(30,295) $(27,573) $(23,840) $(19,300)
Non-vested benefits (104) (1,340) (507) (363)
Accumulated benefit
obligation (30,399) (28,913) (24,347) (19,663)
Effect of projected future
salary increases (8,069) (5,685) (917) (2,164)
Projected benefit obligation (38,468) (34,598) (25,264) (21,827)
Plan assets at fair value,
primarily stocks and bonds 45,830 38,488 15,003 12,420
Projected benefit obligation
(in excess of) less than plan
assets 7,362 3,890 (10,261) (9,407)
Unrecognized net (gain) loss (3,765) (221) 967 919
Prior service cost not yet
recognized (209) (238) 92 562
Unrecognized net transition
obligation (14) (8) 131 40
(Accrued) prepaid pension cost
recognized in the balance sheets $ 3,374 $ 3,423 $ (9,071) $ (7,886)
The Company's assumptions used in determining the pension
assets (liabilities) shown above were as follows:
. Years Ended March 31,
. 1996 1995
Assumptions:
Discount rates 7.0% 7.0 - 8.0%
Increase in compensation 3.0- 4.0% 3.0 - 5.5%
Expected long-term rate of return
on plan assets 7.0 - 9.0% 7.0 - 9.0%
Net pension costs related to these pension plans, exclusive of
the curtailment gain referred to above, include the following
components:
. Years Ended March 31,
. 1996 1995 1994
Service cost $ 2,030 $ 2,253 $ 1,913
Interest cost 4,412 3,988 3,428
Actual loss (return) on plan assets (10,423) 1,683 (7,585)
Net amortization (deferral) 6,400 (5,707) 4,144
Net periodic pension cost $ 2,419 $ 2,217 $ 1,900
Savings Plans:
The Company maintains retirement savings plans which allow
substantially all U.S. employees to defer part of their annual
compensation. Certain contributions by the Company are
discretionary and are determined by the Company's Board of
Directors each year. The Company's contributions to the savings
plans for the years ended March 31, 1996, 1995, and 1994, were
approximately $5,300, $5,000, and $4,700, respectively.
. -25-
The Company established, in August 1994, a nonqualified
deferred compensation program which permits key employees to
annually elect to defer a portion of their compensation until
retirement. A portion of the deferral is subject to a matching
contribution by the Company. The employees select among various
investment alternatives, with the investments held in a separate
trust. The value of the participant's balance fluctuates based
on the performance of the investments. At March 31, 1996, the
market value of the trust ($772) is included as an asset and a
liability of the Company in the accompanying balance sheets
because the trust assets are available to AVX's general
creditors in the event of the Company's insolvency.
7. Stock Option Plans:
The Company has two fixed option plans. Under the 1995 Stock
Option Plan, the Company may grant options to employees for the
purchase of up to an aggregate of 1,550,000 shares of common
stock. Under the Non-Employee Directors Stock Option Plan, the
Company may grant options for the purchase of up to an aggregate
of 100,000 shares of common stock. Under both plans, the
exercise price of each option equals the market price of the
Company's stock on the date of grant and an option's maximum
term is 10 years. All options granted under the 1995 Stock
Option Plan and the Non-Employee Directors Stock Option Plan
vest as to 25% annually commencing on the first anniversary of
the date of grant.
A Summary of the status of the stock option plans is as follows:
. Year Ended March 31, 1996
. Weighted-Average
. Shares Exercise Price
Outstanding, beginning of year 0
Granted 1,143,000 $25.50
Exercised 0
Forfeited (17,000) 25.50
Outstanding, end of year 1,126,000 $25.50
Options, exercisable at year-end 0
8. Commitments and Financial Instruments:
Commitments:
At March 31, 1996 and 1995, the Company had contractual
obligations for the acquisition or construction of plant and
equipment aggregating approximately $42,600 and $12,550,
respectively.
The Company is a lessee under long-term operating leases
primarily for office space, plant and equipment. Future minimum
lease commitments under non-cancelable operating leases as of
March 31, 1996, were as follows:
Years Ending March 31,
1997 $ 3,916
1998 3,158
1999 2,344
2000 2,372
2001 2,260
Thereafter 4,839
$18,889
Rental expense for operating leases was $4,682, $3,996, and
$3,370 for the years ended March 31, 1996, 1995, and 1994,
respectively.
. -26-
Financial Instruments:
At March 31, 1996, $30,700 of the Company's intercompany
borrowings were denominated in foreign currencies. To reduce
the exposure to foreign currency fluctuations, the Company
entered into foreign currency contracts which fix the principal
balance of one intercompany loan at $26,000. Another contract
for 7.5 million deutschmarks fixes the principal balance of
another intercompany loan at $4,300.
In addition to the U.S. dollar, the Company conducts business
in most European currencies and the Japanese yen. The Company's
foreign currency contracts related to anticipated sales and
purchases generally have maturities that do not exceed six
months.
The Company enters into forward delivery contracts with certain
suppliers for certain precious metals used in its production
processes.
The Company's financial instruments that are exposed to
concentrations of credit risk consist primarily of cash and cash
equivalents and trade accounts receivable. The Company places
its cash and cash equivalents with high credit quality
institutions. At times, such investments may be in excess of
the Federal Deposit Insurance Corporation insurance limit.
Concentrations of credit risk with respect to trade accounts
receivable are limited due to the large number of entities
comprising the Company's customer base and their dispersion
across many different industries and countries. As of March 31,
1996, the Company believes that its credit risk exposure is not
significant.
The following disclosure of the estimated fair value of
financial instruments has been determined by the Company, using
available market information and appropriate valuation
methodologies.
The fair value of financial instruments classified as current
assets or liabilities including cash and cash equivalents,
receivables and accounts payable approximate carrying value due
to the short-term maturity of the instruments. The fair value
of short-term and long-term debt approximate carrying value
based on their effective interest rates compared to current
market rates.
March 31, 1996 March 31, 1995
Contract Carrying Unrealized Contract Carrying Unrealized
Amount Amount Gain (Loss) Amount Amount Gain (Loss)
Off-Balance Sheet
Financial Instruments:
Foreign currency contracts $108,055 $ -- $1,243 $90,916 $ -- $(465)
Metal delivery contracts 23,440 -- 616 11,020 -- 685
9. Transactions With Affiliate:
The Company's primary businesses include the design,
manufacture and sale of ceramic and tantalum capacitors and
electronic connectors and the sale and distribution of
electronic products manufactured by Kyocera.
. -27-
The Company entered into transactions with Kyocera as follows:
Years Ended March 31,
1996 1995 1994
Sales:
Product and equipment
sales to affiliates $ 9,240 $ 4,460 $ 3,250
Subcontracting activities 2,365 2,100 1,800
Commissions received 252 95 275
Service fee income 120 400 400
Purchases:
Purchases of resale
inventories, raw materials
supplies, equipment and services 234,612 214,950 169,100
Commissions paid 171 360 400
Rent paid 909 865 800
Cost Reimbursements:
Subcontracting expenses 10,400 5,700
Advertising and promotional
expenditures 230 230
Research and development 442 480 440
Rent received 1,200
Other:
Dividends 17,491 26,250 14,424
Sale of assembly operation
in Indonesia 3,973
Effective April 1, 1995, the Company sold to Kyocera an
assembly operation in Indonesia for $3,973, the equivalent of
the Company's net carrying value of such operation. Consistent
with Kyocera's arrangements with its other worldwide direct
reporting subsidiaries, the Company paid cash dividends equal to
approximately 35% of estimated net income during the two years
ended March 31, 1995 and the quarter ended June 30, 1995.
Thereafter, quarterly cash dividends have been paid as approved
by the Board of Directors on a per common share basis.
. -28-
10. Segment and Geographic Information:
AVX's manufacture and sale of electronic components is
considered one business segment. Information about the
Company's operations in different geographic areas is as follows:
United
Year Ended March 31, States Europe Asia Other Elimination Total
1996:
Net sales to customers $562,994 $301,509 $341,760 $ 1,498 $ - $1,207,761
Net sales between
geographic areas 89,560 104,425 610 66,380 (260,975)
Total net sales 652,554 405,934 342,370 67,878 (260,975) $1,207,761
Profit from operations 98,526 52,575 43,724 9,856 $204,681
Interest income, net 2,744
Other, net 1,655
Income before income taxes
and cumulative effect of
accounting change for
income taxes $209,080
Identifiable assets 483,186 261,154 77,231 45,945 $867,516
1995:
Net sales to customers $466,696 $230,153 $290,333 $ 1,711 $ - $988,893
Net sales between
geographic areas 73,751 84,458 487 59,155 (217,851)
Total net sales 540,447 314,611 290,820 60,866 (217,851) $988,893
Profit from operations 53,278 21,789 26,195 8,931 $ 110,193
Interest expense, net (211)
Other, net 1,218
Income before income taxes
and cumulative effect of
accounting change for
income taxes $111,200
Identifiable assets 338,321 213,983 79,048 39,345 $670,697
1994:
Net sales to customers $392,925 $166,078 $235,642 $ 870 $ - $795,515
Net sales between
geographic areas 56,541 57,089 208 56,556 (170,394)
Total net sales 449,466 223,167 235,850 57,426 (170,394) $795,515
Profit from operations 47,616 (8,540) 12,630 3,876 $ 55,582
Interest expense, net (2,043)
Other, net 1,439
Income before income taxes
and cumulative effect of
accounting change for
income taxes $ 54,978
Identifiable assets 279,349 188,257 70,189 36,171 $573,966
The other category consists of Mexico, El Salvador and Israel
operations. Sales between geographic areas are priced based on a
percentage over cost which allows the selling organization to
earn a reasonable profit. Operating profit is total revenue
less operating expenses and allocated general corporate
expenses. In computing income and operating profit, interest
expenses, interest income, miscellaneous other non-operating
income and expenses and income taxes were not deducted.
11. Environmental Matters and Contingencies:
The Company has been named as a potentially responsible party
in state and federal administrative proceedings seeking
contribution for costs associated with the correction and
remediation of environmental conditions at various hazardous
waste disposal sites. The Company continues to monitor these
actions and proceedings and to vigorously defend its interests.
The Company's ultimate liability in connection with
environmental claims will depend on many factors, including its
volumetric share of waste, the total cost of remediation and the
financial viability of other companies that also sent waste to a
given site. Once it becomes probable that the Company will
incur costs in connection with remediation of a site and such
costs can be reasonably estimated, the Company establishes or
adjusts its reserves for its projected share of these costs.
These reserves do not reflect any possible future insurance
recoveries, which are not expected to be significant, but do
reflect a reasonable estimate of cost sharing at multiple party
sites. Based upon information known to the Company concerning
the size of these sites, their years of operations and the
number of past users, management believes that it has adequate
reserves with respect to these matters. Such reserves for
remediation totaled $8,500 and $6,500 at March 31, 1996 and
1995, respectively. Actual costs may vary from these
estimated reserves, but such costs are not expected to have a
material adverse effect on the Company's financial condition or
results of operations.
AVX is presently under investigation by the United States
Customs Service for possible violations of the customs laws.
During this investigation, AVX has identified certain
inadvertent duty underpayments or over refunds of Customs duties
and has tendered those monies to Customs. The Company does not
believe that the ultimate resolution of these customs matters
will materially affect AVX's financial condition or results of
operations.
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12. Summary of Quarterly Financial Information (Unaudited):
Quarterly financial information for the years ended March 31,
1996 and 1995 is as follows:
First Quarter Second Quarter
1996 1995 1996 1995
Net sales $304,556 $233,995 $307,637 $249,299
Gross profit 78,115 49,650 82,289 51,787
Net income 30,408 18,185 36,435 18,071
Per share .35 .21 .42 .21
Third Quarter Fourth Quarter
1996 1995 1996 1995
Net sales $302,716 $241,998 $292,852 $263,601
Gross profit 79,828 52,721 81,035 57,048
Net income 34,198 18,522 36,695 20,093
Per share .39 .22 .42 .23
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of AVX Corporation
We have audited the accompanying consolidated balance sheets of
AVX Corporation and Subsidiaries as of March 31, 1996 and 1995,
and the related consolidated statements of income, cash flows
and stockholders' equity for each of the three years in the
period ended March 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of AVX Corporation and Subsidiaries as of
March 31, 1996 and 1995, and the consolidated results of their
operations and their cash flows for each of the three years in
the period ended March 31, 1996, in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the financial statements, the Company
changed its method of accounting for income taxes during the
year ended March 31, 1994.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
May 8, 1996
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