. SECURITIES AND EXCHANGE COMMISSION
. Washington, DC 20549
. --------------------
. Form 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1996.
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
. For the transition period from __________ to __________
. -------------------------------
. Commission file number 1-10431
. -------------------------------
. AVX CORPORATION
. Delaware 33-0379007
. (State of other jurisdiction (IRS Employer ID No.)
. of incorporation or organization)
. 801 17th Avenue South, Myrtle Beach, South Carolina 29577
. (Address of principal executive offices)
. (803) 448-9411
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
. Yes 'X' No ___
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
. Class Outstanding at November 4, 1996
. ----- -------------------------------
. Common Stock, par value $0.01 per share 88,000,000
. AVX CORPORATION
. INDEX
. -----
Page Number
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PART I: Financial Information
ITEM 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1996 and
March 31, 1996 1
Consolidated Statements of Income for the three months
ended September 30, 1996 and 1995 and for the six months
ended September 30, 1996 and 1995 2
Consolidated Statements of Cash Flows for the six months
ended September 30, 1996 and 1995 3
Notes to Consolidated Financial Statements 4-5
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
PART II: Other Information
Signatures
Exhibits
1
AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
September 30, 1996 March 31, 1996
(unaudited)
------------------ --------------
Current assets:
Cash and cash equivalents $128,771 $131,601
Accounts receivable, net 134,684 139,545
Inventories 269,927 243,155
Deferred income taxes 30,853 30,853
Other receivables - affiliate 4,158 2,429
Prepaid and other 14,155 13,562
------- -------
Total current assets 582,548 561,145
------- -------
Property and equipment:
Land 10,543 9,370
Buildings and improvements 115,318 109,574
Machinery and equipment 554,655 506,004
Construction in progress 34,726 46,030
-------- -------
715,242 670,978
Accumulated depreciation (435,584) (404,432)
--------- ---------
279,658 266,546
Goodwill, net 35,355 36,067
Other assets 4,142 3,758
--------- ---------
TOTAL ASSETS $901,703 $867,516
========= =========
Current liabilities:
Short-term debt - bank $ 18,382 $ 19,398
Current maturities of
long-term debt 1,062 1,398
Accounts payable:
Trade 30,256 31,755
Affiliates 34,302 33,040
Income taxes payable 37,704 35,546
Accrued payroll and benefits 33,842 40,481
Accrued expenses 33,412 41,597
------- -------
Total current liabilities 188,960 203,215
------- -------
Long-term debt 5,888 8,507
Deferred income taxes 19,431 22,818
Other liabilities 10,446 8,976
------- -------
TOTAL LIABILITIES 224,725 243,516
------- -------
Contingencies (Note 4)
Stockholders' equity:
Preferred stock, par value $0.01 per share:
Authorized, 20,000,000 shares; none issued
or outstanding
Common stock, par value $0.01 per share:
Authorized, 300,000,000 shares;
88,000,000 shares
issued and outstanding 880 880
Additional paid-in capital 319,909 319,909
Retained earnings 357,863 306,923
Foreign currency translation adjustment (1,674) (3,712)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 676,978 624,000
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $901,703 $867,516
======= =======
<FN>
<FN1> See accompanying notes to consolidated financial statements.
</FN>
2
. AVX CORPORATION AND SUBSIDIARIES
. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
. (dollars in thousands, except share data)
Three Months ended September 30, Six Months ended September 30,
1996 1995 1996 1995
--------------------------------- --------------------------------
Net Sales $ 267,909 $ 307,637 $ 536,120 $ 612,193
Cost of sales 202,114 225,348 397,039 451,789
------- ------- ------- -------
Gross profit 65,795 82,289 139,081 160,404
Selling, general, and
administrative expenses 25,919 27,930 52,736 60,499
------ ------ ------ ------
Profit from operations 39,876 54,359 86,345 99,905
Other income (expense):
Interest income 1,731 1,358 3,268 1,863
Interest expense (503) (561) (1,006) (1,223)
Other, net 257 475 544 547
------- ------- ------- --------
Income before income taxes 41,361 55,631 89,151 101,092
Provision for income taxes 13,208 19,196 28,531 34,249
------- ------- ------- --------
Net income $ 28,153 $ 36,435 $ 60,620 $ 66,843
======= ======= ======= ========
Income per share $ 0.32 $ 0.42 $ 0.69 $ 0.77
Weighted average number of
common shares outstanding 88,000,000 86,900,000 88,000,000 86,350,000
<FN>
<FN1> See accompanying notes to consolidated financial statements.
</FN>
3
AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)
Six Months Ended September 30,
1996 1995
-------------------------------
Operating Activities:
Net Income $ 60,620 $ 66,843
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 37,553 32,988
Deferred income taxes (3,156) (5,198)
Changes in operating assets and liabilities:
Accounts receivable 8,173 (28,352)
Inventories (26,222) (18,722)
Accounts payable and accrued expenses (15,338) 18,190
Income taxes payable 1,753 8,545
Other assets and liabilities (65) 3,142
-------- --------
Net cash from operating activities 63,318 77,436
-------- --------
Investing Activities:
Purchases of property and equipment (53,144) (50,274)
Proceeds from sale of operations to affiliate 3,973
Other 7 (105)
-------- --------
Net cash used in investing activities (53,137) (46,406)
-------- --------
Financing Activities:
Repayment of debt (3,523) (712)
Dividends paid (9,680) (10,644)
Proceeds from issuance of debt 65 5,548
Proceeds from issuance of common stock 52,889
-------- --------
Net cash from (used in) financing activities (13,138) 47,081
-------- --------
Effect of exchange rate changes on cash 127 (23)
-------- --------
Increase (decrease) in cash and cash equivalents (2,830) 78,088
-------- --------
Cash and cash equivalents at beginning of period 131,601 43,813
-------- --------
Cash and cash equivalents at end of period $128,771 $121,901
======== ========
<FN>
<FN1> See accompanying notes to consolidated financial statements
</FN>
4
AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
1. Basis of presentation:
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. In the opinion of management, the accompanying
unaudited financial statements reflect all adjustments
(consisting of normal recurring accruals) that are necessary to
a fair presentation of the results for the interim periods
shown. These financial statements should be read in conjunction
with the Company's audited financial statements for the fiscal
year ended March 31, 1996.
2. Accounts Receivable:
Accounts receivable consisted of:
September 30, March 31,
1996 1996
------------- -------------
Trade $152,246 $159,798
Less, allowance for doubtful
accounts, sales returns,
distributor adjustments
and discounts (17,562) (20,253)
--------- ---------
$134,684 $139,545
========= =========
3. Inventories:
Inventories consisted of:
September 30, March 31,
1996 1996
------------- -------------
Finished goods $92,723 $75,235
Work in process 77,390 77,256
Raw materials and supplies 99,814 90,664
-------- --------
$269,927 $243,155
======== ========
5
AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
4. 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 waste
disposal sites. Once it becomes probable that the Company will
incur costs in connection with remediation of a site and such
costs can be reasonably estimated, the Company establishes
reserves or adjusts its reserve for its projected share of these
costs. Based upon information known to the Company, the Company
had accrued approximately $8,300 at September 30, 1996 and
management believes that it has adequate reserves with respect
to these matters. Actual costs may vary from these estimated
reserves, but such costs are not expected to have 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 custom laws. The
Company does not believe that the ultimate resolution of these
customs matters will materially affect AVX's financial condition
or results of operations.
5. New Accounting Standards
The Company has adopted Statement of Financial Accounting
Standard No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of", which
requires that certain long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. The adoption
did not materially affect the Company's financial condition or
results of operations.
6. Subsequent Event
On October 17, 1996, the Company declared a $0.055 dividend per
share of common stock with respect to the quarter ended
September 30, 1996, payable on November 8, 1996.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
- ----------------------
Three Months Ended September 30, 1996 Compared to Three Months
Ended September 30, 1995
- -------------------------------------------------------------------
Net sales in the three months ended September 30, 1996
decreased 12.9% to $267.9 million from $307.6 million in the
three months ended September 30, 1995. The decrease was
primarily attributable to continued softening in the demand of
the electronic component industry as customers reduce their
level of inventory and suppliers reduce their lead times.
Gross profit in the three months ended September 30, 1996
decreased 20% to $65.8 million (24.6% of net sales) from $82.3
million (26.7% of net sales) in the three months ended
September 30, 1995. The decrease in gross profit as a
percentage of net sales can be attributed to a decline in
selling prices, offset in part by the strength of advanced
products and continued efforts to reduce manufacturing costs
through various cost containment programs.
Selling, general and administrative expenses in the three
months ended September 30, 1996 decreased to $25.9 million (9.7%
of net sales) from $27.9 million (9.1% of net sales) in the
three months ended September 30, 1995. Despite a decrease in
net sales of almost 13%, selling, general, and administrative
expenses as a percentage of net sales increased only slightly
from 9.1% to 9.7%, primarily due to cost containment programs.
As a result of the above factors, profit from operations in
the three months ended September 30, 1996 decreased 26.6% to $39.9
million from $54.4 million in the three months ended September 30, 1995.
For the reasons set forth above, offset by higher interest
income on invested cash, net income in the three months ended
September 30, 1996 decreased 22.7% to $28.2 million (10.5% of
net sales) from $36.4 million (11.8% of net sales) in the three
months ended September 30, 1995.
- ------------------------------------------------------------------
Six Months Ended September 30, 1996 Compared to Six Months Ended
September 30, 1995
- ------------------------------------------------------------------
Net sales in the six months ended September 30, 1996
decreased 12.4% to $536.1 million from $612.2 million in the six
months ended September 30, 1995. The decrease was primarily
attributable to continued softening in the demand of the
electronic component industry as customers reduce their level of
inventory and suppliers reduce their lead times.
Gross profit in the six months ended September 30, 1996
decreased 13.3% to $139.1 million (25.9% of net sales) from
$160.4 million (26.2% of net sales) in the six months ended
September 30, 1995. As a percentage of net sales, gross profit
decreased to 25.9% from 26.2% primarily as a result of decreased
selling prices. However, the effect of these decreases was
dampened by the strength in advanced and surface-mount products.
Selling, general and administrative expenses in the six
months ended September 30, 1996 were $52.7 million (9.8% of net
sales) compared with $60.5 million (9.9% of net sales) in the
six months ended September 30, 1995. The decrease in selling,
general, and administrative expenses is primarily due to higher
adjustments for environmental remediation accruals and charges
related to the closing of the company's previous headquarters
recorded in the quarter ended June 30, 1995 and current year
cost containment programs.
7
As a result of the above factors, profit from operations in
the six months ended September 30, 1996 decreased 13.6% to $86.3
million from $99.9 million in the six months ended September 30,
1995.
For the reasons set forth above and higher interest income
on invested cash, net income in the six months ended September
30, 1996 decreased 9.3% to $60.6 million (11.3% of net sales)
from $66.8 million (10.9% of net sales) in the six months ended
September 30, 1995.
Liquidity and Capital Resources
- ---------------------------------
The Company's liquidity needs arise primarily from working
capital requirements, dividends and capital expenditures.
Historically, the Company has satisfied its liquidity
requirements through internally generated funds. As of September
30, 1996, the Company had a current ratio of 3.1 to 1, $128.8
million of cash and cash equivalents, $677.0 million of
stockholders' equity and an insignificant amount of long-term
debt.
Net cash from operating activities was $63.3 million in the six
months ended September 30, 1996 compared to $77.4 million in the
six months ended September 30, 1995. The growth in inventories
primarily contributed to the decrease.
Purchases of property and equipment were $53.1 million in the
six month period ended September 30, 1996 and $50.3 million in
the six month period ended September 30, 1995. Expenditures for
both periods were primarily for expanding production
capabilities of the tantalum and ceramic surface-mount and
advanced product lines in North America and Europe.
During the six months ended September 30, 1996, the Company
repaid $3.5 million of European loans. During September 30,
1995, a European subsidiary of the Company borrowed 7.5 million
deutschmarks under a one year bank line of credit to repay an
intercompany loan with AVX in the United States.
Based on the financial condition of the Company as of September
30, 1996, the Company believes that cash on hand and expected to
be generated from operating activities will be sufficient to
satisfy the Company's anticipated financing needs for working
capital, capital expenditures, research and development expenses
and any dividends to be paid in the foreseeable future.
8
Part II: Other Information
Item 1. Legal Proceedings.
None.
Item 2. Change in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
None.
(b) Reports on Form 8-K.
None.
9
. Signatures
. ----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Date: November 4, 1996 AVX Corporation
. /s/ Donald B. Christiansen
. ----------------------
. Donald B. Christiansen
. Chief Financial Officer,
. Vice President and Treasurer