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 December 31, 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 February 7, 1997
Common Stock, par value $0.01 per share 88,000,000
AVX CORPORATION
INDEX
Page Number
PART I: Financial Information
ITEM 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1996
and March 31, 1996 1
Consolidated Statements of Income for the three months
ended December 31, 1996 and 1995 and for the nine months
ended December 31, 1996 and 1995 2
Consolidated Statements of Cash Flows for the nine months
ended December 31, 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)
December 31, 1996 March 31, 1996
----------------- ---------------
(unaudited)
Current assets:
Cash and cash equivalents $175,903 $131,601
Accounts receivable, net 135,981 139,545
Inventories 255,437 243,155
Deferred income taxes 30,853 30,853
Other receivables - affiliates 4,071 2,429
Prepaid and other 15,299 13,562
------- -------
Total current assets 617,544 561,145
Property and equipment:
Land 10,597 9,370
Buildings and improvements 116,840 109,574
Machinery and equipment 576,956 506,004
Construction in progress 38,196 46,030
------- -------
742,589 670,978
Accumulated depreciation (462,587) (404,432)
------- -------
280,002 266,546
Goodwill, net 35,702 36,067
Other assets 4,289 3,758
------- -------
TOTAL ASSETS $937,537 $867,516
======== ========
Current liabilities:
Short-term debt - bank $ 18,095 $ 19,398
Current maturities of long-term debt 2,328 1,398
Accounts payable:
Trade 32,830 31,755
Affiliates 34,203 33,040
Income taxes payable 43,049 35,546
Accrued payroll and benefits 34,432 40,481
Accrued expenses 26,411 41,597
------- -------
Total current liabilities 191,348 203,215
Long-term debt 4,414 8,507
Deferred income taxes 19,647 22,818
Other liabilities 12,244 8,976
------- -------
TOTAL LIABILITIES 227,653 243,516
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 383,074 306,923
Foreign currency translation adjustment 6,021 (3,712)
------- -------
TOTAL STOCKHOLDERS' EQUITY 709,884 624,000
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $937,537 $867,516
======== ========
<FN>
<FN1> See accompanying notes to consolidated financial statements.
</FN>
</TABLE/>
2
AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except share data)
Three Months ended December 31, Nine Months ended December 31,
1996 1995 1996 1995
-------------------------------- ------------------------------
Net sales $289,574 $302,716 $825,694 $914,909
Cost of sales 224,941 222,888 621,980 674,677
------- ------- ------- -------
Gross profit 64,633 79,828 203,714 240,232
Selling, general and
administrative expenses 22,253 28,501 74,989 89,000
------- ------- ------- -------
Profit from operations 42,380 51,327 128,725 151,232
Other income (expense):
Interest income 1,900 1,699 5,168 3,562
Interest expense (497) (679) (1,503) (1,902)
Other, net 444 459 988 1,006
------- ------ ------- -------
Income before income taxes 44,227 52,806 133,378 153,898
Provision for income taxes 14,176 18,608 42,707 52,857
------- ------- ------- -------
Net income $ 30,051 $ 34,198 $ 90,671 $101,041
Income per share $ 0.34 $ 0.39 $ 1.03 $ 1.16
Weighted average number of
common shares outstanding 88,000,000 88,000,000 88,000,000 86,900,000
<FN>
<FN1> See accompanying notes to consolidated financial statements.
</FN>
</TABLE/>
3
AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)
Nine Months Ended December 31,
1996 1995
Operating Activities:
Net Income $ 90,671 $101,041
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 59,241 51,293
Deferred income taxes (3,158) (6,486)
Changes in operating assets and liabilities:
Accounts receivable 9,852 (21,928)
Inventories (8,196) (41,063)
Accounts payable and accrued expenses (22,053) 19,733
Income taxes payable 5,226 12,273
Other assets and liabilities 744 5,432
------- -------
Net cash from operating activities 132,327 120,295
------- -------
Investing Activities:
Purchases of property and equipment (70,475) (82,411)
Proceeds from sale of operations to affiliate 3,973
Other 2 (79)
------- -------
Net cash used in investing activities (70,473) (78,517)
------- -------
Financing Activities:
Repayment of debt (3,523) (2,867)
Dividends paid (14,520) (15,044)
Proceeds from issuance of debt 65 8,696
Proceeds from issuance of common stock 52,889
------- -------
Net cash from (used in) financing activities (17,978) 43,674
------- -------
Effect of exchange rate changes on cash 426 (75)
------- -------
Increase in cash and cash equivalents 44,302 85,377
Cash and cash equivalents at beginning of period 131,601 43,813
------- -------
Cash and cash equivalents at end of period $175,903 $129,190
======== =======
<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:
December 31, March 31,
1996 1996
----------- ---------
Trade $153,943 $159,798
Less, allowance for doubtful accounts,
sales returns, distributor adjustments
and discounts (17,962) (20,253)
-------- --------
$135,981 $139,545
======== ========
3. Inventories:
Inventories consisted of:
December 31, March 31,
1996 1996
----------- ---------
Finished goods $ 80,554 $ 75,235
Work in process 83,770 77,256
Raw materials and supplies 91,113 90,664
-------- ---------
$255,437 $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. As a result of revised remediation
methods and cost estimates, the Company recorded a reduction in remediation
accruals of $3,400 during the quarter ended December 31, 1996. Based upon
information known to the Company,the Company had accrued approximately $4,600
at December 31, 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 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 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 amounts may not be recoverable. The adoption
did not materially affect the Company's financial condition or results of
operations.
6. Subsequent Event
On January 16, 1997, the Company declared a $0.055 dividend per share of
common stock with respect to the quarter ended December 31, 1996, payable
on February 10, 1997.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
- ---------------------
Three Months Ended December 31, 1996 Compared to Three Months Ended
December 31, 1995
- -------------------------------------------------------------------
Net sales in the three months ended December 31, 1996 decreased 4.3% to
$289.6 million from $302.7 million in the three months ended
December 31, 1995. The decrease was attributable to a combination of factors,
including the continuation of the trend toward surface-mount products and
smaller part sizes, which traditionally have lower average selling prices,
and an overall reduction in selling prices. In addition, the residual effect
of the softened order demand experienced by the electronic component industry
through the latter portion of the calendar 1995 and much of calendar 1996
(as customers reduced their level of inventory and suppliers reduced lead
times) resulted in reduced shipments during the current quarter.
Gross profit in the three months ended December 31, 1996 decreased 19% to
$64.6 million (22.3% of net sales) from $79.8 million (26.4% of net sales)
in the three months ended December 31, 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, improvements in
manufacturing efficiencies and continued efforts to reduce manufacturing
costs through various cost containment programs. The 1995 quarter's results
included a provision of $3.5 million for the consolidation of one of the
Company's smaller facilities.
Selling, general and administrative expenses in the three months ended
December 31, 1996 decreased to $22.3 million (7.7% of net sales) from $28.5
million (9.4% of net sales) in the three months ended December 31, 1995.
During the quarter ended December 31, 1996, selling, general and
administrative expenses were reduced by $4.0 million as a result of changes
in estimates for environmental remediation and legal costs. Exclusive of the
$4.0 million benefit, selling, general and administrative expenses, as a
percentage of sales, declined .3% (9.1% vs. 9.4%), despite a decrease in net
sales of 4.3%. This is attributed to the Company's ongoing cost containment
programs.
As a result of the above factors, profit from operations in the three months
ended December 31, 1996 decreased 17.4% to $42.4 million from $51.3 million
in the three months ended December 31, 1995.
For the reasons set forth above, net income in the three months ended
December 31, 1996 decreased 12.1% to $30.0 million (10.4% of net sales) from
$34.2 million (11.3% of net sales) in the three months ended December 31, 1995.
Nine Months Ended December 31, 1996 Compared to Nine Months Ended
December 31, 1995
- -----------------------------------------------------------------
Net sales in the nine months ended December 31, 1996 decreased 9.8% to
$825.7 million from $914.9 million in the nine months ended December 31, 1995.
The decrease was attributable to a combination of factors, including the
continuation of the trend toward surface-mount products and smaller part
sizes, which traditionally have lower average selling prices, and an overall
reduction in selling prices. In addition, the residual effect of the
softened order demand experienced by the electronic component industry
through the latter portion of the calendar 1995 and much of calendar 1996
(as customers reduced their level of inventory and suppliers reduced lead
times) resulted in reduced shipments.
7
Gross profit in the nine months ended December 31, 1996 decreased 15.2% to
$203.7 million (24.7% of net sales) from $240.2 million (26.3% of net sales)
in the nine months ended December 31, 1995. As a percentage of net sales,
gross profit decreased primarily as a result of decreased selling prices.
However, the effect of these decreases was dampened by the continued
automation of the manufacturing processes and continued efforts to reduce
manufacturing cost for products sold. The 1995 period's results include a
provision of $3.5 million for the consolidation of one of the Company's
smaller facilities.
Selling, general and administrative expenses in the nine months ended
December 31, 1996 were $75.0 million (9.1% of net sales) compared with $89.0
million (9.7% of net sales) in the nine months ended December 31, 1995.
The decrease in selling, general, and administrative expenses is primarily
due to the benefit of adjustments for environmental remediation accruals and
charges related to the closing of the Company's previous headquarters
recorded in 1995 and current year cost containment programs.
As a result of the above factors, profit from operations in the nine months
ended December 31, 1996 decreased 14.9% to $128.7 million from $151.2 million
in the nine months ended December 31, 1995.
For the reasons set forth above and higher interest income on invested cash,
net income in the nine months ended December 31, 1996 decreased 10.3% to
$90.7 million (11.0% of net sales) from $101.0 million (11.0% of net sales)
in the nine months ended December 31, 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 December 31, 1996, the Company had a current ratio of 3.2 to 1, $175.9
million of cash and cash equivalents, $709.9 million of stockholders' equity
and an insignificant amount of long-term debt.
Net cash from operating activities was $132.3 million in the nine months
ended December 31, 1996 compared to $120.3 million in the nine months ended
December 31, 1995. Decreases in working capital partially offset by lower
income contributed to the increase.
Purchases of property and equipment were $70.4 million in the nine month
period ended December 31, 1996 and $82.4 million in the nine month period
ended December 31, 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 nine months ended December 31, 1996, the Company repaid $3.5
million of European loans. During December 31, 1995, a European subsidiary
of the Company borrowed 7.5 million deutschmarks under a bank line of credit
to repay an intercompany loan with AVX in the United States.
In August 1995, the Company completed an initial public offering of
2,200,000 shares of common stock at a price of $25.50 per share resulting
in proceeds (net of underwriting commissions and offering costs) of $52.9
million. The proceeds were used for general purposes, including capital
expenditures and working capital.
8
Based on the financial condition of the Company as of December 31, 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.
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: February 7, 1997
AVX Corporation
/s/ Donald B. Christiansen
--------------------------
Donald B. Christiansen
Chief Financial Officer,
Vice President and
Treasurer