AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
March 31,
1997 1996
Current assets:
Cash and cash equivalents $ 188,574 $ 131,601
Accounts receivable, net 155,358 139,545
Inventories 247,895 243,155
Deferred income taxes 21,145 30,853
Other receivables - affiliate 3,131 2,429
Prepaid and other 22,365 13,562
------- -------
Total current assets 638,468 561,145
Property and equipment:
Land 10,028 9,370
Buildings and improvements 113,614 109,574
Machinery and equipment 588,880 506,004
Construction in progress 34,040 46,030
------- -------
746,562 670,978
Accumulated depreciation (474,970) (404,432)
--------- ---------
271,592 266,546
Goodwill, net 34,913 36,067
Other assets 4,334 3,758
--------- ---------
TOTAL ASSETS $ 949,307 $ 867,516
========= =========
Current liabilities:
Short-term bank debt $ 12,216 $ 19,398
Current maturities of long-term debt 1,362 1,398
Accounts payable:
Trade 39,399 31,755
Affiliates 38,621 33,040
Income taxes payable 25,405 35,546
Accrued payroll and benefits 34,328 40,481
Accrued expenses 30,465 41,597
-------- --------
Total current liabilities 181,796 203,215
Long-term debt 12,170 8,507
Deferred income taxes 12,190 22,818
Other liabilities 11,182 8,976
------- -------
TOTAL LIABILITIES 217,338 243,516
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: 880 880
Authorized, 300,000,000 shares; issued and
outstanding,
88,000,000 shares
Additional paid-in capital 319,909 319,909
Retained earnings 408,904 306,923
Foreign currency translation adjustment 2,276 (3,712)
------- --------
TOTAL STOCKHOLDERS' EQUITY 731,969 624,000
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $949,307 $867,516
======= =======
See accompanying notes to consolidated financial statements.
F-15
AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except share data)
Years Ended March 31,
1997 1996 1995
Net sales $1,126,178 $1,207,761 $988,893
Cost of sales 851,863 886,494 777,687
--------- --------- -------
Gross profit 274,315 321,267 211,206
Selling, general and
administrative expenses 102,369 116,586 101,013
------- ------- -------
Profit from operations 171,946 204,681 110,193
Other income (expense):
Interest income 7,536 5,096 2,018
Interest expense (2,049) (2,352) (2,229)
Other, net 1,010 1,655 1,218
------- ------- -------
Income before income taxes 178,443 209,080 111,200
Provision for income taxes 57,102 71,344 36,329
Net income $ 121,341 $ 137,736 $ 74,871
Income per share $ 1.38 $ 1.58 $ .87
Weighted average shares
outstanding 88,000,000 87,175,000 85,800,000
See accompanying notes to consolidated financial statements.
F-16
AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands)
Common Stock Foreign
Additional Currency
Number Paid-In Retained Translation
of Shares Amount Capital Earnings Adjustment Total
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
Net income 121,341 121,341
Dividends (19,360) (19,360)
Current year's adjustment 5,988 5,988
---------- ---- -------- -------- ------ --------
Balance, March 31, 1997 88,000,000 $880 $319,909 $408,904 $2,276 $731,969
========== ==== ======== ======= ===== =======
See accompanying notes to consolidated financial statements.
F-17
AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Years Ended March 31,
1997 1996 1995
Operating Activities:
Net income $121,341 $137,736 $74,871
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization 82,242 69,910 60,608
Deferred income taxes (911) (15,680) (6,023)
Changes in operating assets and liabilities:
Accounts receivable (9,745) (26,564) (13,579)
Inventories (2,912) (44,862) (36,957)
Accounts payable and accrued expenses (5,730) 12,416 28,471
Income taxes payable (11,093) 20,351 13,425
Other assets and liabilities (5,266) 2,380 5,342
------- ------- -------
Net cash from operating activities 167,926 155,687 126,158
Investing Activities:
Purchases of property and equipment (93,954) (110,487) (77,308)
Proceeds from sale of operations to affiliate 3,973
Other 2,347 (79) 680
------- -------- -------
Net cash used in investing activities (91,607) (106,593) (76,628)
Financing Activities:
Repayment of debt (10,043) (3,308) (10,736)
Dividends paid (19,360) (19,444) (26,250)
Proceeds from issuance of debt 9,738 8,696 4,167
Proceeds from issuance of common stock 52,888
------- ------ -------
Net cash from (used in) financing activities (19,665) 38,832 (32,819)
Effect of exchange rate changes on cash 319 (138) 244
------- -------- -------
Increase (decrease) in cash and cash equivalents 56,973 87,788 16,955
Cash and cash equivalents at beginning of year 131,601 43,813 26,858
-------- -------- -------
Cash and cash equivalents at end of year $188,574 $131,601 $43,813
======== ======== =======
See accompanying notes to consolidated financial statements.
F-18
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 telecommunications, computers, 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 $80,120, $67,508 and $58,476 for the years ended March 31,
1997, 1996, and 1995, 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.
F-19
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, 1997 and
1996 was $17,289 and $14,409, 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.
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, 1997,
the amount of U.S. taxes on such undistributed earnings would
have been approximately $27,000.
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.
Grants:
The Company's manufacturing and research facilities in the
Republic of Ireland and Israel have received capital, employment
and research grants from various governmental agencies.
Employment and research grants, which are recognized in earnings
in the period in which the related expenditures are incurred,
were $750 for the year ended March 31, 1997 and were immaterial
for the years ended March 31, 1996 and 1995. Capital grants for
the acquisition of equipment are recorded as reductions of the
related equipment cost and reduce future depreciation expense.
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.
F-20
Research, Development and Engineering:
Research and development expenditures are expensed when
incurred. Research, development and engineering expenses totaled
approximately $34,000, $30,000, and $25,000 for the years ended
March 31, 1997, 1996, and 1995, respectively, while research and
development expenses included in these amounts totaled $18,500,
$16,000 and $10,000 for the years ended March 31, 1997, 1996 and
1995, respectively.
Stock-Based Compensation:
Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation", allows companies to
record compensation cost for stock-based compensation plans at
fair value or provide pro forma disclosures. The Company has
chosen to continue to account for stock-based compensation using
the method whereby compensation cost for stock options is
measured as the excess, if any, of the quoted market price of
the Company's stock at the date of grant over the amount an
employee must pay to acquire the stock.
Reclassifications:
Certain prior year amounts have been reclassified to conform
to the 1997 presentation.
New Accounting Standards:
The Company has adopted the 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.
The adoption did not materially affect the Company's financial
condition or results of operations.
In February 1997, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No.
128("SFAS 128"). The new standard replaces primary and fully
diluted earnings per share with basic and diluted earnings per
share. SFAS 128 is required to be adopted by the Company for
periods ending after December 15, 1997. Had the Company been
required to adopt SFAS 128 for the periods presented, the
adoption would not have impacted diluted or primary earnings per
share.
2. Accounts Receivable:
Accounts receivable at March 31 consisted of:
1997 1996
Trade $173,414 $159,798
Less, allowance for doubtful accounts, sales returns,
distributor adjustments and discounts (18,056) (20,253)
-------- --------
$155,358 $139,545
Charges to expense related to such allowances were
approximately $58,543, $53,117 and $42,055, and applications to
such allowances were approximately $60,991, $50,078 and $37,915
for the years ended March 31, 1997, 1996 and 1995, respectively.
F-20
3. Inventories:
Inventories at March 31 consisted of:
1997 1996
Finished goods $83,711 $75,235
Work in process 89,146 77,256
Raw materials and supplies 75,038 90,664
------- ------
$247,895 $243,155
4. Debt:
Long-term debt at March 31 consisted of:
1997 1996
Deutschmark loans at 3.37% to 6.25% due through
2000 $13,532 $6,182
Other - 3,723
------- -------
13,532 9,905
Less--current maturities (1,362) (1,398)
------- -------
$12,170 $8,507
The aggregate annual maturities of long-term debt are as
follows:
1998 $ 1,362
1999 3,139
2000 9,031
-------
$13,532
Long-term debt includes a 15 million deutchmark loan which has
a variable rate of interest based on a market rate plus .25%. At March 31, 1997,
this loan had a rate of 3.37%. The remaining loans carry a fixed
rate of 6.25%
Short-term bank debt at March 31, 1997 consists primarily of
borrowings incurred by the Company's European subsidiaries under
two DM 10.0 million working capital bank facilities and a DM 1.5
million short-term bank facility bearing interest at market
rates (between 4.05% and 4.45% at March 31, 1997) which extend
through December 1997.
Interest paid totaled $1,639, $2,452 and $1,881 during the
years ended March 31, 1997, 1996, and 1995, respectively.
F-21
5. Income Taxes:
For financial reporting purposes, after adjustments for certain
corporate items, income before income taxes includes the
following components:
Years Ended March 31,
1997 1996 1995
Domestic $102,717 $114,011 $ 57,197
Foreign 75,726 95,069 54,003
-------- -------- --------
$178,443 $209,080 $111,200
The provision (benefit) for income taxes consisted of:
Years Ended March 31,
1997 1996 1995
Current:
Federal/State $38,186 $55,480 $ 29,754
Foreign 20,084 31,544 12,598
------ ------- --------
58,270 87,024 42,352
Deferred: ------ ------ ------
Federal/State 4,031 (15,680) (10,006)
Foreign (5,199) 3,983
------ ------ ------
(1,168) (15,680) (6,023)
----- ------ ------
$57,102 $71,344 $ 36,329
====== ======= =======
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,
1997 1996
Current: Assets Liabilities Assets Liabilities
Sales and receivable reserves $5,317 $ -- $ 6,625 $ --
Inventory reserves 4,989 -- 8,073 --
Accrued expenses 10,839 -- 16,155 --
------ ------- ------ -----
$21,145 $ -- $30,853 $ --
March 31,
1997 1996
Non-Current: Assets Liabilities Assets Liabilities
Property and equipment
depreciation $ 471 $6,147 $ 797 $12,879
Accrued expenses 1,100 1,251 709 1,252
Other 10,674 14,591
Foreign income tax loss
carryforwards 7,246 8,792
----- ------ ----- ------
8,817 18,072 10,298 28,722
Valuation allowance (2,935) (4,394)
------- ------ ------ ------
$ 5,882 $18,072 $ 5,904 $28,722
======= ======= ======= =======
F-22
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,
1997 1996 1995
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 2.4 .9 1.8
Taxes at different tax rates on foreign earnings (2.9) (1.5)( 2.8)
Change in valuation allowance (.8) (2.5) 1.9
Other, net (1.7) 2.2 (3.2)
---- ----- -----
Effective tax rate 32.0 34.1% 32.7%
===== ===== =====
At March 31, 1997, certain of the Company's foreign
subsidiaries in Europe had tax net operating loss carryforwards
totaling approximately $16,457, 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 $1,459 during the year ended March
31, 1997 and $5,297 during the year ended March 31, 1996. During
fiscal 1997, the Company reached resolution on all outstanding
issues related to U.S. income tax returns for the years 1990
through 1994.
Income taxes paid totaled $72,096, $66,500 and $29,329 during
the years ended March 31, 1997, 1996 and 1995, 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.
The following table sets forth the plans' funded status and
amounts recognized in the Company's balance sheet at March 31:
F-23
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
1997 1996 1997 1996
Actuarial present value of
benefit obligations:
Vested benefits $ (49,019) $(30,295) $ (6,779) $(23,840)
Non-vested benefits (295) (104) - (507)
Accumulated benefit obligation (49,314) (30,399) (6,779) (24,347)
Effect of projected future salary
increases (10,882) (8,069) - (917)
Projected benefit obligation (60,196) (38,468) (6,779) (25,264)
Plan assets at fair value, primarily
stocks and bonds 65,695 45,830 2,068 15,003
Projected benefit obligation (in excess
of) less than plan assets 5,499 7,362 (4,711) (10,261)
Unrecognized net (gain) loss (5,009) (3,765) 455 967
Prior service cost not yet recognized 631 (209) - 92
Unrecognized net transition obligation 90 (14) - 131
(Accrued) prepaid pension cost
recognized in the balance sheets $ 1,211 $3,374 $ (4,256) $(9,071)
The Company's assumptions used in determining the pension
assets (liabilities) shown above were as follows:
Years Ended March 31,
1997 1996
Assumptions:
Discount rates 6.75-7.75% 7.0%
Increase in compensation 3.0 - 4.0% 3.0 - 4.0%
Expected long-term rate of return on plan assets 8.0 - 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,
1997 1996 1995
Service cost $ 1,873 $ 2,030 $ 2,253
Interest cost 4,384 4,412 3,988
Actual loss (return) on plan assets (6,911) (10,423) 1,683
Net amortization (deferral) 2,063 6,400 (5,707)
Net periodic pension cost $ 1,409 $ 2,419 $ 2,217
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, 1997, 1996, and 1995, were
approximately $5,800, $5,300, and $5,000, respectively.
F-24
The Company sponsors 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, 1997, the market
value of the trust ($1,300) 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 as of March
31, 1997 is as follows:
Grant Options Options Exercise Remaining
Date Outstanding Exercisable Price Life (Years)
8/14/95 1,110,000 277,500 $25.500 8 1/2
8/12/96 528,500 0 $18.125 9 1/2
A total of 21,500 and 17,000 options were forfeited during the
years ended March 31, 1997 and 1996, respectively, and none were
exercised. The calculated fair value at date of grant for each
option granted during the years ended March 31, 1997 and 1996
was $6.82 and $8.96, respectively. The fair value of options at
date of grant was estimated using the Black-Scholes model with
the following weighted average assumptions:
Year Ended March 31,
1997 1996
Expected life (years) 5 5
Interest rate 6.70% 6.25%
Volatility 35% 30%
Dividend yield 1.21% 0.78%
If the estimated fair value of the options had been recognized
as compensation expense over the vesting periods, income before
income taxes would have been reduced by $3,099 ($2,523 after
income taxes, or $.03 per share) and $1,787 ($1,460 after income
taxes, or $.02 per share) for the years ended March 31, 1997 and
1996, respectively.
8. Commitments and Financial Instruments:
Commitments
At March 31, 1997 and 1996, the Company had contractual
obligations for the acquisition or construction of plant and
equipment aggregating approximately $24,422 and $42,600,
respectively. In connection with an expansion at the Company's
manufacturing facility in the Republic of Ireland, capital
grants totaling $11,500 have been approved, $8,600 of which had
not been received as of March 31, 1997 and are contingent upon the
Company spending approximately $28,600 for plant and equipment.
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, 1997, were as follows:
F-25
Years Ending
March 31,
1998 $ 6,120
1999 5,656
2000 3,486
2001 2,685
2002 2,763
Thereafter 5,053
$25,763
Rental expense for operating leases was $6,390, $4,682, and
$3,996 for the years ended March 31, 1997, 1996, and 1995,
respectively.
Financial Instruments
At March 31, 1997, $25,000 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 swaps which at March 31, 1997 fix
a portion of the principal balance of one intercompany loan at
$21,000 over a four year period.
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,
1997, 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, 1997 March 31, 1996
Contract Carrying Unrealized Contract Carrying Unrealized
Amount Amount Gain (Loss) Amount Amount Gain (Loss)
Off-Balance Sheet
Financial Instruments:
Foreign currency contracts $81,510 $ - $ 2,887 $77,738 $ - $ 562
Foreign currency swaps 21,000 (1,166) (1,166) 30,317 681
Metal delivery contracts 6,225 - 1,225 23,440 616
F-26
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.
The Company entered into transactions with Kyocera as follows:
Years Ended March 31,
1997 1996 1995
Sales:
Product and equipment sales to affiliates $ 23,120 $ 9,240 $ 4,460
Subcontracting activities 2,111 2,365 2,100
Commissions received 236 252 95
Service fee income 120 400
Purchases:
Purchases of resale inventories, raw materials
supplies, equipment and services 234,434 234,612 214,950
Commissions paid 202 171 360
Rent paid 959 909 865
Cost Reimbursements:
Subcontracting expenses 10,400
Advertising and promotional expenditures 230
Research and development 442 480
Other:
Dividends 14,553 17,491 26,250
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 year
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.
F-27
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
1997:
Net sales to
customers $524,990 $253,493 $345,262 $2,433 $ - $1,126,178
Net sales between
geographic areas 96,952 138,260 214 40,186 (275,612)
-------- -------- -------- ------ --------- ---------
Total net sales 621,942 391,753 345,476 42,619 (275,612) $1,126,178
Profit from operations 107,634 28,105 29,406 6,801 $171,946
Interest income, net 5,487
Other, net 1,010
Income before income taxes $178,443
Identifiable assets 517,563 274,726 88,123 68,895 $949,307
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 $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 $111,200
Identifiable assets 338,321 213,983 79,048 39,345 $670,697
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 operating profit, interest expenses,
interest income, miscellaneous other non-operating income and
expenses and income taxes were not deducted.
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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, compliance and legal costs totaled $5,025 at March
31, 1997. 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.
12. Summary of Quarterly Financial Information (Unaudited):
Quarterly financial information for the years ended March 31,
1997 and 1996 is as follows:
First Quarter Second Quarter
1997 1996 1997 1996
Net sales $268,211 $304,556 $267,909 $307,637
Gross profit 73,286 78,115 65,795 82,289
Net income 32,467 30,408 28,153 36,435
Per share .37 .35 .32 .42
Third Quarter Fourth Quarter
1997 1996 1997 1996
Net sales $289,574 $302,716 $300,484 $292,852
Gross profit 64,633 79,828 70,601 81,035
Net income 30,051 34,198 30,670 36,695
Per share .34 .39 .35 .42
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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, 1997 and 1996,
and the related consolidated statements of income, cash flows
and stockholders' equity for each of the three years in the
period ended March 31, 1997. 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, 1997 and 1996, and the consolidated results of their
operations and their cash flows for each of the three years in
the period ended March 31, 1997, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
May 13, 1997
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