SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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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 June 30, 1997.
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from __________ to __________
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Commission file number 1-10431
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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 July 25, 1997
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Common Stock, par value $0.01 per share 88,036,250
AVX CORPORATION
INDEX
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Page Number
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PART I: Financial Information
ITEM 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1997 and
March 31, 1997 1
Consolidated Statements of Income for the three months
ended June 30,1997 and 1996 2
Consolidated Statements of Cash Flows for the three months
ended June 30, 1997 and 1996 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)
June 30, 1997 March 31, 1997
(unaudited)
------------- -------------
Current assets:
Cash and cash equivalents $217,308 $188,574
Accounts receivable, net 147,663 155,358
Inventories 257,527 247,895
Deferred income taxes 21,145 21,145
Other receivables - affiliates 4,148 3,131
Prepaid and other 22,961 22,365
-------- --------
Total current assets 670,752 638,468
-------- --------
Property and equipment:
Land 10,138 10,028
Buildings and improvements 114,341 113,614
Machinery and equipment 604,220 588,880
Construction in progress 42,830 34,040
-------- --------
771,529 746,562
Accumulated depreciation (496,095) (474,970)
-------- --------
275,434 271,592
Goodwill, net 34,712 34,913
Other assets 10,316 4,334
-------- --------
TOTAL ASSETS $991,214 $949,307
======== ========
Current liabilities:
Short-term bank debt $ 9,560 $ 12,216
Current maturities of long-term debt 2,202 1,362
Accounts payable:
Trade 43,625 39,399
Affiliates 33,775 38,621
Income taxes payable 39,952 25,405
Accrued payroll and benefits 29,596 34,328
Accrued expenses 33,254 30,465
-------- ---------
Total current liabilities 191,964 181,796
-------- ---------
Long-term debt 11,863 12,170
Deferred income taxes 11,563 12,190
Other liabilities 11,833 11,182
-------- --------
TOTAL LIABILITIES 227,223 217,338
-------- --------
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 438,558 408,904
Foreign currency translation adjustment 4,644 2,276
-------- --------
TOTAL STOCKHOLDERS' EQUITY 763,991 731,969
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $991,214 $949,307
======== ========
<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 June 30,
1997 1996
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Net sales $ 313,807 $ 268,211
Cost of sales 235,727 194,925
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Gross profit 78,080 73,286
Selling, general and administrative expenses 28,408 26,817
------- -------
Profit from operations 49,672 46,469
Other income (expense):
Interest income 2,941 1,537
Interest expense (511) (503)
Other, net (8) 287
------- -------
Income before income taxes 52,094 47,790
Provision for income taxes 17,159 15,323
------- -------
Net income $ 34,935 $ 32,467
======= =======
Amounts per share:
Income per share $ 0.40 $ 0.37
Dividends declared $ 0.06 $ 0.055
Weighted average number of common shares
outstanding 88,000,000 88,000,000
<FN>
<FN1> See accompanying notes to consolidated financial statements.
</FN>
3
AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)
Three Months Ended June 30,
1997 1996
---------------------------
Operating Activities:
Net Income $ 34,935 $ 32,467
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 20,769 18,930
Deferred income taxes (665) (2,235)
Changes in operating assets and liabilities:
Accounts receivable 1,693 9,569
Inventories (8,240) (26,329)
Accounts payable and accrued expenses (3,624) (6,525)
Income taxes payable 14,200 10,979
Other assets and liabilities 5,797 (6,515)
------- -------
Net cash from operating activities 64,865 30,341
Investing Activities:
Purchases of property and equipment (25,368) (31,854)
Equity investment (5,300)
Other 5
Net cash used in investing activities (30,668) (31,849)
Financing Activities:
Repayment of debt (43) (2,724)
Dividends paid (5,281) (4,840)
Proceeds from issuance of debt 405
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Net cash from (used in) financing activities (5,324) (7,159)
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Effect of exchange rate changes on cash (139) 73
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Increase (decrease) in cash and cash
equivalents 28,734 (8,594)
Cash and cash equivalents at beginning of period 188,574 131,601
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Cash and cash equivalents at end of period $217,308 $123,007
========= =========
<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, 1997.
2. Accounts Receivable:
Accounts receivable consisted of:
June 30, March 31,
1997 1997
Trade $ 172,752 $ 173,414
Less, allowances for doubtful accounts,
sales returns, distributor adjustments
and discounts (25,089) (18,056)
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$ 147,663 $ 155,358
3. Inventories:
Inventories consisted of:
June 30, March 31,
1997 1997
Finished goods $ 84,000 $ 83,711
Work in process 98,935 89,146
Raw material and supplies 74,592 75,038
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$ 257,527 $ 247,895
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 $4,800 at June 30, 1997 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.
5. New Accounting Standards
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.
6. Subsequent Event
On July 18, 1997, the Company declared a $0.06 dividend per share of
common stock with respect to the quarter ended June 30,1997, payable on
August 11, 1997.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
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Three Months Ended June 30, 1997 Compared to Three Months
Ended June 30, 1996
- --------------------------------------------------------------------------
Net sales in the three months ended June 30, 1997 increased 17% to $313.8
million from $268.2 million in the three months ended June 30, 1996. The
increase was attributable to a combination of factors, including the growth of
ceramic and tantalum products, particularly surface mount capacitors and
advanced products.
Gross profit in the three months ended June 30, 1997 increased 6.5% to
$78.1 million (24.9% of net sales) from $73.3 million (27.3% of net sales) in
the three months ended June 30, 1996. 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 improvements in
manufacturing efficiencies coupled with higher through-put in the factories.
Selling, general and administrative expenses in the three months ended June
30, 1997 were $28.4 million (9.1% of net sales) compared with $26.8 million
(10.0% of net sales) in the three months ended June 30, 1996. Selling, general
and administrative expenses, as a percentage of sales, declined 0.9% (9.1% vs.
10.0%). The decrease is attributed to the benefit of higher sales and the
Company's ongoing cost containment programs, offset in part by higher research
and development spending.
As a result of the above factors, profit from operations in the three
months ended June 30, 1997 increased 6.9% to $49.7 million from $46.5 million
in the three months ended June 30, 1996.
For the reasons set forth above and higher interest income on invested cash,
net income in the three months ended June 30, 1997 increased 7.6% to $34.9
million (11.1% of net sales) from $32.5 million (12.1% of net sales) in the
three months ended June 30, 1996.
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 June 30, 1997, the Company had a current ratio of 3.5 to 1, $217.3 million
of cash and cash equivalents, $764 million of stockholders' equity and an
insignificant amount of long-term debt.
Net cash from operating activities was $64.9 million in the three months
ended June 30, 1997 compared to $30.3 million in the three months ended June
30, 1996. The increase is attributable to the higher inventory levels at June
30,1996 which was due to the softening in the demand of the electronic
component industry as customers reduced their level of inventory and suppliers
reduced lead their lead times.
Purchases of property and equipment were $25.4 million in the three month
period ended June 30, 1997 and $31.9 million in the three month period ended
June 30, 1996. 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 three months ended June
30, 1997, the Company purchased for $5.3 million, a minority interest in an
electronics research company.
Based on the financial condition of the Company as of June 30, 1997, 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, development and
engineering expenses and any dividends to be paid in the foreseeable future.
Certain statements contained above may be "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Actual events, results, and/or timing may differ from the events, results and
/or timing as projected, estimated, or described above.
7
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.
The Company held its Annual Meeting of Stockholders on July 17, 1997 for the
purpose of electing a board of directors, amending the 1995 Stock Option Plan,
and approving the appointment of auditors. Proxies for the meeting were
solicited pursuant to Regulation 14A of the Securities Exchange Act of 1934 and
there was no solicitation in opposition to management's solicitations.
Proposal 1:
All of management's nominees for directors as listed in the proxy statement
were elected with the following vote:
Shares Shares
Voted Shares Not
"For" "Withheld" Voted
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Benedict P. Rosen 83,548,714 417,345 4,033,941
John S. Gilbertson 83,547,892 418,167 4,033,941
Donald B. Christiansen 83,548,903 417,156 4,033,941
Marshall D. Butler 83,542,059 424,000 4,033,941
Carrol A. Campbell, Jr. 83,794,096 171,963 4,033,941
Kensuke Itoh 83,548,813 417,246 4,033,941
Rodney N. Lanthorne 83,549,914 416,145 4,033,941
Kazuo Inamori 83,546,413 419,646 4,033,941
Richard Tressler 83,799,204 166,855 4,033,941
Mashiro Umemura 83,549,213 416,846 4,033,941
Mashiro Yamamoto 82,961,605 1,004,454 4,033,941
Yuzo Yamamura 82,962,205 1,003,854 4,033,941
Michihisa Yamamoto 83,464,703 501,356 4,033,941
8
Proposal 2:
Amendment to the 1995 Stock Option Plan to (a) increase the number of shares
that may be issued under the plan by 1,100,000 and (b) modify the 300,000
share limit on the stock options that may be granted to any one individual to
apply to grants in any five-year period was approved with the following vote:
Shares Shares Shares
voted voted Shares not
"For" "Against" "Withheld Voted
----------- -------- --------- ---------
83,097,244 782,258 86,557 4,033,941
Proposal 3:
The appointment of Coopers & Lybrand L.L.P. as the Company's independent
auditors was approved with the following vote:
Shares Shares Shares
voted voted Shares not
"For" "Against" "Withheld" Voted
---------- --------- ---------- ---------
83,889,621 31,831 44,607 4,033,941
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
None.
(b) Reports on Form 8-K.
None.
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.
9
Date: July 31, 1997 AVX Corporation
/s/ Donald B. Christiansen
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Donald B. Christiansen
Senior Vice President of Finance,
Chief Financial Officer,
and Treasurer