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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 June 30, 1999.
-------------
[ ] 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)
(843) 448-9411
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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 August 2, 1999
----- -----------------------------
Common Stock, par value $0.01 per share 86,397,125
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AVX CORPORATION
INDEX
Page Number
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PART I: Financial Information
ITEM 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1999 and March 31, 1999 1
Consolidated Statements of Income for the three months ended
June 30, 1999 and 1998 2
Consolidated Statements of Cash Flows for the three months ended
June 30, 1999 and 1998 3
Notes to Consolidated Financial Statements 4-6
ITEM 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
PART II: Other Information
Signatures
Exhibits:
10.10 Amended 1995 Stock Option Plan
27 Financial Data Schedule (for SEC use only)
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AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
June 30, 1999 March 31, 1999
------------- --------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 178,262 $ 173,106
Accounts receivable, net 181,592 157,331
Inventories 287,828 277,393
Deferred income taxes 22,207 21,895
Other receivables - affiliates 2,255 2,738
Prepaid and other 29,164 31,072
----------- -----------
Total current assets 701,308 663,535
Property and equipment:
Land 12,617 12,287
Buildings and improvements 146,780 142,661
Machinery and equipment 734,028 730,574
Construction in progress 59,776 58,692
----------- -----------
953,201 944,214
Accumulated depreciation (651,556) (639,966)
----------- -----------
301,645 304,248
Goodwill, net 77,464 78,790
Other assets 12,893 11,467
----------- -----------
TOTAL ASSETS $ 1,093,310 $ 1,058,040
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term bank debt $ 17,823 $ 20,944
Current maturities of long-term debt 95 148
Accounts payable:
Trade 52,159 46,737
Affiliates 43,404 32,311
Income taxes payable 20,836 11,995
Accrued payroll and benefits 39,969 41,055
Accrued expenses 42,352 39,092
----------- -----------
Total current liabilities 216,638 192,282
Long-term debt 17,812 12,714
Deferred income taxes 6,251 6,115
Other liabilities 14,421 16,288
----------- -----------
TOTAL LIABILITIES 255,122 227,399
----------- -----------
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; 88,184,125 (June 1999)
and 88,184,125 (March 1999) issued 882 882
Additional paid-in capital 325,181 325,028
Retained earnings 553,106 541,267
Accumulated other comprehensive income (loss) (9,648) (4,789)
Common stock in treasury, at cost: 1,903,967 (June 1999)
and 1,929,100 (March 1999) share (31,333) (31,747)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 838,188 830,641
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,093,310 $ 1,058,040
=========== ===========
See accompanying notes to consolidated financial statements.
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AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except share data)
Three Months ended June 30,
---------------------------------
1999 1998
------------ ------------
Net sales $ 343,150 $ 292,000
Cost of sales 289,291 240,540
------------ ------------
Gross profit 53,859 51,460
Selling, general and administrative expenses 27,458 27,880
------------ ------------
Profit from operations 26,401 23,580
Other income (expense):
Interest income 1,831 2,578
Interest expense (487) (531)
Other, net (879) (406)
------------ ------------
Income before income taxes 26,866 25,221
Provision for income taxes 9,420 7,819
------------ ------------
Net income $ 17,446 $ 17,402
============ ============
Amounts per share:
Basic and diluted income per share $ 0.20 $ 0.20
============ ============
Dividends declared $ 0.065 $ 0.065
============ ============
Weighted average number of common shares 86,258,257 87,973,038
outstanding
See accompanying notes to consolidated financial statements.
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AVX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)
Three Months Ended June 30,
---------------------------
1999 1998
--------- ---------
Operating Activities:
Net income $ 17,446 $ 17,402
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization 22,371 21,286
Changes in operating assets and liabilities, net of effects from
business acquired:
Accounts receivable (30,263) 5,593
Inventories (13,228) (4,108)
Accounts payable and accrued expenses 20,836 (19,720)
Income taxes payable 9,031 3,379
Other assets and liabilities 7,026 8,788
--------- ---------
Net cash from operating activities 33,219 32,620
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Investing Activities:
Purchases of property and equipment (23,951) (24,636)
Business acquired, net of cash received (10,941)
Loans to investee (625)
Other (265)
--------- ---------
Net cash used in investing activities (24,841) (35,577)
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Financing Activities:
Repayment of debt (3,293) (42)
Dividends paid (5,607) (5,725)
Purchase of treasury stock (10,141)
Proceeds from issuance of debt 5,636 2,836
Exercise of stock options 515 11
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Net cash from (used in) financing activities (2,749) (13,061)
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Effect of exchange rate changes on cash (473) 9
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Increase (decrease) in cash and cash equivalents 5,156 (16,009)
Cash and cash equivalents at beginning of period 173,106 201,887
--------- ---------
Cash and cash equivalents at end of period $ 178,262 $ 185,878
========= =========
See accompanying notes to consolidated financial statements.
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AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED
(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, 1999.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
2. Accounts Receivable:
Accounts receivable consisted of:
June 30, March 31,
1999 1999
--------- ---------
Trade $ 216,497 $ 183,033
Less: allowances for doubtful accounts, sales
returns, distributor adjustments and discounts (34,905) (25,702)
--------- ---------
$ 181,592 $ 157,331
========= =========
3. Inventories:
Inventories consisted of:
June 30, March 31,
1999 1999
--------- ---------
Finished goods $ 86,365 $ 91,551
Work in process 101,187 96,604
Raw materials and supplies 100,276 89,238
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$ 287,828 $ 277,393
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AVX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED - (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. 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. Comprehensive Income:
The Company has adopted Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income ("SFAS No. 130"). The statement requires
disclosure of total non-shareowner changes in equity on an annual basis. Total
non-shareowner changes in equity includes all changes in equity during a period
except those resulting from investments by and distributions to shareowners. The
specific components include: net income, deferred gains and losses resulting
from foreign currency translation and minimum pension liability adjustments.
Comprehensive income for the three months ended June, 30 1999 and 1998, includes
the following components:
Three Months ended June 30,
1999 1998
--------------------------------
Net income 17,446 17,402
Other comprehensive income, net of tax:
Foreign currency translation adjustment (4,859) (17)
--------------------------------
Comprehensive income 12,587 17,385
================================
The accumulated balance of comprehensive income (loss), (all of which relate to
foreign currency translation adjustments) as of June 30, 1999 and 1998 is as
follows:
Three Months ended June 30,
1999 1998
--------------------------------
Balance at beginning of period (4,789) 2,575
Translation adjustment (4,859) (17)
--------------------------------
Balance at end of period (9,648) 2,558
================================
6. Earnings Per Share:
Basic earnings per share are computed by dividing net income by the weighted
average number of shares of common stock outstanding for the period which were
86,258,257 and 87,973,038 for the three months ended June 30, 1999 and 1998,
respectively.
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Diluted earnings per share has been calculated by dividing net income by
the weighted average number of shares of common stock and common stock
equivalents outstanding for the period which were 86,562,914 and 87,980,994 for
the three months ended June 30, 1999 and 1998, respectively. Stock options are
the only common stock equivalents and are therefore considered in the diluted
earnings per share calculations. Common stock equivalents are computed using the
treasury stock method.
7. Segment information:
The Company has three reportable operating segments: Passive Components,
Connectors and Research and Development. The Company is organized, exclusive of
research and development, on the basis of products being separated into six
units. Five of the units which manufacture or distribute ceramic, tantalum, film
and power capacitors, ferrites and other passive devices have been aggregated
into the segment "Passive Components".
The Company evaluates performance of its segments based upon sales and
operating profit. There are no intersegment revenues. The tables below present
information about reported segments for the three months ended June 30,
1999 1998
--------- ---------
Net sales:
Passive components $ 312,048 $ 263,893
Connectors 31,102 28,107
Research & development -- --
--------- ---------
Total $ 343,150 $ 292,000
========= =========
Operating profit:
Passive components $ 30,539 $ 26,564
Connectors 5,374 4,063
Research & development (5,192) (4,141)
Corporate administration (4,320) (2,906)
--------- ---------
Total $ 26,401 $ 23,580
========= =========
8. Acquisition:
On June 2, 1998 the Company purchased the passive component business of
Thomson-CSF ("TPC") for $74,000 ($58,000 in cash and $16,000 of assumed debt).
The acquisition was accounted for as a purchase and funded through the use of
working capital. Based upon market valuations of the fair values of the assets
acquired and liabilities assumed the purchase price exceeded the fair value of
net assets acquired by approximately $49,000, which is being amortized on a
straight-line basis over 20 years. The results of the operations of TPC are
included in the accompanying financial statements from the date of acquisition.
9. Subsequent Event:
On July 15, 1999, the Company declared a $0.065 dividend per share of common
stock with respect to the quarter ended June 30, 1999, payable on August 9,
1999.
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Three months ended June 30, 1999 1998
- ---------------------------------------------------------------------------
Net sales 100% 100%
- ---------------------------------------------------------------------------
Cost of sales 84.3 82.4
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Gross profit 15.7 17.6
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Selling, general and administrative expenses 8.0 9.5
- ---------------------------------------------------------------------------
Profit from operations 7.7 8.1
- ---------------------------------------------------------------------------
Income before income taxes 7.8 8.6
- ---------------------------------------------------------------------------
Provision for income taxes 2.7 2.7
- ---------------------------------------------------------------------------
Net income 5.1 6.0
- ---------------------------------------------------------------------------
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998
Net sales in the three months ended June 30, 1999 increased 17.5% to $343.1
million from $292.0 million in the three months ended June 30, 1998. The
increase was attributable to growth in both passive components and connectors,
particularly tantalum and advanced products. Sales for the three months ended
June 30, 1999 also benefited from a full three months of revenue from TPC, a
passive component business acquired on June 2, 1998.
Gross profit in the three months ended June 30, 1999 increased 4.7% to
$53.9 million (15.7% of net sales) from $51.5 million (17.6% of net sales) in
the three months ended June 30, 1998. The increase in gross profit can be
attributed to additional sales. The decline in gross profit as a percentage of
sales can be attributed to decline in selling prices and a rise in the cost of
palladium, a principle raw material used in the manufacture of ceramic
capacitors, and the continuing costs associated with the integration of the TPC
operation. Offsetting these factors was the benefit of higher margin advanced
product sales, improvements in manufacturing efficiencies, and higher throughput
in the factories.
Selling, general and administrative expenses in the three months ended June
30, 1999 were $27.5 million (8.0% of net sales) compared with $27.9 million
(9.5% of net sales) in the three months ended June 30, 1998. The decline in
selling, general and administrative expenses, as a percentage of sales, is
primarily a result of higher sales and the Company's ongoing cost containment
programs.
As a result of the above factors, profit from operations in the three
months ended June 30, 1999 increased 12.0% to $26.4 million from $23.6 million
in the three months ended June 30, 1998.
For the reasons set forth above, lower interest income on invested cash and
a higher income tax rate as a result of the non recognition of certain foreign
income tax benefits, net income in the three months ended June 30, 1999 was
$17.4 million (5.1% of net sales) compared to $17.4 million (6.0% of net sales)
in the three months ended June 30, 1998.
Liquidity and Capital Resources
The Company's liquidity needs arise primarily from working capital
requirements, dividends, capital expenditures and acquisitions. Historically,
the Company has satisfied its liquidity requirements through internally
generated funds. As of June 30, 1999, the Company had a current
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ratio of 3.2 to 1, $178.3 million of cash and cash equivalents, $838.2 million
of stockholders' equity and an insignificant amount of long-term debt.
Net cash from operating activities was $33.2 million in the three months
ended June 30, 1999 compared to $32.6 million in the three months ended June 30,
1998.
Purchases of property and equipment were $24.0 million in the three month
period ended June 30, 1999 and $24.6 million in the three month period ended
June 30, 1998. 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.
On June 2, 1998, the Company purchased the passive component business of
Thomson-CSF ("TPC") for $74.0 million, including the assumption of debt. The
Company made an initial payment of $10.9 million during the three months ended
June 30,1998.
Although the majority of the Company's funding is internally generated,
certain European subsidiaries of the Company have borrowed German deutsche marks
and French francs under various bank agreements.
Based on the financial condition of the Company as of June 30, 1999, 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 and acquisition payments 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.
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 15, 1999 for the
purpose of electing five Directors, ratifying an amendment to AVX Corporation
1995 Stock Option Plan, ratifying the Management Incentive Plan, and ratifying
the appointment of independent accountants. 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.
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Proposal 1:
Election of Class III directors with terms expiring at the Annual Meeting in
July of 2002.
Shares
Voted Shares
"For" "Withheld"
------------------------------------
Class III Donald B. Christiansen 84,202,259 176,144
Class III Mashiro Yamamoto 84,202,359 176,044
Class III Yuzo Yamamura 84,202,359 176,044
Class III Yasuo Nishiguchi 84,202,359 176,044
Class III Henry C. Lucas 84,202,057 176,346
The following is a summary of directors who were not up for election and
continue in office.
Class I Kazuo Inamori
Class I Kensuke Itoh
Class I Benedict P. Rosen
Class I Richard Tressler
Class I Mashiro Umemura
Class II Carrol A. Campbell, Jr.
Class II John S. Gilbertson
Class II Rodney N. Lanthorne
Class II Michihisa Yamamoto
Proposal 2:
Ratification of an amendment to the 1995 Stock Option Plan to (a) increase the
number of shares that may be issued under the plan by 500,000 and (b) modify the
300,000 share limit on the stock options that may be granted to any one
individual during any five-year period to a 500,000 share limit.
Shares Shares
voted voted Shares
"For" "Against" "Abstaining"
--------------------------------------------------------------
80,581,343 24,791 21,712
Proposal 3:
Ratification of the Management Incentive Plan:
Shares Shares
voted voted Shares
"For" "Against" "Abstaining"
--------------------------------------------------------------
83,792,206 528,071 58,125
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Proposal 4:
Ratification of appointment of PricewaterhouseCoopers LLP as the Company's
independent accountants was approved with the following vote:
Shares Shares
voted voted Shares
"For" "Against" "Abstaining"
--------------------------------------------------------------
84,347,263 12,602 18,538
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10.10 Amended 1995 Stock Option Plan
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K.
None.
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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: August 2, 1999
AVX Corporation
/s/ DONALD B. CHRISTIANSEN
---------------------------------
Donald B. Christiansen
Senior Vice President of Finance,
Chief Financial Officer,
and Treasurer
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