AVX Corporation (NYSE:AVX) today reported preliminary unaudited results for the second quarter ended September 30, 2016.
Chief Executive Officer and President, John Sarvis, stated, “We completed the second quarter of our fiscal year with net sales of $327.5 million reflecting an increase over both the previous quarter and the same quarter in the prior year. Our gross profit of $61.8 million, or 18.9%, was negatively impacted by $9.9 million, or 3.1%, related to intellectual property litigation (discussed below). Our results continue to reflect solid operating results reflective of our focus on value added products for our customers and our focus on cost control. We continue to be optimistic about future activity as we saw a build in our order backlog during the quarter and increased distribution customer activity. We have made significant investments in manufacturing plant expansion and product line rationalizations to support the anticipated growth resulting from the continuing evolution of new electronic devices and increased electronic component content in the products and devices that impact our lives.”
For the three and six month periods ended September 30, 2016, net sales were $327.5 million and $642.3 million, respectively, compared to net sales of $304.4 million and $604.9 million, respectively, for the same periods last year reflecting improving markets for our components and interconnect products.
Profit from operations for the three and six month periods ended September 30, 2016 include charges of $12.8 million and $15.3 million, respectively, related to previously disclosed intellectual property damages awards resulting from litigation with respect to a patent infringement case filed in the United States District Court for the District of Delaware by Presidio Components, Inc. This case alleged that certain American Technical Ceramics Corp. (ATC, a subsidiary of AVX) products infringe on a Presidio patent. On April 18, 2016, the jury returned a verdict in favor of the plaintiff and found damages to be paid to Presidio in the amount of $2.2 million, which was accrued as of March 31, 2016. In addition, at that time the court indicated that it was considering awarding additional damages on product sales; however, no amounts were disclosed by the court of any potential award. We made an estimate of the probable amount of the award and accrued $2.5 million in the quarter ended June 30, 2016 on sales of the affected product. Subsequently, on August 17, 2016, the court issued a permanent injunction prohibiting ATC from manufacturing or selling the related product after November 16, 2016 and awarded Presidio damages related to ATC’s sale of such products from February 21, 2016 through November 16, 2016. Furthermore, on October 21, 2016, the Federal Circuit court granted AVX’s request for a stay of the permanent injunction whereby AVX may continue to sell the disputed product until March 17, 2017 to anyone who was a customer prior to June 17, 2016. Any sales subsequent to November 16, 2016 pursuant to the stay of the permanent injunction are subject to the intellectual property damages award discussed above. The $12.8 million and $15.3 million intellectual property damages award charges for the three and six month periods ended September 30, 2016, respectively, include $6.2 of damages (over and above our original $2.5 million estimate) related to sales that occurred prior to the beginning of the current quarter and $6.6 million of damages which related to sales that occurred in the current quarter ended September 30, 2016. Net sales for the three and six month periods ended September 30, 2016 include $2.9 million from increased sales prices related to the affected products which have the effect of partially offsetting the effect of the intellectual property damages awards.
The net effect of the damages awards and the higher selling prices was a negative impact on net income of $6.4 million, or $0.04 per diluted share and $8.1 million, or $0.05 per diluted share, for the three and six month periods ended September 30, 2016, respectively.
Additionally, profit from operations was impacted by the accrual of estimated environmental remediation costs and the settlement of certain litigation involving legacy environmental issues during thesix month period ended September 30, 2016 and the three and six month periods ended September 30, 2015 as discussed below. Profit from operations for the three month period and six month periods ended September 30, 2015 reflect a charge of $6.2 million related to the settlement of certain litigation involving legacy environmental issues. Profit from operations for the six month period ended September 30, 2016 reflects a charge of $3.6 million related to estimated environmental remediation costs resulting from legacy environmental issues at an inactive property.
Net income for the quarter ended September 30, 2016 was $24.8 million, or $0.15 per diluted share, compared to net income of $27.9 million, or $0.17 per diluted share, for the three months ended September 30, 2015.
Net income for the six month period ended September 30, 2016 was $54.7 million, or $0.33 per diluted share, compared to net income of $63.5 million, or $0.38 per diluted share, for the six month period ended September 30, 2015.
Chief Financial Officer, Kurt Cummings, stated, “As a part of our long-term strategy, we continued to foster our financial strength in order to allow flexibility for investments in potential acquisitions, materials, equipment and people to support the long-term growth of the Company. We have cash, cash equivalents and short-term investments in securities of approximately $1.1 billion and no debt. We continued to use our resources to provide value to our stockholders during the quarter by paying $17.6 million in dividends to stockholders and using $3.2 million to repurchase shares of AVX stock on the open market.”
AVX, headquartered in Fountain Inn, South Carolina, is a leading manufacturer and supplier of a broad line of passive electronic components and related products.
Please visit our website at www.avx.com.