Forward-Looking Statements

This Quarterly Report on Form 10-Q contains "forward-looking" information within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding industry prospects and future results of operations or financial position, made in this Quarterly Report on Form 10-Q are forward-looking. The forward-looking information may include, among other information, statements concerning the Company's outlook for fiscal year 2009, overall volume and pricing trends, cost reduction and acquisition strategies and their anticipated results, expectations for research and development, and capital expenditures. There may also be other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. Forward-looking statements reflect management's expectations and are inherently uncertain. The forward-looking information and statements in this report are subject to risks and uncertainties, including those discussed in the Company's Annual Report on Form 10-K for fiscal year ended March 31, 2008, that could cause actual results to differ materially from those expressed in or implied by the information or statements herein. Forward-looking statements should be read in context with, and with the understanding of, the various other disclosures concerning the Company and its business made elsewhere in this quarterly report as well as other public reports filed by the Company with the SEC. You should not place undue reliance on any forward-looking statements as a prediction of actual results or developments.

The Company does not intend to update or revise any forward-looking statement contained in this quarterly report to reflect new events or circumstances unless and to the extent required by applicable law. All forward-looking statements contained in this quarterly report constitute "forward-looking statements" within the meaning of Section 21E of the United States Securities Exchange Act of 1934 and, to the extent it may be applicable by way of incorporation of statements contained in this quarterly report by reference or otherwise, Section 27A of the United States Securities Act of 1933, each of which establishes a safe-harbor from private actions for forward-looking statements as defined in those statutes.

Critical Accounting Policies and Estimates

"Management's Discussion and Analysis of Financial Condition and Results of Operations" is based upon the Company's unaudited Consolidated Financial Statements and Notes thereto, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. On an ongoing basis, management evaluates its estimates and judgments, including those related to investment securities, revenue recognition, inventories, property and equipment, goodwill, intangible assets, income taxes and contingencies. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There can be no assurance that actual results will not differ from those estimates.

Business Overview

AVX is a leading worldwide manufacturer and supplier of a broad line of passive electronic components. Virtually all types of electronic devices use our passive component products to store, filter or regulate electric energy. We also manufacture and supply high-quality electronic connectors and inter-connect systems for use in electronic products.

We have manufacturing, sales and distribution facilities located throughout the world which are divided into three main geographic regions: the Americas, Asia and Europe. AVX is organized into five main product groups with three reportable segments: Passive Components, KED Resale and Connectors. The Passive Components segment consists primarily of surface mount and leaded ceramic capacitors, RF thick and thin film components, tantalum capacitors, film capacitors, ceramic and film power capacitors, super capacitors, EMI filters, thick and thin film packages, varistors, thermistors, inductors and resistive products. The KED Resale segment consists primarily of ceramic capacitors, frequency control devices, SAW devices, resistive products, RF modules, actuators, acoustic devices and connectors produced by Kyocera, and resold by AVX. The Connectors segment consists primarily of Elco automotive, telecom and memory connectors manufactured by AVX.

Our customers are multi-national original equipment manufacturers, or OEMs, independent electronic component distributors and electronic manufacturing service providers, or EMSs. We market our products through our own direct sales force and independent manufacturers' representatives, based upon market characteristics and demands. We coordinate our sales, marketing and manufacturing organizations by strategic customer account and globally by region.

We sell our products to customers in a broad array of industries, such as telecommunications, information technology hardware, automotive electronics, medical devices and instrumentation, industrial instrumentation, defense and aerospace electronic systems and consumer electronics.

Results of Operations - Three Months Ended September 30, 2008 and 2007

Net income for the quarter ended September 30, 2008 was $27.8 million, or
diluted earnings per share of $0.16, compared to $37.4 million, or $0.22 diluted
earnings per share, for the quarter ended September 30, 2007. Net income for the
three months ended September 30, 2008 includes after-tax charges of $2.8 million
of restructuring charges and a $1.2 million impairment charge for the decline in
market value of certain available-for-sale securities.
                                      -19-
                                       Three Months Ended
in thousands, except per share data      September 30,
                                        2007        2008
Net Sales                           $   400,706  $ 400,280
Gross Profit                             68,789     63,473
Operating Income                         38,818     30,238
Net Income                               37,441     27,791
Diluted Earnings per Share          $      0.22  $    0.16

Net sales in the three months ended September 30, 2008 decreased slightly to $400.3 million compared to $400.7 million in the three months ended September 30, 2007. This decrease is a result of lower demand resulting primarily from weakness in the consumer electronics markets reflecting the uncertainty in global economic conditions. Supply chain inventory levels have remained lean during the quarter as customers remain cautious waiting for end market demand to improve. Overall sales prices for our commodity components decreased when compared to the same quarter last year.

The table below represents product group revenues for the three-month periods ended September 30, 2007 and September 30, 2008.

Sales Revenue               Three Months Ended September 30,
$(000's)                        2007                2008
Ceramic Components       $          55,128   $          44,736
Tantalum Components                 79,759              77,419
Advanced Components                 91,891             117,634
Total Passive Components           226,778             239,789
KDP and KKC Resale                 126,075             109,900
KEC Resale                          21,969              23,680
Total KED Resale                   148,044             133,580
Connectors                          25,884              26,911
Total Revenue            $         400,706   $         400,280

Passive Component sales increased $13.0 million, or 5.7%, to $239.8 million in the three months ended September 30, 2008 from $226.8 million during the same quarter last year. The sales increase in Passive Components was primarily due to the acquisition of American Technical Ceramics Corp. ("ATC") in September 2007 and the Company's strategy to focus on a higher mix of value added products. This increase was partially offset by the lower demand in the consumer electronics markets reflecting the overall uncertainty in global economic conditions. The decrease in sales of Ceramic Components reflects a decline of approximately 10% in the volume of unit sales coupled with a higher mix of commodity priced components as commodity prices declined during the quarter. The decrease in sales of Tantalum Components is due to a decline of approximately 10% in sales unit volume resulting from a decrease in demand for these components as customers reduced inventory levels or changed product designs, partially offset by higher average selling prices.

KDP and KKC Resale sales decreased 12.8% to $109.9 million in the three months ended September 30, 2008 compared to $126.1 million during the same period last year. When compared to the same period last year, the decrease during the quarter ended September 30, 2008 is primarily attributable to a decrease in the Asian region due to lower volumes and selling prices resulting from a decrease in end market demand.

The Company's sales to independent electronic distributor customers represented 36.0% of total net sales for the three months ended September 30, 2008 compared to 42.5% for the three months ended September 30, 2007. This decline is due to caution in the distributor market as distributor customers reduced inventory levels in light of current economic conditions reflecting lower end user demand. The Company's sales to distributor customers involve specific ship and debit and stock rotation programs for which sales allowances are recorded as reductions in sales. Such allowance charges were $10.7 million, or 6.9% of gross sales to distributor customers, for the three months ended September 30, 2008 and $10.6 million, or 5.9% of gross sales to distributor customers, for the three months ended September 30, 2007. Applications under such programs for the quarters ended September 30, 2008 and 2007 were approximately $10.0 million and $9.8 million, respectively.

Geographically, compared to the same period last year, sales increased 5.0% in Europe and 13.6% in the Americas. This reflects higher demand for higher margin Advanced Components products as well as the addition of ATC sales in the Americas and Europe regions. These increases were partially offset by lower demand in Asia, where sales decreased 9.3% compared to the same period last year reflecting lower end user demand. In addition, the weakening of the U.S. dollar against certain foreign currencies positively impacted reported sales by approximately $8.9 million, when compared to the same quarter last year.

Gross profit in the three months ended September 30, 2008 was 15.9% of sales or $63.5 million compared to a gross profit margin of 17.2% or $68.8 million in the three months ended September 30, 2007. This decrease is a result of increases in material and operating costs chiefly related to the increased cost of energy and transportation, metals and other materials used in production. In addition, the U.S. dollar weakened against certain foreign currencies when compared to those currencies at September 30, 2007. The negative effect of currency movement on costs was approximately $18.9 million when compared to the same quarter last year. This negative effect is primarily due to currency movement on reported European cost of sales. Compared to the same period last year, depreciation and amortization expense was $4.4 million higher primarily due to the acquisition of ATC. In addition, we recorded $3.3 million of restructuring charges in connection with headcount reductions and a facility closure in Brazil to reduce ongoing operating expenses. The Company continues to focus on the rationalization of production capacity and other cost reduction opportunities and expects to have additional restructuring charges during the second half of this fiscal year.

Selling, general and administrative expenses in the three months ended September 30, 2008 were $32.5 million, or 8.1% of net sales, compared to $29.6 million, or 7.4% of net sales, in the three months ended September 30, 2007. The overall increase in selling, general and administrative expenses was primarily due to higher selling and other costs resulting from the addition of ATC and the effects of general inflation and the weakness of the U.S. dollar. In addition, we recorded $0.7 million of restructuring charges in connection with headcount reductions to reduce ongoing selling, general and administrative expenses.

Primarily as a result of the above factors, income from operations declined $8.6 million to $30.2 million in the three months ended September 30, 2008 compared to $38.8 million in the three months ended September 30, 2007.

Other income decreased $7.6 million to $5.6 million in the three months ended September 30, 2008 compared to $13.2 million in the same period last year. This decrease is primarily due to a $1.7 million impairment charge related to the decline in market value of certain available-for-sale securities in addition to lower interest income resulting from lower cash and securities investment balances due to the purchase of ATC at the end of September 2007 and lower interest rates. This decrease is partially offset by net currency exchange gains for the quarter.

Results of Operations - Six Months Ended September 30, 2008 and 2007

Net income for the six months ended September 30, 2008 decreased $17.8 million to $58.8 million, or diluted earnings per share of $0.34, compared to $76.6 million, or $0.44 diluted earnings per share for the quarter ended September 30, 2007. Net income for the six months ended September 30, 2008 include after-tax charges of $3.7 million related to restructuring charges and $1.2 million for an other-than-temporary impairment of certain available-for-sale securities, partially offset by other operating income of $3.0 million from a gain on the sale of excess assets.

in thousands, except per share data    Six Months Ended
                                        September 30,
                                        2007      2008
Net Sales                           $  783,864 $ 797,169
Gross Profit                           143,514   125,625
Operating Income                        82,975    62,280
Net Income                              76,600    58,796
Diluted Earnings per Share          $     0.44 $    0.34

Net sales in the six months ended September 30, 2008 increased $13.3 million, or 1.7%, to $797.2 million compared to $783.9 million in the six months ended September 30, 2007. This increase is a result of sales from the September 25, 2007 acquisition of ATC partially offset by lower demand resulting primarily from weakness in the consumer electronics markets reflecting the uncertainty in global economic conditions. Supply chain inventory levels have remained lean during the first half of the fiscal year as our distributor customers remain cautious and wait for improved end user demand. Overall sales prices for our commodity components decreased during the first half of this fiscal year.

The table below represents product group revenues for the six month periods ended September 30, 2007 and September 30, 2008.

Sales Revenue               Six Months Ended September 30,
$(000's)                        2007              2008
Ceramic Components       $        109,205  $         95,742
Tantalum Components               159,436           155,674
Advanced Components               184,563           237,528
Total Passive Components          453,204           488,944
KDP and KKC Resale                236,136           207,599
KEC Resale                         43,062            43,285
Total KED Resale                  279,198           250,884
Connectors                         51,462            57,341
Total Revenue            $        783,864  $        797,169

KDP and KKC Resale sales decreased 12.1% to $207.6 million in the six months ended September 30, 2008 compared to $236.1 million during the same period last year. When compared to the same period last year, the decrease during the first half of fiscal 2009 is primarily attributable to a decrease of approximately 10% in unit sales volume and a decrease in average selling prices due to lower consumer demand resulting from the uncertainty in global market conditions.

Total Connector sales, including AVX manufactured and KEC Resale connectors, increased $6.1 million, or 6.5%, to $100.6 million in the six months ended September 30, 2008 compared to $94.5 million during the same period last year. This increase was primarily attributable to customer demand for complex electronic devices and new programs, particularly in the automotive sector, as more electronic content is needed to support the functionality being built into today's vehicles.

The Company's sales to independent electronic distributor customers represented 36.1% of total net sales for the six months ended September 30, 2008, compared to 43.2% for the six months ended September 30, 2007. Our distributor customers have been limiting their intake of inventory in this uncertain demand environment. The Company's sales to distributor customers involve specific ship and debit and stock rotation programs for which sales allowances are recorded as reductions in sales. Such allowance charges were $21.2 million, or 6.7% of gross sales to distributor customers, for the six months ended September 30, 2008 and $21.4 million, or 5.9% of gross sales to distributor customers, for the six months ended September 30, 2007. Applications under such programs for the six months ended September 30, 2008 and 2007 were approximately $19.9 million and $19.5 million, respectively.

Geographically, compared to the same period last year, sales increased 12.1% in Europe and 11.9% in the Americas. This reflects the higher demand in Europe for Connector Components and Advanced Components products as well as the addition of ATC sales in the Americas and Europe regions. These increases were partially offset by lower demand in Asia, where sales decreased 8.5% compared to the same period last year. In addition, the weakening of the U.S. dollar against certain foreign currencies positively impacted reported sales by approximately $26.5 million, when compared to the same six month period last year.

Gross profit in the six months ended September 30, 2008 was 15.8% of sales or $125.6 million compared to a gross profit margin of 18.3% or $143.5 million in the six months ended September 30, 2007. This decrease is attributable to several factors including the factors discussed above relating to sales coupled with the increased cost of raw materials and utilities, and the negative impact of currency translation as the U.S. dollar weakened against certain foreign currencies during the six months ended September 30, 2008. The negative effect of currency translation of approximately $45.3 million, when compared to the same period last year, was primarily due to the currency movement on reported European costs of sales. In addition, we incurred restructuring charges of $4.6 million related to headcount reductions and a facility closure in Brazil as we continue to realign production capabilities and reduce operating costs. In addition, lower margins were partially offset by the Company's continued efforts to increase efficiency of our production, to lower operating costs and to pursue increased capacity for the production of value added products. Also, compared to the same period last year, depreciation and amortization expense was $8.3 million higher as a result of the acquisition of ATC.

Income from operations declined $20.7 million to $62.3 million in the six months ended September 30, 2008 compared to $83.0 million in the six months ended September 30, 2007. This decrease is due to the factors discussed above including $5.3 million in restructuring charges. This decline was partially offset by other operating income of $4.1 million from gains on the sale of excess assets during the first quarter of fiscal 2009.

Other income decreased $10.2 million to $14.0 million in the six months ended September 30, 2008 compared to $24.2 million in the same period last year. This decrease is predominately due to lower interest income resulting from lower cash and securities investment balances during the first half of this fiscal year primarily due to the purchase of ATC at the end of September 2007 and lower interest rates. This decrease is partially offset by net currency exchange gains during the first half of this fiscal year.

The Company's effective tax rate for the six-month period ended September 30, 2008 was 22.9% compared to 28.5% for the same period last year. This lower effective tax rate is primarily due to higher profits in lower tax jurisdictions in the current period when compared to the same period last year. In addition, the effective tax rate was favorably impacted from the benefit of our foreign branch losses taken as deductions in prior years' U.S. tax returns no longer subject to U.S. income tax recapture regulations and reinvestment allowances related to additional capital investments in Malaysia.

Outlook

Near-Term:

The electronic component industry in which we operate is cyclical. Near-term results for us will depend on the impact of the overall uncertainty in global economic conditions and their impact on telecommunications, information technology hardware, automotive, consumer electronics and other electronic markets. Looking ahead, visibility is low and forecasting is a challenge in this uncertain market. We believe that some markets we serve are slowing as a result of the unprecedented credit crisis and projected softening of the global economic environment. We expect to see continued pricing pressure in the markets we serve as our customers look to offset the impacts of the current economic downturn and rising production costs and additional industry production capacity. In response to anticipated market conditions, we expect to continue to focus on cost reductions and expect additional restructuring actions in the near term for headcount reductions and product line rationalization. We also continue to focus on process improvements and enhanced production capabilities in conjunction with our focus on the sales of value added electronic components to support today's advanced electronic devices. If uncertainties in the credit and capital markets continue, the overall impact on our customers as well as end user demand for electronic products could have a significant adverse impact on our near-term results.

Long-Term:

While there is uncertainty in the near-term market as a result of the current economic conditions, we continue to be optimistic that opportunities for long-term growth and profitability will continue due to: (a) the continued increase as a long-term trend in worldwide demand for electronic devices which require our electronic components, (b) cost reductions and improvements in our production processes and (c) opportunities for growth in our Advanced Component and Connector product lines due to advances in component design and our production capabilities.

The Company's liquidity needs arise primarily from working capital requirements, dividend payments, capital expenditures and acquisitions. Historically, the Company has satisfied its liquidity requirements through funds from operations and investment income from cash and investments in securities. As of September 30, 2008, the Company had a current ratio of 6.6 to 1, $804.0 million of cash, . . .