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 and beyond, 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.

The Company has identified the accounting policies and estimates that are critical to our business operations and understanding the Company's results of operations. Those policies and estimates can be found in Note 1, "Summary of Significant Accounting Policies", of the Notes to Consolidated Financial Statements and in "Critical Accounting Policies and Estimates", in "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2008 and in Note 1, "Critical Accounting Policies and Estimates", in the Notes to Consolidated Financial Statements in this Form 10-Q. Accordingly, this Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2008. During the nine month period ended December 31, 2008, except as noted in Note 1, "Critical Accounting Policies and Estimates", of the Company's Notes to Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q, there were no significant changes to any critical accounting policies, judgments involved in applying those policies or the methodology used in determining estimates with respect to those related to investment securities, revenue recognition, inventories, goodwill, intangible assets, property and equipment, income taxes and contingencies.

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 December 31, 2008 and 2007

Overall results for the quarter are reflective of the macro economic issues facing all companies in our industry. Consumer spending for electronics and automobiles has been significantly reduced and many of our customers' factories were on extended shut downs through the holiday period thereby reducing demand for our products. Net income for the three months ended December 31, 2008 was $23.9 million, or diluted earnings per share of $0.14, compared to $37.0 million, or $0.22 diluted earnings per share, for the three months ended December 31, 2007. Net income for the three months ended December 31, 2008 includes after-tax charges of $2.2 million for restructuring actions and $1.6 million for the impairment of certain available-for-sale securities transferred to the Company in December 2007 from an impaired Bank of America enhanced cash investment fund.

in thousands, except per share data     Three Months Ended December 31,
                                           2007                2008
Net Sales                           $         429,542   $         320,617
Gross Profit                                   73,806              52,981
Operating Income                               40,467              22,929
Net Income                                     37,019              23,864
Diluted Earnings per Share          $            0.22   $            0.14

Net sales in the three months ended December 31, 2008 were $320.6 million compared to $429.5 million in the three months ended December 31, 2007. This decrease is a result of lower end user demand resulting primarily from weakness in the consumer electronics and automotive markets reflecting the limited availability of credit in the marketplace and overall 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 in line with historical norms when compared to the same quarter last year.

Sales Revenue                Three Months Ended December 31,
$(000's)                        2007                2008
Ceramic Components       $          50,684   $          40,794
Tantalum Components                 75,862              61,456
Advanced Components                123,522              99,916
Total Passive Components           250,068             202,166
KDP and KKC Resale                 128,502              82,390
KEC Resale                          24,456              18,312
Total KED Resale                   152,958             100,702
Connectors                          26,516              17,749
Total Revenue            $         429,542   $         320,617

Passive Component sales were $202.2 million in the three months ended December 31, 2008 compared to $250.1 million during the same quarter last year. The decrease in sales for all Passive Component products is reflective of the overall decline in global markets resulting from the current economic uncertainty as both consumer end users and manufacturing customers reduced spending. The decline in the consumer electronic and automotive markets was partially offset by improving trends in the medical and military marketplaces.

KDP and KKC Resale sales were $82.4 million in the three months ended December 31, 2008 compared to $128.5 million during the same period last year. When compared to the same period last year, the decrease during the quarter ended December 31, 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, particularly in the telecommunications market.

Total Connector sales, including AVX manufactured and KEC Resale connectors, were $36.1 million in the three months ended December 31, 2008 compared to $51.0 million during the same period last year. This decrease was primarily attributable to lower unit sales in the automotive and consumer products sectors partially offset by increases in sales volume related to production demand for smart phone devices when compared to the same period last year.

The Company's sales to independent electronic distributor customers represented 37.5% of total net sales for the three months ended December 31, 2008 compared to 39.7% for the three months ended December 31, 2007. This decline is due to caution in that market as distributor customers maintained their reduced inventory levels in light of 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 $9.2 million, or 7.1% of gross sales to distributor customers, for the three months ended December 31, 2008 and $11.4 million, or 6.2% of gross sales to distributor customers, for the three months ended December 31, 2007. Applications under such programs for the quarters ended December 31, 2008 and 2007 were approximately $9.7 million and $11.9 million, respectively.

Geographically, compared to the same period last year, sales decreased 37.3% in Asia, 23.9% in Europe and 2.2% in the Americas. This reflects lower end user consumer market demand as a result of the weakening economy. In addition, the strengthening of the U.S. dollar against certain foreign currencies, and weakening against others, resulted in an unfavorable impact on reported sales of approximately $2.0 million for the three months ended December 31, 2008, when compared to the same period last year.

Selling, general and administrative expenses in the three months ended December 31, 2008 were $30.1 million, or 9.4% of net sales, compared to $33.3 million, or 7.8% of net sales, in the three months ended December 31, 2007. The overall decrease in selling, general and administrative expenses was primarily due to savings as a result of headcount reductions in prior quarters as well as an overall decrease in direct selling expenses due to lower sales. In addition, we recorded $1.0 million of restructuring charges in connection with headcount reductions to reduce ongoing selling, general and administrative expenses in the quarter ended December 31, 2008.

Primarily as a result of the above factors, income from operations was $22.9 million in the three months ended December 31, 2008 compared to $40.5 million in the three months ended December 31, 2007.

Other income decreased $4.9 million to $3.6 million in the three months ended December 31, 2008 compared to $8.5 million in the same period last year. This decrease is primarily due to a $2.0 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 and lower interest rates.

The Company's effective tax rate for the quarter ended December 31, 2008 was 10.0% compared to 24.5% for the same period last year. This lower effective tax rate is due in part to the cumulative effect of a change in the Company's annual effective tax rate from 26% to 22% during the quarter which impacted the current quarter by approximately $3.1 million in addition to the recognition of a net tax benefit of $0.4 million for the release of certain liabilities associated with closed income tax audits. The effective tax rate continues to be 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. In March 2007, the Internal Revenue Service enacted a change in tax regulations that reduced the U.S. income tax recapture period from 15 to 5 years. As a result, $8.6 million of recapture will expire during the current fiscal year and has favorably impacted the Company's annual effective income tax rate.

Results of Operations - Nine Months Ended December 31, 2008 and 2007

Net income for the nine months ended December 31, 2008 decreased to $82.7 million, or diluted earnings per share of $0.48, compared to $113.6 million, or $0.66 diluted earnings per share for the nine months ended December 31, 2007. Net income for the nine months ended December 31, 2008 include after-tax charges of $5.9 million related to restructuring charges and $2.8 million for the other-than-temporary impairment of certain available-for-sale securities, partially offset by after-tax other operating income of $3.0 million from a gain on the sale of excess corporate assets.

in thousands, except per share data     Nine Months Ended December 31,
                                           2007               2008
Net Sales                           $       1,213,406  $       1,117,786
Gross Profit                                  217,320            178,606
Operating Income                              123,442             85,209
Net Income                                    113,619             82,660
Diluted Earnings per Share          $            0.66  $            0.48

The table below represents product group revenues for the nine month periods ended December 31, 2007 and December 31, 2008.

Sales Revenue                Nine Months Ended December 31,
$(000's)                        2007               2008
Ceramic Components       $         159,889  $         136,536
Tantalum Components                235,298            217,130
Advanced Components                308,085            337,444
Total Passive Components           703,272            691,110
KDP and KKC Resale                 364,638            289,989
KEC Resale                          67,518             61,597
Total KED Resale                   432,156            351,586
Connectors                          77,978             75,090
Total Revenue            $       1,213,406  $       1,117,786

Passive Component sales were $691.1 million in the nine months ended December 31, 2008 compared to $703.3 million during the same period last year. The sales decrease in Passive Components was primarily due to the lower demand in the consumer electronics and automotive markets reflecting the overall uncertainty in global economic conditions, partially offset by increases related to the Company's strategy to focus on a higher mix of value added products from our Advanced Components group and the effects of including ATC sales since its acquisition in September 2007. The decrease in sales of Ceramic Components reflects a decrease in the volume of unit sales with a higher mix of commodity priced components and a decrease in average selling prices. The decrease in sales of Tantalum Components is due to a lower sales unit volume due to a decrease in demand for these components as customers reduced inventory levels or changed product designs.

KDP and KKC Resale sales were $290.0 million in the nine months ended December 31, 2008 compared to $364.6 million during the same period last year. When compared to the same period last year, the decrease during the first nine months of fiscal 2009 is primarily attributable to a decrease in unit sales volume in the Asian region and a decrease in average selling prices due to lower consumer demand, particularly in the telecommunications markets.

Total Connector sales, including AVX manufactured and KEC Resale connectors, were $136.7 million in the nine months ended December 31, 2008 compared to $145.5 million during the same period last year. This decrease was primarily attributable to a decrease in the automotive and consumer products sectors as a result of the adverse economy, particularly in the quarter ended December 31, 2008. This decrease was slightly offset by increases in sales volume related to production demand for certain smart phone devices when compared to the same period last year.

The Company's sales to independent electronic distributor customers represented 36.5% of total net sales for the nine months ended December 31, 2008, compared to 41.9% for the nine months ended December 31, 2007. Our distributor customers have been limiting their intake of inventory and maintaining lower inventory levels 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 $30.4 million, or 6.9% of gross sales to distributor customers, for the nine months ended December 31, 2008 and $32.7 million, or 6.0% of gross sales to distributor customers, for the nine months ended December 31, 2007. Applications under such programs for the nine months ended December 31, 2008 and 2007 were approximately $29.6 million and $31.4 million, respectively.

Geographically, compared to the same period last year, sales increased 0.1% in Europe and 6.9% in the Americas. This reflects an increase in the sales of Advanced Components products related to the addition of American Technical Ceramics ("ATC") sales in the Americas and Europe regions. Increases in these regions were offset by an overall lower demand for product due to the decline of the global market. These regional increases were partially offset by lower demand in Asia, where sales decreased 19.0% compared to the same period last year. In addition, the weakening of the U.S. dollar against certain foreign currencies during the nine months ended December 31, 2008 positively impacted reported sales by approximately $24.5 million, when compared to the same nine month period last year.

Selling, general and administrative expenses in the nine months ended December 31, 2008 were $97.4 million, or 8.7% of net sales, compared to $93.5 million, or 7.7% of net sales, in the nine months ended December 31, 2007. The overall increase in selling, general and administrative expenses was 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, during the nine months ended December 31, 2008 we recorded $1.7 million of restructuring charges in connection with headcount reductions to reduce ongoing selling, general and administrative expenses.

Income from operations was $85.2 million in the nine months ended December 31, 2008 compared to $123.4 million in the nine months ended December 31, 2007. This decrease is due to the factors discussed above including $8.1 million in restructuring charges recorded during the nine months ended December 31, 2008 compared to $2.4 million recorded during the same period last year. This decline was partially offset by other operating income of $4.1 million from gains on the sale of excess corporate assets during the nine months ended December 31, 2008.

Other income decreased $15.2 million to $17.6 million in the nine months ended December 31, 2008 compared to $32.7 million in the same period last year. This decrease is primarily due to lower interest income resulting from lower cash and securities investment balances during the fiscal year and lower interest rates. This decrease is partially offset by net currency exchange gains during the first nine months of the current fiscal year.

The Company's effective tax rate for the nine-month period ended December 31, 2008 was 19.6% compared to 27.2% for the same period last year. This lower effective tax rate is due to higher profits in lower tax jurisdictions 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. In March 2007, the Internal Revenue Service enacted a change in tax regulations that reduced the U.S. income tax recapture period from 15 to 5 years. As a result, $8.6 million of recapture will expire during the current fiscal year and has favorably impacted the Company's annual effective income tax rate in the current fiscal year. In addition, the recognition of a net tax benefit of $2.9 million for the release of certain liabilities associated with closed income tax audits and reinvestment allowances related to additional capital investments in Malaysia have benefited the Company's effective income tax rate during the nine months ended December 31, 2008.

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. 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 . . .