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 our outlook for fiscal year 2010, 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, 2009, 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.

We have 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, 2009 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, 2009. During the three month period ended June 30, 2009, 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.

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, sensor 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 June 30, 2009 and 2008

Net income for the quarter ended June 30, 2009 was $24.3 million, or diluted
earnings per share of $0.14, compared to $31.0 million, or $0.18 diluted
earnings per share, for the quarter ended June 30, 2008. This decrease is a
result of the factors set forth below.

in thousands, except per share data       Three Months Ended June 30,
                                           2008                 2009
Net Sales                              $     396,889        $     292,040
Gross Profit                                  62,152               54,142
Operating Income                              32,042               26,511
Net Income                                    31,005               24,280
Diluted Earnings per Share             $        0.18        $        0.14

Net sales in the three months ended June 30, 2009 decreased $104.8 million, or 26.4%, to $292.0 million compared to $396.9 million in the three months ended June 30, 2008. This decrease is a result of weakness in the consumer electronics and automotive markets reflecting the downturn in global economic activity and disruption in the global financial markets when compared to the same period in the prior year. Supply chain inventory levels have remained lean during the quarter as distributor customers and product manufacturers limit inventory purchases and remain cautious reflecting the overall uncertainty in the market. Overall sales prices for our commodity components remained stable during this first quarter.

The table below represents product group revenues for the three-month periods ended June 30, 2008 and June 30, 2009.

Sales Revenue                    Three Months Ended June 30,
$(000's)                          2008                 2009
Ceramic Components            $      51,006        $      27,716
Tantalum Components                  78,255               60,875
Advanced Components                 119,894               93,001
  Total Passive Components          249,155              181,592
KDP and KKC Resale                   97,699               75,567
KEC Resale                           19,605               17,512
  Total KED Resale                  117,304               93,079
Connectors                           30,430               17,369
  Total Revenue               $     396,889        $     292,040

Passive Component sales decreased $67.6 million, or 27.1%, to $181.6 million in the three months ended June 30, 2009 from $249.2 million during the same quarter last year. The sales decrease in Passive Components reflects the overall decline in global markets resulting from the current economic uncertainty as both consumers and manufacturers reduced spending. Lower demand in the consumer electronics and automotive markets was partially offset by increases in the medical and military markets. Lower revenues from Advanced Components reflect the lower demand primarily in the semi conductor business resulting from the current economic conditions partially offset by higher demand in the energy markets for wind and solar products. The decrease in sales of Ceramic Components reflects a decrease in the volume of unit sales, a higher mix of commodity priced components and a moderate decrease in average selling prices reflective of the downturn in the economy. The decrease in sales of Tantalum Components is the result of lower sales unit volume due to a decrease in demand for these components as customers reduced inventory levels and production in response to the overall decline in economic conditions.

KDP and KKC Resale sales decreased 22.7% to $75.6 million in the three months ended June 30, 2009 compared to $97.7 million during the same period last year. When compared to the same period last year, the decrease during the quarter ended June 30, 2009 is primarily attributable to a decrease in unit sales volume in the Asian region due to lower end user demand, particularly in the telecommunications market, resulting from the uncertainty in global economic conditions.

Total Connector sales, including AVX manufactured and KEC Resale connectors, decreased $15.2 million, or 30.3%, to $34.9 million in the three months ended June 30, 2009 compared to $50.0 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. 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 in the prior year.

Our sales to independent electronic distributor customers represented 36.4% of total sales for the three months ended June 30, 2009, compared to 36.2% for the three months ended June 30, 2008. Overall distributor inventories remained lean as distributor customers limited their inventory purchases during the quarter while remaining cautious in this uncertain demand environment. Our 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 $7.6 million, or 6.7% of gross sales to distributor customers, for the three months ended June 30, 2009 and $10.5 million, or 6.8% of gross sales to distributor customers, for the three months ended June 30, 2008. Applications under such programs for the quarters ended June 30, 2009 and 2008 were approximately $7.5 million and $9.9 million, respectively.

Geographically, compared to the same period last year, sales decreased 41.9% in Europe and 24.2% in the Americas. Decreases in these regions were reflective of lower demand for electronic products due to the decline of the global market. In addition, there was lower demand in Asia, where sales for the quarter ended June 30, 2009 decreased 18.0% compared to the same period in the prior year driven by declines in the consumer market. The movement of the U.S. dollar against certain foreign currencies resulted in an unfavorable impact on sales by approximately $4.7 million when compared to the same quarter last year.

Gross profit in the three months ended June 30, 2009 was 18.5% of sales or $54.1 million compared to a gross profit margin of 15.7% or $62.2 million in the three months ended June 30, 2008. This overall decrease is primarily attributable to lower sales resulting from the overall decline in global economic conditions. The improved gross margin percentage is a result of the Company's focus on higher margin value added products in addition to a lower cost structure resulting from the benefits of our previously initiated restructuring activities and current cost control measures. During the quarter ended June 30, 2009, we incurred restructuring charges of $0.7 million related to headcount reductions and other charges, including those related to facility closures, as we continue to realign production capabilities and reduce operating costs to support current business levels. We recorded $1.3 million of restructuring costs during the quarter ended June 30, 2008. In addition, costs due to currency movement of the U.S. dollar against certain foreign currencies were favorably impacted in the current quarter by approximately $10.3 million when compared to the same quarter last year.

Selling, general and administrative expenses in the three months ended June 30, 2009 were $27.3 million, or 9.4% of net sales, compared to $34.1 million, or 8.6% of net sales, in the three months ended June 30, 2008. The overall decrease in selling, general and administrative expenses was primarily due to lower selling expenses due to lower sales and savings resulting from previous restructuring and cost reduction actions. In addition, during the quarter ended June 30, 2009, we recorded $0.3 million of restructuring charges primarily related to headcount reductions to reduce ongoing selling, general and administrative expenses.

As a result of the above factors, income from operations declined $5.5 million to $26.5 million in the three months ended June 30, 2009 compared to $32.0 million in the three months ended June 30, 2008. Other operating income of $4.1 million from gains on the sale of excess assets was recognized during the quarter ended June 30, 2008.

Other income decreased $6.3 million to $2.1 million in the three months ended June 30, 2009 compared to $8.4 million in the same period last year. This decrease is primarily due to lower interest income resulting from lower interest rates on cash and securities investment balances and by net currency exchange losses for the quarter.

The Company's effective tax rate for the period ended June 30, 2009 was 15.0% compared to 23.3% for the same period last year. This lower effective tax rate is mainly due to the reduction of deferred tax liabilities associated with certain 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, $16.6 million of recapture will expire during the current fiscal year ending March 31, 2010.

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 its impact on telecommunications, information technology hardware, automotive, consumer electronics and other electronic markets. 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 current economic conditions, we expect to continue to focus on cost reductions and additional restructuring actions in the near term for overhead 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 conditions in the credit and capital markets worsen, 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:

Although there is much 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) a projected increase in the long-term worldwide demand for electronic devices, which require electronic components such as the ones we sell, (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. We have fostered our financial health and the strength of our balance sheet. We remain confident that our strategies to weather this current economic downturn will enable our continued long-term success.

Liquidity and Capital Resources

Liquidity needs arise primarily from working capital requirements, dividend payments, capital expenditures and acquisitions. Historically, we have satisfied our liquidity requirements through funds from operations and investment income from cash and investments in securities. As of June 30, 2009, we had a current ratio of 8.0 to 1, $812.9 million of cash, cash equivalents and short-term and long-term investments in securities, $1.7 billion of stockholders' equity and no debt.

Net cash provided by operating activities was $61.7 million in the three months ended June 30, 2009 compared to $17.2 million of cash provided by operating activities in the three months ended June 30, 2008. The increase in cash flow from operating activities compared to the same period last year was primarily a result of a decrease in inventory levels and higher accounts payable, partially offset by lower earnings.

Purchases of property and equipment were $6.1 million in the three month period ended June 30, 2009 compared to $14.7 million in the three month period ended June 30, 2008. Expenditures for both periods were primarily in connection with the expansion of passive component manufacturing operations in lower cost regions, process improvements in passive component product lines and expansion of production of certain advanced component and connector product lines. The carrying value for our equipment reflects the use of the accelerated double-declining balance method to compute depreciation expense for machinery and equipment. We continue to make strategic investments in our advanced passive component and connector products and expect to incur capital expenditures of approximately $35 million in fiscal 2010. The actual amount of capital expenditures will depend upon the outlook for end-market demand.

The majority of our funding is internally generated through operations and investment income from cash and investments in securities. Since March 31, 2009, there have been no material changes in our contractual obligations or commitments for the acquisition or construction of plant and equipment or future minimum lease commitments under noncancellable operating leases. Based on our financial condition as of June 30, 2009, we believe that cash on hand and cash expected to be generated from operating activities and investment income from cash and investments in securities will be sufficient to satisfy our anticipated financing needs for working capital, capital expenditures, environmental clean-up costs, research, development and engineering expenses, any acquisitions of businesses and any dividend payments or stock repurchases to be made during the year. While changes in customer demand have an impact on our future cash requirements, changes in those requirements are mitigated by our ability to adjust manufacturing capabilities to meet increases or decreases in customer demand. We do not anticipate any significant changes in our ability to generate or meet our liquidity needs in the long-term.

From time to time we enter into delivery contracts with selected suppliers for certain precious metals used in our production processes. The delivery contracts represent routine purchase orders for delivery within three months and payment is due upon receipt. As of June 30, 2009, we did not have any significant delivery contracts outstanding.

We are involved in disputes, warranty and legal proceedings arising in the normal course of business. While we cannot predict the outcome of these proceedings, we believe, based upon our review with legal counsel, that none of these proceedings will have a material impact on our financial position, results of operations, or cash flows. However, we cannot be certain if the eventual outcome and any adverse result in these or other matters that may arise from time to time may harm our financial position, results of operations, or cash flows.

We have 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 and operating sites. In addition, we operate on sites that may have potential future environmental issues as a result of activities at sites during AVX's long history of manufacturing operations or prior to the start of operations by AVX. Even though we may have rights of indemnity for such environmental matters at certain sites, regulatory agencies in those jurisdictions may require us to address such issues. Once it becomes probable that we will incur costs in connection with remediation of a site and such costs can be reasonably estimated, we establish reserves or adjust our reserves for our projected share of these costs. A separate account receivable is recorded for any indemnified costs. Our environmental reserves are not discounted and do reflect any possible future insurance recoveries, which are not expected to be significant, but do reflect a reasonable estimate of cost sharing at multiple party sites or indemnification of our liability by a third party.

We currently have environmental reserves for current remediation, compliance and legal costs totaling $19.5 million at June 30, 2009. Additional information related to environmental and legal issues can be found in Note 8 "Commitments and Contingencies" of the Company's Notes to Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.

New Accounting Standards

Information related to new Statement of Financial Accounting Standards and Financial Accounting Standards Board Staff Positions that we have recently adopted or are currently reviewing can be found in Note 1 "Basis of Presentation" under New Accounting Standards of the Company's Notes to Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.