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 and six months ended September 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.

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 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, 2009 and 2008

Net income for the quarter ended September 30, 2009 was $31.6 million, or
diluted earnings per share of $0.19, compared to $27.8 million, or $0.16 diluted
earnings per share, for the quarter ended September 30, 2008. This increase is a
result of the factors set forth below.

                                        Three Months Ended
in thousands, except per share data        September 30,
                                        2008          2009
Net Sales                             $ 400,280     $ 310,522
Gross Profit                             63,473        64,736
Operating Income                         30,238        37,215
Net Income                               27,791        31,642
Diluted Earnings per Share            $    0.16     $    0.19

Net sales in the three months ended September 30, 2009 decreased $89.8 million, or 22.4%, to $310.5 million compared to $400.3 million in the three months ended September 30, 2008. This decrease is a result of slower demand across all market sectors reflecting a broad based downturn in global economic activity 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 limited inventory purchases and remained cautious reflecting the overall uncertainty in the market. Overall sales prices for our commodity components remained stable during this second quarter.

                             Three Months Ended
Sales Revenue                   September 30,
$(000's)                     2008          2009
Ceramic Components         $  44,736     $  31,736
Tantalum Components           77,419        67,404
Advanced Components          117,634        89,493
Total Passive Components     239,789       188,633
KDP and KKC Resale           109,900        82,417
KEC Resale                    23,680        19,262
Total KED Resale             133,580       101,679
Connectors                    26,911        20,210
Total Revenue              $ 400,280     $ 310,522

Passive Component sales decreased $51.2 million, or 21.3%, to $188.6 million in the three months ended September 30, 2009 compared to sales of $239.8 million during the same quarter last year. The sales decrease in Passive Components reflects the overall slower demand resulting from the current economic uncertainty as both consumers and manufacturers reduced spending. Lower demand particularly in the consumer electronics, telecom and automotive markets was partially offset by improved medical device and military markets. Lower revenues from Advanced Components reflect the lower demand primarily in the semiconductor and medical equipment businesses resulting from the current economic conditions partially offset by higher demand in the energy markets for wind and solar power generation systems. The decrease in sales of Ceramic and Tantalum Components reflects a decrease in the volume of unit sales and a moderate decrease in average selling prices reflective of the downturn in the economy.

KDP and KKC Resale sales decreased 25.0% to $82.4 million in the three months ended September 30, 2009 compared to $109.9 million during the same period last year. When compared to the same period last year, the decrease during the quarter ended September 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 global economic conditions.

Total Connector sales, including AVX manufactured and KEC Resale connectors, decreased $11.1 million, or 22.0%, to $39.5 million in the three months ended September 30, 2009 compared to $50.6 million during the same period last year. This decrease was primarily attributable to a decrease in the automotive and consumer products sectors in the Europe and Americas regions as a result of the adverse economy when compared to the same period in the prior year.

Our sales to independent electronic distributor customers represented 38.3% of total sales for the three months ended September 30, 2009, compared to 36.0% for the three months ended September 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 $7.4 million, or 5.8% of gross sales to distributor customers, for the three months ended September 30, 2009 and $10.7 million, or 6.9% of gross sales to distributor customers, for the three months ended September 30, 2008. Applications under such programs for the quarters ended September 30, 2009 and 2008 were approximately $6.8 million and $10.0 million, respectively.

Geographically, compared to the same period last year, sales decreased in all regions, 19.7% in Asia, 27.9% in Europe and 22.2% in the Americas. Decreases in these regions were reflective of slower demand for electronic products due to the decline of the global market. The movement of the U.S. dollar against certain foreign currencies resulted in a favorable impact on sales of approximately $2.0 million when compared to the same period last year.

Selling, general and administrative expenses in the three months ended September 30, 2009 were $27.1 million, or 8.7% of net sales, compared to $32.5 million, or 8.1% of net sales, in the three months ended September 30, 2008. The overall decrease in selling, general and administrative expenses was primarily due to lower selling expenses due to lower sales in addition to a lower cost structure resulting from current cost control initiatives and previous restructuring actions. During the quarters ended September 30, 2009 and 2008, we recorded $0.5 million and $0.7 million, respectively, 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 increased $7.0 million to $37.2 million in the three months ended September 30, 2009 compared to $30.2 million in the three months ended September 30, 2008.

Other income decreased $3.2 million to $2.4 million in the three months ended September 30, 2009 compared to $5.6 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 lower net currency exchange gains for the quarter.

The Company's effective tax rate for the period ended September 30, 2009 was 20.2% compared to 22.4% 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 being 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 potential recapture will expire during the current fiscal year ending March 31, 2010.

Results of Operations - Six Months Ended September 30, 2009 and 2008

Net income for the six months ended September 30, 2009 was $55.9 million, or
diluted earnings per share of $0.33, compared to $58.8 million, or $0.34 diluted
earnings per share, for the six months ended September 30, 2008. This decrease
is a result of the factors set forth below.

                                         Six Months Ended
in thousands, except per share data        September 30,
                                        2008          2009
Net Sales                             $ 797,169     $ 602,562
Gross Profit                            125,625       118,878
Operating Income                         62,280        63,726
Net Income                               58,796        55,922
Diluted Earnings per Share            $    0.34     $    0.33

Net sales in the six months ended September 30, 2009 decreased $194.6 million, or 24.4%, to $602.6 million compared to sales of $797.2 million in the six months ended September 30, 2008. This decrease is a result of slower demand across all market sectors 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 as distributor customers and product manufacturers limited inventory purchases and remained cautious reflecting the overall uncertainty in the market. Overall sales prices for our commodity components have remained stable during the first six months of the current fiscal year.

                              Six Months Ended
Sales Revenue                   September 30,
$(000's)                     2008          2009
Ceramic Components         $  95,742     $  59,452
Tantalum Components          155,674       128,279
Advanced Components          237,528       182,494
Total Passive Components     488,944       370,225
KDP and KKC Resale           207,599       157,984
KEC Resale                    43,285        36,774
Total KED Resale             250,884       194,758
Connectors                    57,341        37,579
Total Revenue              $ 797,169     $ 602,562

Passive Component sales decreased $118.7 million, or 24.3%, to $370.2 million in the six months ended September 30, 2009 compared to sales of $488.9 million during the same period last year. The sales decrease in Passive Components reflects slower demand due to the overall decline in global markets resulting from the current economic uncertainty as both consumers and manufacturers reduced spending. Lower demand particularly in the consumer electronics, telecom and automotive markets was partially offset by improving medical and military markets. Lower revenues from Advanced Components reflect the lower demand primarily in the semiconductor and medical equipment businesses resulting from the current economic conditions partially offset by higher demand in the energy markets for wind and solar power generation systems. The decrease in sales of Ceramic and Tantalum Components reflects a decrease in the volume of unit sales and a moderate decrease in average selling prices reflective of the downturn in the economy.

KDP and KKC Resale sales decreased 23.9% to $158.0 million in the six months ended September 30, 2009 compared to $207.6 million during the same period last year. When compared to the same period last year, the decrease during the six months ended September 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 $26.3 million, or 26.1%, to $74.4 million in the six months ended September 30, 2009 compared to $100.6 million during the same period last year. This decrease was primarily attributable to a decrease in the automotive and consumer products sectors in the Europe and Americas regions as a result of the adverse economy when compared to the same period in the prior year.

Our sales to independent electronic distributor customers represented 37.4% of total sales for the six months ended September 30, 2009, compared to 36.1% for the six months ended September 30, 2008. Overall distributor inventories remained lean as distributor customers limited their inventory purchases during the first half of the fiscal year 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 $15.0 million, or 6.2% of gross sales to distributor customers, for the six months ended September 30, 2009 and $21.2 million, or 6.7% of gross sales to distributor customers, for the six months ended September 30, 2008. Applications under such programs for the six months ended September 30, 2009 and 2008 were approximately $14.3 million and $19.9 million, respectively.

Geographically, compared to the same period last year, sales decreased 35.4% in Europe and 23.2% 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 six months ended September 30, 2009 decreased 18.9% 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 in the first half of the fiscal year by approximately $2.7 million when compared to the same period last year.

Selling, general and administrative expenses in the six months ended September 30, 2009 were $54.4 million, or 9.0% of net sales, compared to $66.7 million, or 8.4% of net sales, in the six months ended September 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 effective cost control programs and benefits from previous restructuring and cost reduction actions. During the six months ended September 30, 2009 and 2008, we recorded $0.8 million and $0.7 million, respectively, 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 increased $1.4 million to $63.7 million in the six months ended September 30, 2009 compared to $62.3 million in the six months ended September 30, 2008. During the six months ended September 30, 2008, other operating income of $4.1 million was recognized from a gain on the sale of excess corporate assets.

Other income decreased $9.5 million to $4.5 million in the six months ended September 30, 2009 compared to $14.0 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 lower net currency exchange gains for the first half of the fiscal year. In addition, other income for the six months ended September 30, 2009 and 2008 includes $0.4 million and $1.6 million, respectively, due to the decline in value of available for sale securities.

The Company's effective tax rate for the six-month period ended September 30, 2009 was 18.0% compared to 22.9% 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 being 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 potential 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 reduce procurement costs as the economy and volumes improve. 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 do not improve, 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 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 September 30, 2009, we had a current ratio of 7.8 to 1, $864.0 million of cash, cash equivalents and short-term and long-term investments in securities, $1.8 billion of stockholders' equity and no debt.

Net cash provided by operating activities was $125.1 million in the six months ended September 30, 2009 compared to $50.0 million of cash provided by operating . . .