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TMCNet:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

[February 07, 2014]

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Edgar Glimpses Via Acquire Media NewsEdge) 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 2014, overall volume and pricing trends, cost reduction and acquisition strategies and their anticipated results, and 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 our Annual Report on Form 10-K for the fiscal year ended March 31, 2013, 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.


Any forward-looking statements by the Company are intended to speak only as of the date thereof. We do 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 our 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 our Annual Report on Form 10-K for the fiscal year ended March 31, 2013 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 our Annual Report on Form 10-K for the fiscal year ended March 31, 2013. During the three and nine month periods ended December 31, 2013, 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.

21 -------------------------------------------------------------------------------- Table of Contents During the third quarter of fiscal 2014, we determined there was an error in the calculation of deferred taxes on intangible assets pursuant to the acquisition of American Technical Ceramics ("ATC") Corporation in September of 2007.

Accordingly in the third quarter of fiscal 2014, we have recorded an out-of-period adjustment related to our calculation of deferred taxes relative to the fair values of intangible assets at that date resulting in an increase of $12,240 to deferred income tax liabilities and a corresponding increase to goodwill. The change in goodwill would not have resulted in an impairment in a prior period. Management performed an evaluation under Staff Accounting Bulletin No. 108 and concluded the effect of the adjustment was immaterial to the current year and prior years' financial statements as there was no impact on prior income statements, cash flows, or retained earnings and the adjustment was immaterial to our consolidated balance sheets.

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 interconnect 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 Interconnect. The Passive Components segment consists primarily of surface mount and leaded ceramic capacitors, RF thick and thin film components, surface mount and leaded tantalum capacitors, surface mount and leaded film capacitors, ceramic and film power capacitors, super capacitors, EMI filters (bolt in and surface mount), thick and thin film packages of multiple passive integrated components, 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 Interconnect segment consists of automotive, telecom, and memory connectors manufactured by AVX Interconnect and KCP Resale connector products.

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, 2013 and 2012 Our net income for the quarter ended December 31, 2013 was $31.4 million, or $0.19 per share, compared to net income of $19.9 million, or $0.12 per share, for the quarter ended December 31, 2012.

(in thousands, except per share data) Three Months Ended December 31, 2012 December 31, 2013 Net sales $ 339,875 $ 346,211 Gross profit 62,417 67,766 Operating income (loss) 33,232 35,573 Net income (loss) 19,864 31,434 Diluted earnings (loss) per share $ 0.12 $ 0.19 Net sales in the three months ended December 31, 2013 increased $6.3 million, or 1.9%, to $346.2 million compared to $339.9 million in the three months ended December 31, 2012. This increase is primarily a result of the incremental sales attributable to our acquisition of Asia Tantalum, which was acquired in February of 2013. Compared to the same period last year, supply chain inventory levels were minimized as product manufacturers managed component purchases in light of uncertain end-market demand and economic conditions. Overall sales prices for our commodity components declined 22 -------------------------------------------------------------------------------- Table of Contents moderately this quarter when compared to the same quarter in the prior year resulting from increased competitive pricing pressure.

The table below represents product group revenues for the quarters ended December 31, 2012 and December 31, 2013.

Sales Revenue Three Months Ended $(000's) December 31, 2012 December 31, 2013 Ceramic Components $ 42,889 $ 50,227 Tantalum Components 76,828 96,270 Advanced Components 83,069 86,605 Total Passive Components 202,786 233,102 KDP and KCD Resale 87,658 59,835 KCP Resale 18,548 17,969 Total KED Resale 106,206 77,804 AVX Interconnect 30,883 35,305 Total Revenue $ 339,875 $ 346,211 Passive Component sales increased $30.3 million, or 14.9%, to $233.1 million in the three months ended December 31, 2013 from $202.8 million during the same quarter last year, as a result of increased demand for electronic components in the markets we serve. The sales increase in Passive Components reflects the overall increased unit demand for electronics across global markets as customers introduced new and more sophisticated end-market products. The impact of the Asia Tantalum acquisition, which was completed in February of 2013, accounted for $11.8 million of the increased sales of our tantalum products. The increase in sales of Ceramic Components reflects a higher volume of unit sales resulting partially from an increase in the sale of higher capacitance components compared to the same quarter last year, partially offset by lower selling prices.

KDP and KCD Resale sales decreased $27.8 million, or 31.7%, to $59.8 million in the three months ended December 31, 2013 compared to $87.7 million during the same period last year. When compared to the same period last year, the decrease during the quarter ended December 31, 2013 is primarily attributable to lower sales to telecommunications and computer manufacturers as they changed design specifications and managed supply chain inventory levels in response to consumer demand trends and new product introduction cycles.

Total connector sales, including AVX Interconnect manufactured and KCP Resale connectors, increased $3.8 million, or 7.8%, to $53.3 million in the three months ended December 31, 2013 compared to $49.4 million during the same period last year. This increase was primarily attributable to stronger demand in the automotive sector reflective of the increased electronic content in new automobile designs.

Our sales to independent electronic distributor customers represented 45.4% of total sales for the three months ended December 31, 2013, compared to 40.3% for the three months ended December 31, 2012. Overall, distributor activity increased 14.8% when compared to the same period last year. This increase is reflective of their customer demand improvements. 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 $9.6 million, or 6.1% of gross sales to distributor customers, for the three months ended December 31, 2013 and $8.7 million, or 6.4% of gross sales to distributor customers, for the three months ended December 31, 2012. This increase in activity is reflective of higher sales to our distribution customers. Applications under such programs for the quarters ended December 31, 2013 and 2012 were approximately $8.6 million and $8.5 million, respectively.

23 -------------------------------------------------------------------------------- Table of Contents Geographically, compared to the same period last year, sales increases in Europe and the Americas were offset by sales declines in Asia primarily as a result of lower KED Resale product demand in the telecommunications markets. Sales in the Asian market decreased to 44.4% of total sales while sales in the Americas and Europe increased to 28.7% and 26.9% of total sales, respectively. This compares to 47.8%, 27.1%, and 25.1% of total sales for the Asian, American, and European regions in the same period last year, respectively. The movement of the U.S.

dollar against certain foreign currencies resulted in an unfavorable impact on sales of approximately $3.6 million when compared to the same period last year.

Gross profit in the three months ended December 31, 2013 was 19.6% of sales, or $67.8 million, compared to a gross profit margin of 18.4%, or $62.4 million, in the three months ended December 31, 2012. The increase in gross profit is primarily attributable to an improved product mix of higher margin value added products in addition to a lower proportion of commodity and KED Resale product sales. We continue to focus on spending controls and cost reductions in light of the global demand for electronic components. Costs due to currency movement of the U.S. dollar against certain foreign currencies were favorably impacted in the current quarter by approximately $7.8 million when compared to the same quarter last year.

Selling, general and administrative expenses in the three months ended December 31, 2013 were $32.2 million, or 9.3% of net sales, compared to $29.2 million, or 8.6% of net sales, in the three months ended December 31, 2012. The overall increase in selling, general and administrative expenses is primarily due to higher legal and consulting expenses as well as higher selling expenses resulting from the increased level of sales.

As a result of the factors set forth above, income from operations was $35.6 million in the three months ended December 31, 2013 compared to $33.2 million in the three months ended December 31, 2012.

Our effective tax rate for the three months ended December 31, 2013 was 15.5% compared to 42.6% for the three months ended December 31, 2012. The lower effective rate for the three month period ended December 31, 2013 is primarily due to a favorable impact relating to the release of certain reserves for uncertain tax positions due to the expiration of periods allowed for the audit of certain prior year income tax returns. Excluding such discrete items recorded in the period, the effective tax rate would have been 28.5% compared to an effective rate, without discrete items as discussed below, of 34.0% for the same period in the prior year. This decrease is primarily a result of a higher proportion of income in lower tax rate jurisdictions in the period ended December 31, 2013. For the three month period ended December 31, 2012, the higher effective rate is primarily due to the effects of the environmental charge recognized in fiscal 2013 related to the New Bedford Harbor Superfund Site in Massachusetts discussed in "Liquidity and Capital Resources" below and in Note 8 to the Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q, and the expected loss of a U.S. federal tax deduction for fiscal 2013 due to projected annual taxable income limitations. Excluding discrete items recorded in the three month period ended December 31, 2012, the effective tax rate would have been 34.0%.

As a result of the factors discussed above, net income for the three month period ended December 31, 2013 was $31.4 million compared to $19.9 million for the same three month period last year.

Results of Operations - Nine Months Ended December 31, 2013 and 2012 Our net income for the nine month period ended December 31, 2013 was $87.9 million, or $0.52 per share, compared to net loss of $(88.9) million, or $(0.53) per share, for the nine month period ended December 31, 2012. The net loss for the nine month period ended December 31, 2012 includes an environmental charge of $266.3 million related to environmental issues at the New Bedford Harbor Superfund site in Massachusetts discussed in "Liquidity and Capital Resources" below and in Note 8 to the Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.

24 -------------------------------------------------------------------------------- Table of Contents (in thousands, except per share data) Nine Months Ended December 31, 2012 December 31, 2013 Net sales $ 1,053,852 $ 1,091,375 Gross profit 200,300 207,563 Operating income (loss) (154,498) 116,174 Net income (loss) (88,882) 87,907 Diluted earnings (loss) per share $ (0.53) $ 0.52 Net sales in the nine months ended December 31, 2013 increased $37.5 million, or 3.6%, to $1,091.4 million compared to $1,053.9 million in the nine months ended December 31, 2012. This increase is primarily a result of incremental sales attributable to our acquisition of Asia Tantalum, which was completed in February of 2013. Compared to the same period last year, supply chain inventory levels were minimized as product manufacturers managed component purchases in light of uncertain end-market demand and economic uncertainty. Overall sales prices for our commodity components declined moderately over the nine month period when compared to the same nine month period in the prior year resulting from increased competitive pricing pressure.

The table below represents product group revenues for the nine month periods ended December 31, 2012 and December 31, 2013.

Sales Revenue Nine Months Ended December 31, $(000's) December 31, 2012 December 31, 2013 Ceramic Components $ 127,112 $ 144,814 Tantalum Components 243,751 295,452 Advanced Components 260,028 264,711 Total Passive Components 630,891 704,977 KDP and KCD Resale 281,539 234,736 KCP Resale 47,738 49,072 Total KED Resale 329,277 283,808 AVX Interconnect 93,684 102,590 Total Revenue $ 1,053,852 $ 1,091,375 Passive Component sales increased $74.1 million, or 11.7%, to $705.0 million in the nine months ended December 31, 2013 from $630.9 million during the same period last year, as we saw increases in many of the markets that we serve, particularly in the automotive sector and component sales related to higher-end smart phones, tablet devices and telecommunications hardware. The impact of the Asia Tantalum acquisition, which was completed in February of 2013, accounted for $40.3 million of increased sales of our tantalum products. The increase in sales of Ceramic Components reflects a higher volume of unit sales resulting partially from an increase in the sale of higher capacitance components compared to the same quarter last year, partially offset by lower selling prices.

KDP and KCD Resale sales decreased $46.8 million, or 16.6%, to $234.7 million in the nine months ended December 31, 2013 compared to $281.5 million during the same period last year. When compared to the same period last year, the decrease during the nine months ended December 31, 2013 is primarily attributable to lower sales to telecommunications and computer manufacurers as they changed design specifications and managed supply chain inventory levels in response to consumer demand trends and new product introduction cycles.

Total connector sales, including AVX Interconnect manufactured and KCP Resale connectors, increased $10.2 million, or 7.2%, to $151.7 million in the nine months ended December 31, 2013 compared to $141.4 million during the same period last year. This increase was primarily attributable to stronger demand in the automotive sector reflective of the increased electronic content in today's automobiles.

25 -------------------------------------------------------------------------------- Table of Contents Our sales to independent electronic distributor customers represented 41.5% of total sales for the nine months ended December 31, 2013, compared to 39.3% for the nine months ended December 31, 2012. Overall, distributor activity increased 9.4% when compared to the same period last year. This increase is reflective of their customer demand improvements. 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 $30.8 million, or 6.8% of gross sales to distributor customers, for the nine months ended December 31, 2013 and $25.8 million, or 6.2% of gross sales to distributor customers, for the nine months ended December 31, 2012. This increase in activity is reflective of increased sales to our distribution. Applications under such programs for the nine month periods ended December 31, 2013 and 2012 were approximately $29.1 million and $25.5 million, respectively.

Geographically, compared to the same period last year, sales increased in all regions tracking the overall global macroeconomic conditions. Sales in the Asian market reflect, in part, the increased sales due to the Asia Tantalum acquisition offset by lower KED Resale product sales in the telecommunications markets. Asian market sales decreased to 46.5% of total sales while sales in the Americas and Europe increased to 28.0% and 25.5% of total sales, respectively.

This compares to 47.8%, 27.4%, and 24.8% of total sales for the Asian, American, and European regions in the same period last year, respectively. The movement of the U.S. dollar against certain foreign currencies resulted in an unfavorable impact on sales of approximately $21.8 million when compared to the same period last year.

Gross profit in the nine months ended December 31, 2013 was 19.0% of sales, or $207.6 million, compared to a gross profit margin of 19.0%, or $200.3 million, in the nine months ended December 31, 2012. Gross profit is in line with prior year which is primarily attributable to an improved product mix of higher margin components coupled with a lower proportion of commodity and KED Resale products partially offset by lower selling prices. Costs due to currency movement of the U.S. dollar against certain foreign currencies were favorably impacted in the current nine month period by approximately $36.8 million when compared to the same three month period last year.

Selling, general and administrative expenses in the nine months ended December 31, 2013 were $91.4 million, or 8.4% of net sales, compared to $88.5 million, or 8.4% of net sales, in the nine months ended December 31, 2012. The overall increase in selling, general and administrative expenses is primarily due to higher selling expenses due to increased sales and higher legal and consulting fees when compared to the same period last year.

Income (loss) from operations was $116.2 million in the nine months ended December 31, 2013 compared to $(154.5) million in the nine months ended December 31, 2012. This increase is a result of the factors set forth above and the recognition of a $266.3 million charge related to remediation issues at the New Bedford Harbor Superfund site in Massachusetts during the nine months ended December 31, 2012.

Our effective tax rate for the nine month period ended December 31, 2013 was 26.2%, compared to 40.6% for the same period last year. The lower effective rate for the nine month period ended December 31, 2013 is primarily due to a favorable impact relating to the release of certain reserves for uncertain tax positions due to the expiration of tax periods allowed for the audit of certain prior year income tax returns. Excluding such discrete items recorded in the period, the effective tax rate would have been 29.6%. For the nine month period ended December 31, 2012, the higher effective rate is primarily due to the effects of the environmental charge recognized in fiscal 2013 related to the New Bedford Harbor Superfund Site in Massachusetts discussed in "Liquidity and Capital Resources" below and in Note 8 to the Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q, and the expected loss of a U.S. federal tax deduction for fiscal 2013 due to projected annual taxable income limitations. Excluding discrete items recorded in the nine month period ended December 31, 2012 the effective tax rate would have been 29.5%.

As a result of the factors discussed above, net income (loss) for the nine month period ended December 31, 2013 was $87.9 million compared to $(88.9) million for the same nine month period last year.

26 -------------------------------------------------------------------------------- Table of Contents Outlook Near-Term: With uncertain global geopolitical and economic conditions, it is difficult to quantify expectations for the remainder of fiscal 2014. Near-term results for us will depend on the impact of the overall global geopolitical and 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 and volatile market. We expect to see typical pricing pressure in the markets we serve due to competitive activity. In response to anticipated market conditions, we expect to continue to focus on cost management and product line rationalization to maximize earnings potential. 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 current global geopolitical and economic conditions 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 uncertainty in the near-term market as a result of the current global geopolitical and economic conditions, we continue to see opportunities for long-term growth and profitability improvement due to: (a) a projected increase in the long-term worldwide demand for more sophisticated 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 Interconnect 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 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, cash equivalents, and investments in securities. As of December 31, 2013, we had a current ratio of 6.2 to 1, $985.1 million of cash, cash equivalents, and short-term and long-term investments in securities, $2,018.7 million of stockholders' equity, and no debt.

Net cash used in operating activities was $(11.2) million in the nine months ended December 31, 2013 compared to $148.6 million of cash provided by operating activities in the nine months ended December 31, 2012. The decrease in operating cash flow compared to the same period last year was primarily the result of the $133.4 million installment payment, plus interest, related to the New Bedford harbor settlement, as discussed below and in Note 8, "Commitments and Contingencies," in our Notes to Consolidated Financial Statements contained in the Quarterly Report on Form 10-Q, as well as higher inventory levels and other net increases in working capital requirements resulting from the higher volume of sales and related production.

Purchases of property and equipment were $18.1 million in the nine month period ended December 31, 2013 compared to $34.3 million in the nine month period ended December 31, 2012. Expenditures in the prior year included investments in connection with the expansion of interconnect manufacturing operations in the Czech Republic. We continue to make strategic investments in our advanced passive component and interconnect product lines and expect to incur capital expenditures of approximately $25 million in fiscal 2014. The actual amount of capital expenditures will depend upon the outlook for electronic component demand and equipment needs.

27 -------------------------------------------------------------------------------- Table of Contents The majority of our funding is internally generated through operations and investment income from cash, cash equivalents, and investments in securities. Since March 31, 2013, 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 December 31, 2013, we believe that cash on hand and cash expected to be generated from operating activities and investment income from cash, cash equivalents, and investments in securities will be sufficient to satisfy our anticipated financing needs for working capital, capital expenditures, environmental clean-up costs, funding the remaining New Bedford Harbor settlement, research, development and engineering expenses, acquisitions of businesses, and any dividend payments or stock repurchases to be made during the year. Changes in demand may have an impact on our future cash requirements; however, 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 December 31, 2013, 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, comprehensive income (loss), 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, comprehensive income (loss), or cash flows.

In 1991, in connection with a consent decree finally approved in 1992 ("1992 Consent Decree"), we paid $66.0 million, plus interest, toward the environmental conditions at, and remediation of, New Bedford Harbor in the Commonwealth of Massachusetts (the "harbor") in a settlement with the United States and the Commonwealth of Massachusetts (sometimes the "Governments"), subject to reopener provisions, including a reopener if certain remediation costs for the site exceed $130.5 million.

On April 18, 2012, the EPA issued to the Company a Unilateral Administrative Order (the "UAO") directing the Company to perform certain remedial actions for the harbor pursuant to the reopener provisions.

On October 10, 2012, the EPA, the United States, the Commonwealth of Massachusetts and AVX announced that they had reached a settlement with respect to the EPA's ongoing clean-up of the harbor. That agreement is set forth in a Supplemental Consent Decree ("Supplemental CD") that modifies certain provisions of the 1992 Consent Decree, including elimination of the Governments' right to invoke any clean-up reopener provisions in the future. Under the terms of the settlement, AVX was obligated to pay $366.3 million, plus interest computed from August 1, 2012, in three installments over a two-year period for use by the EPA and the Commonwealth to complete the clean-up of the harbor. The settlement also required the EPA to withdraw the UAO. The United States District Court (the "Court") approved the settlement and entered the Supplemental CD on September 19, 2013.

On October 18, 2013, the Company paid the initial settlement payment of $133.4 million, plus accrued interest on the entire settlement amount through that date into a court-managed registry account. Following expiration of the time period for the appeal of the court's approval of the settlement, such funds were disbursed to the various governments. In accordance with the terms of the Supplemental CD, AVX is obligated to pay $110.8 million, plus interest, on September 19, 2014 and $122.1 million, plus interest, on September 21, 2015. AVX has the option to prepay any portion of the remaining settlement balance at any time prior to the due dates of the remaining installments.

We have also 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 other 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 28 -------------------------------------------------------------------------------- Table of Contents 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 not 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.

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, "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 Annual Report on Form 10-K for the fiscal year ended March 31, 2013. Accordingly, this Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended March 31, 2013.

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