AVX Earnings Call Insights: Inventory Replenishment and Shift to Tablets

AVX Corporation (NYSE:AVX) recently reported its third quarter earnings and discussed the following topics in its earnings conference call.

Inventory Replenishment

Matt Sheerin – Stifel Nicolaus: First question, John, regarding your commentary on backlog on book-to-bill. Those trends all seem to be pretty positive yet you are guiding – I don’t know if it is cautious guide or not, up 1% off of a fairly low base here. Are you just being cautious or are you really not seeing trends in end markets like you have any visibility into either inventory replenishment or any kind of growth here?

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John S. Gilbertson – CEO and President: Matt, a couple of things happened. The answer is straightforward is I am a little cautious. Once burned you’re little shy to lit that stove again, but if you look at the September quarter, things were starting to improve pretty good in that September quarter and apparently what we were seeing some build of inventory at the OEMs particularly to get ready for the holiday season. They put a lot of inventory in place. That bullishness that we saw in the September quarter did not keep up as we moved into the December quarter. Some of that is related to the volumes of some of the smartphones, all they grew dramatically. They didn’t grew to the level that some customers thought they were in the December quarter. So, they slowed down as the quarter progressed and one major customer actually pushed out a model until the first calendar quarter. So, I would say I am at this point, I’m more cautious than I am negative. Actually, we are pretty optimistic. If you look at that number, you can look at our book-to-bill and we’ve been building book-to-bill each quarter of the last three quarters, and we have to go back to see this level of backlog. We have to go back to March of – I sort of say December, be the September of ’11. If I looked at this morning, we haven’t had this backlog since September of ’11. So, I’m bullish, but also wait-and-see attitude.

Matt Sheerin – Stifel Nicolaus: That’s fair and on the — and obviously we are seeing from other suppliers and a very big smartphone manufacturer that looks like big swings in seasonality, and of course, you’ve got a lot of mobility exposure there, and I don’t know if that’s new normal or not where you see big swings inventory built at that those customers and then big cuts, are you still seeing the same things?

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