<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________to_____________
COMMISSION FILE NUMBER: 1-12432
AMERICAN POWER CONVERSION CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-2722013
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
132 FAIRGROUNDS ROAD, WEST KINGSTON, RHODE ISLAND 02892
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 401-789-5735
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL
REPORTS TO BE FILED BY SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH
SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH
REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS
FOR THE PAST 90 DAYS.
YES [ X ] NO [ ]
THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON
STOCK, $.01 PAR VALUE, ON AUGUST 7, 1996 WAS 93,993,264 SHARES.
1
<PAGE>
FORM 10-Q
JUNE 30, 1996
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
INDEX
PAGE
NO.
PART I - FINANCIAL INFORMATION:
ITEM 1. CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS:
CONSOLIDATED CONDENSED BALANCE
SHEETS -JUNE 30, 1996 (UNAUDITED) 3,4
AND DECEMBER 31, 1995
CONSOLIDATED CONDENSED STATEMENTS
OF INCOME - SIX MONTHS AND THREE
MONTHS ENDED JUNE 30, 1996 AND 5
1995 (UNAUDITED)
CONSOLIDATED CONDENSED STATEMENTS
OF CASH FLOWS - SIX MONTHS AND
THREE MONTHS ENDED JUNE 30,1996 6
AND 1995 (UNAUDITED)
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (UNAUDITED) 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8 - 11
PART II - OTHER INFORMATION:
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF 12
SECURITY HOLDERS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
2
<PAGE>
FORM 10-Q
JUNE 30, 1996
PART I - CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
ITEM 1 - FINANCIAL STATEMENTS
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER
1996 31, 1995
(UNAUDITED)
CURRENT ASSETS:
<S> <C> <C>
CASH AND CASH EQUIVALENTS $97,126,123 39,039,735
ACCOUNTS RECEIVABLE, LESS
ALLOWANCE FOR DOUBTFUL
ACCOUNTS OF $9,198,000 IN 1996
AND $6,920,000 IN 1995 86,207,772 71,199,105
INVENTORIES:
RAW MATERIALS 62,448,000 62,495,212
WORK-IN-PROCESS AND
FINISHED GOODS 53,539,402 85,045,841
TOTAL INVENTORIES 115,987,402 147,541,053
PREPAID EXPENSES AND OTHER
CURRENT ASSETS 11,223,390 9,277,986
DEFERRED INCOME TAXES 14,015,000 11,323,000
TOTAL CURRENT ASSETS 324,559,687 278,380,879
PROPERTY, PLANT AND EQUIPMENT:
LAND, BUILDINGS AND IMPROVEMENTS 16,769,472 15,973,746
MACHINERY AND EQUIPMENT 56,486,366 51,353,043
PURCHASED SOFTWARE 4,308,283 4,160,439
OFFICE EQUIPMENT AND FURNITURE 20,489,197 17,860,365
98,053,318 89,347,593
LESS ACCUMULATED DEPRECIATION AND
AMORTIZATION 27,588,830 22,144,085
NET PROPERTY, PLANT AND EQUIPMENT 70,464,488 67,203,508
OTHER ASSETS 1,141,713 1,003,452
TOTAL ASSETS $396,165,888 $346,587,839
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS
3
<PAGE>
FORM 10-Q
JUNE 30, 1996
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
JUNE 30, DECEMBER
1996 31, 1995
(UNAUDITED)
CURRENT LIABILITIES:
<S> <C> <C>
ACCOUNTS PAYABLE $28,613,717 26,406,283
ACCRUED EXPENSES 5,408,965 5,790,421
ACCRUED COMPENSATION 8,926,922 6,472,255
ACCRUED SALES AND MARKETING PROGRAMS 12,855,496 6,780,595
ACCRUED PENSION CONTRIBUTIONS 3,347,983 4,677,639
INCOME TAXES PAYABLE 3,385,832 1,795,751
TOTAL CURRENT LIABILITIES 62,538,915 51,922,944
DEFERRED INCOME TAX LIABILITY 5,170,000 4,899,000
TOTAL LIABILITIES 67,708,915 56,821,944
SHAREHOLDERS' EQUITY:
COMMON STOCK, $.01 PAR VALUE;
AUTHORIZED 200,000,000 SHARES;
ISSUED AND OUTSTANDING 93,942,686
SHARES IN 1996, 93,270,933 SHARES
IN 1995 939,427 932,709
ADDITIONAL PAID-IN CAPITAL 42,975,669 37,122,872
RETAINED EARNINGS 286,028,136 251,710,314
TREASURY STOCK, 120,000 SHARES,
AT COST (1,486,259) -
TOTAL SHAREHOLDERS' EQUITY 328,456,973 289,765,895
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $396,165,888 $346,587,839
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS
4
<PAGE>
FORM 10-Q
JUNE 30, 1996
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales $303,062,684 231,754,353 161,436,849 122,550,777
Cost of goods sold 177,539,535 121,697,126 94,098,786 65,084,353
Gross Profit 125,523,149 110,057,227 67,338,063 57,466,424
Operating expenses:
Research and
Development 7,226,048 6,131,461 3,506,576 3,382,282
Selling, General and
Administrative 68,410,049 51,111,789 36,112,221 28,088,364
Total Operating
Expenses 75,636,097 57,243,250 39,618,797 31,470,646
Operating Income 49,887,052 52,813,977 27,719,266 25,995,778
Other income
(deductions):
Interest income 1,711,090 886,864 1,007,011 250,977
Other income
(expenses) 7,680 (91,482) 3,975 (110,209)
Earnings before
income taxes 51,605,822 53,609,359 28,730,252 26,136,546
Income Taxes 17,288,000 17,959,000 9,625,000 8,756,000
Net Income $ 34,317,822 35,650,359 19,105,252 17,380,546
Earnings per Share $0.37 0.38 0.20 0.19
Weighted average
shares outstanding 93,938,528 93,378,485 94,243,830 93,642,721
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS
5
<PAGE>
FORM 10-Q
JUNE 30, 1996
American Power Conversion Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months Ended Three months Ended
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995
Cash flows from operating
activities:
<S> <C> <C> <C> <C>
Net income $34,317,822 35,650,359 19,105,252 17,380,546
Adjustments to reconcile
net income to net
cash provided by (used in)
operating activities:
Depreciation and
amortization 5,444,745 4,562,088 2,714,179 2,484,270
Provision for losses on
accounts receivable 2,278,000 1,302,000 803,000 787,000
Provision for deferred
taxes (2,421,000) (3,703,000) (2,490,000) (2,772,000)
Increase in accounts
receivable (17,286,667) (15,937,832) (13,336,725) (13,551,566)
(Increase) decrease in
inventories 31,553,651 (64,998,037) 20,855,750 (23,818,910)
(Increase) decrease in
prepaid expenses and
other current assets (1,945,404) (3,820,020) 97,505 (3,874,857)
(Increase) decrease in
other assets (138,261) (64,101) 29,186 (64,101)
Increase (decrease) in
accounts payable 2,207,434 7,630,449 6,470,057 (13,945,096)
Increase in accrued
expenses 6,818,456 17,243 4,454,022 1,344,562
Increase(decrease) in
income taxes payable 1,590,081 2,419,131 (3,618,803) (3,591,577)
Net cash provided by (used
in) operating activities 62,418,857 (36,941,728) 35,083,423 (39,621,729)
Cash flows from investing
activities:
Capital expenditures, net
of capital grants (8,705,725) (15,921,451) (5,085,332) (8,305,707)
Proceeds from sale of
equipment - 130,310 - -
Sales/maturities of short-
term investments - 13,707,529 - 13,512,698
Purchases of short-term
investments - (802,800) - -
Net cash provided by (used
in) investing activities (8,705,725) (2,886,412) (5,085,332) 5,206,991
Cash flows from financing
activities:
Line of credit borrowings,
net of repayments - 8,500,000 - 8,500,000
Issuances of common stock 5,859,515 5,452,895 1,543,756 4,967,230
Purchases of common stock (1,486,259) - (1,486,259) -
Net cash provided by
financing activities 4,373,256 13,952,895 57,497 13,467,230
Net increase (decrease) in
cash and cash equivalents 8,086,388 (25,875,245) 30,055,588 (20,947,508)
Cash and cash equivalents
at beginning of period 39,039,735 29,072,717 67,070,535 24,144,980
Cash and cash equivalents
at end of period $97,126,123 3,197,472 97,126,123 3,197,772
</TABLE>
The Company paid approximately $16,457,000 and $17,442,000 for
income taxes for the six month periods ended June 30, 1996 and
1995, respectively. During the first six months of 1995, changes
in unrealized holding losses on short-term investments resulted
in increases to shareholders' equity and to short-term
investments of $497,000.
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS
6
<PAGE>
FORM 10-Q
JUNE 30, 1996
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(1) MANAGEMENT REPRESENTATION: In the opinion of management,
the accompanying unaudited interim financial statements contain
all adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position and the
results of operations for the interim periods. The results of
operations for the interim period are not necessarily indicative
of results to be expected for the full year.
(2) PRINCIPLES OF CONSOLIDATION: The consolidated
financial statements include the financial statements of American
Power Conversion Corporation and its wholly-owned subsidiaries.
All significant intercompany accounts and transactions have been
eliminated in consolidation.
(3) PER SHARE DATA: Earnings per common share are based on the
weighted average number of shares of common stock and dilutive
common stock options outstanding during each period. Under the
treasury stock method, the unexercised options were assumed to be
exercised at the beginning of the period or at issuance, if
later. The assumed proceeds were then used to purchase common
stock at the average market price during the period. Common
stock equivalents whose inclusion would have the effect of
increasing earnings per share (i.e antidilutive) are excluded
from the computation. Primary and fully diluted earnings per
share are equivalent for all periods presented.
(4) SHAREHOLDERS' EQUITY: Changes in paid-in capital for the
periods presented represent the issuances of common stock
resulting from the exercise of employee stock options, as well as
the Company's contributions to the Employee Stock Ownership Plan.
7
<PAGE>
FORM 10-Q
JUNE 30, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Revenues
Net sales of $161,436,849 for the second quarter of 1996
increased 31.7% compared to $122,550,777 for the same period in
1995. Net sales for the first six months of 1996 were
$303,062,684 compared to $231,754,353 in 1995, an increase of
30.8%. North American net sales grew 25% versus the second
quarter of 1995, while second quarter international net sales
grew 41% compared to the same period last year. The increases
are attributable to continued strong worldwide demand for the
Company's products across fast-growing core markets, including
computer networking, internetworking equipment and point-of-sale
devices, as well as what the Company believes is an increasing
awareness by computer users of the consequences of data loss and
hardware damage which can be caused by power problems. The
Company continues to experience increased sales growth in
emerging international markets as international sales (excluding
Canada) comprised 34.1% of net sales in the first six months of
1996 compared to 32.0% in the first six months of 1995.
Cost of Goods Sold
Cost of goods sold was $94,098,786 or 58.3% of net sales in the
second quarter of 1996 compared to $65,084,353 or 53.1% in the
second quarter of 1995. Cost of goods sold for the first six
months of 1996 was $177,539,535 or 58.6% compared to $121,697,126
or 52.5% in 1995. The gross margin erosion from 1995 to 1996 was
primarily attributable to several factors, including but not
limited to: increased reserves for potential excess inventories
in light of the on-going product transition occurring within the
Smart-UPS(R) product family; a shift in product sales mix from
the high-end Smart-UPS products to the lower margin Smart-UPS v/s
products offset by a favorable margin impact of increasing sales
of third generation Smart-UPS products; reduced average selling
prices resulting from sales discounting, particularly relating to
the Smart-UPS product transition; and increased indirect
manufacturing costs associated with additional indirect
manufacturing personnel and other costs incurred to support
manufacturing infrastructure expansion and a transition toward
more specific product-focused factories.
Operating Expenses
Operating expenses include Selling, General and Administrative
and Research and Development expenses.
Selling, General and Administrative expenses increased to
$36,112,221 or 22.4% of net sales for the second quarter of 1996
compared to $28,088,364 or 22.9% of net sales for the second
quarter of 1995. The decrease as a percentage of sales for the
three month period is attributable to certain fixed SG&A expenses
spread over a higher revenue base in 1996. Selling, General and
Administrative expenses were $68,410,049 or 22.6% of net sales
for the first six months of 1996 compared to $51,111,789 or 22.1%
of net sales for 1995. The increase was due primarily to costs
associated with increased advertising and promotional costs, as
well as costs associated with increased staffing of sales and
other related positions both domestically and internationally.
The allowance for bad debts increased from 8.9% of accounts
receivable at December 31, 1995 to 9.6% at June 30, 1996 as a
result of additional bad debt provisioning charged to operating
expenses. The Company has experienced and continues to
experience very strong collection performance from its accounts
receivable with balances outstanding over 60 days representing
4.3% and 5.8% of total receivables at June 30, 1996 and December
31, 1995, respectively. Write-offs of uncollectible accounts
have historically represented less than 1% of total receivable
balances. A majority of international customer balances are
covered by receivables insurance. The increase in bad debt
reserves was primarily attributable to increased international
sales, particularly in regions not covered by the Company's
receivables insurance, as well as discretionary increases in the
Company's bad debt provision during the first six months of 1996
to cover potential exposure in identified customer accounts.
Research and Development expenses were $3,506,576 or 2.2% of net
sales and $3,382,282 or 2.8% of net sales for the second quarter
of 1996 and 1995, respectively. Research and Development
expenses for the first six months of 1996 were $7,226,048 or 2.4%
of net sales compared to $6,131,461 or 2.6% of net sales in 1995.
The increased research and development spending primarily
reflects increased numbers of software and hardware engineers and
costs associated with new product development and engineering
8
<PAGE>
support, while the decrease as a percentage of sales for the six
month period is attributable to certain fixed R&D expenses spread
over a higher revenue base in 1996.
Other Income (Expenses) and Income Taxes
Interest income increased by 301.2% and 92.9% for the three
months and six months ended June 30, 1996 compared to the same
periods in 1995. The increase is primarily attributable to
higher average cash balances available for investment during the
second quarter and first six months of 1996.
The Company's effective tax rate was approximately 33.5% for
both the periods ended June 30, 1996 and 1995.
9
<PAGE>
FORM 10-Q
JUNE 30, 1996
LIQUIDITY AND CAPITAL RESOURCES
Working capital at June 30, 1996 was $262,020,772 compared to
$226,457,935 at December 31, 1995. The Company has been able to
increase its working capital position as the result of continued
strong operating results and despite internally financing the
capital investment of the expansion of its operations. The
Company's cash position rose approximately $58.1 million, or
149%, to $97.1 million at June 30, 1996.
Worldwide inventories were $115,987,402 at June 30, 1996 compared
to $147,541,053 at December 31, 1995. Inventory levels have
decreased as a result of the Company's concerted efforts to
reduce inventory levels as a percentage of sales. Inventory
levels as a percentage of quarterly sales have declined from 97%
in the first quarter of 1996 to 72% in the second quarter of
1996. The total inventory reserves at June 30, 1996 were $10.5
million compared to $6.5 million at December 31, 1995. The
increased inventory reserves have been provided primarily to
cover the potential loss exposure that may result from excess
inventories as the demand for second generation products
diminishes. Second generation Smart-UPS represented
approximately 6% of total inventories at June 30, 1996. The
Company's reserve estimate methodology involves quantifying the
total inventory position having potential loss exposure, reduced
by an amount reasonably forecasted to be sold, and adjusting its
interim reserve provisioning to cover the net loss exposure.
During the first quarter of 1996, the Company announced that the
Board of Directors had authorized the repurchase of up to $15
million worth of the Company's outstanding Common Stock. The
objective of the repurchase program is to offset potential
dilution of earnings per share which may result from employee
stock programs. The Company repurchased approximately $1.5
million of its common shares during the second quarter of 1996.
Capital investment for the first six months of 1996 consisted
primarily of manufacturing and office equipment. The nature and
level of capital spending was made to improve manufacturing
capabilities and to support the increased selling, marketing and
administrative efforts necessitated by the Company's significant
growth. Net capital expenditures were financed from available
operating cash. The Company had no material capital commitments
at June 30, 1996, except for a commitment to purchase certain
software and related hardware to replace its current enterprise-
wide manufacturing, distribution and financial applications. The
cost of the software licenses, project consulting and hardware
requirements will be approximately $5 million. The
implementation of the new system began during the third quarter
of 1996.
The Company's Ireland facility is providing manufacturing and
technical support in order to better service the Company's
markets in Europe, the Middle East, Africa and Russia. In
February 1994, the Company executed an agreement with the
Industrial Development Authority of Ireland ("IDA") under which
the Company will receive grant monies equal to 40% of the costs
incurred for machinery, equipment and building improvements for
the Galway facility. The maximum amount attainable under the
agreement is approximately $13.1 million. The grant monies would
be repayable, in whole or in part, should (1) the Company fail to
meet certain employment goals established under the agreement
which are to be achieved over a five year implementation period
and/or (2) the Company discontinues operations in Ireland prior
to the termination of the agreement. The agreement terminates
eight years from the date of the last claim made by the Company
for grant monies. The total cumulative amount of capital grant
claims submitted through June 30, 1996 was approximately $9.3
million. The total cumulative amount of capital grants received
through June 30, 1996 amounted to approximately $6.1 million.
Under a separate agreement with the IDA, the Company will also
receive up to $3,000 per new employee hired for the direct
reimbursement of training costs. The total cumulative amount of
training grant claims submitted through June 30, 1996 was
approximately $1.9 million. The total cumulative amount of
training grants received through June 30, 1996 amounted to
approximately $700,000.
The Company continues to investigate potential sites for
manufacturing expansion in international locations. The Company
began establishing a manufacturing operation in the Philippines
during the second quarter of 1996. The Company purchased and
improved a 70,000 square foot facility for approximately $1.5
million which was financed from operating cash. Capital
expenditures for the Philippines expansion are estimated to be
$5.0 million for 1996 and will be financed from operating cash
and, if needed, short-term borrowings.
Management believes that current internal cash flows together
with available cash and short-term investments, available credit
facilities or, if needed, the proceeds from the sale of
additional equity, would provide sufficient financing support for
10
<PAGE>
capital spending needs and other working capital requirements for
the foreseeable future. At June 30, 1996, the Company had
available for future borrowings $50 million under an unsecured
line of credit agreement at a floating interest rate equal to the
bank's cost of funds rate plus 0.625% and an additional $15
million under an unsecured line of credit agreement with a second
bank at a similar interest rate. No borrowings were outstanding
under these facilities at June 30, 1996. Additionally, the
Company has no significant financial commitments outstanding
other than those required in the normal course of business.
Foreign Currency Activity
During the fourth quarter of 1994, the Company began invoicing
its customers in Great Britain, France and Germany in their
respective local currencies. During the second quarter of 1996,
the Company began invoicing certain of its Japan customers in
Yen. Realized and unrealized transaction gains or losses are
included in the results of operations and are measured based upon
the effect of changes in exchange rates on the actual or expected
amount of functional currency cash flows. Transaction gains and
losses were not material to the results of operations during the
second quarter and first six months of 1996 and 1995.
At June 30, 1996, the Company's unhedged foreign currency
accounts receivable, by currency, were as follows:
British Pounds - 2,978,000 (approx. US$4,625,000)
French Francs - 13,865,000 (approx. US$2,675,000)
German Marks - 5,729,000 (approx. US$3,770,000)
Japanese Yen - 15,244,000 (approx. US$140,000)
Total gross accounts receivable at June 30, 1996 was
approximately $95,406,000. The Company had non-trade receivables
of 2,800,000 Irish Pounds (approximately US$4,490,000), as well
as Irish Pound denominated liabilities of 4,307,000
(approximately US$6,900,000). The Company also had liabilities
denominated in various European currencies of US$1,550,000, as
well as Yen denominated liabilities of approximately US$20,000.
The Company continually reviews its foreign exchange exposure and
considers various risk management techniques including the
netting of foreign currency receipts and disbursements, rate
protection agreements with customers/vendors and derivatives
arrangements, including foreign exchange contracts. The Company
presently does not utilize rate protection agreements or
derivatives arrangements.
The Company's rationale for not hedging its foreign currency risk
exposure through derivatives arrangements is based on the
assessment that the net foreign currency position was not
material to the financial condition or results of operations of
the Company at June 30, 1996 and, to a lesser degree, an
assessment that the risk of loss from exchange rate fluctuations
was not material based upon available forecasts of short-term
exchange rate movements for the currencies noted above.
Legal Proceedings
As initially reported in Report on Form 10-Q for the quarter
ended June 30, 1995, several purported class action lawsuits were
filed in the United States District Court for the District of
Rhode Island in which the Company was named as a defendant, along
with certain of its officers. The lawsuits relate to disclosures
made by the Company in its public filings and press releases and
assert violations of federal securities laws. The plaintiffs
seek unspecified damages, interest, costs and fees. In mid-
February 1996, a derivative lawsuit was filed by two shareholders
on behalf and for the benefit of the Company against certain
present and former officers and/or directors of the Company in
the Superior Court of Suffolk County, Massachusetts. The Company
was also named as a nominal defendant. The derivative action
plaintiffs allege that the individual defendants in that case
traded in the stock of the Company allegedly in breach of their
fiduciary duty to the Company. It is possible that other claims
may be made against the Company in these actions or that related
allegations could be made that could give rise to other
consequences. The Company intends to defend these lawsuits
vigorously and any similar lawsuits that may be filed; however,
the ultimate outcome of these matters cannot yet be determined.
No provision for any liability that may result from the actions
has been recognized in the consolidated condensed financial
statements included in Item 1 of this Report.
Factors That May Affect Future Performance
This document contains forward-looking statements based on
current expectations that involve a number of risks and
uncertainties. The factors that could cause actual results to
differ materially include the following: general economic
conditions and growth rates in the power protection industry and
related industries, including but not limited to the PC, server
and networking industries; competitive factors and pricing
pressures; changes in product mix; changes in the seasonality of
demand patterns; the timely development and acceptance of new
products; inventory risks due to shifts in market demand;
component constraints and shortages; risk of nonpayment of
accounts receivable; ramp-up and expansion of manufacturing
capacity and the risks described from time to time in the
Company's filings with the Securities and Exchange Commission.
11
<PAGE>
FORM 10-Q
JUNE 30, 1996
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held on June 13, 1996 at
which the shareholders of the Company approved the following:
(i) by a vote of 83,114,998 shares in favor, 1,603,706 shares
opposed and 781,728 abstaining, the number of directors was fixed
at five.
(ii) the following persons (with vote results) were elected to
serve another term as Directors of the Company:
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
Rodger B. Dowdell, Jr. 84,492,413 1,008,019
James D. Gerson 84,551,989 948,443
Emanuel E. Landsman 84,458,121 1,042,311
Ervin F. Lyon 84,491,703 1,008,729
Neil E. Rasmussen 84,490,393 1,010,039
</TABLE>
(iii) by a vote of 85,065,672 shares in favor, 145,516 shares
opposed and 289,244 shares abstaining, the ratification of the
selection of the firm of KPMG Peat Marwick LLP as auditors for
the fiscal year ending December 31, 1996.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8 - K
(A) EXHIBITS:
EXHIBIT NO. 11 - COMPUTATION OF EARNINGS PER SHARE (PAGE 14)
EXHIBIT NO. 27 - FINANCIAL DATA SCHEDULE
(B) REPORTS ON FORM 8-K
NO REPORT ON FORM 8-K WAS FILED BY AMERICAN POWER CONVERSION
CORPORATION DURING THE QUARTER ENDED JUNE 30, 1996.
12
<PAGE>
FORM 10-Q
JUNE 30, 1996
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT
OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
AMERICAN POWER CONVERSION CORPORATION
/s/ Donald M. Muir
-----------------------------------
Date: August 13, 1996
Donald M. Muir
CHIEF FINANCIAL OFFICER
(PRINCIPAL ACCOUNTING AND FINANCIAL OFFICER)
13
FORM 10-Q
JUNE 30, 1996
EXHIBIT 11
American Power Conversion Corporation
Computation of Earnings Per Share
(Unaudited)
<TABLE>
<CAPTION>
Six months Ended Three months ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Primary:
Weighted average shares
outstanding 93,626,946 92,703,601 93,834,564 92,956,907
Net effect of dilutive
stock options
based on the treasury
stock method
using the average
market price 311,582 674,884 409,266 685,814
Total 93,938,528 93,378,485 94,243,830 93,642,721
Net Income $34,317,822 35,650,359 19,105,252 17,380,546
Per share amount $0.37 0.38 0.20 0.19
Fully Diluted:
Weighted average shares
outstanding 93,626,946 92,703,601 93,834,564 92,956,907
Net effect of dilutive
stock options
based on the treasury
stock method
using the period end
market price 275,687 875,127 275,687 875,127
Total 93,902,633 93,578,728 94,110,251 93,832,034
Net income $34,317,822 35,650,359 19,105,252 17,380,546
Per share amount $0.37 0.38 0.20 0.19
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET AT JUNE 30, 1996 AND CONSOLIDATED CONDENSED
STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY SUCH REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1.00
<CASH> 97,126,123
<SECURITIES> 0
<RECEIVABLES> 95,405,772
<ALLOWANCES> 9,198,000
<INVENTORY> 115,987,402
<CURRENT-ASSETS> 324,559,687
<PP&E> 98,053,318
<DEPRECIATION> 27,588,830
<TOTAL-ASSETS> 396,165,888
<CURRENT-LIABILITIES> 62,538,915
<BONDS> 0
0
0
<COMMON> 939,427
<OTHER-SE> 327,517,546
<TOTAL-LIABILITY-AND-EQUITY> 396,165,888
<SALES> 303,062,684
<TOTAL-REVENUES> 303,062,684
<CGS> 177,539,535
<TOTAL-COSTS> 253,175,632
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 51,605,822
<INCOME-TAX> 17,288,000
<INCOME-CONTINUING> 34,317,822
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,317,822
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.37
</TABLE>
