<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 29, 1997
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 identification no.)
incorporation or organization)
132 FAIRGROUNDS ROAD, WEST KINGSTON, RHODE ISLAND 02892
401-789-5735
(Address and telephone number of principal executive offices)
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 [ ]
_________
Registrant's Common Stock outstanding, $.01 par value, at August 7, 1997 -
95,129,020 shares
1
<PAGE>
FORM 10-Q
June 29, 1997
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information:
Item 1. Consolidated Condensed Financial Statements:
Consolidated Condensed Balance Sheets -
June 29, 1997 (Unaudited) and December 31, 1996 3 - 4
Consolidated Condensed Statements of Income -
Six Months and Three Months Ended
June 29, 1997 and June 30, 1996 (Unaudited) 5
Consolidated Condensed Statements of Cash Flows -
Six Months and Three Months Ended
June 29, 1997 and June 30, 1996 (Unaudited) 6
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 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
<PAGE>
FORM 10-Q
June 29, 1997
PART I - CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
ITEM 1 - FINANCIAL STATEMENTS
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
ASSETS
<TABLE>
<CAPTION>
June 29, 1997 December 31,
1996
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 142,805 $ 153,234
Accounts receivable,
less allowance for doubtful accounts of
$11,893 in 1997 and $10,789 in 1996 117,725 108,544
Inventories:
Raw materials 76,310 68,657
Work-in-process and finished goods 83,283 61,786
Total inventories 159,593 130,443
Prepaid expenses and other current assets 13,375 11,610
Deferred income taxes 28,022 20,284
Total current assets 461,520 424,115
Property, plant and equipment:
Land, buildings and improvements 23,499 18,710
Machinery and equipment 74,786 64,986
Office equipment and furniture 27,079 23,299
Purchased software 8,189 7,357
133,553 114,352
Less accumulated depreciation and amortization 44,058 35,655
Net property, plant and equipment 89,495 78,697
Other assets 1,640 1,190
Total assets $ 552,655 $ 504,002
</TABLE>
See accompanying notes to consolidated condensed financial statements
3
<PAGE>
FORM 10-Q
June 29, 1997
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 29, 1997 December 31,
1996
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 38,171 $ 41,587
Accrued expenses 11,507 12,576
Accrued compensation 13,595 12,217
Accrued sales and marketing programs 19,128 16,360
Accrued pension contributions 4,481 6,290
Income taxes payable 13,944 17,294
Total current liabilities 100,826 106,324
Deferred tax liability 6,594 5,780
Total liabilities 107,420 112,104
Shareholders' equity:
Common stock, $.01 par value;
authorized 200,000 shares;
issued 95,238 shares in 1997,
94,417 shares in 1996 952 944
Additional paid-in capital 53,311 48,374
Retained earnings 392,523 344,131
Treasury stock, 125 shares, at cost (1,551) (1,551)
Total shareholders' equity 445,235 391,898
Total liabilities and shareholders' equity $ 552,655 $ 504,002
</TABLE>
See accompanying notes to consolidated condensed financial statements
4
<PAGE>
FORM 10-Q
June 29, 1997
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands, except earnings per share)
<TABLE>
<CAPTION>
Six months ended Three months ended
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 375,609 $ 303,063 $ 203,619 $ 161,437
Cost of goods sold 208,011 177,540 112,209 94,099
Gross margin 167,598 125,523 91,410 67,338
Operating expenses:
Marketing, selling, general and 89,282 68,410 48,294 36,112
administrative
Research and development 9,596 7,226 5,391 3,507
Total operating expenses 98,878 75,636 53,685 39,619
Operating income 68,720 49,887 37,725 27,719
Other income, net 748 1,719 1,122 1,011
Earnings before income taxes 69,468 51,606 38,847 28,730
Income taxes 21,882 17,288 12,236 9,625
Net income $ 47,586 $ 34,318 $ 26,611 $ 19,105
Earnings per share $ .50 $ .37 $ .28 $ .20
Weighted average common stock and
common stock equivalents outstanding 95,928 93,939 96,076 94,244
</TABLE>
See accompanying notes to consolidated condensed financial statements
5
<PAGE>
FORM 10-Q
June 29, 1997
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six months ended Three months ended
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income $ 47,586 $ 34,318 $ 26,611 $ 19,105
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization 8,417 5,445 4,515 2,714
Provision for doubtful accounts 2,128 2,278 1,155 803
Deferred taxes (7,211) (2,421) (3,890) (2,490)
Changes in operating assets and
liabilities:
Increase in accounts receivable (10,725) (17,287) (12,124) (13,337)
Decrease (increase) in inventories (28,791) 31,554 21 20,856
Decrease (increase) in prepaid
expenses and other current assets (1,862) (1,945) (3,826) 98
Decrease (increase) in other assets 525 (138) 156 29
Increase (decrease) in accounts
payable (3,894) 2,207 (17,645) 6,470
Increase in accrued expenses 218 6,818 4,563 4,454
Increase (decrease) in income taxes (3,350) 1,590 (3,103) (3,619)
payable
Net cash provided by (used in)
operating activities 3,041 62,419 (3,567) 35,083
Cash flows from investing activities
Capital expenditures, net of capital (18,513) (8,706) (5,721) (5,085)
grants
Cash acquired in acquisition 101 - - -
Net cash used in investing activities (18,412) (8,706) (5,721) (5,085)
Cash flows from financing activities
Proceeds from issuances of common stock 4,942 5,859 996 1,543
Purchases of common stock - (1,486) - (1,486)
Net cash provided by financing 4,942 4,373 996 57
activities
Net increase (decrease) in cash and
cash equivalents (10,429) 58,086 (8,292) 30,055
Cash and cash equivalents at beginning 153,234 39,040 151,097 67,071
of period
Cash and cash equivalents at end of $ 142,805 $ 97,126 $ 142,805 $ 97,126
period
Supplemental cash flow disclosures
Cash paid during the period for income
taxes (net of refunds) $ 25,544 $ 16,457 $ 12,402 $ 14,072
</TABLE>
See accompanying notes to consolidated condensed financial statements
6
<PAGE>
FORM 10-Q
June 29, 1997
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
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
periods 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.
On February 14, 1997, the Company completed its acquisition of Systems
Enhancement Corporation ("Systems Enhancement"), a privately-held manufacturer
of power management software and accessories. The Company has accounted for the
acquisition as a pooling-of-interests and, accordingly, Systems Enhancement's
results of operations and cash flows are included in the Company's financial
statements from January 1, 1997. The acquisition was deemed to be immaterial to
the Company's consolidated results of operations and financial condition and,
therefore, comparative prior period results have not been restated.
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 29, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Revenues
Net sales were $203.6 million for the second quarter of 1997, an increase of
26.1% compared to $161.4 million for the same period in 1996. Net sales for the
first half of 1997 were $375.6 million compared to $303.1 million in 1996, an
increase of 23.9%. The increase was attributable to continued strong 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. International net sales in the second quarter of 1997 were up 34%
versus the second quarter of 1996, while the North American market continued to
be strong with net sales up 22%. International sales (excluding Canada)
comprised 37% of net sales in the second quarter of 1997 compared to 36% in the
second quarter of 1996.
Cost of Goods Sold
Cost of goods sold was $112.2 million or 55.1% of net sales in the second
quarter of 1997 compared to $94.1 million or 58.3% in the second quarter of
1996. Cost of goods sold was $208.0 million or 55.4% of net sales in the first
half of 1997 compared to $177.5 million or 58.6% in the first half of 1996.
Gross margins, which improved by approximately 320 basis points during the
second quarter and first half of 1997 over the comparable periods in 1996, were
primarily attributable to lower cost Back-UPS(R) products manufactured in the
Philippines and, to a lesser degree, increasing sales volume of higher margin
third generation Smart-UPS(R) products. Total inventory reserves at June 29,
1997 were $19.3 million compared to $16.1 million at December 31, 1996. Second
generation Smart-UPS represented approximately 5% of total inventories at June
29, 1997 unchanged as a percentage of total inventories from December 31, 1996.
The increased inventory reserves include coverage of the potential loss exposure
that may result from excess inventories as the demand for second generation
products diminishes. 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.
Operating Expenses
Operating expenses include marketing, selling, general and administrative
(SG&A), and research and development expenses.
SG&A expenses were $48.3 million or 23.7% of net sales for the second quarter of
1997 compared to $36.1 million or 22.4% of net sales for the second quarter of
1996. Marketing, selling, general and administrative (SG&A) expenses were $89.3
million or 23.8% of net sales for the first half of 1997 compared to $68.4
million or 22.6% of net sales for the first half of 1996. The increases over
last year were due primarily to 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 doubtful
accounts at June 29, 1997 was 9.2% of accounts receivable, compared to 9.0% at
December 31, 1996. The Company continues to experience strong collection
performance with accounts receivable balances outstanding over 60 days
representing 8.5% of total receivables, down from 9.1% at December 31, 1996.
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.
Research and development expenses were $5.4 million or 2.6% of net sales and
$3.5 million or 2.2% of net sales for the second quarter of 1997 and 1996,
respectively. Research and development expenses were $9.6 million or 2.6% of
net sales and $7.2 million or 2.4% of net sales for the first half of 1997 and
1996, respectively. The increased research and development spending primarily
reflects increased numbers of software and hardware engineers and costs
associated with new product development and engineering support, including
additional engineering resources gained in the 1997 acquisition of Systems
Enhancement Corporation.
8
<PAGE>
Other Income, Net and Income Taxes
Net foreign currency losses in the second quarter and first half of 1997
(primarily related to foreign currency denominated assets of international
subsidiaries for which the U.S. dollar is the functional currency) were more
than offset by an increase in interest income. This increase was due to higher
average cash balances available for investment during the first half of 1997
compared to the same period in 1996.
The Company's effective income tax rates were approximately 31.5% and 33.5% for
the quarters ended June 29, 1997 and June 30, 1996, respectively. The decrease
from last year is due to the expected tax savings from an increasing portion of
taxable earnings being generated from the Company's operations in Ireland, a
jurisdiction which currently has a lower income tax rate for manufacturing
companies than the present U.S. statutory income tax rate.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at June 29, 1997 was $360.7 million compared to $317.8 million
at December 31, 1996. The Company has been able to increase its working capital
position as the result of continued strong operating results and despite
internally financing the build-up of inventories and the capital investment
required to expand its operations. The Company's cash position decreased to
$142.8 million at June 29, 1997 compared to $153.2 million at December 31, 1996.
Worldwide inventories were $159.6 million at June 29, 1997 compared to $130.4
million at December 31, 1996. The first half 1997 inventory build was primarily
attributable to the effects of seasonal factors, opening new plant capacity in
the Philippines, and the introduction of a new product line, the Symmetra (TM)
Power Array (TM). Inventory levels as a percentage of quarterly sales were 78%
in the second quarter of 1997, 93% in the first quarter of 1997, and 62% in the
fourth quarter of 1996.
At June 29, 1997, 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 .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 29, 1997.
Additionally, the Company has no significant financial commitments outstanding
other than those required in the normal course of business.
Capital investment for the first half of 1997 consisted primarily of
manufacturing and office equipment. The nature and level of capital spending
was made to establish additional manufacturing operations in the Philippines, to
improve manufacturing capabilities, and to support the increased marketing,
selling, and administrative efforts necessitated by the Company's growth. Net
capital expenditures were financed from available operating cash. The Company
had no material capital commitments at June 29, 1997.
During the second quarter of 1996, the Company established a manufacturing
operation in the Philippines which is operating within a designated economic
zone which provides certain economic incentives, primarily in the form of tax
exemptions. The Company purchased and improved a 70,000 square foot facility
for approximately $1.5 million which was financed from operating cash. This
facility currently manufactures certain Back-UPS products sold in the Company's
domestic and European markets. In the future this operation will also provide
manufacturing and technical support to better serve the Company's markets in the
Asia Pacific region. In January 1997, the Company purchased a second location
in the Philippines for approximately $3 million. The Company expects to begin
manufacturing selected products at this facility beginning in the third quarter
of 1997.
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 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 (a) 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 (b) 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 29, 1997 was approximately $9.5 million. The total
cumulative amount of capital grants received through June 29, 1997 amounted to
approximately $8.2 million.
9
<PAGE>
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 29,
1997 was approximately $1.9 million. The total cumulative amount of training
grants received through June 29, 1997 amounted to approximately $1.4 million.
The Company continues to investigate potential sites for manufacturing expansion
in international locations. In July 1997, the Company began establishing a
second manufacturing location in Ireland. The Company expects to begin
manufacturing selected products at this facility beginning in the fourth quarter
of 1997.
Management believes that current internal cash flows, together with available
cash, available credit facilities or, if needed, the proceeds from the sale of
additional equity, will be sufficient to support anticipated capital spending
and other working capital requirements for the foreseeable future.
Acquisition
On February 14, 1997, the Company completed its acquisition of Systems
Enhancement Corporation ("Systems Enhancement"), a privately-held manufacturer
of power management software and accessories, by means of a merger of a wholly-
owned subsidiary of the Company with and into Systems Enhancement. As a result
of the merger, Systems Enhancement became a wholly-owned subsidiary of the
Company. The Company issued 480,144 shares of its Common Stock, $.01 par value,
in exchange for all of the issued and outstanding shares of Systems Enhancement.
The Company has accounted for the acquisition as a pooling-of-interests and,
accordingly, Systems Enhancement's results of operations and cash flows are
included in the Company's financial statements from January 1, 1997.
Foreign Currency Activity
Financial statements for the Company's international subsidiaries for which the
U.S. dollar is the functional currency are remeasured into U.S. dollars using
current rates of exchange for monetary assets and liabilities and historical
rates of exchange for nonmonetary assets. Gains and losses from remeasurement
are included in other income (deductions), net.
During 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.
At June 29, 1997 the Company's unhedged foreign currency accounts receivable, by
currency, were as follows:
(In thousands) Foreign Currency U.S. Dollars
British Pounds 2,597 4,328
French Francs 21,324 3,677
German Marks 7,282 4,233
Japanese Yen 561,288 4,757
Total gross accounts receivable at June 29, 1997 was approximately $129.6
million. The Company had non-trade receivables of 1,196 thousand Irish Pounds
(approximately US$1,816 thousand), as well as Irish Pound denominated
liabilities of 7,200 thousand (approximately US$10,938 thousand). The Company
also had liabilities denominated in various European currencies of US$1,005
thousand, as well as Yen denominated liabilities of approximately US$2,032
thousand.
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.
Legal Proceedings
On or about June 16, 1997, Trippe Manufacturing Company ("Trippe") filed suit
against the Company and Systems Enhancement in the United States District Court
for the Northern District of Illinois, alleging a variety of contract,
antitrust, and unfair competition claims relating to the Company's February 14,
1997 acquisition of Systems Enhancement. Trippe seeks unspecified damages,
costs, fees, and injunctive relief. On or about August 6, 1997, the Company and
Systems Enhancement filed a motion to dismiss the lawsuit in its entirety for
failure to state a claim on which relief could be granted. That motion has not
yet been ruled upon. The Company believes the lawsuit to be without merit and
intends to vigorously defend against it.
10
<PAGE>
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 these actions has been
recognized in the consolidated condensed financial statements included in Item 1
of this Report.
Recently Issued Accounting Standards
The Financial Accounting Standards Board recently issued the following
Statements of Financial Accounting Standards (SFAS):
SFAS No. 128, Earnings per Share, establishes standards for computing and
presenting earnings per share, simplifying previous standards and making them
comparable to international earnings per share standards. The Company will
adopt this Statement at December 31, 1997 and does not expect its provisions to
have a material effect on the Company's computation or presentation of earnings
per share.
SFAS No. 130, Reporting Comprehensive Income, establishes standards for
reporting and display of comprehensive income in a full set of financial
statements. This Statement requires companies to (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a balance
sheet. The Company will adopt this Statement at December 31, 1998 and does not
expect its provisions to have a material effect on the Company's presentation of
its consolidated financial statements.
SFAS No. 131, Segment Reporting, establishes standards for reporting information
about operating segments in annual and interim financial statements issued to
shareholders. This Statement also establishes standards for related disclosures
about products and services, geographic areas, and major customers. The Company
will adopt this Statement at December 31, 1998 and is currently studying its
provisions.
Factors That May Affect Future Performance
This document may include forward looking statements. Any statements contained
herein that do not describe historical facts are forward-looking statements.
The Company makes such forward-looking statements under the provisions of the
"safe harbor" section of the Private Securities Litigation Reform Act of 1995.
The forward-looking statements contained herein are based on current
expectations, but are subject to a number of risks and uncertainties which could
cause actual results to differ from those projected. The factors that could
cause actual results to differ materially from such forward-looking statements
include the following: the timely development and acceptance of new products
such as the Symmetra Power Array; ramp up and expansion of manufacturing
capacity; 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; inventory risks due
to shifts in market demand; mergers and acquisitions; component constraints and
shortages; risk of nonpayment of accounts receivable; the uncertainty of the
litigation process including risk of an unexpected, unfavorable result of
current litigation; factors associated with international operations; 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 29, 1997
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On or about June 16, 1997, Trippe Manufacturing Company ("Trippe") filed suit
against the Company and Systems Enhancement in the United States District Court
for the Northern District of Illinois, alleging a variety of contract,
antitrust, and unfair competition claims relating to the Company's February 14,
1997 acquisition of Systems Enhancement. Trippe seeks unspecified damages,
costs, fees, and injunctive relief. On or about August 6, 1997, the Company and
Systems Enhancement filed a motion to dismiss the lawsuit in its entirety for
failure to state a claim on which relief could be granted. That motion has not
yet been ruled upon. The Company believes the lawsuit to be without merit and
intends to vigorously defend against it.
No provision for any liability that may result from these actions has been
recognized in the accompanying consolidated condensed financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held on April 21, 1997 at which the
shareholders of the Company approved the following:
(i) by a vote of 79,071,865 shares in favor, 2,542,131 opposed, and
377,393 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:
For Withheld
Rodger B. Dowdell, Jr. 80,740,756 1,250,633
James D. Gerson 80,743,231 1,248,158
Emanuel E. Landsman 80,745,720 1,245,669
Ervin F. Lyon 80,723,846 1,267,543
Neil E. Rasmussen 80,817,616 1,173,773
(iii) by a vote of 72,952,039 shares in favor, 4,639,824 opposed, and 421,595
abstaining, adoption of the 1997 Non-Employee Director Stock Option Plan
was approved.
(iv) by a vote of 63,552,467 shares in favor, 13,164,647 opposed, and
408,740 abstaining, adoption of the 1997 Stock Option Plan was approved.
(v) by a vote of 71,006,792 shares in favor, 9,486,887 opposed, and 311,368
abstaining, adoption of the 1997 Employee Stock Purchase Plan was
approved.
In addition, by a vote of 5,718,703 shares in favor, 58,312,421 opposed, and
1,173,934 abstaining, a shareholder proposal to increase the Board of Directors
to nine members, no more than three of whom shall be officers or employees of
the Company, nor any be a relative of a Company officer or Director, was not
approved.
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 (For SEC EDGAR Filing Only
(B) Reports on Form 8-K
No reports on Form 8-K were filed by American Power Conversion Corporation
during the quarter ended June 29, 1997.
12
<PAGE>
FORM 10-Q
June 29, 1997
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
Date: August 13, 1997
/s/ Donald M. Muir
Donald M. Muir
Chief Financial Officer
(Principal Accounting And Financial Officer)
13
<PAGE>
FORM 10-Q
June 29, 1997
EXHIBIT 11
AMERICAN POWER CONVERSION CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except for earnings per share)
<TABLE>
<CAPTION>
Six months ended Three months ended
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Primary
Weighted average common stock 94,921 93,627 95,174 93,835
outstanding
Net effect of dilutive stock options
based on the treasury stock method using 1,007 312 902 409
the average market price
Total 95,928 93,939 96,076 94,244
Net income $ 47,586 $ 34,318 $ 26,611 $ 19,105
Per share amount $ .50 $ .37 $ .28 $ .20
Fully diluted
Weighted average common stock 94,921 93,627 95,174 93,835
outstanding
Net effect of dilutive stock options
based on the treasury stock method using 862 275 862 275
the period end market price
Total 95,783 93,902 96,036 94,110
Net income $ 47,586 $ 34,318 $ 26,611 $ 19,105
Per share amount $ .50 $ .37 $ .28 $ .20
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT JUNE 29, 1997 AND THE CONSOLIDATED STATEMENT OF
INCOME FOR THE PERIOD ENDED JUNE 29, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
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> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 142,805,000
<SECURITIES> 0
<RECEIVABLES> 129,618,000
<ALLOWANCES> 11,893,000
<INVENTORY> 159,593,000
<CURRENT-ASSETS> 461,520,000
<PP&E> 133,553,000
<DEPRECIATION> 44,058,000
<TOTAL-ASSETS> 552,655,000
<CURRENT-LIABILITIES> 100,826,000
<BONDS> 0
0
0
<COMMON> 952,000
<OTHER-SE> 444,283,000
<TOTAL-LIABILITY-AND-EQUITY> 552,655,000
<SALES> 375,609,000
<TOTAL-REVENUES> 375,609,000
<CGS> 208,011,000
<TOTAL-COSTS> 306,889,000
<OTHER-EXPENSES> 748,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 69,468,000
<INCOME-TAX> 21,882,000
<INCOME-CONTINUING> 47,586,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,586,000
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
