<PAGE>
QUARTERLY REPORT ON FORM 10-Q
U.S. 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 28, 1998
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
incorporation or organization) no.)
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 6, 1998 -
95,549,000 shares
1
<PAGE>
FORM 10-Q
June 28, 1998
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information:
Item 1. Consolidated Condensed Financial Statements:
Consolidated Condensed Balance Sheets -
June 28, 1998 (Unaudited) and December 31, 1997 3 - 4
Consolidated Condensed Statements of Income -
Three Months and Six Months Ended
June 28, 1998 and June 29, 1997 (Unaudited) 5
Consolidated Condensed Statements of Cash Flows -
Three Months and Six Months Ended
June 28, 1998 and June 29, 1997 (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 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
<PAGE>
FORM 10-Q
June 28, 1998
PART I - CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
ASSETS
<CAPTION>
June 28, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $203,310 $270,134
Accounts receivable,
less allowance for doubtful accounts of
$14,452 in 1998 and $12,230 in 1997 183,359 131,115
Inventories:
Raw materials 96,949 61,430
Work-in-process and finished goods 102,828 42,741
Total inventories 199,777 104,171
Prepaid expenses and other current assets 17,769 13,305
Deferred income taxes 24,680 21,571
Total current assets 628,895 540,296
Property, plant, and equipment:
Land, buildings and improvements 48,718 31,143
Machinery and equipment 102,994 80,091
Office equipment, furniture, and fixtures 35,321 31,431
Purchased software 10,161 9,584
197,194 152,249
Less accumulated depreciation and amortization 68,374 52,631
Net property, plant, and equipment 128,820 99,618
Goodwill and other intangibles 38,659 -
Other assets 2,416 1,376
Total assets $798,790 $641,290
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
FORM 10-Q
June 28, 1998
<TABLE>
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
June 28, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
Current liabilities:
Short term debt $24,848 $ -
Accounts payable 101,570 37,068
Accrued expenses 20,435 16,334
Accrued compensation 16,515 16,476
Accrued sales and marketing programs 15,198 15,965
Accrued retirement contributions 9,026 7,446
Income taxes payable 22,798 20,241
Total current liabilities 210,390 113,530
Deferred tax liability 7,719 6,006
Total liabilities 218,109 119,536
Minority interest 3,314 -
Shareholders' equity:
Common stock, $.01 par value;
authorized 200,000 shares; issued 95,562
shares in 1998 and 95,383 shares in 1997 956 954
Additional paid-in capital 57,739 55,626
Retained earnings 520,223 466,725
Treasury stock, 125 shares, at cost (1,551) (1,551)
Total shareholders' equity 577,367 521,754
Total liabilities, minority interest, and shareholders'
equity $798,790 $641,290
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
FORM 10-Q
June 28, 1998
<TABLE>
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands except earnings per share)
<CAPTION>
Six months ended Three months ended
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $479,528 $375,609 $260,661 $203,619
Cost of goods sold 263,298 208,011 142,443 112,209
Gross profit 216,230 167,598 118,218 91,410
Operating expenses:
Marketing, selling, general and administrative 118,909 89,282 63,542 48,294
Research and development 16,696 9,596 8,972 5,391
Acquired research and development 7,387 - 7,387 -
Total operating expenses 142,992 98,878 79,901 53,685
Operating income 73,238 68,720 38,317 37,725
Other income, net 6,979 748 3,445 1,122
Earnings before income taxes 80,217 69,468 41,762 38,847
Income taxes 26,719 21,882 14,990 12,236
Net income $53,498 $47,586 $26,772 $26,611
Basic earnings per share $ .56 $ .50 $ .28 $ .28
Basic weighted average shares outstanding 95,349 94,796 95,394 95,049
Diluted earnings per share $ .55 $ .50 $ .28 $ .28
Diluted weighted average shares outstanding 96,629 95,928 96,740 96,076
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE>
FORM 10-Q
June 28, 1998
<TABLE>
AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Six months ended Three months ended
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income $53,498 $47,586 $26,772 $26,611
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 11,743 8,417 5,395 4,515
Provision for doubtful accounts 2,598 2,128 1,350 1,155
Deferred income taxes (3,232) (7,211) 1,659 (3,890)
Acquired research and development 7,387 - 7,387 -
Changes in operating assets and liabilities
excluding effects of acquisitions:
Accounts receivable (35,329) (10,725) (14,926) (12,124)
Inventories (76,422) (28,791) (49,699) 21
Prepaid expenses and other current assets (4,119) (1,862) (2,053) (3,826)
Other assets (315) 525 (394) 156
Accounts payable 49,930 (3,894) 20,257 (17,645)
Accrued expenses (378) 218 (538) 4,563
Income taxes payable 2,403 (3,350) (14,168) (3,103)
Net cash provided by (used in) operating activities 7,764 3,041 (18,958) (3,567)
Cash flows from investing activities
Capital expenditures, net of capital grants (24,174) (18,513) (14,458) (5,721)
Acquisitions (52,529) 101 (52,529) -
Net cash used in investing activities (76,703) (18,412) (66,987) (5,721)
Cash flows from financing activities
Proceeds from issuances of common stock 2,115 4,942 1,369 996
Net cash provided by financing activities 2,115 4,942 1,369 996
Net decrease in cash and cash equivalents (66,824) (10,429) (84,576) (8,292)
Cash and cash equivalents at beginning of period 270,134 153,234 287,886 151,097
Cash and cash equivalents at end of period $203,310 $142,805 $203,310 $142,805
Supplemental cash flow disclosures
Cash paid during the period for income taxes
(net of refunds) $24,162 $25,544 $24,162 $12,402
Details of acquisitions:
Fair value of assets $104,544 $ - $104,544 $ -
Liabilities and minority interest (50,055) - (50,055) -
Cash paid 54,489 - 54,489 -
Cash acquired (1,960) (101) (1,960) -
Acquisitions $52,529 $ (101) $52,529 $ -
</TABLE>
See accompanying notes to consolidated condensed financial statements.
6
<PAGE>
FORM 10-Q
June 28, 1998
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 accounts of American Power
Conversion Corporation and all of its wholly- and majority-owned subsidiaries.
All intercompany accounts and transactions are eliminated in consolidation.
Early in the second quarter of 1998, the Company entered into a definitive
agreement with the principal management shareholders of Silcon A/S to acquire
stock of Silcon, a Denmark-based manufacturer of three-phase UPSs up to 480 kVA,
and the Company commenced a tender offer for Silcon shares. In June 1998, the
initial tender offer and purchase of stock from principal management
shareholders was completed enabling the Company to operate Silcon as a majority-
owned subsidiary. The acquisition has been accounted for as a purchase and,
accordingly, 75% of Silcon's assets and liabilities are included in the
Company's consolidated balance sheet as of June 28, 1998. Silcon's results of
operations will be included in the Company's consolidated financial statements
beginning in the third quarter of 1998.
3. Per Share Data
Basic earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding during the period. Diluted earnings
per share is computed by dividing net income by the weighted average number of
common shares and dilutive potential common shares outstanding during the
period. Under the treasury stock method, the unexercised options are assumed to
be exercised at the beginning of the period or at issuance, if later. The
assumed proceeds are then used to purchase common shares at the average market
price during the period. Dilutive potential common shares outstanding at June
28, 1998 and June 29, 1997 were approximately 1.3 million and 1.1 million,
respectively.
Potential common shares for which inclusion would have the effect of increasing
diluted earnings per share (i.e., antidilutive) are excluded from the
computation. Antidilutive potential common shares outstanding at June 28, 1998
and June 29, 1997 were approximately 16,000 and 1,000, respectively.
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.
7
<PAGE>
FORM 10-Q
June 28, 1998
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Revenues
Net sales were $260.7 million for the second quarter of 1998, an increase of
28.0% compared to $203.6 million for the same period in 1997. Net sales for the
first half of 1998 were $479.5 million compared to $375.6 million in 1997, an
increase of 27.7%. The increase was attributable to continued strong demand for
the Company's uninterruptible power supply (UPS) and surge protection products.
Second quarter and first half sales growth was strong worldwide with the
Americas (North and Latin America) growing 30.2% and 28.7%, respectively, EMEA
(Europe, Middle East and Africa) growing 33.8% and 37.3%, respectively, and the
Asia Pacific region growing 6.3% and 5.5%, respectively, despite the economic
downturn in that region. International sales (excluding Canada) comprised 37%
and 38% of net sales in the second quarter of 1998 and 1997, respectively, and
37% and 38% of net sales in the first half of 1998 and 1997, respectively.
Cost of Goods Sold
Cost of goods sold was $142.4 million or 54.7% of net sales in the second
quarter of 1998 compared to $112.2 million or 55.1% in the second quarter of
1997. Cost of goods sold was $263.3 million or 54.9% of net sales in the first
half of 1998 compared to $208.0 million or 55.4% in the first half of 1997.
Gross margins improved by approximately 50 basis points during the second
quarter and first half of 1998, respectively, over the comparable periods in
1997. The improvements were primarily attributable to continued improvement in
margins on lower cost Back-UPSr products manufactured in the Philippines and the
favorable margin impact of a higher-end product mix resulting from strong growth
in Smart-UPSr sales into the server segment of the power protection market.
Total inventory reserves at June 28, 1998 were $19.9 million compared to $19.3
million at December 31, 1997. 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 (R&D) expenses.
SG&A expenses were $63.5 million or 24.4 % of net sales for the second quarter
of 1998 compared to $48.3 million or 23.7% of net sales for the second quarter
of 1997. SG&A expenses were $118.9 million or 24.8% of net sales for the first
half of 1998 compared to $89.3 million or 23.8% of net sales for the first half
of 1997. 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 administrative positions both domestically and
internationally. The allowance for doubtful accounts at June 28, 1998 was 7.3%
of accounts receivable, compared to 8.5% at December 31, 1997. The Company
continues to experience strong collection performance.
Excluding a second quarter 1998 $7.4 million charge for acquired R&D (see
"Acquisition" below), R&D expenses were $9.0 million or 3.4% of net sales and
$5.4 million or 2.6% of net sales for the second quarters of 1998 and 1997,
respectively, and R&D expenses were $16.7 million or 3.5% of net sales and $9.6
million or 2.6% of net sales for the first six month periods of 1998 and 1997,
respectively. The increased R&D spending primarily reflects increased numbers
of software and hardware engineers and costs associated with new product
development and engineering support.
8
<PAGE>
Other Income, Net and Income Taxes
Other income is comprised principally of interest income, which increased
substantially from 1997 to 1998 due to higher average cash balances available
for investment during 1998.
Excluding a second quarter 1998 non-tax deductible $7.4 million charge for
acquired R&D (see "Acquisition" below), the Company's effective income tax rates
were approximately 30.5% and 31.5% for the quarters ended June 28, 1998 and June
29, 1997, 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 28, 1998 was $418.5 million compared to $426.8 million
at December 31, 1997. The Company's cash position decreased to $203.3 million
at June 28, 1998 from $270.1 million at December 31, 1997, primarily due to the
cash purchase of approximately 75% of the share capital of Silcon A/S (see
"Acquisition" below).
Worldwide inventories were $199.8 million at June 28, 1998 compared to $104.2
million at December 31, 1997. The first half 1998 inventory build was primarily
related to anticipation of increased demand patterns during the second half of
the year which result from typical seasonal factors, combined with $19 million
of inventory purchased in the Silcon acquisition. Inventory levels were 77% as
a percentage of quarterly sales in the second quarter of 1998 up from 60% in the
first quarter of 1998.
At June 28, 1998, the Company had $50 million available for future borrowings
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 28, 1998.
In connection with the acquisition of Silcon (see "Acquisition" below), the
Company acquired $24.8 million in bank indebtedness with interest rates ranging
from 4% to 8%. The Company had no significant financial commitments, other than
those required in the normal course of business, at June 28, 1998.
Capital investment for the first half of 1998 consisted primarily of
manufacturing and office equipment, and buildings and improvements. The nature
and level of capital spending was made 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,
other than those required in the normal course of business, at June 28, 1998.
The Company has agreements with the Industrial Development Authority of Ireland
("IDA") under which the Company receives grant monies for costs incurred for
machinery, equipment, and building improvements for its Galway and Castlebar
facilities equal to 40% and 60%, respectively, of such costs up to a maximum of
$13.1 million and $1.3 million, respectively. Such grant monies are subject to
the Company meeting certain employment goals and maintaining operations in
Ireland until termination of the respective agreements. The total cumulative
amounts of capital grant claims submitted and received through June 28, 1998 for
the Galway facility were approximately $11.1 million and $8.4 million,
respectively. The total cumulative amount of capital grant claims submitted
through June 28, 1998 for the Castlebar facility was $1.1 million; no capital
grant claims had been received for the Castlebar facility. Under separate
agreements with the IDA, the Company receives direct reimbursement of training
costs at its Galway and Castlebar facilities for up to $3,000 and $12,500,
respectively, per new employee hired. The total cumulative amounts of training
grant claims submitted and received through June 28, 1998 for the Galway
facility were approximately $1.7 million and $1.2 million, respectively. The
total cumulative amount of training grant claims submitted through June 28, 1998
for the Castlebar facility was approximately $0.6 million; no training grant
claims had been received for the Castlebar facility.
9
<PAGE>
During the first quarter of 1998, the Company began establishing a manufacturing
operation in China. The Company is leasing a 50,000 square foot facility in
Suzhou and expects to begin manufacturing selected products at this facility
during the second half of 1998. Capital expenditures for the China expansion
will be financed from operating cash. In August 1998, the Company purchased a
third manufacturing facility in the Philippines for approximately $750,000,
financed from operating cash. The Company continues to evaluate international
manufacturing expansion including additional locations in the Far East and South
America.
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
Early in the second quarter of 1998, the Company entered into a definitive
agreement with the principal management shareholders of Silcon A/S to acquire
stock of Silcon, a Denmark-based manufacturer of three-phase UPSs up to 480 kVA,
and the Company commenced a tender offer for Silcon shares. In June 1998, the
initial tender offer and purchase of stock from principal management
shareholders was completed enabling the Company to operate Silcon as a majority-
owned subsidiary. The initial cash outlay of $54 million was financed from
operating cash.
The purchase price was allocated to the net assets acquired and to acquired in-
process research and development (acquired R&D). Acquired R&D includes the
value of products in the development stage and not considered to have reached
technological feasibility. In accordance with applicable accounting rules,
acquired R&D is required to be expensed. Accordingly, $7.4 million of the
acquisition cost was expensed in the second quarter of 1998. The remaining
purchase price exceeded the fair value of net assets acquired by approximately
$39 million, which will be amortized on a straight-line basis over periods
ranging from 10-20 years. The acquisition has been accounted for as a purchase
and, accordingly, 75% of Silcon's assets and liabilities are included in the
Company's consolidated balance sheet as of June 28, 1998. Silcon's results of
operations will be included in the Company's consolidated financial statements
beginning in the third quarter of 1998.
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, net.
The Company invoices its customers in Japan, Great Britain, Germany, and France,
in their respective local currencies. At June 28, 1998 the Company's unhedged
foreign currency accounts receivable, by currency, were as follows:
(In thousands) Foreign Currency U.S. Dollars
Japanese Yen 987,042 6,951
British Pounds 3,434 5,733
German Marks 14,869 8,261
French Francs 34,887 5,795
Total gross accounts receivable at June 28, 1998 was approximately $197.8
million. The Company had non-trade receivables of 2.2 million Irish Pounds
(approximately US$3.1 million), as well as Irish Pound denominated liabilities
of 9.5 million (approximately US$13.3 million). The Company also had
liabilities denominated in various European currencies of US$11.1 million, as
well as Yen denominated liabilities of approximately US$2.6 million.
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.
10
<PAGE>
Recently Issued Accounting Standards
During 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information, which 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.
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities, which establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives), and for hedging activities.
This Statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. The adoption of this Statement is not expected to have a
material impact on the Company's financial position or results of operations.
The AICPA Accounting Standards Executive Committee recently issued Statement of
Position ("SOP") 98-1, Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use. This SOP requires that certain costs related to
the development or purchase of internal-use software be capitalized and
amortized over the estimated useful life of the software, and is effective for
fiscal years beginning after December 15, 1998. The SOP also requires that
costs related to the preliminary project stage and post
implementation/operations stage in an internal-use computer software development
project be expensed as incurred. The adoption of this SOP is not expected to
have a material impact on the Company's financial position or results of
operations.
The AICPA Accounting Standards Executive Committee recently issued Statement of
Position ("SOP") 98-5, Reporting on the Costs of Start-Up Activities. This SOP
requires that costs incurred during start-up activities, including organization
costs, be expensed as incurred, and is effective for fiscal years beginning
after December 15, 1998. The adoption of this SOP is expected to have no impact
on the Company's financial position or results of operations.
Factors That May Affect Future Performance
Statements contained in this document that do not describe historical facts may
constitute 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
include the following: the ability of APC to operate Silcon as a less than
wholly-owned subsidiary; APC's ability to successfully integrate Silcon's
operations; 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; the effects of any other possible 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; risks associated with the Year 2000 issue; 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 28, 1998
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 26, 1998, the Company announced that it had reached agreements-in-
principle to settle five purported class action lawsuits that were filed in the
United States District Court for the District of Rhode Island in August 1995
(the "Federal Class Action") and a derivative action lawsuit that was filed in
the Massachusetts Superior Court for Suffolk County in February 1996 (the "State
Derivative Action"). The settlements of the Federal Class Action and the State
Derivative Action were both contingent upon certain events, including approval
by the respective courts in which the lawsuits were filed. The settlement of
the State Derivative Action has been finally approved by the Massachusetts
Superior Court. The settlement of the Federal Class Action has been finally
approved by the United States District Court for the District of Rhode Island.
Although the Company believes that the allegations in both the Federal Class
Action and the State Derivative Action are without merit and defended the
lawsuits vigorously, it concluded that settlement of the lawsuits on the terms
of the settlement agreements was in the Company's best interests. The entire
settlement amount was borne by the liability insurance carrier which insures the
Company, its directors, and its officers.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held on May 1, 1998 at which the
shareholders of the Company approved the following:
(i) by a vote of 83,002,003 shares in favor, 1,184,025 opposed, and 226,387
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 Against
Rodger B. Dowdell, Jr. 83,205,222 1,207,193
James D. Gerson 83,187,076 1,225,339
Emanuel E. Landsman 83,185,137 1,227,278
Ervin F. Lyon 83,187,337 1,225,078
Neil E. Rasmussen 83,177,229 1,235,186
ITEM 5. OTHER INFORMATION
The deadline for submission of proposals by shareholders pursuant to Rule 14a-8
issued under the Securities Exchange Act of 1934 (the "Act"), which are intended
for inclusion in the proxy statement to be furnished to all shareholders
entitled to vote at the next annual meeting of shareholders of the Company, is
November 23, 1998. Pursuant to recent amendments to the rules relating to proxy
statements under the Act, the shareholders of the Company are hereby notified
that the deadline for providing timely notice to the Company of matters that
shareholders desire to introduce at the next annual meeting of shareholders of
the Company (which are not otherwise submitted for inclusion in the proxy
statement in accordance with the preceding sentence) is February 6, 1999.
Management proxies will be authorized to exercise discretionary authority with
respect to any such shareholder proposal not included in the Company's proxy
materials for the next annual meeting unless the Company receives notice of such
proposal prior to February 6, 1999 and the conditions set forth in Rule 14a-
14(c)(2)(i)-(iii) under the Act are met. In order to curtail any controversy as
to the date on which a proposal was received by the Company, it is suggested
that proponents submit their proposals by Certified Mail, Return Receipt
Requested.
12
<PAGE>
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 reports on Form 8-K were filed by American Power Conversion Corporation
during the quarter ended June 28, 1998.
13
<PAGE>
FORM 10-Q
June 28, 1998
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 12, 1998
/s/ Donald M. Muir
Donald M. Muir
Chief Financial Officer
(Principal Accounting And Financial Officer)
14
<PAGE>
FORM 10-Q
June 28, 1998
EXHIBIT 11
<TABLE>
AMERICAN POWER CONVERSION CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(In thousands except for earnings per share)
<CAPTION>
Six months ended Three months ended
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
(Unaudited)
<S> <C> <C> <C> <C>
Basic
Net income $53,498 $47,586 $26,772 $26,611
Basic weighted average shares outstanding 95,349 94,796 95,394 95,049
Basic earnings per share $ .56 $ .50 $ .28 $ .28
Diluted
Net income $53,498 $47,586 $26,772 $26,611
Basic weighted average shares outstanding 95,349 94,796 95,394 95,049
Net effect of dilutive potential common shares
outstanding based on the treasury stock
method using the average market price 1,280 1,132 1,346 1,027
Diluted weighted average shares outstanding 96,629 95,928 96,740 96,076
Diluted earnings per share $ .55 $ .50 $ .28 $ .28
</TABLE>
15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET AT JUNE 28, 1998 AND CONSOLIDATED CONDENSED
STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 28, 1998 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-31-1998
<PERIOD-END> JUN-28-1998
<EXCHANGE-RATE> 1.00
<CASH> 203,310,000
<SECURITIES> 0
<RECEIVABLES> 197,811,000
<ALLOWANCES> 14,452,000
<INVENTORY> 199,777,000
<CURRENT-ASSETS> 628,895,000
<PP&E> 197,194,000
<DEPRECIATION> 68,374,000
<TOTAL-ASSETS> 798,790,000
<CURRENT-LIABILITIES> 210,390,000
<BONDS> 0
0
0
<COMMON> 956,000
<OTHER-SE> 576,411,000
<TOTAL-LIABILITY-AND-EQUITY> 798,790,000
<SALES> 479,528,000
<TOTAL-REVENUES> 479,528,000
<CGS> 263,298,000
<TOTAL-COSTS> 406,290,000
<OTHER-EXPENSES> 6,979,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 80,217,000
<INCOME-TAX> 26,719,000
<INCOME-CONTINUING> 53,498,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,498,000
<EPS-PRIMARY> 0.56
<EPS-DILUTED> 0.55
</TABLE>
