-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KTxwUemna4qaEnHVRii4D9htdjgR8G2GirYFRMHL3hEFvPgL9OEhqchZtHyf/Ic9 l0dtQ4FBsgReywMNiMQpVg== 0000835910-97-000027.txt : 19971114 0000835910-97-000027.hdr.sgml : 19971114 ACCESSION NUMBER: 0000835910-97-000027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970928 FILED AS OF DATE: 19971112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN POWER CONVERSION CORPORATION CENTRAL INDEX KEY: 0000835910 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL INDUSTRIAL APPARATUS [3620] IRS NUMBER: 042722013 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12432 FILM NUMBER: 97714963 BUSINESS ADDRESS: STREET 1: 132 FAIRGROUNDS RD CITY: WEST KINGSTON STATE: RI ZIP: 02892 BUSINESS PHONE: 4017895735 MAIL ADDRESS: STREET 1: 132 FAIRGROUNDS ROAD CITY: WEST KINGSTON STATE: RI ZIP: 02892 10-Q 1 FORM 10-Q 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 September 28, 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 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 November 6, 1997 - 95,199,000 shares 1 FORM 10-Q September 28, 1997 AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES INDEX Page No. Part I - Financial Information: Item 1. Consolidated Condensed Financial Statements: Consolidated Condensed Balance Sheets - September 28, 1997 (Unaudited) and December 31, 1996 3 - 4 Consolidated Condensed Statements of Income - Nine Months and Three Months Ended September 28, 1997 and September 30, 1996 (Unaudited) 5 Consolidated Condensed Statements of Cash Flows - Nine Months and Three Months Ended September 28, 1997 and September 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 6. Exhibits and Reports on Form 8-K 12 Signatures 13 2 FORM 10-Q September 28, 1997 PART I - CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ITEM 1 - FINANCIAL STATEMENTS AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands) ASSETS
September 28, December 31, 1997 1996 (Unaudited) Current assets: Cash and cash equivalents $211,901 $153,234 Accounts receivable, less allowance for doubtful accounts of $13,095 in 1997 and $10,789 in 1996 139,483 108,544 Inventories: Raw materials 60,753 68,657 Work-in-process and finished goods 58,091 61,786 Total inventories 118,844 130,443 Prepaid expenses and other current assets 11,959 11,610 Deferred income taxes 25,390 20,284 Total current assets 507,577 424,115 Property, plant and equipment: Land, buildings and improvements 27,309 18,710 Machinery and equipment 76,403 64,986 Office equipment and furniture 29,148 23,299 Purchased software 8,750 7,357 141,610 114,352 Less accumulated depreciation and amortization 48,308 35,655 Net property, plant and equipment 93,302 78,697 Other assets 1,569 1,190 Total assets $602,448 $504,002
See accompanying notes to consolidated condensed financial statements 3 FORM 10-Q September 28, 1997 AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED) (In thousands) LIABILITIES AND SHAREHOLDERS' EQUITY
September 28, December 31, 1997 1996 (Unaudited) Current liabilities: Accounts payable $34,387 $41,587 Accrued expenses 14,174 12,576 Accrued compensation 17,825 12,217 Accrued sales and marketing programs 20,308 16,360 Accrued pension contributions 6,020 6,290 Income taxes payable 20,141 17,294 Total current liabilities 112,855 106,324 Deferred tax liability 6,846 5,780 Total liabilities 119,701 112,104 Shareholders' equity: Common stock, $.01 par value; authorized 200,000 shares; issued 95,308 shares in 1997, 94,417 shares in 1996 953 944 Additional paid-in capital 54,049 48,374 Retained earnings 429,296 344,131 Treasury stock, 125 shares, at cost (1,551) (1,551) Total shareholders' equity 482,747 391,898 Total liabilities and shareholders' equity $602,448 $504,002
See accompanying notes to consolidated condensed financial statements 4 FORM 10-Q September 28, 1997 AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (In thousands, except earnings per share)
Nine months ended Three months ended September 28, September 30, September 28, September 30, 1997 1996 1997 1996 (Unaudited) Net sales $621,653 $496,818 $246,044 $193,755 Cost of goods sold 340,482 289,311 132,471 111,771 Gross margin 281,171 207,507 113,573 81,984 Operating expenses: Marketing, selling, general and administrative 144,987 106,627 55,705 38,217 Research and development 15,782 10,683 6,186 3,457 Total operating expenses 160,769 117,310 61,891 41,674 Operating income 120,402 90,197 51,682 40,310 Other income, net 2,750 3,365 2,002 1,646 Earnings before income taxes 123,152 93,562 53,684 41,956 Income taxes 38,793 31,343 16,911 14,055 Net income $84,359 $62,219 $36,773 $27,901 Earnings per share $ .88 $ .66 $ .38 $ .30 Weighted average common stock and common stock equivalents outstanding 96,125 93,995 96,495 94,401
See accompanying notes to consolidated condensed financial statements 5 FORM 10-Q September 28, 1997 AMERICAN POWER CONVERSION CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In thousands)
Nine months ended Three months ended September 28, September 30, September 28, September 30, 1997 1996 1997 1996 (Unaudited) Cash flows from operating activities Net income $84,359 $62,219 $36,773 $27,901 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,335 9,003 4,918 3,559 Provision for doubtful accounts 3,455 3,188 1,327 910 Deferred taxes (4,327) (6,120) 2,884 (3,699) Changes in operating assets and liabilities: Increase in accounts receivable (33,810) (34,307) (23,085) (17,020) Decrease in inventories 11,958 36,798 40,749 5,244 Decrease (increase) in prepaid expenses and other current assets (1,025) (2,927) 837 (981) Decrease (increase) in other assets 507 (157) (18) (19) Increase (decrease) in accounts payable (7,678) 20,713 (3,784) 18,505 Increase in accrued expenses 9,834 16,098 9,616 9,280 Increase in income taxes payable 2,847 12,297 6,197 10,706 Net cash provided by operating activities 79,455 116,805 76,414 54,386 Cash flows from investing activities Capital expenditures, net of capital grants (26,570) (15,863) (8,057) (7,157) Cash acquired in acquisition 101 - - - Net cash used in investing activities (26,469) (15,863) (8,057) (7,157) Cash flows from financing activities Proceeds from issuances of common stock 5,681 8,101 739 2,242 Purchases of common stock - (1,551) - (65) Net cash provided by financing activities 5,681 6,550 739 2,177 Net increase in cash and cash equivalents 58,667 107,492 69,096 49,406 Cash and cash equivalents at beginning of period 153,234 39,040 142,805 97,126 Cash and cash equivalents at end of period $211,901 $146,532 $211,901 $146,532 Supplemental cash flow disclosures Cash paid during the period for income taxes (net of refunds) $34,260 $25,166 $8,716 $8,709
See accompanying notes to consolidated condensed financial statements 6 FORM 10-Q September 28, 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 FORM 10-Q September 28, 1997 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS: Revenues Net sales were $246.0 million for the third quarter of 1997, an increase of 27.0% compared to $193.8 million for the same period in 1996. Net sales for the first nine months of 1997 were $621.7 million compared to $496.8 million in 1996, an increase of 25.1%. 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 (excluding Canada) in the third quarter of 1997 were up 27% versus the third quarter of 1996, while the North American market also continued to be strong with net sales up 27%. International sales (excluding Canada) comprised 36% of net sales in the third quarter of 1997 and 1996. Cost of Goods Sold Cost of goods sold was $132.5 million or 53.8% of net sales in the third quarter of 1997 compared to $111.8 million or 57.7% in the third quarter of 1996. Cost of goods sold was $340.5 million or 54.8% of net sales in the first nine months of 1997 compared to $289.3 million or 58.2% in the nine months of 1996. Gross margins improved by approximately 390 basis points during the third quarter and approximately 340 basis points during the first nine months of 1997 over the comparable periods in 1996. The improvements were primarily attributable to volume production efficiencies combined with continued improvement in margins on lower cost Back-UPSr products manufactured in the Philippines. Total inventory reserves at September 28, 1997 were $20.0 million compared to $16.1 million at December 31, 1996. Second generation Smart-UPSr represented approximately 7% of total inventories at September 28, 1997 compared to 5% of total inventories at 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 $55.7 million or 22.6 % of net sales for the third quarter of 1997 compared to $38.2 million or 19.7% of net sales for the third quarter of 1996. SG&A expenses were $145.0 million or 23.3% of net sales for the first nine months of 1997 compared to $106.6 million or 21.5% of net sales for the first nine months 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 September 28, 1997 was 8.6% of accounts receivable, compared to 9.0% at December 31, 1996. The Company continues to experience strong collection performance. Accounts receivable balances outstanding over 60 days represented 10.7% of total receivables, up from 9.1% at December 31, 1996 due to the timing of customer payments received in early October. 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 $6.2 million or 2.5% of net sales and $3.5 million or 1.8% of net sales for the third quarter of 1997 and 1996, respectively. Research and development expenses were $15.8 million or 2.5% of net sales and $10.7 million or 2.2% of net sales for the first nine months 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 Other Income, Net and Income Taxes Net foreign currency losses in the third quarter and first nine months 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 nine months 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 September 28, 1997 and September 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 September 28, 1997 was $394.7 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 capital investment required to expand its operations. The Company's cash position increased to $211.9 million at September 28, 1997 from $153.2 million at December 31, 1996. Worldwide inventories were $118.8 million at September 28, 1997 compared to $130.4 million at December 31, 1996. Inventories decreased substantially during the third quarter of 1997 due to operational improvements relating to component and finished goods planning, combined with work-in-process reductions associated with the Company's conversion to lean cellular manufacturing. The third quarter decrease more than offset the first half 1997 inventory build which 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 48% in the third quarter of 1997, 78% in the second quarter of 1997, 93% in the first quarter of 1997, and 62% in the fourth quarter of 1996. At September 28, 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 September 28, 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 nine months of 1997 consisted primarily of manufacturing and office equipment, and buildings and improvements. 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 September 28, 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. In January 1997, the Company purchased a second location in the Philippines for approximately $3 million. The Company began manufacturing selected products at this facility during the third quarter of 1997. Both Philippines facilities currently manufacture certain Back-UPS products sold in the Company's domestic and international markets. The Company's Galway, Ireland facility is providing manufacturing and technical support to service the Company's international customers. 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 September 28, 1997 was approximately $9.5 million. The total cumulative amount of capital grants received through 9 September 28, 1997 amounted to approximately $8.3 million. Under a separate agreement with the IDA, the Company receives up to $3,000 per new employee hired at the Galway facility for the direct reimbursement of training costs. The total cumulative amount of training grant claims submitted through September 28, 1997 was approximately $1.8 million. The total cumulative amount of training grants received through September 28, 1997 amounted to approximately $1.3 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 Castlebar, Ireland. The Company purchased and improved a 70,000 square foot facility at which the Company expects to begin manufacturing certain Matrix-UPS(TM) products beginning in the fourth quarter of 1997. The Company executed an agreement with the IDA under which the Company will receive grant monies equal to 60% of the costs incurred for machinery, equipment and building improvements for the Castlebar facility. The maximum amount attainable under the agreement is approximately $1.3 million. The grant monies would be repayable, in whole or in part, should (a) the Company fail to meet ertain 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 five years from the date of the last claim made by the Company for grant monies. Under a separate agreement with the IDA, the Company will also receive up to $12,500 per new employee hired at the Castlebar facility for the direct reimbursement of training costs. 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 Japanese customers in Yen. At September 28, 1997 the Company's unhedged foreign currency accounts receivable, by currency, were as follows: (In thousands) Foreign Currency U.S. Dollars British Pounds 3,781 6,060 French Francs 21,823 3,649 German Marks 10,826 6,082 Japanese Yen 925,577 7,525 Total gross accounts receivable at September 28, 1997 was approximately $152.6 million. The Company had non-trade receivables of 1,175 thousand Irish Pounds (approximately US$1,730 thousand), as well as Irish Pound denominated liabilities of 5,222 thousand (approximately US$7,688 thousand). The Company also had liabilities denominated in various European currencies of US$3,075 thousand, as well as Yen denominated liabilities of approximately US$3,583 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. 10 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 sought unspecified damages, costs, fees, and injunctive relief. On or about September 11, 1997, Trippe withdrew its lawsuit without prejudice. By stipulation of the parties, the court dismissed all claims in the lawsuit with prejudice on or about October 22, 1997. 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 FORM 10-Q September 28, 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 sought unspecified damages, costs, fees, and injunctive relief. On or about September 11, 1997, Trippe withdrew its lawsuit without prejudice. By stipulation of the parties, the court dismissed all claims in the lawsuit with prejudice on or about October 22, 1997. 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 September 28, 1997. 12 FORM 10-Q September 28, 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: November 12, 1997 /s/ Donald M. Muir Donald M. Muir Chief Financial Officer (Principal Accounting And Financial Officer) 13 FORM 10-Q September 28, 1997 EXHIBIT 11 AMERICAN POWER CONVERSION CORPORATION COMPUTATION OF EARNINGS PER SHARE (In thousands, except for earnings per share)
Nine months ended Three months ended September 28, September 30, September 28, September 30, 1997 1996 1997 1996 Primary Weighted average common stock outstanding 95,040 93,751 95,279 94,039 Net effect of dilutive stock options based on the treasury stock method using the average market price 1,085 244 1,216 362 Total 96,125 93,995 96,495 94,401 Net income $84,359 $62,219 $36,773 $27,901 Per share amount $ .88 $ .66 $ .38 $ .30 Fully diluted Weighted average common stock outstanding 95,040 93,751 95,279 94,039 Net effect of dilutive stock options based on the treasury stock method using the period end market price 1,375 544 1,375 562 Total 96,415 94,295 96,654 94,601 Net income $84,359 $62,219 $36,773 $27,901 Per share amount $ .87 $ .66 $ .38 $ .29
14 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED BALANCE SHEET AT SEPTEMBER 28, 1997 AND CONSOLIDATED CONDENSED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 U.S. DOLLARS 9-MOS DEC-31-1997 SEP-28-1997 1.00 211,901,000 0 152,578,000 13,095,000 118,844,000 507,577,000 141,610,000 48,308,000 602,448,000 112,855,000 0 0 0 953,000 481,794,000 602,448,000 621,653,000 621,653,000 340,482,000 501,251,000 2,750,000 0 0 123,152,000 38,793,000 84,359,000 0 0 0 84,359,000 0.88 0.87
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