U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 11-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 (No Fee Required)
For the fiscal year ended December 31, 2002
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from ______________ to ______________
Commission File Number 1-12432
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
American Power Conversion Corporation 401(k) Plan
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
American Power Conversion Corporation
132 Fairgrounds Road
West Kingston, Rhode Island 02892
1
REQUIRED INFORMATION
A. Financial Statements and Schedules Page
Independent Auditors' Report 5
Statements of Net Assets Available for Plan Benefits
as of December 31, 2002 and 2001 6
Statements of Changes in Net Assets Available for Plan
Benefits for the Years Ended December 31, 2002 and 2001 7
Notes to Financial Statements 8-13
Schedule I - Schedule of Assets Held for Investment
Purposes as of December 31, 2002 14
B. Exhibit Listing
Exhibit
Number Description
23 Consent of KPMG LLP 15
99.1 Certification 16
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
AMERICAN POWER CONVERSION CORPORATION 401(K) PLAN
(Name of Plan)
By: American Power Conversion Corporation, Plan Administrator
By: /s/ Donald M. Muir
- -------------------------------------------------
Donald M. Muir,
Senior Vice President, Finance and Administration,
Treasurer and Chief Financial Officer
June 30, 2003
2
AMERICAN POWER CONVERSION CORPORATION
401(K) PLAN
Financial Statements and Schedules
December 31, 2002 and 2001
(With Independent Auditors' Report Thereon)
3
AMERICAN POWER CONVERSION CORPORATION
401(K) PLAN
December 31, 2002 and 2001
Table of Contents
Page
Independent Auditors' Report 5
Statements of Net Assets Available for Plan Benefits 6
Statements of Changes in Net Assets Available for Plan Benefits 7
Notes to Financial Statements 8-13
Schedule
1 Schedule of Assets Held for Investment Purposes as of December 31, 2002 14
Note: Certain schedules as required by Section 103(b)(3) of the Employee
Retirement Income Security Act of 1974, have not been included
herein as the information is not applicable.
4
Independent Auditors' Report
The 401(k) Plan Committee
American Power Conversion Corporation:
We have audited the accompanying statements of net assets available for plan
benefits of the American Power Conversion Corporation 401(k) Plan as of
December 31, 2002 and 2001, and the related statements of changes in net assets
available for plan benefits for the years then ended. These financial statements
are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the
American Power Conversion Corporation 401(k) Plan as of December 31, 2002 and
2001, and the changes in net assets available for plan benefits for the years
then ended, in conformity with accounting principles generally accepted in the
United States of America.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Assets (Held
at End of Year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements, but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This supplemental schedule is the responsibility of the Plan's management.
The supplemental schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements as of December 31, 2002, and in
our opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
Providence, Rhode Island /s/ KPMG LLP
May 19, 2003
5
AMERICAN POWER CONVERSION CORPORATION
401(k) PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 2002 and 2001
2002 2001
Cash $8,113 $16,576
Receivables:
Employer's contribution 214,376 231,031
Accrued income 29,341 28,098
Participants' contributions 12,675 25,719
264,505 301,424
Investments (note 3):
American Power Conversion Corporation common stock 14,654,355 11,577,849
Investments in common/collective trusts:
Merrill Lynch Equity Index Trust 1,771,796 1,585,608
Merrill Lynch Retirement Preservation Trust 2,077,141 1,494,006
3,848,937 3,079,614
Mutual Funds:
Blackrock Small Cap Growth - 1,797,916
Alliance Bond Fund Corporate - 895,651
Merrill Lynch Equity Income Fund Class A 1,491,132 1,456,492
Merrill Lynch Fundamental Growth Fund Class A 2,416,310 2,645,505
Ivy International Fund - 1,541,169
MFS Massachusetts Investors Growth 2,065,983 2,405,264
Pimco Total Return Fund Class A 1,593,483 -
MFS New Discovery Fund Class A 1,419,109 -
Ariel Fund 828,599 -
Templeton Foreign Fund 1,564,861 -
Merrill Lynch Basic Value Fund Class A 2,471,324 2,388,714
13,850,801 13,130,711
Loans to participants 677,545 607,400
Total investments 33,031,638 28,395,57
Net assets available for plan benefits $33,296,143 $28,696,998
See accompanying notes to financial statements.
6
AMERICAN POWER CONVERSION CORPORATION
401(k) PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years ended December 31, 2002 and 2001
2002 2001
Additions (deductions) to net assets attributed to:
Investment income (loss):
Net realized losses $(523,374) $(113,874)
Net unrealized losses (2,168,044) (1,437,293)
Interest 45,001 45,287
Dividends 354,523 433,634
(2,291,894) (1,072,246)
Contributions:
Participants 5,849,578 6,153,265
Employer 3,256,767 3,332,109
9,106,345 9,485,374
Total additions 6,814,451 8,413,128
Deductions from net assets attributed to:
Distributions paid to participants 2,200,626 1,805,572
Total deductions 2,200,626 1,805,572
Net increase prior to other 4,613,825 6,607,556
Other (14,680) (4,093)
Net increase in net assets available for
benefits 4,599,145 6,603,463
Net assets available for benefits:
Beginning of year 28,696,998 22,093,535
End of year $33,296,143 $28,696,998
See accompanying notes to financial statements.
7
AMERICAN POWER CONVERSION CORPORATION
401(k) PLAN
Notes to Consolidated Financial Statements
December 31, 2002 and 2001
(1) Description of Plan
The following brief description of the American Power Conversion Corporation
401(k) Plan (the Plan) provides only general information. Participants
should refer to the Plan agreement for a more complete description of the
Plan's provisions.
(a) General
The Plan is a qualified defined contribution plan covering American
Power Conversion Corporation (the Company) employees who have completed
at least 45 days of service with the Company. The Plan covers all U.S.
employees working for the Company and the Participating Affiliates, APC
America, Inc., APC Sales and Service Corporation, Systems Enhancement
Corporation, Advanced Power, Inc., ABL Electronics Corp. and Airflow
Company. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA).
(b) Contributions
The maximum salary savings (pre-tax) contribution that an employee may
elect to contribute to the Plan is the lesser of 15% of annual gross
compensation or the limit established by the IRS ($11,000 for 2002 and
$10,500 for 2001). The Company may match this salary savings
contribution at a rate of up to 100% of the first 3%, and during 1999,
the Plan was amended to match up to 50% of the next 3% of the
participant's salary and wage compensation, excluding bonuses,
commissions, incentive compensation, taxable fringe benefits, moving
expenses, auto and other allowances, and disqualifying dispositions of
Company stock. Matching contributions are subject to a maximum amount of
6% per participant. The Company may also make discretionary profit-
sharing contributions to the Plan. All employer matching and profit-
sharing contributions are deposited to the American Power Conversion
Corporation Common Stock Fund.
There were no discretionary contributions made for the 2002 or 2001 Plan
year.
(c) Vesting
Participants are fully vested to the extent of their salary savings
contributions and earnings on those contributions. Furthermore, the Plan
was amended in 1999, such that participants are immediately vested in
employer matching contributions and the related earnings. However, any
discretionary (profit-sharing) contributions vest on a schedule of 25%
after 2 years of service, and an additional 25% per year thereafter
until 100% vesting is reached after 5 years of service.
(d) Loans to Participants
Participants may borrow from their vested account balance under certain
circumstances as provided in the Plan agreement. The minimum loan amount
is $1,000 and participants may borrow the lesser of 50% of their vested
account balance or $50,000. Interest on loans is charged at the
prevailing commercial interest rate for loans of a similar type (Prime
plus 1%) with a repayment term not to exceed five years. This term can
be extended if the loan is used for the purchase of the participant's
primary residence. A participant may not have more than one loan
outstanding at any time.
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(e) Payment of Account Balances
Upon termination from the Plan, a participant's vested accrued balance
in his or her account shall be distributed, as elected by the
participant, in either a single lump-sum payment, or, provided the
participant's vested account exceeds $5,000, in periodic installments
not to exceed the participant's lifetime, or the joint lifetime of the
participant and his/her spouse. Distributions may also be made in cash
or in kind, or part cash and part in kind over a period not to exceed
the participant's lifetime, or the joint lifetime of the participant and
his/her spouse.
(f) Hardship Withdrawal
The Plan provides for hardship withdrawals, as defined by the Plan, from
the participant's account. Participants who take a hardship withdrawal
must be suspended from contributing to the Plan for a period of 6 months
following the date of the withdrawal.
(g) Forfeitures
Forfeitures related to discretionary contributions are allocated to
remaining participants in the succeeding plan year in the ratio that the
compensation of each participant for the plan year bears to the total
compensation of all participants entitled to share in the contributions
so long as the forfeiture allocation group meets the requirements of
Code Section 410(b). If the forfeiture allocation group does not meet
the requirements of Code Section 410(b), then the trustee shall allocate
non-highly compensated participants in the forfeiture allocation group
an amount in the ratio that such compensation of each non-highly
compensated participant in the group bears to the total compensation of
all non-highly compensated participants. No forfeiture allocations are
made to highly compensated employees.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying financial statements of the Plan have been prepared
using the accrual basis of accounting in accordance with accounting
principles generally accepted in the United States of America.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of additions
and deductions to net assets available for plan benefits during the
reporting period. Actual results could differ from those estimates.
(b) Investments
Investments are stated at aggregate fair market values. Loans are valued
at cost, which approximates fair value. Quoted market prices are used to
value investments.
Purchases and sales of securities are recorded on a trade-date basis.
Dividends are recorded on the ex-dividend date.
9
(c) Expenses
All expenses of the Plan are paid by the Company in accordance with the
Plan agreement, with the exception of loan set-up fees, which are paid
by each participant receiving a loan, and are paid out of the
participant's account. In 2002 and 2001, these administrative expenses
totaled $8,642 and $4,093, respectively, and are included in the
"Statement of Changes in Net Assets Available for Plan Benefits" under
the heading "Other".
(d) Payment of Account Balances
Distributions are recorded when paid.
(3) Investments
The Plan's investments are held in trust and managed by Merrill Lynch.
Participants may direct employer and employee contributions into any of the
investment options listed below. The following table summarizes the
investments held by Merrill Lynch at December 31, 2002 and 2001. Investments
representing 5% or more of net assets available for plan benefits are
indicated by an asterisk (*).
2002 2001
Number of Fair Market Number of Fair Market
shares value shares value
American Power Conversion
Corporation common stock
(note 4) 967,284 $14,654,355* 800,681 $11,577,849*
Merrill Lynch Equity Index
Trust 28,281 1,771,796* 19,672 1,585,608*
Merrill Lynch Retirement
Preservation Trust 2,077,141 2,077,141* 1,494,006 1,494,006*
Blackrock Small Cap Growth - - 143,718 1,797,916*
Alliance Bond Fund
Corporate - - 73,114 895,651
Merrill Lynch Equity
Income Fund Class A 147,345 1,491,132 125,776 1,456,492*
Merrill Lynch Fundamental
Growth Fund Class A 187,166 2,416,310* 146,080 2,645,505*
Ivy International Fund - - 74,489 1,541,169*
MFS Massachusetts Investor
Growth 223,833 2,065,983* 186,599 2,405,264*
Merrill Lynch Basic Value
Fund Class A 105,793 2,471,324* 81,582 2,388,714*
Templeton Foreign Fund 188,311 1,564,861 - -
Pimco Total Return Fund
Class A 149,342 1,593,483 - -
MFS New Discovery Fund
Class A 124,157 1,419,109 - -
Ariel Fund 23,513 828,599 - -
10
A brief description of each current fund's investment objective follows:
Merrill Lynch Equity Index Trust invests primarily in a portfolio of
equity securities designed to match the performance of the S&P 500
Index.
Merrill Lynch Retirement Preservation Trust seeks to provide
preservation of capital, liquidity, and current income at levels that
are typically higher than those provided by money market funds.
Merrill Lynch Equity Income Fund Class A provides shareholders with long-
term total return by investing primarily in a diversified portfolio of
dividend-paying common stocks that yield more than the S&P 500 Index.
Total return is the aggregate of income and capital value changes.
Merrill Lynch Fundamental Growth Fund Class A seeks long-term growth of
capital by investing in a diversified portfolio of equity securities,
placing particular emphasis on companies that have exhibited above-
average growth rates in earnings.
MFS Massachusetts Investors Growth seeks to provide long-term growth of
capital and future income rather than current income. The fund may
invest up to 50% of its total assets in foreign securities, including
securities of issuers located in developing markets.
Merrill Lynch Basic Value Fund Class A seeks capital appreciation, and
secondarily, income, by investing primarily in equities that appear to
be undervalued.
Templeton Foreign Fund seeks to achieve long-term capital growth through
a flexible policy of investing in the equity and debt securities of
companies and governments outside the U.S. Although the Fund primarily
invests in common stocks, it also may invest in preferred stocks and
certain debt securities, rated or unrated.
Pimco Total Return Fund Class A seeks to maximize total return,
consistent with preservation of capital and prudent investment
management. Under normal circumstances, the Fund invests at least 65%
of its total assets in a diversified portfolio of fixed-income
securities of varying maturities.
MFS New Discovery Fund Class A seeks capital appreciation by investing
at least 65% of its total assets in U.S. or foreign companies that Fund
management believes offer superior prospects for growth.
Ariel Fund seeks long-term capital appreciation by investing in
companies with market capitalization primarily under $1.5 billion at the
time of investment, with an emphasis on small-cap stocks.
American Power Conversion Corporation common stock is offered to Plan
participants as an additional investment option. Merrill Lynch purchases the
shares in the open market at the time contributions are received. The timing
of all stock transactions is subject to the availability of American Power
Conversion Corporation common stock on the open market, and prices are set
by the market.
11
(4) Nonparticipant-Directed Investments
The employer matching contribution is entirely directed to purchasing shares
of common stock of American Power Conversion Corporation. However, once the
employer match is invested in this fund the participant may reallocate the
investment to any of the other funds in the Plan restricted only by the
closed employee stock trading periods. Furthermore, employees may elect to
direct a portion of their 401(k) contribution towards purchasing shares of
common stock of American Power Conversion Corporation.
Information about the net assets and the components of the changes in net
assets relating to shares of common stock of American Power Conversion
Corporation is as follows:
December 31,
2002 2001
Net assets:
American Power Conversion Corp.
common stock $14,869,402 $11,811,194
Changes in net assets:
Contributions $3,871,791 $4,453,629
Net realized (losses) gains (92,095) 180,933
Net unrealized gains 1,131,590 1,273,783
Benefits paid to participants (834,268) (711,566)
Interest on outstanding
participant loans 6,528 10,285
Net interfund transfers out (1,075,837) (346,620)
Loan repayments 50,499 57,720
$3,058,208 $4,918,164
(5) Plan Termination
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate
the Plan subject to the provisions of ERISA. In the event of Plan
termination, participants will be fully vested in their accounts.
(6) Tax Status
The Internal Revenue Service has determined and informed the Company by a
letter dated October 6, 2000, that the Plan and related trust are designed
in accordance with applicable sections of the Internal Revenue Code (IRC).
Although the Plan has been amended since receiving the determination letter,
the Plan administrator and the Plan's tax counsel believe that the Plan is
designed and is currently being operated in compliance with the applicable
requirements of the IRC.
(7) Related-Party Transactions
Certain Plan investments are shares of mutual funds managed by Merrill
Lynch. Merrill Lynch is the trustee as defined by the Plan and, therefore,
these transactions qualify as party-in-interest transactions.
12
(8) Realized/Unrealized Gains and Losses
Net realized and unrealized gains and (losses) by investment type for the
year ended December 31, 2002 and 2001 were comprised of the following:
2002 2001
Realized Unrealized Realized Unrealized
Common stocks $(92,095) $1,131,590 $180,932 $1,273,783
Common/collective trusts (400,551) (395,003) (16,666) (141,705)
Mutual funds (30,728) (2,904,631) (278,140) (2,569,371)
Total $(523,374) $(2,168,044) $(113,874) $(1,437,293)
(9) Asset Transfer from Other Plans
In December 2002, the Board of Directors of the Company voted to merge the
assets of the American Power Conversion Employee Stock Ownership Plan
("ESOP") into the American Power Conversion Corporation 401(k) Plan during
the 2003 Plan year. During May 2003, the participants of the ESOP were
notified of the anticipated merger, which is expected to be effective on
July 1, 2003.
13
Schedule 1
AMERICAN POWER CONVERSION CORPORATION
401(k) PLAN
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2002
Identity of issuer,
borrower, lessor, Description of Current
or similar party Investment Cost Value
*American Power
Conversion Corp. Common Stock $13,465,248 $14,654,355
*Merrill Lynch EquityIndex Trust 2,166,799 1,771,796
*Merrill Lynch Retirement Preservation Trust 2,077,141 2,077,141
*Merrill Lynch Equity Income Fund Class A 1,679,029 1,491,132
*Merrill Lynch Fundamental Growth Fund Class A 3,212,217 2,416,310
MFS Massachusetts Investors Growth 2,714,224 2,065,983
Templeton Foreign Fund 1,787,375 1,564,861
Pimco Total Return Fund Class A 1,575,857 1,593,483
MFS New Discovery Fund Class A 1,952,881 1,419,109
Ariel Ariel Fund 904,329 828,599
*Merrill Lynch Basic Value Fund Class A 2,986,770 2,471,324
*Loans to participants Various loans with interest
(177 loans) rates of 5.25% to 10.5% - 677,545
$33,031,638
* Indicates a party-in-interest to the Plan.
See accompanying independent auditors' report.
14
Exhibit 23
Independent Auditors' Consent
The Board of Directors
American Power Conversion Corporation:
We consent to incorporation by reference in the registration statements of
American Power Conversion Corporation on Form S-8 (File Nos. 33-25873,
33-54416, 333-32563, 333-78595, 333-80541, 333-80569 and 333-91994) of our
report dated May 19, 2003, relating to the statements of net assets available
for plan benefits of the American Power Conversion Corporation 401(k) Plan as
of December 31, 2002 and 2001, and the related statements of changes in net
assets available for plan benefits for the years then ended, and the related
supplementary schedule, which report appears in the December 31, 2002 annual
report on Form 11-K of the American Power Conversion Corporation 401(k) Plan.
Providence, Rhode Island /s/ KPMG LLP
June 27, 2003
15
Exhibit 99.1
Certification
In connection with the Annual Report for the American Power Conversion
Corporation 401(k) Plan (the "Plan") on Form 11-K for the fiscal year
ended December 31, 2002 as filed with the Securities and Exchange Commission
on the date hereof (the "Report"), I, Donald M. Muir, in my capacity as Senior
Vice President, Finance and Administration, Treasurer and Chief Financial
Officer of American Power Conversion Corporation, the Plan Administrator of
the Plan, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant
to section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the net assets available for benefits and the changes in
net assets available for benefits of the Plan.
By: /s/ Donald M. Muir
- ------------------------------------------------
Donald M. Muir,
Senior Vice President, Finance and Administration,
Treasurer and Chief Financial Officer,
American Power Conversion Corporation, Plan Administrator
June 30, 2003
The foregoing certification is being furnished solely pursuant to section 906
of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350,
chapter 63 of title 18, United States Code) and is not being filed as part of
a separate disclosure document.
16