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, 2003
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 Consolidated 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
Report of Independent Registered Public Accounting Firm 5
Statements of Net Assets Available for Plan Benefits
as of December 31, 2003 and 2002 6
Statements of Changes in Net Assets Available for Plan
Benefits for the Years Ended December 31, 2003 and 2002 7
Notes to Financial Statements 8-14
Schedule I - Schedule of Assets Held for Investment
Purposes as of December 31, 2003 15
B. Exhibit Listing
Exhibit
Number Description
23 Consent of Independent Registered Public Accounting Firm 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 CONSOLIDATED 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,
and Chief Financial Officer
June 28, 2004
2
AMERICAN POWER CONVERSION CORPORATION
CONSOLIDATED 401(K) PLAN
Financial Statements and Schedules
December 31, 2003 and 2002
(With Independent Auditors' Report Thereon)
3
AMERICAN POWER CONVERSION CORPORATION
CONSOLIDATED 401(K) PLAN
December 31, 2003 and 2002
Table of Contents
Page
Report of Independent Registered Public Accounting Firm 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 - 14
Schedule
1 Schedule H, Line 4i - Schedule of Assets (Held at End of Year) 15
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
Report of Independent Registered Public Accounting Firm
The Consolidated 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 Consolidated 401(k) Plan
(the Plan) as of December 31, 2003 and 2002, 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 standards of the Public Company
Accounting Oversight Board (United States). 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 Consolidated 401(k) Plan as of
December 31, 2003 and 2002, 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, 2003, and in
our opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ KPMG LLP
Providence, Rhode Island
May 28, 2004
5
AMERICAN POWER CONVERSION CORPORATION
CONSOLIDATED 401(K) PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 2003 and 2002
2003 2002
Cash $34,600 $8,113
Receivables:
Employer's contribution 290,119 214,376
Accrued income 30,016 29,341
Participants' contributions - 12,675
354,735 264,505
Investments (note 3):
American Power Conversion Corporation common stock 145,042,318 14,654,355
Investments in common/collective trusts:
Merrill Lynch Equity Index Trust 1 3,347,376 1,771,796
Merrill Lynch Retirement Preservation Trust 3,347,726 2,077,141
151,737,420 18,503,292
Mutual Funds:
Merrill Lynch Equity Dividend Fund Class 1 2,618,186 1,491,132
Merrill Lynch Fundamental Growth Class 1 4,059,880 2,416,310
Massachusetts Investors Growth Stock Fund Class A 3,262,392 2,065,983
Pimco Total Return Fund Class A 2,675,646 1,593,483
MFS New Discovery Fund Class A 2,831,099 1,419,109
Ariel Fund 2,563,063 828,599
Templeton Foreign Fund 2,865,631 1,564,861
Merrill Lynch Basic Value Fund Class 1 4,249,914 2,471,324
25,125,811 13,850,801
Loans to participants 1,269,204 677,545
Total investments 178,132,435 33,031,638
Net assets available for plan benefits $178,487,170 $33,296,143
See accompanying notes to financial Statements.
6
AMERICAN POWER CONVERSION CORPORATION
CONSOLIDATED 401(K) PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years ended December 31, 2003 and 2002
2003 2002
Additions (deductions) to net assets attributed to:
Investment income (loss):
Net realized gains (losses) $4,479,224 $(523,374)
Net unrealized gains (losses) 50,812,366 (2,168,044)
Interest 48,850 45,001
Dividends 971,284 354,523
56,311,724 (2,291,894)
Contributions:
Participants 6,993,274 5,849,578
Employer 3,754,420 3,256,767
10,747,694 9,106,345
Transfers in (note 1) 83,333,837 -
Total additions 150,393,255 6,814,451
Deductions from net assets attributed to:
Distributions paid to participants 5,196,842 2,200,626
Total deductions 5,196,842 2,200,626
Net increase prior to other 145,196,413 4,613,825
Other (5,386) (14,680)
Net increase in net assets available
for benefits 145,191,027 4,599,145
Net assets available for benefits:
Beginning of year 33,296,143 28,696,998
End of year $178,487,170 $33,296,143
See accompanying notes to financial statements.
7
AMERICAN POWER CONVERSION CORPORATION
CONSOLIDATED 401(K) PLAN
Notes to Financial Statements
December 31, 2003 and 2002
(1) Description of Plan
The following brief description of the American Power Conversion Corporation
Consolidated 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.
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. On July 1, 2003, the assets of the ESOP totaling
$83,333,837 were transferred to the Plan.
Effective July 1, 2003, the Company amended and restated the Plan in its
entirety to reflect the merger of the ESOP and renamed the Plan as the
American Power Conversion Corporation Consolidated 401(k) Plan.
(a) General
The Plan is a qualified defined contribution plan covering American
Power Conversion Corporation (the Company) employees who have completed
at least 30 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, APC DC Network Solutions, Inc. and ABL Electronics Corp.
The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
(b) Contributions
An employee may elect to contribute pre-tax savings subject to a maximum
of 80% of annual compensation or the dollar limit established by the IRS
($12,000 for 2003 and $11,000 for 2002), whichever is less. In 2003,
contributions were also limited to a maximum of 15% of compensation per
pay period. The Company may match this salary savings contribution at a
rate of up to 100% of the first 3%, and up to 50% of the next 3% of the
participant's salary and bonus compensation, excluding commissions,
incentive compensation, taxable fringe benefits, moving expenses, auto
and other allowances, and disqualifying dispositions of Company stock. A
maximum of 6% per participant contributions are subject to employer
match. 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. Additional deferrals, "catch-up contributions", are
available for eligible participants aged 50 or over at the end of the
Plan year ($2,000 for 2003 and $1,000 for 2002). The catch-up
contributions are not eligible for 401(k) matching.
There were no discretionary contributions made for the 2003 or 2002 Plan
year.
8
(c) Vesting
Participants are fully vested to the extent of their salary savings
contributions and earnings on those contributions. 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.
(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 a single lump-sum
payment. Distributions may also be made in cash or in kind, or part cash
and part in kind.
(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
Prior to the merger of the ESOP and Plan, forfeitures related to
discretionary contributions were 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
nonhighly compensated participants in the forfeiture allocation group an
amount in the ratio that such compensation of each nonhighly compensated
participant in the group bears to the total compensation of all
nonhighly compensated participants. No forfeiture allocations are made
to highly compensated employees.
Subsequent to the merger of the ESOP and Plan, forfeitures are utilized
to: (i) reinstate previously forfeited account balances of former
participants; (ii) satisfy administrative expenses; and (iii) reduce
subsequent company contributions.
9
(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.
(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 2003 and 2002, administrative expenses 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.
10
(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, 2003 and 2002. Investments
representing 5% or more of net assets available for plan benefits are
indicated by an asterisk (*).
2003 2002
Number of Fair Market Number of Fair Market
shares value shares value
American Power Conversion
Corporation common stock
(note 4) 5,920,095 $145,042,318* 967,284 $14,654,355*
Merrill Lynch Equity Index
Trust 1 41,644 3,347,376 28,281 1,771,796*
Merrill Lynch Retirement
Preservation Trust 3,347,726 3,347,726 2,077,141 2,077,141*
Merrill Lynch Fundamental
Growth Fund Class 1 245,162 4,059,880 187,166 2,416,310*
Pimco Total Return Fund
Class A 249,827 2,675,646 149,342 1,593,483
MFS New Discovery Fund
Class A 184,436 2,831,099 124,157 1,419,109
Ariel FUnd 56,805 2,563,063 23,513 828,599
Merrill Lynch Equity
Dividend Fund Class 1 208,123 2,618,186 147,345 1,491,132
Templeton Foreign Fund 269,326 2,865,631 188,311 1,564,861
Massachusetts Investors
Growth Stock Fund Class A 288,197 3,262,392 223,833 2,065,983*
Merrill Lynch Basic Value
Fund Class A 139,068 4,249,914 105,793 2,471,324*
A brief description of each current fund's investment objective follows:
Merrill Lynch Equity Index Trust 1 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 Dividend Fund Class 1 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 1 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.
11
Massachusetts Investors Growth Stock Fund Class A 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 1 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 employee 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.
(4) Nonparticipant-Directed Investments
The employer matching contribution is entirely directed to purchasing shares
of common stock of American Power Conversion Corporation. However, the
participant may reallocate this 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.
12
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 and the related employer contribution receivable is as follows:
December 31,
2003 2002
Net assets:
American Power Conversion Corporation
common stock $145,332,595 $14,869,402
Changes in net assets:
Contributions $4,358,652 $3,871,791
Net realized (losses) gains 4,249,188 (92,095)
Net unrealized gains 46,116,530 1,131,590
Benefits paid to participants (3,860,797) (834,268)
Interest on outstanding participant loans 7,903 6,528
Dividends 625,171 -
Other (485) -
Net interfund transfer out (4,451,265) (1,075,837)
Transfer in from ESOP 83,333,837 -
Loan repayments 84,459 50,499
Increase in net assets $130,463,193 $3,058,208
(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 September 30, 2003, that the Plan and related trust are
designed in accordance with applicable sections of the Internal Revenue Code
(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.
13
(8) Realized/Unrealized Gains and Losses
Net realized and unrealized gains (losses) by investment type for the year
ended December 31, 2003 and 2002 were comprised of the following:
2003 2002
Realized Unrealized Realized Unrealized
Common stocks $4,249,188 $46,116,530 $(92,095) $1,131,590
Common/collective trusts 16,910 628,797 (400,551) (395,003)
Mutual funds 213,126 4,067,039 (30,728) (2,904,631)
Total $4,479,224 $50,812,366 $(523,374) $(2,168,044)
14
SCHEDULE 1
AMERICAN POWER CONVERSION CORPORATION
CONSOLIDATED 401(K) PLAN
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2003
Identity of issuer,
borrower, lessor, Current
or simialar party Description of Investment Cost Value
*American Power COnversion
Corp. Common Stock $34,054,586 $145,042,318
*Merrill Lynch Equity Index Trust 1 2,718,580 3,347,376
*Merrill Lynch Retirement Preservation Trust 3,347,726 3,347,726
*Merrill Lynch Fundamental Growth Fund Class 1 3,276,466 4,059,880
Massachusetts Investors Growth Stock Fund Class A 2,763,115 3,262,392
Templeton Foreign Fund 2,328,507 2,865,631
Pimco Total Return Fund Class A 2,686,801 2,675,646
MFS New Discovery Fund Class A 2,266,074 2,831,099
Ariel Ariel Fund 2,175,613 2,563,063
*Merrill Lynch Basic Value Fund Class 1 3,371,818 4,249,914
*Merrill Lynch Equity Dividend Fund Class 1 2,173,762 2,618,186
*Loans to participants Various loans with interst rates
(201 loans) of 5.00% to 10.5% - 1,269,204
$178,132,435
*Indicates a party-in-interest to the Plan.
See accompanying independent auditors' report.
15
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
American Power Conversion Corporation:
We consent to the incorporation by reference in the
registration statements (Nos. 33-25873, 33-54416, 333-32563,
333-78595, 333-80541, 333-80569 and 333-91994) on Form S-8
and (No. 333-107559) on Form S-3 of American Power
Conversion Corporation of our report dated May 28, 2004,
relating to the statements of net assets available for plan
benefits of the American Power Conversion Corporation Consolidated
401(k)Plan as of December 31, 2003 and 2002, 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, 2003 annual report on Form 11-K of the American Power
Conversion Corporation Consolidated 401(k) Plan.
/s/ KPMG LLP
Providence, Rhode Island
June 25, 2004
16