1
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, 1998
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
REQUIRED INFORMATION
A. Financial Statements and Schedules Page
----
Independent Auditors' Report 4
Statements of Net Assets Available for Plan
Benefits as of December 31, 1998 and 1997 5
Statements of Changes in Net Assets Available for
Plan Benefits for the Years Ended December 31,
1998 and 1997 6
Notes to Financial Statements 7-13
Schedule I Line 27a - Schedule of Assets
Held for Investment Purposes as of December 31, 1998 14
Schedule II Line 27d - Schedule of Reportable
Transactions 15
B. Exhibit Listing
Exhibit Description
Number
23.1 Consent of KPMG LLP
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange
Act of 1934, the trustees (or other persons who administer the
employee benefitplan) 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)
Date: June 29, 1999
/s/ Donald M. Muir
-------------------------------------------------
Donald M. Muir, Chief Financial Officer
(principal financial and accounting officer)
2
AMERICAN POWER CONVERSION CORPORATION
401(k) PLAN
Financial Statements and Schedules
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
3
AMERICAN POWER CONVERSION CORPORATION
401(k) PLAN
Table of Contents
Page
Independent Auditors' Report 1
Statements of Net Assets Available for Plan Benefits 2
Statements of Changes in Net Assets Available for
Plan Benefits 3
Notes to Financial Statements 4 - 11
Schedules
1 Item 27a - Schedule of Assets Held for Investment Purposes12
2 Item 27d - Schedule of Reportable Transactions 13
Note:Schedules regarding nonexempt transactions, loans or fixed income
obligations, leases in default or classified as un-
collectible, and assets held for investment purposes which
were both acquired and disposed of within the plan year, 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, 1998 and 1997, and the related statements of
changes in net assets available for plan benefits for the year ended
December 31, 1998 and the period from May 1, 1997 (date of inception)
to December 31, 1997. 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 generally accepted auditing
standards. 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, 1998 and 1997, and the changes in net assets available
for plan benefits for the year ended December 31, 1998 and the period
from May 1, 1997 (date of inception) to December 31, 1997, in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental
schedules of assets held for investment purposes and reportable
transactions are presented for the purpose of additional analysis and
are not a required part of the basic financial statements, but are
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. The supplemental schedules
have been subjected to the auditing procedures applied in the audits
of the basic financial statements as of December 31, 1998 and 1997 and
for the year ended December 31, 1998 and the period from May 1, 1997
(date of inception) to December 31, 1997, and in our opinion, are
fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ KPMG LLP
June 16, 1999
Providence, Rhode Island
5
AMERICAN POWER CONVERSION CORPORATION
401(k) PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 1998 and 1997
1998 1997
Cash $2,104 46
Receivables:
Employer's contribution 497,110 1,269,448
Accrued income 3,420 -
Participants' contributions 9,061 -
511,695 1,269,494
Investments (note 3):
American Power Conversion Corporation 4,713,068 409,330
Common Stock
Investments in common/collective trusts:
Merrill Lynch Equity Index Trust 3,803 -
Merrill Lynch Retirement Preservation Trust 468,998 129,173
472,801 129,173
Mutual Funds:
Blackrock Small Cap Growth 764,228 248,639
Alliance Bond Fund Corporate 354,253 132,690
Merrill Lynch Strategic Dividend Fund Class A 746,552 184,013
Merrill Lynch Growth Fund Class A 1,984,069 915,116
Ivy International Fund 1,107,297 456,146
MFS Massachusetts Investors Growth 14,961 -
Merrill Lynch Basic Value Fund Class A 1,345,310 384,224
6,316,670 2,320,828
Loans to participants 113,403 35,420
Total investments 11,615,942 2,894,751
Net assets available for plan benefits $12,127,637 4,164,245
See accompanying notes to financial statements.
6
AMERICAN POWER CONVERSION CORPORATION
401(k) PLAN
Statements of Changes in Net Assets Available for Plan Benefits
For the year ended December 31, 1998 and for the period from
May 1, 1997 (date of inception) to December 31, 1997
1998 1997
Additions to net assets attributed to:
Investment income:
Net realized gains (losses) $ (11,537) 2,615
Net unrealized gains (losses) 1,315,815 (156,639)
Interest 6,888 957
Dividends 257,719 108,733
1,568,885 (44,334)
Contributions:
Participants 4,814,607 2,227,642
Employer 1,764,258 1,599,066
6,578,865 3,826,708
Total additions 8,147,750 3,782,374
Deductions from net assets attributed to:
Benefits paid to participants 183,208 14,215
Total deductions 183,208 14,215
Net increase prior to transfers and other 7,964,542 3,768,159
Transfers from other plans (note 7) - 396,086
Other (1,150) -
Net increase in net assets available for
benefits 7,963,392 4,164,245
Net assets available for benefits:
Beginning of year 4,164,245 -
End of year $ 12,127,637 4,164,245
See accompanying notes to financial statements.
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AMERICAN POWER CONVERSION CORPORATION
401(K) PLAN
Notes to Financial Statements
(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 employees working for the Company
and the Participating Affiliates, APC America, Inc., APC Sales
and Service Corporation and Systems Enhancement Corporation,
except those employees who are members of a union who bargained
separately for retirement benefits during negotiations. 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 ($10,000 and $9,500 for 1998 and 1997, respectively).
The Company may match this salary savings contribution at a
rate of up to 100% of the first 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. During 1998 the Plan was amended to include
bonuses in the definition of compensation. 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.
During 1998, the Company made a $952,954 profit sharing
contribution for the 1997 Plan year. There were no
discretionary contributions made for the 1998 Plan year.
(c)Vesting
Participants are fully vested to the extent of their salary
savings contributions and earnings on those contributions.
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Participants vest in Company contributions and the related
earnings based on the following schedule:
Percentage of
Years of service vesting
in employer
contributions
Less than two years 0%
Two years 25%
Three years 50%
Four years 75%
Five years 100%
The first and/or last year in which the participant is employed
by the Company will be counted for vesting purposes if the
participant has more than 1,000 hours of service in that year.
Participants also become fully vested in the employer
contributions upon death, permanent disability, or upon
attaining the age of 65.
(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 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)Distributions
Upon termination from the Plan, a participant's vested accrued
benefits 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, of the participant's account. Participants who take a
hardship withdrawal must be suspended from contributing to the
Plan for a period of 12 months following the date of the
withdrawal.
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(g)Forfeitures
Nonvested employer contributions are forfeited by a participant
who terminates employment and are reallocated among remaining
participants in the Plan. There were no forfeitures in 1998
and 1997.
(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 generally accepted accounting principles.
The preparation of financial statements in conformity with
generally accepted accounting principles 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
benefits during the reporting period. Actual results could
differ from those estimates.
(b)Investments
Investments are stated at aggregate fair market values, which
are based principally on published market prices.
Investment income is recognized when earned, and purchases and
sales of securities are recorded on a trade-date basis.
(c)Expenses
All expenses of the Plan are paid by the Company in accordance
with the Plan agreement.
(d)Payment of Benefits
Benefits are recorded when paid.
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(3)Investments
The Plan's investments are held in trust and managed by Merrill
Lynch (ML). 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, 1998. Investments representing 5% or more of net
assets available for benefits are indicated by an asterisk (*).
1998
Fair
Number market
of value
shares
American Power Conversion Corporation Common Stock 194,606 $ 4,713,068*
Merrill Lynch Equity Index Trust 45 3,803
Merrill Lynch Retirement Preservation Trust 468,998 468,998
Blackrock Small Cap Growth 35,595 764,228*
Alliance Bond Fund Corporate 26,837 354,253
Merrill Lynch Strategic Dividend Fund Class A 54,612 746,552*
Merrill Lynch Growth Fund Class A 92,239 1,984,069*
Ivy International Fund 26,876 1,107,297*
MFS Massachusetts Investor Growth 940 14,961
Merrill Lynch Basic Value Fund Class A 35,384 1,345,310*
A brief description of each 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.
Blackrock Small Cap Growth is designed for investors aggressively
seeking long-term growth from small company stocks, which may
exhibit a higher degree of price volatility than stocks of larger
companies with longer earnings histories.
Alliance Bond Fund Corporate seeks income; capital appreciation is
secondary. The fund normally invests at least 65% of assets in
investment-grade debt securities. It may hold corporate bonds,
convertibles, US government obligations, and dollar denominated
foreign debt.
Merrill Lynch Strategic Dividend 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 Standard & Poor's 500 Composite Stock Price
Index. Total return is the aggregate of income and capital value
changes.
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Merrill Lynch Growth Fund Class A seeks growth of capital and,
secondarily, income through a diversified portfolio of primarily
equity securities, with principal emphasis on issues believed by
Fund management to be undervalued.
Ivy International Fund seeks long-term capital growth; current
income is a secondary consideration. The Fund normally invests at
least 65% of assets in common stocks issued in at least three
countries.
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.
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. The
number of shares shown in the above table have been adjusted to
reflect a two-for-one stock split subsequent to year end.
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(4) Detailed Changes in Net Assets
Changes in net assets for the year ended December 31, 1998
were as follows:
ML MFS ML American
ML Retire- Blackrock ML ML Massa- Basic Power
Equity ment Small Cap Alliance Strategic Growth Ivy chusetts Value Conversion Partici
Index Preser- Growth Bond Fund Dividend Fund Intern'l Investors Fund Corporation pant Uninvested
Trust vation Fund Corporate Fund Class A Fund Growth Class A Common Stock Loans Cash Total
Trust Class A Fund
Additions to net assets attributable to:
Investment income:
Net realized
gains(losses) $ - - (3,354) (701) (504) (49,581) (1,262) - 493 43,372 - - (11,537)
Net unrealized
gains(losses) 141 - 67,606 (16,022)(39,551) (353,484) 27,960 (334) 9,058 1,620,441 - - 1,315,815
Interest - 677 114 477 649 555 816 - 1,166 340 - 2,094 6,888
Dividends - 15,029 - 17,107 98,176 30,135 18,726 1,160 73,966 - - 3,420 257,719
141 15,706 64,366 861 58,770 (372,375) 46,240 826 84,683 1,664,153 - 5,514 1,568,885
Contributions:
Participants 846 57,489 474,107 186,909 471,830 1,623,634 683,085 1,966 785,743 328,998 - - 4,814,607
Employer - - - - - - - - - 1,764,258 - - 1,764,258
846 257,489 474,107 186,909 471,830 1,623,634 683,085 1,966 785,743 2,093,256 - - 6,578,865
Total additions 987 273,195 538,473 187,770 530,600 1,251,259 729,325 2,792 870,426 3,757,409 - 5,514 8,147,750
Deductions from net assets attributable to:
Benefits paid
to participants - 15,860 14,767 3,043 2,007 58,364 9,289 - 9,737 45,855 23,930 356 183,208
Total deductions - 15,860 14,767 3,043 2,007 58,364 9,289 - 9,737 45,855 23,930 356 183,208
Net increase prior
to transfers 987 257,335 523,706 184,727 28,593 1,192,895 720,036 2,792 860,689 3,711,554 (23,930) 5,158 7,964,542
Interfund
transfers 2,842 84,620 (7,509) 37,376 34,847 (121,508) (67,659) 12,196 101,767 (179,154) 101,913 269 -
Administrative
expenses - (1,201) - - - - - - - - - 51 (1,150)
2,842 83,419 (7,509) 37,376 34,847 (121,508) (67,659) 12,196 101,767 (179,154) 101,913 320 (1,150)
Net increase 3,829 340,754 516,197 222,103 563,440 1,071,387 652,377 14,988 962,456 3,532,400 77,983 5,478 7,963,392
Net assets available
for benefits:
Beginning of
year - 129,173 248,639 132,690 184,013 915,116 456,146 - 384,224 1,678,778 35,420 46 4,164,245
End of year $3,829 469,927 764,836 354,793 747,453 1,986,503 1,108,523 14,988 1,346,680 5,211,178 113,403 5,524 12,127,637
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(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 become fully vested in their
accounts.
(6)Tax Status
The Plan has not applied to the Internal Revenue Service for a tax
determination letter to establish its tax-exempt status. However, in
the opinion of the Plan's Administrator, the Plan has operated within
the terms of the plan document and applicable regulations and is
qualified under the Internal Revenue Code.
(7)Plan Transfers
Effective July 1, 1997, the Systems Enhancement Corporation 401(k)
Savings Plan was merged into the Plan. Systems Enhancement Corporation
was acquired by the Company in February 1997.
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Schedule 1
AMERICAN POWER CONVERSION CORPORATION
401(k) PLAN
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1998
Identity of issue, borrower,
lessor or similar party Description of investment Cost Current Value
*Merrill Lynch Equity Index Trust $ 3,661 3,803
*Merrill Lynch Retirement Preservation Trust 468,998 468,998
Blackrock Small Cap Growth 707,537 764,228
Alliance Bond Fund Corporate 370,606 354,253
*Merrill Lynch Strategic Dividend Fund Class A 788,134 746,552
*Merrill Lynch Growth Fund Class A 2,409,325 1,984,069
Ivy International Fund 1,104,395 1,107,297
MFS Massachusetts Investors Growth 15,296 14,961
*Merrill Lynch Basic Value Fund Class A 1,339,401 1,345,310
*American Power
Conversion Corp. Common Stock 3,136,010 4,713,068
*Loans to participants Various loans with interest rates
of 9% 113,403 113,403
$10,456,766 11,615,942
*Indicates a party-in-interest to the plan.
See accompanying independent auditors' report.
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Schedule 2
AMERICAN POWER CONVERSION CORPORATION
401(k) PLAN
Item 27d - Schedule of Reportable Transactions
For the year ended December 31, 1998
Current
value of asset
Identity of party Purchase Selling Cost of on transaction Net gain
involved Description of Asset price price asset date or (loss)
*Merrill Lynch Retirement Preservation Trust $ 437,399 - 427,399 437,399 -
*Merrill Lynch Retirement Preservation Trust - 97,574 97,574 97,574 -
Blackrock Small Capital Growth Fund 518,272 - 518,272 518,272 -
Blackrock Small Capital Growth Fund - 66,936 70,290 66,936 (3,354)
Alliance Bond Fund Corporate 260,005 - 260,005 260,005 -
Alliance Bond Fund Corporate - 21,736 22,436 21,736 (700)
*Merrill Lynch Strategic Dividend Fund Class A 632,600 - 632,600 632,600 -
*Merrill Lynch Strategic Dividend Fund Class A - 30,006 30,510 30,006 (504)
*Merrill Lynch Growth Fund Class A 1,707,491 - 1,707,491 1,707,491 -
*Merrill Lynch Growth Fund Class A - 235,473 285,054 235,473 (49,581)
Ivy International Fund 743,396 - 743,396 743,396 -
Ivy International Fund - 118,943 120,205 - (1,262)
*Merrill Lynch Basic Value Fund Class A 993,403 - 993,403 993,403 -
*Merrill Lynch Basic Value Fund Class A - 41,868 41,375 - 493
*American Power
Conversion
Corp. Common Stock 2,919,493 - 2,919,493 2,919,493 -
*American Power
Conversion
Corp. Common Stock - 274,979 231,607 274,979 43,372
* Indicates a party-in-interest to the plan.
See accompanying independent auditors' report.