1. Summary of Significant Accounting Policies

Nature of Business

American Power Conversion Corporation and its subsidiaries (the “Company”) designs, develops, manufactures, and markets power protection and management solutions for computer and electronic applications worldwide. The Company’s solutions include uninterruptible power supply products (“UPS”), electrical surge protection devices, power conditioning products, associated software, services, and accessories. These solutions are for use with sensitive electronic devices which rely on electric utility power including, but not limited to, home electronics, personal computers (“PCs”), high performance workstations, servers, networking equipment, telecommunications equipment, internetworking equipment, datacenters, mainframe computers, and facilities. The Company’s principal markets are in North America, Europe, and the Far East.

Principles of Consolidation

The consolidated financial statements include the accounts of American Power Conversion Corporation and all of its wholly- and majority-owned subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.
Cash and Cash Equivalents
Cash and cash equivalents consists of funds on deposit, money market savings accounts, and short-term commercial paper with original maturities of three months or less.

Inventories

Inventories are stated at the lower of cost or market, cost being determined using the first-in, first-out (FIFO) method.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Depreciation is provided by using the straight-line method over estimated useful lives as follows:

Land improvements	15 years
Buildings and improvements	40 years
Machinery and equipment	5 - 10 years
Office equipment, furniture, and fixtures	3 - 10 years
Purchased software	3 years

Goodwill and Other Intangibles

Goodwill and other intangibles represents the excess of cost over the fair value of the net tangible assets of businesses acquired and is being amortized on a straight-line basis over 15 years. Periodically, the Company evaluates the recovery of goodwill to assure that changes in facts and circumstances do not suggest that recoverability has been impaired. This analysis relies on a number of factors, including operating results, business plans, budgets, economic projections, and changes in management’s strategic direction or market emphasis. In management’s opinion, no impairment exists at December 31, 1998.

Research and Development

Expenditures for R&D are expensed in the year incurred.

Warranties

The Company offers limited two-year and one-year warranties. The provision for potential liabilities resulting from warranty claims is provided at the time of sale. The provision is computed based upon historical data and current estimates. The Company also offers its customers the opportunity to extend the basic warranty period up to an additional three years under a separately priced program. Recognition of the revenue associated with the extended warranty program commences on the date the extended warranty becomes effective and is recognized on a straight-line basis over the extended warranty period. In addition, the Company has an Equipment Protection Policy which provides up to $25,000 for repair or replacement of a customers’ hardware should a surge or lightning strike pass through a Company unit. The policy applies to all units manufactured after January 1, 1992. Other restrictions also apply. The Company’s ProtectNet line of data line surge suppressors feature a unique “Double-Up” Supplemental Equipment Protection Policy, under which the total recoverable limit under the Equipment Protection Policy is doubled, up to $50,000 (U.S. and Canada only). The Company has experienced satisfactory field operating results, and warranty costs incurred to date have not had a significant impact on the Company’s results of operations.

Income Taxes

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Deferred income taxes have not been provided for the undistributed earnings of the Company’s foreign subsidiaries which aggregated approximately $180 million at December 31, 1998. The Company plans to reinvest all such earnings for future expansion. If such earnings were distributed, taxes would be increased by approximately $48 million.

Earnings per Share

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares and dilutive potential common shares outstanding during the period. Under the treasury stock method, the unexercised options are assumed to be exercised at the beginning of the period or at issuance, if later. The assumed proceeds are then used to purchase common shares at the average market price during the period.

	1998	1997	1996
Basic weighted average shares outstanding	95,503	94,993	93,872
Net effect of dilutive potential common shares outstanding based on the treasury stock method using the average market price	1,285	1,128	475
Diluted weighted average shares outstanding	96,788	96,121	94,347

Potential common shares for which inclusion would have the effect of increasing diluted earnings per share (i.e., antidilutive) are excluded from the computation. Antidilutive potential common shares outstanding at December 31, 1998, 1997, and 1996 were approximately 248,000, 83,000, and 68,000, respectively.

Stock-Based Compensation

The Company applies APB Opinion 25 and related Interpretations in accounting for its stock option plans. No compensation cost has been recognized for these plans in the accompanying consolidated financial statements.

Advertising Costs

Advertising costs are expensed as incurred and reported in selling, general, and administrative expenses in the accompanying consolidated statements of income. Such costs of advertising, advertising production, trade shows, and other activities designed to enhance demand for the Company’s products. Advertising costs were $67.4 million in 1998, $59.9 million in 1997, and $36.3 million in 1996. There are no capitalized advertising costs in the accompanying consolidated balance sheets.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make 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 revenues and expenses during the reporting period. Actual results may differ from those estimates.

2. Accounts Receivable

Accounts receivable are generally not concentrated in any geographic region or industry. Collateral is usually not required except for certain international transactions for which the Company requires letters of credit to secure payment. The Company estimates an allowance for doubtful accounts based on the credit worthiness of its customers as well as general economic conditions. Consequently, an adverse change in those factors could affect the Company’s estimate of its bad debts.

3. Inventories

Inventories consist of the following:

In thousands Raw materials Work in process Finished goods

1998 $ 87,975 9,328 131,379 $228,682

1997 $ 61,430 3,731 39,010 $104,171

4. Revolving Credit Agreements and Short Term Debt

At December 31, 1998, 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 December 31, 1998. In connection with the acquisition of Silcon, the Company acquired $24.8 million in bank indebtedness with interest rates ranging from 4% to 8%. The Company repaid $12.3 million of this indebtedness during the second half of 1998.


5. Income Taxes

Total federal, state, and foreign income tax expense (benefit) from continuing operations for the years ended December 31, 1998, 1997, and 1996 consists of the following:

In thousands 1998: Federal State Foreign 1997: Federal State Foreign 1996: Federal State Foreign

Current $58,294 4,707 11,197 $74,198 $41,090 7,031 8,944 $57,065 $38,279 7,100 9,259 $54,638

Deferred ($4,188) (785) (994) ($5,967) ($1,028) (193) 160 ($1,061) ($6,759) (1,100) (221) ($8,080)

Total $54,106 3,922 10,203 $68,231 $40,062 6,838 9,104 $56,004 $31,520 6,000 9,038 $46,558

Income tax expense attributable to continuing operations amounted to $68.2 million in 1998, $56.0 million in 1997, and $46.6 million in 1996, (effective rates of 31.6%, 31.5%, and 33.5%, respectively). The actual expense for 1998, 1997, and 1996 differs from the “expected” tax expense (computed by applying the statutory U.S. federal corporate tax rate of 35% to earnings before income taxes) as follows:

In thousands Computed “expected” tax expense State income taxes, net of federal income tax benefit Foreign earnings taxed at rates lower than U.S. statutory rate (principally Ireland) Foreign sales corporation Acquired R&D Other

1998 $75,655 2,549 (12,676) (2,729) 3,094 2,338 $68,231

1997 $62,227 4,445 (10,727) (1,603) - 1,662 $56,004

1996 $48,643 3,900 (4,520) (1,475) - 10 $46,558

The domestic and foreign components of earnings before income taxes were $162.0 million and $54.2 million, respectively, for 1998, $121.0 million and $56.8 million, respectively, for 1997, and $94.8 million and $44.2 million, respectively, for 1996. Total income tax expense for the years ended December 31, 1998, 1997 and 1996 was allocated as follows:

In thousands Income from continuing operations Shareholders' equity, for compen- sation expense for tax purposes in excess of amounts recognized for financial statement purposes

1998 $68,231 (2,082) $66,149

1997 $56,004 (765) $55,239

1996 $46,558 (1,430) $45,128

At December 31, 1998 and 1997, deferred income tax assets and liabilities result from temporary differences in the recognition of income and expense for tax and financial reporting purposes. The sources and tax effects of these temporary differences are presented below:

In thousands Deferred tax liabilities Excess of tax over financial statement depreciation Other Total deferred tax liabilities Deferred tax assets Allowance for doubtful accounts Additional costs inventoried for tax purposes Intercompany inventory profits Allowances for sales and marketing programs Inventory obsolescence reserve Accrual for compensation and compensated absences Reserve for warranty costs Deferred revenue Other Total gross deferred tax assets Less valuation allowance Net deferred tax assets Net deferred income taxes

1998 $ 5,605 1,895 7,500 4,441 1,050 4,521 6,517 3,865 1,672 1,024 2,356 3,052 28,498 - 28,498 $20,998

1997 $ 5,736 270 6,006 3,702 22 2,983 6,005 4,569 1,039 761 1,913 577 21,571 - 21,571 $15,565

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Due to the fact that the Company has sufficient taxable income in the federal carryback period and anticipates sufficient future taxable income over the periods which the deferred tax assets are deductible, the ultimate realization of deferred tax assets for federal and state tax purposes appears more likely than not. The U.S. federal taxable income for 1997, 1996 and 1995 was approximately $111.6 million, $98.3 million, and $82.8 million, respectively.

6. Stock Plans

Stock Option Plans

At December 31, 1998, the Company had four stock option plans, which are described below. SFAS No. 123, Accounting for Stock-Based Compensation, requires companies to either (a) record an expense related to its stock option plans based on the estimated fair value of stock options as of the date of the grant or (b) disclose pro forma net income and earnings per share data as if the company had recorded an expense, beginning with options granted in 1995. The Company has elected to continue to apply APB Opinion 25 and related Interpretations in accounting for these plans and to comply with the SFAS No. 123 disclosure requirements. Accordingly, no compensation cost has been recognized for its stock option plans in the accompanying consolidated financial statements. Had compensation cost for such plans been determined based on the fair value at the grant dates for awards under these plans consistent with the method of SFAS No. 123, the Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below:

In thousands except per share amounts Net income Basic earnings per share Diluted earnings per share

1997 As reported Pro forma As reported Pro forma As reported Pro forma

1998 $147,576 132,296 $1.55 1.39 $1.52 1.37

1997 $121,788 116,370 $1.28 1.23 $1.27 1.22

1996 $ 92,421 91,228 $.98 .97 $.98 .97

The pro forma effect on net income for 1998, 1997 and 1996 is not representative of the pro forma effect on net income in future years because it does not take into consideration pro forma compensation expense related to grants made prior to 1995. The weighted average fair value of options granted during 1998, 1997 and 1996 was $17.67, $11.19, and $5.13, respectively. The Company estimates the fair value of each option as of the date of grant using the Black-Scholes pricing model with the following weighted average assumptions used for grants in 1998, 1997 and 1996:

Expected volatility Dividend yield Risk-free interest rate Expected life

1998 57% - 5.5% 5 years

1997 57% - 6.3% 5 years

1996 56% - 6.6% 5 years

On April 21, 1997, the Company’s shareholders approved the 1997 Stock Option Plan and on June 19, 1987 approved the 1987 Stock Option Plan (collectively the “Plans”). The 1997 and 1987 Stock Option Plans authorized the grant of options for up to 6.0 million shares and 10.8 million shares, respectively, of common stock. Options granted under the Plans are either (a) options intended to constitute incentive stock options (“ISOs”) under the Internal Revenue Code of 1986 (the “Code”) or (b) non-qualified options. Incentive stock options may be granted under the Plans to employees or officers of the Company. Non-qualified options may be granted to consultants, directors (whether or not they are employees), employees or officers of the Company.

ISOs granted under the Plans may not be granted at a price less than the fair market value of the common stock on the date of grant (or 110% of fair market value in the case of employees or officers holding 10% or more of the voting stock of the Company). The aggregate fair market value of shares, for which ISOs granted to any employee are exercisable for the first time by such employee during any calendar year (under all stock option plans of the Company and any related corporation), may not exceed $100,000. Non-qualified options granted under the Plan may not be granted at a price less than the lesser of (a) the book value per share of common stock as of the end of the fiscal year of the Company immediately preceding the date of such grant, or (b) 50% of the fair market value of the common stock on the date of grant.

Options granted under the Plans before December 1, 1995 vested 25% at the end of the first year and 12.5% at the end of each six month period thereafter. Options granted after December 1, 1995 and before February 14, 1997 vest 20% at the end of the second year and 20% at the end of each year thereafter. Options granted after February 14, 1997 vest 25% at the end of the first year and 12.5% at the end of each six month period thereafter.

On April 21, 1997, the Company’s shareholders approved the 1997 Non-employee Director Stock Option Plan and on May 20, 1993 approved the 1993 Non-employee Director Stock Option Plan (collectively the “Director Plans”). Options granted under these plans are non-qualified stock options and may be granted to each person who was a member of the Company’s Board of Directors on April 21, 1997 and February 25, 1993, respectively, and who was not an employee or officer of the Company. The 1997 and 1993 Director Plans authorized the grant of options for up to 200,000 shares and 40,000 shares of common stock, respectively. Two directors were entitled to participate in the Director Plans with each receiving a grant of options as of February 12, 1998 for 10,000 shares at an exercise price of $27.00, as of April 21, 1997 for 10,000 shares at an exercise price of $21.75 per share, and as of February 25, 1993 for 20,000 shares at an exercise price of $12 per share (i.e., the market price on the dates of grant).

Options granted under the 1997 Director Plan vest 25% at the end of the second year and 9.375% at the end of each six month period thereafter. Options granted under the 1993 Director Plan vested 25% at the end of the first year and 25% annually thereafter.

Options granted under all stock option plans before January 1, 1993 will expire not more than five years from the date of grant. Options granted under all stock option plans after January 1, 1993 will expire not more than ten years from the date of grant (five years in the case of ISOs granted to ten percent shareholders). The outstanding options expire at various dates through 2008. Options granted terminate within a specified period of time following termination of an optionee’s employment or position as a director or consultant with the Company.

A summary of the status of the Company’s stock option plans as of December 31, 1998, 1997 and 1996, and changes during the years ending on those dates is presented below:

1998

1997

1996

Shares in thousands Outstanding at beginning of year Granted Exercised Terminated Outstanding at end of year Exercisable at end of year Shares reserved at end of year

Shares 3,009 2,399 (472) (156) 4,780 677 6,768

Weighted Average Exercise Price $15.62 33.02 13.23 22.33 24.45

Shares 1,609 1,939 (348) (191) 3,009 397 7,240

Weighted Average Exercise Price $10.04 18.78 9.29 12.03 15.62

Shares 1,947 461 (576) (223) 1,609 556 2,837

Weighted Average Exercise Price $ 8.59 9.68 5.05 9.17 10.04

The following table summarizes information about stock options outstanding at December 31, 1998

1998

1997

1996

Shares in thousands

Options Outstanding

Options Exercisable

Range of Exercise Prices $9.13 to $12.00 $13.63 to $17.50 $19.50 to $21.75 $22.63 to $26.88 $27.00 to $30.25 $31.75 to $35.41 $44.81

Shares Outstanding 747 811 660 154 115 2,153 140 4,780

Weighted Average Remaining Contractual Life (years) 6.9 8.2 8.4 8.0 9.1 9.3 9.9 8.6

Weighted Average Exercise Price $ 9.63 16.52 19.97 23.59 28.33 32.49 44.81 24.45

Shares Exercisable 295 220 136 11 - 15 - 677

Weighted Average Exercise Price $10.08 16.59 20.07 23.77 - 31.75 - 14.90

Stock Purchase Plan

On April 21, 1997, the Company’s shareholders approved an Employee Stock Purchase Plan (the “Plan”) to provide substantially all employees an opportunity to purchase shares of its common stock through payroll deductions, up to 10% of eligible compensation. Semiannually, participant account balances are used to purchase shares of stock at the lesser of 85% of the fair market value of shares on the grant date or the exercise date. The aggregate number of shares purchased by an employee may not exceed 3,000 shares annually (subject to limitations imposed by the Internal Revenue Code). The employee stock purchase plan expires on February 11, 2007. A total of 1.0 million shares are available for purchase under the Plan. During 1998, 21,316 shares were issued at $26.88 per share and 15,313 shares were issued at $21.14 per share under the Plan. There were no shares issued under the Plan during 1997.

7. Retirement Benefits

Employee Stock Ownership Plans

At December 31, 1998, the Company had noncontributory Employee Stock Ownership Plans (the “ESOP”) covering substantially all employees in North America and Ireland. Contributions to the ESOP are based on a percentage of eligible compensation and are determined by the Company’s Board of Directors at its discretion, subject to the limitations established by U.S. and Ireland tax laws. The ESOP holds 4.7 million shares of common stock at December 31, 1998. Substantially all contributed shares have been allocated to participant accounts. No shares were contributed to the ESOP in 1998. The value of contributed shares to the ESOP in 1997 and 1996 amounted to approximately $3.3 million and $6.9 million, respectively.

Employee Savings Plan

On May 1, 1997, the Company established an employee savings plan (the “Savings Plan”) that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code of 1986, as amended, covering substantially all North American employees. The Savings Plan allows eligible employees to contribute up to 15% of their compensation on a pre-tax basis subject to certain limitations. The Company matches, with Company common stock, 100% of the first 3% of employee contributions. Such matching Company contributions vest according to an employee’s years of service. The Company’s matching contributions in 1998 and 1997 amounted to approximately $1.6 million and $0.4 million, respectively.

The retirement expense for 1998, 1997, and 1996 amounted to approximately $2.9 million, $5.2 million, and $8.5 million, respectively.

8. Operating Segment and Geographic Information

At December 31, 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related Information." Prior-period amounts have been restated in accordance with the requirements of SFAS 131. Segment accounting policies are the same as policies described in note 1.

Basis for presentation

The Company’s operating businesses design, manufacture, and market power protection equipment and related software and accessories for computer and computer-related equipment. The Company manages its businesses based on the nature of products provided. These businesses share similar economic characteristics and have been aggregated into one reportable operating segment. Markets and competition are global. Products are sold to businesses, home users, and SOHOs utilizing an indirect selling model which encompasses computer distributors and dealers, value added resellers, mass merchandisers, catalog merchandisers, E-commerce vendors, and strategic partnerships. The Company also sells directly to some large value added resellers, which typically integrate the Company’s products into specialized microcomputer systems and then market turnkey systems to selected vertical markets. Additionally, the Company sells certain select products directly to manufacturers for incorporation into products manufactured or packaged by them.

The Company evaluates the performance of its businesses based on direct contribution margin. Direct contribution margin includes R&D, marketing, and administrative expenses directly attributable to the segment and excludes certain expenses which are managed outside the reportable segment. Costs excluded from segment profit are indirect operating expenses, primarily consisting of selling and corporate expenses, and income taxes. Expenditures for additions to long-lived assets are not reported to management by the operating businesses.

Summary operating segment information is as follows:

1998

1997

1996

In thousands Net sales Segment direct contribution margin Indirect operating expenses Other income, net Earnings before incomes taxes and minority interest Segment depreciation

$1,125,835 $448,200 243,731 11,687 $216,156 $16,996

$873,388 $345,156 173,718 6,354 $177,792 $15,421

$706,877 $268,139 134,349 5,189 $138,979 $11,755

Summary geographic information is as follows:

1998

1997

1996

In thousands Net Sales United States North and Latin America excluding United States Europe, Middle East, and Africa Far East Note: sales are attributed to geographic regions based on location of customer: In thousands Long-lived assets United States Europe Far East

$639,229 60,897 305,108 120,601 $1,125,835 $79,724 87,711 29,303 $196,738

$495,108 55,138 222,011 101,131 $873,388 $72,167 17,350 11,477 $100,994

$401,823 42,052 179,002 84,000 $706,877 $62,035 15,443 2,409 $79,887

The Company closely monitors the credit worthiness of its customers, adjusting credit policies and limits as deemed necessary. One customer accounted for approximately 11% and 10%, respectively, of the Company’s net sales in 1998 and 1997. No single customer comprised 10% or more of the Company’s net sales in 1996.

9. Litigation

On or about November 6, 1998, General Signal Power Systems, Inc. (“GSPS”) filed suit against the Company in Waukesha County Circuit Court in Wisconsin. GSPS alleges interference with a contractual relationship with respect to a distribution agreement between the Best Power division of GSPS and Silcon Power Electronics A/S, a wholly-owned subsidiary of Silcon A/S. GSPS seeks unspecified damages, costs, fees, and injunctive relief. On or about November 17, 1998, the Company removed the case from the Waukesha County Circuit Court to the United States District Court for the Eastern District of Wisconsin. The Company believes the GSPS lawsuit to be without merit and intends to vigorously defend against it. The Company also believes the ultimate disposition of this matter will not have a material adverse effect on the Company’s consolidated financial position or results of operations or liquidity. No provision for any liability that may result from this action has been recognized in the Company’s consolidated financial statements.

On or about January 27, 1999, the Company was served with a lawsuit filed by an individual in the United States District Court for the Central District of California alleging patent infringement. The plaintiff, Anthony F. Coppola, claims sole ownership of the patent referenced in the lawsuit. Coppola seeks unspecified damages, costs, fees, and injunctive relief. The Company intends to vigorously defend against the suit and believes the ultimate disposition of this matter will not have a material adverse effect on the Company’s consolidated financial position or results of operations or liquidity. No provision for any liability that may result from this action has been recognized in the Company’s consolidated financial statements.

The Company is also involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position or results of operations or liquidity.

10. Fair Value of Financial Instruments

The carrying amount of cash, cash equivalents, accounts receivable, short-term debt, accounts payable, and accrued liabilities approximates their fair value because of the short duration of these instruments.

11. Commitments

The Company has several noncancelable operating leases, primarily for warehousing and office space, expiring at various dates through 2004. These leases contain renewal options for periods ranging from one to three years and require the Company to pay its proportionate share of utilities, taxes, and insurance. Rent expense under these leases for 1998, 1997 and 1996 was $2.5 million, $2.3 million, and $2.5 million, respectively.

Future minimum lease payments under these leases are: 1999 - $2.9 million; 2000 - $2.1 million; 2001 - $2.0 million; 2002 - $1.7 million; 2003 - $1.4 million; and 2004 - $1.3 million.

12. Contingencies

The Company has agreements with the Industrial Development Authority of Ireland (“IDA”) under which the Company receives grant monies for costs incurred for machinery, equipment, and building improvements for its Galway and Castlebar facilities equal to 40% and 60%, respectively, of such costs up to a maximum of $13.1 million and $1.3 million, respectively. Such grant monies are subject to the Company meeting certain employment goals and maintaining operations in Ireland until termination of the respective agreements. The total cumulative amounts of capital grant claims submitted and received through December 31, 1998 for the Galway facility were approximately $12.8 million and $9.4 million, respectively. The total cumulative amount of capital grant claims submitted through December 31, 1998 for the Castlebar facility was $1.3 million; no capital grant claims had been received for the Castlebar facility. Under separate agreements with the IDA, the Company receives direct reimbursement of training costs at its Galway and Castlebar facilities for up to $3,000 and $12,500, respectively, per new employee hired. The total cumulative amounts of training grant claims submitted and received through December 31, 1998 for the Galway facility were approximately $1.3 million and $1.3 million, respectively. The total cumulative amount of training grant claims submitted through December 31, 1998 for the Castlebar facility was approximately $1.0 million; no training grant claims had been received for the Castlebar facility.

In addition, the Company executed agreements in 1994 with an unrelated company to acquire the 280,000 square foot manufacturing and distribution facility presently occupied for one (1) Irish Pound (equivalent to approximately $1.50). As additional consideration for the facility, the Company assumed a contingent liability of approximately $5.2 million as part of the Company’s agreement with the IDA. The contingent liability is canceled upon successful completion of the terms of the agreement.

13. Quarterly Financial Data (Unaudited)

The following is a summary of quarterly results of operations in thousands except per share amounts:

Q1

Q2

Q3

Q4

1998: Net Sales Gross Profit Net Income Basic Earnings Per Share Basic Weighted Average Shares Outstanding Diluted Earnings Per Share Diluted Weighted Average Shares Outstanding 1997: Net Sales Gross Profit Net Income Basic Earnings Per Share Basic Weighted Average Shares Outstanding Diluted Earnings Per Share Diluted Weighted Average Shares Outstanding

$218,867 $98,012 $26,726 $.28 95,304 $.28 96,568 $171,989 $76,188 $20,975 $.22 94,542 $.22 95,551

$260,661 $118,218 $26,772 $.28 95,394 $.28 96,740 $203,619 $91,410 $26,611 $.28 95,049 $.28 96,076

$327,370 $144,283 $46,618 $.49 95,537 $.48 96,861 $246,044 $113,573 $36,773 $.39 95,154 $.38 96,495

$318,937 $144,249 $47,460 $.50 95,775 $.49 97,712 $251,736 $116,157 $37,429 $.39 95,226 $.39 96,588