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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal year ended JANUARY 2, 1998 Commission File No. 0-4466
COMPUTER PRODUCTS, INC.
-----------------------
(Exact name of Registrant as specified in its charter)
FLORIDA 59-1205269
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION) IDENTIFICATION NO.)
7900 GLADES ROAD, SUITE 500, BOCA RATON, FL 33434-4105
- ----------------------------------------- -------------
(Address of principal executive offices) (ZIP CODE)
(561) 451-1000
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(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
COMMON STOCK PURCHASE RIGHTS
----------------------------
(Title of each class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO __.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ X].
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 13, 1998 was approximately $784 million.
As of March 13, 1998, 38,521,952 shares of the Registrant's $.01 par value
common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's annual shareholders' report for the year ended January
2, 1998 (the "Annual Report") are incorporated by reference into Parts I and II.
Portions of the Company's proxy statement for the annual meeting of shareholders
to be held May 6, 1998 are incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS
Computer Products, Inc. (the "Company") was incorporated under the laws of the
State of Florida in 1968. Unless the context indicates otherwise, as used herein
the term "Company" means Computer Products, Inc. and its consolidated
subsidiaries.
The Company has begun doing business under the name Artesyn Technologies.
Management will request shareholder approval at its next annual shareholders'
meeting in May 1998 to legally change the Company's corporate name to Artesyn
Technologies, Inc. Pending shareholder approval, the Company's legal name will
remain Computer Products, Inc. and trade under The Nasdaq National Market symbol
CPRD.
The Company designs, develops, manufactures and markets (1) power conversion
products for electronic equipment used in commercial and industrial applications
requiring a precise and constant voltage level for proper operation, (2) high
performance single-board computers, systems and subsystems for real-time
applications, and (3) provides repair services and logistics for a variety of
products primarily for a significant customer.
POWER CONVERSION
INDUSTRY OVERVIEW
The Company is one of the leading providers of power supplies, power converters
and distributed power systems to the communications industry. According to
independent industry sources, the Company ranks among the top ten worldwide
independent power supply manufacturers in sales volume.
Power supplies, power converters and distributed powers systems perform many
essential functions relating to the supply, regulation, and distribution of
electrical power within electronic equipment. Electronic systems require a
steady supply of electrical power at one or more voltage levels. AC-to-DC power
supplies convert alternating electric current (`AC") (the form in which
virtually all electric current is delivered by utility companies) from a primary
power source into the direct current ("DC") required to operate virtually all
solid state electronic equipment. DC-to-DC power supplies are used to convert a
particular direct current voltage into another (higher or lower) direct current
voltage that is required by the electronic device to which it is connected.
Power supplies can also be designed to perform diagnostic functions that prevent
electronic equipment from being damaged by such equipment's own malfunction, as
well as provide power through use of a short-term battery back-up system when
the electronic equipment's primary power source fails.
The dominant technology now used in power supplies is switching technology.
Before the development of switching power supplies, power supply technology was
fairly simple, and power supplies consisted of a transformer and some related
components to rectify and control power surges. As the complexity of electronic
equipment has increased, power supplies and their underlying technology have
become more advanced. Switching power supplies, such as those manufactured by
the Company, have hundreds of components, provide advanced diagnostic and power
management functions, can be designed to provide battery back-up power, and are
smaller and more efficient than older power supplies using simpler technology.
SWITCHING POWER SUPPLIES
[GRAPHIC SHOWING FROM AC WALL POWER IN TO AC TO DC POWER SUPPLY TO A DISK
DRIVE OR MEMORY OR INTEGRATED CIRCUITS OR MOTORS OR MONITORS]
A further enhancement of AC/DC power supplies utilizing a newer more flexible
switching technology is emerging which the Company refers to as "distributed
power architecture" ("DPA"). Most electronic systems have a number of
subsystems, each of which may require a different operating voltage or level of
power. As a result, power supplies can be designed to have multiple outputs that
can provide varying voltage levels to all subsystems of an electronic system. In
such power supplies, power is "distributed" throughout the system so that in
addition to the system's main AC/DC power supply, DC/DC converters located on or
near the subsystem or component being powered change the DC voltage to the
specific level of DC voltage needed for that particular subsystem or component.
Distributed power permits greater flexibility to meet the power supply
requirements of electronic systems if components or subsystems are added or
upgraded.
DISTRIBUTED POWER ARCHITECTURE
[GRAPHIC SHOWING FROM INPUT TO AC TO DC
FRONT END TO OUTPUT TO VARIOUS SUB SYSTEMS]
MARKET OVERVIEW
The overall market for power supplies can be classified as follows:
Merchant/Captive. Merchant power supply manufacturers design and
manufacture power supplies for use by other third parties. Captive power supply
manufacturers design and manufacture power supplies for use within their own
products. Currently, the merchant segment of the market is approximately 55%.
According to independent industry sources, the merchant segment of the market is
projected to grow to 60% of the overall market in the year 2000 as Original
Equipment Manufacturers ("OEMs") demand product options and features and high
quality levels that make power supplies increasingly difficult to design and
manufacture in-house.
Power Range. The power supply market is also segmented by power supply output
range, as follows:
Typical Representative
Power Range Characteristics End Users Applications
- ---------------------------------------------------------------------------------------------------------------------------------
LOW o Less than 150 Watts o PC Companies o Personal Computers
o Lower Technology o Consumer Electronics o Consumer Electronics
o Higher Volume o Desk Top Printers
o Lower Margin
MID o 150-750 Watts o Internetwork Companies o Routers, Hubs
o High Technology o Computer Companies o Workstations, Fault
o Moderate Volume o Medical Companies o Tolerant Computers
o Higher Margin o Blood Analyzers
HIGH o More than 750 Watts o Computer Companies o Main-frame Computers
o High Technology o Industrial Companies o Industrial Process Control
o Lower Volume o Internetworking Companies o High-end Routers/Switches
o Higher Margin
Custom/Standard. Custom power supplies are designed and manufactured to
meet the form, fit, and functional requirements of an OEM's unique and specific
application. They are attractive to OEMs because they present maximum design
flexibility, provide the lowest cost, and allow the use of special features.
Standard, "off-the-shelf" power supplies are not design-specific but also do not
require substantial up-front engineering design costs. Once a product has
reached the stage of development where the OEM is confident that there will be a
market demand for the product, it is typically cost-effective to custom design a
unique power supply to meet that product's specific requirements. The OEM is
then able to utilize a moderately high-volume, customized solution at the lowest
cost per watt of power without paying for unnecessary features or capabilities.
The Company currently offers standard power products in over 1,000
configurations and accommodates a wide variety of customer applications. In
addition to its standard power supply products, the Company pursues the custom
power supply business because it capitalizes on its strengths in the areas of
sophisticated design, volume manufacturing, and customer service. It has been
the Company's experience that competition among qualified design and
manufacturing outsourcing companies providing these customized solutions is
intense. The competition causes downward pressure on gross margins, which is
only partially offset by lower selling and distribution costs.
The Company believes a number of important trends affecting its customers will
continue to shape the power supply marketplace. The applications markets that
are growing rapidly, such as workstations and data communications hardware
(e.g., hubs, routers and file servers), need mid-range power supplies. In
addition, OEMs face pressure from end-users to improve the price and performance
of products, bring new products to market quickly, provide more product options
and features, reduce product size, and meet increasingly complex safety and
regulatory agency standards. The Company believes that these pressures will
support the need for and encourage a modest migration from captive manufacturers
to merchant-provided, custom-designed power supply manufacturers such as the
Company particularly the mid-range segment of the market.
The Company's Power Conversion products are manufactured in Redwood Falls,
Minnesota; Broomfield, Colorado; Huntington Beach, California; Kindberg,
Austria; Tatabanya, Hungary; Chomutov, Czech Republic; Youghal, Ireland;
Oberhausen and Ensiedel, Germany; and in Hong Kong and Zhongshan, China. Power
Conversion activities are also carried on in Vienna, Austria; Etten-Leur,
Netherlands; Eden Prairie, Minnesota; Boston, Massachusetts and Fremont,
California.
COMPUTER SYSTEMS
The Company's Computer Systems division designs and manufactures high
performance board-level computers and communication controllers, integrating
them with real-time operating system and protocol software to form complete
subsystems for communications and other real-time applications.
The products are designed around and incorporate industry standards which permit
easy portability to a variety of applications. The technology relies on popular
and powerful microprocessors from sources such as Motorola, Intel and MIPS. The
primary product line combines both the worldwide industry standard VMEbus, which
defines physical board size and signal characteristics for the interconnection
of microprocessors. Application requirements for these products usually include
environments requiring rapid computer response time with high quality processing
capabilities, such as telecommunications or data communications.
The Company's Computer Systems' customers are primarily OEMs who use the
products for high-speed telecommunications applications. They are also used in
other areas such as medical instrumentation, airplane and weapons training
simulators, process control, industrial automation and traffic control systems.
Management believes that the market for VMEbus and real-time products will
expand as communications companies move from proprietary to open systems in
order to speed time to market and enhance upgrade capability.
The Company's Computer Systems' products are manufactured in Madison, Wisconsin.
SERVICES AND LOGISTICS
The Company's Services and Logistics division provides repair services for a
variety of products primarily manufactured by Hewlett-Packard Company. The
process to repair products that fail in the field involves the logistics of
arranging for return of products and, when they have been repaired, arranging
for delivery of products to their customers. This function has traditionally
been accomplished as part of the OEM's business. In the 1980s and 1990s, as
companies have focused their energies on core competencies, electronics
manufacturers have often outsourced many activities that they do not consider
essential to their business. In the case of the Company's Services and Logistics
operation, the Company was retained by Hewlett-Packard ("HP") in 1992 to manage
inbound and outbound logistics for some of HP's computer products and to repair
certain products. This business has grown rapidly since 1992 as HP has
transferred repairs of more products to the Company. Since 1992, the Company has
taken over repair of laserjet and deskjet printers, faxes, scanners and to
service other products. Through 1997, nearly all of the Company's Services and
Logistics' sales were to HP.
It is the Company's strategy to expand its Services and Logistics facilities
within the value chain of manufacturer distribution and repair. For this
purpose, the Company has established a Foreign Trade Zone ("FTZ"), which allows
reduced or delayed customs duties on products returned from foreign locations
for repair or on component parts shipped to the United States and assembled in
the FTZ. The FTZ, together with existing repair processes, allows the Company to
service both domestic and foreign products and, in combination with its process
design capability, to perform assembly or light manufacturing operations.
Another expansion of the value chain involves network services operations, which
plan to target configuration and installation of hardware, as well as provide
follow-on maintenance.
The Company's Services and Logistics division is located in Lincoln, California.
STRATEGY
The Company's objective is to be the supplier of choice to multinational OEM
customers who require sophisticated power supply solutions and who are likely to
have substantial volume requirements. To achieve this objective, the Company's
strategy is to differentiate itself from its competition through utilization of
new and advanced technology and design, fastest time-to-market and superior
product performance, quality, service and the lowest total cost of ownership.
The Company's primary target market for the last several years has been OEMs in
the communications, networking, computer and other electronic equipment
marketplaces. These OEMs manufacture hubs, routers, high availability file
servers and disk arrays which typically have complex technical needs, high
product reliability standards, short product development cycles and variable
production needs. The Company implements its strategy by combining the following
key elements:
Deliver High-Quality Products and Services
The Company believes that quality and responsiveness to the customer's
needs are of critical importance in its efforts to compete successfully. The
Company actively involves its employees in implementing techniques to measure,
monitor and improve performance and provides its employees with education and
training, including courses in statistical process control and related
techniques. Also, employees participate in the Company's planning sessions and
monitor adherence to their annual plans on a monthly basis. Through its
commitment to customer service and quality, the Company believes it is able to
provide superior value to its customers.
Provide Leading-Edge Engineering and Time-to-Market
The Company's target markets and customers are characterized by high growth
rates and continually evolving technology. As a result, its customers typically
require leading-edge technology designed in a relatively short period. The
Company has been working to enhance time-to-market through two initiatives:
concurrent engineering and design-ready platforms. Concurrent engineering
creates a process allowing all functional disciplines to take part in a
product's design from the very beginning. With design-ready platforms, the
Company can modify standard platforms to meet specific customers' needs for a
customized product, a fast fulfillment schedule and an affordable price. These
initiatives have contributed to a reduction of time-to-market from 72 weeks in
1994 to 24 weeks in 1997.
Develop and Expand Collaborative Relationships
Through the development and expansion of collaborative relationships with its
customers, the Company attempts to satisfy their needs by offering a full range
of value-added services, including design expertise, process development and
control, testing, inventory management, and rapid response to volume and design
changes. Some custom-designed projects are priced based on agreed-to gross
margins and allow for a sharing of the costs, risks and rewards of the
manufacturing process with the customer. These relationships also provide the
Company with increased knowledge regarding the customer's products. The Company
focuses its efforts on customers with which it believes the opportunity exists
to develop long-term business collaborations.
Offer Customers the Lowest Total Cost of Ownership
The Company strives to create value for its customers by offering them the
lowest total cost of ownership. Through manufacturing flexibility, reduced
time-to-market, world-wide procurement, design for manufacturability, and
unmatched customer service, the Company is able to complement each customer's
unique set of needs. The Company has built long-standing relationships with
industry leaders by providing a high level of consultation at the earliest
stages of design development. This hands-on approach enables the Company to
design all its products for manufacturability to maximinze quality and minimize
unit cost.
Leverage Advanced Manufacturing and Management Techniques
The Company's strategy focuses on the quality of all elements of the production
process, rather than merely the quality of the end product. To implement this
strategy, the Company uses sophisticated design and manufacturing techniques
(such as computer integrated design and manufacture, computer aided design, and
automated testing and assembly of printed circuit boards), combined with
advanced management techniques, including just-in-time manufacturing,
statistical process control and total quality commitment. These techniques allow
the Company to decrease production costs by improving the efficiency of
production processes.
Expand Complementary Businesses
The Company believes that providing a wide range of services affords the Company
a competitive advantage, as it further addresses customer needs and therefore
increases the likelihood that the Company will make continuing sales to its
customers. For example, at a customer's request, the Company may build
assemblies by adding cables, harnesses, frames, and other components to its
power supply unit. In addition, it offers power supply repair services for power
supplies manufactured by others.
PRODUCTS AND SERVICES
The following table sets forth sales of the Company's product lines (after
elimination of intercompany transactions) during the fiscal years indicated
($000s):
1997 1996 1995
------------- -------------- --------------
Power Conversion $474,116 $395,322 $314,422
Computer Systems 26,771 18,953 19,026
Services and Logistics 26,349 21,456 11,521
------------- -------------- --------------
Total $527,236 $435,731 $344,969
============= ============== ==============
For further information on sales, particularly with respect to foreign and
intercompany sales, refer to Note 18 of the Notes to Consolidated Financial
Statements in the Company's Annual Report, which is incorporated herein by
reference.
MARKETING AND DISTRIBUTION
The Company's distribution channels consist of distributors, independent
manufacturers' representatives, and a direct sales team. The Company's business
is not seasonal in nature. Power Conversion products are sold directly to OEMs,
private-label customers and distributors. In addition, the Company's sales and
engineering personnel supervise and provide technical assistance to independent
domestic sales representatives and to domestic and foreign distributors.
Computer Systems products are marketed domestically through independent sales
representative organizations. Substantially all foreign sales are made through
independent foreign distributors and foreign trading companies. Computer Systems
manages some sales on a direct basis.
Sales representatives are responsible for marketing the Company's repair
business in North America.
Although the Company seeks to diversify both its customer and market application
base, sales to one customer (Hewlett-Packard Company) amounted to $79.2 million
or 15% of 1997 sales.
The Company has derived a significant portion of its sales in recent years from
its international operations. Thus, the Company's future operations and
financial results could be significantly affected by international factors, such
as changes in foreign currency exchange rates or political instability. The
Company's operating strategy and pricing take into account changes in exchange
rates over time. However, the Company's future results of operations may be
significantly affected in the short term by fluctuations in foreign currency
exchange rates. See Note 17 of the Notes to Consolidated Financial Statements,
incorporated herein by reference, for additional information.
MATERIALS AND COMPONENTS
The manufacture of the Company's products requires a wide variety of materials
and components. The Company has multiple external sources for most of the
materials and components used in its production processes, and it manufactures
certain of these components. Although the Company has from time to time
experienced shortages of certain supplies, such shortages have not resulted in
any significant disruptions in production. The Company believes that there are
adequate alternative sources of supply to meet its requirements.
INTELLECTUAL PROPERTY MATTERS
The Company believes that its future success is primarily dependent upon the
technical competence and creative skills of its personnel, rather than upon any
patent or other proprietary rights. However, the Company has protected certain
of its products with patents where appropriate and has defended, and will
continue to defend, its rights under these patents.
BACKLOG
Sales are made pursuant to purchase orders rather than long-term contracts.
Backlog consists of purchase orders on hand generally having delivery dates
scheduled within the next six months. Order backlog from continuing operations
at January 2, 1998 was $102.1 million as compared to $100.1 million at January
3, 1997. Historically, the effects of changes and cancellations have not been
significant to the Company's operations. The Company expects to ship
substantially all of its January 2, 1998 backlog in the first six months of
fiscal 1998.
COMPETITION
The industries in which the Company competes are highly competitive and
characterized by increasing customer demands for product performance, shorter
manufacturing cycles and lower prices. These trends result in frequent
introductions of new products with added capabilities and features and
continuous improvements in the relative price/performance of the products.
Increased competition could result in price reductions, reduced profit margins
and loss of market share, each of which could adversely affect the Company's
results of operations and financial condition. The Company's principal
competitors include Lucent Technologies, Delta Product and Astec (BSR) plc.
Certain of the Company's major competitors have also been engaged in merger and
acquisition transactions. Such consolidations by competitors are likely to
create entities with increased market share, customer bases, technology and
marketing expertise, sales force size, and/or proprietary technology. These
developments may adversely affect the Company's ability to compete in such
markets.
RESEARCH AND DEVELOPMENT
The Company maintains active research and development departments which are
engaged in the modification and improvement of existing products and the
development of new products. Expenditures for research and development during
the 1997, 1996, and 1995 fiscal years were approximately $30.0 million, $23.6
million, and $21.1 million, respectively. As a percentage of total sales,
research and development accounted for 5.7%, 5.4%, and 6.1% in 1997, 1996 and
1995, respectively. Research and development spending has increased in each of
the past three years as the Company invested in new product platforms to service
the communications industry. The Company believes that the timely introduction
of new technology and products is an important component of its competitive
strategy.
EMPLOYEES
The Company presently employs approximately 4,200 full-time people. In addition,
the Company presently has approximately 2,700 temporary employees and
contractors primarily in its China facility. The Company's ability to conduct
its present and proposed activities would be impaired if the Company lost the
services of a significant number of its engineers and technicians and could not
readily replace them with comparable personnel. Although there is demand for
qualified technical personnel, the Company has not, to date, experienced
difficulty in attracting and retaining sufficient engineering and technical
personnel to meet its needs.
None of the Company's domestic employees is covered by collective bargaining
agreements. The Company considers its relations with its employees to be
satisfactory.
ENVIRONMENTAL MATTERS
Compliance with federal, state and local laws and regulations regulating the
discharge of materials into the environment has not had, and, under present
conditions the Company does not anticipate that such laws and regulations will
have, a material effect on the results of operations, capital expenditures or
competitive position of the Company.
ACQUISITIONS AND DIVESTITURE; RECENT DEVELOPMENTS
ZYTEC -- On December 29, 1997, shareholders of the Company and Zytec
Corporation, a Minnesota corporation ("Zytec"), approved the merger of CPI
Acquisition Corp, a Minnesota corporation and a wholly-owned subsidiary of the
Company with and into Zytec, pursuant to an Agreement and Plan of Merger dated
September 2, 1997, with Zytec surviving as a wholly-owned subsidiary of the
Company (the "Merger"). As a result of the Merger, each outstanding share of
Zytec's common stock, no par value, was converted into the right to receive 1.33
shares of the Company's common stock, $0.01 par value. Approximately 14.1
million shares of the Company's stock were exchanged for Zytec shares. The
Merger constituted a tax-free reorganization and has been accounted for as a
pooling-of-interests.
THE ELBA GROUP - - On July 22, 1997, pursuant to an Agreement on the Sale,
Purchase and Transfer of Shares, the Company acquired for a purchase price of 52
million Deutsche marks (approximately $28.5 million) all the outstanding capital
stock of the following affiliated companies: Elba Electric GmbH, Elba Modul
GmbH, Elba Elektronik AG, Elba Electronics Ltd., Elba Electric-Produktion
s.r.o., Elba Electronique S.A.R.L., and KRP Power Source B.V. (collectively
referred to as the Elba Group). Such acquisition has been accounted for as a
purchase transaction.
The Elba Group is engaged in the design, manufacture and marketing of a wide
range of both AC to DC and DC to DC power conversion products in Europe. Elba's
fastest growing product segment is its medium power AC to DC converters (150-750
watts) sold to OEM communications customers under the Elba and KRP Power Source
labels. The Elba Group's customers include major multinational corporations such
as Ericsson, Kodak, Krone AG and Siemens among others.
RTP CORP. - - On July 5, 1997, the Company sold substantially all the assets of
its Industrial Automation Division, RTP Corp. ("RTP") to RT Acquisition Florida
Corp. The sales price, as subsequently adjusted on January 6, 1998, included
$3.0 million in cash, a subordinated unsecured promissory note due July 1998 in
the aggregate principal amount of approximately $1.1 million bearing interest at
the prime rate, and the assumption of certain of RTP's liabilities.
ITEM 2. PROPERTIES
The Company currently occupies approximately 1,180,000 square feet of office and
manufacturing space worldwide. Approximately 47% of the space utilized by the
Company is owned while the remainder is leased. Certain of the facilities owned
by the Company are subject to liens, which are described in Note 8 to the Notes
to Consolidated Financial Statements, incorporated herein by reference.
The Company maintains the following facilities:
APPROXIMATE OWNED VS.
FACILITY PRIMARY ACTIVITY SQUARE FOOTAGE LEASED
-------- ---------------- -------------- ------
Boca Raton, FL Corporate Headquarters 7,000 Leased
Eden Prairie, MN Engineering, Administration 28,000 Leased
Redwood Falls, MN Manufacturing 103,000 Owned
Redwood Falls, MN Manufacturing 87,000 Leased
Broomfield, CO Manufacturing 81,000 Leased
Vienna, Austria Engineering, Administration 17,200 Leased
Kindberg, Austria Manufacturing 64,000 Leased
Tatabanya, Hungary Magnetics Manufacturing 49,000 Owned
Lincoln, CA Repair, Logistics 210,000 Leased
Madison, WI Manufacturing 45,586 Owned
Fremont, CA Engineering, Administration 44,565 Leased
Boston, MA Engineering, Administration 40,000 Leased
Hong Kong Manufacturing 144,900 Owned
Youghal, Ireland Manufacturing 86,000 Owned
Huntington Beach, CA Manufacturing 45,315 Owned
Oberhausen, Germany Manufacturing 64,450 Owned
Ensiedel, Germany Manufacturing 29,300 Owned
Chomutov, Czech Republic Manufacturing 12,750 Owned
Etten-Leur, Netherlands Administration 19,550 Leased
In addition to the above locations, the Company has leased sales offices located
in or near London and Chesterfield, England; Paris and Vaulx-Milieu, France;
Pfaffikon, Switzerland and Munich, Germany. The Company considers the facilities
described in this Item to be generally well-maintained, adequate for its current
needs and capable of supporting a reasonably higher level of demand for its
products.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 29, 1997, a special meeting of the stockholders of each of the
Company and Zytec was held whereby shareholders of the Company voted on the
following proposal:
Proposal to approve the issuance of shares of common stock, $.01 par
value per share of the Company, pursuant to an Agreement and Plan of
Merger, dated as of September 2, 1997, between the Company, CPI
Acquisition Corp. and Zytec (the "Merger Agreement");
while shareholders of Zytec voted on the following proposal:
Proposal for the approval and adoption of the Merger Agreement pursuant
to which CPI Acquisition Corp. would be merged with and into Zytec,
with Zytec surviving as a wholly-owned subsidiary of the Company.
The shareholders of the Company and Zytec voted to approve their
respective proposals by the following vote:
BROKER
FOR AGAINST ABSTAIN NON-VOTES
--- ------- ------- ---------
Computer Products 17,271,652 60,232 38,719 0
Zytec Corporation 6,874,820 119,231 158,347 0
ITEM 4A. EXECUTIVE OFFICERS
Name Age Position(s) with the Company
- ---- --- ----------------------------
Joseph M. O'Donnell 51 Co-Chairman of the Board, President and Chief Executive Officer, Director
Richard J. Thompson 48 Vice President - Finance, Chief Financial Officer, and
Secretary
Hartmut Liebel 35 Corporate Treasurer
John M. Steel 53 Vice President
Robert J. Aebli 62 President - Communication Products
Louis R. DeBartelo 57 President - Power Conversion North America
Harvey Dewan 58 President, North America and Asia Manufacturing
Gary J. Duffy 45 Managing Director - Power Conversion Europe
Ervin F. Kamm, Jr. 58 President, Systems and Services Group
Thomas J. Kent 49 President, Services and Logistics
Joseph J. Matz 58 Managing Director - Zytec Austria
Joseph M. O'Donnell was appointed as Chairman of the Board of Directors in
February 1997 and as Co-Chairman of the Board following the Merger in December
1997. Mr. O'Donnell has served as President and Chief Executive Officer of the
Company since July 1994. Mr. O'Donnell served as Managing Director of O'Donnell
Associates, a consulting firm, from March 1994 to June 1994 and from October
1992 to September 1993; as Chief Executive Officer of Savin Corporation, an
office products distributor, from October 1993 to February 1994; and as
President and Chief Executive Officer of Go/Dan Industries, a manufacturer of
automotive parts, from June 1990 to September 1992. He is a Director of Boca
Research, Inc., a manufacturer of data communications, multimedia and networking
products, and a Director of V-Band Corporation, a manufacturer of computer
systems.
Richard J. Thompson has served as Vice President - Finance, Chief Financial
Officer, and Secretary of the Company since June 1990. Prior to joining the
Company, Mr. Thompson served as Group Controller - Technical Services and
Controller - Pan Am/Asia Pacific at Control Data Corporation, a multi-national
computer company.
Hartmut Liebel was appointed in February 1998 to the position of Corporate
Treasurer. Prior to joining the Company, Mr. Liebel had been employed by W.R.
Grace & Co., a global specialty chemical supplier. Mr. Liebel served as
Assistant Treasurer from 1995 to 1997 and Director of Financial Risk Management
during 1993 and 1994.
John M. Steel was appointed in December 1997 to the position of Vice President -
Marketing and New Product Development and Director. Mr. Steel was a co-founder
of Zytec and had been an officer and a director of Zytec since 1984.
Robert J. Aebli was appointed in November 1993 to the position of President of
Communication Products. From 1991 to 1993 Mr. Aebli served as Vice President
Operations of Contraves, Inc., a manufacturer of testing and simulation systems.
Louis R. DeBartelo was appointed President of the Company's Power Conversion
North America Division in 1993. From 1992 to 1994 he served as President - Power
Conversion National Accounts Division and from 1990 to 1992 as President - Power
Conversion America.
Harvey Dewan was appointed President of North America and Asia Manufacturing in
December 1997. From February to December 1997, Mr. Dewan was Vice President of
Operations for the Company's Communication Products division. From 1969 to April
1996, Mr. Dewan held various positions with General Instrument Corporation, most
recently as Vice President of Quality and General Manager.
Gary J. Duffy has served as Managing Director of the Company's European Power
Conversion Division since 1987, having held various manufacturing and general
management positions since joining the Company in 1982.
Ervin F. Kamm, Jr. was appointed President of the Systems and Services Group in
December 1997. Mr. Kamm was previously President of Zytec's Power Conversion
division since 1997 and a director of Zytec since 1996. From 1994 to 1997, Mr.
Kamm served as President and Chief Executive Officer of Digi International,
Inc., a provider of data communications hardware and software. From 1988 to
1993, Mr. Kamm was President and Chief Executive Officer of Norstan, Inc., a
telecommunications company. Mr. Kamm is also a director of the Institute for
Advanced Technology and MicroMedics, Inc.
Thomas J. Kent was appointed President of the Services and Logistics division in
December 1997. Mr. Kent had been General Manager of Zytec's Services and
Logistics operations since 1994 and was named Vice President of Services and
Logistics as well as a director of Zytec in 1996. From 1990 to 1994, Mr. Kent
was employed by US Windpower, most recently as its Director of Customer and Site
Support.
Joseph J. Matz joined Zytec in November 1991 as Managing Director of its
Austrian division. From October 1990 to November 1991, he was Vice President
European Operations for Modular Computer Systems, a computer manufacturer.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The common stock of Computer Products, Inc. is traded on the NASDAQ National
Stock Market under the symbol CPRD. High and low sales prices of such stock and
the information pertaining to the number of record holders on page 40 of the
Annual Report for the fiscal year ended January 2, 1998 is incorporated herein
by reference.
The Registrant has not paid cash dividends in the past and no change in such
policy is anticipated. Future dividends, if any, will be determined by the Board
of Directors in light of the circumstances then existing, including the
Company's earnings and financial requirements and general business conditions.
The Company's term loans and $20 million revolving credit facility contain
certain restrictive covenants that, among other things, require the Company to
maintain certain financial ratios and limit the purchase, redemption or
retirement of capital stock and other assets. To date, no funds have been drawn
on the revolving credit facility.
ITEM 6. SELECTED FINANCIAL DATA
The Consolidated Five-Year Financial History on page 13 of the Annual Report for
the fiscal year ended January 2, 1998 is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in the Annual Report for the fiscal year ended January 2,
1998 is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company (including Note 19,
Selected Consolidated Quarterly Data) and the independent certified public
accountants' report thereon contained in the 1997 Annual Report to Stockholders
are incorporated in this Item 8 by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEMS 10, 11, 12 AND 13.
The information called for by that portion of Item 10 which relates to the
Directors of the Company, by Item 11 (Executive Compensation), Item 12 (Security
Ownership of Certain Beneficial Owners and Management) and Item 13 (Certain
Relationships and Related Transactions) is incorporated herein by reference from
the Company's definitive proxy statement for the Annual Meeting of Shareholders
to be filed with the Securities and Exchange Commission not later than 120 days
after the close of the fiscal year ended January 2, 1998. That portion of Item
10 which relates to Executive Officers of the Company appears as Item 4A of Part
I of this Report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8K.
(a) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
1. FINANCIAL STATEMENTS
The following consolidated financial statements of Computer Products, Inc. and
subsidiaries included in the Company's Annual Report for the fiscal year ended
January 2, 1998 are incorporated herein by reference in Item 8:
Consolidated Statements of Operations -- Years Ended on the Friday
nearest December 31, 1997, 1996 and 1995
Consolidated Statements of Financial Condition -- as of the Friday
nearest December 31, 1997 and 1996
Consolidated Statements of Cash Flows -- Years Ended on the Friday
nearest December 31, 1997, 1996 and 1995
Consolidated Statements of Shareholders' Equity -- Years Ended on the
Friday nearest December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
2. FINANCIAL STATEMENT SCHEDULE
The following information is filed as part of this Form 10-K and should be read
in conjunction with the financial statements contained in the 1997 Annual Report
to Stockholders.
Report of Independent Certified Public Accountants On Schedule
Report of Independent Accountants
Schedule for Computer Products Inc. and Subsidiaries:
Schedule II - Valuation and Qualifying Accounts
Schedules other than that listed above have been omitted because they are either
not required or not applicable, or because the required information has been
included in the consolidated financial statements or notes thereto.
3. EXHIBITS
EXHIBIT # DESCRIPTION
2.1 Agreement and Plan of Merger by and between Zytec Corporation,
Computer Products Inc. and CPI Acquisition Corp. dated as of September
2, 1997 - incorporated by reference to Exhibit 2.1 of Registrant's
Registration Statement on Form S-4 filed on September 25, 1997.
2.2 Agreement on the Sale, Purchase and Transfer of Shares dated as of
July 22, 1997 - incorporated by reference to Exhibit 2 of Registrant's
Registration Statement on Form 8-K filed on August 6, 1997.
3.1 Articles of Incorporation of the Company, as amended, on May 15, 1989
- incorporated by reference to Exhibit 3.1 of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 28, 1989.
3.2 By-laws of the Company, as amended, effective October 16, 1990
incorporated by reference to Exhibit 3.2 of Registrant's Registration
Statement on Form S-4, filed with the Commission on September 25,
1997, as amended.
4.1 Rights Agreement, dated as of November 9, 1988, by and between
Computer Products, Inc. and The Bank of New York, as amended
incorporated by reference to Exhibit 4.1 of Registrant's Current
Report on Form 8-K filed with the Commission on June 15, 1990.
10.1 Grant Agreement, dated June 19, 1981, as supplemented, by and among
the Industrial Development Authority of Ireland, Power Products Ltd.
and Computer Products, Inc. - incorporated by reference to Exhibit
10.2 of Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1982.
10.2 Indenture between Industrial Development Authority of Ireland and
Power Products Ltd. - incorporated by reference to Exhibit 10.3 of
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1982.
10.3 Lease for facilities of Boschert, Incorporated located in Milpitas,
California - incorporated by reference to Exhibit 10.14 of
Registrant's Annual Report on Form 10-K for the fiscal year ended
January 3, 1986.
10.4 Letter Amendment to Lease for facilities of Boschert, Incorporated,
dated January 9, 1991 located in Milpitas, California - incorporated
by reference to Exhibit 10.8 of Registrant's Annual Report on Form
10-K for the fiscal year ended December 28, 1990.
10.5 Sublease for facilities of Boschert, Incorporated located in Milpitas,
California - incorporated by reference to Exhibit 10.8 of Registrant's
Annual Report on Form 10-K for the fiscal year ended January 1, 1988.
10.6 Sublessee Estoppel Certificate to Sublease for facilities of Boschert,
Incorporated, dated February 4, 1991, located in Milpitas, California
- incorporated by reference to Exhibit 10.10 of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 28, 1990.
10.7 1981 Stock Option Plan, as amended, effective as of October 16, 1990
incorporated by reference to Exhibit 10.10 of Registrant's Current
Report on Form 8-K, filed with the Commission on November 30, 1990.
10.8 Computer Products, Inc. 1986 Outside Directors' Stock Option Plan,
amended as of February 22, 1988 - incorporated by reference to Exhibit
10.12 of Registrant's Annual Report on Form 10-K for the fiscal year
ended January 1, 1988.
10.9 Asset Purchase Agreement, dated as of January 1, 1992, by and among
Computer Products, Inc., HC Holding Corp. and Heurikon Corporation
including exhibits and schedules thereto - incorporated by reference
to Exhibit 2 of Registrant's Current Report on Form 8-K, filed with
the Commission on January 20, 1992.
10.10Contract to Purchase between Computer Products, Inc. and Sauk
Enterprises dated December 23, 1991 for the premises located at 8310
Excelsior Drive, Madison, Wisconsin - incorporated by reference to
Registrant's Annual Report on Form 10-K for the fiscal year ended
January 3, 1992.
10.11Lease for facilities of the executive offices located in Boca Raton,
Florida - incorporated by reference to Exhibit 10.23 of Registrant's
Annual Report on Form 10-K for the fiscal year ended December 30,
1988.
10.12Outside Directors' Retirement Plan, effective October 17, 1989
incorporated by reference to Exhibit 10.22 of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 29, 1989.
10.131990 Performance Equity Plan - incorporated by reference to Exhibit
10.26 of Registrant's Annual Report on Form 10-K for the fiscal year
ended December 28, 1990.
10.141990 Outside Directors' Stock Option Plan - incorporated by reference
to Exhibit 10.27 of Registrant's Annual Report on Form 10-K for the
fiscal year ended December 28, 1990.
10.15Manufacturing and Development Agreement dated March 16, 1992, between
Computer Products, Inc. and Analogic Corporation - incorporated by
reference to Exhibit 10.30 of Registrant's Annual Report on Form 10-K
for the fiscal year ended January 3, 1992.
10.16License Agreement dated March 16, 1992, between Computer Products,
Inc. and Analogic Corporation - incorporated by reference to Exhibit
10.31 of Registrant's Annual Report on Form 10-K for the fiscal year
ended January 3, 1992.
10.17Asset Purchase Agreement between Computer Products, Inc., Tecnetics
Incorporated, Miller Acquisition Corporation and certain former
managers of Tecnetics Incorporated - incorporated by reference to
Exhibit 10.29 of Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended April 3, 1992.
10.18 Manufacturing License and Technical Assistance Agreement between
Heurikon Corporation and Lockheed Sanders, Inc. dated January 31,
1992 - incorporated by reference to Exhibit 10.34 of Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended July 3,
1992.
10.19 Star MVP Domestic Terms and Conditions of Sale Between Heurikon
Corporation and Lockhead Sanders, Inc. dated March 18, 1992
incorporated by reference to Exhibit 10.35 of Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended July 3, 1992.
10.20 DSP32C VME Board License Agreement between Heurikon Corporation and
American Telephone and Telegraph Company dated October 28, 1991
incorporated by reference to Exhibit 10.36 of Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended July 3, 1992.
10.21 Software License agreement between Heurikon Corporation and American
Telephone and Telegraph Company dated October 28, 1991 - incorporated
by reference to Exhibit 10.37 of Registrant's Quarterly Report on
Form 10-Q for the quarterly period ended July 3, 1992.
10.22 Employment Agreement, dated June 29, 1994, by and between Computer
Products, Inc. and Joseph M. O'Donnell - incorporated by reference to
Exhibit 10.41 of Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended July 1, 1994.
10.23 (a) Credit Agreement, dated as of June 28, 1994, by and between
Heurikon Corporation and Firstar Bank Madison, N.A.; (b) Guaranty of
Payment, dated as of June 28, 1994, by and between Computer Products,
Inc. and Firstar Bank Madison, N.A. (c) Term Note, as of June 28,
1994, by and between Heurikon Corporation and Firstar Bank Madison,
N.A.; (d) Mortgage, Security Agreement, and Fixture Financing
Statement, dated as of June 28, 1994, by and between Heurikon
Corporation and Firstar Bank Madison, N.A. - incorporated by
reference to Exhibit 10.42 of Registrant's Quarterly Report on Form
10-Q for the quarterly period ended July 1, 1994.
10.24 Grant Agreement, dated October 26, 1994, by and among the Industrial
Development Authority of Ireland, Power Products Ltd. and Computer
Products, Inc. - incorporated by reference to Exhibit 10.43 of
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 30, 1994.
10.25 1996 Employee Stock Purchase Plan - incorporated by reference to
Exhibit 10.45 of Registrant's Annual Report on Form 10-K for the
fiscal year ended December 29, 1995.
10.26 1990 Performance Equity Plan as amended - incorporated by reference
to Exhibit 10.46 of Registrant's Annual Report on Form 10-K for the
fiscal year ended December 29, 1995.
10.27 1990 Outside Directors Stock Option Plan, restated as of January 25,
1996 - incorporated by reference to Exhibit 10.47 of Registrant's
Annual Report on Form 10-K for the fiscal year ended December 29,
1995.
10.28 1996 Executive Incentive Plan - incorporated by reference to Exhibit
10.48 of Registrant's Annual Report on Form 10-K for the fiscal year
ended December 29, 1995.
10.29 Executive Stock Ownership plan - incorporated by reference to Exhibit
10.49 of Registrant's Annual Report on Form 10-K for the fiscal year
ended December 29, 1995.
10.30 Agreement and Plan of Merger, dated August 23, 1996, by and among
Computer Products, Inc., JPS Acquisition Corp, Jeta Power Systems
Inc. and Jagdish C. Chopra - incorporated by reference to Exhibit
10.50 of Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended September 27, 1996.
10.31 Asset Purchase Agreement among RT Acquisition Florida Corp., RTP
Corp. and Computer Products Inc. dated as of July 5, 1997
incorporated by reference to Exhibit 10.33 of Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended July 4, 1997.
10.32 Amendment to Installment or Single Payment Note by and between
Firstar Bank Madison, N.A., Heurikon Corporation and Computer
Products Inc. dated as of May 23, 1997- incorporated by reference to
Exhibit 10.34 of Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended July 4, 1997.
10.33 Agreement by and between Oates Business Park and the Company dated
May 1, 1995 regarding the leasing of certain premises and real
property located in Lincoln, California - Incorporated by reference
to Exhibit 10.26 to Form 10-K of Zytec Corporation for the year ended
December 31, 1995 (File No. 0-22428).
10.34 Agreement and Addendum by and between Buzz Oates Enterprise and the
Company dated September 15, 1995, as amended December 8, 1995, and as
second amended March 8, 1996, and as third amended May 14, 1996, and
as fourth amended November 8, 1996, regarding the leasing of certain
premises and real property located in Lincoln, California
Incorporated by reference to Exhibit 10.19 to Form 10-K of Zytec
Corporation for the year ended December 31, 1996.
10.35 Agreement by and between Superior Investments I, Inc. and the Company
dated January 22, 1996 regarding the leasing of certain premises and
real property located in Broomfield, Colorado - Incorporated by
reference to Exhibit 10.27 to Form 10-K of Zytec Corporation for the
year ended December 31, 1995. (File No. 0-22428).
10.36 Rental Agreement by and between Schrack Elektronik Aktiengesellschaft
and IMMORENT-Weiko Grundverwertungsge- sellschaft m.b.H. dated March
14, 1985 (English translation) regarding the leasing of certain real
property located in Kindberg, Austria - Incorporated by reference to
Exhibit 10.70 to Zytec Corporation's Registration
Statement on Form S-1 (File No. 33-68822).
10.37 Real Estate Lease Agreement by and between IMMORENT - Weiko
Grundverwertungsge-sellschaft m.b.H. and Schrack Elektronik
Aktiengesellschaft dated December 16, 1984 Aktiengesellschaft dated
December 16, 1984 (English translation) regarding the leasing of
certain real property located in Kindberg, Austria - Incorporated by
reference to Exhibit 10.71 to Zytec Corporation's Registration
Statement on Form S-1 (File No. 33-68822).
10.38 Lease (Rental) Agreement by and between Schrack Telecom AG and
Schrack Power Supply Gesellschaft m.b.H. dated February 19, 1991
(English translation) regarding the leasing of certain property
located in Kindberg, Austria - Incorporated by reference to Exhibit
10.72 to Zytec Corporation's Registration Statement on Form S-1 (File
No. 33-68822).
10.39 Sublease (Subrental) Agreement by and between Schrack Power Supply
Gesellschaft m.b.H. and Schrack Power Supply Gesellschaft m.b.H.
dated February 14, 1991 (English translation) regarding the leasing
of certain property located in Kindberg, Austria - Incorporated by
reference to Exhibit 10.73 to Zytec Corporation's Registration
Statement on Form S-1 (File No. 33-68822).
10.40 Sublease (Subrental) Agreement by and between Schrack Power Supply
Gesellschaft m.b.H. and Schrack Telecom AG dated February 14, 1991
(English translation) regarding the leasing of certain property
located in Kindberg, Austria - Incorporated by reference to Exhibit
10.74 to Zytec Corporation's Registration Statement on Form S-1 (File
No. 33-68822).
10.41 Third Addendum to Lease Agreement between Zytec Corporation and
Superior Investments I, Inc. dated May 23, 1997 - Incorporated by
reference to Exhibit 10.2 to Form 10-Q of Zytec Corporation for the
quarter ended June 29, 1997.
10.42 Fourth Addendum to Lease Agreement between Zytec Corporation and
Superior Investments I, Inc. dated June 27, 1997- Incorporated by
reference to Exhibit 10.3 to Form 10-Q of Zytec Corporation for the
quarter ended June 29, 1997.
10.43 Loan agreement between Herbert Elektronische Gerate GmbH & Co. KG and
First Union National Bank, London Branch dated as of July 15, 1997.
10.44 Loan agreement between Computer Products, Inc. and First Union
National Bank, London Branch dated as of July 15, 1997.
10.45 Amended and restated loan agreement between Computer Products, Inc.,
First Union National Bank and First Union National Bank, London
Branch dated as of July 15, 1997.
13 Annual Report of Computer Products, Inc. for the fiscal year ended
January 2, 1998.
21 List of subsidiaries of Registrant.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
27 Financial data schedule
(b) Reports on Form 8-K
During the thirteen-week period ended January 2, 1998, the Company filed the
following reports on Form 8-K:
On October 30, 1997, the Company filed a Current Report on Form 8-K to file
restated audited historical financial statements pursuant to its discontinued
operations plan for RTP Corp. adopted during 1997.
On January 13, 1998, the Company filed a Current Report on Form 8-K announcing
that on December 29, 1997 it completed its merger transaction with Zytec
Corporation.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE
To the Board of Directors and Shareholders of
Computer Products, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Computer Products, Inc.'s annual
report to shareholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated January 23, 1998. Our audits were made for the
purpose of forming an opinion on those statements taken as a whole. The schedule
listed in Item 14(a)(2) is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, based on our audits and the
report of other auditors, fairly states in all material respects the financial
data required to be set forth therein in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
January 23, 1998.
REPORT OF INDEPENDENT ACCOUNTANTS
The Shareholders and Board of Directors of
Computer Products, Inc.:
We have audited the consolidated balance sheet of Zytec Corporation as of
December 31, 1996, and the related consolidated statements of operations, cash
flows and stockholders' equity for each of the two years in the period ended
December 31, 1996 (not shown separately in Computer Products, Inc. Annual Report
on Form 10-K for the year ended January 2, 1998). In connection with our audits
of such financial statements, we have also audited the related financial
statement schedule II, valuation and qualifying accounts for each of the two
years in the period ended December 31, 1996 (not shown separately in Computer
Products, Inc. Annual Report on Form 10-K for the year ended, January 2, 1998).
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule 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 consolidated financial position of Zytec Corporation
as of December 31, 1996, and the consolidated results of its operations and its
cash flows for each of the two years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Minneapolis, Minnesota
February 18, 1997
COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended on the Friday Nearest December 31 ($000s)
- ---------------------------------------------------------- ----------- ------------------------ ----------------------- -----------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------------------------------------------- ----------- ------------------------ ----------------------- -----------
-----------------------
Additions
----------- ------------ ---------- ---------------------- ----------
Balance at Charged to Charged to Deductions Balance at
Beginning Costs & Other ----------- ---------- End of
Description of Period Expenses Accounts Description Amount Period
- ---------------------------------------------------------- ----------- ----------- ------------ ----------- ----------- -----------
Fiscal Year 1997:
Reserve deducted from asset to which it applies:
Allowance for doubtful accounts $ 1,312 $ 426 $ - (1) $ 2 $ 1,736
Inventory 7,076 4,963 (3) 941 11,098
Deferred tax asset valuation allowance 8,926 (2,332) (2) 1,743 4,851
Fiscal Year 1996:
Reserve deducted from asset to which it applies:
Allowance for doubtful accounts $ 1,223 $ 89 (1) $ - $ 1,312
Inventory 6,728 1,990 (3) 1,642 7,076
Deferred tax asset valuation allowance 9,890 982 (2) 1,946 8,926
Other 292 (1) 292 -
Fiscal Year 1995:
Reserve deducted from asset to which it applies:
Allowance for doubtful accounts $ 1,114 $ 183 (3) $ 74 $ 1,223
Inventory 4,013 4,422 (3) 1,707 6,728
Deferred tax asset valuation allowance 10,453 74 (2) 637 9,890
Other 292 292
(1) This amount relates to recoveries.
(2) The reduction relates to utilization of tax loss carryforwards.
(3) The reduction relates to charge-offs.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
COMPUTER PRODUCTS, INC.
-----------------------
(Registrant)
Dated: March 27, 1998 By: Joseph M. O'Donnell
-------------------
Joseph M. O'Donnell
Co-Chairman of the Board,
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
Joseph M. O'Donnell Co-Chairman of the Board, 03/27/98
- ------------------- President and Chief Executive
Joseph M. O'Donnell Officer, Director
Ronald D. Schmidt Co-Chairman of the Board 03/27/98
- -------------------
Ronald D. Schmidt
Richard J. Thompson Vice President-Finance, 03/27/98
- ------------------- Chief Financial Officer,
Richard J. Thompson and Secretary
Edward S. Croft, III Director 03/27/98
- --------------------
Edward S. Croft, III
Dr. Fred C. Lee Director 03/27/98
- ---------------
Dr. Fred C. Lee
Lawrence J. Matthews Director 03/27/98
- --------------------
Lawrence J. Matthews
Stephen A. Ollendorff Director 03/27/98
- ---------------------
Stephen A. Ollendorff
Phillip A. O'Reilly Director 03/27/98
- -------------------
Phillip A. O'Reilly
Bert Sager Director 03/27/98
- ----------
Bert Sager
A. Eugene Sapp, Jr. Director 03/27/98
- -------------------
A. Eugene Sapp, Jr.
Lewis Solomon Director 03/27/98
- -------------
Lewis Solomon
John M. Steel Director 03/27/98
- -------------
John M. Steel
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
10.43 Loan agreement between Herbert Elektronische Gerate GmbH & Co. KG
and First Union National Bank, London Branch dated as of July 15,
1997.
10.44 Loan agreement between Computer Products, Inc. and First Union
National Bank, London Branch dated as of July 15, 1997.
10.45 Amended and restated loan agreement between Computer Products, Inc.,
First Union National Bank and First Union National Bank, London
Branch dated as of July 15, 1997.
13 Annual Report of Computer Products, Inc. for the fiscal year ended
January 2, 1998
21 List of subsidiaries of Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule