<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarter ended March 31, 1997           Commission File No. 0-18106


                          EXIDE ELECTRONICS GROUP, INC.
             (Exact name of registrant as specified in its charter)

         Delaware                                    23-2231834
(State or other jurisdiction of        (I.R.S. Employer Identification Number)
incorporation or organization)

               8609 Six Forks Road, Raleigh, North Carolina 27615
              (Address of principal executive offices and zip code)

                                 (919) 872-3020
              (Registrant's telephone number, including area code)


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  period 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 [     ]


As of May 12, 1997, 10,049,543 shares of the Registrant's $0.01 par value common
stock were outstanding.


<PAGE>

EXIDE ELECTRONICS GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                         Three Months Ended          Six Months Ended
                                                              March 31,                   March 31,
                                                        --------------------       --------------------
                                                          1997         1996          1997         1996
                                                          ----         ----          ----         ----
<S>                                                   <C>          <C>            <C>          <C>      
Revenues
   Products                                           $ 109,714    $  73,819      $ 209,126    $ 131,478
   Services                                              29,124       27,869         60,634       53,513
                                                         ------       ------         ------      -------
     Total revenues                                     138,838      101,688        269,760      184,991
                                                         ------       ------         ------      -------
Cost of revenues
   Products                                              78,029       53,579        146,569       96,087
   Services                                              19,581       19,423         40,357       38,003
                                                         ------       ------         ------      -------
     Total cost of revenues                              97,610       73,002        186,926      134,090
                                                         ------       ------         ------      -------
   Gross profit                                          41,228       28,686         82,834       50,901

Selling, general and administrative expense              29,268       21,025         58,199       38,482
Research and development expense                          3,944        2,577          7,519        5,086
Acquisition and restructuring expense                        --       11,621             --       11,621
                                                          -----        -----         ------      -------
   Income (loss) from operations                          8,016       (6,537)        17,116       (4,288)

Interest expense                                          7,074        7,435         14,073        8,932
Interest income                                            (107)        (180)          (292)        (211)
Other (income) expense                                     (122)          68             36          185
                                                           ----         ----          -----        -----
   Income (loss) before income taxes                      1,171      (13,860)         3,299      (13,194)

Provision (benefit) for income taxes                        592       (4,869)         1,650       (4,616)
Minority interests in net income of subsidiaries             81           --            192           --
                                                          -----        -----         ------       ------
   Income (loss) before extraordinary item                  498       (8,991)         1,457       (8,578)
                                                         
Extraordinary item                                        2,376           --          2,376           --
                                                          -----        -----         ------       ------
Net loss                                              $  (1,878)    $ (8,991)     $    (919)    $ (8,578)
Preferred stock dividends and accretion                     342           67            684           67
                                                           ----         ----           ----         ----
Net loss applicable to common shareholders            $  (2,220)    $ (9,058)     $  (1,603)    $ (8,645)
                                                      =========    =========      ==========    =========
Per Share Amounts
Primary
   Net income (loss) before extraordinary item        $    0.02    $   (0.97)     $    0.08     $  (0.93)
   Extraordinary item                                     (0.24)          --          (0.24)          --
                                                          -----        -----          -----        -----
   Net loss                                           $   (0.22)   $   (0.97)     $   (0.16)    $  (0.93)
                                                      ==========    =========     ==========    =========
   Weighted average number of common and equivalent
      shares outstanding                                 10,051        9,313         10,018        9,272
                                                         ======        =====        =======        =====
Fully diluted
   Net income (loss) before extraordinary item        $    0.02    $   (0.97)     $    0.08     $  (0.93)
   Extraordinary item                                     (0.24)          --          (0.24)          --
                                                          -----        -----          -----        -----
   Net loss                                           $   (0.22)   $   (0.97)     $   (0.16)    $  (0.93)
                                                      ==========   ==========     ==========    =========
   Weighted average number of common and equivalent
      shares outstanding                                 10,052        9,313         10,052        9,423
                                                         ======        =====         ======        =====
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
                                        2
<PAGE>

EXIDE ELECTRONICS GROUP, INC.
CONSOLIDATED BALANCE SHEET
(unaudited; in thousands)
<TABLE>
<CAPTION>


                                                      March 31,   September 30,   March 31,
                                                        1997          1996          1996
                                                        ----          ----          ----
Assets
Current assets
<S>                                                  <C>          <C>           <C>
   Cash and cash equivalents                         $   2,860    $   7,848     $   5,882
   Accounts receivable                                 125,828      129,423       123,580
   Inventories                                         103,089       90,069       107,770
   Other current assets                                 23,252       20,409        24,029
                                                        ------       ------        ------
      Total current assets                             255,029      247,749       261,261
                                                       -------      -------       -------
Property, plant, and equipment
   Land, buildings, and leasehold improvements          16,695       17,539        13,607
   Machinery and equipment                              74,743       75,768        76,417
                                                        ------       ------        ------
                                                        91,438       93,307        90,024
   Accumulated depreciation                             43,233       44,386        39,651
                                                        ------       ------        ------
                                                        48,205       48,921        50,373
Goodwill                                               152,462      154,373       157,852
Other intangible assets                                 22,362       28,665        30,051
Other assets                                            10,023        9,766         8,613
                                                        ------       ------        ------
                                                     $ 488,081    $ 489,474     $ 508,150
                                                     =========    =========     =========

Liabilities, Redeemable Preferred Stock, & Common Shareholders' Equity

Current liabilities
   Short-term debt                                   $  16,804    $  14,568     $   7,978
   Accounts payable                                     80,803       71,046        69,030
   Deferred revenues                                    23,244       21,913        21,966
   Other accrued liabilities                            23,479       24,355        26,812
                                                        ------       ------        ------
      Total current liabilities                        144,330      131,882       125,786
                                                        ------       ------        ------
Long-term debt                                          98,053      110,347       137,655
                                                        ------       ------        ------
Subordinated notes                                     122,084      121,920       121,756
                                                        ------       ------        ------
Deferred liabilities                                     9,943        9,912         6,760
                                                         -----        -----         -----
Minority interests                                       1,461          762             -
                                                        ------       ------        ------
Redeemable preferred stock                              18,597       18,312        18,028
                                                         -----        -----         -----
Common shareholders' equity
   Common stock, $0.01 par value, 30,000,000
    shares authorized; shares issued - 10,372,005
    at March 31, 1997, 10,370,505 at September 30,
    1996, and 10,362,130 at March 31, 1996                 104          104           104
   Additional paid-in capital                           86,893       87,491        87,362
   Retained earnings                                    19,749       21,372        23,803
   Cumulative translation adjustments                   (2,927)        (975)       (1,592)
                                                        ------       ------        ------
                                                       103,819      107,992       109,677
   Less:  Notes receivable from shareholders            (5,107)      (5,304)       (5,163)
          Treasury stock, 322,462 shares at March
           31, 1997, and 386,668 shares at September
           30, 1996 and at March 31, 1996               (5,099)      (6,349)       (6,349)
                                                         -----        -----         -----
                                                        93,613       96,339        98,165
                                                        ------       ------        ------
                                                     $ 488,081    $ 489,474     $ 508,150
                                                     =========    =========     =========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
                                        3
<PAGE>

EXIDE ELECTRONICS GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited; in thousands)
<TABLE>
<CAPTION>


                                                                 Six Months Ended
                                                                     March 31,
                                                                -------------------
                                                                  1997        1996
                                                                  ----        ----
Cash flows from operating activities

<S>                                                            <C>         <C>
   Net loss                                                    $   (919)   $ (8,578)
     Adjustments to reconcile net loss to cash 
       provided by (used in) operating activities:
       Depreciation expense                                       4,899       3,642
       Amortization expense                                       5,840       2,009
       Write-off of debt issue costs, net of tax                  2,376          --
       Acquisition and restructuring provisions                      --      10,566
       Decrease in accounts receivable                            2,721       3,435
       Increase in inventories                                  (12,199)     (8,485)
       Increase in other current assets                          (2,812)     (2,648)
       Increase (decrease) in accounts payable                    9,858        (354)
       Increase (decrease) in other current liabilities              14        (431)
       Other, net                                                   240      (6,343)
                                                                   ----      ------
       Net cash provided by (used in) operating activities       10,018      (7,187)
                                                                  -----       -----
Cash flows from investing activities
   Acquisitions of property, plant, and equipment                (4,359)     (7,386)
   Acquisitions, net of cash received                              (219)   (162,976)
   Other, net                                                       915        (526)
                                                                   ----      ------
       Net cash used in investing activities                     (3,663)   (170,888)
                                                                 ------      ------
Cash flows from financing activities
   Proceeds from bank credit facilities                          50,528     200,588
   Payments of bank credit facilities                           (60,502)   (132,956)
   Issuance of senior subordinated debt, net of fees                 --     116,673
   Issuance of common stock warrants                                 --       3,259
   Issuances of common stock                                        717         142
   Purchases of treasury stock                                       --      (6,926)
   Payments of notes receivable from shareholders                   306         215
   Other, net                                                    (2,392)        175
                                                                  -----       -----
       Net cash provided by (used in) financing activities      (11,343)    181,170
                                                                 ------      ------
Net increase (decrease) in cash and cash equivalents             (4,988)      3,095

Cash and cash equivalents, beginning of period                    7,848       2,787
                                                                 ------      ------
Cash and cash equivalents, end of period                       $  2,860    $  5,882
                                                               ========    ========

Supplemental cash flow disclosures
    Interest paid, net of amounts capitalized                  $ 13,363    $  8,247
    Income taxes paid                                          $  2,042    $  4,308

<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>


                                        4
<PAGE>
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements include the
accounts of Exide Electronics Group, Inc. (the "Company") and its subsidiaries.
The Company designs, manufactures, markets, and services a broad line of
uninterruptible power systems ("UPS") products that protect computers and other
sensitive electronic equipment against electrical power distortions and
interruptions. The Company's products are used principally for networking,
financial, medical, industrial, telecommunications, military, and aerospace
applications throughout the world.

The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles and the rules and
regulations of the Securities and Exchange Commission for interim financial
statements. Certain information and footnote disclosures required for complete
financial statements have been condensed or omitted. These financial statements
should be read in conjunction with the financial statements presented in the
Company's 1996 Annual Report to Shareholders.

In the opinion of management, the accompanying consolidated financial statements
include all adjustments (which consist of normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows as of and for the six month periods ended March 31, 1997 and 1996.
The results of operations for the six month period ended March 31, 1997 are not
necessarily indicative of the results to be expected for the full year.


NOTE 2: ACQUISITION OF DELTEC

On March 13, 1996, the Company completed its acquisition of Deltec Power
Systems, Inc. ("Deltec"), one of the world's largest manufacturers and marketers
of off-line and line-interactive small UPS, from Fiskars Oy Ab for a purchase
price of $197.6 million. The acquisition was accounted for using the purchase
method of accounting. Deltec's accounts and results of operations are included 
in the Company's financial statements from March 13, 1996 forward.

NOTE 3 - INVENTORIES

Inventories, which include materials, labor, and manufacturing overhead, are
stated at the lower of cost or market, and consist of the following (in
thousands):

                                               March 31,   Sept. 30,  March 31,
                                                   1997        1996       1996
                                                   ----        ----       ----
Raw materials and supplies                      $38,135     $33,328    $44,675
Work in process                                   5,505       5,883      6,584
Finished goods                                   39,107      31,712     37,389
Service parts                                    20,342      19,146     19,122
                                                 ------      ------     ------
                                               $103,089     $90,069   $107,770
                                                =======     =======    =======


                                        5
<PAGE>
                          EXIDE ELECTRONICS GROUP, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


NOTE 4 - LONG-TERM DEBT AND EXTRAORDINARY ITEM

In March 1997, the Company entered into a binding agreement to amend and restate
its domestic bank credit facilities with $170 million of senior secured bank
credit facilities (the "Amended and Restated Credit Facility") comprised of a 
$125 million revolving credit facility and a $45 million term loan. Borrowings 
under the revolving credit facility are limited to specified amounts of eligible
accounts receivable and inventories. Outstanding borrowings are secured by
substantially all the inventories and accounts receivable of the Company, and
the pledge of all of the capital stock of all of the Company's material domestic
subsidiaries and 66% of the capital stock of certain of its foreign
subsidiaries. Amounts outstanding under the Amended and Restated Credit
Facility, which was effective April 9, 1997, currently bear interest at LIBOR
plus 150 basis points, or the bank's base rate plus 50 basis points, as defined.
The 30-day LIBOR rate on March 31, 1997 was 5.6875%. The average unutilized
daily commitment incurs a commitment fee of .375% per annum, and letters of
credit bear a fee of 1.50% per annum. Interest rates on borrowings under the
Amended and Restated Credit Facility may vary according to the Company's
leverage ratio, as defined. At March 31, 1997, the Company had borrowings of
$105.0 million outstanding under the Amended and Restated Credit Facility, and a
remaining borrowing capacity of approximately $11.0 million.

The amendment and restatement of the credit agreement described above
constituted a substantial modification in the terms of the agreement and has
been treated as an early extinguishment of debt. Accordingly, in March 1997 the
Company wrote off approximately $3.7 million ($2.4 million after tax) of
unamortized debt acquisition costs related to the original credit facility as an
extraordinary item.

Both the term and revolving credit facility portions of the Amended and Restated
Credit Facility require at least quarterly payments of accrued and unpaid 
interest. The term loan has scheduled quarterly principal payments. The Company
is permitted to prepay the principal amount of the Amended and Restated Credit
Facility without penalty at any time. Any principal amount of the term loan and 
any amounts due under the revolving credit facility that remain unpaid on the
maturity date, April 9, 2002, are required to be repaid in full on that date.

In the event the Company (i) sells certain assets, (ii) incurs certain
additional debt, (iii) issues any equity securities, or (iv) receives certain
casualty insurance proceeds, the Company may be obligated to first repay the
term loan and second permanently reduce commitments under the revolving credit 
facility in addition to the scheduled term loan payments.


                                       6

<PAGE>
The Company is subject to certain financial covenants, as defined in the Amended
and Restated Credit Facility, including maintaining specified fixed charge
coverage and leverage ratios and minimum net worth. The Company and its lending
group modified certain covenants in the Amended and Restated Credit Agreement.
The Company was in compliance with all applicable financial covenants as of
March 31, 1997. 

Under the terms of the Amended and Restated Credit Facility, the Company is
required to cap a portion of its interest rate risk. In April 1996, the Company
entered into several two-year interest rate cap agreements for a combined 
notional principal amount of $65 million, which capped the Company's floating 
rate LIBOR index to a weighted average rate of 6.5%. Premiums paid for the 
interest rate cap agreements have been capitalized and are amortized as interest
expense over the terms of the caps. Unamortized premiums are included with other
assets in the accompanying consolidated balance sheet. There are no amounts
receivable under the cap agreements at March 31, 1997. In the future, such
receivable amounts, if any, will be accrued as a reduction of interest expense.

In March 1996, the Company issued 125,000 units (the "Units") comprised of $125
million of 11.5% senior subordinated notes (the "Notes") and warrants (the
"Warrants") to purchase 643,750 shares of the Company's common stock. Each Unit
consists of one $1,000 Note and one detachable Warrant to acquire 5.15 shares
of the Company's common stock at an exercise price of $13.475 per share, subject
to adjustment in certain events.

The Amended and Restated Credit Facility and the Notes contain restrictive
covenants which, among other things, limit the Company's ability to incur
additional debt, pay dividends, consummate certain acquisitions, make certain
asset sales, and incur certain liens.

NOTE 5 - COMMON SHAREHOLDERS' EQUITY

During the first quarter of fiscal 1997, the Company issued approximately 64,000
shares of its common stock for approximately $0.7 million under its Employee
Stock Purchase Plan. This resulted in a reduction of $1.2 million in treasury
stock and $0.5 million in additional paid-in capital.

NOTE 6 - GOVERNMENT CONTRACT MATTERS

During the fourth quarter of fiscal 1996, the Company was awarded a follow-on
contract with the Sacramento Air Force Air Logistics Center (the "ALC II
Contract"). That requirements contract, which has a base term of three years and
a two-year renewal option, was awarded to the Company as a result of a new bid
process following a protest of an earlier award to the Company of a similar
contract in June 1995. In October 1996, the Company was notified by the Air
Force that a competitor had filed a protest with the General Accounting Office
("GAO") contesting the award of this contract to Exide Electronics. As required
by the rules governing government contract protests, work under the contract was
automatically suspended. In January 1997, the Company was notified by the Air
Force that the GAO had advised the Air Force that all claims in the protest had
been denied. A motion seeking reconsideration of the denial of the protest of


                                       7
<PAGE>
the contract award has been filed with the GAO by the competitor and is pending
GAO review. However, this motion does not impact the Company's ability to begin
performance under the ALC II Contract. The GAO may decide on the motion for
reconsideration at any time. It is unknown whether further appeals will be made
by the competitor who filed the protest. There have been no material purchases
to date under the ALC II Contract. There can be no assurances that the ALC II
Contract will remain in effect for any definite period or that the Air Force
will place orders with the Company against such contract.

NOTE 7 - EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share," in February 1997. The
Company is required to adopt SFAS No. 128 for the year ended September 30, 1998.
This statement establishes standards for computing and presenting earnings per
share ("EPS") and makes such standards comparable to international EPS
standards. The statement requires dual presentation of basic and diluted EPS on
the face of the income statement and requires a reconciliation of the numerator
and denominator of the basic EPS calculation to the numerator and denominator of
the diluted EPS calculation. If the Company had been required to report EPS
under SFAS No. 128, EPS for the quarters and six months ended March 31, 1997 and
1996 would not have been materially different than shown.

NOTE 8 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

In March 1996, the Company issued $125 million of 11.5% senior subordinated
notes (the "Notes"). The Company's payment obligations under the Notes are
guaranteed by certain of the Company's wholly-owned subsidiaries (the "Guarantor
Subsidiaries"). Such guarantees are full, unconditional and joint and several.
Separate financial statements of the Guarantor Subsidiaries are not presented
because the Company's management has determined that they would not be material
to investors. The following supplemental financial information sets forth, on an
unconsolidated basis, statement of operations, balance sheet, and statement of
cash flow information for the Company ("Parent Company Only"), for the Guarantor
Subsidiaries and for the Company's other subsidiaries (the "Non-Guarantor
Subsidiaries"). The supplemental financial information reflects the investments
of the Company and the Guarantor Subsidiaries in the Guarantor and Non-Guarantor
Subsidiaries using the equity method of accounting. Certain reclassifications
have been made to provide for uniform disclosure of all periods presented. These
reclassifications are not material.







                                       8
<PAGE>

                          EXIDE ELECTRONICS GROUP, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                      THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>


                                         PARENT
                                         COMPANY    GUARANTOR     NON-GUARANTOR
                                          ONLY     SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                         -------   ------------   -------------   ------------   ------------
(UNAUDITED; IN THOUSANDS)



<S>                                     <C>        <C>            <C>             <C>            <C>
Product revenues.......................  $   --      $105,467        $49,080        $(44,833)      $109,714
Service revenues.......................      --        21,312          7,812              --         29,124
                                         -------   ------------   -------------   ------------   ------------
          Total revenues...............      --       126,779         56,892         (44,833)       138,838
                                         -------   ------------   -------------   ------------   ------------
Product cost of revenues...............      --        83,640         39,388         (44,999)        78,029
Service cost of revenues...............      --        14,866          4,715              --         19,581
                                         -------   ------------   -------------   ------------   ------------
          Total cost of revenues.......      --        98,506         44,103         (44,999)        97,610
                                         -------   ------------   -------------   ------------   ------------
     Gross profit......................      --        28,273         12,789             166         41,228
Selling, general and administrative
  expense..............................     156        18,719         10,393              --         29,268
Research and development expense.......      --         3,500            444              --          3,944
                                         -------   ------------   -------------   ------------   ------------
          Income (loss) from
            operations.................    (156)        6,054          1,952             166          8,016
Interest expense.......................   6,312           234            528              --          7,074
Interest income........................     (51)          (29)           (27)             --           (107)
Other (income) expense.................      --         1,634         (1,756)             --           (122)
                                         -------   ------------   -------------   ------------   ------------
Income (loss) before income taxes......  (6,417)        4,215          3,207             166          1,171
Provision for (benefit from) income
  taxes................................  (2,247)        2,175            664              --            592
Minority interests in net income of
  subsidiaries.........................      --            --             81              --             81
                                         -------   ------------   -------------   ------------   ------------
Income (loss) before extraordinary
  item and equity in income of
  consolidated subsidiaries............  (4,170)        2,040          2,462             166            498
Extraordinary item ....................   2,376            --             --              --          2,376
                                         -------   ------------   -------------   ------------   ------------
Income (loss) before equity in income
   of consolidated subsidiaries........  (6,546)        2,040          2,462             166         (1,878)
Equity in income of consolidated
   subsidiaries........................   4,668         2,462             --          (7,130)            --
                                         -------   ------------   -------------   ------------   ------------
Net income (loss)..................... $ (1,878)    $   4,502     $    2,462       $  (6,964)      $ (1,878)
                                         =======     =========     ==========       =========      =========

</TABLE>

                                        9
<PAGE>

                          EXIDE ELECTRONICS GROUP, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                      THREE MONTHS ENDED MARCH 31, 1996

<TABLE>
<CAPTION>


                                         PARENT
                                         COMPANY    GUARANTOR     NON-GUARANTOR
                                          ONLY     SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                         -------   ------------   -------------   ------------   ------------
(UNAUDITED; IN THOUSANDS)



<S>                                       <C>        <C>             <C>            <C>            <C>
Product revenues.......................   $  --      $ 76,961        $ 21,936        $(25,078)      $ 73,819
Service revenues.......................      --        23,904           3,965              --         27,869
                                         -------   ------------   -------------   ------------   ------------
          Total revenues...............      --       100,865          25,901         (25,078)       101,688
                                         -------   ------------   -------------   ------------   ------------
Product cost of revenues...............      --        61,713          17,072         (25,206)        53,579
Service cost of revenues...............      --        16,996           2,427              --         19,423
                                         -------   ------------   -------------   ------------   ------------
          Total cost of revenues.......      --        78,709          19,499         (25,206)        73,002
                                         -------   ------------   -------------   ------------   ------------
     Gross profit......................      --        22,156           6,402             128         28,686
Selling, general and administrative
  expense..............................   1,923        14,585           4,517              --         21,025
Research and development expense.......      --         2,477             100              --          2,577
Acquisition and restructuring expense..      --         9,921           1,700              --         11,621
                                         -------   ------------   -------------   ------------   ------------
          Income (loss) from
            operations.................  (1,923)       (4,827)             85             128         (6,537)
Interest expense.......................   5,380         1,884             171              --          7,435
Interest income........................     (87)          (40)            (53)             --           (180)
Other (income) expense.................      --            93             (25)             --             68
                                         -------   ------------   -------------   ------------   ------------
Income (loss) before income taxes......  (7,216)       (6,764)             (8)            128        (13,860)
Provision for (benefit from) income
  taxes................................  (2,526)       (2,416)             73              --         (4,869)
                                         -------   ------------   -------------   ------------   ------------
Loss before equity in loss
  of consolidated subsidiaries.........  (4,690)       (4,348)            (81)            128         (8,991)
Equity in loss of consolidated
  subsidiaries.........................  (4,301)          (81)             --           4,382             --
                                         -------   ------------   -------------   ------------   ------------
Net income (loss)..................... $ (8,991)    $  (4,429)       $    (81)        $ 4,510      $  (8,991)
                                        ========    ==========      ==========      ==========      =========
</TABLE>



                                        10
<PAGE>

                          EXIDE ELECTRONICS GROUP, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                         SIX MONTHS ENDED MARCH 31, 1997

<TABLE>
<CAPTION>


                                         PARENT
                                         COMPANY    GUARANTOR     NON-GUARANTOR
                                          ONLY     SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                         -------   ------------   -------------   ------------   ------------
(UNAUDITED; IN THOUSANDS)



<S>                                       <C>        <C>             <C>            <C>            <C>
Product revenues.......................   $  --      $202,658        $ 84,751        $(78,283)      $209,126
Service revenues.......................      --        45,689          14,945              --         60,634
                                         -------   ------------   -------------   ------------   ------------
          Total revenues...............      --       248,347          99,696         (78,283)       269,760
                                         -------   ------------   -------------   ------------   ------------
Product cost of revenues...............      --       156,187          67,862         (77,480)       146,569
Service cost of revenues...............      --        30,903           9,454              --         40,357
                                         -------   ------------   -------------   ------------   ------------
          Total cost of revenues.......      --       187,090          77,316         (77,480)       186,926
                                         -------   ------------   -------------   ------------   ------------
     Gross profit......................      --        61,257          22,380            (803)        82,834
Selling, general and administrative
  expense..............................     318        38,616          19,265              --         58,199
Research and development expense.......      --         6,624             895              --          7,519
                                         -------   ------------   -------------   ------------   ------------
          Income (loss) from
            operations.................    (318)       16,017           2,220            (803)        17,116
Interest expense.......................  12,746           395             932              --         14,073
Interest income........................    (141)          (29)           (122)             --           (292)
Other (income) expense.................      --         2,344          (2,308)             --             36
                                         -------   ------------   -------------   ------------   ------------
Income (loss) before income taxes...... (12,923)       13,307           3,718            (803)         3,299
Provision for (benefit from) income
  taxes................................  (4,525)        5,241             934              --          1,650
Minority interest in joint venture.....      --            --             192              --            192
                                         -------   ------------   -------------   ------------   ------------
Income (loss) before extraordinary
  item and equity in income of
  consolidated subsidiaries............  (8,398)        8,066           2,592            (803)         1,457
Extraordinary item.....................   2,376            --              --              --          2,376
                                         -------   ------------   -------------   ------------   ------------
Income (loss) before equity in income
  of consolidate subsidiaries.......... (10,774)        8,066           2,592            (803)          (919)
Equity in income of consolidated
  subsidiaries.........................   9,855         2,592              --         (12,447)            --
                                         -------   ------------   -------------   ------------   ------------

Net income (loss)..................... $   (919)    $  10,658       $   2,592        $(13,250)      $   (919)
                                        ========    ==========      ==========      ==========      =========
</TABLE>



                                       11
<PAGE>

                          EXIDE ELECTRONICS GROUP, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                         SIX MONTHS ENDED MARCH 31, 1996

<TABLE>
<CAPTION>


                                         PARENT
                                         COMPANY    GUARANTOR     NON-GUARANTOR
                                          ONLY     SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                         -------   ------------   -------------   ------------   ------------
(UNAUDITED; IN THOUSANDS)



<S>                                       <C>        <C>             <C>            <C>            <C>
Product revenues.......................   $  --      $135,594        $ 37,380        $(41,496)      $131,478
Service revenues.......................      --        46,599           7,119            (205)        53,513
                                         -------   ------------   -------------   ------------   ------------
          Total revenues...............      --       182,193          44,499         (41,701)       184,991
                                         -------   ------------   -------------   ------------   ------------
Product cost of revenues...............      --       108,961          28,834         (41,708)        96,087
Service cost of revenues...............      --        33,613           4,595            (205)        38,003
                                         -------   ------------   -------------   ------------   ------------
          Total cost of revenues.......      --       142,574          33,429         (41,913)       134,090
                                         -------   ------------   -------------   ------------   ------------
     Gross profit......................      --        39,619          11,070             212         50,901
Selling, general and administrative
  expense..............................   2,044        28,755           7,683              --         38,482
Research and development expense.......      --         4,986             100              --          5,086
Acquisition and restructuring expense..      --         9,921           1,700              --         11,621
                                         -------   ------------   -------------   ------------   ------------
          Income (loss) from
            operations.................  (2,044)       (4,043)          1,587             212         (4,288)
Interest expense.......................   5,414         3,227             291              --          8,932
Interest income........................    (118)          (40)            (53)             --           (211)
Other (income) expense.................      --          (144)            329              --            185
                                         -------   ------------   -------------   ------------   ------------
Income (loss) before income taxes......  (7,340)       (7,086)          1,020             212        (13,194)
Provision for (benefit from) income
  taxes................................  (2,570)       (2,368)            322              --         (4,616)
                                         -------   ------------   -------------   ------------   ------------
Income (loss) before equity in income
  (loss) of consolidated subsidiaries..  (4,770)       (4,718)            698             212         (8,578)
Equity in income (loss) of consolidated
  subsidiaries.........................  (3,808)          698              --           3,110             --
                                         -------   ------------   -------------   ------------   ------------
Net income (loss)..................... $ (8,578)    $  (4,020)       $    698        $  3,322     $   (8,578)
                                        ========    ==========      ==========      ==========      =========
</TABLE>




                                        12

<PAGE>

                          EXIDE ELECTRONICS GROUP, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

               SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                                MARCH 31, 1997

<TABLE>
<CAPTION>


                                         PARENT
                                         COMPANY    GUARANTOR     NON-GUARANTOR
                                          ONLY     SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                         -------   ------------   -------------   ------------   ------------
(UNAUDITED; IN THOUSANDS)

ASSETS
<S>                                      <C>         <C>             <C>           <C>             <C>
Current assets
  Cash and cash equivalents............  $    --     $    795        $ 2,065       $       --      $  2,860
  Accounts receivable..................       --       78,354         47,474               --       125,828
  Intercompany accounts receivable.....    7,501       70,956         16,512          (94,969)           --
  Inventories..........................       --       80,771         24,276           (1,958)      103,089
  Other current assets.................    8,619       12,405          2,228               --        23,252
                                         -------   ------------   -------------   ------------   ------------
          Total current assets.........   16,120      243,281         92,555          (96,927)      255,029
Property, plant, and equipment, net....       --       41,915          6,290               --        48,205
Goodwill...............................       --       89,141         63,321               --       152,462
Noncurrent intercompany receivables....   71,529      292,261             --         (363,790)           --
Investment in affiliates...............  279,944       96,091             --         (375,194)          841
Other assets...........................    5,396       16,847          9,301               --        31,544
                                         -------   ------------   -------------   ------------   ------------
                                        $372,989     $779,536       $171,467       $ (835,911)     $488,081
                                         =======    =========     ===========       =========     =========


LIABILITIES, REDEEMABLE PREFERRED STOCK AND COMMON SHAREHOLDERS' EQUITY
Current liabilities
  Short-term debt......................  $ 8,368     $     --        $ 8,436       $       --      $ 16,804
  Accounts payable.....................   31,527       35,776         13,500               --        80,803
  Intercompany accounts payable........       --       59,454         35,515          (94,969)           --
  Deferred revenues....................       --       20,082          3,162               --        23,244
  Other accrued liabilities............    1,748       13,611          8,120               --        23,479
                                         -------   ------------   -------------   ------------   ------------
          Total current liabilities....   41,643      128,923         68,733          (94,969)      144,330
Long-term debt.........................   96,667           --          1,386               --        98,053
Subordinated notes.....................  122,084           --             --               --       122,084
Noncurrent intercompany payables.......       --      363,790             --         (363,790)           --
Deferred liabilities...................      385        6,879          2,679               --         9,943
Minority interests.....................       --           --          1,461               --         1,461
Redeemable preferred stock.............   18,597           --             --               --        18,597
Common shareholders' equity............   93,613      279,944         97,208         (377,152)       93,613
                                         -------   ------------   -------------   ------------   ------------
                                        $372,989     $779,536       $171,467       $ (835,911)     $488,081
                                         =======    =========     ===========       =========     =========

</TABLE>


                                        13
<PAGE>


                          EXIDE ELECTRONICS GROUP, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

               SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                              SEPTEMBER 30, 1996

<TABLE>
<CAPTION>

                                         PARENT
                                         COMPANY    GUARANTOR     NON-GUARANTOR
                                          ONLY     SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                         -------   ------------   -------------   ------------   ------------
(IN THOUSANDS)

ASSETS
<S>                                      <C>         <C>            <C>            <C>             <C>
Current assets
  Cash and cash equivalents............  $    --     $  2,224       $  5,624       $       --      $  7,848
  Accounts receivable..................       --       91,197         38,226               --       129,423
  Intercompany accounts receivable.....   12,139       40,848          5,023          (58,010)           --
  Inventories..........................       --       71,699         19,321             (951)       90,069
  Other current assets.................      398       18,054          1,957               --        20,409
                                         -------   ------------   -------------   ------------   ------------
          Total current assets.........   12,537      224,022         70,151          (58,961)      247,749
Property, plant, and equipment, net....       --       43,159          5,762               --        48,921
Goodwill...............................       --       90,555         63,818               --       154,373
Non-current intercompany receivables...   89,585      155,858             --         (245,443)           --
Investment in affiliates...............  267,799       93,326             --         (360,473)          652
Other assets...........................    9,820       16,994         10,965               --        37,779
                                         -------   ------------   -------------   ------------   ------------
                                        $379,741     $623,914       $150,696      $  (664,877)     $489,474
                                         =======    =========      ==========        =========     =========


LIABILITIES, REDEEMABLE PREFERRED STOCK AND COMMON SHAREHOLDERS' EQUITY
Current liabilities
  Short-term debt......................  $ 6,702     $     --        $ 7,866       $       --      $ 14,568
  Accounts payable.....................   27,250       26,884         16,912               --        71,046
  Intercompany accounts payable........       --       39,351         18,659          (58,010)           --
  Deferred revenues....................       --       19,556          2,357               --        21,913
  Other accrued liabilities............       --       17,533          6,822               --        24,355
                                         -------   ------------   -------------   ------------   ------------
          Total current liabilities....   33,952      103,324         52,616          (58,010)      131,882
Long-term debt.........................  108,833           --          1,514               --       110,347
Subordinated notes.....................  121,920           --             --               --       121,920
Non-current intercompany payables.......      --      245,443             --         (245,443)           --
Deferred liabilities...................      385        7,348          2,179               --         9,912
Redeemable preferred stock.............   18,312           --             --               --        18,312
Minority interests.....................       --           --            536              226           762
Common shareholders' equity............   96,339      267,799         93,851         (361,650)       96,339
                                         -------   ------------   -------------   ------------   ------------
                                        $379,741     $623,914       $150,696       $ (664,877)     $489,474
                                         =======    =========      ==========        =========     =========
</TABLE>



                                       14
<PAGE>


                         EXIDE ELECTRONICS GROUP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

               SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
                       SIX MONTHS ENDED MARCH 31, 1997

<TABLE>
<CAPTION>


                                              PARENT
                                              COMPANY     GUARANTOR     NON-GUARANTOR
                                               ONLY      SUBSIDIARIES    SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                             ---------   ------------   --------------   ------------   ------------
(UNAUDITED; IN THOUSANDS)

Cash flows from operating activities
<S>                                          <C>           <C>              <C>            <C>            <C>
  Net income (loss)......................... $   (919)      $10,658         $ 2,592        $(13,250)      $   (919)
  Adjustments to reconcile net income to
    cash provided by (used in) operating
    activities:
    Depreciation expense....................       --         3,990             909              --          4,899
    Amortization expense....................       --         3,632           2,208              --          5,840
    Write-off of debt issue costs,
      net of tax............................    2,376            --              --              --          2,376
    Equity in income of consolidated
      subsidiaries..........................   (9,855)       (2,592)             --          12,447             --
    (Increase) decrease in accounts
      receivable............................    4,638       (18,139)        (20,737)         36,959          2,721
    Increase in inventories.................       --        (8,251)         (4,955)          1,007        (12,199)
    (Increase) decrease in other current
      assets................................   (8,221)        5,680            (271)             --         (2,812)
    Increase in accounts payable............    4,277        29,096          13,444         (36,959)         9,858
    Increase (decrease) in other current
      liabilities...........................    1,749        (3,838)          2,103              --             14
    Other, net..............................       --           287             (47)             --            240
                                             ---------   ------------      --------       ----------   ------------
      Net cash provided by (used in)
         operating activities...............   (5,955)       20,523          (4,754)            204         10,018
                                             ---------   ------------      --------       ----------   ------------
Cash flows from investing activities
  Acquisitions of property, plant,
    and equipment...........................       --        (3,119)         (1,240)             --         (4,359)
  Acquisitions, net of cash received........       --          (219)             --              --           (219)
  Other, net................................   14,983       (15,628)          1,764            (204)           915
                                             ---------   ------------      --------       ----------   ------------
      Net cash provided by (used in)
         investing activities...............   14,983       (18,966)            524            (204)        (3,663)
                                             ---------   ------------      --------       ------------   ----------
Cash flows from financing activities
  Proceeds from bank credit facilities......   44,000            --           6,528              --         50,528
  Payments of bank credit facilities........  (54,500)           --          (6,002)             --        (60,502)
  Issuance of common stock..................      717            --              --              --            717
  Payments of notes receivable from
    shareholders............................      306            --              --              --            306
  Other, net................................      449        (2,986)            145              --         (2,392)
                                             ---------   ------------      --------       ----------   ------------
      Net cash provided by (used in)
         financing activities...............   (9,028)       (2,986)            671              --        (11,343)
                                             ---------   ------------      --------       ----------   ------------
Net decrease in cash and cash equivalents...       --        (1,429)         (3,559)             --         (4,988)
Cash and cash equivalents, beginning of
  period....................................       --         2,224           5,624              --          7,848
                                             ---------   ------------      --------       ----------   ------------
Cash and cash equivalents, end of period....  $    --      $    795         $ 2,065         $    --       $  2,860
                                             =========   ===========    ============       =========    ===========
</TABLE>



                                       15
<PAGE>


                          EXIDE ELECTRONICS GROUP, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

               SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
                        SIX MONTHS ENDED MARCH 31, 1996

<TABLE>
<CAPTION>
                                               PARENT
                                              COMPANY     GUARANTOR     NON-GUARANTOR
                                               ONLY      SUBSIDIARIES    SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                             ---------   ------------   --------------   ------------   ------------
(UNAUDITED; IN THOUSANDS)

Cash flows from operating activities
<S>                                          <C>           <C>             <C>             <C>            <C>
  Net income (loss)........................  $ (8,578)     $ (4,020)       $    698        $  3,322      $   (8,578)
  Adjustments to reconcile net income to
    cash provided by (used in) operating
    activities:
    Depreciation expense...................        --         3,299             343              --           3,642
    Amortization expense...................        --         1,781             228              --           2,009
    Acquisition and restructuring provisions       --         8,866           1,700              --          10,566
    Equity in (income) loss of consolidated
      subsidiaries.........................     3,808          (698)             --          (3,110)             --
    (Increase) decrease in accounts
      receivable...........................       206        14,873          (8,516)         (3,128)          3,435
    Decrease in inventories................        --        (7,170)         (1,102)           (213)         (8,485)
    (Increase) decrease in other current
      assets...............................        13        (1,908)           (753)             --          (2,648)
    Increase (decrease) in accounts
      payable..............................     7,616       (15,411)          4,313           3,128            (354)
    Increase (decrease) in other current
      liabilities..........................       662        (2,258)          1,164               1            (431)
    Other, net.............................      (736)       (3,662)         (1,945)             --          (6,343)
                                             ---------   ------------   -------------    ------------   ------------
      Net cash provided by (used in)
         operating activities..............     2,991        (6,308)         (3,870)             --          (7,187)
                                             ---------   ------------   -------------    ------------   ------------
Cash flows from investing activities
  Acquisitions of property, plant, and
    equipment..............................        --        (6,883)           (503)             --          (7,386)
  Acquisitions, net of cash received.......  (162,976)           --              --              --        (162,976)
  Other, net...............................  (132,945)     (184,526)        (61,998)        378,943            (526)
                                             ---------   ------------   -------------    ------------   ------------
      Net cash used in investing
         activities........................  (295,921)     (191,409)        (62,501)        378,943        (170,888)
                                             ---------   ------------   -------------    ------------   ------------
Cash flows from financing activities
  Proceeds from bank credit facilities.....   140,000        57,878           2,710              --         200,588
  Payments of bank credit facilities.......    (4,000)     (127,108)         (1,848)             --        (132,956)
  Issuance of subordinated debt, net
    of fees................................   116,673            --              --              --         116,673
  Issuance of common stock warrants........     3,259            --              --              --           3,259
  Issuance of common stock.................       142            --              --              --             142
  Purchases of treasury stock..............    (6,926)           --              --              --          (6,926)
  Payments of notes receivable from
    shareholders...........................       215            --              --              --             215
  Other, net...............................    43,567       266,743          68,808        (378,943)            175
                                             ---------   ------------   -------------    ------------   ------------
      Net cash provided by financing
         activities........................   292,930       197,513          69,670        (378,943)        181,170
                                             ---------   ------------   -------------    ------------   ------------
Net increase (decrease) in cash and cash
  equivalents..............................        --          (204)          3,299              --           3,095
Cash and cash equivalents, beginning of
  period...................................        --           702           2,085              --           2,787
                                             ---------   ------------   -------------    ------------   ------------
Cash and cash equivalents, end of period...  $     --     $     498        $  5,384        $     --      $    5,882
                                             =========   ===========     ============    ============    ===========

</TABLE>


                                       16
<PAGE>

                          Exide Electronics Group, Inc.
                      Management's Discussion and Analysis
                of Results of Operations and Financial Condition

Overview

Exide Electronics (the "Company") provides Strategic Power Management(TM)
solutions to a broad range of businesses and institutions worldwide. The
Company's products are used for networking, financial, medical, industrial,
telecommunications, military, and aerospace applications -- wherever continuous
power is essential to daily operations. Several factors had a significant impact
on the Company's results of operations during the first six months of fiscal
1997 compared to the first six months of fiscal 1996. These factors include the
impact of an extraordinary non-cash charge to write off debt acquisition costs
in the second quarter of 1997, the growth in revenues of small uninterruptible
power supply ("UPS") products; the overall strong growth in international sales;
the acquisition of Deltec Power Systems, Inc. ("Deltec") in March 1996 and the
expensing of certain costs associated with the acquisition; the impact of
certain restructuring charges recorded in the second quarter of fiscal 1996 to
integrate recent acquisitions; and the effect of declining Federal government
product and service revenues. The impact of certain of these and other factors
on fiscal 1996 is discussed in more depth in "Management's Discussion and
Analysis of Results of Operations and Financial Condition" presented in the
Company's 1996 Annual Report to Shareholders.

The Company acquired Deltec from Fiskars Oy Ab in March 1996. Deltec designs,
manufactures, markets, sells and services a broad line of UPS products and power
management software worldwide through its principal operating subsidiaries,
Deltec Electronics, which is headquartered and has a plant in San Diego,
California and a plant in Tijuana, Mexico, and FPS Power Systems, Inc. ("FPS"),
which is based and has a manufacturing facility in Espoo, Finland. Deltec's
accounts and results of operations were included in the Company's financial
statements from the closing date forward. During the quarter ended March 31,
1997, approximately 25% of the Company's total revenues resulted from the
consolidation of Deltec, compared to 6% of total revenues in the same quarter of
the prior fiscal year. The acquisition and its financing is discussed further in
Note 2 of notes to consolidated financial statements and in the "Liquidity and
Financial Condition" section of Management's Discussion and Analysis of Results
of Operations and Financial Condition contained in the Company's 1996 Annual
Report to Shareholders.

The Company's product and service offerings and its marketing, manufacturing,
and research and development functions have been organized into four business
units: the Small Systems Group ("SSG") for all single phase products; the Large
Systems Group ("LSG") for all three phase products; the Emerging Technologies
Group ("ETG") for products in the CATV and broadband communications markets; and
the Worldwide Services Group ("WSG") for all services provided by the Company.
ETG results were included in SSG results for the three and six months ended
March 31, 1997 and 1996. As of April 1, 1997, the Company realigned its internal
business unit structure. This change is not expected to result in material
differences in reported results in future periods.


                                       17
<PAGE>
Results of Operations

The following table presents, for the periods shown, revenues; gross profit;
selling, general and administrative expense; research and development expense;
income (loss) from operations; income (loss) before extraordinary item and net
loss in millions of dollars, and certain income statement captions as a
percentage of related revenues or total revenues.
<TABLE>
<CAPTION>
                                                       ------------------------------------------------------
                                                         Three Months Ended             Six Months Ended 
                                                              March 31,                     March 31,
                                                       ------------------------------------------------------
                                                         1997           1996           1997          1996
                                                       ------------------------------------------------------
Revenues
<S>                                                     <C>           <C>            <C>           <C>    
   Small Systems Products(1)                             $72.3         $39.2          $138.2         $69.7
   Large Systems Products(1)                              37.4          34.6            70.9          61.8
                                                       ------------------------------------------------------
     Total Products                                      109.7          73.8           209.1         131.5
  Worldwide Services Group                                29.1          27.9            60.6          53.5
                                                       ------------------------------------------------------
      Total Revenues                                     138.8         101.7           269.7         185.0
                                                       ------------------------------------------------------

Gross Profit
   Products                                               31.7          20.2            62.5          35.4
   Services                                                9.5           8.5            20.3          15.5
                                                       ------------------------------------------------------
      Total Gross Profit                                  41.2          28.7            82.8          50.9
                                                       ------------------------------------------------------

Selling, general and administrative expense               29.3          21.0            58.2          38.5
Research and development expense                           3.9           2.6             7.5           5.1
Acquisition and restructuring expense                        -          11.6               -          11.6
                                                       ------------------------------------------------------
      Income (loss) from operations                        8.0          (6.5)           17.1          (4.3)

Interest/other                                             6.8           7.3            13.8           8.9
Provision (benefit) for income taxes                        .6          (4.9)            1.7          (4.6)
Minority interests in net income of subsidiaries            .1             -              .2             -
                                                       ------------------------------------------------------
Income (loss) before extraordinary item                     .5          (9.0)            1.5          (8.6)
                                                                           
Extraordinary item                                         2.4             -             2.4             -
                                                       ------------------------------------------------------
Net Loss                                                 $(1.9)        $(9.0)           $(.9)        $(8.6)
                                                       ------------------------------------------------------

Revenue Growth:
   Small Systems Products(1)                              84.5%                         98.4%
   Large Systems Products(1)                               8.1                          14.7
                                                       ---------------------------------------------------
     Total Products                                       48.6                          59.1
  Worldwide Services Group                                 4.5                          13.3
                                                       ---------------------------------------------------
      Total Revenues                                      36.5%                         45.8%
                                                       ---------------------------------------------------
</TABLE>

------------------
(1) Certain Powerware Plus product lines were reclassified from SSG to LSG
during fiscal 1996.  All periods have been restated.


                                       18
<PAGE>
<TABLE>
<CAPTION>
                                                     --------------------------------------------------------
                                                         Three Months Ended             Six Months Ended 
                                                              March 31,                     March 31,
                                                     --------------------------------------------------------
                                                         1997           1996           1997          1996
                                                     --------------------------------------------------------
Margin Data (as a percent of revenues):
Gross Profit
<S>                                                     <C>            <C>             <C>           <C>  
   Products                                               28.9          27.4            29.9          26.9
   Services                                               32.8          30.3            33.4          29.0
                                                       ------------------------------------------------------
      Total Gross Profit                                  29.7          28.2            30.7          27.5
                                                       ------------------------------------------------------

Selling, general and administrative expense               21.1          20.7            21.6          20.8
Research and development expense                           2.8           2.5             2.8           2.7
Acquisition and restructuring expense                        -          11.4               -           6.3
                                                       ------------------------------------------------------
      Income (loss) from operations                        5.8         (6.4)             6.3          (2.3)
                                                       ------------------------------------------------------
</TABLE>


Three months ended March 31, 1997 versus March 31, 1996

Total revenues increased by 37% to $138.8 million in the second quarter of
fiscal 1997 from $101.7 million in the second quarter of fiscal 1996, due to a
49% increase in product sales and a 5% increase in service revenues.

SSG revenues for the quarter ended March 31, 1997 increased by $33.1 million or
85% over the same period of the prior year. Over $25 million of this increase
was due to revenues generated by the acquisition of Deltec. Revenues increased
over 80% in both domestic and international channels after inclusion of Deltec
revenues. SSG revenues in the Company's historical channels increased by 33%,
primarily due to continued strong sales growth in the Prestige product family
and in ETG products for the CATV and broadband communications markets, and
significantly higher sales of new line-interactive NetUPS products. The increase
in the Company's historical channels was driven primarily by increased sales
internationally, which were over 45% higher than in the same period last year.
International revenues were especially strong in Latin America and in Europe,
the former aided by the operation of the Company's new subsidiary in Brazil.
Higher revenues were generally due to a higher number of units sold, as opposed
to increased unit prices.


                                       19
<PAGE>

LSG revenues for the second quarter of fiscal 1997 increased $2.8 million or 8%
over the same period of the prior year, with growth of 11% in commercial
segments offset by a scheduled decline in sales under the Company's program with
the Federal Aviation Administration (the "FAA Program"). Commercial sales growth
in LSG products occurred primarily in international channels, which benefited
from the acquisition of Deltec in March 1996. LSG revenues related to the
acquisition of Deltec (including FPS) were $4.1 million for the three months
ended March 31, 1997. Product revenues under the FAA Program have been declining
because the Company has completed the shipment of most of the systems and
related ancillary products to the various FAA sites. Overall, the total number
of units shipped increased while the average selling price decreased, reflecting
higher unit sales of lower kVA products. This trend is consistent with the
Company's focus on commercial markets, and the growth in the mid-range market
segment.

WSG revenues for the second quarter of fiscal 1997 increased by $1.2 million or
5% over the same period of the prior fiscal year. WSG's U.S. commercial revenues
grew 16% and international commercial revenues increased 71%, primarily due to
consolidation of Deltec results. WSG revenues related to the acquisition of
Deltec were $4.8 million for the three months ended March 31, 1997, compared to
$1.1 million in the corresponding period last year. This growth was offset by a
decline of 48% in Federal service revenues over the prior year, mainly 
attributable to the effect of declining FAA site service revenues. At March 31,
1997, the Company was installing systems at two FAA sites versus eight FAA sites
in the prior year. Delivery on the remainder of the FAA orders is currently 
scheduled through fiscal 1997. Although Federal service revenues are expected to
decline approximately 50-60% in fiscal 1997 from $35.1 million in fiscal 1996,
the Company expects the impact to be substantially offset by growth in 
commercial segments. WSG revenue increases were primarily a result of a greater
amount of services provided rather than an increase in the price of the 
services.

Gross Profit

Gross profit in the second quarter of fiscal 1997 increased by $12.5 million
over the second quarter of fiscal 1996 to $41.2 million. Gross profit as a
percentage of total revenues increased to 29.7% in the second quarter of fiscal
1997 from 28.2% in the same period of fiscal 1996. Product gross profit margins
rose to 28.9% in the second quarter of fiscal 1997 from 27.4% in the same period
of fiscal 1996, and service margins rose to 32.8% from 30.3% during that same
period.

Product gross profit margins rose as a result of improved product sales mix,
cost reductions, and new product introductions. Product margins were adversely
affected in the second quarter of fiscal 1997 by new product start-up costs and
manufacturing inefficiencies caused by a significant increase in production
capability in the Company's low-cost Mexican facility. The Company expects
product margins to benefit from improvements and higher production volumes at
this facility in the last half of the fiscal year. Service gross profit margins
improved primarily due to a higher mix of commercial revenues and operating
improvements.


                                       20
<PAGE>

Selling, General and Administrative Expense

Selling, general and administrative expense increased $8.2 million to $29.3
million in the second quarter of fiscal 1997 (21.1% percent of revenues) from
$21.0 million in the same period of fiscal 1996 (20.7% of revenues). This
increase was primarily attributable to incremental costs related to the
operations of Deltec, coupled with the amortization of intangible assets
recorded in the Deltec acquisition. Excluding these incremental expenses, SG&A
expense increased approximately $3 million, due to expanding operations in
Europe, and expenses of the Company's new subsidiaries in Brazil and India. SG&A
expenses are expected to remain at approximately 21-22% of revenues for fiscal
1997.

Research and Development Expense

Research and development expense increased $1.4 million to $3.9 million in the
second quarter of fiscal 1997 compared to the same period of fiscal 1996. As a
percentage of revenues, research and development expense increased to 2.8% in
fiscal 1997 from 2.5% in fiscal 1996, due to the introduction of nearly 30 new
models of standalone and rackmount UPS products in the current quarter, and 
incremental costs of $1.1 million for the consolidation of Deltec's operations.

Acquisition and Restructuring Expense

In March 1996, the Company completed its acquisition of Deltec. In connection
with the acquisition, the Company recorded in the quarter ended March 31, 1996
approximately $11.6 million of non-recurring expenses, including a $5.0 million
charge for purchased in-process research and development and $6.6 million for
restructuring and other costs primarily related to the acquisition.
Restructuring costs consisted primarily of reserves for severance and asset
valuations.

Income (loss) from Operations

Income from operations increased $14.5 million to $8.0 million for the second
quarter of fiscal 1997 from an operating loss of $6.5 million in the same period
of fiscal 1996. The fiscal 1996 quarter included, as described above, certain
one-time acquisition and restructuring expense. Excluding such one-time charges,
operating income was up 58%, primarily due to improved gross margins and higher
revenue volumes. As a percentage of revenues, income from operations (excluding
the one-time charges in fiscal 1996) increased to 5.8% in the second quarter of
fiscal 1997 from 5.0% in the same period of fiscal 1996.

Interest Expense

Interest expense decreased to $7.1 million in the second quarter of fiscal 1997
from $7.4 million in the same period of fiscal 1996, which included a one-time
non-recurring charge of $4.4 million for fees and interest related to the Deltec
acquisition. During the quarter ended March 31, 1997, the Company incurred
approximately $5.3 million in interest expense related to increased borrowings
used to finance the acquisition of Deltec, including interest at 11.5% per annum
on $125 million of senior subordinated notes.


                                       21
<PAGE>

Provision (Benefit) for Income Taxes

The provision for second quarter fiscal 1997 income taxes reflects a
consolidated effective tax provision of approximately 50% as compared to a
benefit of approximately 35% for the same period of fiscal 1996. The fiscal 1996
benefit is due to the significant loss generated during the quarter. The Company
anticipates that its effective tax rate for fiscal year 1997 will be 47% to 52%,
which is impacted by permanent differences, including goodwill amortization
related to the acquisition of Deltec.

Income (loss) before Extraordinary Item

Income before extraordinary item for the second quarter of fiscal 1997 was $.5
million, or $0.02 per fully diluted share, as compared to a net loss of $9.0
million, or $0.97 per fully diluted share, for the same period of fiscal 1996.
Excluding the non-recurring items in fiscal 1996 discussed above under
"Acquisition and Restructuring Expense" and "Interest Expense" and $0.5 million
of purchase accounting adjustments, pro forma income before extraordinary item
decreased 70% to $.5 million for the current quarter, compared to $1.7 million
in the same quarter of fiscal 1996, due primarily to a full quarter of 
acquisition-related interest expense (see "Interest Expense") and amortization 
of intangible assets as compared to a partial quarter of expense in the prior
year. 

Extraordinary Item

During the second quarter of fiscal 1997, the Company recorded a one-time
non-cash charge of $2.4 million, net of tax, or $0.24 per fully diluted share,
for the write-off of debt acquisition costs related to the substantial 
modification of the Company's domestic credit facility. See "Liquidity and 
Financial Condition."

Six months ended March 31, 1997 versus March 31, 1996

Total revenues increased by 46% to $269.8 million in the six months ended March
31, 1997 from $185.0 million in the six months ended March 31, 1996, due to a
59% increase in product sales and a 13% increase in service revenues.

SSG revenues for the six months ended March 31, 1997 increased by $68.6 million
or 98% over the same period of the prior year. Approximately $53.1 million was
due to revenues generated by the acquisition of Deltec. Excluding revenues from
this acquisition, revenues grew by 30%, primarily due to growth of 38% in
international channels and growth in ETG products. Including the revenues of
Deltec, both U.S. and international revenues increased over 90%, with sales
abroad accounting for over 50% of total SSG revenues. Sales of the Prestige
product family increased approximately 30% for the first six months of fiscal
1997 compared to the same period in fiscal 1996. Sales of the Company's new
line-interactive products accounted for over 20% of SSG's revenues in the first
half of fiscal 1997. Increased revenues were generally due to higher unit sales
as opposed to increased unit prices.


                                       22
<PAGE>

LSG revenues for the six months ended March 31, 1997 increased $9.1 million or
15% over the same period of fiscal 1996, due primarily to growth exceeding 50% 
in international channels, offset by declines in sales under the FAA Program.
International revenues benefitted from the acquisition of Deltec (including
FPS), which added $6.8 million in incremental revenues for the six months ended
March 31, 1997. Product revenues under the FAA Program have been declining
because the Company has completed the shipment of most of the systems and 
related ancillary products to the various FAA sites. 

WSG revenues for the first six months of fiscal 1997 increased by $7.1 million
or 13% over the same period of fiscal 1996. WSG's commercial domestic revenues
grew by about 25.3% due to increased battery service and UPS module upgrade
sales, coupled with incremental service revenues from the Deltec acquisition of
$4.9 million. International service sales increased 86%, due to higher sales in
Europe, including incremental revenues generated by Deltec (including FPS) of
$4.5 million. As expected, Federal service revenues decreased over the prior 
year by approximately 37%, mainly attributable to the decline in FAA site 
service revenues.

Gross Profit

Gross profit increased by $31.9 million in the first six months of fiscal 1997
over the same period of fiscal 1996 to $82.8 million. Gross profit as a
percentage of total revenues increased to 30.7% for the first six months of
fiscal 1997 from 27.5% in the same period of fiscal 1996. Product gross profit
margins rose to 29.9% in the first six months of fiscal 1997 from 26.9% in the
same period of fiscal 1996, while service margins increased to 33.4% from 29.0%
during that same period. Product gross profit margins rose due to new products,
reduced costs and better product mix. Service margins increased primarily due to
a higher mix of commercial service revenues and operating improvements.

Selling, General and Administrative Expense

Selling, general and administrative expense increased $19.7 million to $58.2
million in the first six months of fiscal 1997 (21.6% of revenues) from $38.5
million in the same period of fiscal 1996 (20.8% of revenues). Selling, general
and administrative expenses increased due to incremental costs related to the
consolidation of Deltec, the amortization of intangible assets generated by
recent acquisitions, expanding operations in Europe, and the operations of the
Company's new subsidiaries in Brazil and India.

Research and Development Expense

Research and development expense increased $2.4 million in the first half of
fiscal 1997 compared to the same period of fiscal 1996, to $7.5 million (2.8% of
revenue) from $5.1 million (2.7% of revenue). Increased research and development
expenses were primarily due to incremental costs for the consolidation of Deltec
and the cost of introducing nearly 30 new products in the second quarter of
fiscal 1997.


                                       23
<PAGE>

Acquisition and Restructuring Expense

During the second quarter of fiscal 1996, the Company completed its acquisition
of Deltec. In connection with the acquisition, the Company recorded
approximately $11.6 million of non-recurring expenses, including a $5.0 million
charge for purchased in-process research and development and $6.6 million for
restructuring and other costs primarily related to the acquisition.
Restructuring costs consist primarily of reserves for severance and asset
valuations.

Income (loss) from Operations

Income (loss) from operations increased $21.4 million to $17.1 million for the
first half of fiscal 1997 from an operating loss of $4.3 million in the same
period of fiscal 1996. The fiscal 1996 period included, as described above,
certain one-time acquisition and restructuring expense. Excluding such one-time
charges, operating income was up over 130%, primarily due to improved gross
margins and higher revenue volumes. As a percentage of revenues, income from
operations (excluding the one-time charges in fiscal 1996) increased to 6.3% in
the second quarter of fiscal 1997 from 4.0% in the same period of fiscal 1996.

Interest Expense

Interest expense increased to $14.1 million in the first six months of fiscal
1997 from $8.9 million in the same period of fiscal 1996, which included a
one-time non-recurring charge of $4.4 million for fees and interest related to
the Deltec acquisition. The Company incurred approximately $10.7 million in
interest expense during the first half of fiscal 1997 related to increased
borrowings used to finance the acquisition of Deltec, including interest at
11.5% per annum on $125 million of senior subordinated notes, versus $1.1
million in the corresponding period of fiscal 1996. 

Provision for Income Taxes

The provision for income taxes for the first six months of fiscal 1997 reflects
a consolidated effective tax provision of approximately 50% as compared to a
benefit of approximately 35% for the same period of fiscal 1996. The Company
anticipates that its effective tax rate for fiscal year 1997 will be 47% to 52%,
which is impacted by permanent differences including goodwill related to the
acquisition of Deltec.

Income (loss) before Extraordinary Item

Income (loss) before extraordinary item for the first half of fiscal 1997 was
$1.5 million, or $0.08 per fully diluted share, as compared to a net loss of
$8.6 million, or $0.93 per fully diluted share, for the same period of fiscal
1996. Excluding the 1996 non-recurring charges discussed above under
"Acquisition and Restructuring Expense" and "Interest Expense" and $0.5 million
of purchase accounting adjustments, income before extraordinary item for the
first half of fiscal 1997 would have been $1.5 million or $0.08 per fully
diluted share, compared to $2.1 million or $0.21 per fully diluted share in the
prior year comparable period. This decrease of $.6 million was due primarily to
a full six months of acquisition-related interest expense and amortization of 
intangible assets, offset by higher gross margins.


                                       24
<PAGE>

Quarterly Operating Results

The Company's quarterly operating results have fluctuated significantly.
Quarterly results depend upon the timing of product shipments and major systems
implementation services, which can be influenced by a number of factors. Some of
these factors are beyond the Company's control. The fourth quarter typically has
produced the largest portion of the Company's revenues and income. The Company
believes that the fourth quarter results reflect increased shipments resulting
from management incentives that are tied to annual sales performance, and
increased sales prompted by weather-related power disturbances during the spring
and summer months. The first quarter has typically produced the smallest portion
of the Company's revenues and income, so that there has been a historical
reduction in the Company's first quarter results as compared to the previous
fiscal year's fourth quarter. During fiscal years 1996, 1995 and 1994, revenues
generally increased for each successive quarter during the fiscal year, but 
revenues for the first quarter were lower than revenues for the fourth quarter 
of the preceding year.

Selling, general and administrative, and research and development expenditures
are incurred to support projected annual sales. These expenses do not
necessarily vary proportionately with revenues on a quarterly basis. As a
result, variations in quarterly revenues may not be accompanied by an equivalent
change in expenses; therefore, operating margins can vary significantly between
quarters.

Liquidity and Financial Condition

At March 31, 1997, the Company had $110.7 million of working capital, as
compared to $115.9 million at September 30, 1996 and $135.5 million at March 31,
1996. The decrease of approximately $24.8 million in working capital from March
31, 1996 was primarily the result of a decrease in inventory balances, and
increased short-term debt and accounts payable balances. Increased short-term
debt reflects the current maturity of the Company's term loan, and higher
borrowings to finance expanding operations globally. Working capital has been
used to pay down the Company's senior debt, which decreased $30 million since
March 31, 1996. The decrease of $5.2 million in working capital from September
30, 1996 was primarily the result of lower accounts receivable and higher
current liabilities balances, offset by higher inventory. Inventory levels are
generally lowest at September 30 due to high fourth quarter shipments. Cash
provided by operations was $4.3 million in the second quarter of fiscal 1997, as
compared to cash used in operations of $7.2 million in the second quarter of
fiscal 1996. The increase of $11.5 million was due to the significantly higher
net loss in fiscal 1996 caused by the acquisition and merger expenses incurred
in the second quarter of that year.

During the first six months of fiscal 1997, the Company invested approximately
$4.4 million in capital expenditures, as compared to approximately $7.4 million
in the same period of fiscal 1996. Capital expenditures for fiscal 1997 are
expected to approximate $12 to $14 million. Capital expenditures were higher in
fiscal 1996 as the Company consolidated its headquarters and integrated the
facilities of previously acquired companies.


                                       25
<PAGE>

In March 1997, the Company entered into a binding agreement to amend and restate
its domestic bank credit facilities with $170 million of senior secured bank
credit facilities (the "Amended and Restated Credit Facility") comprised of a
$125 million revolving credit facility and a $45 million term loan. Borrowings
under the revolving credit facility are limited to specified amounts of eligible
accounts receivable and inventories. Outstanding borrowings are secured by
substantially all the inventories and accounts receivable of the Company, and
the pledge of all of the capital stock of all of the Company's material domestic
subsidiaries and 66% of the capital stock of certain of its foreign
subsidiaries. Amounts outstanding under the Amended and Restated Credit
Facility, which was effective April 9, 1997, currently bear interest at LIBOR
plus 150 basis points, or the bank's base rate plus 50 basis points, as defined.
The 30-day LIBOR rate on March 31, 1997 was 5.6875%. The average unutilized
daily commitment incurs a commitment fee of .375% per annum, and letters of
credit bear a fee of 1.50% per annum. Interest rates on borrowings under the
Amended and Restated Credit Facility may vary according to the Company's
leverage ratio, as defined. At March 31, 1997, the Company had borrowings of
$105.0 million outstanding under the Amended and Restated Credit Facility, and a
remaining borrowing capacity of approximately $11.0 million.

The amendment and restatement of the credit agreement described above
constituted a substantial modification in the terms of the agreement and has
been treated as an early extinguishment of debt. Accordingly, in March 1997 the
Company wrote off approximately $3.7 million ($2.4 million after tax) of
unamortized debt acquisition costs related to the original credit facility as an
extraordinary item.

Both the term and revolving credit facility portions of the Amended and Restated
Credit Facility require at least quarterly payments of accrued and unpaid
interest. The term loan has scheduled quarterly principal payments. The Company
is permitted to prepay the principal amount of the Amended and Restated Credit
Facility without penalty at any time. Any principal amount of the term loan and
any amounts due under the revolving credit facility that remain unpaid on the
maturity date, April 9, 2002, are required to be repaid in full on that date.

In the event the Company (i) sells certain assets, (ii) incurs certain
additional debt, (iii) issues any equity securities, or (iv) receives certain
casualty insurance proceeds, the Company may be obligated to first repay the
term loan and second permanently reduce commitments under the revolving credit
facility in addition to the scheduled term loan payments.

The Company is subject to certain financial covenants, as defined in the Amended
and Restated Credit Facility, including maintaining specified fixed charge
coverage and leverage ratios and minimum net worth. The Company and its lending
group modified certain covenants in the Amended and Restated Credit Facility.
The Company was in compliance with all applicable financial covenants as of
March 31, 1997. 

Under the terms of the Amended and Restated Credit Facility, the Company is
required to cap a portion of its interest rate risk. In April 1996, the Company
entered into several two-year interest rate cap agreements for a combined
notional principal amount of $65 million, which capped the Company's floating
rate LIBOR index to a weighted average rate of 6.5%. Premiums paid for the
interest rate cap agreements have been capitalized and are amortized as interest
expense over the terms of the caps. Unamortized premiums are included with other
assets in the accompanying consolidated balance sheet. There are no amounts
receivable under the cap agreements at March 31, 1997. In the future, such
receivable amounts, if any, will be accrued as a reduction of interest expense.


                                       26
<PAGE>

In March 1996, the Company issued 125,000 units (the "Units") comprised of $125
million of 11.5% senior subordinated notes (the "Notes") and warrants (the
"Warrants") to purchase 643,750 shares of the Company's common stock. Each Unit
consists of one $1,000 Note and one detachable Warrant to acquire 5.15 shares of
the Company's common stock at an exercise price of $13.475 per share, subject to
adjustment in certain events.

The Amended and Restated Credit Facility and the Notes contain restrictive
covenants which, among other things, limit the Company's ability to incur
additional debt, pay dividends, consummate certain acquisitions, make certain
asset sales, and incur certain liens.

The Company expects to finance its capital requirements in the future through
existing cash balances, cash generated from operations, and borrowings under its
credit facilities. Based on the current level of operations and anticipated
growth, management believes that cash flow from operations, together with
available borrowings under its credit facilities and other sources of liquidity,
will be adequate to meet the Company's anticipated future requirements for
working capital, capital expenditures, and scheduled payments of principal and
interest on its indebtedness. The Company believes that its cash flow from
operations and its bank facilities will be adequate to meet its short-term
requirements for working capital and capital expenditures, however no assurances
can be given that the Company's business will generate sufficient cash flow from
operations or that future working capital borrowings will be available in an
amount sufficient to enable the Company to service its indebtedness, or make
necessary capital expenditures.

Disclosure Regarding Forward-Looking Statements

The disclosures included in this Form 10-Q, including documents incorporated by
reference herein and therein, contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These statements are
identified by words such as "expect," "anticipate," "should" and words of
similar import. Forward-looking statements are inherently subject to risks and
uncertainties, many of which cannot be predicted with accuracy and some of which
might not even be anticipated. Future events and actual results, financial and
otherwise, may differ materially from the results discussed in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in this Form 10-Q and other matters
detailed from time-to-time in the Company's Securities and Exchange Commission
filings, including the Company's Forms 10-Q and 10-K.

Litigation

The Company is involved in various litigation proceedings incidental to its
business. The defense of most of these matters is handled by the Company's
insurance carriers. The Company believes that the outcome of such other pending
litigation in the aggregate will not have a material adverse effect on its
financial statements. See Item 1, "Legal Proceedings" elsewhere in this Form
10-Q.


                                       27
<PAGE>

Contingencies

Government Contract Matters

Sales to the Federal government accounted for approximately 7% and 16% of total
revenues for the six months ended March 31, 1997 and 1996, respectively, and
approximately 13% and 27% of total revenues for fiscal years 1996 and 1995,
respectively. The Company's contracts with the Federal government have no
significant minimum purchase commitments, and the government may cease purchases
under these contracts at any time for any reason. These contracts are subject to
termination at the convenience of the government pursuant to the terms of the
contracts. The Company's compliance with government contract regulations is
audited or reviewed from time to time by government auditors, who have the right
to audit the Company's records and the records of its subcontractors during and
after completion of contract performance, and may recommend that certain charges
be treated as unallowable and reimbursement be made to the government. The
Company provides for estimated unallowable charges and voluntary refunds in its
financial statements, and believes that such provisions are adequate as of March
31, 1997.

Foreign Currency Exposures

International sales accounted for approximately 43% and 35% of total revenues
for the six months ended March 31, 1997 and 1996, respectively, and
approximately 37% and 31% of total revenues for fiscal years 1996 and 1995,
respectively. A significant portion of the Company's international sales are
denominated in foreign currencies. Fluctuations in foreign currency exchange
rates adversely impacted the Company's revenues by approximately 3% for the six
months ended March 31, 1997. As of March 31, 1997, approximately 35% of the
Company's total assets were located outside the United States, primarily in
Canada and Europe. Fluctuations in the recorded value of the Company's net
investment in its international subsidiaries resulting from changes in foreign
exchange rates are recorded in the cumulative translation adjustments component
of common shareholders' equity. The Company hedges these risks using a
combination of natural hedges such as foreign currency denominated borrowings
and, from time to time, foreign currency financial instruments. European,
Canadian, and Japanese currencies have been especially volatile over the last
two years. As of March 31, 1997, the Company had accounts receivable and
accounts payable totaling approximately $8.6 million that were exposed to
fluctuations in exchange rates. These balances are principally spread among
various European currencies, but are mostly denominated in French francs.

During the second quarter of fiscal 1997, the Company had foreign exchange
transaction gains of approximately $0.1 million, and the change in the
cumulative translation adjustments account decreased the recorded value of
common shareholders' equity by $2.0 million from December 31, 1996 to March 31,
1997.



                                       28
<PAGE>

Environmental Matters

The Company's operations are subject to Federal, state, local, and foreign
environmental laws and regulations relating to the storage, handling, and
disposal of hazardous or toxic materials and discharge into the environment of
regulated pollutants. In the last three fiscal years, the Company's capital
expenditures for environmental compliance have not been significant. To the best
of the Company's knowledge, there are no existing or potential environmental
claims against the Company that are likely to have a material adverse effect on
the Company's business or financial condition or its financial statements taken
as a whole.





                                       29
<PAGE>

                           PART II - OTHER INFORMATION

                                 MARCH 31, 1997

ITEM 1.  Legal Proceedings

On August 21, 1995, a case entitled National Broadcasting Company, Inc. and
CNBC, Inc. vs. International Power Machines/Lortec Systems Inc. et al, was filed
against International Power Machines ("IPM"), a subsidiary of the Company, in
the Supreme Court of New York, New York County. The plaintiffs allege that IPM
negligently manufactured and installed a UPS product that caused them property
and compensatory damages when the equipment malfunctioned during the
installation of the product by third-party contractors. The plaintiffs have
filed seven causes of action, each of which seeks damages in the amount of $1.1
million. Three of those causes of action also seek $3 million in punitive
damages. Claims of this nature are generally covered by the Company's insurance
and its insurer has accepted general defense of the matter. The insurer has
notified the Company that while claims based on IPM's negligent manufacture or
design are covered by the insurance policy, damages, if any, caused by IPM's
intentional or careless decision to install a known defective and dangerous
product would be subject to certain exclusions under the policy. While discovery
is in progress, the Company believes at this time, based on the advice of its
defense counsel, that no evidence has yet been presented that supports any
allegation of intentional or careless conduct. IPM also believes that it has
meritorious defenses and counter-claims against the third-party co-defendants,
whom the Company alleges defectively installed the UPS product. The Company
believes that the final outcome of this matter will not have a material adverse
effect on the business or the financial statements of the Company and its
subsidiaries taken as a whole.

The Company is involved in various litigation proceedings incidental to its
business. The defense of most of these matters is handled by the Company's
insurance carriers. The Company believes that the outcome of such other pending
litigation in the aggregate will not have a material adverse effect on its
financial statements.


ITEM 4. Submission of Matters to a Vote of Security Holders

At the Annual Meeting of Shareholders held on February 23, 1997, the Company's
shareholders voted as follows:

A. The following directors were elected to three year terms expiring in 2000:

     Mr. James A. Risher- 8,968,261 votes for, 186,169 votes abstained
     Mr. Ron E. Doggett - 8,991,362 votes for, 163,068 votes abstained
     Mr. Ralf R. Boer - 8,991,362 votes for, 163,068 votes abstained

     The recent appointment by the Board of Directors of Stig Stendahl as
     Director was ratified with 8,997,748 votes for, 60,729 votes abstained.

     All other directors continued in office.

B. The firm of Arthur Andersen LLP was approved as independent public 
   accountants for the fiscal year ending September 30, 1997, with 9,143,229
   votes for, 3,440 votes against, and 7,761 votes abstained.

There were no other matters to be voted upon.


                                       30
<PAGE>

ITEM 6. Exhibits and Reports on Form 8-K

    (a) Exhibits:

      Exhibit
      Number   Description

        10     Amended and Restated Credit Agreement, dated April 9, 1997, 
               among Exide Electronics Group, Inc., Morgan Guaranty Trust 
               Company as agent and the lending group.

        11     Statement of Computation of Per Share Earnings.

        27     Financial Data Schedule.


    (b) Reports on Form 8-K

     No reports on Form 8-K were filed during the quarter ended March 31, 1997.



                                       31
<PAGE>

                         EXIDE ELECTRONICS GROUP, INC.

                                   SIGNATURE


Pursuant  to the  requirements  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.


                                 EXIDE ELECTRONICS GROUP, INC.
                                                  (Registrant)



Date:  May 14, 1997     By:  /s/Marty R. Kittrell

                                  Marty R. Kittrell
                                  Vice President and
                                  Chief Financial Officer



                                       32
<PAGE>

                          EXIDE ELECTRONICS GROUP, INC.

                            EXHIBIT INDEX - FORM 10-Q

                                  MARCH 31, 1997
      Exhibit
      Number   Description

        10     Amended and Restated Credit Agreement, dated April 9, 1997, 
               among Exide Electronics Group, Inc., Morgan Guaranty Trust 
               Company as agent and the lending group.
 
        11     Statement of Computation of Per Share Earnings.

        27     Financial Data Schedule.