___________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended December 31, 1993 or
[ ] Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 0-10030
APPLE COMPUTER, INC.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94-2404110
---------------------------------------- ------------------------------------
[State or other jurisdiction [I.R.S. Employer Identification No.]
ofincorporation or organization]
20525 Mariani Avenue
Cupertino, California 95014
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[Address of principal executive offices] [Zip Code]
Registrant's telephone number, including area code: (408) 996-1010
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 [ ]
117,242,991 shares of Common Stock Issued and Outstanding as of
January 21, 1994
___________________________________________________________________________
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
APPLE COMPUTER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
THREE MONTHS ENDED
December 31, December 25,
1993 1992
Net sales $ 2,468,854 $ 2,000,292
Costs and expenses:
Cost of sales 1,876,830 1,189,367
Research and development 152,612 160,282
Selling, general and administrative 374,705 409,858
2,404,147 1,759,507
Operating income 64,707 240,785
Interest and other income (expense), net (163) 19,442
Income before income taxes 64,544 260,227
Provision for income taxes 24,526 98,886
Net income $ 40,018 $ 161,341
Earnings per common and
common equivalent share $ .34 $ 1.33
Cash dividends paid per
common share $ .12 $ .12
Common and common equivalent
shares used in the calculation
of earnings per share 116,956 121,156
See accompanying notes.
2
APPLE COMPUTER, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
December 31, September 24,
1993 1993
(Unaudited)
Current assets:
Cash and cash equivalents $ 972,388 $ 676,413
Short-term investments 150,387 215,890
Accounts receivable, net of allowance for
doubtful accounts of $87,942 ($83,776 at
September 24, 1993) 1,247,954 1,381,946
Inventories:
Purchased parts 391,118 504,201
Work in process 214,504 284,440
Finished goods 733,015 717,997
1,338,637 1,506,638
Prepaid income taxes 279,198 268,085
Other current assets 219,443 289,383
Total current assets 4,208,007 4,338,355
Property, plant, and equipment:
Land and buildings 411,061 404,688
Machinery and equipment 566,228 578,272
Office furniture and equipment 162,088 167,905
Leasehold improvements 233,745 261,792
1,373,122 1,412,657
Accumulated depreciation and amortization (730,786) (753,111)
Net property, plant, and equipment 642,336 659,546
Other assets 192,097 173,511
$ 5,042,440 $ 5,171,412
See accompanying notes.
3
APPLE COMPUTER, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
(Dollars in thousands)
December 31, September24,
1993 1993
(Unaudited)
Current liabilities:
Notes payable $ 752,257 $ 823,182
Accounts payable 739,599 742,622
Accrued compensation and employee benefits 121,344 144,779
Income taxes payable 2,886 23,658
Accrued marketing and distribution 154,868 174,547
Accrued restructuring costs 251,539 307,932
Other current liabilities 305,668 298,482
Total current liabilities 2,328,161 2,515,202
Deferred income taxes 661,020 629,832
Shareholders' equity:
Common stock, no par value; 320,000,000
shares authorized; 116,495,476 shares
issued and outstanding at December 31, 1993
(116,147,035 shares at September 24, 1993) 211,108 203,613
Retained earnings 1,868,660 1,842,600
Accumulated translation adjustment (26,509) (19,835)
Total shareholders' equity 2,053,259 2,026,378
$ 5,042,440 $ 5,171,412
See accompanying notes.
4
APPLE COMPUTER, INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited)
(In thousands)
THREE MONTHS ENDED
December 31, December 25,
1993 1992
Cash and cash equivalents, beginning of the
period $ 676,413 $ 498,557
Operations:
Net income 40,018 161,341
Adjustments to reconcile net income to cash
generated by operations:
Depreciation and amortization 42,606 39,401
Net book value of property, plant, and
equipment retirements 6,848 1,026
Changes in assets and liabilities:
Accounts receivable 133,992 (111,553)
Inventories 168,001 (16,516)
Prepaid income taxes (11,113) (13,807)
Other current assets 69,940 (96,343)
Accounts payable (3,023) 40,246
Accrued restructuring costs (56,393) (13,497)
Other current liabilities (54,633) 25,320
Deferred income taxes 31,188 63,189
Cash generated by operations 367,431 78,807
Investments:
Purchase of short-term investments (151,001) (699,949)
Proceeds from short-term investments 216,504 775,468
Purchase of property, plant, and equipment (23,564) (44,289)
Other (33,940) 33,461
Cash generated by investment activities 7,999 64,691
Financing:
Decrease in short-term borrowings (70,925) 6,126
Increases in common stock, net of related
tax benefits and changes in notes
receivable from shareholders 5,428 16,282
Repurchase of common stock -- (65,775)
Cash dividends (13,958) (14,246)
Cash used for financing activities (79,455) (57,613)
Total cash generated 295,975 85,885
Cash and cash equivalents, end of the period $ 972,388 $ 584,442
See accompanying notes.
5
APPLE COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Interim information is unaudited; however, in the opinion of the
Company's management, all adjustments necessary for a fair statement of
interim results have been included. The results for interim periods
are not necessarily indicative of results to be expected for the entire
year. These financial statements and notes should be read in
conjunction with the Company's annual consolidated financial statements
and the notes thereto for the fiscal year ended September 24, 1993,
included in its Annual Report on Form 10-K for the year ended September
24, 1993 (the "1993 Form 10-K").
2. Effective September 25, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 -Accounting for Income Taxes (FAS 109),
which changes the method of accounting for income taxes from the
deferred method to the liability method. This change in accounting
principle has been adopted on a prospective basis, and the financial
statements of prior years have not been restated. The cumulative
effect of the change was not material.
Under FAS 109, deferred income taxes reflect the future income tax
effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and their tax bases.
Prior to 1994, the Company accounted for income taxes under the
provisions of APB Opinion No. 11, which recognized deferred taxes for
the effect of timing differences between pretax accounting income and
taxable income.
At September 25, 1993, the significant components of the Company's
deferred tax assets and liabilities were:
(In thousands)
Deferred tax assets:
Accounts receivable and inventory reserves $ 123,158
Accrued liabilities and other reserves 170,632
Basis of capital assets and investments 79,104
Total deferred tax assets 372,894
Deferred tax liabilities:
Unremitted earnings of subsidiaries 707,242
Other 27,399
Total deferred tax liabilities 734,641
Net deferred tax liability $ 361,747
U.S. income taxes have not been provided on a cumulative total of $211
million of undistributed earnings of the Company's foreign
subsidiaries. It is intended that these earnings will be indefinitely
invested in operations outside of the United States. It is not
practicable to determine the income tax liability that might be
incurred if these earnings were to be distributed. Except for such
indefinitely invested earnings, the Company provides federal and state
income taxes currently on undistributed earnings of foreign
subsidiaries.
The Internal Revenue Service has proposed federal income tax
deficiencies for the years 1984 through 1988, and the Company has made
prepayments thereon. The Company has contested these alleged
deficiencies and is pursuing administrative and judicial remedies.
Management believes that adequate provision has been made for any
adjustments that may result from these tax examinations.
6
3. In the third quarter of 1993, the Company initiated a plan to
restructure its operations worldwide. In connection with this plan,
the Company recorded a $321 million charge to operating expenses ($199
million, or $1.72 per share, after taxes). The restructuring costs
include $162 million of estimated employee-related expenses and $159
million of estimated facilities, equipment and other expenses
associated with the consolidation, relocation and termination of
operations and employees.
4. Earnings per share is computed using the weighted average number of
common and dilutive common equivalent shares attributable to stock
options outstanding during the period.
5. Certain prior year amounts on the consolidated statements of cash flows
have been reclassified to conform to the current period presentation.
6. The information set forth in Item 1 of Part II hereof is hereby
incorporated by reference.
7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following information should be read in conjunction with the
consolidated financial statements and notes thereto. All information is
based on Apple's fiscal calendar.
(Tabular information: Dollars in millions, except per share amounts)
Results of Operations
First First
Quarter Quarter
1994 1993 Change
Net sales $ 2,469 $ 2,000 23.4%
Gross margin $ 592 $ 811 -27.0%
Percentage of net sales 24.0% 40.5%
Operating expenses $ 527 $ 570 -7.5%
Percentage of net sales 21.4% 28.5%
Net income $ 40 $ 161 -75.2%
Earnings per share $ 0.34 $ 1.33 -74.4%
Net sales for the first quarter of 1994 increased by 23.4% over the
comparable period of 1993. Total Macintosh(R) computer unit sales increased
40% in the first quarter of 1994 over the comparable period of 1993. This
unit sales growth principally resulted from strong sales of the Company's
newer product offerings within the LC, Performa(TM) and Quadra(R) families of
desktop personal computers and within the PowerBook(TM) family of notebook-
sized personal computers. This unit growth was partially offset by
declining unit sales of certain of the Company's more established products
and older product offerings. The average aggregate revenue per Macintosh
computer unit declined 12% in the first quarter of 1994 over the comparable
period of 1993, primarily as a result of pricing actions undertaken by the
Company in response to continuing industrywide pricing pressures and high
levels of inventory. Going forward, the Company anticipates continued
industrywide competitive pricing and promotional actions.
International net sales grew 24% and domestic net sales grew 23% in the
first quarter of 1994 over the comparable period of 1993. The increase in
international net sales primarily reflected strong net sales growth in the
Pacific region. Despite generally weak economic conditions and competitive
pressures in various European countries, net sales grew moderately in
Europe. International net sales represented 45% of total net sales for the
first quarter of 1994, unchanged from the corresponding period of 1993.
The Company has historically experienced increased net sales in its first
quarter, compared with other quarters in its fiscal year, due to demand for
and calendar year-end buying of some of its products. The Company does
not, however, consider its business to be highly seasonal.
It is anticipated that a significant portion of the Company's future
revenues will come from new products, especially personal computers based
on the Power PC family of Reduced Instruction Set Computing (RISC)
microprocessors. However, there can be no assurance that these new
products will receive favorable market acceptance, and the Company cannot
determine the ultimate effect these products will have on its sales or
results of operations. See "Factors That May Affect Future Results and
Financial Condition."
In general, the Company's resellers typically purchase products on an as-
needed basis due to the Company's distribution strategy, which is
designed to expedite the filling of orders. Resellers frequently change
delivery schedules and order rates depending on changing market
conditions. Unfilled orders ("backlog"), which are not necessarily
legally binding, can be, and often are, canceled at will. The Company's
backlog decreased to approximately $302 million at January 19, 1994, from
approximately $663 million at November 19, 1993, as the Company's higher
inventory levels provided greater product availability to meet reseller
orders and delivery schedules.
8
In the Company's experience, the actual amount of product backlog at any
particular time is not a meaningful indication of its future business
prospects. Because of the foregoing, as well as other factors affecting
the Company's backlog, backlog should not be considered a reliable
indicator of the Company's future revenue or financial performance.
Gross Margin
Gross margin declined both in amount and as a percentage of net sales
during the first quarter of 1994 from the comparable period of 1993. The
decline in gross margin as a percentage of net sales was primarily a result
of pricing and promotional actions undertaken by the Company in response to
industrywide pricing pressures (including the increasing price competition
that the Company is experiencing in the Japanese market) and high levels of
inventory. Gross margin was also adversely affected by increases in
inventory valuation reserves associated with the high levels of inventory,
increased costs associated with providing customers a wider variety of
product configuration options, and a seasonal shift of product mix towards
lower margin products.
Gross margin was affected somewhat adversely by changes in foreign currency
exchange rates as a result of a stronger U.S. dollar relative to certain
foreign currencies during the first quarter of 1994 compared with the
corresponding period of 1993. The Company's operating strategy and pricing
take into account changes in exchange rates over time; however, the
Company's results of operations can be significantly affected in the short
term by fluctuations in foreign currency exchange rates.
The Company anticipates that gross margins will remain under pressure and
below historic levels worldwide due to a variety of factors, including
continued industrywide pricing pressures, increased competition and
compressed product cycles. The Company's gross margins could also be
adversely affected by inventory valuation reserves that could result if
anticipated unit sales growth projections for new and current product
offerings are not realized.
Research and Development First First
Quarter Quarter
1994 1993 Change
Research and development $ 153 $ 160 -4.8%
Percentage of net sales 6.2% 8.0%
Research and development expenditures decreased both in amount and as a
percentage of net sales in the first quarter of 1994 when compared with the
corresponding period of 1993. This decrease reflects the results of the
Company's restructuring actions aimed at reducing costs, including more
focused product development expenditures.
The Company believes that continued investments in research and development
are critical to its future growth and competitive position in the
marketplace and are directly related to continued, timely development of
new and enhanced products. However, in light of the Company's expectation
of continued pressure on gross margin, the Company anticipates that
research and development expenditures will decrease in amount as the
Company maintains its efforts to manage operating expense growth relative
to gross margin levels during 1994.
First First
Quarter Quarter
Selling, General and 1994 1993 Change
Administrative
Selling, general and $ 375 $ 410 -8.6%
administrative
Percentage of net sales 15.2% 20.5%
Selling, general and administrative expenses decreased in amount and as a
percentage of net sales in the first
9
quarter of 1994 when compared with the corresponding period of 1993. This
decrease was primarily a result of the Company's ongoing efforts to manage
operating expense growth relative to gross margin levels, and also due to
an increase in the level of net sales.
The Company will continue to face the challenge of managing selling,
general and administrative expenses relative to gross margin levels,
particularly in light of the Company's expectation of continued pressure on
gross margin, and continued weak economic conditions worldwide. The
Company's objective is to continue to reduce selling, general and
administrative expenses as a percentage of net sales during 1994.
Interest and Other Income First First
(Expense), Net Quarter Quarter
1994 1993 Change
Interest and other income
(expense), net $ 0 $ 19 -100.0%
The Company derived other income from sources such as interest earned on
cash and portfolio balances, gains on the sale of certain venture capital
investments, and gains on interest rate and foreign exchange hedging
activities. Interest and other income (expense), net, decreased in the
first quarter of 1994 when compared with the same period in 1993. This
decrease is primarily due to a non-recurring gain on the sale of certain of
the Company's venture capital investments in the first quarter of 1993, an
increase in interest expense due to higher commercial paper borrowing
levels, and a decrease in interest income due to lower interest rates and
lower cash balances.
Provision for Income Taxes First First
Quarter Quarter
1994 1993 Change
Provision for income taxes $ 25 $ 99 -75.2%
Effective tax rate 38% 38%
The information contained in Note 2 of the Notes to Consolidated Financial
Statements (Unaudited) in Part I, Item 1 of this Quarterly Report on Form
10-Q is incorporated by reference into this discussion.
Factors That May Affect Future Results and Financial Condition
During the first half of calendar year 1994, the Company plans to introduce
its first Macintosh computers based on a new PowerPC family of RISC
microprocessors. Accordingly, the Company's results of operations and
financial condition could be adversely affected if it is unable to
successfully transition its line of Macintosh personal computers and
servers from the Motorola 68000 series of microprocessors to the PowerPC
microprocessor. The success of this transition will depend on the
Company's ability to continue the sales momentum of products based on the
Motorola 68000 series of microprocessors through the introduction of the
PowerPC-based products, to successfully manage inventory levels of both
product lines simultaneously, to gain market acceptance of the new PowerPC-
based products, and to coordinate the timely development and distribution
of new versions of commonly-used software products specifically designed
for the PowerPC-based products.
The Company's future operating results and financial condition may also be
affected by a number of other factors, including the Company's ability to:
increase market share in its personal computer business while successfully
expanding its new businesses and product offerings into other markets;
broaden industry acceptance of the Newton personal digital assistant
(PDA) product, including effectively licensing Newton technology and
marketing the related products and services; realize the anticipated
10
cost-reduction benefits associated with its restructuring plan initiated
in the third quarter of 1993; develop, manufacture, and sell its products
profitably; reduce existing inventory levels; and manage future
inventory levels effectively. The Company's future operating results
and financial condition may also be affected by uncertainties relative to
global economic conditions; the strength of its distribution channels;
industry factors; and the availability and cost of components.
The personal computer industry is highly volatile and continues to be
characterized by dynamic customer demand patterns, rapid technological
advances, frequent introduction of new products and product enhancements,
and industrywide competition resulting in aggressive pricing practices and
downward pressure on gross margins. The Company's operating results and
financial condition could be adversely affected should the Company be
unable to: accurately anticipate customer demand; introduce new products on
a timely basis; manage lead times required to obtain components in order to
be more responsive to short-term shifts in customer demand patterns; offer
customers competitive technologies while effectively managing the impact on
inventory levels and the potential for customer confusion created by
product proliferation; effectively manage the impact on the Company of
industrywide pricing pressures; or effectively implement and manage the
competitive risk associated with certain of the Company's collaboration
agreements with other companies, such as the agreements with International
Business Machines Corporation (IBM). The Company's results of operations
and financial condition could also be adversely affected by inventory
valuation reserves that could result if anticipated unit sales growth
projections for new and current product offerings are not realized.
A large portion of the Company's revenues in recent years has come from its
international operations. As a result, the Company's operating results and
financial condition could be significantly affected by international
factors, such as changes in foreign currency exchange rates or weak
economic conditions in foreign markets in which the Company distributes its
products. The Company's operating strategy and pricing take into account
changes in exchange rates over time; however, the Company's results of
operations can be significantly affected in the short term by fluctuations
in foreign currency exchange rates.
During the first quarter of 1994, the Company introduced several products
that extend its entry-level, midrange and notebook computer offerings. In
addition, the Company introduced several new or enhanced peripheral
products. The success of these new products is dependent on a number of
factors, including market acceptance, the Company's ability to manage the
risks associated with product transitions, and the Company's ability to
reduce existing inventory levels and manage future inventory levels in line
with anticipated product demand and to manufacture the products in
appropriate quantities to meet anticipated demand. Accordingly, the
Company cannot determine the ultimate effect that these new products will
have on its sales or results of operations.
The Company's products include certain components, such as microprocessors
manufactured by Motorola Inc. and monochrome active-matrix displays
manufactured by Hosiden Corporation, that are currently available only from
single sources. Any availability limitations, interruptions in supplies,
or price increases of these and other components could adversely affect the
Company's business and financial results.
The majority of the Company's research and development activities, its
corporate headquarters, and other critical business operations are located
near major earthquake faults. The Company's operating results and financial
condition could be materially adversely affected in the event of a major
earthquake.
A number of uncertainties also exist regarding the marketing and
distribution of the Company's products. The Company's primary means of
distribution is through third-party computer resellers and various
education and consumer channels. Although the Company has in place certain
policies to limit concentrations of credit risk, business and financial
results could be adversely affected in the event that the generally weak
financial condition of third-party computer resellers worsens. In
addition, the Company is continuing its expansion into new distribution
channels, such as mass-merchandise stores (such as Sears and Wal-Mart),
consumer electronics outlets, and computer superstores, in response to
changing industry practices and customer preferences. At this time, the
Company cannot determine the ultimate effect of these or other future
distribution expansion efforts on its future operating results.
11
Because of the foregoing factors, as well as other factors affecting the
Company's operating results and financial condition, past financial
performance should not be considered to be a reliable indicator of future
performance, and investors should not use historical trends to anticipate
results or trends in future periods. In addition, the Company's
participation in a highly dynamic industry often results in significant
volatility of the Company's common stock price.
Liquidity and Capital Resources
First Quarter First Quarter
1994 1993
Cash generated by operations $ 367 $ 79
Cash used for investment
activities, excluding short-
term investments $ 58 $ 11
Cash used for financing
activities $ 79 $ 58
The Company's financial position with respect to cash, cash equivalents and
short-term investments, net of short-term borrowings increased to $371
million at December 31, 1993 from $69 million at September 24, 1993.
Working capital increased to approximately $1.9 billion at December 31,
1993, from $1.8 billion at September 24, 1993.
Operations generated net cash of $367 million during the first quarter of
1994, compared with $400 million used during the fourth quarter of 1993.
This improvement was due primarily to decreases in inventory levels and
accounts receivable. Accounts receivable decreased by $134 million as a
result of improved collection activity. Continued improvement in cash flow
from operations for the remainder of 1994 will depend principally on the
Company's ability to improve profit levels and the Company's continued
aggressive management of working capital, particularly in the area of
inventory management as the Company introduces its Power PC-based personal
computers.
The Company's inventory levels increased sequentially each quarter during
fiscal 1993 from approximately $580 million at the end of fiscal 1992 to
approximately $1.51 billion at the end of fiscal 1993 in support of its
expanded product line and distribution channels and anticipated higher
sales volumes. These higher levels of inventory, in turn, resulted in
increased levels of short-term borrowings. As of the end of the first
quarter of fiscal 1994, inventory levels had declined by approximately $168
million and short-term borrowings had declined by $71 million from the
fiscal 1993 year-end levels, primarily as a result of improved inventory
management and increased sales resulting from pricing and promotional
actions. The Company has also identified additional measures to improve
management of working capital, including the implementation of long-term
financing arrangements, and long-term measures designed to improve
inventory management, such as increased emphasis on designing-in
commonality of parts among products, increased use of manufacturing-on-
demand based on products orders rather than forecasts, and greater
rationalization of product offerings. Although the Company believes that
these measures will result in improved inventory and working capital
management during 1994, there can be no assurance that these measures will
be successful or that inventory reserves will not be necessary in future
periods.
Net cash used for the purchase of property, plant and equipment totaled
approximately $24 million during the first quarter of 1994 compared with
$47 million during the fourth quarter of 1993. These purchases were
primarily of manufacturing machinery and equipment, and leasehold
improvements. The Company anticipates that capital expenditures in 1994
will be slightly below 1993 expenditures.
Short-term borrowings at December 31, 1993 were approximately $71 million
lower than at September 24, 1993. The Company's aggregate borrowings at
December 31, 1993 were approximately $752 million, comprised of
approximately $527 million short-term borrowings in the U.S. and
approximately $225 million short-term borrowings overseas. Aggregate
borrowings at September 24, 1993 were $823 million.
12
The Company expects that it will continue to incur short- and long-term
borrowings from time to time to finance U.S. working capital needs and
capital expenditures, because substantially all of the Company's cash, cash
equivalents, and short-term investments is held by foreign subsidiaries,
generally in U.S. dollar-denominated holdings. Amounts held by foreign
subsidiaries would be subject to U.S. income taxation upon repatriation to
the United States; the Company's financial statements fully provide for any
related tax liability on amounts that may be repatriated.
The Company's short-term borrowings are principally under its commercial
paper program. From time to time, the Company also borrows to finance
operations pursuant to short-term uncommitted bid-line arrangements with
commercial banks. During the first quarter of 1994, the Company entered
into a $500 million unsecured revolving credit facility with a syndicate of
banks to support its commercial paper program. No borrowings have been
made under this facility. In addition, Apple Japan, Inc., a wholly owned
subsidiary of the Company, incurred short-term yen-denominated borrowings
aggregating the U.S. dollar equivalent of approximately $225 million from
several Japanese banks.
On May 5, 1993, the Company filed an omnibus shelf registration statement
with the Securities and Exchange Commission for the registration of debt
and other securities for an aggregate offering amount of $500 million. On
January 24, 1994, the Company commenced marketing its first take-down under
this shelf registration statement in the aggregate principal amount of $300
million. The Company believes that the shelf registration provides it with
additional financing flexibility to meet future funding requirements and to
take advantage of attractive market conditions.
In January 1994, a wholly owned subsidiary of the Company exercised its
option to purchase for $51.9 million the remaining partnership interest in
the Cupertino Gateway Partners partnership, a general partnership, which
owns the Company's campus-type office facilities located in Cupertino,
California (the "Campus"). As a result of this purchase, the Company's
wholly owned subsidiary now owns 100% of the right, title and interest in
the Campus. This transaction will be reflected in the Company's financial
statements for the second quarter of 1994.
The Internal Revenue Service has proposed federal income tax deficiencies
for the years 1984 through 1988, which the Company is contesting. The
Company believes the resolution of any tax liability for these proposed tax
deficiencies will occur over the course of the next several years.
Although payment of any assessment is not required until the end of such
process, the Company elected to make a prepayment in April 1991 for the
years 1984 through 1986, and a prepayment in May 1993 for the years 1987
through 1988.
The Company believes that its balances of cash, cash equivalents, and short-
term investments, together with funds generated from operations and short-
and long-term borrowing capabilities, will be sufficient to meet its
operating cash requirements in the foreseeable future.
13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to pages 34 through 36 of the Company's 1993 Form 10-K
under the heading "Litigation," for a discussion of certain litigation
involving Microsoft Corporation and Hewlett-Packard Company; Securities
Litigation; 1993 Derivative Litigation; and litigation involving a
complaint filed by Jerome Lemelson; and litigation involving a complaint
filed by Richard B. Grant.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit
Number Description
10.1 Credit Agreement between the Registrant and certain
lenders dated as of December 9, 1993.
b) Reports on Form 8-K
None.
14
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.
APPLE COMPUTER, INC.
(Registrant)
DATE: January 25, 1994 BY /s/ Joseph A. Graziano
Joseph A. Graziano
Executive Vice President and
Chief Financial Officer
15
APPLE COMPUTER, INC.
INDEX TO EXHIBITS
Exhibit Description Page Number
Index
10.1 Credit Agreement between the 17
Registrant and certain lenders dated
as of December 9, 1993.
16