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APPLE INC
FORM 10-K
(Annual Report)
Filed 12/13/94 for the Period Ending 09/30/94
Address ONE INFINITE LOOP
CUPERTINO, CA 95014
Telephone (408) 996-1010
CIK 0000320193
Symbol AAPL
SIC Code 3571 - Electronic Computers
Industry Computer Hardware
Sector Technology
Fiscal Year 09/30
http://www.edgar-online.com
© Copyright 2011, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    APPLE INC FORM 10-K (Annual Report) Filed 12/13/94 for the Period Ending 09/30/94 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year ONE INFINITE LOOP CUPERTINO, CA 95014 (408) 996-1010 0000320193 AAPL 3571 - Electronic Computers Computer Hardware Technology 09/30 http://www.edgar-...

  • Page 2
    ... held by nonaffiliates of the Registrant was approximately $ 4,193,708,403 as of December 2, 1994, based upon the closing price on the Nasdaq National Market reported for such date. Shares of Common Stock held by each executive officer and director and by each person who beneficially owns more than...

  • Page 3
    DOCUMENTS INCORPORATED BY REFERENCE, Portions of the definitive Proxy Statement dated December 9, 1994 (the "Proxy Statement"), to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held January 24, 1995, are incorporated by reference into Parts I and III.

  • Page 4
    ... offices are located at 1 Infinite Loop, Cupertino, California, 95014 and its telephone number is (408) 996-1010. The Company designs, manufactures and markets microprocessor-based personal computers and related personal computing products for sale primarily to business, education, home, and...

  • Page 5
    .... LC personal computers are well-suited for education and business applications such as graphics, color presentations and spreadsheets. LC products are also capable of running the Apple IIe applications that a large number of primary and secondary schools have acquired over the years. Macintosh...

  • Page 6
    ... to education customers through direct sales and independent resellers. In order to provide products and service to its independent resellers on a timely basis, the Company distributes its products through a number of Apple distribution and support centers. Business customers account for the largest...

  • Page 7
    ... as in parts of Africa and in the Middle East. Products sold by the Europe division are manufactured primarily in the Company's facility in Cork, Ireland. The Apple Pacific division, based in Cupertino, California, focuses on opportunities in Japan, Australia, Canada, the Far East, and Latin America...

  • Page 8
    ...1994. Backlog 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...

  • Page 9
    ...to develop new products and technologies and to enhance existing products in the areas of hardware and peripherals, system software, and networking and communications. The Company's research and development expenditures totaled $564 million, $665 million, and $602 million, in fiscal years 1994, 1993...

  • Page 10
    ..., Colorado, Sacramento, California, Cork, Ireland, and Singapore. As of September 30, 1994, the Company leased approximately 5.2 million square feet of space, primarily in the United States, and to a lesser extent, in Europe and the Pacific. Leases are generally for terms of five to ten years...

  • Page 11
    ..., Apple USA in January 1994. Daniel L. Eilers, Senior Vice President, Apple Computer, Inc., and President and Chief Executive Officer, Claris Corporation (age 39). Mr. Eilers joined the Company as a software product manager in June 1982. He was promoted to Assistant Treasurer in 1984, Director of...

  • Page 12
    ... and Corporate Controller (age 45). Ms. Seeley joined the Company in October 1981, as the Controller for the Peripherals Division. In June 1985, Ms. Seeley was promoted to Senior Controller for the Operations Group, was named Director of Finance in July 1986, and was promoted to Senior Director of...

  • Page 13
    ... the Tokyo Stock Exchange under the symbol APPLE, and on the Frankfurt Stock Exchange under the symbol APCD. Options are traded on the Chicago Board Options Exchange and the American Stock Exchange. Information regarding the Company's high and low reported closing prices for its common stock and the...

  • Page 14
    ... prior year. This growth resulted principally from strong sales of the Company's new Power Macintosh products, first introduced on March 14, 1994, and from sales of newer product offerings within the Macintosh Performa line of desktop personal computers and, to a lesser extent, within the PowerBook...

  • Page 15
    ... margins will remain under pressure and could fall below prior years' levels worldwide due to a variety of factors, including continued industrywide pricing pressures, increased competition, and compressed product life cycles. Operating Expenses Research and development Percentage of net sales 1994...

  • Page 16
    ...of continued pressure on gross margins and continued competitive pressures worldwide. The Company anticipates an increase in selling, general and administrative expenses in 1995 from current levels, primarily resulting from marketing and advertising expenditures. 1994 Change $(127) -140% (1.4%) 1993...

  • Page 17
    ... develop, manufacture, and market technologically innovative products in order to meet dynamic customer demand patterns. Inherent in this process are a number of factors that the Company must successfully manage in order to achieve favorable future operating results and financial condition. Product...

  • Page 18
    ... certain other collaboration agreements entered into, and to manage the associated competitive risk. The Company's future operating results and financial condition may also be affected by the Company's ability to increase market share in its personal computer business. Currently, the Company is the...

  • Page 19
    ...The Company's future operating results and financial condition may also be affected by the Company's ability to successfully expand its new businesses and product offerings into other markets, such as the markets for on-line services and personal digital assistant (PDA) products. Global Market Risks...

  • Page 20
    ... condition of these sellers weakens or if sellers within consumer channels decide not to continue to distribute the Company's products. Other Factors The majority of the Company's research and development activities, its corporate headquarters, and other critical business operations are located...

  • Page 21
    ... the Company's short-term financing. The improvement in the Company's financial condition was also attributable to the Company's continued efforts to increase profit levels and to manage working capital, particularly in the area of inventory management. More cash was generated by operations in 1994...

  • Page 22
    ... the Notes to Consolidated Financial Statements. The Company's balance of long-term debt increased during 1994 due to the issuance of $300 million aggregate principal amount of 6.5% unsecured notes under an omnibus shelf registration statement filed with the Securities and Exchange Commission. This...

  • Page 23
    ... 30, 1994 Schedule II - Amounts receivable from related parties and underwriters, promoters and employees other than related parties Schedule VIII - Valuation and qualifying accounts and reserves Schedule IX - Short-term borrowings Schedule X - Supplementary income statement information Page 22...

  • Page 24
    ... AUDITORS The Shareholders and Board of Directors of Apple Computer, Inc. We have audited the accompanying consolidated balance sheets of Apple Computer, Inc. as of September 30, 1994 and September 24, 1993, and the related consolidated statements of income, shareholders' equity, and cash flows for...

  • Page 25
    ... costs 58,238 Other current liabilities 396,961 Total current liabilities 1,944,305 Long-term debt 304,472 Deferred tax liabilities 670,668 Commitments and contingencies Shareholders' equity: Common stock, no par value; 320,000,000 shares authorized; 119,542,527 shares issued and outstanding in 1994...

  • Page 26
    ...Three fiscal years ended September 30, 1994 Net sales Costs and expenses: Cost of sales Research and development Selling, general and administrative Restructuring costs Operating income Interest and other income (expense), net Income before income taxes Provision for income taxes Net income Earnings...

  • Page 27
    Consolidated Statements of Shareholders' Equity (In thousands, except per share amounts) mulated Translation Adjustment Notes Receivable from Shareholders Common Stock Shares Amount Balance at September 27, 1991 Common stock issued under stock option and purchase plans, including related tax ...

  • Page 28
    adjustment Net income Balance at September 30, 1994 --- --- -310,178 9,001 -- --- 9,001 310,178 119,543 $ 297,929 $2,096,206 $ (10,834) $ -- $2,383,301 See accompanying notes. 25

  • Page 29
    ...) operations: Depreciation and amortization 167,958 Net book value of property, plant, and equipment retirements 11,130 Changes in assets and liabilities: Accounts receivable (199,401) Inventories 418,204 Deferred tax assets (24,963) Other current assets 33,616 Accounts payable 139,095 Income taxes...

  • Page 30
    ...the time products are shipped. Provisions are made currently for estimated product returns and price protection that may occur under Company programs. Historically, actual amounts recorded for product returns and price protection have not varied significantly from estimated amounts. Warranty Expense...

  • Page 31
    ..., the Company provides federal and state income taxes currently on undistributed earnings of foreign subsidiaries. Earnings per Share Earnings per share are computed using the weighted average number of common and dilutive common equivalent shares attributable to stock options outstanding during the...

  • Page 32
    ...date. The Company's exposure to credit loss and market risk will vary over time as a function of interest rates and currency exchange rates. The estimates of fair value are based on applicable and commonly used pricing models using prevailing financial market information as of September 30, 1994. In...

  • Page 33
    ... below or rise above predetermined levels. All interest rate option contracts outstanding at September 30, 1994, expire within 18 months. Interest rate contracts not accounted for as hedges are carried at fair value with gains and losses recorded currently in income. Unrealized gains and losses on...

  • Page 34
    ... ten-year interest rate swaps on the Company's long- term debt. To mitigate the credit risk associated with these ten-year swap transactions, the Company entered into margining agreements with its third-party bank counterparties. Margining under these agreements generally does not start until 1997...

  • Page 35
    ... facility. The cost of this facility was immaterial. Long-Term Debt On February 10, 1994, the Company issued $300 million aggregate principal amount of 6.5% unsecured notes under the Company's $500 million omnibus shelf registration statement filed with the Securities and Exchange Commission. The...

  • Page 36
    ... the Bay Area and alternative locations were reduced, and recent changes to the California income tax laws made it more attractive for companies to do business in California. The Company canceled this action in the third quarter of 1994, when management decided that the extended estimated pay- back...

  • Page 37
    ...(C) $ Other costs relating to terminated employees (B) Provisions relating to employees who will not be terminated (C) Termination payments for leases and other contracts (C) Write-down of operating assets to be sold (N) Provisions for litigation (C) R&D project cancelations (C) Other provisions...

  • Page 38
    ... The tax benefit credited directly to common stock as a result of compensation expense attributable to employee stock option and purchase plans recognized differently for financial reporting and tax purposes was $11 million in 1994. As discussed in the Summary of Significant Accounting Policies, the...

  • Page 39
    ..., the Company adopted a shareholder rights plan and distributed a dividend of one right to purchase one share of common stock (a Right) for each outstanding share of common stock of the Company. The Rights become exercisable in certain limited circumstances involving a potential business combination...

  • Page 40
    ... Plan are limited to 10% of an employee's compensation, up to a maximum of $25,000 in any calendar year. As of September 30, 1994, approximately 1 million shares were reserved for future issuance under the Purchase Plan. Stock Repurchase Programs In November 1992, the Board of Directors authorized...

  • Page 41
    ... on length of service, up to a maximum 6% of the employee's earnings. The Company's matching contributions to the Savings Plan were approximately $10.7 million in 1994 and $11.1 million in each of 1993 and 1992. Preferred Stock Five million shares of preferred stock have been authorized for...

  • Page 42
    ...action complaints relating to the June 1993 drop in price of Apple stock were filed against the Company, as nominal defendant, and certain of its officers and directors. The suits allege violations of California law. On September 28, 1993, all parties entered into a stipulation that consolidated the...

  • Page 43
    ... net sales Transfers between geographic areas (eliminated in consolidation): United States Europe Pacific Other countries Total transfers Operating income (loss): United States Europe Pacific Other countries Eliminations Corporate income (expense), net Income before income taxes Identifiable assets...

  • Page 44
    ... the Company's earnings, capital requirements, financial condition, and other factors. The price range per common share represents the highest and lowest closing prices for the Company's common stock on the Nasdaq National Market during each quarter. Net income for the third quarter of 1994 includes...

  • Page 45
    ... Proxy Statement under the heading "Information About Apple Computer, Inc. - Director Compensation ", "Information About Apple Computer, Inc. - Certain Relationships and Related Transactions", and "Report of the Compensation Committee and Stock Option Committee of the Board of Directors on Executive...

  • Page 46
    ... 8-K No Current Reports on Form 8-K were filed by Apple with the Securities and Exchange Commission during the fourth quarter of fiscal 1994. (c) Exhibits Exhibit Number 3.1 Notes* 88-S3 Description Restated Articles of Incorporation, filed with the Secretary of State of the State of California on...

  • Page 47
    ... Inc. Savings and Investment Plan dated March 1, 1992. Form of Director Warrant 1990 Stock Option Plan, as amended through January 26, 1994. Apple Computer, Inc. Employee Stock Purchase Plan, as amended. 1994 Senior / Executive Bonus Plan. Form of Indemnification Agreement between the Registrant and...

  • Page 48
    ...dated November 15, 1988 between TGL Associates and the Registrant, as amended by a Modification of Lease Agreement dated March 1, 1989. Amended and Restated General Partnership Agreement dated July 12, 1991 between ACI Real Properties, Inc. and Sobrato Development Company #910. 10.B.1 88K-10.1 10...

  • Page 49
    ...) 10.D.2-1 92K Agreement amending Cupertino Gateway Partners General Partnership Agreement dated November 11, 1992. Lease Agreement (Building 1) dated July 12, 1991 between Cupertino Partners and the Registrant. First Amendment of Lease (Building 1) dated November 11, 1992. Lease Agreement (Building...

  • Page 50
    ... to Lease Agreement filed as Exhibit 10.D.3- 1. 88K Incorporated by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1988 (the "1988 Form 10-K"). 88-S3 Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on...

  • Page 51
    ... exhibit of that number in the Company's Quarterly Report on Form 10-Q for the quarter ended April 1, 1994. Incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 1, 1994. 94/1Q 94/2Q 94/3Q (d) Financial Statement Schedules See Item 14...

  • Page 52
    ... Stock Option Plan, the 1987 Executive Long Term Stock Option Plan, and the Form of Director Warrant of Apple Computer, Inc. and Form S-3 No. 33-62310 and in the related Prospectuses of our report dated October 17, 1994 with respect to the consolidated financial statements and schedules of Apple...

  • Page 53
    ... 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) By: /s/ MICHAEL H. SPINDLER MICHAEL H. SPINDLER President and Chief Executive Officer December 8, 1994 KNOW ALL PERSONS...

  • Page 54
    ... shareholders' equity since they are related to the sale of Common Stock by the Company to officers, directors, and employees under stock option and purchase plans. Notes Receivable from Shareholders does not include accrued interest. The notes receivable are secured by a pledge of the shares issued...

  • Page 55
    ... $ $ 4 129 61 -194 (1)(2) The above Other Accounts Receivable bore interest from 6% to 10% and were payable on various dates through April 1, 1994. NOTES (1) Director of the Company at the end of the period indicated. (2) Executive Officer of the Company at the end of the period indicated. S-2

  • Page 56
    SCHEDULE VIII APPLE COMPUTER, INC. VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (In thousands) Charged to Costs and Expenses Deductions(1) Allowance for Doubtful Accounts: Year Ended September 30,1994 Year Ended September 24, 1993 Year Ended September 25, 1992 Beginning Balance Ending Balance ...

  • Page 57
    SCHEDULE IX APPLE COMPUTER, INC. SHORT-TERM BORROWINGS (In thousands) Weighted Average Interest Category of Weighted Maximum Amount Average Amount Aggregate Average Outstanding Outstanding Rate Short-term Year-end Interest During the During the During the Borrowings(1) Balance Rate Year Year ...

  • Page 58
    ... INCOME STATEMENT INFORMATION (In thousands) Fiscal Year Ended September 30, 1994 $ 158,175 September 24, 1993 $ 153,382 September 25, 1992 $ 134,128 Advertising Advertising includes all direct costs of advertising in various media and outside advertising agencies. Maintenance and repairs, taxes...

  • Page 59
    ... due 2004. Form of the Company's 6 1/2% Note due 2004. Credit Agreement between the Registrant and certain lenders dated as of December 9, 1993. 1981 Stock Option Plan, as amended. 1987 Executive Long Term Stock Option Plan. Apple Computer, Inc. Savings and Investment Plan, as amended and restated...

  • Page 60
    ... H. Spindler. 1993 Executive Restricted Stock Plan Separation Agreement dated October 14, 1993 between the Registrant and John Sculley. Separation Agreement dated November 19, 1993 between the Registrant and Albert A. Eisenstat. Separation Agreement and Consulting Services Agreement dated October 15...

  • Page 61
    ...between TGL Associates and the Registrant, as amended by a Modification of Lease Agreement dated March 1, 1989. Amended and Restated General Partnership Agreement dated July 12, 1991 between ACI Real Properties, Inc. and Sobrato Development Company #910. Agreement amending Cupertino Gateway Partners...

  • Page 62
    ...TO EXHIBITS (Continued) Exhibit Index Number 10.D.3-1 Notes (1) Description First Amendment of Lease (Building 1) dated November 11, 1992. Lease Agreement (Building 2) dated July 12, 1991 between Cupertino Gateway Partners and the Registrant. First Amendment of Lease (Building 2) dated November 11...

  • Page 63
    ... Presidents - --Senior Directors - --General Managers - --Directors - --Senior Vice Presidents Full year participants in the Senior/Executive Bonus Plan may not participate in other bonus plans without the approval of the Chief Executive Officer. However, nominal gift certificates and awards are...

  • Page 64
    ... PERFORMANCE MEASUREMENTS - -Corporate Performance Measurements will be divided into two segments measuring Pretax Operating Profit (PTOP) and Return on Capital Employed (ROCE) against plan targets. - -The weighting is 60% for PTOP and 40% for ROCE. Each segment will be measured separately. - -If...

  • Page 65
    ... specific Performance Measurements will be used by the Divisions, Geographies or Markets. - -- Pretax Operating Profit (PTOP) - -- Return on Capital Employed (ROCE) - -- Targeted Day Sales Outstanding (DSO) and Inventory Turns (IT) - -- Revenue - -- Units -The Units segment is further defined and...

  • Page 66
    ... Payout x Yes PIE GM / VP Director 80% PTOP 20% ROCE Total Payout x Yes Total Division Business Payout results will be multiplied by a Corporate Multiplier (see The Corporate Multiplier section for description) to determine the Total Bonus Payout. GEOGRAPHY / MARKET PERFORMANCE MEASUREMENTS...

  • Page 67
    ...105% 100% 97% 95% 93% 90% < 90% % Bonus Payout 175% 150% 125% 100% 83.5% 72.5% 61.5% 45% 0% (Maximum) (Plan) (Threshold) REVENUE, UNITS & TARGETED DAYS SALES OUTSTANDING & INVENTORY TURN SEGMENTS To Plan % Achievment 116% 115% 110% 105% 100% 95% 90% < 90% % Bonus Payout 175% 170% 145% 120% 95% 70...

  • Page 68
    ...with a Corporate Multiplier as described in the previous section of this document. Functional Staff (e.g. Finance, Human Resources, Information Systems, etc.) within a Division or Geography/Market will be measured on the Division's or Geography's Performance Measurements. Senior/Executive Bonus Plan...

  • Page 69
    ... the Senior/Executive Plan. Employees promoted or transferred from one eligible position into another eligible position will require: a) a determination of whether a new target award should be set; and b) prorated awards based on the number of months of service in each position during the plan year...

  • Page 70
    ... plan by management and/or the Board of Directors is binding on all interested persons. Apple Computer Inc's obligation to pay out a Senior/Executive Bonus shall be unfunded and all payment of benefits shall be made from the general assets of Apple Computer, Inc. Title to and beneficial ownership...

  • Page 71
    ..., except per share amounts) Fiscal Years Ended September 30, 1994 Share September 24, 1993 September 25, 1992 Primary Earnings Per Earnings Net income applicable to common stock Shares Weighted average number of common shares outstanding Adjustment for dilutive effect of outstanding stock options...

  • Page 72
    ... INC* Jurisdiction of Incorporation Delaware Netherlands France Ireland Ireland United Kingdom Japan Name Ac Real Properties, Inc. Apple Computer B.V. Apple Computer France S.A.R.L. Apple Computer, Inc. Limited Apple Computer Limited Apple Computer (UK) Ltd. Apple Japan, Inc. *Pursuant to Item 601...

  • Page 73
    ... PREFERRED OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS PRIMARY EPS DILUTED YEAR SEP 30 1994 SEP 30 1994 1,203,488 54,368 1,672,339...