Apple 1994 Annual Report Download - page 20

To ensure the adequacy and effectiveness of the Company's foreign exchange and interest rate hedge positions, as well as to monitor the risks
and opportunities of the nonhedge portfolios, the Company continually monitors its foreign exchange forward and option positions, and its
interest rate swap, swaption, and option positions on a stand-alone basis and in conjunction with its underlying foreign currency- and interest
rate- related exposures, respectively, from both an accounting and an economic perspective. However, given the effective horizons of the
Company's risk management activities, there can be no assurance that the aforementioned programs will offset more than a portion of the
adverse financial impact resulting from unfavorable movements in either foreign exchange or interest rates. As such, the Company's operating
results and financial position may be adversely affected.
Inventory
The Company's products include certain components, such as specific microprocessors manufactured by Motorola, Inc., 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 Company's future operating results and financial condition may also
be adversely affected by the Company's ability to manage inventory levels and lead times required to obtain components in order to be more
responsive to short-term shifts in customer demand patterns. In addition, if anticipated unit sales growth for new and current product offerings
is not realized, inventory valuation reserves may be necessary that would adversely affect the Company's results of operations and financial
condition.
Marketing and Distribution
A number of uncertainties exist regarding the marketing and distribution of the Company's products. Currently, the Company's primary means
of distribution is through third-party computer resellers. However, in response to changing industry practices and customer preferences, the
Company is continuing its expansion into various consumer channels, such as mass-merchandise stores (for example, Sears and Wal-Mart),
consumer electronics outlets, and computer superstores. The Company's business and financial results could be adversely affected if the
financial 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 near major seismic faults. The Company's operating results and financial condition could be materially adversely affected in the event
of a major earthquake.
The Company plans to replace its current transaction systems (which include order management, distribution, manufacturing, and finance) with
a single integrated system as part of its ongoing effort to increase operational efficiency. The Company's future operating results and financial
condition could be adversely affected by its ability to implement and effectively manage the transition to this new integrated system.
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.
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