Apple 1995 Annual Report Download - page 18

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, the Company's results of operations and financial
condition could be adversely affected.
Marketing and Distribution
A number of uncertainties may affect the marketing and distribution of the Company's products. Currently, the Company's primary means of
distribution is through third-party computer resellers. However, the Company is continuing its expansion into various consumer channels, such
as mass-merchandise stores, consumer electronics outlets, and computer superstores. The Company's business and financial results could be
adversely affected if the financial condition of these resellers weakens or if resellers 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 is currently in the process of replacing 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 if it is unable to implement and effectively manage the transition to
this new integrated system.
In April 1995, the Company announced a companywide reorganization designed to more closely align the Company's organizational structure
with the Company's business strategy of placing increased focus on customer needs and expanding its presence in the home, education, and
business markets. In November 1995, the Company announced a further companywide reorganization to accelerate the implementation of its
market segmentation strategy. The Company's reorganization will result in the consolidation of its sales, marketing, and customer solutions
organization into three geographic business units, namely, the Americas, Europe, and Japan and Asia. The Company's future operating results
and financial condition could be adversely affected by its ability to effectively manage the transition to these new organizational structures.
Although it is uncertain at this time, the Company may incur future restructuring charges as a result of these reorganizations.
Historically, the Company has experienced increased sales in its first and fourth fiscal quarters due to holiday demand for and calendar year-
end buying of some of its products. As of the date of this Annual Report, published reports relating to the U.S. economy indicated a potentially
unfavorable year-
end buying season. Any general economic slowdown could adversely affect demand for the Company's products, which could
adversely affect the Company's results of operations and financial condition.
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
The Company's financial position with respect to cash, cash equivalents, and short-term investments, net of short-term borrowings, decreased
to $491 million at September 29, 1995, from $966 million at September 30, 1994.
Less cash was generated by operations in 1995 compared with 1994, primarily as a result of growth in inventory levels and an increase in
accounts receivable. Inventory levels grew during 1995 in order to support anticipated demand in the first quarter of 1996 for the Company's
new products. Accounts receivable also increased, reflecting the higher sales levels achieved during 1995, primarily toward the end of the
fourth quarter.
Cash used for operations in 1995 was partially offset by cash generated from higher sales and accounts payable levels. The increased sales
levels were driven by aggressive pricing and promotional actions coupled with strong demand for the Company's PowerPC processor-based
products. Accounts payable increased as a result of the growth in inventory and production levels and longer payment terms negotiated with
vendors.
More cash was generated by operations in 1994 compared with 1993, primarily due to a significant decrease in inventory levels, as well as
increased sales levels. The significant decrease in inventory levels during 1994 resulted from improved inventory
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