Apple 1997 Annual Report Download - page 19

compared to 1995. The increase as a percentage of net sales in 1996 over 1995 was the result of a decrease in net sales during 1996.
The Company believes that selling, general and administrative expenditures will decrease in 1998 compared to 1997 as the Company completes
and more fully realizes the cost reduction benefits of its restructuring plan. The Company believes that selling, general and administrative
expenditures will decrease only slightly in the first quarter of 1998 compared to the fourth quarter of 1997 as a result of continued cost
reduction benefits from the restructuring plan, partially offset by planned advertising spending.
SPECIAL CHARGES
IN-PROCESS RESEARCH AND DEVELOPMENT
As a result of the NeXT acquisition, the Company took a substantial charge for in-process research and development during 1997. Further
discussion relating to the Company's acquisition of NeXT, including the related in-process research and development charge, may be found in
Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements under the subheading "NeXT Acquisition" included under
the heading "Special Charges", which information is hereby incorporated by reference. Information relating to the Company's research and
development expenditures, may be found in Part I, Item 1 of this Form 10-K under the heading "Research and Development" and in Part II,
Item 7 of this Form 10-K under the heading "Research and Development," which information is hereby incorporated by reference.
RESTRUCTURING COSTS
Information relating to the Company's restructuring costs may be found in this Part II, Item 7 of Form 10-K under the subheading
"Restructuring of Operations" included under the heading "Factors That May Affect Future Results and Financial Condition," and in Part II,
Item 8 of this Form 10-
K in the Notes to Consolidated Financial Statements under the subheading "Restructuring of Operations" included under
the heading "Special Charges," which information is hereby incorporated by reference.
TERMINATION OF LICENSE AGREEMENT
Information relating to the Company's termination of license agreement may be found in this Part II, Item 7 of Form 10-K under the
subheading "Competition" included under the heading "Factors That May Affect Future Results and Financial Condition," and in Part II, Item 8
of this Form 10-K in the Notes to Consolidated Financial Statements under the subheading "Termination of License Agreement" included
under the heading "Special Charges," which information is hereby incorporated by reference.
INTEREST AND OTHER INCOME (EXPENSE), NET
Interest and other income (expense), net, decreased to $25 million in 1997 from $88 million in 1996. The decrease is primarily due to gains
realized in 1996 on sales of available-for-sale and other securities. Interest and other income (expense), net, also decreased compared to the
prior year due to decreased foreign exchange gains, net of cost, in 1997 compared to 1996, partially offset by higher average cash balances
during 1997. Over the last two years, the Company's debt ratings have been downgraded to non-
investment grade. The Company's cost of funds
may increase as a result of the downgrading in the second quarter of 1997 of its senior and subordinated long-term debt to B3 and Caa2,
respectively, by Moody's Investor Services, and the downgrading in October 1997 of its senior and subordinated long-term debt to B- and
CCC, respectively, by Standard and Poor's Rating Agency.
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1997 CHANGE 1996 CHANGE 1995
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Interest and other income (expense), net............................ $ 25 (72%) $ 88 NM $ (10)