Apple 1997 Annual Report Download - page 46

INTEREST AND OTHER INCOME (EXPENSE), NET
Interest and other income (expense), net, consisted of the following:
CONCENTRATIONS OF RISK
CONCENTRATIONS OF CREDIT RISK
The Company distributes its products principally through third-party computer resellers and various education and consumer channels.
Concentrations of credit risk with respect to trade receivables are limited because of flooring arrangements for selected customers with third-
party financing companies and because the Company's customer base consists of large numbers of geographically diverse customers dispersed
across several industries. As such, the Company generally does not require collateral from its customers.
The counterparties to the agreements relating to the Company's investments and foreign exchange and interest rate instruments consist of a
number of major international financial institutions. To date, no such counterparty has failed to meet its financial obligations to the Company.
The Company does not believe that there is significant risk of nonperformance by these counterparties because the Company continually
monitors its positions and the credit ratings of such counterparties, and limits the financial exposure and the number of agreements and
contracts it enters into with any one party. The Company generally does not require collateral from counterparties, except for margin
agreements associated with the ten-year interest rate swaps on the Company's ten-year unsecured notes. To mitigate the credit risk associated
with these ten-year swap transactions which mature in 2004, the Company entered into margining agreements with its third-party bank
counterparties. These agreements require the Company or the counterparty to post margin only if certain credit risk thresholds are exceeded.
The amounts held in margin accounts were not material as of September 26, 1997.
CONCENTRATIONS IN THE AVAILABLE SOURCES OF SUPPLY OF MATERIALS AND PRODUCT
Although certain components essential to the Company's business are generally available from multiple sources, other key components
(including microprocessors and application-specific integrated circuits, or "ASICs") are currently obtained by the Company from single
sources. If the supply of a key single-sourced component to the Company were to be delayed or curtailed, the Company's ability to ship the
related product utilizing such component in desired quantities and in a timely manner could be adversely affected, depending on the time
required to obtain sufficient quantities from the original source, or to identify and obtain sufficient quantities from an alternate source. In
addition, the Company uses some components that are not common to the rest of the personal computer industry. Continued availability of
these components may be affected if producers were to decide to concentrate on the production of common components instead of components
customized to meet the Company's requirements. Finally, a significant portion of the Company's CPUs and logic boards are now manufactured
by outsourcing partners. Although the Company works closely with its outsourcing partners on manufacturing
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1997 1996 1995
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(IN MILLIONS)
Interest income.................................................................. $ 82 $ 60 $ 100
Interest expense................................................................. (71) (60) (48)
Foreign currency gain (loss)..................................................... 13 30 (15)
Net premiums and discounts on foreign exchange instruments....................... (4) (13) (46)
Realized gains on the sale of available-for-sale and other securities............ 2 74 1
Other income (expense), net...................................................... 3 (3) (2)
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$ 25 $ 88 $ (10)
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