Apple 1998 Annual Report Download - page 27

DEPENDENCE ON KEY EMPLOYEES
During the past several years, the Company has experienced significant voluntary employee turnover as a result of employees' concerns over
the Company's prospects, as well as the abundance of career opportunities available elsewhere. The Company is dependent on its key
employees in order to achieve its business plan. While the Company experienced reduced voluntary turnover during 1998, there can be no
assurance the Company will be able to continue to attract, motivate and retain key employees. Failure to do so may have a significant effect on
the Company's consolidated operating results and financial condition.
OTHER FACTORS
The potential risks associated with the Company's Y2K Plan are discussed above under the heading "Year 2000 Compliance."
The majority of the Company's research and development activities, its corporate headquarters, and other critical business operations, including
certain major vendors, 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.
Production and marketing of products in certain states and countries may subject the Company to environmental and other regulations which
include, in some instances, the requirement that the Company provide consumers with the ability to return to the Company product at the end
of its useful life, and leave responsibility for environmentally safe disposal or recycling with the Company. Although the Company does not
anticipate any material adverse effects in the future based on the nature of its operations and the thrust of such laws, no assurance can be given
that such laws, or any future laws enacted for the protection of the environment, will not have a material adverse effect on the Company.
The Company is in the process of replacing its existing transaction systems in the U.S. (which include order management, product
procurement, distribution, and finance) with a single integrated system as part of its ongoing effort to increase operational efficiency.
Substantially all of the transaction systems in the European operations were replaced with the same integrated system in 1997. The Company's
future consolidated operating results and financial condition could be adversely affected if the Company is unable 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 consolidated 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.
ITEM 7A. DISCLOSURES ABOUT MARKET RISK
INTEREST RATE AND FOREIGN CURRENCY RISK MANAGEMENT
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, option and floor positions both 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 and the anticipatory nature of the exposures intended to hedge, 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. In addition, the timing of the accounting for recognition of gains and losses related to mark-to-market
instruments for any given period may not coincide with the timing of
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