Apple 1999 Annual Report Download - page 18

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1999 RESTRUCTURING ACTIONS
During the fourth quarter of 1999, the Company initiated restructuring actions resulting in a charge to operations of $21 million. The net
restructuring charge of $18 million recognized during the fourth quarter of 1999 reflects the $3 million of excess reserves related to the 1996
and 1997 restructuring actions. The total cost of these actions of $21 million is comprised of $11 million for contract cancellation charges
associated with the closure of the Company's outsourced data center and $10 million for contract cancellation charges related to supply and
development agreements previously discontinued. The Company expects these actions to result in cash expenditures of $21 million over the
next year.
During the second quarter of 1999, the Company took certain actions to improve the flexibility and efficiency of its manufacturing operations
by moving final assembly of certain of its products to third-party manufacturers. These restructuring actions resulted in the Company
recognizing a charge to operations of approximately $9 million during the second quarter of 1999, which was comprised of $6 million for
severance benefits to be paid to employees involuntarily terminated, $2 million for the write-
down of operating assets to be disposed of, and $1
million for payments on canceled contracts. These actions resulted in the termination of approximately 580 employees and are substantially
complete as of September 25, 1999.
IN-PROCESS RESEARCH AND DEVELOPMENT
In May 1998, the Company acquired certain technology that was under development and had no alternative future use. The acquisition resulted
in the recognition of $7 million of purchased in-process research and development, which was charged to operations upon acquisition.
In February 1997, the Company acquired all of the outstanding shares of NeXT Software, Inc. (NeXT). NeXT had developed, marketed, and
supported software enabling customers to implement business applications on the Internet/World Wide Web, intranets and enterprise-wide
client/server networks. Of the total purchase price of $427 million, $375 million was allocated to purchased in-process research and
development and $52 million was allocated to goodwill and other intangible assets. The purchased in-process research and development was
charged to operations upon acquisition, and the goodwill and other intangible assets are being amortized on a straight-line basis over two to
three years.
TERMINATION OF LICENSE AGREEMENT
In August 1997, the Company agreed to acquire certain assets of Power Computing Corporation (PCC), a licensed distributor of the Mac OS
operating system, including PCC's customer database and its license to distribute the Mac OS. The agreement with PCC also included a release
of claims between the parties. On January 28, 1998, the Company completed its acquisition of certain assets from PCC. The total purchase
price was approximately $110 million, of which $75 million was expensed in the fourth quarter of 1997 as "termination of license agreement"
and $35 million was recorded as goodwill in the second quarter of 1998. The goodwill is being amortized over three years.
INTEREST AND OTHER INCOME (EXPENSE), NET
Interest and other income and expense (net) increased $59 million or 211% to $87 million during 1999 as compared to 1998. This increase is
attributable to two primary factors. First, the Company's cash, cash equivalents, and short-term investments increased $926 million or 40%
during 1999 resulting in an increase in interest income during 1999 of $44 million. Second, interest expense declined $15 million during 1999,
primarily as a result of the conversion of approximately $661 million of the Company's convertible subordinated notes to common stock during
the third quarter of 1999. During 1998, the Company experienced a $27 million increase in interest income net of interest expense, the result of
higher cash and investment balances and lower average short-term borrowings, offset by decreased foreign exchange gains and increased other
expense.
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