Apple 1999 Annual Report Download - page 54

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--SPECIAL CHARGES (CONTINUED)
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, which 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.
TECHNOLOGY ACQUISITION
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.
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. The purchase price was comprised of
approximately 4.2 million shares of the Company's common stock valued at $80 million, forgiveness of $28 million of receivables due from
PCC, and assumption by the Company of $2 million of certain customer support liabilities of PCC.
NEXT ACQUISITION
On February 4, 1997, the Company acquired all of the outstanding shares of NeXT Software, Inc. (NeXT). NeXT, headquartered in Redwood
City, California, 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. The total purchase price was $427 million and was comprised of cash
payments of $319 million and the issuance of 1.5 million shares of the Company's common stock to the NeXT shareholders valued at
approximately $25 million according to the terms of the purchase agreement; the issuance of approximately 1.9 million options to purchase the
Company's common stock to the NeXT optionholders valued at approximately $16 million; cash payments of $56 million to the NeXT
debtholders; cash payments of $9 million for closing and related costs, and $2 million of net liabilities assumed. The acquisition was accounted
for as a purchase; and, accordingly, the operating results
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