Apple 2000 Annual Report Download - page 20

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RESEARCH AND DEVELOPMENT
The Company recognizes focused investments in research and development are critical to its future growth and competitive position in the
marketplace and are directly related to timely development of new and enhanced products that are central to the Company's core business
strategy. Expenditures on research and development increased 21% or $66 million to $380 million in 2000 as compared to 1999. This followed
a $11 million or 4% increase in 1999 as compared to 1998. Spending on R&D has remained at approximately 5% of net sales during each of
the last three years. The overall increase in R&D spending over the last two years is directly related to increases in R&D headcount of
approximately 13% over that time to support expanded product development efforts.
SELLING, GENERAL, AND ADMINISTRATIVE
Selling, general, and administrative expenditures increased 17% to $1,166 million in 2000 as compared to 1999 and decreased to 15% of net
sales in 2000 from 16% in 1999. This increase in total expenditures resulted from higher spending for promotional and marketing activities,
increased sales expenses resulting from higher net sales, and a 21% increase in combined sales, marketing, and general and administrative
headcount from the end of 1999 to the end of 2000.
in 1999 from 15% in 1998. These increases are primarily the result of increased spending on marketing and promotional activities throughout
1999 and a 12% increase in combined sales, marketing, and general and administrative headcount from the end of 1998 to the end of 1999.
SPECIAL CHARGES
2000 RESTRUCTURING ACTIONS
During the first quarter of 2000, the Company initiated restructuring actions resulting in recognition of an $8 million restructuring charge. This
charge was comprised of $3 million for the write-off of various operating assets and $5 million for severance payments to approximately 95
employees associated with consolidation of various domestic and international sales and marketing functions.
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 $3 million of excess reserves related to prior
restructuring actions. The $21 million cost of these actions was 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.
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. The charge 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.
EXECUTIVE BONUS
During the first quarter of 2000, the Company's Board of Directors approved a special executive bonus for the Company's Chief Executive
Officer for past services in the form of an aircraft with a total cost to the Company of approximately $90 million, the majority of which is not
tax deductible. Approximately half of
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