Apple 2002 Annual Report Download - page 28

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In June 2002, the Financial Accounting Standards Board issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities
. SFAS No. 146 supersedes Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs To Exit an Activity (Including Certain Costs Associated with a Restructuring)
and requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is incurred, as opposed to when management is committed to an
exit plan. SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. This Statement is effective for
exit or disposal activities initiated after December 31, 2002. The provisions of SFAS No. 146 are required to be applied prospectively after the
adoption date to newly initiated exit activities, and may affect the timing of recognizing future restructuring costs, as well as the amounts
recognized.
33
Liquidity and Capital Resources
The following table presents selected financial information and statistics for each of the last three fiscal years (dollars in millions):
(a)
2002
2001
2000
Cash, cash equivalents, and short
-
term investments
$
4,337
$
4,336
$
4,027
Accounts receivable, net
$
565
$
466
$
953
Inventory
$
45
$
11
$
33
Working capital
$
3,730
$
3,625
$
3,494
Days sales in accounts receivable (a)
36
29
46
Days of supply in inventory (b)
4
1
2
Annual operating cash flow
$
89
$
185
$
868
Based on ending net trade receivables and most recent quarterly net sales for each period.
(b) Based on ending inventory and most recent quarterly cost of sales for each period.
As of September 28, 2002, the Company had $4.337 billion in cash, cash equivalents, and short-
term investments, virtually unchanged from the
end of fiscal 2001. The primary sources of total cash, cash equivalents, and short-term investments in fiscal 2002 were $89 million in cash
generated by operating activities and $105 million in proceeds from the exercise of employee stock options, offset by cash utilized for business
and asset acquisitions of $52 million and capital expenditures of $174 million.
The Company believes its existing balances of cash, cash equivalents, and short-term investments will be sufficient to satisfy its working
capital needs, capital expenditures, stock repurchase activity, outstanding commitments, and other liquidity requirements associated with its
existing operations over the next 12 months.
Lease Commitments
As of September 28, 2002, the Company had total outstanding commitments on noncancelable operating leases of $464 million, $209 million
of which related to the lease of retail space and related facilities. Remaining terms on the Company's existing operating leases range from 1 to
12 years. Subsequent to September 28, 2002, the Company entered into additional operating lease commitments for retail space with future
lease commitments totaling $65 million for periods ranging from 5 to 10 years.
Long
-Term Debt
The Company currently has long-term debt outstanding in the form of $300 million of aggregate principal amount 6.5% unsecured notes. The
notes were sold at 99.925% of par, for an effective yield to maturity of 6.51%. The notes pay interest semiannually and mature on February 15,
2004.
Purchase Commitments with Contract Manufacturers and Component Suppliers
The Company utilizes several contract manufacturers to manufacture sub-
assemblies for the Company's products and to perform final assembly
and test of finished products. These contract manufacturers acquire components and build product based on demand information supplied by
the Company, which typically covers periods ranging from 1 to 3 months. The Company also obtains individual components for its products
from a wide variety of individual suppliers. Consistent with industry practice, the Company acquires components through a combination of
formal purchase orders, supplier contracts, and open orders based on projected demand information. Such formal and informal purchase
commitments typically cover the Company's forecasted component and manufacturing requirements for periods ranging from 30 to 130 days.
As of September 28, 2002, the Company had outstanding third-party manufacturing commitments and component purchase commitments of
approximately $525 million.