Apple 2003 Annual Report Download - page 32

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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)
2003
2002
2001
Cash, cash equivalents, and short
-
term investments
$
4,566
$
4,337
$
4,336
Accounts receivable, net
$
766
$
565
$
466
Inventory
$
56
$
45
$
11
Working capital
$
3,530
$
3,730
$
3,625
Days sales in accounts receivable (DSO) (a)
41
36
29
Days of supply in inventory (b)
4
4
1
Days payables outstanding (DPO) (c)
82
77
73
Annual operating cash flow
$
289
$
89
$
185
DSO is based on ending net trade receivables and most recent quarterly net sales for each period.
(b) Days supply of inventory is based on ending inventory and most recent quarterly cost of sales for each period.
(c) DPO is based on ending accounts payable and most recent quarterly cost of sales adjusted for the change in inventory.
As of September 27, 2003, the Company's cash, cash equivalents, and short-term investments portfolio totaled $4.566 billion, an increase of
$229 million from the end of fiscal 2002. The Company's short-term investment portfolio consists primarily of investments in U.S. Treasury
and Agency securities, U.S. corporate securities, and foreign securities. Foreign securities consist primarily of foreign commercial paper,
certificates of deposit and time deposits with foreign institutions, most of which are denominated in U.S. dollars. The Company's investments
are generally liquid and investment grade.
As a result of declining investment yields on the Company's cash equivalents and short-term investments resulting from substantially lower
market interest rates during 2003, the Company has elected to reduce the average maturity of its portfolio to maintain liquidity for future
investment opportunities when market interest rates increase. Accordingly, during 2003 the Company increased its holdings in short-term
investment grade instruments, both in U.S. corporate and foreign securities, that are classified as cash equivalents and has reduced its holdings
in longer-term U.S. corporate securities classified as short-term investments.
Although the Company's cash, cash equivalents, and short-term investments increased in 2003, the Company's working capital at
September 27, 2003 decreased by $200 million as compared to the end of
38
fiscal 2002 due primarily to the current year reclassification of the Company's long-term debt as a current obligation resulting from its
scheduled maturity in February 2004.
The primary sources of total cash and cash equivalents in fiscal 2003 were $289 million in cash generated by operating activities and
$53 million in proceeds from the issuance of common stock, partially offset by $164 million utilized for capital expenditures and $26 million
for the repurchase of common stock.
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, debt obligations, stock repurchase activity, outstanding commitments, and other liquidity requirements
associated with its existing operations over the next 12 months.
Debt
The Company currently has debt outstanding in the form of $300 million of aggregate principal amount 6.5% unsecured notes that were
originally issued in 1994. The notes, which pay interest semiannually, were sold at 99.925% of par, for an effective yield to maturity of 6.51%.
The notes, along with approximately $4 million of unamortized deferred gains on closed interest rate swaps, are due in February 2004 and
therefore have been classified as current debt as of September 27, 2003. The Company currently anticipates utilizing its existing cash balances
to settle these notes when due.
Capital Expenditures
The Company's total capital expenditures were $164 million during fiscal 2003, $92 million of which were for retail store facilities and
equipment related to the Company's Retail segment and $72 million of which were primarily for corporate infrastructure, including information