Apple 2005 Annual Report Download - page 46

Download and view the complete annual report

Please find page 46 of the 2005 Apple annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 152

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152

The following table presents certain payments due by the Company under contractual obligations with minimum firm commitments as of
September 24, 2005 and excludes amounts already recorded on the Company’s balance sheet as current liabilities (in millions):
Lease Commitments
As of September 24, 2005, the Company had total outstanding commitments on noncancelable operating leases of approximately $865 million,
$606 million of which related to the lease of retail space and related facilities. Lease terms on the Company’s existing major facility operating
leases range from 5 to 20 years.
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 30 to 150 days. 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 purchase orders, supplier contracts, and open orders based on projected demand information. Such purchase commitments
typically cover the Company’s forecasted component and manufacturing requirements for periods ranging from 30 to 150 days. As of
September 24, 2005, the Company had outstanding third-party manufacturing commitments and component purchase commitments of
approximately $2.0 billion.
Subsequent to September 24, 2005, the Company entered into long-
term supply agreements with Hynix Semiconductor, Inc., Intel Corporation,
Micron Technology, Inc., Samsung Electronics Co., Ltd., and Toshiba Corporation to secure supply of NAND flash memory through calendar
year 2010. As part of these agreements, the Company intends to prepay a total of $1.25 billion for flash memory components by the end of the
second quarter of 2006.
Asset Retirement Obligations
The Company’s asset retirement obligations are associated with commitments to return property subject to operating leases to original
condition upon lease termination. As of September 24, 2005, the Company estimates that gross expected future cash flows of approximately
$14 million will be required to fulfill these obligations.
Other Obligations
The Company’s other obligations of approximately $4 million are primarily related to Internet and telecommunications services.
Indemnifications
The Company generally does not indemnify end-users of its operating system and application software against legal claims that the software
infringes third-party intellectual property rights. Other agreements entered into by the Company sometimes include indemnification provisions
under which the Company
44
Total
Payments
Due in Less
Than
1 year
Payments
Due in
1
-
3 years
Payments
Due in
4
-
5 years
Payments
Due in More
Than
5 years
Operating Leases
$
865
$
108
$
211
$
192
$
354
Purchase Obligations
1,994
1,994
—
—
—
Asset Retirement Obligations
14
—
2
2
10
Other Obligations
4
4
—
—
—
Total
$
2,877
$
2,106
$
213
$
194
$
364