Apple 2007 Annual Report Download - page 55

Capital Assets
The Company's total capital asset purchases were $822 million during 2007, consisting of $294 million for retail store facilities and $528 million
for real estate acquisitions and corporate infrastructure including information systems enhancements. Of the $822 million in total capital asset
purchases during 2007, $87 million were not yet paid for as of September 29, 2007. The Company currently anticipates it will utilize
approximately $1.1 billion for capital asset purchases during 2008, including approximately $400 million for expansion of the Company's Retail
segment, and approximately $700 million to support normal replacement of existing capital assets, including manufacturing related equipment,
enhancements to general information technology infrastructure, and real estate acquisitions.
Off-Balance Sheet Arrangements and Contractual Obligations
The Company has not entered into any transactions with unconsolidated entities whereby the Company has financial guarantees, subordinated
retained interests, derivative instruments, or other contingent arrangements that expose the Company to material continuing risks, contingent
liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides financing, liquidity, market risk, or credit
risk support to the Company.
The following table presents certain payments due by the Company under contractual obligations with minimum firm commitments as of
September 29, 2007 and excludes amounts already recorded on the Company's balance sheet as current liabilities (in millions):
Lease Commitments
As of September 29, 2007, the Company had total outstanding commitments on noncancelable operating leases of $1.4 billion, $1.1 billion of
which related to the lease of retail space and related facilities. Lease terms on the Company's existing major facility operating leases generally
range from 3 to 15 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. In addition, the Company has an off-balance
sheet warranty obligation for products accounted for under subscription accounting pursuant to SOP No. 97-2 whereby the Company recognizes
warranty expense as incurred. As of September 29, 2007, the Company had outstanding off-balance sheet third-party manufacturing
commitments, component purchase commitments, and warranty commitments of $3.2 billion.
During the first quarter of 2006, 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
51
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
$
1,425
$
155
$
345
$
308
$
617
Purchase obligations
3,179
3,179
—
—
—
Asset retirement obligations
24
3
3
7
11
Other obligations
50
50
—
—
—
Total
$
4,678
$
3,387
$
348
$
315
$
628