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Table of Contents
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB
Statement No. 133, which requires companies to provide additional disclosures about its objectives and strategies for using derivative
instruments, how the derivative instruments and related hedged items are accounted for under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities
, and related interpretations, and how the derivative instruments and related hedged items affect the
Company’s financial statements. SFAS No. 161 also requires companies to disclose information about credit risk-related contingent features in
their hedged positions. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008 and is required to be
adopted by the Company beginning in the second quarter of fiscal 2009. Although the Company will continue to evaluate the application of
SFAS No. 161, management does not currently believe adoption will have a material impact on the Company’s financial condition or operating
results.
Liquidity and Capital Resources
The following table presents selected financial information and statistics as of and for the three fiscal years ended September 27, 2008 (in
millions):
As of September 27, 2008, the Company had $24.5 billion in cash, cash equivalents, and short-
term investments, an increase of $9.1 billion from
September 29, 2007. The principal components of this net increase were cash generated by operating activities of $9.6 billion, proceeds from the
issuance of common stock under stock plans of $483 million and excess tax benefits from stock-based compensation of $757 million. These
increases were partially offset by payments for acquisitions of property, plant, and equipment of $1.1 billion, payments made in connection with
business acquisitions, net of cash acquired, of $220 million and payments for acquisitions of intangible assets of $108 million. The Company’s
cash generated by operating activities significantly exceeded its net income due primarily to the large increase in deferred revenue, net of
deferred costs, associated with subscription accounting for iPhone.
The Company’s short-term investment portfolio is invested primarily in highly rated securities with a minimum rating of single-A. As of
September 27, 2008 and September 29, 2007, $11.3 billion and $6.5 billion, respectively, of the Company’s cash, cash equivalents, and short-
term investments were held by foreign subsidiaries and are generally based in U.S. dollar-
denominated holdings. The Company had $117 million
in net unrealized losses on its investment portfolio, primarily related to investments with stated maturities ranging from one to five years, as of
September 27, 2008, and net unrealized losses of approximately $11 million on its investment portfolio, primarily related to investments with
stated maturities from one to five years, as of September 29, 2007. The Company has the intent and ability to hold such investments for a
sufficient period of time to allow for recovery of the principal amounts invested. Accordingly, none of these declines in fair value were
recognized in the Company’s Statement of Operations.
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, outstanding commitments, and other liquidity requirements associated with its existing operations over the next 12
months.
Capital Assets
The Company’s cash payments for capital asset purchases were $1.1 billion during 2008, consisting of $389 million for retail store facilities and
$702 million for real estate acquisitions and corporate infrastructure including information systems enhancements. The Company anticipates
utilizing approximately $1.5 billion for capital asset purchases during 2009, including approximately $400 million for Retail facilities and
approximately $1.1 billion for corporate facilities and infrastructure.
49
2008
2007
2006
Cash, cash equivalents, and short
-
term investments
$
24,490
$
15,386
$
10,110
Accounts receivable, net
$
2,422
$
1,637
$
1,252
Inventory
$
509
$
346
$
270
Working capital
$
20,598
$
12,676
$
8,066
Annual operating cash flow
$
9,596
$
5,470
$
2,220