<PAGE> 1
FILED PURSUANT TO
RULE 424(B)5
SUBJECT TO COMPLETION, DATED JANUARY 24, 1994
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MAY 27, 1993
$300,000,000
(LOGO)
APPLE COMPUTER, INC.
% NOTES DUE 2004
------------------------
Interest on the Notes is payable on and
of each year, commencing , 1994. The Notes are redeemable in
whole or in part at the option of the Company at any time at 100% of the
principal amount thereof, together with accrued interest thereon, plus a
Make-Whole Premium, if any. See "Description of Notes."
The Notes will be represented by one or more Global Notes registered in the
name of a nominee of The Depository Trust Company, as Depositary. Beneficial
interests in the Global Notes will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary and its
participants. Except as described under "Description of Notes -- Book-Entry
System" herein and under "Description of Securities -- Description of Debt
Securities -- Book-Entry System" in the accompanying Prospectus, owners of
beneficial interests in the Global Notes will not be entitled to receive Notes
in definitive form and will not be considered the holders thereof. Settlement
for the Notes will be made in same-day funds. The Notes will trade in the
Depositary's Same-Day Funds Settlement System until maturity, and secondary
market trading activity in the Notes will therefore settle in same-day funds.
See "Description of Notes -- Same-Day Settlement."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS TO
TO PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
---------------------------------------------------------------------
<S> <C> <C> <C>
Per Note.................. % % %
Total..................... $ $ $
</TABLE>
- ---------------
(1) Plus accrued interest, if any, from February , 1994.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of $ payable by the Company.
------------------------
The Notes are offered severally by the Underwriters, as specified herein,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part. It is expected that delivery of the Notes will be
made in book-entry form only to the facilities of The Depository Trust Company
on or about February , 1994.
GOLDMAN, SACHS & CO.
CITICORP SECURITIES, INC.
CS FIRST BOSTON
MORGAN STANLEY & CO.
INCORPORATED
------------------------
The date of this Prospectus Supplement is February , 1994.
<PAGE> 2
Apple, the Apple logo, AppleTalk, Macintosh Quadra, PowerBook, and Newton
are registered trademarks and eWorld, Macintosh Centris, Macintosh Performa, and
MessagePad are trademarks of Apple Computer, Inc. Classic is a registered
trademark licensed to Apple Computer, Inc. Claris Clear Choice is a trademark of
Claris Corporation.
DECnet is a trademark of Digital Equipment Corporation. MS-DOS and Windows
are trademarks of Microsoft Corporation. PowerPC is a trademark of International
Business Machines Corporation. UNIX is a registered trademark of UNIX Systems
Laboratories, Inc. This Prospectus Supplement also includes trademarks of other
companies.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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<PAGE> 3
THE COMPANY
OVERVIEW
Apple Computer, Inc. is one of the world's leading personal computer
technology companies. The Company develops and manufactures products that it
markets and sells in the United States and more than 120 other countries. In its
fiscal quarter ended December 31, 1993, Apple generated 55% of its net sales
from the United States and 45% from international markets. For information
concerning factors that may affect Apple's future operating results and
financial condition, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Factors That May Affect Future Results
and Financial Condition."
Apple Computer, Inc. was incorporated under the laws of the State of
California on January 3, 1977. The Company's principal executive offices are
located at 20525 Mariani Avenue, Cupertino, California 95014 and its telephone
number is (408) 996-1010. References in this Prospectus Supplement to "Apple" or
the "Company" mean Apple Computer, Inc. together with its subsidiaries, unless
the context otherwise requires.
COMPANY BACKGROUND AND STRATEGY
The Company's strategy is to expand its market share in the personal
computing ("PC") industry while developing and expanding into new related
businesses such as Personal Interactive Electronics and Apple Business Systems.
See "Products and Businesses." Substantially all of the Company's net sales to
date have been derived from the sale of personal computers and related software
and peripherals. The Apple(R) Macintosh(R) and Apple Macintosh PowerBook(R)
computers are the core product lines in this business. From Apple's introduction
of the Apple Macintosh in January 1984 through the end of December 1993, more
than 12 million Macintosh personal computers have been shipped. As of the end of
calendar 1993, there were more than 5,000 software applications for a wide
variety of computing tasks (including word processing, statistical analysis,
desktop publishing, database management, and three-dimensional modeling)
available on the Macintosh platform.
According to independent PC market research data, the Company's unit share
of the worldwide PC market is estimated to be 10% in calendar 1993 compared with
7% in calendar 1990. The Company believes that it must continue to increase its
market share in order to continue to be a successful participant in the PC
industry. The Company intends to pursue this objective by offering PC products
that incorporate superior technologies at competitive prices. Concurrently, the
Company is working to reduce operating expenses throughout its operations and
focus its research and development investments on activities that it believes
will enhance its competitive position in the marketplace.
Average selling prices ("ASPs") for substantially all of the Company's
personal computers have declined significantly over the course of the past
several quarters. For example, the ASP for the Macintosh LC II, one of the
Company's entry-level color computers, declined 44% in the first quarter of
fiscal 1994 compared with the first quarter of fiscal 1993. The ASP for the
Macintosh Quadra(R) 950, the Company's highest-priced personal computer,
declined 34% during the same period. The Company believes that these price
reductions have contributed to market share gains by the Company in the PC
industry during this period. Although ASPs for individual models of personal
computers have declined significantly over the course of the past several
quarters, the average aggregate revenue per Macintosh computer unit declined
only 12% in the first quarter of fiscal 1994 over the comparable period of 1993,
reflecting a shift in user buying patterns to higher performance systems.
To offset declines in gross margins resulting from reduced ASPs and in
response to continuing industrywide pricing pressures over the past several
quarters, the Company has implemented steps to reduce its operating expenses,
both in amount and as a percentage of net sales. As a result of these steps,
total operating expenses in the first quarter of fiscal 1994 were $527 million
(21.4% of net sales) compared with $570 million (28.5% of net sales) in the
first quarter of fiscal 1993. In the
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<PAGE> 4
third quarter of fiscal 1993, the Company initiated a restructuring of its
operations as part of its ongoing efforts to lower its cost structure. This
restructuring included plans to terminate approximately 2,500 employees,
relocate certain Company functions to lower-cost geographic locations, and
eliminate certain projects and activities. The restructuring resulted in a
charge of $321 million in the third quarter of fiscal 1993. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Year-to-Year Comparison -- Results of Operations -- Operating
Expenses."
The Company's inventory levels increased substantially during fiscal 1993
from approximately $580 million at the end of fiscal 1992 to approximately $1.51
billion at the end of fiscal 1993 in support of its expanded product line and
distribution channels and anticipated higher sales volumes. During the first
quarter of fiscal 1994, inventory levels declined by approximately $168 million
to approximately $1.34 billion, primarily as a result of improved inventory
management and increased sales resulting from pricing and promotional actions.
The Company has also identified additional measures to enhance its management of
working capital, including the implementation of long-term financing
arrangements (such as the sale of the Notes offered hereby), and long-term
measures designed to improve inventory management, such as increased emphasis on
designing-in commonality of parts among products, increased use of
manufacturing-on-demand techniques based on product orders rather than
forecasts, and greater rationalization of product offerings. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
As part of its goal to offer PC products that incorporate superior
technology at competitive prices, the Company plans to begin introducing
personal computers that are based on the PowerPC(R) architecture, a new Reduced
Instruction Set Computing ("RISC") microprocessor design, in the first half of
calendar 1994. These computers are expected to yield significant improvements in
performance and functionality compared with the Company's current products. See
"Products and Businesses -- PowerPC-based Personal Computers."
The Company's strategy is also to use its position as a leading personal
computer technology company to participate in emerging technology markets. For
example, the Company believes that with its experience in the areas of
communications, mobile computing, and miniaturization, it is well positioned to
become a leader in developing and marketing personal communications products,
such as personal digital assistants ("PDAs"). See "Products and
Businesses -- Personal Interactive Electronics."
PRODUCTS AND BUSINESSES
PERSONAL COMPUTING PRODUCTS
Unlike most other companies in the PC industry, Apple develops and markets
both personal computer hardware and the related operating system software. This
combination enables the Company to design well-integrated computer products that
provide superior ease-of-use in both set-up and operation. According to a
leading independent PC market research firm, ownership costs (including the
initial hardware and software costs; training and support; and the time a user
spends learning new software applications) are significantly lower for Macintosh
users than for users of other leading PC platforms.
Apple's personal computers also feature "plug and play" capabilities. For
example, every Macintosh computer includes built-in networking capabilities
("AppleTalk(R)") which enable users to connect their Macintosh computers
together in an AppleTalk network to share printers and files by plugging in one
low-cost cable without the need for any additional hardware or software.
Macintosh computers can also be connected to other personal computers,
minicomputers, and mainframes by means of other leading network environments
such as DECnet(TM), TCP/IP, SNA, APPC, 3270, and X.25.
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<PAGE> 5
The Company also markets a wide range of printers, monitors, scanners, and
operating system software. Additionally, the Company markets a variety of
interoperability, networking, and communications products that enable the
integration of Macintosh systems into different computing environments such as
MS/DOS(TM), Windows(TM), and UNIX(R). These products are supported by thousands
of independent hardware and software developers.
Apple's broad range of PC products enables the Company to reach a wide
variety of market segments, including those in education; home; small, medium,
and large business organizations; and local, state, and federal government
organizations. The Company's current line of PC products is based on the
Motorola, Inc. ("Motorola") 68000-series of microprocessors and includes the
Classic, LC, Performa, Quadra, and PowerBook families of Macintosh personal
computers.
CURRENT PC PRODUCT FAMILIES
Macintosh Classic
The Classic family of personal computers offers a compact design and is
well-suited for commonly-performed functions such as word processing,
spreadsheet modeling, database management, and personal finance. These products
are the Company's most affordable personal computer systems and are designed to
appeal to first-time personal computer buyers.
Macintosh LC
The LC family of personal computers offers high performance and competitive
prices in a flexible, modular design. LC personal computers are well suited for
education and business applications such as color presentations and
spreadsheets. LC products are also capable of running the Apple IIe applications
currently used by a large number of primary and secondary schools.
Macintosh Performa
The Macintosh Performa(TM) family of personal computers is designed to
appeal to first-time personal computer buyers. These products feature all-in-one
box computing solutions, including software and hardware designed specifically
with home users in mind. Performa products also include in-home service and
unlimited toll-free telephone support. The Performa family is distributed
through a wide variety of retail outlets, including national mass merchandisers,
such as Sears and Wal-Mart, and computer superstores (high volume retail stores
that specialize in high technology products or office equipment).
Macintosh Quadra
The Quadra family of personal computers includes the most powerful desktop
products in the Macintosh line and is targeted at business and professional
users. Quadra personal computers include a wide variety of built-in features
that make them well-suited for activities such as color publishing, multi-user
accounting, three-dimensional modeling, computer-aided design (CAD), and
computer-aided engineering (CAE).
PowerBook
The PowerBook family of notebook personal computers is specifically
designed for mobile computing needs. All PowerBook personal computers include
the capability to connect to Macintosh desktop personal computers and AppleTalk
networks and, therefore, to access files and services that are located remotely;
they also offer the capability to transmit facsimiles. The PowerBook family has
become one of the most popular personal computer families in the industry. In
the first year following their introduction in 1991, sales of PowerBook personal
computers surpassed $1 billion. As of December 31, 1993, the Company had shipped
more than one million PowerBooks.
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<PAGE> 6
POWERPC-BASED PERSONAL COMPUTERS
During the first half of calendar 1994, the Company plans to introduce its
first personal computers based on the PowerPC architecture, a new RISC
microprocessor design. The PowerPC microprocessor family is a result of a joint
development effort by Apple, International Business Machines Corporation
("IBM"), and Motorola. Apple intends to use the PowerPC in its products for
several strategic reasons, including the expected price/performance ratio and
the potential for PowerPC to become a common standard used by Apple, IBM and
other industry leaders.
The Company's PowerPC-based products are expected to yield significant
improvements in price/performance and functionality compared with the Company's
current products (which are based on the Motorola 68000-series of Complex
Instruction Set Computing ("CISC") microprocessors). The Company believes that
these expected improvements will provide the Company with opportunities to
increase the functionality of its operating system software platform and attract
new developers and customers to the Company's hardware platform.
The Company intends to provide most of its current installed base of
Macintosh CISC-based platform users a competitively-priced upgrade path to the
Company's PowerPC-based products. Further, the Company intends to incorporate in
its PowerPC-based products an emulation capability that will allow them to run
existing CISC-based software. The Company's research and testing indicates that
the vast majority of current Macintosh software applications will run on the
Company's PowerPC-based products in emulation mode with performance equivalent
to the Company's existing high-end CISC-based products.
The Company expects a number of third-party developers to publish new
versions of commonly-used software applications specifically designed for the
PowerPC-based products ("native versions"). Apple expects that a number of these
native versions will be made available by third-party developers when Apple
introduces its first PowerPC-based products in the first half of calendar 1994.
These new native versions are expected to provide substantial improvements in
system performance.
APPLE BUSINESS SYSTEMS
In 1991, the Company established a division, now called Apple Business
Systems, to focus on the client/server computing environments of large
organizations. The objective of this division is to develop, distribute, and
support hardware and software products that will operate in mixed computing
environments as well as in the Macintosh environment.
During fiscal 1993, the Company introduced several competitively-priced,
high-performance hardware and software products particularly suited for server
applications. These products are currently designed to address the client/server
needs of Macintosh-based computer network environments. Apple plans to expand
its hardware and connectivity software product offerings to other leading
network operating system environments with additional competitively-priced
client and server products. Many of these product offerings are planned to be
based on the PowerPC microprocessor and operate in the UNIX environment.
PERSONAL INTERACTIVE ELECTRONICS
Apple's Personal Interactive Electronics division develops, licenses, and
markets technologies, products, and services in the categories of PDAs,
multimedia products, and on-line services. The Company believes that there are
several trends emerging that can create significant business opportunities for
companies that can market affordable, portable, easy-to-use personal
communications products and services. These trends include the shift from analog
to digital telecommunications technologies, the expansion of network capacity,
and the increase in the use of digitally-compressed information.
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<PAGE> 7
The Company believes it has the opportunity to develop an attractive PDA
business by widely licensing its Newton(R) technology to a variety of hardware
manufacturers, software application developers, and service and communications
providers. The Company believes this licensing strategy provides Apple the
potential to establish a leading architectural standard for PDAs. Establishment
of a leading standard could enable Apple to develop a business model whose
revenues and profits are generated, to a large extent, from the on-going usage
by the individual user of a variety of information and data services. As of
December 31, 1993, Apple had entered into agreements to license Newton
technology and resell Newton products with several major companies, including
Kyushu Matsushita Electric Co., Sharp Corporation, Siemens/Rolm, Motorola, and
Alcatel SEL.
On July 30, 1993, the Company introduced its first PDA product, the Newton
MessagePad(TM), a handheld communications assistant. This product has not
contributed materially to revenues to date. On January 5, 1994, the Company
announced its plans for its new on-line service, eWorld(TM), which is intended
to exploit new business opportunities in the area of on-line electronic
distribution of information, messaging, and entertainment.
CLARIS
Claris Corporation, a wholly-owned subsidiary of the Company, develops,
publishes, and distributes software applications in a variety of established
personal productivity categories (such as word processing, database management,
and graphics) for Macintosh and Windows-based systems. Claris also publishes and
distributes software developed by independent developers through its Claris
Clear Choice(TM) program. Claris products are distributed primarily through
independent software resellers.
DISTRIBUTION CHANNELS
Apple reaches the various market segments of the Personal Computer Division
through two general channels of distribution: direct sales and Apple authorized
resellers. Apple authorized resellers currently represent Apple's single largest
channel and operate in every country in which Apple sells products.
The number and types of Apple authorized resellers have evolved in recent
years as customer buying patterns, Apple's market focus, and the economics of
distribution, have changed. For example, the Macintosh Performa line is
currently distributed in approximately 5,000 retail stores, including computer
superstores (high volume retail stores that specialize in high technology
products or office equipment) in the United States. Over 1,600 value-added
resellers (businesses that create and sell customized hardware and software
solutions) currently distribute Macintosh products in the United States.
MARKETING AND MANUFACTURING
Products sold in the United States are manufactured primarily in the
Company's manufacturing facilities in Singapore and Fountain, Colorado, and
distributed from facilities in Sacramento, California and Chicago, Illinois. The
Company has two international sales and marketing divisions. The Apple Europe
division, based in Paris, France, focuses on opportunities in Europe as well as
parts of Africa and the Middle East. Products sold by the Europe division are
manufactured primarily in the Company's facilities in Cork, Ireland. The Apple
Pacific division, based in Cupertino, California, focuses on opportunities in
Australia, Canada, the Far East, Latin America, and Japan. Products sold by the
Pacific division are manufactured primarily in the Company's manufacturing
facilities in Singapore and Fountain, Colorado.
As of December 31, 1993, the Company had approximately 11,000 regular
employees and 2,000 persons working on a temporary or contractor basis.
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<PAGE> 8
USE OF PROCEEDS
The Company expects to use the net proceeds from the sale of the Notes
offered hereby (estimated to be $297,550,000) to reduce short-term indebtedness
(comprised primarily of commercial paper borrowings bearing interest at rates
ranging from 3.0% to 3.5% per annum).
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of
December 31, 1993 and as adjusted to give effect to the sale by the Company of
the Notes offered hereby and the application of the net proceeds therefrom (as
if such sale and application of proceeds occurred on such date). See "Use of
Proceeds."
<TABLE>
<CAPTION>
DECEMBER 31, 1993
-------------------------
AS
ACTUAL ADJUSTED
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt........................................... $ 752,257 $ 454,707
---------- ----------
---------- ----------
Long-term debt............................................ $ -- $ 300,000
---------- ----------
Shareholders' equity:
Common Stock, no par value; 320,000,000 shares
authorized; 116,495,476 shares issued and
outstanding.......................................... 211,108 211,108
Retained earnings....................................... 1,868,660 1,868,660
Accumulated translation adjustment...................... (26,509) (26,509)
---------- ----------
Total shareholders' equity........................... 2,053,259 2,053,259
---------- ----------
Total capitalization............................ $2,053,259 $2,353,259
---------- ----------
---------- ----------
</TABLE>
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SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected consolidated financial information of the Company
for, and as of the end of, each of the five years in the period ended September
24, 1993, except for the ratio of earnings to fixed charges, has been derived
from consolidated financial statements, which have been audited by Ernst &
Young, independent auditors. The selected consolidated financial information
should be read in conjunction with the consolidated financial statements and
notes thereto incorporated by reference in the accompanying Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED(1)
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SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 27, SEPTEMBER 25, SEPTEMBER 24,
1989 1990 1991 1992 1993
------------- ------------- ------------- ------------- -------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Net sales:
Domestic............................... $ 3,401,462 $ 3,241,061 $ 3,484,533 $ 3,885,042 $ 4,387,674
International.......................... 1,882,551 2,317,374 2,824,316 3,201,500 3,589,280
------------- ------------- ------------- ------------- -------------
Total net sales.................. 5,284,013 5,558,435 6,308,849 7,086,542 7,976,954
Costs and expenses:
Cost of sales.......................... 2,694,823 2,606,223 3,314,118 3,991,337 5,248,834
Research and development............... 420,083 478,019 583,046 602,135 664,564
Selling, general and administrative.... 1,534,794 1,728,508 1,740,293 1,687,262 1,632,362
Restructuring costs and other.......... -- 33,673 224,043 -- 320,856
------------- ------------- ------------- ------------- -------------
Total costs and expenses......... 4,649,700 4,846,423 5,861,500 6,280,734 7,866,616
------------- ------------- ------------- ------------- -------------
Operating income......................... 634,313 712,012 447,349 805,808 110,338
Interest and other income, net........... 110,009 66,505 52,395 49,634 29,321
------------- ------------- ------------- ------------- -------------
Income before income taxes............... 744,322(2) 778,517 499,744 855,442 139,659
Provision for income taxes............... 290,289 303,622 189,903 325,069 53,070
------------- ------------- ------------- ------------- -------------
Net income............................... $ 454,033(2) $ 474,895 $ 309,841 $ 530,373 $ 86,589
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Earnings per common and common equivalent
share.................................. $ 3.53(2) $ 3.77 $ 2.58 $ 4.33 $ 0.73
Common and common equivalent shares used
in the calculations of earnings per
share.................................. 128,669 125,813 120,283 122,490 119,125
FINANCIAL POSITION DATA:
Cash, cash equivalents, and short-term
investments............................ $ 808,950 $ 997,091 $ 892,719 $ 1,435,500 $ 892,303
Accounts receivable, net................. 792,824 761,868 907,159 1,087,185 1,381,946
Inventories.............................. 475,377 355,473 671,655 580,097 1,506,638
Net property, plant, and equipment....... 334,227 398,165 447,978 462,221 659,546
Total assets............................. 2,743,899 2,975,707 3,493,597 4,223,693 5,171,412
Current liabilities...................... 895,243 1,027,055 1,217,051 1,425,520 2,515,202
Notes payable............................ 56,751 122,630 148,566 184,461 823,182
Deferred income taxes.................... 362,910 501,832 509,870 610,803 629,832
Shareholders' equity..................... 1,485,746 1,446,820 1,766,676 2,187,370 2,026,378
OTHER DATA:
Cash dividends declared per common
share.................................. $ 0.40 $ 0.44 $ 0.48 $ 0.48 $ 0.48
Capital expenditures..................... 238,993 224,305 218,348 194,853 213,118
Depreciation and amortization............ 124,800 202,686 204,433 217,182 166,113
Ratio of earnings to fixed charges(3).... 15.7x 17.2x 11.4x 22.9x 3.6x
</TABLE>
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(1) Certain prior year amounts have been reclassified to conform to the
presentation for the fiscal year ended September 24, 1993.
(2) Includes a pretax gain of approximately $79 million ($48 million, or $0.37
per share, after taxes) from the Company's sale of its common stock of Adobe
Systems Incorporated.
(3) The ratio of earnings to fixed charges is computed by dividing earnings
before taxes and fixed charges by fixed charges. Fixed charges consist of
interest expense and the estimated interest component of rent expense. The
ratio of earnings to fixed charges for the fiscal quarter ended December 31,
1993 was 4.8x.
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The following selected consolidated financial information of the Company
for the five fiscal quarters in the period ended December 31, 1993 is unaudited.
In the opinion of the Company's management, this unaudited information has been
prepared on the same basis as the audited information set forth in the
consolidated financial statements and notes thereto incorporated by reference in
the accompanying Prospectus and includes all adjustments, consisting of normal
recurring adjustments, necessary to present fairly the quarterly information set
forth herein. The results for any quarter are not necessarily indicative of
results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED(1)
---------------------------------------------------------------------------
SEPTEMBER
DECEMBER 25, MARCH 26, JUNE 25, 24, DECEMBER 31,
1992 1993 1993 1993 1993
------------ ----------- ----------- ------------ ------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Net sales:
Domestic.................................... $ 1,095,369 $ 1,040,090 $ 1,000,497 $ 1,251,718 $ 1,350,974
International............................... 904,923 933,804 861,482 889,071 1,117,880
------------ ----------- ----------- ------------ ------------
Total net sales....................... 2,000,292 1,973,894 1,861,979 2,140,789 2,468,854
Costs and expenses:
Cost of sales............................... 1,189,367 1,213,131 1,255,975 1,590,361 1,876,830
Research and development.................... 160,282 166,007 174,169 164,106 152,612
Selling, general and administrative......... 409,858 425,690 417,645 379,169 374,705
Restructuring costs and other............... -- -- 320,856 -- --
------------ ----------- ----------- ------------ ------------
Total costs and expenses.............. 1,759,507 1,804,828 2,168,645 2,133,636 2,404,147
------------ ----------- ----------- ------------ ------------
Operating income (loss)....................... 240,785 169,066 (306,666) 7,153 64,707
Interest and other income (expense), net...... 19,442 9,803 2,931 (2,855 ) (163 )
------------ ----------- ----------- ------------ ------------
Income (loss) before
income taxes................................ 260,227 178,869 (303,735) 4,298 64,544
Provision (benefit) for
income taxes................................ 98,886 67,969 (115,419) 1,634 24,526
------------ ----------- ----------- ------------ ------------
Net income (loss)............................. $ 161,341 $ 110,900 $ (188,316) $ 2,664 $ 40,018
------------ ----------- ----------- ------------ ------------
------------ ----------- ----------- ------------ ------------
Earnings (loss) per common and common
equivalent share............................ $ 1.33 $ 0.92 $ (1.63) $ 0.02 $ 0.34
Common and common equivalent shares
used in the calculations of earnings (loss)
per share................................... 121,156 120,904 115,669 116,592 116,956
FINANCIAL POSITION DATA:
Cash, cash equivalents, and short-term
investments................................. $ 1,445,866 $ 1,079,377 $ 856,811 $ 892,303 $ 1,122,775
Accounts receivable, net...................... 1,198,738 1,285,743 1,265,359 1,381,946 1,247,954
Inventories................................... 596,613 876,756 1,238,658 1,506,638 1,338,637
Net property, plant, and equipment............ 639,333 650,313 659,520 659,546 642,336
Total assets.................................. 4,494,609 4,470,088 4,767,983 5,171,412 5,042,440
Current liabilities........................... 1,537,819 1,469,503 2,097,246 2,515,202 2,328,161
Notes payable................................. 191,394 59,930 312,766 823,182 752,257
Deferred income taxes......................... 673,992 714,375 650,268 629,832 661,020
Shareholders' equity.......................... 2,282,798 2,286,210 2,020,469 2,026,378 2,053,259
OTHER DATA:
Cash dividends declared per common share...... $ 0.12 $ 0.12 $ 0.12 $ 0.12 $ 0.12
Capital expenditures.......................... 44,289 48,493 72,625 47,711 23,564
Depreciation and amortization................. 39,401 42,842 41,393 42,477 42,606
</TABLE>
- ------------------
(1) Certain prior quarter amounts have been reclassified to conform to the
presentation for the fiscal quarter ended December 31, 1993.
S-10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended September 24, 1993 and the
Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1993,
each of which is incorporated by reference in the accompanying Prospectus. All
information set forth herein is based on the Company's fiscal calendar. Dollar
amounts set forth in tables herein are in millions, except per share amounts.
QUARTER-TO-QUARTER COMPARISON
The following table presents the unaudited quarterly consolidated financial
information of the Company set forth under the heading "Selected Consolidated
Financial Information" expressed as a percentage of net sales for the quarters
indicated.
<TABLE>
<CAPTION>
AS A PERCENTAGE OF NET SALES FOR THE QUARTER ENDED
----------------------------------------------------------------------
SEPTEMBER
DECEMBER 25, MARCH 26, JUNE 25, 24, DECEMBER 31,
1992 1993 1993 1993 1993
------------ --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales:
Domestic........................... 54.8% 52.7% 53.7% 58.5% 54.7%
International...................... 45.2 47.3 46.3 41.5 45.3
------------ --------- -------- ------------ ------------
Total net sales.............. 100.0 100.0 100.0 100.0 100.0
Gross margin......................... 40.5 38.5 32.5 25.7 24.0
Costs and expenses:
Cost of sales...................... 59.5 61.5 67.5 74.3 76.0
Research and development........... 8.0 8.4 9.4 7.7 6.2
Selling, general and 20.5 21.6 22.4 17.7 15.2
administrative...................
Restructuring costs and other...... -- -- 17.2 -- --
------------ --------- -------- ------------ ------------
Total costs and expenses..... 88.0 91.5 116.5 99.7 97.4
------------ --------- -------- ------------ ------------
Operating income (loss).............. 12.0 8.5 -16.5 0.3 2.6
Interest and other income (expense), 1.0 0.5 0.2 -0.1 --
net................................
------------ --------- -------- ------------ ------------
Income (loss) before income tax...... 13.0 9.0 -16.3 0.2 2.6
Provision (benefit) for income tax... 4.9 3.4 -6.2 0.1 1.0
------------ --------- -------- ------------ ------------
Net income (loss).................... 8.1% 5.6% -10.1% 0.1% 1.6%
------------ --------- -------- ------------ ------------
------------ --------- -------- ------------ ------------
</TABLE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
FIRST QUARTER FIRST QUARTER
1994 CHANGE 1993
------------- ------- -------------
<S> <C> <C> <C>
Net sales......................................... $ 2,469 23.4% $ 2,000
Gross margin...................................... $ 592 -27.0% $ 811
Percentage of net sales......................... 24.0% 40.5%
Operating expenses................................ $ 527 -7.5% $ 570
Percentage of net sales......................... 21.4% 28.5%
Net income........................................ $ 40 -75.2% $ 161
Earnings per share................................ $ 0.34 -74.4% $ 1.33
</TABLE>
Net Sales
Net sales for the first quarter of 1994 increased by 23.4% over the
comparable period of 1993. Total Macintosh computer unit sales increased 40% in
the first quarter of 1994 over the comparable period of 1993. This unit sales
growth principally resulted from strong sales of the Company's newer product
offerings within the LC, Performa and Quadra families of desktop personal
computers and within the PowerBook family of notebook-sized personal computers.
This unit growth was partially
S-11
<PAGE> 12
offset by declining unit sales of certain of the Company's more established
products and older product offerings. The average aggregate revenue per
Macintosh computer unit declined 12% in the first quarter of 1994 over the
comparable period of 1993, primarily as a result of pricing actions undertaken
by the Company in response to continuing industrywide pricing pressures and high
levels of inventory. Going forward, the Company anticipates continued
industrywide competitive pricing and promotional actions.
International net sales grew 24% and domestic net sales grew 23% in the
first quarter of 1994 over the comparable period of 1993. The increase in
international net sales primarily reflected strong net sales growth in the
Pacific region. Despite generally weak economic conditions and competitive
pressures in various European countries, net sales grew moderately in Europe.
International net sales represented 45% of total net sales for the first quarter
of 1994, unchanged from the corresponding period of 1993.
The Company has historically experienced increased net sales in its first
quarter, compared with other quarters in its fiscal year, due to demand for and
calendar year-end buying of some of its products. The Company does not, however,
consider its business to be highly seasonal.
It is anticipated that a significant portion of the Company's future
revenues will come from new products, especially personal computers based on the
PowerPC family of microprocessors. However, there can be no assurance that these
new products will receive favorable market acceptance, and the Company cannot
determine the ultimate effect these products will have on its sales or results
of operations. See "Factors That May Affect Future Results and Financial
Condition."
In general, the Company's resellers typically purchase products on an
as-needed basis due to the Company's distribution strategy, which is designed to
expedite the filling of orders. Resellers frequently change delivery schedules
and order rates depending on changing market conditions. Unfilled orders
("backlog"), which are not necessarily legally binding, can be, and often are,
canceled at will. The Company's backlog decreased to approximately $302 million
at January 19, 1994 from approximately $663 million at November 19, 1993, as the
Company's higher inventory levels provided greater product availability to meet
reseller orders and delivery schedules.
In the Company's experience, the actual amount of product backlog at any
particular time is not a meaningful indication of its future business prospects.
Because of the foregoing, as well as other factors affecting the Company's
backlog, backlog should not be considered a reliable indicator of the Company's
future revenue or financial performance.
Gross Margin
Gross margin declined both in amount and as a percentage of net sales
during the first quarter of 1994 from the comparable period of 1993. The decline
in gross margin as a percentage of net sales was primarily a result of pricing
and promotional actions undertaken by the Company in response to industrywide
pricing pressures (including the increasing price competition that the Company
is experiencing in the Japanese market) and high levels of inventory. Gross
margin was also adversely affected by increases in inventory valuation reserves
associated with the high levels of inventory, increased costs associated with
providing customers a wider variety of product configuration options, and a
seasonal shift of product mix toward lower margin products.
Gross margin was affected somewhat adversely by changes in foreign currency
exchange rates as a result of a stronger U.S. dollar relative to certain foreign
currencies during the first quarter of 1994 compared with the corresponding
period of 1993. The Company's operating strategy and pricing take into account
changes in exchange rates over time; however, the Company's results of
operations can be significantly affected in the short-term by fluctuations in
foreign currency exchange rates.
S-12
<PAGE> 13
The Company anticipates that gross margins will remain under pressure and
below historic levels worldwide due to a variety of factors, including continued
industrywide pricing pressures, increased competition and compressed product
cycles. The Company's gross margins could also be adversely affected by
inventory valuation reserves that could result if anticipated unit sales growth
projections for new and current product offerings are not realized.
Operating Expenses
<TABLE>
<CAPTION>
FIRST QUARTER FIRST QUARTER
1994 CHANGE 1993
------------- ---- -------------
<S> <C> <C> <C>
Research and development............................. $ 153 -4.8% $ 160
Percentage of net sales.............................. 6.2% 8.0%
</TABLE>
Research and development expenditures as a percentage of net sales
fluctuated between 7.7% and 9.4% during 1993. These expenditures decreased both
in amount and as a percentage of net sales in the first quarter of 1994 when
compared with the corresponding period of 1993. This decrease reflects the
results of the Company's restructuring actions aimed at reducing costs,
including more focused product development expenditures.
The Company believes that continued investments in research and development
are critical to its future growth and competitive position in the marketplace
and are directly related to continued, timely development of new and enhanced
products. However, in light of the Company's expectation of continued pressure
on gross margin, the Company anticipates that research and development
expenditures will decrease in amount as the Company maintains its efforts to
manage operating expense growth relative to gross margin levels during 1994.
<TABLE>
<CAPTION>
FIRST QUARTER FIRST QUARTER
1994 CHANGE 1993
------------- ---- -------------
<S> <C> <C> <C>
Selling, general and administrative.................. $ 375 -8.6% $ 410
Percentage of net sales.............................. 15.2% 20.5%
</TABLE>
Selling, general and administrative expenses decreased in amount and as a
percentage of net sales in the first quarter of 1994 when compared with the
corresponding period of 1993. This decrease was primarily a result of the
Company's ongoing efforts to manage operating expense growth relative to gross
margin levels, and also due to an increase in the level of net sales.
In the first three quarters of 1993, selling, general and administrative
expenses increased sequentially in amount and as a percentage of net sales
increasing from 20.5% to 22.4%. In the fourth quarter of 1993 and the first
quarter of 1994, however, selling, general and administrative expenses as a
percentage of net sales decreased to 17.7% and 15.2%, respectively, principally
as a result of the Company's restructuring actions initiated in the third
quarter of 1993, which included a decrease in employee-related expenses. For a
discussion of the restructuring actions, see "Year-to-Year Comparison -- Results
of Operations -- Operating Expenses." While no assurance can be given that the
restructuring actions will be successful or that similar actions will not be
required in the future, the Company has already realized some cost-reduction
benefits, and expects to realize additional benefits in the future.
The Company will continue to face the challenge of managing selling,
general and administrative expenses relative to gross margin levels,
particularly in light of the Company's expectation of continued pressure on
gross margin, and continued weak economic conditions worldwide. The Company's
objective is to continue to reduce selling, general and administrative expenses
as a percentage of net sales during 1994.
S-13
<PAGE> 14
INTEREST AND OTHER INCOME (EXPENSE), NET
<TABLE>
<CAPTION>
FIRST QUARTER FIRST QUARTER
1994 CHANGE 1993
------------- -------- -------------
<S> <C> <C> <C>
Interest and other income (expense), net......... $ 0 -100.0% $ 19
</TABLE>
The Company derived other income from sources such as interest earned on
cash and portfolio balances, gains on the sale of certain venture capital
investments, and gains on interest rate and foreign exchange hedging activities.
Interest and other income (expense), net, decreased in the first quarter of 1994
when compared with the same period in 1993. This decrease was primarily due to a
non-recurring gain on the sale of certain of the Company's venture capital
investments in the first quarter of 1993, an increase in interest expense due to
higher commercial paper borrowing levels, and a decrease in interest income due
to lower interest rates and lower cash balances.
PROVISION FOR INCOME TAXES
<TABLE>
<CAPTION>
FIRST QUARTER FIRST QUARTER
1994 CHANGE 1993
------------- ------- -------------
<S> <C> <C> <C>
Provision for income taxes........................ $ 25 -75.2% $ 99
Effective tax rate................................ 38% 38%
</TABLE>
Effective September 25, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 -- Accounting for Income Taxes ("FAS 109"), which
changes the method of accounting for income taxes from the deferred method to
the liability method. This change in accounting principle has been adopted on a
prospective basis, and the financial statements of prior years have not been
restated. The cumulative effect of the change was not material.
Under FAS 109, deferred income taxes reflect the future income tax effects
of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and their tax basis. Prior to 1994, the Company
accounted for income taxes under the provisions of APB Opinion No. 11, which
recognized deferred taxes for the effect of timing differences between pre-tax
accounting income and taxable income.
For additional information regarding the Company's provision for income
taxes, reference is made to Note 2 of the Notes to Consolidated Financial
Statements (Unaudited) in the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended December 31, 1993, which is incorporated by reference in
the accompanying Prospectus.
S-14
<PAGE> 15
YEAR-TO-YEAR COMPARISON
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
1993 CHANGE 1992 CHANGE 1991
-------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C>
Net sales................................. $ 7,977 13% $ 7,087 12% $ 6,309
Gross margin.............................. $ 2,728 -12% $ 3,095 3% $ 2,995
Percentage of net sales................. 34.2% 43.7% 47.5%
Operating expenses (excluding
restructuring costs and other).......... $ 2,297 -- $ 2,289 -1% $ 2,323
Percentage of net sales................. 28.8% 32.3% 36.8%
Restructuring costs and other............. $ 321 -- -- -- $ 224
Percentage of net sales................. 4.0% -- 3.6%
Net income................................ $ 87 -84% $ 530 71% $ 310
Earnings per share........................ $ 0.73 -83% $ 4.33 68% $ 2.58
</TABLE>
Net Sales
The net sales growth in 1993 over 1992 reflected strong unit sales of the
Company's Macintosh computers, including the Color Classic, the LC III, and the
Centris family (which has recently been consolidated with the Quadra family),
all of which were introduced in 1993. Additions to the PowerBook family of
notebook personal computers and the Performa family of desktop personal
computers also contributed to net sales growth. This growth was partially offset
by declining unit sales of certain of the Company's more established products
and older product versions. Total Macintosh computer unit sales increased 32%
over the prior year, compared with a 20% increase from 1991 to 1992. The average
aggregate revenue per Macintosh computer unit declined 16% in 1993 compared with
1992, primarily as a result of pricing actions undertaken by the Company in
response to continuing industrywide pricing pressures and high inventory levels.
Growth in net sales in 1992 over 1991 reflected strong unit sales of the
Classic II, LC II, and PowerBook and Quadra families of Macintosh computers, all
of which were introduced in 1992. This growth was partially offset by declining
unit sales of certain of the Company's more established products and older
product versions. The average aggregate revenue per Macintosh computer unit
declined slightly in 1992 when compared with 1991, primarily as a result of a
shift in product mix towards the Company's PowerBook and entry-level products,
coupled with pricing and promotional actions undertaken by the Company in 1992.
In 1993, domestic net sales increased 13% over the prior year, compared
with an increase of 11% in 1992 over 1991. International net sales grew 12% from
1992 to 1993, representing a slight decrease in growth rate compared with 13%
growth from 1991 to 1992. International net sales represented 45% of net sales
in 1993, 1992, and 1991.
Gross Margin
Gross margin as a percentage of net sales in 1993 continued to decline from
1992 and 1991 levels. The gross margin percentage declined to 34.2% in 1993 from
43.7% in 1992. The downward trend in gross margin as a percentage of net sales
was primarily a result of pricing and promotional actions undertaken by the
Company in response to industrywide competitive pricing pressures and higher
levels of inventory for certain products. Inventory valuation reserves recorded
against certain products also contributed to the decline in gross margin as a
percentage of net sales.
The decline in gross margin as a percentage of net sales from 47.5% in 1991
to 43.7% in 1992 was primarily the result of industrywide competitive pressures
and associated pricing and promotional actions, partially offset by a shift in
product mix towards the Company's PowerBook and Quadra products.
S-15
<PAGE> 16
Gross margin was minimally affected by changes in foreign currency exchange
rates in 1993 and in 1992.
Operating Expenses
<TABLE>
<CAPTION>
1993 CHANGE 1992 CHANGE 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Research and development............ $ 665 10% $ 602 3% $ 583
Percentage of net sales............. 8.3% 8.5% 9.2%
</TABLE>
Research and development expenditures increased in amount during 1993 and
1992 compared with 1992 and 1991, respectively, reflecting net additions to the
Company's engineering staff and related costs as the Company continued to invest
in the development of new products and technologies, and in the enhancement of
existing products in the areas of hardware and peripherals, system software, and
networking and communications. Research and development expenditures as a
percentage of net sales have continued to decrease since 1991 as a result of
revenue growth during 1992 and 1993 coupled with the Company's continuing
efforts to focus its research and development project spending.
<TABLE>
<CAPTION>
1993 CHANGE 1992 CHANGE 1991
------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Selling, general and
administrative.................. $ 1,632 -3% $ 1,687 -3% $ 1,740
Percentage of net sales........... 20.5% 23.8% 27.6%
</TABLE>
Selling, general and administrative expenses decreased in amount and as a
percentage of net sales in 1993 and 1992 compared with 1992 and 1991,
respectively. These decreases reflect the Company's ongoing efforts to manage
operating expense growth relative to gross margin levels.
General and administrative expenses decreased in 1993 compared with 1992,
primarily because of reduced employee-related expenses resulting from the
restructuring actions taken in the third quarter of 1993. This decrease in
general and administrative expenses was offset slightly by an increase in sales
and marketing expenses as a result of increases in product marketing and
advertising programs related to new product introductions and efforts to
increase product demand.
In 1992, selling expenses decreased in amount and as a percentage of net
sales compared with 1991, primarily because of reduced sales programs and
marketing expenditures, as well as lower employee-related costs. Revenue growth
also contributed to the decrease in selling expenses as a percentage of net
sales. General and administrative expenses also decreased in amount and as a
percentage of net sales in 1992 compared to 1991, primarily as a result of lower
legal and employee-related costs. This decrease was offset slightly by an
increase in bad debt expense resulting from generally weak worldwide economic
conditions.
<TABLE>
<CAPTION>
1993 CHANGE 1992 CHANGE 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Restructuring costs and other....... $ 321 -- -- -- $ 224
Percentage of net sales............. 4.0% -- 3.6%
</TABLE>
In the third quarter of 1993, the Company initiated a plan to restructure
its operations worldwide in order to address the competitive conditions in the
PC industry, including increased market demand for lower-priced products. The
restructuring charge of $321 million included $162 million of estimated
employee-related expenses and $159 million of estimated facilities, equipment,
and other expenses associated with the planned consolidation of operations and
relocation and termination of operations and employees, including termination of
approximately 2,500 employees, relocation of certain Company functions to
lower-cost geographic locations, and elimination of certain projects and
activities.
The Company's 1993 restructuring plan consisted of a series of actions, the
majority of which have been initiated. The remaining actions are expected to be
initiated during 1994. Spending associated with certain actions is expected to
extend beyond the initiation of those actions. For example, lease payments under
noncancelable leases generally extend beyond the closing of the
S-16
<PAGE> 17
facilities. Although plans are in place to carry out the remaining actions, some
plans may be refined as the Company continues to identify the best means of
achieving reductions in its cost structure. The Company believes that the
restructuring actions were necessary in light of competitive pressures on its
gross margins as a percentage of net sales and in light of generally weak
economic conditions worldwide.
In 1991, the Company recorded a $197.5 million charge to operating expenses
under a plan to restructure its operations worldwide. The Company believed that
the restructuring actions were necessary in light of its continued expectation
of lower gross margins as a percentage of net sales and in light of generally
weak economic conditions worldwide. Also in 1991, the Company recorded a reserve
in the amount of $26.5 million in connection with certain trademark litigation
filed against it by Apple Corps Ltd. and Apple Corps S.A. in 1989, which amount
was paid in settlement of such litigation in 1992.
INTEREST AND OTHER INCOME, NET
<TABLE>
<CAPTION>
1993 CHANGE 1992 CHANGE
---- ------ ---- ----
<S> <C> <C> <C> <C>
Interest and other income, net......................... $ 29 -41% $ 50 -5%
</TABLE>
Interest and other income, net, decreased in amount in 1993 compared with
1992 because of lower interest rates, lower cash balances, expenses associated
with certain financing transactions, lower gains on the sale of certain of the
Company's venture capital investments, an increase in the cost of hedging
certain foreign currency exposures, and an increase in interest expense due to
higher commercial paper borrowing levels. This decrease was partially offset by
a payment received from the Internal Revenue Service reflecting interest earned
on an income tax refund, and gains realized on foreign exchange and interest
rate hedges.
Interest and other income, net, decreased slightly in amount in 1992
compared with 1991 because of lower interest rates and an increase in the cost
of hedging certain foreign currency exposures. This decrease was partially
offset by a gain on the sale of certain of the Company's venture capital
investments, gains realized on interest rate hedges, and larger interest-earning
portfolio balances.
PROVISION FOR INCOME TAXES
<TABLE>
<CAPTION>
1993 CHANGE 1992 CHANGE 1991
----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
Provision for income taxes.................. $ 53 -84% $ 325 71% $ 190
Effective tax rate.......................... 38% 38% 38%
</TABLE>
The Company's effective tax rate remained unchanged in 1993, 1992, and
1991. For additional information regarding the Company's provision for income
taxes, reference is made to the Note entitled "Income Taxes" in the Notes to
Consolidated Financial Statements in the Company's Annual Report on Form 10-K
for the fiscal year ended September 24, 1993, which is incorporated by reference
in the accompanying Prospectus.
S-17
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
AS OF AND FOR THE
QUARTER ENDED AS OF AND FOR THE YEAR ENDED
---------------------------- --------------------------------------------
DECEMBER 31, SEPTEMBER 24, SEPTEMBER 24, SEPTEMBER 25, SEPTEMBER 27,
1993 1993 1993 1992 1991
------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents, and
short-term investments..... $ 1,123 $ 892 $ 892 $1,436 $ 893
Short-term borrowings........ 752 823 823 184 149
Inventory.................... 1,339 1,507 1,507 580 672
Working capital.............. 1,880 1,823 1,823 2,133 1,647
Cash generated by (used for)
operations................. 367 (400) (662) 921 189
Cash used for investment
activities, excluding
short-term investments..... 58 35 228 264 276
Cash generated by (used for)
financing activities....... (79) 470 347 (114) (18)
</TABLE>
The Company's financial position with respect to cash, cash equivalents,
and short-term investments, net of short-term borrowings, increased to $371
million at December 31, 1993 from $69 million at September 24, 1993. Working
capital increased to approximately $1.9 billion at December 31, 1993 from $1.8
billion at September 24, 1993.
Operations generated net cash of $367 million during the first quarter of
1994, compared with $400 million used during the fourth quarter of 1993. This
improvement was due primarily to decreases in inventory levels and accounts
receivable. Accounts receivable decreased by $134 million as a result of
improved collections activity. Continued improvement in cash flow from
operations for the remainder of 1994 will depend principally on the Company's
ability to improve profit levels and the Company's continued aggressive
management of working capital, particularly in the area of inventory management
as the Company introduces its Power PC-based personal computers.
The Company's inventory levels increased sequentially each quarter during
fiscal 1993 from approximately $580 million at the end of fiscal 1992 to
approximately $1.51 billion at the end of fiscal 1993 in support of its expanded
product line and distribution channels and anticipated higher sales volumes.
These higher levels of inventory, in turn, resulted in increased levels of
short-term borrowings. As of the end of the first quarter of fiscal 1994,
inventory levels had declined by approximately $168 million and short-term
borrowings had declined by $71 million from the fiscal 1993 year-end levels,
primarily as a result of improved inventory management and increased sales
resulting from pricing and promotional actions. The Company has also identified
additional measures to improve management of working capital, including the
implementation of long-term financing arrangements (such as the sale of the
Notes offered hereby), and long-term measures designed to improve inventory
management, such as increased emphasis on designing-in commonality of parts
among products, increased use of manufacturing-on-demand based on product orders
rather than forecasts, and greater rationalization of product offerings.
Although the Company believes that these measures will result in improved
inventory and working capital management during 1994, there can be no assurance
that these measures will be successful or that inventory reserves will not be
necessary in future periods.
Net cash used for the purchase of property, plant, and equipment totaled
approximately $24 million during the first quarter of 1994 compared with $47
million during the first quarter of 1993. In both quarters, the purchases were
primarily of manufacturing machinery and equipment and leasehold improvements.
The Company anticipates that capital expenditures in 1994 will be slightly below
1993 expenditures.
Short-term borrowings at December 31, 1993 were approximately $71 million
lower than at September 24, 1993. The Company's aggregate borrowings at December
31, 1993 were approximately $752 million, comprised of approximately $527
million short-term borrowings in the U.S. and
S-18
<PAGE> 19
approximately $225 million of short-term borrowings overseas. Aggregate
borrowings at September 24, 1993 were $823 million.
The Company's financial position with respect to cash, cash equivalents,
and short-term investments, net of short-term borrowings, declined to $69
million at the end of 1993, compared with $1.25 billion and $744 million at the
end of 1992 and 1991, respectively. Working capital was $1.8 billion at the end
of 1993, compared with $2.1 billion and $1.6 billion at the end of 1992 and
1991, respectively.
In 1993, $662 million of net cash was used for operations compared with
$921 million of net cash generated by operations in 1992. This change resulted
primarily from a substantial increase in inventory levels; significant price
reductions taken in response to competitive pressures, which resulted in lower
gross margin and net income despite higher net sales; and increases in accounts
receivable levels resulting from higher net sales coupled with slower
collections. These factors were offset slightly by increases in accrued
restructuring costs and accounts payable.
In 1992, net cash generated by operations increased compared with 1991,
primarily as a result of increased net income and lower inventory levels, offset
somewhat by a reduction in accrued restructuring costs. Higher sales resulting
from strong demand for new products and price reductions and other sales
incentive programs, coupled with a decrease in operating expenses, contributed
to the increase in net income. Inventory levels decreased as a result of higher
sales levels and more effective inventory management.
Excluding short-term investments, net cash used for investments declined in
1993 compared with 1992 and 1991 levels. Net cash used for the purchase of
property, plant and equipment totaled $213 million in 1993, and was primarily
made up of increases in land and buildings, manufacturing machinery and
equipment, and leasehold improvements.
Net cash generated by financing activities increased in 1993 compared with
1992 and 1991, mainly because of a significant increase in short-term borrowings
used for working capital needs. Net cash generated by financing activities in
1993 was partially offset by the repurchase of approximately five million shares
of the Company's common stock in the open market under stock repurchase
programs.
The Company expects that it will continue to incur short-and long-term
borrowings from time to time to finance U.S. working capital needs and capital
expenditures, because substantially all of the Company's cash, cash equivalents,
and short-term investments is held by foreign subsidiaries, generally in U.S.
dollar denominated holdings. Amounts held by foreign subsidiaries would be
subject to U.S. income taxation upon repatriation to the United States. The
Company's financial statements fully provide for any related tax liability on
amounts that may be repatriated.
The Company's short-term borrowings are principally under its commercial
paper program. From time to time, the Company also borrows to finance operations
pursuant to short-term uncommitted bid-line arrangements with commercial banks.
During the first quarter of 1994, the Company entered into a $500 million
unsecured revolving credit facility with a syndicate of banks to support its
commercial paper program. No borrowings have been made under this facility. In
addition, Apple Japan, Inc., a wholly-owned subsidiary of the Company, incurred
short-term yen-denominated borrowings aggregating the U.S. dollar equivalent of
approximately $225 million from several Japanese banks.
On May 5, 1993, the Company filed an omnibus shelf registration statement
with the Securities and Exchange Commission for the registration of debt and
other securities for an aggregate offering amount of $500 million. The $300
million aggregate principal amount of Notes offered hereby represents the first
takedown under this shelf registration statement. The Company believes that this
shelf registration provides it with additional financing flexibility to meet
future funding requirements and to take advantage of attractive market
conditions.
The Company leases the majority of its facilities and certain of its
equipment under noncancelable operating leases. In 1993, rent expense under
operating leases was approximately $170
S-19
<PAGE> 20
million. For additional information with respect to the Company's future lease
commitments, reference is made to the Note entitled "Commitments and
Contingencies" in the Notes to Consolidated Financial Statements included in the
Company's Annual Report on Form 10-K for the fiscal year ended September 24,
1993, which is incorporated by reference in the accompanying Prospectus.
In January 1994, a wholly-owned subsidiary of the Company exercised its
option to purchase for $51.9 million the remaining partnership interest in the
Cupertino Gateway Partners partnership, a general partnership, which owns the
Company's campus-type office facilities located in Cupertino, California (the
"Campus"). As a result of this purchase, the Company's wholly-owned subsidiary
now owns 100% of the right, title, and interest in the Campus. This transaction
will be reflected in the Company's financial statements for the second quarter
of 1994.
The Internal Revenue Service has asserted federal income tax deficiencies
for the years 1984 through 1988, which the Company is contesting. The Company
believes the resolution of any tax liability for these proposed tax deficiencies
will occur over the course of the next several years. Although payment of any
assessment is not required until the end of such process, the Company elected to
make a prepayment in April 1991 for the years 1984 through 1986, and a
prepayment in May 1993 for the years 1987 through 1988.
The Company believes that its balances of cash, cash equivalents, and
short-term investments, together with funds generated from operations, the
proceeds of the sale of the Notes offered hereby, and other short-and long-term
borrowing capabilities, will be sufficient to meet its operating cash
requirements in the foreseeable future.
FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION
During the first half of calendar year 1994, the Company plans to introduce
its first Macintosh computers based on the new PowerPC family of RISC
microprocessors. Accordingly, the Company's results of operations and financial
condition could be adversely affected if it is unable to successfully transition
its line of Macintosh personal computers and servers from the Motorola
68000-series of microprocessors to the PowerPC microprocessor. The success of
this transition will depend on the Company's ability to continue the sales
momentum of products based on the Motorola 68000-series of microprocessors
through the introduction of its PowerPC-based products, to successfully manage
inventory levels of both product lines simultaneously, to gain market acceptance
of its PowerPC-based products, and to coordinate the timely development and
distribution of new versions of commonly-used software products specifically
designed for its PowerPC-based products.
The Company's future operating results and financial condition may also be
affected by a number of other factors, including the Company's ability to:
increase market share in its PC business while successfully expanding its new
businesses and product offerings into other markets; broaden industry acceptance
of the Newton PDA product, including effectively licensing Newton technology and
marketing the related products and services; realize the anticipated
cost-reduction benefits associated with its restructuring plan initiated in the
third quarter of 1993; develop, manufacture, and sell its products profitably;
reduce existing inventory levels and manage future inventory levels effectively.
The Company's future operating results and financial condition may also be
affected by uncertainties relative to global economic conditions; the strength
of its distribution channels; industry factors; and the availability and cost of
components.
The PC industry is highly volatile and continues to be characterized by
dynamic customer demand patterns, rapid technological advances, frequent
introduction of new products and product enhancements, and industrywide
competition resulting in aggressive pricing practices and downward pressure on
gross margins. The Company's operating results and financial condition could be
adversely affected should the Company be unable to: accurately anticipate
customer demand; introduce new products on a timely basis; manage lead times
required to obtain components in order to be more responsive to short-term
shifts in customer demand patterns; offer customers
S-20
<PAGE> 21
competitive technologies while effectively managing the impact on inventory
levels and the potential for customer confusion created by product
proliferation; effectively manage the impact on the Company of industrywide
pricing pressures; or effectively implement and manage the competitive risks
associated with certain of the Company's collaboration agreements with other
companies, such as the Company's agreements with IBM. The Company's results of
operations and financial condition could also be adversely affected by inventory
valuation reserves that could result if anticipated sales unit growth
projections for new and current product offerings are not realized.
A large portion of the Company's revenues in recent years has come from its
international operations. As a result, the Company's operating results and
financial condition could be significantly affected by international factors,
such as changes in foreign currency exchange rates or weak economic conditions
in foreign markets in which the Company distributes its products. The Company's
operating strategy and pricing take into account changes in exchange rates over
time; however, the Company's results of operations can be significantly affected
in the short term by fluctuations in foreign currency exchange rates.
During the first quarter of 1994, the Company introduced several products
that extend its entry-level, midrange and notebook computer offerings. In
addition, the Company introduced several new or enhanced peripheral products.
The success of these new products is dependent on a number of factors, including
market acceptance, the Company's ability to manage the risks associated with
product transitions, and the Company's ability to reduce existing inventory
levels and manage future inventory levels in line with anticipated product
demand and to manufacture the products in appropriate quantities to meet
anticipated demand. Accordingly, the Company cannot determine the ultimate
effect that these new products will have on its sales or results of operations.
The Company's products include certain components, such as microprocessors
manufactured by Motorola, Inc. and monochrome active-matrix displays
manufactured by Hosiden Corporation, that are currently available only from
single sources. Any availability limitations, interruptions in supplies, or
price increases of these and other components could adversely affect the
Company's business and financial results.
The majority of the Company's research and development activities, its
corporate headquarters, and other critical business operations are located near
major earthquake faults. The Company's operating results and financial condition
could be materially adversely affected in the event of a major earthquake.
A number of uncertainties also exist regarding the marketing and
distribution of the Company's products. The Company's primary means of
distribution is through third-party computer resellers and various education and
consumer channels. Although the Company has in place certain policies to limit
concentrations of credit risk, business and financial results could be adversely
affected in the event that the generally weak financial condition of third-party
computer resellers worsens. In addition, the Company is continuing its expansion
into new distribution channels, such as mass merchandise stores (such as Sears
and Wal-Mart), consumer electronics outlets, and computer superstores, in
response to changing industry practices and customer preferences. At this time,
the Company cannot determine the ultimate effect of these or other future
distribution expansion efforts on its future operating results.
Because of the foregoing factors, as well as other factors affecting the
Company's operating results and financial condition, past financial performance
should not be considered to be a reliable indicator of future performance, and
investors should not use historical trends to anticipate results or trends in
future periods.
S-21
<PAGE> 22
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the Prospectus as the "Offered Debt Securities")
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Debt Securities set forth in the
Prospectus, to which description reference is hereby made. Capitalized terms not
otherwise defined herein or in the accompanying Prospectus have the meanings
given to them in the Indenture.
GENERAL
The Notes will be issued under an Indenture dated as of February , 1994
(the "Indenture"), between the Company and Citibank, N.A., as trustee (in
substitution for Morgan Guaranty Trust Company of New York, which has recently
announced the sale of substantially all of its domestic corporate trust
business) (the "Trustee"). The Notes will be limited to $ aggregate
principal amount and will mature on , 2004. The Notes will bear
interest at the rate of % per annum from , 1994, or from the
most recent Interest Payment Date to which interest has been paid or provided
for, payable semiannually on and of each year,
commencing , 1994, to the persons in whose names the Notes (or
any predecessor Notes) are registered at the close of business on the
or , as the case may be, next preceding such
Interest Payment Date.
The Notes will be unsecured general obligations of the Company that will
rank on a parity with all other unsecured and unsubordinated indebtedness of the
Company from time to time outstanding.
The defeasance and covenant defeasance provisions of the Indenture
described under the caption "Description of Securities -- Description of Debt
Securities -- Defeasance and Covenant Defeasance" in the accompanying Prospectus
will apply to the Notes.
The covenant provisions of the Indenture described under the caption
"Description of Securities -- Description of Debt Securities -- Certain
Covenants of the Company" in the accompanying Prospectus will apply to the
Notes.
The Notes do not provide for any sinking fund.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the option of the Company, at any time in
whole or from time to time in part, upon not less than 30 and not more than 60
days' notice mailed to each Holder of Notes to be redeemed at his address
appearing in the Security Register, on any date prior to their Stated Maturity
at a price equal to 100% of the principal amount thereof plus accrued interest
to the Redemption Date (subject to the right of Holders of record on the
relevant Regular Record Date to receive interest due on an Interest Payment Date
that is on or prior to the Redemption Date) plus a Make-Whole Premium, if any
(the "Redemption Price").
The amount of the Make-Whole Premium with respect to any Note (or portion
thereof) to be redeemed will be equal to the excess, if any, of:
(i) the sum of the present value, calculated as of the Redemption Date, of:
(A) each interest payment that, but for such redemption, would have
been payable on the Note (or portion thereof) being redeemed on
each Interest Payment Date occurring after the Redemption Date
(excluding any accrued interest for the period prior to the
Redemption Date); and
(B) the principal amount that, but for such redemption, would have
been payable on the Stated Maturity of the Note (or portion
thereof) being redeemed;
over
(ii) the principal amount of the Note (or portion thereof) being redeemed.
S-22
<PAGE> 23
The present values of interest and principal payments referred to in clause
(i) above will be determined in accordance with generally accepted principles of
financial analysis. Such present values will be calculated by discounting the
amount of each payment of interest or principal from the date that each such
payment would have been payable, but for the redemption, to the Redemption Date
at a discount rate equal to the Treasury Yield (as defined below).
For purposes of determining the Make-Whole Premium, "Treasury Yield" means
a rate of interest per annum (expressed on semi-annual bond equivalent yield
basis) equal to the weekly average yield to maturity of United States Treasury
Notes that have a constant maturity that corresponds to the remaining term to
Stated Maturity of the Notes, calculated to the nearest 1/12 of the year (the
"Remaining Term"). The Treasury Yield will be determined as of the third
business day immediately preceding the applicable Redemption Date.
The weekly average yields of United States Treasury Notes will be
determined by reference to the most recent statistical release published by the
Federal Reserve Bank of New York and designated "H.15(sec. 19) Selected Interest
Rates" or successor publication (or, if such Statistical Release (or successor
publication) is no longer published or no longer contains the applicable data,
to the most recently published issue of The Wall Street Journal (Eastern
Edition) that contains such data or, if the Wall Street Journal (Eastern
Edition) is no longer published or no longer contains such data, to any publicly
available source of such market data) (the "Applicable Source"). If the
Applicable Source sets forth a weekly average yield for United States Treasury
Notes having a constant maturity that is the same as the Remaining Term, then
the Treasury Yield will be equal to such weekly average yield. In all other
cases, the Treasury Yield will be calculated by interpolation, on a
straight-line basis, between the weekly average yields on the United States
Treasury Notes that have a constant maturity closest to and greater than the
Remaining Term and the United States Treasury Notes that have a constant
maturity closest to and less than the Remaining Term (in each case as set forth
in the Applicable Source). Any weekly average yields so calculated by
interpolation will be rounded to the nearest 1/100 of 1%, with any figure of
1/200% or above being rounded upward.
If less than all of the Notes are to be redeemed, the Trustee will select
the Notes to be redeemed pro rata or by lot. The Trustee may select for
redemption Notes and portions of Notes in amounts of $1,000 or whole multiples
of $1,000, provided that if all of the Notes of a holder are to be redeemed, the
entire outstanding amount of the Notes held by such Holder, even if not a whole
multiple of $1,000, will be redeemed.
BOOK-ENTRY SYSTEM
The Notes will be represented by one or more Global Notes (collectively,
the "Global Note") registered in the name of a nominee of The Depository Trust
Company, as Depositary. The provisions set forth under "Description of
Securities -- Description of Debt Securities -- Book-Entry System" in the
accompanying Prospectus will be applicable to the Notes. Accordingly, beneficial
interests in the Notes will be shown on, and transfers thereof will be effected
only through, records maintained by the Depositary and its participants. Except
as described under "Description of Securities -- Description of Debt
Securities -- Book-Entry System" in the accompanying Prospectus, owners of
beneficial interests in the Global Note will not be entitled to receive Notes in
definitive form and will not be considered Holders of Notes.
The Depositary has advised the Company and the Underwriters as follows: The
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered under the Securities Exchange Act of 1934, as
amended. The Depositary was created to hold securities of its participants and
to facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for
S-23
<PAGE> 24
physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers (including the Underwriters), banks,
trust companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own the Depositary. Access to the
Depositary's book-entry system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. The Depositary
agrees with and represents to its participants that it will administer its
book-entry system in accordance with its rules and by-laws and requirements of
law.
Payment of principal and interest and premium, if any, on the Notes
registered in the name of the Depositary's nominee will be made in same-day
funds to the Depositary's nominee as the registered owner of the Global Note.
Under the terms of the Indenture, the Company and the Trustee will treat the
persons in whose names the Notes are registered as the owners of such Notes for
the purpose of receiving payment of principal and interest and premium, if any,
on such Notes and for all other purposes whatsoever. Therefore, neither the
Company, the Trustee nor any paying agent has any direct responsibility or
liability for the payment of principal or interest or premium, if any, on the
Notes to owners of beneficial interests in the Global Note. The Depositary has
advised the Company and the Trustee that its current practice is, upon receipt
of any payment of principal or interest or premium, if any, to immediately
credit the accounts of the participants with such payment in amounts
proportionate to their respective holdings in principal amount of beneficial
interests in the Global Note as shown in the records of the Depositary. Payments
by participants and indirect participants to owners of beneficial interests in
the Global Note will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of customers
in bearer form or registered in "street name," and will be the responsibility of
the participants or indirect participants.
SAME-DAY SETTLEMENT
Settlement for the Notes will be made by the Underwriters in same-day
funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the Notes
will trade in the Depositary's Same-Day Funds Settlement System until maturity,
and secondary market trading activity in the Notes will therefore be required by
the Depositary to settle in same-day funds. No assurance can be given as to the
effect, if any, of settlement in same-day funds on trading activity in the
Notes.
REGARDING THE TRUSTEE
The Trustee under the Indenture will be Citibank, N.A. (in substitution for
Morgan Guaranty Trust Company of New York, which has recently announced the sale
of substantially all of its domestic corporate trust business). The Trustee
currently provides certain banking and financial services to the Company,
including acting as an agent and lender for the Company's $500 million unsecured
revolving credit facility. The Trustee is also currently acting as agent under
the Company's commercial paper program. The Trustee may provide other banking
and financial services in the future. The Indenture contains limitations on the
right of the Trustee, as a creditor of the Company, to obtain payment of claims
in certain cases or to realize for its own account on certain property received
in respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in certain other transactions; however, if it acquires any
conflicting interest and there is a default under the Indenture, the Trustee
must eliminate such conflict or resign.
S-24
<PAGE> 25
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the Underwriters named
below, and each of such Underwriters has severally agreed to purchase from the
Company, the principal amount of Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
UNDERWRITER OF NOTES
------------------------------------------------------------- ------------
<S> <C>
Goldman, Sachs & Co.......................................... $
Citicorp Securities, Inc.....................................
CS First Boston Corporation..................................
Morgan Stanley & Co. Incorporated............................
------------
Total.............................................. $300,000,000
------------
------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Notes, if any are
taken.
The Underwriters propose to offer the Notes in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain securities dealers at such price
less a concession of % of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of % of the principal amount of the Notes to certain brokers and dealers.
After the Notes are released for sale to the public, the public offering price
and other selling terms may from time to time be varied by the Underwriters.
The Notes are a new issue of securities with no established trading market.
The Company does not intend to apply for listing of the Notes on any national
securities exchange. The Company has been advised by the Underwriters that the
Underwriters intend to make a market in the Notes, but are not obligated to do
so and may discontinue market making at any time without notice. No assurance
can be given as to the liquidity of, or the trading market for, the Notes.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
From time to time the Underwriters and certain of their affiliates have
engaged, and may in the future engage, in transactions with, or perform services
for, the Company or its affiliates in the ordinary course of business,
including, in the case of Citicorp Securities, Inc., its affiliate Citibank,
N.A., serving as Trustee under the Indenture.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Company by Wilson, Sonsini, Goodrich & Rosati, P.C., Palo Alto, California, and
for the Underwriters by Shearman & Sterling, San Francisco, California. Shearman
& Sterling serves as counsel to the Company with respect to certain litigation
and other matters.
S-25
<PAGE> 26
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- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
The Company........................... S-3
Use of Proceeds....................... S-8
Capitalization........................ S-8
Selected Consolidated Financial
Information......................... S-9
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... S-11
Description of Notes.................. S-22
Underwriting.......................... S-25
Legal Matters......................... S-25
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 3
Use of Proceeds....................... 3
Selected Consolidated Financial
Information......................... 4
Description of Securities............. 5
Description of Capital Stock.......... 17
Plan of Distribution.................. 19
Legal Matters......................... 20
Experts............................... 20
- -------------------------------------------
- -------------------------------------------
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
$300,000,000
APPLE COMPUTER, INC.
% NOTES DUE 2004
------------------------
[LOGO]
------------------------
GOLDMAN, SACHS & CO.
CITICORP SECURITIES, INC.
CS FIRST BOSTON
MORGAN STANLEY & CO.
INCORPORATED
- ------------------------------------------------------
- ------------------------------------------------------
