___________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended December 30, 1994 or
[ ] Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 0-10030
APPLE COMPUTER, INC.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94-2404110,
[State or other jurisdiction [I.R.S. Employer Identification No.]
of incorporation or organization]
1 Infinite Loop
Cupertino California 95014
[Address of principal executive offices] [Zip Code]
Registrant's telephone number, including area code: (408) 996-1010
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
120,762,023 shares of Common Stock Issued and Outstanding as of
February 3, 1995
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
APPLE COMPUTER, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
December 30, December 31,
1994 1993
<S> <C> <C>
Net sales $ 2,832 $ 2,469
Costs and expenses:
Cost of sales 2,018 1,877
Research and development 132 152
Selling, general and administrative 415 375
Restructuring costs (17) --
2,548 2,404
Operating income 284 65
Interest and other income
(expense), net 15 --
Income before provision for income taxes 299 65
Provision for income taxes 111 25
Net income $ 188 $ 40
Earnings per common and common
equivalent share $ 1.55 $ .34
Cash dividends paid per common share $ .12 $ .12
Common and common equivalent shares
used in the calculations of
earnings per share 121,600,188 116,956,648
</TABLE>
See accompanying notes.
2
<PAGE>
APPLE COMPUTER, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(In millions)
<TABLE>
<CAPTION>
December 30, September 30,
1994 1994
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,148 $ 1,203
Short-term investments 439 55
Accounts receivable, net of allowance for
doubtful accounts of $93 ($91 at September
30, 1994) 1,599 1,581
Inventories:
Purchased parts 455 469
Work in process 167 207
Finished goods 462 412
1,084 1,088
Deferred tax assets 269 293
Other current assets 179 256
Total current assets 4,718 4,476
Property, plant, and equipment:
Land and buildings 489 484
Machinery and equipment 584 573
Office furniture and equipment 154 158
Leasehold improvements 235 237
1,462 1,452
Accumulated depreciation and amortization (801) (785)
Net property, plant, and equipment 661 667
Other assets 154 160
$ 5,533 $ 5,303
</TABLE>
See accompanying notes.
3
<PAGE>
APPLE COMPUTER, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
(Dollars in millions)
<TABLE>
<CAPTION>
December 30, September 30,
1994 1994
(Unaudited)
<S> <C> <C>
Current liabilities:
Short-term borrowings $ 209 $ 292
Accounts payable 956 882
Accrued compensation and employee benefits 129 137
Accrued marketing and distribution 275 178
Accrued restructuring costs 32 58
Other current liabilities 334 397
Total current liabilities 1,935 1,944
Long-term debt 304 305
Deferred tax liabilities 732 671
Shareholders' equity:
Common stock, no par value; 320,000,000
shares authorized; 119,890,480 shares issued
and outstanding at December 30, 1994
(119,542,527 shares at September 30, 1994) 309 298
Retained earnings 2,270 2,096
Accumulated translation adjustment (17) (11)
Total shareholders' equity 2,562 2,383
$ 5,533 $ 5,303
</TABLE>
See accompanying notes.
4
<PAGE>
APPLE COMPUTER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
December 30, December 31,
1994 1993
<S> <C> <C>
Cash and cash equivalents, beginning
of the period $ 1,203 $ 676
Operations:
Net income 188 40
Adjustments to reconcile net income to cash
generated by operations:
Depreciation and amortization 38 43
Net book value of property, plant, and
equipment retirements 5 7
Changes in assets and liabilities:
Accounts receivable (18) 134
Inventories 4 168
Other current assets 101 59
Accounts payable 74 (3)
Accrued restructuring costs (26) (56)
Accrued marketing and distribution 97 (20)
Other current liabilities (71) (33)
Deferred tax liabilities 61 31
Cash generated by operations 453 370
Investments:
Purchase of short-term investments (410) (151)
Proceeds from sale of short-term investments 25 217
Purchase of property, plant, and equipment (22) (24)
Other (12) (34)
Cash generated by (used for)
investment activities (419) 8
Financing:
Decrease in short-term borrowings (83) (71)
Decrease in long-term borrowings (1) (2)
Increases in common stock, net of related
tax benefits and changes in notes receivable
from shareholders 9 5
Cash dividends (14) (14)
Cash used for financing activities (89) (82)
Total cash generated (used) (55) 296
Cash and cash equivalents, end of the period $ 1,148 $ 972
</TABLE>
See accompanying notes.
5
<PAGE>
APPLE COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Interim information is unaudited; however, in the opinion of the
Company's management, all adjustments necessary for a fair statement of
interim results have been included. All adjustments are of a normal
recurring nature unless specified in a separate note included in these
Notes to Consolidated Financial Statements. The results for interim
periods are not necessarily indicative of results to be expected for
the entire year. These financial statements and notes should be read
in conjunction with the Company's annual consolidated financial
statements and the notes thereto for the fiscal year ended September
30, 1994, included in its Annual Report on Form 10-K for the year ended
September 30, 1994 (the "1994 Form 10-K").
2. In the first quarter of 1995, the Company lowered its estimates of the
total remaining costs associated with its restructuring plan initiated
in the third quarter of 1993 and recorded an adjustment that increased
income by $17 million ($11 million, or $0.09 per share, after taxes).
This adjustment primarily reflected favorable cancellation settlements
of certain R&D project commitments and facility leases and the
completion of other actions at lower costs than originally estimated.
At December 30, 1994, the Company had $32 million of accrued
restructuring costs for actions that are currently under way.
Approximately $26 million in charges to the accrual are expected to be
incurred during the remainder of 1995 with the remaining $6 million to
be incurred beyond 1995. Charges to be incurred beyond 1995 relate
primarily to recurring payments under certain noncancelable operating
leases.
The following table depicts a roll-forward reconciliation of the
activity in the restructuring accrual balance from September 30, 1994
to December 30, 1994:
(In millions)
Balance at Balance at
Category September December
30, 1994 Charges Adjustments 30, 1994
Employee termination payments (C) $ 11 $ 2 $ 5 $ 4
Provisions relating to employees
who will not be terminated (C) 4 * 1 3
Termination payments for leases
and other contracts (C) 20 3 1 16
Write-down of operating assets
to be sold (N) 1 * 1 --
Provisions for litigation (C) 2 1 -- 1
R&D project cancellations (C) 6 * 5 1
Other provisions and write-downs (B) 13 2 4 7
1991 accrued restructuring costs (B) 1 1 -- --
$ 58 $ 9 $ 17 $ 32
C: Cash; N: Noncash; B: Both cash and noncash;
*: Less than $1 million
3. Effective October 1, 1994, the Company adopted Financial Accounting
Standard No. 115 (FAS 115), "Accounting for Certain Investments in Debt
and Equity Securities". In accordance with FAS 115, prior period
financial statements have not been restated to reflect the change in
accounting principle. The cumulative effect of the change was not
material to shareholders' equity as of October 1, 1994. Under FAS 115,
debt securities that a company has both the positive intent and ability
to hold to maturity are carried at amortized cost. Debt securities
that a company does not have the positive intent and ability to hold to
maturity and all marketable equity securities are classified as either
available-for-sale or trading and are carried at fair value.
Generally, unrealized holding gains and losses on securities classified
as available-for-sale are carried as a component of shareholders'
equity. Unrealized holding gains and losses on securities classified
as trading are reported in earnings.
The Company's cash equivalents consist primarily of certificates of
deposit, time deposits and commercial paper with maturities of three
months or less at the date of purchase. Short-term investments consist
principally of commercial paper with maturities between three and
twelve months. As of December 30, 1994, the Company's cash equivalents
and short-term investments are classified as available-for-sale. The
related unrealized gains and losses on the available-for-sale
securities are not material to
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<PAGE>
shareholders' equity as of December 30, 1994. The Company did not
realize any material gains or losses, either individually or in the
aggregate, on sales of available-for-sale securities during the three
months ended December 30, 1994.
4. U.S. income taxes have not been provided on a cumulative total of $360
million of undistributed earnings of the Company's foreign
subsidiaries. It is intended that these earnings will be indefinitely
invested in operations outside the United States. It is not
practicable to determine the income tax liability that might be
incurred if these earnings were to be distributed. Except for such
indefinitely invested earnings, the Company provides for federal and
state income taxes currently on undistributed earnings of foreign
subsidiaries.
The Internal Revenue Service has proposed federal income tax
deficiencies for the years 1984 through 1988, and the Company has made
prepayments thereon. The Company has contested these alleged
deficiencies and is pursuing administrative and judicial remedies.
Management believes that adequate provision has been made for any
adjustments that may result from these tax examinations.
5. Earnings per share is computed using the weighted average number of
common and dilutive common equivalent shares attributable to stock
options outstanding during the period.
6. Certain prior year amounts on the consolidated statements of cash flows
have been reclassified to conform to the current period presentation.
7. The information set forth in Item 1 of Part II hereof is hereby
incorporated by reference.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following information should be read in conjunction with the
consolidated financial statements and notes thereto. All information is
based on Apple's fiscal calendar.
(Tabular information: Dollars in millions, except per share amounts)
Results of Operations
<TABLE>
<CAPTION>
First First
Quarter Quarter
1995 1994 Change
<S> <C> <C> <C>
Net sales $ 2,832 $ 2,469 14.7%
Gross margin $ 814 $ 592 37.5%
Percentage of net sales 28.7% 24.0%
Operating expenses (excluding
restructuring costs) $ 547 $ 527 3.8%
Percentage of net sales 19.3% 21.4%
Restructuring costs $ (17) -- --
Percentage of net sales -0.6%
Net income $ 188 $ 40 370.0%
Earnings per share $ 1.55 $ 0.34 355.9%
</TABLE>
Net sales for the first quarter of 1995 increased over the comparable
period of 1994, resulting primarily from a shift in product mix towards the
Company's higher margin products within each product category.
Specifically, the Company recorded strong sales of its Performa(registered
trademark) 630, and of products within the Power Macintosh(trademark)
family and PowerBook(registered trademark) 500 series of personal computers.
Increased sales of these products contributed to an increase in the
average aggregate revenue per Macintosh(registered trademark) computer unit
of approximately 26% in the first quarter of 1995 over the comparable period
of 1994. Despite an increase in net sales, total Macintosh computer unit
sales remained relatively flat in the first quarter of 1995 over the
comparable period of 1994, when unit growth increased 40% over the
comparable period of 1993. Unit sales growth resulting from strong sales
of the Company's Power Macintosh products and newer product offerings
within the Performa family of desktop personal computers was almost
completely offset by a reduction in sales of certain products within the
Company's PowerBook family of notebook-sized personal computers and certain
of the Company's older product offerings.
International net sales grew 19% in the first quarter of 1995 over the
comparable period of 1994, primarily reflecting strong net sales growth in
the Pacific region, particularly Japan. Net sales for the first quarter of
1995 grew moderately in Europe over the comparable period of 1994.
International net sales represented 47% of total net sales for the first
quarter of 1995, compared with 45% for the corresponding period of 1994.
Domestic net sales grew 11% in the first quarter of 1995 over the
comparable period of 1994, primarily resulting from strong growth in the
consumer market, and to a lesser extent, from growth in the business
market.
The Company has historically experienced increased net sales in its first
and fourth quarters, compared with other quarters in its fiscal year, due
to holiday demand for and calendar year-end buying of some of its products.
The Company does not, however, consider its business to be highly seasonal.
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") can be, and often are, canceled
at will. The Company attempts to fill orders on the requested delivery
schedules. However, products may be in relatively short supply from time
to time until production volumes have reached a level sufficient to meet
demand or if other production or fulfillment constraints exist. The
Company's backlog increased slightly to approximately $670 million at
February 3, 1995, from approximately $663 million at December 2, 1994.
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. In particular, backlog often increases in anticipation of or
immediately following introduction of new products because of over-ordering
by dealers anticipating shortages. Backlog often is reduced sharply once
dealers and customers believe they
8
<PAGE>
can obtain sufficient supply. 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. Further information regarding the Company's backlog may be
found under Part I, Item 2 of this Form 10-Q under the heading "Factors
that May Affect Future Results and Financial Condition", which information
is hereby incorporated by reference.
Gross Margin
Gross margin increased both in amount and as a percentage of net sales
during the first quarter of 1995 over the comparable period of 1994. The
increase in gross margin as a percentage of net sales was primarily a
result of a shift in product mix towards the Company's higher margin
products within each product category which included strong sales of the
Company's entry level Macintosh Performa 630, and of products within its
Power Macintosh family and its PowerBook 500 series of personal computers.
The increase in gross margin levels in the first quarter of 1995 over the
comparable period of 1994 was affected somewhat favorably by changes in
foreign currency exchange rates as a result of a weaker U.S. dollar
relative to certain foreign currencies during such period. 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.
Although the Company's gross margin percentage was 28.7% for the first
quarter of 1995, resulting primarily from strong sales of Power Macintosh
computers and the PowerBook 500 series of notebook personal computers, it
is anticipated that gross margins will remain under pressure and could fall
below prior years' levels worldwide due to a variety of factors, including
continued industrywide pricing pressures, increased competition, and
compressed product life cycles.
<TABLE>
<CAPTION>
Research and Development First First
Quarter Quarter
1995 1994 Change
<S> <C> <C> <C>
Research and development $ 132 $ 152 -13.2%
Percentage of net sales 4.7% 6.2%
</TABLE>
Research and development expenditures decreased both in amount and as a
percentage of net sales in the first quarter of 1995 when compared with the
corresponding period of 1994. This decrease primarily reflects lower
product development expenditures resulting from the Company's restructuring
actions aimed at reducing costs as well as fewer new product introductions
in the first quarter of 1995 compared with the corresponding period of
1994.
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. The Company anticipates that research and
development expenditures will increase in amount and as a percentage of net
sales as a result of additional projects scheduled to begin in the later
quarters of 1995.
<TABLE>
<CAPTION>
First First
Quarter Quarter
Selling, General and 1995 1994 Change
Administrative
<S> <C> <C> <C>
Selling, general and
administrative $ 415 $ 375 10.7%
Percentage of net sales 14.7% 15.2%
</TABLE>
Selling, general and administrative expenses increased in amount in the
first quarter of 1995 when compared with the corresponding period of 1994.
This increase was primarily a result of increased advertising and channel
marketing program spending as the Company continued its efforts to expand
market share. Selling, general and administrative expenses decreased as a
percentage of net sales in the first quarter of 1995 when compared with the
corresponding period of 1994, as a result of an increase in the level of
net sales and the Company's ongoing efforts to manage operating expense
growth.
9
<PAGE>
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 competitive pressures worldwide. The Company
anticipates that selling, general and administrative expenses will decrease
in amount during the remaining quarters of 1995, but will continue to be
higher than 1994 levels.
<TABLE>
<CAPTION>
Restructuring costs First First
Quarter Quarter
1995 1994 Change
<S> <C> <C> <C>
Restructuring costs $ (17) -- --
Percentage of net sales (0.6%) -- --
</TABLE>
For information regarding the Company's restructuring actions, refer to
Note 2 of the Notes to Consolidated Financial Statements (Unaudited) in
Part I, Item 1 of this Quarterly Report on Form 10-Q, which information is
hereby incorporated by reference.
<TABLE>
<CAPTION>
Interest and Other Income First First
(Expense), Net Quarter Quarter
1995 1994 Change
<S> <C> <C> <C>
Interest and other income
(expense), net $ 15 $ 0 100.0%
</TABLE>
Interest and other income (expense), net increased by approximately $15
million in income in the first quarter of 1995 compared with the same
period in 1994. Higher cash and short-term investment balances coupled
with higher investment interest rates resulted in increased interest income
of approximately $8 million. Other factors contributing to the increase in
interest and other income (expense), net include a net gain from foreign
exchange activity and a decrease in interest expense resulting from lower
worldwide short-term borrowing balances.
<TABLE>
<CAPTION>
Provision for Income Taxes First First
Quarter Quarter
1995 1994 Change
<S> <C> <C> <C>
Provision for income taxes $ 111 $ 25 344.0%
Effective tax rate 37% 38%
</TABLE>
The information contained in Note 4 of the Notes to Consolidated Financial
Statements (Unaudited) in Part I, Item 1 of this Quarterly Report on Form
10-Q is incorporated by reference into this discussion.
Factors That May Affect Future Results and Financial Condition
The Company's future operating results and financial condition are
dependent on the Company's ability to successfully develop, manufacture,
and market technologically innovative products in order to meet dynamic
customer demand patterns. Inherent in this process are a number of factors
that the Company must successfully manage in order to achieve favorable
future operating results and financial condition.
Product Introductions and Transitions
Due to the highly volatile nature of the personal computer industry, which
is characterized by dynamic customer demand patterns and rapid
technological advances, the Company frequently introduces new products and
product enhancements. The success of new product introductions is
dependent on a number of factors, including market acceptance, the
Company's ability to manage the risks associated with product transitions,
the availability of application software for new products, the effective
management of inventory levels in line with anticipated product demand, and
the manufacturing of products in appropriate quantities to meet anticipated
demand. Accordingly, the Company cannot determine the ultimate effect that
new products will have on its sales or results of operations.
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<PAGE>
On March 14, 1994, the Company introduced Power Macintosh, a new line of
Macintosh computers based on a new PowerPC family of RISC microprocessors.
The Company's results of operations and financial condition may be
adversely affected if it is unable to successfully complete the transition
of its lines of personal computers and servers from the Motorola 68000
series of microprocessors to the PowerPC(registered trademark)
microprocessor. The success of this ongoing transition will depend on the
Company's ability to continue to sell products based on the Motorola 68000
series of microprocessors while gaining market acceptance of the new
PowerPC processor-based products, to successfully manage inventory levels
of both product lines simultaneously, and to continue to coordinate the
timely development and distribution by independent software vendors of
new "native" software applications specifically designed for the PowerPC
processor-based products.
The rate of product shipments immediately following introduction of a new
product is not necessarily an indication of the future rate of shipments
for that product, which depends on many factors, some of which are not
under the control of the Company. These factors may include initial large
purchases by a small segment of the user population that tends to purchase
new technology prior to its acceptance by the majority of users ("early
adopters"); purchases in satisfaction of pent-up demand by users who
anticipated new technology and as a result deferred purchases of other
products; and over-ordering by dealers who anticipate shortages due to the
aforementioned factors. The preceding may also be offset by other factors,
such as the deferral of purchases by many users until new technology is
accepted as "proven" and for which commonly used software products are
available; and the reduction of orders by dealers once they believe they
can obtain sufficient supply of product previously in backlog.
Backlog is often volatile after new product introductions due to the
aforementioned demand factors, often increasing sharply coincident with
introduction, and then reducing sharply once dealers and customers believe
they can obtain sufficient supply of product.
The measurement of demand for newly introduced products is further
complicated by the availability of different product configurations, which
may include various types of built-in peripherals and software.
Configurations may also require certain localization (such as language) for
various markets and, as a result, demand in different geographic areas may
be a function of the availability of third-party software in those
localized versions. For example, the availability of European-language
versions of software products manufactured by U.S. producers may lag behind
the availability of U.S. versions by a quarter or more. This may result in
lower initial demand for the Company's new products outside the United
States, although localized versions of the products may be available.
Competition
The personal computer industry is highly competitive and continues to be
characterized by consolidations in the hardware and software industries,
aggressive pricing practices, and downward pressure on gross margins. The
Company's results of operations and financial condition could be adversely
affected should the Company be unable to effectively manage the impact of
industrywide pricing pressures and continue to realize the anticipated cost-
reduction benefits associated with the restructuring plan initiated in the
third quarter of 1993.
The Company's future operating results and financial condition may also be
affected by the Company's ability to offer customers competitive
technologies while effectively managing the impact on inventory levels and
the potential for customer confusion created by product proliferation.
On November 7, 1994, the Company reached an agreement with International
Business Machines Corporation (IBM) and Motorola, Inc. on a new hardware
reference platform for the PowerPC microprocessor that is intended to
deliver a much wider range of operating system and application choices for
computer customers. As a result of this agreement, the Company intends to
make the Macintosh operating system available on the common platform.
Accordingly, the Company's future operating results and financial
condition may be affected by its ability to implement this and certain
other collaboration agreements entered into, and to manage the associated
competitive risk.
The Company's future operating results and financial condition may also be
affected by the Company's ability to increase market share in its personal
computer business. Although the Company recently announced the licensing
of the Macintosh operating system to other personal computer vendors, it is
currently the only maker of hardware that uses the Macintosh operating
system, and it has a minority market share in the personal computer market,
which is dominated by makers of computers that run the
MS-DOS(registered trademark) and Microsoft Windows(trademark)
operating systems. Certain of the Company's personal computer products are
capable of running application software designed for the MS-DOS or Windows
operating system, through software emulation of Intel Corporation
microprocessor
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<PAGE>
chips by use of software specifically designed for the Company's products,
either those based on the Motorola 68000 series of microprocessors or those
based on the PowerPC microprocessor. The Company also recently introduced
products which include both the RISC-based PowerPC 601 microprocessor and
the 486 DX2/66 microprocessor which enable users to switch between
Macintosh and DOS computing environments. In addition, as a result of the
collaboration agreement noted in the preceding paragraph, the Company
believes it may have the opportunity to increase its market share in the
personal computer business as the Macintosh operating system becomes
available on computers based on the new hardware reference platform.
Decisions by customers to purchase the Company's personal computers, as
opposed to MS-DOS or Windows-based systems, are often based on the
availability of third-party software for particular applications. The
Company believes that the availability of third-party application software
for the Company's hardware products depends in part on the third-party
developers' perception and analysis of the relative benefits of developing
such software for the Company's products versus software for the larger MS-
DOS and Windows market. This analysis is based on factors such as the
relative market share of the Company's products, the anticipated potential
revenue that may be earned, and the costs of developing such software
products.
In an effort to increase overall market share, the Company has commenced
licensing the Macintosh operating system to other personal computer
vendors. The Company anticipates that the licensing activities will result
in a variety of these vendors bringing to market personal computers that
will run application software based on the Macintosh operating system. The
Company also believes that licensing will offer software vendors a broader
installed base on which they can develop and provide technical innovations
for the Macintosh platform, but there can be no assurance on the number of
or the rate at which vendors will bring to market application software
based on the Macintosh operating system. Accordingly, the Company cannot
determine the ultimate effect that licensing of the Macintosh operating
system will have on its sales or results of operations.
Microsoft Corporation is the developer of the MS-DOS and Windows operating
systems, which are the principal competing operating systems to the
Company's Macintosh operating system. Microsoft is also an important
developer of application software for the Company's products. Accordingly,
Microsoft's interest in producing application software for the Company's
products may be influenced by Microsoft's perception of its interests as an
operating system vendor.
The Company's ability to produce and market competitive products is also
dependent on the ability of IBM and Motorola, Inc., the suppliers of the
new PowerPC RISC microprocessor for certain of the Company's products, to
continue to supply to the Company microprocessors which produce superior
price/performance results compared with those supplied to the Company's
competitors by Intel Corporation, the developer and producer of the
microprocessors used by most personal computers using the MS-DOS and
Windows operating systems. IBM produces personal computers based on the
Intel microprocessors as well as on the PowerPC microprocessor, and is also
the developer of OS/2, a competing operating system to the Company's
Macintosh operating system. Accordingly, IBM's interest in supplying the
Company with improved versions of microprocessors for the Company's
products may be influenced by IBM's perception of its interests as a
competing manufacturer of personal computers and as a competing operating
system vendor.
The Company's future operating results and financial condition may also be
affected by the Company's ability to successfully expand its new
businesses and product offerings into other markets, such as the markets
for on-line services and personal digital assistant (PDA) products.
Global Market Risks
A large portion of the Company's revenue is derived from its international
operations. As a result, the Company's operations and financial results
could be significantly affected by international factors, such as changes
in foreign currency exchange rates or weak economic conditions in the
foreign markets in which the Company distributes its products. When the
U.S. dollar strengthens against other currencies, the U.S. dollar value of
non-U.S. dollar-based sales decreases. When the U.S. dollar weakens, the
U.S. dollar value of non-U.S. dollar-based sales increases.
Correspondingly, the U.S. dollar value of non-U.S. dollar-based costs
increases when the U.S. dollar weakens and decreases when the U.S. dollar
strengthens. Overall, the Company is a net receiver of currencies other
than the U.S. dollar and, as such, benefits from a weaker dollar and is
adversely affected by a stronger dollar relative to major currencies
worldwide. Accordingly, changes in exchange rates may negatively affect
the Company's consolidated sales and gross margins (as expressed in U.S.
dollars).
12
<PAGE>
To mitigate the short-term impact of fluctuating currency exchange rates on
the Company's non-U.S. dollar-based sales, product procurement, and
operating expenses, the Company regularly hedges its non-U.S. dollar-based
exposures. Specifically, the Company enters into foreign exchange forward
and option contracts to hedge firmly committed transactions. Currently,
hedges of firmly committed transactions do not extend beyond one year. The
Company also purchases foreign exchange option contracts to hedge certain
other probable, but not firmly committed transactions. Hedges of probable,
but not firmly committed transactions do not extend beyond one year. To
reduce the costs associated with these ongoing foreign exchange hedging
programs, the Company also regularly sells foreign exchange option
contracts and enters into certain other foreign exchange transactions. All
foreign exchange forward and option contracts not accounted for as hedges,
including all transactions intended to reduce the costs associated with the
Company's foreign exchange hedging programs, are carried at fair value and
are adjusted on each balance sheet date for changes in exchange rates.
While the Company is exposed with respect to fluctuations in the interest
rates of many of the world's leading industrialized countries, the
Company's interest income and expense is most sensitive to fluctuations in
the general level of U.S. interest rates. In this regard, changes in U.S.
interest rates affect the interest earned on the Company's cash, cash
equivalents, and short-term investments as well as interest paid on its
short-term borrowings and long-term debt. To mitigate the impact of
fluctuations in U.S. interest rates, the Company has entered into interest
rate swap and option transactions. Certain of these swaps are intended to
better match the Company's floating-rate interest income on its cash, cash
equivalents, and short-term investments with the fixed-rate interest
expense on its long-term debt. The Company also enters into interest rate
swap, swaption, and option transactions in order to extend the effective
duration of a portion of its cash, cash equivalent, and short-term
investment portfolios. These swaps may extend the Company's cash investment
horizon up to a maximum effective duration of three years.
To ensure the adequacy and effectiveness of the Company's foreign exchange
and interest rate hedge positions, as well as to monitor the risks and
opportunities of the nonhedge portfolios, the Company continually monitors
its foreign exchange forward and option positions, and its interest rate
swap, swaption, and option positions on a stand-alone basis and in
conjunction with its underlying foreign currency- and interest rate-
related exposures, respectively, from both an accounting and an economic
perspective. However, given the effective horizons of the Company's risk
management activities, there can be no assurance that the aforementioned
programs will offset more than a portion of the adverse financial impact
resulting from unfavorable movements in either foreign exchange or interest
rates. As such, the Company's operating results and financial position may
be adversely affected.
Inventory
The Company's products include certain components, such as specific
microprocessors manufactured by Motorola, Inc., 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
Company's future operating results and financial condition may also be
adversely affected by the Company's ability to manage inventory levels and
lead times required to obtain components in order to be more responsive to
short-term shifts in customer demand patterns. In addition, if anticipated
unit sales growth for new and current product offerings is not realized,
inventory valuation reserves may be necessary that would adversely affect
the Company's results of operations and financial condition.
Certain of the Company's products include components which are manufactured
by suppliers located in Japan. As a result of the January 17, 1995
earthquake in Kobe, Japan, supplies of these components may be constrained
due to potential damage to facilities of the Company's direct suppliers and
their source suppliers located in or around the earthquake area. However,
at the date of this Form 10-Q, the full impact of the damage to facilities
and supply chains is not known, and as a result, the Company cannot fully
determine the effect of the earthquake on its future operating results and
financial condition.
Marketing and Distribution
A number of uncertainties exist regarding the marketing and distribution of
the Company's products. Currently, the Company's primary means of
distribution is through third-party computer resellers. However, in
response to changing industry practices and customer preferences, the
Company is continuing its expansion into various consumer channels, such as
mass-merchandise stores (for example, Sears and Wal-Mart), consumer
electronics outlets, and computer superstores. The Company's business and
financial results could be adversely affected if the financial condition of
these sellers weakens or if sellers within consumer channels decide not to
continue to distribute the Company's products.
13
<PAGE>
Other Factors
The majority of the Company's research and development activities, its
corporate headquarters, and other critical business operations are located
near major seismic faults. The Company's operating results and financial
condition could be materially adversely affected in the event of a major
earthquake.
The Company plans to replace its current transaction systems (which include
order management, distribution, manufacturing, and finance) with a single
integrated system as part of its ongoing effort to increase operational
efficiency. The Company's future operating results and financial condition
could be adversely affected by its ability to implement and effectively
manage the transition to this new integrated system.
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. In addition, the Company's
participation in a highly dynamic industry often results in significant
volatility of the Company's common stock price.
<TABLE>
<CAPTION>
Liquidity and Capital Resources
First
Quarter
1995
<S> <C>
Cash, cash equivalents and short-term
investments, net of short-term
borrowings $ 1,378
Cash generated by operations $ 453
Cash used for investment activities,
excluding short-term investments $ 34
Cash used for financing activities $ 89
</TABLE>
The Company's financial position with respect to cash, cash equivalents and
short-term investments, net of short-term borrowings increased to $1,378
million at December 30, 1994 from $966 million at September 30, 1994. This
increase was primarily attributable to the Company's continued efforts to
increase profit levels and to manage working capital, particularly in the
areas of inventory and accounts receivable.
Cash generated by operations during the first three months of 1995 totaled
$453 million. Cash was generated primarily by higher sales levels related
to a shift in product mix towards higher-margin products which typically
have higher average selling prices.
Net cash used for the purchase of property, plant and equipment totaled
approximately $22 million during the first quarter of 1995. These
purchases primarily included manufacturing machinery and equipment. The
Company anticipates that capital expenditures in 1995 will be relatively
consistent with 1994 expenditures of $160 million.
Short-term borrowings at December 30, 1994 were approximately $83 million
lower than at September 30, 1994, as commercial paper borrowing activity
decreased due to the increased level of cash generated by operations. In
general, the Company's short-term borrowings reflect borrowings made under
its commercial paper program and short-term uncommitted bid-line
arrangements with certain commercial banks. In particular, Apple Japan,
Inc., a wholly owned subsidiary of the Company, incurred short-term yen-
denominated borrowings from several Japanese banks during 1994, the balance
of which aggregated the U.S. dollar equivalent of approximately $209
million at December 30, 1994.
Long-term borrowings of $304 million at December 30, 1994 remained
consistent with the balance at September 30, 1994. Substantially the
entire amount of long-term borrowings represents $300 million aggregate
principal amount of 6.5% unsecured notes issued under an omnibus shelf
registration statement filed with the Securities and Exchange Commission in
1994. This shelf registration covers the registration of debt and other
securities for an aggregate offering price of up to $500 million. The
notes were
14
<PAGE>
sold at 99.925% of par, for an effective yield to maturity of 6.51%. The
notes pay interest semi-annually and mature on February 15, 2004.
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 a substantial portion 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 Internal Revenue Service has proposed federal income tax deficiencies
for the years 1984 through 1988, and the Company has made prepayments
thereon. The Company has contested these alleged deficiencies and is
pursuing administrative and judicial remedies. Management believes that
adequate provision has been made for any adjustments that may result from
these tax examinations.
The Company believes that its balances of cash, cash equivalents, and short-
term investments, together with funds generated from operations and short-
and long-term borrowing capabilities, will be sufficient to meet its
operating cash requirements on a short- and long-term basis.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to page 39 of the Company's 1994 Annual Report on Form 10-
K under the subheading "Litigation" for a discussion of certain litigation
involving Microsoft Corporation and Hewlett-Packard Company; 1993
Securities and State Court Shareholders Action Litigation; and litigation
involving a complaint filed by Jerome Lemelson.
In the case of Apple Computer, Inc. v. Microsoft Corporation and Hewlett-
Packard Company, the Company filed a petition for a writ of certiorari in
------------------
the Supreme Court of the United States on December 19, 1994.
On December 9, 1994, Lemelson v. Apple Computer, Inc. was resolved.
The Company continues to believe the pending suits cited above, in which
the Company is a defendant, to be without merit and intends to vigorously
defend against these actions. The Company believes the resolution of all
of these matters will not have a material adverse effect on its financial
condition and results of operations as reported in the accompanying
financial statements. However, depending on the amount and timing of an
unfavorable resolution of these lawsuits, it is possible that the Company's
future results of operations or cash flows could be materially affected in
a particular period.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit
Number Description
3.3 By-Laws of the Company, as amended through
November 2, 1994
11 Computation of per share earnings
27 Financial Data Schedule
b) Reports on Form 8-K
None.
15
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
APPLE COMPUTER, INC.
(Registrant)
DATE: February 8, 1995 BY /s/ Joseph A. Graziano
Joseph A. Graziano
Executive Vice President and
Chief Financial Officer
16
<PAGE>
APPLE COMPUTER, INC.
INDEX TO EXHIBITS
Exhibit Description Page Number
Index
3.3 By-Laws of the Company, as amended 18
through November 2, 1994
11 Computation of per share earnings 38
27 Financial Data Schedule 39
17
<PAGE>
BY-LAWS
OF
APPLE COMPUTER, INC.
(a California corporation)
(as amended through November 2, 1994)
Article I
OFFICES
Section 1.1: Principal Office. The principal executive office for
the transaction of the business of this corporation shall be 1 Infinite
Loop, Cupertino, California 95014. The Board of Directors is hereby
granted full power and authority to change the location of the principal
executive office from one location to another.
Section 1.2: Other Offices. One or more branch or other subordinate
offices may at any time be fixed and located by the Board of Directors at
such place or places within or without the State of California as it deems
appropriate.
Article II
DIRECTORS
Section 2.1: Exercise of Corporate Powers. Except as otherwise
provided by these By-Laws, by the Articles of Incorporation of this
corporation or by the laws of the State of California now or hereafter in
force, the business and affairs of this corporation shall be managed and
all corporate powers shall be exercised by or under the direction of the
Board of Directors.
Section 2.2: Number. The number of directors of the corporation
shall be not less than five (5) nor more than nine (9). The exact number
of directors shall be nine (9) until changed within the limits specified
above, by a by-law amending this section, duly adopted by the Board of
Directors or by the shareholders. The indefinite number of directors may
be changed, or a definite number fixed without provision for an indefinite
number, by a duly adopted amendment to the Articles of Incorporation or by
an amendment to this by-law duly adopted by the vote or written consent of
18
<PAGE>
holders of a majority of the outstanding shares entitled to vote; provided,
however, that an amendment reducing the fixed number or the minimum number
of directors to a number less than five (5) cannot be adopted if the votes
cast against its adoption at a meeting of the shareholders, or the shares
not consenting in the case of action by written consent, are equal to more
than 16-2/3% of the outstanding shares entitled to vote. No amendment may
change the stated maximum number of authorized directors to a number
greater than two times the stated minimum number of directors minus one.
Section 2.3: Need Not Be Shareholders. The directors of this
corporation need not be shareholders of this corporation.
Section 2.4: Compensation. Directors and members of committees may
receive such compensation, if any, for their services as may be fixed or
determined by resolution of the Board of Directors. Nothing herein
contained shall be construed to preclude any director from serving this
corporation in any other capacity and receiving compensation therefor.
Section 2.5: Election and Term of Office. The directors shall be
divided into two classes, designated Class I and Class II. Each class
shall consist of one-half of the directors or as close an approximation as
possible. The initial term of office of the directors of Class I shall
expire at the annual meeting to be held during fiscal year 1991 and the
initial term of office of the directors of Class II shall expire at the
annual meeting to be held during fiscal year 1992. At each annual meeting,
commencing with the annual meeting to be held during fiscal year 1991, each
of the successors to the directors of the class whose term shall have
expired at such annual meeting shall be elected for a term running until
the second annual meeting next succeeding his or her election and until his
or her successor shall have been duly elected and qualified.
Section 2.6: Vacancies. A vacancy or vacancies on the Board of
Directors shall exist in case of the death, resignation or removal of any
director, or if the authorized number of directors is increased, or if the
shareholders fail, at any annual meeting of shareholders at which any
director is elected, to elect the full authorized number of directors to be
voted for at that meeting. The Board of Directors may declare vacant the
office of a director if he or she is declared of unsound mind by an order
of court or convicted of a felony or if, within 60 days after notice of his
or her election, he or she does not accept the office. Any vacancy, except
for a vacancy created by removal of a director as provided in Section 2.7
hereof, may be filled by a person selected by a majority of the remaining
directors then in office, whether or not less than a quorum, or by a sole
remaining director. Vacancies occurring in the Board of Directors by
reason of removal of directors shall be filled only by approval of
shareholders. The shareholders may elect a director at any time to fill
any vacancy not filled by the directors. Any such election by written
consent requires the consent of a majority of the outstanding shares
entitled to vote. If, after the filling of any vacancy by the directors,
the directors then in office who have been elected by the shareholders
shall constitute less than a majority of the directors then in office, any
holder or holders of an aggregate of 5% or more of the total number of
shares at the time outstanding having the right to vote for such directors
may call a special meeting of shareholders to be held to elect the entire
Board of Directors. The term of office of any director shall terminate
upon such election of a successor. Any director may resign effective upon
giving written notice to the Chairman of the Board, if any, the Chief
Executive Officer, the President, the Secretary or the Board of Directors
of this corporation, unless the notice specifies a later time for the
effectiveness of such resignation. If the resignation is effective at a
future time, a successor may be elected to take office
19
<PAGE>
when the resignation becomes effective. A reduction of the authorized
number of directors shall not remove any director prior to the expiration
of such director's term of office.
Section 2.7: Removal. The entire Board of Directors or any
individual director may be removed without cause from office by an
affirmative vote of a majority of the outstanding shares entitled to vote;
provided that, unless the entire Board of Directors is removed, no director
shall be removed when the votes cast against removal, or not consenting in
writing to such removal, would be sufficient to elect such director if
voted cumulatively (without regard to whether such shares may be voted
cumulatively) at an election at which the same total number of votes were
cast, or, if such action is taken by written consent, all shares entitled
to vote were voted, and either the number of directors elected at the most
recent annual meeting of shareholders, or if greater, the number of
directors for whom removal is being sought, were then being elected. If
any or all directors are so removed, new directors may be elected at the
same meeting or at a subsequent meeting. If at any time a class or series
of shares is entitled to elect one or more directors under authority
granted by the Articles of Incorporation of this corporation, the
provisions of this Section 2.7 shall apply to the vote of that class or
series and not to the vote of the outstanding shares as a whole.
Section 2.8: Powers and Duties. Without limiting the generality or
extent of the general corporate powers to be exercised by the Board of
Directors pursuant to Section 2.1 of these By-Laws, it is hereby provided
that the Board of Directors shall have full power with respect to the
following matters:
(a) To purchase, lease, and acquire any and all kinds of
property, real, personal or mixed, and at its discretion to pay therefor in
money, in property and/or in stocks, bonds, debentures or other securities
of this corporation.
(b) To enter into any and all contracts and agreements which in
its judgment may be beneficial to the interests and purposes of this
corporation.
(c) To fix and determine and to vary from time to time the
amount or amounts to be set aside or retained as reserve funds or as
working capital of this corporation or for maintenance, repairs,
replacements or enlargements of its properties.
(d) To declare and pay dividends in cash, shares and/or property
out of any funds of this corporation at the time legally available for the
declaration and payment of dividends on its shares.
(e) To adopt such rules and regulations for the conduct of its
meetings and the management of the affairs of this corporation as it may
deem proper.
(f) To prescribe the manner in which and the person or persons
by whom any or all of the checks, drafts, notes, bills of exchange,
contracts and other corporate instruments shall be executed.
(g) To accept resignations of directors; to declare vacant the
office of a director as provided in Section 2.6 hereof; and, in case of
vacancy in the office of directors, to fill the same to the extent provided
in Section 2.6 hereof.
20
<PAGE>
(h) To create offices in addition to those for which provision
is made by law or these By-Laws; to elect and remove at pleasure all
officers of this corporation, fix their terms of office, prescribe their
powers and duties, limit their authority and fix their salaries in any way
it may deem advisable which is not contrary to law or these By-Laws; and,
if it sees fit, to require from the officers or any of them security for
faithful service.
(i) To designate some person to perform the duties and exercise
the powers of any officer of this corporation during the temporary absence
or disability of such officer.
(j) To appoint or employ and to remove at pleasure such agents
and employees as it may see fit, to prescribe their titles, powers and
duties, limit their authority, and fix their salaries in any way it may
deem advisable which is not contrary to law or these By-Laws; and, if it
sees fit, to require from them or any of them security for faithful
performance.
(k) To fix a time in the future, which shall not be more than 60
days nor less than 10 days prior to the date of the meeting nor more than
sixty (60) days prior to any other action for which it is fixed, as a
record date for the determination of the shareholders entitled to notice of
and to vote at any meeting, or entitled to receive any payment of any
dividend or other distribution, or allotment of any rights, or entitled to
exercise any rights in respect of any other lawful action; and in such case
only shareholders of record on the date so fixed shall be entitled to
notice of and to vote at the meeting or to receive the dividend,
distribution or allotment of rights or to exercise the rights, as the case
may be, notwithstanding any transfer of any shares on the books of this
corporation after any record date fixed as aforesaid. The Board of
Directors may close the books of this corporation against transfers of
shares during the whole or any part of such period.
(l) To fix and locate from time to time the principal office for
the transaction of the business of this corporation and one or more branch
or other subordinate office or offices of this corporation within or
without the State of California; to designate any place within or without
the State of California for the holding of any meeting or meetings of the
shareholders or the Board of Directors, as provided in Sections 10.1 and
11.1 hereof; to adopt, make and use a corporate seal, and to prescribe the
forms of certificates for shares and to alter the form of such seal and of
such certificates from time to time as in its judgment it may deem best,
provided such seal and such certificates shall at all times comply with the
provisions of law now or hereafter in effect.
(m) To authorize the issuance of shares of stock of this
corporation in accordance with the laws of the State of California and the
Articles of Incorporation of this corporation.
(n) Subject to the limitation provided in Section 14.2 hereof,
to adopt, amend or repeal from time to time and at any time these By-Laws
and any and all amendments thereof.
(o) To borrow money and incur indebtedness on behalf of this
corporation, including the power and authority to borrow money from any of
the shareholders, directors or officers of this corporation, and to cause
to be executed and delivered therefor in the corporate name promissory
notes, bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations, or other evidences of debt and securities therefor, and the
note or other obligation given for any indebtedness of this corporation,
signed officially by any officer or officers thereunto duly authorized by
the Board of Directors shall be binding on this corporation.
21
<PAGE>
(p) To designate and appoint committees of the Board of
Directors as it may see fit, to prescribe their names, powers and duties
and limit their authority in any way it may deem advisable which is not
contrary to law or these By-Laws.
(q) Generally to do and perform every act and thing whatsoever
that may pertain to the office of a director or to a board of directors.
Article III
OFFICERS
Section 3.1: Election and Qualifications. The officers of this
corporation shall consist of a Chief Executive Officer, a President, one or
more Vice Presidents, a Secretary, a Chief Financial Officer and such other
officers, including, but not limited to, a Chairman of the Board of
Directors, a Treasurer, and Assistant Secretaries and Assistant Treasurers
as the Board of Directors shall deem expedient, who shall be chosen in such
manner and hold their offices for such terms as the Board of Directors may
prescribe. Any two or more of such offices may be held by the same person.
Any Vice President, Assistant Treasurer or Assistant Secretary,
respectively, may exercise any of the powers of the Chief Executive
Officer, the President, the Chief Financial Officer, or the Secretary,
respectively, as directed by the Board of Directors, and shall perform such
other duties as are imposed upon him or her by the By-Laws or the Board of
Directors.
Section 3.2: Term of Office and Compensation. The term of office
and salary of each of said officers and the manner and time of the payment
of such salaries shall be fixed and determined by the Board of Directors
and may be altered by said Board from time to time at its pleasure, subject
to the rights, if any, of an officer under any contract of employment. Any
officer may resign at any time upon written notice to this corporation,
without prejudice to the rights, if any, of this corporation under any
contract to which the officer is a party. If any vacancy occurs in any
office of this corporation, the Board of Directors may elect a successor to
fill such vacancy.
Article IV
CHAIRMAN OF THE BOARD
Section 4.1: Powers and Duties. The Chairman of the Board of
Directors, if there be one, shall have the power to preside at all meetings
of the Board of Directors and shall have such other powers and shall be
subject to such other duties as the Board of Directors may from time to
time prescribe.
Article V
CHIEF EXECUTIVE OFFICER
Section 5.1: Powers and Duties. The powers and duties of the Chief
Executive Officer are:
(a) To act as the general manager and chief executive officer of
this corporation and, subject to the control of the Board of Directors, to
have general supervision, direction and control of the business and affairs
of this corporation.
22
<PAGE>
(b) To preside at all meetings of the shareholders and, in the
absence of the Chairman of the Board or if there be no Chairman, at all
meetings of the Board of Directors.
(c) To call meetings of the shareholders and meetings of the
Board of Directors to be held at such times and, subject to the limitations
prescribed by law or by these By-Laws, at such places as he or she shall
deem proper.
(d) To affix the signature of this corporation to all deeds,
conveyances, mortgages, leases, obligations, bonds, certificates and other
papers and instruments in writing which have been authorized by the Board
of Directors or which, in the judgment of the Chief Executive Officer,
should be executed on behalf of this corporation; to sign certificates for
shares of stock of this corporation; and, subject to the direction of the
Board of Directors, to have general charge of the property of this
corporation and to supervise and control all officers, agents and employees
of this corporation.
Article VA
PRESIDENT
Section 5A.1: Powers and Duties. The powers and duties of the
President are:
(a) To act as the general manager of this corporation and,
subject to the control of the Board of Directors, to have general
supervision, direction and control of the business and affairs of this
corporation.
(b) To preside at all meetings of the shareholders and, in the
absence of the Chairman of the Board and the Chief Executive Officer or if
there be no Chairman or Chief Executive Officer, at all meetings of the
Board of Directors.
(c) To affix the signature of this corporation to all deeds,
conveyances, mortgages, leases, obligations, bonds, certificates and other
papers and instruments in writing which have been authorized by the Board
of Directors or which, in the judgment of the President, should be executed
on behalf of this corporation; to sign certificates for shares of stock of
this corporation; and, subject to the direction of the Board of Directors,
to have general charge of the property of this corporation and to supervise
and control all officers, agents and employees of this corporation.
Section 5A.2: President Pro Tem. If neither the Chairman of the
Board, the Chief Executive Officer, the President, nor any Vice President
is present at any meeting of the Board of Directors, a President pro tem
may be chosen to preside and act at such meeting. If neither the Chief
Executive Officer, the President nor any Vice President is present at any
meeting of the shareholders, a President pro tem may be chosen to preside
at such meeting.
23
<PAGE>
Article VI
VICE PRESIDENT
Section. 6.1: Powers and Duties. The titles, powers and duties of
the Vice President or Vice Presidents shall be prescribed by the Board of
Directors. In case of the absence, disability or death of the Chief
Executive Officer, the President, the Vice President, or one of the Vice
Presidents, shall exercise all his or her powers and perform all his or her
duties. If there is more than one Vice President, the order in which the
Vice Presidents shall succeed to the powers and duties of the Chief
Executive Officer or President shall be as fixed by the Board of Directors.
Article VII
SECRETARY
Section 7.1: Powers and Duties. The powers and duties of the
Secretary are:
(a) To keep a book of minutes at the principal executive office
of this corporation, or such other place as the Board of Directors may
order, of all meetings of its directors and shareholders with the time and
place of holding, whether regular or special, and, if special, how
authorized, the notice thereof given, the names of those present at
directors' meetings, the number of shares present or represented at
shareholders' meetings and the proceedings thereof.
(b) To keep the seal of this corporation and to affix the same
to all instruments which may require it.
(c) To keep or cause to be kept at the principal executive
office of this corporation, or at the office of the transfer agent or
agents, a record of the shareholders of this corporation, giving the names
and addresses of all shareholders and the number and class of shares held
by each, the number and date of certificates issued for shares and the
number and date of cancellation of every certificate surrendered for
cancellation.
(d) To keep a supply of certificates for shares of this
corporation, to fill in all certificates issued, and to make a proper
record of each such issuance; provided that so long as this corporation
shall have one or more duly appointed and acting transfer agents of the
shares, or any class or series of shares, of this corporation, such duties
with respect to such shares shall be performed by such transfer agent or
transfer agents.
(e) To transfer upon the share books of this corporation any and
all shares of this corporation; provided that so long as this corporation
shall have one or more duly appointed and acting transfer agents of the
shares, or any class or series of shares, of this corporation, such duties
with respect to such shares shall be performed by such transfer agent or
transfer agents, and the method of transfer of each certificate shall be
subject to the reasonable regulations of the transfer
24
<PAGE>
agent to which the certificate is presented for transfer and, also, if this
corporation then has one or more duly appointed and acting registrars,
subject to the reasonable regulations of the registrar to which a new
certificate is presented for registration; and provided, further, that no
certificate for shares of stock shall be issued or delivered or, if issued
or delivered, shall have any validity whatsoever until and unless it has
been signed or authenticated in the manner provided in Section 12.3 hereof.
(f) To make service and publication of all notices that may be
necessary or proper and without command or direction from anyone. In case
of the absence, disability, refusal or neglect of the Secretary to make
service or publication of any notices, then such notices may be served
and/or published by the Chief Executive Officer, the President or a Vice
President, or by any person thereunto authorized by either of them or by
the Board of Directors or by the holders of a majority of the outstanding
shares of this corporation.
(g) Generally to do and perform all such duties as pertain to
such office and as may be required by the Board of Directors.
Article VIII
CHIEF FINANCIAL OFFICER
Section 8.1: Powers and Duties. The powers and duties of the Chief
Financial Officer are:
(a) To supervise and control the keeping and maintaining of
adequate and correct accounts of this corporation's properties and business
transactions, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, surplus and shares. The books of
account shall at all reasonable times be open to inspection by any
director.
(b) To have the custody of all funds, securities, evidences of
indebtedness and other valuable documents of this corporation and, at his
or her discretion, to cause any or all thereof to be deposited for the
account of this corporation with such depository as may be designated from
time to time by the Board of Directors.
(c) To receive or cause to be received, and to give or cause to
be given, receipts and acquittances for moneys paid in for the account of
this corporation.
(d) To disburse, or cause to be disbursed, all funds of this
corporation as may be directed by the Chief Executive Officer, the
President or the Board of Directors, taking proper vouchers for such
disbursements.
(e) To render to the Chief Executive Officer, the President or
to the Board of Directors, whenever either may require, accounts of all
transactions as Chief Financial Officer and of the financial condition of
this corporation.
(f) Generally to do and perform all such duties as pertain to
such office and as may be required by the Board of Directors.
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Article VIIIA
APPOINTED VICE PRESIDENTS, ETC.
Section 8A.l: Appointed Vice Presidents, Etc.; Appointment, Duties,
etc. The Chief Executive Officer of the corporation shall have the power,
in the exercise of his or her discretion, to appoint additional persons to
hold positions and titles such as vice president of the corporation or a
division of the corporation or president of a division of the corporation,
or similar such titles, as the business of the corporation may require,
subject to such limits in appointment power as the Board may determine.
The Board shall be advised of any such appointment at a meeting of the
Board, and the appointment shall be noted in the minutes of the meeting.
The minutes shall clearly state that such persons are non-corporate
officers appointed pursuant to this Section 8A.l of these By-laws.
Each such appointee shall have such title, shall serve in such
capacity and shall have such authority and perform such duties as the Chief
Executive Officer of the corporation shall determine.
Appointees may hold titles such as "president" of a division or
other group within the corporation, or "vice president" of the corporation
or of a division or other group within the corporation. However, any such
appointee, absent specific election by the Board as an elected corporate
officer, (i) shall not be considered an officer elected by the Board of
Directors pursuant to Article III of these By-Laws and shall not have the
executive powers or authority of corporate officers elected pursuant to
such Article III, (ii) shall not be considered (a) an "officer" of the
corporation for the purposes of Rule 3b-2 promulgated under the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (collectively, the "Act") or an "executive officer" of the
corporation for the purposes of Rule 3b-7 promulgated under the Act, and
similarly shall not be considered an "officer" of the corporation for the
purposes of Section 16 of the Act (as such persons shall not be given the
access to inside information of the corporation enjoyed by officers of the
corporation) or an "executive officer" of the corporation for the purposes
of Section 14 of the Act or (b) a "corporate officer" for the purposes of
Section 312 of the California Corporation Code (the "Code"), except in any
such case as otherwise required by law, and (iii) shall be empowered to
represent himself or herself to third parties as an appointed vice
president, etc., only, and shall be empowered to execute documents, bind
the corporation or otherwise act on behalf of the corporation only as
authorized by the Chief Executive Officer or the President of the
Corporation or by resolution of the Board of Directors.
An elected officer of the corporation may also serve in an appointed
capacity hereunder.
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Article IX
EXECUTIVE COMMITTEE
Section 9.1: Appointment and Procedure. The Board of Directors may,
by resolution adopted by a majority of the authorized number of directors,
appoint from among its members an Executive Committee of two or more
members. The Executive Committee may make its own rules of procedure
subject to Section 11.9 hereof, and shall meet as provided by such rules or
by a resolution adopted by the Board of Directors (which resolution shall
take precedence). A majority of the members of the Executive Committee
shall constitute a quorum, and in every case the affirmative vote of a
majority of all members of the Committee shall be necessary to the adoption
of any resolution by such Committee.
Section 9.2: Powers. During the intervals between the meetings of
the Board of Directors, the Executive Committee, in all cases in which
specific directions shall not have been given by the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of this corporation
in such manner as the Committee may deem best for the interests of this
corporation, except with respect to:
(a) any action for which California law also requires
shareholder approval,
(b) the filling of vacancies on the Board of Directors or in the
committee,
(c) the fixing of compensation of the directors for serving on
the Board of Directors or on any committee,
(d) the amendment or repeal of By-Laws or the adoption of new By-
Laws,
(e) the amendment or repeal of any resolution of the Board of
Directors which by its express terms is not so amendable or repealable,
(f) a distribution to the shareholders of this corporation,
except at a rate or in a periodic amount or within a price range determined
by the Board of Directors,
(g) the appointment of other committees of the Board of
Directors or the members thereof.
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Article X
MEETINGS OF SHAREHOLDERS
Section 10.1: Place of Meetings. Meetings (whether regular, special
or adjourned) of the shareholders of this corporation shall be held at the
principal executive office for the transaction of business of this
corporation, or at any place within or without the State which may be
designated by written consent of all the shareholders entitled to vote
thereat, or which may be designated by resolution of the Board of
Directors. Any meeting shall be valid wherever held if held by the written
consent of all the shareholders entitled to vote thereat, given either
before or after the meeting and filed with the Secretary of this
corporation.
Section 10.2: Annual Meetings. The annual meeting of the
shareholders shall be held at the hour of 10:00 a.m. on the last Wednesday
in January in each year , if not a legal holiday, and if a legal holiday,
then on the next succeeding business day not a legal holiday or at such
other time in a particular year as may be designated by written consent of
all the shareholders entitled to vote thereat or which may be designated by
resolution of the Board of Directors. Such annual meetings shall be held
at the place provided pursuant to Section 10.1 hereof. Said annual
meetings shall be held for the purpose of the election of directors, for
the making of reports of the affairs of this corporation and for the
transaction of such other business as may come before the meeting.
Section 10.3: Special Meetings. Special meetings of the shareholders
for any purpose or purposes whatsoever may be called at any time by the
President or by the Board of Directors, or by two or more members thereof,
or by one or more holders of shares entitled to cast not less than ten
percent (10%) of the votes at the meeting. Upon request in writing sent by
registered mail to the Chief Executive Officer, President, Vice President
or Secretary, or delivered to any such officer in person, by any person
entitled to call a special meeting of shareholders, it shall be the duty of
such officer forthwith to cause notice to be given to the shareholders
entitled to vote that a meeting will be requested by the person or persons
calling the meeting, which shall be not less than 35 days nor more than 60
days after the receipt of such request.
Section 10.4: Notice of Meetings. Notice of any meeting of
shareholders shall be given in writing not less than 10 nor more than 60
days before the date of the meeting to each shareholder entitled to vote
thereat by the Secretary or an Assistant Secretary, or other person charged
with that duty, or if there be no such officer or person, or in case of his
or her neglect or refusal, by any director or shareholder. The notice
shall state the place, date and hour of the meeting and (i) in the case of
a special meeting, the general nature of the business to be transacted, and
no other business may be transacted, or (ii) in the case of the annual
meeting, those matters which the Board of Directors, at the time of the
mailing of the notice, intends to present for action by the shareholders,
but any proper matter may be presented at the meeting for such action
except that notice must be given or waived in writing of any proposal
relating to approval of contracts between the corporation and any director
of this corporation, amendment of the Articles of Incorporation,
reorganization of this corporation or winding up of this corporation. The
notice of any meeting at which directors are to be elected shall include
the names of nominees intended at the time of the notice to be presented by
management for election. Written notice shall be given by this corporation
to any shareholder, either (i) personally or
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(ii) by mail or other means of written communication, charges prepaid,
addressed to such shareholder at such shareholder's address appearing on
the books of this corporation or given by such shareholder to this
corporation for the purpose of notice. If a shareholder gives no address
or no such address appears on the books of this corporation, notice shall
be deemed to have been given if sent by mail or other means of written
communication addressed to the place where the principal executive office
of this corporation is located, or if published at least once in a
newspaper of general circulation in the county in which such office is
located. The notice shall be deemed to have been given at the time when
delivered personally or deposited in the United States mail, postage
prepaid, or sent by other means of written communication and addressed as
hereinbefore provided. An affidavit of delivery or mailing of any notice
in accordance with the provisions of this Section 10.4, executed by the
Secretary, Assistant Secretary or any transfer agent, shall be prima facie
evidence of the giving of the notice. If any notice addressed to the
shareholder at the address of such shareholder appearing on the books of
the corporation is returned to this corporation by the United States Postal
Service marked to indicate that the United States Postal Service is unable
to deliver the notice to the shareholder at such address, all future
notices shall be deemed to have been duly given without further mailing if
the same shall be available for the shareholder upon written demand of the
shareholder at the principal executive office of this corporation for a
period of one year from the date of the giving of the notice to all other
shareholders.
Section 10.5: Consent to Shareholders' Meetings. The transactions of
any meeting of shareholders, however called and noticed, and wherever held,
are as valid as though had at a meeting duly held after regular call and
notice, if a quorum is present either in person or by proxy, and if, either
before or after the meeting, each of the shareholders entitled to vote, not
present in person or by proxy, signs a written waiver of notice or a
consent to the holding of such meeting or an approval of the minutes
thereof. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Attendance
of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person objects, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully
called or convened and except that attendance at a meeting is not a waiver
of any right to object to the consideration of matters required by law to
be included in the notice but not so included, if such objection is
expressly made at the meeting. Neither the business to be transacted at
nor the purpose of any regular or special meeting of shareholders need be
specified in any written waiver of notice, except as to approval of
contracts between this corporation and any of its directors, amendment of
the Articles of Incorporation, reorganization of this corporation or
winding up the affairs of this corporation.
Section 10.6: Quorum. The presence in person or by proxy of the
holders of a majority of the shares entitled to vote at any meeting of
shareholders shall constitute a quorum for the transaction of business.
Shares shall not be counted to make up a quorum for a meeting if voting of
such shares at the meeting has been enjoined or for any reason they cannot
be lawfully voted at the meeting. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to
transact business until adjournment notwithstanding the withdrawal of
enough shareholders to leave less than a quorum, if any action taken (other
than adjournment) is approved by at least a majority of the shares required
to constitute a quorum.
Section 10.7: Adjourned Meetings. Any shareholders' meeting, whether
or not a quorum is present, may be adjourned from time to time by the vote
of a majority of the shares, the holders of
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which are either present in person or represented by proxy thereat, but,
except as provided in Section 10.6 hereof, in the absence of a quorum, no
other business may be transacted at such meeting. When a meeting is
adjourned for more than 45 days or if after adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each shareholder of record entitled to vote at a meeting.
Except as aforesaid, it shall not be necessary to give any notice of the
time and place of the adjourned meeting or of the business to be transacted
thereat other than by announcement at the meeting at which such adjournment
is taken. At any adjourned meeting the shareholders may transact any
business which might have been transacted at the original meeting.
Section 10.8: Voting Rights. Only persons in whose names shares
entitled to vote stand on the stock records of this corporation at the
close of business on the business day next preceding the day on which
notice is given or, if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is held or, if
some other day be fixed for the determination of shareholders of record
pursuant to Section 2.8(j) hereof, then on such other day, shall be
entitled to vote at such meeting. The record date for determining
shareholders entitled to give consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors has been
taken, shall be the day on which the first written consent is given. In
the absence of any contrary provision in the Articles of Incorporation or
in any applicable statute relating to the election of directors or to other
particular matters, each such person shall be entitled to one vote for each
share.
Section 10.9: Action by Written Consents. Any action which may be
taken at any annual or special meeting of shareholders may be taken without
a meeting and without prior notice, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding shares
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Unless the consents of all
shareholders entitled to vote have been solicited in writing, notice of any
shareholder approval of (i) contracts between this corporation and any of
its directors, (ii) indemnification of any person, (iii) reorganization of
this corporation or (iv) distributions to shareholders upon winding up of
this corporation in certain circumstances without a meeting by less than
unanimous written consent shall be given at least 10 days before the
consummation of the action authorized by such approval, and prompt notice
shall be given of the taking of any other corporate action approved by
shareholders without a meeting by less than unanimous written consent, to
those shareholders entitled to vote who have not consented in writing. All
notices given hereunder shall conform to the requirements of Section 10.4
hereto and applicable law. When written consents are given with respect to
any shares, they shall be given by and accepted from the persons in whose
names such shares stand on the books of this corporation at the time such
respective consents are given, or any shareholder's proxy holder, or a
transferee of the shares or a personal representative of the shareholder or
their respective proxy holders, may revoke the consent by a writing
received by this corporation prior to the time that written consents of the
number of shares required to authorize the proposed action have been filed
with the Secretary of this corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the Secretary of this
corporation. Notwithstanding anything to the contrary, directors may not
be elected by written consent except by unanimous written consent of all
shares entitled to vote for the election of directors.
Section 10.10: Elections of Directors. In any election of directors,
the candidates receiving the highest number of affirmative votes of the
shares entitled to be voted for them up to the number of
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directors to be elected by such shares are elected; votes against the
directors and votes withheld with respect to the election of the directors
shall have no legal effect. Elections of directors need not be by ballot
except upon demand made by a shareholder at the meeting and before the
voting begins.
Section 10.11: Proxies. Every person entitled to vote or execute
consents shall have the right to do so either in person or by one or more
agents authorized by a written proxy executed by such person or such
person's duly authorized agent and filed with the Secretary of this
corporation. No proxy shall be valid (l) after revocation thereof, unless
the proxy is specifically made irrevocable and otherwise conforms to this
Section 10.11 and applicable law, or (2) after the expiration of eleven
months from the date thereof, unless the person executing it specifies
therein the length of time for which such proxy is to continue in force.
Revocation may be effected by a writing delivered to the Secretary of this
corporation stating that the proxy is revoked or by a subsequent proxy
executed by, or by attendance at the meeting and voting in person by, the
person executing the proxy. A proxy is not revoked by the death or
incapacity of the maker unless, before the vote is counted, a written
notice of such death or incapacity is received by this corporation. A
proxy which states that it is irrevocable is irrevocable for the period
specified therein when it is held by any of the following or a nominee of
any of the following: (l) a pledgee, (2) a person who has purchased or
agreed to purchase or holds an option to purchase the shares or a person
who has sold a portion of such person's shares in this corporation to the
maker of the proxy, (3) a creditor or creditors of this corporation or the
shareholder who extended or continued credit to this corporation or the
shareholder in consideration of the proxy if the proxy states that it was
given in consideration of such extension or continuation of credit and the
name of the person extending or continuing the credit, (4) a person who has
contracted to perform services as an employee of this corporation, if a
proxy is required by the contract of employment and if the proxy states
that it was given in consideration of such contract of employment, the name
of the employee and the period of employment contracted for, (5) a person
designated by or under a close corporation shareholder agreement or a
voting trust agreement. In addition, a proxy may be made irrevocable if it
is given to secure the performance of a duty or to protect a title, either
legal or equitable, until the happening of events which, by its terms,
discharge the obligation secured by it. Notwithstanding the period of
irrevocability specified, the proxy becomes revocable when the pledge is
redeemed, the option or agreement to purchase is terminated or the seller
no longer owns any shares of this corporation or dies, the debt of this
corporation or the shareholder is paid, the period of employment provided
for in the contract of employment has terminated or the close corporation
shareholder agreement or the voting trust agreement has terminated. In
addition, a proxy may be revoked, notwithstanding a provision making it
irrevocable, by a purchaser of shares without knowledge of the existence of
the provision unless the existence of the proxy and its irrevocability
appears on the certificate representing such shares. Every form of proxy
or written consent, which provides an opportunity to specify approval or
disapproval with respect to any proposal, shall also contain an appropriate
space marked "abstain", whereby a shareholder may indicate a desire to
abstain from voting his or her shares on the proposal. A proxy marked
"abstain" by the shareholder with respect to a particular proposal shall
not be voted either for or against such proposal. In any election of
directors, any form of proxy in which the directors to be voted upon are
named therein as candidates and which is marked by a shareholder "withhold"
or otherwise marked in a manner indicating that the authority to vote for
the election of directors is withheld shall not be voted either for or
against the election of a director.
Section 10.12: Inspectors of Election. Before any meeting of
shareholders, the Board of Directors may appoint any persons other than
nominees for office to act as inspectors of election at
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the meeting or its adjournment. If no inspectors of election are so
appointed, the Chairman of the meeting may, and on the request of any
shareholder or a shareholder's proxy shall, appoint inspectors of election
at the meeting. The number of inspectors shall be either one (l) or three
(3). If inspectors are appointed at a meeting on the request of one or
more shareholders or proxies, the holders of a majority of shares or their
proxies present at the meeting shall determine whether one (l) or three (3)
inspectors are to be appointed. If any person appointed as inspector fails
to appear or fails or refuses to act, the Chairman of the meeting may, and
upon the request of any shareholder or a shareholder's proxy shall, appoint
a person to fill that vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
Article XI
MEETINGS OF DIRECTORS
Section 11.1: Place of Meetings. Meetings (whether regular, special
or adjourned) of the Board of Directors of this corporation shall be held
at the principal office of this corporation for the transaction of
business, as specified in accordance with Section 1.1 hereof, or at any
other place within or without the State which has been designated from time
to time by resolution of the Board or which is designated in the notice of
the meeting.
Section 11.2: Regular Meetings. Regular meetings of the Board of
Directors shall be held after the adjournment of each annual meeting of the
shareholders (which regular directors' meeting shall be designated the
"Regular Annual Meeting") and at such other times as may be designated from
time to time by resolution of the Board of Directors. Notice of the time
and place of all regular meetings shall be given in the same manner as for
special meetings, except that no such notice need be given if
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(l) the time and place of such meetings are fixed by the Board of Directors
or (2) the Regular Annual Meeting is held at the principal place of
business provided at Section 1.1 hereof and on the date specified in
Section 10.2 hereof.
Section 11.3: Special Meetings. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board, if any,
or the President, or any Vice President, or the Secretary or by any two or
more directors.
Section 11.4: Notice of Special Meetings. Special meetings of the
Board of Directors shall be held upon no less than four days' notice by
mail or 48 hours' notice delivered personally or by telephone or telegraph
to each director. Notice need not be given to any director who signs a
waiver of notice or who attends the meeting without protesting, prior
thereto or at its commencement, the lack of notice to such director. Any
oral notice given personally or by telephone may be communicated either to
the director or to a person at the home or office of the director who the
person giving the notice has reason to believe will promptly communicate it
to the director. A notice or waiver of notice need not specify the purpose
of any meeting of the Board. If the address of a director is not shown on
the records and is not readily ascertainable, notice shall be addressed to
him at the city or place in which the meetings of the directors are
regularly held. If the meeting is adjourned for more than 24 hours, notice
of any adjournment to another time or place shall be given prior to the
time of the adjourned meeting to all directors not present at the time of
adjournment.
Section 11.5: Quorum. A majority of all directors elected by the
shareholders and appointed to fill vacancies as provided in Section 2.6
hereof shall constitute a quorum of the Board of Directors for the
transaction of business. Every act or decision done or made by a majority
of the directors present at a meeting duly held at which a quorum is
present is the act of the Board of Directors subject to provisions of law
relating to interested directors and indemnification of agents of this
corporation. A majority of the directors present, whether or not a quorum
is present, may adjourn any meeting to another time and place. A meeting
at which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for such meeting.
Section 11.6: Conference Telephone. Members of the Board of
Directors may participate in a meeting through use of conference telephone
or similar communications equipment, so long as all directors participating
in such meeting can hear one another. Participation in a meeting pursuant
to this Section 11.6 constitutes presence in person at such meeting.
Section 11.7: Waiver of Notice and Consent. The transactions of any
meeting of the Board of Directors, however called and noticed or wherever
held, shall be as valid as though had at a meeting duly held after regular
call and notice, if a quorum is present, and if, either before or after the
meeting, each of the directors not present signs a written waiver of
notice, a consent to holding such meeting or an approval of the minutes
thereof. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Section 11.8: Action Without a Meeting. Any action required or
permitted by law to be taken by the Board of Directors may be taken without
a meeting, if all members of the Board of Directors shall individually or
collectively consent in writing to such action. Such written consent or
consents
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shall be filed with the minutes of the proceedings of the Board of
Directors. Such action by written consent shall have the same force and
effect as the unanimous vote of such directors.
Section 11.9: Committees. The provisions of this Article XI apply
also to committees of the Board of Directors and action by such committees,
mutatis mutandis.
Article XII
SUNDRY PROVISIONS
Section 12.1: Instruments in Writing. All checks, drafts, demands
for money and notes of this corporation, and all written contracts of this
corporation, shall be signed by such officer or officers, agent or agents,
as the Board of Directors may from time to time designate. No officer,
agent, or employee of this corporation shall have the power to bind this
corporation by contract or otherwise unless authorized to do so by these By-
Laws or by the Board of Directors.
Section 12.2: Shares Held by the Corporation. Shares in other
corporations standing in the name of this corporation may be voted or
represented and all rights incident thereto may be exercised on behalf of
the corporation by any officer of this corporation authorized so to do by
resolution of the Board of Directors.
Section 12.3: Certificates of Stock. There shall be issued to every
holder of shares in this corporation a certificate or certificates signed
in the name of this corporation by the Chairman of the Board of Directors,
if any, or the Chief Executive Officer or the President or a Vice President
and by the Chief Financial Officer or an Assistant Chief Financial Officer
or the Secretary or any Assistant Secretary, certifying the number of
shares and the class or series of shares owned by the shareholder. Any or
all of the signatures on the certificate may be facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it
may be issued by this corporation with the same effect as if such person
were an officer, transfer agent or registrar at the date of issue.
Section 12.4: Lost Certificates. Where the owner of any certificate
for shares of this corporation claims that the certificate has been lost,
stolen or destroyed, a new certificate shall be issued in place of the
original certificate if the owner (l) so requests before this corporation
has notice that the original certificate has been acquired by a bona fide
purchaser, (2) files with this corporation an indemnity bond in such form
and in such amount as shall be approved by the Chief Executive Officer, the
President or a Vice President of this corporation, and (3) satisfies any
other reasonable requirements imposed by this corporation. The Board of
Directors may adopt such other provisions and restrictions with reference
to lost certificates, not inconsistent with applicable law, as it shall in
its discretion deem appropriate.
Section 12.5: Certification and Inspection of By-Laws. This
corporation shall keep at its principal executive or business office the
original or a copy of these By-Laws as amended or
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otherwise altered to date, which shall be open to inspection by the
shareholders at all reasonable times during office hours.
Section 12.6: Annual Reports. The making of annual reports to the
shareholders is dispensed with and the requirement that such annual reports
be made to shareholders is expressly waived, except as may be directed from
time to time by the Board of Directors or the President.
Section 12.7: Fiscal Quarters. Each fiscal quarter of the
Corporation shall be comprised of 13 weeks each of which shall end at
midnight on Friday of such week, and the fiscal months in any one calendar
quarter shall be comprised of at least four consecutive calendar weeks with
one week to be added, at management's discretion, to any one month during
such fiscal year.
Section 12.8: Officer Loans and Guaranties. If the corporation has
outstanding shares held of record by 100 or more persons on the date of
approval by the Board of Directors, the corporation may make loans of money
or property to, or guarantee the obligations of, any officer of the
corporation or its parent or subsidiaries, whether or not the officer is a
director, upon the approval of the Board of Directors alone. Such approval
by the Board of Directors must be determined by a vote of a majority of the
disinterested directors, if it is determined that such a loan or guaranty
may reasonably be expected to benefit the corporation. In no event may an
officer owning 2% or more of the outstanding common shares of the
corporation be extended a loan under this provision.
Article XIII
CONSTRUCTION OF BY-LAWS WITH
REFERENCE TO PROVISIONS OF LAW
Section 13.1: By-Law Provisions Additional and Supplemental to
Provisions of Law. All restrictions, limitations, requirements and other
provisions of these By-Laws shall be construed, insofar as possible, as
supplemental and additional to all provisions of law applicable to the
subject matter thereof and shall be fully complied with in addition to the
said provisions of law unless such compliance shall be illegal.
Section 13.2: By-Law Provisions Contrary to or Inconsistent with
Provisions of Law. Any article, section, subsection, subdivision,
sentence, clause or phrase of these By-Laws which, upon being construed in
the manner provided in Section 13.1 hereof, shall be contrary to or
inconsistent with any applicable provision of law, shall not apply so long
as said provisions of law shall remain in effect, but such result shall not
affect the validity or applicability of any other portions of these By-
Laws, it being hereby declared that these By-Laws, and each article,
section, subsection, subdivision, sentence, clause, or phrase thereof,
would have been adopted irrespective of the fact that any one or more
articles, sections, subsections, subdivisions, sentences, clauses or
phrases is or are illegal.
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Article XIV
ADOPTION, AMENDMENT OR REPEAL OF BY-LAWS
Section 14.1: By Shareholders. By-Laws may be adopted, amended or
repealed by the vote or written consent of holders of a majority of the
outstanding shares entitled to vote. By-Laws specifying or changing a
fixed number of directors or the maximum or minimum number or changing
from a fixed to a variable board or vice versa may only be adopted by the
shareholders; provided, however, that a By-Law or amendment of the Articles
of Incorporation reducing the number or the minimum number of directors to
a number less than five cannot be adopted if the votes cast against its
adoption at a meeting or the shares not consenting in the case of action by
written consent are equal to more than 16-2/3% of the outstanding shares
entitled to vote.
Section 14.2: By the Board of Directors. Subject to the right of
shareholders to adopt, amend or repeal By-Laws, By-Laws, other than a By-
Law or amendment thereof specifying or changing a fixed number of directors
or the maximum or minimum number or changing from a fixed to a variable
board or vice versa, may be adopted, amended or repealed by the Board of
Directors. A By-Law adopted by the shareholders may restrict or eliminate
the power of the Board of Directors to adopt, amend or repeal By-Laws.
Article XV
RESTRICTIONS ON TRANSFER OF STOCK
Section 15.1: Subsequent Agreement or By-Law. If (a) any two or more
shareholders of this corporation shall enter into any agreement abridging,
limiting or restricting the rights of any one or more of them to sell,
assign, transfer, mortgage, pledge, hypothecate or transfer on the books of
this corporation any or all of the shares of this corporation held by them,
and if a copy of said agreement shall be filed with this corporation, or if
(b) shareholders entitled to vote shall adopt any By-Law provision
abridging, limiting or restricting the aforesaid rights of any
shareholders, then, and in either of such events, all certificates of
shares of stock subject to such abridgments, limitations or restrictions
shall have a reference thereto endorsed thereon by an officer of this
corporation and such certificates shall not thereafter be transferred on
the books of this corporation except in accordance with the terms and
provisions of such agreement or ByLaw, as the case may be; provided, that
no restriction shall be binding with respect to shares issued prior to
adoption of the restriction unless the holders of such shares voted in
favor of or consented in writing to the restriction.
Article XVI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES, AND OTHER AGENTS
Section 16.1: Indemnification of Directors and Officers. The corporation
shall, to the maximum extent and in the manner permitted by the Code,
indemnify each of its directors and officers against expenses (as defined
in Section 317(a) of the Code), judgments, fines, settlements, and other
amounts actually and reasonably incurred in connection with any proceeding
(as defined in Section 317(a) ofthe Code), arising by reason of the fact
that such person is or was an agent of the corporation. For
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purposes of this Article XVI, a "director" or "officer" of the corporation
includes any person (i) who is or was a director or officer of the
corporation, (ii) who is or was serving at the request of the corporation
as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was a director or officer
of a corporation which was a predecessor corporation of the corporation or
of another enterprise at the request of such predecessor corporation.
Section 16.2: Indemnification of Others. The corporation shall have
the power, to the extent and in the manner permitted by the Code, to
indemnify each of its employees and agents (other than directors and
officers) against expenses (as defined in Section 317(a) of the Code),
judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding (as defined in Section 317(a) of
the Code), arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Article XVI, an "employee"
or "agent" of the corporation (other than a director or officer) includes
any person (i) who is or was an employee or agent of the corporation, (ii)
who is or was serving at the request of the corporation as an employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was an employee or agent of a corporation which
was a predecessor corporation of the corporation or of another enterprise
at the request of such predecessor corporation.
Section 16.3: Payment of Expenses in Advance. Expenses incurred in
defending any civil or criminal action or proceeding for which
indemnification is required pursuant to Section 16.1 or for which
indemnification is permitted pursuant to Section 16.2 following
authorization thereof by the Board of Directors, shall be paid by the
corporation in advance of the final disposition of such action or
proceeding upon receipt of an undertaking by or on behalf of the
indemnified party to repay such amount if it shall ultimately be determined
that the indemnified party is not entitled to be indemnified as authorized
in this Article XVI.
Section 16.4: Indemnity Not Exclusive. The indemnification provided
by this Article XVI shall not be deemed exclusive of any other rights to
which those seeking indemnification may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise,
both as to action in an official capacity and as to action in another
capacity while holding such office, to the extent that such additional
rights to indemnification are authorized in the Articles of Incorporation.
Section 16.5: Insurance Indemnification. The corporation shall have
the power to purchase and maintain insurance on behalf of any person who is
or was an Agent of the corporation against any liability asserted against
or incurred by such person in such capacity or arising out of such person's
status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this Article
XVI.
Section 16.6: Conflicts. No indemnification or advance shall be made
under this Article XVI, except where such indemnification or advance is
mandated by law or the order, judgment or decree of any court of competent
jurisdiction, in any circumstance where it appears:
(a) That it would be inconsistent with a provision of the
Articles of Incorporation, these bylaws, a resolution of the shareholders
or an agreement in effect at the time of the accrual of the alleged cause
of the action asserted in the proceeding in which the expenses were
incurred or other amounts were paid, which prohibits or otherwise limits
indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
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EXHIBIT 11
APPLE COMPUTER, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
December December
30, 1994 31, 1993
<C> <C> <C>
Primary Earnings Per Share
Earnings
Net income applicable to common stock $ 188,186 $ 40,018
Shares
Weighted average number of
common shares outstanding 119,806 116,268
Adjustment for dilutive
effect of outstanding stock options 1,794 688
Weighted average number of common
and common equivalent shares used for
primary earnings per share 121,600 116,956
Primary earnings per common share $ 1.55 $ 0.34
Fully Diluted Earnings Per Share
Earnings
Net income applicable to common stock $ 188,186 $ 40,018
Shares
Weighted average number of
common shares outstanding 119,806 116,268
Adjustment for dilutive effect of
outstanding stock options 1,850 753
Weighted average number of
common and common equivalent
shares used for fully diluted
earnings per share 121,656 117,021
Fully diluted earnings per common share $ 1.55 $ 0.34
</TABLE>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF INCOME
OF APPLE COMPUTER, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-29-1995
<PERIOD-END> DEC-30-1994
<CASH> 1,148
<SECURITIES> 439
<RECEIVABLES> 1,692
<ALLOWANCES> 93
<INVENTORY> 1,084
<CURRENT-ASSETS> 4,718
<PP&E> 1,462
<DEPRECIATION> 801
<TOTAL-ASSETS> 5,533
<CURRENT-LIABILITIES> 1,935
<BONDS> 304
<COMMON> 309
0
0
<OTHER-SE> 2,253
<TOTAL-LIABILITY-AND-EQUITY> 5,533
<SALES> 2,832
<TOTAL-REVENUES> 2,832
<CGS> 2,018
<TOTAL-COSTS> 2,018
<OTHER-EXPENSES> 530
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> 299
<INCOME-TAX> 111
<INCOME-CONTINUING> 188
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 188
<EPS-PRIMARY> 1.55
<EPS-DILUTED> 1.55
</TABLE>
