4600000 Shares Apple Computer, Inc. - The SWTPC Computer ...

to the retail stores, the regional centers also are responsible for warehousing Apple's products andproviding credit, service training and service support. See "Service and Support".The largest retail chain distributing Apple products during the 1980 fiscal year was Computer­Land with 108 franchised outlets offering Apple products in the United States. The Company hasentered into a volume purchase agreement with ComputerLand, expiring on March 24, 1981, whichis subject to automatic extension unless terminated upon 90 days notic;e by either party. Underthe agreement, the Company sells its products directly to ComputerLand. ComputerLand resellssuch products to its franchised outlets and is responsible for centralized purchasing as well as selecting,training and monitoring its franchised dealers. Sales of Apple products to ComputerLand accountedfor approximately 14% of the Company's net sales for the 1980 fiscal year. No other retail chain orstore accounted for more than 3% of net sales during the 1980 fiscal year.Retail dealers typically purchase the Company's products on an as-needed basis. The Company,in turn, currently ships to retailers shortly after order receipt. For this reason and because thenature of their business frequently results in retail dealers changing delivery schedules and orderrates, the Company's backlog of orders as of any particular period may not be representative of theCompany's actual sales for any- s1lcceeCling period.Prior to August 1980, foreign sales were made primarily to an independent dishibuto:r, Eurapple,located in the United States, under an agreement providing for exclusive rights to distribute Apple'sproducts in certain foreign countries. Foreign sales were made by Eurapple to other independentdistributors primarily located in Europe and, to a lesser extent, in the Far East, the Middle East,Australia, the Philippines and South Africa. In August 1980, Apple acquired Eurapple's distributionrights and currently sells its products directly to 21 independent foreign distributors. Sales to Eurapplein fiscal 1980 prior to such date accounted for approximately 17% of the Company's net sales forfiscal 1980. See Note 2 of Notes to Consolidated Financial Statements. The foreign dishibutors resellthe products to approximately 1,000 retail dealers.In September 1980 Apple established a center for sales, marketing, service, dealer training,warehousing and distribution in Zeist, Netherlands to serve the European market. In addition, theCompany expects to manufacture a substantial portion of its products for sale in Europe at its recentlyopened facility in County Cork, Ireland.During the 1979 and 1980 fiscal years, foreign sales of Apple's products, including sales inCanada, were approximately 24% and 25%, respectively, of net sales for such periods. Since August1980 sales to the foreign distributors generally have been made in local currencies and are subject tothe risks of exchange rate fluctuations. Restrictive tariff and export control policies are potential risksof foreign sales, but the Company has experienced no material problems to date.The Company has not directly financed, rented, or leased any of its computer systems nor is anysuch program presently contemplated. The Company, however, has entered into agreements with ITTDiversified Credit Corporation ("ITT") and United States Leasing Corporation ( "USLC") to provideinventory financing for retail dealers and third-party leasing arrangements for commercial end-usercustomers, respectively. The ITT agreement is tenninable by the Company upon 10 days writtennotice to ITT and obligates the Company to repurchase factory-sealed Apple products from ITT inthe event of certain defaults in the dealer's obligations. The USLC leasing plan offers commercial endusercustomers three and four-year leases with fixed purchase options and permits users to add additionalequipment to their leases. The agreement between the Company and USLC continues untilOctober 31, 1981 and provides for automatic renewal for an additional one--year period unlessterminated by either party. Both of the foregoing agreements were entered into by the Company in15