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0000320193
20180801
10-Q
430
Further information regarding the Company’s debt issuances and related hedging activity can be found in Part I, Item 1 of this Form 10-Q in the Notes to Condensed Consolidated Financial Statements in Note 2, “Financial Instruments” and Note 5, “Debt.” Apple Inc. | Q3 2018 Form 10-Q | 32 Capital Return Program During th...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
431
Of the $20.0 billion, $10.4 billion was repurchased under the Company’s previous share repurchase program of up to $210 billion, thereby completing that program.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
432
On May 1, 2018, the Company announced the Board of Directors had authorized a new program to repurchase up to $100 billion of the Company’s common stock.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
433
The remaining $9.6 billion repurchased during the third quarter of 2018 was in connection with the new share repurchase program.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
434
On May 1, 2018, the Company also announced the Board of Directors raised the Company’s quarterly cash dividend from $0.63 to $0.73 per share, beginning with the dividend paid during the third quarter of 2018.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
435
The Company intends to increase its dividend on an annual basis, subject to declaration by the Board of Directors.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
436
The Company plans to use current cash and cash generated from ongoing operating activities to fund its share repurchase program and quarterly cash dividend.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
437
Off-Balance Sheet Arrangements and Contractual Obligations The Company has not entered into any transactions with unconsolidated entities whereby the Company has financial guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements that expose the Company to material continuing...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
438
Operating Leases As of June 30, 2018, the Company’s total future minimum lease payments under noncancelable operating leases were $9.6 billion.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
439
The Company’s retail store and other facility leases typically have original terms not exceeding 10 years and generally contain multi-year renewal options.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
440
Manufacturing Purchase Obligations The Company utilizes several outsourcing partners to manufacture sub-assemblies for the Company’s products and to perform final assembly and testing of finished products.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
441
These outsourcing partners acquire components and build product based on demand information supplied by the Company, which typically covers periods up to 150 days.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
442
The Company also obtains individual components for its products from a wide variety of individual suppliers.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
443
As of June 30, 2018, the Company expects to pay $31.4 billion under manufacturing-related supplier arrangements, substantially all of which is noncancelable.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
444
Other Purchase Obligations The Company’s other purchase obligations consist of noncancelable obligations to acquire capital assets, including product tooling and manufacturing process equipment, and noncancelable obligations related to advertising, licensing, R&D, internet and telecommunications services and other obli...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
445
As of June 30, 2018, the Company had other purchase obligations of $8.5 billion.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
446
Other Non-Current Liabilities The Company’s other non-current liabilities in the Condensed Consolidated Balance Sheets consist primarily of long-term taxes payable of $34.0 billion, and net unrecognized tax benefits and related interest and penalties of $6.8 billion.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
447
The Company plans to pay the tax payable in installments in accordance with the Act.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
448
The Company is unable to make a reasonably reliable estimate of the timing of payments related to unrecognized tax benefits due to uncertainties in the timing of tax audit outcomes.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
449
Indemnification Agreements entered into by the Company sometimes include indemnification provisions which may subject the Company to costs and damages in the event of a claim against an indemnified third party.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
450
Except as disclosed in Part I, Item 1 of this Form 10-Q in the Notes to Condensed Consolidated Financial Statements in Note 9, “Commitments and Contingencies” under the heading “Contingencies,” in the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss, o...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
451
The Company offers an iPhone Upgrade Program, which is available to customers who purchase a qualifying iPhone in the U.S., the U.K. and mainland China.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
452
The iPhone Upgrade Program provides customers the right to trade in that iPhone for a specified amount when purchasing a new iPhone, provided certain conditions are met.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
453
The Company accounts for the trade-in right as a guarantee liability and recognizes arrangement revenue net of the fair value of such right, with subsequent changes to the guarantee liability recognized within revenue.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
454
Apple Inc. | Q3 2018 Form 10-Q | 33 The Company has entered into indemnification agreements with its directors and executive officers.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
455
Under these agreements, the Company has agreed to indemnify such individuals to the fullest extent permitted by law against liabilities that arise by reason of their status as directors or officers of the Company and to advance expenses incurred by such individuals in connection with related legal proceedings.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
456
It is not possible to determine the maximum potential amount of payments the Company could be required to make under these agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each claim.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
457
While the Company maintains directors and officers liability insurance coverage, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
458
Critical Accounting Policies and Estimates The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assum...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
459
Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
460
Actual results may differ from these estimates, and such differences may be material.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
461
Note 1, “Summary of Significant Accounting Policies” in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the 2017 Form 10-K, and “Critical Accounting Policies and Estimates” in Part II, Item 7 of the 2017 Form 10-K describe the significant accounting policies ...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
462
With the exception of Income Taxes, there have been no material changes to the Company’s critical accounting policies and estimates since the 2017 Form 10-K. Income Taxes The Company records a tax provision for the anticipated tax consequences of its reported operating results.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
463
The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax cred...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
464
Deferred tax assets and liabilities are measured using the currently enacted tax rates that will be in effect for the years in which those tax assets and liabilities are expected to be realized or settled.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
465
The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
466
The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
467
The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
468
Management believes it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with future reversals of existing taxable temporary differences, will be sufficient to fully recover the Company’s deferred tax assets.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
469
In the event that the Company determines all or part of its net deferred tax assets are not realizable in the future, the Company will record an adjustment to the valuation allowance that would be charged to earnings in the period such determination is made.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
470
In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of GAAP and complex tax laws.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
471
Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on the Company’s financial condition and operating results.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
472
On December 22, 2017, the U.S. enacted the Act, which significantly changed U.S. tax law.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
473
The Act lowered the Company’s U.S. statutory federal income tax rate from 35% to 21% effective January 1, 2018, while also imposing a deemed repatriation tax on previously deferred foreign income.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
474
The Act also created a new minimum tax on certain future foreign earnings.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
475
During the first quarter of 2018, the Company’s income tax expense included a provisional estimate of $2.6 billion in accordance with the SEC Staff Accounting Bulletin No.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
476
118.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
477
This $2.6 billion provisional estimate included $1.8 billion related to the impact of remeasuring the Company’s deferred tax balances to reflect the new lower tax rate, and approximately $800 million associated with the net impact of the deemed repatriation tax.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
478
During the third quarter of 2018, the Company reduced its estimate of the deemed repatriation tax by $1.0 billion and adjusted the estimated impact of the deemed repatriation tax on unrecognized tax benefits by $700 million, resulting in the reduction of the Company’s provisional estimate from $2.6 billion to $900 mill...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
479
The impact of the adjustments to the provisional estimate for the deemed repatriation tax and unrecognized tax benefits was included in the Company’s income tax expense during the third quarter of 2018.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
480
Resolution of the provisional estimates of the Act’s effects different from the assumptions made by the Company could have a material impact on the Company’s financial condition and operating results.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
481
Apple Inc. | Q3 2018 Form 10-Q | 34 Item 3.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
482
Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the Company’s market risk during the first nine months of 2018.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
483
For a discussion of the Company’s exposure to market risk, refer to the Company’s market risk disclosures set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of the 2017 Form 10-K.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
484
Item 4.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
485
Controls and Procedures Evaluation of Disclosure Controls and Procedures Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as ...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
486
Changes in Internal Control Over Financial Reporting There were no changes in the Company’s internal control over financial reporting during the third quarter of 2018, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have ...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
487
Apple Inc. | Q3 2018 Form 10-Q | 35 PART II - OTHER INFORMATION Item 1.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
488
Legal Proceedings The Company is subject to legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
489
Except as described in Part I, Item 1 of this Form 10-Q in the Notes to Condensed Consolidated Financial Statements in Note 9, “Commitments and Contingencies” under the heading “Contingencies,” in the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss, o...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
490
The outcome of litigation is inherently uncertain.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
491
If one or more legal matters were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s consolidated financial statements for that reporting period could be materially adversely affected.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
492
See the risk factor “The Company could be impacted by unfavorable results of legal proceedings, such as being found to have infringed on intellectual property rights” in Part II, Item 1A of this Form 10-Q under the heading “Risk Factors.” The Company settled certain matters during the third quarter of 2018 that did not...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
493
Item 1A.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
494
Risk Factors The following description of risk factors includes any material changes to, and supersedes the description of, risk factors associated with the Company’s business previously disclosed in Part I, Item 1A of the 2017 Form 10-K and in Part II, Item 1A of the Forms 10-Q for the quarters ended December 30, 2017...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
495
Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
496
The following discussion of risk factors contains forward-looking statements.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
497
These risk factors may be important to understanding other statements in this Form 10-Q.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
498
The following information should be read in conjunction with the condensed consolidated financial statements and related notes in Part I, Item 1, “Financial Statements” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
499
Because of the following factors, as well as other factors affecting the Company’s financial condition and operating results, 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 per...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
500
Global and regional economic conditions could materially adversely affect the Company’s business, results of operations, financial condition and growth.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
501
The Company has international operations with sales outside the U.S. representing a majority of the Company’s total net sales.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
502
In addition, a majority of the Company’s supply chain, and its manufacturing and assembly activities, are located outside the U.S. As a result, the Company’s operations and performance depend significantly on global and regional economic conditions.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
503
Adverse macroeconomic conditions, including inflation, slower growth or recession, new or increased tariffs, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment and currency fluctuations could materially adversely affect demand for the Company’s products and services.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
504
In addition, consumer confidence and spending could be adversely affected in response to financial market volatility, negative financial news, conditions in the real estate and mortgage markets, declines in income or asset values, changes to fuel and other energy costs, labor and healthcare costs and other economic fac...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
505
In addition to an adverse impact on demand for the Company’s products, uncertainty about, or a decline in, global or regional economic conditions could have a significant impact on the Company’s suppliers, contract manufacturers, logistics providers, distributors, cellular network carriers and other channel partners.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
506
Potential effects include financial instability; inability to obtain credit to finance operations and purchases of the Company’s products; and insolvency.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
507
A downturn in the economic environment could also lead to increased credit and collectibility risk on the Company’s trade receivables; the failure of derivative counterparties and other financial institutions; limitations on the Company’s ability to issue new debt; reduced liquidity; and declines in the fair value of t...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
508
These and other economic factors could materially adversely affect the Company’s business, results of operations, financial condition and growth.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
509
Apple Inc. | Q3 2018 Form 10-Q | 36 Global markets for the Company’s products and services are highly competitive and subject to rapid technological change, and the Company may be unable to compete effectively in these markets.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
510
The Company’s products and services compete in highly competitive global markets characterized by aggressive price competition and resulting downward pressure on gross margins, frequent introduction of new products, short product life cycles, evolving industry standards, continual improvement in product price/performan...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
511
The Company’s ability to compete successfully depends heavily on its ability to ensure a continuing and timely introduction of innovative new products, services and technologies to the marketplace.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
512
The Company believes it is unique in that it designs and develops nearly the entire solution for its products, including the hardware, operating system, numerous software applications and related services.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
513
As a result, the Company must make significant investments in R&D.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
514
The Company currently holds a significant number of patents and copyrights and has registered and/or has applied to register numerous patents, trademarks and service marks.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
515
In contrast, many of the Company’s competitors seek to compete primarily through aggressive pricing and very low cost structures, and emulating the Company’s products and infringing on its intellectual property.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
516
If the Company is unable to continue to develop and sell innovative new products with attractive margins or if competitors infringe on the Company’s intellectual property, the Company’s ability to maintain a competitive advantage could be adversely affected.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
517
The Company markets certain mobile communication and media devices based on the iOS mobile operating system and also markets related services, including third-party digital content and applications.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
518
The Company faces substantial competition in these markets from companies that have significant technical, marketing, distribution and other resources, as well as established hardware, software and digital content supplier relationships; and the Company has a minority market share in the global smartphone market.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
519
Additionally, the Company faces significant competition as competitors reduce their selling prices and attempt to imitate the Company’s product features and applications within their own products or, alternatively, collaborate with each other to offer solutions that are more competitive than those they currently offer.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
520
The Company competes with business models that provide content to users for free.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
521
The Company also competes with illegitimate means to obtain third-party digital content and applications.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
522
Some of the Company’s competitors have greater experience, product breadth and distribution channels than the Company.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
523
Because some current and potential competitors have substantial resources and/or experience and a lower cost structure, they may be able to provide products and services at little or no profit or even at a loss.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
524
The Company also expects competition to intensify as competitors attempt to imitate the Company’s approach to providing components seamlessly within their individual offerings or work collaboratively to offer integrated solutions.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
525
The Company’s financial condition and operating results depend substantially on the Company’s ability to continually improve iOS and iOS devices in order to maintain their functional and design advantages.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
526
The Company is the only authorized maker of hardware using macOS, which has a minority market share in the personal computer market.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
527
This market has been contracting and is dominated by computer makers using competing operating systems, most notably Windows.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
528
In the market for personal computers and accessories, the Company faces a significant number of competitors, many of which have broader product lines, lower-priced products and a larger installed customer base.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
529
Historically, consolidation in this market has resulted in larger competitors.
0000320193-18-000100/full-submission.txt