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0000320193
20180801
10-Q
630
Apple Inc. | Q3 2018 Form 10-Q | 40 The outcome of litigation is inherently uncertain.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
631
If one or more legal matters were resolved against the Company or an indemnified third party 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
632
Further, such an outcome could result in significant compensatory, punitive or trebled monetary damages, disgorgement of revenue or profits, remedial corporate measures or injunctive relief against the Company that could materially adversely affect its financial condition and operating results.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
633
While the Company maintains insurance coverage for certain types of claims, 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
634
The Company is subject to laws and regulations worldwide, changes to which could increase the Company’s costs and individually or in the aggregate adversely affect the Company’s business.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
635
The Company is subject to laws and regulations affecting its domestic and international operations in a number of areas.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
636
These U.S. and foreign laws and regulations affect the Company’s activities including, but not limited to, in areas of labor, advertising, digital content, consumer protection, real estate, billing, e-commerce, promotions, quality of services, telecommunications, mobile communications and media, television, intellectua...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
637
By way of example, laws and regulations related to mobile communications and media devices in the many jurisdictions in which the Company operates are extensive and subject to change.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
638
Such changes could include, among others, restrictions on the production, manufacture, distribution and use of devices, locking devices to a carrier’s network, or mandating the use of devices on more than one carrier’s network.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
639
These devices are also subject to certification and regulation by governmental and standardization bodies, as well as by cellular network carriers for use on their networks.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
640
These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications, or delays in product shipment dates, or could preclude the Company from selling certain products.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
641
Compliance with these laws, regulations and similar requirements may be onerous and expensive, and they may be inconsistent from jurisdiction to jurisdiction, further increasing the cost of compliance and doing business.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
642
Any such costs, which may rise in the future as a result of changes in these laws and regulations or in their interpretation, could individually or in the aggregate make the Company’s products and services less attractive to the Company’s customers, delay the introduction of new products in one or more regions, or caus...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
643
The Company has implemented policies and procedures designed to ensure compliance with applicable laws and regulations, but there can be no assurance that the Company’s employees, contractors, or agents will not violate such laws and regulations or the Company’s policies and procedures.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
644
The Company’s business is subject to the risks of international operations.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
645
The Company derives a significant portion of its revenue and earnings from its international operations.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
646
Compliance with applicable U.S. and foreign laws and regulations, such as import and export requirements, anti-corruption laws, tax laws, foreign exchange controls and cash repatriation restrictions, data privacy requirements, environmental laws, labor laws and anti-competition regulations, increases the costs of doing...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
647
Although the Company has implemented policies and procedures to comply with these laws and regulations, a violation by the Company’s employees, contractors or agents could nevertheless occur.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
648
In some cases, compliance with the laws and regulations of one country could violate the laws and regulations of another country.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
649
Violations of these laws and regulations could materially adversely affect the Company’s brand, international growth efforts and business.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
650
The Company also could be significantly affected by other risks associated with international activities including, but not limited to, economic and labor conditions, increased duties, taxes and other costs, political instability and international trade disputes.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
651
Margins on sales of the Company’s products in foreign countries, and on sales of products that include components obtained from foreign suppliers, could be materially adversely affected by international trade regulations, including duties, tariffs and antidumping penalties.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
652
The Company is also exposed to credit and collectibility risk on its trade receivables with customers in certain international markets.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
653
There can be no assurance the Company can effectively limit its credit risk and avoid losses.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
654
Apple Inc. | Q3 2018 Form 10-Q | 41 The Company’s retail stores have required and will continue to require a substantial investment and commitment of resources and are subject to numerous risks and uncertainties.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
655
The Company’s retail stores have required substantial investment in equipment and leasehold improvements, information systems, inventory and personnel.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
656
The Company also has entered into substantial operating lease commitments for retail space.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
657
Certain stores have been designed and built to serve as high-profile venues to promote brand awareness and serve as vehicles for corporate sales and marketing activities.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
658
Because of their unique design elements, locations and size, these stores require substantially more investment than the Company’s more typical retail stores.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
659
Due to the high cost structure associated with the Company’s retail stores, a decline in sales or the closure or poor performance of individual or multiple stores could result in significant lease termination costs, write-offs of equipment and leasehold improvements and severance costs.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
660
Many factors unique to retail operations, some of which are beyond the Company’s control, pose risks and uncertainties.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
661
These risks and uncertainties include, but are not limited to, macro-economic factors that could have an adverse effect on general retail activity, as well as the Company’s inability to manage costs associated with store construction and operation, the Company’s failure to manage relationships with its existing retail ...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
662
Investment in new business strategies and acquisitions could disrupt the Company’s ongoing business and present risks not originally contemplated.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
663
The Company has invested, and in the future may invest, in new business strategies or acquisitions.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
664
Such endeavors may involve significant risks and uncertainties, including distraction of management from current operations, greater than expected liabilities and expenses, inadequate return of capital and unidentified issues not discovered in the Company’s due diligence.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
665
These new ventures are inherently risky and may not be successful.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
666
The Company’s business and reputation may be impacted by information technology system failures or network disruptions.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
667
The Company may be subject to information technology system failures or network disruptions caused by natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins, or other events or disruptions.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
668
System redundancy and other continuity measures may be ineffective or inadequate, and the Company’s business continuity and disaster recovery planning may not be sufficient for all eventualities.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
669
Such failures or disruptions could adversely impact the Company’s business by, among other things, preventing access to the Company’s online services, interfering with customer transactions or impeding the manufacturing and shipping of the Company’s products.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
670
These events could materially adversely affect the Company’s reputation, financial condition and operating results.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
671
There may be losses or unauthorized access to or releases of confidential information, including personally identifiable information, that could subject the Company to significant reputational, financial, legal and operational consequences.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
672
The Company’s business requires it to use and store confidential information, including, among other things, personally identifiable information (“PII”) with respect to the Company’s customers and employees.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
673
The Company devotes significant resources to network and data security, including through the use of encryption and other security measures intended to protect its systems and data.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
674
But these measures cannot provide absolute security, and losses or unauthorized access to or releases of confidential information may still occur, which could materially adversely affect the Company’s reputation, financial condition and operating results.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
675
The Company’s business also requires it to share confidential information with suppliers and other third parties.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
676
Although the Company takes steps to secure confidential information that is provided to third parties, such measures may not be effective and losses or unauthorized access to or releases of confidential information may still occur, which could materially adversely affect the Company’s reputation, financial condition an...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
677
For example, the Company may experience a security breach impacting the Company’s information technology systems that compromises the confidentiality, integrity or availability of confidential information.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
678
Such an incident could, among other things, impair the Company’s ability to attract and retain customers for its products and services, impact the Company’s stock price, materially damage supplier relationships, and expose the Company to litigation or government investigations, which could result in penalties, fines or...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
679
Although malicious attacks perpetrated to gain access to confidential information, including PII, affect many companies across various industries, the Company is at a relatively greater risk of being targeted because of its high profile and the value of the confidential information it creates, owns, manages, stores and...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
680
Apple Inc. | Q3 2018 Form 10-Q | 42 The Company has implemented systems and processes intended to secure its information technology systems and prevent unauthorized access to or loss of sensitive data, including through the use of encryption and authentication technologies.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
681
As with all companies, these security measures may not be sufficient for all eventualities and may be vulnerable to hacking, employee error, malfeasance, system error, faulty password management or other irregularities.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
682
For example, third parties may attempt to fraudulently induce employees or customers into disclosing user names, passwords or other sensitive information, which may in turn be used to access the Company’s information technology systems.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
683
To help protect customers and the Company, the Company monitors its services and systems for unusual activity and may freeze accounts under suspicious circumstances, which, among other things, may result in the delay or loss of customer orders or impede customer access to the Company’s products and services.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
684
In addition to the risks relating to general confidential information described above, the Company may also be subject to specific obligations relating to health data and payment card data.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
685
Health data may be subject to additional privacy, security and breach notification requirements, and the Company may be subject to audit by governmental authorities regarding the Company’s compliance with these obligations.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
686
If the Company fails to adequately comply with these rules and requirements, or if health data is handled in a manner not permitted by law or under the Company’s agreements with healthcare institutions, the Company could be subject to litigation or government investigations, may be liable for associated investigatory e...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
687
Under payment card rules and obligations, if cardholder information is potentially compromised, the Company could be liable for associated investigatory expenses and could also incur significant fees or fines if the Company fails to follow payment card industry data security standards.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
688
The Company could also experience a significant increase in payment card transaction costs or lose the ability to process payment cards if it fails to follow payment card industry data security standards, which would materially adversely affect the Company’s reputation, financial condition and operating results.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
689
While the Company maintains insurance coverage that is intended to address certain aspects of data security risks, 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
690
The Company’s business is subject to a variety of U.S. and international laws, rules, policies and other obligations regarding data protection.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
691
The Company is subject to federal, state and international laws relating to the collection, use, retention, security and transfer of PII.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
692
In many cases, these laws apply not only to third-party transactions, but also may restrict transfers of PII among the Company and its international subsidiaries.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
693
Several jurisdictions have passed laws in this area, and other jurisdictions are considering imposing additional restrictions.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
694
These laws continue to develop and may be inconsistent from jurisdiction to jurisdiction.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
695
Complying with emerging and changing international requirements may cause the Company to incur substantial costs or require the Company to change its business practices.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
696
Noncompliance could result in significant penalties or legal liability.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
697
The Company makes statements about its use and disclosure of PII through its privacy policy, information provided on its website and press statements.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
698
Any failure by the Company to comply with these public statements or with other federal, state or international privacy-related or data protection laws and regulations could result in proceedings against the Company by governmental entities or others.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
699
In addition to reputational impacts, penalties could include ongoing audit requirements and significant legal liability.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
700
The Company’s success depends largely on the continued service and availability of key personnel.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
701
Much of the Company’s future success depends on the continued availability and service of key personnel, including its Chief Executive Officer, executive team and other highly skilled employees.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
702
Experienced personnel in the technology industry are in high demand and competition for their talents is intense, especially in Silicon Valley, where most of the Company’s key personnel are located.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
703
The Company’s business may be impacted by political events, international trade disputes, war, terrorism, natural disasters, public health issues, industrial accidents and other business interruptions.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
704
Political events, international trade disputes, war, terrorism, natural disasters, public health issues, industrial accidents and other business interruptions could harm or disrupt international commerce and the global economy, and could have a material adverse effect on the Company and its customers, suppliers, contra...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
705
International trade disputes could result in tariffs and other protectionist measures that could adversely affect the Company’s business.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
706
Tariffs could increase the cost of the Company’s products and the components and raw materials that go into making them.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
707
These increased costs could adversely impact the gross margin that the Company earns on sales of its products.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
708
Tariffs could also make the Company’s products more expensive for customers, which could make the Company’s products less competitive and reduce consumer demand.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
709
Countries may also adopt other protectionist measures that could limit the Company’s ability to offer its products and services.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
710
Political uncertainty surrounding international trade disputes and protectionist measures could also have a negative effect on consumer confidence and spending, which could adversely affect the Company’s business.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
711
Apple Inc. | Q3 2018 Form 10-Q | 43 Many of the Company’s operations and facilities as well as critical business operations of the Company’s suppliers and contract manufacturers are in locations that are prone to earthquakes and other natural disasters.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
712
In addition, such operations and facilities are subject to the risk of interruption by fire, power shortages, nuclear power plant accidents and other industrial accidents, terrorist attacks and other hostile acts, labor disputes, public health issues and other events beyond the Company’s control.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
713
Global climate change could result in certain types of natural disasters occurring more frequently or with more intense effects.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
714
Such events could make it difficult or impossible for the Company to manufacture and deliver products to its customers, create delays and inefficiencies in the Company’s supply and manufacturing chain, and result in slowdowns and outages to the Company’s service offerings.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
715
Following an interruption to its business, the Company could require substantial recovery time, experience significant expenditures in order to resume operations, and lose significant revenue.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
716
Because the Company relies on sole or limited sources for the supply and manufacture of many critical components, a business interruption affecting such sources would exacerbate any negative consequences to the Company.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
717
The Company’s operations are also subject to the risks of industrial accidents at its suppliers and contract manufacturers.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
718
While the Company’s suppliers are required to maintain safe working environments and operations, an industrial accident could occur and could result in disruption to the Company’s business and harm to the Company’s reputation.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
719
Should major public health issues, including pandemics, arise, the Company could be adversely affected by more stringent employee travel restrictions, additional limitations in freight services, governmental actions limiting the movement of products between regions, delays in production ramps of new products and disrup...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
720
The Company expects its quarterly revenue and operating results to fluctuate.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
721
The Company’s profit margins vary across its products and distribution channels.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
722
The Company’s software, accessories, and service and support contracts generally have higher gross margins than certain of the Company’s other products.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
723
Gross margins on the Company’s hardware products vary across product lines and can change over time as a result of product transitions, pricing and configuration changes, and component, warranty, and other cost fluctuations.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
724
The Company’s direct sales generally have higher associated gross margins than its indirect sales through its channel partners.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
725
In addition, the Company’s gross margin and operating margin percentages, as well as overall profitability, may be materially adversely impacted as a result of a shift in product, geographic or channel mix, component cost increases, the strengthening U.S. dollar, price competition, or the introduction of new products, ...
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
726
The Company has typically experienced higher net sales in its first quarter compared to other quarters due in part to seasonal holiday demand.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
727
Additionally, new product introductions can significantly impact net sales, product costs and operating expenses.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
728
Further, the Company generates a majority of its net sales from a single product and a decline in demand for that product could significantly impact quarterly net sales.
0000320193-18-000100/full-submission.txt
0000320193
20180801
10-Q
729
The Company could also be subject to unexpected developments late in a quarter, such as lower-than-anticipated demand for the Company’s products, issues with new product introductions, an internal systems failure, or failure of one of the Company’s logistics, components supply, or manufacturing partners.
0000320193-18-000100/full-submission.txt