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0000320193
20070202
10-Q
965
Because these new ventures are inherently risky, no assurance can be given that such strategies and initiatives will be successful and will not materially adversely affect the Company’s business, operating results or financial condition.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
966
Declines in the sales of the Company’s professional products, software, accessories, or service and support contracts, or increases in sales of consumer products, including iPods, may negatively impact the Company’s gross margin and operating margin percentages.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
967
The Company’s professional products, including MacBook Pro and Mac Pro systems, software, accessories, and service and support contracts, generally have higher gross margins than the Company’s consumer products, including the iMac, Mac mini, MacBook, iPod, and content from the iTunes Store.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
968
A shift in sales mix away from higher margin professional products towards lower margin consumer products could adversely affect the Company’s future gross margin and operating margin percentages.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
969
The Company’s traditional professional customers may choose to buy consumer products, specifically the iMac and MacBook, instead of professional products.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
970
Professional users may choose to buy the iMac due to its relative price performance and unique design featuring a flat panel screen.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
971
Professional users may also choose to purchase MacBooks instead of the Company’s professional-oriented portable products due to their price performance and screen size.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
972
Additionally, significant future growth in iPod sales without corresponding growth in higher margin product sales could also reduce gross margin and operating margin percentages.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
973
The Company expects its quarterly revenue and operating results to fluctuate for a variety of reasons.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
974
The Company’s profit margins vary among its products and its distribution channels.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
975
The Company’s direct sales, primarily through its retail and online stores, generally have higher associated profitability than its indirect sales.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
976
In addition the Company’s gross margin and operating margin percentages, as well as overall profitability may be adversely impacted as a result of a shift in product, geographic or channel mix, or new product announcements, including the iPhone.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
977
The Company generally sells more product during the third month of each quarter than it does during either of the first two months, a pattern typical in the personal computer and consumer electronics industries.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
978
This sales pattern can produce pressure on the Company’s internal infrastructure during the third month of a quarter and may adversely impact the Company’s ability to predict its financial results accurately.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
979
Furthermore, the Company has typically experienced greater net sales in the first and fourth fiscal quarters compared to other quarters in the fiscal year due to seasonal demand related to the holiday season and the beginning of the school year.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
980
Developments late in a quarter, such as lower-than-anticipated demand for the Company’s products, an internal systems failure, or failure of one of the Company’s key logistics, components suppliers, or manufacturing partners, could have significant adverse impacts on the Company and its results of operations and financ...
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
981
The Company has higher research and development and selling, general and administrative costs, as a percentage of revenue, than many of its competitors.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
982
The Company’s ability to compete successfully and maintain attractive gross margins and revenue growth is heavily dependent upon its ability to ensure a continuing and timely flow of innovative and competitive products and technologies to the marketplace.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
983
The Company is generally unique in that it designs and develops the entire solution for its personal computers and consumer electronics products, including the hardware, software, and related services.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
984
As a result, the Company generally incurs higher research and development costs as a percentage of revenue than its competitors.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
985
Many of these competitors seek to compete aggressively on price and maintain very low cost structures.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
986
Further, as a result of the expansion of the Company’s Retail segment and costs associated with marketing the Company’s brand including its unique operating system, the Company incurs higher selling costs as a percentage of revenue than many of its competitors.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
987
If the Company is unable to continue to develop and sell innovative new products with attractive gross margins, its results of operations may be materially adversely affected by its operating cost structure.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
988
The Company is exposed to credit risk on its accounts receivable and prepayments related to long-term supply agreements.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
989
This risk is heightened during periods when economic conditions worsen.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
990
The Company distributes its products through third-party computer resellers and retailers and directly to certain educational institutions and commercial customers.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
991
A substantial majority of the Company’s outstanding trade receivables are not covered by collateral or credit insurance.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
992
The Company also has unsecured non-trade receivables from certain of its manufacturing vendors resulting from the sale by the Company of raw material components to these manufacturing vendors who manufacture sub-assemblies or assemble final products for the Company.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
993
In addition, the Company has entered into long-term supply agreements to secure supply of NAND flash-memory and has prepaid a total of $1.25 billion under these agreements.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
994
While the Company has procedures in place to monitor and limit exposure to credit risk on its trade and non-trade receivables as well as long-term prepayments, there can be no assurance such procedures will be effective in limiting its credit risk and avoiding losses.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
995
Additionally, if the global economy or regional economies deteriorate, the Company would be more likely to incur a material loss or losses as a result of the weakening financial condition of one or more of its customers or manufacturing vendors.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
996
The Company’s success depends largely on its ability to attract and retain key personnel.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
997
Much of the future success of the Company depends on the continued service and availability of skilled personnel, including its Chief Executive Officer, members of its executive team, and those in technical, marketing and staff positions.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
998
Experienced personnel in the technology industry are in high demand and competition for their talents is intense, especially in the Silicon Valley, where the majority of the Company’s key employees are located.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
999
The Company has relied on its ability to grant stock options as one mechanism for recruiting and retaining this highly skilled talent.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,000
Recent accounting regulations requiring the expensing of stock options have resulted in increased stock-based compensation expense, which may cause the Company to reduce the amount of stock-based awards issued to employees.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,001
There can be no assurance that the Company will continue to successfully attract and retain key personnel.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,002
The Company is subject to risks associated with the availability and coverage of insurance.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,003
For certain risks, the Company does not maintain insurance coverage because of cost and/or availability.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,004
Because the Company retains some portion of its insurable risks, and in some cases self insures completely, unforeseen or catastrophic losses in excess of insured limits may have a material adverse effect on the Company’s results of operations and financial position.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,005
Failure of information technology systems and breaches in the security of data upon which the Company relies could adversely affect the Company’s future operating results.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,006
Information technology system failures and breaches of data security could disrupt the Company’s ability to function in the normal course of business by potentially causing delays or cancellation of customer orders, impeding the manufacture or shipment of products, or resulting in the unintentional disclosure of custom...
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,007
Management has taken steps to address these concerns for its own systems by implementing sophisticated network security and internal control measures.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,008
However, there can be no assurance that a system failure or data security breach of the Company or a third-party vendor will not have a material adverse effect on the Company’s results of operations.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,009
The Company’s business is subject to the risks of international operations.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,010
A large portion of the Company’s revenue is derived from its international operations.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,011
As a result, the Company’s operating results and financial condition could be significantly affected by risks associated with international activities, including economic and labor conditions, political instability, tax laws (including U.S. taxes on foreign subsidiaries), and changes in the value of the U.S. dollar ver...
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,012
The Company’s primary exposure to movements in foreign currency exchange rates relate to non-U.S. dollar denominated sales in Europe, Japan, Australia, Canada, and certain parts of Asia and non-dollar denominated operating expenses incurred throughout the world.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,013
Weaknesses in foreign currencies, particularly the Japanese Yen and the Euro, can adversely impact consumer demand for the Company’s products and the U.S. dollar value of the Company’s foreign currency denominated sales.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,014
Conversely, a strengthening in these and other foreign currencies can cause the Company to modify international pricing and affect the value of the Company’s foreign denominated sales, and in some cases, may also increase the cost to the Company of some product components.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,015
Margins on sales of the Company’s products in foreign countries, and on sales of products that include components obtained from foreign suppliers, can be adversely affected by foreign currency exchange rate fluctuations and by international trade regulations, including tariffs and antidumping penalties.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,016
Derivative instruments, such as foreign exchange forward and option positions have been utilized by the Company to hedge exposures to fluctuations in foreign currency exchange rates.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,017
The use of such hedging activities may not offset more than a portion of the adverse financial impact resulting from unfavorable movements in foreign exchange rates.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,018
Further information related to the Company’s global market risks may be found in Part II, Item 7A of the 2006 Form 10-K for the year ended September 30, 2006 under the subheading “Foreign Currency Risk” and may be found in Part II, Item 8 of the 2006 Form 10-K at Notes 1 and 3 of Notes to Consolidated Financial Stateme...
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,019
The Company is subject to risks associated with environmental regulations.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,020
Production and marketing of products in certain states and countries may subject the Company to environmental and other regulations including, in some instances, the requirement to provide customers the ability to return product at the end of its useful life, and place responsibility for environmentally safe disposal o...
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,021
Such laws and regulations have recently been passed in several jurisdictions in which the Company operates, including various European Union member countries, Japan, and certain states within the U.S.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,022
Although the Company does not anticipate any material adverse effects in the future based on the nature of its operations and the thrust of such laws, there is no assurance such existing laws or future laws will not have a material adverse effect on the Company’s financial condition, liquidity, or results of operations...
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,023
Changes in accounting rules could affect the Company’s future operating results.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,024
Financial statements are prepared in accordance with U.S. generally accepted accounting principles.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,025
These principles are subject to interpretation by various governing bodies, including the FASB and the SEC, who create and interpret appropriate accounting standards.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,026
A change from current accounting standards could have a significant effect on the Company’s results of operations.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,027
In December 2004, the FASB issued new guidance that addresses the accounting for share-based payments, SFAS No.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,028
123R, which the Company adopted in 2006.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,029
Although the adoption of SFAS No.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,030
123R has had and is expected to continue to have a significant impact on the Company’s results of operations, future changes to various assumptions used to determine the fair-value of awards issued or the amount and type of equity awards granted create uncertainty as to the amount of future stock-based compensation exp...
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,031
Changes in the Company’s tax rates could affect its future results.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,032
The Company’s future effective tax rates could be favorably or unfavorably affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of the Company’s deferred tax assets and liabilities, or by changes in tax laws or their interpretation.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,033
In addition, the Company is subject to the continuous examination of its income tax returns by the Internal Revenue Service and other tax authorities.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,034
The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,035
There can be no assurance the outcomes from these continuous examinations will not have an adverse effect on the Company’s results of operations and financial condition.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,036
The Company’s stock price may be volatile.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,037
The Company’s stock has at times experienced substantial price volatility as a result of variations between its actual and anticipated financial results and as a result of announcements by the Company and its competitors.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,038
The stock market has, at times, experienced extreme price and volume fluctuations that have affected the market price of many technology companies in ways that may have been unrelated to the operating performance of these companies.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,039
Furthermore, the Company believes its stock price reflects high future growth and profitability expectations.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,040
If the Company fails to meet these expectations its stock price may significantly decline.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,041
In addition, increases in the Company’s stock price may result in greater dilution of earnings per share.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,042
For additional discussion of these and other factors affecting the Company’s future results and financial condition, see Item 1, “Business” in the Company’s 2006 Form 10-K.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,043
Item 6.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,044
Exhibits (a) Index to Exhibits Incorporated by Reference Exhibit Number Exhibit Description Form Filing Date/ Period End Date Filed/Furnished Herewith 3.1 Restated Articles of Incorporation, filed with the Secretary of State of the State of California on January 27, 1988.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,045
S-3 7/27/88 3.2 Certificate of Amendment to Restated Articles of Incorporation, filed with the Secretary of State of the State of California on May 4, 2000.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,046
10-Q 5/11/00 3.3 By-Laws of the Company, as amended through June 7, 2004.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,047
10-Q 6/26/04 3.4 Certificate of Amendment to Restated Articles of Incorporation, as amended, filed with the Secretary of State of the State of California on February 25, 2005.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,048
10-Q 3/26/05 3.5 Certificate of Ownership as filed with the Secretary of State of the State of California on January 9, 2007.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,049
8-K 1/9/07 4.1** Form of Stock Certificate of the Registrant.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,050
X 4.9 Certificate of Determination of Preferences of Series A Non-Voting Convertible Preferred Stock of Apple Computer, Inc. 10-K 9/26/97 10.A.3 Apple Computer, Inc. Savings and Investment Plan, as amended and restated effective as of October 1, 1990.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,051
10-K 9/27/91 10.A.3-1 Amendment of Apple Computer, Inc. Savings and Investment Plan dated March 1, 1992.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,052
10-K 9/25/92 10.A.3-2 Amendment No.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,053
2 to the Apple Computer, Inc. Savings and Investment Plan.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,054
10-Q 3/28/97 10.A.5 1990 Stock Option Plan, as amended through November 5, 1997.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,055
10-Q 12/26/97 10.A.6 Apple Computer, Inc.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,056
Employee Stock Purchase Plan, as amended through April 21, 2005.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,057
10-Q 3/26/05 10.A.8 Form of Indemnification Agreement between the Registrant and each officer of the Registrant.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,058
10-K 9/26/97 10.A.43 NeXT Computer, Inc. 1990 Stock Option Plan, as amended.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,059
S-8 3/21/97 10.A.49 1997 Employee Stock Option Plan, as amended through October 19, 2001.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,060
10-K 9/28/02 10.A.50 1997 Director Stock Option Plan.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,061
10-Q 3/27/98 10.A.51 2003 Employee Stock Plan, as amended through November 9, 2005.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,062
10-K 9/24/05 10.A.52 Reimbursement Agreement dated as of May 25, 2001 by and between the Registrant and Steven P. Jobs.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,063
10-Q 6/29/02 10.A.53 Option Cancellation and Restricted Stock Award Agreement dated as of March 19, 2003 by and between the Registrant and Steven P. Jobs.
0001104659-07-006648/full-submission.txt
0000320193
20070202
10-Q
1,064
10-Q 6/28/03 10.A.54 Form of Restricted Stock Unit Award Agreement.
0001104659-07-006648/full-submission.txt