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0000320193
20130424
10-Q
286
If the facts and circumstances underlying the factors considered change, including the estimated or actual costs incurred to provide non-software services or the estimated period the software upgrades and non-software services are expected to be provided, or should future facts and circumstances lead the Company to con...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
287
The Company records reductions to revenue for estimated commitments related to price protection and other customer incentive programs.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
288
For transactions involving price protection, the Company recognizes revenue net of the estimated amount to be refunded, provided the refund amount can be reasonably and reliably estimated and the other conditions for revenue recognition have been met.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
289
The Company’s policy requires that, if refunds cannot be reliably estimated, revenue is not recognized until reliable estimates can be made or the price protection lapses.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
290
For the Company’s other customer incentive programs, the estimated cost is recognized at the later of the date at which the Company has sold the product or the date at which the program is offered.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
291
The Company also records reductions to revenue for expected future product returns based on the Company’s historical experience.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
292
Future market conditions and product transitions may require the Company to increase customer incentive programs that could result in reductions to future revenue.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
293
Additionally, certain customer incentive programs require management to estimate the number of customers who will actually redeem the incentive.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
294
Management’s estimates are based on historical experience and the specific terms and conditions of particular incentive programs.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
295
If a greater than estimated proportion of customers redeems such incentives, the Company would be required to record additional reductions to revenue, which would have an adverse impact on the Company’s results of operations.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
296
Valuation and Impairment of Marketable Securities The Company’s investments in available-for-sale securities are reported at fair value.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
297
Unrealized gains and losses related to changes in the fair value of securities are recognized in accumulated other comprehensive income, net of tax, in the Company’s Condensed Consolidated Balance Sheets.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
298
Changes in the fair value of available-for-sale securities impact the Company’s net income only when such securities are sold or an other-than-temporary impairment is recognized.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
299
Realized gains and losses on the sale of securities are determined by specific identification of each security’s cost basis.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
300
The Company regularly reviews its investment portfolio to determine if any security is other-than-temporarily impaired, which would require the Company to record an impairment charge in the period any such determination is made.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
301
In making this judgment, the Company evaluates, among other things, the duration and extent to which the fair value of a security is less than its cost; the financial condition of the issuer and any changes thereto; and the Company’s intent to sell, or whether it will more likely than not be required to sell, the secur...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
302
The Company’s assessment on whether a security is other-than-temporarily impaired could change in the future due to new developments or changes in assumptions related to any particular security.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
303
Inventory Valuation and Valuation of Manufacturing-Related Assets and Estimated Purchase Commitment Cancellation Fees The Company must order components for its products and build inventory in advance of product shipments and has invested in manufacturing process equipment, including capital assets held at its suppliers...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
304
In addition, the Company has made prepayments to certain of its suppliers associated with long-term supply agreements to secure supply of inventory components.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
305
The Company records a write-down for inventories of components and products, including third-party products held for resale, which have become obsolete or are in excess of anticipated demand or net realizable value.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
306
The Company performs a detailed review of inventory each fiscal quarter that considers multiple factors including demand forecasts, product life cycle status, product development plans, current sales levels, and component cost trends.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
307
The Company also reviews its manufacturing-related capital assets and inventory prepayments for impairment whenever events or circumstances indicate the carrying amount of such assets may not be recoverable.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
308
If the Company determines that an asset is not recoverable, it records an impairment loss equal to the amount by which the carrying value of such an asset exceeds its fair value.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
309
The industries in which the Company competes are subject to a rapid and unpredictable pace of product and component obsolescence and demand changes.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
310
In certain circumstances the Company may be required to record additional write-downs of inventory, inventory prepayments and/or manufacturing-related capital assets.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
311
These circumstances include future demand or market conditions for the Company’s products being less favorable than forecasted, unforeseen technological changes or changes to the Company’s product development plans that negatively impact the utility of any of these assets, or significant deterioration in the financial ...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
312
Such write-downs would adversely affect the Company’s results of operations in the period when the write-downs were recorded.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
313
The Company records accruals for estimated cancellation fees related to component orders that have been cancelled or are expected to be cancelled.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
314
Consistent with industry practice, the Company acquires components through a combination of purchase orders, supplier contracts, and open orders based on projected demand information.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
315
These commitments typically cover the Company’s requirements for periods up to 150 days.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
316
If there is an abrupt and substantial decline in demand for one or more of the Company’s products, if the Company’s product development plans change, or if there is an unanticipated change in technological requirements for any of the Company’s products, then the Company may be required to record additional accruals for...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
317
Warranty Costs The Company provides for the estimated cost of warranties at the time the related revenue is recognized based on historical and projected warranty claim rates, historical and projected cost-per-claim, and knowledge of specific product failures that are outside of the Company’s typical experience.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
318
Each quarter, the Company reevaluates its estimates to assess the adequacy of its recorded warranty liabilities considering the size of the installed base of products subject to warranty protection and adjusts the amounts as necessary.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
319
If actual product failure rates or repair costs differ from estimates, revisions to the estimated warranty liabilities would be required and could materially affect the Company’s results of operations.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
320
Income Taxes The Company records a tax provision for the anticipated tax consequences of the reported results of operations.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
321
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...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
322
Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
323
The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
324
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.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
325
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.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
326
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 deferred tax assets.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
327
In the event that the Company determines all or part of the net deferred tax assets are not realizable in the future, the Company will make an adjustment to the valuation allowance that would be charged to earnings in the period such determination is made.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
328
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.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
329
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.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
330
Legal and Other Contingencies As discussed in Part II, Item 1 of this Form 10-Q under the heading “Legal Proceedings” and in Note 6, “Commitments and Contingencies” in the Notes to Condensed Consolidated Financial Statements of this Form 10-Q, the Company is subject to various legal proceedings and claims that arise in...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
331
The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
332
There is significant judgment required in both the probability determination and as to whether an exposure can be reasonably estimated.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
333
In the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss, or a material loss in excess of a recorded accrual, with respect to loss contingencies for legal and other contingencies.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
334
However, the outcome of legal proceedings and claims brought against the Company is subject to significant uncertainty.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
335
Therefore, although management considers the likelihood of such an outcome to be remote, if one or more of these 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 ma...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
336
Net Sales The following table shows net sales by operating segment and net sales and unit sales by product during the three- and six- month periods ended March 30, 2013 and March 31, 2012 (in millions, except unit sales in thousands): (a) Greater China includes China, Hong Kong and Taiwan.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
337
(b) Includes deferrals and amortization of related non-software services and software upgrade rights.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
338
(c) Includes revenue from sales on the iTunes Store, the App Store, the Mac App Store, and the iBookstore, and revenue from sales of AppleCare, licensing and other services.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
339
(d) Includes sales of hardware peripherals and Apple-branded and third-party accessories for iPhone, iPad, Mac and iPod.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
340
The Company’s fiscal year is the 52 or 53-week period that ends on the last Saturday of September.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
341
An extra week is added to the Company’s first quarter approximately every six years to realign the Company’s fiscal quarters more closely to calendar quarters.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
342
A 14th week was added to the first quarter of 2012, while the first quarter of 2013 spanned only 13 weeks.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
343
Inclusion of the 14th week increased the Company’s overall net sales and operating expenses for the first six months of 2012 compared to 2013.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
344
Product Performance iPhone Net sales of iPhone were $23.0 billion and $53.6 billion in the second quarter and first six months of 2013, respectively, representing an increase of $679 million or 3% and $7.4 billion or 16% compared to the same periods in 2012. iPhone unit sales totaled 37.4 million and 85.2 million in th...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
345
For the first six months of 2013, iPhone year-over-year growth resulted from strong demand for iPhone in all of the Company’s operating segments primarily due to the launch of iPhone 5 beginning in September 2012 and strong ongoing demand for iPhone 4 and 4S.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
346
The year-over-year impact of higher iPhone unit sales on net sales was partially offset during the second quarter and first six months of 2013 by a reduction in iPhone average selling prices as a result of a shift in product mix towards lower-priced iPhone models, particularly the iPhone 4.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
347
Net sales of iPhone accounted for 53% and 57% of the Company’s total net sales for the second quarters of 2013 and 2012, respectively, and were 55% and 54% of the Company’s total net sales during the first six months of 2013 and 2012, respectively.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
348
iPad Net sales of iPad were $8.7 billion and $19.4 billion in the second quarter and first six months of 2013, respectively, representing an increase of $2.5 billion or 40% and $4.4 billion or 29% compared to the same periods in 2012.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
349
Unit sales of iPad were 19.5 million and 42.3 million during the second quarter and first six months of 2013, respectively, an increase of 65% and 55% compared to the same periods in 2012.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
350
The year-over-year increase in net sales and unit sales was driven by strong demand for iPad in all of the Company’s operating segments as a result of the launch of iPad mini and the fourth generation iPad beginning in the first quarter of 2013.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
351
The year-over-year growth rate of iPad unit sales was higher than the growth rate of iPad net sales during the second quarter and first six months of 2013 due to a reduction in average selling prices primarily as a result of the introduction of iPad mini.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
352
Net sales of iPad accounted for 20% and 16% of the Company’s total net sales for the second quarters of 2013 and 2012, respectively, and were 20% and 18% of the Company’s total net sales during the first six months of 2013 and 2012, respectively.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
353
Mac Net sales of Mac were $5.4 billion and $11.0 billion in the second quarter and first six months of 2013, respectively.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
354
While Mac net sales during the second quarter of 2013 increased $374 million or 7% compared to the second quarter of 2012, Mac net sales decreased by $705 million or 6% during the first six months of 2013 compared to the same period in 2012.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
355
Mac unit sales decreased by 65 thousand or 2% and 1.2 million or 13% in the second quarter and first six months of 2013 compared to the same periods in 2012.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
356
Declines in Mac net sales and Mac unit sales for the first six months of 2013 were experienced to some extent in the Americas, Europe, Greater China and Rest of Asia Pacific segments and were only partially offset by increases in the Japan and the Retail segments.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
357
These declines reflect lower unit sales of both Mac desktop and Mac portable systems.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
358
Mac net sales and unit sales were negatively impacted during the first quarter of 2013 by a number of factors including supply constraints through the end of the quarter on the Company’s new iMac models that were announced in October 2012 but did not ship until the final month of that quarter; one less week in the firs...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
359
The year-over-year increase of 7% in Mac net sales during the second quarter of 2013 compared to the same period in 2012 was a result of strong demand for and improved supply of the Company’s new iMac models, partially offset by a decline in sales of Mac portable systems.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
360
Net sales of Mac accounted for 12% and 13% of the Company’s total net sales in the second quarters of 2013 and 2012, respectively, and were 11% and 14% of the Company’s total net sales during the first six months of 2013 and 2012, respectively.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
361
iTunes, Software and Services Net sales of iTunes, software and services were $4.1 billion and $7.8 billion in the second quarter and first six months of 2013, respectively, representing an increase of $943 million or 30% and $1.6 billion or 26% compared to the same periods in 2012.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
362
This increase was due primarily to growth of iTunes which generated total net sales of $2.4 billion and $4.5 billion for the second quarter and first six months of 2013 compared to net sales of $1.9 billion and $3.6 billion during the same periods in 2012. iTunes growth reflects continued growth in the installed base o...
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
363
Net sales of iTunes, software and services accounted for 9% and 8% of the Company’s total net sales for the second quarters of 2013 and 2012, respectively, and were 8% and 7% of the Company’s total net sales during the first six months of 2013 and 2012, respectively.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
364
Segment Operating Performance The Company manages its business primarily on a geographic basis.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
365
Prior to 2013, the Company’s reportable operating segments consisted of the Americas, Europe, Japan, Asia-Pacific and Retail.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
366
In 2013, the Company established a new reportable operating segment, Greater China, which was previously included in the Asia-Pacific segment.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
367
Segment data for prior periods has been reclassified to reflect establishment of the Greater China segment.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
368
The Americas segment includes both North and South America.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
369
The Europe segment includes European countries, as well as the Middle East and Africa.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
370
The Greater China segment includes China, Hong Kong and Taiwan.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
371
The Rest of Asia Pacific segment includes Australia and Asian countries, other than Japan and those countries included in the Greater China segment.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
372
The Retail segment operates Apple retail stores in 13 countries, including the U.S.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
373
The results of the Americas, Europe, Greater China, Japan and Rest of Asia Pacific segments do not include results of the Retail segment.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
374
Each operating segment provides similar hardware and software products and similar services.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
375
Further information regarding the Company’s operating segments may be found in Note 7, “Segment Information and Geographic Data” in Notes to Condensed Consolidated Financial Statements of this Form 10-Q.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
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Americas Net sales in the Americas segment increased $870 million or 7% during the second quarter of 2013 compared to the second quarter of 2012, and increased $3.5 billion or 11% during the first six months of 2013 compared to the same period in 2012.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
377
The growth in net sales during the second quarter and first six months of 2013 was primarily driven by increased demand for iPad following the launch of iPad mini and the fourth generation iPad, continuing demand for iPhone, particularly iPhone 5 and iPhone 4, and higher sales from iTunes.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
378
The growth in net sales during the second quarter of 2013 also benefited from an increase in Mac net sales as supply constraints on the new iMac eased during the quarter.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
379
These increases were partially offset by a decrease in net sales of iPod.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
380
The Americas segment represented 32% and 34% of the Company’s total net sales in the second quarter of 2013 and 2012, respectively, and 35% and 36% of total net sales for the first six months of 2013 and 2012, respectively.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
381
Europe Net sales in the Europe segment increased $993 million or 11% during the second quarter of 2013 compared to the second quarter of 2012, and increased $2.2 billion or 11% during the first six months of 2013 compared to the same period in 2012.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
382
The growth in net sales during the second quarter of 2013 was primarily driven by increased demand for iPad following the launch of iPad mini and the fourth generation iPad, higher sales from iTunes, increased net sales of the new iMac, and continuing demand for iPhone.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
383
These increases were partially offset by a decrease in net sales of iPod.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
384
The growth in net sales during the first six months of 2013 was primarily driven by increased demand for iPad and iPhone, and higher sales from iTunes.
0001193125-13-168288/full-submission.txt
0000320193
20130424
10-Q
385
These increases were partially offset by decreases in net sales of Mac and iPod.
0001193125-13-168288/full-submission.txt