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0000320193
20071115
10-K
436
Results of legal proceedings cannot be predicted with certainty.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
437
Regardless of its merit, litigation may be both time-consuming and disruptive to the Company's operations and cause significant expense and diversion of management attention.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
438
Should the Company fail to prevail in certain matters, or should several of these matters be resolved against the Company in the same reporting period, the Company's financial condition and operating results could be materially adversely affected.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
439
The Company's business is subject to the risks of international operations.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
440
The Company derives a large portion of its revenue from its international operations.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
441
As a result, its financial condition and operating results 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 versus local ...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
442
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 materially adversely affected by foreign currency exchange rate fluctuations and by international trade regulations, including tariffs and antidumping penalties.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
443
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.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
444
Weaknesses in foreign currencies, particularly the Japanese Yen and the Euro, can adversely affect demand for the Company's products and the U.S. dollar value of the Company's foreign currency-denominated sales.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
445
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 may also increase the cost of product components.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
446
The Company has used derivative instruments, such as foreign exchange forward and option positions, to hedge exposures to fluctuations in foreign currency exchange rates.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
447
The use of such hedging activities may not offset more than a portion of the adverse financial effect resulting from unfavorable movements in foreign exchange rates.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
448
Further information related to the Company's global market risks may be found in Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," under the subheading "Foreign Currency Risk," and in Part II, Item 8, "Financial Statements and Supplementary Data," at Note 1, "Summary of Significant Account...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
449
The Company's retail initiative has required and will continue to require a substantial investment and commitment of resources and is subject to numerous risks and uncertainties.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
450
Through September 29, 2007, the Company had opened 197 retail stores.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
451
The Company's retail initiative has required substantial fixed investment in equipment and leasehold improvements, information systems, inventory, and personnel.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
452
The Company has also entered into substantial operating lease commitments for retail space with terms ranging from 5 to 20 years, the majority of which are for 10 years.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
453
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.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
454
Because of their unique design elements, locations and size, these stores require substantially more investment than the Company's more typical retail stores.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
455
A substantial decline in sales, the closure or poor performance of individual or multiple stores, or the termination of the retail initiative could result in significant lease termination costs, write-offs of equipment and leasehold improvements, and severance costs that could have a material adverse impact on the Comp...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
456
Many factors unique to retail operations, some of which are beyond the Company's control, pose risks and uncertainties that could have a material adverse effect on the Retail segment's future results, cause its actual results to differ from anticipated results and have a material adverse effect on the Company's financi...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
457
These risks and uncertainties include, among other things, macro-economic factors that have a negative effect on general retail activity, inability to manage costs associated with store construction and operation, inability to sell third-party products at adequate margins, failure to manage relationships with existing ...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
458
The Company's future performance depends on support from third-party software developers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
459
If third-party software applications cease to be developed and maintained for the Company's hardware products, customers may choose not to buy the Company's products.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
460
The Company believes decisions by customers to purchase the Company's hardware products are often based on the availability of third-party application software, such as Microsoft Office.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
461
There is no assurance that third-party developers will continue to develop and maintain applications for the Company's hardware products on a timely basis or at all, and discontinuance or delay of these applications could have a material adverse effect on the Company's financial condition and operating results.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
462
The Company believes the availability of third-party applications depends in part on the developers' perception and analysis of the relative benefits of developing, maintaining, and upgrading such software for the Company's products versus Windows-based products.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
463
This analysis may be based on factors such as the perceived strength of the Company and its products, the anticipated revenue that may be generated, continued acceptance by customers of Mac OS X, and the costs of developing such applications.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
464
If the Company's minority share of the global personal computer market causes developers to question the Company's prospects, developers could be less inclined to develop or upgrade software for the Company's products and more inclined to devote their resources to developing and upgrading software for the larger Window...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
465
The Company's development of its own software applications may also negatively affect the decisions of third-party developers, such as Microsoft and Adobe, to develop, maintain, and upgrade similar or competitive software for the Company's products.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
466
Mac OS X Leopard, which became available in October 2007, includes a new feature that enables Intel-based Mac systems to run Windows XP and Windows Vista.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
467
This feature may deter developers from creating software applications for Mac OS X if such applications are already available for the Windows platform.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
468
During calendar year 2006, the Company transitioned its Mac line of computers from PowerPC to Intel microprocessors.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
469
The Company depends on third-party developers to timely develop current and future Universal applications.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
470
A Universal version of Microsoft Office and certain other important applications are currently not available.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
471
The lack of Universal applications that run on Intel-based Mac systems could have a material adverse effect on the Company's financial condition and operating results.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
472
Investment in new business strategies and initiatives could disrupt the Company's ongoing business and present risks not originally contemplated.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
473
The Company has invested, and may in the future invest, in new business strategies or acquisitions.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
474
Such endeavors may involve significant risks and uncertainties, including distraction of management from current operations, insufficient revenue to offset liabilities assumed and expenses associated with the strategy, inadequate return of capital, and unidentified issues not discovered in the Company's due diligence.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
475
Because these new ventures are inherently risky, no assurance can be given that such strategies and initiatives will be successful and will not have a material adverse effect on the Company's financial condition and operating results.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
476
The Company's future operating performance depends on the performance of distributors and other resellers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
477
The Company distributes its products through wholesalers, resellers, national and regional retailers, value-added resellers, and cataloguers, many of whom distribute products from competing manufacturers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
478
The Company also sells many of its products and resells third-party products in most of its major markets directly to end-users, certain education customers, and certain resellers through its online and retail stores.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
479
iPhone is distributed through the Company and its exclusive cellular network carriers' distribution channels.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
480
Many resellers operate on narrow product margins and have been negatively affected in the past by weak economic conditions.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
481
Some resellers have perceived the expansion of the Company's direct sales as conflicting with their business interests as distributors and resellers of the Company's products.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
482
Such a perception could discourage resellers from investing resources in the distribution and sale of the Company's products or lead them to limit or cease distribution of those products.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
483
The Company's financial condition and operating results could be materially adversely affected if the financial condition of these resellers weakens, if resellers stopped distributing the Company's products, or if uncertainty regarding demand for the Company's products caused resellers to reduce their ordering and mark...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
484
The Company has invested and will continue to invest in programs to enhance reseller sales, including staffing selected resellers' stores with Company employees and contractors and improving product placement displays.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
485
These programs could require a substantial investment while providing no assurance of return or incremental revenue.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
486
The Company is exposed to credit risk on its accounts receivable and prepayments related to long-term supply agreements.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
487
This risk is heightened during periods when economic conditions worsen.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
488
A substantial majority of the Company's outstanding trade receivables are not covered by collateral or credit insurance.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
489
The Company also has unsecured non-trade receivables resulting from the sale by the Company of components to vendors who manufacture sub-assemblies or assemble final products for the Company.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
490
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, of which $208 million had been used as of September 29, 2007.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
491
While the Company has procedures 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 effectively limit its credit risk and avoid losses.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
492
The Company is subject to risks associated with laws and regulations related to health, safety and environmental protection.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
493
The Company's products and services, and the production and distribution of those goods and services, are subject to a variety of laws and regulations.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
494
These may require the Company to offer customers the ability to return a product at the end of its useful life and place responsibility for environmentally safe disposal or recycling with the Company.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
495
Such laws and regulations have recently been passed in several jurisdictions in which the Company operates, including various countries within Europe and Asia, certain Canadian provinces and certain states within the U.S.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
496
Although the Company does not anticipate any material adverse effects 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 and operating results.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
497
Changes in the Company's tax rates could affect its future results.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
498
The Company's future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or by changes in tax laws or their interpretation.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
499
The Company is subject to the continuous examination of its income tax returns by the Internal Revenue Service and other tax authorities.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
500
The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for taxes.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
501
There can be no assurance that the outcomes from these examinations will not have a material adverse effect on the Company's financial condition and operating results.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
502
The Company is subject to risks associated with the availability and coverage of insurance.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
503
For certain risks, the Company does not maintain insurance coverage because of cost and/or availability.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
504
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 financial condition and operating results.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
505
Item 1B.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
506
Unresolved Staff Comments None.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
507
Item 2.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
508
Properties The Company's headquarters are located in Cupertino, California.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
509
The Company has a manufacturing facility in Cork, Ireland.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
510
As of September 29, 2007, the Company leased approximately 3.7 million square feet of space, primarily in the U.S., and to a lesser extent, in Europe, Japan, Canada, and the Asia Pacific region.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
511
The major facility leases are generally for terms of 3 to 15 years and generally provide renewal options for terms of 3 to 7 additional years.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
512
Leased space includes approximately 1.5 million square feet of retail space, a majority of which is in the U.S.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
513
Lease terms for retail space range from 5 to 20 years, the majority of which are for 10 years, and often contain multi-year renewal options.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
514
The Company owns a 367,000 square-foot manufacturing facility in Cork, Ireland that also houses a customer support call center.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
515
The Company also owns 805,000 square feet of facilities in Sacramento, California that include warehousing and distribution operations, as well as a customer support call center.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
516
In addition, the Company owns approximately 2.4 million square feet of facilities for research and development and corporate functions in Cupertino, California, including approximately 1.0 million square feet purchased in 2007 and 2006 for the future development of the Company's second corporate campus in Cupertino, Ca...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
517
Outside the U.S., the Company owns additional facilities totaling approximately 129,000 square feet.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
518
The Company believes its existing facilities and equipment are well maintained and in good operating condition.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
519
The Company has invested in internal capacity and strategic relationships with outside manufacturing vendors, and therefore believes it has adequate manufacturing capacity for the foreseeable future.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
520
The Company continues to make investments in capital equipment as needed to meet anticipated demand for its products.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
521
Item 3.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
522
Legal Proceedings The Company is subject to various legal proceedings and claims as of September 29, 2007, the end of the annual period covered by this report, that are discussed below.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
523
The Company is also subject to certain other legal proceedings and claims that have arisen in the ordinary course of business and which have not been fully adjudicated.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
524
In the opinion of management, the Company does not have a potential liability related to any current legal proceedings and claims that would individually or in the aggregate have a material adverse effect on its financial condition or operating results.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
525
However, the results of legal proceedings cannot be predicted with certainty.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
526
Should the Company fail to prevail in any of these legal matters or should several of these legal matters be resolved against the Company in the same reporting period, the operating results of a particular reporting period could be materially adversely affected.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
527
The Company settled certain matters during the fourth quarter of 2007 that did not individually or in the aggregate have a material impact on the Company's results of operations.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
528
Apple Computer, Inc. v. Burst.com, Inc.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
529
The Company filed an action for declaratory judgment against defendant Burst.com, Inc. on January 4, 2006 in the United States District Court for the Northern District of California.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
530
The Company seeks declaratory judgment that U.S. Patent Nos.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
531
4,963,995, 5,164,839, 5,057,932 and 5,995,705 ("Burst patents") are invalid and not infringed by the Company.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
532
Burst filed an answer and counterclaim on April 17, 2006 adding infringement allegations relating to U.S. Patent No.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
533
5,995,705.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
534
Apple counterclaimed for declaratory judgment that each of these patents is invalid, not infringed and unenforceable.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
535
Burst alleges that the following Apple products and services infringe the four patents at issue: iTunes Store, iPod devices, iTunes software, iLife software (GarageBand, iMovie, iWeb) separately and in conjunction with the .Mac service and Apple computers sold with or running iTunes or iLife.
0001047469-07-009340/full-submission.txt