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0000320193
20071115
10-K
836
Plaintiff filed this purported class action on August 24, 2006, in the United States District Court for the Northern District of California against the Company and certain of the Company's current and former officers and directors alleging improper backdating of stock option grants to maximize certain defendants' profi...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
837
On January 19, 2007, the Court appointed the New York City Employees' Retirement System as lead plaintiff.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
838
On March 23, 2007, plaintiffs filed a Consolidated Class Action Complaint.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
839
The Consolidated Complaint purports to be brought on behalf of several classes of holders of the Company's stock and asserts claims under Section 14(a) and 20(a) of the Securities Exchange Act as well as state law.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
840
The Consolidated Complaint seeks rescission of amendments to various stock option and other incentive compensation plans, an accounting and damages in an unspecified amount.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
841
Defendants filed a motion to dismiss on June 8, 2007, which was heard on September 7, 2007.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
842
Item 4.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
843
Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the fourth quarter of the Company's fiscal year ended September 29, 2007.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
844
PART II Item 5.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
845
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company's common stock is traded on the over-the-counter market and is quoted on the NASDAQ Global Select Market under the symbol AAPL and on the Frankfurt Stock Exchange under the symbol APCD.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
846
Price Range of Common Stock The price range per share of common stock presented below represents the highest and lowest sales prices for the Company's common stock on the NASDAQ Global Select Market during each quarter of the two most recent fiscal years.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
847
Holders As of November 2, 2007, there were 30,336 shareholders of record.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
848
Dividends The Company did not declare or pay cash dividends in either fiscal 2007 or 2006.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
849
The Company anticipates that, for the foreseeable future, it will retain any earnings for use in the operation of its business.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
850
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
851
Company Stock Performance The following graph shows a five-year comparison of cumulative total shareholder return, calculated on a dividend reinvested basis, for the Company, the S&P 500 Composite Index (the "S&P 500") and the S&P Computers (Hardware) Index (the "Industry Index").
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
852
The graph assumes $100 was invested in each of the Company's common stock, the S&P 500, and the Industry Index on September 30, 2002.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
853
Data points on the graph are annual.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
854
Note that historic stock price performance is not necessarily indicative of future stock price performance.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
855
Item 6.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
856
Selected Financial Data The information set forth below is not necessarily indicative of results of future operations, and should be read in conjunction with Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes theret...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
857
Item 7.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
858
Management's Discussion and Analysis of Financial Condition and Results of Operations This section and other parts of this Form 10-K contain forward-looking statements that involve risks and uncertainties.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
859
Forward-looking statements can also be identified by words such as "anticipates," "expects," "believes," "plans," "predicts," and similar terms.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
860
Forward-looking statements are not guarantees of future performance and the Company's actual results may differ significantly from the results discussed in the forward-looking statements.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
861
Factors that might cause such differences include, but are not limited to, those discussed in the subsection entitled "Risk Factors" above.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
862
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in Item 8 of this Form 10-K. All information presented herein is based on the Company's fiscal calendar.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
863
Unless otherwise stated, references in this report to particular years or quarters refer to the Company's fiscal years ended in September and the associated quarters of those fiscal years.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
864
The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
865
Executive Overview The Company designs, manufactures, and markets personal computers, portable digital music players, and mobile communication devices and sells a variety of related software, services, peripherals, and networking solutions.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
866
The Company's products and services include the Mac® line of desktop and portable computers, the iPod line of portable digital music players, iPhone, Apple TV, Xserve®, and Xserve RAID, a portfolio of consumer and professional software applications, the Mac OS® X operating system, third-party digital content through th...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
867
The Company sells its products worldwide through its online stores, its retail stores, its direct sales force, and third-party wholesalers, resellers, and value-added resellers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
868
In addition, the Company sells a variety of third-party Mac, iPod and iPhone compatible products, including application software, printers, storage devices, speakers, headphones, and various other accessories and peripherals through its online and retail stores.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
869
The Company sells to education, consumer, creative professional, business, and government customers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
870
Further discussion of the Company's products may be found in Part I, Item 1 of this Form 10-K under the heading "Business."
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
871
The Company believes that for both professionals and consumers the personal computer has become the center of an evolving digital lifestyle by integrating with and enhancing the utility of advanced digital devices such as the Company's iPods, iPhones, digital video and still cameras, televisions, personal digital assis...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
872
The attributes of the personal computer that enable this functionality include a high-quality user interface, easy access to relatively inexpensive data storage, the ability to run complex applications, and the ability to connect easily to a wide variety of other digital devices and to the Internet.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
873
The Company is the only participant in the personal computer industry that controls the design and development of the entire personal computer-from the hardware and operating system to sophisticated applications.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
874
This, along with its products' creative industrial designs, intuitive ease-of-use, and built-in graphics, multimedia and networking capabilities, uniquely positions the Company to offer innovative integrated digital lifestyle solutions.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
875
The Company's business strategy leverages its ability, through the design and development of its own operating system, hardware, and many software applications and technologies, to bring to its customers around the world compelling new products and solutions with superior ease-of-use, seamless integration, and innovati...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
876
The Company participates in several highly competitive markets, including personal computers with its Mac line of computers, consumer electronics with its iPod product family of portable digital music players, and distribution of third-party digital content through its online iTunes Store.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
877
With the introduction of iPhone, the Company has also begun to compete with mobile communication device companies that have substantial experience and technological and financial resources.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
878
While the Company is widely recognized as a leading innovator in the personal computer and consumer electronics markets as well as a leader in the emerging market for distribution of digital content, these markets are highly competitive and subject to aggressive pricing.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
879
To remain competitive, the Company believes that increased investment in research and development ("R&D") and marketing and advertising is necessary to maintain or expand its position in the markets where it competes.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
880
The Company's R&D spending is focused on further developing its existing line of personal computers, operating systems, application software, and portable digital music players; developing new digital lifestyle consumer and professional software applications; and investing in new product areas such as iPhone and wirele...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
881
The Company also believes increased investment in marketing and advertising programs is critical to increasing product and brand awareness.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
882
The Company utilizes a variety of direct and indirect distribution channels.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
883
The Company believes that sales of its innovative and differentiated products are enhanced by knowledgeable salespersons who can convey the value of the hardware, software, and peripheral integration, demonstrate the unique digital lifestyle solutions that are available only on Mac computers, and demonstrate the compat...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
884
The Company further believes providing a high-quality sales and after-sales support experience is critical to attracting and retaining customers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
885
To ensure a high-quality buying experience for its products in which service and education are emphasized, the Company has expanded and improved its distribution capabilities by opening its own retail stores in the U.S. and internationally.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
886
The Company had 197 stores open as of September 29, 2007.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
887
The Company also staffs selected third-party stores with the Company's own employees to improve the buying experience through reseller channels.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
888
The Company has deployed Apple employees and contractors in reseller locations around the world including the U.S., Canada, Europe, Japan, Asia, Latin America and Australia.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
889
The Company also sells to customers directly through its online stores around the world.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
890
To improve access to the iPod product family, the Company has significantly expanded the number of distribution points where iPods are sold.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
891
iPods can be purchased in certain department stores, member-only warehouse stores, large retail chains, and specialty retail stores, as well as through the channels for Mac distribution listed above.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
892
The Company began shipping iPhone in the U.S. on June 29, 2007, in the U.K. and Germany on November 9, 2007 and expects to begin shipping the iPhone in France on November 29, 2007.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
893
AT&T Mobility LLC ("AT&T"), O2 Limited ("O2"), T-Mobile International AG & Co. KG ("T-Mobile"), and France Telecom ("Orange") are the exclusive cellular network carriers for iPhone in the U.S., U.K., Germany, and France, respectively.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
894
iPhone is distributed through the Company and its exclusive cellular network carriers' distribution channels.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
895
Critical Accounting Policies and Estimates The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and the Company's discussion and analysis of its financial condition and operating results require the Company's management to make judgments, assum...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
896
Note 1 "Summary of Significant Accounting Policies" of Notes to Consolidated Financial Statements in this Form 10-K describes the significant accounting policies and methods used in the preparation of the Company's consolidated financial statements.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
897
Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
898
Actual results may differ from these estimates and such differences may be material.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
899
Management believes the Company's critical accounting policies and estimates are those related to revenue recognition, allowance for doubtful accounts, inventory valuation and inventory purchase commitments, warranty costs, stock-based compensation, income taxes, and legal and other contingencies.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
900
Management considers these critical policies because they are both important to the portrayal of the Company's financial condition and operating results, and they require management to make judgments and estimates about inherently uncertain matters.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
901
The Company's senior management has reviewed these critical accounting policies and related disclosures with the Audit and Finance Committee of the Company's Board of Directors.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
902
Revenue Recognition Net sales consist primarily of revenue from the sale of hardware, software, music products, digital content, peripherals, and service and support contracts.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
903
The Company recognizes revenue for software products (operating system software and applications software), or any product that is considered to be software-related in accordance with the guidance in Emerging Issues Task Force ("EITF") No.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
904
03-5, Applicability of AICPA Statement of Position 97-2 to Non-software Deliverables in an Arrangement Containing More-Than-Incidental Software, (e.g., Mac computers, iPod portable digital music players and iPhone) pursuant to American Institute of Certified Public Accountants ("AICPA") Statement of Position ("SOP") No...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
905
97-2, Software Revenue Recognition, as amended.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
906
For products that are not software or software-related, (e.g., digital content sold on the iTunes Store and certain Mac, iPod and iPhone supplies and accessories) the Company recognizes revenue pursuant to SEC Staff Accounting Bulletin ("SAB") No.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
907
104, Revenue Recognition.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
908
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collection is probable.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
909
Product is considered delivered to the customer once it has been shipped, and title and risk of loss have been transferred.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
910
For most of the Company's product sales, these criteria are met at the time the product is shipped.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
911
For online sales to individuals, for some sales to education customers in the U.S., and for certain other sales, the Company defers revenue until the customer receives the product because the Company retains a portion of the risk of loss on these sales during transit.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
912
If at the outset of an arrangement the Company determines the arrangement fee is not, or is presumed not to be, fixed or determinable, revenue is deferred and subsequently recognized as amounts become due and payable and all other criteria for revenue recognition have been met.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
913
During 2007, the Company began shipping Apple TV and iPhone.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
914
For both Apple TV and iPhone, the Company indicated it may provide future unspecified features and additional software products free of charge to customers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
915
Therefore, sales of Apple TV and iPhone handsets are recognized under subscription accounting in accordance with SOP No.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
916
97-2.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
917
The Company recognizes the associated revenue and cost of goods sold on a straight-line basis over the currently estimated 24-month economic lives of these products with any loss recognized at the time of sale.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
918
Costs incurred by the Company for engineering, sales, marketing and warranty are expensed as incurred.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
919
The Company records reductions to revenue for estimated commitments related to price protection and for customer incentive programs, including reseller and end-user rebates, and other sales programs and volume-based incentives.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
920
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.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
921
If refunds cannot be reliably estimated, revenue is not recognized until reliable estimates can be made or the price protection lapses.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
922
For customer incentive programs, the estimated cost of these programs 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.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
923
The Company also records reductions to revenue for expected future product returns based on the Company's historical experience.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
924
Future market conditions and product transitions may require the Company to increase customer incentive programs and incur incremental price protection obligations that could result in additional reductions to revenue at the time such programs are offered.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
925
Additionally, certain customer incentive programs require management to estimate the number of customers who will actually redeem the incentive based on historical experience and the specific terms and conditions of particular incentive programs.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
926
If a greater than estimated proportion of customers redeem such incentives, the Company would be required to record additional reductions to revenue, which would have a negative impact on the Company's results of operations.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
927
Allowance for Doubtful Accounts The Company distributes its products through third-party distributors and resellers and directly to certain education, consumer, and commercial customers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
928
The Company generally does not require collateral from its customers; however, the Company will require collateral in certain instances to limit credit risk.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
929
In addition, when possible the Company does attempt to limit credit risk on trade receivables with credit insurance for certain customers in Latin America, Europe, Asia, and Australia by arranging with third-party financing companies to provide flooring arrangements and other loan and lease programs to the Company's di...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
930
These credit-financing arrangements are directly between the third-party financing company and the end customer.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
931
As such, the Company generally does not assume any recourse or credit risk sharing related to any of these arrangements.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
932
However, considerable trade receivables that are not covered by collateral, third-party flooring arrangements, or credit insurance are outstanding with the Company's distribution and retail channel partners.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
933
The allowance for doubtful accounts is based on management's assessment of the collectibility of specific customer accounts and includes consideration of the credit worthiness and financial condition of those specific customers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
934
The Company records an allowance to reduce the specific receivables to the amount that is reasonably believed to be collectible.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
935
The Company also records an allowance for all other trade receivables based on multiple factors including historical experience with bad debt, the general economic environment, the financial condition of the Company's distribution channels, and the aging of such receivables.
0001047469-07-009340/full-submission.txt