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0000320193
20071115
10-K
1,636
Because the Company's Retail initiative was an unproven concept at inception, management chose to measure the Retail segment's performance in a manner that would allow comparability to the Company's major channel partners operating retail stores in the U.S.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,637
There were three significant differences in the measurement of the Retail segment's results relative to the Company's other operating segments.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,638
First, the Retail segment's operating income reflected cost of sales for Apple products at amounts normally charged to Apple's major U.S. channel partners for the same products, less the cost of the Company's sales programs and other costs to support those partners.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,639
Second, the cost of sales of the Company's service and support contracts, including the AppleCare Protection Plan ("APP") and .Mac, were reflected in the Retail segment's results at the costs charged to major channel partners for such contracts, and all associated revenue was reflected in the Retail segment's results a...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,640
Because the Company had not yet earned the revenue or incurred the cost associated with the sale of such contracts, an offset to these amounts was recognized in other segments' net sales and cost of sales.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,641
Third, the Company allocated certain expenses related to the operation of its high-profile stores to corporate marketing expense.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,642
Having operated the Company's Retail stores successfully for more than six years, management believes its Retail initiative is a proven concept that will continue to be an integral element of the Company's distribution and marketing strategies.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,643
Additionally, the Company expects sales of iPhone by the Company's geographic and Retail operating segments to generate significant levels of deferred revenue and deferred cost of sales over time.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,644
In consideration of these factors, management has determined that beginning with the quarter ended June 30, 2007, aligning measurements for the performance of the Retail segment with those used for the Company's other operating segments provides the most meaningful information.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,645
Accordingly, management has begun to measure the Retail segment's operating performance in a manner generally consistent with the Company's other operating segments.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,646
The cost of sales of the Company's products sold through the Retail segment is now reflected at amounts similar to the cost of sales of the same products reflected in the Company's other operating segments.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,647
Revenue from APP and .Mac contracts sold through the Retail segment is now being recognized over the lives of the respective service agreements.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,648
Additionally, the Retail segment is applying the same subscription accounting to iPhone net sales and cost of sales that the Company's other operating segments apply.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,649
Management believes aligning measurements for the performance of the Retail segment with those used for the Company's other operating segments will provide greater comparability with the rest of the Company's segments and allow for more meaningful assessment of the Retail segment's operating results.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,650
The Company has reclassified prior period operating segment results to reflect these changes in the measurement of the operating results for the Retail segment, along with the corresponding offsetting impact to the Company's other operating segments.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,651
The Company will continue to allocate certain operating expenses associated with its high-profile stores to corporate marketing expense to reflect the estimated Company-wide benefit.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,652
These high-profile stores are larger than the Company's typical retail stores and were designed to further promote brand awareness and provide a venue for certain corporate sales and marketing activities, including corporate briefings.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,653
The allocation of these operating costs to corporate expense is based on the amount incurred for a high-profile store in excess of that incurred by a more typical Company retail location.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,654
The Company had opened a total of eight high-profile stores as of September 29, 2007.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,655
Expenses allocated to corporate marketing resulting from the operations of high-profile stores were $39 million, $33 million, and $31 million for the years ended September 29, 2007, September 30, 2006, and September 24, 2005 respectively.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,656
Summary information by operating segment follows (in millions): (a)The Americas asset figures do not include fixed assets held in the U.S.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,657
Such fixed assets are not allocated specifically to the Americas segment and are included in the corporate assets figures below.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,658
(b)Retail segment depreciation and asset figures reflect the cost and related depreciation of its retail stores and related infrastructure.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,659
Retail store construction-in-progress, which is not subject to depreciation, is reflected in corporate assets.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,660
(c)Other Segments include Asia-Pacific and FileMaker.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,661
A reconciliation of the Company's segment operating income and assets to the consolidated financial statements follows (in millions): (a)Corporate expenses include research and development, corporate marketing expenses, manufacturing costs and variances not included in standard costs, and other separately managed gener...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,662
No single customer or single country outside of the U.S. accounted for more than 10% of net sales in 2007, 2006, or 2005.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,663
Net sales and long-lived assets related to the U.S. and international operations are as follows (in millions): Information regarding net sales by product is as follows (in millions): (a)Includes iMac, eMac, Mac mini, Power Mac, Mac Pro, and Xserve product lines.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,664
(b)Includes MacBook, iBook, MacBook Pro, and PowerBook product lines.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,665
(c)Consists of iTunes Store sales and iPod services, and Apple-branded and third-party iPod accessories.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,666
(d)Derived from handset sales, carrier agreements, and Apple-branded and third-party iPhone accessories.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,667
(e)Includes sales of Apple-branded and third-party displays, wireless connectivity and networking solutions, and other hardware accessories.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,668
(f)Includes sales of Apple-branded operating system and application software, third-party software, AppleCare, and Internet services.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,669
Note 10-Related Party Transactions and Certain Other Transactions The Company entered into a Reimbursement Agreement with its CEO, Steve Jobs, for the reimbursement of expenses incurred by Mr. Jobs in the operation of his private plane when used for Apple business.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,670
The Company recognized a total of approximately $776,000, $202,000, and $1,100,000 in expenses pursuant to the Reimbursement Agreement during 2007, 2006, and 2005, respectively.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,671
In 2006, the Company entered into an agreement with Pixar to sell certain of Pixar's short films on the iTunes Store.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,672
Mr. Jobs was the CEO, Chairman, and a large shareholder of Pixar.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,673
On May 5, 2006, The Walt Disney Company ("Disney") acquired Pixar, which resulted in Pixar becoming a wholly-owned subsidiary of Disney.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,674
Upon Disney's acquisition of Pixar, Mr. Jobs' shares of Pixar common stock were exchanged for Disney's common stock and he was elected to the Disney Board of Directors.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,675
Royalty expense recognized by the Company under the arrangement with Pixar from September 25, 2005 through May 5, 2006 was less than $1 million.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,676
Note 11-Selected Quarterly Financial Information (Unaudited) The following tables set forth a summary of the Company's quarterly financial information for each of the four quarters ended September 29, 2007 and September 30, 2006 (in millions, except share and per share amounts): Basic and diluted earnings per share are...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,677
Therefore, the sum of quarterly basic and diluted per share information may not equal annual basic and diluted earnings per share.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,678
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders Apple Inc.: We have audited the accompanying consolidated balance sheets of Apple Inc. and subsidiaries (the Company) as of September 29, 2007 and September 30, 2006, and the related consolidated statements of operations, sh...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,679
These consolidated financial statements are the responsibility of the Company's management.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,680
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,681
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,682
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,683
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,684
An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,685
We believe that our audits provide a reasonable basis for our opinion.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,686
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Apple Inc. and subsidiaries as of September 29, 2007 and September 30, 2006, and the results of their operations and their cash flows for each of the years in the three-year period...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,687
As discussed in Note 1 to the Consolidated Financial Statements, effective September 25, 2005, the Company adopted the provisions of Statement of Financial Accounting Standards No.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,688
123R, Share-Based Payment.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,689
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Apple Inc.'s internal control over financial reporting as of September 29, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizat...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,690
/s/ KPMG LLP Mountain View, California November 15, 2007 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders Apple Inc.: We have audited Apple Inc.'s internal control over financial reporting as of September 29, 2007, based on criteria established in Internal Control-Integrat...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,691
Apple's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,692
Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,693
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,694
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,695
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,696
Our audit also included performing such other procedures as we considered necessary in the circumstances.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,697
We believe that our audit provides a reasonable basis for our opinion.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,698
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,699
A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are rec...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,700
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,701
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,702
In our opinion, Apple Inc. maintained, in all material respects, effective internal control over financial reporting as of September 29, 2007, based on criteria established in Internal Control-Integrated Framework issued by COSO.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,703
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Apple Inc. as of September 29, 2007 and September 30, 2006, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of ...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,704
/s/ KPMG LLP Mountain View, California November 15, 2007 Item 9.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,705
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,706
Item 9A.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,707
Controls and Procedures Evaluation of Disclosure Controls and Procedures Based on an evaluation under the supervision and with the participation of the Company's management, the Company's principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures as ...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,708
Inherent Limitations Over Internal Controls The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,709
The Company's internal control over financial reporting includes those policies and procedures that: (i)pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company's assets; (ii)provide reasonable assurance that transactions are record...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,710
Management, including the Company's Chief Executive Officer and Chief Financial Officer, does not expect that the Company's internal controls will prevent or detect all errors and all fraud.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,711
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,712
Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,713
Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,714
Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,715
Management's Annual Report on Internal Control Over Financial Reporting The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended).
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,716
Management conducted an evaluation of the effectiveness of the Company's internal control over financial reporting based on the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,717
Based on this evaluation, management has concluded that the Company's internal control over financial reporting was effective as of September 29, 2007.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,718
The Company's independent registered public accounting firm, KPMG LLP, has issued an attestation report on the Company's internal control over financial reporting.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,719
The report on the audit of internal control over financial reporting appears on page 92 of this Form 10-K. Changes in Internal Control Over Financial Reporting There were no changes in the Company's internal control over financial reporting during the fourth quarter of fiscal 2007, which were identified in connection w...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,720
Item 9B.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,721
Other Information On November 13, 2007, the Board of Directors of the Company amended and restated the Company's Amended Bylaws to permit the issuance of uncertificated shares of stock and to make related conforming and mechanical changes.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,722
The foregoing description of the amendments to the Company's Amended and Restated Bylaws is qualified in its entirety by the text of the Amended and Restated Bylaws, which is attached hereto as Exhibit 3.5 and is incorporated herein by reference.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,723
PART III Item 10.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,724
Directors, Executive Officers and Corporate Governance Directors Listed below are the Company's seven directors whose terms expire at the next annual meeting of shareholders.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,725
William V. Campbell has been Chairman of the Board of Directors of Intuit, Inc. ("Intuit") since August 1998.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,726
From September 1999 to January 2000, Mr. Campbell acted as Chief Executive Officer of Intuit.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,727
From January 1994 to August 1998, Mr. Campbell was President and Chief Executive Officer and a director of Intuit.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,728
From January 1991 to December 1993, Mr. Campbell was President and Chief Executive Officer of GO Corporation.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,729
Millard S. Drexler has been Chairman and Chief Executive Officer of J.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,730
Crew Group, Inc. since January 2003.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,731
Previously, Mr. Drexler was Chief Executive Officer of Gap Inc. ("Gap") from 1995 and President from 1987 until 1995.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,732
Mr. Drexler was also a member of the Board of Directors of Gap from November 1983 until October 2002.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,733
Albert A. Gore, Jr. has served as a Senior Advisor to Google, Inc. ("Google") since 2001.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,734
He has also served as Executive Chairman of Current TV since 2002 and as Chairman of Generation Investment Management since 2004.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,735
He is a visiting professor at Middle Tennessee State University.
0001047469-07-009340/full-submission.txt