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0000320193
20031219
10-K
252
The Company attempts to mitigate these potential risks by working closely with these and other key suppliers on product introduction plans, strategic inventories, coordinated product introductions, and internal and external manufacturing schedules and levels.
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Consistent with industry practice, the Company acquires components through a combination of formal purchase orders, supplier contracts, and open orders based on projected demand information.
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Such purchase commitments typically cover the Company's requirements for periods ranging from 30 to 130 days.
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The Company believes there are several component suppliers and manufacturing vendors whose loss to the Company could have a material adverse effect upon the Company's business and financial position.
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At this time, such vendors include Agere Systems, Inc., Ambit Microsystems Corporation, ASUSTeK Corporation, ATI Technologies, Inc., Broadcom Corporation, Compal Corporation, Hon Hai Precision Industry Co., Ltd., IBM Corporation, International Display Technology, Inventec Appliances Corporation, LG.
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Phillips Co., Ltd., Matsushita, Mitsubishi Electric Corporation, Motorola, Inc., Nvidia Corp., Quanta Computer, Inc., Samsung Electronics, Synaptics, Inc., and Toshiba Corporation.
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10-K
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Research and Development Because the personal computer industry is characterized by rapid technological advances, the Company's ability to compete successfully is heavily dependent upon its ability to ensure a continuing and timely flow of competitive products and technology to the marketplace.
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10-K
259
The Company continues to develop new products and technologies and to enhance existing products in the areas of hardware and peripherals, system software, applications software, networking and communications software and solutions, and the Internet.
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10-K
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The Company's research and development expenditures, before any charges for purchased in-process research and development, totaled $471 million, $446 million, and $430 million in 2003, 2002, and 2001, respectively.
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10-K
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Patents, Trademarks, Copyrights and Licenses The Company currently holds rights to patents and copyrights relating to certain aspects of its computer systems, peripheral systems, and software.
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In addition, the Company has registered, and/or has applied to register, trademarks and service marks in the United States and a number of foreign countries for "Apple," the Apple logo, "Macintosh," and numerous other trademarks and service marks.
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10-K
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Although the Company believes the ownership of such patents, copyrights, trademarks and service marks is an important factor in its business and that its success does depend in part on the ownership thereof, the Company relies primarily on the innovative skills, technical competence, and marketing abilities of its pers...
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20031219
10-K
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Many of the Company's products are designed to include intellectual property obtained from third-parties.
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While it may be necessary in the future to seek or renew licenses relating to various aspects of its products and business methods, the Company believes that based upon past experience and industry practice, such licenses generally could be obtained on commercially reasonable terms; however, there is no guarantee that ...
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10-K
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Because of technological changes in the computer industry, current extensive patent coverage, and the rapid rate of issuance of new patents, it is possible certain components of the Company's products and business methods may unknowingly infringe existing patents of others.
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10-K
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The Company has from time to time been notified that it may be infringing certain patents or other intellectual property rights of others.
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Foreign and Domestic Operations and Geographic Data The United States represents the Company's largest geographic marketplace.
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Approximately 58% of the Company's net sales in fiscal 2003 came from sales to customers inside the United States.
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Final assembly of products sold by the Company is conducted in the Company's manufacturing facilities in Sacramento, California, and Cork, Ireland, and by external vendors in Fremont, California, Fullerton, California, Taiwan, Korea, the Netherlands, the People's Republic of China, and the Czech Republic.
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Currently, manufacture of many of the components used in the Company's products and final assembly of substantially all of the Company's portable products including PowerBooks, iBooks, and the iPod are performed by third-party vendors in Japan, Taiwan and China.
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20031219
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Margins on sales of Apple products in foreign countries, and on sales of products that include components obtained from foreign suppliers, can be adversely affected by foreign currency exchange rate fluctuations and by international trade regulations, including tariffs and antidumping penalties.
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20031219
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Information regarding financial data by geographic segment is set forth in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements at Note 11, "Segment Information and Geographic Data."
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Seasonal Business Although the Company does not consider its business to be highly seasonal, it has historically experienced increased net sales in its first and fourth fiscal quarters, compared to other quarters in its fiscal year, due to seasonal demand related to the holiday season and the school year, respectively.
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Past performance should not be considered a reliable indicator of the Company's future net sales or financial performance.
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Warranty The Company offers a basic limited parts and labor warranty on its hardware products.
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The basic warranty period for hardware products is typically one year from the date of purchase by the end-user.
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The Company also offers a 90-day basic warranty for Apple software and for Apple service parts used to repair Apple hardware products.
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In addition, consumers may purchase extended service coverage on most Apple hardware products in all of the Company's major markets.
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Backlog In the Company's experience, the actual amount of product backlog at any particular time is not a meaningful indication of its future business prospects.
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In particular, backlog often increases in anticipation of or immediately following new product introductions because of over ordering by dealers anticipating shortages.
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Backlog often is reduced once dealers and customers believe they can obtain sufficient supply.
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Because of the foregoing, backlog should not be considered a reliable indicator of the Company's ability to achieve any particular level of revenue or financial performance.
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Environmental Laws Compliance with federal, state, local, and foreign laws enacted for the protection of the environment has to date had no material effect upon the Company's capital expenditures, earnings, or competitive position.
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10-K
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Although the Company does not anticipate any material adverse effects in the future based on the nature of its operations and the subject of these laws, there is no assurance that such existing laws or future laws will not have a material adverse affect on the Company.
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Production and marketing of products in certain states and countries may subject the Company to environmental and other regulations including, in some instances, the requirement that the Company provide consumers with the ability to return to the Company product at the end of its useful life, and place responsibility f...
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Such laws and regulations have recently been passed in several jurisdictions in which the Company operates, including various European Union member states, Japan and California.
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Although the Company does not anticipate any material adverse effects in the future based on the nature of its operations and the thrust of such laws, there is no assurance that such existing laws or future laws will not have a material adverse affect on the Company.
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20031219
10-K
289
Employees As of September 27, 2003, Apple and its subsidiaries worldwide had 10,912 employees and an additional 2,654 temporary employees and contractors.
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0000320193
20031219
10-K
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Available Information Beginning in fiscal 2003, the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available on its website at www.apple.com/in...
0001047469-03-041604/full-submission.txt
0000320193
20031219
10-K
291
The public may read and copy any materials filed by the Company with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549.
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The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
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The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
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The contents of these websites are not incorporated into this filing.
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10-K
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Further, the Company's references to the URLs for these websites are intended to be inactive textual references only.
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Item 2.
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Properties The Company's headquarters are located in Cupertino, California.
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The Company has manufacturing facilities in Sacramento, California and Cork, Ireland.
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10-K
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As of September 27, 2003, the Company leased approximately 3.2 million square feet of space, primarily in the United States, and to a lesser extent, in Europe, Japan, and the Asia Pacific region.
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Leased space in the United States includes 538,000 square feet of retail space.
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The major facility leases are for terms of 5 to 10 years and generally provide renewal options for terms of 3 to 5 additional years.
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Leases for retail space are for terms of 5 to 15 years and often contain multi-year renewal options.
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The Company owns its manufacturing facility in Cork, Ireland, which has approximately 352,000 square feet.
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The Company also owns a 752,000 square-foot facility in Sacramento, California, which is used as a manufacturing, warehousing and distribution center.
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The Sacramento and Cork facilities also house customer support call centers.
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In addition, the Company owns 930,000 square feet of facilities located in Cupertino, California, used for research and development and corporate functions.
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Outside the United States, the Company owns additional facilities totaling approximately 169,000 square feet.
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20031219
10-K
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The Company believes its existing facilities and equipment are well maintained and in good operating condition.
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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.
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The Company continues to make investments in capital equipment as needed to meet anticipated demand for its products.
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Item 3.
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Legal Proceedings The Company is subject to various legal proceedings and claims that are discussed below.
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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.
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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, liquidity or results of operations.
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However, the results of legal proceedings cannot be predicted with certainty.
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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.
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The Company settled certain legal matters in 2003, which did not individually or in the aggregate have a material impact on the Company's results of operations.
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Antor Media Corporation v. Apple Computer, Inc. et al.
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Plaintiff, Antor Media filed this action on September 5, 2003 in the United States District Court in the Eastern District of Texas alleging infringement by the Company and other defendants of patent 5,754,961 relating to a "Method and Apparatus for Transmitting Information Recorded on Information Storage Means from a C...
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Plaintiff seeks unspecified damages and other relief.
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The Company has answered the complaint, denying all allegations and asserting numerous affirmative defenses.
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The Company also asserted counterclaims requesting declaratory judgment for non-infringement and invalidity.
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Apple Corps Ltd. v. Apple Computer, Inc.; Apple Computer, Inc. v. Apple Corps Ltd.
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Plaintiff, Apple Corps filed this action on July 4, 2003 in the High Court of Justice, Chancery Division, in London alleging that the Company has breached a 1991 agreement which resolved earlier trademark litigation regarding use of the Apple marks.
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Plaintiff seeks unspecified damages and other relief.
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The Company filed a motion on October 13, 2003, challenging jurisdiction in the U.K. On October 8, 2003, the Company filed a case in the United States District Court for the Northern District of California requesting a declaratory judgment that the Company has not breached the 1991 agreement.
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Articulate Systems, Inc. v. Apple Computer, Inc.
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Plaintiff Articulate filed this action in March 1996 in the United States District Court in Massachusetts claiming patent infringement relating to voice recognition technology.
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Plaintiff seeks unspecified damages and other relief.
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The Company has answered the complaint, denying all allegations and asserting numerous affirmative defenses.
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The Company also asserted counterclaims requesting declaratory judgment for non-infringement, unenforceability and invalidity.
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The case was stayed for several months pending resolution of four summary judgment motions filed by the Company, all of which were denied by the Court.
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20031219
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Through a series of corporate transactions the assets belonging to Plaintiff were acquired by a subsidiary, Lernout & Hauspie Speech Products N.V. ("L&H").
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L&H filed for bankruptcy in November 2000 and is being liquidated as part of the bankruptcy.
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The case has been inactive since approximately May 2002, pending the resolution of the L&H bankruptcy and liquidation.
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Bancroft v. Apple Computer, Inc.
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20031219
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Plaintiff Bancroft filed this purported class action on January 30, 2002 in Los Angeles Superior Court on behalf of a potentially nationwide class of purchasers of certain Power Macintosh G3 computers.
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Plaintiff alleged violation of the Consumer Legal Remedies Act ("CLRA") arising from allegedly poor performance while running the Company's Mac OS X operating system, specifically relating to 2D hardware acceleration, QuickTime movie hardware acceleration, 3D graphics performance and DVD movie playback.
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The parties reached a settlement and the Court granted preliminary approval on September 2, 2003.
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The final approval hearing is set for January 26, 2004.
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Settlement of the matter will not have a material effect on the Company's financial position or results of operations.
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BIAX Corporation v. Apple Computer, Inc.
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Plaintiff BIAX filed this action on September 5, 2001 in the United States District Court in Delaware claiming patent infringement relating to dual processor technology.
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IBM and Motorola were added as defendants in an amended complaint.
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Plaintiff sought unspecified damages and other relief.
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The Company answered the complaint, denied all allegations and asserted numerous affirmative defenses.
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The Company also asserted counterclaims for declaratory judgment for non-infringement, unenforceability and invalidity.
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The parties settled this case in August 2003 and the matter is concluded.
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Settlement of this matter did not have a material effect on the Company's financial position or results of operations.
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Dan, et al.
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v. Apple Computer, Inc. et al.
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