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0000320193
20021219
10-K
721
The Company is required to adopt the provisions of SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
722
143 for the first quarter of its fiscal 2003.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
723
Management does not expect the adoption of SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
724
143 to have a material impact on the Company's financial statements.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
725
In August 2001, the Financial Accounting Standards Board issued SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
726
144, Accounting for the Impairment or Disposal of Long-Lived Assets (Statement 144), which supersedes both SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
727
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of and the accounting and reporting provisions of APB Opinion No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
728
30 (Opinion 30), Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of a business (as previously defined in that Opinion).
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
729
SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
730
144 retains the fundamental provisions in SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
731
121 for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by sale, while also resolving significant implementation issues associated with SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
732
121.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
733
For example, SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
734
144 provides guidance on how a long-lived asset that is used as part of a group should be evaluated for impairment, establishes criteria for when a long-lived asset is held for sale, and prescribes the accounting for a long-lived asset that will be disposed of other than by sale.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
735
SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
736
144 retains the basic provisions of Opinion 30 on how to present discontinued operations in the income statement but broadens that presentation to include a component of an entity (rather than a segment of a business).
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
737
Unlike SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
738
121, an impairment assessment under SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
739
144 will never result in a write-down of goodwill.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
740
Rather, goodwill is evaluated for impairment under SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
741
No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
742
142, Goodwill and Other Intangible Assets.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
743
The Company is required to adopt the provisions of SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
744
144 for the first quarter of its fiscal 2003.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
745
Management does not expect the adoption of SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
746
144 for long-lived assets held for use to have a material impact on the Company's financial statements because the impairment assessment under SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
747
144 is largely unchanged from SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
748
121.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
749
The provisions of SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
750
144 for assets held for sale or other disposal generally are required to be applied prospectively after the adoption date to newly initiated disposal activities.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
751
In June 2002, the Financial Accounting Standards Board issued SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
752
146, Accounting for Costs Associated with Exit or Disposal Activities.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
753
SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
754
146 supersedes Emerging Issues Task Force Issue No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
755
94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs To Exit an Activity (Including Certain Costs Associated with a Restructuring) and requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, as opposed to when manag...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
756
SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
757
146 also establishes that the liability should initially be measured and recorded at fair value.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
758
This Statement is effective for exit or disposal activities initiated after December 31, 2002.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
759
The provisions of SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
760
146 are required to be applied prospectively after the adoption date to newly initiated exit activities, and may affect the timing of recognizing future restructuring costs, as well as the amounts recognized.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
761
Liquidity and Capital Resources The following table presents selected financial information and statistics for each of the last three fiscal years (dollars in millions): (a)Based on ending net trade receivables and most recent quarterly net sales for each period.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
762
(b)Based on ending inventory and most recent quarterly cost of sales for each period.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
763
As of September 28, 2002, the Company had $4.337 billion in cash, cash equivalents, and short-term investments, virtually unchanged from the end of fiscal 2001.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
764
The primary sources of total cash, cash equivalents, and short-term investments in fiscal 2002 were $89 million in cash generated by operating activities and $105 million in proceeds from the exercise of employee stock options, offset by cash utilized for business and asset acquisitions of $52 million and capital expen...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
765
The Company believes its existing balances of cash, cash equivalents, and short-term investments will be sufficient to satisfy its working capital needs, capital expenditures, stock repurchase activity, outstanding commitments, and other liquidity requirements associated with its existing operations over the next 12 mo...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
766
Lease Commitments As of September 28, 2002, the Company had total outstanding commitments on noncancelable operating leases of $464 million, $209 million of which related to the lease of retail space and related facilities.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
767
Remaining terms on the Company's existing operating leases range from 1 to 12 years.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
768
Subsequent to September 28, 2002, the Company entered into additional operating lease commitments for retail space with future lease commitments totaling $65 million for periods ranging from 5 to 10 years.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
769
Long-Term Debt The Company currently has long-term debt outstanding in the form of $300 million of aggregate principal amount 6.5% unsecured notes.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
770
The notes were sold at 99.925% of par, for an effective yield to maturity of 6.51%.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
771
The notes pay interest semiannually and mature on February 15, 2004.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
772
Purchase Commitments with Contract Manufacturers and Component Suppliers The Company utilizes several contract manufacturers to manufacture sub-assemblies for the Company's products and to perform final assembly and test of finished products.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
773
These contract manufacturers acquire components and build product based on demand information supplied by the Company, which typically covers periods ranging from 1 to 3 months.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
774
The Company also obtains individual components for its products from a wide variety of individual suppliers.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
775
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.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
776
Such formal and informal purchase commitments typically cover the Company's forecasted component and manufacturing requirements for periods ranging from 30 to 130 days.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
777
As of September 28, 2002, the Company had outstanding third-party manufacturing commitments and component purchase commitments of approximately $525 million.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
778
Capital Expenditures Of total capital expenditures in 2002 of $174 million, $106 million was for retail store facilities and equipment related to the Company's Retail segment and $68 million was for corporate infrastructure including information systems enhancements and operating facilities enhancements and expansions.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
779
The Company currently anticipates it will utilize approximately $160 million for capital expenditures during 2003, approximately $77 million of which is expected to be utilized for further expansion of the Company's Retail segment and the remainder utilized to support normal replacement of existing capital assets and e...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
780
Stock Repurchase Plan In July 1999, the Company's Board of Directors authorized a plan for the Company to repurchase up to $500 million of its common stock.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
781
This repurchase plan does not obligate the Company to acquire any specific number of shares or acquire shares over any specified period of time.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
782
During 2002 and 2001, the Company repurchased no common shares.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
783
However, during the fourth quarter of 2001, the Company entered into a forward purchase agreement to acquire 1.5 million shares of its common stock in September of 2003 at an average price of $16.64 per share for a total cost of $25.5 million.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
784
Since inception of the repurchase plan, the Company has repurchased or committed to repurchase a total of 6.55 million shares of its common stock at a cost of $217 million.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
785
Non-Current Debt and Equity Investments The Company has held significant investments in ARM, Samsung Electronics Co., Ltd, Akamai, and EarthLink.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
786
These investments are reflected in the consolidated balance sheets as non-current debt and equity investments and have been categorized as available-for-sale requiring that they be carried at fair value with unrealized gains and losses, net of taxes, reported in equity as a component of accumulated other comprehensive ...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
787
All realized gains on the sale of these investments have been included in other income.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
788
The combined fair value of these investments was $39 million, $128 million, and $786 million as of the end of fiscal 2002, 2001, and 2000, respectively.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
789
The Company believes it is likely there will continue to be significant fluctuations in the fair value of these investments in the future.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
790
Further information related to the Company's non-current debt and equity investments may be found in Part II, Item 8 of this Form 10-K at Note 2 of Notes to Consolidated Financial Statements.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
791
Factors That May Affect Future Results and Financial Condition Because of the following factors, as well as other factors affecting the Company's operating results and financial condition, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use ...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
792
General economic conditions and current economic and political uncertainty could adversely affect the Company.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
793
The Company's operating performance depends significantly on general economic conditions.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
794
For much of the past 3 years, demand for the Company's products has been negatively impacted by worsening global economic conditions.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
795
Continued uncertainty about future economic conditions continues to make it difficult to forecast future operating results.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
796
Should global and regional economic conditions fail to improve or continue to deteriorate, demand for the Company's products could continue to be adversely affected, as could the financial health of its suppliers, distributors, and resellers.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
797
The terrorist attacks that took place on September 11, 2001, disrupted commerce throughout the world and created many economic and political uncertainties that have had a strong negative impact on the global economy.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
798
The long-term effects of the September 11, 2001 attacks on the Company's future operating results and financial condition remain unknown.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
799
The national and international responses to terrorist attacks, the potential for future terrorist attacks and other acts of hostility, and the potential for war in the Middle East have created economic and political uncertainties that could adversely affect the Company's future operating results and financial condition...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
800
The market for personal computers is highly competitive.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
801
The personal computer industry is highly competitive and is characterized by aggressive pricing practices, downward pressure on gross margins, frequent introduction of new products, short product life cycles, continual improvement in product price/performance characteristics, price sensitivity on the part of consumers,...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
802
Over the past several years, price competition in the market for personal computers has been particularly intense.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
803
The Company's competitors who sell Windows-based personal computers have aggressively cut prices and lowered their product margins in order to gain or maintain market share in response to weakness in demand for personal computing products that began in the second half of calendar 2000.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
804
The Company's results of operations and financial condition have been, and in the future may continue to be, adversely affected by these and other industry-wide pricing pressures and downward pressures on gross margins.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
805
The personal computer industry has also been characterized by rapid technological advances in software functionality, hardware performance, and features based on existing or emerging industry standards.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
806
Further, as the personal computer industry and its customers place more reliance on the Internet, an increasing number of Internet devices that are smaller and simpler than traditional personal computers may compete for market share with the Company's existing products.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
807
Several competitors of the Company have either targeted or announced their intention to target certain of the Company's key market segments, including consumer, education, professional and consumer digital video editing, and design and publishing.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
808
Additionally, several of the Company's competitors have introduced or announced plans to introduce products that mimic many of the unique design, technical features, and solutions of the Company's products.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
809
The Company has many substantial competitors, many of whom have greater financial, marketing, manufacturing, and technological resources, as well as broader product lines and larger installed customer bases than those of the Company.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
810
Additionally, there has been a trend towards consolidation in the personal computer industry that has resulted in larger and potentially stronger competitors in the Company's markets.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
811
The Company is currently the only maker of hardware using the Mac OS.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
812
The Mac OS has a minority market share in the personal computer market, which is dominated by makers of computers utilizing Microsoft's Windows operating systems.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
813
The Company's future operating results and financial condition are substantially dependent on its ability to continue to develop improvements to the Macintosh platform in order to maintain perceived design and functional advantages over competing platforms, including Windows.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
814
The Company has higher research and development and selling, general and administrative costs, as a percentage of revenues, than many of competitors.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
815
The Company's ability to compete successfully and maintain attractive gross margins is heavily dependent upon its ability to ensure a continuing and timely flow of innovative and competitive products and technology to the marketplace.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
816
As a result, the Company incurs higher research and development costs as a percentage of revenue than its competitors who sell Windows-based personal computers.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
817
Many of these competitors seek to compete aggressively on price and maintain very low cost structures.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
818
Further, as a result of the expansion of the Company's Retail segment and costs associated with marketing the Company's brand including its unique operating system, the Company incurs higher selling costs as a percent of revenue than many of its competitors.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
819
If the Company is unable to continue to develop and sell innovative new products with attractive gross margins, its results of operations may be materially adversely affected by its operating cost structure.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
820
The Company must successfully manage frequent product introductions and transitions.
0001047469-02-007674/full-submission.txt