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0000320193 | 20021219 | 10-K | 821 | Due to the highly volatile nature of the personal computer industry, which is characterized by dynamic customer demand patterns and rapid technological advances, the Company must continually introduce new products and technologies and enhance existing products in order to remain competitive. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 822 | The success of new product introductions is dependent on a number of factors, including market acceptance, the Company's ability to manage the risks associated with product transitions, the availability of application software for new products, the effective management of inventory levels in line with anticipated produ... | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 823 | Accordingly, the Company cannot determine in advance the ultimate effect that new products will have on its sales or results of operations. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 824 | During 2001, the Company introduced a new client operating system, Mac OS X, and delivered its first major upgrade, Mac OS X version 10.1. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 825 | During 2002, the Company delivered another major upgrade, Mac OS X Jaguar. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 826 | Inability of the Company to improve the performance and functionality of Mac OS X, advance customer acceptance of the new operating system and its upgrades, or obtain the continued commitment of software developers to transition existing applications to run on Mac OS X or create new applications to run on Mac OS X, may... | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 827 | Because orders for components, and in some cases commitments to purchase components, must be placed in advance of customer orders, the Company faces substantial inventory risk. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 828 | The Company records a write-down for inventories of components and products that have become obsolete or are in excess of anticipated demand or net realizable value and accrues necessary reserves for cancellation fees of orders for inventories that have been canceled. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 829 | Although the Company believes its inventory and related provisions are adequate, given the rapid and unpredictable pace of product obsolescence in the computer industry, no assurance can be given the Company will not incur additional inventory and related charges. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 830 | In addition, such charges have had, and may again have, a material effect on the Company's financial position and results of operations. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 831 | The Company must order components for its products and build inventory in advance of product shipments. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 832 | Because the Company's markets are volatile and subject to rapid technology and price changes, there is a risk the Company will forecast incorrectly and produce or order from third parties excess or insufficient inventories of particular products. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 833 | Consistent with industry practice, components are normally acquired 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 | 834 | 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 | 835 | The Company's operating results and financial condition have been in the past and may in the future be materially adversely affected by the Company's ability to manage its inventory levels and respond to short-term shifts in customer demand patterns. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 836 | Future operating results are dependent upon the Company's ability to obtain a sufficient supply of components, some of which are in short supply or available only from limited sources. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 837 | Although most components essential to the Company's business are generally available from multiple sources, certain key components including microprocessors and application specific integrated circuits ("ASICs") are currently obtained by the Company from single or limited sources. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 838 | Some key components (including without limitation DRAM, TFT-LCD flat-panel displays, and optical and magnetic disk drives), while currently available to the Company from multiple sources, are at times subject to industry-wide availability and pricing pressures. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 839 | In addition, new products introduced by the Company often initially utilize custom components obtained from only one source until the Company has evaluated whether there is a need for, and subsequently qualifies, additional suppliers. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 840 | In situations where a component or product utilizes new technologies, initial capacity constraints may exist until such time as the suppliers' yields have
matured. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 841 | The Company and other producers in the personal computer industry also compete for various components with other industries that have experienced increased demand for their products. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 842 | The Company uses some components that are not common to the rest of the personal computer industry including certain microprocessors and ASICs. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 843 | Continued availability of these components may be affected if producers were to decide to concentrate on the production of components other than those customized to meet the Company's requirements. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 844 | If the supply of a key component were to be delayed or constrained on a new or existing product, the Company's results of operations and financial condition could be adversely affected. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 845 | The Company's ability to produce and market competitive products is also dependent on the ability and desire of IBM and Motorola, the sole suppliers of the PowerPC RISC-based microprocessor for the Company's Macintosh computers, to provide the Company with a sufficient supply of microprocessors with price/performance f... | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 846 | Further, despite its efforts to educate the marketplace to the contrary, the Company believes that many of its current and potential customers believe that the relatively slower MHz rating or clock speed of the microprocessors it utilizes in its Macintosh systems compares unfavorably to those utilized by Windows-based ... | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 847 | There have been instances in recent years where the inability of the Company's suppliers to provide advanced G4 and G3 microprocessors with higher clock speeds in sufficient quantity has had significant adverse effects on the Company's results of operations. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 848 | The inability in the future of the Company to obtain microprocessors in sufficient quantities with competitive price/performance features could have an adverse impact on the Company's results of operations and financial condition. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 849 | The Company is dependent on manufacturing and logistics services provided by third parties, many of whom are located outside of the United States. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 850 | Many of the Company's products are manufactured in whole or in part by third-party manufacturers. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 851 | In addition, the Company has outsourced much of its transportation and logistics management. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 852 | While outsourcing arrangements may lower the fixed cost of operations, they also reduce the Company's direct control over production and distribution. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 853 | It is uncertain what effect such diminished control will have on the quality or quantity of the products manufactured, or the flexibility of the Company to respond to changing market conditions. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 854 | Moreover, although arrangements with such manufacturers may contain provisions for warranty expense reimbursement, the Company may remain at least initially responsible to the ultimate consumer for warranty service or in the event of product defects. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 855 | Any unanticipated product defect or warranty liability, whether pursuant to arrangements with contract manufacturers or otherwise, could adversely affect the Company's future operating results and financial condition. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 856 | 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 Fullerton, California, Taiwan, Korea, the People's Republic of China, and the Czech Republic. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 857 | Currently, manufacture of many of the components used in the Company's products and final assembly of all of the Company's portable products including PowerBooks, iBooks, and the iPod is performed by third-party vendors in Taiwan. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 858 | If for any reason manufacturing or logistics in any of these locations is disrupted by regional economic, business, environmental, political, or military conditions or events, the Company's results of operations and financial condition could be adversely affected. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 859 | The Company's products could experience quality problems that result in decreased net sales and operating profits. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 860 | The Company sells highly complex hardware and software products that may contain defects in design and manufacture. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 861 | Sophisticated operating system software and applications such as the Company sells often contains "bugs" that can unexpectedly interfere with the operation of the software. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 862 | Defects may also occur in components and products the Company purchases from third parties that may be beyond its control. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 863 | There can be no assurance that the Company will be able to detect and fix all defects in the hardware and software it sells. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 864 | Failure to do so could result in lost revenues, loss of reputation, and significant expense to remedy. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 865 | The Company's retail initiative requires a substantial investment and commitment of resources and is subject to numerous risks and uncertainties. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 866 | Since May of 2001, the Company has opened 51 retail stores in the United States and anticipates opening more stores in calendar 2003. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 867 | The Company's retail initiative has required substantial investment in equipment and leasehold improvements, information systems, inventory, and personnel. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 868 | The Company has also entered into substantial operating leases commitments for retail space with lease terms ranging from 5 to 12 years. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 869 | The Company would incur substantial costs should it choose to terminate this initiative or close individual stores. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 870 | Such costs could adversely affect the Company's results of operations and financial condition. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 871 | Additionally, a relatively high proportion of the Retail segment's costs are fixed because of depreciation on store constructions costs and lease expense. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 872 | As a result, should the Retail segment experience a decline in sales for any reason, significant losses would result. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 873 | Certain of the Company's stores have been intentionally designed and built to serve as high profile venues that function as vehicles for general corporate marketing, corporate events, and brand awareness. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 874 | Because of their unique design elements, locations and size, these stores require substantially more investment in equipment and leasehold improvements than the Company's typical retail stores. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 875 | The Company has opened two such stores and has several others under development. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 876 | Because of their location and size, these high profile stores also require the Company to enter into substantially larger operating lease commitments compared to those required for its more typical stores. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 877 | Current leases on such locations have terms ranging from 5 to 10 years with total commitments per location over the lease terms ranging from $25 million to $50 million. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 878 | Closure or poor performance of one of these high profile stores could have a particularly significant negative impact on the Company's results of operations and financial condition. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 879 | Many of the general risks and uncertainties the Company faces could also have an adverse impact on its Retail segment. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 880 | Also, many factors unique to retail operations present risks and uncertainties, some of which are beyond the Company's control, that could adversely affect the Retail segment's future results, cause its actual results to differ from those currently expected, and/or have an adverse effect on the Company's consolidated r... | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 881 | Potential risks and uncertainties unique to retail operations that could have an adverse impact on the Retail segment include, among other things, macro-economic factors that have a negative impact on general retail activity; inability to manage costs associated with store construction and operation; lack of consumer a... | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 882 | Unit sales of the Company's professionally oriented desktop systems have declined sharply over past two to three years negatively impacting net sales and gross margin. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 883 | Unit sales of Power Macintosh systems fell 18% during 2002 as compared to 2001 and fell 35% in 2001 from 2000. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 884 | Power Macintosh unit sales have fallen as a percentage of total Macintosh unit sales from 38% in 1999 to 25% in 2002. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 885 | The Company believes that weak economic conditions over the past several years are having a pronounced negative impact on its professional and creative customers who are the primary users of such systems. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 886 | The Company also believes that many of these customers continue to delay upgrades of their Power Macintosh systems due to the Company's ongoing transition to Mac OS X and in anticipation of certain software vendors transitioning their professionally oriented Macintosh software applications to run natively in Mac OS X. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 887 | In addition to the negative impact on net sales, declining sales of Power Macintosh systems also have a negative effect on the Company's overall gross margin because Power Macintosh systems are generally higher priced and have higher individual gross margins than the
Company's other Macintosh systems. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 888 | Continued deterioration in Power Macintosh unit sales will adversely affect the Company's future net sales and gross margin. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 889 | If future unit sales of Power Macintosh systems fail to partially or fully recover, it will be difficult for the Company to improve its overall profitability. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 890 | The Company faces increasing competition in the U.S. education market. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 891 | Sales in the United States to both elementary and secondary schools, as well as for college and university customers, remains a core market for Apple. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 892 | Net sales in these markets fell to 21% of the Company's total net sales in 2002 from 26% in 2001. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 893 | This drop reflects declines in both net sales and Macintosh unit sales in these markets of 15% and 14%, respectively, in fiscal 2002 compared to 2001. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 894 | These developments are consistent with industry data showing the Company losing market share in the U.S. education market in each of the last two fiscal years. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 895 | Several competitors of the Company have either targeted or announced their intention to target the education market for personal computers. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 896 | Although the Company has taken certain steps to strengthen its position in the education market, there can be no assurance that the Company will be able to increase its share of the education market or maintain its existing share of that market. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 897 | Failure to increase or maintain market share in the education market may have an adverse impact on the Company's operating results and financial condition. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 898 | The Company's future operating performance is dependent on the performance of distributors and other resellers of the Company's products. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 899 | The Company distributes its products through wholesalers, resellers, national and regional retailers and cataloguers, many of whom distribute products from competing manufacturers. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 900 | In addition, the Company also sells many of its products and resells certain third-party products in most of its major markets directly to end users, certain education customers, and certain resellers through its online stores around the world. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 901 | The Company also sells its own products and certain third-party products through its retail stores in the United States. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 902 | Many of the Company's significant resellers operate on narrow product margins and have been negatively affected by current economic conditions. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 903 | Considerable trade receivables that are not covered by collateral or credit insurance are outstanding with the Company's distribution and retail channel partners. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 904 | The Company's business and financial results could be adversely affected if the financial condition of these resellers weakened, if resellers within consumer channels were to cease distribution of the Company's products, or if uncertainty regarding demand for the Company's products caused resellers to reduce their orde... | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 905 | Further information regarding risks associated with Marketing and Distribution may be found in Part I, Item 1 of this Form 10-K under the heading "Markets and Distribution," which information is hereby incorporated by reference. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 906 | The Company's business is subject to the risks of international operations. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 907 | A large portion of the Company's revenue is derived from its international operations. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 908 | As a result, the Company's operating results and financial condition could be significantly affected by risks associated with international activities, including economic and labor conditions, political instability, tax laws (including U.S. taxes on foreign subsidiaries), and changes in the value of the U.S. dollar ver... | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 909 | Historically, the Company's primary exposure to movements in foreign currency exchange rates relate to non-dollar denominated sales in Europe, Japan, Australia, Canada, and certain parts of Asia and non-dollar denominated operating expenses incurred throughout the world. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 910 | Weaknesses in foreign currencies, particularly the Japanese Yen and the Euro, can adversely impact consumer demand for the Company's products and the U.S. dollar value of the Company's foreign currency denominated sales. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 911 | Conversely, strengthening in these and other foreign currencies can increase the cost to the Company of product components, negatively affecting the Company's results of operations. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 912 | 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. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 913 | Further information related to the Company's global market risks may be found in Part II, Item 7A of this Form 10-K under the subheading "Foreign Currency Risk" and may be found in Part II, Item 8 of this Form 10-K at Notes 1 and 2 of Notes to Consolidated Financial Statements, which information is hereby incorporated ... | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 914 | The Company's future performance is dependent upon support from third-party software developers. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 915 | The Company believes that decisions by customers to purchase the Company's personal computers, as opposed to Windows-based systems, are often based on the availability of third-party software for particular applications such as Microsoft Office. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 916 | The Company also believes the availability of third-party application software for the Company's hardware products depends in part on third-party developers' perception and analysis of the relative benefits of developing, maintaining, and upgrading such software for the Company's products versus software for the larger... | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 917 | This analysis is based on factors such as the perceived strength of the Company and its products, the anticipated potential revenue that may be generated, acceptance by customers of Mac OS X, and the costs of developing such software products. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 918 | To the extent the Company's financial losses in prior years and the minority market share held by the Company in the personal computer market, as well as the Company's decision to end its Mac OS licensing program, have caused software developers to question the Company's prospects in the personal computer market, devel... | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 919 | In addition, past and future development by the Company of its own software applications and solutions may negatively impact the decision of software developers to develop, maintain, and upgrade similar or competitive software for the Company's products. | 0001047469-02-007674/full-submission.txt |
0000320193 | 20021219 | 10-K | 920 | Moreover, there can be no assurance software developers will continue to develop software for Mac OS X, the Company's new operating system, on a timely basis or at all. | 0001047469-02-007674/full-submission.txt |
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