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0000320193
20100125
10-K/A
9
Yes x No ¨ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thi...
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See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ (Do not check if smaller reporting company) Smaller Reporting Company ¨ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
0001193125-10-012091/full-submission.txt
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Yes ¨ No x The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant, as of March 28, 2009, was approximately $94,593,000,000 based upon the closing price reported for such date on the NASDAQ Global Select Market.
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For purposes of this disclosure, shares of common stock held by persons who hold more than 5% of the outstanding shares of common stock and shares held by executive officers and directors of the registrant have been excluded because such persons may be deemed to be affiliates.
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This determination of executive officer or affiliate status is not necessarily a conclusive determination for other purposes.
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900,678,473 shares of Common Stock Issued and Outstanding as of October 16, 2009 DOCUMENTS INCORPORATED BY REFERENCE (1) Portions of the registrant’s definitive Proxy Statement relating to its 2010 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indica...
0001193125-10-012091/full-submission.txt
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Such Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.
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Parts of this Amendment No.
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1 to the Annual Report on Form 10-K contain forward-looking statements that involve risks and uncertainties.
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Many of the forward-looking statements are located in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical o...
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Forward-looking statements can also be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” and similar terms.
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Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements.
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Factors that might cause such differences include, but are not limited to, those discussed in the subsection entitled “Risk Factors” under Part I, Item 1A of the Form 10-K for the year ended September 26, 2009 that was filed with the Securities and Exchange Commission on October 27, 2009.
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All information presented herein is based on the Company’s fiscal calendar.
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Unless otherwise stated, references in this report to particular years or quarters refer to the Company’s fiscal years ended in September and the associated quarters of those fiscal years.
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The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
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Explanatory Note Apple Inc. (the “Company”) is filing this Amendment No.
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1 to the Annual Report on Form 10-K (the “Form 10-K/A”) to amend its Annual Report on Form 10-K for the year ended September 26, 2009, which was filed with the Securities and Exchange Commission (“SEC”) on October 27, 2009 (the “Original Filing” and together with the Form 10-K/A, the “Form 10-K”).
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As amended by this Form 10-K/A, the Form 10-K reflects the Company’s retrospective adoption of the Financial Accounting Standards Board’s (“FASB”) amended accounting standards related to revenue recognition for arrangements with multiple deliverables and arrangements that include software elements (“new accounting prin...
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The new accounting principles permit prospective or retrospective adoption, and the Company elected retrospective adoption.
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The Company adopted the new accounting principles during the first quarter of 2010, as reflected in the Company’s financial statements included in its Quarterly Report on Form 10-Q for the quarter ended December 26, 2009, which was filed with the SEC on January 25, 2010.
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The new accounting principles significantly change how the Company accounts for certain revenue arrangements that include both hardware and software elements as described further below.
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Under the historical accounting principles, the Company was required to account for sales of both iPhone and Apple TV using subscription accounting because the Company indicated it might from time-to-time provide future unspecified software upgrades and features for those products free of charge.
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Under subscription accounting, revenue and associated product cost of sales for iPhone and Apple TV were deferred at the time of sale and recognized on a straight-line basis over each product’s estimated economic life.
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This resulted in the deferral of significant amounts of revenue and cost of sales related to iPhone and Apple TV.
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Costs incurred by the Company for engineering, sales, marketing and warranty were expensed as incurred.
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As of September 26, 2009, based on the historical accounting principles, total accumulated deferred revenue and deferred costs associated with past iPhone and Apple TV sales were $12.1 billion and $5.2 billion, respectively.
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The new accounting principles generally require the Company to account for the sale of both iPhone and Apple TV as two deliverables.
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The first deliverable is the hardware and software delivered at the time of sale, and the second deliverable is the right included with the purchase of iPhone and Apple TV to receive on a when-and-if-available basis future unspecified software upgrades and features relating to the product’s software.
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The new accounting principles result in the recognition of substantially all of the revenue and product costs from sales of iPhone and Apple TV at the time of sale.
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Additionally, the Company is required to estimate a standalone selling price for the unspecified software upgrade right included with the sale of iPhone and Apple TV and recognizes that amount ratably over the 24-month estimated life of the related hardware device.
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For all periods presented, the Company’s estimated selling price for the software upgrade right included with each iPhone and Apple TV sold is $25 and $10, respectively.
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The adoption of the new accounting principles increased the Company’s net sales by $6.4 billion, $5.0 billion and $572 million for 2009, 2008 and 2007, respectively.
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As of September 26, 2009, the revised total accumulated deferred revenue associated with iPhone and Apple TV sales to date was $483 million; revised accumulated deferred costs for such sales were zero.
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The Company had the option of adopting the new accounting principles on a prospective or retrospective basis.
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Prospective adoption would have required the Company to apply the new accounting principles to sales beginning in fiscal year 2010 without reflecting the impact of the new accounting principles on iPhone and Apple TV sales made prior to September 2009.
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Accordingly, the Company’s financial results for the two years following adoption would have included the impact of amortizing the significant amounts of deferred revenue and cost of sales related to historical iPhone and Apple TV sales.
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The Company believes prospective adoption would have resulted in financial information that was not comparable between financial periods because of the significant amount of past iPhone sales; therefore, the Company elected retrospective adoption.
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Retrospective adoption required the Company to revise its previously issued financial statements as if the new accounting principles had always been applied.
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The Company believes retrospective adoption provides the most comparable and useful financial information for financial statement users, is more consistent with the information the Company’s management uses to evaluate its business, and better reflects the underlying economic performance of the Company.
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Accordingly, the Company has revised its financial statements for 2009, 2008 and 2007 in this Form 10-K/A to reflect the retrospective adoption of the new accounting principles.
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There was no impact from the retrospective adoption of the new accounting principles for 2006 and 2005.
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Those years predated the Company’s introduction of iPhone and Apple TV.
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Part II, Item 8 under Note 2, “Retrospective Adoption of New Accounting Principles” in Notes to Consolidated Financial Statements of this Form 10-K/A provides a discussion of the full effects of the retrospective adoption of the new accounting principles to the Company’s previously reported Consolidated Balance Sheets ...
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This Form 10-K/A amends the following items in the Company’s Original Filing to reflect the retrospective adoption of the new accounting principles: Part II, Item 6.
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Selected Financial Data Part II, Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations Part II, Item 8.
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Financial Statements and Supplementary Data Part IV, Item 15.
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Exhibits, Financial Statement Schedules This Form 10-K/A includes only items amended due to the retrospective adoption of the new accounting principles.
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This Form 10-K/A does not attempt to modify or update the disclosures in any other items set forth in the Original Filing.
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This Form 10-K/A speaks as of September 26, 2009, unless otherwise noted.
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The Original Filing sets forth the annual disclosures that are unaffected by the retrospective adoption of the new accounting principles.
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Accordingly, this Form 10-K/A should be read in conjunction with the Original Filing and all filings made with the SEC subsequent to the date of the Original Filing.
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PART II Item 6.
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Selected Financial Data The Consolidated Balance Sheets as of September 26, 2009 and September 27, 2008, and the Consolidated Statements of Operations for the years ended September 26, 2009, September 27, 2008, and September 29, 2007 have been amended to reflect the impact of the retrospective adoption of the new accou...
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There was no impact from the retrospective adoption of the new accounting principles for the years ended September 30, 2006 and September 24, 2005.
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Those years predated the Company’s introduction of iPhone and Apple TV.
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The information set forth below for the five years ended September 26, 2009, is not necessarily indicative of results of future operations, and should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial state...
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Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations This section and other parts of this Form 10-K contain forward-looking statements that involve risks and uncertainties.
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Forward-looking statements can also be identified by words such as “anticipates,” “expects,” “believes,” “plans,” “predicts,” and similar terms.
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Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements.
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Factors that might cause such differences include, but are not limited to, those discussed in the subsection entitled “Risk Factors” under Part I, Item 1A of this Form 10-K, which are incorporated herein by reference.
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The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in Part II, Item 8 of this Form 10-K. All information presented herein is based on the Company’s fiscal calendar.
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Unless otherwise stated, references in this report to particular years or quarters refer to the Company’s fiscal years ended in September and the associated quarters of those fiscal years.
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The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
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The following information has been amended to reflect the retrospective adoption of the Financial Accounting Standards Board’s (“FASB”) amended accounting standards related to revenue recognition for arrangements with multiple deliverables and arrangements that include software elements (“new accounting principles”) on...
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The Company’s products and services include the Mac line of desktop and portable computers, iPhone, the iPod line of portable digital music and video players, Apple TV, Xserve, a portfolio of consumer and professional software applications, the Mac OS X operating system, third-party digital content and applications thr...
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The Company sells its products worldwide through its online stores, its retail stores, its direct sales force, and third-party wholesalers, retailers, and value-added resellers.
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In addition, the Company sells a variety of third-party Mac, iPhone and iPod compatible products, including application software, printers, storage devices, speakers, headphones, and various other accessories and peripherals through its online and retail stores.
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The Company sells to consumer, small and mid-sized business (“SMB”), education, enterprise, government, and creative markets.
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The Company is focused on providing innovative products and solutions to consumer, SMB, education, enterprise, government and creative customers that greatly enhance their evolving digital lifestyles and work environments.
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The Company’s overall business strategy is to control the design and development of the hardware and software for all of its products, including the personal computer, mobile communications and consumer electronics devices.
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The Company’s business strategy leverages its unique ability to design and develop its own operating system, hardware, application software, and services to provide its customers new products and solutions with superior ease-of-use, seamless integration, and innovative industrial design.
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The Company believes continual investment in research and development is critical to the development and enhancement of innovative products and technologies.
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In conjunction with its strategy, the Company continues to build and host a robust platform for the discovery and delivery of third-party digital content and applications through the iTunes Store.
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Most recently the Company launched the App Store that allows users to browse, search for, and purchase third-party applications through either a Mac or Windows-based computer or by wirelessly downloading directly to an iPhone or iPod touch.
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The Company also desires to support a community for the development of third-party products that complement the Company’s offerings through its developer programs.
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The Company is therefore uniquely positioned to offer superior and well-integrated digital lifestyle and productivity solutions.
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The Company participates in several highly competitive markets, including personal computers with its Mac line of personal computers, mobile communications with iPhone, consumer electronics with its iPod product families, and distribution of third-party digital content and applications through its online iTunes Store.
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While the Company is widely recognized as a leading innovator in the personal computer, mobile communications and consumer electronics markets as well as a leader in the emerging market for distribution of digital content and applications, these markets are highly competitive and subject to aggressive pricing.
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To remain competitive, the Company believes that increased investment in research and development and marketing and advertising is necessary to maintain or expand its position in the markets where it competes.
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The Company’s research and development spending is focused on further developing its existing Mac line of personal computers, its operating system, application software, iPhone and iPods; developing new digital lifestyle consumer and professional software applications; and investing in new product areas and technologie...
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The Company also believes increased investment in marketing and advertising programs is critical to increasing product and brand awareness.
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The Company utilizes a variety of direct and indirect distribution channels.
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The Company believes that sales of its innovative and differentiated products are enhanced by knowledgeable salespersons who can convey the value of the hardware, software, and peripheral integration, demonstrate the unique digital lifestyle solutions that are available on Mac computers, and demonstrate the compatibili...
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The Company further believes providing a high-quality sales and after-sales support experience is critical to attracting new and retaining existing customers.
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To ensure a high-quality buying experience for its products in which service and education are emphasized, the Company continues to expand and improve its distribution capabilities by opening its own retail stores in the U.S. and in international markets.
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The Company had 273 stores open as of September 26, 2009.
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The Company has also invested in programs to enhance reseller sales, including the Apple Sales Consultant Program, which places Apple employees and contractors at selected third-party reseller locations, and the Apple Premium Reseller Program, through which independently run businesses focus on the Apple platform and p...
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The Company believes providing direct contact with its targeted customers is an efficient way to demonstrate the advantages of its Mac computers and other products over those of its competitors.
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The Company also sells to customers directly through its online stores around the world and through its direct sales force.
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The Company distributes iPhone in over 80 countries, through its direct channels, its cellular network carriers’ distribution channels and certain third-party resellers.
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The Company has signed multi-year agreements with various cellular network carriers authorizing them to distribute and provide cellular network services for iPhones.
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These agreements are generally not exclusive with a specific carrier, except in the U.S., Germany, Spain, Ireland and certain other countries.
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The Company’s iPods are sold through a significant number of distribution points to provide broad access.
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iPods can be purchased in certain department stores, member-only warehouse stores, large retail chains and specialty retail stores, as well as through the channels for Mac distribution listed above.
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Critical Accounting Policies and Estimates The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgmen...
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Note 1, “Summary of Significant Accounting Policies” of Notes to Consolidated Financial Statements in this Form 10-K describes the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements.
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