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0000320193 | 20111026 | 10-K | 757 | Although total R&D expense increased 34% during 2010, it declined as a percentage of net sales given the 52% year-over-year increase in net sales in 2010. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 758 | The Company continues to believe that focused investments in R&D are critical to its future growth and competitive position in the marketplace and are directly related to timely development of new and enhanced products that are central to the Company’s core business strategy. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 759 | As such, the Company expects to make further investments in R&D to remain competitive. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 760 | Selling, General and Administrative Expense (“SG&A”)
SG&A expense increased $2.1 billion or 38% to $7.6 billion during 2011 compared to 2010. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 761 | This increase was due primarily to the Company’s continued expansion of its Retail segment, increased headcount and related costs, higher spending on professional services and marketing and advertising programs, and increased variable costs associated with the overall growth of the Company’s net sales. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 762 | SG&A expense increased $1.4 billion or 33% to $5.5 billion in 2010 compared to 2009. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 763 | This increase was due primarily to the Company’s continued expansion of its Retail segment, higher spending on marketing and advertising programs, increased share-based compensation expenses and variable costs associated with the overall growth of the Company’s net sales. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 764 | Other Income and Expense
Other income and expense for the three years ended September 24, 2011, are as follows (in millions):
Total other income and expense increased $260 million or 168% to $415 million during 2011 compared to $155 million and $326 million in 2010 and 2009, respectively. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 765 | The year-over-year increase in other income and expense during 2011 was due primarily to higher interest income and net realized gains on sales of marketable securities. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 766 | The overall decrease in other income and expense in 2010 compared to 2009 was attributable to the significant declines in interest rates on a year-over-year basis, partially offset by the Company’s higher cash, cash equivalents and marketable securities balances. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 767 | Additionally the Company incurred higher premium expenses on its foreign exchange option contracts, which further reduced the total other income and expense. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 768 | The weighted average interest rate earned by the Company on its cash, cash equivalents and marketable securities was 0.77%, 0.75% and 1.43% during 2011, 2010 and 2009, respectively. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 769 | During 2011, 2010 and 2009, the Company had no debt outstanding and accordingly did not incur any related interest expense. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 770 | Provision for Income Taxes
The Company’s effective tax rates were approximately 24.2%, 24.4% and 31.8% for 2011, 2010 and 2009, respectively. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 771 | The Company’s effective rates for these periods differ from the statutory federal income tax rate of
35% due primarily to certain undistributed foreign earnings for which no U.S. taxes are provided because such earnings are intended to be indefinitely reinvested outside the U.S.
As of September 24, 2011, the Company ha... | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 772 | Management believes it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with future reversals of existing taxable temporary differences, will be sufficient to fully recover the deferred tax assets. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 773 | The Company will continue to evaluate the realizability of deferred tax assets quarterly by assessing the need for and amount of a valuation allowance. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 774 | The Internal Revenue Service (the “IRS”) has completed its field audit of the Company’s federal income tax returns for the years 2004 through 2006 and proposed certain adjustments. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 775 | The Company has contested certain of these adjustments through the IRS Appeals Office. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 776 | The IRS is currently examining the years 2007 through 2009. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 777 | All IRS audit issues for years prior to 2004 have been resolved. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 778 | In addition, the Company is subject to audits by state, local, and foreign tax authorities. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 779 | Management believes that adequate provisions have been made for any adjustments that may result from tax examinations. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 780 | However, the outcome of tax audits cannot be predicted with certainty. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 781 | If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 782 | Liquidity and Capital Resources
The following table presents selected financial information and statistics as of and for the three years ended September 24, 2011 (in millions):
Cash, cash equivalents and marketable securities increased $30.6 billion or 60% during 2011. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 783 | The principal components of this net increase was the cash generated by operating activities of $37.5 billion, which was partially offset by payments for acquisition of property, plant and equipment of $4.3 billion, payments for acquisition of intangible assets of $3.2 billion and payments made in connection with busin... | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 784 | The Company believes its existing balances of cash, cash equivalents and marketable securities will be sufficient to satisfy its working capital needs, capital asset purchases, outstanding commitments and other liquidity requirements associated with its existing operations over the next 12 months. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 785 | The Company’s marketable securities investment portfolio is invested primarily in highly rated securities and its policy generally limits the amount of credit exposure to any one issuer. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 786 | The Company’s investment policy requires investments to generally be investment grade with the objective of minimizing the potential risk of principal loss. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 787 | As of September 24, 2011 and September 25, 2010, $54.3 billion and $30.8 billion, respectively, of the Company’s cash, cash equivalents and marketable securities were held by foreign subsidiaries and are generally based in U.S. dollar-denominated holdings. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 788 | Amounts held by foreign subsidiaries are generally subject to U.S. income taxation on repatriation to the U.S.
Capital Assets
The Company’s capital expenditures were $4.6 billion during 2011, consisting of approximately $614 million for retail store facilities and $4.0 billion for other capital expenditures, including ... | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 789 | The Company’s actual cash payments for capital expenditures during 2011 were $4.3 billion, of which $612 million relates to retail store facilities. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 790 | The Company anticipates utilizing approximately $8.0 billion for capital expenditures during 2012, including approximately $900 million for retail store facilities and approximately $7.1 billion for product tooling and manufacturing process equipment, and corporate facilities and infrastructure, including information s... | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 791 | During 2012, the Company expects to open about 40 new retail stores, approximately three-quarters of which will be located outside of the U.S.
Off-Balance Sheet Arrangements and Contractual Obligations
The Company has not entered into any transactions with unconsolidated entities whereby the Company has financial guara... | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 792 | The following table presents certain payments due by the Company under contractual obligations with minimum firm commitments as of September 24, 2011 and excludes amounts already recorded on the Consolidated Balance Sheet (in millions):
Lease Commitments
The Company’s major facility leases are typically for terms not e... | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 793 | Leases for retail space are for terms ranging from five to 20 years, the majority of which are for 10 years, and often contain multi-year renewal options. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 794 | As of September 24, 2011, the Company’s total future minimum lease payments under noncancelable operating leases were $3.0 billion, of which $2.4 billion related to leases for retail space. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 795 | Purchase Commitments with Contract Manufacturers and Component Suppliers
The Company utilizes several outsourcing partners to manufacture sub-assemblies for the Company’s products and to perform final assembly and test of finished products. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 796 | These outsourcing partners acquire components and build product based on demand information supplied by the Company, which typically covers periods up to 150 days. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 797 | The Company also obtains individual components for its products from a wide variety of individual suppliers. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 798 | Consistent with industry practice, the Company acquires components through a combination of purchase orders, supplier contracts, and open orders based on projected demand information. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 799 | As of September 24, 2011, the Company had outstanding off-balance sheet third-party manufacturing commitments and component purchase commitments of $13.9 billion. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 800 | Other Obligations
Other outstanding obligations were $2.4 billion as of September 24, 2011, and were comprised mainly of commitments under long-term supply agreements to make additional inventory component prepayments and to acquire capital equipment, commitments to acquire product tooling and manufacturing process equ... | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 801 | The Company’s other non-current liabilities in the Consolidated Balance Sheets consist primarily of deferred tax liabilities, gross unrecognized tax benefits and the related gross interest and penalties. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 802 | As of September 24, 2011, the Company had non-current deferred tax liabilities of $8.2 billion. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 803 | Additionally, as of September 24, 2011, the Company had gross unrecognized tax benefits of $1.4 billion and an additional $261 million for gross interest and penalties classified as non-current liabilities. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 804 | At this time, the Company is unable to make a reasonably reliable estimate of the timing of payments in individual years in connection with these tax liabilities; therefore, such amounts are not included in the above contractual obligation table. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 805 | Indemnification
The Company generally does not indemnify end-users of its operating system and application software against legal claims that the software infringes third-party intellectual property rights. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 806 | Other agreements entered into by the Company sometimes include indemnification provisions under which the Company could be subject to costs and/or damages in the event of an infringement claim against the Company or an indemnified third-party. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 807 | However, the Company has not been required to make any significant payments resulting from such an infringement claim asserted against it or an indemnified third-party. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 808 | In the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss with respect to indemnification of end-users of its operating system or application software for infringement of third-party intellectual property rights. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 809 | The Company did not record a liability for infringement costs related to indemnification as of either September 24, 2011 or September 25, 2010. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 810 | The Company has entered into indemnification agreements with its directors and executive officers. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 811 | Under these agreements, the Company has agreed to indemnify such individuals to the fullest extent permitted by law against liabilities that arise by reason of their status as directors or officers and to advance expenses incurred by such individuals in connection with related legal proceedings. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 812 | It is not possible to determine the maximum potential amount of payments the Company could be required to make under these agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each claim. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 813 | However, the Company maintains directors and officers liability insurance coverage to reduce its exposure to such obligations, and payments made under these agreements historically have not been material. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 814 | Item 7A. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 815 | Quantitative and Qualitative Disclosures About Market Risk
Interest Rate and Foreign Currency Risk Management
The Company regularly reviews its foreign exchange forward and option positions, both on a stand-alone basis and in conjunction with its underlying foreign currency and interest rate related exposures. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 816 | Given the effective horizons of the Company’s risk management activities and the anticipatory nature of the exposures, there can be no assurance these positions will offset more than a portion of the financial impact resulting from movements in either foreign exchange or interest rates. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 817 | Further, the recognition timing of gains and losses related to these instruments for any given period may not coincide with the timing of gains and losses related to the underlying economic exposures and, therefore, may adversely affect the Company’s financial condition and operating results. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 818 | Interest Rate Risk
While the Company is exposed to interest rate fluctuations in many of the world’s leading industrialized countries, the Company’s interest income and expense is most sensitive to fluctuations in U.S. interest rates. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 819 | Changes in U.S. interest rates affect the interest earned on the Company’s cash, cash equivalents and marketable securities, the fair value of those securities, as well as costs associated with hedging. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 820 | The Company’s investment policy and strategy are focused on preservation of capital and supporting the liquidity requirements of the Company. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 821 | A portion of the Company’s cash is managed by external managers within the guidelines of the Company’s investment policy and to objective market benchmarks. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 822 | The Company’s internal portfolio is benchmarked against external manager performance. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 823 | The Company’s exposure to changes in interest rates relates primarily to the Company’s investment portfolio. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 824 | The Company typically invests in highly rated securities and its policy generally limits the amount of credit exposure to any one issuer. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 825 | The Company’s investment policy generally requires investments to be investment grade, with the objective of minimizing the potential risk of principal loss. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 826 | To provide a meaningful assessment of the interest rate risk associated with the Company’s investment portfolio, the Company performed a sensitivity analysis to determine the impact a change in interest rates would have on the value of the investment portfolio assuming a 100 basis point parallel shift in the yield curv... | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 827 | Based on investment positions as of September 24, 2011, a hypothetical 100 basis point increase in interest rates across all maturities would result in a $913 million incremental decline in the fair market value of the portfolio. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 828 | As of September 25, 2010, a similar 100 basis point shift in the yield curve would have resulted in a $477 million incremental decline in the fair market value of the portfolio. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 829 | Such losses would only be realized if the Company sold the investments prior to maturity. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 830 | Foreign Currency Risk
In general, the Company is a net receiver of currencies other than the U.S. dollar. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 831 | Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, will negatively affect the Company’s net sales and gross margins as expressed in U.S. dollars. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 832 | There is a risk that the Company will have to adjust local currency product pricing due to competitive pressures when there have been significant volatility in foreign currency exchange rates. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 833 | The Company may enter into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks associated with certain existing assets and liabilities, certain firmly committed transactions, forecasted future cash flows, and net investments in foreign subsidiaries. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 834 | Generally, the Company’s practice is to hedge a majority of its material foreign exchange exposures, typically for up to six months. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 835 | However, the Company may choose not to hedge certain foreign exchange exposures for a variety of reasons, including but not limited to accounting considerations and the prohibitive economic cost of hedging particular exposures. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 836 | To provide a meaningful assessment of the foreign currency risk associated with certain of the Company’s foreign currency derivative positions, the Company performed a sensitivity analysis using a value-at-risk (“VAR”) model to assess the potential impact of fluctuations in exchange rates. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 837 | The VAR model consisted of using a Monte Carlo simulation to generate thousands of random market price paths assuming normal market conditions. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 838 | The VAR is the maximum expected loss in fair value, for a given confidence interval, to the Company’s foreign currency derivative positions due to adverse movements in rates. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 839 | The VAR model is not intended to represent actual losses but is used as a risk estimation and management tool. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 840 | The model assumes normal market conditions. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 841 | Forecasted transactions, firm commitments, and assets and liabilities denominated in foreign currencies were excluded from the model. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 842 | Based on the results of the model, the Company estimates with 95% confidence a maximum one-day loss in fair value of $161 million as of September 24, 2011 compared to a
maximum one-day loss in fair value of $103 million as of September 25, 2010. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 843 | Because the Company uses foreign currency instruments for hedging purposes, the loss in fair value incurred on those instruments are generally offset by increases in the fair value of the underlying exposures. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 844 | Actual future gains and losses associated with the Company’s investment portfolio and derivative positions may differ materially from the sensitivity analyses performed as of September 24, 2011 due to the inherent limitations associated with predicting the timing and amount of changes in interest rates, foreign currenc... | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 845 | Item 8. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 846 | Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Page
Consolidated Statements of Operations for the three years ended September 24, 2011
Consolidated Balance Sheets as of September 24, 2011 and September 25, 2010
Consolidated Statements of Shareholders’ Equity for the three years e... | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 847 | CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except number of shares which are reflected in thousands and per share amounts)
See accompanying Notes to Consolidated Financial Statements. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 848 | CONSOLIDATED BALANCE SHEETS
(In millions, except number of shares which are reflected in thousands)
See accompanying Notes to Consolidated Financial Statements. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 849 | CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In millions, except number of shares which are reflected in thousands)
See accompanying Notes to Consolidated Financial Statements. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 850 | CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
See accompanying Notes to Consolidated Financial Statements. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 851 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Apple Inc. and its wholly-owned subsidiaries (collectively “Apple” or the “Company”) designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players, and sells... | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 852 | The Company sells its products worldwide through its retail stores, online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers and value-added resellers. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 853 | In addition, the Company sells a variety of third-party iPhone, iPad, Mac, and iPod compatible products including application software, printers, storage devices, speakers, headphones, and various other accessories and supplies through its online and retail stores. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 854 | The Company sells to consumers, small and mid-sized businesses, education, enterprise and government customers. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 855 | Basis of Presentation and Preparation
The accompanying consolidated financial statements include the accounts of the Company. | 0001193125-11-282113/full-submission.txt |
0000320193 | 20111026 | 10-K | 856 | Intercompany accounts and transactions have been eliminated. | 0001193125-11-282113/full-submission.txt |
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