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0000320193
20041203
10-K
1,111
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.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,112
Current leases on such locations have terms ranging from 10 to 16 years with total commitments per location over the lease terms ranging from $25 million to $50 million.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,113
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.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,114
Many of the general risks and uncertainties the Company faces could also have an adverse impact on its Retail segment.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,115
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...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,116
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...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,117
Investment in new business strategies and initiatives could disrupt the Company's ongoing business and may present risks not originally contemplated.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,118
The Company may decide to invest in new business strategies or engage in acquisitions that complement the Company's strategic direction and product roadmap.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,119
Such endeavors may involve significant risks and uncertainties, including distraction of management's attention away from normal business operations; insufficient revenue generation to offset liabilities assumed and expenses associated with the strategy; and unidentified issues not discovered in the Company's due dilig...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,120
Because these new ventures are inherently risky, no assurance can be given that such strategies and initiatives will be successful and will not materially adversely affect the Company's business, operating results or financial condition.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,121
Declines in the sales of the Company's professional products or increases in sales of consumer products, including iPods, may negatively impact the Company's gross margin and operating margin percentages Unit sales of the Company's professional products, including Power Macintosh and PowerBook systems, generally have h...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,122
A shift in sales mix away from higher margin professional products towards lower margin consumer products could adversely affect the Company's future gross margin and operating margin percentages.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,123
The Company's traditional professional customers may choose to buy consumer products, specifically the iMac G5 and iBook, instead of professional products.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,124
Professional users may choose to buy the iMac G5 due to its relative price performance, use of the same PowerPC G5 processor used in the Company's Power Macs, and unique design featuring a flat panel screen.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,125
Potential PowerBook customers may also choose to purchase iBooks instead due to their price performance and screen size.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,126
Additionally, significant future growth in iPod sales without corresponding growth in higher margin product sales could also reduce gross margin and operating margin percentages.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,127
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 significant users of its professional systems.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,128
Also, it is likely that many of the Company's current and potential professional, creative, and small business customers, who are most likely to utilize professional systems, believe that the relatively slower MHz rating or clock speed of the microprocessors the Company utilizes in its Macintosh systems compares unfavo...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,129
These factors may result in an adverse impact to sales of the Company's professional products as well as to gross margin and operating margin percentages.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,130
The Company expects its quarterly revenue and operating results to fluctuate for a variety of reasons.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,131
The Company's profit margins vary among its products and its distribution channels.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,132
The Company's direct sales, primarily through its retail and online stores, generally have higher associated profitability than its indirect sales.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,133
Additionally, the Company's direct channels have traditionally had more sales of software and higher priced hardware products, which generally have higher gross margins, than through its indirect channels.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,134
As a result, the Company's gross margin and operating margin percentages as well as overall profitability may be adversely impacted as a result of a shift in product, geographic or channel mix.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,135
In addition, the Company generally sells more products during the third month of each quarter than it does during either of the first two months, a pattern typical in the personal computer industry.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,136
This sales pattern can produce pressure on the Company's internal infrastructure during the third month of a quarter and may adversely impact the Company's ability to predict its financial results accurately.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,137
Developments late in a quarter, such as lower-than-anticipated demand for the Company's products, an internal systems failure, or failure of one of the Company's key logistics, components suppliers, or manufacturing partners, can have significant adverse impacts on the Company and its results of operations and financia...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,138
The Company has higher research and development and selling, general and administrative costs, as a percentage of revenue, than many of its competitors.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,139
The Company's ability to compete successfully and maintain attractive gross margins and revenue growth is heavily dependent upon its ability to ensure a continuing and timely flow of innovative and competitive products and technologies to the marketplace.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,140
As a result, the Company incurs higher research and development costs as a percentage of revenue than its competitors who sell personal computers based on other operating systems.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,141
Many of these competitors seek to compete aggressively on price and maintain very low cost structures.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,142
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 percentage of revenue than many of its competitors.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,143
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.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,144
The Company is exposed to credit risk on its accounts receivables.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,145
This risk is heightened during periods when economic conditions worsen.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,146
The Company distributes its products through third-party computer resellers and retailers and directly to certain educational institutions and commercial customers.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,147
A substantial majority of the Company's outstanding trade receivables are not covered by collateral or credit insurance.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,148
The Company also has unsecured non-trade receivables from certain of its manufacturing vendors resulting from the sale by the Company of raw material components to these manufacturing vendors who manufacture sub-assemblies or assemble final products for the Company.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,149
While the Company has procedures in place to monitor and limit exposure to credit risk on its trade and non-trade receivables, there can be no assurance that such procedures will be effective in limiting its credit risk and avoiding losses.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,150
Additionally, if the global economy and regional economies fail to improve or continue to deteriorate, it becomes more likely that the Company will incur a material loss or losses as a result of the weakening financial condition of one or more of its customers or manufacturing vendors.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,151
The Company's success depends largely on its ability to attract and retain key personnel.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,152
Much of the future success of the Company depends on the continued service and availability of skilled personnel, including its Chief Executive Officer, members of its executive team, and those in technical, marketing and staff positions.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,153
Experienced personnel in the information technology industry are in high demand and competition for their talents is intense, especially in the Silicon Valley, where the majority of the Company's key employees are located.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,154
The Company has relied on its ability to grant stock options as one mechanism for recruiting and retaining this highly skilled talent.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,155
Potential accounting regulations requiring the expensing of stock options may impair the Company's future ability to provide these incentives without incurring significant compensation costs.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,156
There can be no assurance that the Company will continue to successfully attract and retain key personnel.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,157
The Company is subject to risks associated with the availability and cost of insurance.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,158
The Company has observed rapidly changing conditions in the insurance markets relating to nearly all areas of traditional commercial insurance.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,159
Such conditions have and may continue to result in higher premium costs, higher policy deductibles, lower coverage limits and may also yield possible policy form exclusions.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,160
For some risks, because of cost and/or availability, the Company does not have insurance coverage.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,161
Because the Company retains some portion of its insurable risks, and in some cases self insures completely, unforeseen or catastrophic losses in excess of insured limits may have a material adverse effect on the Company's results of operations and financial position.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,162
Failure of information technology systems and breaches in the security of data upon which the Company relies could adversely affect the Company's future operating results.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,163
Information technology system failures and breaches of data security could disrupt the Company's ability to function in the normal course of business by potentially causing delays or cancellation of customer orders, impeding the manufacture or shipment of products, or resulting in the unintentional disclosure of custom...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,164
Management has taken steps to address these concerns for its own systems by implementing sophisticated network security and internal control measures.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,165
However, there can be no assurance that a system failure or data security breach of the Company or a third-party vendor will not have a material adverse effect on the Company's results of operations.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,166
The Company's business is subject to the risks of international operations.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,167
A large portion of the Company's revenue is derived from its international operations.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,168
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...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,169
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.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,170
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.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,171
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.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,172
Margins on sales of the Company's 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.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,173
Derivative instruments, such as foreign exchange forward and option positions have been utilized by the Company to hedge exposures to fluctuations in foreign currency exchange rates.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,174
The use of such hedging activities may not offset more than a portion of the adverse financial impact resulting from unfavorable movements in foreign exchange rates.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,175
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.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,176
The Company is subject to risks associated with environmental regulations.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,177
Production and marketing of products in certain states and countries may subject the Company to environmental and other regulations including, in some instances, the requirement to provide customers the ability to return product at the end of its useful life, and place responsibility for environmentally safe disposal o...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,178
Such laws and regulations have recently been passed in several jurisdictions in which the Company operates, including various European Union member countries, Japan and certain states within the U.S.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,179
In the future, these laws could have a material adverse affect on the Company.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,180
Changes in accounting rules could adversely affect the Company's future operating results.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,181
Financial statements are prepared in accordance with U.S. generally accepted accounting principles.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,182
These principles are subject to interpretation by various governing bodies, including the FASB and the Securities and Exchange Commission (SEC), who interpret and create appropriate accounting regulations.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,183
A change from current accounting regulations, including accounting for stock-based compensation, could have a significant effect on the Company's results of operations and could impact the manner in which the Company conducts business.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,184
Unanticipated changes in the Company's tax rates could affect its future results.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,185
The Company's future effective tax rates could be favorably or unfavorably affected by unanticipated changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of the Company's deferred tax assets and liabilities, or by changes in tax laws or their interpretation.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,186
In addition, the Company is subject to the continuous examination of its income tax returns by the Internal Revenue Service and other tax authorities.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,187
The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,188
There can be no assurance that the outcomes from these continuous examinations will not have an adverse effect on the Company's operating results and financial condition.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,189
The Company's stock price may be volatile.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,190
The Company's stock has at times experienced substantial price volatility as a result of variations between its actual and anticipated financial results and as a result of announcements by the Company and its competitors.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,191
The stock market has experienced extreme price and volume fluctuations that have affected the market price of many technology companies in ways that have been unrelated to the operating performance of these companies.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,192
These factors, including lack of positive performance in the Company's stock price, as well as general economic and political conditions and investors' concerns regarding the credibility of corporate financial reporting and integrity of financial markets, may materially adversely affect the market price of the Company'...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,193
In addition, increases in the Company's stock price may result in greater dilution of earnings per share.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,194
Item 7A.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,195
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 and its interest rate swap and option positions, both on a stand-alone basis and in conjunction with its underlying foreign curren...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,196
However, given the effective horizons of the Company's risk management activities and the anticipatory nature of the exposures, there can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in either foreign exchange or interest rates.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,197
In addition, the timing of the accounting for recognition of gains and losses related to mark-to-market 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 operating results and financial po...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,198
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 the general level of U.S. interest rates.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,199
In this regard, changes in U.S. interest rates affect the interest earned on the Company's cash, cash equivalents, and short-term investments as well as costs associated with foreign currency hedges.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,200
The Company's short-term investment policy and strategy is to ensure the preservation of capital, meet liquidity requirements, and optimize return in light of current credit and interest rate trends.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,201
The Company benchmarks its performance by utilizing external money managers to manage a small portion of the aggregate investment portfolio.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,202
The external managers adhere to the Company's investment policies and also provide occasional research and market information that supplements internal research used to make credit decisions in the investment process.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,203
The Company's exposure to market risk for changes in interest rates relates primarily to the Company's investment portfolio.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,204
The Company places its short-term investments in highly liquid securities issued by high credit quality issuers and, by policy, limits the amount of credit exposure to any one issuer.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,205
The Company's general policy is to limit the risk of principal loss and ensure the safety of invested funds by limiting market and credit risk.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,206
All highly liquid investments with maturities of three months or less are classified as cash equivalents; highly liquid investments with maturities greater than three months are classified as short-term investments.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,207
As of September 25, 2004, approximately $180 million of the Company's short-term investments had underlying maturities ranging from 1 to 5 years.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,208
As of September 27, 2003, $629 million of the Company's investment portfolio classified as short-term investments had maturities ranging from 1 to 5 years.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,209
The remainder all had underlying maturities between 3 and 12 months.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
1,210
The Company may sell its investments prior to their stated maturities, due to liquidity needs, in anticipation of credit deterioration, or for duration management.
0001047469-04-035975/full-submission.txt