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0000320193
20101027
10-K
374
In the U.S. the Company has contracted with a single carrier to provide cellular network services for iPhone on an exclusive basis.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
375
If this exclusive carrier cannot successfully compete with other carriers in the U.S. market on any basis, including but not limited to the quality and coverage of wireless voice and data services, performance and timely build-out of advanced wireless networks, and pricing and other terms or conditions of customer cont...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
376
The Company is subject to risks associated with laws, regulations and industry-imposed standards related to mobile communications and media devices.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
377
Laws and regulations related to mobile communications and media devices in the many jurisdictions in which the Company operates are extensive and subject to change.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
378
Such changes, which could include but are not limited to restrictions on production, manufacture, distribution, and use of the device, locking the device to a carrier’s network, or mandating the use of the device on more than one carrier’s network, could materially adversely affect the Company’s financial condition and...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
379
Mobile communication and media devices, such as iPhones and 3G enabled iPads, are subject to certification and regulation by governmental and standardization bodies, as well as by cellular network carriers for use on their networks.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
380
These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications or delays in product shipment dates, which could materially adversely affect the Company’s financial condition and operating results.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
381
The Company’s success depends largely on the continued service and availability of key personnel.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
382
Much of the Company’s future success depends on the continued availability and service of key personnel, including its CEO, its executive team and highly skilled employees in technical, marketing and staff positions.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
383
Experienced personnel in the technology industry are in high demand and competition for their talents is intense, especially in the Silicon Valley, where most of the Company’s key personnel are located.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
384
There can be no assurance that the Company will continue to attract and retain key personnel.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
385
Political events, war, terrorism, public health issues, natural disasters and other circumstances could materially adversely affect the Company.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
386
War, terrorism, geopolitical uncertainties, public health issues, and other business interruptions have caused and could cause damage or disruption to international commerce and the global economy, and thus could have a strong negative effect on the Company, its suppliers, logistics providers, manufacturing vendors and...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
387
The Company’s business operations are subject to interruption by natural disasters, fire, power shortages, terrorist attacks, and other hostile acts, labor disputes, public health issues, and other events beyond its control.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
388
Such events could decrease demand for the Company’s products, make it difficult or impossible for the Company to make and deliver products to its customers, including channel partners, or to receive components from its suppliers, and create delays and inefficiencies in the Company’s supply chain.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
389
Should major public health issues, including pandemics, arise, the Company could be negatively affected by more stringent employee travel restrictions, additional limitations in freight services, governmental actions limiting the movement of products between regions, delays in production ramps of new products, and disr...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
390
The majority of the Company’s research and development activities, its corporate headquarters, information technology systems, and other critical business operations, including certain component suppliers and manufacturing vendors, are in locations that could be affected by natural disasters.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
391
In the event of a natural disaster, losses and significant recovery time could be required to resume operations and the Company’s financial condition and operating results could be materially adversely affected.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
392
The Company may be subject to information technology system failures, network disruptions and breaches in data security.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
393
Information technology system failures, network disruptions and breaches of data security caused by such factors, including but not limited to, earthquakes, fire, theft, fraud, malicious attack or other causes could disrupt the Company’s operations by causing delays or cancellation of customer, including channel partne...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
394
While management has taken steps to address these concerns by implementing sophisticated network security and internal control measures, there can be no assurance that a system failure or loss or data security breach will not materially adversely affect the Company’s financial condition and operating results.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
395
The Company expects its quarterly revenue and operating results to fluctuate for a variety of reasons.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
396
The Company’s profit margins vary among its products and its distribution channels.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
397
The Company’s software, accessories, and service and support contracts generally have higher gross margins than certain of the Company’s other products.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
398
Gross margins on the Company’s hardware products vary across product lines and can change over time as a result of product transitions, pricing and configuration changes, and component, warranty, and other cost fluctuations.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
399
The Company’s direct sales generally have higher associated gross margins than its indirect sales through its channel partners.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
400
In addition, the Company’s gross margin and operating margin percentages, as well as overall profitability, may be materially adversely impacted as a result of a shift in product, geographic or channel mix, new products, component cost increases, strengthening U.S. dollar, or price competition.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
401
The Company has typically experienced greater net sales in the first and fourth fiscal quarters compared to the second and third fiscal quarters due to seasonal demand related to the holiday season and the beginning of the school year, respectively.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
402
Furthermore, the Company sells more products from time-to-time during the third month of a quarter than it does during either of the first two months.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
403
Developments late in a quarter, such as lower-than-anticipated demand for the Company’s products, issues with new product introductions, an internal systems failure, or failure of one of the Company’s key logistics, components supply, or manufacturing partners, could have a material adverse impact on the Company’s fina...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
404
The Company’s stock price continues to be volatile.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
405
The Company’s stock has at times experienced substantial price volatility due to a number of factors, including but not limited to variations between its actual and anticipated financial results, announcements by the Company and its competitors, and uncertainty about current global economic conditions.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
406
The stock market as a whole also has experienced extreme price and volume fluctuations that have affected the market price of many technology companies in ways that may have been unrelated to these companies’ operating performance.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
407
Furthermore, the Company believes its stock price reflects high future growth and profitability expectations.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
408
If the Company fails to meet these expectations its stock price may significantly decline, which could have a material adverse impact on investor confidence and employee retention.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
409
The Company’s business is subject to the risks of international operations.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
410
The Company derives a significant portion of its revenue and earnings from its international operations.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
411
Compliance with U.S. and foreign laws and regulations that apply to the Company’s international operations, including without limitation import and export requirements, anti-corruption laws, tax laws (including U.S. taxes on foreign subsidiaries), foreign exchange controls and cash repatriation restrictions, data priva...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
412
Furthermore, the Company has implemented policies and procedures designed to ensure compliance with these laws and regulations, but there can be no assurance that the Company’s employees, contractors, or agents will not violate such laws and regulations or the Company’s policies.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
413
Any such violations could individually or in the aggregate materially adversely affect the Company’s financial condition or operating results.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
414
The Company’s financial condition and operating results also could be significantly affected by other risks associated with international activities, including but not limited to, economic and labor conditions, increased duties, taxes and other costs, political instability, and changes in the value of the U.S. dollar v...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
415
Margins on sales of the Company’s products in foreign countries, and on sales of products that include components obtained from foreign suppliers, could be materially adversely affected by foreign currency exchange rate fluctuations and by international trade regulations, including duties, tariffs and antidumping penal...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
416
Additionally, the Company is exposed to credit and collectability risk on its trade receivables with customers in certain international markets.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
417
There can be no assurance it can effectively limit its credit risk and avoid losses, which could materially adversely affect the Company’s financial condition and operating results.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
418
The Company’s primary exposure to movements in foreign currency exchange rates relate to non-U.S. dollar denominated sales in Europe, Japan, Australia, Canada and certain parts of Asia, as well as non-U.S. dollar denominated operating expenses incurred throughout the world.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
419
Weakening of foreign currencies relative to the U.S. dollar will adversely affect the U.S. dollar value of the Company’s foreign currency-denominated sales and earnings, and generally will lead the Company to raise international pricing, potentially reducing demand for the Company’s products.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
420
In some circumstances, due to competition or other reasons, the Company may decide not to raise local prices to the full extent of the dollar’s strengthening, or at all, which would adversely affect the U.S. dollar value of the Company’s foreign currency denominated sales and earnings.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
421
Conversely, a strengthening of foreign currencies, while generally beneficial to the Company’s foreign currency-denominated sales and earnings, could cause the Company to reduce international pricing and incur losses on its foreign currency derivative instruments, thereby limiting the benefit.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
422
Additionally, strengthening of foreign currencies may also increase the Company’s cost of product components denominated in those currencies, thus adversely affecting gross margins.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
423
The Company has used derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
424
The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
425
The Company is exposed to credit risk and fluctuations in the market values of its investment portfolio.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
426
Although the Company has not recognized any significant losses to date on its cash, cash equivalents and marketable securities, any significant future declines in their market values could materially adversely affect the Company’s financial condition and operating results.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
427
Given the global nature of its business, the Company has investments both domestically and internationally.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
428
Credit ratings and pricing of these investments can be negatively impacted by liquidity, credit deterioration or losses, financial results, or other factors.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
429
As a result, the value or liquidity of the Company’s cash, cash equivalents and marketable securities could decline and result in a material impairment, which could materially adversely affect the Company’s financial condition and operating results.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
430
The Company is exposed to credit risk on its trade accounts receivable, vendor non-trade receivables and prepayments related to long-term supply agreements.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
431
This risk is heightened during periods when economic conditions worsen.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
432
The Company distributes its products through third-party cellular network carriers, wholesalers, retailers and value-added resellers.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
433
A substantial majority of the Company’s outstanding trade receivables are not covered by collateral or credit insurance.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
434
The Company’s exposure to credit and collectability risk on its trade receivables are increased in certain international markets and its ability to mitigate such risks may be limited.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
435
Cellular network carriers accounted for a significant potion of the Company’s trade receivables as of September 25, 2010.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
436
The Company also has unsecured vendor non-trade receivables resulting from purchases of components by contract manufacturers and other vendors that manufacture sub-assemblies or assemble final products for the Company.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
437
Two vendors accounted for a significant portion of the Company’s non-trade receivables as of September 25, 2010.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
438
In addition, the Company has made prepayments associated with long-term supply agreements to secure supply of certain inventory components.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
439
While the Company has procedures to monitor and limit exposure to credit risk on its trade and vendor non-trade receivables as well as long-term prepayments, there can be no assurance such procedures will effectively limit its credit risk and avoid losses, which could materially adversely affect the Company’s financial...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
440
The matters relating to the Company’s past stock option practices and its restatement of consolidated financial statements may result in additional litigation.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
441
The Company’s investigation into its past stock option practices and its restatement of prior financial statements in the Annual Report on Form 10-K for the year ended September 30, 2006 gave rise to litigation and government investigations.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
442
As described in Part I, Item 3, “Legal Proceedings,” several derivative and class action complaints regarding stock options were filed against the Company and current and former officers and directors.
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20101027
10-K
443
These actions have been dismissed following a comprehensive settlement.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
444
Two former officers of the Company were also named as defendants in an SEC enforcement action, which has been settled.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
445
No assurance can be given that additional actions will not be filed against the Company and current and former officers and directors as a result of past stock option practices.
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20101027
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If such actions are filed and result in adverse findings, the remedies could materially adversely affect the Company’s financial condition and operating results.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
447
Unfavorable results of legal proceedings could materially adversely affect the Company.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
448
The Company is subject to various legal proceedings and claims that have arisen out of the ordinary conduct of its business and are not yet resolved and additional claims may arise in the future.
0001193125-10-238044/full-submission.txt
0000320193
20101027
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449
Results of legal proceedings cannot be predicted with certainty.
0001193125-10-238044/full-submission.txt
0000320193
20101027
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450
Regardless of merit, litigation may be both time-consuming and disruptive to the Company’s operations and cause significant expense and diversion of management attention.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
451
In recognition of these considerations, the Company may enter into material settlements.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
452
Should the Company fail to prevail in certain matters, or should several of these matters be resolved against the Company in the same reporting period, the Company may be faced with significant monetary damages or injunctive relief against it that would materially adversely affect a portion of its business and might ma...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
453
The Company is subject to risks associated with laws and regulations related to health, safety and environmental protection.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
454
The Company’s products and services, and the production and distribution of those goods and services, are subject to a variety of laws and regulations.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
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These may require the Company to offer customers the ability to return a product at the end of its useful life and place responsibility for environmentally safe disposal or recycling with the Company.
0001193125-10-238044/full-submission.txt
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Such laws and regulations have been passed in several jurisdictions in which the Company operates, including various countries within Europe and Asia and certain states and provinces within North America.
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457
Although the Company does not anticipate any material adverse effects based on the nature of its operations and the focus of such laws, there is no assurance such existing laws or future laws will not materially adversely affect the Company’s financial condition and operating results.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
458
Changes in the Company’s tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities could affect its future results.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
459
The Company is subject to taxes in the United States and numerous foreign jurisdictions.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
460
The Company’s future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation.
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0000320193
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461
In addition, the current administration and Congress have announced proposals for new U.S. tax legislation that, if adopted, could adversely affect the Company’s tax rate.
0001193125-10-238044/full-submission.txt
0000320193
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Any of these changes could have a material adverse affect on the Company’s profitability.
0001193125-10-238044/full-submission.txt
0000320193
20101027
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463
The Company is also subject to the continual examination of its income tax returns by the Internal Revenue Service and other tax authorities.
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The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for taxes.
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There can be no assurance that the outcomes from these examinations will not materially adversely affect the Company’s financial condition and operating results.
0001193125-10-238044/full-submission.txt
0000320193
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466
The Company is subject to risks associated with the availability and coverage of insurance.
0001193125-10-238044/full-submission.txt
0000320193
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467
For certain risks, the Company does not maintain insurance coverage because of cost and/or availability.
0001193125-10-238044/full-submission.txt
0000320193
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468
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 could materially adversely affect the Company’s financial condition and operating results.
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Item 1B.
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Unresolved Staff Comments None.
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Item 2.
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Properties The Company’s headquarters are located in Cupertino, California.
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As of September 25, 2010, the Company owned or leased approximately 10.6 million square feet of building space, primarily in the U.S., and to a lesser extent, in Europe, Japan, Canada, and the Asia-Pacific regions.
0001193125-10-238044/full-submission.txt