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0000320193 | 20131030 | 10-K | 819 | 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. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 820 | Further, the recognition of the gains and losses related to these instruments 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. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 821 | Interest Rate Risk
Investments
While the Company is exposed to interest rate fluctuations in many of the world’s leading industrialized countries, the Company’s interest income is most sensitive to fluctuations in U.S. interest rates. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 822 | 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. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 823 | The Company’s investment policy and strategy are focused on preservation of capital and supporting the liquidity requirements of the Company. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 824 | 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. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 825 | The Company’s internal portfolio is benchmarked against external manager performance. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 826 | The Company’s exposure to changes in interest rates relates primarily to the Company’s investment portfolio. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 827 | The Company typically invests in highly-rated securities, and its investment policy generally limits the amount of credit exposure to any one issuer. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 828 | The policy requires investments generally to be investment grade, with the primary objective of minimizing the potential risk of principal loss. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 829 | 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... | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 830 | Based on investment positions as of September 28, 2013, a hypothetical 100 basis point increase in interest rates across all maturities would result in a $2.7 billion incremental decline in the fair market value of the portfolio. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 831 | As of September 29, 2012, a similar 100 basis point increase in the yield curve would have resulted in a $2.1 billion incremental decline in the fair market value of the portfolio. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 832 | Such losses would only be realized if the Company sold the investments prior to maturity. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 833 | Long-Term Debt
In the third quarter of 2013, the Company issued $17.0 billion of long-term debt, which included $3.0 billion of floating-rate notes. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 834 | To manage the risk of fluctuations in interest rates associated with the floating-rate notes, the Company entered into interest rate swaps with an aggregate notional amount of $3.0 billion, which, in effect, fixed the interest rate of the floating-rate notes. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 835 | Foreign Currency Risk
In general, the Company is a net receiver of currencies other than the U.S. dollar. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 836 | 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. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 837 | 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. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 838 | 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. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 839 | The Company’s practice is to hedge a portion of its material foreign exchange exposures, typically for up to 12 months. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 840 | 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. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 841 | 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. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 842 | The VAR model consisted of using a Monte Carlo simulation to generate thousands of random market price paths assuming normal market conditions. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 843 | 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. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 844 | The VAR model is not intended to represent actual losses but is used as a risk estimation and management tool. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 845 | The model assumes normal market conditions. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 846 | Forecasted transactions, firm commitments, and assets and liabilities denominated in foreign currencies were excluded from the model. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 847 | Based on the results of the model, the Company estimates with 95% confidence a maximum one-day loss in fair value of $201 million as of September 28, 2013 compared to a maximum one-day loss in fair value of $200 million as of September 29, 2012. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 848 | 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. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 849 | 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 28, 2013 due to the inherent limitations associated with predicting the timing and amount of changes in interest rates, foreign currenc... | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 850 | Item 8. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 851 | Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Page
Consolidated Statements of Operations for the years ended September 28, 2013, September 29, 2012, and September 24, 2011
Consolidated Statements of Comprehensive Income for the years ended September 28, 2013, September 29, 2012,... | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 852 | 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. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 853 | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
See accompanying Notes to Consolidated Financial Statements. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 854 | CONSOLIDATED BALANCE SHEETS
(In millions, except number of shares which are reflected in thousands)
See accompanying Notes to Consolidated Financial Statements. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 855 | CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In millions, except number of shares which are reflected in thousands)
See accompanying Notes to Consolidated Financial Statements. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 856 | CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
See accompanying Notes to Consolidated Financial Statements. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 857 | 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... | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 858 | 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. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 859 | In addition, the Company sells a variety of third-party iPhone, iPad, Mac, and iPod compatible products, including application software, and various accessories through its online and retail stores. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 860 | The Company sells to consumers, small and mid-sized businesses, and education, enterprise and government customers. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 861 | Basis of Presentation and Preparation
The accompanying consolidated financial statements include the accounts of the Company. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 862 | Intercompany accounts and transactions have been eliminated. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 863 | The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 864 | Actual results could differ materially from those estimates. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 865 | Certain prior period amounts in the consolidated financial statements and notes thereto have been reclassified to conform to the current period’s presentation. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 866 | The Company’s fiscal year is the 52 or 53-week period that ends on the last Saturday of September. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 867 | The Company’s fiscal years 2013, 2012 and 2011 ended on September 28, 2013, September 29, 2012 and September 24, 2011, respectively. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 868 | An additional week is included in the first fiscal quarter approximately every six years to realign fiscal quarters with calendar quarters. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 869 | Fiscal year 2012 spanned 53 weeks, with a 14th week included in the first quarter of 2012. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 870 | Fiscal years 2013 and 2011 spanned 52 weeks each. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 871 | Unless otherwise stated, references to particular years, quarters, months and periods refer to the Company’s fiscal years ended in September and the associated quarters, months and periods of those fiscal years. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 872 | During the first quarter of 2013, the Company adopted amended accounting standards that changed the presentation of comprehensive income. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 873 | These standards increased the prominence of other comprehensive income (“OCI”) by eliminating the option to present components of OCI as part of the statement of changes in shareholders’ equity and required the components of OCI to be presented either in a single continuous statement of comprehensive income or in two c... | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 874 | The amended accounting standards only impacted the financial statement presentation of OCI and did not change the components that are recognized in net income or OCI; accordingly, the adoption had no impact on the Company’s financial position or results of operations. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 875 | Revenue Recognition
Net sales consist primarily of revenue from the sale of hardware, software, digital content and applications, peripherals, and service and support contracts. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 876 | The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collection is probable. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 877 | Product is considered delivered to the customer once it has been shipped and title and risk of loss have been transferred. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 878 | For most of the Company’s product sales, these criteria are met at the time the product is shipped. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 879 | For online sales to individuals, for some sales to education customers in the U.S., and for certain other sales, the Company defers revenue until the customer receives the product because the Company retains a portion of the risk of loss on these sales during transit. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 880 | The Company recognizes revenue from the sale of hardware products, software bundled with hardware that is essential to the functionality of the hardware, and third-party digital content sold on the iTunes Store in accordance with general revenue recognition accounting guidance. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 881 | The Company recognizes revenue in accordance with industry specific software accounting guidance for the
following types of sales transactions: (i) standalone sales of software products, (ii) sales of software upgrades and (iii) sales of software bundled with hardware not essential to the functionality of the hardware. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 882 | For the sale of most third-party products, the Company recognizes revenue based on the gross amount billed to customers because the Company establishes its own pricing for such products, retains related inventory risk for physical products, is the primary obligor to the customer and assumes the credit risk for amounts ... | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 883 | For third-party applications sold through the App Store and Mac App Store and certain digital content sold through the iTunes Store, the Company does not determine the selling price of the products and is not the primary obligor to the customer. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 884 | Therefore, the Company accounts for such sales on a net basis by recognizing in net sales only the commission it retains from each sale. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 885 | The portion of the gross amount billed to customers that is remitted by the Company to third-party app developers and certain digital content owners is not reflected in the Company’s Consolidated Statements of Operations. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 886 | The Company records deferred revenue when it receives payments in advance of the delivery of products or the performance of services. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 887 | This includes amounts that have been deferred for unspecified and specified software upgrade rights and non-software services that are attached to hardware and software products. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 888 | The Company sells gift cards redeemable at its retail and online stores, and also sells gift cards redeemable on the iTunes Store for the purchase of digital content and software. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 889 | The Company records deferred revenue upon the sale of the card, which is relieved upon redemption of the card by the customer. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 890 | Revenue from AppleCare service and support contracts is deferred and recognized over the service coverage periods. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 891 | AppleCare service and support contracts typically include extended phone support, repair services, web-based support resources and diagnostic tools offered under the Company’s standard limited warranty. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 892 | The Company records reductions to revenue for estimated commitments related to price protection and other customer incentive programs. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 893 | For transactions involving price protection, the Company recognizes revenue net of the estimated amount to be refunded. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 894 | For the Company’s other customer incentive programs, the estimated cost of these programs is recognized at the later of the date at which the Company has sold the product or the date at which the program is offered. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 895 | The Company also records reductions to revenue for expected future product returns based on the Company’s historical experience. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 896 | Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 897 | Revenue Recognition for Arrangements with Multiple Deliverables
For multi-element arrangements that include hardware products containing software essential to the hardware product’s functionality, undelivered software elements that relate to the hardware product’s essential software, and undelivered non-software servic... | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 898 | In such circumstances, the Company uses a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of selling price (“TPE”), and (iii) best estimate of selling price (“ESP”). | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 899 | VSOE generally exists only when the Company sells the deliverable separately and is the price actually charged by the Company for that deliverable. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 900 | ESPs reflect the Company’s best estimates of what the selling prices of elements would be if they were sold regularly on a stand-alone basis. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 901 | For multi-element arrangements accounted for in accordance with industry specific software accounting guidance, the Company allocates revenue to all deliverables based on the VSOE of each element, and if VSOE does not exist revenue is recognized when elements lacking VSOE are delivered. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 902 | For sales of qualifying versions of iPhone, iPad and iPod touch (“iOS devices”), Mac and Apple TV, the Company has indicated it may from time to time provide future unspecified software upgrades and features to the essential software bundled with each of these hardware products free of charge to customers. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 903 | Essential software for iOS devices includes iOS and related applications and for Mac includes OS X and related applications. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 904 | The Company also provides various non-software services to owners of qualifying versions of iOS devices and Mac. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 905 | The Company has identified up to three deliverables regularly included in arrangements involving the sale of these devices. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 906 | The first deliverable is the hardware and software essential to the functionality of the hardware device delivered at the time of sale. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 907 | The second deliverable is the embedded right included with the purchase of iOS devices, Mac and Apple TV to receive on a when-and-if-available basis, future unspecified software upgrades and features relating to the product’s essential software. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 908 | The third deliverable is the non-software services to be provided to qualifying versions of iOS devices and Mac. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 909 | The Company allocates revenue between these deliverables using the relative selling price method. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 910 | Because the Company has neither VSOE nor TPE for these deliverables, the allocation of revenue is based on the Company’s ESPs. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 911 | Revenue allocated to the delivered hardware and the related essential software is recognized at the time of sale provided the other conditions for revenue recognition have been met. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 912 | Revenue allocated to the embedded unspecified software upgrade rights and the non-software services is deferred and recognized on a straight-line basis over the estimated period the software upgrades and non-software services are expected to be provided for each of these devices, which ranges from two to four years. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 913 | Cost of sales related to delivered hardware and related essential software, including estimated warranty costs, are recognized at the time of sale. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 914 | Costs incurred to provide non-software services are recognized as cost of sales as incurred, and engineering and sales and marketing costs are recognized as operating expenses as incurred. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 915 | The Company’s process for determining its ESP for deliverables without VSOE or TPE considers multiple factors that may vary depending upon the unique facts and circumstances related to each deliverable. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 916 | The Company believes its customers would be reluctant to buy unspecified software upgrade rights for the essential software included with its qualifying hardware products. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 917 | This view is primarily based on the fact that unspecified software upgrade rights do not obligate the Company to provide upgrades at a particular time or at all, and do not specify to customers which upgrades or features will be delivered. | 0001193125-13-416534/full-submission.txt |
0000320193 | 20131030 | 10-K | 918 | The Company also believes its customers would be unwilling to pay a significant amount for access to the non-software services because other companies offer similar services at little or no cost to users. | 0001193125-13-416534/full-submission.txt |
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