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0000320193
20131030
10-K
1,119
Note 6 - Long-Term Debt In May 2013, the Company issued floating- and fixed-rate notes with varying maturities for an aggregate principal amount of $17.0 billion (collectively the “Notes”).
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,120
The Notes are senior unsecured obligations, and interest is payable in arrears, quarterly for the floating-rate notes and semi-annually for the fixed-rate notes.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,121
The principal amounts and associated interest rates of the Notes as of September 28, 2013, are as follows: The floating-rate notes due 2016 and 2018 bear interest at the three-month London InterBank Offered Rate (“LIBOR”) plus 0.05% and 0.25%, respectively.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,122
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 designated as cash flow hedges of its floating-rate notes.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,123
These hedges effectively convert the floating interest rate on the floating-rate notes to a fixed interest rate.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,124
The gains and losses related to changes in the fair value of the interest rate swaps are recorded in OCI with a portion reclassified to interest expense each period to offset changes in interest rates on the floating-rate notes.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,125
The effective rates for the Notes include the interest on the Notes, amortization of the discount and, if applicable, adjustments related to hedging.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,126
The Company recognized $136 million of interest expense for the year ended September 28, 2013.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,127
As of September 28, 2013, the aggregate unamortized discount for the Company’s Notes was $40 million.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,128
Future principal payments for the Company’s Notes as of September 28, 2013, are as follows (in millions): As of September 28, 2013, the fair value of the Company’s Notes, based on Level 2 inputs, was $15.9 billion.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,129
Note 7 - Shareholders’ Equity Preferred Stock The Company has five million shares of authorized preferred stock, none of which is issued or outstanding.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,130
Under the terms of the Company’s Restated Articles of Incorporation, the Board of Directors is authorized to determine or alter the rights, preferences, privileges and restrictions of the Company’s authorized but unissued shares of preferred stock.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,131
Dividend and Stock Repurchase Program The Company declared and paid cash dividends per common share during the periods presented as follows: The Company paid cash dividends of $2.65 per share, totaling $2.5 billion, during the fourth quarter of 2012.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,132
Future dividends are subject to declaration by the Board of Directors.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,133
In 2012, the Company’s Board of Directors authorized a program to repurchase up to $10 billion of the Company’s common stock beginning in 2013.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,134
In April 2013, the Company’s Board of Directors increased the share repurchase program authorization from $10 billion to $60 billion, of which $23.0 billion had been utilized as of September 28, 2013.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,135
The Company’s share repurchase program does not obligate it to acquire any specific number of shares.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,136
Under the program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,137
In August 2012, the Company entered into an accelerated share repurchase arrangement (“ASR”) with a financial institution to purchase up to $1.95 billion of the Company’s common stock in 2013.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,138
In the first quarter of 2013, 2.6 million shares were initially delivered to the Company.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,139
In April 2013, the purchase period for the ASR ended and an additional 1.5 million shares were delivered to the Company.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,140
In total, 4.1 million shares were delivered under the ASR at an average repurchase price of $478.20 per share.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,141
The shares were retired in the quarters they were delivered, and the up-front payment of $1.95 billion was accounted for as a reduction to shareholders’ equity in the Company’s Consolidated Balance Sheet in the first quarter of 2013.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,142
In April 2013, the Company entered into a new ASR program with two financial institutions to purchase up to $12 billion of the Company’s common stock.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,143
In exchange for up-front payments totaling $12 billion, the financial institutions committed to deliver shares during the ASR’s purchase periods, which will end during 2014.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,144
The total number of shares ultimately delivered, and therefore the average price paid per share, will be determined at the end of the applicable purchase period based on the volume weighted average price of the Company’s stock during that period.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,145
During the third quarter of 2013, 23.5 million shares were initially delivered to the Company and retired.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,146
This does not represent the final number of shares to be delivered under the ASR.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,147
The up-front payments of $12 billion were accounted for as a reduction to shareholders’ equity in the Company’s Consolidated Balance Sheet.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,148
The Company reflected the ASRs as a repurchase of common stock for purposes of calculating earnings per share and as forward contracts indexed to its own common stock.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,149
The forward contracts met all of the applicable criteria for equity classification, and, therefore, were not accounted for as derivative instruments.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,150
During 2013, the Company repurchased 19.4 million shares of its common stock in the open market at an average price of $464.11 per share for a total of $9.0 billion.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,151
These shares were retired upon repurchase.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,152
Note 8 - Comprehensive Income Comprehensive income consists of two components, net income and other comprehensive income.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,153
Other comprehensive income refers to revenue, expenses, and gains and losses that under GAAP are recorded as an element of shareholders’ equity but are excluded from net income.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,154
The Company’s other comprehensive income consists of foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency, net deferred gains and losses on certain derivative instruments accounted for as cash flow hedges, and unrealized gains and losses on marketable s...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,155
The following table shows the components of AOCI, net of taxes, as of September 28, 2013 and September 29, 2012 (in millions): Note 9 - Benefit Plans Stock Plans 2003 Employee Stock Plan The 2003 Employee Stock Plan (the “2003 Plan”) is a shareholder approved plan that provides for broad-based equity grants to employee...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,156
The 2003 Plan permits the granting of incentive stock options, nonstatutory stock options, RSUs, stock appreciation rights, stock purchase rights and performance-based awards.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,157
Options granted under the 2003 Plan generally expire seven to ten years after the grant date and generally become exercisable over a period of four years, based on continued employment, with either annual, semi-annual or quarterly vesting.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,158
RSUs granted under the 2003 Plan generally vest over two to four years, based on continued employment and are settled upon vesting in shares of the Company’s common stock on a one-for-one basis.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,159
Each share issued with respect to an award granted under the 2003 Plan (other than a stock option or stock appreciation right) reduces the number of shares available for grant under the plan by two shares, whereas shares issued in respect of an option or stock appreciation right count against the number of shares avail...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,160
All RSUs, other than RSUs held by the Chief Executive Officer, granted under the 2003 Plan have dividend equivalent rights (“DER”), which entitle holders of RSUs to the same dividend value per share as holders of common stock.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,161
DER are subject to the same vesting and other terms and conditions as the corresponding unvested RSUs.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,162
DER are accumulated and paid when the underlying shares vest.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,163
As of September 28, 2013, approximately 28.3 million shares were reserved for future issuance under the 2003 Plan.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,164
1997 Director Stock Plan The 1997 Director Stock Plan (the “Director Plan”) is a shareholder approved plan that (i) permits the Company to grant awards of RSUs or stock options to the Company’s non-employee directors, (ii) provides for automatic initial grants of RSUs upon a non-employee director joining the Board of D...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,165
Each share issued with respect to RSUs granted under the Director Plan reduces the number of shares available for grant under the plan by two shares.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,166
The Director Plan expires November 9, 2019.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,167
All RSUs granted under the Director Plan are entitled to DER.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,168
As of September 28, 2013, approximately 176,000 shares were reserved for future issuance under the Director Plan.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,169
Rule 10b5-1 Trading Plans During the fourth quarter of 2013, executive officers Timothy D. Cook, Peter Oppenheimer, D. Bruce Sewell, Philip W. Schiller, Daniel Riccio and Jeffrey E. Williams and director William V. Campbell had equity trading plans in place in accordance with Rule 10b5-1(c)(1) under the Exchange Act.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,170
An equity trading plan is a written document that pre-establishes the amounts, prices and dates (or formula for determining the amounts, prices and dates) of future purchases or sales of the Company’s stock, including shares acquired pursuant to the Company’s employee and director equity plans.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,171
Employee Stock Purchase Plan The Employee Stock Purchase Plan (the “Purchase Plan”) is a shareholder approved plan under which substantially all employees may purchase the Company’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning or...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,172
An employee’s payroll deductions under the Purchase Plan are limited to 10% of the employee’s compensation and employees may not purchase more than $25,000 of stock during any calendar year.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,173
As of September 28, 2013, approximately 1.8 million shares were reserved for future issuance under the Purchase Plan.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,174
401(k) Plan The Company’s 401(k) Plan (the “401(k) Plan”) is a deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,175
Under the 401(k) Plan, participating U.S. employees may defer a portion of their pre-tax earnings, up to the IRS annual contribution limit ($17,500 for calendar year 2013).
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,176
The Company matches 50% to 100% of each employee’s contributions, depending on length of service, up to a maximum 6% of the employee’s eligible earnings.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,177
The Company’s matching contributions to the 401(k) Plan were $135 million, $114 million and $90 million in 2013, 2012 and 2011, respectively.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,178
Restricted Stock Units A summary of the Company’s RSU activity and related information for 2013, 2012 and 2011, is as follows: The fair value as of the respective vesting dates of RSUs was $3.1 billion, $3.3 billion and $1.5 billion for 2013, 2012 and 2011, respectively.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,179
The majority of RSUs that vested in 2013, 2012 and 2011 were net-share settled such that the Company withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,180
The total shares withheld were approximately 2.2 million, 2.3 million and 1.6 million for 2013, 2012 and 2011, respectively, and were based on the value of the RSUs on their respective vesting dates as determined by the Company’s closing stock price.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,181
Total payments for the employees’ tax obligations to taxing authorities were $1.1 billion, $1.2 billion and $520 million in 2013, 2012 and 2011, respectively, and are reflected as a financing activity within the Consolidated Statements of Cash Flows.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,182
These net-share settlements had the effect of share repurchases by the Company as they reduced and retired the number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to the Company.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,183
Stock Options A summary of the Company’s stock option activity and related information for 2013, 2012 and 2011, is as follows: Aggregate intrinsic value represents the value of the Company’s closing stock price on the last trading day of the period in excess of the weighted-average exercise price multiplied by the numb...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,184
Total intrinsic value of options at time of exercise was $1.0 billion, $2.3 billion and $2.6 billion for 2013, 2012 and 2011, respectively.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,185
Share-based Compensation The Company granted 8,000 and 1,370 stock options during 2013 and 2011, respectively.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,186
The weighted-average grant date fair value per share of stock options granted during 2013 and 2011 was $294.84 and $181.13, respectively.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,187
The Company did not grant any stock options during 2012.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,188
During 2013 and 2012, in conjunction with certain business combinations, the Company assumed 29,000 and 41,000 stock options, respectively, which had a weighted-average fair value per share of $407.80 and $405.39, respectively.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,189
The Company did not assume any stock options during 2011.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,190
The weighted-average fair value of stock purchase rights per share was $115.19, $108.44 and $71.47 during 2013, 2012 and 2011, respectively.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,191
The following table shows a summary of the share-based compensation expense included in the Consolidated Statements of Operations for 2013, 2012 and 2011 (in millions): The income tax benefit related to share-based compensation expense was $816 million, $567 million and $467 million for 2013, 2012 and 2011, respectivel...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,192
As of September 28, 2013, the total unrecognized compensation cost related to outstanding stock options and RSUs was $4.7 billion, which the Company expects to recognize over a weighted-average period of 3.0 years.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,193
Note 10 - Commitments and Contingencies Accrued Warranty and Indemnification The Company offers a basic limited parts and labor warranty on its hardware products.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,194
The basic warranty period for hardware products is typically one year from the date of purchase by the end-user.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,195
The Company also offers a 90-day basic warranty for its service parts used to repair the Company’s hardware products.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,196
The Company provides currently for the estimated cost that may be incurred under its basic limited product warranties at the time related revenue is recognized.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,197
Factors considered in determining appropriate accruals for product warranty obligations include the size of the installed base of products subject to warranty protection, historical and projected warranty claim rates, historical and projected cost-per-claim, and knowledge of specific product failures that are outside o...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,198
The Company assesses the adequacy of its pre-existing warranty liabilities and adjusts the amounts as necessary based on actual experience and changes in future estimates.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,199
The following table shows changes in the Company’s accrued warranties and related costs for 2013, 2012 and 2011 (in millions): 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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,200
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,201
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 and, in the opinion of management, does not have a potential liability related to unresolved infringement claims subject to indemnification that would m...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,202
Therefore, the Company did not record a liability for infringement costs related to indemnification as of either September 28, 2013 or September 29, 2012.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,203
The Company has entered into indemnification agreements with its directors and executive officers.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,204
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,205
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,206
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.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,207
Concentrations in the Available Sources of Supply of Materials and Product Although most components essential to the Company’s business are generally available from multiple sources, a number of components are currently obtained from single or limited sources.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,208
In addition, the Company competes for various components with other participants in the markets for mobile communication and media devices and personal computers.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,209
Therefore, many components used by the Company, including those that are available from multiple sources, are at times subject to industry-wide shortage and significant pricing fluctuations that can materially adversely affect the Company’s financial condition and operating results.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,210
The Company uses some custom components that are not commonly used by its competitors, and new products introduced by the Company often utilize custom components available from only one source.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,211
When a component or product uses new technologies, initial capacity constraints may exist until the suppliers’ yields have matured or manufacturing capacity has increased.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,212
If the Company’s supply of components for a new or existing product were delayed or constrained, or if an outsourcing partner delayed shipments of completed products to the Company, the Company’s financial condition and operating results could be materially adversely affected.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,213
The Company’s business and financial performance could also be materially adversely affected depending on the time required to obtain sufficient quantities from the original source, or to identify and obtain sufficient quantities from an alternative source.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,214
Continued availability of these components at acceptable prices, or at all, may be affected if those suppliers concentrated on the production of common components instead of components customized to meet the Company’s requirements.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,215
The Company has entered into various agreements for the supply of components; however, there can be no guarantee that the Company will be able to extend or renew these agreements on similar terms, or at all.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,216
Therefore, the Company remains subject to significant risks of supply shortages and price increases that can materially adversely affect its financial condition and operating results.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,217
Substantially all of the Company’s hardware products are manufactured by outsourcing partners that are located primarily in Asia.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
1,218
A significant concentration of this manufacturing is currently performed by a small number of outsourcing partners, often in single locations.
0001193125-13-416534/full-submission.txt