Apple 2003 Annual Report Download - page 74

infringement claim asserted against itself or an indemnified third-party and, in the opinion of management, does not have a potential liability
related to unresolved infringement claims that would have a material adverse effect on its financial condition, liquidity or results of operations.
Therefore, the Company did not record a liability for infringement costs as of either September 27, 2003 or September 28, 2002.
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Concentrations in the Available Sources of Supply of Materials and Product
Although certain components essential to the Company's business are generally available from multiple sources, other key components
(including microprocessors and application-specific integrated circuits, or ("ASICs")) are currently obtained by the Company from single or
limited sources. Some other key components, while currently available to the Company from multiple sources, are at times subject to industry-
wide availability and pricing pressures. In addition, the Company uses some components that are not common to the rest of the personal
computer industry, and new products introduced by the Company often initially utilize custom components obtained from only one source until
the Company has evaluated whether there is a need for and subsequently qualifies additional suppliers. If the supply of a key single-sourced
component to the Company were to be delayed or curtailed or in the event a key manufacturing vendor delays shipments of completed products
to the Company, the Company's ability to ship related products in desired quantities and in a timely manner could be adversely affected. The
Company's business and financial performance could also be 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. Continued availability of these components
may be affected if producers were to decide to concentrate on the production of common components instead of components customized to
meet the Company's requirements. Finally, significant portions of the Company's CPUs, logic boards, and assembled products are now
manufactured by outsourcing partners, the majority of which occurs in various parts of Asia. Although the Company works closely with its
outsourcing partners on manufacturing schedules, the Company's operating results could be adversely affected if its outsourcing partners were
unable to meet their production obligations.
Contingencies
Beginning on September 27, 2001, three shareholder class action lawsuits were filed in the United States District Court for the Northern
District of California against the Company and its Chief Executive Officer. These lawsuits are substantially identical, and purport to bring suit
on behalf of persons who purchased the Company's publicly traded common stock between July 19, 2000, and September 28, 2000. The
complaints allege violations of the 1934 Securities Exchange Act and seek unspecified compensatory damages and other relief. The Company
believes these claims are without merit and intends to defend them vigorously. The Company filed a motion to dismiss on June 4, 2002, which
was heard by the Court on September 13, 2002. On December 11, 2002, the Court granted the Company's motion to dismiss for failure to state
a cause of action, with leave to Plaintiffs to amend their complaint within thirty days. Plaintiffs filed their amended complaint on January 31,
2003, and on March 17, 2003, the Company filed a motion to dismiss the amended complaint. The Court heard the Company's motion on
July 11, 2003 and dismissed Plaintiff's claims with prejudice on August 12, 2003. Plaintiffs have appealed the ruling.
The Company is subject to certain other legal proceedings and claims that have arisen in the ordinary course of business and have not been
fully adjudicated. In the opinion of management, the Company does not have a potential liability related to any current legal proceedings and
claims that would individually or in the aggregate have a material adverse effect on its financial condition, liquidity or results of operations.
However, the results of legal proceedings cannot be predicted with certainty. Should the Company fail to prevail in any of these legal matters
or should several of these legal matters be resolved against the Company in the same reporting period, the operating results of a particular
reporting period could be materially adversely affected.
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
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the ability to return product at the end of its useful life, and place responsibility for environmentally safe disposal or recycling with the
Company. Such laws and regulations have recently been passed in several jurisdictions that the Company operates including various European
Union member countries, Japan and California. Although the Company does not anticipate any material adverse affects in the future based on
the nature of its operations and the thrust of such laws, there is no assurance that such existing laws or future laws will not have a material
adverse effect on the Company's results of operations and financial position.
Note 11—Segment Information and Geographic Data
The Company manages its business primarily on a geographic basis. The Company's reportable segments are comprised of the Americas,
Europe, Japan, and Retail. The Americas segment includes both North and South America, except for the activities of the Company's Retail
segment. The Europe segment includes European countries as well as the Middle East and Africa. The Japan segment includes only Japan. As
of September 27, 2003, the Retail segment currently operates Apple
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owned retail stores in the United States. Other operating segments include