Apple 2004 Annual Report Download - page 58

orders, impeding the manufacture or shipment of products, or resulting in the unintentional disclosure of customer or Company information.
Management has taken steps to address these concerns for its own systems by implementing sophisticated network security and internal control
measures. 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.
The Company's business is subject to the risks of international operations.
A large portion of the Company's revenue is derived from its international operations. 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 versus the local currency in which
the products are sold and goods and services are purchased. 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. 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. 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.
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.
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. 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.
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.
The Company is subject to risks associated with environmental regulations.
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 or recycling with the Company. 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. In the future, these
laws could have a material adverse affect on the Company.
Changes in accounting rules could adversely affect the Company's future operating results.
Financial statements are prepared in accordance with U.S. generally accepted accounting principles. 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. 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.
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