Apple 2007 Annual Report Download - page 88

of most of the Company's portable Mac computers, iPods, and iPhones. 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 commitments.
Long-Term Supply Agreements
During the first quarter of 2006, the Company entered into long-term supply agreements with Hynix Semiconductor, Inc., Intel Corporation,
Micron Technology, Inc., Samsung Electronics Co., Ltd., and Toshiba Corporation to secure supply of NAND flash memory through calendar
year 2010. As part of these agreements, the Company prepaid $1.25 billion for flash memory components during 2006, which will be applied to
certain inventory purchases made over the life of each respective agreement. The Company utilized $208 million of the prepayment as of
September 29, 2007.
Contingencies
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 or operating results. 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 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 countries within Europe and Asia, certain Canadian provinces and certain states within the U.S.
Although the Company does not anticipate any material adverse effects 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 financial condition or
operating results.
Note 9—Segment Information and Geographic Data
In accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information , the Company reports segment
information based on the "management" approach. The management approach designates the internal reporting used by management for making
decisions and assessing performance as the source of the Company's reportable segments.
The Company manages its business primarily on a geographic basis. Accordingly, the Company determined its operating segments, which are
generally based on the nature and location of its customers, to be the Americas, Europe, Japan, Asia-Pacific, Retail, and FileMaker operations.
The Company's four geographical segments, together with the Retail segment, all sell the same products to the same types of customers. The
Company's reportable operating segments are comprised of the Americas, Europe, Japan, and Retail operations. The Americas, Europe, and
Japan reportable segments exclude activities related to the Retail segment. The Americas segment includes both North and South America. The
Europe segment includes European countries as well as the Middle East and Africa. The Retail segment operates Apple-owned retail stores in
the U.S., Canada, Japan, the U.K. and Italy. Other operating segments include
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