Apple 2009 Annual Report Download - page 88

Table of Contents
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. The Company’
s purchase commitments typically cover
its requirements for periods ranging from 30 to 150 days.
Long-Term Supply Agreements
The Company has entered into prepaid long-
term supply agreements to secure the supply of certain inventory components. During the first
quarter of 2009, a long-
term supply agreement with Intel Corporation was terminated and the remaining prepaid balance of $167 million was
repaid to the Company. During the second and fourth quarters of 2009, the Company made a prepayment of $500 million to LG Display for the
purchase of LCD panels and a prepayment of $500 million to Toshiba to purchase NAND flash memory, respectively. As of September 26,
2009, the Company had a total of $1.2 billion of inventory component prepayments outstanding.
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, which are discussed in Part I, Item 3 of this Form 10-K under the heading “Legal Proceedings.”
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
materially adversely affect its financial condition or operating results. However, the results of legal proceedings cannot be predicted with
certainty. If the Company failed to prevail in any of these legal matters or if several of these legal matters were 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, product safety 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 been passed in several
jurisdictions in which the Company operates, including various countries within Europe and Asia and certain states and provinces within North
America. 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 materially adversely affect the Company’
s financial condition
or operating results.
Note 9 – Segment Information and Geographic Data
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 reportable operating segments consist of Americas, Europe, Japan and Retail operations. Other operating segments include Asia
Pacific, which encompasses Australia and Asia except for Japan and the Company’
s FileMaker, Inc. subsidiary. The Americas, Europe, Japan
and Asia Pacific 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. and in international markets. Each reportable operating segment provides similar hardware and software products and similar services to
the same types of customers. The accounting policies of the various segments are the same as those described in Note 1, “
Summary of
Significant Accounting Policies.”
The Company evaluates the performance of its operating segments based on net sales and operating income. Net sales for geographic segments
are generally based on the location of customers, while Retail segment net sales are based on sales from the Company’
s retail stores. Operating
income for each segment includes net sales to
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