Apple 2010 Annual Report Download - page 45

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Table of Contents
Such purchase commitments typically cover the Company’
s forecasted component and manufacturing requirements for periods ranging from 30
to 150 days. As of September 25, 2010, the Company had outstanding off-balance sheet third-
party manufacturing commitments and component
purchase commitments of $8.2 billion.
The Company has entered into prepaid long-
term supply agreements to secure the supply of certain inventory components, which generally
expire between 2011 and 2015. In August 2010, the Company entered into a long-
term supply agreement under which it has committed to
prepay $500 million in 2011. These prepayments will be applied to certain inventory component purchases made over the life of each respective
agreement.
Other Obligations
Other outstanding obligations were $1.1 billion as of September 25, 2010, which related to advertising, research and development, product
tooling and manufacturing process equipment, Internet and telecommunications services and other obligations.
The Company’s other non-
current liabilities in the Consolidated Balance Sheets consist primarily of deferred tax liabilities, gross unrecognized
tax benefits and the related gross interest and penalties. As of September 25, 2010, the Company had non-
current deferred tax liabilities of $4.3
billion. Additionally, as of September 25, 2010, the Company had gross unrecognized tax benefits of $943 million and an additional $247
million for gross interest and penalties classified as non-
current liabilities. At this time, the Company is unable to make a reasonably reliable
estimate of the timing of payments in connection with these tax liabilities; therefore, such amounts are not included in the above contractual
obligation table.
Indemnifications
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. 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. 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 liability related to unresolved
infringement claims subject to indemnification that would materially adversely affect its financial condition or operating results. Therefore, the
Company did not record a liability for infringement costs as of either September 25, 2010 or September 26, 2009.
The Company has entered into indemnification agreements with its directors and executive officers. 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. 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. 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
materially adversely affected the Company’s financial condition or operating results.
Interest Rate and Foreign Currency Risk Management
The Company regularly reviews its foreign exchange forward and option positions, both on a stand-
alone basis and in conjunction with its
underlying foreign currency and interest rate related exposures. However, given the effective horizons of the Company’
s risk management
activities and the anticipatory nature of the exposures, there can be no assurance the hedges will offset more than a portion of the financial
impact resulting from
42
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk