Apple 2010 Annual Report Download - page 81

Download and view the complete annual report

Please find page 81 of the 2010 Apple annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 118

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118

Table of Contents
of substantially all of the Company’
s Macs, iPhones, iPads and iPods. 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. 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, which generally
expire between 2011 and 2015. As of September 25, 2010, the Company had a total of $956 million of inventory component prepayments
outstanding, of which $157 million is classified as other current assets and $799 million is classified as other assets in the Consolidated Balance
Sheets. In August 2010, the Company entered into a long-
term supply agreement under which it has committed to prepay $500 million in 2011.
The Company had a total of $1.2 billion of inventory component prepayments outstanding as of September 26, 2009. These prepayments will be
applied to certain inventory component purchases made over the life of each respective agreement.
Contingencies
The Company is subject to various 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.
On March 14, 2008, Mirror Worlds, LLC
filed an action against the Company alleging that certain of its products infringed on three patents
covering technology used to display files. On October 1, 2010, a jury returned a verdict against the Company, and awarded damages of $208
million per patent for each of the three patents asserted. The Company is challenging the verdict, believes it has valid defenses and has not
recorded a loss contingency at this time.
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 and reporting
segments, which are generally based on the nature and location of its customers, to be the Americas, Europe, Japan, Asia-
Pacific and Retail
operations. The Americas, Europe, Japan and Asia-
Pacific reportable segment results do not include results of 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
78