Apple 2011 Annual Report Download - page 28

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The Company uses a variety of direct and indirect distribution channels, such as its retail stores, online stores, and direct sales force, and third-
party cellular network carriers, wholesalers, retailers, and value-
added resellers. The Company believes that sales of its innovative and
differentiated products are enhanced by knowledgeable salespersons who can convey the value of the hardware and software integration, and
demonstrate the unique solutions that are available on its products. The Company further believes providing direct contact with its targeted
customers is an effective way to demonstrate the advantages of its products over those of its competitors and providing a high-
quality sales and
after-sales support experience is critical to attracting new and retaining existing customers. To ensure a high-
quality buying experience for its
products in which service and education are emphasized, the Company continues to expand and improve its distribution capabilities by
expanding the number of its own retail stores worldwide. Additionally, the Company has invested in programs to enhance reseller sales by
placing high quality Apple fixtures, merchandising materials and other resources within selected third-
party reseller locations. Through the
Apple Premium Reseller Program, certain third-
party resellers focus on the Apple platform by providing a high level of integration and support
services, and product expertise.
Japan Earthquake and Tsunami and Thailand Flooding
On March 11, 2011, the northeast coast of Japan experienced a severe earthquake followed by a tsunami, with continuing aftershocks. These
geological events have caused significant damage in the region, including severe damage to nuclear power plants, and have impacted Japan’
s
power and other infrastructure as well as its economy. Certain of the Company’
s suppliers are located in Japan, and certain of its other suppliers
integrate components or use materials manufactured in Japan in the production of its products. To the extent that component production has been
affected, the Company has generally obtained alternative sources of supply or implemented other measures. The Company does not currently
believe these events will have a material impact on its operations in the first quarter of 2012 unless conditions worsen, including, but not limited
to, power outages and expansion of evacuation zones around the nuclear power plants.
Beyond the first quarter of 2012, uncertainty exists with respect to the availability of electrical power, the damage to nuclear power plants and
the impact to other infrastructure. Thus, there is a risk that the Company could in the future experience delays or other constraints in obtaining
key components and products and/or price increases related to such components and products that could materially adversely affect the
Company’s financial condition and operating results.
In addition, in recent months several regions of Thailand have experienced severe flooding, causing damage to infrastructure, housing and
factories. A number of the Company’
s suppliers are located in Thailand. As with Japan, to the extent that component production has been
affected, the Company will work to obtain alternative sources of supply or implement other measures. Based on the Company’
s current
assessment of the situation, it does not believe this event will have a material impact on its operations in the first quarter of 2012; however,
because the situation in Thailand is still evolving uncertainty remains regarding the ultimate impact of this event on the Company.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”)
and
the Company’s discussion and analysis of its financial condition and operating results require the Company’
s management to make judgments,
assumptions and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes. Note 1, “
Summary
of Significant Accounting Policies” of Notes to Consolidated Financial Statements in this Form 10-
K describes the significant accounting
policies and methods used in the preparation of the Company’
s consolidated financial statements. Management bases its estimates on historical
experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates and such differences may be material.
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