Apple 2012 Annual Report Download - page 9

has accumulated a large portfolio of issued patents in the U.S. and worldwide. The Company holds copyrights
relating to certain aspects of its products and services. No single patent or copyright is solely responsible for
protecting the Company’s products. The Company believes the duration of its patents is adequate relative to the
expected lives of its products.
Many of the Company’s products are designed to include intellectual property obtained from third parties. It may
be necessary in the future to seek or renew licenses relating to various aspects of its products and business
methods. While the Company has generally been able to obtain such licenses on commercially reasonable terms
in the past, there is no guarantee that such licenses could be obtained in the future on reasonable terms or at all.
Because of technological changes in the industries in which the Company competes, current extensive patent
coverage, and the rapid rate of issuance of new patents, it is possible that certain components of the Company’s
products and business methods may unknowingly infringe existing patents or intellectual property rights of
others. From time to time, the Company has been notified that it may be infringing certain patents or other
intellectual property rights of third parties.
Foreign and Domestic Operations and Geographic Data
During 2012, the Company’s domestic and international net sales accounted for 39% and 61%, respectively, of
total net sales. Information regarding financial data by geographic segment is set forth in Part II, Item 7 of this
Form 10-K under the subheading “Segment Operating Performance,” and in Part II, Item 8 of this Form 10-K in
the Notes to Consolidated Financial Statements in Note 8, “Segment Information and Geographic Data.”
Final assembly of the Company’s products is currently performed in the Company’s manufacturing facility in
Ireland, and by outsourcing partners located primarily in Asia. The supply and manufacture of a number of
components is performed by sole-sourced outsourcing partners in the U.S., Asia and Europe. Outsourcing
partners in Asia perform final assembly of substantially all of the Company’s hardware products. Margins on
sales of the Company’s products in foreign countries, and on sales of products that include components obtained
from foreign suppliers, can be adversely affected by foreign currency exchange rate fluctuations and by
international trade regulations, including tariffs and antidumping penalties. Information regarding concentration
in the available sources of supply of materials and products is set forth in Part II, Item 8 of this Form 10-K in the
Notes to Consolidated Financial Statements in Note 7, “Commitments and Contingencies.”
Seasonal Business
The Company has historically experienced higher net sales in its first fiscal quarter compared to other quarters in
its fiscal year due in part to holiday seasonal demand. Actual and anticipated timing of new product introductions
by the Company can also significantly impact the level of net sales experienced by the Company in any particular
quarter. However, neither historical seasonal patterns nor historical patterns of product introductions should be
considered reliable indicators of the Company’s future net sales or financial performance.
Warranty
The Company offers a limited parts and labor warranty on most of its hardware products. The basic warranty
period is typically one year from the date of purchase by the original end-user. The Company also offers a 90-day
basic warranty for its service parts used to repair the Company’s hardware products. In addition, where available,
consumers may purchase APP or APP+, which extends service coverage on many of the Company’s hardware
products.
Backlog
In the Company’s experience, the actual amount of product backlog at any particular time is not a meaningful
indication of its future business prospects. In particular, backlog often increases in anticipation of or immediately
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