Apple 2014 Annual Report Download - page 17

By way of example, laws and regulations related to mobile communications and media devices in the many jurisdictions in
which the Company operates are extensive and subject to change. Such changes could include, among others, restrictions on
the production, manufacture, distribution and use of devices, locking devices to a carrier’s network, or mandating the use of
devices on more than one carrier’s network. These devices are also subject to certification and regulation by governmental and
standardization bodies, as well as by cellular network carriers for use on their networks. These certification processes are
extensive and time consuming, and could result in additional testing requirements, product modifications, or delays in product
shipment dates, or could preclude the Company from selling certain products.
Compliance with these laws, regulations and similar requirements may be onerous and expensive, and they may be
inconsistent from jurisdiction to jurisdiction, further increasing the cost of compliance and doing business. Any such costs,
which may rise in the future as a result of changes in these laws and regulations or in their interpretation, could individually or in
the aggregate make the Company’s products and services less attractive to the Company’s customers, delay the introduction
of new products in one or more regions, or cause the Company to change or limit its business practices. The Company has
implemented policies and procedures designed to ensure compliance with applicable laws and regulations, but there can be
no assurance that the Company’s employees, contractors, or agents will not violate such laws and regulations or the
Company’s policies and procedures.
The Company’s business is subject to the risks of international operations.
The Company derives a significant portion of its revenue and earnings from its international operations. Compliance with
applicable U.S. and foreign laws and regulations, such as import and export requirements, anti-corruption laws, tax laws,
foreign exchange controls and cash repatriation restrictions, data privacy requirements, environmental laws, labor laws and
anti-competition regulations, increases the costs of doing business in foreign jurisdictions. Although the Company has
implemented policies and procedures to comply with these laws and regulations, a violation by the Company’s employees,
contractors, or agents could nevertheless occur.
The Company also could be significantly affected by other risks associated with international activities including, but not limited
to, economic and labor conditions, increased duties, taxes and other costs and political instability. Margins on sales of the
Company’s products in foreign countries, and on sales of products that include components obtained from foreign suppliers,
could be materially adversely affected by international trade regulations, including duties, tariffs and antidumping penalties. The
Company is also exposed to credit and collectability risk on its trade receivables with customers in certain international
markets. There can be no assurance the Company can effectively limit its credit risk and avoid losses.
The Company’s Retail segment has required and will continue to require a substantial investment and commitment of
resources and is subject to numerous risks and uncertainties.
The Company’s retail stores have required substantial investment in equipment and leasehold improvements, information
systems, inventory and personnel. The Company also has entered into substantial operating lease commitments for retail
space. Certain stores have been designed and built to serve as high-profile venues to promote brand awareness and serve as
vehicles for corporate sales and marketing activities. Because of their unique design elements, locations and size, these stores
require substantially more investment than the Company’s more typical retail stores. Due to the high cost structure associated
with the Retail segment, a decline in sales or the closure or poor performance of individual or multiple stores could result in
significant lease termination costs, write-offs of equipment and leasehold improvements, and severance costs.
Many factors unique to retail operations, some of which are beyond the Company’s control, pose risks and uncertainties.
These risks and uncertainties include, but are not limited to, macro-economic factors that could have an adverse effect on
general retail activity, as well as the Company’s inability to manage costs associated with store construction and operation, the
Company’s failure to manage relationships with its existing retail partners, more challenging environments in managing retail
operations outside the U.S., costs associated with unanticipated fluctuations in the value of retail inventory, and the Company’s
inability to obtain and renew leases in quality retail locations at a reasonable cost.
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