Apple 2015 Annual Report Download - page 15

Regardless of the merit of particular claims, litigation may be expensive, time-consuming, disruptive to the Company’s operations and
distracting to management. In recognition of these considerations, the Company may enter into arrangements to settle litigation.
In management’s opinion, there is not at least a reasonable possibility the Company may have incurred a material loss, or a material loss in
excess of a recorded accrual, with respect to loss contingencies, including matters related to infringement of intellectual property rights.
However, the outcome of litigation is inherently uncertain.
Although management considers the likelihood of such an outcome to be remote, if one or more legal matters were resolved against the
Company in a reporting period for amounts in excess of management’s expectations, the Company’s consolidated financial statements
for that reporting period could be materially adversely affected. Further, such an outcome could result in significant compensatory, punitive
or trebled monetary damages, disgorgement of revenue or profits, remedial corporate measures or injunctive relief against the Company
that could materially adversely affect its financial condition and operating results.
The Company is subject to laws and regulations worldwide, changes to which could increase the Company’s costs and individually
or in the aggregate adversely affect the Company’s business.
The Company is subject to laws and regulations affecting its domestic and international operations in a number of areas. These U.S. and
foreign laws and regulations affect the Company’s activities including, but not limited to, in areas of labor, advertising, digital content,
consumer protection, real estate, billing, e-commerce, promotions, quality of services, telecommunications, mobile communications and
media, television, intellectual property ownership and infringement, tax, import and export requirements, anti-corruption, foreign exchange
controls and cash repatriation restrictions, data privacy requirements, anti-competition, environmental, health and safety.
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. Violations of these laws
and regulations could materially adversely affect the Company’s brand, international growth efforts and business.
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.
Apple Inc. | 2015 Form 10-K | 13