Apple 2015 Annual Report Download - page 34

Off-Balance Sheet Arrangements and Contractual Obligations
The Company has not entered into any transactions with unconsolidated entities whereby the Company has financial guarantees,
subordinated retained interests, derivative instruments, or other contingent arrangements that expose the Company to material continuing
risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides financing, liquidity,
market risk, or credit risk support to the Company, or engages in leasing, hedging, or R&D services with the Company.
The following table presents certain payments due by the Company under contractual obligations with minimum firm commitments as of
September 26, 2015, and excludes amounts already recorded on the Consolidated Balance Sheet, except for term debt (in millions):
Payments Due in
Less Than 1 Year Payments Due in 1-3 Years Payments Due in 4-5 Years Payments Due in More Than 5 Years Total
Term debt $ 2,500 $ 9,500 $ 9,356 $ 34,345 $ 55,701
Operating leases 772 1,518 1,389 2,592 6,271
Purchase commitments 29,464 0 0 0 29,464
Other obligations 4,553 1,898 53 757 7,261
Total $ 37,289 $ 12,916 $ 10,798 $ 37,694 $ 98,697
Operating Leases
The Company’s major facility leases are typically for terms not exceeding 10 years and generally contain multi-year renewal options. As of
September 26, 2015, the Company had a total of 463 retail stores. Leases for retail space are for terms ranging from five to 20 years, the
majority of which are for 10 years, and often contain multi-year renewal options. As of September 26, 2015, the Company’s total future
minimum lease payments under noncancelable operating leases were $6.3 billion, of which $3.6 billion related to leases for retail space.
Purchase Commitments
The Company utilizes several outsourcing partners to manufacture sub-assemblies for the Company’s products and to perform final
assembly and testing of finished products. These outsourcing partners acquire components and build product based on demand
information supplied by the Company, which typically covers periods up to 150 days. The Company also obtains individual components
for its products from a wide variety of individual suppliers. Consistent with industry practice, the Company acquires components through a
combination of purchase orders, supplier contracts, and open orders based on projected demand information. Where
appropriate, the purchases are applied to inventory component prepayments that are outstanding with the respective supplier. As of
September 26, 2015, the Company had outstanding off-balance sheet third-party manufacturing commitments and component purchase
commitments of $29.5 billion.
Other Obligations
The Company’s other off-balance sheet obligations were comprised of commitments to acquire capital assets, including product tooling
and manufacturing process equipment, and commitments related to inventory prepayments, advertising, licensing, R&D, internet and
telecommunications services, energy and other obligations.
The Company’s other non-current liabilities in the Consolidated Balance Sheets consist primarily of deferred tax liabilities, gross
unrecognized tax benefits and the related gross interest and penalties. As of September 26, 2015, the Company had non-current deferred
tax liabilities of $24.1 billion. Additionally, as of September 26, 2015, the Company had gross unrecognized tax benefits of $6.9 billion and
an additional $1.3 billion for gross interest and penalties classified as non-current liabilities. At this time, the Company is unable to make a
reasonably reliable estimate of the timing of payments in individual years in connection with these tax liabilities; therefore, such amounts
are not included in the above contractual obligation table.
Indemnification
The Company generally does not indemnify end-users of its operating system and application software against legal claims that the
software infringes third-party intellectual property rights. Other agreements entered into by the Company sometimes include
indemnification provisions under which the Company could be subject to costs and/or damages in the event of an infringement claim
against the Company or an indemnified third-party. In the opinion of management, there was not at least a reasonable possibility the
Company may have incurred a material loss with respect to indemnification of end-users of its operating system or application software for
infringement of third-party intellectual property rights. The Company did not record a liability for infringement costs related to
indemnification as of September 26, 2015 or September 27, 2014.
Apple Inc. | 2015 Form 10-K | 32