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0000320193
20151028
10-K
552
Net sales and unit sales increased for iPhone primarily due to the successful introduction of iPhone 5s and 5c in the latter half of calendar year 2013, the successful launch of iPhone 6 and 6 Plus beginning in the fourth quarter of 2014, and expanded distribution.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
553
Mac net sales and unit sales increased primarily due to strong demand for MacBook Air® and MacBook Pro® which were updated in 2014 with faster processors and offered at lower prices.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
554
Net sales of Services grew primarily due to increased revenue from sales through the App Store®, AppleCare® and licensing.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
555
Growth in these areas was partially offset by the year-over-year decline in net sales for iPad due to lower unit sales in many markets, and a decline in net sales of Other Products.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
556
All of the Company’s operating segments other than the Rest of Asia Pacific segment experienced increased net sales in 2014, with growth being strongest in the Greater China and Japan operating segments.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
557
During 2014, the Company completed various business acquisitions, including the acquisitions of Beats Music, LLC, which offers a subscription streaming music service, and Beats Electronics, LLC, which makes Beats® headphones, speakers and audio software.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
558
Apple Inc. | 2015 Form 10-K | 23 In April 2014, the Company increased its share repurchase authorization to $90 billion and the quarterly dividend was raised to $0.47 per common share, resulting in an overall increase in its capital return program from $100 billion to over $130 billion.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
559
During 2014, the Company utilized $45 billion to repurchase its common stock and paid dividends and dividend equivalents of $11.1 billion.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
560
The Company also issued $12.0 billion of long-term debt during 2014, with varying maturities through 2044, and launched a commercial paper program, with $6.3 billion outstanding as of September 27, 2014.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
561
Sales Data The following table shows net sales by operating segment and net sales and unit sales by product during 2015, 2014 and 2013 (dollars in millions and units in thousands): (1) Includes deferrals and amortization of related software upgrade rights and non-software services.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
562
(2) Includes revenue from the iTunes Store®, App Store, Mac App Store, iBooks Store™ and Apple Music™ (collectively “Internet Services”), AppleCare, Apple Pay®, licensing and other services.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
563
(3) Includes sales of Apple TV®, Apple Watch, Beats products, iPod and Apple-branded and third-party accessories.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
564
Apple Inc. | 2015 Form 10-K | 24 Product Performance iPhone The following table presents iPhone net sales and unit sales information for 2015, 2014 and 2013 (dollars in millions and units in thousands): The year-over-year growth in iPhone net sales and unit sales during 2015 primarily resulted from strong demand for iP...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
565
Overall average selling prices (“ASPs”) for iPhone increased by 11% during 2015 compared to 2014, due primarily to the introduction of iPhone 6 and 6 Plus in September 2014, partially offset by the effect of weakness in most foreign currencies relative to the U.S. dollar.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
566
The year-over-year growth in iPhone net sales and unit sales in 2014 resulted primarily from the successful introduction of new iPhones in the latter half of calendar year 2013, the successful launch of iPhone 6 and 6 Plus beginning in September 2014, and expanded distribution.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
567
iPhone unit sales grew in all of the Company’s operating segments, while iPhone net sales grew in all segments except Rest of Asia Pacific.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
568
Overall ASPs for iPhone were relatively flat in 2014 compared to 2013, with growth in ASPs in the Americas segment being offset by a decline in ASPs in the Greater China, Japan and Rest of Asia Pacific segments.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
569
iPad The following table presents iPad net sales and unit sales information for 2015, 2014 and 2013 (dollars in millions and units in thousands): Net sales and unit sales for iPad declined during 2015 compared to 2014.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
570
The Company believes the decline in iPad sales is due in part to a longer repurchase cycle for iPads and some level of cannibalization from the Company’s other products.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
571
iPad ASPs declined by 5% during 2015 compared to 2014, primarily as a result of the effect of weakness in most foreign currencies relative to the U.S. dollar and a shift in mix to lower-priced iPads.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
572
Net sales and unit sales for iPad declined in 2014 compared to 2013. iPad net sales and unit sales grew in the Greater China and Japan segments but this growth was more than offset by a decline in all other segments.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
573
Overall iPad ASPs were relatively flat in 2014 compared to 2013 with a shift in mix to higher-priced iPads being offset by the October 2013 price reduction of iPad mini™.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
574
ASPs increased in the Japan and Rest of Asia Pacific segments but were slightly down in other segments.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
575
Mac The following table presents Mac net sales and unit sales information for 2015, 2014 and 2013 (dollars in millions and units in thousands): The year-over-year growth in Mac net sales and unit sales during 2015 was driven by strong demand for Mac portables.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
576
Mac ASPs declined 3% during 2015 compared to 2014 largely due to the effect of weakness in most foreign currencies relative to the U.S. dollar.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
577
The year-over-year growth in Mac net sales and unit sales for 2014 was primarily driven by increased sales of MacBook Air, MacBook Pro and Mac Pro.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
578
Mac net sales and unit sales increased in all of the Company’s operating segments.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
579
Mac ASPs decreased during 2014 compared to 2013 primarily due to price reductions on certain Mac models and a shift in mix towards Mac portable systems.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
580
Apple Inc. | 2015 Form 10-K | 25 Services The following table presents net sales information of Services for 2015, 2014 and 2013 (dollars in millions): The increase in net sales of Services during 2015 compared to 2014 was primarily due to growth from Internet Services and licensing.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
581
The App Store, included within Internet Services, generated strong year-over-year net sales growth of 29%.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
582
The increase in net sales of Services in 2014 compared to 2013 was primarily due to growth in net sales from Internet Services, AppleCare and licensing.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
583
Internet Services generated a total of $10.2 billion in net sales during 2014 compared to $9.3 billion during 2013.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
584
Growth in net sales from Internet Services was driven by increases in revenue from app sales reflecting continued growth in the installed base of iOS devices and the expanded offerings of iOS apps and related in-app purchases.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
585
This was partially offset by a decline in sales of digital music.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
586
Segment Operating Performance The Company manages its business primarily on a geographic basis.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
587
The Company’s reportable operating segments consist of the Americas, Europe, Greater China, Japan and Rest of Asia Pacific.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
588
The Americas segment includes both North and South America.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
589
The Europe segment includes European countries, as well as India, the Middle East and Africa.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
590
The Greater China segment includes China, Hong Kong and Taiwan.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
591
The Rest of Asia Pacific segment includes Australia and those Asian countries not included in the Company’s other reportable operating segments.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
592
Although, each reportable operating segment provides similar hardware and software products and similar services, they are managed separately to better align with the location of the Company’s customers and distribution partners and the unique market dynamics of each geographic region.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
593
Further information regarding the Company’s reportable operating segments can be found in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 11, “Segment Information and Geographic Data.” Americas The following table presents Americas net sales information for 2015, 2014 and 201...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
594
The growth in the Americas segment in 2014 was due to increased net sales of iPhone, Mac and Services that was partially offset by a decline in net sales of iPad and Other Products and weakness in foreign currencies relative to the U.S. dollar compared to 2013. iPhone growth resulted primarily from the successful intro...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
595
Mac growth was driven primarily by increased net sales and unit sales of MacBook Air and Mac Pro.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
596
Europe The following table presents Europe net sales information for 2015, 2014 and 2013 (dollars in millions): The year-over-year increase in Europe net sales during 2015 was driven primarily by growth in net sales and unit sales of iPhone, partially offset by the effect of weakness in foreign currencies relative to t...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
597
The growth in the Europe segment in 2014 was due to increased net sales of iPhone, Mac and Services, as well as strength in European currencies relative to the U.S. dollar, partially offset by a decline in net sales of iPad.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
598
iPhone growth resulted primarily from the successful introduction of iPhone 5s and 5c in the second half of calendar 2013 and the successful launch of iPhone 6 and 6 Plus in over 20 countries in Europe in September 2014.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
599
Mac growth was driven primarily by increased net sales and unit sales of MacBook Air, MacBook Pro and Mac Pro.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
600
Apple Inc. | 2015 Form 10-K | 26 Greater China The following table presents Greater China net sales information for 2015, 2014 and 2013 (dollars in millions): Greater China experienced strong year-over-year increases in net sales during 2015 driven primarily by iPhone sales.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
601
The Greater China segment experienced year-over-year growth in net sales in 2014 that was significantly higher than the growth rate for the Company overall.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
602
Greater China growth was driven by higher unit sales and net sales of all major product categories, in addition to higher net sales of Services.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
603
Growth in net sales and unit sales of iPhone was especially strong, driven by the successful launch of iPhone 5s and 5c in Mainland China and Hong Kong in September 2013, the successful launch of iPhone 6 and 6 Plus in Hong Kong in September 2014, increased demand for the Company’s entry-priced iPhones and the addition...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
604
Japan The following table presents Japan net sales information for 2015, 2014 and 2013 (dollars in millions): The year-over-year increase in Japan net sales during 2015 was driven primarily by growth in Services largely associated with strong App Store sales, partially offset by the effect of weakness in the Japanese y...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
605
In 2014 the Japan segment generated year-over-year increases in net sales and unit sales of every major product category and experienced growth in net sales of Services.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
606
The year-over-year growth in iPhone was driven by the successful launch of iPhone 5s and 5c in September 2013, the successful launch of iPhone 6 and 6 Plus in September 2014, increased demand for the Company’s entry-priced iPhones and the addition of a significant new carrier in the fourth quarter of 2013.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
607
These positive factors were partially offset by weakness in the Japanese Yen relative to the U.S. dollar.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
608
Rest of Asia Pacific The following table presents Rest of Asia Pacific net sales information for 2015, 2014 and 2013 (dollars in millions): The year-over-year increase in Rest of Asia Pacific net sales during 2015 primarily reflects strong growth in net sales and unit sales of iPhone, partially offset by the effect of ...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
609
Net sales in the Rest of Asia Pacific segment declined in 2014 compared to 2013 due to year-over-year reductions in net sales in all major product categories except Mac and reductions in unit sales of iPad.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
610
Net sales in 2014 were also negatively affected by the weakness in several foreign currencies relative to the U.S. dollar, including the Australian dollar.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
611
Apple Inc. | 2015 Form 10-K | 27 Gross Margin Gross margin for 2015, 2014 and 2013 is as follows (dollars in millions): The year-over-year increase in the gross margin percentage in 2015 was driven primarily by a favorable shift in mix to products with higher margins and, to a lesser extent, by improved leverage on fix...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
612
These positive factors were partially offset primarily by higher product cost structures and, to a lesser extent, by the effect of weakness in most foreign currencies relative to the U.S. dollar.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
613
The year-over-year increase in the gross margin percentage in 2014 was driven by multiple factors including lower commodity costs, a favorable shift in mix to products with higher margins and improved leverage on fixed costs from higher net sales, which was partially offset by the weakness in several foreign currencies...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
614
The Company anticipates gross margin during the first quarter of 2016 to be between 39% and 40%.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
615
The foregoing statement regarding the Company’s expected gross margin percentage in the first quarter of 2016 is forward-looking and could differ from actual results.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
616
The Company’s future gross margins can be impacted by multiple factors including, but not limited to, those set forth in Part I, Item 1A of this Form 10-K under the heading “Risk Factors” and those described in this paragraph.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
617
In general, the Company believes gross margins will remain under downward pressure due to a variety of factors, including continued industry wide global product pricing pressures, increased competition, compressed product life cycles, product transitions, potential increases in the cost of components, and potential str...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
618
In response to competitive pressures, the Company expects it will continue to take product pricing actions, which would adversely affect gross margins.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
619
Gross margins could also be affected by the Company’s ability to manage product quality and warranty costs effectively and to stimulate demand for certain of its products.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
620
Due to the Company’s significant international operations, its financial condition and operating results, including gross margins, could be significantly affected by fluctuations in exchange rates.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
621
Operating Expenses Operating expenses for 2015, 2014 and 2013 are as follows (dollars in millions): Research and Development The year-over-year growth in R&D expense in 2015 and 2014 was driven primarily by an increase in headcount and related expenses, including share-based compensation costs, and material costs to su...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
622
The Company continues to believe that focused investments in R&D are critical to its future growth and competitive position in the marketplace and are directly related to timely development of new and updated products that are central to the Company’s core business strategy.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
623
Selling, General and Administrative The year-over-year growth in selling, general and administrative expense in 2015 and 2014 was primarily due to increased headcount and related expenses, including share-based compensation costs, and higher spending on marketing and advertising.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
624
Apple Inc. | 2015 Form 10-K | 28 Other Income/(Expense), Net Other income/(expense), net for 2015, 2014 and 2013 are as follows (dollars in millions): The increase in other income/(expense), net during 2015 compared to 2014 was due primarily to higher interest income, partially offset by higher expenses associated with...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
625
The decrease in other income and expense during 2014 compared to 2013 was due primarily to higher interest expense on debt and higher expenses associated with foreign exchange rate movements, partially offset by lower premium expenses on foreign exchange contracts and higher interest income.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
626
The weighted-average interest rate earned by the Company on its cash, cash equivalents and marketable securities was 1.49%, 1.11% and 1.03% in 2015, 2014 and 2013, respectively.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
627
Provision for Income Taxes Provision for income taxes and effective tax rates for 2015, 2014 and 2013 are as follows (dollars in millions): The Company’s effective tax rates for 2015, 2014 and 2013 differ from the statutory federal income tax rate of 35% due primarily to certain undistributed foreign earnings, a substa...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
628
The higher effective tax rate during 2015 compared to 2014 was due primarily to higher foreign taxes.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
629
The effective tax rate in 2014 compared to 2013 was relatively flat.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
630
As of September 26, 2015, the Company had deferred tax assets arising from deductible temporary differences, tax losses and tax credits of $7.8 billion and deferred tax liabilities of $24.1 billion.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
631
Management believes it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with future reversals of existing taxable temporary differences, will be sufficient to fully recover the deferred tax assets.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
632
The Company will continue to evaluate the realizability of deferred tax assets quarterly by assessing the need for and the amount of a valuation allowance.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
633
The U.S. Internal Revenue Service is currently examining the years 2010 through 2012, and all years prior to 2010 are closed.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
634
In addition, the Company is subject to audits by state, local and foreign tax authorities.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
635
In major states and major foreign jurisdictions, the years subsequent to 2003 generally remain open and could be subject to examination by the taxing authorities.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
636
Management believes that adequate provisions have been made for any adjustments that may result from tax examinations.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
637
However, the outcome of tax audits cannot be predicted with certainty.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
638
If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
639
On June 11, 2014, the European Commission issued an opening decision initiating a formal investigation against Ireland for alleged state aid to the Company.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
640
The opening decision concerns the allocation of profits for taxation purposes of the Irish branches of two subsidiaries of the Company.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
641
The Company believes the European Commission’s assertions are without merit.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
642
If the European Commission were to conclude against Ireland, the European Commission could require Ireland to recover from the Company past taxes covering a period of up to 10 years reflective of the disallowed state aid.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
643
While such amount could be material, as of September 26, 2015 the Company is unable to estimate the impact.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
644
Apple Inc. | 2015 Form 10-K | 29 Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
645
2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the existing accounting standards for revenue recognition.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
646
ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
647
The original effective date for ASU 2014-09 would have required the Company to adopt beginning in its first quarter of 2018.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
648
In August 2015, the FASB issued ASU No.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
649
2015-14, Revenue from Contracts with Customers (Topic 606) - Deferral of the Effective Date, which defers the effective date of ASU 2014-09 for one year and permits early adoption as early as the original effective date of ASU 2014-09.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
650
Accordingly, the Company may adopt the standard in either its first quarter of 2018 or 2019.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
651
The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption.
0001193125-15-356351/full-submission.txt