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0000320193
20161026
10-K
538
Apple Inc. | 2016 Form 10-K | 22 Sales Data The following table shows net sales by operating segment and net sales and unit sales by product during 2016, 2015 and 2014 (dollars in millions and units in thousands): (1) Includes deferrals and amortization of related software upgrade rights and non-software services.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
539
(2) Includes revenue from Internet Services, AppleCare®, Apple Pay, licensing and other services.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
540
(3) Includes sales of Apple TV, Apple Watch, Beats® products, iPod and Apple-branded and third-party accessories.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
541
Apple Inc. | 2016 Form 10-K | 23 Product Performance iPhone The following table presents iPhone net sales and unit sales information for 2016, 2015 and 2014 (dollars in millions and units in thousands): iPhone net sales and unit sales decreased during 2016 compared to 2015.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
542
The Company believes the sales decline is due primarily to a lower rate of iPhone upgrades during 2016 compared to 2015 and challenging macroeconomic conditions in a number of major markets in 2016.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
543
Average selling prices (“ASPs”) for iPhone were lower year-over-year during 2016 due primarily to a different mix of iPhones, including the iPhone SE introduced in 2016, and the effect of weakness in most foreign currencies relative to the U.S. dollar.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
544
The year-over-year growth in iPhone net sales and unit sales during 2015 primarily resulted from strong demand for iPhone 6 and 6 Plus during 2015.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
545
Overall ASPs for iPhone increased 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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
546
iPad The following table presents iPad net sales and unit sales information for 2016, 2015 and 2014 (dollars in millions and units in thousands): iPad net sales decreased during 2016 compared to 2015 primarily due to lower unit sales and the effect of weakness in most foreign currencies relative to the U.S. dollar, par...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
547
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
548
Net sales and unit sales for iPad declined during 2015 compared to 2014.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
549
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
550
iPad ASPs declined 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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
551
Mac The following table presents Mac net sales and unit sales information for 2016, 2015 and 2014 (dollars in millions and units in thousands): Mac net sales and unit sales decreased during 2016 compared to 2015.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
552
The year-over-year decline in Mac unit sales during 2016 was at rates similar to the overall market.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
553
The effect of weakness in most foreign currencies relative to the U.S. dollar also negatively impacted Mac net sales.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
554
The year-over-year growth in Mac net sales and unit sales during 2015 was driven by strong demand for Mac portables.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
555
Mac ASPs declined during 2015 compared to 2014 largely due to the effect of weakness in most foreign currencies relative to the U.S. dollar.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
556
Apple Inc. | 2016 Form 10-K | 24 Services The following table presents net sales information of Services for 2016, 2015 and 2014 (dollars in millions): The year-over-year increase in net sales of Services in 2016 was due primarily to growth from the App Store, licensing and AppleCare sales, partially offset by the effe...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
557
During the first quarter of 2016, the Company received $548 million from Samsung Electronics Co., Ltd. related to its patent infringement lawsuit, which was recorded as licensing net sales within Services.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
558
The increase in net sales of Services during 2015 compared to 2014 was primarily due to growth from the App Store and licensing.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
559
Segment Operating Performance The Company manages its business primarily on a geographic basis.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
560
The Company’s reportable operating segments consist of the Americas, Europe, Greater China, Japan and Rest of Asia Pacific.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
561
The Americas segment includes both North and South America.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
562
The Europe segment includes European countries, as well as India, the Middle East and Africa.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
563
The Greater China segment includes China, Hong Kong and Taiwan.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
564
The Rest of Asia Pacific segment includes Australia and those Asian countries not included in the Company’s other reportable operating segments.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
565
Although the reportable operating segments provide similar hardware and software products and similar services, each one is 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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
566
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 2016, 2015 and 201...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
567
The year-over-year growth in Americas net sales during 2015 was driven primarily by growth in net sales and unit sales of iPhone, partially offset by a decline in net sales and unit sales of iPad.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
568
Europe The following table presents Europe net sales information for 2016, 2015 and 2014 (dollars in millions): Europe net sales decreased during 2016 compared to 2015 driven primarily by the effect of weakness in foreign currencies relative to the U.S. dollar and a decrease in unit sales of Mac, largely offset by an i...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
569
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 the U.S. dollar and a decline in net sales and unit sales of iPad.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
570
Apple Inc. | 2016 Form 10-K | 25 Greater China The following table presents Greater China net sales information for 2016, 2015 and 2014 (dollars in millions): Greater China net sales decreased during 2016 compared to 2015 due primarily to lower net sales and unit sales of iPhone and the effect of weakness in foreign cu...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
571
Greater China experienced strong year-over-year increases in net sales during 2015 driven primarily by iPhone sales.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
572
Japan The following table presents Japan net sales information for 2016, 2015 and 2014 (dollars in millions): Japan net sales increased during 2016 compared to 2015 due primarily to higher net sales of Services and the strength in the Japanese yen relative to the U.S. dollar.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
573
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 yen relative to the U.S. dollar.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
574
Rest of Asia Pacific The following table presents Rest of Asia Pacific net sales information for 2016, 2015 and 2014 (dollars in millions): Rest of Asia Pacific net sales decreased during 2016 compared to 2015 due primarily to lower net sales and unit sales of iPhone and the effect of weakness in foreign currencies rel...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
575
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 weakness in foreign currencies relative to the U.S. dollar and a decline in net sales and unit sales of iPad.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
576
Gross Margin Gross margin for 2016, 2015 and 2014 is as follows (dollars in millions): Gross margin decreased in 2016 compared to 2015 due primarily to the effect of weakness in most foreign currencies relative to the U.S. dollar and, to a lesser extent, unfavorable leverage on fixed costs from lower net sales, partial...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
577
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 fixed costs from higher net sales.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
578
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
579
Apple Inc. | 2016 Form 10-K | 26 The Company anticipates gross margin during the first quarter of 2017 to be between 38% and 38.5%.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
580
The foregoing statement regarding the Company’s expected gross margin percentage in the first quarter of 2017 is forward-looking and could differ from actual results.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
581
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
582
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...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
583
In response to competitive pressures, the Company expects it will continue to take product pricing actions, which would adversely affect gross margins.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
584
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
585
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
586
Operating Expenses Operating expenses for 2016, 2015 and 2014 are as follows (dollars in millions): Research and Development The year-over-year growth in R&D expense in 2016 and 2015 was driven primarily by an increase in headcount and related expenses, and material costs to support expanded R&D activities.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
587
The Company continues to believe that focused investments in R&D are critical to its future growth and competitive position in the marketplace, and to the development of new and updated products that are central to the Company’s core business strategy.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
588
Selling, General and Administrative The decrease in selling, general and administrative expense in 2016 compared to 2015 was due primarily to lower discretionary expenditures and advertising costs, partially offset by an increase in headcount and related expenses.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
589
The year-over-year growth in selling, general and administrative expense in 2015 was primarily due to increased headcount and related expenses, and higher spending on marketing and advertising.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
590
Other Income/(Expense), Net Other income/(expense), net for 2016, 2015 and 2014 are as follows (dollars in millions): The year-over-year increase in other income/(expense), net during 2016 and 2015 was due primarily to higher interest income, partially offset by higher interest expense on debt and higher expenses assoc...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
591
The weighted-average interest rate earned by the Company on its cash, cash equivalents and marketable securities was 1.73%, 1.49% and 1.11% in 2016, 2015 and 2014, respectively.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
592
Apple Inc. | 2016 Form 10-K | 27 Provision for Income Taxes Provision for income taxes and effective tax rates for 2016, 2015 and 2014 are as follows (dollars in millions): The Company’s effective tax rates for 2016, 2015 and 2014 differ from the statutory federal income tax rate of 35% due primarily to certain undistr...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
593
The lower effective tax rate in 2016 compared to 2015 was due primarily to greater R&D tax credits.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
594
The higher effective tax rate during 2015 compared to 2014 was due primarily to higher foreign taxes.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
595
As of September 24, 2016, the Company had deferred tax assets arising from deductible temporary differences, tax losses and tax credits of $4.1 billion and deferred tax liabilities of $26.0 billion.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
596
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
597
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
598
During the fourth quarter of 2016, the Company reached a partial settlement with the IRS on its examination of the years 2010 through 2012.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
599
In connection with this settlement, the Company recognized a tax benefit in the fourth quarter of 2016 that was not significant to its consolidated financial statements.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
600
All years prior to 2013 are closed, except for the years 2010 through 2012 relating to R&D tax credits.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
601
In addition, the Company is subject to audits by state, local and foreign tax authorities.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
602
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
603
Management believes that adequate provisions have been made for any adjustments that may result from tax examinations.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
604
However, the outcome of tax audits cannot be predicted with certainty.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
605
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
606
On August 30, 2016, the European Commission announced its decision that Ireland granted state aid to the Company by providing tax opinions in 1991 and 2007 concerning the tax allocation of profits of the Irish branches of two subsidiaries of the Company (the "State Aid Decision").
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
607
The State Aid Decision orders Ireland to calculate and recover additional taxes from the Company for the period June 2003 through September 2014.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
608
Irish legislative changes, effective as of the beginning of 2015, eliminated the application of the tax opinions from that date forward.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
609
The Company believes the State Aid Decision to be without merit and intends to appeal to the General Court of the Court of Justice of the European Union.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
610
Ireland has also announced its intention to appeal the State Aid Decision.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
611
While the European Commission announced a recovery amount of up to €13 billion, plus interest, the actual amount of additional taxes subject to recovery is to be calculated by Ireland in accordance with the European Commission's guidance.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
612
Once the recovery amount is computed by Ireland, the Company anticipates funding it, including interest, out of foreign cash into escrow, pending conclusion of all appeals.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
613
The Company believes that any incremental Irish corporate income taxes potentially due would be creditable against U.S. taxes.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
614
Recent Accounting Pronouncements Income Taxes In October 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory ("ASU 2016-16"), which requires the recognition of the income tax consequenc...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
615
ASU 2016-06 will be effective for the Company in its first quarter of 2019.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
616
The Company is currently evaluating the impact of adopting ASU 2016-16 on its consolidated financial statements.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
617
Stock Compensation In March 2016, the FASB issued ASU No.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
618
2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which simplified certain aspects of the accounting for share-based payment transactions, including income taxes, classification of awards and classification on the statement of cash flows.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
619
ASU 2016-09 will be effective for the Company beginning in its first quarter of 2018.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
620
The Company is currently evaluating the impact of adopting ASU 2016-09 on its consolidated financial statements.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
621
Apple Inc. | 2016 Form 10-K | 28 Leases In February 2016, the FASB issued ASU No.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
622
2016-02, Leases (Topic 842) (“ASU 2016-02”), which modified lease accounting for both lessees and lessors to increase transparency and comparability by recognizing lease assets and lease liabilities by lessees for those leases classified as operating leases under previous accounting standards and disclosing key informa...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
623
ASU 2016-02 will be effective for the Company beginning in its first quarter of 2020, and early adoption is permitted.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
624
The Company is currently evaluating the timing of its adoption and the impact of adopting ASU 2016-02 on its consolidated financial statements.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
625
Financial Instruments In January 2016, the FASB issued ASU No.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
626
2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which updates certain aspects of recognition, measurement, presentation and disclosure of financial instruments.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
627
ASU 2016-01 will be effective for the Company beginning in its first quarter of 2019.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
628
The Company does not believe the adoption of ASU 2016-01 will have a material impact on its consolidated financial statements.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
629
In June 2016, the FASB issued ASU No.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
630
2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which modifies the measurement of expected credit losses of certain financial instruments.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
631
ASU 2016-13 will be effective for the Company beginning in its first quarter of 2021 and early adoption is permitted.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
632
The Company does not believe the adoption of ASU 2016-13 will have a material impact on its consolidated financial statements.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
633
Revenue Recognition In May 2014, the FASB issued ASU No.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
634
2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the existing accounting standards for revenue recognition.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
635
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
636
ASU 2014-09 will be effective for the Company beginning in its first quarter of 2019, and early adoption is permitted.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
637
Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU No.
0001628280-16-020309/full-submission.txt