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0000320193
20161026
10-K
1,038
However, the outcome of tax audits cannot be predicted with certainty.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,039
If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with its 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
1,040
Although timing of the resolution and/or closure of audits is not certain, the Company believes it is reasonably possible that its gross unrecognized tax benefits could decrease (whether by payment, release or a combination of both) in the next 12 months by up to $850 million.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,041
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
1,042
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
1,043
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
1,044
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
1,045
Ireland has also announced its intention to appeal the State Aid Decision.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,046
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
1,047
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
1,048
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
1,049
Apple Inc. | 2016 Form 10-K | 57 Note 6 - Debt Commercial Paper The Company issues unsecured short-term promissory notes (“Commercial Paper”) pursuant to a commercial paper program.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,050
The Company uses net proceeds from the commercial paper program for general corporate purposes, including dividends and share repurchases.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,051
As of September 24, 2016 and September 26, 2015, the Company had $8.1 billion and $8.5 billion of Commercial Paper outstanding, respectively, with maturities generally less than nine months.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,052
The weighted-average interest rate of the Company’s Commercial Paper was 0.45% as of September 24, 2016 and 0.14% as of September 26, 2015.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,053
The following table provides a summary of cash flows associated with the issuance and maturities of Commercial Paper for 2016 and 2015 (in millions): Long-Term Debt As of September 24, 2016, the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate principal amount of $78.4 bil...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,054
The Notes are senior unsecured obligations, and interest is payable in arrears, quarterly for the U.S. dollar-denominated and Australian dollar-denominated floating-rate notes, semi-annually for the U.S. dollar-denominated, Australian dollar-denominated, British pound-denominated and Japanese yen-denominated fixed-rate...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,055
Apple Inc. | 2016 Form 10-K | 58 The following table provides a summary of the Company’s term debt as of September 24, 2016 and September 26, 2015: To manage foreign currency risk associated with the Australian dollar-denominated notes issued in the third quarter of 2016, the Company entered into currency swaps with an...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,056
To manage interest rate risk on the U.S. dollar-denominated fixed-rate notes issued in the second quarter of 2016 and maturing in 2021, 2023 and 2026, the Company entered into interest rate swaps with an aggregate notional amount of $5.0 billion.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,057
To manage interest rate risk on the U.S. dollar-denominated fixed-rate notes issued in the fourth quarter of 2016 and maturing in 2021 and 2026, the Company entered into interest rate swaps with an aggregate notional amount of $1.8 billion.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,058
These interest rate swaps effectively converted a portion of the U.S. dollar-denominated fixed-rate notes to floating interest rate notes.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,059
Apple Inc. | 2016 Form 10-K | 59 As of September 24, 2016, ¥195.5 billion of the Japanese yen-denominated notes was designated as a hedge of the foreign currency exposure of its net investment in a foreign operation.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,060
The foreign currency transaction gain or loss on the Japanese yen-denominated debt designated as a hedge is recorded in OCI as a part of the cumulative translation adjustment.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,061
As of September 24, 2016, the carrying value of the debt designated as a net investment hedge was $1.9 billion.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,062
For further discussion regarding the Company’s use of derivative instruments see the Derivative Financial Instruments section of Note 2, “Financial Instruments.” The effective interest rates for the Notes include the interest on the Notes, amortization of the discount and, if applicable, adjustments related to hedging.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,063
The Company recognized $1.4 billion, $722 million and $381 million of interest expense on its term debt for 2016, 2015 and 2014, respectively.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,064
The future principal payments for the Company’s Notes as of September 24, 2016 are as follows (in millions): As of September 24, 2016 and September 26, 2015, the fair value of the Company’s Notes, based on Level 2 inputs, was $81.7 billion and $54.9 billion, respectively.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,065
Note 7 - Shareholders’ Equity Dividends The Company declared and paid cash dividends per share during the periods presented as follows: Future dividends are subject to declaration by the Board of Directors.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,066
Share Repurchase Program In April 2016, the Company’s Board of Directors increased the share repurchase authorization from $140 billion to $175 billion of the Company’s common stock, of which $133 billion had been utilized as of September 24, 2016.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,067
The Company’s share repurchase program does not obligate it to acquire any specific number of shares.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,068
Under the program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,069
Apple Inc. | 2016 Form 10-K | 60 The Company has entered, and in the future may enter, into accelerated share repurchase arrangements (“ASRs”) with financial institutions.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,070
In exchange for up-front payments, the financial institutions deliver shares of the Company’s common stock during the purchase periods of each ASR.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,071
The total number of shares ultimately delivered, and therefore the average repurchase price paid per share, is determined at the end of the applicable purchase period of each ASR based on the volume weighted-average price of the Company’s common stock during that period.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,072
The shares received are retired in the periods they are delivered, and the up-front payments are accounted for as a reduction to shareholders’ equity in the Company’s Consolidated Balance Sheets in the periods the payments are made.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,073
The Company reflects the ASRs as a repurchase of common stock in the period delivered for purposes of calculating earnings per share and as forward contracts indexed to its own common stock.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,074
The ASRs met all of the applicable criteria for equity classification, and therefore were not accounted for as derivative instruments.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,075
The following table shows the Company’s ASR activity and related information during the years ended September 24, 2016 and September 26, 2015: (1) “Number of Shares” represents those shares delivered in the beginning of the purchase period and does not represent the final number of shares to be delivered under the ASR.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,076
The total number of shares ultimately delivered, and therefore the average repurchase price paid per share, will be determined at the end of the purchase period based on the volume-weighted average price of the Company’s common stock during that period.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,077
The August 2016 ASR purchase period will end in or before November 2016.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,078
(2) Includes 48.2 million shares delivered and retired at the beginning of the purchase period, which began in the third quarter of 2016, and 12.3 million shares delivered and retired at the end of the purchase period, which concluded in the fourth quarter of 2016.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,079
Additionally, the Company repurchased shares of its common stock in the open market, which were retired upon repurchase, during the periods presented as follows: Note 8 - Comprehensive Income Comprehensive income consists of two components, net income and OCI.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,080
OCI refers to revenue, expenses, and gains and losses that under GAAP are recorded as an element of shareholders’ equity but are excluded from net income.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,081
The Company’s OCI consists of foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency, net deferred gains and losses on certain derivative instruments accounted for as cash flow hedges and unrealized gains and losses on marketable securities classified as ...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,082
Apple Inc. | 2016 Form 10-K | 61 The following table shows the pre-tax amounts reclassified from AOCI into the Consolidated Statements of Operations, and the associated financial statement line item, for 2016 and 2015 (in millions): The following table shows the changes in AOCI by component for 2016 and 2015 (in millio...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,083
The 2014 Plan provides for broad-based equity grants to employees, including executive officers, and permits the granting of RSUs, stock grants, performance-based awards, stock options and stock appreciation rights, as well as cash bonus awards.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,084
RSUs granted under the 2014 Plan generally vest over four years, based on continued employment, and are settled upon vesting in shares of the Company’s common stock on a one-for-one basis.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,085
Each share issued with respect to RSUs granted under the 2014 Plan reduces the number of shares available for grant under the plan by two shares.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,086
RSUs cancelled and shares withheld to satisfy tax withholding obligations increase the number of shares available for grant under the 2014 Plan utilizing a factor of two times the number of RSUs cancelled or shares withheld.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,087
Currently, all RSUs granted under the 2014 Plan have dividend equivalent rights (“DERs”), which entitle holders of RSUs to the same dividend value per share as holders of common stock.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,088
DERs are subject to the same vesting and other terms and conditions as the corresponding unvested RSUs.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,089
DERs are accumulated and paid when the underlying shares vest.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,090
Upon approval of the 2014 Plan, the Company reserved 385 million shares plus the number of shares remaining that were reserved but not issued under the 2003 Plan.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,091
Shares subject to outstanding awards under the 2003 Plan that expire, are cancelled or otherwise terminate, or are withheld to satisfy tax withholding obligations with respect to RSUs, will also be available for awards under the 2014 Plan.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,092
As of September 24, 2016, approximately 386.4 million shares were reserved for future issuance under the 2014 Plan.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,093
Apple Inc. | 2016 Form 10-K | 62 2003 Employee Stock Plan The 2003 Plan is a shareholder approved plan that provided for broad-based equity grants to employees, including executive officers.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,094
The 2003 Plan permitted the granting of incentive stock options, nonstatutory stock options, RSUs, stock appreciation rights, stock purchase rights and performance-based awards.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,095
Options granted under the 2003 Plan generally expire seven to ten years after the grant date and generally become exercisable over a period of four years, based on continued employment, with either annual, semi-annual or quarterly vesting.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,096
RSUs granted under the 2003 Plan generally vest over two to four years, based on continued employment and are settled upon vesting in shares of the Company’s common stock on a one-for-one basis.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,097
All RSUs, other than RSUs held by the Chief Executive Officer, granted under the 2003 Plan have DERs.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,098
DERs are subject to the same vesting and other terms and conditions as the corresponding unvested RSUs.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,099
DERs are accumulated and paid when the underlying shares vest.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,100
In the second quarter of 2014, the Company terminated the authority to grant new awards under the 2003 Plan.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,101
1997 Director Stock Plan The 1997 Director Stock Plan (the “Director Plan”) is a shareholder approved plan that (i) permits the Company to grant awards of RSUs or stock options to the Company’s non-employee directors, (ii) provides for automatic initial grants of RSUs upon a non-employee director joining the Board of D...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,102
Each share issued with respect to RSUs granted under the Director Plan reduces the number of shares available for grant under the plan by two shares.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,103
The Director Plan expires November 9, 2019.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,104
All RSUs granted under the Director Plan are entitled to DERs.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,105
DERs are subject to the same vesting and other terms and conditions as the corresponding unvested RSUs.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,106
DERs are accumulated and paid when the underlying shares vest.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,107
As of September 24, 2016, approximately 1.1 million shares were reserved for future issuance under the Director Plan.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,108
Rule 10b5-1 Trading Plans During the three months ended September 24, 2016, Section 16 officers Timothy D. Cook, Angela Ahrendts, Luca Maestri, Daniel Riccio, Philip Schiller and Jeffrey Williams had equity trading plans in place in accordance with Rule 10b5-1(c)(1) under the Exchange Act.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,109
An equity trading plan is a written document that pre-establishes the amounts, prices and dates (or formula for determining the amounts, prices and dates) of future purchases or sales of the Company’s stock, including shares acquired pursuant to the Company’s employee and director equity plans.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,110
Employee Stock Purchase Plan The Employee Stock Purchase Plan (the “Purchase Plan”) is a shareholder approved plan under which substantially all employees may purchase the Company’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning or...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,111
An employee’s payroll deductions under the Purchase Plan are limited to 10% of the employee’s compensation and employees may not purchase more than $25,000 of stock during any calendar year.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,112
As of September 24, 2016, approximately 47.0 million shares were reserved for future issuance under the Purchase Plan.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,113
401(k) Plan The Company’s 401(k) Plan is a deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,114
Under the 401(k) Plan, participating U.S. employees may defer a portion of their pre-tax earnings, up to the IRS annual contribution limit ($18,000 for calendar year 2016).
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,115
The Company matches 50% to 100% of each employee’s contributions, depending on length of service, up to a maximum 6% of the employee’s eligible earnings.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,116
Apple Inc. | 2016 Form 10-K | 63 Restricted Stock Units A summary of the Company’s RSU activity and related information for 2016, 2015 and 2014, is as follows: The fair value as of the respective vesting dates of RSUs was $5.1 billion, $4.8 billion and $3.4 billion for 2016, 2015 and 2014, respectively.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,117
The majority of RSUs that vested in 2016, 2015 and 2014 were net-share settled such that the Company withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,118
The total shares withheld were approximately 15.9 million, 14.1 million and 15.6 million for 2016, 2015 and 2014, respectively, and were based on the value of the RSUs on their respective vesting dates as determined by the Company’s closing stock price.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,119
Total payments for the employees’ tax obligations to taxing authorities were $1.7 billion, $1.6 billion and $1.2 billion in 2016, 2015 and 2014, respectively, and are reflected as a financing activity within the Consolidated Statements of Cash Flows.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,120
These net-share settlements had the effect of share repurchases by the Company as they reduced the number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to the Company.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,121
Share-based Compensation The following table shows a summary of the share-based compensation expense included in the Consolidated Statements of Operations for 2016, 2015 and 2014 (in millions): The income tax benefit related to share-based compensation expense was $1.4 billion, $1.2 billion and $1.0 billion for 2016, 2...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,122
As of September 24, 2016, the total unrecognized compensation cost related to outstanding stock options, RSUs and restricted stock was $7.5 billion, which the Company expects to recognize over a weighted-average period of 2.6 years.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,123
Apple Inc. | 2016 Form 10-K | 64 Note 10 - Commitments and Contingencies Accrued Warranty and Indemnification The following table shows changes in the Company’s accrued warranties and related costs for 2016, 2015 and 2014 (in millions): The Company generally does not indemnify end-users of its operating system and appl...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,124
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,125
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,126
The Company offers an iPhone Upgrade Program, which is available to customers who purchase a qualifying iPhone in the U.S., the U.K. and mainland China.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,127
The iPhone Upgrade Program provides customers the right to trade in that iPhone for a specified amount when purchasing a new iPhone, provided certain conditions are met.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,128
The Company accounts for the trade-in right as a guarantee liability and recognizes arrangement revenue net of the fair value of such right with subsequent changes to the guarantee liability recognized within revenue.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,129
The Company has entered into indemnification agreements with its directors and executive officers.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,130
Under these agreements, the Company has agreed to indemnify such individuals to the fullest extent permitted by law against liabilities that arise by reason of their status as directors or officers and to advance expenses incurred by such individuals in connection with related legal proceedings.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,131
It is not possible to determine the maximum potential amount of payments the Company could be required to make under these agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each claim.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,132
However, the Company maintains directors and officers liability insurance coverage to reduce its exposure to such obligations.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,133
Concentrations in the Available Sources of Supply of Materials and Product Although most components essential to the Company’s business are generally available from multiple sources, a number of components are currently obtained from single or limited sources.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,134
In addition, the Company competes for various components with other participants in the markets for mobile communication and media devices and personal computers.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,135
Therefore, many components used by the Company, including those that are available from multiple sources, are at times subject to industry-wide shortage and significant pricing fluctuations that could materially adversely affect the Company’s financial condition and operating results.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,136
The Company uses some custom components that are not commonly used by its competitors, and new products introduced by the Company often utilize custom components available from only one source.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,137
When a component or product uses new technologies, initial capacity constraints may exist until the suppliers’ yields have matured or manufacturing capacity has increased.
0001628280-16-020309/full-submission.txt