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0000320193
20161026
10-K
1,138
If the Company’s supply of components for a new or existing product were delayed or constrained, or if an outsourcing partner delayed shipments of completed products to the Company, the Company’s financial condition and operating results could be materially adversely affected.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,139
The Company’s business and financial performance could also be materially adversely affected depending on the time required to obtain sufficient quantities from the original source, or to identify and obtain sufficient quantities from an alternative source.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,140
Continued availability of these components at acceptable prices, or at all, may be affected if those suppliers concentrated on the production of common components instead of components customized to meet the Company’s requirements.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,141
The Company has entered into agreements for the supply of many components; however, there can be no guarantee that the Company will be able to extend or renew these agreements on similar terms, or at all.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,142
Therefore, the Company remains subject to significant risks of supply shortages and price increases that could materially adversely affect its financial condition and operating results.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,143
Substantially all of the Company’s hardware products are manufactured by outsourcing partners that are located primarily in Asia.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,144
A significant concentration of this manufacturing is currently performed by a small number of outsourcing partners, often in single locations.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,145
Certain of these outsourcing partners are the sole-sourced suppliers of components and manufacturers for many of the Company’s products.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,146
Although the Company works closely with its outsourcing partners on manufacturing schedules, the Company’s operating results could be adversely affected if its outsourcing partners were unable to meet their production commitments.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,147
The Company’s manufacturing purchase obligations typically cover its requirements for periods up to 150 days.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,148
Apple Inc. | 2016 Form 10-K | 65 Other Off-Balance Sheet Commitments Operating Leases The Company leases various equipment and facilities, including retail space, under noncancelable operating lease arrangements.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,149
The Company does not currently utilize any other off-balance sheet financing arrangements.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,150
As of September 24, 2016, the Company’s total future minimum lease payments under noncancelable operating leases were $7.6 billion.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,151
The Company's retail store and other facility leases are typically for terms not exceeding 10 years and generally contain multi-year renewal options.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,152
Rent expense under all operating leases, including both cancelable and noncancelable leases, was $939 million, $794 million and $717 million in 2016, 2015 and 2014, respectively.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,153
Future minimum lease payments under noncancelable operating leases having remaining terms in excess of one year as of September 24, 2016, are as follows (in millions): Contingencies The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of business and that have not been ...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,154
However, the outcome of litigation is inherently uncertain.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,155
Therefore, although management considers the likelihood of such an outcome to be remote, if one or more of these 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 ma...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,156
Apple Inc. v. Samsung Electronics Co., Ltd., et al.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,157
On August 24, 2012, a jury returned a verdict awarding the Company $1.05 billion in its lawsuit against Samsung Electronics Co., Ltd. and affiliated parties in the United States District Court, Northern District of California, San Jose Division.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,158
On March 6, 2014, the District Court entered final judgment in favor of the Company in the amount of approximately $930 million.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,159
On May 18, 2015, the U.S. Court of Appeals for the Federal Circuit affirmed in part, and reversed in part, the decision of the District Court.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,160
As a result, the Court of Appeals ordered entry of final judgment on damages in the amount of approximately $548 million, with the District Court to determine supplemental damages and interest, as well as damages owed for products subject to the reversal in part.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,161
Samsung paid $548 million to the Company in December 2015, which was included in net sales in the Condensed Consolidated Statement of Operations.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,162
Because the case remains subject to further proceedings, the Company has not recognized any further amounts in its results of operations.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,163
On October 11, 2016, the United States Supreme Court heard arguments in Samsung’s request for appeal related to the $548 million in damages.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,164
Note 11 - Segment Information and Geographic Data The Company reports segment information based on the “management” approach.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,165
The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable operating segments.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,166
The Company manages its business primarily on a geographic basis.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,167
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
1,168
The Americas segment includes both North and South America.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,169
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
1,170
The Greater China segment includes China, Hong Kong and Taiwan.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,171
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
1,172
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
1,173
The accounting policies of the various segments are the same as those described in Note 1, “Summary of Significant Accounting Policies.” Apple Inc. | 2016 Form 10-K | 66 The Company evaluates the performance of its reportable operating segments based on net sales and operating income.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,174
Net sales for geographic segments are generally based on the location of customers and sales through the Company’s retail stores located in those geographic locations.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,175
Operating income for each segment includes net sales to third parties, related cost of sales and operating expenses directly attributable to the segment.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,176
Advertising expenses are generally included in the geographic segment in which the expenditures are incurred.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,177
Operating income for each segment excludes other income and expense and certain expenses managed outside the reportable operating segments.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,178
Costs excluded from segment operating income include various corporate expenses such as R&D, corporate marketing expenses, certain share-based compensation expenses, income taxes, various nonrecurring charges and other separately managed general and administrative costs.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,179
The Company does not include intercompany transfers between segments for management reporting purposes.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,180
The following table shows information by reportable operating segment for 2016, 2015 and 2014 (in millions): A reconciliation of the Company’s segment operating income to the Consolidated Statements of Operations for 2016, 2015 and 2014 is as follows (in millions): Apple Inc. | 2016 Form 10-K | 67 The U.S. and China we...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,181
There was no single customer that accounted for more than 10% of net sales in 2016, 2015 or 2014.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,182
Net sales for 2016, 2015 and 2014 and long-lived assets as of September 24, 2016 and September 26, 2015 are as follows (in millions): (1) China includes Hong Kong.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,183
Long-lived assets located in China consist primarily of product tooling and manufacturing process equipment and assets related to retail stores and related infrastructure.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,184
Net sales by product for 2016, 2015 and 2014 are as follows (in millions): (1) Includes deferrals and amortization of related software upgrade rights and non-software services.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,185
(2) Includes revenue from iTunes Store, App Store, Mac App Store, TV App Store, iBooks Store, Apple Music, AppleCare, Apple Pay, licensing and other services.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,186
(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
1,187
Apple Inc. | 2016 Form 10-K | 68 Note 12 - Selected Quarterly Financial Information (Unaudited) The following tables show a summary of the Company’s quarterly financial information for each of the four quarters of 2016 and 2015 (in millions, except per share amounts): (1) Basic and diluted earnings per share are comput...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,188
Therefore, the sum of quarterly basic and diluted per share information may not equal annual basic and diluted earnings per share.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,189
Apple Inc. | 2016 Form 10-K | 69 Report of Ernst & Young LLP, Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Apple Inc. We have audited the accompanying consolidated balance sheets of Apple Inc. as of September 24, 2016 and September 26, 2015, and the related consolidated state...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,190
These financial statements are the responsibility of the Company’s management.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,191
Our responsibility is to express an opinion on these financial statements based on our audits.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,192
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,193
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,194
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,195
An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,196
We believe that our audits provide a reasonable basis for our opinion.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,197
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Apple Inc. at September 24, 2016 and September 26, 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended September...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,198
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Apple Inc.’s internal control over financial reporting as of September 24, 2016, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organiz...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,199
/s/ Ernst & Young LLP San Jose, California October 26, 2016 Apple Inc. | 2016 Form 10-K | 70 Report of Ernst & Young LLP, Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Apple Inc. We have audited Apple Inc.’s internal control over financial reporting as of September 24, 2016, b...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,200
Apple Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,201
Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,202
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,203
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,204
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,205
We believe that our audit provides a reasonable basis for our opinion.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,206
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,207
A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are rec...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,208
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,209
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,210
In our opinion, Apple Inc. maintained, in all material respects, effective internal control over financial reporting as of September 24, 2016, based on the COSO criteria.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,211
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2016 consolidated financial statements of Apple Inc. and our report dated October 26, 2016 expressed an unqualified opinion thereon.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,212
/s/ Ernst & Young LLP San Jose, California October 26, 2016 Apple Inc. | 2016 Form 10-K | 71 Item 9.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,213
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,214
Item 9A.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,215
Controls and Procedures Evaluation of Disclosure Controls and Procedures Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as ...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,216
Inherent Limitations Over Internal Controls The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting princip...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,217
The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are reco...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,218
Management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s internal controls will prevent or detect all errors and all fraud.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,219
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,220
Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,221
Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,222
Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,223
Management’s Annual Report on Internal Control Over Financial Reporting The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act).
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,224
Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the criteria set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,225
Based on the Company’s assessment, management has concluded that its internal control over financial reporting was effective as of September 24, 2016 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,226
The Company’s independent registered public accounting firm, Ernst & Young LLP, has issued an audit report on the Company’s internal control over financial reporting, which appears in Part II, Item 8 of this Form 10-K. Changes in Internal Control Over Financial Reporting There were no changes in the Company’s internal ...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,227
Item 9B.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,228
Other Information Not applicable.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,229
Apple Inc. | 2016 Form 10-K | 72 PART III Item 10.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,230
Directors, Executive Officers and Corporate Governance The information required by this Item is set forth under the headings “Directors, Corporate Governance and Executive Officers” in the Company’s 2017 Proxy Statement to be filed with the SEC within 120 days after September 24, 2016 in connection with the solicitatio...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,231
The Company has a code of ethics, “Business Conduct: The way we do business worldwide,” that applies to all employees, including the Company’s principal executive officer, principal financial officer, and principal accounting officer, as well as to the members of the Board of Directors of the Company.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,232
The code is available at investor.apple.com/corporate-governance.cfm.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,233
The Company intends to disclose any changes in, or waivers from, this code by posting such information on the same website or by filing a Form 8-K, in each case to the extent such disclosure is required by rules of the SEC or NASDAQ.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,234
Item 11.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,235
Executive Compensation The information required by this Item is set forth under the heading “Executive Compensation” and under the subheadings “Board Oversight of Risk Management,” “Compensation Committee Interlocks and Insider Participation,” “Compensation of Directors” and “Director Compensation-2016” under the headi...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,236
Item 12.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
1,237
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item is set forth under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the Company’s 2017 Proxy Statement to be fil...
0001628280-16-020309/full-submission.txt