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0000320193
20181105
10-K
971
The Company’s provisional estimates are in accordance with the U.S. Securities and Exchange Commission Staff Accounting Bulletin No.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
972
118.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
973
Deemed Repatriation Tax As of September 30, 2017, the Company had a U.S. deferred tax liability of $36.4 billion for deferred foreign income.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
974
During 2018, the Company replaced $36.1 billion of its U.S. deferred tax liability with a deemed repatriation tax payable of $37.3 billion, which was based on the Company’s cumulative post-1986 deferred foreign income.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
975
The deemed repatriation tax payable is a provisional estimate that may change as the Company continues to analyze the impact of additional implementation guidance.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
976
The Company plans to pay the tax in installments in accordance with the Act.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
977
Adoption of ASU No.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
978
2018-02 During the second quarter of 2018, the FASB issued ASU No.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
979
2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”).
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
980
ASU 2018-02 allows an entity to elect to reclassify the income tax effects of the Act on items within AOCI to retained earnings.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
981
The Company elected to apply the provision of ASU 2018-02 in 2018 with a reclassification of net tax benefits related to cumulative foreign currency translation and unrealized gains/losses on derivative instruments and marketable securities, resulting in a $278 million decrease in AOCI and a corresponding increase in r...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
982
Apple Inc. | 2018 Form 10-K | 52 Provision for Income Taxes and Effective Tax Rate The provision for income taxes for 2018, 2017 and 2016, consisted of the following (in millions): The foreign provision for income taxes is based on foreign pre-tax earnings of $48.0 billion, $44.7 billion and $41.1 billion in 2018, 2017...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
983
A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate (24.5% in 2018; 35% in 2017 and 2016) to income before provision for income taxes for 2018, 2017 and 2016, is as follows (dollars in millions): The Company’s income taxes payable have been redu...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
984
For restricted stock units (“RSUs”), the Company receives an income tax benefit upon the award’s vesting equal to the tax effect of the underlying stock’s fair market value.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
985
Prior to adopting ASU 2016-09 in the first quarter of 2018, the Company reflected net excess tax benefits from equity awards as increases to additional paid-in capital, which amounted to $620 million and $379 million in 2017 and 2016, respectively.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
986
Refer to Note 1, “Summary of Significant Accounting Policies” for more information.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
987
Apple Inc. | 2018 Form 10-K | 53 Deferred Tax Assets and Liabilities As of September 29, 2018 and September 30, 2017, the significant components of the Company’s deferred tax assets and liabilities were (in millions): Deferred tax assets and liabilities reflect the effects of tax losses, credits and the future income t...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
988
Uncertain Tax Positions As of September 29, 2018, the total amount of gross unrecognized tax benefits was $9.7 billion, of which $7.4 billion, if recognized, would impact the Company’s effective tax rate.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
989
As of September 30, 2017, the total amount of gross unrecognized tax benefits was $8.4 billion, of which $2.5 billion, if recognized, would have impacted the Company’s effective tax rate.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
990
The aggregate changes in the balance of gross unrecognized tax benefits, which excludes interest and penalties, for 2018, 2017 and 2016, is as follows (in millions): The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
991
As of September 29, 2018 and September 30, 2017, the total amount of gross interest and penalties accrued was $1.4 billion and $1.2 billion, respectively.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
992
Both the unrecognized tax benefits and the associated interest and penalties that are not expected to result in payment or receipt of cash within one year are classified as other non-current liabilities in the Consolidated Balance Sheets.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
993
In connection with tax matters, the Company recognized interest and penalty expense in 2018, 2017 and 2016 of $236 million, $165 million and $295 million, respectively.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
994
Apple Inc. | 2018 Form 10-K | 54 The Company is subject to taxation and files income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
995
The U.S. Internal Revenue Service (the “IRS”) concluded its review of the years 2013 through 2015 in 2018, and all years prior to 2016 are closed.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
996
Tax years subsequent to 2006 in certain major U.S. states and subsequent to 2007 in certain major foreign jurisdictions remain open, and could be subject to examination by the taxing authorities.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
997
The Company believes that an adequate provision has been made for any adjustments that may result from tax examinations.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
998
However, the outcome of tax audits cannot be predicted with certainty.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
999
If any issues addressed in the Company’s tax audits are resolved in a manner inconsistent with its expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,000
Although timing of resolution and/or closure of audits is not certain, the Company believes it is reasonably possible that its gross unrecognized tax benefits could decrease (either by payment, release or a combination of both) in the next 12 months by as much as $800 million.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,001
European Commission State Aid Decision 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”).
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,002
The State Aid Decision ordered Ireland to calculate and recover additional taxes from the Company for the period June 2003 through December 2014.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,003
The recovery amount was calculated to be €13.1 billion, plus interest of €1.2 billion.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,004
Irish legislative changes, effective as of January 2015, eliminated the application of the tax opinions from that date forward.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,005
The Company believes the State Aid Decision to be without merit and appealed to the General Court of the Court of Justice of the European Union.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,006
Ireland has also appealed the State Aid Decision.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,007
The Company believes that any incremental Irish corporate income taxes potentially due related to the State Aid Decision would be creditable against U.S. taxes, subject to any foreign tax credit limitations in the Act.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,008
As of September 29, 2018, the entire recovery amount plus interest was funded into escrow, where it will remain restricted from general use pending conclusion of all appeals.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,009
Refer to Note 2, “Financial Instruments” for more information.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,010
Note 5 - Debt Commercial Paper The Company issues unsecured short-term promissory notes (“Commercial Paper”) pursuant to a commercial paper program.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,011
The Company uses net proceeds from the commercial paper program for general corporate purposes, including dividends and share repurchases.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,012
As of both September 29, 2018 and September 30, 2017, the Company had $12.0 billion of Commercial Paper outstanding with maturities generally less than nine months.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,013
The weighted-average interest rate of the Company’s Commercial Paper was 2.18% as of September 29, 2018 and 1.20% as of September 30, 2017.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,014
The following table provides a summary of cash flows associated with the issuance and maturities of Commercial Paper for 2018, 2017 and 2016 (in millions): Apple Inc. | 2018 Form 10-K | 55 Term Debt As of September 29, 2018, the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggre...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,015
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, Japanese yen-denominated and Canadian ...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,016
The following table provides a summary of the Company’s term debt as of September 29, 2018 and September 30, 2017: To manage interest rate risk on certain of its U.S. dollar-denominated fixed- or floating-rate notes, the Company has entered into interest rate swaps to effectively convert the fixed interest rates to flo...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,017
Additionally, to manage foreign currency risk on certain of its foreign currency-denominated notes, the Company has entered into foreign currency swaps to effectively convert these notes to U.S. dollar-denominated notes.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,018
A portion of the Company’s Japanese yen-denominated notes is designated as a hedge of the foreign currency exposure of the Company’s net investment in a foreign operation.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,019
As of September 29, 2018 and September 30, 2017, the carrying value of the debt designated as a net investment hedge was $811 million and $1.6 billion, respectively.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,020
For further discussion regarding the Company’s use of derivative instruments, refer to 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 or premium and, if applicable, adjustments re...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,021
The Company recognized $3.0 billion, $2.2 billion and $1.4 billion of interest expense on its term debt for 2018, 2017 and 2016, respectively.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,022
Apple Inc. | 2018 Form 10-K | 56 The future principal payments for the Company’s Notes as of September 29, 2018 are as follows (in millions): As of September 29, 2018 and September 30, 2017, the fair value of the Company’s Notes, based on Level 2 inputs, was $103.2 billion and $106.1 billion, respectively.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,023
Note 6 - Shareholders’ Equity Share Repurchase Program During 2018, the Company repurchased 405.5 million shares of its common stock for $73.1 billion in connection with two separate share repurchase programs.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,024
Of the $73.1 billion, $44.0 billion was repurchased under the Company’s previous share repurchase program of up to $210 billion, thereby completing that program.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,025
On May 1, 2018, the Company announced the Board of Directors had authorized a new program to repurchase up to $100 billion of the Company’s common stock.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,026
The remaining $29.0 billion repurchased during 2018 was in connection with the new share repurchase program.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,027
The Company’s new share repurchase program does not obligate it to acquire any specific number of shares.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,028
Under this 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”).
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,029
Note 7 - Comprehensive Income 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 market...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,030
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 2018 and 2017 (in millions): Apple Inc. | 2018 Form 10-K | 57 The following table shows the changes in AOCI by component for 2018 and 2017 (in millio...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,031
Note 8 - Benefit Plans 2014 Employee Stock Plan In the second quarter of 2014, shareholders approved the 2014 Employee Stock Plan (the “2014 Plan”) and terminated the Company’s authority to grant new awards under the 2003 Employee Stock Plan (the “2003 Plan”).
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,032
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.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,033
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.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,034
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.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,035
RSUs canceled 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 canceled or shares withheld.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,036
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.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,037
DERs are subject to the same vesting and other terms and conditions as the corresponding unvested RSUs.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,038
DERs are accumulated and paid when the underlying shares vest.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,039
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.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,040
Shares subject to outstanding awards under the 2003 Plan that expire, are canceled 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.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,041
As of September 29, 2018, approximately 280.2 million shares were reserved for future issuance under the 2014 Plan.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,042
Apple Inc. Non-Employee Director Stock Plan The Apple Inc. Non-Employee 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-em...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,043
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.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,044
The Director Plan expires November 12, 2027.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,045
All RSUs granted under the Director Plan are entitled to DERs.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,046
DERs are subject to the same vesting and other terms and conditions as the corresponding unvested RSUs.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,047
DERs are accumulated and paid when the underlying shares vest.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,048
As of September 29, 2018, approximately 1.1 million shares were reserved for future issuance under the Director Plan.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,049
Apple Inc. | 2018 Form 10-K | 58 Rule 10b5-1 Trading Plans During the three months ended September 29, 2018, Section 16 officers Angela Ahrendts, Timothy D. Cook, Chris Kondo, Luca Maestri, Daniel Riccio, Philip Schiller and Jeffrey Williams had equity trading plans in place in accordance with Rule 10b5-1(c)(1) under t...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,050
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.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,051
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...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,052
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.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,053
As of September 29, 2018, approximately 36.5 million shares were reserved for future issuance under the Purchase Plan.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,054
401(k) Plan The Company’s 401(k) Plan is a deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,055
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 ($18,500 for calendar year 2018).
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,056
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.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,057
Restricted Stock Units A summary of the Company’s RSU activity and related information for 2018, 2017 and 2016, is as follows: The fair value as of the respective vesting dates of RSUs was $7.6 billion, $6.1 billion and $5.1 billion for 2018, 2017 and 2016, respectively.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,058
The majority of RSUs that vested in 2018, 2017 and 2016 were net share settled such that the Company withheld shares with value equivalent to the employees’ obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,059
The total shares withheld were approximately 16.0 million, 15.4 million and 15.9 million for 2018, 2017 and 2016, respectively, and were based on the value of the RSUs on their respective vesting dates as determined by the Company’s closing stock price.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,060
Total payments for the employees’ tax obligations to taxing authorities were $2.7 billion, $2.0 billion and $1.7 billion in 2018, 2017 and 2016, respectively, and are reflected as a financing activity within the Consolidated Statements of Cash Flows.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,061
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.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,062
Apple Inc. | 2018 Form 10-K | 59 Share-Based Compensation The following table shows a summary of the share-based compensation expense included in the Consolidated Statements of Operations for 2018, 2017 and 2016 (in millions): The income tax benefit related to share-based compensation expense was $1.9 billion, $1.6 bil...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,063
As of September 29, 2018, the total unrecognized compensation cost related to outstanding RSUs and stock options was $9.4 billion, which the Company expects to recognize over a weighted-average period of 2.5 years.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,064
Note 9 - Commitments and Contingencies Accrued Warranty and Indemnification The following table shows changes in the Company’s accrued warranties and related costs for 2018, 2017 and 2016 (in millions): Agreements entered into by the Company may include indemnification provisions which may subject the Company to costs ...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,065
Except as disclosed under the heading “Contingencies” below, in the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss, or a material loss in excess of a recorded accrual, with respect to indemnification of third parties.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,066
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.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,067
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.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,068
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.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,069
The Company has entered into indemnification agreements with its directors and executive officers.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
1,070
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 of the Company, and to advance expenses incurred by such individuals in connection with related legal proceedings.
0000320193-18-000145/full-submission.txt