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0000320193
20131030
10-K
619
The Europe segment includes European countries, as well as India, the Middle East and Africa.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
620
The Greater China segment includes China, Hong Kong and Taiwan.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
621
The Rest of Asia Pacific segment includes Australia and Asian countries, other than those countries included in the Company’s other operating segments.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
622
The Retail segment operates Apple retail stores in 13 countries, including the U.S.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
623
The results of the Company’s geographic segments do not include results of the Retail segment.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
624
Each operating segment provides similar hardware and software products and similar services.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
625
Further information regarding the Company’s operating segments may be found in Note 11, “Segment Information and Geographic Data.” Americas The following table presents Americas net sales information for 2013, 2012 and 2011 (in millions): The growth in the Americas segment net sales during 2013 was driven by increased ...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
626
These increases were partially offset by a decrease in net sales of iPod and Mac and a decline in iPad ASPs.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
627
The growth in net sales during 2012 was primarily driven by increased demand for iPhone following the launches of iPhone 4s and iPhone 5, strong demand for the third generation iPad and iPad 2, and higher sales from the iTunes Store.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
628
Europe The following table presents Europe net sales information for 2013, 2012 and 2011 (in millions): Similar to the Americas segment, growth in net sales in the Europe segment during 2013 was primarily driven by increased sales of iPhone, iPad and higher net sales from iTunes.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
629
These increases were partially offset by decreases in net sales of Mac and iPod and a decline in iPad ASPs.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
630
Net sales in the Europe segment continue to be negatively impacted by unfavorable economic conditions in parts of the region reflected by second half 2013 net sales falling 4% compared to the second half of 2012, which followed an 11% increase in net sales during the first half of 2013.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
631
The growth in net sales during 2012 was primarily driven by strong demand for the third generation iPad and iPad 2, higher sales from the iTunes Store and increased demand for iPhone from the launch of iPhone 4s.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
632
iPhone 5 was launched in a limited number of countries in the Europe segment at the end of the fourth quarter of 2012 and did not contribute to the growth in net sales in the Europe segment to the extent it did in other segments.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
633
Lower year-over-year growth in net sales in the Europe segment during 2012 compared to the Company’s other geographic segments reflects growth in iPhone unit sales that was well below the growth rates experienced by the Company’s other operating segments, partially offset by strong growth in iPad unit sales.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
634
Net sales in the Europe segment were also negatively impacted by the region’s uncertain economic conditions and the strength in the U.S. dollar relative to several European currencies, including the euro.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
635
Greater China The following table presents Greater China net sales information for 2013, 2012 and 2011 (in millions): The growth in net sales in the Greater China segment during 2013 resulted from two major iPhone introductions during the year, iPhone 5 in December 2012 and iPhone 5c and iPhone 5s in September 2013.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
636
Further contributing to the growth in 2013 was the introduction of the fourth generation iPad and iPad mini during the second quarter of 2013 and an increase in iPhone channel inventory as of the end of 2013 compared to the end of 2012.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
637
While net sales in the China segment were up 13% for all of 2013, net sales for the second half of 2013 declined 4% compared to the second half of 2012.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
638
The growth in net sales during 2012 was mainly due to increased demand for iPhone following the launch of iPhone 4s and strong demand for the third generation iPad and iPad 2.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
639
Growth in the Greater China segment was affected by the timing of iPhone and iPad product launches.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
640
iPhone 5 was not launched in China during 2012, and the third generation iPad that was introduced by the Company in March 2012 was not launched in China until the fourth quarter of 2012.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
641
Japan The following table presents Japan net sales information for 2013, 2012 and 2011 (in millions): The increase in net sales in the Japan segment during 2013 reflects significant increases in unit volumes of iPhone and iPad, strong growth of iTunes Store net sales and an increase in iPhone channel inventory as of th...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
642
These positive factors were partially offset by declines in ASPs for iPhone and iPad and by weakness in the Japanese Yen relative to the U.S. dollar.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
643
The growth in net sales during 2012 was primarily driven by increased demand for iPhone following the launches of iPhone 4s and iPhone 5, expanded distribution with a new iPhone carrier, strong demand for the third generation iPad and iPad 2, higher sales from the iTunes Store, and strength in the Japanese Yen relative...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
644
Rest of Asia Pacific The following table presents Rest of Asia Pacific net sales information for 2013, 2012 and 2011 (in millions): The growth in net sales during 2013 was primarily driven by the launch of iPhone 5 and higher sales from iTunes, partially offset by a decrease in net sales of iPad and Mac.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
645
The growth in net sales during 2012 was mainly due to strong demand for the third generation iPad.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
646
The Rest of Asia Pacific segment experienced significantly lower year-over-year growth in net sales compared to all of the Company’s other operating segments due primarily to a decrease in iPhone sales.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
647
This decrease reflects the timing of iPhone 5 launches in the Rest of Asia Pacific segment, which only occurred in a limited number of countries during the fourth quarter of 2012.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
648
Retail The following table presents Retail net sales information for 2013, 2012 and 2011 (in millions, except for store counts): The growth in net sales during 2013 was primarily driven by increased unit sales of iPhone and iPad following the new product introductions in the first half of 2013 and increased sales of se...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
649
With an average of 403 and 365 open stores during 2013 and 2012, respectively, average revenue per store decreased to $50.2 million in 2013, compared to $51.5 million in 2012.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
650
The growth in net sales during 2012 was driven primarily by increased demand for iPhone following the launches of iPhone 4s and iPhone 5, strong demand for the third generation iPad and iPad 2, and higher Mac net sales.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
651
Lower year-over-year growth in net sales in the Retail segment during 2012 compared to the Company’s other segments reflects the significant growth in iPad indirect distribution channel expansion.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
652
With an average of 365 stores and 326 stores during 2012 and 2011, respectively, average revenue per store increased 19% to $51.5 million in 2012 compared to $43.3 million in 2011.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
653
The Retail segment’s operating income was $4.0 billion, $4.6 billion and $3.1 billion during 2013, 2012, and 2011, respectively.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
654
The year-over-year decrease in Retail operating income in 2013 is primarily attributable to lower gross margin similar to that experienced by the Company overall, partially offset by higher net sales.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
655
The year-over-year increase in Retail operating income in 2012 is primarily attributable to higher overall net sales that resulted in significantly higher average revenue per store during 2012.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
656
Gross Margin Gross margin for 2013, 2012 and 2011 are as follows (in millions, except gross margin percentages): The gross margin percentage in 2013 was 37.6% compared to 43.9% in 2012.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
657
The year-over-year decrease in gross margin in 2013 compared to 2012 was driven by multiple factors including introduction of new versions of existing products with higher cost structures and flat or reduced pricing; a shift in sales mix to products with lower margins; introduction of iPad mini with gross margin signif...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
658
The gross margin percentage in 2012 was 43.9%, compared to 40.5% in 2011.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
659
This year-over-year increase in gross margin was largely driven by lower commodity and other product costs, a higher mix of iPhone sales, and improved leverage on fixed costs from higher net sales.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
660
The increase in gross margin was partially offset by the impact of a stronger U.S. dollar.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
661
The gross margin percentage during the first half of 2012 was 45.9% compared to 41.4% during the second half of 2012.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
662
The primary drivers of higher gross margin in the first half of 2012 compared to the second half are a higher mix of iPhone sales and improved leverage on fixed costs from higher net sales.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
663
Additionally, gross margin in the second half of 2012 was also affected by the introduction of new products with flat pricing that have higher cost structures and deliver greater value to customers, price reductions on certain existing products, higher transition costs associated with product launches, and continued st...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
664
The Company anticipates gross margin during the first quarter of 2014 to be between 36.5% and 37.5%.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
665
The foregoing statement regarding the Company’s expected gross margin percentage in the first quarter of 2014 is forward-looking and could differ from actual results.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
666
The Company’s future gross margin can be impacted by multiple factors including, but not limited to those set forth above in Part I, Item 1A of this Form 10-K under the heading “Risk Factors” and those described in this paragraph.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
667
In general, gross margins and margins on individual products 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...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
668
In response to competitive pressures, the Company expects it will continue to take product pricing actions, which would adversely affect gross margins.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
669
Gross margins could also be affected by the Company’s ability to manage product quality and warranty costs effectively and to stimulate demand for certain of its products.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
670
Due to the Company’s significant international operations, financial results can be significantly affected in the short-term by fluctuations in exchange rates.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
671
Operating Expenses Operating expenses for 2013, 2012 and 2011 are as follows (in millions, except for percentages): Research and Development (“R&D”) Expense The growth in R&D expense was driven by an increase in headcount and related expenses to support expanded R&D activities.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
672
Although total R&D expense increased 32% and 39% in 2013 and 2012, respectively, it remained fairly consistent as a percentage of net sales.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
673
The Company continues to believe that focused investments in R&D are critical to its future growth and competitive position in the marketplace and are directly related to timely development of new and enhanced products that are central to the Company’s core business strategy.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
674
As such, the Company expects to make further investments in R&D to remain competitive.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
675
Selling, General and Administrative (“SG&A”) Expense The growth in SG&A during 2013 was primarily due to the Company’s continued expansion of its Retail segment and increased headcount and related expenses, partially offset by decreased spending on professional services.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
676
The growth in SG&A during 2012 was primarily due to the Company’s continued expansion of its Retail segment, increased headcount and related expenses, higher spending on professional services, marketing and advertising programs, and increased variable costs associated with the overall growth of the Company’s net sales.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
677
Other Income and Expense Other income and expense for 2013, 2012 and 2011 are as follows (in millions): The year-over-year increase in other income and expense during 2013 was due primarily to higher interest and dividend income resulting from the Company’s higher cash, cash equivalents and marketable securities balanc...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
678
The overall increase in other income and expense in 2012 compared to 2011 was attributable to higher interest and dividend income on the Company’s higher cash, cash equivalents and marketable securities balances, partially offset by higher premium expenses on foreign exchange contracts.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
679
The weighted average interest rate earned by the Company on its cash, cash equivalents and marketable securities was 1.03% during 2013 and 2012 and 0.77% during 2011.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
680
The Company had no debt outstanding during 2012 and 2011 and accordingly did not incur any related interest expense.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
681
Provision for Income Taxes Provision for income taxes and effective tax rates for 2013, 2012 and 2011 are as follows (in millions): The Company’s effective tax rates for all periods differ from the statutory federal income tax rate of 35% due primarily to certain undistributed foreign earnings, a substantial portion of...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
682
Management believes it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with future reversals of existing taxable temporary differences, will be sufficient to fully recover the deferred tax assets.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
683
The Company will continue to evaluate the realizability of deferred tax assets quarterly by assessing the need for and amount of a valuation allowance.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
684
The Internal Revenue Service (the “IRS”) has completed its field audit of the Company’s federal income tax returns for the years 2004 through 2006 and proposed certain adjustments.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
685
The Company has contested certain of these adjustments through the IRS Appeals Office.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
686
The IRS is currently examining the years 2007 through 2012.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
687
All IRS audit issues for years prior to 2004 have been resolved.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
688
In addition, the Company is subject to audits by state, local, and foreign tax authorities.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
689
Management believes that adequate provisions have been made for any adjustments that may result from tax examinations.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
690
However, the outcome of tax audits cannot be predicted with certainty.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
691
If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
692
Liquidity and Capital Resources The following table presents selected financial information and statistics as of and for the years ended September 28, 2013, September 29, 2012 and September 24, 2011 (in millions): The Company believes its existing balances of cash, cash equivalents and marketable securities will be suf...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
693
The Company anticipates the cash used for future dividends and the share repurchase program will come from its current domestic cash, cash generated from on-going U.S. operating activities and from borrowings.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
694
As of September 28, 2013 and September 29, 2012, $111.3 billion and $82.6 billion, respectively, of the Company’s cash, cash equivalents and marketable securities were held by foreign subsidiaries and are generally based in U.S. dollar-denominated holdings.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
695
Amounts held by foreign subsidiaries are generally subject to U.S. income taxation on repatriation to the U.S.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
696
The Company’s marketable securities investment portfolio is invested primarily in highly-rated securities and its investment policy generally limits the amount of credit exposure to any one issuer.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
697
The policy requires investments generally to be investment grade with the objective of minimizing the potential risk of principal loss.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
698
During 2013, cash generated from operating activities of $53.7 billion was a result of $37.0 billion of net income, non-cash adjustments to net income of $10.2 billion and an increase in net change in operating assets and liabilities of $6.5 billion.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
699
Cash used in investing activities of $33.8 billion during 2013 consisted primarily of net purchases, sales and maturities of marketable securities of $24.0 billion and cash used to acquire property, plant and equipment of $8.2 billion.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
700
Cash used in financing activities during 2013 consisted primarily of cash used to repurchase common stock of $22.9 billion and cash used to pay dividends and dividend equivalent rights of $10.6 billion, partially offset by net proceeds from the issuance of long-term debt of $16.9 billion.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
701
During 2012, cash generated from operating activities of $50.9 billion was a result of $41.7 billion of net income and non-cash adjustments to net income of $9.4 billion, partially offset by a decrease in net operating assets and liabilities of $299 million.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
702
Cash used in investing activities during 2012 of $48.2 billion consisted primarily of net purchases, sales and maturities of marketable securities of $38.4 billion and cash used to acquire property, plant and equipment of $8.3 billion.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
703
Cash used in financing activities during 2012 of $1.7 billion consisted primarily of cash used to pay dividends and dividend equivalent rights of $2.5 billion.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
704
Capital Assets The Company’s capital expenditures were $7.0 billion during 2013, consisting of $499 million for retail store facilities and $6.5 billion for other capital expenditures, including product tooling and manufacturing process equipment, and other corporate facilities and infrastructure.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
705
The Company’s actual cash payments for capital expenditures during 2013 were $8.2 billion.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
706
The Company anticipates utilizing approximately $11.0 billion for capital expenditures during 2014, including approximately $550 million for retail store facilities and approximately $10.5 billion for other capital expenditures, including product tooling and manufacturing process equipment, and corporate facilities and...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
707
During 2014, the Company expects to open about 30 new retail stores, with approximately two-thirds located outside of the U.S. During 2014, the Company also expects to remodel approximately 20 of its existing stores.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
708
Long-Term Debt In the third quarter of 2013, the Company issued $17.0 billion of long-term debt, which included $3.0 billion of floating-rate notes.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
709
To manage the risk of adverse fluctuations in interest rates associated with the floating-rate notes, the Company entered into interest rate swaps with an aggregate notional amount of $3.0 billion, which, in effect, fixed the interest rate of the floating-rate notes.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
710
Of the aggregate principal amount of $17.0 billion, $2.5 billion is due in 2016 and $14.5 billion is due in 2018 through 2043. Dividend and Stock Repurchase Program In the third quarter of 2013, the Company raised its cash dividend by 15% to $3.05 per common share.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
711
The Company expects to continue to pay quarterly dividends of $3.05 per common share each quarter, subject to declaration by the Board of Directors.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
712
In 2012, the Company’s Board of Directors authorized a program to repurchase up to $10 billion of the Company’s common stock.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
713
In April 2013, the Company’s Board of Directors increased the share repurchase program authorization from $10 billion to $60 billion, of which $23.0 billion had been utilized as of September 28, 2013.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
714
The share repurchase program is expected to be completed by December 2015.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
715
The Company’s share repurchase program does not obligate it to acquire any specific number of shares.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
716
Under the program, shares may be repurchased in privately negotiated or open market transactions, including under plans complying with Rule 10b5-1 of the Exchange Act.
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
717
Beginning in August 2012 through December 2015, the Company anticipates it will utilize approximately $100 billion to pay dividends and dividend equivalent rights, repurchase shares, and remit withheld taxes related to net share settlement of restricted stock units, of which $37.1 billion had been utilized through Sept...
0001193125-13-416534/full-submission.txt
0000320193
20131030
10-K
718
The following table presents the Company’s dividends, share repurchases and net share settlement activity for 2013 and 2012 since the start of the program (in millions): Off-Balance Sheet Arrangements and Contractual Obligations The Company has not entered into any transactions with unconsolidated entities whereby the ...
0001193125-13-416534/full-submission.txt