Apple (AAPL) 10-K risk factor changes: FY2016 vs FY2015

[removed: _Global] [added: Global] and regional economic conditions could materially adversely affect the [removed: Company._][added: Company.]

[removed: _Global] [added: Global] markets for the Company’s products and services are highly competitive and subject to rapid technological change, and the Company may be unable to compete effectively in these [removed: markets._][added: markets.]

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | 8

The Company markets certain mobile communication and media devices based on the iOS mobile operating system and also markets related [added: services, including] third-party digital content and applications.

The Company competes with business models that [removed: include] [added: provide] content [removed: provided] to users for free.

The Company also competes with illegitimate [removed: ways] [added: means] to obtain third-party digital content and applications.

The Company is the only authorized maker of hardware using [removed: OS X,] [added: macOS,] which has a minority market share in the personal computer market.

Price competition has been particularly intense as competitors [removed: selling Windows-based personal computers] have aggressively cut prices and lowered product margins.

[removed: _To] [added: To] remain competitive and stimulate customer demand, the Company must successfully manage frequent product introductions and [removed: transitions._][added: transitions.]

[removed: _The] [added: The] Company depends on the performance of distributors, carriers and other [removed: resellers._][added: resellers.]

[removed: Carriers] [added: Some carriers] providing cellular network service for iPhone [removed: typically] subsidize users’ purchases of the device.

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | 9

Many resellers have [removed: narrow operating margins and have] been adversely affected in the past by weak economic conditions.

[removed: _The] [added: The] Company faces substantial inventory and other asset risk in addition to purchase commitment cancellation [removed: risk._][added: risk.]

[removed: Purchase commitments] [added: Manufacturing purchase obligations] typically cover forecasted component and manufacturing requirements for periods up to 150 days.

[removed: _Future] [added: Future] operating results depend upon the Company’s ability to obtain components in sufficient [removed: quantities._][added: quantities on commercially reasonable terms.]

A number of suppliers of components may suffer from poor financial conditions, which can lead to business failure for the supplier or consolidation within a particular industry, further limiting the Company’s ability to obtain sufficient quantities of [removed: components.][added: components on commercially reasonable terms.]

The effects of global or regional economic conditions on the Company’s suppliers, described in [removed: “_Global] [added: “Global] and regional economic conditions could materially adversely affect the [removed: Company”_] [added: Company”] above, also could affect the Company’s ability to obtain [removed: components_._ Therefore, the Company remains subject to significant risks of supply shortages and price increases.][added: components.]

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | 10

[removed: _The] [added: The] Company depends on component and product manufacturing and logistical services provided by outsourcing partners, many of which are located outside of the [removed: U.S._][added: U.S.]

[removed: _The] [added: The] Company’s products and services may experience quality problems from time to time that can result in decreased sales and operating margin and harm to the Company’s [removed: reputation._][added: reputation.]

[removed: _The] [added: The] Company relies on access to third-party digital content, which may not be available to the Company on commercially reasonable terms or at [removed: all._][added: all.]

The Company contracts with numerous third parties to offer their digital [removed: content.][added: content to customers.]

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | 11

[removed: _The] [added: The] Company’s future performance depends in part on support from third-party software [removed: developers._][added: developers.]

The Company believes decisions by customers to purchase its hardware products depend in part on the availability of [removed: third-party] [added: third‑party] software applications and services.

With respect to its Mac products, the Company believes the availability of [removed: third-party] [added: third‑party] software applications and services depends in part on the developers’ perception and analysis of the relative benefits of developing, maintaining and upgrading such software for the Company’s products compared to Windows-based products.

[removed: _The] [added: The] Company relies on access to third-party intellectual property, which may not be available to the Company on commercially reasonable terms or at [removed: all._][added: all.]

[removed: _The] [added: The] Company could be impacted by unfavorable results of legal proceedings, such as being found to have infringed on intellectual property [removed: rights._][added: rights.]

[removed: As the Company has grown, the] [added: The] intellectual property rights claims against [removed: it] [added: the Company] have [added: generally] increased [added: over time] and may continue to increase.

In particular, the [removed: Company’s] [added: Company's] cellular enabled products compete with products from mobile communication and media device companies that hold significant patent portfolios, and the [added: Company has faced a significant] number of patent claims against [removed: the Company has significantly increased.][added: it.]

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | 12

[removed: _The] [added: The] Company is subject to laws and regulations worldwide, changes to which could increase the Company’s costs and individually or in the aggregate adversely affect the Company’s [removed: business._][added: business.]

[removed: _The] [added: The] Company’s business is subject to the risks of international [removed: operations._][added: operations.]

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | 13

[removed: _The] [added: The] Company’s retail stores have required and will continue to require a substantial investment and commitment of resources and are subject to numerous risks and [removed: uncertainties._][added: uncertainties.]

[removed: _Investment] [added: Investment] in new business strategies and acquisitions could disrupt the Company’s ongoing business and present risks not originally [removed: contemplated._][added: contemplated.]

[removed: _The] [added: The] Company’s business and reputation may be impacted by information technology system failures or network [removed: disruptions._][added: disruptions.]

[removed: _There] [added: There] may be breaches of the Company’s information technology systems that materially damage business partner and customer relationships, curtail or otherwise adversely impact access to online stores and services, or subject the Company to significant reputational, financial, legal and operational [removed: consequences._][added: consequences.]

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | 14

Therefore, the Company remains subject to significant risks of supply shortages and price increases.

In some cases, compliance with the laws and regulations of one country could violate the laws and regulations of another country.

The Company makes statements about its use and disclosure of PII through its privacy policy, information provided on its website and press statements.

Penalties could include ongoing audit requirements or significant legal liability.

While the Company's suppliers are required to maintain safe working environments and operations, an industrial accident could occur and could result in disruption to the Company's business and harm to the Company's reputation.

| | |

##### [Table of Contents](#toc)

Some resellers have perceived the expansion of the Company’s direct sales as conflicting with their business interests as distributors and resellers of the Company’s products.

Such a perception could discourage resellers from investing resources in the distribution and sale of the Company’s products or lead them to limit or cease distribution of those products.

Where appropriate, the purchases are applied to inventory component prepayments that are outstanding with the respective supplier.

The Company and other participants in the markets for mobile communication and media devices and personal computers also compete for various components with other industries that have experienced increased demand for their products.

The Company uses some custom components that are not common to the rest of these industries.

The Company’s privacy policy, which includes related practices concerning the use and disclosure of data, is posted on its website.

For example, in June 2014, the European Commission opened a formal investigation of Ireland to examine whether decisions by the tax authorities with regard to the corporate income tax to be paid by two of the Company’s Irish subsidiaries comply with European Union rules on state aid.

If the European Commission were to conclude against Ireland, it could require Ireland to recover from the Company past taxes covering a period of up to 10 years reflective of the disallowed state aid, and such amount could be material.

Apple Inc. | 2015 Form 10-K | 17

[removed: _This] [added: This] section and other parts of this Annual Report on Form 10-K (“Form 10-K”) contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties.

The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by [removed: law._][added: law.]

[removed: Overview] [added: Overview] and [removed: Highlights][added: Highlights]

In addition, the Company sells a variety of third-party Apple compatible products, including application software and various accessories through its [removed: online and] retail [added: and online] stores.

[removed: _Fiscal] [added: Fiscal] 2015 [removed: Highlights_][added: Highlights]

Net sales rose 28% or $50.9 billion during 2015 compared to 2014, driven by a [removed: 52%] year-over-year increase in [removed: iPhone®] [added: iPhone] net sales.

The Company also experienced year-over-year net sales increases in [removed: Mac®,] [added: Mac,] Services and Other Products.

Apple [removed: Watch®,] [added: Watch,] which launched during the third quarter of 2015, accounted for more than 100% of the year-over-year growth in net sales of Other Products.

Net sales growth during 2015 was partially offset by the effect of weakness in most foreign currencies relative to the U.S. dollar and lower [removed: iPad®] [added: iPad] net sales.

[removed: _Fiscal 2014 Highlights_][added: Fiscal 2016 Highlights]

[removed: Net] [added: The increase in net] sales of Services [removed: grew] [added: during 2015 compared to 2014 was] primarily due to [removed: increased revenue] [added: growth] from [removed: sales through] the App [removed: Store®, AppleCare®] [added: Store] and licensing.

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | [removed: 23][added: 22]

During [removed: 2014,] [added: 2016,] the Company [removed: utilized $45] [added: spent $29.0] billion to repurchase [added: shares of] its common stock and paid dividends and dividend equivalents of [removed: $11.1] [added: $12.2] billion.

[removed: _Sales Data_][added: Sales Data]

The following table shows net sales by operating segment and net sales and unit sales by product during [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013] [added: 2014] (dollars in millions and units in thousands):

| | [removed: | 2015 | |] [added: 2016] | | [removed: Change] | | [added: Change] | | [removed: 2014] | [added: 2015] | | | [removed: Change] | [added: Change] | | | [removed: 2013] [added: 2014] | | |

| Net Sales by Operating Segment: | | | | | | | | | | | | | | | | | | [removed: | | |]

| Americas | [removed: |] $ | [removed: 93,864 |] [added: 86,613] | | | [removed: 17%] [added: (8] | [added: )%] | | $ | [removed: 80,095 |] [added: 93,864] | | | [removed: 4%] [added: 17] | [added: %] | | $ | [removed: 77,093] [added: 80,095] | |

| Europe | [removed: | | 50,337 |] [added: 49,952] | | | [removed: 14%] | [added: (1] | [added: )%] | | [removed: 44,285] [added: 50,337] | | | | [removed: 8%] [added: 14] | [added: %] | | [added: 44,285] | [removed: 40,980] | |

| Greater China | [removed: | | 58,715 |] [added: 48,492] | | | [removed: 84%] | [added: (17] | [added: )%] | | [removed: 31,853] [added: 58,715] | | | | [removed: 18%] [added: 84] | [added: %] | | [added: 31,853] | [removed: 27,016] | |

| Japan | [removed: | | 15,706 |] [added: 16,928] | | | [removed: 3%] | [added: 8] | [added: %] | | [removed: 15,314] [added: 15,706] | | | | [removed: 11%] [added: 3] | [added: %] | | [added: 15,314] | [removed: 13,782] | |

| Rest of Asia Pacific | [removed: | | 15,093 |] [added: 13,654] | | | [removed: 34%] | [added: (10] | [added: )%] | | [removed: 11,248] [added: 15,093] | | | | [removed: (7)%] [added: 34] | [added: %] | | [added: 11,248] | [removed: 12,039] | |

| Total net sales | [removed: |] $ | [removed: 233,715 |] [added: 215,639] | | | [removed: 28%] [added: (8] | [added: )%] | | $ | [removed: 182,795 |] [added: 233,715] | | | [removed: 7%] [added: 28] | [added: %] | | $ | [removed: 170,910] [added: 182,795] | |

| Net Sales by Product: | | | | | | | | | | | | | | | | | | [removed: | | |]

| iPhone (1) | [removed: |] $ | [removed: 155,041 |] [added: 136,700] | | | [removed: 52%] [added: (12] | [added: )%] | | $ | [removed: 101,991 |] [added: 155,041] | | | [removed: 12%] [added: 52] | [added: %] | | $ | [removed: 91,279] [added: 101,991] | |

| iPad (1) | [removed: | | 23,227 |] [added: 20,628] | | | [removed: (23)%] | [added: (11] | [added: )%] | | [removed: 30,283] [added: 23,227] | | | | [removed: (5)%] [added: (23] | [added: )%] | | [added: 30,283] | [removed: 31,980] | |

| Mac (1) | [removed: | | 25,471 |] [added: 22,831] | | | [removed: 6%] | [added: (10] | [added: )%] | | [removed: 24,079] [added: 25,471] | | | | [removed: 12%] [added: 6] | [added: %] | | [added: 24,079] | [removed: 21,483] | |

| Services (2) | [removed: | | 19,909 |] [added: 24,348] | | | [removed: 10%] | [added: 22] | [added: %] | | [removed: 18,063] [added: 19,909] | | | | [removed: 13%] [added: 10] | [added: %] | | [added: 18,063] | [removed: 16,051] | |

| Other Products (1)(3) | [removed: | | 10,067 |] [added: 11,132] | | | [removed: 20%] | [added: 11] | [added: %] | | [removed: 8,379] [added: 10,067] | | | | [removed: (17)%] [added: 20] | [added: %] | | [added: 8,379] | [removed: 10,117] | |

| Unit Sales by Product: | | | | | | | | | | | | | | | | | | [removed: | | |]

| iPhone | [removed: | | 231,218 |] [added: 211,884] | | | [removed: 37%] | [added: (8] | [added: )%] | | [removed: 169,219] [added: 231,218] | | | | [removed: 13%] [added: 37] | [added: %] | | [added: 169,219] | [removed: 150,257] | |

| iPad | [removed: | | 54,856 |] [added: 45,590] | | | [removed: (19)%] | [added: (17] | [added: )%] | | [removed: 67,977] [added: 54,856] | | | | [removed: (4)%] [added: (19] | [added: )%] | | [added: 67,977] | [removed: 71,033] | |

| Mac | [removed: | | 20,587 |] [added: 18,484] | | | [removed: 9%] | [added: (10] | [added: )%] | | [removed: 18,906] [added: 20,587] | | | | [removed: 16%] [added: 9] | [added: %] | | [added: 18,906] | [removed: 16,341] | |

| [removed: |] (1) | Includes deferrals and amortization of related software upgrade rights and non-software services. | [removed: |]

| [removed: |] (2) | Includes revenue from [removed: the iTunes Store®, App Store, Mac App Store, iBooks Store™ and Apple Music™ (collectively “Internet Services”), AppleCare,] [added: Internet Services, AppleCare®,] Apple [removed: Pay®,] [added: Pay,] licensing and other services. | [removed: |]

| [removed: |] (3) | Includes sales of Apple [removed: TV®,] [added: TV,] Apple Watch, [removed: Beats] [added: Beats®] products, iPod and Apple-branded and third-party accessories. | [removed: |]

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | [removed: 24][added: 23]

[removed: Product Performance][added: Product Performance]

[removed: _iPhone_][added: iPhone]

The following table presents iPhone net sales and unit sales information for [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013] [added: 2014] (dollars in millions and units in thousands):

The Company’s products and services include iPhone®, iPad®, Mac®, iPod®, Apple Watch®, Apple TV®, a portfolio of consumer and professional software applications, iOS, macOS™, watchOS® and tvOS™ operating systems, iCloud®, Apple Pay® and a variety of accessory, service and support offerings.

The Company sells and delivers digital content and applications through the iTunes Store®, App Store®, Mac App Store, TV App Store, iBooks Store™ and Apple Music® (collectively “Internet Services”).

Net sales declined 8% or $18.1 billion during 2016 compared to 2015, primarily driven by a year-over-year decrease in iPhone net sales and the effect of weakness in most foreign currencies relative to the U.S. dollar, partially offset by an increase in Services.

In April 2016, the Company announced a significant increase to its capital return program by raising the expected total size of the program from $200 billion to $250 billion through March 2018.

This included increasing its share repurchase authorization from $140 billion to $175 billion and raising its quarterly dividend from $0.52 to $0.57 per share beginning in May 2016.

Additionally, the Company issued $23.9 billion of U.S. dollar-denominated term debt and A$1.4 billion of Australian dollar-denominated term debt during 2016.

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| | | | | | | | | | | | | | | | | | |

| Total net sales | $ | 215,639 | | | (8 | )% | | $ | 233,715 | | | 28 | % | | $ | 182,795 | |

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| | 2016 | | | | Change | | | 2015 | | | | Change | | | 2014 | | |

iPhone net sales and unit sales decreased during 2016 compared to 2015.

The Company believes the sales decline is due primarily to a lower rate of iPhone upgrades during 2016 compared to 2015 and challenging macroeconomic conditions in a number of major markets in 2016.

Average selling prices (“ASPs”) for iPhone were lower year-over-year during 2016 due primarily to a different mix of iPhones, including the iPhone SE introduced in 2016, and the effect of weakness in most foreign currencies relative to the U.S. dollar.

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| | 2016 | | | | Change | | | 2015 | | | | Change | | | 2014 | | |

iPad net sales decreased during 2016 compared to 2015 primarily due to lower unit sales and the effect of weakness in most foreign currencies relative to the U.S. dollar, partially offset by higher ASPs due to a shift in mix to higher-priced iPads.

The Company believes the decline in iPad sales is due in part to a longer repurchase cycle for iPads and some level of cannibalization from the Company's other products.

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| | 2016 | | | | Change | | | 2015 | | | | Change | | | 2014 | | |

Mac net sales and unit sales decreased during 2016 compared to 2015.

The year-over-year decline in Mac unit sales during 2016 was at rates similar to the overall market.

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| | 2016 | | | | Change | | | 2015 | | | | Change | | | 2014 | | |

Net sales rose 7% or $11.9 billion during 2014 compared to 2013.

This was driven by increases in net sales of iPhone, Mac and Services.

Net sales and unit sales increased for iPhone primarily due to the successful introduction of iPhone 5s and 5c in the latter half of calendar year 2013, the successful launch of iPhone 6 and 6 Plus beginning in the fourth quarter of 2014, and expanded distribution.

Mac net sales and unit sales increased primarily due to strong demand for MacBook Air® and MacBook Pro® which were updated in 2014 with faster processors and offered at lower prices.

Growth in these areas was partially offset by the year-over-year decline in net sales for iPad due to lower unit sales in many markets, and a decline in net sales of Other Products.

All of the Company’s operating segments other than the Rest of Asia Pacific segment experienced increased net sales in 2014, with growth being strongest in the Greater China and Japan operating segments.

During 2014, the Company completed various business acquisitions, including the acquisitions of Beats Music, LLC, which offers a subscription streaming music service, and Beats Electronics, LLC, which makes Beats® headphones, speakers and audio software.

##### [Table of Contents](#toc)

In April 2014, the Company increased its share repurchase authorization to $90 billion and the quarterly dividend was raised to $0.47 per common share, resulting in an overall increase in its capital return program from $100 billion to over $130 billion.

The Company also issued $12.0 billion of long-term debt during 2014, with varying maturities through 2044, and launched a commercial paper program, with $6.3 billion outstanding as of September 27, 2014.

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The year-over-year growth in iPhone net sales and unit sales in 2014 resulted primarily from the successful introduction of new iPhones in the latter half of calendar year 2013, the successful launch of iPhone 6 and 6 Plus beginning in September 2014, and expanded distribution.

iPhone unit sales grew in all of the Company’s operating segments, while iPhone net sales grew in all segments except Rest of Asia Pacific.

Overall ASPs for iPhone were relatively flat in 2014 compared to 2013, with growth in ASPs in the Americas segment being offset by a decline in ASPs in the Greater China, Japan and Rest of Asia Pacific segments.

Net sales and unit sales for iPad declined in 2014 compared to 2013.

iPad net sales and unit sales grew in the Greater China and Japan segments but this growth was more than offset by a decline in all other segments.

Overall iPad ASPs were relatively flat in 2014 compared to 2013 with a shift in mix to higher-priced iPads being offset by the October 2013 price reduction of iPad mini™.

ASPs increased in the Japan and Rest of Asia Pacific segments but were slightly down in other segments.

The year-over-year growth in Mac net sales and unit sales for 2014 was primarily driven by increased sales of MacBook Air, MacBook Pro and Mac Pro.

Mac net sales and unit sales increased in all of the Company’s operating segments.

Mac ASPs decreased during 2014 compared to 2013 primarily due to price reductions on certain Mac models and a shift in mix towards Mac portable systems.

The increase in net sales of Services during 2015 compared to 2014 was primarily due to growth from Internet Services and licensing.

The App Store, included within Internet Services, generated strong year-over-year net sales growth of 29%.

The increase in net sales of Services in 2014 compared to 2013 was primarily due to growth in net sales from Internet Services, AppleCare and licensing.

Internet Services generated a total of $10.2 billion in net sales during 2014 compared to $9.3 billion during 2013.

Growth in net sales from Internet Services was driven by increases in revenue from app sales reflecting continued growth in the installed base of iOS devices and the expanded offerings of iOS apps and related in-app purchases.

This was partially offset by a decline in sales of digital music.

The growth in the Americas segment in 2014 was due to increased net sales of iPhone, Mac and Services that was partially offset by a decline in net sales of iPad and Other Products and weakness in foreign currencies relative to the U.S. dollar compared to 2013.

iPhone growth resulted primarily from the successful introduction of iPhone 5s and 5c in September 2013 and the successful launch of iPhone 6 and 6 Plus in September 2014.

Mac growth was driven primarily by increased net sales and unit sales of MacBook Air and Mac Pro.

The growth in the Europe segment in 2014 was due to increased net sales of iPhone, Mac and Services, as well as strength in European currencies relative to the U.S. dollar, partially offset by a decline in net sales of iPad.

iPhone growth resulted primarily from the successful introduction of iPhone 5s and 5c in the second half of calendar 2013 and the successful launch of iPhone 6 and 6 Plus in over 20 countries in Europe in September 2014.

Mac growth was driven primarily by increased net sales and unit sales of MacBook Air, MacBook Pro and Mac Pro.

The Greater China segment experienced year-over-year growth in net sales in 2014 that was significantly higher than the growth rate for the Company overall.

Greater China growth was driven by higher unit sales and net sales of all major product categories, in addition to higher net sales of Services.

Growth in net sales and unit sales of iPhone was especially strong, driven by the successful launch of iPhone 5s and 5c in Mainland China and Hong Kong in September 2013, the successful launch of iPhone 6 and 6 Plus in Hong Kong in September 2014, increased demand for the Company’s entry-priced iPhones and the addition of a significant new carrier in the second quarter of 2014.

In 2014 the Japan segment generated year-over-year increases in net sales and unit sales of every major product category and experienced growth in net sales of Services.

The year-over-year growth in iPhone was driven by the successful launch of iPhone 5s and 5c in September 2013, the successful launch of iPhone 6 and 6 Plus in September 2014, increased demand for the Company’s entry-priced iPhones and the addition of a significant new carrier in the fourth quarter of 2013.

[removed: Interest] [added: Interest] Rate and Foreign Currency Risk [removed: Management][added: Management]

[removed: Interest] [added: Interest] Rate [removed: Risk][added: Risk]

Based on investment positions as of September [removed: 26, 2015] [added: 24, 2016] and September [removed: 27, 2014,] [added: 26, 2015,] a hypothetical 100 basis point increase in interest rates across all maturities would result in a [removed: $4.3] [added: $4.9] billion and [removed: $3.4] [added: $4.3] billion incremental decline in the fair market value of the portfolio, respectively.

As of September [removed: 26, 2015] [added: 24, 2016] and September [removed: 27, 2014,] [added: 26, 2015,] the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate carrying amount of [removed: $56.0] [added: $78.9] billion and [removed: $29.0] [added: $55.8] billion, respectively.

A 100 basis point increase in market interest rates would cause interest expense on the Company’s debt as of September [removed: 26, 2015] [added: 24, 2016] and September [removed: 27, 2014] [added: 26, 2015] to increase by [removed: $200] [added: $271] million and [removed: $110] [added: $200] million on an annualized basis, respectively.

[removed: Foreign] [added: Foreign] Currency [removed: Risk][added: Risk]

There is a risk that the Company will have to adjust local currency product pricing due to competitive pressures when there [removed: have] [added: has] been significant volatility in foreign currency exchange rates.

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | 36

Based on the results of the model, the Company estimates with 95% [removed: confidence] [added: confidence,] a maximum one-day loss in fair value of [removed: $342] [added: $434] million as of September [removed: 26, 2015] [added: 24, 2016] compared to a maximum one-day loss in fair value of [removed: $240] [added: $342] million as of September [removed: 27, 2014.][added: 26, 2015.]

Actual future gains and losses associated with the Company’s investment portfolio and derivative positions may differ materially from the sensitivity analyses performed as of September [removed: 26, 2015] [added: 24, 2016] due to the inherent limitations associated with predicting the timing and amount of changes in interest rates, foreign currency exchanges rates and the Company’s actual exposures and positions.

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | 37

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##### [Table of Contents](#toc)

[removed: Company Background][added: Company Background]

The Company’s products and services include iPhone®, iPad®, Mac®, iPod®, Apple Watch®, Apple TV®, a portfolio of consumer and professional software applications, iOS, [removed: OS X®] [added: macOS™, watchOS®] and [removed: watchOS™] [added: tvOS™] operating systems, iCloud®, Apple Pay® and a variety of accessory, service and support offerings.

The Company sells and delivers digital content and applications through the iTunes Store®, App [removed: Store,] [added: Store®,] Mac App Store, [added: TV App Store,] iBooks Store™ and Apple [removed: Music™] [added: Music®] (collectively “Internet Services”).

In addition, the Company sells a variety of third-party Apple compatible products, including application software and various accessories through its [removed: online and] retail [added: and online] stores.

[removed: Business Strategy][added: Business Strategy]

As part of its strategy, the Company continues to expand its platform for the discovery and delivery of digital content and applications through its Internet Services, which allows customers to discover and download digital content, iOS, [removed: Mac and] [added: Mac,] Apple Watch [added: and Apple TV] applications, and books through either a Mac or [removed: Windows-based] [added: Windows personal] computer or through iPhone, iPad and iPod touch® devices (“iOS [removed: devices”)] [added: devices”), Apple TV] and Apple Watch.

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | 1

[removed: Business Organization][added: Business Organization]

[removed: Accordingly, the] [added: The] Company’s reportable operating segments consist of the Americas, Europe, Greater China, Japan and Rest of Asia Pacific.

Although [removed: each] [added: the] reportable operating [removed: segment provides] [added: segments provide] similar hardware and software products and similar services, [removed: they are] [added: 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.

[removed: Products][added: Products]

[removed: _iPhone_][added: iPhone]

iPhone includes Siri®, a voice activated intelligent assistant, and Apple Pay and Touch [removed: ID™] [added: ID®] on qualifying devices.

iPhone works with the iTunes Store, App [removed: Store and] [added: Store,] iBooks Store [added: and Apple Music] for purchasing, organizing and playing digital content and apps.

[removed: _iPad_][added: iPad]

iPad is the Company’s line of multi-purpose tablets based on its iOS operating system, which includes iPad [added: Pro™, iPad] Air® and iPad mini™.

iPad works with the iTunes Store, App [removed: Store and] [added: Store,] iBooks Store [added: and Apple Music] for purchasing, organizing and playing digital content and apps.

[removed: _Mac_][added: Mac]

Mac is the Company’s line of desktop and portable personal computers based on its [removed: OS X] [added: macOS] operating system.

The Company’s desktop computers include iMac®, 21.5” iMac with Retina 4K [removed: Display,] [added: display,] 27” iMac with Retina 5K [removed: Display,] [added: display,] Mac Pro® and Mac [removed: mini.][added: mini®.]

[removed: _Operating] [added: Operating] System [removed: Software_][added: Software]

[removed: OS X] [added: macOS] is the Company’s Mac operating system and is built on an open-source UNIX-based foundation and provides an intuitive and integrated computer experience.

Support for iCloud is built into [removed: OS X] [added: macOS] so users can access content and information from Mac, iOS devices and other supported devices and access downloaded content and apps from the iTunes Store.

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | 2

The tvOS operating system is based on the Company’s iOS platform and [removed: will enable] [added: enables] developers to create new apps and games specifically for Apple TV and deliver them to customers through the [removed: new] Apple TV App Store.

[removed: _Application Software_][added: Application Software]

The Company’s application software includes iLife®, iWork® and various other software, including Final Cut [removed: Pro_®_,] [added: Pro®,] Logic® Pro X and FileMaker® Pro.

The Company also has Multi-Touch versions of iLife and iWork applications designed specifically for use on iOS devices, which are available as free downloads for all new [removed: iPhones and iPads.][added: iOS devices.]

[removed: _Services_][added: Services]

[removed: In September 2015, the Company announced the Apple] [added: The] TV App [removed: Store, which provides] [added: Store allows] customers access to apps and games specifically for the [removed: new] Apple TV.

iCloud services include iCloud [removed: DriveSM,] [added: Drive®,] iCloud Photo Library, Family Sharing, Find My iPhone, [added: iPad or Mac,] Find My Friends, Notes, iCloud Keychain® and iCloud Backup for iOS devices.

[removed: AppleCare_®_] [added: AppleCare®] offers a range of support options for the Company’s customers.

Apple Pay is the Company’s mobile payment service available in [removed: the U.S. and U.K.] [added: certain countries] that offers an easy, secure and private way to pay.

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | 3

[removed: _Other Products_][added: Other Products]

The Company sells a variety of Apple-branded and third-party Mac-compatible and iOS-compatible accessories, including Apple TV, Apple Watch, [added: Beats products, iPod,] headphones, displays, storage devices, [removed: Beats products,] and various other connectivity and computing products and supplies.

Apple TV allows streaming digital content from Mac and Windows personal computers through Home Share and [removed: through AirPlay®] from compatible Mac and iOS [removed: devices.][added: devices through AirPlay®.]

[removed: In September 2015, the Company announced the new] [added: The Company's] Apple TV [removed: running] [added: runs] on [removed: the Company’s] [added: its] tvOS operating system and [added: is] based on apps built for the television.

Additionally, the [removed: new] Apple TV remote features Siri, allowing users to search and access content with their voice.

Apple Watch is a personal electronic device that combines the watchOS user interface and technologies created specifically for a smaller device, including the Digital [removed: Crown,] [added: Crown™,] a unique navigation tool that allows users to seamlessly scroll, zoom and navigate, and Force Touch, a technology that senses the difference between a tap and a press and allows users to access controls within apps.

In September 2016, the Company introduced iPhone 7 and 7 Plus, featuring new camera systems, immersive stereo speakers and water and dust resistance.

During the third quarter of 2016, the Company also began selling iPhone SE, which has a 4-inch Retina® display.

In September 2016, the Company released iOS 10, which introduces the ability for Siri to do more by working with apps, updates Messages, includes redesigned Maps, Photos, Apple Music and News apps, and the Home app, which provides a way to manage home automation products in one place.

macOS

macOS Sierra, released in September 2016, is the 13th major release of macOS and incorporates Siri and Apple Pay on the Mac, improves continuity and document access across Apple devices and includes the new Memories feature in Photos.

Released in September 2016, watchOS 3 provides improved performance with the ability to launch favorite apps instantly, enhanced navigation with the new Dock and new fitness and health capabilities for Apple Watch, including the Breathe app designed to promote exercises for relaxation and stress reduction.

tvOS is the Company's operating system for Apple TV.

The new tvOS, released in September 2016, incorporates new Siri capabilities that allow searching across more apps and services.

In September 2016, the Company introduced AirPods™, new wireless headphones that interact with Siri.

In September 2016, the Company introduced Apple Watch Series 2, featuring new fitness and health capabilities, built-in GPS and a 50-meter water resistance rating for swimming.

| | |

In September 2015, the Company announced a new Apple TV, tvOS™ operating system and Apple TV App Store®, which are expected to be available by the end of October 2015.

##### [Table of Contents](#toc)

In 2015, the Company changed its reportable operating segments as management began reporting business performance and making decisions primarily on a geographic basis, including the results of its retail stores in each respective geographic segment.

In September 2015, the Company introduced iPhone 6s and 6s Plus, featuring 3D Touch, which senses force to access features and interact with content and apps.

iPhone is compatible with both Mac and Windows personal computers and Apple’s iCloud services, which provide synchronization across users’ devices.

In September 2015, the Company announced the new iPad Pro™, featuring a 12.9-inch Retina® display, which is expected to be available in November 2015.

iPad is compatible with both Mac and Windows personal computers and Apple’s iCloud services.

In September 2015, the Company released iOS 9, which provides more search abilities and improved Siri features.

iOS 9 also introduced new multitasking features designed specifically for iPad, including Slide Over and Split View, which allow users to work with two apps simultaneously, and Picture-in-Picture that allows users to watch a video while using another application.

OS X

OS X El Capitan, released in September 2015, is the 12th major release of OS X and incorporates additional window management features, including Split View and the new Spaces Bar in Mission Control®, which provides users an intuitive way to group applications.

Released in September 2015, watchOS 2 is the first major software update for Apple Watch, providing users with new features, including new watch faces, the ability to add third-party app information on watch faces, Time Travel, and additional communication capabilities in Mail, Friends and Digital Touch.

watchOS 2 also gives developers the ability to build native apps for Apple Watch.

In September 2015, the Company announced tvOS, its operating system for the new Apple TV, which is expected to be available at the end of October 2015.

The new Apple TV is expected to be available at the end of October 2015.

The Company is subject to [removed: the] legal proceedings and claims [removed: discussed below as well as certain other legal proceedings and claims] that have not been fully resolved and that have arisen in the ordinary course of business.

See the risk factor [removed: “_The] [added: “The] Company could be impacted by unfavorable results of legal proceedings, such as being found to have infringed on intellectual property [removed: rights_”] [added: rights”] in Part I, Item 1A of this Form 10-K under the heading “Risk Factors.” The Company settled certain matters during the fourth quarter of [removed: 2015] [added: 2016] that did not individually or in the aggregate have a material impact on the Company’s financial condition or operating results.

| | |

_Apple eBooks Antitrust Litigation (United States of America v.

Apple Inc., et al.)_

On April 11, 2012, the U.S. Department of Justice filed a civil antitrust action against the Company and five major book publishers in the U.S. District Court for the Southern District of New York, alleging an unreasonable restraint of interstate trade and commerce in violation of §1 of the Sherman Act and seeking, among other things, injunctive relief, the District Court’s declaration that the Company’s agency agreements with the publishers are null and void and/or the District Court’s reformation of such agreements.

On July 10, 2013, the District Court found, following a bench trial, that the Company conspired to restrain trade in violation of §1 of the Sherman Act and relevant state statutes to the extent those laws are congruent with §1 of the Sherman Act.

The District Court entered a permanent injunction, which took effect on October 6, 2013 and will be in effect for five years unless the judgment is overturned on appeal.

The Company has taken the necessary steps to comply with the terms of the District Court’s order, including renegotiating agreements with the five major eBook publishers, updating its antitrust training program and completing a two-year monitorship with a court-appointed antitrust compliance monitor, whose appointment the District Court ended in October 2015.

The Company appealed the District Court’s decision.

Pursuant to a settlement agreement reached in June 2014, any damages the Company may be obligated to pay will be determined by the outcome of the final adjudication following exhaustion of all appeals.

[removed: 10-K 1 d17062d10k.htm FORM] [added: Form] 10-K

[removed: ##### [Table of Contents](#toc)][added: TABLE OF CONTENTS]

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: Form 10-K][added: Form 10-K]

[removed: x ANNUAL] [added: ☒ ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934][added: 1934]

For the fiscal year ended September [removed: 26, 2015][added: 24, 2016]

[removed: ¨ TRANSITION] [added: ☐ TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934][added: 1934]

[removed: ][added: ]

[removed: Apple Inc.][added: Apple Inc.]

| [removed: California] [added: California] | | [removed: 94-2404110] [added: 94-2404110] |

| [removed: 1] [added: 1] Infinite [removed: Loop Cupertino, California] [added: Loop Cupertino, California] | | [removed: 95014] [added: 95014] |

[removed: (408) 996-1010][added: (408) 996-1010]

| [removed: Common] [added: Common] Stock, $0.00001 par value per [removed: share 1.000%] [added: share 1.000%] Notes due [removed: 2022 1.625%] [added: 2022 1.375%] Notes due [removed: 2026 3.05%] [added: 2024 1.625%] Notes due [removed: 2029 3.60%] [added: 2026 2.000%] Notes due [removed: 2042 1.375%] [added: 2027 3.050%] Notes due [removed: 2024 2.000%] [added: 2029 3.600%] Notes due [removed: 2027] [added: 2042] | | [removed: The] [added: The] NASDAQ Stock Market [removed: LLC New] [added: LLC New] York Stock Exchange [removed: LLC New] [added: LLC New] York Stock Exchange [removed: LLC New] [added: LLC New] York Stock Exchange [removed: LLC New] [added: LLC New] York Stock Exchange [removed: LLC New] [added: LLC New] York Stock Exchange [removed: LLC New] [added: LLC New] York Stock Exchange [removed: LLC] [added: LLC] |

Yes [removed: x] [added: ☒] No [removed: ¨][added: ☐]

Yes [removed: ¨] [added: ☐] No [removed: x][added: ☒]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [removed: x]

| Large accelerated filer [removed: x] [added: ☒] | | | | Accelerated filer | | [removed: ¨] [added: ☐] |

| Non-accelerated filer [removed: ¨] [added: ☐] | | (Do not check if a smaller reporting company) | | Smaller reporting company | | [removed: ¨] [added: ☐] |

The aggregate market value of the voting and non-voting stock held by non-affiliates of the Registrant, as of March [removed: 27, 2015,] [added: 25, 2016,] the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately [removed: $709,923,000,000.][added: $578,807,000,000.]

[removed: 5,575,331,000] [added: 5,332,313,000] shares of common stock were issued and outstanding as of October [removed: 9, 2015.][added: 14, 2016.]

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the Registrant’s definitive proxy statement relating to its [removed: 2016] [added: 2017] annual meeting of shareholders (the [removed: “2016] [added: “2017] Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.

The [removed: 2016] [added: 2017] Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

[removed: For] [added: For] the Fiscal Year Ended September [removed: 26, 2015][added: 24, 2016]

| | | [removed: | | Page | |] [added: Page] |

[removed: | [Part I](#toc17062_1) | | | | | | [](#toc17062_1) |][added: PART I]

| [Item [removed: 1.](#toc17062_2) | | [Business](#toc17062_2) | |] [added: 1.](#s6C41364C322E57BAAC969DAD1DBF4AFD)] | [removed: 1] [added: [Business](#s6C41364C322E57BAAC969DAD1DBF4AFD)] | [added: [1](#s6C41364C322E57BAAC969DAD1DBF4AFD)] |

| [Item [removed: 1A.](#toc17062_3) |] [added: 1A.](#sB51EFAA26E3F57518D7A81B3CF383D30)] | [Risk [removed: Factors](#toc17062_3) | | | 8] [added: Factors](#sB51EFAA26E3F57518D7A81B3CF383D30)] | [added: [8](#sB51EFAA26E3F57518D7A81B3CF383D30)] |

| [Item [removed: 1B.](#toc17062_4) |] [added: 1B.](#s8D73094E7B93567FA56C7CB51321C1F8)] | [Unresolved Staff [removed: Comments](#toc17062_4) | | | 18] [added: Comments](#s8D73094E7B93567FA56C7CB51321C1F8)] | [added: [17](#s8D73094E7B93567FA56C7CB51321C1F8)] |

| [Item [removed: 2.](#toc17062_5) | | [Properties](#toc17062_5) | |] [added: 2.](#s71896FD5CC725B99AC31A5FFAB7D60B1)] | [removed: 18] [added: [Properties](#s71896FD5CC725B99AC31A5FFAB7D60B1)] | [added: [17](#s71896FD5CC725B99AC31A5FFAB7D60B1)] |

| [Item [removed: 3.](#toc17062_6) |] [added: 3.](#sD556EBF06308591EAD04C2BE5ED2BED5)] | [Legal [removed: Proceedings](#toc17062_6) | | | 18] [added: Proceedings](#sD556EBF06308591EAD04C2BE5ED2BED5)] | [added: [17](#sD556EBF06308591EAD04C2BE5ED2BED5)] |

| [Item [removed: 4.](#toc17062_7) |] [added: 4.](#s79489CA6DDAC5C9FA9BC0058684A71C8)] | [Mine Safety [removed: Disclosures](#toc17062_7) | | | 18] [added: Disclosures](#s79489CA6DDAC5C9FA9BC0058684A71C8)] | [added: [17](#s79489CA6DDAC5C9FA9BC0058684A71C8)] |

| [Item [removed: 5.](#toc17062_9) |] [added: 5.](#s7CEBB8BDBAF25CB6AD929848EA4570B6)] | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#toc17062_9) | | | 19] [added: Securities](#s7CEBB8BDBAF25CB6AD929848EA4570B6)] | [added: [18](#s7CEBB8BDBAF25CB6AD929848EA4570B6)] |

| [Item [removed: 6.](#toc17062_10) |] [added: 6.](#sE78948B641FF55EDB70F7F75DDCB7673)] | [Selected Financial [removed: Data](#toc17062_10) | | | 22] [added: Data](#sE78948B641FF55EDB70F7F75DDCB7673)] | [added: [21](#sE78948B641FF55EDB70F7F75DDCB7673)] |

| [Item [removed: 7.](#toc17062_11) |] [added: 7.](#s896C84BE4E765705871D69EB0BC22B62)] | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#toc17062_11) | | | 23] [added: Operations](#s896C84BE4E765705871D69EB0BC22B62)] | [added: [22](#s896C84BE4E765705871D69EB0BC22B62)] |

| [Item [removed: 7A.](#toc17062_12) |] [added: 7A.](#s312F59D5215853C98A92CF2CB1813E50)] | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#toc17062_12) | | | 36] [added: Risk](#s312F59D5215853C98A92CF2CB1813E50)] | [added: [36](#s312F59D5215853C98A92CF2CB1813E50)] |

| [Item [removed: 8.](#toc17062_13) |] [added: 8.](#s6D9F6383DC8154C6A9550261722A985C)] | [Financial Statements and Supplementary [removed: Data](#toc17062_13) | | | 38] [added: Data](#s6D9F6383DC8154C6A9550261722A985C)] | [added: [38](#s6D9F6383DC8154C6A9550261722A985C)] |

| [Item [removed: 9.](#toc17062_14) |] [added: 9.](#s5C211D8C569C59F99F7B865C04090230)] | [Changes in and Disagreements With Accountants on Accounting and Financial [removed: Disclosure](#toc17062_14) | | | 71] [added: Disclosure](#s5C211D8C569C59F99F7B865C04090230)] | [added: [72](#s5C211D8C569C59F99F7B865C04090230)] |

10-K 1 a201610-k9242016.htm 10-K

| | | |

Yes ☒ No ☐

Yes ☒ No ☐

Yes ☐ No ☒

Apple Inc.

| | | |

| | | |

| [Part II](#s969F506067C2529D87F0B5F4EADBF60E) | | |

| [Part IV](#s7844746E3EC651DDBFFDC410F52F6B5A) | | |

| | |

| --- | --- |

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

TABLE OF CONTENTS

| [Part II](#toc17062_8) | | | | | | [](#toc17062_8) |

| [Part IV](#toc17062_23) | | | | | | [](#toc17062_23) |

| | |

As of September [removed: 26, 2015,] [added: 24, 2016,] the Company owned [removed: or] [added: 7.1 million square feet and] leased [removed: 25.6] [added: 22.3] million square feet of building space, primarily in the U.S. [removed: The] [added: Additionally, the] Company [removed: also] owned [removed: or leased building space] [added: a total of 2,583 acres of land primarily] in [removed: various locations, including throughout Europe, China, Singapore and Japan.][added: the U.S.]

[removed: In addition,] [added: As of September 24, 2016,] the Company owned facilities and land for [removed: R&D and] [added: R&D,] corporate functions [removed: in San Jose, California] and [removed: Cupertino, California,] [added: data centers at various locations throughout the U.S.,] including land [added: in California] that is being developed for the Company’s second corporate campus.

Outside the U.S., the Company owned additional facilities [added: and land] for various purposes.

| | |

Of the total owned or leased building space 18.5 million square feet was leased building space, which includes approximately 5.3 million square feet related to retail store space.

Additionally, the Company owns a total of 1,757 acres of land in various locations.

As of September 26, 2015, the Company owned a manufacturing facility in Cork, Ireland that also housed a customer support call center; facilities in Elk Grove, California that included warehousing and distribution operations and a customer support call center; and a facility in Mesa, Arizona.

The Company also owned land in Austin, Texas where it is expanding its existing office space and customer support call center.

The Company also owned data centers in Newark, California; Maiden, North Carolina; Prineville, Oregon; and Reno, Nevada.

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | [removed: 18][added: 17]

[removed: PART II][added: PART II]

| | |

##### [Table of Contents](#toc)

[removed: Price] [added: Price] Range of Common [removed: Stock][added: Stock]

| | [removed: | Fourth Quarter | | | | Third Quarter | | | | Second Quarter] [added: Fourth Quarter] | | [added: Third Quarter] | | [removed: First Quarter] [added: Second Quarter] | | [added: First Quarter] |

[removed: Holders][added: Holders]

As of October [removed: 9, 2015,] [added: 14, 2016,] there were [removed: 25,924] [added: 25,641] shareholders of record.

[removed: Dividends][added: Dividends]

The Company paid a total of [removed: $11.4] [added: $12.0] billion and [removed: $11.0] [added: $11.4] billion in dividends during [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] respectively, and expects to pay quarterly dividends of [removed: $0.52] [added: $0.57] per common share each quarter, subject to declaration by the Board of Directors.

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | [removed: 19][added: 18]

[removed: Purchases] [added: Purchases] of Equity Securities by the Issuer and Affiliated [removed: Purchasers][added: Purchasers]

Share repurchase activity during the three months ended September [removed: 26, 2015] [added: 24, 2016] was as follows (in millions, except number of shares, which are reflected in thousands, and per share amounts):

| [removed: Periods] [added: Periods] | | [removed: Total] [added: Total] Number of Shares [removed: Purchased |] [added: Purchased] | | | [removed: Average] [added: Average] Price Paid Per [removed: Share] [added: Share] | | | | [removed: Total] [added: Total] Number of Shares Purchased as Part of Publicly Announced Plans or [removed: Programs |] [added: Programs] | | | [removed: Approximate] [added: Approximate] Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs [removed: (1)] [added: (1)] | | |

| Open market and privately negotiated purchases | | [removed: | 15,882] [added: 9,036] | | | $ | [removed: 124.66 |] [added: 96.83] | | | [removed: 15,882] [added: 9,036] | | | | | |

| Open market and privately negotiated purchases | | [removed: | 68,526] [added: 11,919] | | | $ | [removed: 114.15 |] [added: 108.11] | | | [removed: 68,526] [added: 11,919] | | | | | |

| August [removed: 30, 2015] [added: 28, 2016] to September [removed: 26, 2015: | |] [added: 24, 2016:] | | | | | | | | | | | | | | |

| Open market and privately negotiated purchases | | [removed: | 37,394] [added: 7,624] | | | $ | [removed: 112.94 |] [added: 109.71] | | | [removed: 37,394] [added: 7,624] | | | | | |

| Total | | [removed: | 131,775 |] [added: 63,316] | | | | | | | | | | $ | [removed: 36,024] [added: 42,024] | |

| [removed: |] (1) | In [removed: 2012, the Company’s Board of Directors authorized a program to repurchase up to $10 billion of] [added: April 2016,] the Company’s [removed: common stock beginning in 2013. The Company’s] Board of Directors increased the [added: Company's share repurchase program] authorization [added: from $140 billion] to [removed: repurchase] [added: $175 billion of] the Company’s common [removed: stock to $60 billion in April 2013, to $90 billion in April 2014 and to $140 billion in April 2015.] [added: stock.] As of September [removed: 26, 2015, $104] [added: 24, 2016, $133] billion of the [removed: $140] [added: $175] billion had been utilized. The remaining [removed: $36] [added: $42] billion in the table represents the amount available to repurchase shares under the authorized repurchase program as of September [removed: 26, 2015.] [added: 24, 2016.] The Company’s share repurchase program does not obligate it to acquire any specific number of shares. 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 Exchange Act. | [removed: |]

| [removed: |] (2) | In May [removed: 2015,] [added: 2016,] the Company entered into an accelerated share repurchase arrangement [removed: (“ASR”)] [added: ("ASR")] to purchase up to $6.0 billion of the [removed: Company’s] [added: Company's] common stock. In [removed: July 2015,] [added: August 2016,] the purchase period for this ASR ended and an additional [removed: 10.0] [added: 12.3] million shares were delivered and retired. In total, [removed: 48.3] [added: 60.5] million [removed: net] shares were delivered under this ASR at an average repurchase price of [removed: $124.24. |] [added: $99.25.] |

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | [removed: 20][added: 19]

[removed: Company] [added: Company] Stock [removed: Performance][added: Performance]

The following graph shows a comparison of cumulative total shareholder return, calculated on a dividend reinvested basis, for the Company, the S&P 500 Index, the S&P Information Technology Index and the Dow Jones U.S. Technology Supersector Index for the five years ended September [removed: 26, 2015.][added: 24, 2016.]

The graph assumes $100 was invested in each of the Company’s common stock, the S&P 500 Index, the S&P Information Technology Index and the Dow Jones U.S. Technology Supersector Index as of the market close on September [removed: 24, 2010.][added: 23, 2011.]

[removed: ][added: ]

| [removed: |] * | $100 invested on [removed: 9/25/10] [added: 9/23/11] in stock or index, including reinvestment of dividends. Data points are the last day of each fiscal year for the Company’s common stock and September 30th for indexes. | [removed: |]

Copyright© [removed: 2015] [added: 2016] S&P, a division of McGraw Hill Financial.

Copyright© [removed: 2015] [added: 2016] Dow Jones & Co. All rights reserved.

| | | [removed: September 2010] [added: September 2011] | | | | [removed: September 2011] [added: September 2012] | | | | [removed: September 2012] [added: September 2013] | | | | [removed: September 2013] [added: September 2014] | | | | [removed: September 2014] [added: September 2015] | | | | [removed: September 2015] [added: September 2016] | | |

| Dow Jones U.S. Technology Supersector Index | | $ | 100 | | | $ | [removed: 103] [added: 130] | | | $ | [removed: 134] [added: 137] | | | $ | [removed: 141] [added: 178] | | | $ | [removed: 183] [added: 177] | | | $ | [removed: 183] [added: 217] | |

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | [removed: 21][added: 20]

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| 2016 price range per share | $116.18 - $91.50 | | $112.39 - $89.47 | | $109.43 - $92.39 | | $123.82 - $105.57 |

| 2015 price range per share | $132.97 - $92.00 | | $134.54 - $123.10 | | $133.60 - $104.63 | | $119.75 - $95.18 |

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| June 26, 2016 to July 30, 2016: | | | | | | | | | | | | | | |

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| July 31, 2016 to August 27, 2016: | | | | | | | | | | | | | | |

| May 2016 ASR | | 12,269 | | | (2) | | | | 12,269 | | | | | |

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| August 2016 ASR | | 22,468 | | (3) | (3) | | | | 22,468 | | (3) | | | |

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| (3) | In August 2016, the Company entered into a new ASR to purchase up to $3.0 billion of the Company’s common stock. In exchange for an up-front payment of $3.0 billion, the financial institution party to the arrangement committed to deliver shares to the Company during the ASR’s purchase period, which will end in or before November 2016. The total number of shares ultimately delivered, and therefore the average price paid per share, will be determined at the end of the applicable purchase period based on the volume weighted-average price of the Company’s common stock during that period. |

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| Apple Inc. | | $ | 100 | | | $ | 166 | | | $ | 123 | | | $ | 183 | | | $ | 212 | | | $ | 213 | |

| S&P 500 Index | | $ | 100 | | | $ | 130 | | | $ | 155 | | | $ | 186 | | | $ | 185 | | | $ | 213 | |

| S&P Information Technology Index | | $ | 100 | | | $ | 132 | | | $ | 142 | | | $ | 183 | | | $ | 187 | | | $ | 230 | |

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| 2015 price range per share | | $ | 132.97 - $ 92.00 | | | $ | 134.54 - $ 123.10 | | | $ | 133.60 - $ 104.63 | | | $ | 119.75 - $ 95.18 | |

| 2014 price range per share | | $ | 103.74 - $ 92.09 | | | $ | 95.05 - $ 73.05 | | | $ | 80.18 - $ 70.51 | | | $ | 82.16 - $ 67.77 | |

##### [Table of Contents](#toc)

| June 28, 2015 to August 1, 2015: | | | | | | | | | | | | | | | | |

| May 2015 ASR | | | 9,973 | (2) | | | | (2) | | | 9,973 | (2) | | | | |

| August 2, 2015 to August 29, 2015: | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- |

| Apple Inc. | | $ | 100 | | | $ | 138 | | | $ | 229 | | | $ | 170 | | | $ | 254 | | | $ | 294 | |

| S&P 500 Index | | $ | 100 | | | $ | 101 | | | $ | 132 | | | $ | 157 | | | $ | 188 | | | $ | 187 | |

| S&P Information Technology Index | | $ | 100 | | | $ | 104 | | | $ | 137 | | | $ | 147 | | | $ | 190 | | | $ | 194 | |

The information set forth below for the five years ended September [removed: 26, 2015,] [added: 24, 2016,] is not necessarily indicative of results of future operations, and should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes thereto included in Part II, Item 8 of this Form 10-K to fully understand factors that may affect the comparability of the information presented below (in millions, except number of shares, which are reflected in thousands, and per share amounts).

| | [removed: | 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | |

| Net sales | [removed: |] $ | [removed: 233,715] [added: 215,639] | | | $ | [removed: 182,795] [added: 233,715] | | | $ | [removed: 170,910] [added: 182,795] | | | $ | [removed: 156,508] [added: 170,910] | | | $ | [removed: 108,249] [added: 156,508] | |

| Net income | [removed: |] $ | [removed: 53,394] [added: 45,687] | | | $ | [removed: 39,510] [added: 53,394] | | | $ | [removed: 37,037] [added: 39,510] | | | $ | [removed: 41,733] [added: 37,037] | | | $ | [removed: 25,922] [added: 41,733] | |

| Earnings per share: | | | | | | | | | | | | | | | | | | | | [removed: |]

| Basic | [removed: |] $ | [removed: 9.28] [added: 8.35] | | | $ | [removed: 6.49] [added: 9.28] | | | $ | [removed: 5.72] [added: 6.49] | | | $ | [removed: 6.38] [added: 5.72] | | | $ | [removed: 4.01] [added: 6.38] | |

| Diluted | [removed: |] $ | [removed: 9.22] [added: 8.31] | | | $ | [removed: 6.45] [added: 9.22] | | | $ | [removed: 5.68] [added: 6.45] | | | $ | [removed: 6.31] [added: 5.68] | | | $ | [removed: 3.95] [added: 6.31] | |

| Cash dividends declared per share | [removed: |] $ | [removed: 1.98] [added: 2.18] | | | $ | [removed: 1.82] [added: 1.98] | | | $ | [removed: 1.64] [added: 1.82] | | | $ | [removed: 0.38] [added: 1.64] | | | $ | [removed: 0] [added: 0.38] | |

| Shares used in computing earnings per share: | | | | | | | | | | | | | | | | | | | | [removed: |]

| Basic | [added: 5,470,820] | | [added: | |] 5,753,421 | | | | 6,085,572 | | | | 6,477,320 | | | | 6,543,726 | | | [removed: | 6,469,806 | |]

| Diluted | [added: 5,500,281] | | [added: | |] 5,793,069 | | | | 6,122,663 | | | | 6,521,634 | | | | 6,617,483 | | | [removed: | 6,556,514 | |]

| Total cash, cash equivalents and marketable securities | [removed: |] $ | [removed: 205,666] [added: 237,585] | | | $ | [removed: 155,239] [added: 205,666] | | | $ | [removed: 146,761] [added: 155,239] | | | $ | [removed: 121,251] [added: 146,761] | | | $ | [removed: 81,570] [added: 121,251] | |

| Total assets | [removed: |] $ | [removed: 290,479] [added: 321,686] | | | $ | [removed: 231,839] [added: 290,345] | | | $ | [removed: 207,000] [added: 231,839] | | | $ | [removed: 176,064] [added: 207,000] | | | $ | [removed: 116,371] [added: 176,064] | |

| Commercial paper | [removed: |] $ | [removed: 8,499] [added: 8,105] | | | $ | [removed: 6,308] [added: 8,499] | | | $ | [removed: 0] [added: 6,308] | | | $ | [removed: 0] [added: —] | | | $ | [removed: 0] [added: —] | |

| Total term debt [removed: (2) |] [added: (1)] | $ | [removed: 55,963] [added: 78,927] | | | $ | [removed: 28,987] [added: 55,829] | | | $ | [removed: 16,960] [added: 28,987] | | | $ | [removed: 0] [added: 16,960] | | | $ | [removed: 0] [added: —] | |

| Other long-term obligations [removed: (1) |] [added: (2)] | $ | [removed: 33,427] [added: 36,074] | | | $ | [removed: 24,826] [added: 33,427] | | | $ | [removed: 20,208] [added: 24,826] | | | $ | [removed: 16,664] [added: 20,208] | | | $ | [removed: 10,100] [added: 16,664] | |

| Total liabilities | [removed: |] $ | [removed: 171,124] [added: 193,437] | | | $ | [removed: 120,292] [added: 170,990] | | | $ | [removed: 83,451] [added: 120,292] | | | $ | [removed: 57,854] [added: 83,451] | | | $ | [removed: 39,756] [added: 57,854] | |

| Total shareholders’ equity | [removed: |] $ | [removed: 119,355] [added: 128,249] | | | $ | [removed: 111,547] [added: 119,355] | | | $ | [removed: 123,549] [added: 111,547] | | | $ | [removed: 118,210] [added: 123,549] | | | $ | [removed: 76,615] [added: 118,210] | |

| [removed: | (1)] [added: (2)] | Other long-term obligations [removed: exclude] [added: excludes] non-current deferred revenue. | [removed: |]

| [removed: | (2)] [added: (1)] | Includes current and long-term portion of term debt. | [removed: |]

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | [removed: 22][added: 21]

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##### [Table of Contents](#toc)

| [removed: Index] [added: Index] to Consolidated Financial [removed: Statements | | Page] [added: Statements] | | [added: Page] |

| [Consolidated Statements of Operations for the years ended September [removed: 26, 2015,] [added: 24, 2016,] September [added: 26, 2015 and](#sE35835F1122F576785CF3EE4EC9286A8) [September] 27, [removed: 2014, and September 28, 2013](#toc17062_25) | |] [added: 2014](#sE35835F1122F576785CF3EE4EC9286A8)] | [removed: 39] | [added: [39](#sE35835F1122F576785CF3EE4EC9286A8)] |

| [Consolidated Statements of Comprehensive Income for the years ended September [added: 24, 2016, September] 26, [removed: 2015,] [added: 2015](#s5EBB3F193BD958A09D8C94174074F4B3) [and] September 27, [removed: 2014, and September 28, 2013](#toc17062_26) | |] [added: 2014](#s5EBB3F193BD958A09D8C94174074F4B3)] | [removed: 40] | [added: [40](#s5EBB3F193BD958A09D8C94174074F4B3)] |

| [Consolidated Balance Sheets as of September [removed: 26, 2015] [added: 24, 2016] and September [removed: 27, 2014](#toc17062_27) | |] [added: 26, 2015](#s7141C8F9300451B981539768A645E29A)] | [removed: 41] | [added: [41](#s7141C8F9300451B981539768A645E29A)] |

| [Consolidated Statements of Shareholders’ Equity for the years ended September [removed: 26, 2015,] [added: 24, 2016,] September [removed: 27, 2014,] [added: 26, 2015] and September [removed: 28, 2013](#toc17062_28) | |] [added: 27, 2014](#sE4298470CC7F5A1FAE92EC212CBBCBF7)] | [removed: 42] | [added: [42](#sE4298470CC7F5A1FAE92EC212CBBCBF7)] |

| [Consolidated Statements of Cash Flows for the years ended September [removed: 26, 2015,] [added: 24, 2016,] September [added: 26, 2015 and](#s2960A67654675C3EB708905914048180) [September] 27, [removed: 2014, and September 28, 2013](#toc17062_29) | |] [added: 2014](#s2960A67654675C3EB708905914048180)] | [removed: 43] | [added: [43](#s2960A67654675C3EB708905914048180)] |

[removed: | [Notes] [added: Notes] to Consolidated Financial [removed: Statements](#toc17062_30) | | | 44 | |][added: Statements]

| [Selected Quarterly Financial Information [removed: (Unaudited)](#toc17062_31) | |] [added: (Unaudited)](#s4929B4B3F8BA5C39BF1AB45D20410696)] | [removed: 68] | [added: [69](#s4929B4B3F8BA5C39BF1AB45D20410696)] |

| [Reports of Ernst & Young LLP, Independent Registered Public Accounting [removed: Firm](#toc17062_32) | |] [added: Firm](#s46DE5E82D06F518690808AE847F25D80)] | [removed: 69] | [added: [70](#s46DE5E82D06F518690808AE847F25D80)] |

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | 38

[removed: CONSOLIDATED] [added: CONSOLIDATED] STATEMENTS OF [removed: OPERATIONS][added: OPERATIONS]

| | [removed: | Years ended] [added: Years ended] | | | | | | | | | | |

| | [removed: | September 26, 2015] [added: September 24, 2016] | | | | [removed: September 27, 2014] [added: September 26, 2015] | | | | [removed: September 28, 2013] [added: September 27, 2014] | | |

| Net sales | [removed: |] $ | [removed: 233,715] [added: 215,639] | | | $ | [removed: 182,795] [added: 233,715] | | | $ | [removed: 170,910] [added: 182,795] | |

| Cost of sales | [removed: |] [added: 131,376] | [removed: 140,089] | | | [added: 140,089] | [removed: 112,258] | | | [added: 112,258] | [removed: 106,606] | |

| Gross margin | [removed: |] [added: 84,263] | [removed: 93,626] | | | [added: 93,626] | [removed: 70,537] | | | [added: 70,537] | [removed: 64,304] | |

| Operating expenses: | | | | | | | | | | | | [removed: |]

| Research and development | [removed: |] [added: 10,045] | [removed: 8,067] | | | [added: 8,067] | [removed: 6,041] | | | [added: 6,041] | [removed: 4,475] | |

| Selling, general and administrative | [removed: |] [added: 14,194] | [removed: 14,329] | | | [added: 14,329] | [removed: 11,993] | | | [added: 11,993] | [removed: 10,830] | |

| Total operating expenses | [removed: |] [added: 24,239] | [removed: 22,396] | | | [added: 22,396] | [removed: 18,034] | | | [added: 18,034] | [removed: 15,305] | |

| Operating income | [removed: |] [added: 60,024] | [removed: 71,230] | | | [added: 71,230] | [removed: 52,503] | | | [added: 52,503] | [removed: 48,999] | |

| Other income/(expense), net | [removed: |] [added: 1,348] | [removed: 1,285] | | | [added: 1,285] | [removed: 980] | | | [added: 980] | [removed: 1,156] | |

| Income before provision for income taxes | [removed: |] [added: 61,372] | [removed: 72,515] | | | [added: 72,515] | [removed: 53,483] | | | [added: 53,483] | [removed: 50,155] | |

| Provision for income taxes | [removed: |] [added: 15,685] | [removed: 19,121] | | | [added: 19,121] | [removed: 13,973] | | | [added: 13,973] | [removed: 13,118] | |

| Net income | [removed: |] $ | [removed: 53,394] [added: 45,687] | | | $ | [removed: 39,510] [added: 53,394] | | | $ | [removed: 37,037] [added: 39,510] | |

| Earnings per share: | | | | | | | | | | | | [removed: |]

| Basic | [removed: |] $ | [removed: 9.28] [added: 8.35] | | | $ | [removed: 6.49] [added: 9.28] | | | $ | [removed: 5.72] [added: 6.49] | |

| Diluted | [removed: |] $ | [removed: 9.22] [added: 8.31] | | | $ | [removed: 6.45] [added: 9.22] | | | $ | [removed: 5.68] [added: 6.45] | |

| Shares used in computing earnings per share: | | | | | | | | | | | | [removed: |]

| Basic | [removed: |] [added: 5,470,820] | [removed: 5,753,421] | | | [added: 5,753,421] | [removed: 6,085,572] | | | [added: 6,085,572] | [removed: 6,477,320] | |

| Diluted | [removed: |] [added: 5,500,281] | [removed: 5,793,069] | | | [added: 5,793,069] | [removed: 6,122,663] | | | [added: 6,122,663] | [removed: 6,521,634] | |

| Cash dividends declared per share | [removed: |] $ | [removed: 1.98] [added: 2.18] | | | $ | [removed: 1.82] [added: 1.98] | | | $ | [removed: 1.64] [added: 1.82] | |

Apple Inc. | [removed: 2015] [added: 2016] Form 10-K | 39

[removed: CONSOLIDATED] [added: CONSOLIDATED] STATEMENTS OF COMPREHENSIVE [removed: INCOME][added: INCOME]

| Other comprehensive income/(loss): | | | | | | | | | | | | [removed: |]

| Change in foreign currency translation, net of tax effects of [removed: $201, $50] [added: $8, $201] and [removed: $35,] [added: $50,] respectively | [removed: |] [added: 75] | [removed: (411] | [removed: )] | | [added: (411] | [removed: (137] | ) | | [added: (137] | [removed: (112] | ) |

| Change in unrealized gains/losses on derivative instruments: | | | | | | | | | | | | [removed: |]

| Change in fair value of derivatives, net of tax benefit/(expense) of [removed: $(441), $(297)] [added: $(7), $(441)] and [removed: $(351),] [added: $(297),] respectively | [removed: |] [added: 7] | [removed: 2,905] | | | [added: 2,905] | [removed: 1,390] | | | [added: 1,390] | [removed: 522] | |

| Adjustment for net (gains)/losses realized and included in net income, net of tax expense/(benefit) of [removed: $630, $(36)] [added: $131, $630] and [removed: $255,] [added: $(36),] respectively | [removed: |] [added: (741] | [removed: (3,497] | ) | | [added: (3,497] | [removed: 149] | [added: )] | | [added: 149] | [removed: (458] | [removed: )] |