Apple (AAPL) 10-K risk factor changes: FY2017 vs FY2016

This could have a number of effects on the Company’s business, including the insolvency or financial instability of outsourcing partners or suppliers or their inability to obtain credit to finance development and/or manufacture [removed: products] [added: products,] resulting in product delays; inability of customers, including channel partners, to obtain credit to finance purchases of the Company’s products; failure of derivative counterparties and other financial institutions; and restrictions on the Company’s ability to issue new debt.

The Company’s products and services compete in highly competitive global markets characterized by aggressive price [removed: cutting] [added: competition] and resulting downward pressure on gross margins, frequent introduction of new products, short product life cycles, evolving industry standards, continual improvement in product price/performance characteristics, rapid adoption of technological and product advancements by competitors and price sensitivity on the part of consumers.

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 8

Additionally, the Company faces significant [removed: price] competition as competitors reduce their selling prices and attempt to imitate the Company’s product features and applications within their own products or, alternatively, collaborate with each other to offer solutions that are more competitive than those they currently offer.

In the market for personal computers and accessories, the Company faces a significant number of competitors, many of which have broader product lines, [removed: lower priced] [added: lower-priced] products and a larger installed customer base.

[removed: Price competition] [added: Competition] has been particularly intense as competitors have aggressively cut prices and lowered product margins.

The Company also sells its products and third-party products in most of its major markets directly to education, enterprise and government customers and consumers and small and mid-sized businesses through its [removed: online and] retail [added: and online] stores.

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 9

If the Company determines that impairment has occurred, it records a write-down equal to the amount by which the carrying value of the [removed: assets] [added: asset] exceeds its fair value.

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 10

The Company’s online services may from time to time experience outages, service [removed: slowdowns,] [added: slowdowns] or errors.

Failure to obtain the right to make [removed: available] third-party digital [removed: content,] [added: content available,] or to make [removed: available] such content [added: available] on commercially reasonable terms, could have a material adverse impact on the Company’s financial condition and operating results.

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.

With respect to iOS devices, the Company relies on the continued availability and development of compelling and innovative software applications, [removed: which are] [added: including applications] distributed through [removed: a single distribution channel,] the App Store.

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 11

The Company is subject to various legal proceedings and claims that have [removed: not yet been fully resolved and that have] arisen in the ordinary course of [removed: business,] [added: business] and [removed: additional] [added: have not yet been fully resolved, and new] claims may arise in the future.

For example, technology [removed: companies, including many of the Company’s competitors,] [added: and other patent-holding companies] frequently [added: assert their patents and seek royalties and often] enter into litigation based on allegations of patent infringement or other violations of intellectual property rights.

[removed: The intellectual property rights claims] [added: Claims] against the Company [added: based on allegations of patent infringement or other violations of intellectual property rights] have generally increased over time and may continue to increase.

[removed: In certain cases, the Company may consider the desirability of entering into licensing agreements, although no] [added: No] assurance can be given that such [removed: licenses] [added: agreements] can be obtained on acceptable terms or that litigation will not occur.

These [removed: licenses] [added: agreements] may also significantly increase the Company’s operating expenses.

In recognition of these considerations, the Company may enter into [added: licensing agreements or other] arrangements to settle [removed: litigation.][added: litigation and resolve such disputes.]

Although management considers the likelihood of such an outcome to be remote, if one or more legal matters were resolved against the Company [added: or an indemnified third party] in a reporting period for amounts in excess of management’s expectations, the Company’s consolidated financial statements for that reporting period could be materially adversely affected.

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 12

Although the Company has implemented policies and procedures to comply with these laws and regulations, a violation by the Company’s employees, [removed: contractors,] [added: contractors] or agents could nevertheless occur.

[removed: These] [added: The Company] may be [added: subject to information technology system failures or network disruptions] caused by natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins, or other events or disruptions.

System redundancy [added: and other continuity measures] may be ineffective or inadequate, and the Company’s [added: business continuity and] disaster recovery planning may not be sufficient for all eventualities.

Such failures or disruptions [removed: could,] [added: could adversely impact the Company’s business by,] among other things, [removed: prevent] [added: preventing] access to the Company’s online [removed: stores and] services, [removed: preclude retail store transactions, compromise Company or] [added: interfering with] customer [removed: data, and result in delayed] [added: transactions] or [removed: cancelled orders.][added: impeding the manufacturing and shipping of the Company’s products.]

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 13

The Company’s business requires it to use and store [removed: customer, employee and business partner] [added: confidential information, including, among other things,] personally identifiable information [removed: (“PII”).][added: (“PII”) with respect to the Company’s customers and employees.]

Although malicious attacks [added: perpetrated] to gain access to [removed: PII] [added: confidential information, including PII,] affect many companies across various industries, the Company is at a relatively greater risk of being targeted because of its high profile and the [removed: amount] [added: value] of [removed: PII] [added: the confidential information] it [removed: manages.][added: creates, owns, manages, stores and processes.]

As with all companies, these security measures [removed: are subject] [added: may not be sufficient for all eventualities and may be vulnerable] to [removed: third-party security breaches,] [added: hacking,] employee error, malfeasance, [added: system error,] faulty password [removed: management,] [added: management] or other irregularities.

To help protect customers and the Company, the Company monitors [removed: accounts] [added: its services] and systems for unusual activity and may freeze accounts under suspicious circumstances, [removed: which] [added: which, among other things,] may result in the delay or loss of customer [removed: orders.][added: orders or impede customer access to the Company’s products and services.]

The Company devotes significant resources to network [removed: security,] [added: and] data [added: security, including through the use of] encryption and other security measures [added: intended] to protect its systems and [removed: data, but these security measures cannot provide absolute security.][added: data.]

While the Company maintains insurance coverage [removed: that, subject to policy terms and conditions and subject to a significant self-insured retention,] [added: that] is [removed: designed] [added: intended] to address certain aspects of [removed: cyber] [added: data security] risks, such insurance coverage may be insufficient to cover all losses or all types of claims that may [removed: arise in the continually evolving area of cyber risk.][added: arise.]

Under [removed: these] [added: payment card] rules and obligations, if [added: cardholder] information is [added: potentially] compromised, the Company could be liable [removed: to payment card issuers] for associated [added: investigatory] expenses and [removed: penalties.][added: could also incur significant fees or fines if the Company fails to follow payment card industry data security standards.]

[removed: Penalties] [added: In addition to reputational impacts, penalties] could include ongoing audit requirements [removed: or] [added: and] significant legal liability.

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 14

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 15

Additionally, strengthening of foreign currencies may [removed: also] increase the Company’s cost of product components denominated in those currencies, thus adversely affecting gross margins.

In addition, agreements entered into by the Company sometimes include indemnification provisions which may subject the Company to costs and damages in the event of a claim against an indemnified third party.

In particular, the Company has historically faced a significant number of patent claims relating to its cellular-enabled products, and new claims may arise in the future.

While the Company maintains insurance coverage for certain types of claims, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise.

These events could materially adversely affect the Company’s reputation, financial condition and operating results.

There may be losses or unauthorized access to or releases of confidential information, including personally identifiable information, that could subject the Company to significant reputational, financial, legal and operational consequences.

But these measures cannot provide absolute security, and losses or unauthorized access to or releases of confidential information may still occur, which could materially adversely affect the Company’s reputation, financial condition and operating results.

The Company’s business also requires it to share confidential information with suppliers and other third parties.

Although the Company takes steps to secure confidential information that is provided to third parties, such measures may not be effective and losses or unauthorized access to or releases of confidential information may still occur, which could materially adversely affect the Company’s reputation, financial condition and operating results.

For example, the Company may experience a security breach impacting the Company’s information technology systems that compromises the confidentiality, integrity or availability of confidential information.

Such an incident could, among other things, impair the Company’s ability to attract and retain customers for its products and services, impact the Company’s stock price, materially damage supplier relationships, and expose the Company to litigation or government investigations, which could result in penalties, fines or judgments against the Company.

The Company has implemented systems and processes intended to secure its information technology systems and prevent unauthorized access to or loss of sensitive data, including through the use of encryption and authentication technologies.

In addition to the risks relating to general confidential information described above, the Company may also be subject to specific obligations relating to health data and payment card data.

Health data may be subject to additional privacy, security and breach notification requirements, and the Company may be subject to audit by governmental authorities regarding the Company’s compliance with these obligations.

If the Company fails to adequately comply with these rules and requirements, or if health data is handled in a manner not permitted by law or under the Company’s agreements with healthcare institutions, the Company could be subject to litigation or government investigations, may be liable for associated investigatory expenses, and could also incur significant fees or fines.

The Company could also experience a significant increase in payment card transaction costs or lose the ability to process payment cards if it fails to follow payment card industry data security standards, which would materially adversely affect the Company’s reputation, financial condition and operating results.

Many resellers have been adversely affected in the past by weak economic conditions.

Consistent with industry practice, components are normally acquired through a combination of purchase orders, supplier contracts and open orders, in each case based on projected demand.

In addition, patent holding companies seek to monetize patents they have purchased or otherwise obtained.

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

Regardless of the scope or validity of such patents or other intellectual property rights, or the merits of any claims by potential or actual litigants, the Company may have to engage in protracted litigation.

If the Company is found to infringe one or more patents or other intellectual property rights, regardless of whether it can develop non-infringing technology, it may be required to pay substantial damages or royalties to a third-party, or it may be subject to a temporary or permanent injunction prohibiting the Company from marketing or selling certain products.

The Company may be subject to information technology system failures and network disruptions.

System failures and disruptions could also impede the manufacturing and shipping of products, delivery of online services, transactions processing and financial reporting.

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 consequences.

This may include, among other information, names, addresses, phone numbers, email addresses, contact preferences, tax identification numbers and payment account information.

The Company requires user names and passwords in order to access its information technology systems.

The Company also uses encryption and authentication technologies designed to secure the transmission and storage of data and prevent access to Company data or accounts.

To the extent the Company was to experience a breach of its systems and was unable to protect sensitive data, such a breach could materially damage business partner and customer relationships, and curtail or otherwise adversely impact access to online stores and services.

Moreover, if a computer security breach affects the Company’s systems or results in the unauthorized release of PII, the Company’s reputation and brand could be materially damaged, use of the Company’s products and services could decrease, and the Company could be exposed to a risk of loss or litigation and possible liability.

The Company is also subject to payment card association rules and obligations under its contracts with payment card processors.

In addition, if the Company fails to follow payment card industry security standards, even if no customer information is compromised, the Company could incur significant fines or experience a significant increase in payment card transaction costs.

Apple Inc. | 2016 Form 10-K | 16

The Company designs, manufactures and markets mobile communication and media [removed: devices, personal computers] [added: devices] and [removed: portable digital music players,] [added: personal computers,] and sells a variety of related software, services, accessories, networking solutions and third-party digital content and applications.

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

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

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

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

Fiscal [removed: 2015] [added: 2017] Highlights

[removed: Net] [added: iPad net] sales [removed: growth] [added: decreased] during [added: 2016 compared to] 2015 [removed: was partially offset by] [added: primarily due to lower unit sales and] the effect of weakness in most foreign currencies relative to the U.S. [removed: dollar and lower iPad net sales.][added: dollar, partially offset by higher average selling price due to a shift in mix to higher-priced iPads.]

[removed: Total] [added: The year-over-year increase in] net sales [removed: increased] [added: reflected growth] in each of the [removed: Company’s reportable] [added: geographic] operating segments, with [removed: particularly strong growth in] [added: the exception of] Greater [removed: China where year-over-year net sales increased 84%.][added: China.]

In [removed: April 2015,] [added: May 2017,] the Company announced [removed: a significant] [added: an] increase to its capital return program by raising the expected total size of the program [added: from $250 billion] to [removed: $200] [added: $300] billion through March [removed: 2017.][added: 2019.]

This included increasing its share repurchase authorization [added: from $175 billion] to [removed: $140] [added: $210] billion and raising its quarterly dividend [added: from $0.57] to [removed: $0.52] [added: $0.63] per share beginning in May [removed: 2015.][added: 2017.]

During [removed: 2015,] [added: 2017,] the Company spent [removed: $36.0] [added: $33.0] billion to repurchase shares of its common stock and paid dividends and dividend equivalents of [removed: $11.6] [added: $12.8] billion.

Additionally, the Company issued [removed: $14.5] [added: $24.0] billion of U.S. [removed: dollar-denominated, €4.8 billion of euro-denominated, SFr1.3 billion of Swiss franc-denominated, £1.3 billion of British pound-denominated, A$2.3] [added: dollar-denominated term debt, €2.5] billion of [removed: Australian dollar-denominated] [added: euro-denominated term debt] and [removed: ¥250.0] [added: C$2.5] billion of [removed: Japanese yen-denominated] [added: Canadian dollar-denominated] term debt during [removed: 2015.][added: 2017.]

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 22

The following table shows net sales by operating segment and net sales and unit sales by product [removed: during 2016, 2015] [added: for 2017, 2016] and [removed: 2014] [added: 2015] (dollars in millions and units in thousands):

| | [removed: 2016] [added: 2017] | | | | Change | | | [removed: 2015] [added: 2016] | | | | Change | | | [removed: 2014] [added: 2015] | | |

| Americas | $ | [removed: 86,613] [added: 96,600] | | | [removed: (8] [added: 12] | [removed: )%] [added: %] | | $ | [removed: 93,864] [added: 86,613] | | | [removed: 17] [added: (8] | [removed: %] [added: )%] | | $ | [removed: 80,095] [added: 93,864] | |

| Europe | [removed: 49,952] [added: 54,938] | | | | [removed: (1] [added: 10] | [removed: )%] [added: %] | | [removed: 50,337] [added: 49,952] | | | | [removed: 14] [added: (1] | [removed: %] [added: )%] | | [removed: 44,285] [added: 50,337] | | |

| Greater China | [removed: 48,492] [added: 44,764] | | | | [removed: (17] [added: (8] | )% | | [removed: 58,715] [added: 48,492] | | | | [removed: 84] [added: (17] | [removed: %] [added: )%] | | [removed: 31,853] [added: 58,715] | | |

| Japan | [removed: 16,928] [added: 17,733] | | | | [removed: 8] [added: 5] | % | | [removed: 15,706] [added: 16,928] | | | | [removed: 3] [added: 8] | % | | [removed: 15,314] [added: 15,706] | | |

| Rest of Asia Pacific | [removed: 13,654] [added: 15,199] | | | | [removed: (10] [added: 11] | [removed: )%] [added: %] | | [removed: 15,093] [added: 13,654] | | | | [removed: 34] [added: (10] | [removed: %] [added: )%] | | [removed: 11,248] [added: 15,093] | | |

| Total net sales | $ | [removed: 215,639] [added: 229,234] | | | [removed: (8] [added: 6] | [removed: )%] [added: %] | | $ | [removed: 233,715] [added: 215,639] | | | [removed: 28] [added: (8] | [removed: %] [added: )%] | | $ | [removed: 182,795] [added: 233,715] | |

| iPhone (1) | $ | [removed: 136,700] [added: 141,319] | | | [removed: (12] [added: 3] | [removed: )%] [added: %] | | $ | [removed: 155,041] [added: 136,700] | | | [removed: 52] [added: (12] | [removed: %] [added: )%] | | $ | [removed: 101,991] [added: 155,041] | |

| iPad (1) | [removed: 20,628] [added: 19,222] | | | | [removed: (11] [added: (7] | )% | | [removed: 23,227] [added: 20,628] | | | | [removed: (23] [added: (11] | )% | | [removed: 30,283] [added: 23,227] | | |

| Mac (1) | [removed: 22,831] [added: 25,850] | | | | [removed: (10] [added: 13] | [removed: )%] [added: %] | | [removed: 25,471] [added: 22,831] | | | | [removed: 6] [added: (10] | [removed: %] [added: )%] | | [removed: 24,079] [added: 25,471] | | |

| Services (2) | [removed: 24,348] [added: 29,980] | | | | [removed: 22] [added: 23] | % | | [removed: 19,909] [added: 24,348] | | | | [removed: 10] [added: 22] | % | | [removed: 18,063] [added: 19,909] | | |

| Other Products (1)(3) | [removed: 11,132] [added: 12,863] | | | | [removed: 11] [added: 16] | % | | [removed: 10,067] [added: 11,132] | | | | [removed: 20] [added: 11] | % | | [removed: 8,379] [added: 10,067] | | |

| iPhone | [removed: 211,884] [added: 216,756] | | | | [removed: (8] [added: 2] | [removed: )%] [added: %] | | [removed: 231,218] [added: 211,884] | | | | [removed: 37] [added: (8] | [removed: %] [added: )%] | | [removed: 169,219] [added: 231,218] | | |

| iPad | [removed: 45,590] [added: 43,753] | | | | [removed: (17] [added: (4] | )% | | [removed: 54,856] [added: 45,590] | | | | [removed: (19] [added: (17] | )% | | [removed: 67,977] [added: 54,856] | | |

| Mac | [removed: 18,484] [added: 19,251] | | | | [removed: (10] [added: 4] | [removed: )%] [added: %] | | [removed: 20,587] [added: 18,484] | | | | [removed: 9] [added: (10] | [removed: %] [added: )%] | | [removed: 18,906] [added: 20,587] | | |

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

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 23

The following table presents iPhone net sales and unit sales information for [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014] [added: 2015] (dollars in millions and units in thousands):

| Net sales | $ | [removed: 136,700] [added: 141,319] | | | [removed: (12] [added: 3] | [removed: )%] [added: %] | | $ | [removed: 155,041] [added: 136,700] | | | [removed: 52] [added: (12] | [removed: %] [added: )%] | | $ | [removed: 101,991] [added: 155,041] | |

| Percentage of total net sales | [removed: 63] [added: 62] | | % | | | | | [removed: 66] [added: 63] | | % | | | | | [removed: 56] [added: 66] | | % |

| Unit sales | [removed: 211,884] [added: 216,756] | | | | [removed: (8] [added: 2] | [removed: )%] [added: %] | | [removed: 231,218] [added: 211,884] | | | | [removed: 37] [added: (8] | [removed: %] [added: )%] | | [removed: 169,219] [added: 231,218] | | |

iPhone net sales [removed: and unit sales] decreased during 2016 compared to 2015.

The Company believes the sales decline [removed: is] [added: was] 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 [removed: (“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.

[removed: Overall ASPs for iPhone increased] [added: Greater China net sales decreased] during [removed: 2015] [added: 2016] compared to [removed: 2014,] [added: 2015] due primarily to [removed: the introduction] [added: lower net sales] of iPhone [removed: 6] and [removed: 6 Plus in September 2014, partially offset by] the effect of weakness in [removed: most] foreign currencies relative to the U.S. dollar.

The following table presents iPad net sales and unit sales information for [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014] [added: 2015] (dollars in millions and units in thousands):

Fiscal Period

The Company’s fiscal year is the 52 or 53-week period that ends on the last Saturday of September.

The Company’s fiscal year 2017 included 53 weeks and ended on September 30, 2017.

A 14th week was included in the first quarter of 2017, as is done every five or six years, to realign the Company’s fiscal quarters with calendar quarters.

The Company’s fiscal years 2016 and 2015 ended on September 24, 2016 and September 26, 2015, respectively, and spanned 52 weeks each.

Net sales increased 6% or $13.6 billion during 2017 compared to 2016, primarily driven by growth in Services, iPhone and Mac.

The weakness in foreign currencies relative to the U.S. dollar had an unfavorable impact on net sales during 2017 compared to 2016.

| Total net sales | $ | 229,234 | | | 6 | % | | $ | 215,639 | | | (8 | )% | | $ | 233,715 | |

| (2) | Includes revenue from Digital Content and Services, AppleCare, Apple Pay, licensing and other services. Services net sales in the fourth quarter of 2017 included a favorable one-time adjustment of $640 million due to a change in estimate based on the availability of additional supporting information. |

| | 2017 | | | | Change | | | 2016 | | | | Change | | | 2015 | | |

iPhone net sales increased during 2017 compared to 2016 due to higher iPhone unit sales and a different mix of iPhones with higher average selling prices.

The weakness in foreign currencies relative to the U.S. dollar had an unfavorable impact on iPhone net sales during 2017 compared to 2016.

| | 2017 | | | | Change | | | 2016 | | | | Change | | | 2015 | | |

iPad net sales decreased during 2017 compared to 2016 due to lower iPad unit sales and a different mix of iPads with lower average selling prices.

The weakness in foreign currencies relative to the U.S. dollar had an unfavorable impact on iPad net sales during 2017 compared to 2016.

| | 2017 | | | | Change | | | 2016 | | | | Change | | | 2015 | | |

Mac net sales increased during 2017 compared to 2016 due primarily to a different mix of Macs with higher average selling prices and higher Mac unit sales.

The weakness in foreign currencies relative to the U.S. dollar had an unfavorable impact on Mac net sales during 2017 compared to 2016.

| | 2017 | | | | Change | | | 2016 | | | | Change | | | 2015 | | |

Services net sales in the fourth quarter of 2017 included a favorable one-time adjustment of $640 million due to a change in estimate based on the availability of additional supporting information.

| | 2017 | | | | Change | | | 2016 | | | | Change | | | 2015 | | |

Americas net sales increased during 2017 compared to 2016 due primarily to higher net sales of iPhone, Services and Mac.

| | 2017 | | | | Change | | | 2016 | | | | Change | | | 2015 | | |

Europe net sales increased during 2017 compared to 2016 due primarily to higher net sales of iPhone and Services.

The weakness in foreign currencies relative to the U.S. dollar had an unfavorable impact on Europe net sales during 2017 compared to 2016.

| | 2017 | | | | Change | | | 2016 | | | | Change | | | 2015 | | |

The weakness in foreign currencies relative to the U.S. dollar had an unfavorable impact on Greater China net sales during 2017 compared to 2016.

| | 2017 | | | | Change | | | 2016 | | | | Change | | | 2015 | | |

| | 2017 | | | | Change | | | 2016 | | | | Change | | | 2015 | | |

The strength in foreign currencies relative to the U.S. dollar had a favorable impact on Rest of Asia Pacific net sales during 2017 compared to 2016.

Gross margin percentage decreased in 2017 compared to 2016 due primarily to higher product costs, partially offset by a favorable shift in mix to services.

Year-over-year gross margin increased due primarily to a shift in mix to services and an overall increase in product volumes.

The weakness in foreign currencies relative to the U.S. dollar had an unfavorable impact on gross margin percentage and gross margin during 2017 compared to 2016.

| | 2017 | | | | Change | | | 2016 | | | | Change | | | 2015 | | |

| | 2017 | | | | Change | | | 2016 | | | | Change | | | 2015 | | |

The year-over-year increase in other income/(expense), net during 2017 was due primarily to higher interest income and the favorable impact of foreign exchange-related items, partially offset by higher interest expense on debt.

The IRS concluded its review of the years 2010 through 2012 during the third quarter of 2017.

Although Ireland is still computing the recovery amount, the Company expects the amount to be in line with the European Commission’s announced recovery amount of €13 billion, plus interest of €1 billion.

These amounts are expected to be placed into escrow in 2018, where they will remain pending conclusion of all appeals.

Hedging

Net sales rose 28% or $50.9 billion during 2015 compared to 2014, driven by a year-over-year increase in iPhone net sales.

iPhone net sales and unit sales in 2015 increased in all of the Company’s reportable operating segments.

The Company also experienced year-over-year net sales increases in Mac, Services and Other Products.

Apple 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.

| (2) | Includes revenue from Internet Services, AppleCare®, Apple Pay, licensing and other services. |

The year-over-year growth in iPhone net sales and unit sales during 2015 primarily resulted from strong demand for iPhone 6 and 6 Plus during 2015.

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.

Net sales and unit sales for iPad declined during 2015 compared to 2014.

iPad ASPs declined during 2015 compared to 2014, primarily as a result of the effect of weakness in most foreign currencies relative to the U.S. dollar and a shift in mix to lower-priced iPads.

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

The year-over-year growth in Mac net sales and unit sales during 2015 was driven by strong demand for Mac portables.

The year-over-year growth in Americas net sales during 2015 was driven primarily by growth in net sales and unit sales of iPhone, partially offset by a decline in net sales and unit sales of iPad.

The year-over-year increase in Europe net sales during 2015 was driven primarily by growth in net sales and unit sales of iPhone, partially offset by the effect of weakness in foreign currencies relative to the U.S. dollar and a decline in net sales and unit sales of iPad.

Greater China experienced strong year-over-year increases in net sales during 2015 driven primarily by iPhone sales.

The year-over-year increase in Japan net sales during 2015 was driven primarily by growth in Services largely associated with strong App Store sales, partially offset by the effect of weakness in the Japanese yen relative to the U.S. dollar.

The year-over-year increase in Rest of Asia Pacific net sales during 2015 primarily reflects strong growth in net sales and unit sales of iPhone, partially offset by the effect of weakness in foreign currencies relative to the U.S. dollar and a decline in net sales and unit sales of iPad.

Gross margin decreased in 2016 compared to 2015 due primarily to the effect of weakness in most foreign currencies relative to the U.S. dollar and, to a lesser extent, unfavorable leverage on fixed costs from lower net sales, partially offset by a favorable shift in mix to Services.

The year-over-year increase in the gross margin percentage in 2015 was driven primarily by a favorable shift in mix to products with higher margins and, to a lesser extent, by improved leverage on fixed costs from higher net sales.

These positive factors were partially offset primarily by higher product cost structures and, to a lesser extent, by the effect of weakness in most foreign currencies relative to the U.S. dollar.

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

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

During the fourth quarter of 2016, the Company reached a partial settlement with the IRS on its examination of the years 2010 through 2012.

In connection with this settlement, the Company recognized a tax benefit in the fourth quarter of 2016 that was not significant to its consolidated financial statements.

The Company does not believe the adoption of ASU 2016-13 will have a material impact on its consolidated financial statements.

ASU 2014-09 will be effective for the Company beginning in its first quarter of 2019, and early adoption is permitted.

The actual amount of additional taxes subject to recovery is to be calculated by Ireland in accordance with the European Commission's guidance.

| 2017 | $ | 3,500 | |

| 2019 | 6,834 | | |

| 2020 | 6,454 | | |

| Thereafter | 47,346 | | |

| Total | $ | 47,889 | | | $ | 52,950 | | | $ | 80,026 | | | $ | 5,365 | | | $ | 186,230 | |

| Term debt | $ | 3,500 | | | $ | 13,334 | | | $ | 14,204 | | | $ | 47,346 | | | $ | 78,384 | |

| Operating leases | 929 | | | | 1,834 | | | | 1,725 | | | | 3,139 | | | | 7,627 | | |

| Manufacturing purchase obligations | 24,695 | | | | 939 | | | | 1,830 | | | | 1,127 | | | | 28,591 | | |

| Other purchase obligations | 3,503 | | | | 1,732 | | | | 653 | | | | 732 | | | | 6,620 | | |

| Total | $ | 32,627 | | | $ | 17,839 | | | $ | 18,412 | | | $ | 52,344 | | | $ | 121,222 | |

Consistent with industry practice, the Company acquires components through a combination of purchase orders, supplier contracts, and open orders based on projected demand information.

As of September 24, 2016, the Company had other purchase obligations of $6.6 billion.

As of September 24, 2016, the Company had non-current deferred tax liabilities of $26.0 billion.

The Company generally does not indemnify end-users of its operating system and application software against legal claims that the software infringes third-party intellectual property rights.

The Company regularly reviews its foreign exchange forward and option positions and interest rate swaps, both on a stand-alone basis and in conjunction with its underlying foreign currency and interest rate [removed: related] exposures.

The policy [added: generally] requires investments [removed: generally] to be investment grade, with the primary objective of minimizing the potential risk of principal loss.

Based on investment positions as of September [removed: 24, 2016] [added: 30, 2017] and September [removed: 26, 2015,] [added: 24, 2016,] a hypothetical 100 basis point increase in interest rates across all maturities would result in a [removed: $4.9] [added: $6.0] billion and [removed: $4.3] [added: $4.9] billion incremental decline in the fair market value of the portfolio, respectively.

As of September [removed: 24, 2016] [added: 30, 2017] and September [removed: 26, 2015,] [added: 24, 2016,] the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate carrying amount of [removed: $78.9] [added: $103.7] billion and [removed: $55.8] [added: $78.9] billion, respectively.

The Company has entered, and [removed: may enter] in the [removed: future,] [added: future may enter,] into interest rate swaps to manage interest rate risk on its outstanding term debt.

Gains and losses on [removed: these instruments] [added: term debt] are generally offset by the corresponding losses and gains on the related hedging instrument.

A 100 basis point increase in market interest rates would cause interest expense on the Company’s debt as of September [removed: 24, 2016] [added: 30, 2017] and September [removed: 26, 2015] [added: 24, 2016] to increase by [removed: $271] [added: $376] million and [removed: $200] [added: $271] million on an annualized basis, respectively.

In addition, the Company has entered, and [removed: may enter] in the [removed: future,] [added: future may enter,] into [removed: non-designated] foreign currency contracts to partially offset the foreign currency exchange gains and losses on its foreign-denominated debt issuances.

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 36

Based on the results of the model, the Company estimates with 95% confidence, a maximum one-day loss in fair value of [removed: $434] [added: $485] million as of September [removed: 24, 2016] [added: 30, 2017] compared to a maximum one-day loss in fair value of [removed: $342] [added: $434] million as of September [removed: 26, 2015.][added: 24, 2016.]

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: 24, 2016] [added: 30, 2017] due to the inherent limitations associated with predicting the timing and amount of changes in interest rates, foreign currency [removed: exchanges] [added: exchange] rates and the Company’s actual exposures and positions.

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 37

The Company typically hedges portions of its forecasted foreign currency exposure associated with revenue and inventory purchases, typically for up to 12 months.

The Company’s practice is to hedge a portion of its material foreign exchange exposures, typically for up to 12 months.

The model assumes normal market conditions.

The Company designs, manufactures and markets mobile communication and media [removed: devices, personal computers] [added: devices] and [removed: portable digital music players,] [added: personal computers,] and sells a variety of related software, services, accessories, networking solutions and third-party digital content and applications.

The Company’s products and services include iPhone®, iPad®, Mac®, [removed: iPod®,] Apple Watch®, Apple TV®, a portfolio of consumer and professional software applications, iOS, [removed: macOS™,] [added: 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 [removed: Store™] [added: Store®] and Apple Music® (collectively [removed: “Internet] [added: “Digital Content and] Services”).

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

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

The Company believes ongoing investment in research and development (“R&D”), marketing and advertising is critical to the development and sale of innovative [removed: products] [added: products, services] and technologies.

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

[removed: The] Americas [removed: segment] includes both North and South America.

[removed: The] Europe [removed: segment] includes European countries, as well as India, the Middle East and Africa.

[removed: The] Greater China [removed: segment] includes China, Hong Kong and Taiwan.

[removed: The] Rest of Asia Pacific [removed: segment] includes Australia and those Asian countries not included in the Company’s other reportable [removed: operating] segments.

Although the reportable [removed: operating] segments provide similar hardware and software products and similar services, each one is managed separately to better align with the location of the Company’s customers and distribution partners and the unique market dynamics of each geographic region.

Further information regarding the Company’s reportable [removed: operating] segments may be found in Part II, Item 7 of this Form 10-K under the subheading “Segment Operating Performance,” and in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 11, “Segment Information and Geographic Data.”

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 1

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

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

[removed: iPad] [added: Mac] includes Siri and [added: Apple Pay and] also includes Touch ID on qualifying devices.

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

The Company’s portable computers include MacBook®, MacBook Air®, MacBook Pro® and MacBook Pro with [removed: Retina display.][added: Touch Bar™.]

iOS is the Company’s [removed: Multi-Touch™] [added: mobile] operating system that serves as the foundation for iOS devices.

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

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

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

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

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 2

The TV App Store allows customers access to apps and games specifically for [removed: the] Apple TV.

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

These include assistance that is built into software products, [removed: printed and] electronic product manuals, online support including comprehensive product information as well as technical assistance, the [removed: AppleCare] [added: AppleCare®] Protection Plan (“APP”) and [removed: the] AppleCare+ [removed: Protection Plan] (“AC+”).

[added: APP and] AC+ [removed: is a fee-based service offering] [added: offer] additional coverage under some circumstances for instances of accidental damage [removed: in addition to the services offered by APP] and [removed: is] [added: are] available in certain countries for [removed: iPhone, iPad, Apple Watch and iPod.][added: certain products.]

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

Apple Pay allows users to pay for purchases in [added: participating] stores accepting contactless payments and to pay for purchases within participating apps on qualifying devices.

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

In [removed: September] [added: December] 2016, the Company [removed: introduced AirPods™,] [added: released AirPods®,] new wireless headphones that interact with Siri.

Apple TV connects to consumers’ TVs and enables them to access digital content directly for streaming [removed: high definition] video, playing music and games, and viewing photos.

Content from Apple Music and other media services [removed: are] [added: is] also available on Apple TV.

[removed: The Company's] Apple TV runs on [removed: its] [added: the Company’s] tvOS operating system and is based on apps built for the television.

In September [removed: 2016,] [added: 2017,] the Company introduced Apple Watch Series [removed: 2,] [added: 3,] featuring [removed: new] [added: health and] fitness [added: enhancements] and [removed: health capabilities,] built-in [removed: GPS and a 50-meter water resistance rating for swimming.][added: cellular capability on qualifying devices.]

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 3

iPod [added: touch]

iPod touch, based on the Company’s iOS operating system, is a [removed: flash-memory-based iPod] [added: flash memory-based digital music and media player] that works with the iTunes Store, App [removed: Store and] [added: Store,] iBooks Store [added: and Apple Music] for purchasing and playing digital content and apps.

In September 2017, the Company introduced iPhone 8 and 8 Plus, featuring a new glass and aluminum design, enhanced cameras and speakers, wireless charging and augmented reality optimization.

Additionally, in September 2017, the Company announced iPhone X, featuring an all-glass design with a Super Retina™ OLED display and facial recognition.

iPhone 8 and 8 Plus were available starting in September 2017, and iPhone X is expected to be available in November 2017.

The Company’s line of smartphones also includes iPhone 7, 7 Plus, 6s, 6s Plus and SE models.

iPad includes Siri, Apple Pay and Touch ID.

In June 2017, the Company released a new 10.5-inch iPad Pro and an updated 12.9-inch iPad Pro with more advanced displays and enhanced performance.

In June 2017, the Company announced the new iMac Pro™, which is expected to be available in December 2017.

Operating Systems

In September 2017, the Company released iOS 11, which includes new iPad features, new capabilities to improve images in Photos and Camera, enhanced Siri functionality and a redesigned App Store.

iOS 11 also introduces ARKit, an augmented reality framework for developers.

macOS High Sierra, released in September 2017, is the 14th major release of macOS and incorporates new storage, video and graphics technologies, and includes improvements to Photos, Safari® and Mail.

In September 2017, the Company released watchOS 4, which adds a proactive Siri watch face that displays the information users need most throughout the day, personalized activity coaching and a new music experience.

watchOS 4 also includes an enhanced Workout app and introduces GymKit™, a technology platform that offers users connected workouts with cardio equipment.

Digital Content and Services

APP and AC+ are fee-based services that extend the coverage of phone support eligibility and hardware warranty repairs.

The Company expects to release an update to iOS 11 and watchOS 4 in fall 2017 that will allow peer-to-peer payments using Apple Pay.

Additionally, in June 2017, the Company announced the HomePod™ wireless speaker and in September 2017, announced AirPower™, a new wireless charging accessory, which are expected to be available in December 2017 and calendar year 2018, respectively.

In September 2017, the Company introduced Apple TV 4K, which supports 4K and High Dynamic Range content, providing customers with enhanced picture quality.

Many of the Company’s competitors that sell mobile devices and personal computers based on other operating systems seek to compete primarily through aggressive pricing and very low cost structures.

Intellectual Property

This includes patents, copyrights, trademarks, service marks, trade dress and other forms of intellectual property rights in the U.S. and a number of foreign countries.

Substantially all of the Company’s hardware products are currently manufactured by outsourcing partners that are located primarily in Asia, with some Mac computers manufactured in the U.S. and Ireland.

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.

Operating System Software

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 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.

iLife is the Company’s consumer-oriented digital lifestyle software application suite included with all Mac computers and features iMovie®, a digital video editing application, and GarageBand®, a music creation application that allows users to play, record and create music.

Internet Services

APP is a fee-based service that typically extends the service coverage of phone support, hardware repairs and dedicated web-based support resources for Mac, Apple TV and display products.

iPod is the Company’s line of portable digital music and media players, which includes iPod touch, iPod nano® and iPod shuffle®.

All iPods work with iTunes to purchase and synchronize content.

The Company’s competitors that sell mobile devices and personal computers based on other operating systems have aggressively cut prices and lowered their product margins to gain or maintain market share.

Patents, Trademarks, Copyrights and Licenses

The Company has registered or has applied for trademarks and service marks in the U.S. and a number of foreign countries.

See the risk factor “The Company could be impacted by unfavorable results of legal proceedings, such as being found to have infringed on intellectual property 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: 2016] [added: 2017] that did not individually or in the aggregate have a material impact on the Company’s financial condition or operating results.

For the fiscal year ended September [removed: 24, 2016][added: 30, 2017]

[removed: ][added: ]

| Common Stock, $0.00001 par value per share 1.000% Notes due 2022 1.375% Notes due 2024 [added: 0.875% Notes due 2025] 1.625% Notes due 2026 2.000% Notes due 2027 [added: 1.375% Notes due 2029] 3.050% Notes due 2029 3.600% Notes due 2042 | | The [removed: NASDAQ] [added: Nasdaq] Stock Market LLC New York Stock Exchange LLC New York Stock Exchange LLC New York Stock Exchange LLC New York Stock Exchange LLC New York Stock Exchange LLC New York Stock Exchange LLC [added: New York Stock Exchange LLC New York Stock Exchange LLC] |

| (Title of [added: each] class) | | (Name of [added: each] exchange on which registered) |

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [removed: or a] smaller reporting [added: company, or an emerging growth] company.

See the definitions of “large accelerated filer,” “accelerated [removed: filer” and] [added: filer,”] “smaller reporting [added: company,” and “emerging growth] company” in Rule 12b-2 of the Exchange Act.

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

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

The aggregate market value of the voting and non-voting stock held by non-affiliates of the Registrant, as of March [removed: 25, 2016,] [added: 31, 2017,] the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately [removed: $578,807,000,000.][added: $747,509,000,000.]

[removed: 5,332,313,000] [added: 5,134,312,000] shares of common stock were issued and outstanding as of October [removed: 14, 2016.][added: 20, 2017.]

Portions of the Registrant’s definitive proxy statement relating to its [removed: 2017] [added: 2018] annual meeting of shareholders (the [removed: “2017] [added: “2018] Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.

The [removed: 2017] [added: 2018] 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.

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| [Item [removed: 9B.](#s3F6858C110A556D0BEE2AEACB214EFFC)] [added: 9B.](#s227B19A49AD65D0F9813FA6369F7ED38)] | [Other [removed: Information](#s3F6858C110A556D0BEE2AEACB214EFFC)] [added: Information](#s227B19A49AD65D0F9813FA6369F7ED38)] | [removed: [72](#s3F6858C110A556D0BEE2AEACB214EFFC)] [added: [72](#s227B19A49AD65D0F9813FA6369F7ED38)] |

| [Part [removed: III](#s5879998A24D5513FAA7D0342FB6B61FC)] [added: III](#sAE2552532553519E9996ED3B8AE38F44)] | | |

| [Item [removed: 10.](#sE3107A0327EF544296702D45CD288BE9)] [added: 10.](#s90291A25093F5DC3A1430FDEAF07E36B)] | [Directors, Executive Officers and Corporate [removed: Governance](#sE3107A0327EF544296702D45CD288BE9)] [added: Governance](#s90291A25093F5DC3A1430FDEAF07E36B)] | [removed: [73](#sE3107A0327EF544296702D45CD288BE9)] [added: [73](#s90291A25093F5DC3A1430FDEAF07E36B)] |

| [Item [removed: 11.](#s90E94ECDB4295364AFB663F569D20451)] [added: 11.](#s40ACDC73F5DC54E49DCCE5A5191A994D)] | [Executive [removed: Compensation](#s90E94ECDB4295364AFB663F569D20451)] [added: Compensation](#s40ACDC73F5DC54E49DCCE5A5191A994D)] | [removed: [73](#s90E94ECDB4295364AFB663F569D20451)] [added: [73](#s40ACDC73F5DC54E49DCCE5A5191A994D)] |

| [Item [removed: 12](#s41FE8FCB2A075426A93489F4A7635B5B).] [added: 12](#s6A36AE9D2C3C505D8E0C506B3AD2DDAE).] | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s41FE8FCB2A075426A93489F4A7635B5B)] [added: Matters](#s6A36AE9D2C3C505D8E0C506B3AD2DDAE)] | [removed: [73](#s41FE8FCB2A075426A93489F4A7635B5B)] [added: [73](#s6A36AE9D2C3C505D8E0C506B3AD2DDAE)] |

| [Item [removed: 13](#s75A48C14841B5276A79028DDCC9EDAA8).] [added: 13](#s20DE57744D475C6B90A604546874AC2D).] | [Certain Relationships and Related [removed: Transactions] [added: Transactions,] and Director [removed: Independence](#s75A48C14841B5276A79028DDCC9EDAA8)] [added: Independence](#s20DE57744D475C6B90A604546874AC2D)] | [removed: [73](#s75A48C14841B5276A79028DDCC9EDAA8)] [added: [73](#s20DE57744D475C6B90A604546874AC2D)] |

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| [Item [removed: 15.](#s7A420A4848EE5B91A8D7E867EA4EDCF8)] [added: 15.](#s049868899E945C57B6665E461779381B)] | [Exhibits, Financial Statement [removed: Schedules](#s7A420A4848EE5B91A8D7E867EA4EDCF8)] [added: Schedules](#s049868899E945C57B6665E461779381B)] | [removed: [74](#s7A420A4848EE5B91A8D7E867EA4EDCF8)] [added: [74](#s049868899E945C57B6665E461779381B)] |

10-K 1 a10-k20179302017.htm 10-K

| | | | | Emerging growth company | | ☐ |

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

For the Fiscal Year Ended September 30, 2017

| [Part I](#s8CD194F4F7235E7CBD23B83A8FE8BFBC) | | |

| [Part II](#sC636D99EC3A8510FA69160A37750BD36) | | |

| [Part IV](#s1AC69328AE8C59F0BFFB3DE1C6C80485) | | |

| [Item 16.](#sdafbe4e1e0dc4b1f8bdb4eb2d4449afa) | [Form 10-K Summary](#sdafbe4e1e0dc4b1f8bdb4eb2d4449afa) | [76](#sdafbe4e1e0dc4b1f8bdb4eb2d4449afa) |

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

| [Part I](#s19C5C82A0E105CFB8FE5AF234E160DFA) | | |

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

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

Apple Inc. | 2017 Form 10-K | 16

As of September [removed: 24, 2016,] [added: 30, 2017,] the Company owned [removed: 7.1] [added: 13.4] million square feet and leased [removed: 22.3] [added: 23.0] million square feet of building space, primarily in the U.S. Additionally, the Company owned a total of [removed: 2,583] [added: 4,928] acres of [removed: land] [added: land,] primarily in the U.S.

As of September [removed: 24, 2016,] [added: 30, 2017,] the Company owned facilities and land for [removed: R&D,] corporate [removed: functions] [added: functions, R&D] and data centers at various locations throughout the [added: U.S. Outside the] U.S., [removed: including] [added: the Company owned additional facilities and] land [removed: in California that is being developed] for [removed: the Company’s second corporate campus.][added: various purposes.]

Outside the U.S., the Company owned additional facilities and land for various purposes.

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 17

| 2016 price range per share | $116.18 [removed: -] [added: –] $91.50 | | $112.39 [removed: -] [added: –] $89.47 | | $109.43 [removed: -] [added: –] $92.39 | | $123.82 [removed: -] [added: –] $105.57 |

As of October [removed: 14, 2016,] [added: 20, 2017,] there were [removed: 25,641] [added: 25,333] shareholders of record.

The Company paid a total of [removed: $12.0] [added: $12.6] billion and [removed: $11.4] [added: $12.0] billion in dividends during [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] respectively, and expects to pay quarterly dividends of [removed: $0.57] [added: $0.63] per common share each quarter, subject to declaration by the Board of Directors.

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 18

Share repurchase activity during the three months ended September [removed: 24, 2016] [added: 30, 2017] was as follows (in millions, except number of shares, which are reflected in thousands, and per share amounts):

| Open market and privately negotiated purchases | | [removed: 9,036] [added: 10,076] | | | $ | [removed: 96.83] [added: 148.87] | | | [removed: 9,036] [added: 10,076] | | | | | |

| July [removed: 31, 2016] [added: 2, 2017] to August [removed: 27, 2016:] [added: 5, 2017:] | | | | | | | | | | | | | | |

| Open market and privately negotiated purchases | | [removed: 11,919] [added: 9,684] | | | $ | [removed: 108.11] [added: 160.06] | | | [removed: 11,919] [added: 9,684] | | | | | |

| August [removed: 28, 2016] [added: 6, 2017] to September [removed: 24, 2016:] [added: 2, 2017:] | | | | | | | | | | | | | | |

| Open market and privately negotiated purchases | | [removed: 7,624] [added: 9,313] | | | $ | [removed: 109.71] [added: 155.69] | | | [removed: 7,624] [added: 9,313] | | | | | |

| (1) | In [removed: April 2016,] [added: May 2017,] the Company’s Board of Directors increased the [removed: Company's] [added: Company’s] share repurchase [removed: program] authorization from [removed: $140] [added: $175] billion to [removed: $175] [added: $210] billion of the Company’s common [removed: stock. As of September 24, 2016, $133 billion] [added: stock,] of [removed: the $175] [added: which $166] billion had been [removed: utilized.] [added: utilized as of September 30, 2017.] The remaining [removed: $42] [added: $44] billion in the table represents the amount available to repurchase shares under the authorized repurchase program as of September [removed: 24, 2016.] [added: 30, 2017.] 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. |

| (2) | In May [removed: 2016,] [added: 2017,] the Company entered into an accelerated share repurchase arrangement [removed: ("ASR")] [added: (“ASR”)] to purchase up to [removed: $6.0] [added: $3.0] billion of the [removed: Company's] [added: Company’s] common stock. In August [removed: 2016,] [added: 2017,] the purchase period for this ASR ended and an additional [removed: 12.3] [added: 4.5] million shares were delivered and retired. In total, [removed: 60.5] [added: 20.1] million shares were delivered under this ASR at an average repurchase price of [removed: $99.25.] [added: $149.20.] |

| (3) | In August [removed: 2016,] [added: 2017,] 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 [removed: or before] November [removed: 2016.] [added: 2017.] 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 [removed: volume weighted-average] [added: volume-weighted average] price of the Company’s common stock during that period. |

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 19

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: 24, 2016.][added: 30, 2017.]

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: 23, 2011.][added: 28, 2012.]

[removed: ][added: ]

| * | $100 invested on [removed: 9/23/11] [added: 9/28/12] 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. |

Copyright© [removed: 2016] [added: 2017] S&P, a division of McGraw Hill Financial.

Copyright© [removed: 2016] [added: 2017] Dow Jones & Co. All rights reserved.

| | | September [removed: 2011 | | | | September] 2012 | | | | September 2013 | | | | September 2014 | | | | September 2015 | | | | September 2016 | | | [added: | September 2017 | | |]

| Dow Jones U.S. Technology Supersector Index | | $ | 100 | | | $ | [removed: 130] [added: 105] | | | $ | 137 | | | $ | [removed: 178] [added: 137] | | | $ | [removed: 177] [added: 167] | | | $ | [removed: 217] [added: 214] | |

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 20

| 2017 price range per share | $164.94 – $142.41 | | $156.65 – $140.06 | | $144.50 – $114.76 | | $118.69 – $104.08 |

| May 2017 ASR | | 4,510 | | | (2) | | | | 4,510 | | | | | |

| August 2017 ASR | | 15,069 | | (3) | (3) | | | | 15,069 | | (3) | | | |

| September 3, 2017 to September 30, 2017: | | | | | | | | | | | | | | |

| Total | | 48,652 | | | | | | | | | | $ | 44,023 | |

| Apple Inc. | | $ | 100 | | | $ | 74 | | | $ | 111 | | | $ | 128 | | | $ | 129 | | | $ | 179 | |

| S&P 500 Index | | $ | 100 | | | $ | 119 | | | $ | 143 | | | $ | 142 | | | $ | 164 | | | $ | 194 | |

| S&P Information Technology Index | | $ | 100 | | | $ | 107 | | | $ | 138 | | | $ | 141 | | | $ | 173 | | | $ | 223 | |

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

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

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

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

| Total | | 63,316 | | | | | | | | | | $ | 42,024 | |

| 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 | |

The information set forth below for the five years ended September [removed: 24, 2016,] [added: 30, 2017,] 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: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | |

| Net sales | $ | [removed: 215,639] [added: 229,234] | | | $ | [removed: 233,715] [added: 215,639] | | | $ | [removed: 182,795] [added: 233,715] | | | $ | [removed: 170,910] [added: 182,795] | | | $ | [removed: 156,508] [added: 170,910] | |

| Net income | $ | [removed: 45,687] [added: 48,351] | | | $ | [removed: 53,394] [added: 45,687] | | | $ | [removed: 39,510] [added: 53,394] | | | $ | [removed: 37,037] [added: 39,510] | | | $ | [removed: 41,733] [added: 37,037] | |

| Basic | $ | [removed: 8.35] [added: 9.27] | | | $ | [removed: 9.28] [added: 8.35] | | | $ | [removed: 6.49] [added: 9.28] | | | $ | [removed: 5.72] [added: 6.49] | | | $ | [removed: 6.38] [added: 5.72] | |

| Diluted | $ | [removed: 8.31] [added: 9.21] | | | $ | [removed: 9.22] [added: 8.31] | | | $ | [removed: 6.45] [added: 9.22] | | | $ | [removed: 5.68] [added: 6.45] | | | $ | [removed: 6.31] [added: 5.68] | |

| Cash dividends declared per share | $ | [removed: 2.18] [added: 2.40] | | | $ | [removed: 1.98] [added: 2.18] | | | $ | [removed: 1.82] [added: 1.98] | | | $ | [removed: 1.64] [added: 1.82] | | | $ | [removed: 0.38] [added: 1.64] | |

| Basic | [removed: 5,470,820] [added: 5,217,242] | | | | [removed: 5,753,421] [added: 5,470,820] | | | | [removed: 6,085,572] [added: 5,753,421] | | | | [removed: 6,477,320] [added: 6,085,572] | | | | [removed: 6,543,726] [added: 6,477,320] | | |

| Diluted | [removed: 5,500,281] [added: 5,251,692] | | | | [removed: 5,793,069] [added: 5,500,281] | | | | [removed: 6,122,663] [added: 5,793,069] | | | | [removed: 6,521,634] [added: 6,122,663] | | | | [removed: 6,617,483] [added: 6,521,634] | | |

| Total cash, cash equivalents and marketable securities | $ | [removed: 237,585] [added: 268,895] | | | $ | [removed: 205,666] [added: 237,585] | | | $ | [removed: 155,239] [added: 205,666] | | | $ | [removed: 146,761] [added: 155,239] | | | $ | [removed: 121,251] [added: 146,761] | |

| Total assets | $ | [removed: 321,686] [added: 375,319] | | | $ | [removed: 290,345] [added: 321,686] | | | $ | [removed: 231,839] [added: 290,345] | | | $ | [removed: 207,000] [added: 231,839] | | | $ | [removed: 176,064] [added: 207,000] | |

| Commercial paper | $ | [removed: 8,105] [added: 11,977] | | | $ | [removed: 8,499] [added: 8,105] | | | $ | [removed: 6,308] [added: 8,499] | | | $ | [removed: —] [added: 6,308] | | | $ | — | |

| Total term debt (1) | $ | [removed: 78,927] [added: 103,703] | | | $ | [removed: 55,829] [added: 78,927] | | | $ | [removed: 28,987] [added: 55,829] | | | $ | [removed: 16,960] [added: 28,987] | | | $ | [removed: —] [added: 16,960] | |

| Other long-term obligations (2) | $ | [removed: 36,074] [added: 40,415] | | | $ | [removed: 33,427] [added: 36,074] | | | $ | [removed: 24,826] [added: 33,427] | | | $ | [removed: 20,208] [added: 24,826] | | | $ | [removed: 16,664] [added: 20,208] | |

| Total liabilities | $ | [removed: 193,437] [added: 241,272] | | | $ | [removed: 170,990] [added: 193,437] | | | $ | [removed: 120,292] [added: 170,990] | | | $ | [removed: 83,451] [added: 120,292] | | | $ | [removed: 57,854] [added: 83,451] | |

| Total shareholders’ equity | $ | [removed: 128,249] [added: 134,047] | | | $ | [removed: 119,355] [added: 128,249] | | | $ | [removed: 111,547] [added: 119,355] | | | $ | [removed: 123,549] [added: 111,547] | | | $ | [removed: 118,210] [added: 123,549] | |

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

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 21

| [Consolidated Statements of Operations for the years ended September [added: 30, 2017, September] 24, [removed: 2016,] [added: 2016 and] September 26, [removed: 2015 and](#sE35835F1122F576785CF3EE4EC9286A8) [September 27, 2014](#sE35835F1122F576785CF3EE4EC9286A8)] [added: 2015](#s7C6CCB264A425ACBB17DAE95539ED18A)] | | [removed: [39](#sE35835F1122F576785CF3EE4EC9286A8)] [added: [39](#s7C6CCB264A425ACBB17DAE95539ED18A)] |

| [Consolidated Statements of Comprehensive Income for the years ended September [added: 30, 2017, September] 24, [removed: 2016,] [added: 2016 and] September 26, [removed: 2015](#s5EBB3F193BD958A09D8C94174074F4B3) [and September 27, 2014](#s5EBB3F193BD958A09D8C94174074F4B3)] [added: 2015](#s36812B06546955C98502CC5CBCD663E9)] | | [removed: [40](#s5EBB3F193BD958A09D8C94174074F4B3)] [added: [40](#s36812B06546955C98502CC5CBCD663E9)] |

| [Consolidated Balance Sheets as of September [removed: 24, 2016] [added: 30, 2017] and September [removed: 26, 2015](#s7141C8F9300451B981539768A645E29A)] [added: 24, 2016](#s6F48F6DFDEFA5E9DB0C330DFE0382F68)] | | [removed: [41](#s7141C8F9300451B981539768A645E29A)] [added: [41](#s6F48F6DFDEFA5E9DB0C330DFE0382F68)] |

| [Consolidated Statements of Shareholders’ Equity for the years ended September [removed: 24, 2016,] [added: 30, 2017,] September [removed: 26, 2015] [added: 24, 2016] and September [removed: 27, 2014](#sE4298470CC7F5A1FAE92EC212CBBCBF7)] [added: 26, 2015](#sED2B65808C0252559DDC9DE433461F4C)] | | [removed: [42](#sE4298470CC7F5A1FAE92EC212CBBCBF7)] [added: [42](#sED2B65808C0252559DDC9DE433461F4C)] |

| [Consolidated Statements of Cash Flows for the years ended September [removed: 24, 2016,] [added: 30, 2017,] September [removed: 26, 2015 and](#s2960A67654675C3EB708905914048180)] [added: 24, 2016 and](#s810B9BAF644354B187045E082E52F5E8)] [September [removed: 27, 2014](#s2960A67654675C3EB708905914048180)] [added: 26, 2015](#s810B9BAF644354B187045E082E52F5E8)] | | [removed: [43](#s2960A67654675C3EB708905914048180)] [added: [43](#s810B9BAF644354B187045E082E52F5E8)] |

| [Notes to Consolidated Financial [removed: Statements](#s42316DEAE86B5F32BA3DA9352109F1B7)] [added: Statements](#sA11BC034230A5F68B4D421BD4B676F5C)] | | [removed: [44](#s42316DEAE86B5F32BA3DA9352109F1B7)] [added: [44](#sA11BC034230A5F68B4D421BD4B676F5C)] |

| [Selected Quarterly Financial Information [removed: (Unaudited)](#s4929B4B3F8BA5C39BF1AB45D20410696)] [added: (Unaudited)](#s7563175644E55FF4B2CE4FD251E84096)] | | [removed: [69](#s4929B4B3F8BA5C39BF1AB45D20410696)] [added: [68](#s7563175644E55FF4B2CE4FD251E84096)] |

| [Reports of Ernst & Young LLP, Independent Registered Public Accounting [removed: Firm](#s46DE5E82D06F518690808AE847F25D80)] [added: Firm](#s9C59935312A252DFABD5E9F24743E098)] | | [removed: [70](#s46DE5E82D06F518690808AE847F25D80)] [added: [70](#s9C59935312A252DFABD5E9F24743E098)] |

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 38

| | September [removed: 24, 2016] [added: 30, 2017] | | | | September [removed: 26, 2015] [added: 24, 2016] | | | | September [removed: 27, 2014] [added: 26, 2015] | | |

| Net sales | $ | [removed: 215,639] [added: 229,234] | | | $ | [removed: 233,715] [added: 215,639] | | | $ | [removed: 182,795] [added: 233,715] | |

| Cost of sales | [removed: 131,376] [added: 141,048] | | | | [removed: 140,089] [added: 131,376] | | | | [removed: 112,258] [added: 140,089] | | |

| Gross margin | [removed: 84,263] [added: 88,186] | | | | [removed: 93,626] [added: 84,263] | | | | [removed: 70,537] [added: 93,626] | | |

| Research and development | [removed: 10,045] [added: 11,581] | | | | [removed: 8,067] [added: 10,045] | | | | [removed: 6,041] [added: 8,067] | | |

| Selling, general and administrative | [removed: 14,194] [added: 15,261] | | | | [removed: 14,329] [added: 14,194] | | | | [removed: 11,993] [added: 14,329] | | |

| Total operating expenses | [removed: 24,239] [added: 26,842] | | | | [removed: 22,396] [added: 24,239] | | | | [removed: 18,034] [added: 22,396] | | |

| Operating income | [removed: 60,024] [added: 61,344] | | | | [removed: 71,230] [added: 60,024] | | | | [removed: 52,503] [added: 71,230] | | |

| Other income/(expense), net | [removed: 1,348] [added: 2,745] | | | | [removed: 1,285] [added: 1,348] | | | | [removed: 980] [added: 1,285] | | |

| Income before provision for income taxes | [removed: 61,372] [added: 64,089] | | | | [removed: 72,515] [added: 61,372] | | | | [removed: 53,483] [added: 72,515] | | |

| Provision for income taxes | [removed: 15,685] [added: 15,738] | | | | [removed: 19,121] [added: 15,685] | | | | [removed: 13,973] [added: 19,121] | | |

| Net income | $ | [removed: 45,687] [added: 48,351] | | | $ | [removed: 53,394] [added: 45,687] | | | $ | [removed: 39,510] [added: 53,394] | |

| Basic | $ | [removed: 8.35] [added: 9.27] | | | $ | [removed: 9.28] [added: 8.35] | | | $ | [removed: 6.49] [added: 9.28] | |

| Diluted | $ | [removed: 8.31] [added: 9.21] | | | $ | [removed: 9.22] [added: 8.31] | | | $ | [removed: 6.45] [added: 9.22] | |

| Basic | [removed: 5,470,820] [added: 5,217,242] | | | | [removed: 5,753,421] [added: 5,470,820] | | | | [removed: 6,085,572] [added: 5,753,421] | | |

| Diluted | [removed: 5,500,281] [added: 5,251,692] | | | | [removed: 5,793,069] [added: 5,500,281] | | | | [removed: 6,122,663] [added: 5,793,069] | | |

| Cash dividends declared per share | $ | [removed: 2.18] [added: 2.40] | | | $ | [removed: 1.98] [added: 2.18] | | | $ | [removed: 1.82] [added: 1.98] | |

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 39

| Change in foreign currency translation, net of tax effects of [removed: $8, $201] [added: $(77), $8] and [removed: $50,] [added: $201,] respectively | [removed: 75] [added: 224] | | | | [removed: (411] [added: 75] | | [removed: )] | | [removed: (137] [added: (411] | | ) |

| Change in fair value of derivatives, net of tax benefit/(expense) of [removed: $(7), $(441)] [added: $(478), $(7)] and [removed: $(297),] [added: $(441),] respectively | [removed: 7] [added: 1,315] | | | | [removed: 2,905] [added: 7] | | | | [removed: 1,390] [added: 2,905] | | |

| Adjustment for net (gains)/losses realized and included in net income, net of tax expense/(benefit) of [removed: $131, $630] [added: $475, $131] and [removed: $(36),] [added: $630,] respectively | [removed: (741] [added: (1,477] | | ) | | [removed: (3,497] [added: (741] | | ) | | [removed: 149] [added: (3,497] | | [added: )] |

| Total change in unrealized gains/losses on derivative instruments, net of tax | [removed: (734] [added: (162] | | ) | | [removed: (592] [added: (734] | | ) | | [removed: 1,539] [added: (592] | | [added: )] |

| Change in fair value of marketable securities, net of tax benefit/(expense) of [removed: $(863), $264] [added: $425, $(863)] and [removed: $(153),] [added: $264,] respectively | [removed: 1,582] [added: (782] | | [added: )] | | [removed: (483] [added: 1,582] | | [removed: )] | | [removed: 285] [added: (483] | | [added: )] |

| Adjustment for net (gains)/losses realized and included in net income, net of tax expense/(benefit) of [removed: $(31), $(32)] [added: $35, $(31)] and [removed: $71,] [added: $(32),] respectively | [removed: 56] [added: (64] | | [added: )] | | [removed: 59] [added: 56] | | | | [removed: (134] [added: 59] | | [removed: )] |

| Total change in unrealized gains/losses on marketable securities, net of tax | [removed: 1,638] [added: (846] | | [added: )] | | [removed: (424] [added: 1,638] | | [removed: )] | | [removed: 151] [added: (424] | | [added: )] |

| Total other comprehensive income/(loss) | [removed: 979] [added: (784] | | [added: )] | | [removed: (1,427] [added: 979] | | [removed: )] | | [removed: 1,553] [added: (1,427] | | [added: )] |

| Total comprehensive income | $ | [removed: 46,666] [added: 47,567] | | | $ | [removed: 51,967] [added: 46,666] | | | $ | [removed: 41,063] [added: 51,967] | |

Apple Inc. | [removed: 2016] [added: 2017] Form 10-K | 40

| | September [added: 30, 2017 | | | | September] 24, 2016 | | | | September 26, 2015 | | |

| Cash and cash equivalents | $ | [removed: 20,484] [added: 20,289] | | | $ | [removed: 21,120] [added: 20,484] | |

| Short-term marketable securities | [removed: 46,671] [added: 53,892] | | | | [removed: 20,481] [added: 46,671] | | |

Apple Inc.

Apple Inc.

Apple Inc.

| | September 30, 2017 | | | | September 24, 2016 | | |

Apple Inc.

| Repurchase of common stock | (246,496 | ) | | — | | | | (33,001 | | ) | | — | | | | (33,001 | | ) |

| Balances as of September 30, 2017 | 5,126,201 | | | $ | 35,867 | | | $ | 98,330 | | | $ | (150 | ) | | $ | 134,047 | |

Apple Inc.

| | September 30, 2017 | | | | September 24, 2016 | | | | September 26, 2015 | | |

| Net income | 48,351 | | | | 45,687 | | | | 53,394 | | |

| Other | (166 | | ) | | 486 | | | | 385 | | |

| Accounts receivable, net | (2,093 | | ) | | 527 | | | | 417 | | |

| Accounts payable | 9,618 | | | | 1,837 | | | | 5,001 | | |

Apple Inc.

The Company’s products and services include iPhone, iPad, Mac, 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 “Digital Content and Services”).

The Company’s fiscal year 2017 included 53 weeks and ended on September 30, 2017.

The Company estimates forfeitures expected to occur and recognizes share-based compensation expense for those equity awards expected to vest.

| Net income | $ | 48,351 | | | $ | 45,687 | | | $ | 53,394 | |

| Cash | $ | 7,982 | | | $ | — | | | $ | — | | | $ | 7,982 | | | $ | 7,982 | | | $ | — | | | $ | — | |

| Mutual funds | 799 | | | | — | | | | (88 | | ) | | 711 | | | | — | | | | 711 | | | | — | | |

| Subtotal | 7,333 | | | | — | | | | (88 | | ) | | 7,245 | | | | 6,534 | | | | 711 | | | | — | | |

| U.S. Treasury securities | 55,254 | | | | 58 | | | | (230 | | ) | | 55,082 | | | | 865 | | | | 17,228 | | | | 36,989 | | |

| U.S. agency securities | 5,162 | | | | 2 | | | | (9 | | ) | | 5,155 | | | | 1,439 | | | | 2,057 | | | | 1,659 | | |

| Non-U.S. government securities | 7,827 | | | | 210 | | | | (37 | | ) | | 8,000 | | | | 9 | | | | 123 | | | | 7,868 | | |

| Certificates of deposit and time deposits | 5,832 | | | | — | | | | — | | | | 5,832 | | | | 1,142 | | | | 3,918 | | | | 772 | | |

| Commercial paper | 3,640 | | | | — | | | | — | | | | 3,640 | | | | 2,146 | | | | 1,494 | | | | — | | |

| Corporate securities | 152,724 | | | | 969 | | | | (242 | | ) | | 153,451 | | | | 172 | | | | 27,591 | | | | 125,688 | | |

| Municipal securities | 961 | | | | 4 | | | | (1 | | ) | | 964 | | | | — | | | | 114 | | | | 850 | | |

| Mortgage- and asset-backed securities | 21,684 | | | | 35 | | | | (175 | | ) | | 21,544 | | | | — | | | | 656 | | | | 20,888 | | |

| Subtotal | 253,084 | | | | 1,278 | | | | (694 | | ) | | 253,668 | | | | 5,773 | | | | 53,181 | | | | 194,714 | | |

| Total | $ | 268,399 | | | $ | 1,278 | | | $ | (782 | ) | | $ | 268,895 | | | $ | 20,289 | | | $ | 53,892 | | | $ | 194,714 | |

The Company may enter into foreign currency swaps to manage currency risk on its foreign currency-denominated term debt.

These instruments may offset a portion of the foreign currency remeasurement gains or losses on the Company’s term debt and related interest payments.

The Company designates these instruments as cash flow hedges.

The Company’s hedged term debt-related foreign currency transactions as of September 30, 2017 are expected to be recognized within 25 years.

As a result, the Company recognized a gain of $20 million in net sales, a loss of $40 million in cost of sales and a gain of $606 million in other income/(expense), net for 2017.