Apple (AAPL) 10-K risk factor changes: FY2019 vs FY2018

The following information 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 [removed: related] [added: accompanying] notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.

[removed: Global] [added: Global] and regional economic conditions could materially adversely affect the Company’s business, results of operations, financial condition and [removed: growth.][added: growth.]

[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.]

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

The Company currently holds a significant number of [removed: patents] [added: patents, trademarks] and copyrights and has registered, and applied to register, numerous patents, trademarks and [removed: service marks.][added: copyrights.]

Apple Inc. | [removed: 2018] [added: 2019] Form 10-K | [removed: 8][added: 5]

The Company has a minority market share in the global smartphone, [removed: tablet and] personal computer [added: and tablet] markets.

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

The Company also expects competition to intensify as competitors [removed: attempt to] imitate the Company’s approach to providing components seamlessly within their [removed: individual] offerings or work collaboratively to offer integrated solutions.

Some of the markets in which the Company [removed: competes, including the market for personal computers,] [added: competes] have from time to time experienced little to no growth or contracted.

The Company’s financial condition and operating results depend substantially on the Company’s ability to continually improve its products and services [removed: in order] to maintain their functional and design advantages.

[removed: To] [added: To] remain competitive and stimulate customer demand, the Company must successfully manage frequent introductions and transitions of products and [removed: services.][added: services.]

Due to the highly volatile and competitive nature of the industries in which the Company competes, the Company must continually introduce new products, services and technologies, enhance existing products and services, effectively stimulate customer demand for new and upgraded products and [removed: services] [added: services,] and successfully manage the transition to these new and upgraded products and services.

The success of new product and service introductions depends on a number of factors including, but not limited to, timely and successful development, market acceptance, the Company’s ability to manage the risks associated with new product production ramp-up issues, the availability of application software for new products, the effective management of purchase commitments and inventory levels in line with anticipated product demand, the availability of products in appropriate quantities and at expected costs to meet anticipated [removed: demand] [added: demand,] and the risk that new products and services may have quality or other defects or deficiencies.

[removed: The] [added: The] Company depends on the performance of carriers, wholesalers, retailers and other [removed: resellers.][added: resellers.]

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

These programs [removed: could] [added: can] require a substantial investment while [removed: providing no assurance of] [added: not assuring] return or incremental [removed: revenue.][added: sales.]

Apple Inc. | [removed: 2018] [added: 2019] Form 10-K | [removed: 9][added: 6]

[removed: The] [added: The] Company [removed: faces substantial] [added: is exposed to the risk of write-downs on the value of its] inventory and other [removed: asset risk] [added: assets,] in addition to purchase commitment cancellation [removed: risk.][added: risk.]

[removed: Future] [added: Future] operating results depend upon the Company’s ability to obtain components in sufficient quantities on commercially reasonable [removed: terms.][added: 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 Company’s business, results of operations, financial condition and [removed: growth”] [added: growth,”*] above, also could affect the Company’s ability to obtain [removed: components.][added: components*.* Therefore, the Company remains subject to significant risks of supply shortages and price increases that could materially adversely affect its financial condition and operating results.]

When a component or product uses new technologies, initial capacity constraints may exist until the suppliers’ yields have matured or [added: their] manufacturing [removed: capacity has] [added: capacities have] increased.

[removed: Continued] [added: The continued] availability of these components at acceptable prices, or at all, [removed: may] [added: can] be affected for any number of reasons, including if suppliers decide to concentrate on the production of common components instead of components customized to meet the Company’s requirements.

The Company’s business and financial performance could also be materially adversely affected depending on the time required to obtain sufficient quantities from the [removed: original] source, or to identify and obtain sufficient quantities from an alternative source.

[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.]

While these arrangements [removed: may] [added: can] lower operating costs, they also reduce the Company’s direct control over production and distribution.

Although arrangements with these partners may contain provisions for [removed: warranty] [added: product defect] expense reimbursement, the Company [removed: may remain] [added: generally remains] responsible to the consumer for warranty [added: and out-of-warranty] service in the event of product defects and could experience an unanticipated product defect [removed: or warranty] liability.

The Company relies on [removed: single-sourced] [added: single-source] outsourcing partners in the U.S., Asia and Europe to supply and manufacture many components, and on outsourcing partners primarily located in Asia, for final assembly of substantially all of the Company’s hardware products.

Any failure of these partners to perform [removed: may] [added: can] have a negative impact on the Company’s cost or supply of components or finished goods.

In addition, manufacturing or logistics in these locations or transit to final destinations [removed: may] [added: can] be disrupted for a variety of reasons including, but not limited to, natural and man-made disasters, information technology system failures, commercial disputes, military actions, economic, business, labor, environmental, public health or political issues, or international trade disputes.

Apple Inc. | [removed: 2018] [added: 2019] Form 10-K | [removed: 10][added: 7]

While these arrangements help ensure the supply of components and finished goods, if these outsourcing partners or suppliers experience severe financial problems or other disruptions in their business, such continued supply [removed: could] [added: can] be reduced or terminated and the recoverability of manufacturing process equipment or prepayments [removed: could] [added: can] be negatively impacted.

[removed: The] [added: The] Company’s products and services may be affected from time to time by design and manufacturing defects that could materially adversely affect the Company’s business and result in harm to the Company’s [removed: reputation.][added: reputation.]

Defects [removed: may] [added: can] also exist in components and products the Company purchases from third parties.

In addition, the Company [removed: may] [added: can] be exposed to product liability claims, recalls, product replacements or modifications, write-offs of inventory, property, plant and equipment, and/or intangible assets, and significant warranty and other expenses, including litigation costs and regulatory fines.

Quality problems [removed: could] [added: can] also adversely affect the experience for users of the Company’s products and services, and result in harm to the Company’s reputation, loss of competitive advantage, poor market acceptance, reduced demand for products and services, delay in new product and [removed: services] [added: service] introductions and lost [removed: revenue.][added: sales.]

[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.]

This includes the right to sell currently available [removed: music, movies, TV shows and books.][added: content.]

The licensing or other distribution arrangements with these third parties are for relatively short terms and do not guarantee the continuation or renewal of these arrangements on [added: commercially] reasonable terms, if at all.

Some third-party content providers and distributors currently or in the future may offer competing products and services, and [removed: could] [added: can] take [removed: action] [added: actions] to make it more difficult or impossible for the Company to license or otherwise distribute their content in the future.

In addition, because of technological changes in the industries in which the Company currently competes or in the future may compete, current extensive patent coverage and the rapid rate of issuance of new patents, the Company’s products and services may unknowingly infringe existing patents or intellectual property rights of others.

From time to time, the Company has been notified that it may be infringing certain patents or other intellectual property rights of third parties.

The Company is subject to complex and changing laws and regulations worldwide, which exposes the Company to potential liabilities, increased costs and other adverse effects on the Company’s business.

Changes to laws and regulations can adversely affect the Company’s business by increasing the Company’s costs, limiting the Company’s ability to offer a product or service to customers, requiring changes to the Company’s business practices or otherwise making the Company’s products and services less attractive to customers.

If the Company is found to have violated laws and regulations, it could materially adversely affect the Company’s reputation, financial condition and operating results.

The technology industry, including, in some instances, the Company, is subject to intense media, political and regulatory scrutiny, which exposes the Company to government investigations, legal actions and penalties.

For example, the Company is subject to antitrust investigations in various jurisdictions around the world, which can result in legal proceedings and claims against the Company that could, individually or in the aggregate, have a material impact on the Company’s financial condition and operating results.

There can be no assurance that the Company’s business will not be materially adversely affected, individually or in the aggregate, by the outcomes of such investigations or changes to laws and regulations in the future.

For example, trade tensions have led to a series of tariffs imposed by the U.S. on imports from China.

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

The Company’s gross margins are subject to volatility and downward pressure due to a variety of factors, including: continued industry-wide global product pricing pressures and product pricing actions that the Company may take in response to such pressures; increased competition; the Company’s ability to effectively stimulate demand for certain of its products and services; compressed product life cycles; potential increases in the cost of components, outside manufacturing services, and acquiring and delivering content for the Company’s services; the Company’s ability to manage product quality and warranty costs effectively; shifts in the mix of products and services, or in the geographic, currency or channel mix; fluctuations in foreign exchange rates; and the introduction of new products or services, including new products or services with higher cost structures.

These and other factors could have a materially adverse impact on the Company’s financial condition and operating results.

Therefore, the Company remains subject to significant risks of supply shortages and price increases that could materially adversely affect its financial condition and operating results.

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 business.

The Company is subject to laws and regulations affecting its domestic and international operations in a number of areas.

By way of example, laws and regulations related to mobile communications and media devices in the many jurisdictions in which the Company operates are extensive and subject to change.

Such changes could include, among others, restrictions on the production, manufacture, distribution and use of devices, locking devices to a carrier’s network, or mandating the use of devices on more than one carrier’s network.

These devices are also subject to certification and regulation by governmental and standardization bodies, as well as by cellular network carriers for use on their networks.

These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications, or delays in product shipment dates, or could preclude the Company from selling certain products.

Any such costs, which may rise in the future as a result of changes in these laws and regulations or in their interpretation, could individually or in the aggregate make the Company’s products and services less attractive to the Company’s customers, delay the introduction of new products in one or more regions, or cause the Company to change or limit its business practices.

The Company’s business is subject to the risks of international operations.

The Company derives a majority of its revenue and earnings from its international operations.

Compliance with applicable U.S. and foreign laws and regulations, such as import and export requirements, anti-corruption laws, tax laws, foreign exchange controls and cash repatriation restrictions, data privacy and data localization requirements, environmental laws, labor laws and anti-competition regulations, increases the costs of doing business in foreign jurisdictions.

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

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

Violations of these laws and regulations could materially adversely affect the Company’s brand, international growth efforts and business.

The Company also could be significantly affected by other risks associated with international activities including, but not limited to, economic and labor conditions, increased duties, taxes and other costs, political instability and international trade disputes.

Gross margins on the Company’s products in foreign countries, and on products that include components obtained from foreign suppliers, could be materially adversely affected by international trade regulations, including duties, tariffs and antidumping penalties.

The Company is also exposed to credit and collectibility risk on its trade receivables with customers in certain international markets.

There can be no assurance the Company can effectively limit its credit risk and avoid losses.

The Company’s financial results may be materially adversely impacted as a result of shifts in the mix of products and services that the Company sells; shifts in the geographic, currency or channel mix of the Company’s sales; component cost increases; price competition; or the introduction of new products, including new products with higher cost structures.

[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 following discussion should be read in conjunction with the consolidated financial statements and [added: accompanying] notes [removed: thereto] included in Part II, Item 8 of this Form 10-K.

Unless otherwise stated, [added: all information presented herein is based on the Company’s fiscal calendar, and] references to particular years, quarters, months or periods refer to the Company’s fiscal years ended in September and the associated quarters, months and periods of those fiscal years.

Each of the terms the “Company” and “Apple” as used herein refers collectively to Apple Inc. and its [removed: wholly-owned] [added: wholly owned] subsidiaries, unless otherwise stated.

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: Fiscal Period][added: *Fiscal Period*]

The Company’s fiscal years [removed: 2018] [added: 2019] and [removed: 2016] [added: 2018] spanned 52 weeks each, whereas fiscal year 2017 included 53 weeks.

[removed: Fiscal 2018 Highlights][added: Fiscal 2019 Highlights]

In [removed: May 2018,] [added: April 2019,] the Company announced [removed: a new capital return] [added: an increase to its current share repurchase] program [removed: of] [added: authorization from] $100 billion [added: to $175 billion] and raised its quarterly dividend from [removed: $0.63 to] $0.73 [added: to $0.77] per share beginning in May [removed: 2018.][added: 2019.]

During [removed: 2018,] [added: 2019,] the Company [removed: spent $73.1] [added: repurchased $67.1] billion [removed: to repurchase shares] of its common stock and paid dividends and dividend equivalents of [removed: $13.7] [added: $14.1] billion.

The weakness in foreign currencies relative to the U.S. dollar had an unfavorable impact on [added: Americas] net sales during [removed: 2017.][added: 2019.]

Apple Inc. | [removed: 2018] [added: 2019] Form 10-K | [removed: 22][added: 18]

The following table shows net sales by reportable segment [removed: and net sales and unit sales by product] for [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] (dollars in [removed: millions and units in thousands):][added: millions):]

| | [removed: 2018] [added: 2019] | | | | [removed: Change] [added: Change] | | | [removed: 2017] [added: 2018] | | | | [removed: Change] [added: Change] | | | [removed: 2016] [added: 2017] | | |

| Americas | $ | [removed: 112,093] [added: 116,914] | | | [removed: 16] [added: 4] | % | | $ | [removed: 96,600] [added: 112,093] | | | [removed: 12] [added: 16] | % | | $ | [removed: 86,613] [added: 96,600] | |

| Europe | [removed: 62,420] [added: 60,288] | | | | [removed: 14] [added: (3] | [removed: %] [added: )%] | | [removed: 54,938] [added: 62,420] | | | | [removed: 10] [added: 14] | % | | [removed: 49,952] [added: 54,938] | | |

| Greater China | [removed: 51,942] [added: 43,678] | | | | [removed: 16] [added: (16] | [removed: %] [added: )%] | | [removed: 44,764] [added: 51,942] | | | | [removed: (8] [added: 16] | [removed: )%] [added: %] | | [removed: 48,492] [added: 44,764] | | |

| Japan | [removed: 21,733] [added: 21,506] | | | | [removed: 23] [added: (1] | [removed: %] [added: )%] | | [removed: 17,733] [added: 21,733] | | | | [removed: 5] [added: 23] | % | | [removed: 16,928] [added: 17,733] | | |

| Rest of Asia Pacific | [removed: 17,407] [added: 17,788] | | | | [removed: 15] [added: 2] | % | | [removed: 15,199] [added: 17,407] | | | | [removed: 11] [added: 15] | % | | [removed: 13,654] [added: 15,199] | | |

| Total net sales | $ | [removed: 265,595] [added: 260,174] | | | [removed: 16] [added: (2] | [removed: %] [added: )%] | | $ | [removed: 229,234] [added: 265,595] | | | [removed: 6] [added: 16] | % | | $ | [removed: 215,639] [added: 229,234] | |

| Net [removed: Sales] [added: sales] by [removed: Product:] [added: category:] | | | | | | | | | | | | | | | | | |

| [removed: (3)] [added: (2)] | [removed: Includes] [added: Wearables, Home and Accessories net] sales [added: include sales] of AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch and [removed: other] Apple-branded and third-party accessories. |

Apple Inc. | [removed: 2018] [added: 2019] Form 10-K | [removed: 23][added: 19]

[removed: iPhone][added: *iPhone*]

The following table [removed: presents iPhone] [added: shows] net sales [removed: and unit sales information] [added: by category] for [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] (dollars in [removed: millions and units in thousands):][added: millions):]

| Percentage of total net sales | [removed: 63] [added: 6] | | % | | | | | [removed: 62] [added: 5] | | % | | | | | [removed: 63] [added: 5] | | % |

[removed: iPhone] [added: iPad] net sales increased during [removed: 2018] [added: 2019] compared to [removed: 2017] [added: 2018] due primarily to [removed: a different mix of iPhones resulting in] higher [removed: average selling prices.][added: net sales of iPad Pro.]

The weakness in foreign currencies relative to the U.S. dollar had [removed: an] [added: a significant] unfavorable impact on [removed: iPhone] [added: Europe] net sales during [removed: 2017.][added: 2019.]

[removed: iPad][added: *iPad*]

The following table presents [removed: iPad net sales and unit sales] [added: selected financial] information [removed: for 2018, 2017] and [removed: 2016 (dollars in millions] [added: statistics as of] and [removed: units in thousands):][added: for the years ended September 28, 2019, September 29, 2018 and September 30, 2017 (in millions):]

| Percentage of total net sales | 7 | | % | | | | | [removed: 8] [added: 6] | | % | | | | | [removed: 10] [added: 7] | | % |

[removed: iPad] [added: iPhone] net sales decreased during [removed: 2018] [added: 2019] compared to [removed: 2017] [added: 2018] due primarily to [removed: a different mix of iPads resulting in] lower [removed: average selling prices.][added: iPhone unit sales.]

The [removed: strength] [added: weakness] in foreign currencies relative to the U.S. dollar had [removed: a favorable] [added: an unfavorable] impact on [removed: iPad] [added: Greater China] net sales during [removed: 2018.][added: 2019.]

The weakness in foreign currencies relative to the U.S. dollar had [removed: an] [added: a significant] unfavorable impact on [removed: iPad] [added: Rest of Asia Pacific] net sales during [removed: 2017.][added: 2019.]

[removed: Mac][added: *Mac*]

| Percentage of total net sales | [removed: 10] [added: 13] | | % | | | | | [removed: 11] [added: 12] | | % | | | | | [removed: 11] [added: 12] | | % |

Mac net sales [removed: decreased] [added: increased] during [removed: 2018] [added: 2019] compared to [removed: 2017] [added: 2018] due primarily to [removed: lower Mac unit sales,] [added: higher net sales of MacBook Air,] partially offset by [removed: a different mix] [added: lower net sales] of [removed: Macs with higher average selling prices.][added: MacBook® and MacBook Pro®.]

The [removed: strength in foreign currencies] [added: value of the Japanese Yen] relative to the U.S. dollar had a favorable impact on [removed: Mac] [added: Japan] net sales during [removed: 2018.][added: 2019.]

The weakness in foreign currencies [removed: relative to the U.S. dollar] had [removed: an] [added: a significant] unfavorable impact on [removed: Mac] net sales during [removed: 2017.][added: 2019.]

Apple Inc. | [removed: 2018] [added: 2019] Form 10-K | [removed: 24][added: 20]

*This section of this Form 10-K generally discusses* *2019* *and* *2018* *items and year-to-year comparisons between* *2019* *and* *2018.

Discussions of* *2017* *items and year-to-year comparisons between* *2018* *and* *2017* *that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended* *September 29, 2018.*

Total net sales decreased 2% or $5.4 billion during 2019 compared to 2018, driven by lower net sales of iPhone, partially offset by higher net sales of Wearables, Home and Accessories and Services in all geographic operating segments.

Products and Services Performance

Beginning in the first quarter of 2019, the Company classified the amortization of the deferred value of Maps, Siri and free iCloud services, which are bundled in the sales price of iPhone, Mac, iPad and certain other products, in Services net sales.

Historically, the Company classified the amortization of these amounts in Products net sales consistent with its management reporting framework.

As a result, Products and Services net sales for 2018 and 2017 were reclassified to conform to the 2019 presentation.

| iPhone (1) | $ | 142,381 | | | (14 | )% | | $ | 164,888 | | | 18 | % | | $ | 139,337 | |

| Mac (1) | 25,740 | | | | 2 | % | | 25,198 | | | | (1 | )% | | 25,569 | | |

| iPad (1) | 21,280 | | | | 16 | % | | 18,380 | | | | (2 | )% | | 18,802 | | |

| Wearables, Home and Accessories (1)(2) | 24,482 | | | | 41 | % | | 17,381 | | | | 36 | % | | 12,826 | | |

| Services (3) | 46,291 | | | | 16 | % | | 39,748 | | | | 22 | % | | 32,700 | | |

| (1) | Products net sales include amortization of the deferred value of unspecified software upgrade rights, which are bundled in the sales price of the respective product. |

| (3) | Services net sales include sales from the Company’s digital content stores and streaming services, AppleCare, licensing and other services. Services net sales also include amortization of the deferred value of Maps, Siri and free iCloud services, which are bundled in the sales price of certain products. |

*Wearables, Home and Accessories*

| | 2019 | | | | Change | | | 2018 | | | | Change | | | 2017 | | |

| Gross margin: | | | | | | | | | | | |

| Products | $ | 68,887 | | | $ | 77,683 | | | $ | 70,197 | |

| Services | 29,505 | | | | 24,156 | | | | 17,989 | | |

| Gross margin percentage: | | | | | | | | | | | |

| Products | 32.2 | | % | | 34.4 | | % | | 35.7 | | % |

| Services | 63.7 | | % | | 60.8 | | % | | 55.0 | | % |

*Products Gross Margin*

Products gross margin and Products gross margin percentage decreased during 2019 compared to 2018 due primarily to lower iPhone unit sales and the weakness in foreign currencies relative to the U.S. dollar.

*Services Gross Margin*

Year-over-year Services gross margin increased during 2019 and 2018 due primarily to higher Services net sales and a different services mix.

Year-over-year Services gross margin percentage increased during 2019 and 2018 due primarily to a different services mix and leverage of the Company’s services fixed cost structure from higher Services net sales.

As a result, the Company believes, in general, gross margins will be subject to volatility and remain under downward pressure.

| | 2019 | | | | Change | | | 2018 | | | | Change | | | 2017 | | |

| | 2019 | | | | Change | | | 2018 | | | | Change | | | 2017 | | |

| | 2019 | | | | 2018 | | | | 2017 | | |

| Statutory federal income tax rate | 21.0 | | % | | 24.5 | | % | | 35.0 | | % |

The Company’s effective tax rate for 2019 was lower than the statutory federal income tax rate due primarily to the lower tax rate on foreign earnings and tax benefits from share-based compensation.

The Company’s effective tax rate for 2019 was lower compared to 2018 due primarily to a lower statutory federal income tax rate in 2019 and the impact of the Act in 2018, partially offset by higher taxes on foreign earnings in 2019.

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

| | 2019 | | | | 2018 | | | | 2017 | | |

| Working capital | $ | 57,101 | | | $ | 15,410 | | | $ | 28,792 | |

Further information regarding the State Aid Decision can be found in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 5, “Income Taxes.”

On April 30, 2019, the Company announced the Board of Directors increased the current share repurchase program authorization from $100 billion to $175 billion of the Company’s common stock, of which $96.1 billion had been utilized as of September 28, 2019.

During 2019, the Company repurchased 345.2 million shares of its common stock for $67.1 billion, including 62.0 million shares delivered under a $12.0 billion ASR dated February 2019, which settled in August 2019.

All information presented herein is based on the Company’s fiscal calendar.

Overview and Highlights

The Company designs, manufactures and markets mobile communication and media devices and personal computers, and sells a variety of related software, services, accessories and third-party digital content and applications.

The Company’s products and services include iPhone, iPad, Mac, Apple Watch, AirPods, Apple TV, HomePod, a portfolio of consumer and professional software applications, iOS, macOS, watchOS and tvOS operating systems, iCloud, Apple Pay and a variety of other 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, Book Store and Apple Music (collectively “Digital Content and Services”).

The Company sells its products worldwide through its retail stores, online stores and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers and resellers.

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

The Company sells to consumers, small and mid-sized businesses and education, enterprise and government customers.

Net sales increased 16% or $36.4 billion during 2018 compared to 2017, driven by higher net sales of iPhone, Services and Other Products.

Net sales increased year-over-year in each of the geographic reportable segments.

Fiscal 2017 Highlights

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

The year-over-year increase in net sales reflected growth in each of the geographic reportable segments, with the exception of Greater China.

In May 2017, the Company announced an increase to its capital return program by raising the total size of the program from $250 billion to $300 billion.

This included increasing its share repurchase authorization from $175 billion to $210 billion and raising its quarterly dividend from $0.57 to $0.63 per share beginning in May 2017.

During 2017, the Company spent $33.0 billion to repurchase shares of its common stock and paid dividends and dividend equivalents of $12.8 billion.

The $210 billion share repurchase program was completed in the third quarter of 2018.

The Company issued $24.0 billion of U.S. dollar–denominated term debt, €2.5 billion of euro-denominated term debt and C$2.5 billion of Canadian dollar–denominated term debt during 2017.

Sales Data

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

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

| iPhone (1) | $ | 166,699 | | | 18 | % | | $ | 141,319 | | | 3 | % | | $ | 136,700 | |

| iPad (1) | 18,805 | | | | (2 | )% | | 19,222 | | | | (7 | )% | | 20,628 | | |

| Mac (1) | 25,484 | | | | (1 | )% | | 25,850 | | | | 13 | % | | 22,831 | | |

| Services (2) | 37,190 | | | | 24 | % | | 29,980 | | | | 23 | % | | 24,348 | | |

| Other Products (1)(3) | 17,417 | | | | 35 | % | | 12,863 | | | | 16 | % | | 11,132 | | |

| Unit Sales by Product: | | | | | | | | | | | | | | | | | |

| iPhone | 217,722 | | | | — | % | | 216,756 | | | | 2 | % | | 211,884 | | |

| iPad | 43,535 | | | | — | % | | 43,753 | | | | (4 | )% | | 45,590 | | |

| Mac | 18,209 | | | | (5 | )% | | 19,251 | | | | 4 | % | | 18,484 | | |

| | |

| --- | --- |

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

| (2) | Includes revenue from Digital Content and Services, AppleCare, Apple Pay, licensing and other services. Services net sales in 2018 included a favorable one-time item of $236 million in connection with the final resolution of various lawsuits. Services net sales in 2017 included a favorable one-time adjustment of $640 million due to a change in estimate based on the availability of additional supporting information. |

Product Performance

| Net sales | $ | 166,699 | | | 18 | % | | $ | 141,319 | | | 3 | % | | $ | 136,700 | |

| Unit sales | 217,722 | | | | — | % | | 216,756 | | | | 2 | % | | 211,884 | | |

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.

| Net sales | $ | 18,805 | | | (2 | )% | | $ | 19,222 | | | (7 | )% | | $ | 20,628 | |

| Unit sales | 43,535 | | | | — | % | | 43,753 | | | | (4 | )% | | 45,590 | | |

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

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

The Company’s investment policy and strategy are focused on [added: the] preservation of capital and supporting the Company’s liquidity requirements.

Based on investment positions as of September [removed: 29, 2018] [added: 28, 2019] and September [removed: 30, 2017,] [added: 29, 2018,] a hypothetical 100 basis point increase in interest rates across all maturities would result in a [removed: $4.9] [added: $2.8] billion and [removed: $6.0] [added: $4.9] billion incremental decline in the fair market value of the portfolio, respectively.

Apple Inc. | [removed: 2018] [added: 2019] Form 10-K | [removed: 35][added: 26]

As of September [removed: 29, 2018] [added: 28, 2019] and September [removed: 30, 2017,] [added: 29, 2018,] the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate carrying amount of [removed: $102.5] [added: $102.1] billion and [removed: $103.7] [added: $102.5] billion, respectively.

A 100 basis point increase in market interest rates would cause interest expense on the Company’s debt as of September [removed: 29, 2018] [added: 28, 2019] and September [removed: 30, 2017] [added: 29, 2018] to increase by [removed: $399] [added: $325] million and [removed: $376] [added: $399] 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 [removed: product] pricing due to competitive pressures when there has been significant volatility in foreign currency exchange rates.

To provide [removed: a meaningful] [added: an] assessment of the foreign currency risk associated with certain of the Company’s foreign currency derivative positions, the Company performed a sensitivity analysis using a value-at-risk (“VAR”) model to assess the potential impact of fluctuations in exchange rates.

Based on the results of the model, the Company estimates with 95% confidence, a maximum one-day loss in fair value of [removed: $592] [added: $452] million as of September [removed: 29, 2018] [added: 28, 2019,] compared to a maximum one-day loss in fair value of [removed: $485] [added: $592] million as of September [removed: 30, 2017.][added: 29, 2018.]

Actual future gains and losses associated with the Company’s investment portfolio, debt and derivative positions may differ materially from the sensitivity analyses performed as of September [removed: 29, 2018] [added: 28, 2019] due to the inherent limitations associated with predicting the timing and amount of changes in interest rates, foreign currency exchange rates and the Company’s actual exposures and positions.

Apple Inc. | [removed: 2018] [added: 2019] Form 10-K | [removed: 36][added: 27]

Further details regarding the Company’s debt is provided in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 5, “Debt.”

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

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

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

[removed: Products][added: Products]

[removed: iPhone][added: *iPhone*]

[removed: iPhone] [added: iPhone®] is the Company’s line of smartphones based on its iOS operating system.

In September [removed: 2018,] [added: 2019,] the Company introduced three new [removed: iPhones.][added: iPhones: iPhone 11, iPhone 11 Pro and iPhone 11 Pro Max.]

Apple Inc. | [removed: 2018] [added: 2019] Form 10-K | 1

[removed: iPad][added: *iPad*]

[removed: Mac][added: *Mac*]

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

[removed: Services][added: Services]

[removed: Digital] [added: *Digital] Content [added: Stores] and [removed: Services][added: Streaming Services*]

[added: The Company also offers subscription-based digital content streaming services, including] Apple [removed: Music] [added: Music®, which] offers users a curated listening experience with on-demand radio [removed: stations that evolve based on a user’s play or download activity] [added: stations,] and [removed: a subscription-based internet streaming service that also provides unlimited access to the] Apple [removed: Music library.][added: TV+, which offers exclusive original content, and is expected to be available in November 2019.]

Apple Inc. | [removed: 2018] [added: 2019] Form 10-K | 2

[removed: iCloud][added: *iCloud*]

[removed: iCloud] [added: iCloud®] is the Company’s cloud [removed: service] [added: service,] which stores music, photos, contacts, calendars, mail, documents and more, keeping them up-to-date and available across multiple [removed: iOS devices, Mac] [added: Apple devices] and Windows personal [removed: computers and Apple TV.][added: computers.]

[removed: AppleCare][added: *AppleCare*]

[removed: AC+] [added: AppleCare® includes AppleCare \+ (“AC+”)] and [removed: APP] [added: the AppleCare Protection Plan, which] are fee-based services that extend the coverage of phone support eligibility and hardware repairs.

[removed: Other][added: *Other Services*]

[removed: The Company also sells AirPods,] [added: Wearables, Home and Accessories includes AirPods®, Apple TV®, Apple Watch®,] Beats® products, [removed: HomePod,] [added: HomePod™,] iPod [removed: touch] [added: touch®] and other Apple-branded and third-party accessories.

Apple Inc. | [removed: 2018] [added: 2019] Form 10-K | 3

[removed: Markets] [added: Markets] and [removed: Distribution][added: Distribution]

During [removed: 2018,] [added: 2019,] the Company’s net sales through its direct and indirect distribution channels accounted for [removed: 29%] [added: 31%] and [removed: 71%,] [added: 69%,] respectively, of total net sales.

No single customer accounted for more than 10% of net sales in [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016.][added: 2017.]

[removed: Competition][added: Competition]

These markets are characterized by frequent product introductions and rapid technological advances that have substantially increased the capabilities and use of [removed: mobile communication and media devices,] [added: smartphones,] personal [removed: computers] [added: computers, tablets] and other [removed: digital] electronic devices.

Principal competitive factors important to the Company include price, product and service features (including security features), relative price and performance, product and service quality and reliability, design innovation, a strong third-party software and accessories ecosystem, marketing and distribution capability, service and [removed: support] [added: support,] and corporate reputation.

The Company is focused on expanding its market opportunities related to [added: smartphones,] personal [removed: computers and mobile communication] [added: computers, tablets] and [removed: media] [added: other electronic] devices.

The Company expects competition in these markets to intensify significantly as competitors [removed: attempt to] imitate [removed: some of the] features of the Company’s products and applications within their [removed: own products or, alternatively,] [added: products, or] collaborate [removed: with each other] to offer solutions that are more competitive than those they currently offer.

These markets are characterized by aggressive price competition, frequent product introductions, evolving design approaches and technologies, rapid adoption of technological advancements by [removed: competitors] [added: competitors,] and price sensitivity on the part of consumers and businesses.

Apple Inc. | [removed: 2018] [added: 2019] Form 10-K | 4

The Company believes it offers superior innovation and integration of the entire [removed: solution] [added: solution,] including [removed: the hardware (iOS devices, Mac, Apple Watch and Apple TV),] [added: hardware,] software [removed: (iOS, macOS, watchOS] and [removed: tvOS), online services and distribution of digital content and applications (Digital Content and Services).][added: services.]

Some of the Company’s current and potential competitors have substantial resources and may be able to provide such products and services at little or no [removed: profit] [added: profit,] or even at a [removed: loss] [added: loss,] to compete with the Company’s offerings.

[removed: Supply] [added: Supply] of [removed: Components][added: Components]

[removed: In addition, the] [added: The] Company [added: also] competes for various components with other participants in the markets for [removed: mobile communication and media devices and] [added: smartphones,] personal [removed: computers.][added: computers, tablets and other electronic devices.]

Therefore, many components used by the Company, including those that are available from multiple sources, are at times subject to industry-wide shortage and significant commodity pricing [removed: fluctuations that could materially adversely affect the Company’s financial condition and operating results.][added: fluctuations.]

When a component or product uses new technologies, initial capacity constraints may exist until the suppliers’ yields have matured or [added: their] manufacturing [removed: capacity has] [added: capacities have] increased.

[removed: Continued] [added: The continued] availability of these components at acceptable prices, or at all, may be affected if suppliers decide to concentrate on the production of common components instead of components customized to meet the Company’s requirements.

[removed: Research] [added: Research] and [removed: Development][added: Development]

During 2019, the Company released a new version of MacBook Air® and a new Mac mini®, and introduced an updated Mac Pro®, which is expected to be available in the fall of 2019.

iPad® is the Company’s line of multi-purpose tablets.

iPad is based on the Company’s iPadOS™ operating system, which was introduced during 2019.

Also during 2019, the Company released two new versions of iPad Pro®, an iPad Air®, an updated iPad mini® and a new 10.2-inch iPad.

*Wearables, Home and Accessories*

In October 2019, the Company introduced AirPods Pro™.

Apple Watch is a personal electronic device that combines the watchOS® user interface and other technologies created specifically for a smaller device.

In September 2019, the Company introduced Apple Watch Series 5.

The Company operates various platforms that allow customers to discover and download applications and digital content, such as books, music, video, games and podcasts.

These platforms include the App Store®, available for iPhone and iPad, the Mac App Store, the TV App Store and the Watch App Store.

*Licensing*

The Company licenses the use of certain of its intellectual property, and provides other related services.

The Company delivers a variety of other services available in certain countries, including Apple Arcade™, a game subscription service; Apple Card™, a co-branded credit card; Apple News+, a subscription news and magazine service; and Apple Pay, a cashless payment service.

The Company’s products and services include iPhone®, iPad®, Mac®, Apple Watch®, AirPods®, Apple TV®, HomePod™, a portfolio of consumer and professional software applications, iOS, macOS®, watchOS® and tvOS™ operating systems, iCloud®, Apple Pay® and a variety of other 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, Book Store and Apple Music® (collectively “Digital Content and Services”).

The Company sells its products worldwide through its retail stores, online stores and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers and resellers.

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

Business Strategy

The Company is committed to bringing the best user experience to its customers through its innovative hardware, software and services.

The Company’s business strategy leverages its unique ability to design and develop its own operating systems, hardware, application software and services to provide its customers products and solutions with innovative design, superior ease-of-use and seamless integration.

As part of its strategy, the Company continues to expand its platform for the discovery and delivery of digital content and applications through its Digital Content and Services, which allows customers to discover and download or stream 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, Apple Watch and HomePod.

The Company also supports a community for the development of third-party software and hardware products and digital content that complement the Company’s offerings.

The Company believes a high-quality buying experience with knowledgeable salespersons who can convey the value of the Company’s products and services greatly enhances its ability to attract and retain customers.

Therefore, the Company’s strategy also includes building and expanding its own retail and online stores and its third-party distribution network to effectively reach more customers and provide them with a high-quality sales and post-sales support experience.

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

iPhone includes Siri®, an intelligent assistant, and Apple Pay, Touch ID® and Face ID® on qualifying devices.

iPhone Xs and Xs Max feature a Super Retina™ OLED display, an all-screen stainless steel and glass design, faster processors and enhanced cameras, and were available beginning in September 2018.

iPhone XR features a Liquid Retina™ LCD display in an all-screen aluminum and glass design, and was available beginning in October 2018.

The Company’s line of smartphones also includes iPhone 8, 8 Plus, 7 and 7 Plus models.

iPhone works with the iTunes Store, App Store, Book Store and Apple Music for purchasing, organizing and playing digital content and apps.

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

iPad includes Siri, Apple Pay and Touch ID.

In March 2018, the Company released a new 9.7-inch iPad with Apple Pencil® compatibility.

In October 2018, the Company introduced a new version of iPad Pro as well as a new Apple Pencil and Smart Keyboard Folio™.

The new 11-inch and 12.9-inch iPad Pro models feature a Liquid Retina LCD display in an all-screen aluminum and glass design and integrate Face ID.

iPad works with the iTunes Store, App Store, Book Store and Apple Music for purchasing, organizing and playing digital content and apps.

Mac includes Siri and supports Apple Pay, and also includes Touch ID on qualifying devices.

The Company’s desktop computers include iMac® 21.5-inch, iMac 21.5-inch with Retina® 4K display, iMac 27-inch with Retina 5K display, iMac Pro®, Mac Pro® and Mac mini®.

The Company’s portable computers include MacBook®, MacBook Air®, MacBook Pro® and MacBook Pro with Touch Bar™.

In October 2018, the Company introduced a new MacBook Air featuring a Retina display and Touch ID, and a new Mac mini with upgraded performance.

Operating Systems

iOS

iOS is the Company’s mobile operating system that serves as the foundation for iOS devices.

Devices running iOS are compatible with both Mac and Windows personal computers and Apple’s iCloud services.

In September 2018, the Company released iOS 12, which includes improved performance and responsiveness, new augmented reality capabilities and expressive communication features, and introduces Siri Shortcuts, enabling Siri to intelligently pair with third-party apps.

macOS

macOS is the Company’s desktop 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 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.

macOS Mojave, released in September 2018, is the 15th major release of macOS and makes apps such as News, Stocks, Voice Memos and Home available on the Mac for the first time.

macOS Mojave also adds desktop and Finder® enhancements, such as Dark Mode, and introduces a full redesign of the Mac App Store.

watchOS

watchOS is the Company’s operating system for Apple Watch.

In September 2018, the Company released watchOS 5, which helps users stay healthy and connected with new features including Activity Sharing competitions, auto-workout detection, advanced running features, Walkie-Talkie, Apple Podcasts and third-party apps on the Siri watch face.

Except as described in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note [removed: 9,] [added: 10,] “Commitments and Contingencies” under the heading “Contingencies,” in the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss, or a material loss [removed: in excess of] [added: greater than] a recorded accrual, [removed: with respect to] [added: concerning] loss contingencies for asserted legal and other claims.

If one or more legal matters were resolved against the Company in a reporting period for amounts [removed: in excess of] [added: above] management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected.

Refer to 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: 2018] [added: 2019] that did not individually or in the aggregate have a material impact on the Company’s financial condition or operating results.

[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: 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: 29, 2018][added: 28, 2019]

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

For the transition period from to [added: .]

Commission File Number: [removed: 001-36743][added: 001-36743]

[removed: ][added: ]

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

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

| (State or other jurisdiction of incorporation or organization) | | [added: | |] (I.R.S. Employer Identification No.) |

| [removed: One] [added: One] Apple Park [removed: Way Cupertino, California] [added: Way] | | [removed: 95014] | [added: | |]

| (Address of principal executive offices) | | [added: | |] (Zip Code) |

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

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

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit [removed: and post] such files).

The aggregate market value of the voting and non-voting stock held by non-affiliates of the Registrant, as of March [removed: 30, 2018,] [added: 29, 2019,] the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately [removed: $828,880,000,000.][added: $874,698,000,000.]

[removed: 4,745,398,000] [added: 4,443,265,000] shares of common stock were issued and outstanding as of October [removed: 26, 2018.][added: 18, 2019.]

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

Portions of the Registrant’s definitive proxy statement relating to its [removed: 2019] [added: 2020] annual meeting of shareholders (the [removed: “2019] [added: “2020] Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.

The [removed: 2019] [added: 2020] 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: TABLE] [added: TABLE] OF [removed: CONTENTS][added: CONTENTS]

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

[removed: | [Part I](#s3BB848FCD8905781B453DFFF0861164B) | | |][added: PART I]

| [Item [removed: 1.](#sDBC90BB3472F5D77AE627A9E12BBCE54)] [added: 1.](#s8FA93AA667C0535398014FA54B397439)] | [removed: [Business](#sDBC90BB3472F5D77AE627A9E12BBCE54)] [added: [Business](#s8FA93AA667C0535398014FA54B397439)] | [removed: [1](#sDBC90BB3472F5D77AE627A9E12BBCE54)] [added: [1](#s8FA93AA667C0535398014FA54B397439)] |

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| [Item [removed: 4.](#s682D53AE5B1253F59539FE888CDB6ACF)] [added: 4.](#sD33472E8BE865C43851A1C3B62FDB2D2)] | [Mine Safety [removed: Disclosures](#s682D53AE5B1253F59539FE888CDB6ACF)] [added: Disclosures](#sD33472E8BE865C43851A1C3B62FDB2D2)] | [removed: [18](#s682D53AE5B1253F59539FE888CDB6ACF)] [added: [14](#sD33472E8BE865C43851A1C3B62FDB2D2)] |

| [Item [removed: 5.](#sB74C8C048FEE5B9094CFFF9C4D8835B0)] [added: 5.](#sF8C8F387D3165D459768F3D870FAEA13)] | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#sB74C8C048FEE5B9094CFFF9C4D8835B0)] [added: Securities](#sF8C8F387D3165D459768F3D870FAEA13)] | [removed: [19](#sB74C8C048FEE5B9094CFFF9C4D8835B0)] [added: [15](#sF8C8F387D3165D459768F3D870FAEA13)] |

| [Item [removed: 6.](#s3D96A5DBA8715BDE86A791ABECED236C)] [added: 6.](#sEDE9BAA1C9E05AB4843082ACD6A97FE3)] | [Selected Financial [removed: Data](#s3D96A5DBA8715BDE86A791ABECED236C)] [added: Data](#sEDE9BAA1C9E05AB4843082ACD6A97FE3)] | [removed: [21](#s3D96A5DBA8715BDE86A791ABECED236C)] [added: [17](#sEDE9BAA1C9E05AB4843082ACD6A97FE3)] |

| [Item [removed: 7.](#s43F56BE3F0F05D22954A79CDC2E0C81F)] [added: 7.](#s86531024D4355D39AEEBA31406A0E758)] | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s43F56BE3F0F05D22954A79CDC2E0C81F)] [added: Operations](#s86531024D4355D39AEEBA31406A0E758)] | [removed: [22](#s43F56BE3F0F05D22954A79CDC2E0C81F)] [added: [18](#s86531024D4355D39AEEBA31406A0E758)] |

| [Item [removed: 7A.](#sCEB5492E489C53C2AC6331716AC400E1)] [added: 7A.](#s37F84E3E4CEC530F9DE46181A4344271)] | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#sCEB5492E489C53C2AC6331716AC400E1)] [added: Risk](#s37F84E3E4CEC530F9DE46181A4344271)] | [removed: [35](#sCEB5492E489C53C2AC6331716AC400E1)] [added: [26](#s37F84E3E4CEC530F9DE46181A4344271)] |

| [Item [removed: 8.](#s774D98D6A1E053D995022229C35FD4F6)] [added: 8.](#sDBCC0D7FC5D05F49A572F9AA0627E992)] | [Financial Statements and Supplementary [removed: Data](#s774D98D6A1E053D995022229C35FD4F6)] [added: Data](#sDBCC0D7FC5D05F49A572F9AA0627E992)] | [removed: [37](#s774D98D6A1E053D995022229C35FD4F6)] [added: [28](#sDBCC0D7FC5D05F49A572F9AA0627E992)] |

| [Item [removed: 9.](#s089446C831B151E6904D89C3FB4849BE)] [added: 9.](#s6B01DE738B9E59FF8C3F8CFE9C9E0B79)] | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s089446C831B151E6904D89C3FB4849BE)] [added: Disclosure](#s6B01DE738B9E59FF8C3F8CFE9C9E0B79)] | [removed: [67](#s089446C831B151E6904D89C3FB4849BE)] [added: [59](#s6B01DE738B9E59FF8C3F8CFE9C9E0B79)] |

| [Item [removed: 9A.](#s8A19B44BFA295DB3A5F47E8109C38898)] [added: 9A.](#sA9A243DA245A56F5AC25705E9A3D277F)] | [Controls and [removed: Procedures](#s8A19B44BFA295DB3A5F47E8109C38898)] [added: Procedures](#sA9A243DA245A56F5AC25705E9A3D277F)] | [removed: [67](#s8A19B44BFA295DB3A5F47E8109C38898)] [added: [59](#sA9A243DA245A56F5AC25705E9A3D277F)] |

| [Item [removed: 9B.](#s03D5DA8D066F5C9384B1625B189E18E5)] [added: 9B.](#s05D204CD87755D688D28C56362110879)] | [Other [removed: Information](#s03D5DA8D066F5C9384B1625B189E18E5)] [added: Information](#s05D204CD87755D688D28C56362110879)] | [removed: [67](#s03D5DA8D066F5C9384B1625B189E18E5)] [added: [59](#s05D204CD87755D688D28C56362110879)] |

| | | | | |

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

| | | | | |

| | | | | |

| Cupertino | | California | | 95014 |

| Common Stock, $0.00001 par value per share | AAPL | The Nasdaq Stock Market LLC |

| 1.000% Notes due 2022 | — | The Nasdaq Stock Market LLC |

| 1.375% Notes due 2024 | — | The Nasdaq Stock Market LLC |

| 0.875% Notes due 2025 | — | The Nasdaq Stock Market LLC |

| 1.625% Notes due 2026 | — | The Nasdaq Stock Market LLC |

| 2.000% Notes due 2027 | — | The Nasdaq Stock Market LLC |

| 1.375% Notes due 2029 | — | The Nasdaq Stock Market LLC |

| 3.050% Notes due 2029 | — | The Nasdaq Stock Market LLC |

| 3.600% Notes due 2042 | — | The Nasdaq Stock Market LLC |

Apple Inc.

Form 10-K

For the Fiscal Year Ended September 28, 2019

| [Part II](#s441770BCD3195825A459C905D90A255A) | | |

| [Part IV](#s49498D0CD5C959CA84C417CEA46A6953) | | |

10-K 1 a10-k20189292018.htm 10-K

| | | |

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

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

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.

| [Part II](#s3B8BC521410054958D1841FAD29D8B76) | | |

| [Part IV](#sA641B38724A3501FB5FD0FE0A4D259EF) | | |

All information presented herein is based on the Company’s fiscal calendar.

Apple Inc. | 2018 Form 10-K | 17

As of September [removed: 29, 2018,] [added: 28, 2019,] the Company owned [added: or leased] facilities and land for corporate functions, [removed: R&D and] [added: R&D,] data [removed: centers] [added: centers, retail and other purposes] at [removed: various] locations throughout the U.S. [removed: Outside the U.S.,] [added: and in various places outside] the [added: U.S. The] Company [removed: owned additional] [added: believes its existing] facilities and [removed: land] [added: equipment, which are used by all reportable segments, are in good operating condition and are suitable] for [removed: various purposes.][added: the conduct of its business.]

As of September 29, 2018, the Company owned 16.5 million square feet and leased 24.3 million square feet of building space, primarily in the U.S. Additionally, the Company owned a total of 7,376 acres of land, primarily in the U.S.

The Company believes its existing facilities and equipment, which are used by all reportable segments, are in good operating condition and are suitable for the conduct of its business.

The Company has invested in internal capacity and strategic relationships with outside manufacturing vendors and continues to make investments in capital equipment as needed to meet anticipated demand for its products and services.

Apple Inc. | [removed: 2018] [added: 2019] Form 10-K | [removed: 18][added: 14]

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

The Company’s common stock is traded on The Nasdaq Stock Market LLC [removed: (“Nasdaq”)] under the symbol AAPL.

[removed: Holders][added: Holders]

As of October [removed: 26, 2018,] [added: 18, 2019,] there were [removed: 23,712] [added: 23,233] shareholders of record.

[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: 29, 2018] [added: 28, 2019] was as follows (in millions, except number of shares, which are reflected in thousands, and per share amounts):

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

| Open market and privately negotiated purchases | | [removed: 26,859] [added: 23,860] | | | $ | [removed: 192.50] [added: 205.36] | | | [removed: 26,859] [added: 23,860] | | | | | |

| Open market and privately negotiated purchases | | [removed: 36,575] [added: 34,705] | | | $ | [removed: 214.07] [added: 204.59] | | | [removed: 36,575] [added: 34,705] | | | | | |

| Open market and privately negotiated purchases | | [removed: 29,029] [added: 27,178] | | | $ | [removed: 222.07] [added: 217.17] | | | [removed: 29,029] [added: 27,178] | | | | | |

| (1) | On [removed: May 1, 2018,] [added: April 30, 2019,] the Company announced the Board of Directors [removed: had authorized a program to] [added: increased the current share] repurchase [removed: up to] [added: program authorization from] $100 billion [added: to $175 billion] of the Company’s common stock, of which [removed: $29.0] [added: $96.1] billion had been utilized as of September [removed: 29, 2018.] [added: 28, 2019.] The remaining [removed: $71.0] [added: $78.9] billion in the table represents the amount available to repurchase shares under the authorized repurchase program as of September [removed: 29, 2018.] [added: 28, 2019.] The Company’s share repurchase program does not obligate it to acquire any specific number of shares. Under this program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act. |

Apple Inc. | [removed: 2018] [added: 2019] Form 10-K | [removed: 19][added: 15]

[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: 29, 2018.][added: 28, 2019.]

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: 27, 2013.][added: 26, 2014.]

[removed: ][added: ]

| * | $100 invested on September [removed: 27, 2013] [added: 26, 2014] 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: 2018] [added: 2019] Standard & Poor’s, a division of S&P Global.

Copyright© [removed: 2018] [added: 2019] S&P Dow Jones Indices LLC, a division of S&P Global.

| | | [removed: September 2013] [added: September 2014] | | | | [removed: September 2014] [added: September 2015] | | | | [removed: September 2015] [added: September 2016] | | | | [removed: September 2016] [added: September 2017] | | | | [removed: September 2017] [added: September 2018] | | | | [removed: September 2018] [added: September 2019] | | |

| Dow Jones U.S. Technology Supersector Index | | $ | 100 | | | $ | [removed: 130] [added: 100] | | | $ | [removed: 130] [added: 122] | | | $ | [removed: 159] [added: 156] | | | $ | [removed: 203] [added: 205] | | | $ | [removed: 266] [added: 218] | |

Apple Inc. | [removed: 2018] [added: 2019] Form 10-K | [removed: 20][added: 16]

| June 30, 2019 to August 3, 2019: | | | | | | | | | | | | | | |

| August 4, 2019 to August 31, 2019: | | | | | | | | | | | | | | |

| February 2019 ASR | | 6,886 | | | (2) | | | | 6,886 | | | | | |

| September 1, 2019 to September 28, 2019: | | | | | | | | | | | | | | |

| Total | | 92,629 | | | | | | | | | | $ | 78,869 | |

| (2) | In February 2019, the Company entered into an accelerated share repurchase arrangement (“ASR”) to purchase up to $12.0 billion of the Company’s common stock. In August 2019, the purchase period for this ASR ended and an additional 6.9 million shares were delivered and retired. In total, 62.0 million shares were delivered under this ASR at an average repurchase price of $193.69. |

| Apple Inc. | | $ | 100 | | | $ | 116 | | | $ | 116 | | | $ | 162 | | | $ | 240 | | | $ | 237 | |

| S&P 500 Index | | $ | 100 | | | $ | 99 | | | $ | 115 | | | $ | 136 | | | $ | 160 | | | $ | 167 | |

| S&P Information Technology Index | | $ | 100 | | | $ | 102 | | | $ | 125 | | | $ | 162 | | | $ | 213 | | | $ | 231 | |

| | |

| --- | --- |

| July 1, 2018 to August 4, 2018: | | | | | | | | | | | | | | |

| August 5, 2018 to September 1, 2018: | | | | | | | | | | | | | | |

| September 2, 2018 to September 29, 2018: | | | | | | | | | | | | | | |

| Total | | 92,463 | | | | | | | | | | $ | 70,970 | |

| Apple Inc. | | $ | 100 | | | $ | 149 | | | $ | 173 | | | $ | 174 | | | $ | 242 | | | $ | 359 | |

| S&P 500 Index | | $ | 100 | | | $ | 120 | | | $ | 119 | | | $ | 137 | | | $ | 163 | | | $ | 192 | |

| S&P Information Technology Index | | $ | 100 | | | $ | 129 | | | $ | 132 | | | $ | 162 | | | $ | 209 | | | $ | 275 | |

The information set forth below for the five years ended September [removed: 29, 2018,] [added: 28, 2019,] 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 [removed: related] [added: accompanying] 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: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| [removed: Net] [added: Total net] sales | $ | [removed: 265,595] [added: 260,174] | | | $ | [removed: 229,234] [added: 265,595] | | | $ | [removed: 215,639] [added: 229,234] | | | $ | [removed: 233,715] [added: 215,639] | | | $ | [removed: 182,795] [added: 233,715] | |

| Net income | $ | [removed: 59,531] [added: 55,256] | | | $ | [removed: 48,351] [added: 59,531] | | | $ | [removed: 45,687] [added: 48,351] | | | $ | [removed: 53,394] [added: 45,687] | | | $ | [removed: 39,510] [added: 53,394] | |

| Basic | $ | [removed: 12.01] [added: 11.97] | | | $ | [removed: 9.27] [added: 12.01] | | | $ | [removed: 8.35] [added: 9.27] | | | $ | [removed: 9.28] [added: 8.35] | | | $ | [removed: 6.49] [added: 9.28] | |

| Diluted | $ | [removed: 11.91] [added: 11.89] | | | $ | [removed: 9.21] [added: 11.91] | | | $ | [removed: 8.31] [added: 9.21] | | | $ | [removed: 9.22] [added: 8.31] | | | $ | [removed: 6.45] [added: 9.22] | |

| Cash dividends declared per share | $ | [removed: 2.72] [added: 3.00] | | | $ | [removed: 2.40] [added: 2.72] | | | $ | [removed: 2.18] [added: 2.40] | | | $ | [removed: 1.98] [added: 2.18] | | | $ | [removed: 1.82] [added: 1.98] | |

| Basic | [removed: 4,955,377] [added: 4,617,834] | | | | [removed: 5,217,242] [added: 4,955,377] | | | | [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: 5,000,109] [added: 4,648,913] | | | | [removed: 5,251,692] [added: 5,000,109] | | | | [removed: 5,500,281] [added: 5,251,692] | | | | [removed: 5,793,069] [added: 5,500,281] | | | | [removed: 6,122,663] [added: 5,793,069] | | |

| Total cash, cash equivalents and marketable securities | $ | [removed: 237,100] [added: 205,898] | | | $ | [removed: 268,895] [added: 237,100] | | | $ | [removed: 237,585] [added: 268,895] | | | $ | [removed: 205,666] [added: 237,585] | | | $ | [removed: 155,239] [added: 205,666] | |

| Total assets | $ | [removed: 365,725] [added: 338,516] | | | $ | [removed: 375,319] [added: 365,725] | | | $ | [removed: 321,686] [added: 375,319] | | | $ | [removed: 290,345] [added: 321,686] | | | $ | [removed: 231,839] [added: 290,345] | |

| Non-current portion of term debt | $ | [removed: 93,735] [added: 91,807] | | | $ | [removed: 97,207] [added: 93,735] | | | $ | [removed: 75,427] [added: 97,207] | | | $ | [removed: 53,329] [added: 75,427] | | | $ | [removed: 28,987] [added: 53,329] | |

Apple Inc. | [removed: 2018] [added: 2019] Form 10-K | [removed: 21][added: 17]

| Other non-current liabilities | $ | 50,503 | | | $ | 48,914 | | | $ | 44,212 | | | $ | 39,986 | | | $ | 38,104 | |

| Other non-current liabilities | $ | 45,180 | | | $ | 40,415 | | | $ | 36,074 | | | $ | 33,427 | | | $ | 24,826 | |

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

| [Consolidated Statements of Operations for the years ended September [removed: 29, 2018,] [added: 28, 2019,] September [removed: 30, 2017] [added: 29, 2018] and September [removed: 24, 2016](#s7699811054DB54C4A592D6E5B5BD32B7)] [added: 30, 2017](#sD628584EE6B55393A4E35023D14120AE)] | | [removed: [38](#s7699811054DB54C4A592D6E5B5BD32B7)] [added: [29](#sD628584EE6B55393A4E35023D14120AE)] |

| [Consolidated Statements of Comprehensive Income for the years ended September [removed: 29, 2018,] [added: 28, 2019,] September [removed: 30, 2017] [added: 29, 2018] and September [removed: 24, 2016](#s2983BBBD222758FE894E9D07D76E7F49)] [added: 30, 2017](#s43F41C0D88375104950641E5AD6BB17A)] | | [removed: [39](#s2983BBBD222758FE894E9D07D76E7F49)] [added: [30](#s43F41C0D88375104950641E5AD6BB17A)] |

| [Consolidated Balance Sheets as of September [removed: 29, 2018] [added: 28, 2019] and September [removed: 30, 2017](#s89D18B6BECA751588D8AD93C418ED353)] [added: 29, 2018](#s6D62EE50CBA95D4FB3E6485B01BAD719)] | | [removed: [40](#s89D18B6BECA751588D8AD93C418ED353)] [added: [31](#s6D62EE50CBA95D4FB3E6485B01BAD719)] |

| [Consolidated Statements of Shareholders’ Equity for the years ended September [removed: 29, 2018,] [added: 28, 2019,] September [removed: 30, 2017] [added: 29, 2018] and September [removed: 24, 2016](#s2371694182255298AFA942F140F18B7D)] [added: 30, 2017](#s4B3C881CFFBD57FCA56006EDB8D567DC)] | | [removed: [41](#s2371694182255298AFA942F140F18B7D)] [added: [32](#s4B3C881CFFBD57FCA56006EDB8D567DC)] |

| [Consolidated Statements of Cash Flows for the years ended September [removed: 29, 2018,] [added: 28, 2019,] September [removed: 30, 2017] [added: 29, 2018] and September [removed: 24, 2016](#sE585273B2EE25A9DB55C6483D0E8E225)] [added: 30, 2017](#s518AB031B05D5A74940A902D148B98B2)] | | [removed: [42](#sE585273B2EE25A9DB55C6483D0E8E225)] [added: [33](#s518AB031B05D5A74940A902D148B98B2)] |

[removed: | [Notes] [added: Notes] to Consolidated Financial [removed: Statements](#s9CFA4FAD42005CE09BB5A2A0F2FA386A) | | [43](#s9CFA4FAD42005CE09BB5A2A0F2FA386A) |][added: Statements]

| [Selected Quarterly Financial Information [removed: (Unaudited)](#s06C8ABB5ED3D51CFB48E40BC455B7FD8)] [added: (Unaudited)](#s7D3B610B0B9E50E2AD227A1A14EA70E6)] | | [removed: [64](#s06C8ABB5ED3D51CFB48E40BC455B7FD8)] [added: [55](#s7D3B610B0B9E50E2AD227A1A14EA70E6)] |

| [Reports of Independent Registered Public Accounting [removed: Firm](#s537D63A68FF15409819E4272AB310E76)] [added: Firm](#s9FD5F74E60ED59B798D9FFE366A57E96)] | | [removed: [65](#s537D63A68FF15409819E4272AB310E76)] [added: [56](#s9FD5F74E60ED59B798D9FFE366A57E96)] |

All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and [removed: notes thereto.][added: accompanying notes.]

Apple Inc. | [removed: 2018] [added: 2019] Form 10-K | [removed: 37][added: 28]

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

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

(In millions, except [removed: number of shares which are reflected in thousands and] per share amounts)

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

| | [removed: September 29, 2018] [added: September 28, 2019] | | | | [removed: September 30, 2017] [added: September 29, 2018] | | | | [removed: September 24, 2016] [added: September 30, 2017] | | |

| [removed: Net] [added: Total net] sales | [removed: $] [added: 260,174] | [removed: 265,595] | | | [removed: $] [added: 265,595] | [removed: 229,234] | | | [removed: $] [added: 229,234] | [removed: 215,639] | |

| [removed: Cost] [added: Total cost] of sales | [removed: 163,756] [added: 161,782] | | | | [removed: 141,048] [added: 163,756] | | | | [removed: 131,376] [added: 141,048] | | |

| Gross margin | [removed: 101,839] [added: 98,392] | | | | [removed: 88,186] [added: 101,839] | | | | [removed: 84,263] [added: 88,186] | | |

| Research and development | [removed: 14,236] [added: 16,217] | | | | [removed: 11,581] [added: 14,236] | | | | [removed: 10,045] [added: 11,581] | | |

| Selling, general and administrative | [removed: 16,705] [added: 18,245] | | | | [removed: 15,261] [added: 16,705] | | | | [removed: 14,194] [added: 15,261] | | |

| Total operating expenses | [removed: 30,941] [added: 34,462] | | | | [removed: 26,842] [added: 30,941] | | | | [removed: 24,239] [added: 26,842] | | |

| Operating income | [removed: 70,898] [added: 63,930] | | | | [removed: 61,344] [added: 70,898] | | | | [removed: 60,024] [added: 61,344] | | |

| Other income/(expense), net | [removed: 2,005] [added: 1,807] | | | | [removed: 2,745] [added: 2,005] | | | | [removed: 1,348] [added: 2,745] | | |

| Income before provision for income taxes | [removed: 72,903] [added: 65,737] | | | | [removed: 64,089] [added: 72,903] | | | | [removed: 61,372] [added: 64,089] | | |

| Provision for income taxes | [removed: 13,372] [added: 10,481] | | | | [removed: 15,738] [added: 13,372] | | | | [removed: 15,685] [added: 15,738] | | |

| Net income | $ | [removed: 59,531] [added: 55,256] | | | $ | [removed: 48,351] [added: 59,531] | | | $ | [removed: 45,687] [added: 48,351] | |

| Basic | $ | [removed: 12.01] [added: 11.97] | | | $ | [removed: 9.27] [added: 12.01] | | | $ | [removed: 8.35] [added: 9.27] | |

| Diluted | $ | [removed: 11.91] [added: 11.89] | | | $ | [removed: 9.21] [added: 11.91] | | | $ | [removed: 8.31] [added: 9.21] | |

| Basic | [removed: 4,955,377] [added: 4,617,834] | | | | [removed: 5,217,242] [added: 4,955,377] | | | | [removed: 5,470,820] [added: 5,217,242] | | |

| Diluted | [removed: 5,000,109] [added: 4,648,913] | | | | [removed: 5,251,692] [added: 5,000,109] | | | | [removed: 5,500,281] [added: 5,251,692] | | |

Apple Inc. | [removed: 2018] [added: 2019] Form 10-K | [removed: 38][added: 29]

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

| Change in foreign currency translation, net of tax [removed: effects of $(1), $(77) and $8, respectively] | [removed: (525] [added: (408] | | ) | | [removed: 224] [added: (525] | | [added: )] | | [removed: 75] [added: 224] | | |

| Change in unrealized gains/losses on derivative [removed: instruments:] [added: instruments, net of tax:] | | | | | | | | | | | |

| Change in fair value of [removed: derivatives, net of tax benefit/(expense) of $(149), $(478) and $(7), respectively] [added: derivatives] | [removed: 523] [added: (661] | | [added: )] | | [removed: 1,315] [added: 523] | | | | [removed: 7] [added: 1,315] | | |

| Adjustment for net (gains)/losses realized and included in net [removed: income, net of tax expense/(benefit) of $(104), $475 and $131, respectively] [added: income] | [removed: 382] [added: 23] | | | | [removed: (1,477] [added: 382] | | [removed: )] | | [removed: (741] [added: (1,477] | | ) |

| Total change in unrealized gains/losses on derivative [removed: instruments, net of tax] [added: instruments] | [removed: 905] [added: (638] | | [added: )] | | [removed: (162] [added: 905] | | [removed: )] | | [removed: (734] [added: (162] | | ) |

| Change in unrealized gains/losses on marketable [removed: securities:] [added: securities, net of tax:] | | | | | | | | | | | |

| Adjustment for net (gains)/losses realized and included in net [removed: income, net of tax expense/(benefit) of $21, $35 and $(31), respectively] [added: income] | [removed: 1] [added: 25] | | | | [removed: (64] [added: 1] | | [removed: )] | | [removed: 56] [added: (64] | | [added: )] |

| Products | $ | 213,883 | | | $ | 225,847 | | | $ | 196,534 | |

| Services | 46,291 | | | | 39,748 | | | | 32,700 | | |

| Products | 144,996 | | | | 148,164 | | | | 126,337 | | |

| Services | 16,786 | | | | 15,592 | | | | 14,711 | | |

Apple Inc.

| | Years ended | | | | | | | | | | |

| Change in fair value of marketable securities | 3,802 | | | | (3,407 | | ) | | (782 | | ) |

Apple Inc.

| | September 28, 2019 | | | | September 29, 2018 | | |

| Other current liabilities | 37,720 | | | | 33,327 | | |

| Deferred revenue | 5,522 | | | | 5,966 | | |

| Total current liabilities | 105,718 | | | | 115,929 | | |

| Total shareholders’ equity | 90,488 | | | | 107,147 | | |

Apple Inc.

| | Years ended | | | | | | | | | | |

| | September 28, 2019 | | | | September 29, 2018 | | | | September 30, 2017 | | |

| Total shareholders’ equity, beginning balances | $ | 107,147 | | | $ | 134,047 | | | $ | 128,249 | |

| Common stock and additional paid-in capital: | | | | | | | | | | | |

| Beginning balances | 40,201 | | | | 35,867 | | | | 31,251 | | |

| Common stock issued | 781 | | | | 669 | | | | 555 | | |

| Common stock withheld related to net share settlement of equity awards | (2,002 | | ) | | (1,778 | | ) | | (1,468 | | ) |

| Ending balances | 45,174 | | | | 40,201 | | | | 35,867 | | |

| Retained earnings: | | | | | | | | | | | |

| Beginning balances | 70,400 | | | | 98,330 | | | | 96,364 | | |

| Common stock withheld related to net share settlement of equity awards | (1,029 | | ) | | (948 | | ) | | (581 | | ) |

| Common stock repurchased | (67,101 | | ) | | (73,056 | | ) | | (33,001 | | ) |

| Cumulative effects of changes in accounting principles | 2,501 | | | | 278 | | | | — | | |

| Ending balances | 45,898 | | | | 70,400 | | | | 98,330 | | |

| Beginning balances | (3,454 | | ) | | (150 | | ) | | 634 | | |

| Cumulative effects of changes in accounting principles | 89 | | | | (278 | | ) | | — | | |

| Ending balances | (584 | | ) | | (3,454 | | ) | | (150 | | ) |

Apple Inc.

| | Years ended | | | | | | | | | | |

| | September 28, 2019 | | | | September 29, 2018 | | | | September 30, 2017 | | |

| Deferred revenue | (625 | | ) | | (3 | | ) | | (593 | | ) |

| Other | (105 | | ) | | — | | | | — | | |

| Cash, cash equivalents and restricted cash, ending balances | $ | 50,224 | | | $ | 25,913 | | | $ | 20,289 | |

Apple Inc.

Recently Adopted Accounting Pronouncements

In the first quarter of 2019, the Company adopted the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Update (“ASU”) No. 2014-09, *Revenue from Contracts with Customers (Topic 606)* (“ASU 2014-09”), and additional ASUs issued to clarify the guidance in ASU 2014-09 (collectively the “new revenue standard”), which amends the existing accounting standards for revenue recognition.

| Change in fair value of marketable securities, net of tax benefit/(expense) of $1,156, $425 and $(863), respectively | (3,407 | | ) | | (782 | | ) | | 1,582 | | |

| Total current liabilities | 116,866 | | | | 100,814 | | |

| Deferred revenue | 2,797 | | | | 2,836 | | |

| Total non-current liabilities | 141,712 | | | | 140,458 | | |

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

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

| | Common Stock and Additional Paid-In Capital | | | | | | | Retained Earnings | | | | Accumulated Other Comprehensive Income/(Loss) | | | | Total Shareholders’ Equity | | |

| | Shares | | | Amount | | | | | | | | | | | | | | |

| Balances as of September 26, 2015 | 5,578,753 | | | $ | 27,416 | | | $ | 92,284 | | | $ | (345 | ) | | $ | 119,355 | |

| Repurchase of common stock | (279,609 | ) | | — | | | | (29,000 | | ) | | — | | | | (29,000 | | ) |

| Balances as of September 24, 2016 | 5,336,166 | | | 31,251 | | | | 96,364 | | | | 634 | | | | 128,249 | | |

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

| Common stock issued, net of shares withheld for employee taxes | 36,531 | | | (913 | | ) | | (581 | | ) | | — | | | | (1,494 | | ) |

| Tax benefit from equity awards, including transfer pricing adjustments | — | | | 620 | | | | — | | | | — | | | | 620 | | |

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

| Dividends and dividend equivalents declared at $2.72 per share or RSU | — | | | — | | | | (13,735 | | ) | | — | | | | (13,735 | | ) |

| Repurchase of common stock | (405,549 | ) | | — | | | | (73,056 | | ) | | — | | | | (73,056 | | ) |

| Common stock issued, net of shares withheld for employee taxes | 34,334 | | | (1,109 | | ) | | (948 | | ) | | — | | | | (2,057 | | ) |

| Balances as of September 29, 2018 | 4,754,986 | | | $ | 40,201 | | | $ | 70,400 | | | $ | (3,454 | ) | | $ | 107,147 | |

| Deferred revenue | (44 | | ) | | (626 | | ) | | (1,554 | | ) |

| Cash and cash equivalents, end of the year | $ | 25,913 | | | $ | 20,289 | | | $ | 20,484 | |

Apple Inc. and its wholly-owned subsidiaries (collectively “Apple” or the “Company”) designs, manufactures and markets mobile communication and media devices and personal computers, and sells a variety of related software, services, accessories and third-party digital content and applications.

The Company’s products and services include iPhone, iPad, Mac, Apple Watch, AirPods, Apple TV, HomePod, a portfolio of consumer and professional software applications, iOS, macOS, watchOS and tvOS operating systems, iCloud, Apple Pay and a variety of other 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, Book Store and Apple Music (collectively “Digital Content and Services”).

The Company sells its products worldwide through its retail stores, online stores and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers and resellers.

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

The Company sells to consumers, small and mid-sized businesses and education, enterprise and government customers.

Net sales consist primarily of revenue from the sale of hardware, software, digital content and applications, accessories, and service and support contracts.

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collection is probable.

Product is considered delivered to the customer once it has been shipped and title, risk of loss and rewards of ownership have been transferred.

For online sales to individuals, for some sales to education customers in the U.S., and for certain other sales, the Company defers revenue until the customer receives the product because the Company retains a portion of the risk of loss on these sales during transit.

For payment terms in excess of the Company’s standard payment terms, revenue is recognized as payments become due unless the Company has positive evidence that the sales price is fixed or determinable, such as a successful history of collection, without concession, on comparable arrangements.

The Company recognizes revenue from the sale of hardware products, software bundled with hardware that is essential to the functionality of the hardware and third-party digital content sold on the iTunes Store in accordance with general revenue recognition accounting guidance.

The Company recognizes revenue in accordance with industry-specific software accounting guidance for the following types of sales transactions: (i) standalone sales of software products, (ii) sales of software upgrades and (iii) sales of software bundled with hardware not essential to the functionality of the hardware.

For the sale of most third-party products, the Company recognizes revenue based on the gross amount billed to customers because the Company establishes its own pricing for such products, retains related inventory risk for physical products, is the primary obligor to the customer and assumes the credit risk for amounts billed to its customers.

The portion of the gross amount billed to customers that is remitted by the Company to third-party app developers and certain digital content owners is not reflected in the Company’s Consolidated Statements of Operations.

The Company records deferred revenue when it receives payments in advance of the delivery of products or the performance of services.

This includes amounts that have been deferred for unspecified and specified software upgrade rights and non-software services that are attached to hardware and software products.

The Company sells gift cards redeemable at its retail and online stores, and also sells gift cards redeemable on iTunes Store, App Store, Mac App Store, TV App Store and Book Store for the purchase of digital content and software.

The Company records deferred revenue upon the sale of the card, which is relieved upon redemption of the card by the customer.

[removed: Evaluation] [added: Evaluation] of Disclosure Controls and [removed: Procedures][added: Procedures]

Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of September [removed: 29, 2018] [added: 28, 2019] to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

[removed: Inherent] [added: Inherent] Limitations [removed: Over] [added: over] Internal [removed: Controls][added: Controls]

[removed: Management’s] [added: Management’s] Annual Report on Internal Control [removed: Over] [added: over] Financial [removed: Reporting][added: Reporting]

Based on the Company’s assessment, management has concluded that its internal control over financial reporting was effective as of September [removed: 29, 2018] [added: 28, 2019] to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.

[removed: Changes] [added: Changes] in Internal Control [removed: Over] [added: over] Financial [removed: Reporting][added: Reporting]

There were no changes in the Company’s internal control over financial reporting during the fourth quarter of [removed: 2018,] [added: 2019,] which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Apple Inc. | [removed: 2018] [added: 2019] Form 10-K | [removed: 67][added: 59]

[removed: PART III][added: PART III]

The information required by this Item is set forth under the headings “Corporate Governance,” “Directors,” “Executive Officers” and “Other Information—Security Ownership of Certain Beneficial Owners and Management” in the Company’s [removed: 2019] [added: 2020] Proxy Statement to be filed with the SEC within 120 days after September [removed: 29, 2018] [added: 28, 2019] in connection with the solicitation of proxies for the Company’s [removed: 2019] [added: 2020] annual meeting of [removed: shareholders] [added: shareholders,] and is incorporated herein by reference.

The Company has a code of ethics, “Business Conduct: The way we do business worldwide,” that applies to all employees, including the Company’s principal executive officer, principal financial officer, and principal accounting officer, as well as to the members of the Board of Directors of the Company.

The code is available at investor.apple.com/investor-relations/leadership-and-governance/.

The Company intends to disclose any changes in, or waivers from, this code by posting such information on the same website or by filing a Form 8-K, in each case to the extent such disclosure is required by rules of the SEC or Nasdaq.

The information required by this Item is set forth under the heading “Executive Compensation,” under the subheadings “Board Oversight of Risk Management” and “Compensation Committee Interlocks and Insider Participation” under the heading “Corporate Governance” and under the subheadings “Compensation of Directors” and “Director [removed: Compensation—2018”] [added: Compensation—2019”] under the heading “Directors” in the Company’s [removed: 2019] [added: 2020] Proxy Statement to be filed with the SEC within 120 days after September [removed: 29, 2018] [added: 28, 2019,] and is incorporated herein by reference.

The information required by this Item is set forth under the headings “Other Information—Security Ownership of Certain Beneficial Owners and Management” and “Other Information—Equity Compensation Plan Information” in the Company’s [removed: 2019] [added: 2020] Proxy Statement to be filed with the SEC within 120 days after September [removed: 29, 2018] [added: 28, 2019,] and is incorporated herein by reference.