UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 26, 2020
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number: 001-36743
Apple Inc.
(Exact name of Registrant as specified in its charter)
California
(State or other jurisdiction
of incorporation or organization)
One Apple Park Way
Cupertino, California
(Address of principal executive offices)
94-2404110
(I.R.S. Employer Identification No.)
95014
(Zip Code)
(408) 996-1010
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.00001 par value per share
1.000% Notes due 2022
1.375% Notes due 2024
0.000% Notes due 2025
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
0.500% Notes due 2031
3.600% Notes due 2042
Trading
symbol(s)
AAPL
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Name of each exchange on which registered
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☒ No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
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 such files).
Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report. ☒
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No ☒
The aggregate market value of the voting and non-voting stock held by non-affiliates of the Registrant, as of March 27, 2020, the last business
day of the Registrant’s most recently completed second fiscal quarter, was approximately $1,070,633,000,000. Solely for purposes of this
disclosure, shares of common stock held by executive officers and directors of the Registrant as of such date have been excluded because such
persons may be deemed to be affiliates. This determination of executive officers and directors as affiliates is not necessarily a conclusive
determination for any other purposes.
17,001,802,000 shares of common stock were issued and outstanding as of October 16, 2020.
Portions of the Registrant’s definitive proxy statement relating to its 2021 annual meeting of shareholders (the “2021 Proxy Statement”) are
incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2021 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.
DOCUMENTS INCORPORATED BY REFERENCE
Apple Inc.
Form 10-K
For the Fiscal Year Ended September 26, 2020
TABLE OF CONTENTS
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Part I
Part II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Item 6.
Item 7.
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Part III
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibit and Financial Statement Schedules
Form 10-K Summary
Part IV
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This Annual Report on Form 10-K (“Form 10-K”) contains forward-looking statements, within the meaning of the Private
Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Many of the forward-looking statements are
located in Part II, Item 7 of this Form 10-K under the heading “Management’s Discussion and Analysis of Financial Condition
and Results of Operations.” Forward-looking statements provide current expectations of future events based on certain
assumptions and include any statement that does not directly relate to any historical or current fact. For example, statements in
this Form 10-K regarding the potential future impact of the COVID-19 pandemic on the Company’s business and results of
operations are forward-looking statements. Forward-looking statements can also be identified by words such as “future,”
“anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and
similar terms. Forward-looking statements are not guarantees of future performance and the Company’s actual results may
differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences
include, but are not limited to, those discussed in Part I, Item 1A of this Form 10-K under the heading “Risk Factors.” The
Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Unless otherwise stated, 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 wholly owned subsidiaries, unless otherwise stated.
PART I
Item 1.
Business
Company Background
The Company designs, manufactures and markets smartphones, personal computers, tablets, wearables and accessories, and
sells a variety of related services. The Company’s fiscal year is the 52- or 53-week period that ends on the last Saturday of
September. The Company is a California corporation established in 1977.
Products
iPhone
iPhone® is the Company’s line of smartphones based on its iOS operating system. During 2020, the Company released a new
iPhone SE. In October 2020, the Company announced four new iPhone models with 5G technology: iPhone 12 and iPhone 12
Pro were available starting in October 2020, and iPhone 12 Pro Max and iPhone 12 mini are both expected to be available in
November 2020.
Mac
Mac® is the Company’s line of personal computers based on its macOS® operating system. During 2020, the Company released
a new 16-inch MacBook Pro®, a fully redesigned Mac Pro®, and updated versions of its MacBook Air®, 13-inch MacBook Pro and
27-inch iMac®.
iPad
iPad® is the Company’s line of multi-purpose tablets based on its iPadOS® operating system. During 2020, the Company
released an updated iPad Pro®. In September 2020, the Company released an eighth-generation iPad and introduced an all-new
iPad Air®, which was available starting in October 2020.
Wearables, Home and Accessories
Wearables, Home and Accessories includes AirPods®, Apple TV®, Apple Watch®, Beats® products, HomePod®, iPod touch® and
other Apple-branded and third-party accessories. AirPods are the Company’s wireless headphones that interact with Siri®.
During 2020, the Company released AirPods Pro®. Apple Watch is the Company’s line of smart watches based on its watchOS®
operating system. In September 2020, the Company released Apple Watch Series 6 and a new Apple Watch SE. In October
2020, the Company announced HomePod mini™, which is expected to be available in November 2020.
Services
Advertising
The Company’s advertising services include various third-party licensing arrangements and the Company’s own advertising
platforms.
Apple Inc. | 2020 Form 10-K | 1
AppleCare
The Company offers a portfolio of fee-based service and support products under the AppleCare® brand. The offerings provide
priority access to Apple technical support, access to the global Apple authorized service network for repair and replacement
services, and in many cases additional coverage for instances of accidental damage and/or theft and loss, depending on the
country and type of product.
Cloud Services
The Company’s cloud services store and keep customers’ content up-to-date and available across multiple Apple devices and
Windows personal computers.
Digital Content
The Company operates various platforms, including the App Store®, that allow customers to discover and download applications
and digital content, such as books, music, video, games and podcasts.
The Company also offers digital content through subscription-based services, including Apple ArcadeSM, a game subscription
service; Apple Music®, which offers users a curated listening experience with on-demand radio stations; Apple News+SM, a
subscription news and magazine service; and Apple TV+SM, which offers exclusive original content. In September 2020, the
Company announced Apple Fitness+SM, a personalized fitness service built for Apple Watch, which is expected to be available
before the end of calendar 2020.
Payment Services
The Company offers payment services, including Apple Card™, a co-branded credit card, and Apple Pay®, a cashless payment
service.
Markets and Distribution
The Company’s customers are primarily in the consumer, small and mid-sized business, education, enterprise and government
markets. The Company sells its products and resells third-party products in most of its major markets directly to consumers,
small and mid-sized businesses, and education, enterprise and government customers through its retail and online stores and its
direct sales force. The Company also employs a variety of indirect distribution channels, such as third-party cellular network
carriers, wholesalers, retailers and resellers. During 2020, the Company’s net sales through its direct and indirect distribution
channels accounted for 34% and 66%, respectively, of total net sales.
No single customer accounted for more than 10% of net sales in 2020, 2019 and 2018.
Competition
The markets for the Company’s products and services are highly competitive, and are 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 and performance characteristics, rapid
adoption of technological advancements by competitors, and price sensitivity on the part of consumers and businesses. Many of
the Company’s competitors seek to compete primarily through aggressive pricing and very low cost structures, and by emulating
the Company’s products and infringing on its intellectual property.
The Company’s ability to compete successfully depends heavily on ensuring the continuing and timely introduction of innovative
new products, services and technologies to the marketplace. The Company believes it is unique in that it designs and develops
nearly the entire solution for its products, including the hardware, operating system, numerous software applications and related
services. 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 support, and corporate reputation.
Apple Inc. | 2020 Form 10-K | 2
The Company is focused on expanding its market opportunities related to smartphones, personal computers, tablets and other
electronic devices and services. The Company faces substantial competition in these markets from companies that have
significant technical, marketing, distribution and other resources, as well as established hardware, software, and service offerings
with large customer bases. In addition, some of the Company’s competitors have broader product lines, lower-priced products
and a larger installed base of active devices. Competition has been particularly intense as competitors have aggressively cut
prices and lowered product margins. Certain competitors may have the resources, experience or cost structures to provide
products at little or no profit or even at a loss. The Company’s services compete with business models that provide content to
users for free and use illegitimate means to obtain third-party digital content and applications. The Company expects competition
in these markets to intensify significantly as competitors imitate the Company’s product features and applications within their
products, or collaborate to offer integrated solutions that are more competitive than those they currently offer.
Supply of Components
Although most components essential to the Company’s business are generally available from multiple sources, certain
components are currently obtained from single or limited sources. The Company also competes for various components with
other participants in the markets for smartphones, personal 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 fluctuations.
The Company uses some custom components that are not commonly used by its competitors, and new products introduced by
the Company often utilize custom components available from only one source. When a component or product uses new
technologies, initial capacity constraints may exist until the suppliers’ yields have matured or their manufacturing capacities have
increased. 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.
The Company has entered into agreements for the supply of many components; however, there can be no guarantee that the
Company will be able to extend or renew these agreements on similar terms, or at all.
Substantially all of the Company’s hardware products are manufactured by outsourcing partners that are located primarily in
Asia, with some Mac computers manufactured in the U.S. and Ireland.
Research and Development
Because the industries in which the Company competes are characterized by rapid technological advances, the Company’s
ability to compete successfully depends heavily upon its ability to ensure a continual and timely flow of competitive products,
services and technologies to the marketplace. The Company continues to develop new technologies to enhance existing
products and services, and to expand the range of its offerings through research and development (“R&D”), licensing of
intellectual property and acquisition of third-party businesses and technology.
Intellectual Property
The Company currently holds a broad collection of intellectual property rights relating to certain aspects of its hardware devices,
accessories, software and services. This includes patents, copyrights, trademarks, service marks, trade dress and other forms of
intellectual property rights in the U.S. and various foreign countries. Although the Company believes the ownership of such
intellectual property rights is an important factor in its business and that its success does depend in part on such ownership, the
Company relies primarily on the innovative skills, technical competence and marketing abilities of its personnel.
The Company regularly files patent applications to protect innovations arising from its research, development and design, and is
currently pursuing thousands of patent applications around the world. Over time, the Company has accumulated a large portfolio
of issued patents, including utility patents, design patents and others. The Company also holds copyrights relating to certain
aspects of its products and services. No single intellectual property right is solely responsible for protecting the Company’s
products. The Company believes the duration of its intellectual property rights is adequate relative to the expected lives of its
products.
In addition to Company-owned intellectual property, many of the Company’s products and services are designed to include
intellectual property owned by third parties. It may be necessary in the future to seek or renew licenses relating to various
aspects of the Company’s products, processes and services. While the Company has generally been able to obtain such
licenses on commercially reasonable terms in the past, there is no guarantee that such licenses could be obtained in the future
on reasonable terms or at all.
Apple Inc. | 2020 Form 10-K | 3
Business Seasonality and Product Introductions
The Company has historically experienced higher net sales in its first quarter compared to other quarters in its fiscal year due in
part to seasonal holiday demand. Additionally, new product and service introductions can significantly impact net sales, cost of
sales and operating expenses. The timing of product introductions can also impact the Company’s net sales to its indirect
distribution channels as these channels are filled with new inventory following a product launch, and channel inventory of an
older product often declines as the launch of a newer product approaches. Net sales can also be affected when consumers and
distributors anticipate a product introduction.
Employees
As of September 26, 2020, the Company had approximately 147,000 full-time equivalent employees.
Available Information
The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and
amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), are filed with the Securities and Exchange Commission (the “SEC”). Such reports and other information filed by
the Company with the SEC are available free of charge at investor.apple.com/investor-relations/sec-filings/default.aspx when
such reports are available on the SEC’s website. The Company periodically provides other information for investors on its
corporate website, www.apple.com, and its investor relations website, investor.apple.com. This includes press releases and
other information about financial performance, information on corporate governance and details related to the Company’s annual
meeting of shareholders. The information contained on the websites referenced in this Form 10-K is not incorporated by
reference into this filing. Further, the Company’s references to website URLs are intended to be inactive textual references only.
Apple Inc. | 2020 Form 10-K | 4
Item 1A. Risk Factors
The following discussion of risk factors contains forward-looking statements. These risk factors may be important to
understanding other statements in this Form 10-K. 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 accompanying notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.
The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently
known or unknown, including but not limited to those described below, any one or more of which could, directly or indirectly,
cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future,
financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the
Company’s business, financial condition, operating results and stock price.
Because of the following factors, as well as other factors affecting the Company’s financial condition and operating results, past
financial performance should not be considered to be a reliable indicator of future performance, and investors should not use
historical trends to anticipate results or trends in future periods.
The Company’s business, results of operations, financial condition and stock price have been adversely affected and
could in the future be materially adversely affected by the COVID-19 pandemic.
COVID-19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in
response. Such measures have included restrictions on travel and business operations, temporary closures of businesses, and
quarantines and shelter-in-place orders. The COVID-19 pandemic has significantly curtailed global economic activity and caused
significant volatility and disruption in global financial markets.
The COVID-19 pandemic and the measures taken by many countries in response have adversely affected and could in the
future materially adversely impact the Company’s business, results of operations, financial condition and stock price. Following
the initial outbreak of the virus, the Company experienced disruptions to its manufacturing, supply chain and logistical services
provided by outsourcing partners, resulting in temporary iPhone supply shortages that affected sales worldwide. During the
course of the pandemic, the Company’s retail stores, as well as channel partner points of sale, have been temporarily closed at
various times. In many cases, where stores and points of sale have reopened they are subject to operating restrictions to protect
public health and the health and safety of employees and customers. The Company has at times required substantially all of its
employees to work remotely.
The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and
requirements of relevant authorities. The full extent of the impact of the COVID-19 pandemic on the Company’s operational and
financial performance is currently uncertain and will depend on many factors outside the Company’s control, including, without
limitation, the timing, extent, trajectory and duration of the pandemic, the development and availability of effective treatments and
vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on the global
economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to,
material adverse effects on: demand for the Company’s products and services; the Company’s supply chain and sales and
distribution channels; the Company’s ability to execute its strategic plans; and the Company’s profitability and cost structure.
To the extent the COVID-19 pandemic adversely affects the Company’s business, results of operations, financial condition and
stock price, it may also have the effect of heightening many of the other risks described in this Part I, Item 1A of this Form 10-K.
Global and regional economic conditions could materially adversely affect the Company’s business, results of
operations, financial condition and growth.
The Company has international operations with sales outside the U.S. representing a majority of the Company’s total net sales.
In addition, a majority of the Company’s supply chain, and its manufacturing and assembly activities, are located outside the U.S.
As a result, the Company’s operations and performance depend significantly on global and regional economic conditions.
Adverse macroeconomic conditions, including inflation, slower growth or recession, new or increased tariffs and other barriers to
trade, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment and currency fluctuations
could materially adversely affect demand for the Company’s products and services. In addition, consumer confidence and
spending could be adversely affected in response to financial market volatility, negative financial news, conditions in the real
estate and mortgage markets, declines in income or asset values, changes to fuel and other energy costs, labor and healthcare
costs and other economic factors.
Apple Inc. | 2020 Form 10-K | 5
In addition to an adverse impact on demand for the Company’s products, uncertainty about, or a decline in, global or regional
economic conditions could have a significant impact on the Company’s suppliers, contract manufacturers, logistics providers,
distributors, cellular network carriers and other channel partners. Potential effects include financial instability; inability to obtain
credit to finance operations and purchases of the Company’s products; and insolvency.
A downturn in the economic environment could also lead to increased credit and collectibility risk on the Company’s trade
receivables; the failure of derivative counterparties and other financial institutions; limitations on the Company’s ability to issue
new debt; reduced liquidity; and declines in the fair value of the Company’s financial instruments. These and other economic
factors could materially adversely affect the Company’s business, results of operations, financial condition and growth.
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 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 and performance characteristics, rapid
adoption of technological advancements by competitors, and price sensitivity on the part of consumers and businesses.
The Company’s ability to compete successfully depends heavily on ensuring the continuing and timely introduction of innovative
new products, services and technologies to the marketplace. The Company believes it is unique in that it designs and develops
nearly the entire solution for its products, including the hardware, operating system, numerous software applications and related
services. As a result, the Company must make significant investments in R&D. There can be no assurance that these
investments will achieve expected returns, and the Company may not be able to develop and market new products and services
successfully.
The Company currently holds a significant number of patents, trademarks and copyrights and has registered, and applied to
register, numerous patents, trademarks and copyrights. In contrast, many of the Company’s competitors seek to compete
primarily through aggressive pricing and very low cost structures, and by emulating the Company’s products and infringing on
its intellectual property. Effective intellectual property protection may not be consistently available in every country in which the
Company operates. If the Company is unable to continue to develop and sell innovative new products with attractive margins or if
competitors infringe on the Company’s intellectual property, the Company’s ability to maintain a competitive advantage could be
adversely affected.
The Company has a minority market share in the global smartphone, personal computer and tablet markets. The Company faces
substantial competition in these markets from companies that have significant technical, marketing, distribution and other
resources, as well as established hardware, software and digital content supplier relationships. In addition, some of the
Company’s competitors have broader product lines, lower-priced products and a larger installed base of active devices.
Competition has been particularly intense as competitors have aggressively cut prices and lowered product margins. Certain
competitors may have the resources, experience or cost structures to provide products at little or no profit or even at a loss.
Some of the markets in which the Company competes have from time to time experienced little to no growth or contracted
overall.
Additionally, the Company faces significant competition as competitors imitate the Company’s product features and applications
within their products or collaborate to offer solutions that are more competitive than those they currently offer. The Company also
expects competition to intensify as competitors imitate the Company’s approach to providing components seamlessly within their
offerings or work collaboratively to offer integrated solutions.
The Company’s services also face substantial competition, including from companies that have significant resources and
experience and have established service offerings with large customer bases. The Company competes with business models
that provide content to users for free. The Company also competes with illegitimate means to obtain third-party digital content
and applications.
The Company’s financial condition and operating results depend substantially on the Company’s ability to continually improve its
products and services to maintain their functional and design advantages. There can be no assurance the Company will be able
to continue to provide products and services that compete effectively.
Apple Inc. | 2020 Form 10-K | 6
To remain competitive and stimulate customer demand, the Company must successfully manage frequent introductions
and transitions of products and 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 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 demand, and the risk that new products and services may
have quality or other defects or deficiencies. Accordingly, the Company cannot determine in advance the ultimate effect of new
product and service introductions and transitions.
The Company depends on the performance of carriers, wholesalers, retailers and other resellers.
The Company distributes its products through cellular network carriers, wholesalers, retailers and resellers, many of whom
distribute products from competing manufacturers. The Company also sells its products and resells third-party products in most
of its major markets directly to consumers, small and mid-sized businesses, and education, enterprise and government
customers through its retail and online stores and its direct sales force.
Some carriers providing cellular network service for iPhone offer financing, installment payment plans or subsidies for users’
purchases of the device. There is no assurance that such offers will be continued at all or in the same amounts upon renewal of
the Company’s agreements with these carriers or in agreements the Company enters into with new carriers.
The Company has invested and will continue to invest in programs to enhance reseller sales, including staffing selected
resellers’ stores with Company employees and contractors, and improving product placement displays. These programs can
require a substantial investment while not assuring return or incremental sales. The financial condition of these resellers could
weaken, these resellers could stop distributing the Company’s products, or uncertainty regarding demand for some or all of the
Company’s products could cause resellers to reduce their ordering and marketing of the Company’s products.
The Company is exposed to the risk of write-downs on the value of its inventory and other assets, in addition to purchase
commitment cancellation risk.
The Company records a write-down for product and component inventories that have become obsolete or exceed anticipated
demand, or for which cost exceeds net realizable value. The Company also accrues necessary cancellation fee reserves for
orders of excess products and components. The Company reviews long-lived assets, including capital assets held at its
suppliers’ facilities and inventory prepayments, for impairment whenever events or circumstances indicate the assets may not be
recoverable. If the Company determines that an impairment has occurred, it records a write-down equal to the amount by which
the carrying value of the asset exceeds its fair value. Although the Company believes its inventory, capital assets, inventory
prepayments and other assets and purchase commitments are currently recoverable, no assurance can be given that the
Company will not incur write-downs, fees, impairments and other charges given the rapid and unpredictable pace of product
obsolescence in the industries in which the Company competes.
The Company orders components for its products and builds inventory in advance of product announcements and shipments.
Manufacturing purchase obligations cover the Company’s forecasted component and manufacturing requirements, typically for
periods up to 150 days. Because the Company’s markets are volatile, competitive and subject to rapid technology and price
changes, there is a risk the Company will forecast incorrectly and order or produce excess or insufficient amounts of components
or products, or not fully utilize firm purchase commitments.
Apple Inc. | 2020 Form 10-K | 7
Future operating results depend upon the Company’s ability to obtain components in sufficient quantities on
commercially reasonable terms.
Because the Company currently obtains certain components from single or limited sources, the Company is subject to significant
supply and pricing risks. Many components, including those that are available from multiple sources, are at times subject to
industry-wide shortages and significant commodity pricing fluctuations that could materially adversely affect the Company’s
financial condition and operating results. While the Company has entered into agreements for the supply of many components,
there can be no assurance that the Company will be able to extend or renew these agreements on similar terms, or at all.
Component suppliers may suffer from poor financial conditions, which can lead to business failure for the supplier or
consolidation within a particular industry, further limiting the Company’s ability to obtain sufficient quantities of components on
commercially reasonable terms. The effects of global or regional economic conditions on the Company’s suppliers, described in
“Global and regional economic conditions could materially adversely affect the Company’s business, results of operations,
financial condition and growth,” above, also could affect the Company’s ability to obtain 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.
The Company’s new products often utilize custom components available from only one source. When a component or product
uses new technologies, initial capacity constraints may exist until the suppliers’ yields have matured or their manufacturing
capacities have increased. The continued availability of these components at acceptable prices, or at all, 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. If the Company’s supply of components for a new or existing product were
delayed or constrained, or if an outsourcing partner delayed shipments of completed products to the Company, the Company’s
financial condition and operating results could be materially adversely affected. The Company’s business and financial
performance could also be materially adversely affected depending on the time required to obtain sufficient quantities from the
source, or to identify and obtain sufficient quantities from an alternative source.
The Company depends on component and product manufacturing and logistical services provided by outsourcing
partners, many of which are located outside of the U.S.
Substantially all of the Company’s manufacturing is performed in whole or in part by outsourcing partners located primarily in
Asia. A significant concentration of this manufacturing is currently performed by a small number of outsourcing partners, often in
single locations. The Company has also outsourced much of its transportation and logistics management. While these
arrangements can lower operating costs, they also reduce the Company’s direct control over production and distribution. Such
diminished control may have an adverse effect on the quality or quantity of products or services, or the Company’s flexibility to
respond to changing conditions. Although arrangements with these partners may contain provisions for product defect expense
reimbursement, the Company generally remains responsible to the consumer for warranty and out-of-warranty service in the
event of product defects and could experience an unanticipated product defect liability. While the Company relies on its partners
to adhere to its supplier code of conduct, material violations of the supplier code of conduct could occur.
The Company relies on 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 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 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.
The Company has invested in manufacturing process equipment, much of which is held at certain of its outsourcing partners,
and has made prepayments to certain of its suppliers associated with long-term supply agreements. 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 can be reduced or terminated, and the recoverability of
manufacturing process equipment or prepayments can be negatively impacted.
Apple Inc. | 2020 Form 10-K | 8
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 reputation.
The Company offers complex hardware and software products and services that can be affected by design and manufacturing
defects. Sophisticated operating system software and applications, such as those offered by the Company, often have issues
that can unexpectedly interfere with the intended operation of hardware or software products. Defects can also exist in
components and products the Company purchases from third parties. Component defects could make the Company’s products
unsafe and create a risk of environmental or property damage and personal injury. These risks may increase as the Company’s
products are introduced into specialized applications, including healthcare. In addition, the Company’s service offerings may
have quality issues and from time to time experience outages, service slowdowns or errors. As a result, the Company’s services
may not perform as anticipated and may not meet customer expectations. There can be no assurance the Company will be able
to detect and fix all issues and defects in the hardware, software and services it offers. Failure to do so could result in
widespread technical and performance issues affecting the Company’s products and services. In addition, the Company 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 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 service introductions and lost sales.
The Company relies on access to third-party digital content, which may not be available to the Company on
commercially reasonable terms or at all.
The Company contracts with numerous third parties to offer their digital content to customers. This includes the right to sell
currently available 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 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 can take
actions to make it more difficult or impossible for the Company to license or otherwise distribute their content in the future. Other
content owners, providers or distributors may seek to limit the Company’s access to, or increase the cost of, such content. The
Company may be unable to continue to offer a wide variety of content at commercially reasonable prices with acceptable usage
rules, or continue to expand its geographic reach. Failure to obtain the right to make third-party digital content available, or to
make such content available on commercially reasonable terms, could have a material adverse impact on the Company’s
financial condition and operating results.
Some third-party digital content providers require the Company to provide digital rights management and other security solutions.
If requirements change, the Company may have to develop or license new technology to provide these solutions. There is no
assurance the Company will be able to develop or license such solutions at a reasonable cost and in a timely manner. In
addition, certain countries have passed or may propose and adopt legislation that would force the Company to license its digital
rights management, which could lessen the protection of content and subject it to piracy and also could negatively affect
arrangements with the Company’s content providers.
The Company’s future performance depends in part on support from third-party software developers.
The Company believes decisions by customers to purchase its hardware products depend in part on the availability of third-party
software applications and services. There is no assurance that third-party developers will continue to develop and maintain
software applications and services for the Company’s products. If third-party software applications and services cease to be
developed and maintained for the Company’s products, customers may choose not to buy the Company’s products.
The Company believes the availability of third-party software applications and services for its products depends in part on the
developers’ perception and analysis of the relative benefits of developing, maintaining and upgrading such software and services
for the Company’s products compared to competitors’ platforms, such as Android for smartphones and tablets and Windows for
personal computers. This analysis may be based on factors such as the market position of the Company and its products, the
anticipated revenue that may be generated, expected future growth of product sales, and the costs of developing such
applications and services.
The Company’s minority market share in the global smartphone, personal computer and tablet markets could make developers
less inclined to develop or upgrade software for the Company’s products and more inclined to devote their resources to
developing and upgrading software for competitors’ products with larger market share. If developers focus their efforts on these
competing platforms, the availability and quality of applications for the Company’s devices may suffer.
Apple Inc. | 2020 Form 10-K | 9
The Company relies on the continued availability and development of compelling and innovative software applications for its
products. The Company’s products and operating systems are subject to rapid technological change, and if third-party
developers are unable to or choose not to keep up with this pace of change, third-party applications might not take advantage of
these changes to deliver improved customer experiences or might not operate correctly and may result in dissatisfied customers.
The Company sells and delivers third-party applications for its products through the App Store. For the vast majority of
applications, developers keep all of the revenue they generate on the App Store. The Company only retains a commission from
sales of applications through its platforms and in situations where a developer offers purchases for digital features, services, or
goods within an application. If developers reduce their use of the Company’s platforms, including in-app purchases, then the
volume of sales, and the commission that the Company earns on those sales, would decrease. If the rate of the commission that
the Company retains on such sales is reduced, or if it is otherwise narrowed in scope or eliminated, the Company’s financial
condition and operating results could be materially adversely affected.
The Company relies on access to third-party intellectual property, which may not be available to the Company on
commercially reasonable terms or at all.
Many of the Company’s products and services are designed to include intellectual property owned by third parties, which
requires licenses from those third parties. 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. Based on experience and industry practice, the Company believes licenses to such third-party intellectual property
can generally be obtained on commercially reasonable terms. There is, however, no assurance that the necessary licenses can
be obtained on commercially reasonable terms or at all. Failure to obtain the right to use third-party intellectual property, or to
use such intellectual property on commercially reasonable terms, could preclude the Company from selling certain products or
services, or otherwise have a material adverse impact on the Company’s financial condition and operating results.
The Company’s financial condition and operating results could be adversely impacted by unfavorable results of legal
proceedings or government investigations.
The Company is subject to various claims, legal proceedings and government investigations that have arisen in the ordinary
course of business and have not yet been fully resolved, and new matters may arise in the future. In addition, agreements
entered into by the Company sometimes include indemnification provisions which can subject the Company to costs and
damages in the event of a claim against an indemnified third party. The number of claims, legal proceedings and government
investigations involving the Company, and the alleged magnitude of such claims, proceedings and government investigations,
has generally increased over time and may continue to increase.
The Company has faced and continues to face a significant number of patent claims relating to its cellular-enabled products, and
new claims may arise in the future. For example, technology and other patent-holding companies frequently assert their patents
and seek royalties and often enter into litigation based on allegations of patent infringement or other violations of intellectual
property rights. The Company is vigorously defending infringement actions in courts in several U.S. jurisdictions, as well as
internationally in various countries. The plaintiffs in these actions frequently seek injunctions and substantial damages.
Regardless of the merit of particular claims, defending against litigation or responding to government investigations can be
expensive, time-consuming, disruptive to the Company’s operations and distracting to management. In recognition of these
considerations, the Company may enter into agreements or other arrangements to settle litigation and resolve such challenges.
No assurance can be given that such agreements can be obtained on acceptable terms or that litigation will not occur. These
agreements may also significantly increase the Company’s cost of sales and operating expenses.
Except as described in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 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 greater than a recorded accrual,
concerning loss contingencies for asserted legal and other claims, including matters related to infringement of intellectual
property rights.
The outcome of litigation or government investigations is inherently uncertain. If one or more legal matters were resolved against
the Company or an indemnified third party in a reporting period for amounts above management’s expectations, the Company’s
financial condition and operating results for that reporting period could be materially adversely affected. Further, such an
outcome could result in significant compensatory, punitive or trebled monetary damages, disgorgement of revenue or profits,
remedial corporate measures or injunctive relief against the Company, and could require the Company to change its business
practices or limit the Company’s ability to offer certain products and services, all of which could materially adversely affect its
financial condition and operating results.
While the Company maintains insurance coverage for certain types of claims, such insurance coverage may be insufficient to
cover all losses or all types of claims that may arise.
Apple Inc. | 2020 Form 10-K | 10
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.
The Company’s global operations are subject to complex and changing laws and regulations on subjects including, but not
limited to: antitrust; privacy, data security and data localization; consumer protection; advertising, sales, billing and e-commerce;
product liability; intellectual property ownership and infringement; digital platforms; Internet, telecommunications, and mobile
communications; media, television, film and digital content; availability of third-party software applications and services; labor and
employment; anti-corruption; import, export and trade; foreign exchange controls and cash repatriation restrictions; anti–money
laundering; foreign ownership and investment; tax; and environmental, health and safety.
Compliance with these laws and regulations may be onerous and expensive, increasing the cost of conducting the Company’s
global operations. 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 supply chain
and business practices or otherwise making the Company’s products and services less attractive to customers. The Company
has implemented policies and procedures designed to ensure compliance with applicable laws and regulations, but there can be
no assurance that the Company’s employees, contractors or agents will not violate such laws and regulations or the Company’s
policies and procedures. 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 materially adverse impact on the Company’s financial
condition and operating results. In addition, if enacted, legislative and other proposals to further regulate technology companies
could result in changes to the Company’s business, including requiring the Company to modify its product and service offerings,
limiting the Company’s ability to invest in strategic acquisitions, or affecting the Company’s business relationships with other
technology companies, and could have a materially adverse impact on the Company’s financial condition and operating results.
Further, the Company’s business partners are or may become subject to litigation that, if resolved against them, could affect the
Company’s relationships with these business partners and have a materially adverse 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, litigation or changes to laws and regulations in
the future.
The Company’s retail stores have required and will continue to require a substantial investment and commitment of
resources and are subject to numerous risks and uncertainties.
The Company’s retail stores have required substantial investment in equipment and leasehold improvements, information
systems, inventory and personnel. The Company also has entered into substantial lease commitments for retail space. Certain
stores have been designed and built to serve as high-profile venues to promote brand awareness. Because of their unique
design elements, locations and size, these stores require substantially more investment than the Company’s more typical retail
stores. Due to the high cost structure associated with the Company’s retail stores, a decline in sales or the closure or poor
performance of an individual store or multiple stores, including as a result of protective public safety measures in response to the
COVID-19 pandemic, could result in significant lease termination costs, write-offs of equipment and leasehold improvements and
severance costs.
The Company’s retail operations are subject to many factors that pose risks and uncertainties and could adversely impact the
Company’s financial condition and operating results, including macro-economic factors that could have an adverse effect on
general retail activity. Other factors include, but are not limited to, the Company’s ability to: manage costs associated with retail
store construction and operation; manage relationships with existing retail partners; manage costs associated with fluctuations in
the value of retail inventory; and obtain and renew leases in quality retail locations at a reasonable cost.
Investment in new business strategies and acquisitions could disrupt the Company’s ongoing business, present risks not
originally contemplated and adversely affect the Company’s reputation, financial condition and operating results.
The Company has invested, and in the future may invest, in new business strategies or acquisitions. Such endeavors may
involve significant risks and uncertainties, including distraction of management from current operations, greater-than-expected
liabilities and expenses, economic, political, legal and regulatory challenges associated with operating in new businesses,
regions or countries, inadequate return on capital, potential impairment of tangible and intangible assets, and significant write-
offs. These new ventures are inherently risky and may not be successful. The failure of any significant investment could
adversely affect the Company’s reputation, financial condition and operating results.
Apple Inc. | 2020 Form 10-K | 11
The Company’s business and reputation may be impacted by information technology system failures or network
disruptions.
The Company is exposed to information technology system failures or network disruptions caused by natural disasters,
accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic
break-ins, or other events or disruptions. System redundancy and other continuity measures may be ineffective or inadequate,
and the Company’s business continuity and disaster recovery planning may not be sufficient for all eventualities. Such failures or
disruptions can adversely impact the Company’s business by, among other things, preventing access to the Company’s online
services, interfering with customer transactions or impeding the manufacturing and shipping of the Company’s products. These
events could materially adversely affect the Company’s reputation, financial condition and operating results.
There may be losses or unauthorized access to or releases of confidential information, including personally identifiable
information, that could subject the Company to significant reputational, financial, legal and operational consequences.
The Company’s business requires it to use and store confidential information including, among other things, personally
identifiable information (“PII”) with respect to the Company’s customers and employees. The Company devotes significant
resources to network and data security, including through the use of encryption and other security measures intended to protect
its systems and data. But these measures cannot provide absolute security, and losses or unauthorized access to or releases of
confidential information occur and could materially adversely affect the Company’s reputation, financial condition and operating
results.
The Company’s business also requires it to share confidential information with suppliers and other third parties. Although the
Company takes steps to secure confidential information that is provided to third parties, such measures are not always effective
and losses or unauthorized access to or releases of confidential information occur and could materially adversely affect the
Company’s reputation, financial condition and operating results.
For example, the Company may experience a security breach impacting the Company’s information technology systems that
compromises the confidentiality, integrity or availability of confidential information. Such an incident could, among other things,
impair the Company’s ability to attract and retain customers for its products and services, impact the Company’s stock price,
materially damage supplier relationships, and expose the Company to litigation or government investigations, which could result
in penalties, fines or judgments against the Company.
Although malicious attacks perpetrated to gain access to confidential information, including PII, affect many companies across
various industries, the Company is at a relatively greater risk of being targeted because of its high profile and the value of the
confidential information it creates, owns, manages, stores and processes.
The Company has implemented systems and processes intended to secure its information technology systems and prevent
unauthorized access to or loss of sensitive data, including through the use of encryption and authentication technologies. As with
all companies, these security measures may not be sufficient for all eventualities and may be vulnerable to hacking, employee
error, malfeasance, system error, faulty password management or other irregularities. For example, third parties fraudulently
induce employees or customers into disclosing user names, passwords or other sensitive information, which may, in turn, be
used to access the Company’s information technology systems. To help protect customers and the Company, the Company
monitors its services and systems for unusual activity and may freeze accounts under suspicious circumstances, which, among
other things, may result in the delay or loss of customer orders or impede customer access to the Company’s products and
services.
In addition to the risks relating to general confidential information described above, the Company is also subject to specific
obligations relating to health data and payment card data. Health data is subject to additional privacy, security and breach
notification requirements, and the Company can be subject to audit by governmental authorities regarding the Company’s
compliance with these obligations. If the Company fails to adequately comply with these rules and requirements, or if health data
is handled in a manner not permitted by law or under the Company’s agreements with healthcare institutions, the Company could
be subject to litigation or government investigations, may be liable for associated investigatory expenses, and could also incur
significant fees or fines.
Under payment card rules and obligations, if cardholder information is potentially compromised, the Company could be liable for
associated investigatory expenses and could also incur significant fees or fines if the Company fails to follow payment card
industry data security standards. The Company could also experience a significant increase in payment card transaction costs or
lose the ability to process payment cards if it fails to follow payment card industry data security standards, which would materially
adversely affect the Company’s reputation, financial condition and operating results.
While the Company maintains insurance coverage that is intended to address certain aspects of data security risks, such
insurance coverage may be insufficient to cover all losses or all types of claims that may arise.
Apple Inc. | 2020 Form 10-K | 12
The Company’s business is subject to a variety of U.S. and international laws, rules, policies and other obligations
regarding data protection.
The Company is subject to federal, state and international laws relating to the collection, use, retention, security and transfer of
PII. In many cases, these laws apply not only to third-party transactions, but also may restrict transfers of PII among the
Company and its international subsidiaries. Several jurisdictions have passed laws in this area, and other jurisdictions are
considering imposing additional restrictions. These laws continue to develop and may be inconsistent from jurisdiction to
jurisdiction. Complying with emerging and changing international requirements may cause the Company to incur substantial
costs or require the Company to change its business practices. Noncompliance could result in significant penalties or legal
liability.
The Company makes statements about its use and disclosure of PII through its privacy policy, information provided on its
website and press statements. Any failure by the Company to comply with these public statements or with other federal, state or
international privacy-related or data protection laws and regulations could result in proceedings against the Company by
governmental entities or others. In addition to reputational impacts, penalties could include ongoing audit requirements and
significant legal liability.
The Company’s success depends largely on the continued service and availability of key personnel.
Much of the Company’s future success depends on the continued availability and service of key personnel, including its Chief
Executive Officer, executive team and other highly skilled employees. Experienced personnel in the technology industry are in
high demand and competition for their talents is intense, especially in Silicon Valley, where most of the Company’s key personnel
are located.
The Company’s business can be impacted by political events, international trade disputes, war, terrorism, natural
disasters, public health issues, industrial accidents and other business interruptions.
Political events, international trade disputes, war, terrorism, natural disasters, public health issues, industrial accidents and other
business interruptions could harm or disrupt international commerce and the global economy, and could have a material adverse
effect on the Company and its customers, suppliers, contract manufacturers, logistics providers, distributors, cellular network
carriers and other channel partners.
The Company has a large, global business, and the Company believes that it generally benefits from growth in international
trade. International trade disputes can result in tariffs, sanctions, and other measures that restrict international trade and can
adversely affect the Company’s business. For example, tensions between the U.S. and China have led to a series of tariffs being
imposed by the U.S. on imports from China mainland, as well as other business restrictions. Tariffs may increase the cost of the
Company’s products and the components and raw materials that go into making them. These increased costs adversely impact
the gross margin that the Company earns on its products. Tariffs can also make the Company’s products more expensive for
customers, which could make the Company’s products less competitive and reduce consumer demand. Countries may also
adopt other measures, such as controls on imports or exports of goods, technology or data, that could adversely impact the
Company’s operations and supply chain and limit the Company’s ability to offer its products and services as designed. These
measures can require the Company to take various actions, including change suppliers, restructure business relationships, and
stop offering third-party applications on its platforms. Changing the Company’s operations in accordance with new or changed
trade restrictions may be expensive, time-consuming, disruptive to the Company’s operations and distracting to management.
Trade restrictions may be announced with little or no advance notice and the Company may not be able to effectively mitigate all
adverse impacts from such measures. Political uncertainty surrounding international trade disputes could also have a negative
effect on consumer confidence and spending, which could adversely affect the Company’s business.
Many of the Company’s operations and facilities, as well as critical business operations of the Company’s suppliers and contract
manufacturers, are in locations that are prone to earthquakes and other natural disasters. In addition, such operations and
facilities are subject to the risk of interruption by fire, power shortages, nuclear power plant accidents and other industrial
accidents, terrorist attacks and other hostile acts, labor disputes, public health issues, including pandemics such as the
COVID-19 pandemic, and other events beyond the Company’s control. Global climate change could result in certain types of
natural disasters occurring more frequently or with more intense effects. Such events could make it difficult or impossible for the
Company to manufacture and deliver products to its customers, create delays and inefficiencies in the Company’s supply and
manufacturing chain, and result in slowdowns and outages to the Company’s service offerings. Following an interruption to its
business, the Company could require substantial recovery time, experience significant expenditures to resume operations, and
lose significant sales. Because the Company relies on single or limited sources for the supply and manufacture of many critical
components, a business interruption affecting such sources would exacerbate any negative consequences to the Company.
Apple Inc. | 2020 Form 10-K | 13
The Company’s operations are also subject to the risks of industrial accidents at its suppliers and contract manufacturers. While
the Company’s suppliers are required to maintain safe working environments and operations, an industrial accident could occur
and could result in disruption to the Company’s business and harm to the Company’s reputation. Major public health issues,
including pandemics such as the COVID-19 pandemic, have adversely affected, and could in the future adversely affect, the
Company due to their impact on the global economy and demand for consumer products; the imposition of protective public
safety measures, such as stringent employee travel restrictions and limitations on freight services and the movement of products
between regions; and disruptions in the Company’s supply chain and sales and distribution channels, resulting in interruptions of
the supply of current products and delays in production ramps of new products.
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 expects its quarterly net sales and operating results to fluctuate.
The Company’s profit margins vary across its products, services, geographic segments and distribution channels. For example,
the gross margins on the Company’s products and services vary significantly and can change over time. 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 developing, 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.
The Company has historically experienced higher net sales in its first quarter compared to other quarters in its fiscal year due in
part to seasonal holiday demand. Additionally, new product and service introductions can significantly impact net sales, cost of
sales and operating expenses. Further, the Company generates a significant portion of its net sales from a single product and a
decline in demand for that product could significantly impact quarterly net sales. The Company could also be subject to
unexpected developments, such as lower-than-anticipated demand for the Company’s products or services, issues with new
product or service introductions, information technology system failures or network disruptions, or failure of one of the
Company’s logistics, components supply, or manufacturing partners.
The Company’s stock price is subject to volatility.
The Company’s stock price has experienced substantial price volatility in the past and may continue to do so in the future.
Additionally, the Company, the technology industry and the stock market as a whole have experienced extreme stock price and
volume fluctuations that have affected stock prices in ways that may have been unrelated to these companies’ operating
performance. Price volatility over a given period may cause the average price at which the Company repurchases its stock to
exceed the stock’s price at a given point in time. The Company believes its stock price should reflect expectations of future
growth and profitability. The Company also believes its stock price should reflect expectations that its cash dividend will continue
at current levels or grow, and that its current share repurchase program will be fully consummated. Future dividends are subject
to declaration by the Company’s Board of Directors, and the Company’s share repurchase program does not obligate it to
acquire any specific number of shares. If the Company fails to meet expectations related to future growth, profitability, dividends,
share repurchases or other market expectations, its stock price may decline significantly, which could have a material adverse
impact on investor confidence and employee retention.
The Company’s financial performance is subject to risks associated with changes in the value of the U.S. dollar relative
to local currencies.
The Company’s primary exposure to movements in foreign currency exchange rates relates to non–U.S. dollar–denominated
sales, cost of sales and operating expenses worldwide. 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 foreign currency
exchange rate fluctuations.
The weakening of foreign currencies relative to the U.S. dollar adversely affects the U.S. dollar value of the Company’s foreign
currency–denominated sales and earnings, and generally leads the Company to raise international pricing, potentially reducing
demand for the Company’s products. In some circumstances, for competitive or other reasons, the Company may decide not to
raise international pricing to offset the U.S. dollar’s strengthening, which would adversely affect the U.S. dollar value of the gross
margins the Company earns on foreign currency–denominated sales.
Apple Inc. | 2020 Form 10-K | 14
Conversely, a strengthening of foreign currencies relative to the U.S. dollar, while generally beneficial to the Company’s foreign
currency–denominated sales and earnings, could cause the Company to reduce international pricing and incur losses on its
foreign currency derivative instruments, thereby limiting the benefit. Additionally, strengthening of foreign currencies may
increase the Company’s cost of product components denominated in those currencies, thus adversely affecting gross margins.
The Company uses derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to
fluctuations in foreign currency exchange rates. The use of such hedging activities may not be effective to offset any, or more
than a portion, of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the
hedges are in place.
The Company is exposed to credit risk and fluctuations in the values of its investment portfolio.
The Company’s investments can be negatively affected by liquidity, credit deterioration, financial results, market and economic
conditions, political risk, sovereign risk, interest rate fluctuations or other factors. As a result, the value and liquidity of the
Company’s cash, cash equivalents, and marketable and non-marketable securities may fluctuate substantially. Therefore,
although the Company has not realized any significant losses on its cash, cash equivalents, and marketable and non-marketable
securities, future fluctuations in their value could result in significant losses and could have a material adverse impact on the
Company’s financial condition and operating results.
The Company is exposed to credit risk on its trade accounts receivable, vendor non-trade receivables and prepayments
related to long-term supply agreements, and this risk is heightened during periods when economic conditions worsen.
The Company distributes its products through third-party cellular network carriers, wholesalers, retailers and resellers. The
Company also sells its products directly to small and mid-sized businesses and education, enterprise and government
customers. A substantial majority of the Company’s outstanding trade receivables are not covered by collateral, third-party bank
support or financing arrangements, or credit insurance, and a significant portion of the Company’s trade receivables can be
concentrated within cellular network carriers or other resellers. The Company’s exposure to credit and collectibility risk on its
trade receivables is higher in certain international markets and its ability to mitigate such risks may be limited. The Company also
has unsecured vendor non-trade receivables resulting from purchases of components by outsourcing partners and other vendors
that manufacture sub-assemblies or assemble final products for the Company. In addition, the Company has made prepayments
associated with long-term supply agreements to secure supply of inventory components. As of September 26, 2020, the
Company’s vendor non-trade receivables and prepayments related to long-term supply agreements were concentrated among a
few individual vendors located primarily in Asia. While the Company has procedures to monitor and limit exposure to credit risk
on its trade and vendor non-trade receivables, as well as long-term prepayments, there can be no assurance such procedures
will effectively limit its credit risk and avoid losses.
The Company could be subject to changes in its tax rates, the adoption of new U.S. or international tax legislation or
exposure to additional tax liabilities.
The Company is subject to taxes in the U.S. and numerous foreign jurisdictions, including Ireland, where a number of the
Company’s subsidiaries are organized. Due to economic and political conditions, tax rates in various jurisdictions may be subject
to significant change. The Company’s effective tax rates could be affected by changes in the mix of earnings in countries with
differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, the introduction of new taxes, or
changes in tax laws or their interpretation, including in the U.S. and Ireland.
The Company is also subject to the examination of its tax returns and other tax matters by the U.S. Internal Revenue Service
and other tax authorities and governmental bodies. The Company regularly assesses the likelihood of an adverse outcome
resulting from these examinations to determine the adequacy of its provision for taxes. There can be no assurance as to the
outcome of these examinations. If the Company’s effective tax rates were to increase, particularly in the U.S. or Ireland, or if the
ultimate determination of the Company’s taxes owed is for an amount in excess of amounts previously accrued, the Company’s
financial condition and operating results could be materially adversely affected.
Item 1B. Unresolved Staff Comments
None.
Item 2.
Properties
The Company’s headquarters are located in Cupertino, California. As of September 26, 2020, the Company owned or leased
facilities and land for corporate functions, R&D, data centers, retail and other purposes at locations throughout the U.S. and in
various places outside 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.
Apple Inc. | 2020 Form 10-K | 15
Item 3.
Legal Proceedings
The Company is subject to legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary
course of business. The Company’s material legal proceedings are described in Part II, Item 8 of this Form 10-K in the Notes to
Consolidated Financial Statements in Note 10, “Commitments and Contingencies” under the heading “Contingencies.”
The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting
period for amounts above management’s expectations, the Company’s financial condition and operating results for that reporting
period could be materially adversely affected. The Company settled certain matters during the fourth quarter of 2020 that did not
individually or in the aggregate have a material impact on the Company’s financial condition or operating results.
Item 4. Mine Safety Disclosures
Not applicable.
Apple Inc. | 2020 Form 10-K | 16
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
The Company’s common stock is traded on The Nasdaq Stock Market LLC under the symbol AAPL.
Common Stock Split
On August 28, 2020, the Company effected a four-for-one stock split to shareholders of record as of August 24, 2020. All share,
restricted stock unit (“RSU”) and per share or per RSU information has been retroactively adjusted to reflect the stock split.
Holders
As of October 16, 2020, there were 22,797 shareholders of record.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Share repurchase activity during the three months ended September 26, 2020 was as follows (in millions, except number of
shares, which are reflected in thousands, and per share amounts):
Periods
June 28, 2020 to August 1, 2020:
Total Number
of Shares
Purchased
Average
Price
Paid Per
Share
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
Approximate
Dollar Value of
Shares That May
Yet Be Purchased
Under the Plans
or Programs (1)
Open market and privately negotiated purchases
67,990
$
94.68
67,990
August 2, 2020 to August 29, 2020:
May 2020 ASR
Open market and privately negotiated purchases
3,115
(2)
40,004
$ 115.99
3,115
40,004
August 30, 2020 to September 26, 2020:
Open market and privately negotiated purchases
60,725
$ 114.00
60,725
Total
171,834
$
56,353
(1) As of September 26, 2020, the Company was authorized to purchase up to $225 billion of the Company’s common stock
under a share repurchase program announced on April 30, 2020, of which $168.6 billion had been utilized. The remaining
$56.4 billion in the table represents the amount available to repurchase shares under the authorized repurchase program as
of September 26, 2020. 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.
(2)
In May 2020, the Company entered into an accelerated share repurchase arrangement (“ASR”) to purchase up to $6.0 billion
of the Company’s common stock. In August 2020, the purchase period for this ASR ended and an additional 3 million shares
were delivered and retired. In total, 64 million shares were delivered under this ASR at an average repurchase price of
$94.14.
Apple Inc. | 2020 Form 10-K | 17
Company Stock 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 26, 2020. 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 25, 2015. Note that past stock price performance is not necessarily indicative of future stock
price performance.
*
$100 invested on September 25, 2015 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© 2020 Standard & Poor’s, a division of S&P Global. All rights reserved.
Copyright© 2020 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.
Apple Inc.
S&P 500 Index
S&P Information Technology Index
Dow Jones U.S. Technology Supersector Index
September
2015
September
2016
September
2017
September
2018
September
2019
September
2020
$
$
$
$
100 $
100 $
100 $
100 $
100 $
115 $
123 $
122 $
140 $
137 $
158 $
156 $
208 $
161 $
208 $
205 $
204 $
168 $
226 $
218 $
424
194
333
325
Apple Inc. | 2020 Form 10-K | 18
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN*Among Apple Inc., the S&P 500 Index, the S&P Information Technology Indexand the Dow Jones U.S. Technology Supersector IndexApple Inc.S&P 500 IndexS&P Information Technology IndexDow Jones U.S. Technology Supersector Index9/25/159/24/169/30/179/29/189/28/199/26/20$0$100$200$300$400$500 Item 6.
Selected Financial Data
The information set forth below for the five years ended September 26, 2020, 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 accompanying notes 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).
Total net sales
Net income
Earnings per share:
Basic
Diluted
Cash dividends declared per share
Shares used in computing earnings per share:
2020
2019
2018
2017
2016
$ 274,515 $ 260,174 $ 265,595 $ 229,234 $ 215,639
$
57,411 $
55,256 $
59,531 $
48,351 $
45,687
$
$
$
3.31 $
3.28 $
2.99 $
2.97 $
3.00 $
2.98 $
2.32 $
2.30 $
2.09
2.08
0.795 $
0.75 $
0.68 $
0.60 $
0.545
Basic
Diluted
17,352,119
18,471,336
19,821,510
20,868,968
21,883,281
17,528,214
18,595,651
20,000,435
21,006,767
22,001,126
Total cash, cash equivalents and marketable securities
$ 191,830 $ 205,898 $ 237,100 $ 268,895 $ 237,585
Total assets
Non-current portion of term debt
Other non-current liabilities
$ 323,888 $ 338,516 $ 365,725 $ 375,319 $ 321,686
$
$
98,667 $
91,807 $
93,735 $
97,207 $
75,427
54,490 $
50,503 $
48,914 $
44,212 $
39,986
Apple Inc. | 2020 Form 10-K | 19
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes
included in Part II, Item 8 of this Form 10-K. This section of this Form 10-K generally discusses 2020 and 2019 items and year-
to-year comparisons between 2020 and 2019. Discussions of 2018 items and year-to-year comparisons between 2019 and
2018 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 28, 2019.
Fiscal Year Highlights
COVID-19 Update
COVID-19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in
response. Such measures have included restrictions on travel and business operations, temporary closures of businesses, and
quarantines and shelter-in-place orders. The COVID-19 pandemic has significantly curtailed global economic activity and caused
significant volatility and disruption in global financial markets. The COVID-19 pandemic and the measures taken by many
countries in response have adversely affected and could in the future materially adversely impact the Company’s business,
results of operations, financial condition and stock price.
During 2020, aspects of the Company’s business were adversely affected by the COVID-19 pandemic, with many of the
Company’s retail stores, as well as channel partner points of sale, temporarily closed at various times, and the vast majority of
the Company’s employees working remotely. The Company has reopened some of its offices and the majority of its retail stores,
subject to operating restrictions to protect public health and the health and safety of employees and customers, and it continues
to work on safely re-opening the remainder of its offices and retail stores, subject to local rules and regulations.
The full extent of the future impact of the COVID-19 pandemic on the Company’s operational and financial performance is
currently uncertain and will depend on many factors outside the Company’s control, including, without limitation, the timing,
extent, trajectory and duration of the pandemic, the development and availability of effective treatments and vaccines, the
imposition of protective public safety measures, and the impact of the pandemic on the global economy and demand for
consumer products. Refer to Part I, Item 1A of this Form 10-K under the heading “Risk Factors,” for more information.
The Company believes its existing balances of cash, cash equivalents and marketable securities, along with commercial paper
and other short-term liquidity arrangements, will be sufficient to satisfy its working capital needs, capital asset purchases,
dividends, share repurchases, debt repayments and other liquidity requirements associated with its existing operations.
Fiscal 2020 Highlights
Total net sales increased 6% or $14.3 billion during 2020 compared to 2019, primarily driven by higher net sales of Services and
Wearables, Home and Accessories. The weakness in foreign currencies had an unfavorable impact on net sales during 2020.
In April 2020, the Company announced an increase to its current share repurchase program authorization from $175 billion to
$225 billion and raised its quarterly dividend from $0.1925 to $0.205 per share beginning in May 2020. During 2020, the
Company repurchased $72.5 billion of its common stock and paid dividends and dividend equivalents of $14.1 billion.
On August 28, 2020, the Company effected a four-for-one stock split to shareholders of record as of August 24, 2020. All share,
RSU and per share or per RSU information has been retroactively adjusted to reflect the stock split.
Apple Inc. | 2020 Form 10-K | 20
Products and Services Performance
The following table shows net sales by category for 2020, 2019 and 2018 (dollars in millions):
Net sales by category:
iPhone (1)
Mac (1)
iPad (1)
Wearables, Home and Accessories (1)(2)
Services (3)
2020
Change
2019
Change
2018
$
137,781
(3) % $
142,381
(14) % $
164,888
28,622
23,724
30,620
53,768
11 %
11 %
25 %
16 %
25,740
21,280
24,482
46,291
2 %
16 %
41 %
16 %
25,198
18,380
17,381
39,748
Total net sales
$
274,515
6 % $
260,174
(2) % $
265,595
(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.
(2) Wearables, Home and Accessories net sales include sales of AirPods, Apple TV, Apple Watch, Beats products, HomePod,
iPod touch and Apple-branded and third-party accessories.
(3) Services net sales include sales from the Company’s advertising, AppleCare, digital content and other services. Services net
sales also include amortization of the deferred value of Maps, Siri, and free iCloud® storage and Apple TV+ services, which
are bundled in the sales price of certain products.
iPhone
iPhone net sales decreased during 2020 compared to 2019 due primarily to the absence of new iPhone models in the fourth
quarter of 2020 and the weakness in foreign currencies relative to the U.S. dollar, partially offset by the introduction of iPhone SE
in the third quarter of 2020.
Mac
Mac net sales increased during 2020 compared to 2019 due primarily to higher net sales of MacBook Pro.
iPad
iPad net sales increased during 2020 compared to 2019 due primarily to higher net sales of 10-inch versions of iPad, iPad Air
and iPad Pro.
Wearables, Home and Accessories
Wearables, Home and Accessories net sales increased during 2020 compared to 2019 due primarily to higher net sales of
AirPods and Apple Watch.
Services
Services net sales increased during 2020 compared to 2019 due primarily to higher net sales from the App Store, advertising
and cloud services.
Apple Inc. | 2020 Form 10-K | 21
Segment Operating Performance
The Company manages its business primarily on a geographic basis. The Company’s reportable segments consist of the
Americas, Europe, Greater China, Japan and Rest of Asia Pacific. Americas includes both North and South America. Europe
includes European countries, as well as India, the Middle East and Africa. Greater China includes China mainland, Hong Kong
and Taiwan. Rest of Asia Pacific includes Australia and those Asian countries not included in the Company’s other reportable
segments. Although the reportable segments provide similar hardware and software products and similar services, each one is
managed separately to better align with the location of the Company’s customers and distribution partners and the unique market
dynamics of each geographic region. Further information regarding the Company’s reportable segments can be found in Part II,
Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 11, “Segment Information and Geographic
Data.”
The following table shows net sales by reportable segment for 2020, 2019 and 2018 (dollars in millions):
Net sales by reportable segment:
Americas
Europe
Greater China
Japan
Rest of Asia Pacific
Total net sales
Americas
2020
Change
2019
Change
2018
$
124,556
7 % $
116,914
4 % $
112,093
68,640
40,308
21,418
19,593
14 %
(8) %
— %
10 %
60,288
43,678
21,506
17,788
(3) %
(16) %
(1) %
2 %
62,420
51,942
21,733
17,407
$
274,515
6 % $
260,174
(2) % $
265,595
Americas net sales increased during 2020 compared to 2019 due primarily to higher net sales of Services and Wearables, Home
and Accessories. The weakness in foreign currencies relative to the U.S. dollar had an unfavorable impact on Americas net sales
during 2020.
Europe
Europe net sales increased during 2020 compared to 2019 due primarily to higher net sales of iPhone, Wearables, Home and
Accessories and Services. The weakness in foreign currencies relative to the U.S. dollar had an unfavorable impact on Europe
net sales during 2020.
Greater China
Greater China net sales decreased during 2020 compared to 2019 due primarily to lower net sales of iPhone, partially offset by
higher net sales of Services and iPad. The weakness in foreign currencies relative to the U.S. dollar had an unfavorable impact
on Greater China net sales during 2020.
Japan
Japan net sales were flat during 2020 compared to 2019 due primarily to lower net sales of iPhone, offset by higher net sales of
Services and Wearables, Home and Accessories. The strength of the Japanese yen relative to the U.S. dollar had a favorable
impact on Japan net sales during 2020.
Rest of Asia Pacific
Rest of Asia Pacific net sales increased during 2020 compared to 2019 due primarily to higher net sales of Wearables, Home
and Accessories, Services and iPhone. The weakness in foreign currencies relative to the U.S. dollar had an unfavorable impact
on Rest of Asia Pacific net sales during 2020.
Apple Inc. | 2020 Form 10-K | 22
Gross Margin
Products and Services gross margin and gross margin percentage for 2020, 2019 and 2018 were as follows (dollars in millions):
Gross margin:
Products
Services
Total gross margin
Gross margin percentage:
Products
Services
Total gross margin percentage
Products Gross Margin
2020
2019
2018
$
$
69,461 $
68,887 $
35,495
29,505
77,683
24,156
104,956 $
98,392 $
101,839
31.5%
66.0%
38.2%
32.2%
63.7%
37.8%
34.4%
60.8%
38.3%
Products gross margin increased during 2020 compared to 2019 due primarily to higher Products volume and material cost
savings, partially offset by the weakness in foreign currencies relative to the U.S. dollar and a different Products mix. Products
gross margin percentage decreased during 2020 compared to 2019 due primarily to the weakness in foreign currencies relative
to the U.S. dollar and a different Products mix, partially offset by material cost savings and higher leverage.
Services Gross Margin
Services gross margin increased during 2020 compared to 2019 due primarily to higher Services net sales and a different
Services mix. Services gross margin percentage increased during 2020 compared to 2019 due primarily to a different Services
mix and higher leverage, partially offset by higher Services costs.
The Company’s future gross margins can be impacted by a variety of factors, as set forth in Part I, Item 1A of this Form 10-K
under the heading “Risk Factors.” As a result, the Company believes, in general, gross margins will be subject to volatility and
remain under downward pressure.
Operating Expenses
Operating expenses for 2020, 2019 and 2018 were as follows (dollars in millions):
Research and development
$
18,752
16 % $
16,217
14 % $
14,236
Percentage of total net sales
7%
6%
5%
2020
Change
2019
Change
2018
Selling, general and administrative
$
19,916
9 % $
18,245
9 % $
16,705
Percentage of total net sales
7%
7%
6%
Total operating expenses
$
38,668
12 % $
34,462
11 % $
30,941
Percentage of total net sales
14%
13%
12%
Research and Development
The year-over-year growth in R&D expense in 2020 was driven primarily by increases in headcount-related expenses. The
Company continues to believe that focused investments in R&D are critical to its future growth and competitive position in the
marketplace, and to the development of new and updated products and services that are central to the Company’s core business
strategy.
Selling, General and Administrative
The year-over-year growth in selling, general and administrative expense in 2020 was driven primarily by increases in
headcount-related expenses, higher spending on marketing and advertising, and higher variable selling expenses.
Apple Inc. | 2020 Form 10-K | 23
Other Income/(Expense), Net
Other income/(expense), net (“OI&E”) for 2020, 2019 and 2018 was as follows (dollars in millions):
Interest and dividend income
$
3,763
$
4,961
$
5,686
Interest expense
Other income/(expense), net
Total other income/(expense), net
$
(2,873)
(87)
803
(3,576)
422
1,807
(56) % $
(3,240)
(441)
(10) % $
2,005
2020
Change
2019
Change
2018
The year-over-year decrease in OI&E during 2020 was due primarily to lower interest income and net impairment/gain activity on
non-marketable securities, partially offset by lower interest expense. The weighted-average interest rate earned by the Company
on its cash, cash equivalents and marketable securities was 1.85% and 2.19% in 2020 and 2019, respectively.
Provision for Income Taxes
Provision for income taxes, effective tax rate and statutory federal income tax rate for 2020, 2019 and 2018 were as follows
(dollars in millions):
Provision for income taxes
Effective tax rate
Statutory federal income tax rate
2020
2019
2018
$
9,680
$
10,481
$
13,372
14.4%
21%
15.9%
21%
18.3%
24.5%
The Company’s effective tax rate for both 2020 and 2019 was lower than the statutory federal income tax rate due primarily to
the lower tax rate on foreign earnings, including the impact of tax settlements, and tax benefits from share-based compensation.
The Company’s effective tax rate for 2020 was lower compared to 2019 due primarily to a one-time adjustment of U.S. foreign
tax credits in response to regulations issued by the U.S. Department of the Treasury in December 2019 in connection with the
U.S. Tax Cuts and Jobs Act of 2017 (the “Act”) and higher tax benefits from share-based compensation.
As of September 26, 2020, the Company had net deferred tax assets arising from deductible temporary differences and tax
credits of $11.0 billion and deferred tax liabilities of $2.8 billion. Management believes it is more likely than not that forecasted
income, including income that may be generated as a result of certain tax planning strategies, together with future reversals of
existing taxable temporary differences, will be sufficient to recover the net deferred tax assets. The Company will continue to
evaluate the amount of the valuation allowance, if any, by assessing the realizability of deferred tax assets.
Recent Accounting Pronouncements
Financial Instruments
In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-13, Financial
Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which
modifies the measurement of expected credit losses on certain financial instruments. The Company will adopt ASU 2016-13 in its
first quarter of 2021 utilizing the modified retrospective transition method. Based on the composition of the Company’s
investment portfolio, current market conditions, and historical credit loss activity, the adoption of ASU 2016-13 will not have a
material impact on its consolidated financial statements.
Apple Inc. | 2020 Form 10-K | 24
Liquidity and Capital Resources
The following table presents selected financial information and statistics as of and for the years ended September 26, 2020,
September 28, 2019 and September 29, 2018 (in millions):
Cash, cash equivalents and marketable securities (1)
Property, plant and equipment, net
Commercial paper
Total term debt
Working capital
Cash generated by operating activities
Cash generated by/(used in) investing activities
Cash used in financing activities
2020
2019
2018
191,830 $
205,898 $
237,100
36,766 $
37,378 $
4,996 $
5,980 $
41,304
11,964
107,440 $
102,067 $
102,519
38,321 $
57,101 $
80,674 $
69,391 $
(4,289) $
45,896 $
15,410
77,434
16,066
(86,820) $
(90,976) $
(87,876)
$
$
$
$
$
$
$
$
(1) As of September 26, 2020 and September 28, 2019, total marketable securities included $18.6 billion and $18.9 billion,
respectively, that was restricted from general use, related to the State Aid Decision (refer to Note 5, “Income Taxes” in the
Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K) and other agreements.
The Company believes its existing balances of cash, cash equivalents and marketable securities, along with commercial paper
and other short-term liquidity arrangements, will be sufficient to satisfy its working capital needs, capital asset purchases,
dividends, share repurchases, debt repayments and other liquidity requirements associated with its existing operations over the
next 12 months.
In connection with the State Aid Decision, as of September 26, 2020, the adjusted recovery amount of €12.9 billion plus interest
of €1.2 billion was funded into escrow, where it will remain restricted from general use pending the conclusion of all legal
proceedings. 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.”
The Company’s marketable securities investment portfolio is primarily invested in highly rated securities, with the primary
objective of minimizing the potential risk of principal loss. The Company’s investment policy generally requires securities to be
investment grade and limits the amount of credit exposure to any one issuer.
During 2020, cash generated by operating activities of $80.7 billion was a result of $57.4 billion of net income, non-cash
adjustments to net income of $17.6 billion and an increase in the net change in operating assets and liabilities of $5.7 billion.
Cash used in investing activities of $4.3 billion during 2020 consisted primarily of cash used to acquire property, plant and
equipment of $7.3 billion and cash paid for business acquisitions, net of cash acquired, of $1.5 billion, partially offset by proceeds
from maturities and sales of marketable securities, net of purchases, of $5.5 billion. Cash used in financing activities of $86.8
billion during 2020 consisted primarily of cash used to repurchase common stock of $72.4 billion, cash used to pay dividends and
dividend equivalents of $14.1 billion, cash used to repay or redeem term debt of $12.6 billion and net repayments of commercial
paper of $1.0 billion, partially offset by net proceeds from the issuance of term debt of $16.1 billion.
During 2019, cash generated by operating activities of $69.4 billion was a result of $55.3 billion of net income and non-cash
adjustments to net income of $17.6 billion, partially offset by a decrease in the net change in operating assets and liabilities of
$3.5 billion. Cash generated by investing activities of $45.9 billion during 2019 consisted primarily of proceeds from sales and
maturities of marketable securities, net of purchases, of $57.5 billion, partially offset by cash used to acquire property, plant and
equipment of $10.5 billion. Cash used in financing activities of $91.0 billion during 2019 consisted primarily of cash used to
repurchase common stock of $66.9 billion, cash used to pay dividends and dividend equivalents of $14.1 billion, cash used to
repay term debt of $8.8 billion and net repayments of commercial paper of $6.0 billion, partially offset by net proceeds from the
issuance of term debt of $7.0 billion.
Debt
The Company issues unsecured short-term promissory notes (“Commercial Paper”) pursuant to a commercial paper program.
The Company uses the net proceeds from the commercial paper program for general corporate purposes, including dividends
and share repurchases. As of September 26, 2020, the Company had $5.0 billion of Commercial Paper outstanding, with a
weighted-average interest rate of 0.62% and maturities generally less than nine months.
The Company may enter into agreements to sell certain of its marketable securities with a promise to repurchase the securities
at a specified time and amount as an additional short-term liquidity arrangement.
Apple Inc. | 2020 Form 10-K | 25
As of September 26, 2020, the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate
principal amount of $106.1 billion (collectively the “Notes”). During 2020, the Company issued $16.1 billion and repaid or
redeemed $12.6 billion of Notes. The Company has entered, and in the future may enter, into interest rate swaps to manage
interest rate risk on the Notes. In addition, the Company has entered, and in the future may enter, into foreign currency swaps to
manage foreign currency risk on the Notes.
Further information regarding the Company’s debt issuances and related hedging activity can be found in Part II, Item 8 of this
Form 10-K in the Notes to Consolidated Financial Statements in Note 3, “Financial Instruments” and Note 6, “Debt.”
Capital Return Program
As of September 26, 2020, the Company was authorized to purchase up to $225 billion of the Company’s common stock under a
share repurchase program, of which $168.6 billion had been utilized. During 2020, the Company repurchased 917 million shares
of its common stock for $72.5 billion, including 141 million shares delivered under a $10.0 billion November 2019 ASR and 64
million shares delivered under a $6.0 billion May 2020 ASR. 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.
As of September 26, 2020, the Company’s quarterly cash dividend was $0.205 per share. The Company intends to increase its
dividend on an annual basis, subject to declaration by the Board of Directors.
Contractual Obligations
The following table presents certain payments due by the Company as of September 26, 2020, and includes amounts already
recorded on the Consolidated Balance Sheet, except for manufacturing purchase obligations, other purchase obligations and
certain lease obligations (in millions):
Payments due in
2021
Payments due in
2022–2023
Payments due in
2024–2025
Payments due
after 2025
Total
Term debt
$
8,750 $
20,958 $
21,029 $
55,341 $
106,078
Leases
Manufacturing purchase obligations (1)
Other purchase obligations
Deemed repatriation tax payable
1,622
47,961
6,178
1,533
3,097
1,849
2,736
5,923
2,352
61
400
12,955
5,888
40
90
9,254
12,959
49,911
9,404
29,665
Total
$
66,044 $
34,563 $
36,797 $
70,613 $
208,017
(1) Represents amount expected to be paid under manufacturing-related supplier arrangements, which are primarily
noncancelable.
Leases
The Company has lease arrangements for certain equipment and facilities, including retail, corporate, manufacturing and data
center space. The Company’s retail store and other facility leases typically have original terms not exceeding 10 years and
generally contain multi-year renewal options. The above contractual obligations table includes future payments under leases that
had commenced as of September 26, 2020, and were therefore recorded on the Company’s Consolidated Balance Sheet, as
well as leases that had been signed but not yet commenced as of September 26, 2020. Further information regarding the
Company’s leases can be found in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note
12, “Leases.”
Manufacturing Purchase Obligations
The Company utilizes several outsourcing partners to manufacture sub-assemblies for the Company’s products and to perform
final assembly and testing of finished products. These outsourcing partners acquire components and build product based on
demand information supplied by the Company, which typically covers periods up to 150 days. The Company also obtains
individual components for its products from a wide variety of individual suppliers.
Other Purchase Obligations
The Company’s other purchase obligations consist of noncancelable obligations to acquire capital assets, including product
tooling and manufacturing process equipment, and noncancelable obligations related to advertising, licensing, R&D, Internet and
telecommunications services, content creation and other activities.
Apple Inc. | 2020 Form 10-K | 26
Deemed Repatriation Tax Payable
As of September 26, 2020, a significant portion of the other non-current liabilities in the Company’s Consolidated Balance Sheet
consisted of the deemed repatriation tax payable imposed by the Act. The Company plans to pay the deemed repatriation tax
payable in installments in accordance with the Act.
Other Non-Current Liabilities
The Company’s remaining other non-current liabilities primarily consist of items for which the Company is unable to make a
reasonably reliable estimate of the timing or amount of payments; therefore, such amounts are not included in the above
contractual obligations table.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles
(“GAAP”) and the Company’s discussion and analysis of its financial condition and operating results require the Company’s
management to make judgments, assumptions and estimates that affect the amounts reported. Note 1, “Summary of Significant
Accounting Policies,” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K describes the
significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements.
Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under
the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Actual results may differ from these estimates, and such differences may be material.
Management believes the Company’s critical accounting policies and estimates are those related to revenue recognition,
valuation of manufacturing-related assets and estimation of inventory purchase commitment cancellation fees, warranty costs,
income taxes, and legal and other contingencies. Management considers these policies critical because they are both important
to the portrayal of the Company’s financial condition and operating results, and they require management to make judgments
and estimates about inherently uncertain matters. The Company’s senior management has reviewed these critical accounting
policies and related disclosures with the Audit and Finance Committee of the Company’s Board of Directors.
Revenue Recognition
The Company has identified up to three performance obligations regularly included in arrangements involving the sale of iPhone,
Mac, iPad and certain other products. The first performance obligation, which represents the substantial portion of the allocated
sales price, is the hardware and bundled software delivered at the time of sale. The second performance obligation is the right to
receive certain product-related bundled services, which include iCloud, Siri and Maps. The third performance obligation is the
right to receive, on a when-and-if-available basis, future unspecified software upgrades relating to the software bundled with
each device. The Company allocates revenue and any related discounts to these performance obligations based on their relative
stand-alone selling prices (“SSPs”). Because the Company lacks observable prices for the undelivered performance obligations,
the allocation of revenue is based on the Company’s estimated SSPs. Revenue allocated to the product-related bundled services
and unspecified software upgrade rights is deferred and recognized on a straight-line basis over the estimated period they are
expected to be provided.
The Company’s process for determining estimated SSPs involves management’s judgment and considers multiple factors that
may vary over time depending upon the unique facts and circumstances related to each deliverable. Should future facts and
circumstances change, the Company’s SSPs and the future rate of related amortization for product-related bundled services and
unspecified software upgrade rights related to future sales of these devices could change. Factors subject to change include the
nature of the product-related bundled services and unspecified software upgrade rights offered, their estimated value and the
estimated period they are expected to be provided.
Valuation of Manufacturing-Related Assets and Estimation of Inventory Purchase Commitment Cancellation Fees
The Company invests in manufacturing-related assets, including capital assets held at its suppliers’ facilities and prepayments
provided to certain of its suppliers associated with long-term agreements to secure the supply of inventory. The Company also
accrues estimated purchase commitment cancellation fees related to inventory orders that have been canceled or are expected
to be canceled. The Company’s estimates of future product development plans and demand for its products are key inputs in
determining the recoverability of manufacturing-related assets and assessing the adequacy of any purchase commitment
cancellation fee accruals. If there is an abrupt and substantial decline in estimated demand for one or more of the Company’s
products, a change in the Company’s product development plans, or an unanticipated change in technological requirements for
any of the Company’s products, the Company may be required to record write-downs or impairments of manufacturing-related
assets or accrue purchase commitment cancellation fees.
Apple Inc. | 2020 Form 10-K | 27
Warranty Costs
The Company offers limited warranties on its new and certified refurbished hardware products and on parts used to repair its
hardware products, and customers may purchase extended service coverage, where available, on many of the Company’s
hardware products. The Company accrues the estimated cost of warranties in the period the related revenue is recognized
based on historical and projected warranty claim rates, historical and projected cost per claim and knowledge of specific product
failures outside the Company’s typical experience. If actual product failure rates or repair costs differ from estimates, revisions to
the estimated warranty liabilities would be required.
Income Taxes
The Company recognizes tax benefits from uncertain tax positions if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in
the financial statements from such positions are measured based on the largest benefit that has a greater-than-50% likelihood of
being realized upon ultimate settlement. The calculation of tax liabilities involves significant judgment in estimating the impact of
uncertainties in the application of GAAP and complex tax laws. Resolution of these uncertainties in a manner inconsistent with
management’s expectations could have a material impact on the Company’s financial condition and operating results.
Legal and Other Contingencies
As discussed in Part I, Item 3 of this Form 10-K under the heading “Legal Proceedings” and in Part II, Item 8 of this Form 10-K in
the Notes to Consolidated Financial Statements in Note 10, “Commitments and Contingencies,” the Company is subject to
various legal proceedings and claims that arise in the ordinary course of business. The Company records a liability when it is
probable that a loss has been incurred and the amount is reasonably estimable, the determination of which requires significant
judgment. Except as described in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 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 greater than a recorded accrual,
concerning loss contingencies for asserted legal and other claims.
The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting
period for amounts above management’s expectations, the Company’s financial condition and operating results for that reporting
period could be materially adversely affected.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate and Foreign Currency Risk Management
The Company regularly reviews its foreign exchange forward and option positions and interest rate swaps, both on a stand-alone
basis and in conjunction with its underlying foreign currency and interest rate exposures. Given the effective horizons of the
Company’s risk management activities and the anticipatory nature of the exposures, there can be no assurance these positions
will offset more than a portion of the financial impact resulting from movements in either foreign exchange or interest rates.
Further, the recognition of the gains and losses related to these instruments may not coincide with the timing of gains and losses
related to the underlying economic exposures and, therefore, may adversely affect the Company’s financial condition and
operating results.
Interest Rate Risk
The Company’s exposure to changes in interest rates relates primarily to the Company’s investment portfolio and outstanding
debt. While the Company is exposed to global interest rate fluctuations, the Company’s interest income and expense are most
sensitive to fluctuations in U.S. interest rates. Changes in U.S. interest rates affect the interest earned on the Company’s cash,
cash equivalents and marketable securities and the fair value of those securities, as well as costs associated with hedging and
interest paid on the Company’s debt.
The Company’s investment policy and strategy are focused on the preservation of capital and supporting the Company’s liquidity
requirements. The Company uses a combination of internal and external management to execute its investment strategy and
achieve its investment objectives. The Company typically invests in highly rated securities, with the primary objective of
minimizing the potential risk of principal loss. The Company’s investment policy generally requires securities to be investment
grade and limits the amount of credit exposure to any one issuer. To provide a meaningful assessment of the interest rate risk
associated with the Company’s investment portfolio, the Company performed a sensitivity analysis to determine the impact a
change in interest rates would have on the value of the investment portfolio assuming a 100 basis point parallel shift in the yield
curve. Based on investment positions as of September 26, 2020 and September 28, 2019, a hypothetical 100 basis point
increase in interest rates across all maturities would result in a $3.1 billion and $2.8 billion incremental decline in the fair market
value of the portfolio, respectively. Such losses would only be realized if the Company sold the investments prior to maturity.
Apple Inc. | 2020 Form 10-K | 28
As of September 26, 2020 and September 28, 2019, the Company had outstanding floating- and fixed-rate notes with varying
maturities for an aggregate carrying amount of $107.4 billion and $102.1 billion, respectively. The Company has entered, and in
the future may enter, into interest rate swaps to manage interest rate risk on its outstanding term debt. Interest rate swaps allow
the Company to effectively convert fixed-rate payments into floating-rate payments or floating-rate payments into fixed-rate
payments. Gains and losses on term debt are generally offset by the corresponding losses and gains on the related hedging
instrument. A 100 basis point increase in market interest rates would cause interest expense on the Company’s debt as of
September 26, 2020 and September 28, 2019 to increase by $218 million and $325 million on an annualized basis, respectively.
Foreign Currency Risk
In general, the Company is a net receiver of currencies other than the U.S. dollar. Accordingly, changes in exchange rates, and
in particular a strengthening of the U.S. dollar, will negatively affect the Company’s net sales and gross margins as expressed in
U.S. dollars. There is a risk that the Company will have to adjust local currency pricing due to competitive pressures when there
has been significant volatility in foreign currency exchange rates.
The Company may enter into foreign currency forward and option contracts with financial institutions to protect against foreign
exchange risks associated with certain existing assets and liabilities, certain firmly committed transactions, forecasted future
cash flows and net investments in foreign subsidiaries. In addition, the Company has entered, and in the future may enter, into
foreign currency contracts to partially offset the foreign currency exchange gains and losses on its foreign currency–denominated
debt issuances. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue
and inventory purchases, typically for up to 12 months. However, the Company may choose not to hedge certain foreign
exchange exposures for a variety of reasons including, but not limited to, accounting considerations or the prohibitive economic
cost of hedging particular exposures.
To provide 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. The VAR model consisted of using a Monte Carlo simulation to generate thousands of random
market price paths assuming normal market conditions. The VAR is the maximum expected loss in fair value, for a given
confidence interval, to the Company’s foreign currency derivative positions due to adverse movements in rates. The VAR model
is not intended to represent actual losses but is used as a risk estimation and management tool. Forecasted transactions, firm
commitments and assets and liabilities denominated in foreign currencies were excluded from the model. Based on the results of
the model, the Company estimates with 95% confidence, a maximum one-day loss in fair value of $551 million as of
September 26, 2020, compared to a maximum one-day loss in fair value of $452 million as of September 28, 2019. Because the
Company uses foreign currency instruments for hedging purposes, the losses in fair value incurred on those instruments are
generally offset by increases in the fair value of the underlying exposures.
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 26, 2020 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. | 2020 Form 10-K | 29
Item 8.
Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Consolidated Statements of Operations for the years ended September 26, 2020, September 28, 2019 and
September 29, 2018
Consolidated Statements of Comprehensive Income for the years ended September 26, 2020, September 28,
2019 and September 29, 2018
Consolidated Balance Sheets as of September 26, 2020 and September 28, 2019
Consolidated Statements of Shareholders’ Equity for the years ended September 26, 2020, September 28, 2019
and September 29, 2018
Consolidated Statements of Cash Flows for the years ended September 26, 2020, September 28, 2019 and
September 29, 2018
Notes to Consolidated Financial Statements
Selected Quarterly Financial Information (Unaudited)
Reports of Independent Registered Public Accounting Firm
Page
31
32
33
34
35
36
57
59
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 accompanying notes.
Apple Inc. | 2020 Form 10-K | 30
Apple Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except number of shares which are reflected in thousands and per share amounts)
Net sales:
Products
Services
Total net sales
Cost of sales:
Products
Services
Total cost of sales
Gross margin
Operating expenses:
Research and development
Selling, general and administrative
Total operating expenses
Operating income
Other income/(expense), net
Income before provision for income taxes
Provision for income taxes
Net income
Earnings per share:
Basic
Diluted
Shares used in computing earnings per share:
Basic
Diluted
Years ended
September 26,
2020
September 28,
2019
September 29,
2018
$
220,747 $
213,883 $
225,847
53,768
274,515
46,291
260,174
39,748
265,595
151,286
18,273
169,559
104,956
18,752
19,916
38,668
66,288
803
67,091
9,680
144,996
16,786
161,782
98,392
16,217
18,245
34,462
63,930
1,807
65,737
10,481
$
57,411 $
55,256 $
148,164
15,592
163,756
101,839
14,236
16,705
30,941
70,898
2,005
72,903
13,372
59,531
$
$
3.31 $
3.28 $
2.99 $
2.97 $
3.00
2.98
17,352,119
18,471,336
19,821,510
17,528,214
18,595,651
20,000,435
See accompanying Notes to Consolidated Financial Statements.
Apple Inc. | 2020 Form 10-K | 31
Apple Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
Net income
Other comprehensive income/(loss):
Change in foreign currency translation, net of tax
Change in unrealized gains/losses on derivative instruments, net of tax:
Change in fair value of derivatives
Adjustment for net (gains)/losses realized and included in net
income
Total change in unrealized gains/losses on derivative
instruments
Change in unrealized gains/losses on marketable debt securities, net of
tax:
Years ended
September 26,
2020
September 28,
2019
September 29,
2018
$
57,411 $
55,256 $
59,531
(408)
(525)
88
79
(661)
(1,264)
23
(1,185)
(638)
523
382
905
Change in fair value of marketable debt securities
1,202
3,802
(3,407)
Adjustment for net (gains)/losses realized and included in net
income
Total change in unrealized gains/losses on marketable debt
securities
(63)
25
1
1,139
3,827
(3,406)
Total other comprehensive income/(loss)
Total comprehensive income
42
2,781
(3,026)
$
57,453 $
58,037 $
56,505
See accompanying Notes to Consolidated Financial Statements.
Apple Inc. | 2020 Form 10-K | 32
Apple Inc.
CONSOLIDATED BALANCE SHEETS
(In millions, except number of shares which are reflected in thousands and par value)
ASSETS:
LIABILITIES AND SHAREHOLDERS’ EQUITY:
September 26,
2020
September 28,
2019
$
38,016 $
52,927
16,120
4,061
21,325
11,264
48,844
51,713
22,926
4,106
22,878
12,352
143,713
162,819
100,887
36,766
42,522
180,175
$
323,888 $
$
42,296 $
42,684
6,643
4,996
8,773
105,392
98,667
54,490
153,157
258,549
105,341
37,378
32,978
175,697
338,516
46,236
37,720
5,522
5,980
10,260
105,718
91,807
50,503
142,310
248,028
Current assets:
Cash and cash equivalents
Marketable securities
Accounts receivable, net
Inventories
Vendor non-trade receivables
Other current assets
Total current assets
Non-current assets:
Marketable securities
Property, plant and equipment, net
Other non-current assets
Total non-current assets
Total assets
Current liabilities:
Accounts payable
Other current liabilities
Deferred revenue
Commercial paper
Term debt
Total current liabilities
Non-current liabilities:
Term debt
Other non-current liabilities
Total non-current liabilities
Total liabilities
Commitments and contingencies
Shareholders’ equity:
Common stock and additional paid-in capital, $0.00001 par value: 50,400,000 shares
authorized; 16,976,763 and 17,772,945 shares issued and outstanding, respectively
Retained earnings
Accumulated other comprehensive income/(loss)
Total shareholders’ equity
50,779
14,966
(406)
65,339
45,174
45,898
(584)
90,488
Total liabilities and shareholders’ equity
$
323,888 $
338,516
See accompanying Notes to Consolidated Financial Statements.
Apple Inc. | 2020 Form 10-K | 33
Apple Inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In millions, except per share amounts)
Total shareholders’ equity, beginning balances
$
90,488 $
107,147 $
134,047
Years ended
September 26,
2020
September 28,
2019
September 29,
2018
Common stock and additional paid-in capital:
Beginning balances
Common stock issued
Common stock withheld related to net share settlement of equity
awards
Share-based compensation
Ending balances
Retained earnings:
Beginning balances
Net income
Dividends and dividend equivalents declared
Common stock withheld related to net share settlement of equity
awards
Common stock repurchased
Cumulative effects of changes in accounting principles
Ending balances
Accumulated other comprehensive income/(loss):
Beginning balances
Other comprehensive income/(loss)
Cumulative effects of changes in accounting principles
Ending balances
45,174
880
40,201
781
(2,250)
(2,002)
6,975
50,779
6,194
45,174
35,867
669
(1,778)
5,443
40,201
45,898
57,411
70,400
55,256
98,330
59,531
(14,087)
(14,129)
(13,735)
(1,604)
(1,029)
(948)
(72,516)
(67,101)
(73,056)
(136)
14,966
2,501
45,898
278
70,400
(584)
(3,454)
42
136
2,781
89
(406)
(584)
(150)
(3,026)
(278)
(3,454)
Total shareholders’ equity, ending balances
Dividends and dividend equivalents declared per share or RSU
$
$
65,339 $
90,488 $
107,147
0.795 $
0.75 $
0.68
See accompanying Notes to Consolidated Financial Statements.
Apple Inc. | 2020 Form 10-K | 34
Apple Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Years ended
September 26,
2020
September 28,
2019
September 29,
2018
Cash, cash equivalents and restricted cash, beginning balances
$
50,224 $
25,913 $
20,289
Operating activities:
Net income
Adjustments to reconcile net income to cash generated by operating activities:
Depreciation and amortization
Share-based compensation expense
Deferred income tax benefit
Other
Changes in operating assets and liabilities:
Accounts receivable, net
Inventories
Vendor non-trade receivables
Other current and non-current assets
Accounts payable
Deferred revenue
Other current and non-current liabilities
Cash generated by operating activities
Investing activities:
Purchases of marketable securities
Proceeds from maturities of marketable securities
Proceeds from sales of marketable securities
Payments for acquisition of property, plant and equipment
Payments made in connection with business acquisitions, net
Purchases of non-marketable securities
Proceeds from non-marketable securities
Other
Cash generated by/(used in) investing activities
Financing activities:
Proceeds from issuance of common stock
Payments for taxes related to net share settlement of equity awards
Payments for dividends and dividend equivalents
Repurchases of common stock
Proceeds from issuance of term debt, net
Repayments of term debt
Repayments of commercial paper, net
Other
57,411
55,256
59,531
11,056
6,829
(215)
(97)
6,917
(127)
1,553
(9,588)
(4,062)
2,081
8,916
80,674
12,547
6,068
(340)
(652)
245
(289)
2,931
873
(1,923)
(625)
(4,700)
69,391
10,903
5,340
(32,590)
(444)
(5,322)
828
(8,010)
(423)
9,175
(3)
38,449
77,434
(114,938)
(39,630)
(71,356)
69,918
50,473
(7,309)
(1,524)
(210)
92
(791)
(4,289)
880
(3,634)
(14,081)
(72,358)
16,091
(12,629)
(963)
(126)
40,102
56,988
55,881
47,838
(10,495)
(13,313)
(624)
(1,001)
1,634
(1,078)
45,896
781
(2,817)
(14,119)
(66,897)
6,963
(8,805)
(5,977)
(105)
(721)
(1,871)
353
(745)
16,066
669
(2,527)
(13,712)
(72,738)
6,969
(6,500)
(37)
—
Cash used in financing activities
(86,820)
(90,976)
(87,876)
Increase/(Decrease) in cash, cash equivalents and restricted cash
(10,435)
24,311
39,789 $
50,224 $
5,624
25,913
Cash, cash equivalents and restricted cash, ending balances
Supplemental cash flow disclosure:
Cash paid for income taxes, net
Cash paid for interest
$
$
$
9,501 $
3,002 $
15,263 $
3,423 $
10,417
3,022
See accompanying Notes to Consolidated Financial Statements.
Apple Inc. | 2020 Form 10-K | 35
Apple Inc.
Notes to Consolidated Financial Statements
Note 1 – Summary of Significant Accounting Policies
Basis of Presentation and Preparation
The consolidated financial statements include the accounts of Apple Inc. and its wholly owned subsidiaries (collectively “Apple”
or the “Company”). Intercompany accounts and transactions have been eliminated. In the opinion of the Company’s
management, the consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary
for fair financial statement presentation. The preparation of these consolidated financial statements and accompanying notes in
conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that
affect the amounts reported. Actual results could differ materially from those estimates. Certain prior period amounts in the
consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s
presentation.
The Company’s fiscal year is the 52- or 53-week period that ends on the last Saturday of September. The Company’s fiscal
years 2020, 2019 and 2018 spanned 52 weeks each. An additional week is included in the first fiscal quarter every five or six
years to realign the Company’s fiscal quarters with calendar quarters. Unless otherwise stated, references to particular years,
quarters, months and periods refer to the Company’s fiscal years ended in September and the associated quarters, months and
periods of those fiscal years.
Common Stock Split
On August 28, 2020, the Company effected a four-for-one stock split to shareholders of record as of August 24, 2020. All share,
restricted stock unit (“RSU”) and per share or per RSU information has been retroactively adjusted to reflect the stock split.
Recently Adopted Accounting Pronouncements
Leases
At the beginning of the first quarter of 2020, the Company adopted the Financial Accounting Standards Board’s (the “FASB”)
Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), and additional ASUs issued to clarify
and update the guidance in ASU 2016-02 (collectively, the “new leases standard”), which modifies lease accounting for lessees
to increase transparency and comparability by recording lease assets and liabilities for operating leases and disclosing key
information about leasing arrangements. The Company adopted the new leases standard utilizing the modified retrospective
transition method, under which amounts in prior periods presented were not restated. For contracts existing at the time of
adoption, the Company elected to not reassess (i) whether any are or contain leases, (ii) lease classification, and (iii) initial direct
costs. Upon adoption, the Company recorded $7.5 billion of right-of-use (“ROU”) assets and $8.1 billion of lease liabilities on its
Condensed Consolidated Balance Sheet.
Hedging
At the beginning of the first quarter of 2020, the Company adopted FASB ASU No. 2017-12, Derivatives and Hedging (Topic
815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). ASU 2017-12 expands component and fair
value hedging, specifies the presentation of the effects of hedging instruments, eliminates the separate measurement and
presentation of hedge ineffectiveness, and updates disclosure requirements related to hedging. The Company adopted ASU
2017-12 utilizing the modified retrospective transition method. Upon adoption, the Company recorded a $136 million increase in
accumulated other comprehensive income/(loss) (“AOCI”) and a corresponding decrease in retained earnings in the Condensed
Consolidated Statement of Shareholders’ Equity.
Advertising Costs
Advertising costs are expensed as incurred and included in selling, general and administrative expenses.
Share-Based Compensation
The Company generally measures share-based compensation based on the closing price of the Company’s common stock on
the date of grant, and recognizes expense on a straight-line basis for its estimate of equity awards that will ultimately vest.
Further information regarding share-based compensation can be found in Note 9, “Benefit Plans.”
Apple Inc. | 2020 Form 10-K | 36
Earnings Per Share
The following table shows the computation of basic and diluted earnings per share for 2020, 2019 and 2018 (net income in
millions and shares in thousands):
Numerator:
Net income
Denominator:
Weighted-average basic shares outstanding
Effect of dilutive securities
Weighted-average diluted shares
Basic earnings per share
Diluted earnings per share
2020
2019
2018
$
57,411 $
55,256 $
59,531
17,352,119
18,471,336
19,821,510
176,095
124,315
178,925
17,528,214
18,595,651
20,000,435
$
$
3.31 $
3.28 $
2.99 $
2.97 $
3.00
2.98
The Company applies the treasury stock method to determine the dilutive effect of potentially dilutive securities. Potentially
dilutive securities representing 62 million shares of common stock were excluded from the computation of diluted earnings per
share for 2019 because their effect would have been antidilutive.
Cash Equivalents and Marketable Securities
All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents.
The Company’s investments in marketable debt securities have been classified and accounted for as available-for-sale. The
Company classifies its marketable debt securities as either short-term or long-term based on each instrument’s underlying
contractual maturity date. Unrealized gains and losses on marketable debt securities classified as available-for-sale are
recognized in other comprehensive income/(loss) (“OCI”).
The Company’s investments in marketable equity securities are classified based on the nature of the securities and their
availability for use in current operations. The Company’s marketable equity securities are measured at fair value with gains and
losses recognized in other income/(expense), net (“OI&E”).
The cost of securities sold is determined using the specific identification method.
Inventories
Inventories are measured using the first-in, first-out method.
Property, Plant and Equipment
Depreciation on property, plant and equipment is recognized on a straight-line basis over the estimated useful lives of the assets,
which for buildings is the lesser of 40 years or the remaining life of the building; between one and five years for machinery and
equipment, including product tooling and manufacturing process equipment; and the shorter of lease term or useful life for
leasehold improvements. Capitalized costs related to internal-use software are amortized on a straight-line basis over the
estimated useful lives of the assets, which range from three to seven years. Depreciation and amortization expense on property
and equipment was $9.7 billion, $11.3 billion and $9.3 billion during 2020, 2019 and 2018, respectively.
Non-cash investing activities involving property, plant and equipment resulted in a net increase/(decrease) to accounts payable
and other current liabilities of $(2.9) billion and $3.4 billion during 2019 and 2018, respectively.
Apple Inc. | 2020 Form 10-K | 37
Non-Marketable Securities
The Company has elected to apply the measurement alternative to equity securities without readily determinable fair values. As
such, the Company’s non-marketable equity securities are measured at cost, less any impairment, and are adjusted for changes
in fair value resulting from observable transactions for identical or similar investments of the same issuer. Gains and losses on
non-marketable equity securities are recognized in OI&E.
Restricted Cash and Restricted Marketable Securities
The Company considers cash and marketable securities to be restricted when withdrawal or general use is legally restricted. The
Company reports restricted cash as other assets in the Consolidated Balance Sheets, and determines current or non-current
classification based on the expected duration of the restriction. The Company reports restricted marketable securities as current
or non-current marketable securities in the Consolidated Balance Sheets based on the classification of the underlying securities.
Fair Value Measurements
The fair values of the Company’s money market funds and certain marketable equity securities are based on quoted prices in
active markets for identical assets. The valuation techniques used to measure the fair value of the Company’s debt instruments
and all other financial instruments, which generally have counterparties with high credit ratings, are based on quoted market
prices or model-driven valuations using significant inputs derived from or corroborated by observable market data.
Note 2 – Revenue Recognition
Net sales consist of revenue from the sale of iPhone, Mac, iPad, Services and other products. The Company recognizes revenue
at the amount to which it expects to be entitled when control of the products or services is transferred to its customers. Control is
generally transferred when the Company has a present right to payment and title and the significant risks and rewards of
ownership of products or services are transferred to its customers. For most of the Company’s Products net sales, control
transfers when products are shipped. For the Company’s Services net sales, control transfers over time as services are
delivered. Payment for Products and Services net sales is collected within a short period following transfer of control or
commencement of delivery of services, as applicable.
The Company records reductions to Products net sales related to future product returns, price protection and other customer
incentive programs based on the Company’s expectations and historical experience.
For arrangements with multiple performance obligations, which represent promises within an arrangement that are distinct, the
Company allocates revenue to all distinct performance obligations based on their relative stand-alone selling prices (“SSPs”).
When available, the Company uses observable prices to determine SSPs. When observable prices are not available, SSPs are
established that reflect the Company’s best estimates of what the selling prices of the performance obligations would be if they
were sold regularly on a stand-alone basis. The Company’s process for estimating SSPs without observable prices considers
multiple factors that may vary depending upon the unique facts and circumstances related to each performance obligation
including, where applicable, prices charged by the Company for similar offerings, market trends in the pricing for similar offerings,
product-specific business objectives and the estimated cost to provide the performance obligation.
The Company has identified up to three performance obligations regularly included in arrangements involving the sale of iPhone,
Mac, iPad and certain other products. The first performance obligation, which represents the substantial portion of the allocated
sales price, is the hardware and bundled software delivered at the time of sale. The second performance obligation is the right to
receive certain product-related bundled services, which include iCloud, Siri and Maps. The third performance obligation is the
right to receive, on a when-and-if-available basis, future unspecified software upgrades relating to the software bundled with
each device. The Company allocates revenue and any related discounts to these performance obligations based on their relative
SSPs. Because the Company lacks observable prices for the undelivered performance obligations, the allocation of revenue is
based on the Company’s estimated SSPs. Revenue allocated to the delivered hardware and bundled software is recognized
when control has transferred to the customer, which generally occurs when the product is shipped. Revenue allocated to the
product-related bundled services and unspecified software upgrade rights is deferred and recognized on a straight-line basis
over the estimated period they are expected to be provided. Cost of sales related to delivered hardware and bundled software,
including estimated warranty costs, are recognized at the time of sale. Costs incurred to provide product-related bundled
services and unspecified software upgrade rights are recognized as cost of sales as incurred.
For certain long-term service arrangements, the Company has performance obligations for services it has not yet delivered. For
these arrangements, the Company does not have a right to bill for the undelivered services. The Company has determined that
any unbilled consideration relates entirely to the value of the undelivered services. Accordingly, the Company has not recognized
revenue, and has elected not to disclose amounts, related to these undelivered services.
Apple Inc. | 2020 Form 10-K | 38
For the sale of third-party products where the Company obtains control of the product before transferring it to the customer, the
Company recognizes revenue based on the gross amount billed to customers. The Company considers multiple factors when
determining whether it obtains control of third-party products including, but not limited to, evaluating if it can establish the price of
the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the product. For
third-party applications sold through the App Store and certain digital content sold through the Company’s other digital content
stores, the Company does not obtain control of the product before transferring it to the customer. Therefore, the Company
accounts for such sales on a net basis by recognizing in Services net sales only the commission it retains.
The Company has elected to record revenue net of taxes collected from customers that are remitted to governmental authorities,
with the collected taxes recorded within other current liabilities until remitted to the relevant government authority.
Deferred Revenue
As of September 26, 2020 and September 28, 2019, the Company had total deferred revenue of $10.2 billion and $8.1 billion,
respectively. As of September 26, 2020, the Company expects 65% of total deferred revenue to be realized in less than a year,
25% within one-to-two years, 8% within two-to-three years and 2% in greater than three years.
Disaggregated Revenue
Net sales disaggregated by significant products and services for 2020, 2019 and 2018 were as follows (in millions):
iPhone (1)
Mac (1)
iPad (1)
Wearables, Home and Accessories (1)(2)
Services (3)
Total net sales (4)
2020
2019
2018
$
137,781 $
142,381 $
164,888
28,622
23,724
30,620
53,768
25,740
21,280
24,482
46,291
25,198
18,380
17,381
39,748
$
274,515 $
260,174 $
265,595
(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.
(2) Wearables, Home and Accessories net sales include sales of AirPods, Apple TV, Apple Watch, Beats products, HomePod,
iPod touch and Apple-branded and third-party accessories.
(3) Services net sales include sales from the Company’s advertising, AppleCare, digital content and other services. Services net
sales also include amortization of the deferred value of Maps, Siri, and free iCloud storage and Apple TV+ services, which
are bundled in the sales price of certain products.
(4)
Includes $5.0 billion of revenue recognized in 2020 that was included in deferred revenue as of September 28, 2019, $5.9
billion of revenue recognized in 2019 that was included in deferred revenue as of September 29, 2018, and $5.8 billion of
revenue recognized in 2018 that was included in deferred revenue as of September 30, 2017.
The Company’s proportion of net sales by disaggregated revenue source was generally consistent for each reportable segment
in Note 11, “Segment Information and Geographic Data” for 2020, 2019 and 2018.
Apple Inc. | 2020 Form 10-K | 39
Note 3 – Financial Instruments
Cash, Cash Equivalents and Marketable Securities
The following tables show the Company’s cash and marketable securities by significant investment category as of September 26,
2020 and September 28, 2019 (in millions):
Cash
Level 1 (1):
Money market funds
Subtotal
Level 2 (2):
U.S. Treasury securities
U.S. agency securities
Non-U.S. government securities
Certificates of deposit and time
deposits
Commercial paper
Corporate debt securities
Municipal securities
Mortgage- and asset-backed
securities
Subtotal
Total (3)
Cash
Level 1 (1):
Money market funds
Subtotal
Level 2 (2):
U.S. Treasury securities
U.S. agency securities
Non-U.S. government securities
Certificates of deposit and time
deposits
Commercial paper
Corporate debt securities
Municipal securities
Mortgage- and asset-backed
securities
Subtotal
Total (3)
Adjusted
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Cash and
Cash
Equivalents
Current
Marketable
Securities
Non-Current
Marketable
Securities
2020
$ 17,773 $
— $
— $ 17,773 $
17,773 $
— $
2,171
2,171
28,439
8,604
19,361
10,399
11,226
76,937
1,001
13,520
169,487
—
—
331
8
275
—
—
1,834
22
314
2,784
—
—
—
—
2,171
2,171
28,770
8,612
(186)
19,450
—
—
(175)
—
10,399
11,226
78,596
1,023
(24)
13,810
2,171
2,171
8,580
2,009
255
4,043
3,185
—
—
—
—
—
11,972
3,078
3,329
6,246
8,041
19,687
139
435
(385)
171,886
18,072
52,927
—
—
—
8,218
3,525
15,866
110
—
58,909
884
13,375
100,887
$ 189,431 $
2,784 $
(385) $ 191,830 $
38,016 $
52,927 $
100,887
Adjusted
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Cash and
Cash
Equivalents
Current
Marketable
Securities
Non-Current
Marketable
Securities
2019
$ 12,204 $
— $
— $ 12,204 $
12,204 $
— $
15,897
15,897
30,293
9,767
19,821
4,041
12,433
85,383
958
—
—
33
1
337
—
—
756
8
—
—
15,897
15,897
15,897
15,897
(62)
(3)
(50)
—
—
(92)
(1)
30,264
9,765
20,108
4,041
12,433
86,047
965
6,165
6,489
749
2,024
5,193
123
—
14,180
176,876
67
1,202
(73)
14,174
—
(281)
177,797
20,743
—
—
9,817
2,249
3,168
1,922
7,240
26,127
68
1,122
51,713
—
—
—
14,282
1,027
16,191
95
—
59,797
897
13,052
105,341
$ 204,977 $
1,202 $
(281) $ 205,898 $
48,844 $
51,713 $
105,341
(1) Level 1 fair value estimates are based on quoted prices in active markets for identical assets or liabilities.
(2) Level 2 fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets
and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable
or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
(3) As of September 26, 2020 and September 28, 2019, total marketable securities included $18.6 billion and $18.9 billion,
respectively, that was restricted from general use, related to the State Aid Decision (refer to Note 5, “Income Taxes”) and
other agreements.
Apple Inc. | 2020 Form 10-K | 40
The Company may sell certain of its marketable debt securities prior to their stated maturities for reasons including, but not
limited to, managing liquidity, credit risk, duration and asset allocation. The maturities of the Company’s non-current marketable
debt securities generally range from one to five years.
The Company typically invests in highly rated securities, with the primary objective of minimizing the potential risk of principal
loss. The Company’s investment policy generally requires securities to be investment grade and limits the amount of credit
exposure to any one issuer. Fair values were determined for each individual security in the investment portfolio. When evaluating
a marketable debt security for other-than-temporary impairment, the Company reviews factors such as the duration and extent to
which the fair value of the security is less than its cost, the financial condition of the issuer and any changes thereto, and the
Company’s intent to sell, or whether it will more likely than not be required to sell, the security before recovery of its amortized
cost basis. As of September 26, 2020, the Company does not consider any of its marketable debt securities to be other-than-
temporarily impaired.
Non-Marketable Securities
The Company holds non-marketable equity securities of certain privately held companies without readily determinable fair
values. As of September 26, 2020 and September 28, 2019, the Company’s non-marketable equity securities had a carrying
value of $2.8 billion and $2.9 billion, respectively.
Restricted Cash
A reconciliation of the Company’s cash and cash equivalents in the Consolidated Balance Sheets to cash, cash equivalents and
restricted cash in the Consolidated Statements of Cash Flows as of September 26, 2020 and September 28, 2019 is as follows
(in millions):
Cash and cash equivalents
Restricted cash included in other current assets
Restricted cash included in other non-current assets
Cash, cash equivalents and restricted cash
2020
2019
38,016 $
48,844
36
1,737
39,789 $
23
1,357
50,224
$
$
The Company’s restricted cash primarily consisted of cash to support the Company’s iPhone Upgrade Program.
Derivative Financial Instruments
The Company may use derivatives to partially offset its business exposure to foreign currency and interest rate risk on expected
future cash flows, net investments in certain foreign subsidiaries, and certain existing assets and liabilities. However, the
Company may choose not to hedge certain exposures for a variety of reasons including, but not limited to, accounting
considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will
offset more than a portion of the financial impact resulting from movements in foreign currency exchange or interest rates.
To protect gross margins from fluctuations in foreign currency exchange rates, certain of the Company’s subsidiaries whose
functional currency is the U.S. dollar may hedge a portion of forecasted foreign currency revenue, and subsidiaries whose
functional currency is not the U.S. dollar may hedge a portion of forecasted inventory purchases not denominated in the
subsidiaries’ functional currencies. The Company may enter into forward contracts, option contracts or other instruments to
manage this risk and may designate these instruments as cash flow hedges. The Company generally hedges portions of its
forecasted foreign currency exposure associated with revenue and inventory purchases, typically for up to 12 months.
To protect the net investment in a foreign operation from fluctuations in foreign currency exchange rates, the Company may
enter into foreign currency forward and option contracts to offset a portion of the changes in the carrying amounts of these
investments due to fluctuations in foreign currency exchange rates. In addition, the Company may use non-derivative financial
instruments, such as its foreign currency–denominated debt, as hedges of its net investments in certain foreign subsidiaries. In
both of these cases, the Company designates these instruments as net investment hedges.
To protect the Company’s foreign currency–denominated term debt or marketable securities from fluctuations in foreign currency
exchange rates, the Company may enter into forward contracts, cross-currency swaps or other instruments. These instruments
may offset a portion of the foreign currency remeasurement gains or losses, or changes in fair value. The Company may
designate these instruments as either cash flow or fair value hedges. As of September 26, 2020, the Company’s hedged term
debt– and marketable securities–related foreign currency transactions are expected to be recognized within 22 years.
The Company may also enter into non-designated foreign currency contracts to offset a portion of the foreign currency exchange
gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies.
Apple Inc. | 2020 Form 10-K | 41
To protect the Company’s foreign currency–denominated term debt or marketable securities from fluctuations in interest rates,
the Company may enter into interest rate swaps, options or other instruments. These instruments may offset a portion of the
changes in interest income or expense, or changes in fair value. The Company designates these instruments as either cash flow
or fair value hedges. As of September 26, 2020, the Company’s hedged interest rate transactions are expected to be recognized
within seven years.
Cash Flow Hedges
Cash flow hedge amounts that are included in the assessment of hedge effectiveness are deferred in AOCI until the hedged item
is recognized in earnings. Deferred gains and losses associated with cash flow hedges of foreign currency revenue are
recognized as a component of net sales in the same period as the related revenue is recognized, and deferred gains and losses
related to cash flow hedges of inventory purchases are recognized as a component of cost of sales in the same period as the
related costs are recognized. Deferred gains and losses associated with cash flow hedges of interest income or expense are
recognized in OI&E in the same period as the related income or expense is recognized. For options designated as cash flow
hedges, the time value is excluded from the assessment of hedge effectiveness and recognized in the financial statement line
item to which the hedge relates on a straight-line basis over the life of the hedge. Changes in the fair value of amounts excluded
from the assessment of hedge effectiveness are recognized in OCI.
Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted
hedged transaction will not occur in the initially identified time period or within a subsequent two-month time period. Deferred
gains and losses in AOCI associated with such derivative instruments are reclassified into OI&E in the period of de-designation.
Any subsequent changes in fair value of such derivative instruments are reflected in OI&E unless they are re-designated as
hedges of other transactions.
Net Investment Hedges
Net investment hedge amounts that are included in the assessment of hedge effectiveness are recorded in OCI as a part of the
cumulative translation adjustment. For foreign exchange forward contracts designated as net investment hedges, the forward
carry component is excluded from the assessment of hedge effectiveness and recognized in OCI on a straight-line basis over the
life of the hedge. Changes in the fair value of amounts excluded from the assessment of hedge effectiveness are recognized in
OCI.
Fair Value Hedges
Fair value hedge gains and losses related to amounts that are included in the assessment of hedge effectiveness are recognized
in earnings along with a corresponding loss or gain related to the change in value of the hedged item in the same line in the
Consolidated Statements of Operations. For foreign exchange forward contracts designated as fair value hedges, the forward
carry component is excluded from the assessment of hedge effectiveness and recognized in OI&E on a straight-line basis over
the life of the hedge. Amounts excluded from the effectiveness assessment of fair value hedges and recognized in OI&E were
gains of $465 million and $777 million for 2020 and 2019, respectively. Changes in the fair value of amounts excluded from the
assessment of hedge effectiveness are recognized in OCI.
Non-Designated Derivatives
Derivatives that are not designated as hedging instruments are adjusted to fair value through earnings in the financial statement
line item to which the derivative relates.
The Company records all derivatives in the Consolidated Balance Sheets at fair value. The Company’s accounting treatment for
these derivative instruments is based on its hedge designation. The following tables show the Company’s derivative instruments
at gross fair value as of September 26, 2020 and September 28, 2019 (in millions):
Derivative assets (1):
Foreign exchange contracts
Interest rate contracts
Derivative liabilities (2):
Foreign exchange contracts
2020
Fair Value of
Derivatives Designated
as Hedge Instruments
Fair Value of
Derivatives Not Designated
as Hedge Instruments
Total
Fair Value
$
$
$
749 $
1,557 $
303 $
— $
1,052
1,557
1,561 $
485 $
2,046
Apple Inc. | 2020 Form 10-K | 42
Derivative assets (1):
Foreign exchange contracts
Interest rate contracts
Derivative liabilities (2):
Foreign exchange contracts
Interest rate contracts
2019
Fair Value of
Derivatives Designated
as Hedge Instruments
Fair Value of
Derivatives Not Designated
as Hedge Instruments
Total
Fair Value
$
$
$
$
1,798 $
685 $
1,341 $
105 $
323 $
— $
2,121
685
160 $
— $
1,501
105
(1) The fair value of derivative assets is measured using Level 2 fair value inputs and is included in other current assets and
other non-current assets in the Consolidated Balance Sheets.
(2) The fair value of derivative liabilities is measured using Level 2 fair value inputs and is included in other current liabilities and
other non-current liabilities in the Consolidated Balance Sheets.
The Company classifies cash flows related to derivative financial instruments as operating activities in its Consolidated
Statements of Cash Flows.
The following table shows the pre-tax gains and losses of the Company’s derivative and non-derivative instruments designated
as cash flow and fair value hedges in OCI and the Consolidated Statements of Operations for 2020, 2019 and 2018 (in millions):
Gains/(Losses) recognized in OCI – included in effectiveness assessment:
2020
2019
2018
Cash flow hedges:
Foreign exchange contracts
Interest rate contracts
Total
Net investment hedges:
Foreign currency debt
Gains/(Losses) reclassified from AOCI into net income – included in
effectiveness assessment:
Cash flow hedges:
Foreign exchange contracts
Interest rate contracts
Total
$
$
$
$
$
365 $
(57)
308 $
(959) $
—
(959) $
682
1
683
15 $
(58) $
4
1,553 $
(116) $
(8)
(7)
1,545 $
(123) $
(482)
1
(481)
The amount excluded from the effectiveness assessment of the Company’s hedges and recognized in OCI was a loss of $168
million for 2020.
Apple Inc. | 2020 Form 10-K | 43
The following tables show information about the Company’s derivative instruments designated as fair value hedges and the
related hedged items for 2020, 2019 and 2018 and as of September 26, 2020 (in millions):
Gains/(Losses) on derivative instruments (1):
Foreign exchange contracts
Interest rate contracts
Total
Gains/(Losses) related to hedged items (1):
Marketable securities
Fixed-rate debt
Total
Carrying amounts of hedged assets/(liabilities):
Marketable securities (2)
Fixed-rate debt (3)
2020
2019
2018
(992) $
1,020 $
1,114
2,068
122 $
3,088 $
(168)
(1,363)
(1,531)
991 $
(1,018) $
(1,114)
(2,068)
(123) $
(3,086) $
167
1,363
1,530
$
$
$
$
2020
16,270
(21,033)
493
(1,541)
$
$
$
$
Cumulative hedging adjustments included in the carrying amounts of hedged items:
Marketable securities carrying amount increases/(decreases)
Fixed-rate debt carrying amount (increases)/decreases
(1) Gains and losses related to fair value hedges are included in OI&E in the Consolidated Statements of Operations.
(2) The carrying amounts of marketable securities that are designated as hedged items in fair value hedges are included in
current marketable securities and non-current marketable securities in the Consolidated Balance Sheet.
(3) The carrying amounts of fixed-rate debt instruments that are designated as hedged items in fair value hedges are included in
current term debt and non-current term debt in the Consolidated Balance Sheet.
The following table shows the notional amounts of the Company’s outstanding derivative instruments and credit risk amounts
associated with outstanding or unsettled derivative instruments as of September 26, 2020 and September 28, 2019 (in millions):
Instruments designated as accounting hedges:
Foreign exchange contracts
Interest rate contracts
Instruments not designated as accounting hedges:
2020
2019
Notional
Amount
Credit Risk
Amount
Notional
Amount
Credit Risk
Amount
$
$
57,410 $
749 $
61,795 $
20,700 $
1,557 $
31,250 $
1,798
685
Foreign exchange contracts
$
88,636 $
303 $
76,868 $
323
The notional amounts for outstanding derivative instruments provide one measure of the transaction volume outstanding and do
not represent the amount of the Company’s exposure to credit or market loss. The credit risk amounts represent the Company’s
gross exposure to potential accounting loss on derivative instruments that are outstanding or unsettled if all counterparties failed
to perform according to the terms of the contract, based on then-current currency or interest rates at each respective date. The
Company’s exposure to credit loss and market risk will vary over time as currency and interest rates change. Although the table
above reflects the notional and credit risk amounts of the Company’s derivative instruments, it does not reflect the gains or
losses associated with the exposures and transactions that the instruments are intended to hedge. The amounts ultimately
realized upon settlement of these financial instruments, together with the gains and losses on the underlying exposures, will
depend on actual market conditions during the remaining life of the instruments.
Apple Inc. | 2020 Form 10-K | 44
The Company generally enters into master netting arrangements, which are designed to reduce credit risk by permitting net
settlement of transactions with the same counterparty. To further limit credit risk, the Company generally enters into collateral
security arrangements that provide for collateral to be received or posted when the net fair value of certain financial instruments
fluctuates from contractually established thresholds. The Company presents its derivative assets and derivative liabilities at their
gross fair values in its Consolidated Balance Sheets. As of September 26, 2020 and September 28, 2019, the net cash collateral
received by the Company related to derivative instruments under its collateral security arrangements was $875 million and $1.6
billion, respectively. The Company includes gross collateral posted and received in other current assets and other current
liabilities in the Consolidated Balance Sheets, respectively.
Under master netting arrangements with the respective counterparties to the Company’s derivative contracts, the Company is
allowed to net settle transactions with a single net amount payable by one party to the other. As of September 26, 2020 and
September 28, 2019, the potential effects of these rights of set-off associated with the Company’s derivative contracts, including
the effects of collateral, would be a reduction to both derivative assets and derivative liabilities of $2.8 billion and $2.7 billion,
respectively, resulting in net derivative liabilities of $312 million and $407 million, respectively.
Accounts Receivable
Trade Receivables
The Company has considerable trade receivables outstanding with its third-party cellular network carriers, wholesalers, retailers,
resellers, small and mid-sized businesses and education, enterprise and government customers. The Company generally does
not require collateral from its customers; however, the Company will require collateral or third-party credit support in certain
instances to limit credit risk. In addition, when possible, the Company attempts to limit credit risk on trade receivables with credit
insurance for certain customers or by requiring third-party financing, loans or leases to support credit exposure. These credit-
financing arrangements are directly between the third-party financing company and the end customer. As such, the Company
generally does not assume any recourse or credit risk sharing related to any of these arrangements.
As of both September 26, 2020 and September 28, 2019, the Company had no customers that individually represented 10% or
more of total trade receivables. The Company’s cellular network carriers accounted for 51% of total trade receivables as of
September 28, 2019.
Vendor Non-Trade Receivables
The Company has non-trade receivables from certain of its manufacturing vendors resulting from the sale of components to
these vendors who manufacture sub-assemblies or assemble final products for the Company. The Company purchases these
components directly from suppliers. As of September 26, 2020, the Company had two vendors that individually represented 10%
or more of total vendor non-trade receivables, which accounted for 57% and 11%. As of September 28, 2019, the Company had
two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 59% and 14%.
Note 4 – Consolidated Financial Statement Details
The following tables show the Company’s consolidated financial statement details as of September 26, 2020 and September 28,
2019 (in millions):
Property, Plant and Equipment, Net
Land and buildings
Machinery, equipment and internal-use software
Leasehold improvements
Gross property, plant and equipment
Accumulated depreciation and amortization
Total property, plant and equipment, net
Other Non-Current Liabilities
Long-term taxes payable
Other non-current liabilities
Total other non-current liabilities
Apple Inc. | 2020 Form 10-K | 45
2020
2019
$
17,952 $
75,291
10,283
103,526
(66,760)
$
36,766 $
17,085
69,797
9,075
95,957
(58,579)
37,378
2020
2019
$
$
28,170 $
26,320
54,490 $
29,545
20,958
50,503
Other Income/(Expense), Net
The following table shows the detail of OI&E for 2020, 2019 and 2018 (in millions):
Interest and dividend income
Interest expense
Other income/(expense), net
Total other income/(expense), net
Note 5 – Income Taxes
U.S. Tax Cuts and Jobs Act
2020
2019
2018
$
$
3,763 $
4,961 $
(2,873)
(3,576)
(87)
803 $
422
1,807 $
5,686
(3,240)
(441)
2,005
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”), which significantly changed U.S. tax law. The
Act lowered the Company’s U.S. statutory federal income tax rate from 35% to 21% effective January 1, 2018, while also
imposing a deemed repatriation tax on previously deferred foreign income. The Act also created a new minimum tax on certain
foreign earnings, for which the Company has elected to record certain deferred tax assets and liabilities.
Provision for Income Taxes and Effective Tax Rate
The provision for income taxes for 2020, 2019 and 2018, consisted of the following (in millions):
Federal:
Current
Deferred
Total
State:
Current
Deferred
Total
Foreign:
Current
Deferred
Total
2020
2019
2018
$
6,306 $
6,384 $
41,425
(3,619)
(2,939)
(33,819)
2,687
3,445
7,606
455
21
476
3,134
3,383
6,517
475
(67)
408
3,962
2,666
6,628
551
48
599
3,986
1,181
5,167
Provision for income taxes
$
9,680 $
10,481 $
13,372
The foreign provision for income taxes is based on foreign pre-tax earnings of $38.1 billion, $44.3 billion and $48.0 billion in
2020, 2019 and 2018, respectively.
A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate
(21% in 2020 and 2019; 24.5% in 2018) to income before provision for income taxes for 2020, 2019 and 2018, is as follows
(dollars in millions):
Computed expected tax
State taxes, net of federal effect
Impacts of the Act
Earnings of foreign subsidiaries
Research and development credit, net
Excess tax benefits from equity awards
Other
Provision for income taxes
Effective tax rate
2020
2019
2018
$
14,089
$
13,805
$
17,890
423
(582)
(2,534)
(728)
(930)
(58)
423
—
(2,625)
(548)
(639)
65
271
1,515
(5,606)
(560)
(675)
537
$
9,680
$
10,481
$
13,372
14.4%
15.9%
18.3%
Apple Inc. | 2020 Form 10-K | 46
Deferred Tax Assets and Liabilities
As of September 26, 2020 and September 28, 2019, the significant components of the Company’s deferred tax assets and
liabilities were (in millions):
Deferred tax assets:
Amortization and depreciation
Accrued liabilities and other reserves
Lease liabilities
Deferred revenue
Other
Total deferred tax assets
Less: Valuation allowance
Total deferred tax assets, net
Deferred tax liabilities:
Minimum tax on foreign earnings
Right-of-use assets
Unrealized gains
Other
Total deferred tax liabilities
Net deferred tax assets
2020
2019
$
8,317 $
4,934
2,038
1,638
2,409
19,336
(1,041)
18,295
7,045
1,862
526
705
10,138
$
8,157 $
11,645
5,196
—
1,372
2,174
20,387
(747)
19,640
10,809
—
186
600
11,595
8,045
Deferred tax assets and liabilities reflect the effects of tax credits and the future income tax effects of temporary differences
between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases,
and are measured using enacted tax rates that apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled.
Uncertain Tax Positions
As of September 26, 2020, the total amount of gross unrecognized tax benefits was $16.5 billion, of which $8.8 billion, if
recognized, would impact the Company’s effective tax rate. As of September 28, 2019, the total amount of gross unrecognized
tax benefits was $15.6 billion, of which $8.6 billion, if recognized, would have impacted the Company’s effective tax rate.
The aggregate change in the balance of gross unrecognized tax benefits, which excludes interest and penalties, for 2020, 2019
and 2018, is as follows (in millions):
2020
2019
2018
Beginning balances
$
15,619 $
9,694 $
Increases related to tax positions taken during a prior year
Decreases related to tax positions taken during a prior year
Increases related to tax positions taken during the current year
Decreases related to settlements with taxing authorities
Decreases related to expiration of the statute of limitations
454
(791)
1,347
(85)
(69)
5,845
(686)
1,697
(852)
(79)
Ending balances
$
16,475 $
15,619 $
8,407
2,431
(2,212)
1,824
(756)
—
9,694
The Company is subject to taxation and files income tax returns in the U.S. federal jurisdiction and many state and foreign
jurisdictions. The U.S. Internal Revenue Service (the “IRS”) concluded its review of the years 2013 through 2015 in 2018, and all
years before 2016 are closed. Tax years after 2014 remain open in certain major foreign jurisdictions and are subject to
examination by the taxing authorities. The Company believes that an adequate provision has been made for any adjustments
that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues
addressed in the Company’s tax audits are resolved in a manner inconsistent with its expectations, the Company could be
required to adjust its provision for income taxes in the period such resolution occurs. Although the timing of resolution and/or
closure of audits is not certain, the Company believes it is reasonably possible that its gross unrecognized tax benefits could
decrease in the next 12 months by as much as $3.9 billion.
Apple Inc. | 2020 Form 10-K | 47
Interest and Penalties
The Company includes interest and penalties related to income tax matters within the provision for income taxes. As of
September 26, 2020 and September 28, 2019, the total amount of gross interest and penalties accrued was $1.4 billion and $1.3
billion, respectively. The Company recognized interest and penalty expense in 2020, 2019 and 2018 of $85 million, $73 million
and $489 million, respectively.
European Commission State Aid Decision
On August 30, 2016, the European Commission announced its decision that Ireland granted state aid to the Company by
providing tax opinions in 1991 and 2007 concerning the tax allocation of profits of the Irish branches of two subsidiaries of the
Company (the “State Aid Decision”). The State Aid Decision ordered Ireland to calculate and recover additional taxes from the
Company for the period June 2003 through December 2014. Irish legislative changes, effective as of January 2015, eliminated
the application of the tax opinions from that date forward. The recovery amount was calculated to be €13.1 billion, plus interest of
€1.2 billion. The Company and Ireland appealed the State Aid Decision to the General Court of the Court of Justice of the
European Union (the “General Court”). On July 15, 2020, the General Court annulled the State Aid Decision. On September 25,
2020, the European Commission appealed the General Court’s decision to the European Court of Justice. The Company
believes that any incremental Irish corporate income taxes potentially due related to the State Aid Decision would be creditable
against U.S. taxes, subject to any foreign tax credit limitations in the Act.
On an annual basis, the Company may request approval from the Irish Minister for Finance to reduce the recovery amount for
certain taxes paid to other countries. As of September 26, 2020, the adjusted recovery amount was €12.9 billion, excluding
interest. The adjusted recovery amount plus interest is funded into escrow, where it will remain restricted from general use
pending the conclusion of all legal proceedings. Refer to the Cash, Cash Equivalents and Marketable Securities section of Note
3, “Financial Instruments” for more information.
Note 6 – Debt
Commercial Paper and Repurchase Agreements
The Company issues unsecured short-term promissory notes (“Commercial Paper”) pursuant to a commercial paper program.
The Company uses net proceeds from the commercial paper program for general corporate purposes, including dividends and
share repurchases. As of September 26, 2020 and September 28, 2019, the Company had $5.0 billion and $6.0 billion of
Commercial Paper outstanding, respectively, with maturities generally less than nine months. The weighted-average interest rate
of the Company’s Commercial Paper was 0.62% and 2.24% as of September 26, 2020 and September 28, 2019, respectively.
The following table provides a summary of cash flows associated with the issuance and maturities of Commercial Paper for
2020, 2019 and 2018 (in millions):
Maturities 90 days or less:
Proceeds from/(Repayments of) commercial paper, net
$
100 $
(3,248) $
1,044
2020
2019
2018
Maturities greater than 90 days:
Proceeds from commercial paper
Repayments of commercial paper
Repayments of commercial paper, net
6,185
(7,248)
(1,063)
13,874
14,555
(16,603)
(15,636)
(2,729)
(1,081)
Total repayments of commercial paper, net
$
(963) $
(5,977) $
(37)
In 2020, the Company entered into agreements to sell certain of its marketable securities with a promise to repurchase the
securities at a specified time and amount (“Repos”). Due to the Company’s continuing involvement with the marketable
securities, the Company accounted for its Repos as collateralized borrowings. The Company entered into $5.2 billion of Repos
during 2020, all of which had been settled as of September 26, 2020.
Apple Inc. | 2020 Form 10-K | 48
Term Debt
As of September 26, 2020, the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate
principal amount of $106.1 billion (collectively the “Notes”). The Notes are senior unsecured obligations and interest is payable in
arrears. The following table provides a summary of the Company’s term debt as of September 26, 2020 and September 28,
2019:
2013 – 2019 debt issuances:
Floating-rate notes
Maturities
(calendar year)
Amount
(in millions)
Effective
Interest Rate
Amount
(in millions)
Effective
Interest Rate
2020
2019
2021 – 2022
$
2,250
0.60% – 1.39% $
4,250
2.25% – 3.28%
Fixed-rate 0.375% – 4.650% notes
2020 – 2049
87,487
0.28% – 4.78%
97,429
0.28% – 4.78%
First quarter 2020 debt issuance of €2.0 billion:
Fixed-rate 0.000% – 0.500% notes
2025 – 2031
2,341
0.03% – 0.56%
—
—%
Third quarter 2020 debt issuance of $8.5 billion:
Fixed-rate 0.750% – 2.650% notes
2023 – 2050
8,500
0.84% – 2.72%
—
—%
Fourth quarter 2020 debt issuance of $5.5 billion:
Fixed-rate 0.550% – 2.550% notes
2025 – 2060
5,500
0.60% – 2.59%
—
— %
Total term debt
106,078
101,679
Unamortized premium/(discount) and issuance
costs, net
Hedge accounting fair value adjustments
Less: Current portion of term debt
(314)
1,676
(8,773)
(224)
612
(10,260)
Total non-current portion of term debt
$
98,667
$
91,807
To manage interest rate risk on certain of its U.S. dollar–denominated fixed- or floating-rate notes, the Company has entered into
interest rate swaps to effectively convert the fixed interest rates to floating interest rates or the floating interest rates to fixed
interest rates on a portion of these notes. Additionally, to manage foreign currency risk on certain of its foreign currency–
denominated notes, the Company has entered into foreign currency swaps to effectively convert these notes to U.S. dollar–
denominated notes.
As of September 28, 2019, a portion of the Company’s Japanese yen–denominated notes with a carrying value of $1.0 billion
was designated as a hedge of the foreign currency exposure of the Company’s net investment in a foreign operation. The
Company’s Japanese yen–denominated notes matured during 2020 and the associated net investment hedges were terminated.
For further discussion regarding the Company’s use of derivative instruments, refer to the Derivative Financial Instruments
section of Note 3, “Financial Instruments.”
The effective interest rates for the Notes include the interest on the Notes, amortization of the discount or premium and, if
applicable, adjustments related to hedging. The Company recognized $2.8 billion, $3.2 billion and $3.0 billion of interest cost on
its term debt for 2020, 2019 and 2018, respectively.
The future principal payments for the Company’s Notes as of September 26, 2020, are as follows (in millions):
2021
2022
2023
2024
2025
Thereafter
Total term debt
$
8,750
9,569
11,389
10,115
10,914
55,341
$
106,078
As of September 26, 2020 and September 28, 2019, the fair value of the Company’s Notes, based on Level 2 inputs, was $117.1
billion and $107.5 billion, respectively.
Apple Inc. | 2020 Form 10-K | 49
Note 7 – Shareholders’ Equity
Share Repurchase Program
As of September 26, 2020, the Company was authorized to purchase up to $225 billion of the Company’s common stock under a
share repurchase program, of which $168.6 billion had been utilized. During 2020, the Company repurchased 917 million shares
of its common stock for $72.5 billion, including 141 million shares delivered under a $10.0 billion November 2019 accelerated
share repurchase arrangement (“ASR”) and 64 million shares delivered under a $6.0 billion May 2020 ASR. 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Shares of Common Stock
The following table shows the changes in shares of common stock for 2020, 2019 and 2018 (in thousands):
Common stock outstanding, beginning balances
Common stock repurchased
2020
2019
2018
17,772,945
19,019,943
20,504,805
(917,270)
(1,380,819)
(1,622,198)
Common stock issued, net of shares withheld for employee taxes
121,088
133,821
137,336
Common stock outstanding, ending balances
16,976,763
17,772,945
19,019,943
Note 8 – Comprehensive Income
The Company’s OCI consists of foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as
their functional currency, net deferred gains and losses on certain derivative instruments accounted for as cash flow hedges and
unrealized gains and losses on marketable debt securities classified as available-for-sale.
The following table shows the pre-tax amounts reclassified from AOCI into the Consolidated Statements of Operations, and the
associated financial statement line items, for 2020 and 2019 (in millions):
Comprehensive Income Components
Financial Statement Line Items
2020
2019
Unrealized (gains)/losses on derivative instruments:
Foreign exchange contracts
Interest rate contracts
Total net sales
Total cost of sales
Other income/(expense), net
Other income/(expense), net
Unrealized (gains)/losses on marketable debt securities Other income/(expense), net
$
(365) $
(584)
(604)
8
(1,545)
(82)
Total amounts reclassified from AOCI
$
(1,627) $
(206)
(482)
784
7
103
31
134
Apple Inc. | 2020 Form 10-K | 50
The following table shows the changes in AOCI by component for 2020 and 2019 (in millions):
Cumulative
Foreign
Currency
Translation
Unrealized
Gains/Losses
on Derivative
Instruments
Unrealized
Gains/Losses
on Marketable
Debt Securities
Total
Balances as of September 29, 2018
$
(1,055) $
810 $
(3,209) $
(3,454)
Other comprehensive income/(loss) before
reclassifications
Amounts reclassified from AOCI
Tax effect
Other comprehensive income/(loss)
Cumulative effect of change in accounting principle
Balances as of September 28, 2019
Other comprehensive income/(loss) before
reclassifications
Amounts reclassified from AOCI
Tax effect
Other comprehensive income/(loss)
Cumulative effect of change in accounting principle (1)
(421)
(949)
—
13
(408)
—
(1,463)
91
—
(3)
88
—
103
208
(638)
—
172
115
(1,545)
245
(1,185)
136
4,854
31
(1,058)
3,827
89
707
1,560
(82)
(339)
1,139
—
Balances as of September 26, 2020
$
(1,375) $
(877) $
1,846 $
(1) Refer to Note 1, “Summary of Significant Accounting Policies” for more information on the Company’s adoption of ASU
3,484
134
(837)
2,781
89
(584)
1,766
(1,627)
(97)
42
136
(406)
2017-12 in 2020.
Note 9 – Benefit Plans
2014 Employee Stock Plan
In the second quarter of 2014, shareholders approved the 2014 Employee Stock Plan (the “2014 Plan”) and terminated the
Company’s authority to grant new awards under the 2003 Employee Stock Plan (the “2003 Plan”). The 2014 Plan provides for
broad-based equity grants to employees, including executive officers, and permits the granting of RSUs, stock grants,
performance-based awards, stock options and stock appreciation rights, as well as cash bonus awards. RSUs granted under the
2014 Plan generally vest over four years, based on continued employment, and are settled upon vesting in shares of the
Company’s common stock on a one-for-one basis. RSUs granted under the 2014 Plan reduce the number of shares available for
grant under the plan by a factor of two times the number of RSUs granted. RSUs canceled and shares withheld to satisfy tax
withholding obligations increase the number of shares available for grant under the 2014 Plan utilizing a factor of two times the
number of RSUs canceled or shares withheld. Currently, all RSUs granted under the 2014 Plan have dividend equivalent rights
(“DERs”), which entitle holders of RSUs to the same dividend value per share as holders of common stock. DERs are subject to
the same vesting and other terms and conditions as the corresponding unvested RSUs. DERs are accumulated and paid when
the underlying shares vest. Upon approval of the 2014 Plan, the Company reserved 1.54 billion shares plus the number of
shares remaining that were reserved but not issued under the 2003 Plan. Shares subject to outstanding awards under the 2003
Plan that expire, are canceled or otherwise terminate, or are withheld to satisfy tax withholding obligations for RSUs, will also be
available for awards under the 2014 Plan. As of September 26, 2020, approximately 808 million shares were reserved for future
issuance under the 2014 Plan.
Apple Inc. Non-Employee Director Stock Plan
The Apple Inc. Non-Employee Director Stock Plan (the “Director Plan”) is a shareholder-approved plan that (i) permits the
Company to grant awards of RSUs or stock options to the Company’s non-employee directors, (ii) provides for automatic initial
grants of RSUs upon a non-employee director joining the Board of Directors and automatic annual grants of RSUs at each
annual meeting of shareholders, and (iii) permits the Board of Directors to prospectively change the value and relative mixture of
stock options and RSUs for the initial and annual award grants and the methodology for determining the number of shares of the
Company’s common stock subject to these grants, in each case within the limits set forth in the Director Plan and without further
shareholder approval. RSUs granted under the Director Plan reduce the number of shares available for grant under the plan by a
factor of two times the number of RSUs granted. The Director Plan expires on November 12, 2027. All RSUs granted under the
Director Plan are entitled to DERs. DERs are subject to the same vesting and other terms and conditions as the corresponding
unvested RSUs. DERs are accumulated and paid when the underlying shares vest. As of September 26, 2020, approximately 4
million shares were reserved for future issuance under the Director Plan.
Apple Inc. | 2020 Form 10-K | 51
Rule 10b5-1 Trading Plans
During the three months ended September 26, 2020, Section 16 officers Katherine L. Adams, Timothy D. Cook, Chris Kondo,
Luca Maestri, Deirdre O’Brien and Jeffrey Williams had equity trading plans in place in accordance with Rule 10b5-1(c)(1) under
the Exchange Act. An equity trading plan is a written document that pre-establishes the amounts, prices and dates (or formula for
determining the amounts, prices and dates) of future purchases or sales of the Company’s stock, including shares acquired
under the Company’s employee and director equity plans.
Employee Stock Purchase Plan
The Employee Stock Purchase Plan (the “Purchase Plan”) is a shareholder-approved plan under which substantially all
employees may purchase the Company’s common stock through payroll deductions at a price equal to 85% of the lower of the
fair market values of the stock as of the beginning or the end of six-month offering periods. An employee’s payroll deductions
under the Purchase Plan are limited to 10% of the employee’s compensation and employees may not purchase more than
$25,000 of stock during any calendar year. As of September 26, 2020, approximately 107 million shares were reserved for future
issuance under the Purchase Plan.
401(k) Plan
The Company’s 401(k) Plan is a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the
401(k) Plan, participating U.S. employees may defer a portion of their pre-tax earnings, up to the IRS annual contribution limit
($19,500 for calendar year 2020). The Company matches 50% to 100% of each employee’s contributions, depending on length
of service, up to a maximum of 6% of the employee’s eligible earnings.
Restricted Stock Units
A summary of the Company’s RSU activity and related information for 2020, 2019 and 2018, is as follows:
Balance as of September 30, 2017
RSUs granted
RSUs vested
RSUs canceled
Balance as of September 29, 2018
RSUs granted
RSUs vested
RSUs canceled
Balance as of September 28, 2019
RSUs granted
RSUs vested
RSUs canceled
Balance as of September 26, 2020
Number of
RSUs
(in thousands)
Weighted-Average
Grant Date Fair
Value Per RSU
Aggregate
Fair Value
(in millions)
390,284 $
181,402 $
(178,873) $
(24,195) $
368,618 $
147,409 $
(168,350) $
(21,609) $
326,068 $
156,800 $
(157,743) $
(14,347) $
310,778 $
27.58
40.72
27.81
31.95
33.65
53.99
33.80
40.71
42.30
59.20
40.29
48.07
51.58 $
34,894
The fair value as of the respective vesting dates of RSUs was $10.8 billion, $8.6 billion and $7.6 billion for 2020, 2019 and 2018,
respectively. The majority of RSUs that vested in 2020, 2019 and 2018 were net share settled such that the Company withheld
shares with a value equivalent to the employees’ obligation for the applicable income and other employment taxes, and remitted
the cash to the appropriate taxing authorities. The total shares withheld were approximately 56 million, 59 million and 64 million
for 2020, 2019 and 2018, respectively, and were based on the value of the RSUs on their respective vesting dates as determined
by the Company’s closing stock price. Total payments for the employees’ tax obligations to taxing authorities were $3.9 billion,
$3.0 billion and $2.7 billion in 2020, 2019 and 2018, respectively.
Apple Inc. | 2020 Form 10-K | 52
Share-Based Compensation
The following table shows share-based compensation expense and the related income tax benefit included in the Consolidated
Statements of Operations for 2020, 2019 and 2018 (in millions):
Share-based compensation expense
Income tax benefit related to share-based compensation expense
2020
2019
2018
$
$
6,829 $
6,068 $
(2,476) $
(1,967) $
5,340
(1,893)
As of September 26, 2020, the total unrecognized compensation cost related to outstanding RSUs and stock options was $12.2
billion, which the Company expects to recognize over a weighted-average period of 2.6 years.
Note 10 – Commitments and Contingencies
Accrued Warranty and Guarantees
The following table shows changes in the Company’s accrued warranties and related costs for 2020, 2019 and 2018 (in millions):
Beginning accrued warranty and related costs
Cost of warranty claims
Accruals for product warranty
Ending accrued warranty and related costs
2020
2019
2018
$
$
3,570 $
3,692 $
(2,956)
(3,857)
2,740
3,735
3,354 $
3,570 $
3,834
(4,115)
3,973
3,692
The Company offers an iPhone Upgrade Program, which is available to customers who purchase a qualifying iPhone in the U.S.,
the U.K. and China mainland. The iPhone Upgrade Program provides customers the right to trade in that iPhone for a specified
amount when purchasing a new iPhone, provided certain conditions are met. The Company accounts for the trade-in right as a
guarantee liability and recognizes arrangement revenue net of the fair value of such right, with subsequent changes to the
guarantee liability recognized within net sales.
Concentrations in the Available Sources of Supply of Materials and Product
Although most components essential to the Company’s business are generally available from multiple sources, certain
components are currently obtained from single or limited sources. The Company also competes for various components with
other participants in the markets for smartphones, personal 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 fluctuations.
The Company uses some custom components that are not commonly used by its competitors, and new products introduced by
the Company often utilize custom components available from only one source. When a component or product uses new
technologies, initial capacity constraints may exist until the suppliers’ yields have matured or their manufacturing capacities have
increased. 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.
The Company has entered into agreements for the supply of many components; however, there can be no guarantee that the
Company will be able to extend or renew these agreements on similar terms, or at all.
Substantially all of the Company’s hardware products are manufactured by outsourcing partners that are located primarily in
Asia, with some Mac computers manufactured in the U.S. and Ireland.
Apple Inc. | 2020 Form 10-K | 53
Unconditional Purchase Obligations
The Company has entered into certain off–balance sheet commitments that require the future purchase of goods or services
(“unconditional purchase obligations”). The Company’s unconditional purchase obligations primarily consist of payments for
supplier arrangements, Internet and telecommunication services, intellectual property licenses and content creation. Future
payments under noncancelable unconditional purchase obligations having a remaining term in excess of one year as of
September 26, 2020, are as follows (in millions):
2021
2022
2023
2024
2025
Thereafter
Total
Contingencies
$
3,476
2,885
1,700
357
104
130
$
8,652
The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of business and that
have not been fully resolved. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against
the Company in a reporting period for amounts above management’s expectations, the Company’s financial condition and
operating results for that reporting period could be materially adversely affected. 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 greater than a recorded accrual,
concerning loss contingencies for asserted legal and other claims, except for the following matters:
VirnetX
VirnetX, Inc. (“VirnetX”) filed a lawsuit against the Company alleging that certain of the Company’s products infringe on patents
owned by VirnetX. On April 11, 2018, a jury returned a verdict against the Company and awarded damages of $503 million. The
Company appealed the verdict to the U.S. Court of Appeals for the Federal Circuit, which remanded the case back to the U.S.
District Court for the Eastern District of Texas, where it is scheduled for a re-trial in October 2020. The Company has challenged
the validity of the patents at issue in the re-trial at the U.S. Patent and Trademark Office (the “PTO”), and the PTO has declared
the patents invalid, subject to further appeal by VirnetX.
iOS Performance Management Cases
Various civil litigation matters have been filed in state and federal courts in the U.S. and in various international jurisdictions
alleging violation of consumer protection laws, fraud, computer intrusion and other causes of action related to the Company’s
performance management feature used in its iPhone operating systems, introduced to certain iPhones in iOS updates 10.2.1 and
11.2. The claims seek monetary damages and other non-monetary relief. On April 5, 2018, several U.S. federal actions were
consolidated through a Multidistrict Litigation process into a single action in the U.S. District Court for the Northern District of
California (the “Northern California District Court”). On February 28, 2020, the parties in the Multidistrict Litigation reached a
settlement to resolve the U.S. federal and California state class actions. Under the terms of the settlement, which the Northern
California District Court preliminarily approved in May 2020, the Company has agreed to pay up to $500 million in the aggregate
to certain U.S. owners of iPhones if certain conditions are met. The final amount of the settlement will be determined based on
the number of consumers who file valid claims and the attorneys’ fee award. However, the Company has agreed to pay at least
$310 million to settle the claims. In addition to civil litigation, the Company is also responding to governmental investigations and
requests for information relating to the performance management feature. The Company continues to believe that its iPhones
were not defective, that the performance management feature introduced with iOS updates 10.2.1 and 11.2 was intended to, and
did, improve customers’ user experience, and that the Company did not make any misleading statements or fail to disclose any
material information. The Company has accrued its best estimate for the ultimate resolution of these matters.
French Competition Authority
On March 16, 2020, the French Competition Authority (“FCA”) announced its decision that aspects of the Company’s sales and
distribution practices in France violate French competition law, and issued a fine of €1.1 billion. The Company strongly disagrees
with the FCA’s decision, and has appealed.
Apple Inc. | 2020 Form 10-K | 54
Optis
Optis Wireless Technology, LLC and related entities (“Optis”) filed a lawsuit in the U.S. District Court for the Eastern District of
Texas against the Company alleging that certain of the Company’s products infringe on patents owned by Optis. On August 11,
2020, a jury returned a verdict against the Company and awarded damages of $506 million. The Company has asked the court
to set aside the verdict, where the case remains pending.
Note 11 – Segment Information and Geographic Data
The Company reports segment information based on the “management” approach. The management approach designates the
internal reporting used by management for making decisions and assessing performance as the source of the Company’s
reportable segments.
The Company manages its business primarily on a geographic basis. The Company’s reportable segments consist of the
Americas, Europe, Greater China, Japan and Rest of Asia Pacific. Americas includes both North and South America. Europe
includes European countries, as well as India, the Middle East and Africa. Greater China includes China mainland, Hong Kong
and Taiwan. Rest of Asia Pacific includes Australia and those Asian countries not included in the Company’s other reportable
segments. Although the reportable segments provide similar hardware and software products and similar services, each one is
managed separately to better align with the location of the Company’s customers and distribution partners and the unique market
dynamics of each geographic region. The accounting policies of the various segments are the same as those described in Note
1, “Summary of Significant Accounting Policies.”
The Company evaluates the performance of its reportable segments based on net sales and operating income. Net sales for
geographic segments are generally based on the location of customers and sales through the Company’s retail stores located in
those geographic locations. Operating income for each segment includes net sales to third parties, related cost of sales and
operating expenses directly attributable to the segment. Advertising expenses are generally included in the geographic segment
in which the expenditures are incurred. Operating income for each segment excludes other income and expense and certain
expenses managed outside the reportable segments. Costs excluded from segment operating income include various corporate
expenses such as research and development, corporate marketing expenses, certain share-based compensation expenses,
income taxes, various nonrecurring charges and other separately managed general and administrative costs. The Company
does not include intercompany transfers between segments for management reporting purposes.
The following table shows information by reportable segment for 2020, 2019 and 2018 (in millions):
Americas:
Net sales
Operating income
Europe:
Net sales
Operating income
Greater China:
Net sales
Operating income
Japan:
Net sales
Operating income
Rest of Asia Pacific:
Net sales
Operating income
2020
2019
2018
124,556 $
116,914 $
112,093
37,722 $
35,099 $
34,864
68,640 $
60,288 $
22,170 $
19,195 $
62,420
19,955
40,308 $
43,678 $
15,261 $
16,232 $
51,942
19,742
21,418 $
21,506 $
9,279 $
9,369 $
21,733
9,500
19,593 $
17,788 $
6,808 $
6,055 $
17,407
6,181
$
$
$
$
$
$
$
$
$
$
Apple Inc. | 2020 Form 10-K | 55
A reconciliation of the Company’s segment operating income to the Consolidated Statements of Operations for 2020, 2019 and
2018 is as follows (in millions):
Segment operating income
Research and development expense
Other corporate expenses, net
Total operating income
2020
2019
2018
$
91,240 $
85,950 $
90,242
(18,752)
(16,217)
(14,236)
(6,200)
(5,803)
(5,108)
$
66,288 $
63,930 $
70,898
The U.S. and China were the only countries that accounted for more than 10% of the Company’s net sales in 2020, 2019 and
2018. There was no single customer that accounted for more than 10% of net sales in 2020, 2019 and 2018. Net sales for 2020,
2019 and 2018 and long-lived assets as of September 26, 2020 and September 28, 2019 were as follows (in millions):
Net sales:
U.S.
China (1)
Other countries
Total net sales
Long-lived assets:
U.S.
China (1)
Other countries
Total long-lived assets
2020
2019
2018
$
109,197 $
102,266 $
40,308
125,010
43,678
114,230
98,061
51,942
115,592
$
274,515 $
260,174 $
265,595
2020
2019
$
$
25,890 $
24,711
7,256
3,620
9,064
3,603
36,766 $
37,378
(1) China includes Hong Kong and Taiwan. Long-lived assets located in China consist primarily of product tooling and manufacturing
process equipment and assets related to retail stores and related infrastructure.
Note 12 – Leases
The Company has lease arrangements for certain equipment and facilities, including retail, corporate, manufacturing and data
center space. These leases typically have original terms not exceeding 10 years and generally contain multi-year renewal
options, some of which are reasonably certain of exercise. The Company’s lease arrangements may contain both lease and non-
lease components. The Company has elected to combine and account for lease and non-lease components as a single lease
component for leases of retail, corporate, and data center facilities.
Payments under the Company’s lease arrangements may be fixed or variable, and variable lease payments are primarily based
on purchases of output of the underlying leased assets. Lease costs associated with fixed payments on the Company’s operating
leases were $1.5 billion for 2020. Lease costs associated with variable payments on the Company’s leases were $9.3 billion for
2020. Rent expense for operating leases, as previously reported under former lease accounting standards, was $1.3 billion and
$1.2 billion in 2019 and 2018, respectively.
For 2020, the Company made $1.5 billion of fixed cash payments related to operating leases. Non-cash activities involving ROU
assets obtained in exchange for lease liabilities were $10.5 billion for 2020, including the impact of adopting the new leases
standard in the first quarter of 2020.
Apple Inc. | 2020 Form 10-K | 56
The following table shows ROU assets and lease liabilities, and the associated financial statement line items, as of
September 26, 2020 (in millions):
Lease-Related Assets and Liabilities
Financial Statement Line Items
2020
Right-of-use assets:
Operating leases
Finance leases
Total right-of-use assets
Lease liabilities:
Operating leases
Finance leases
Other non-current assets
Property, plant and equipment, net
Other current liabilities
Other non-current liabilities
Other current liabilities
Other non-current liabilities
$
$
$
8,570
629
9,199
1,436
7,745
24
637
Total lease liabilities
$
9,842
Lease liability maturities as of September 26, 2020, are as follows (in millions):
2021
2022
2023
2024
2025
Thereafter
Total undiscounted liabilities
Less: Imputed interest
Total lease liabilities
Operating
Leases
Finance
Leases
Total
$
1,493 $
43 $
1,461
1,317
1,068
960
3,845
10,144
(963)
$
9,181 $
43
54
30
25
895
1,090
(429)
661 $
1,536
1,504
1,371
1,098
985
4,740
11,234
(1,392)
9,842
The weighted-average remaining lease term and discount rate related to the Company’s lease liabilities as of September 26,
2020 were 10.3 years and 2.0%, respectively. The discount rates are generally based on estimates of the Company’s
incremental borrowing rate, as the discount rates implicit in the Company’s leases cannot be readily determined.
As of September 26, 2020, the Company had $1.7 billion of future payments under additional leases, primarily for corporate
facilities and retail space, that had not yet commenced. These leases will commence between 2021 and 2022, with lease terms
ranging from 1 year to 20 years.
Note 13 – Selected Quarterly Financial Information (Unaudited)
The following tables show a summary of the Company’s quarterly financial information for each of the four quarters of 2020 and
2019 (in millions, except per share amounts):
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2020:
Total net sales
Gross margin
Net income
Earnings per share (1):
Basic
Diluted
$
$
$
$
$
64,698 $
24,689 $
12,673 $
59,685 $
22,680 $
11,253 $
58,313 $
22,370 $
11,249 $
91,819
35,217
22,236
0.74 $
0.73 $
0.65 $
0.65 $
0.64 $
0.64 $
1.26
1.25
Apple Inc. | 2020 Form 10-K | 57
2019:
Total net sales
Gross margin
Net income
Earnings per share (1):
Basic
Diluted
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
$
$
$
$
$
64,040 $
24,313 $
13,686 $
53,809 $
20,227 $
10,044 $
58,015 $
21,821 $
11,561 $
84,310
32,031
19,965
0.76 $
0.76 $
0.55 $
0.55 $
0.62 $
0.61 $
1.05
1.05
(1) Basic and diluted earnings per share are computed independently for each of the quarters presented. Therefore, the sum of
quarterly basic and diluted per share information may not equal annual basic and diluted earnings per share.
Apple Inc. | 2020 Form 10-K | 58
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Apple Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Apple Inc. as of September 26, 2020 and September 28,
2019, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of
the three years in the period ended September 26, 2020, and the related notes (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Apple Inc. at
September 26, 2020 and September 28, 2019, and the results of its operations and its cash flows for each of the three years in
the period ended September 26, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (the
“PCAOB”), Apple Inc.’s internal control over financial reporting as of September 26, 2020, based on criteria established in
Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated October 29, 2020 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of Apple Inc.’s management. Our responsibility is to express an opinion on
Apple Inc.’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to Apple Inc. in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the U.S. Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole,
and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on
the account or disclosure to which it relates.
Description of the Matter
Uncertain Tax Positions
As discussed in Note 5 to the financial statements, Apple Inc. is subject to taxation and files
income tax returns in the U.S. federal jurisdiction and many state and foreign jurisdictions.
As of September 26, 2020, the total amount of gross unrecognized tax benefits was $16.5
billion, of which $8.8 billion, if recognized, would impact Apple Inc.’s effective tax rate. Apple
Inc. uses significant judgment in the calculation of tax liabilities in estimating the impact of
uncertainties in the application of technical merits and complex tax laws.
Auditing management’s evaluation of whether an uncertain tax position is more likely than
not to be sustained and the measurement of the benefit of various tax positions can be
complex, involves significant judgment, and is based on interpretations of tax laws and legal
rulings.
Apple Inc. | 2020 Form 10-K | 59
How We Addressed the
Matter in Our Audit
We tested controls relating to the evaluation of uncertain tax positions, including controls
over management’s assessment as to whether tax positions are more likely than not to be
sustained, management’s process to measure the benefit of its tax positions, and the
development of the related disclosures.
To evaluate Apple Inc.’s assessment of which tax positions are more likely than not to be
sustained, our audit procedures
included, among others, reading and evaluating
management’s assumptions and analysis, and, as applicable, Apple Inc.’s communications
with taxing authorities, that detailed the basis and technical merits of the uncertain tax
positions. We involved our tax subject matter resources in assessing the technical merits of
certain of Apple Inc.’s tax positions based on our knowledge of relevant tax laws and
experience with related taxing authorities. For certain tax positions, we also received
external legal counsel confirmation letters and discussed the matters with external advisors
and Apple Inc. tax personnel. In addition, we evaluated Apple Inc.’s disclosure in relation to
these matters included in Note 5 to the financial statements.
/s/ Ernst & Young LLP
We have served as Apple Inc.’s auditor since 2009.
San Jose, California
October 29, 2020
Apple Inc. | 2020 Form 10-K | 60
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Apple Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Apple Inc.’s internal control over financial reporting as of September 26, 2020, based on criteria established in
Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) (the “COSO criteria”). In our opinion, Apple Inc. maintained, in all material respects, effective internal control
over financial reporting as of September 26, 2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (the
“PCAOB”), the consolidated balance sheets of Apple Inc. as of September 26, 2020 and September 28, 2019, the related
consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years
in the period ended September 26, 2020, and the related notes and our report dated October 29, 2020 expressed an unqualified
opinion thereon.
Basis for Opinion
Apple Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment
of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on
Internal Control over Financial Reporting. Our responsibility is to express an opinion on Apple Inc.’s internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent
with respect to Apple Inc. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the U.S.
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S.
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
San Jose, California
October 29, 2020
Apple Inc. | 2020 Form 10-K | 61
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and 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 26, 2020 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.
Inherent Limitations over Internal Controls
The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted
accounting principles (“GAAP”). The Company’s internal control over financial reporting includes those policies and procedures
that:
(i)
(ii)
(iii)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the Company’s assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that the Company’s receipts and expenditures are being made only in
accordance with authorizations of the Company’s management and directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the Company’s assets that could have a material effect on the financial statements.
Management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s
internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute
assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of
controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in
business conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management’s Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting
(as defined in Rule 13a-15(f) under the Exchange Act). Management conducted an assessment of the effectiveness of the
Company’s internal control over financial reporting based on the criteria set forth in Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on the Company’s
assessment, management has concluded that its internal control over financial reporting was effective as of September 26, 2020
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in
accordance with GAAP. The Company’s independent registered public accounting firm, Ernst & Young LLP, has issued an audit
report on the Company’s internal control over financial reporting, which appears in Part II, Item 8 of this Form 10-K.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the fourth quarter of 2020, 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.
Item 9B. Other Information
None.
Apple Inc. | 2020 Form 10-K | 62
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item is set forth under the headings “Corporate Governance,” “Directors,” “Executive Officers”
and, if applicable, “Other Information—Security Ownership of Certain Beneficial Owners and Management” in the Company’s
2021 Proxy Statement to be filed with the SEC within 120 days after September 26, 2020 in connection with the solicitation of
proxies for the Company’s 2021 annual meeting of shareholders, and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this Item is set forth under the heading “Executive Compensation,” under the subheadings “Board
Oversight of Risk Management” and, if applicable, “Compensation Committee Interlocks and Insider Participation” under the
heading “Corporate Governance” and under the subheadings “Compensation of Directors” and “Director Compensation—2020”
under the heading “Directors” in the Company’s 2021 Proxy Statement to be filed with the SEC within 120 days after
September 26, 2020, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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 2021
Proxy Statement to be filed with the SEC within 120 days after September 26, 2020, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is set forth under the subheadings “Role of the Board of Directors,” “Board Committees”,
“Review, Approval, or Ratification of Transactions with Related Persons” and “Transactions with Related Persons” under the
heading “Corporate Governance” in the Company’s 2021 Proxy Statement to be filed with the SEC within 120 days after
September 26, 2020, and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item is set forth under the subheadings “Fees Paid to Auditors” and “Policy on Audit Committee
Pre-Approval of Audit and Non-Audit Services Performed by the Independent Registered Public Accounting Firm” under the
proposal “Ratification of Appointment of Independent Registered Public Accounting Firm” in the Company’s 2021 Proxy
Statement to be filed with the SEC within 120 days after September 26, 2020, and is incorporated herein by reference.
Apple Inc. | 2020 Form 10-K | 63
PART IV
Item 15. Exhibit and Financial Statement Schedules
(a) Documents filed as part of this report
(1) All financial statements
Index to Consolidated Financial Statements
Consolidated Statements of Operations for the years ended September 26, 2020, September 28, 2019 and
September 29, 2018
Consolidated Statements of Comprehensive Income for the years ended September 26, 2020, September 28,
2019 and September 29, 2018
Consolidated Balance Sheets as of September 26, 2020 and September 28, 2019
Consolidated Statements of Shareholders’ Equity for the years ended September 26, 2020, September 28, 2019
and September 29, 2018
Consolidated Statements of Cash Flows for the years ended September 26, 2020, September 28, 2019 and
September 29, 2018
Notes to Consolidated Financial Statements
Selected Quarterly Financial Information (Unaudited)
Reports of Independent Registered Public Accounting Firm
(2) Financial Statement Schedules
Page
31
32
33
34
35
36
57
59
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 accompanying notes included in this Form 10-K.
(3) Exhibits required by Item 601 of Regulation S-K (1)
Incorporated by Reference
Exhibit
Number
Exhibit Description
Form
Exhibit
Filing Date/
Period End
Date
8/7/20
12/15/16
4/29/13
5/3/13
Restated Articles of Incorporation of the Registrant filed on August 3, 2020.
8-K
Amended and Restated Bylaws of the Registrant effective as of December 13,
8-K
2016.
Description of Securities of the Registrant.
Indenture, dated as of April 29, 2013, between the Registrant and The Bank of
S-3
New York Mellon Trust Company, N.A., as Trustee.
Officer’s Certificate of the Registrant, dated as of May 3, 2013, including forms of
global notes representing the Floating Rate Notes due 2016, Floating Rate
Notes due 2018, 0.45% Notes due 2016, 1.00% Notes due 2018, 2.40% Notes
due 2023 and 3.85% Notes due 2043.
8-K
3.1
3.2
4.1
4.1
Officer’s Certificate of the Registrant, dated as of May 6, 2014, including forms of
global notes representing the Floating Rate Notes due 2017, Floating Rate
Notes due 2019, 1.05% Notes due 2017, 2.10% Notes due 2019, 2.85% Notes
due 2021, 3.45% Notes due 2024 and 4.45% Notes due 2044.
Officer’s Certificate of the Registrant, dated as of November 10, 2014, including
forms of global notes representing the 1.000% Notes due 2022 and 1.625%
Notes due 2026.
Officer’s Certificate of the Registrant, dated as of February 9, 2015, including
forms of global notes representing the Floating Rate Notes due 2020, 1.55%
Notes due 2020, 2.15% Notes due 2022, 2.50% Notes due 2025 and 3.45%
Notes due 2045.
Officer’s Certificate of the Registrant, dated as of May 13, 2015, including forms
of global notes representing the Floating Rate Notes due 2017, Floating Rate
Notes due 2020, 0.900% Notes due 2017, 2.000% Notes due 2020, 2.700%
Notes due 2022, 3.200% Notes due 2025, and 4.375% Notes due 2045.
Officer’s Certificate of the Registrant, dated as of July 31, 2015, including forms
of global notes representing the 3.05% Notes due 2029 and 3.60% Notes due
2042.
8-K
4.1
5/6/14
8-K
4.1
11/10/14
8-K
4.1
2/9/15
8-K
4.1
5/13/15
8-K
4.1
7/31/15
Apple Inc. | 2020 Form 10-K | 64
3.1
3.2
4.1**
4.2
4.3
4.4
4.5
4.6
4.7
4.8
Exhibit
Number
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
4.19
4.20
4.21
4.22
4.23
4.24
4.25*
10.1*
10.2*
Exhibit Description
Officer’s Certificate of the Registrant, dated as of September 17, 2015, including
forms of global notes representing the 1.375% Notes due 2024 and 2.000%
Notes due 2027.
Officer’s Certificate of the Registrant, dated as of February 23, 2016, including
forms of global notes representing the Floating Rate Notes due 2019, Floating
Rate Notes due 2021, 1.300% Notes due 2018, 1.700% Notes due 2019,
2.250% Notes due 2021, 2.850% Notes due 2023, 3.250% Notes due 2026,
4.500% Notes due 2036 and 4.650% Notes due 2046.
Incorporated by Reference
Form
Exhibit
Filing Date/
Period End
Date
8-K
4.1
9/17/15
8-K
4.1
2/23/16
Supplement No. 1 to the Officer’s Certificate of the Registrant, dated as of March
8-K
24, 2016.
Officer’s Certificate of the Registrant, dated as of August 4, 2016, including forms
of global notes representing the Floating Rate Notes due 2019, 1.100% Notes
due 2019, 1.550% Notes due 2021, 2.450% Notes due 2026 and 3.850%
Notes due 2046.
8-K
4.1
4.1
3/24/16
8/4/16
Officer’s Certificate of the Registrant, dated as of February 9, 2017, including
forms of global notes representing the Floating Rate Notes due 2019, Floating
Rate Notes due 2020, Floating Rate Notes due 2022, 1.550% Notes due 2019,
1.900% Notes due 2020, 2.500% Notes due 2022, 3.000% Notes due 2024,
3.350% Notes due 2027 and 4.250% Notes due 2047.
Officer’s Certificate of the Registrant, dated as of May 11, 2017, including forms
of global notes representing the Floating Rate Notes due 2020, Floating Rate
Notes due 2022, 1.800% Notes due 2020, 2.300% Notes due 2022, 2.850%
Notes due 2024 and 3.200% Notes due 2027.
Officer’s Certificate of the Registrant, dated as of May 24, 2017, including forms
of global notes representing the 0.875% Notes due 2025 and 1.375% Notes
due 2029.
8-K
4.1
2/9/17
8-K
4.1
5/11/17
8-K
4.1
5/24/17
Officer’s Certificate of the Registrant, dated as of June 20, 2017, including form of
8-K
global note representing the 3.000% Notes due 2027.
Officer’s Certificate of the Registrant, dated as of August 18, 2017, including form
8-K
of global note representing the 2.513% Notes due 2024.
Officer’s Certificate of the Registrant, dated as of September 12, 2017, including
forms of global notes representing the 1.500% Notes due 2019, 2.100% Notes
due 2022, 2.900% Notes due 2027 and 3.750% Notes due 2047.
8-K
4.1
4.1
4.1
6/20/17
8/18/17
9/12/17
Officer’s Certificate of the Registrant, dated as of November 13, 2017, including
forms of global notes representing the 1.800% Notes due 2019, 2.000% Notes
due 2020, 2.400% Notes due 2023, 2.750% Notes due 2025, 3.000% Notes
due 2027 and 3.750% Notes due 2047.
8-K
4.1
11/13/17
Indenture, dated as of November 5, 2018, between the Registrant and The Bank
S-3
of New York Mellon Trust Company, N.A., as Trustee.
Officer’s Certificate of the Registrant, dated as of September 11, 2019, including
forms of global notes representing the 1.700% Notes due 2022, 1.800% Notes
due 2024, 2.050% Notes due 2026, 2.200% Notes due 2029 and 2.950%
Notes due 2049.
8-K
4.1
4.1
11/5/18
9/11/19
Officer’s Certificate of the Registrant, dated as of November 15, 2019, including
forms of global notes representing the 0.000% Notes due 2025 and 0.500%
Notes due 2031.
Officer’s Certificate of the Registrant, dated as of May 11, 2020, including forms
of global notes representing the 0.750% Notes due 2023, 1.125% Notes due
2025, 1.650% Notes due 2030 and 2.650% Notes due 2050.
Officer’s Certificate of the Registrant, dated as of August 20, 2020, including
forms of global notes representing the 0.550% Notes due 2025, 1.25% Notes
due 2030, 2.400% Notes due 2050 and 2.550% Notes due 2060.
8-K
4.1
11/15/19
8-K
4.1
5/11/20
8-K
4.1
8/20/20
Apple Inc. Deferred Compensation Plan.
Employee Stock Purchase Plan, as amended and restated as of March 10, 2015.
S-8
8-K
Form of Indemnification Agreement between the Registrant and each director
10-Q
and executive officer of the Registrant.
4.1
10.1
10.2
8/23/18
3/13/15
6/27/09
10.3*
Apple Inc. Non-Employee Director Stock Plan, as amended and restated as of
8-K
10.1
2/14/18
February 13, 2018.
10.4*
2003 Employee Stock Plan, as amended through February 25, 2010.
8-K
10.1
3/1/10
Apple Inc. | 2020 Form 10-K | 65
Exhibit
Number
10.5*
10.6*
10.7*
Exhibit Description
Incorporated by Reference
Form
Exhibit
Filing Date/
Period End
Date
Form of Restricted Stock Unit Award Agreement under 2003 Employee Stock
10-Q
10.10
12/25/10
Plan effective as of November 16, 2010.
2014 Employee Stock Plan, as amended and restated as of October 1, 2017.
Form of Amendment, effective as of August 26, 2014, to Restricted Stock Unit
Award Agreements and Performance Award Agreements outstanding as of
August 26, 2014.
10-K
10-K
10.8
9/30/17
10.13
9/27/14
10.8*
Form of Restricted Stock Unit Award Agreement under 2014 Employee Stock
10-K
10.18
9/24/16
Plan effective as of October 14, 2016.
10.9*
Form of Restricted Stock Unit Award Agreement under 2014 Employee Stock
10-K
10.20
9/30/17
Plan effective as of September 26, 2017.
10.10*
Form of Performance Award Agreement under 2014 Employee Stock Plan
10-K
10.21
9/30/17
effective as of September 26, 2017.
10.11*
Form of Restricted Stock Unit Award Agreement under Non-Employee Director
10-Q
10.2
3/31/18
Stock Plan effective as of February 13, 2018.
10.12*
Form of Restricted Stock Unit Award Agreement under 2014 Employee Stock
10-K
10.17
9/29/18
Plan effective as of August 21, 2018.
10.13*
Form of Performance Award Agreement under 2014 Employee Stock Plan
10-K
10.18
9/29/18
effective as of August 21, 2018.
10.14*
Form of Restricted Stock Unit Award Agreement under 2014 Employee Stock
10-K
10.15
9/28/19
Plan effective as of September 29, 2019.
10.15*
Form of Performance Award Agreement under 2014 Employee Stock Plan
10-K
10.16
9/28/19
effective as of September 29, 2019.
10.16*, **
Form of Restricted Stock Unit Award Agreement under 2014 Employee Stock
Plan effective as of August 18, 2020.
10.17*, **
Form of Performance Award Agreement under 2014 Employee Stock Plan
21.1**
23.1**
24.1**
31.1**
31.2**
32.1***
101**
effective as of August 18, 2020.
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
Power of Attorney (included on the Signatures page of this Annual Report on
Form 10-K).
Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer.
Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer.
Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer.
Inline XBRL Document Set for the consolidated financial statements and
“Financial Statements and
accompanying notes
in Part
Supplementary Data” of this Annual Report on Form 10-K.
Item 8,
II,
104**
Inline XBRL for the cover page of this Annual Report on Form 10-K, included in
the Exhibit 101 Inline XBRL Document Set.
*
**
Indicates management contract or compensatory plan or arrangement.
Filed herewith.
*** Furnished herewith.
(1) Certain instruments defining the rights of holders of long-term debt securities of the Registrant are omitted pursuant to Item
601(b)(4)(iii) of Regulation S-K. The Registrant hereby undertakes to furnish to the SEC, upon request, copies of any such
instruments.
Item 16. Form 10-K Summary
None.
Apple Inc. | 2020 Form 10-K | 66
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: October 29, 2020
Apple Inc.
By:
/s/ Luca Maestri
Luca Maestri
Senior Vice President,
Chief Financial Officer
Power of Attorney
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints
Timothy D. Cook and Luca Maestri, jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him
or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated:
Name
Title
Date
/s/ Timothy D. Cook
TIMOTHY D. COOK
/s/ Luca Maestri
LUCA MAESTRI
/s/ Chris Kondo
CHRIS KONDO
/s/ James A. Bell
JAMES A. BELL
/s/ Al Gore
AL GORE
/s/ Andrea Jung
ANDREA JUNG
/s/ Arthur D. Levinson
ARTHUR D. LEVINSON
/s/ Ronald D. Sugar
RONALD D. SUGAR
/s/ Susan L. Wagner
SUSAN L. WAGNER
Chief Executive Officer and Director
(Principal Executive Officer)
October 29, 2020
Senior Vice President, Chief Financial Officer
(Principal Financial Officer)
October 29, 2020
Senior Director of Corporate Accounting
(Principal Accounting Officer)
October 29, 2020
October 29, 2020
October 29, 2020
October 29, 2020
October 29, 2020
October 29, 2020
October 29, 2020
Director
Director
Director
Director
Director
Director
Apple Inc. | 2020 Form 10-K | 67
Exhibit 4.1
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
As of September 26, 2020, Apple Inc. (“Apple” or the “Company”) had eleven classes of securities registered under
Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”): (i) Common Stock, $0.00001
par value per share (“Common Stock”); (ii) 1.000% Notes due 2022 (the “2022 Notes”); (iii) 1.375% Notes due 2024
(the “2024 Notes”); (iv) 0.000% Notes due 2025 (the “0.000% 2025 Notes”); (v) 0.875% Notes due 2025 (the “0.875%
2025 Notes”); (vi) 1.625% Notes due 2026 (the “2026 Notes”); (vii) 2.000% Notes due 2027 (the “2027 Notes”); (viii)
1.375% Notes due 2029 (the “1.375% 2029 Notes”); (ix) 3.050% Notes due 2029 (the “3.050% 2029 Notes”); (x)
0.500% Notes due 2031 (the “2031 Notes”); and (xi) 3.600% Notes due 2042 (the “2042 Notes,” and together with the
2022 Notes, the 2024 Notes, the 0.000% 2025 Notes, the 0.875% 2025 Notes, the 2026 Notes, the 2027 Notes, the
1.375% 2029 Notes, the 3.050% 2029 Notes, and the 2031 Notes, the “Notes”). Each of the Company’s securities
registered under Section 12 of the Exchange Act are listed on The Nasdaq Stock Market LLC.
DESCRIPTION OF COMMON STOCK
The following is a description of the rights of Common Stock and related provisions of the Company’s
Restated Articles of Incorporation (the “Articles”) and Amended and Restated Bylaws (the “Bylaws”) and applicable
California law. This description is qualified in its entirety by, and should be read in conjunction with, the Articles,
Bylaws and applicable California law.
Authorized Capital Stock
The Company’s authorized capital stock consists of 50,400,000,000 shares of Common Stock.
Common Stock
Fully Paid and Nonassessable
All of the outstanding shares of the Company’s Common Stock are fully paid and nonassessable.
Voting Rights
The holders of shares of Common Stock are entitled to one vote per share on all matters to be voted on by
such holders. Holders of shares of Common Stock are not entitled to cumulative voting rights.
Except as described below or as required by law, all matters to be voted on by shareholders must be
approved by the affirmative vote of (i) a majority of the shares present or represented by proxy and voting and (ii) a
majority of the shares required to constitute a quorum.
In an election of directors where the number of nominees exceeds the number of directors to be elected, the
candidates receiving the highest number of affirmative votes of the shares entitled to be voted for them up to the
number of directors to be elected by such shares will be elected.
The Company’s entire Board of Directors or any individual director may be removed without cause by an
affirmative vote of a majority of the outstanding shares entitled to vote, subject to the provisions of the Company’s
Bylaws.
Vacancies created by the removal of a director must be filled only by approval of the shareholders, or by the
unanimous written consent of all shares entitled to vote. The shareholders may elect a director at any time to fill a
vacancy not filled by the directors, but any such election by written consent, other than to fill a vacancy created by
removal, requires the consent of a majority of the outstanding shares entitled to vote thereon.
An amendment of the Bylaws or the Articles may be adopted by the vote of the majority of the outstanding
shares entitled to vote. Any amendment of the Bylaws specifying or changing a fixed number of directors or the
maximum or minimum number or changing from a fixed to a variable board or vice versa may only be adopted by the
shareholders; provided, however, that an amendment of the Bylaws or the Articles reducing the fixed number or the
minimum number of directors to less than five cannot be adopted if the votes cast against its adoption are equal to
more than 16 2/3% of the outstanding shares entitled to vote.
Any shareholders’ meeting may be adjourned from time to time by the vote of a majority of the shares
present in person or represented by proxy.
Dividends
The holders of shares of Common Stock are entitled to receive such dividends, if any, as may be declared
from time to time by the Company’s Board of Directors in its discretion from funds legally available therefor.
Right to Receive Liquidation Distributions
Upon liquidation, dissolution or winding-up, the holders of shares of Common Stock are entitled to receive
pro rata all assets remaining available for distribution to holders of such shares.
No Preemptive or Similar Rights
Common Stock has no preemptive or other subscription rights, and there are no conversion rights or
redemption or sinking fund provisions with respect to such shares of Common Stock.
Anti-Takeover Provisions of the Articles, Bylaws and California Law
Provisions of the Articles and Bylaws may delay or discourage transactions involving an actual or potential
change in control of the Company or change in its management, including transactions in which shareholders might
otherwise receive a premium for their shares, or transactions that its shareholders might otherwise deem to be in their
best interests. Among other things, the Articles and Bylaws:
•
•
•
•
•
provide that, except for a vacancy caused by the removal of a director as provided in the Bylaws, a
vacancy on the Company’s Board of Directors may be filled by a person selected by a majority of the
remaining directors then in office, whether or not less than a quorum, or by a sole remaining director;
provide that shareholders seeking to present proposals before a meeting of shareholders or to nominate
candidates for election as directors at a meeting of shareholders must provide notice in writing in a
timely manner, and also specify requirements as to the form and content of a shareholder’s notice;
provide that a shareholder, or group of up to 20 shareholders, that has owned continuously for at least
three years shares of Common Stock representing an aggregate of at least 3% of the Company’s
outstanding shares of Common Stock, may nominate and include in the Company’s proxy materials
director nominees constituting up to 20% of the Company’s Board of Directors, provided that the
shareholder(s) and nominee(s) satisfy the requirements in the Bylaws;
do not provide for cumulative voting rights for the election of directors; and
provide that special meetings of the shareholders may only be called by two or more members of the
Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer or by one or
more holders of shares entitled to cast not less than ten percent (10%) of the votes on the record date
established pursuant to the Company’s Bylaws.
In addition, as a California corporation, the Company is subject to the provisions of Section 1203 of the
California General Corporation Law, which requires it to provide a fairness opinion to its shareholders in connection
with their consideration of any proposed “interested party” reorganization transaction.
Listing
“AAPL.”
The Company’s Common Stock is listed on The Nasdaq Stock Market LLC under the trading symbol
The following description of the Notes is a summary and does not purport to be complete. This description is qualified
in its entirety by reference, as applicable, to the Indenture, dated as of April 29, 2013, between Apple Inc. and The
DESCRIPTION OF DEBT SECURITIES
2
Bank of New York Mellon Trust Company, N.A., as trustee (the “2013 Indenture”) and the Indenture, dated as of
November 5, 2018, between Apple Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (the
“2018 Indenture,” and together with the 2013 Indenture, the “Indentures”). References in this section to the
“Company,” “us,” “we” and “our” are solely to Apple Inc. and not to any of its subsidiaries, unless the context requires
otherwise.
The Notes
Each of the Notes were issued under the applicable Indenture, which provides that debt securities may be
issued under such Indenture from time to time in one or more series. The Indentures and the Notes are governed by,
and construed in accordance with, the laws of the State of New York. The Indentures do not limit the amount of debt
securities that we may issue thereunder. We may, without the consent of the holders of the debt securities of any
series, issue additional debt securities ranking equally with, and otherwise similar in all respects to, the debt securities
of the series (except for the date of issuance, the date interest begins to accrue and, in certain circumstances, the
first interest payment date) so that those additional debt securities will be consolidated and form a single series with
the debt securities of the series previously offered and sold; provided, however, that any additional debt securities will
have a separate ISIN number unless certain conditions are met.
The 2022 Notes
We issued €1,400,000,000 aggregate principal amount of the 2022 Notes on November 10, 2014. The
maturity date of the 2022 Notes is November 10, 2022, and interest at a rate of 1.000% per annum is paid annually
on November 10 of each year, beginning on November 10, 2015, and on the maturity date. As of October 16, 2020,
€1,400,000,000 aggregate principal amount of the 2022 Notes was outstanding.
The 2024 Notes
We issued €1,000,000,000 aggregate principal amount of the 2024 Notes on September 17, 2015. The
maturity date of the 2024 Notes is January 17, 2024, and interest at a rate of 1.375% per annum is paid annually on
January 17 of each year, beginning on January 17, 2016, and on the maturity date. As of October 16, 2020,
€1,000,000,000 aggregate principal amount of the 2024 Notes was outstanding.
The 0.000% 2025 Notes
We issued €1,000,000,000 aggregate principal amount of the 0.000% 2025 Notes on November 15, 2019.
The maturity date of the 0.000% 2025 Notes is November 15, 2025, and interest at a rate of 0.000% per annum is
paid annually on November 15 of each year, beginning on November 15, 2020, and on the maturity date. As of
October 16, 2020, €1,000,000,000 aggregate principal amount of the 0.000% 2025 Notes was outstanding.
The 0.875% 2025 Notes
We issued €1,250,000,000 aggregate principal amount of the 0.875% 2025 Notes on May 24, 2017. The
maturity date of the 0.875% 2025 Notes is May 24, 2025, and interest at a rate of 0.875% per annum is paid annually
on May 24 of each year, beginning on May 24, 2018, and on the maturity date. As of October 16, 2020,
€1,250,000,000 aggregate principal amount of the 0.875% 2025 Notes was outstanding.
The 2026 Notes
We issued €1,400,000,000 aggregate principal amount of the 2026 Notes on November 10, 2014. The
maturity date of the 2026 Notes is November 10, 2026, and interest at a rate of 1.625% per annum is paid annually
on November 10 of each year, beginning on November 10, 2015, and on the maturity date. As of October 16, 2020,
€1,400,000,000 aggregate principal amount of the 2026 Notes was outstanding.
The 2027 Notes
We issued €1,000,000,000 aggregate principal amount of the 2027 Notes on September 17, 2015. The
maturity date of the 2027 Notes is September 17, 2027, and interest at a rate of 2.000% per annum is paid annually
on September 17 of each year, beginning on September 17, 2016, and on the maturity date. As of October 16, 2020,
€1,000,000,000 aggregate principal amount of the 2027 Notes was outstanding.
3
The 1.375% 2029 Notes
We issued €1,250,000,000 aggregate principal amount of the 1.375% 2029 Notes on May 24, 2017. The
maturity date of the 1.375% 2029 Notes is May 24, 2029, and interest at a rate of 1.375% per annum is paid annually
on May 24 of each year, beginning on May 24, 2018, and on the maturity date. As of October 16, 2020,
€1,250,000,000 aggregate principal amount of the 1.375% 2029 Notes was outstanding.
The 3.050% 2029 Notes
We issued £750,000,000 aggregate principal amount of the 3.050% 2029 Notes on July 31, 2015. The
maturity date of the 3.050% 2029 Notes is July 31, 2029, and interest at a rate of 3.050% per annum is paid semi-
annually on January 31 and July 31 of each year, beginning on January 31, 2016, and on the maturity date. As of
October 16, 2020, £750,000,000 aggregate principal amount of the 3.050% 2029 Notes was outstanding.
The 2031 Notes
We issued €1,000,000,000 aggregate principal amount of the 2031 Notes on November 15, 2019. The
maturity date of the 2031 Notes is November 15, 2031, and interest at a rate of 0.500% per annum is paid annually
on November 15 of each year, beginning on November 15, 2020, and on the maturity date. As of October 16, 2020,
€1,000,000,000 aggregate principal amount of the 2031 Notes was outstanding.
The 2042 Notes
We issued £500,000,000 aggregate principal amount of the 2042 Notes on July 31, 2015. The maturity date
of the 2042 Notes is July 31, 2042, and interest at a rate of 3.600% per annum is paid semi-annually on January 31
and July 31 of each year, beginning on January 31, 2016, and on the maturity date. As of October 16, 2020,
£500,000,000 aggregate principal amount of the 2042 Notes was outstanding.
Ranking
The Notes are our senior unsecured indebtedness and rank equally with each other and with all of our other
senior unsecured and unsubordinated indebtedness from time to time outstanding. However, the Notes are
structurally subordinated to any indebtedness and preferred stock, if any, of our subsidiaries and are effectively
subordinated to any secured indebtedness to the extent of the value of the assets securing such indebtedness.
Claims of the creditors of our subsidiaries generally have priority with respect to the assets and earnings of such
subsidiaries over the claims of our creditors, including holders of the Notes. Accordingly, the Notes are effectively
subordinated to creditors, including trade creditors and preferred stockholders, if any, of our subsidiaries. The
Indentures do not restrict our ability or that of our subsidiaries to incur additional indebtedness.
Payment on the Notes
All payments of principal of, the redemption price (if any), and interest and additional amounts (if any) on the
2022 Notes, the 2024 Notes, the 0.000% 2025 Notes, the 0.875% 2025 Notes, the 2026 Notes, the 2027 Notes, the
1.375% 2029 Notes and the 2031 Notes are payable in euro, provided that, if the euro is unavailable to the Company
due to the imposition of exchange controls or other circumstances beyond the Company’s control, or if the euro is no
longer being used by the then member states of the European Monetary Union that have adopted the euro as their
currency or for the settlement of transactions by public institutions of or within the international banking community,
then all payments in respect of the 2022 Notes, the 2024 Notes, the 0.000% 2025 Notes, the 0.875% 2025 Notes, the
2026 Notes, the 2027 Notes, the 1.375% 2029 Notes and the 2031 Notes will be made in U.S. dollars, until the euro
is again available to the Company or so used. The amount payable on any date in euro will be converted into U.S.
dollars at the rate mandated by the U.S. Federal Reserve Board as of the close of business on the second Business
Day prior to the relevant payment date or, in the event the U.S. Federal Reserve Board has not mandated a rate of
conversion, on the basis of the most recent U.S. dollar/euro exchange rate published in The Wall Street Journal on or
prior to the second Business Day prior to the relevant payment date. Any payment in respect of the 2022 Notes, the
2024 Notes, the 0.000% 2025 Notes, the 0.875% 2025 Notes, the 2026 Notes, the 2027 Notes, the 1.375% 2029
Notes and the 2031 Notes so made in U.S. dollars will not constitute an event of default under such Notes or the
applicable Indenture.
With respect to the 2022 Notes, the 2024 Notes, the 0.000% 2025 Notes, the 0.875% 2025 Notes, the 2026
Notes, the 2027 Notes, the 1.375% 2029 Notes and the 2031 Notes, “Business Day” means any day, other than a
Saturday or Sunday, (1) which is not a day on which banking institutions in The City of New York or London are
4
authorized or required by law, regulation or executive order to close and (2) on which the Trans-European Automated
Real-time Gross Settlement Express Transfer system (the TARGET2 system), or any successor thereto, is open.
All payments of principal of, the redemption price (if any), and interest and additional amounts (if any) on the
3.050% 2029 Notes and the 2042 Notes are payable in pounds sterling, or, if the United Kingdom adopts euro as its
lawful currency, in euro. If pounds sterling or, in the event the Notes are redenominated into euro, euro is unavailable
to the Company due to the imposition of exchange controls or other circumstances beyond the Company’s control or,
in the event the notes are redenominated into euro, the euro is no longer being used by the then member states of
the European Monetary Union that have adopted the euro as their currency or for the settlement of transactions by
public institutions of or within the international banking community, then all payments in respect of the 3.050% 2029
Notes and the 2042 Notes will be made in U.S. dollars until the pound sterling or euro, as the case may be, is again
available to the Company or so used. The amount payable on any date in pounds sterling or, in the event such Notes
are redenominated into euro, euro will be converted into U.S. dollars at the rate mandated by the U.S. Federal
Reserve Board as of the close of business on the second Business Day prior to the relevant payment date or, in the
event the U.S. Federal Reserve Board has not mandated a rate of conversion, on the basis of the most recent U.S.
dollar/pounds sterling or, in the event the Notes are redenominated into euro, the most recent U.S. dollar/euro
exchange rate published in The Wall Street Journal on or prior to the second Business Day prior to the relevant
payment date. Any payment in respect of the 3.050% 2029 Notes and the 2042 Notes so made in U.S. dollars will not
constitute an event of default under such Notes or the 2013 Indenture.
With respect to the 3.050% 2029 Notes and the 2042 Notes, “Business Day” means any day which is not a
day on which banking institutions in The City of New York or London or the relevant place of payment are authorized
or required by law, regulation or executive order to close.
Payment of Additional Amounts
The terms of the Notes state that all payments of principal and interest in respect of the Notes will be made
free and clear of, and without deduction or withholding for or on account of any present or future taxes, duties,
assessments or other governmental charges of whatsoever nature required to be deducted or withheld by the United
States or any political subdivision or taxing authority of or in the United States, unless such withholding or deduction
is required by law.
All of the Notes also contain a covenant substantially similar to the following:
The Company will, subject to the exceptions and limitations set forth below, pay as additional interest on the
Notes such additional amounts (“Additional Amounts”) as are necessary in order that the net payment by the
Company or the paying agent of the Company for the applicable Notes (“Paying Agent”) of the principal of and
interest on the Notes to a holder who is not a United States person (as defined below), after withholding or deduction
for any present or future tax, assessment or other governmental charge (“Tax”) imposed by the United States or a
taxing authority in the United States, will not be less than the amount provided in the Notes to be then due and
payable; provided, however, that the foregoing obligation to pay Additional Amounts shall not apply:
(1)
to any Tax that is imposed by reason of the holder (or the beneficial owner for whose benefit such
holder holds the Notes), or a fiduciary, settlor, beneficiary, member or shareholder of the holder if the
holder is an estate, trust, partnership or corporation, or a person holding a power over an estate or trust
administered by a fiduciary holder, being considered as:
(a) being or having been engaged in a trade or business in the United States or having or having had a
permanent establishment in the United States;
(b) having a current or former connection with the United States (other than a connection arising solely
as a result of the ownership of the Notes, the receipt of any payment or the enforcement of any
rights hereunder), including being or having been a citizen or resident of the United States;
(c) being or having been a personal holding company, a passive foreign investment company or a
controlled foreign corporation for U.S. federal income tax purposes or a corporation that has
accumulated earnings to avoid U.S. federal income tax;
(d) being or having been a “10-percent shareholder” of the Company as defined in Section 871(h)(3) of
the Internal Revenue Code of 1986, as amended (the “Code”);
5
(e) being a controlled foreign corporation that is related to the Company within the meaning of Section
864(d)(4) of the Code; or
(f) being a bank receiving payments on an extension of credit made pursuant to a loan agreement
entered into in the ordinary course of its trade or business;
to any holder that is not the sole beneficial owner of the Notes, or a portion of the Notes, or that is a
fiduciary, partnership or limited liability company, but only to the extent that a beneficial owner with
respect to the holder, a beneficiary or settlor with respect to the fiduciary, or a beneficial owner or
member of the partnership or limited liability company would not have been entitled to the payment of
an additional amount had the beneficiary, settlor, beneficial owner or member received directly its
beneficial or distributive share of the payment;
to any Tax that would not have been imposed but for the failure of the holder or any other person to
comply with certification, identification or information reporting requirements concerning the nationality,
residence, identity or connection with the United States of the holder or beneficial owner of the Notes, if
compliance is required by statute, by regulation of the United States or any taxing authority therein or by
an applicable income tax treaty to which the United States is a party as a precondition to exemption
from such Tax (including, but not limited to, the requirement to provide Internal Revenue Service Forms
W-8BEN, W-8BEN-E, W-8ECI, or any subsequent versions thereof or successor thereto, and any
documentation requirement under an applicable income tax treaty);
to any Tax that is imposed otherwise than by withholding by the Company or a Paying Agent from the
payment;
to any Tax that would not have been imposed but for a change in law, regulation, or administrative or
judicial interpretation that becomes effective more than 10 days after the payment becomes due or is
duly provided for, whichever occurs later;
to any estate, inheritance, gift, sales, excise, transfer, wealth, capital gains or personal property or
similar Tax;
to any Tax required to be withheld by any paying agent from any payment of principal of or interest on
any Note, if such payment can be made without such withholding by at least one other paying agent;
to any Tax that would not have been imposed but for the presentation by the holder of any Note, where
presentation is required, for payment on a date more than 30 days after the date on which payment
became due and payable or the date on which payment thereof is duly provided for, whichever occurs
later;
to any Tax imposed under Sections 1471 through 1474 of the Code (or any amended or successor
provisions), any current or future regulations or official interpretations thereof, any agreement entered
into pursuant to Section 1471(b) of the Code, or any fiscal or regulatory legislation, rules or practices
adopted pursuant to any intergovernmental agreement entered into in connection with the
implementation of such sections of the Code; or
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10) in the case of any combination of items (1) through (9) above.
The Notes are subject in all cases to any tax, fiscal or other law or regulation or administrative or judicial
interpretation applicable to the Notes. Except as specifically provided under this heading “—Payment of Additional
Amounts,” the Company will not be required to make any payment for any Tax imposed by any government or a
political subdivision or taxing authority of or in any government or political subdivision. As used under “—Payment of
Additional Amounts” and under “—Redemption for Tax Reasons,” the term “United States” means the United States
of America (including the states and the District of Columbia and any political subdivision thereof), and the term
“United States person” means any individual who is a citizen or resident of the United States for U.S. federal income
tax purposes, a corporation, partnership or other entity created or organized in or under the laws of the United States,
any state of the United States or the District of Columbia (other than a partnership that is not treated as a United
States person under any applicable Treasury regulations), or any estate or trust the income of which is subject to U.S.
federal income taxation regardless of its source.
6
Redemption for Tax Reasons
If, as a result of any change in, or amendment to, or, in the case of the 0.000% 2025 Notes and the 2031
Notes, introduction of, the laws (or any regulations or rulings promulgated under the laws) of the United States (or any
political subdivision or taxing authority of or in the United States), or any change in, or amendments to, an official
position regarding the application or interpretation of such laws, regulations or rulings, which change or amendment is
announced or becomes effective on or after the date of the applicable prospectus supplement, we become, or based
upon a written opinion of independent counsel selected by us, will become obligated to pay additional amounts as
described above under the heading “Payments of Additional Amounts” with respect to a series of the Notes, then we
may at our option redeem, in whole, but not in part, in the case of the 2022 Notes, the 2024 Notes, the 2026 Notes,
the 2027 Notes, the 3.050% 2029 Notes and the 2042 Notes, the Notes of such series on not less than 30 nor more
than 60 days’ prior notice, in the case of the 0.875% 2025 Notes and the 1.375% 2029 Notes, the Notes of such
series on not less than 15 nor more than 60 days’ notice, and in the case of the 0.000% 2025 Notes and the 2031
Notes, the Notes of such series on not less than 10 nor more than 60 days’ prior notice, in each case at a redemption
price equal to 100% of their principal amount, together with interest accrued but unpaid on those Notes to (and, in the
case of the 0.000% 2025 Notes and the 2031 Notes, but not including) the date fixed for redemption.
Optional Redemption
We may redeem the 2022 Notes, the 2024 Notes, the 2026 Notes, the 2027 Notes, the 3.050% 2029 Notes
and the 2042 Notes at our option, at any time in whole or from time to time in part, at a redemption price equal to the
greater of:
•
•
100% of the principal amount of the Notes to be redeemed; or
the sum of the present values of the remaining scheduled payments of principal and interest thereon
(not including any portion of such payments of interest accrued as of the date of redemption),
discounted to the date of redemption on an annual basis (ACTUAL/ACTUAL (ICMA)) at the applicable
Comparable Government Bond Rate (as defined below), plus 5 basis points in the case of the 2022
Notes, plus 10 basis points in the case of the 2026 Notes, plus 15 basis points in the case of the 2024
Notes, the 3.050% 2029 Notes and the 2042 Notes and plus 20 basis points in the case of the 2027
Notes.
We may redeem the 0.000% 2025 Notes, the 0.875% 2025 Notes, the 1.375% 2029 Notes and the 2031
Notes at our option, at any time in whole or from time to time in part, prior to the applicable Par Call Date at a
redemption price equal to the greater of:
•
•
100% of the principal amount of the Notes to be redeemed; or
the sum of the present values of the remaining scheduled payments of principal and interest thereon
assuming that the Notes matured on the applicable Par Call Date (not including any portion of such
payments of interest accrued as of the date of redemption), discounted to the date of redemption on an
annual basis (ACTUAL/ACTUAL (ICMA)) at the applicable Comparable Government Bond Rate (as
defined below), plus 10 basis points in the case of the 0.000% 2025 Notes, plus 15 basis points in the
case of the 0.875% 2025 Notes and the 2031 Notes, and 20 basis points in the case of the 2029 Notes.
“Par Call Date” means (i) with respect to the 0.000% 2025 Notes, August 15, 2025 (three months prior to the
maturity date of the 0.000% 2025 Notes), (ii) with respect to the 0.875% 2025 Notes, February 24, 2025 (three
months prior to the maturity date of the 0.875% 2025 Notes), (iii) with respect to the 1.375% 2029 Notes, February
24, 2029 (three months prior to the maturity date of 1.375% 2029 Notes) and (iv) with respect to the 2031 Notes,
August 15, 2031 (three months prior to the maturity of the 2031 Notes).
If any of the 0.000% 2025 Notes, the 0.875% 2025 Notes, the 1.375% 2029 Notes or the 2031 Notes are
redeemed on or after the applicable Par Call Date, the redemption price for such Notes will equal 100% of the
principal amount of the Notes being redeemed.
In each case upon redemption of the Notes, we will pay accrued and unpaid interest on the principal amount
being redeemed to, but excluding, the date of redemption.
7
Installments of interest on Notes being redeemed that are due and payable on interest payment dates falling
on or prior to a redemption date shall be payable on the interest payment date to the holders as of the close of
business on the relevant regular record date according to the Notes and the applicable Indenture.
“Comparable Government Bond” means, in relation to any Comparable Government Bond Rate calculation
for the 2022 Notes, the 2024 Notes, the 2026 Notes and the 2027 Notes, at the discretion of an independent
investment bank selected by us, a German government bond whose maturity is closest to the maturity of the Notes
being redeemed, or if such independent investment bank in its discretion determines that such similar bond is not in
issue, such other German government bond as such independent investment bank may, with the advice of three
brokers of, and/or market makers in, German government bonds selected by us, determine to be appropriate for
determining the Comparable Government Bond Rate.
“Comparable Government Bond” means, in relation to any Comparable Government Bond Rate calculation
for the 3.050% 2029 Notes and the 2042 Notes, at the discretion of an independent investment bank selected by us,
a United Kingdom government bond whose maturity is closest to the maturity of the Notes being redeemed, or if such
independent investment bank in its discretion determines that such similar bond is not in issue, such other United
Kingdom government bond as such independent investment bank may, with the advice of three brokers of, and/or
market makers in, United Kingdom government bonds selected by us, determine to be appropriate for determining the
Comparable Government Bond Rate.
“Comparable Government Bond” means, in relation to any Comparable Government Bond Rate calculation
for the 0.000% 2025 Notes, the 0.875% 2025 Notes, the 1.375% 2029 Notes and the 2031 Notes, at the discretion of
an independent investment bank selected by us, a German government bond whose maturity is closest to the
applicable Par Call Date of the Notes being redeemed, or if such independent investment bank in its discretion
determines that such similar bond is not in issue, such other German government bond as such independent
investment bank may, with the advice of three brokers of, and/or market makers in, German government bonds
selected by us, determine to be appropriate for determining the Comparable Government Bond Rate.
“Comparable Government Bond Rate” means the price, expressed as a percentage (rounded to three
decimal places, with 0.0005 being rounded upwards), at which the gross redemption yield on the Notes, if they were
to be purchased at such price on the third business day prior to the date fixed for redemption, would be equal to the
gross redemption yield on such business day of the Comparable Government Bond on the basis of the middle market
price of the Comparable Government Bond prevailing at 11:00 a.m. (London time) on such business day as
determined by an independent investment bank selected by us.
Covenants
The Indentures set forth limited covenants that apply to the Notes. However, these covenants do not, among
other things:
•
•
•
limit the amount of indebtedness or lease obligations that may be incurred by us and our subsidiaries;
limit our ability or that of our subsidiaries to issue, assume or guarantee debt secured by liens; or
restrict us from paying dividends or making distributions on our capital stock or purchasing or redeeming
our capital stock.
Consolidation, Merger and Sale of Assets
The Indentures provide that we may consolidate with or merge with or into any other person, and may sell,
transfer, or lease or convey all or substantially all of our properties and assets to another person; provided that the
following conditions are satisfied:
•
we are the continuing entity, or the resulting, surviving or transferee person (the “Successor”) is a
person (if such person is not a corporation, then the Successor will include a corporate co-issuer of the
debt securities) organized and existing under the laws of the United States of America, any state thereof
or the District of Columbia and the Successor (if not us) will expressly assume, by supplemental
indenture, all of our obligations under the debt securities and the applicable Indenture and, for each
security that by its terms provides for conversion, provide for the right to convert such security in
accordance with its terms;
8
•
•
immediately after giving effect to such transaction, no default or event of default under the applicable
Indenture has occurred and is continuing; and
in the case of the 2013 Indenture, the trustee receives from us an officers’ certificate and an opinion of
counsel that the transaction and such supplemental indenture, as the case may be, complies with the
applicable provisions of the 2013 Indenture.
If we consolidate or merge with or into any other person or sell, transfer, lease or convey all or substantially
all of our properties and assets in accordance with the Indentures, the Successor will be substituted for us in the
Indentures, with the same effect as if it had been an original party to the Indentures. As a result, the Successor may
exercise our rights and powers under the Indentures, and we will be released from all our liabilities and obligations
under the Indentures and under the debt securities.
For purposes of this covenant, “person” means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof or any other entity.
Events of Default
Each of the following events are defined in the Indentures as an “event of default” (whatever the reason for
such event of default and whether or not it will be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or
governmental body) with respect to the debt securities of any series:
(1) default in the payment of any installment of interest on any debt securities of such series for 30 days
after becoming due;
(2) default in the payment of principal of or premium, if any, on any debt securities of such series when it
becomes due and payable at its stated maturity, upon optional redemption, upon declaration or
otherwise;
(3) default in the performance, or breach, of any covenant or agreement of ours in the applicable Indenture
with respect to the debt securities of such series (other than a covenant or agreement, a default in the
performance of which or a breach of which is elsewhere in the applicable Indenture specifically dealt
with or that has expressly been included in the applicable Indenture solely for the benefit of a series of
debt securities other than such series), which continues for a period of 90 days after written notice to us
by the trustee or to us and the trustee by the holders of, in the case of the 2013 Indenture, at least 25%
in aggregate principal amount of the outstanding debt securities of that series, and in the case of the
2018 Indenture, at least 33% in aggregate principal amount of the outstanding debt securities of that
series;
(4) we, pursuant to or within the meaning of the Bankruptcy Law:
•
•
•
commence a voluntary case or proceeding;
consent to the entry of an order for relief against us in an involuntary case or proceeding;
consent to the appointment of a custodian of us or for all or substantially all of our property;
• make a general assignment for the benefit of our creditors;
•
•
•
file a petition in bankruptcy or answer or consent seeking reorganization or relief;
consent to the filing of such petition or the appointment of or taking possession by a custodian; or
take any comparable action under any foreign laws relating to insolvency;
(5) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:
9
•
•
•
is for relief against us in an involuntary case, or adjudicates us insolvent or bankrupt;
appoints a custodian of us or for all or substantially all of our property; or
orders the winding-up or liquidation of us (or any similar relief is granted under any foreign laws);
and the order or decree remains unstayed and in effect for 90 days (or, in the case of the 2018
Indenture, 90 consecutive days); or
(6) any other event of default provided with respect to debt securities of such series occurs.
“Bankruptcy Law” means Title 11, United States Code or any similar federal or state or foreign law for the
relief of debtors. “Custodian” means any custodian, receiver, trustee, assignee, liquidator or other similar official
under any Bankruptcy Law.
If an event of default with respect to debt securities of any series (other than an event of default relating to
certain events of bankruptcy, insolvency, or reorganization of us) occurs and is continuing, the trustee by notice to us,
or the holders of, in the case of the 2013 Indenture, at least 25% in aggregate principal amount of the outstanding
debt securities of such series, and in the case of the 2018 Indenture, at least 33% in aggregate principal amount of
the outstanding debt securities of such series, by notice to us and the trustee, may, and the trustee at the request of
these holders will, declare the principal of and premium, if any, and accrued and unpaid interest on all the debt
securities of such series to be due and payable. Upon such a declaration, such principal, premium and accrued and
unpaid interest will be due and payable immediately. If an event of default relating to certain events of bankruptcy,
insolvency, or reorganization of us occurs and is continuing, the principal of and premium, if any, and accrued and
unpaid interest on the debt securities of such series will become and be immediately due and payable without any
declaration or other act on the part of the trustee or any holders.
The holders of not less than a majority in aggregate principal amount of the outstanding debt securities of
any series may rescind a declaration of acceleration and its consequences, if we have deposited certain sums with
the trustee and all events of default with respect to the debt securities of such series, other than the non-payment of
the principal or interest which have become due solely by such acceleration, have been cured or waived, as provided
in the Indentures.
An event of default for a particular series of debt securities does not necessarily constitute an event of
default for any other series of debt securities issued under the Indentures.
We are required to furnish the trustee annually within 120 days after the end of our fiscal year a statement
by one of our officers to the effect that, to the best knowledge of such officer, we are not in default in the fulfillment of
any of our obligations under the applicable Indenture or, if there has been a default in the fulfillment of any such
obligation, specifying each such default and the nature and status thereof.
No holder of any debt securities of any series will have any right to institute any judicial or other proceeding
with respect to the applicable Indenture, or for the appointment of a receiver or trustee, or for any other remedy
unless:
(1) an event of default has occurred and is continuing and such holder has given the trustee prior written
notice of such continuing event of default with respect to the debt securities of such series;
(2) in the case of the 2013 Indenture, the holders of not less than 25% of the aggregate principal amount of
the outstanding debt securities of such series, and in the case of the 2018 Indenture, the holders of not
less than 33% of the aggregate principal amount of the outstanding debt securities of such series have
requested the trustee to institute proceedings in respect of such event of default;
(3) the trustee has been offered indemnity reasonably satisfactory to it against its costs, expenses and
liabilities in complying with such request;
(4) the trustee has failed to institute proceedings 60 days after the receipt of such notice, request and offer
of indemnity; and
10
(5) no direction inconsistent with such written request has been given for 60 days by the holders of a
majority in aggregate principal amount of the outstanding debt securities of such series.
The holders of a majority in aggregate principal amount of outstanding debt securities of a series will have
the right, subject to certain limitations, to direct the time, method and place of conducting any proceeding for any
remedy available to the trustee with respect to the debt securities of that series or exercising any trust or power
conferred to the trustee, and to waive certain defaults. Each of the Indentures provides that if an event of default
occurs and is continuing, the trustee will exercise such of its rights and powers under such Indenture, and use the
same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in
the conduct of such person’s own affairs. Subject to such provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the applicable Indenture at the request of any of the holders of the debt
securities of a series unless they will have offered to the trustee security or indemnity satisfactory to the trustee
against the costs, expenses and liabilities which might be incurred by it in compliance with such request.
Notwithstanding the foregoing, the holder of any debt security will have an absolute and unconditional right
to receive payment of the principal of and premium, if any, and interest on that debt security on or after the due dates
expressed in that debt security and to institute suit for the enforcement of payment.
Modification and Waivers
Modification and amendments of the Indentures and the Notes may be made by us and the trustee with the
consent of the holders of not less than a majority in aggregate principal amount of the outstanding series of Notes
affected thereby; provided, however, that no such modification or amendment may, without the consent of the holder
of each outstanding Note of that series affected thereby:
•
•
•
•
•
•
•
change the stated maturity of the principal of, or installment of interest on, any Note;
reduce the principal amount of any Note or reduce the amount of the principal of any Note which would
be due and payable upon a declaration of acceleration of the maturity thereof or reduce the rate of
interest on any Note;
reduce any premium payable on the redemption of any Note or change the date on which any Note may
or must be redeemed (in the case of the 2018 Indenture, it being understood that a change to any
notice requirement with respect to such date shall not be deemed to be a change of such date);
change the coin or currency in which the principal of, premium, if any, or interest on any Note is
payable;
impair the right of any holder to institute suit for the enforcement of any payment on or after the stated
maturity of any Note (or, in the case of redemption, on or after the redemption date);
reduce the percentage in principal amount of the outstanding Notes, the consent of whose holders is
required in order to take certain actions;
reduce the requirements for quorum or voting by holders of Notes in the applicable Indenture or the
Note;
• modify any of the provisions in the applicable Indenture regarding the waiver of past defaults and the
waiver of certain covenants by the holders of Notes except to increase any percentage vote required or
to provide that certain other provisions of the applicable Indenture cannot be modified or waived without
the consent of the holder of each Notes affected thereby;
• make any change that adversely affects the right to convert or exchange any debt security or decreases
the conversion or exchange rate or increases the conversion price of any convertible or exchangeable
debt security, unless such decrease or increase is permitted by the terms of the debt securities; or
• modify any of the above provisions.
We and the trustee may, without the consent of any holders, modify or amend the terms of the Indentures
and any series of Notes with respect to the following:
11
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
to add to our covenants for the benefit of holders of all or any series of the Notes or to surrender any
right or power conferred upon us;
to evidence the succession of another person to, and the assumption by the successor of our
covenants, agreements and obligations under, the applicable Indenture pursuant to the covenant
described above under the caption “Covenants—Consolidation, Merger and Sale of Assets”;
to add any additional events of default for the benefit of holders of all or any series of the Notes;
to add one or more guarantees, and in the case of the 2018 Indenture, co-obligors, for the benefit of
holders of the Notes;
to secure the Notes pursuant to the covenants of the Indenture;
to add or appoint a successor or separate trustee or other agent;
to provide for the issuance of additional debt securities of any series;
to establish the form or terms of the debt securities of any series as permitted by the Indenture;
to comply with the rules of any applicable securities depository;
to provide for uncertificated Notes in addition to or in place of certificated Notes;
in the case of the 2013 Indenture, to add to, change or eliminate any of the provisions of the 2013
Indenture in respect of one or more series of debt securities; provided that any such addition, change or
elimination (a) shall neither (1) apply to any debt security of any series created prior to the execution of
such supplemental indenture and entitled to the benefit of such provision nor (2) modify the rights of the
holder of any such debt security with respect to such provision or (b) shall become effective only when
there is no debt security described in clause (a)(1) outstanding;
in the case of the 2018 Indenture, to add to, change or eliminate any of the provisions of the 2018
Indenture in respect of one or more series of debt securities; provided that any such addition, change or
elimination shall become effective only when there is no outstanding security of any series created prior
to the execution of such supplemental indenture that is entitled to the benefit of such provision and as to
which such supplemental indenture would apply;
to cure any ambiguity, omission, defect or inconsistency;
to change any other provision; provided that the change does not adversely affect the interests of the
holders of debt securities of, in the case of the 2013 Indenture any series, and in the case of the 2018
Indenture, any outstanding series, in any material respect;
to supplement any of the provisions of the applicable Indenture to such extent as shall be necessary to
permit or facilitate the defeasance and discharge of any series of Notes pursuant to the Indenture;
provided that any such action shall not adversely affect the interests of the holders of Notes of such
series or any other series of debt securities in any material respect;
to comply with the rules or regulations of any securities exchange or automated quotation system on
which any of the Notes may be listed or traded; and
to add to, change or eliminate any of the provisions of the applicable Indenture as shall be necessary or
desirable in accordance with any amendments to the Trust Indenture Act of 1939, as amended, and in
the case of the 2013 Indenture, provided that such action does not adversely affect the rights or
interests of any holder of debt securities in any material respect.
The holders of at least a majority in aggregate principal amount of the outstanding Notes of any series may,
on behalf of the holders of all Notes of that series, waive compliance by us with certain restrictive provisions of the
Indentures. The holders of not less than a majority in aggregate principal amount of the outstanding Notes of a series
12
may, on behalf of the holders of all Notes of that series, waive any past default and its consequences under the
applicable Indenture with respect to the Notes of that series, except a default (1) in the payment of principal or
premium, if any, or interest on Notes of that series or (2) in respect of a covenant or provision of the applicable
Indenture that cannot be modified or amended without the consent of the holder of each Note of that series. Upon any
such waiver, such default will cease to exist, and any event of default arising therefrom will be deemed to have been
cured, for every purpose of the Indenture; however, no such waiver will extend to any subsequent or other default or
event of default or impair any rights consequent thereon.
Discharge, Defeasance and Covenant Defeasance
We may discharge certain obligations to holders of the Notes of a series that have not already been
delivered to the trustee for cancellation and that either have become due and payable or will become due and
payable within one year (or scheduled for redemption within one year) by depositing with the trustee, in trust, funds in
U.S. dollars in an amount sufficient to pay the entire indebtedness including, but not limited to, the principal and
premium, if any, and interest to the date of such deposit (if due and payable) or to the maturity thereof or the
redemption date of the Notes of that series, as the case may be. We may direct the trustee to invest such funds in
U.S. Treasury securities with a maturity of one year or less or in a money market fund that invests solely in short-term
U.S. Treasury securities.
The Indentures provide that we may elect either (1) to defease and be discharged from any and all
obligations with respect to the Notes of a series (except for, among other things, obligations to register the transfer or
exchange of the Notes, to replace temporary or mutilated, destroyed, lost or stolen Notes, to maintain an office or
agency with respect to the Notes and to hold moneys for payment in trust) (“legal defeasance”) or (2) to be released
from our obligations to comply with the restrictive covenants under the applicable Indenture, and any omission to
comply with such obligations will not constitute a default or an event of default with respect to the Notes of a series
and clauses (3) and (6) under the caption “Events of Default” above will no longer be applied (“covenant
defeasance”). Legal defeasance or covenant defeasance, as the case may be, will be conditioned upon, among other
things, the irrevocable deposit by us with the trustee, in trust, of an amount in U.S. dollars, or U.S. government
obligations (as such term is modified below), or both, applicable to the Notes of that series which through the
scheduled payment of principal and interest in accordance with their terms will provide money in an amount sufficient
to pay the principal or premium, if any, and interest on the Notes on the scheduled due dates therefor.
If we effect covenant defeasance with respect to the Notes of any series, the amount in U.S. dollars, or U.S.
government obligations (as such term is modified below), or both, on deposit with the trustee will be sufficient, in the
opinion of a nationally recognized firm of independent accountants, to pay amounts due on the Notes of that series at
the time of the stated maturity but may not be sufficient to pay amounts due on the Notes of that series at the time of
the acceleration resulting from such event of default. However, we would remain liable to make payment of such
amounts due at the time of acceleration.
With respect to the 2022 Notes, the 2024 Notes, the 0.000% 2025 Notes, the 0.875% 2025 Notes, the 2026
Notes, the 2027 Notes, the 1.375% 2029 Notes and the 2031 Notes, the term “U.S. government obligations” shall
instead mean (x) any security that is (i) a direct obligation of the German government or (ii) an obligation of a person
controlled or supervised by and acting as an agency or instrumentality of the German government the payment of
which is fully and unconditionally guaranteed by the German government or the central bank of the German
government, which, in either case (x)(i) or (ii), is not callable or redeemable at the option of the issuer thereof, and (y)
certificates, depositary receipts or other instruments which evidence a direct ownership interest in obligations
described in clause (x)(i) or (x)(ii) above or in any specific principal or interest payments due in respect thereof.
With respect to the 3.050% 2029 Notes and the 2042 Notes, the term “U.S. government obligations” shall
instead mean (x) any security that is (i) a direct obligation of the United Kingdom government or (ii) an obligation of a
person controlled or supervised by and acting as an agency or instrumentality of the United Kingdom government the
payment of which is fully and unconditionally guaranteed by the United Kingdom government or the central bank of
the United Kingdom government, which, in either case (x)(i) or (ii), is not callable or redeemable at the option of the
issuer thereof, and (y) certificates, depositary receipts or other instruments which evidence a direct ownership interest
in obligations described in clause (x)(i) or (x)(ii) above or in any specific principal or interest payments due in respect
thereof.
We will be required to deliver to the trustee an opinion of counsel that the deposit and related defeasance
will not cause the holders and beneficial owners of the Notes of that series to recognize income, gain or loss for
13
federal income tax purposes. If we elect legal defeasance, that opinion of counsel must be based upon a ruling from
the U.S. Internal Revenue Service or a change in law to that effect.
We may exercise our legal defeasance option notwithstanding our prior exercise of our covenant
defeasance option.
Book-Entry and Settlement
The Notes were issued in book-entry form and are represented by global notes deposited with, or on behalf
of, a common depositary on behalf of Euroclear and Clearstream, and are registered in the name of the common
depositary or its nominee. Except as described herein, certificated notes will not be issued in exchange for beneficial
interests in the global notes.
Certificated Notes
Subject to certain conditions, the Notes represented by the global notes are exchangeable for certificated
notes in definitive form of like tenor, in minimum denominations of €100,000 principal amount and integral multiples of
€1,000 in excess thereof in the case of the 2022 Notes, the 2024 Notes, the 0.000% 2025 Notes, the 0.875% 2025
Notes, the 2026 Notes, the 2027 Notes, the 1.375% 2029 Notes and the 2031 Notes, and in minimum denominations
of £100,000 principal amount and integral multiples of £1,000 in excess thereof in the case of the 3.050% 2029 Notes
and the 2042 Notes, if:
1.
the common depositary notifies us that it is unwilling or unable to continue as depositary or if the
common depositary ceases to be eligible under the applicable Indenture and we do not appoint a
successor depository within 90 days;
2. we determine that the Notes will no longer be represented by global securities and execute and deliver
to the trustee an order to that effect; or
3. an event of default with respect to the Notes will have occurred and be continuing.
Any Note that is exchangeable as above is exchangeable for certificated notes issuable in authorized
denominations and registered in such names as the common depositary shall direct. Subject to the foregoing, a
global note is not exchangeable, except for a global note of the same aggregate denomination to be registered in the
name of the common depositary or its nominee.
The Trustee for the Notes
The Bank of New York Mellon Trust Company, N.A. is the trustee under the Indentures. We have
commercial deposits and custodial arrangements with The Bank of New York Mellon Trust Company, N.A. and its
affiliates (“BNYM”). We may enter into similar or other banking relationships with BNYM in the future in the normal
course of business. In addition, BNYM acts as trustee and as paying agent with respect to other debt securities
issued by us, and may do so for future issuances of debt securities by us as well.
14
Exhibit 10.16
APPLE INC.
2014 EMPLOYEE STOCK PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
NOTICE OF GRANT
(the “Participant”)
Name:
Employee ID:
Grant Number:
No. of Units Subject to Award:
Award Date:
(the “Award Date”)
Vesting Commencement Date:
(the “Vesting Commencement Date”)
Vesting Schedule:
This restricted stock unit award (the “Award”) is granted under and governed by the terms and
conditions of the Apple Inc. 2014 Employee Stock Plan and the Terms and Conditions of Restricted Stock
Unit Award, which are incorporated herein by reference.
You do not have to accept the Award. If you wish to decline your Award, you should promptly
notify Apple Inc.’s Stock Plan Group of your decision at stock@apple.com. If you do not provide such
notification by the last day of the calendar month prior to the first Vesting Date, you will be deemed to
have accepted your Award on the terms and conditions set forth herein.
APPLE INC.
2014 EMPLOYEE STOCK PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
TERMS AND CONDITIONS OF RESTRICTED STOCK UNIT AWARD
1.
General. These Terms and Conditions of Restricted Stock Unit Award (these “Terms”)
apply to a particular restricted stock unit award (the “Award”) granted by Apple Inc., a California
corporation (the “Company”), and are incorporated by reference in the Notice of Grant (the “Grant
Notice”) corresponding to that particular grant. The recipient of the Award identified in the Grant Notice is
referred to as the “Participant.” The effective date of grant of the Award as set forth in the Grant Notice
is referred to as the “Award Date.” The Award was granted under and is subject to the provisions of the
Apple Inc. 2014 Employee Stock Plan (the “Plan”). Capitalized terms are defined in the Plan if not
defined herein. The Award is discretionary and has been granted to the Participant in addition to, and not
in lieu of, any other form of compensation otherwise payable or to be paid to the Participant. The Grant
Notice and these Terms are collectively referred to as the “Award Agreement” applicable to the Award.
2.
Stock Units. As used herein, the term “Stock Unit” shall mean a non-voting unit of
measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share of
the Company’s Common Stock (“Share”) solely for purposes of the Plan and this Award Agreement. The
Stock Units shall be used solely as a device for the determination of the payment to eventually be made
to the Participant if such Stock Units vest pursuant to this Award Agreement. The Stock Units shall not be
treated as property or as a trust fund of any kind.
3.
Vesting. Subject to Sections 4 and 8 below, the Award shall vest and become
nonforfeitable as set forth in the Grant Notice. (Each vesting date set forth in the Grant Notice is referred
to herein as a “Vesting Date.”)
4.
Continuance of Employment. Except as provided in this Section 4 and in Section 8
below, vesting of the Award requires continued active employment or service through each applicable
Vesting Date as a condition to the vesting of the applicable installment of the Award and the rights and
benefits under this Award Agreement. Employment or service for only a portion of the period between the
Vesting Commencement Date and the first Vesting Date or between subsequent Vesting Dates, even if a
substantial portion, will not entitle the Participant to any proportionate vesting of the Award. For purposes
of this Award Agreement, active service shall include (a) the duration of an approved leave of absence
(other than a personal leave of absence) and (b) the first thirty (30) days of an approved personal leave of
absence, in each case as approved by the Company, in its sole discretion. The vesting of the Award
shall be tolled beginning on the thirty-first (31st) day of a personal leave of absence.
Nothing contained in this Award Agreement or the Plan constitutes an employment or service
commitment by the Company, affects the Participant’s status as an employee at will who is subject to
termination with or without cause, confers upon the Participant any right to remain employed by or in
service to the Company or any Subsidiary, interferes in any way with the right of the Company or any
Subsidiary at any time to terminate such employment or service, or affects the right of the Company or
any Subsidiary to increase or decrease the Participant’s other compensation or benefits. Nothing in this
Section 4, however, is intended to adversely affect any independent contractual right of the Participant
without his or her consent thereto.
1
5.
Dividend and Voting Rights.
(a)
Limitations on Rights Associated with Stock Units. The Participant shall have
no rights as a shareholder of the Company, no dividend rights (except as expressly provided in Section
5(b) with respect to Dividend Equivalent Rights) and no voting rights, with respect to the Stock Units or
any Shares underlying or issuable in respect of such Stock Units until such Shares are actually issued to
and held of record by the Participant. No adjustments will be made for dividends or other rights of a
holder for which the record date is prior to the date of issuance of the stock certificate or book entry
evidencing such Shares.
(b) Dividend Equivalent Rights Distributions. As of any date that the Company
pays an ordinary cash dividend on its Shares, the Company shall credit the Participant with a dollar
amount equal to (i) the per share cash dividend paid by the Company on its Shares on such date,
multiplied by (ii) the total number of Stock Units (with such total number adjusted pursuant to Section 11
of the Plan) subject to the Award that are outstanding immediately prior to the record date for that
dividend (a “Dividend Equivalent Right”). Any Dividend Equivalent Rights credited pursuant to the
foregoing provisions of this Section 5(b) shall be subject to the same vesting, payment and other terms,
conditions and restrictions as the original Stock Units to which they relate, including the obligation to
satisfy the Tax-Related Items; provided, however, that the amount of any vested Dividend Equivalent
Rights shall be paid in cash. No crediting of Dividend Equivalent Rights shall be made pursuant to this
Section 5(b) with respect to any Stock Units which, immediately prior to the record date for that dividend,
have either been paid pursuant to Section 7 or terminated pursuant to Section 8.
6.
Restrictions on Transfer. Except as provided in Section 4(c) of the Plan, the Award,
the Dividend Equivalent Rights and any interest therein or amount or Shares payable in respect thereof
shall not be sold, assigned, transferred, pledged or otherwise disposed of, alienated or encumbered,
either voluntarily or involuntarily.
7.
Timing and Manner of Payment of Stock Units. On or as soon as administratively
practical following each vesting event pursuant to Section 3 or Section 8 (and in all events not later than
two and one-half (2 ½) months after such vesting event), the Company shall deliver to the Participant a
number of Shares (either by delivering one or more certificates for such Shares or by entering such
Shares in book entry form, as determined by the Company in its discretion) equal to the number of Stock
Units subject to the Award that vest on the applicable Vesting Date, less Tax-Related Items (as defined in
Section 11 below), unless such Stock Units terminate prior to the given Vesting Date pursuant to Section
8. The Company’s obligation to deliver Shares or otherwise make payment with respect to vested Stock
Units is subject to the condition precedent that the Participant or other person entitled under the Plan to
receive any Shares with respect to the vested Stock Units deliver to the Company any representations or
other documents or assurances required pursuant to Section 13(c) of the Plan. The Participant shall
have no further rights with respect to any Stock Units that are paid or that terminate pursuant to
Section 8.
8.
Effect of Termination of Service. Except as expressly provided in Section 4 or this
Section 8, the Participant’s Stock Units (as well as the related Dividend Equivalent Rights) shall terminate
to the extent such Stock Units have not become vested prior to the Participant’s Termination of Service,
meaning the first date the Participant is no longer employed by or providing services to the Company or
one of its Subsidiaries (the “Severance Date”), regardless of the reason for the Participant’s Termination
of Service, whether with or without cause, voluntarily or involuntarily, or whether the Participant was
employed or provided services for a portion of the vesting period prior to a Vesting Date. Notwithstanding
the foregoing, in the event the Participant’s Termination of Service is due to the Participant’s Disability at
a time when Stock Units remain unvested under the Award, (a) the Award shall vest with respect to the
number of Stock Units determined by multiplying (i) the number of then-outstanding and unvested Stock
Units as well as the related Dividend Equivalent Rights subject to the Award that would have otherwise
vested pursuant to Section 3 on the next Vesting Date following the Severance Date but for such
2
Termination of Service, by (ii) a fraction, the numerator of which shall be the number of days that have
elapsed between the Vesting Date that immediately preceded the Severance Date (or, in the case of a
Termination of Service prior to the initial Vesting Date, the Vesting Commencement Date) and the
Severance Date, and the denominator of which shall be the number of days between the Vesting Date
that immediately preceded the Severance Date (or, in the case of a Termination of Service prior to the
initial Vesting Date, the Vesting Commencement Date) and the next Vesting Date following the
Severance Date that would have occurred but for such Termination of Service; and (b) any Stock Units
(as well as the related Dividend Equivalent Rights) that are not vested after giving effect to the foregoing
clause (a) shall terminate on the Severance Date. Further, in the event the Participant’s Termination of
Service is due to the Participant’s death, any unvested Stock Units shall be fully vested as of the
Severance Date, and any Dividend Equivalent Rights credited to the Participant shall be paid. If any
unvested Stock Units are terminated hereunder, such Stock Units (as well as the related Dividend
Equivalent Rights) shall automatically terminate and be cancelled as of the applicable Severance Date
without payment of any consideration by the Company and without any other action by the Participant or
the Participant’s personal representative, as the case may be.
9.
Recoupment. Notwithstanding any other provision herein, the Award and any Shares or
other amount or property that may be issued, delivered or paid in respect of the Award, as well as any
consideration that may be received in respect of a sale or other disposition of any such Shares or
property, shall be subject to any recoupment, “clawback” or similar provisions of applicable law. In
addition, the Company may require the Participant to deliver or otherwise repay to the Company the
Award and any Shares or other amount or property that may be issued, delivered or paid in respect of the
Award, as well as any consideration that may be received in respect of a sale or other disposition of any
such Shares or property, if the Company reasonably determines that one or more of the following has
occurred:
(a)
during the period of the Participant’s employment or service with the Company or
any of its Subsidiaries (the “Employment Period”), the Participant has committed a felony (under
the laws of the United States or any relevant state, or a similar crime or offense under the
applicable laws of any relevant foreign jurisdiction);
(b)
during the Employment Period or at any time thereafter, the Participant has
committed or engaged in a breach of confidentiality, or an unauthorized disclosure or use of
inside information, customer lists, trade secrets or other confidential information of the Company
or any of its Subsidiaries;
(c)
during the Employment Period or at any time thereafter, the Participant has
committed or engaged in an act of theft, embezzlement or fraud, or materially breached any
agreement to which the Participant is a party with the Company or any of its Subsidiaries.
For purposes of the foregoing, the Participant expressly and explicitly authorizes the Company to
issue instructions, on the Participant’s behalf, to any brokerage firm or third party administrator holding
the Participant’s Shares and other amounts acquired under the Plan to re-convey, transfer, or otherwise
return such Shares and other amounts to the Company. This Section 9 is not the Company’s exclusive
remedy with respect to such matters.
10.
Adjustments Upon Specified Events. Upon the occurrence of certain events relating to
the Company’s stock contemplated by Section 11 of the Plan (including, without limitation, an
extraordinary cash dividend on such stock), the Committee shall make adjustments in accordance with
such section in the number of Stock Units then outstanding and the number and kind of securities that
may be issued in respect of the Award. No such adjustment shall be made with respect to any ordinary
cash dividend for which Dividend Equivalent Rights are credited pursuant to Section 5(b).
3
11.
Responsibility for Taxes. The Participant acknowledges that, regardless of any action
the Company or the Participant’s employer (“Employer”) take with respect to any or all income tax
(including U.S. federal, state and local tax or non-U.S. tax), social insurance, payroll tax, payment on
account or other tax-related items related to the Participant’s participation in the Plan and legally
applicable to the Participant or deemed by the Company or the Employer to be an appropriate charge to
the Participant even if technically due by the Company or the Employer (“Tax-Related Items”), the
ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and may exceed
the amount, if any, actually withheld by the Company or the Employer. The Participant further
acknowledges that the Company and the Employer (i) make no representations or undertakings regarding
the treatment of any Tax-Related Items in connection with any aspect of the Award, including the grant of
the Stock Units, the vesting of the Stock Units, the delivery of Shares, the subsequent sale of any Shares
acquired at vesting, and the receipt of any dividends or Dividend Equivalent Rights; and (ii) do not commit
to and are under no obligation to structure the terms of the grant or any aspect of the Award to reduce or
eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if
the Participant is or becomes subject to tax in more than one jurisdiction, the Participant acknowledges
that the Company or the Employer (or former employer, as applicable) may be required to withhold or
account for Tax-Related Items in more than one jurisdiction.
Prior to the relevant taxable or tax withholding event, as applicable, the Participant shall pay or
make arrangements satisfactory to the Company or the Employer to satisfy all Tax-Related Items. In this
regard, the Participant authorizes the Company or the Employer, or their respective agents, at their
discretion and pursuant to such procedures as they may specify from time to time, to satisfy any
applicable withholding obligations with regard to all Tax-Related Items by one or a combination of the
following:
(a)
withholding from any wages or other cash compensation payable to the
Participant by the Company or the Employer;
(b)
withholding otherwise deliverable Shares and from otherwise payable Dividend
Equivalent Rights to be issued or paid upon vesting/settlement of the Award;
(c)
arranging for the sale of Shares otherwise deliverable to the Participant (on the
Participant’s behalf and at the Participant’s direction pursuant to this authorization), including
selling Shares as part of a block trade with other Participants in the Plan; or
(d)
withholding from the proceeds of the sale of Shares acquired upon vesting/
settlement of the Award.
Notwithstanding the foregoing, if the Participant is an officer of the Company who is subject to
Section 16 of the Exchange Act, then the Company must satisfy any withholding obligations arising upon
the occurrence of a taxable or tax withholding event, as applicable, by withholding Shares otherwise
deliverable or an amount otherwise payable upon settlement of Dividend Equivalent Rights pursuant to
method (b), unless the Board or the Committee determines in its discretion to satisfy the obligation for
Tax-Related Items by one or a combination of methods (a), (b), (c), and (d) above.
The Company may withhold or account for Tax-Related Items by considering statutory
withholding amounts or other withholding rates, including maximum rates applicable in the Participant’s
jurisdiction(s). If the maximum rate is used, any over-withheld amount may be refunded to the Participant
in cash by the Company or Employer (with no entitlement to the Share equivalent) or if not refunded, the
Participant may seek a refund from the local tax authorities. In the event of under-withholding, the
Participant may be required to pay additional Tax-Related Items directly to the applicable tax authority or
to the Company or Employer. If the obligation for Tax-Related Items is satisfied by withholding a number
of Shares as described herein, for tax purposes, the Participant is deemed to have been issued the full
number of Shares subject to the vested Stock Units, notwithstanding that a number of the Shares are
4
held back solely for the purpose of paying the Tax-Related Items. The Company may refuse to issue or
deliver to the Participant any Shares or the proceeds of the sale of Shares if the Participant fails to
comply with the Participant’s obligations in connection with the Tax-Related Items.
12.
Electronic Delivery and Acceptance. The Company may, in its sole discretion, deliver
any documents related to the Award by electronic means or request the Participant’s consent to
participate in the Plan by electronic means. The Participant hereby consents to receive all applicable
documentation by electronic delivery and to participate in the Plan through an on-line or voice activated
system established and maintained by the Company or a third party vendor designated by the Company.
13.
Data Privacy. By participating in the Plan, the Participant acknowledges and consents to
the collection, use, processing and transfer of personal data as described in this Section 13. The
Company, its related entities, and the Employer hold certain personal information about the Participant,
including the Participant’s name, home address and telephone number, email address, date of birth,
social security number or other employee identification number, salary, nationality, job title, any Shares or
directorships held in the Company, details of all Stock Units or any other entitlement to Shares or
equivalent benefits awarded, canceled, purchased, vested, unvested or outstanding in the Participant’s
favor, for the purpose of managing and administering the Plan (“Data”). The Company and its related
entities may transfer Data amongst themselves as necessary for the purpose of implementation,
administration, and management of the Participant’s participation in the Plan, and the Company and its
related entities may each further transfer Data to any third parties assisting the Company or any such
related entity in the implementation, administration, and management of the Plan. The Participant
acknowledges that the transferors and transferees of such Data may be located anywhere in the world
and hereby authorizes each of them to receive, possess, use, retain and transfer the Data, in electronic or
other form, for the purposes of implementing, administering, and managing the Participant’s participation
in the Plan, including any transfer of such Data as may be required for the administration of the Plan and
the subsequent holding of Shares on the Participant’s behalf to a broker or to other third party with whom
the Participant may elect to deposit any Shares acquired under the Plan (whether pursuant to the Award
or otherwise).
14.
Notices. Any notice to be given under the terms of this Award Agreement shall be in
writing and addressed to the Company at its principal office to the attention of the Secretary, and to the
Participant at the Participant’s last address reflected on the Company’s records, or at such other address
as either party may hereafter designate in writing to the other. Any such notice shall be given only when
received, but if the Participant is no longer an employee of the Company, shall be deemed to have been
duly given by the Company when enclosed in a properly sealed envelope addressed as aforesaid,
registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or
branch post office regularly maintained by the United States Government.
15.
Plan. The Award and all rights of the Participant under this Award Agreement are
subject to the terms and conditions of the provisions of the Plan, incorporated herein by reference. The
Participant agrees to be bound by the terms of the Plan and this Award Agreement. The Participant
acknowledges having read and understood the Plan, the Prospectus for the Plan, and this Award
Agreement. Unless otherwise expressly provided in other sections of this Award Agreement, provisions
of the Plan that confer discretionary authority on the Board or the Committee do not (and shall not be
deemed to) create any rights in the Participant unless such rights are expressly set forth herein or are
otherwise in the sole discretion of the Board or the Committee so conferred by appropriate action of the
Board or the Committee under the Plan after the date hereof.
16.
Entire Agreement. This Award Agreement and the Plan together constitute the entire
agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto
with respect to the subject matter hereof. The Plan and this Award Agreement may be amended
pursuant to Section 15 of the Plan. Such amendment must be in writing and signed by the Company.
The Company may, however, unilaterally waive any provision hereof in writing to the extent such waiver
5
does not adversely affect the interests of the Participant hereunder, but no such waiver shall operate as
or be construed to be a subsequent waiver of the same provision or a waiver of any other provision
hereof.
17.
Limitation on the Participant’s Rights. Participation in the Plan confers no rights or
interests other than as herein provided. This Award Agreement creates only a contractual obligation on
the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither
the Plan nor any underlying program, in and of itself, has any assets. The Participant shall have only the
rights of a general unsecured creditor of the Company with respect to amounts credited and benefits
payable, if any, with respect to the Stock Units, and rights no greater than the right to receive the Shares
as a general unsecured creditor with respect to Stock Units, as and when payable hereunder.
18.
Section Headings. The section headings of this Award Agreement are for convenience
of reference only and shall not be deemed to alter or affect any provision hereof.
19.
Governing Law. This Award Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California without regard to conflict of law principles
thereunder.
20.
Choice of Venue. For purposes of litigating any dispute that arises directly or indirectly
from the relationship of the parties evidenced by this grant or this Award Agreement, the parties hereby
submit to the exclusive jurisdiction of the State of California and agree that such litigation shall be
conducted only in the courts of Santa Clara County, California, or the federal courts for the Northern
District of California, and no other courts, where this grant is made or to be performed.
21.
Construction. It is intended that the terms of the Award will not result in the imposition
of any tax liability pursuant to Section 409A of the Code. This Award Agreement shall be construed and
interpreted with that intent.
22.
Severability. The provisions of this Award Agreement are severable and if any one of
more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining
provisions shall nevertheless be binding and enforceable.
23.
Imposition of Other Requirements. The Company reserves the right to impose other
requirements on the Participant’s participation in the Plan, on the Stock Units and on any Shares acquired
under the Plan, to the extent the Company determines it is necessary or advisable for legal or
administrative reasons, and to require the Participant to sign any additional agreements or undertakings
that may be necessary to accomplish the foregoing.
6
Exhibit 10.17
APPLE INC.
2014 EMPLOYEE STOCK PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
PERFORMANCE AWARD
NOTICE OF GRANT
(the “Participant”)
Name:
Employee ID:
Grant Number:
Target No. of Units
Subject to Award:
Award Date:
(the “Award Date”)
Vesting Schedule:
Performance Period:
This restricted stock unit award (the “Award”) is granted under and governed by the terms and
conditions of the Apple Inc. 2014 Employee Stock Plan and the Terms and Conditions of Restricted Stock
Unit Award - Performance Award (including Exhibit A thereto), which are incorporated herein by
reference.
You do not have to accept the Award. If you wish to decline your Award, you should promptly
notify Apple Inc.’s Stock Plan Group of your decision at stock@apple.com. If you do not provide such
notification by the last day of the calendar month prior to the Vesting Date, you will be deemed to have
accepted your Award on the terms and conditions set forth herein.
APPLE INC.
2014 EMPLOYEE STOCK PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
TERMS AND CONDITIONS OF RESTRICTED STOCK UNIT AWARD
PERFORMANCE AWARD
1.
General. These Terms and Conditions of Restricted Stock Unit Award - Performance
Award (these “Terms”) apply to a particular restricted stock unit award (the “Award”) granted by Apple
Inc., a California corporation (the “Company”), and are incorporated by reference in the Notice of Grant
(the “Grant Notice”) corresponding to that particular grant. The recipient of the Award identified in the
Grant Notice is referred to as the “Participant.” The effective date of grant of the Award as set forth in
the Grant Notice is referred to as the “Award Date.” The Award was granted under and is subject to the
provisions of the Apple Inc. 2014 Employee Stock Plan (the “Plan”). Capitalized terms are defined in the
Plan if not defined herein. The Award is discretionary and has been granted to the Participant in addition
to, and not in lieu of, any other form of compensation otherwise payable or to be paid to the Participant.
The Grant Notice and these Terms (including Exhibit A hereto, incorporated herein by this reference) are
collectively referred to as the “Award Agreement” applicable to the Award.
2.
Stock Units. As used herein, the term “Stock Unit” shall mean a non-voting unit of
measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share of
the Company’s Common Stock (“Share”) solely for purposes of the Plan and this Award Agreement. The
Stock Units shall be used solely as a device for the determination of the payment to eventually be made
to the Participant if such Stock Units vest pursuant to this Award Agreement. The Stock Units shall not be
treated as property or as a trust fund of any kind.
3.
Vesting. Subject to Sections 4 and 8 below, the Award shall vest and become
nonforfeitable as set forth in the Grant Notice and Exhibit A hereto. (The vesting date set forth in the
Grant Notice is referred to herein as a “Vesting Date”).
4.
Continuance of Employment. Except as provided in this Section 4 and in Section 8
below, vesting of the Award requires continued active employment or service through the Vesting Date as
a condition to the vesting of the Award and the rights and benefits under this Award Agreement.
Employment or service for only a portion of the vesting period, even if a substantial portion, will not entitle
the Participant to any proportionate vesting of the Award. For purposes of this Award Agreement, active
service shall include (a) the duration of an approved leave of absence (other than a personal leave of
absence) and (b) the first thirty (30) days of an approved personal leave of absence, in each case as
approved by the Company, in its sole discretion. The vesting of the Award shall be tolled beginning on
the thirty-first (31st) day of a personal leave of absence.
Nothing contained in this Award Agreement or the Plan constitutes an employment or service
commitment by the Company, affects the Participant’s status as an employee at will who is subject to
termination with or without cause, confers upon the Participant any right to remain employed by or in
service to the Company or any Subsidiary, interferes in any way with the right of the Company or any
Subsidiary at any time to terminate such employment or services, or affects the right of the Company or
any Subsidiary to increase or decrease the Participant’s other compensation or benefits. Nothing in this
Section 4, however, is intended to adversely affect any independent contractual right of the Participant
without his or her consent thereto.
1
5.
Dividend and Voting Rights.
(a)
Limitations on Rights Associated with Stock Units. The Participant shall have
no rights as a shareholder of the Company, no dividend rights (except as expressly provided in Section
5(b) with respect to Dividend Equivalent Rights) and no voting rights, with respect to the Stock Units or
any Shares underlying or issuable in respect of such Stock Units until such Shares are actually issued to
and held of record by the Participant. No adjustments will be made for dividends or other rights of a
holder for which the record date is prior to the date of issuance of the stock certificate or book entry
evidencing such Shares.
(b) Dividend Equivalent Rights Distributions. As of any date that the Company
pays an ordinary cash dividend on its Shares, the Company shall credit the Participant with a dollar
amount equal to (i) the per share cash dividend paid by the Company on its Shares on such date,
multiplied by (ii) the total target number of Stock Units (with such total number adjusted pursuant to
Section 11 of the Plan) subject to the Award that are outstanding immediately prior to the record date for
that dividend (a “Dividend Equivalent Right”). Any Dividend Equivalent Rights credited pursuant to the
foregoing provisions of this Section 5(b) shall be subject to the same vesting, payment and other terms,
conditions and restrictions as the original Stock Units to which they relate, including the obligation to
satisfy the Tax-Related Items; provided, however, that the amount of any vested Dividend Equivalent
Rights shall be paid in cash. For purposes of clarity, the percentage of the Dividend Equivalent Rights
that are paid will correspond to the percentage of the total target number of Stock Units that vest on the
Vesting Date, after giving effect to Exhibit A. No crediting of Dividend Equivalent Rights shall be made
pursuant to this Section 5(b) with respect to any Stock Units which, immediately prior to the record date
for that dividend, have either been paid pursuant to Section 7 or terminated pursuant to Section 8 or
Exhibit A.
6.
Restrictions on Transfer. Except as provided in Section 4(c) of the Plan, the Award,
the Dividend Equivalent Rights and any interest therein or amount or Shares payable in respect thereof
shall not be sold, assigned, transferred, pledged or otherwise disposed of, alienated or encumbered,
either voluntarily or involuntarily.
7.
Timing and Manner of Payment of Stock Units. On or as soon as administratively
practical following the vesting event pursuant to Section 3 or Section 8 (and in all events not later than
two and one-half (2 ½) months after such vesting event), the Company shall deliver to the Participant a
number of Shares (either by delivering one or more certificates for such Shares or by entering such
Shares in book entry form, as determined by the Company in its discretion) equal to the number of Stock
Units subject to the Award that vest on the Vesting Date, less Tax-Related Items (as defined in Section
11 below), unless such Stock Units terminate prior to the Vesting Date pursuant to Section 8. The
Company’s obligation to deliver Shares or otherwise make payment with respect to vested Stock Units is
subject to the condition precedent that the Participant or other person entitled under the Plan to receive
any Shares with respect to the vested Stock Units deliver to the Company any representations or other
documents or assurances required pursuant to Section 13(c) of the Plan. The Participant shall have no
further rights with respect to any Stock Units that are paid or that terminate pursuant to Section 8.
8.
Effect of Termination of Service. Except as provided in Section 4 or this Section 8, the
Participant’s Stock Units (as well as the related Dividend Equivalent Rights) shall terminate to the extent
such Stock Units have not become vested prior to the Participant’s Termination of Service, meaning the
first date the Participant is no longer employed by or providing services to the Company or one of its
Subsidiaries (the “Severance Date”), regardless of the reason for the Participant’s Termination of
Service, whether with or without cause, voluntarily or involuntarily or whether the Participant was
employed or provided services for a portion of the vesting period prior to a Vesting Date. In the event the
Participant’s Severance Date is the result of the Participant’s Termination of Service due to the
Participant’s death or Disability and the Severance Date occurs prior to the Vesting Date, on the Vesting
Date the Award shall vest with respect to a number of Stock Units determined by multiplying (i) the Stock
2
Units as well as the related Dividend Equivalent Rights subject to the Award that would have otherwise
vested pursuant to the Award on such Vesting Date but for the Termination of Service and to the extent
the applicable performance-based vesting requirement is satisfied, by (ii) the Severance Fraction
(determined as set forth below). Any Stock Units (as well as the related Dividend Equivalent Rights) that
are unvested on the Severance Date and that are not eligible to vest on the Vesting Date following the
Severance Date pursuant to the preceding sentence shall terminate as of the Severance Date, and any
Stock Units that remain outstanding and unvested after giving effect to the preceding sentence shall
terminate as of the Vesting Date. The “Severance Fraction” means a fraction, the numerator of which
shall be determined by subtracting the number of days remaining in the Performance Period on the
Severance Date from the total number of days in the Performance Period, and the denominator of which
shall be the total number of days in the Performance Period. If any unvested Stock Units are terminated
pursuant to this Award Agreement, such Stock Units (as well as the related Dividend Equivalent Rights)
shall automatically terminate and be cancelled as of the applicable Severance Date (or, to the extent the
applicable performance-based vesting conditions are not satisfied, the Vesting Date, as provided in
Exhibit A) without payment of any consideration by the Company and without any other action by the
Participant, or the Participant’s beneficiary or personal representative, as the case may be.
9.
Recoupment. Notwithstanding any other provision herein, the Award and any Shares or
other amount or property that may be issued, delivered or paid in respect of the Award, as well as any
consideration that may be received in respect of a sale or other disposition of any such Shares or
property, shall be subject to any recoupment, “clawback” or similar provisions of applicable law. In
addition, the Company may require the Participant to deliver or otherwise repay to the Company the
Award and any Shares or other amount or property that may be issued, delivered or paid in respect of the
Award, as well as any consideration that may be received in respect of a sale or other disposition of any
such Shares or property, if the Company reasonably determines that one or more of the following has
occurred:
(a)
during the period of the Participant’s employment or service with the Company or
any of its Subsidiaries (the “Employment Period”), the Participant has committed a felony (under
the laws of the United States or any relevant state, or a similar crime or offense under the
applicable laws of any relevant foreign jurisdiction);
(b)
during the Employment Period or at any time thereafter, the Participant has
committed or engaged in a breach of confidentiality, or an unauthorized disclosure or use of
inside information, customer lists, trade secrets or other confidential information of the Company
or any of its Subsidiaries;
(c)
during the Employment Period or at any time thereafter, the Participant has
committed or engaged in an act of theft, embezzlement or fraud, or materially breached any
agreement to which the Participant is a party with the Company or any of its Subsidiaries.
For purposes of the foregoing, the Participant expressly and explicitly authorizes the Company to
issue instructions, on the Participant’s behalf, to any brokerage firm and/or third party administrator
engaged by the Company to hold the Participant’s Shares and other amounts acquired under the Plan to
re-convey, transfer or otherwise return such Shares and/or other amounts to the Company. This Section 9
is not the Company’s exclusive remedy with respect to such matters.
10.
Adjustments Upon Specified Events. Upon the occurrence of certain events relating to
the Company’s stock contemplated by Section 11 of the Plan (including, without limitation, an
extraordinary cash dividend on such stock), the Committee shall make adjustments in accordance with
such section in the number of Stock Units then outstanding and the number and kind of securities that
may be issued in respect of the Award. No such adjustment shall be made with respect to any ordinary
cash dividend for which Dividend Equivalent Rights are credited pursuant to Section 5(b).
3
11.
Responsibility for Taxes. The Participant acknowledges that, regardless of any action
the Company and/or the Participant’s employer (“Employer”) take with respect to any or all income tax
(including U.S. federal, state and local tax and/or non-U.S. tax), social insurance, payroll tax, payment on
account or other tax-related items related to the Participant’s participation in the Plan and legally
applicable to the Participant or deemed by the Company or the Employer to be an appropriate charge to
the Participant even if technically due by the Company or the Employer (“Tax-Related Items”), the
ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and may exceed
the amount, if any, actually withheld by the Company or the Employer. The Participant further
acknowledges that the Company and/or the Employer (i) make no representations or undertakings
regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including
the grant of the Stock Units, the vesting of the Stock Units, the delivery of Shares, the subsequent sale of
any Shares acquired at vesting and the receipt of any dividends and/or Dividend Equivalent Rights; and
(ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the
Award to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax
result. Further, if the Participant is or becomes subject to tax in more than one jurisdiction, the Participant
acknowledges that the Company and/or the Employer (or former employer, as applicable) may be
required to withhold or account for Tax-Related Items in more than one jurisdiction.
Prior to the relevant taxable or tax withholding event, as applicable, the Participant shall pay or
make arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In
this regard, the Participant authorizes the Company and/or the Employer, or their respective agents, at
their discretion and pursuant to such procedures as they may specify from time to time, to satisfy any
applicable withholding obligations with regard to all Tax-Related Items by one or a combination of the
following:
(a)
withholding from any wages or other cash compensation payable to the
Participant by the Company and/or the Employer;
(b)
withholding otherwise deliverable Shares and/or
Dividend Equivalent Rights to be issued or paid upon vesting/settlement of the Award;
from otherwise payable
(c)
arranging for the sale of Shares otherwise deliverable to the Participant (on the
Participant’s behalf and at the Participant’s direction pursuant to this authorization), including
selling Shares as part of a block trade with other Participants in the Plan; or
(d)
withholding from the proceeds of the sale of Shares acquired upon vesting/
settlement of the Award.
Notwithstanding the foregoing, if the Participant is an officer of the Company who is subject to
Section 16 of the Exchange Act, then the Company must satisfy any withholding obligations arising upon
the occurrence of a taxable or tax withholding event, as applicable, by withholding Shares otherwise
deliverable or an amount otherwise payable upon settlement of Dividend Equivalent Rights pursuant to
method (b), unless the Board or the Committee determines in its discretion to satisfy the obligation for
Tax-Related Items by one or a combination of methods (a), (b), (c), and (d) above.
The Company may withhold or account for Tax-Related Items by considering statutory
withholding amounts or other withholding rates, including maximum rates applicable in the Participant's
jurisdiction(s). If the maximum rate is used, any over-withheld amount may be refunded to the Participant
in cash by the Company or Employer (with no entitlement to the Share equivalent) or if not refunded, the
Participant may seek a refund from the local tax authorities. In the event of under-withholding, the
Participant may be required to pay additional Tax-Related Items directly to the applicable tax authority or
to the Company or Employer. If the obligation for Tax-Related Items is satisfied by withholding a number
of Shares as described herein, for tax purposes, the Participant is deemed to have been issued the full
number of Shares subject to the vested Stock Units, notwithstanding that a number of the Shares are
4
held back solely for the purpose of paying the Tax-Related Items. The Company may refuse to issue or
deliver to the Participant any Shares or the proceeds of the sale of Shares if the Participant fails to
comply with the Participant’s obligations in connection with the Tax-Related Items.
12.
Electronic Delivery and Acceptance. The Company may, in its sole discretion, deliver
any documents related to the Award by electronic means or request the Participant’s consent to
participate in the Plan by electronic means. The Participant hereby consents to receive all applicable
documentation by electronic delivery and to participate in the Plan through an on-line (and/or voice
activated) system established and maintained by the Company or a third party vendor designated by the
Company.
13.
Data Privacy. The Participant acknowledges and consents to the collection, use,
processing and transfer of personal data as described in this Section 13. The Company, its related
entities, and the Employer hold certain personal information about the Participant, including the
Participant’s name, home address and telephone number, email address, date of birth, social security
number or other employee identification number, salary, nationality, job title, any Shares or directorships
held in the Company, details of all Stock Units or any other entitlement to Shares or equivalent benefits
awarded, canceled, purchased, vested, unvested or outstanding in the Participant’s favor, for the purpose
of managing and administering the Plan (“Data”). The Company and its related entities may transfer Data
amongst themselves as necessary for the purpose of implementation, administration and management of
the Participant’s participation in the Plan, and the Company and its related entities may each further
transfer Data to any third parties assisting the Company or any such related entity in the implementation,
administration and management of the Plan. The Participant acknowledges that the transferors and
transferees of such Data may be located anywhere in the world and hereby authorizes each of them to
receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of
implementing, administering and managing the Participant’s participation in the Plan, including any
transfer of such Data as may be required for the administration of the Plan and/or the subsequent holding
of Shares on the Participant’s behalf to a broker or to other third party with whom the Participant may
elect to deposit any Shares acquired under the Plan (whether pursuant to the Award or otherwise).
14.
Notices. Any notice to be given under the terms of this Award Agreement shall be in
writing and addressed to the Company at its principal office to the attention of the Secretary, and to the
Participant at the Participant’s last address reflected on the Company’s records, or at such other address
as either party may hereafter designate in writing to the other. Any such notice shall be given only when
received, but if the Participant is no longer an employee of the Company, shall be deemed to have been
duly given by the Company when enclosed in a properly sealed envelope addressed as aforesaid,
registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or
branch post office regularly maintained by the United States Government.
15.
Plan. The Award and all rights of the Participant under this Award Agreement are
subject to the terms and conditions of the provisions of the Plan, incorporated herein by reference. The
Participant agrees to be bound by the terms of the Plan and this Award Agreement. The Participant
acknowledges having read and understood the Plan, the Prospectus for the Plan, and this Award
Agreement. Unless otherwise expressly provided in other sections of this Award Agreement, provisions
of the Plan that confer discretionary authority on the Board or the Committee do not (and shall not be
deemed to) create any rights in the Participant unless such rights are expressly set forth herein or are
otherwise in the sole discretion of the Board or the Committee so conferred by appropriate action of the
Board or the Committee under the Plan after the date hereof.
16.
Entire Agreement. This Award Agreement and the Plan together constitute the entire
agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto
with respect to the subject matter hereof. The Plan and this Award Agreement may be amended
pursuant to Section 15 of the Plan. Such amendment must be in writing and signed by the Company.
The Company may, however, unilaterally waive any provision hereof in writing to the extent such waiver
5
does not adversely affect the interests of the Participant hereunder, but no such waiver shall operate as
or be construed to be a subsequent waiver of the same provision or a waiver of any other provision
hereof.
17.
Limitation on the Participant’s Rights. Participation in the Plan confers no rights or
interests other than as herein provided. This Award Agreement creates only a contractual obligation on
the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither
the Plan nor any underlying program, in and of itself, has any assets. The Participant shall have only the
rights of a general unsecured creditor of the Company with respect to amounts credited and benefits
payable, if any, with respect to the Stock Units, and rights no greater than the right to receive the Shares
as a general unsecured creditor with respect to Stock Units, as and when payable hereunder.
18.
Section Headings. The section headings of this Award Agreement are for convenience
of reference only and shall not be deemed to alter or affect any provision hereof.
19.
Governing Law. This Award Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California without regard to conflict of law principles
thereunder.
20.
Choice of Venue. For purposes of litigating any dispute that arises directly or indirectly
from the relationship of the parties evidenced by this grant or this Award Agreement, the parties hereby
submit to the exclusive jurisdiction of the State of California and agree that such litigation shall be
conducted only in the courts of Santa Clara County, California, or the federal courts for the Northern
District of California, and no other courts, where this grant is made and/or to be performed.
21.
Construction. It is intended that the terms of the Award will not result in the imposition
of any tax liability pursuant to Section 409A of the Code. This Award Agreement shall be construed and
interpreted consistent with that intent.
22.
Severability. The provisions of this Award Agreement are severable and if any one of
more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining
provisions shall nevertheless be binding and enforceable.
23.
Imposition of Other Requirements. The Company reserves the right to impose other
requirements on the Participant’s participation in the Plan, on the Stock Units and on any Shares acquired
under the Plan, to the extent the Company determines it is necessary or advisable for legal or
administrative reasons, and to require the Participant to sign any additional agreements or undertakings
that may be necessary to accomplish the foregoing.
* * * * *
6
PERFORMANCE AWARD
EXHIBIT A
PERFORMANCE VESTING REQUIREMENTS
The Stock Units (and related Dividend Equivalent Rights) subject to the Award that will vest on
the Vesting Date will be determined based on the Company’s relative total shareholder return (“TSR”)
Percentile for the Performance Period.
The percentage of the Stock Units (and related Dividend Equivalent Rights) that vest on the
Vesting Date will be determined as follows:
•
•
•
•
If the Company’s TSR Percentile for the Performance Period is at the [ ] ([ ])
percentile or greater, [ ] ([ ]%) of the target Stock Units will vest on the Vesting Date.
If the Company’s TSR Percentile for the Performance Period is at the [ ] ([ ])
percentile, [ ] ([ ]%) of the target Stock Units will vest on the Vesting Date.
If the Company’s TSR Percentile for the Performance Period is at the [ ] ([ ])
percentile, [ ] ([ ]%) of the target Stock Units will vest on the Vesting Date.
If the Company’s TSR Percentile for the Performance Period is below the [ ] ([ ])
percentile, [ ] ([ ]%) of the Stock Units will vest on the Vesting Date.
For TSR Percentile performance for the Performance Period between the levels indicated above,
the portion of the Stock Units that will vest on the Vesting Date will be determined on a straight-line basis
(i.e., linearly interpolated) between the two nearest vesting percentages indicated above.
Notwithstanding the foregoing, if the Company’s TSR for the Performance Period is negative, in
no event shall more than one hundred percent (100%) of the target Stock Units vest.
The number of Stock Units that vest on the Vesting Date will be rounded to the nearest whole
unit, and the balance of the Stock Units will not vest and will terminate on that Vesting Date.
For purposes of the Award, the following definitions will apply:
•
•
“TSR Percentile” means the percentile ranking of the Company’s TSR among the TSRs
for the Comparison Group members for the Performance Period. In determining the
Company’s TSR Percentile for the Performance Period, in the event that the Company’s
TSR for the Performance Period is equal to the TSR(s) of one or more other Comparison
Group members for that same period, the Company’s TSR Percentile ranking will be
determined by ranking the Company’s TSR for that period as being greater than such
other Comparison Group members.
“Comparison Group” means the Company and each other company included in the
Standard & Poor’s 500 index on the first day of the Performance Period and, except as
provided below, the common stock (or similar equity security) of which continues to be
listed or traded on a national securities exchange through the last trading day of the
Performance Period. In the event a member of the Comparison Group files for
bankruptcy or liquidates due to an insolvency, such company shall continue to be treated
as a Comparison Group member, and such company’s Ending Price will be treated as $0
if the common stock (or similar equity security) of such company is no longer listed or
A-1
traded on a national securities exchange on the last trading day of the Performance
Period. In the event of a formation of a new parent company by a Comparison Group
member, substantially all of the assets and liabilities of which consist immediately after
the transaction of the equity interests in the original Comparison Group member or the
assets and liabilities of such Comparison Group member immediately prior to the
transaction, such new parent company shall be substituted for the Comparison Group
member to the extent (and for such period of time) as its common stock (or similar equity
securities) are listed or traded on a national securities exchange but the common stock
(or similar equity securities) of the original Comparison Group member are not. In the
event of a merger or other business combination of two Comparison Group members
(including, without limitation, the acquisition of one Comparison Group member, or all or
substantially all of its assets, by another Comparison Group member), the surviving,
resulting or successor entity, as the case may be, shall continue to be treated as a
member of the Comparison Group, provided that the common stock (or similar equity
security) of such entity is listed or traded on a national securities exchange through the
last trading day of the Performance Period. With respect to the preceding two sentences,
the applicable stock prices shall be equitably and proportionately adjusted to the extent (if
any) necessary to preserve the intended incentives of the awards and mitigate the impact
of the transaction.
•
•
•
“TSR” shall be determined with respect to the Company and any other Comparison
Group member by dividing: (a) the sum of (i) the difference obtained by subtracting the
applicable Beginning Price from the applicable Ending Price plus (ii) all dividends and
other distributions during the Performance Period by (b) the applicable Beginning Price.
Any non-cash distributions shall be valued at fair market value. For the purpose of
determining TSR, the value of dividends and other distributions shall be determined by
treating them as reinvested in additional shares of stock at the closing market price on
the date of distribution.
“Beginning Price” means, with respect to the Company and any other Comparison
Group member, the average of the closing market prices of such company’s common
stock on the principal exchange on which such stock is traded for the twenty (20)
consecutive trading days beginning with the first trading day of the Performance Period.
For the purpose of determining Beginning Price, the value of dividends and other
distributions shall be determined by treating them as reinvested in additional shares of
stock at the closing market price on the date of distribution.
“Ending Price” means, with respect to the Company and any other Comparison Group
member, the average of the closing market prices of such company’s common stock on
the principal exchange on which such stock is traded for the twenty (20) consecutive
trading days ending on the last trading day of the Performance Period. For the purpose
of determining Ending Price, the value of dividends and other distributions shall be
determined by treating them as reinvested in additional shares of stock at the closing
market price on the date of distribution.
With respect to the computation of TSR, Beginning Price, and Ending Price, there shall also be
an equitable and proportionate adjustment to the extent (if any) necessary to preserve the intended
incentives of the awards and mitigate the impact of any stock split, stock dividend or reverse stock split
occurring during the Performance Period (or during the applicable 20-day period in determining Beginning
Price or Ending Price, as the case may be).
In the event of any ambiguity or discrepancy, the determination of the Committee shall be final
and binding.
* * * * *
A-2
Subsidiaries of
Apple Inc.*
Apple Canada Inc.
Apple Computer Trading (Shanghai) Co., Ltd.
Apple Distribution International Limited
Apple Europe Limited
Apple France
Apple GmbH
Apple Japan, Inc.
Apple Operations Limited
Apple Operations Europe Limited
Apple Operations International Limited
Apple Pty Limited
Apple Sales International Limited
Apple Value Services, LLC
Braeburn Capital, Inc.
Exhibit 21.1
Jurisdiction
of Incorporation
Canada
China
Ireland
United Kingdom
France
Germany
Japan
Ireland
Ireland
Ireland
Australia
Ireland
Virginia, U.S.
Nevada, U.S.
* Pursuant to Item 601(b)(21)(ii) of Regulation S-K, the names of other subsidiaries of Apple Inc. are omitted because,
considered in the aggregate, they would not constitute a significant subsidiary as of the end of the year covered by this
report.
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Registration Statement (Form S-3 ASR No. 333-228159) of Apple Inc.,
Registration Statement (Form S-8 No. 333-226986) pertaining to Apple Inc. Deferred Compensation Plan,
Registration Statement (Form S-8 No. 333-203698) pertaining to Apple Inc. Employee Stock Purchase Plan,
Registration Statement (Form S-8 No. 333-195509) pertaining to Apple Inc. 2014 Employee Stock Plan,
Registration Statement (Form S-8 No. 333-193709) pertaining to Topsy Labs, Inc. 2007 Stock Plan,
Registration Statement (Form S-8 No. 333-184706) pertaining to AuthenTec, Inc. 2010 Incentive Plan, as amended,
Registration Statement (Form S-8 No. 333-179189) pertaining to Anobit Technologies Ltd. Global Share Incentive Plan
(2006), and
Registration Statement (Form S-8 No. 333-60455) pertaining to Apple Inc. Non-Employee Director Stock Plan;
of our reports dated October 29, 2020 with respect to the consolidated financial statements of Apple Inc., and the effectiveness
of internal control over financial reporting of Apple Inc., included in this Annual Report on Form 10-K for the year ended
September 26, 2020.
/s/ Ernst & Young LLP
San Jose, California
October 29, 2020
Exhibit 31.1
I, Timothy D. Cook, certify that:
1.
I have reviewed this annual report on Form 10-K of Apple Inc.;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods
presented in this report;
4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred
during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control
over financial reporting; and
5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize
and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role
in the Registrant’s internal control over financial reporting.
Date: October 29, 2020
By:
/s/ Timothy D. Cook
Timothy D. Cook
Chief Executive Officer
Exhibit 31.2
I, Luca Maestri, certify that:
1.
I have reviewed this annual report on Form 10-K of Apple Inc.;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods
presented in this report;
4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred
during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control
over financial reporting; and
5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize
and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role
in the Registrant’s internal control over financial reporting.
Date: October 29, 2020
By:
/s/ Luca Maestri
Luca Maestri
Senior Vice President,
Chief Financial Officer
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
I, Timothy D. Cook, certify, as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that the Annual Report of Apple Inc. on Form 10-K for the fiscal year ended September 26, 2020
fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information
contained in such Form 10-K fairly presents in all material respects the financial condition and results of operations of Apple Inc.
at the dates and for the periods indicated.
Date: October 29, 2020
By:
/s/ Timothy D. Cook
Timothy D. Cook
Chief Executive Officer
I, Luca Maestri, certify, as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that the Annual Report of Apple Inc. on Form 10-K for the fiscal year ended September 26, 2020
fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information
contained in such Form 10-K fairly presents in all material respects the financial condition and results of operations of Apple Inc.
at the dates and for the periods indicated.
Date: October 29, 2020
By:
/s/ Luca Maestri
Luca Maestri
Senior Vice President,
Chief Financial Officer
A signed original of this written statement required by Section 906 has been provided to Apple Inc. and will be retained by Apple
Inc. and furnished to the Securities and Exchange Commission or its staff upon request.