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UNITEDSTATES
SECURITIESANDEXCHANGECOMMISSION
Washington,D.C.20549

Form10K

(MarkOne)

ANNUALREPORTPURSUANTTOSECTION13OR15(d)OFTHESECURITIESEXCHANGEACTOF1934
ForthefiscalyearendedSeptember28,2013
Or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1934
Forthetransitionperiodfromto
Commissionfilenumber:00010030

APPLEINC.
(Exactnameofregistrantasspecifiedinitscharter)

California

942404110

(Stateorotherjurisdictionofincorporationororganization)

(I.R.S.EmployerIdentificationNo.)

1InfiniteLoop
Cupertino,California

95014

(Addressofprincipalexecutiveoffices)

(ZipCode)

Registrantstelephonenumber,includingareacode:(408)9961010

SecuritiesregisteredpursuanttoSection12(b)oftheAct:

CommonStock,noparvalue

TheNASDAQStockMarketLLC

(Titleofclass)

(Nameofexchangeonwhichregistered)

SecuritiesregisteredpursuanttoSection12(g)oftheAct:None

Indicatebycheckmarkiftheregistrantisawellknownseasonedissuer,asdefinedinRule405oftheSecuritiesAct.

YesNo
IndicatebycheckmarkiftheregistrantisnotrequiredtofilereportspursuanttoSection13orSection15(d)oftheAct.
YesNo
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
SecuritiesExchangeActof1934duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredto
filesuchreports),and(2)hasbeensubjecttosuchfilingrequirementsforthepast90days.
YesNo

IndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyandpostedonitscorporateWebsite,ifany,every
InteractiveDataFilerequiredtobesubmittedandpostedpursuanttoRule405ofRegulationST(232.405ofthischapter)
duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtosubmitandpostsuchfiles).
YesNo
IndicatebycheckmarkifdisclosureofdelinquentfilerspursuanttoItem405ofRegulationSK(229.405ofthischapter)is
notcontainedherein,andwillnotbecontained,tothebestoftheregistrantsknowledge,indefinitiveproxyorinformation
statementsincorporatedbyreferenceinPartIIIofthisForm10KoranyamendmenttothisForm10K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, or a
smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting
companyinRule12b2oftheExchangeAct.

Largeacceleratedfiler

Acceleratedfiler

Nonacceleratedfiler

(Donotcheckifasmallerreportingcompany)

Smallerreportingcompany

Indicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b2oftheAct).
YesNo
Theaggregatemarketvalueofthevotingandnonvotingstockheldbynonaffiliatesoftheregistrant,asofMarch29,2013,
thelastbusinessdayoftheregistrantsmostrecentlycompletedsecondfiscalquarter,wasapproximately$416,005,000,000.
Solelyforpurposesofthisdisclosure,sharesofcommonstockheldbyexecutiveofficersanddirectorsoftheregistrantasof
suchdatehavebeenexcludedbecausesuchpersonsmaybedeemedtobeaffiliates.Thisdeterminationofexecutiveofficers
anddirectorsasaffiliatesisnotnecessarilyaconclusivedeterminationforanyotherpurposes.
899,738,000sharesofcommonstockwereissuedandoutstandingasofOctober18,2013.
DOCUMENTSINCORPORATEDBYREFERENCE
Portionsoftheregistrantsdefinitiveproxystatementrelatingtoits2014annualmeetingofshareholders(the2014Proxy
Statement)areincorporatedbyreferenceintoPartIIIofthisAnnualReportonForm10Kwhereindicated.The2014Proxy
StatementwillbefiledwiththeU.S.SecuritiesandExchangeCommissionwithin120daysaftertheendofthefiscalyearto
whichthisreportrelates.

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AppleInc.
Form10K
FortheFiscalYearEndedSeptember28,2013
TABLEOFCONTENTS

Page

PartI
Item1.

Business

20

20

21

21

Item1A. RiskFactors

Item1B. UnresolvedStaffComments

Item2.

Properties

Item3.

LegalProceedings

Item4.

MineSafetyDisclosures

PartII
Item5.

Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities

Item6.

22

24

25

42

44

81

81

82

SelectedFinancialData

Item7.

ManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperations

Item7A. QuantitativeandQualitativeDisclosuresAboutMarketRisk

Item8.

FinancialStatementsandSupplementaryData

Item9.

ChangesinandDisagreementsWithAccountantsonAccountingandFinancialDisclosure

Item9A. ControlsandProcedures

Item9B. OtherInformation

PartIII
Item10.

Directors,ExecutiveOfficersandCorporateGovernance

Item11.

83

83

83

ExecutiveCompensation

Item12.

SecurityOwnershipofCertainBeneficialOwnersandManagementandRelatedStockholderMatters

Item13.

CertainRelationshipsandRelatedTransactionsandDirectorIndependence

Item14.

83

83

PrincipalAccountingFeesandServices

PartIV
Item15.

Exhibits,FinancialStatementSchedules

84

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The Business section and other parts of this Annual Report on Form 10K (Form 10K) contain forwardlooking
statements,withinthemeaningofthePrivateSecuritiesLitigationReformActof1995,thatinvolverisksanduncertainties.
ManyoftheforwardlookingstatementsarelocatedinManagementsDiscussionandAnalysisofFinancialConditionand
Results of Operations. Forwardlooking 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. Forwardlooking
statementscanalsobeidentifiedbywordssuchasfuture,anticipates,believes, estimates, expects, intends,
plans, predicts, will, would, could, can, may, and similar terms. Forwardlooking statements are not
guaranteesoffutureperformanceandtheCompanysactualresultsmaydiffersignificantlyfromtheresultsdiscussedinthe
forwardlookingstatements.Factorsthatmightcausesuchdifferencesinclude,butarenotlimitedto,thosediscussedinPart
I,Item1AofthisForm10KundertheheadingRiskFactors,whichareincorporatedhereinbyreference.Eachoftheterms
the Company and Apple as used herein refers collectively to Apple Inc. and its whollyowned subsidiaries, unless
otherwisestated.TheCompanyassumesnoobligationtoreviseorupdateanyforwardlookingstatementsforanyreason,
exceptasrequiredbylaw.
PARTI

Item1.

Business

CompanyBackground
The Company designs, manufactures, and markets mobile communication and media devices, personal computers, and
portabledigitalmusicplayers,andsellsavarietyofrelatedsoftware,services,peripherals,networkingsolutions,andthird
partydigitalcontentandapplications.TheCompanysproductsandservicesincludeiPhone,iPad,Mac,iPod ,Apple
TV,aportfolioofconsumerandprofessionalsoftwareapplications,theiOSandOSX operatingsystems,iCloud ,anda
variety of accessory, service and support offerings. The Company also sells and delivers digital content and applications
throughtheiTunesStore , App Store, iBooks Store, and Mac App Store. The Company sells its products worldwide
through its retail stores, online stores, and direct sales force, as well as through thirdparty cellular network carriers,
wholesalers,retailers,andvalueaddedresellers.Inaddition,theCompanysellsavarietyofthirdpartyiPhone,iPad,Macand
iPodcompatibleproducts,includingapplicationsoftware,andvariousaccessories,throughitsonlineandretailstores.The
Companysellstoconsumerssmallandmidsizedbusinesses(SMB)andeducation,enterpriseandgovernmentcustomers.
TheCompanysfiscalyearisthe52or53weekperiodthatendsonthelastSaturdayofSeptember.Unlessotherwisestated,all
informationpresentedinthisForm10KisbasedontheCompanysfiscalcalendar.TheCompanyisaCaliforniacorporation
establishedin1977.
BusinessStrategy
TheCompanyiscommittedtobringingthebestuserexperiencetoitscustomersthroughitsinnovativehardware,software
andservices.TheCompanysbusinessstrategyleveragesitsuniqueabilitytodesignanddevelopitsownoperatingsystems,
hardware,applicationsoftware,andservicestoprovideitscustomersnewproductsandsolutionswithsuperioreaseofuse,
seamless integration, and innovative design. The Company believes continual investment in research and development,
marketing and advertising is critical to the development and sale of innovative products and technologies. As part of its
strategy, the Company continues to expand its platform for the discovery and delivery of thirdparty digital content and
applications through the iTunes Store. As part of the iTunes Store, the Companys App Store and iBooks Store allow
customerstodiscoveranddownloadapplicationsandbooksthrougheitheraMacorWindowsbased computer or through
iOSdevices,namelyiPhone,iPadandiPodtouch .TheCompanysMacAppStoreallowscustomerstoeasilydiscover,
downloadandinstallMacapplications.TheCompanyalsosupportsacommunityforthedevelopmentofthirdpartysoftware
andhardwareproductsanddigitalcontentthatcomplementtheCompanysofferings.TheCompanybelievesahighquality
buying experience with knowledgeable salespersons who can convey the value of the Companys products and services
greatlyenhancesitsabilitytoattractandretaincustomers.Therefore,theCompanysstrategyalsoincludesenhancingand
expandingitsownretailandonlinestoresanditsthirdpartydistributionnetworktoeffectivelyreachmorecustomersand
providethemwithahighqualitysalesandpostsalessupportexperience.

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BusinessOrganization
The Company manages its business primarily on a geographic basis. Accordingly, the Company determined its reportable
operatingsegments,whicharegenerallybasedonthenatureandlocationofitscustomers,tobetheAmericas,Europe,Japan,
GreaterChina,RestofAsiaPacificandRetail.TheAmericassegmentincludesbothNorthandSouthAmerica.TheEurope
segmentincludesEuropeancountries,aswellasIndia,theMiddleEastandAfrica.TheGreaterChinasegmentincludesChina,
HongKongandTaiwan.TheRestofAsiaPacificsegmentincludesAustraliaandAsiancountries,otherthanthosecountries
included in the Companys other operating segments. The Retail segment operates Apple retail stores in 13 countries,
includingtheU.S.Eachoperatingsegmentprovidessimilarhardwareandsoftwareproductsandsimilarservices.Theresultsof
the Companys geographic segments do not include results of the Retail segment. Further information regarding the
CompanysoperatingsegmentsmaybefoundinPartII,Item7ofthisForm10KunderthesubheadingSegmentOperating
Performance,andinPartII,Item8ofthisForm10KintheNotestoConsolidatedFinancialStatementsinNote11,Segment
InformationandGeographicData.
Products
iPhone
iPhoneistheCompanyslineofsmartphonesthatcombinesaphone,musicplayer,andinternetdeviceinoneproduct,andis
basedonApplesiOSMultiTouchoperatingsystem.iPhonehasanintegratedphotoandvideocameraandphotolibrary
app, and on qualifying devices, also includes Siri , a voice activated intelligent assistant. iPhone works with the iTunes
Store,theAppStoreandiBooksStoreforpurchasing,organizingandplayingmusic,movies,TVshows,podcasts,books,and
apps.InadditiontoappsdeliveredwithiOS,beginninginSeptember2013,freedownloadsofiPhoto,iMovieandiWork
appsforiOSbecameavailablewithallnewiPhones.iPhoneiscompatiblewithbothMacandWindowspersonalcomputers
andApplesiCloudserviceswhichprovidesynchronizationofmail,contacts,calendars,apps,music,photos,documents,and
moreacrossusersdevices.Thelatestversions,introducedinSeptember2013,areiPhone5candiPhone5s.
iPad
iPadandiPadminiaretheCompanyslineofmultipurposetabletsbasedonApplesiOSMultiTouchoperatingsystem.
iPad has an integrated photo and video camera and photo library app, and on qualifying devices, also includes Siri. iPad
works with the iTunes Store, the iBooks Store, and the App Store for purchasing and playing music, movies, TV shows,
podcasts, books, and apps. In addition to apps delivered with iOS for qualifying devices, beginning in September 2013,
iPhoto,iMovieandiWorkappsforiOSbecameavailableasfreedownloadswithallnewiPads.iPadiscompatiblewithboth
MacandWindowspersonalcomputersandApplesiCloudservices.InOctober2013,theCompanyannouncediPadAir,its
fifthgenerationiPad,andiPadminiwithRetinadisplay.
Mac
Mac is the Companys line of desktop and portable personal computers. Macs feature Intel microprocessors, the OS X
operating system and include Mail, Safari web browser, Messages, Calendars, Reminders, Contacts and the iLife suite of
software apps. The Companys desktop computers include iMac , Mac Pro and Mac mini. The Companys portable
computersincludeMacBookProandMacBookAir.BeginninginOctober2013,theCompanysiWorkproductivitysuite
ofappsforOSXbecameavailableasfreedownloadswithallnewMacs.
iPod
TheCompanysiPodlineofportabledigitalmusicandmediaplayersincludesiPodtouch,iPodnano ,iPodshuffle and
iPodclassic .AlliPodsworkwithiTunestopurchaseandsynchronizecontent.iPodtouch,basedontheCompanys iOS
MultiTouchoperatingsystem,isaflashmemorybasediPodwithanintegratedphoto

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andvideocameraandphotolibraryapp,andalsoincludesSiri.iPodtouchworkswiththeiTunesStore,theAppStore,andthe
iBooksStoreforpurchasingandplayingmusic,movies,TVshows,podcasts,books,andapps.Inadditiontoappsdelivered
withiOS,beginninginSeptember2013,iPhoto,iMovieandiWorkappsforiOSbecameavailableasfreedownloadsforall
newiPodtouches.iPodtouchiscompatiblewithbothMacandWindowspersonalcomputersandApplesiCloudservices.
iTunesandtheiTunesStore
Apples iTunes app, available for both Mac and Windows personal computers, keeps users music, movies, and TV shows
organized in one place. iTunes is integrated with the iTunes Store, the App Store and the iBooks Store. The iTunes Store
allowsuserstopurchaseanddownloadmusicandTVshowsandtorentorpurchasemovies.TheiTunesStorealsoincludes
hundredsofthousandsoffreePodcastsonamultitudeofsubjects.TheAppStoreallowscustomerstodiscoveranddownload
apps and purchase inapp content. The iBooks Store features ebooks from major and independent publishers. iTunes U
allowsuserstodownloadfreelectures,videos,andmorefromtopuniversities,museums,andotherinstitutions.iTunes also
featuresGeniusmixestofindsongsthatgotogetherandorganizethemintogenrebasedmixesandHomeSharingtoallow
userstostreamcontentfromonecomputertoanothercomputeraswellastoiOSdevicesandnewerversionsoftheCompanys
AppleTV.InSeptember2013,AppleintroducediTunesRadio,afreeInternetstreamingservicethatallowsusersofiOS
devices,MacandWindowspersonalcomputersandAppleTVtopersonalizeradiostationsfeaturingmusicfromtheiTunes
Store.
MacAppStore
TheMacAppStoreallowscustomerstodiscover,downloadandinstallMacapps.TheMacAppStoreoffersapplicationsin
education,games,graphicsanddesign,lifestyle,productivity,utilitiesandothercategories.TheCompanysOSXoperating
systemsoftwareanditsiLife,iWorkandotherapplicationsoftwaretitlesarealsoavailableontheMacAppStore.
iCloud
iCloudistheCompanyscloudservice,whichstoresmusic,photos,applications,contacts,calendars,documentsandmore,
keepingthemuptodateandavailabletomultipleiOSdevicesandMacandWindowspersonalcomputers.iCloudsfeatures
includeiTunesintheCloudPhotoStreamDocumentsintheCloudContactsCalendarMailautomaticdownloadsand
purchasehistoryforcontent,applicationsandbooksandiCloudBackupforiOSdevices.Userscansignupforfreeaccessto
iCloudusingadevicerunningqualifyingversionsofiOSorOSX.
OperatingSystemSoftware
iOS
iOSistheCompanysMultiTouchoperatingsystemthatservesasthefoundationforiOSdevices.iOS7isthecurrentversion
andwasreleasedinSeptember2013.AppsdeliveredwithiOSforqualifyingdevicesincludeSafariwebbrowser,FaceTime
video calling, Maps with turnbyturn directions, Mail, Contacts, Calendar, Clock, Weather, Calculator, Notes, Reminders,
Stocks,Compass,andMessages.DevicesrunningiOSarecompatiblewithbothMacandWindowspersonalcomputersand
ApplesiCloudservices.
OSX
OSX,theCompanysMacoperatingsystem,isbuiltonanopensourceUNIXbasedfoundationandprovidesanintuitiveand
integratedcomputerexperience.OSXMavericks,releasedinOctober2013,isthetenthmajorreleaseofOSX.Supportfor
iCloud is built into OS X so users can access content and information from their other Macs, their iOS devices and other
supporteddevicesandaccessdownloadedcontentandappsfromthe

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iTunes Store. In addition to Mail, Safari web browser, Messages, Calendars, Reminders, Contacts and the iLife suite of
softwareapps,MavericksalsoincludesanewMapsappandanewiBooksappthatbothworkwiththeiriOScounterparts.
ApplicationSoftware
iLife
iLife for Mac is the Companys consumeroriented digital lifestyle software application suite included with all Mac
computers.iLifefeaturesiPhoto,adigitalphotoapplicationforstoring,viewing,editingandsharingphotosiMovie,adigital
videoeditingapplicationandGarageBand ,amusiccreationapplicationthatallowscustomerstoplay,recordandcreate
music.TheCompanyalsohasMultiTouchversionsoftheseiLifeapplicationsdesignedspecificallyforuseoniPhoneand
iPad,andbeginninginSeptember2013,bothiPhotoandiMovieforiOSbecameavailableasfreedownloadswithallnewiOS
devices.
iWork
iWorkforMacistheCompanysintegratedproductivitysuitedesignedtohelpuserscreate,present,andpublishdocuments,
presentations,andspreadsheets.iWorkincludesPagesforwordprocessingandpagelayout,Keynoteforpresentations,and
Numbersforspreadsheets.BeginninginOctober2013,theiWorksuiteofappsforOSXwillbeavailableasfreedownloads
withallnewMacs.TheCompanyalsohasiOSMultiTouchversionsofeachiWorkapplicationdesignedspecificallyforuse
oniOSdevicesand,beginninginSeptember2013,theyallbecameavailableasfreedownloadswithallnewiOSdevices.
OtherApplicationSoftware
TheCompanyalsosellsvariousotherapplicationsoftware,includingitsprofessionallineofapplications,FinalCutPro ,
LogicProX,anditsFileMakerProdatabasesoftware.
Displays&PeripheralProducts
TheCompanymanufacturestheAppleLEDCinemaDisplayandThunderboltDisplay.TheCompanyalsosellsavarietyof
ApplebrandedandthirdpartyMaccompatibleandiOScompatibleperipheralproducts,includingprinters,storagedevices,
computermemory,digitalvideoandstillcameras,pointingdevices,andvariousothercomputingproductsandsupplies.
AppleTV
AppleTVconnectstoconsumershighdefinitionTVsandenablesthemtoaccessiTunescontentdirectlyforstreamingHD
video,playingmusicandviewingphotos.ContentfromNetflix,YouTube,Flickr,MLB,HuluPlus,iTunesRadioandother
media services is also available. Apple TV allows streaming iTunes content from Macs and Windows personal computers
throughHomeShareandthroughAirPlayfromcompatibleMacandiOSdevices.CompatibleMacandiOSdevicescanalso
mirrortheirdevicescreensaswellasstreamandplaygamesonAppleTV.
iOSandMacDeveloperPrograms
TheCompanysiOSandMacDeveloperProgramssupportappdeveloperswiththedevelopment,testinganddistributionof
iOSandMacappsthroughtheAppStoreandtheMacAppStore.DevelopmenttoolsincludedwiththeCompanysDeveloper
ProgramsincludeXcode,theCompanysintegrateddevelopmentenvironmentforcreatingappsforiOSdevices,including
iPhone and iPad, and Mac. Xcode includes project management tools analysis tools to collect, display and compare app
performancedatasimulationtoolstolocallyrun,test,anddebugappstoolstosimplifythedesignanddevelopmentofuser
interfacesandthelatestsoftware

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development kits for iOS and OS X. The Companys Developer Programs also provide access to multiple development
resourcesincludingtheCompanysDeveloperForums,extensivetechnicaldocumentation,andsamplecode.TheCompanys
DeveloperProgramsalsoprovidedeveloperswithaccesstoolsandinformationforsubmittingtheirappstotheAppStoreand
theMacAppStore.
ProductSupportandServices
AppleCare offers a range of support options for the Companys customers. These include assistance that is built into
softwareproducts,printedandelectronicproductmanuals,onlinesupportincludingcomprehensiveproductinformationas
wellastechnicalassistance,theAppleCareProtectionPlan(APP)andtheAppleCare+ProtectionPlan(AC+).APPisafee
basedservicethattypicallyincludestwotothreeyearsofphonesupport,hardwarerepairsanddedicatedwebbasedsupport
resources.AC+isafeebasedserviceavailableincertaincountriesforiPhoneandiPad.AC+offersadditionalcoverageunder
somecircumstancesforinstancesofaccidentaldamageinadditiontotheservicesofferedbyAPP.
MarketsandDistribution
TheCompanyscustomersareprimarilyintheconsumer,SMB,education,enterpriseandgovernmentmarkets.TheCompany
sellsitsproductsandresellsthirdpartyproductsinmostofitsmajormarketsdirectlytoconsumersandSMBsthroughits
retailandonlinestoresanditsdirectsalesforce.TheCompanyalsoemploysavarietyofindirectdistributionchannels,such
asthirdpartycellularnetworkcarriers,wholesalers,retailers,andvalueaddedresellers.During2013,theCompanysnetsales
throughitsdirectandindirectdistributionchannelsaccountedfor30%and70%,respectively,oftotalnetsales.
TheCompanybelievesthatsalesofitsinnovativeanddifferentiatedproductsareenhancedbyknowledgeablesalespersons
whocanconveythevalueofthehardwareandsoftwareintegration,anddemonstratetheuniquesolutionsthatareavailable
on its products. The Company further believes providing direct contact with its targeted customers is an effective way to
demonstrate the advantages of its products over those of its competitors and providing a highquality sales and aftersales
supportexperienceiscriticaltoattractingnewandretainingexistingcustomers.
Toensureahighqualitybuyingexperienceforitsproductsinwhichserviceandeducationareemphasized,theCompany
continuestoexpandandimproveitsdistributioncapabilitiesbyexpandingthenumberofitsownretailstoresworldwide.The
Companysretailstoresaretypicallylocatedathightrafficlocationsinqualityshoppingmallsandurbanshoppingdistricts.
ByoperatingitsownstoresandlocatingthemindesirablehightrafficlocationstheCompanyisbetterpositionedtoensurea
high quality customer buying experience and attract new customers. The stores are designed to simplify and enhance the
presentation and marketing of the Companys products and related solutions. The retail stores employ experienced and
knowledgeablepersonnelwhoprovideproductadvice,serviceandtrainingandofferawideselectionofthirdpartyhardware,
software,andotheraccessoriesandperipheralsthatcomplementtheCompanysproducts.
TheCompanyhasalsoinvestedinprogramstoenhanceresellersalesbyplacinghighqualityApplefixtures,merchandising
materials and other resources within selected thirdparty reseller locations. Through the Apple Premium Reseller Program,
certain thirdparty resellers focus on the Apple platform by providing a high level of product expertise, integration and
supportservices.
The Company is committed to delivering solutions to help educators teach and students learn. The Company believes
effective integration of technology into classroom instruction can result in higher levels of student achievement and has
designedarangeofproducts,servicesandprogramstoaddresstheneedsofeducationcustomers.TheCompanyalsosupports
mobilelearningandrealtimedistributionof,andaccessto,educationrelatedmaterialsthroughiTunesU ,aplatformthat
allows students and teachers to share and distribute educational media online. The Company sells its products to the
educationmarketthroughitsdirectsalesforce,selectthirdpartyresellersanditsonlineandretailstores.

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TheCompanyalsosellsitshardwareandsoftwareproductstoenterpriseandgovernmentcustomersineachofitsgeographic
segments.TheCompanysproductsaredeployedinthesemarketsbecauseoftheirperformance,productivity,easeofuseand
seamlessintegrationintoinformationtechnologyenvironments.TheCompanysproductsarecompatiblewiththousandsof
thirdparty business applications and services, and its tools enable the development and secure deployment of custom
applicationsaswellasremotedeviceadministration.
Nosinglecustomeraccountedformorethan10%ofnetsalesin2013,2012or2011.
Competition
ThemarketsfortheCompanysproductsandservicesarehighlycompetitiveandtheCompanyisconfrontedbyaggressive
competition in all areas of its business. These markets are characterized by frequent product introductions and rapid
technological advances that have substantially increased the capabilities and use of mobile communication and media
devices,personalcomputers,andotherdigitalelectronicdevices.TheCompanyscompetitorswhosellmobiledevicesand
personalcomputersbasedonotheroperatingsystemshaveaggressivelycutpricesandloweredtheirproductmarginstogain
ormaintainmarketshare.TheCompanysfinancialconditionandoperatingresultscanbeadverselyaffectedbytheseand
otherindustrywidedownwardpressuresongrossmargins.PrincipalcompetitivefactorsimportanttotheCompanyinclude
price, product features, relative price/performance, product quality and reliability, design innovation, a strong thirdparty
softwareandperipheralsecosystem,marketinganddistributioncapability,serviceandsupport,andcorporatereputation.
TheCompanyisfocusedonexpandingitsmarketopportunitiesrelatedtopersonalcomputersandmobilecommunicationand
mediadevices.Thesemarketsarehighlycompetitiveandincludemanylarge,wellfundedandexperiencedparticipants.The
Company expects competition in these markets to intensify significantly as competitors attempt to imitate some of the
featuresoftheCompanysproductsandapplicationswithintheirownproductsor,alternatively,collaboratewitheachotherto
offersolutionsthataremorecompetitivethanthosetheycurrentlyoffer.Thesemarketsarecharacterizedbyaggressivepricing
practices,frequentproductintroductions,evolvingdesignapproachesandtechnologies,rapidadoptionoftechnologicaland
productadvancementsbycompetitors,andpricesensitivityonthepartofconsumersandbusinesses.
TheCompanysdigitalcontentserviceshavefacedsignificantcompetitionfromothercompaniespromotingtheirowndigital
musicandcontentproductsandservices,includingthoseofferingfreepeertopeermusicandvideoservices.
TheCompanysfuturefinancialconditionandoperatingresultsdependontheCompanysabilitytocontinuetodevelopand
offer new innovative products and services in each of the markets in which it competes. The Company believes it offers
superiorinnovationandintegrationoftheentiresolutionincludingthehardware(iPhone,iPad,Mac,andiPod),software(iOS,
OSXandiTunes),onlineservices,anddistributionofdigitalcontentandapplications(iTunesStore,AppStore,iBooksStore
andMacAppStore).SomeoftheCompanyscurrentandpotentialcompetitorshavesubstantialresourcesandmaybeableto
providesuchproductsandservicesatlittleornoprofitorevenatalosstocompetewiththeCompanysofferings.
SupplyofComponents
AlthoughmostcomponentsessentialtotheCompanysbusinessaregenerallyavailablefrommultiplesources,anumberof
componentsarecurrentlyobtainedfromsingleorlimitedsources.Inaddition,theCompanycompetesforvariouscomponents
withotherparticipantsinthemarketsformobilecommunicationandmediadevicesandpersonalcomputers.Therefore,many
componentsusedbytheCompany,includingthosethatareavailablefrommultiplesources,areattimessubjecttoindustry
wideshortageandsignificantpricingfluctuationsthatcanmateriallyadverselyaffecttheCompanysfinancialconditionand
operatingresults.

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TheCompanyusessomecustomcomponentsthatarenotcommonlyusedbyitscompetitors,andnewproductsintroducedby
the Company often utilize custom components available from only one source. When a component or product uses new
technologies,initialcapacityconstraintsmayexistuntilthesuppliersyieldshavematuredormanufacturing capacity has
increased. If the Companys 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 Companys financial condition and
operatingresultscouldbemateriallyadverselyaffected.TheCompanysbusinessandfinancialperformancecouldalsobe
materiallyadverselyaffecteddependingonthetimerequiredtoobtainsufficientquantitiesfromthe original source, or to
identifyandobtainsufficientquantitiesfromanalternativesource.Continuedavailabilityofthesecomponentsatacceptable
prices, or at all, may be affected if those suppliers concentrated on the production of common components instead of
componentscustomizedtomeettheCompanysrequirements.
TheCompanyhasenteredintovariousagreementsforthesupplyofcomponentshowever,therecanbenoguaranteethatthe
Companywillbeabletoextendorrenewtheseagreementsonsimilarterms,oratall.Therefore,theCompanyremainssubject
to significant risks of supply shortages and price increases that can materially adversely affect its financial condition and
operatingresults.
WhiletheCompany has announced plans to begin manufacturing some Macs in the United States, substantially all of the
Companys hardware products are currently manufactured by outsourcing partners that are located primarily in Asia. A
significantconcentration of this manufacturing is currently performed by a small number of outsourcing partners, often in
single locations. Certain of these outsourcing partners are the solesourced suppliers of components and manufacturers for
many of the Companys products. Although the Company works closely with its outsourcing partners on manufacturing
schedules,theCompanysoperatingresultscouldbeadverselyaffectedifitsoutsourcingpartnerswereunabletomeettheir
productioncommitments.TheCompanyspurchasecommitmentstypicallycoveritsrequirementsforperiodsupto150days.
ResearchandDevelopment
BecausetheindustriesinwhichtheCompanycompetesarecharacterizedbyrapidtechnologicaladvances,theCompanys
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
existingproductsandtoexpandtherangeofitsproductofferingsthroughresearchanddevelopment,licensingofintellectual
propertyandacquisitionofthirdpartybusinessesandtechnology.Totalresearchanddevelopmentexpensewas$4.5billion,
$3.4billionand$2.4billionin2013,2012and2011,respectively.
Patents,Trademarks,CopyrightsandLicenses
TheCompanycurrentlyholdsrightstopatentsandcopyrightsrelatingtocertainaspectsofitsiPhone,iPad,MacandiPod
devices,peripherals,softwareandservices.TheCompanyhasregisteredorhasappliedfortrademarksandservicemarksinthe
U.S.andanumberofforeigncountries.AlthoughtheCompanybelievestheownershipofsuchpatents,copyrights,trademarks
andservicemarksisanimportantfactorinitsbusinessandthatitssuccessdoesdependinpartontheownershipthereof,the
Companyreliesprimarilyontheinnovativeskills,technicalcompetenceandmarketingabilitiesofitspersonnel.
TheCompanyregularlyfilespatentapplicationstoprotectinnovationsarisingfromitsresearch,developmentanddesign,and
iscurrently pursuing thousands of patent applications around the world. Over time, the Company has accumulated a large
portfolioofissuedpatentsintheU.S.andworldwide.TheCompanyholdscopyrightsrelatingtocertainaspectsofitsproducts
and services. No single patent or copyright is solely responsible for protecting the Companys products. The Company
believesthedurationofitspatentsisadequaterelativetotheexpectedlivesofitsproducts.

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ManyoftheCompanysproductsaredesignedtoincludeintellectualpropertyobtainedfromthirdparties.Itmaybenecessary
inthefuturetoseekorrenewlicensesrelatingtovariousaspectsofitsproducts,processesandservices.WhiletheCompany
hasgenerallybeenabletoobtainsuchlicensesoncommerciallyreasonabletermsinthepast,thereisnoguaranteethatsuch
licensescouldbeobtainedinthefutureonreasonabletermsoratall.Becauseoftechnologicalchangesintheindustriesin
whichtheCompanycompetes,currentextensivepatentcoverage,andtherapidrateofissuanceofnewpatents,itispossible
that certain components of the Companys products, processes 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
patentsorotherintellectualpropertyrightsofthirdparties.
ForeignandDomesticOperationsandGeographicData
During 2013, the Companys domestic and international net sales accounted for 39% and 61%, respectively, of total net
sales.InformationregardingfinancialdatabygeographicsegmentissetforthinPartII,Item7ofthisForm10Kunderthe
subheadingSegmentOperatingPerformance,andinPartII,Item8ofthisForm10KintheNotestoConsolidatedFinancial
StatementsinNote11,SegmentInformationandGeographicData.
While substantially all of the Companys hardware products are currently manufactured by outsourcing partners that are
located primarily in Asia, the Company also performs final assembly of certain products at its manufacturing facility in
Ireland.ThesupplyandmanufactureofanumberofcomponentsisperformedbysolesourcedoutsourcingpartnersintheU.S.,
AsiaandEurope. Margins on sales of the Companys products in foreign countries, and on sales of products that include
componentsobtainedfromforeignsuppliers,canbeadverselyaffectedbyforeigncurrencyexchangeratefluctuationsandby
international trade regulations, including tariffs and antidumping penalties. Information regarding concentration in the
available sources of supply of materials and products is set forth in Part II, Item 8 of this Form 10K in the Notes to
ConsolidatedFinancialStatementsinNote10,CommitmentsandContingencies.
BusinessSeasonalityandProductIntroductions
TheCompanyhashistoricallyexperiencedhighernetsalesinitsfirstquartercomparedtootherquartersinitsfiscalyeardue
inparttoseasonalholidaydemand.Additionally,newproductintroductionscansignificantlyimpactnetsales,productcosts
andoperatingexpenses.ProductintroductionscanalsoimpacttheCompanysnetsalestoitsindirectdistributionchannelsas
these channels are filled with new product inventory following a product introduction, and often, channel inventory of a
particular product declines as the next related major product launch approaches. Net sales can also be affected when
consumers and distributors anticipate a product introduction. However, neither historical seasonal patterns nor historical
patterns of product introductions should be considered reliable indicators of the Companys future pattern of product
introductions,futurenetsalesorfinancialperformance.
Warranty
TheCompanyoffersalimitedpartsandlaborwarrantyonmostofitshardwareproducts.Thebasicwarrantyperiodistypically
oneyearfromthedateofpurchasebytheoriginalenduser.TheCompanyalsooffersa90daybasicwarrantyforitsservice
partsusedtorepairtheCompanyshardwareproducts.Inaddition,whereavailable,consumersmaypurchaseAPPorAC+,
whichextendsservicecoverageonmanyoftheCompanyshardwareproducts.
Backlog
IntheCompanysexperience,theactualamountofproductbacklogatanyparticulartimeisnotameaningfulindicationofits
future business prospects. In particular, backlog often increases in anticipation of or immediately following new product
introductionsascustomersanticipateshortages.Backlogisoftenreducedoncecustomersbelievetheycanobtainsufficient
supply.Becauseoftheforegoing,backlogshouldnotbeconsideredareliableindicatoroftheCompanysabilitytoachieve
anyparticularlevelofrevenueorfinancialperformance.

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Employees
AsofSeptember28,2013,theCompanyhadapproximately80,300fulltimeequivalentemployeesandanadditional4,100
fulltimeequivalenttemporaryemployeesandcontractors.Approximately42,800ofthetotalfulltimeequivalentemployees
workedintheCompanysRetailsegment.
AvailableInformation
The Companys Annual Report on Form 10K, Quarterly Reports on Form 10Q, Current Reports on Form 8K, and
amendmentstoreportsfiledpursuanttoSections13(a)and15(d)oftheSecuritiesExchangeActof1934,asamended(the
Exchange Act), are filed with the Securities Exchange Commission (the SEC). The Company is subject to the
informationalrequirementsoftheExchangeActandfilesorfurnishesreports,proxystatements,andotherinformationwith
the SEC. Such reports and other information filed by the Company with the SEC are available free of charge on the
Companyswebsiteatinvestor.apple.com/sec.cfmwhensuchreportsareavailableontheSECswebsite.Thepublicmayread
andcopyanymaterialsfiledbytheCompanywiththeSECattheSECsPublicReferenceRoomat100FStreet,NE,Room
1580,Washington,DC20549.ThepublicmayobtaininformationontheoperationofthePublicReferenceRoombycalling
theSECat1800SEC0330.TheSECmaintainsanInternetsitethatcontainsreports,proxyandinformationstatementsand
otherinformationregardingissuersthatfileelectronicallywiththeSECatwww.sec.gov.Thecontentsofthesewebsitesare
notincorporatedintothisfiling.Further,theCompanysreferencestotheURLsforthesewebsitesareintendedtobeinactive
textualreferencesonly.

Item1A.

RiskFactors

The following discussion of risk factors contains forwardlooking statements. These risk factors may be important to
understandinganystatementinthisForm10Korelsewhere.Thefollowinginformationshouldbereadinconjunctionwith
Part II, Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations and the
consolidatedfinancialstatementsandrelatednotesinPartII,Item8,FinancialStatementsandSupplementaryDataofthis
Form10K.
Becauseofthefollowingfactors,aswellasotherfactorsaffectingtheCompanysfinancialconditionandoperatingresults,
pastfinancialperformanceshouldnotbeconsideredtobeareliableindicatoroffutureperformance,andinvestorsshouldnot
usehistoricaltrendstoanticipateresultsortrendsinfutureperiods.
GlobalandregionaleconomicconditionscouldmateriallyadverselyaffecttheCompany.
TheCompanysoperationsandperformancedependsignificantlyonglobalandregionaleconomicconditions.Uncertainty
aboutglobalandregionaleconomicconditionsposesariskasconsumersandbusinessespostponespendinginresponseto
tighter credit, higher unemployment, financial market volatility, government austerity programs, negative financial news,
declinesinincome or asset values and/or other factors. These worldwide and regional economic conditions could have a
material adverse effect on demand for the Companys products and services. Demand also could differ materially from the
Companys expectations because the Company generally raises prices on goods and services sold outside the U.S. to
correspond with the effect of a strengthening of the U.S. dollar. Other factors that could influence worldwide or regional
demandincludeincreasesinfuelandotherenergycosts,conditionsintherealestateandmortgagemarkets,unemployment,
labor and healthcare costs, access to credit, consumer confidence, and other macroeconomic factors affecting consumer
spendingbehavior.TheseandothereconomicfactorscouldmateriallyadverselyaffectdemandfortheCompanysproducts
andservices.
Intheeventoffurtherfinancialturmoilaffectingthebankingsystemandfinancialmarkets,additionalconsolidationofthe
financialservicesindustry,orsignificantfinancialserviceinstitutionfailures,therecouldbeaneworincrementaltightening
inthecreditmarkets,lowliquidity,andextremevolatilityinfixedincome,credit,currency,andequitymarkets.Thiscould
haveanumberofeffectsontheCompanysbusiness,includingtheinsolvencyorfinancialinstabilityofoutsourcingpartners
orsuppliersortheirinabilitytoobtaincreditto

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finance development and/or manufacture products resulting in product delays inability of customers, including channel
partners, to obtain credit to finance purchases of the Companys products failure of derivative counterparties and other
financial institutions and restricting the Companys ability to issue new debt. Other income and expense also could vary
materially from expectations depending on gains or losses realized on the sale or exchange of financial instruments
impairment charges resulting from revaluations of debt and equity securities and other investments interest rates cash
balancesvolatilityinforeignexchangeratesandchangesinfairvalueofderivativeinstruments.Increasedvolatilityinthe
financialmarketsandoveralleconomicuncertaintywouldincreasetheriskoftheactualamountsrealizedinthefutureonthe
Companysfinancialinstrumentsdifferingsignificantlyfromthefairvaluescurrentlyassignedtothem.
GlobalmarketsfortheCompanysproductsandservicesarehighlycompetitiveandsubjecttorapidtechnologicalchange,
andtheCompanymaybeunabletocompeteeffectivelyinthesemarkets.
TheCompanysproductsandservicescompeteinhighlycompetitiveglobalmarketscharacterizedbyaggressivepricecutting
andresultingdownwardpressureongrossmargins,frequentintroductionofnewproducts,shortproductlifecycles,evolving
industrystandards,continualimprovementinproductprice/performancecharacteristics,rapidadoptionoftechnologicaland
productadvancementsbycompetitors,andpricesensitivityonthepartofconsumers.
TheCompanysabilitytocompetesuccessfullydependsheavilyonitsabilitytoensureacontinuingandtimelyintroduction
ofinnovativenewproductsandtechnologiestothemarketplace.TheCompanybelievesitisuniqueinthatitdesignsand
developsnearlytheentiresolutionforitsproducts,includingthehardware,operatingsystem,numeroussoftwareapplications,
andrelatedservices.Asaresult,theCompanymustmakesignificantinvestmentsinresearchanddevelopment.TheCompany
currently holds a significant number of patents and copyrights and has registered and/or has applied to register numerous
patents, trademarks and service marks. In contrast, many of the Companys competitors seek to compete primarily through
aggressive pricing and very low cost structures, and emulating the Companys products and infringing on its intellectual
property. If the Company is unable to continue to develop and sell innovative new products with attractive margins or if
competitors infringe on the Companys intellectual property, the Companys ability to maintain a competitive advantage
couldbeadverselyaffected.
TheCompanymarketscertainmobilecommunicationandmediadevicesbasedontheiOSmobileoperatingsystemandalso
marketsrelatedthirdpartydigitalcontentandapplications.TheCompanyfacessubstantialcompetitioninthesemarketsfrom
companies that have significant technical, marketing, distribution and other resources, as well as established hardware,
softwareanddigitalcontentsupplierrelationshipsandtheCompanyhasaminoritymarketshareinthesmartphonemarket.
Additionally, the Company faces significant price competition as competitors reduce their selling prices and attempt to
imitatetheCompanysproductfeaturesandapplicationswithintheirownproducts or, alternatively, collaborate with each
other to offer solutions that are more competitive than those they currently offer. The Company also competes with
illegitimate ways to obtain thirdparty digital content and applications. Some of the Companys competitors have greater
experience, product breadth and distribution channels than the Company. Because some current and potential competitors
havesubstantialresourcesand/orexperienceandalowercoststructure,theymaybeabletoprovideproductsandservicesat
littleornoprofitorevenataloss.TheCompanyalsoexpectscompetitiontointensifyascompetitorsattempttoimitatethe
Companysapproachtoprovidingcomponentsseamlesslywithintheirindividualofferingsorworkcollaborativelytooffer
integratedsolutions.TheCompanysfinancialconditionandoperatingresultsdependsubstantiallyontheCompanysability
tocontinuallyimproveiOSandiOSdevicesinordertomaintaintheirfunctionalanddesignadvantages.
The Company is the only authorized maker of hardware using OS X, which has a minority market share in the personal
computermarket.Thismarketisdominatedbycomputermakersusingcompetingoperatingsystems,mostnotablyWindows.
Inthemarketforpersonalcomputersandperipherals,theCompanyfacesasignificantnumberofcompetitors,manyofwhich
havebroaderproductlines,lowerpricedproducts,andalargerinstalled

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customer base. Historically, consolidation in this market has resulted in larger competitors. Price competition has been
particularly intense as competitors selling Windowsbased personal computers have aggressively cut prices and lowered
product margins. An increasing number of Internetenabled devices that include software applications and are smaller and
simplerthantraditionalpersonalcomputerscompeteformarketsharewiththeCompanysexistingproducts.TheCompanys
financialconditionandoperatingresultsalsodependonitsabilitytocontinuallyimprovetheMacplatformtomaintainits
functionalanddesignadvantages.
TherecanbenoassurancetheCompanywillbeabletocontinuetoprovideproductsandservicesthatcompeteeffectively.
To remain competitive and stimulate customer demand, the Company must successfully manage frequent product
introductionsandtransitions.
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, and effectively
stimulatecustomerdemandfornewandupgradedproducts.Thesuccessofnewproductintroductionsdependsonanumberof
factorsincluding,butnotlimitedto,timelyandsuccessfulproductdevelopment,marketacceptance,theCompanysabilityto
manage the risks associated with new product production rampup issues, the availability of application software for new
products,theeffectivemanagementofpurchasecommitmentsandinventorylevelsinlinewithanticipatedproductdemand,
theavailabilityofproductsinappropriatequantitiesandcoststomeetanticipateddemand,andtheriskthatnewproducts
may have quality or other defects or deficiencies in the early stages of introduction. Accordingly, the Company cannot
determineinadvancetheultimateeffectofnewproductintroductionsandtransitions.
TheCompanydependsontheperformanceofdistributors,carriersandotherresellers.
TheCompanydistributesitsproductsthroughcellularnetworkcarriers,wholesalers,nationalandregionalretailers,andvalue
addedresellers,manyofwhomdistributeproductsfromcompetingmanufacturers.TheCompanyalsosellsitsproductsand
thirdpartyproductsinmostofitsmajormarketsdirectlytoeducation,enterpriseandgovernmentcustomers,andconsumers
andsmallandmidsizedbusinessesthroughitsonlineandretailstores.
CarriersprovidingcellularnetworkserviceforiPhonetypicallysubsidizeuserspurchasesofthedevice.Thereisnoassurance
thatsuchsubsidieswillbecontinuedatallorinthesameamountsuponrenewaloftheCompanysagreementswiththese
carriersorinagreementstheCompanyentersintowithnewcarriers.
Manyresellershavenarrowoperatingmarginsandhavebeenadverselyaffectedinthepastbyweakeconomic conditions.
Some resellers have perceived the expansion of the Companys direct sales as conflicting with their business interests as
distributorsandresellersoftheCompanysproducts.Suchaperceptioncoulddiscourageresellersfrominvestingresourcesin
the distribution and sale of the Companys products or lead them to limit or cease distribution of those products. The
Companyhasinvestedandwillcontinuetoinvestinprogramstoenhanceresellersales,includingstaffingselectedresellers
storeswithCompanyemployeesandcontractorsandimprovingproductplacementdisplays.Theseprogramscouldrequirea
substantial investment while providing no assurance of return or incremental revenue. The financial condition of these
resellerscouldweaken,theseresellerscouldstopdistributingtheCompanysproducts,oruncertaintyregardingdemandfor
theCompanysproductscouldcauseresellerstoreducetheirorderingandmarketingoftheCompanysproducts.
TheCompanyfacessubstantialinventoryandotherassetriskinadditiontopurchasecommitmentcancellationrisk.
TheCompanyrecordsawritedownforproductandcomponentinventoriesthathavebecomeobsoleteorexceedanticipated
demandornetrealizablevalueandaccruesnecessarycancellationfeereservesforordersofexcessproductsandcomponents.
The Company also reviews its longlived assets, including capital assets held at its suppliers facilities and inventory
prepayments,forimpairmentwhenevereventsorcircumstancesindicatethe

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carryingamountofanassetmaynotberecoverable.IftheCompanydeterminesthatimpairmenthasoccurred,itrecordsa
writedown equal to the amount by which the carrying value of the assets exceeds its fair value. Although the Company
believesitsprovisionsrelatedtoinventory,capitalassets,inventoryprepaymentsandotherassetsandpurchasecommitments
arecurrentlyadequate,noassurancecanbegiventhattheCompanywillnotincuradditionalrelatedchargesgiventherapid
andunpredictablepaceofproductobsolescenceintheindustriesinwhichtheCompanycompetes.
The Company must order components for its products and build inventory in advance of product announcements and
shipments.Consistentwithindustrypractice,componentsarenormallyacquiredthroughacombinationofpurchaseorders,
suppliercontracts,andopenorders,ineachcasebasedonprojecteddemand.Whereappropriate,thepurchasesareapplied
toinventorycomponentprepaymentsthatareoutstandingwiththerespectivesupplier.Purchasecommitmentstypicallycover
forecasted component and manufacturing requirements for periods up to 150 days. Because the Companys markets are
volatile,competitiveandsubjecttorapidtechnologyandpricechanges,thereisarisktheCompanywillforecastincorrectly
and order or produce excess or insufficient amounts of components or products, or not fully utilize firm purchase
commitments.
FutureoperatingresultsdependupontheCompanysabilitytoobtaincomponentsinsufficientquantities.
Because the Company currently obtains components from single or limited sources, the Company is subject to significant
supplyandpricingrisks.Manycomponents,includingthosethatareavailablefrommultiplesources,areattimessubjectto
industrywide shortages and significant commodity pricing fluctuations. While the Company has entered into various
agreementsforthesupplyofcomponents,therecanbenoassurancethattheCompanywillbeabletoextendorrenewthese
agreementsonsimilarterms,oratall.ThefollowoneffectsfromglobaleconomicconditionsontheCompanyssuppliers,
described in Global economic conditions could materially adversely affect the Company above, also could affect the
Companysabilitytoobtaincomponents.Therefore,theCompanyremainssubjecttosignificantrisksofsupplyshortages
andpriceincreases.
TheCompanyandotherparticipantsinthemarketsformobilecommunicationandmediadevicesandpersonalcomputers
alsocompeteforvariouscomponentswithotherindustriesthathaveexperiencedincreaseddemandfortheirproducts.The
Companyusessomecustomcomponentsthatarenotcommontotherestoftheseindustries.TheCompanysnewproducts
oftenutilizecustomcomponentsavailablefromonlyonesource.Whenacomponentorproductusesnewtechnologies,initial
capacityconstraintsmayexistuntilthesuppliersyieldshavematuredormanufacturingcapacityhasincreased.Continued
availabilityofthesecomponentsatacceptableprices,oratall,maybeaffectedifthosesuppliersdecidedtoconcentrateonthe
productionofcommoncomponentsinsteadofcomponentscustomizedtomeettheCompanysrequirements.Thesupplyof
components for a new or existing product could be delayed or constrained, or a key manufacturing vendor could delay
shipmentsofcompletedproductstotheCompany.
TheCompanydependsoncomponentandproductmanufacturingandlogisticalservicesprovidedbyoutsourcingpartners,
manyofwhomarelocatedoutsideoftheU.S.
Substantially all of the Companys manufacturing is performed in whole or in part by a few outsourcing partners located
primarily in Asia. The Company has also outsourced much of its transportation and logistics management. While these
arrangementsmayloweroperatingcosts,theyalsoreducetheCompanysdirectcontroloverproductionanddistribution.Itis
uncertainwhateffectsuchdiminishedcontrolwillhaveonthequalityorquantityofproductsorservices,ortheCompanys
flexibilitytorespondtochangingconditions.Althougharrangementswiththesepartnersmaycontainprovisionsforwarranty
expensereimbursement,theCompanymayremainresponsibletotheconsumerforwarrantyserviceintheeventofproduct
defectsandcouldexperienceanunanticipatedproductdefectorwarrantyliability.WhiletheCompanyreliesonitspartners
toadheretoitssuppliercodeofconduct,materialviolationsofthesuppliercodeofconductcouldoccur.
The Company relies on solesourced outsourcing partners in the U.S., Asia and Europe to supply and manufacture many
criticalcomponents,andonoutsourcingpartnersinAsiaforfinalassemblyofsubstantiallyall

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oftheCompanyshardwareproducts.AnyfailureofthesepartnerstoperformmayhaveanegativeimpactontheCompanys
costorsupplyofcomponentsorfinishedgoods.Inaddition,manufacturingorlogisticsintheselocationsortransittofinal
destinations may be disrupted for a variety of reasons including, but not limited to, natural and manmade disasters,
informationtechnologysystemfailures,commercialdisputes,militaryactionsoreconomic,business,labor,environmental,
publichealth,orpoliticalissues.
TheCompanyhasinvestedinmanufacturingprocessequipment,muchofwhichisheldatcertainofitsoutsourcingpartners,
andhasmadeprepaymentstocertainofitssuppliersassociatedwithlongtermsupplyagreements.Whilethesearrangements
help ensure the supply of components and finished goods, if these outsourcing partners or suppliers experience severe
financialproblemsorotherdisruptionsintheirbusiness,thenetrealizablevalueoftheseassetscouldbenegativelyimpacted.
TheCompanysproductsandservicesmayexperiencequalityproblemsfromtimetotimethatcanresultindecreasedsales
andoperatingmarginandharmtotheCompanysreputation.
TheCompanysellscomplexhardwareandsoftwareproductsandservicesthatcancontaindesignandmanufacturingdefects.
Sophisticatedoperatingsystemsoftwareandapplications,suchasthosesoldbytheCompany,oftencontainbugsthatcan
unexpectedly interfere with the softwares intended operation. The Companys online services may from time to time
experienceoutages,serviceslowdowns,orerrors.DefectsmayalsooccurincomponentsandproductstheCompanypurchases
fromthirdparties.TherecanbenoassurancetheCompanywillbeabletodetectandfixalldefectsinthehardware,software
andservicesitsells.Failuretodosocouldresultinlostrevenue,significantwarrantyandotherexpenses,andharmtothe
Companysreputation.
TheCompanyreliesonaccesstothirdpartydigitalcontent,whichmaynotbeavailabletotheCompanyoncommercially
reasonabletermsoratall.
TheCompanycontractswithnumerousthirdpartiestooffertheirdigitalcontentthroughtheiTunesStore.Thisincludesthe
right to make available music, movies, TV shows and books currently available through the iTunes Store. The licensing
arrangementswiththesethirdpartiesareshorttermanddonotguaranteethecontinuationorrenewalofthesearrangementson
reasonableterms,ifatall.Somethirdpartycontentprovidersanddistributorscurrentlyorinthefuturemayoffercompeting
productsandservices,andcouldtakeactiontomakeitmoredifficultorimpossiblefortheCompanytolicensetheircontent
inthefuture.Othercontentowners,providersordistributorsmayseektolimittheCompanysaccessto,orincreasethecostof,
suchcontent.TheCompanymaybeunabletocontinuetoofferawidevarietyofcontentatreasonablepriceswithacceptable
usage rules, or continue to expand its geographic reach. Failure to obtain the right to make available thirdparty digital
content,ortomakeavailablesuchcontentoncommerciallyreasonableterms,couldhaveamaterialadverseimpactonthe
Companysfinancialconditionandoperatingresults.
Some thirdparty digital content providers require the Company to provide digital rights management and other security
solutions.Ifrequirementschange,theCompanymayhavetodeveloporlicensenewtechnologytoprovidethesesolutions.
There is no assurance the Company will be able to develop or license such solutions at a reasonable cost and in a timely
manner.Inaddition,certaincountrieshavepassedormayproposeandadoptlegislationthatwouldforcetheCompanyto
licenseitsdigitalrightsmanagement,whichcouldlessentheprotectionofcontentandsubjectittopiracyandalsocould
negativelyaffectarrangementswiththeCompanyscontentproviders.
TheCompanysfutureperformancedependsinpartonsupportfromthirdpartysoftwaredevelopers.
The Company believes decisions by customers to purchase its hardware products depend in part on the availability of
thirdpartysoftwareapplicationsandservices.Thereisnoassurancethatthirdpartydeveloperswillcontinuetodevelopand
maintainsoftwareapplicationsandservicesfortheCompanysproducts.Ifthirdpartysoftwareapplicationsandservicescease
tobedevelopedandmaintainedfortheCompanysproducts,customersmaychoosenottobuytheCompanysproducts.

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With respect to its Mac products, the Company believes the availability of thirdparty software applications and services
dependsinpartonthedevelopersperceptionandanalysisoftherelativebenefitsofdeveloping,maintaining,andupgrading
suchsoftwarefortheCompanysproductscomparedtoWindowsbasedproducts.Thisanalysismaybebasedonfactorssuch
asthemarketpositionoftheCompanyanditsproducts,theanticipatedrevenuethatmaybegenerated,continuedgrowthof
Macsales,andthecostsofdevelopingsuchapplicationsandservices.IftheCompanysminorityshareoftheglobalpersonal
computer market causes developers to question the Companys prospects, developers could be less inclined to develop or
upgrade software for the Companys products and more inclined to devote their resources to developing and upgrading
softwareforthelargerWindowsmarket.
WithrespecttoiOSdevices,theCompanyreliesonthecontinuedavailabilityanddevelopmentofcompellingandinnovative
software applications, which are distributed through a single distribution channel, the App Store. The absence of multiple
distributionchannels,whichareavailableforcompetingplatforms,maylimittheavailabilityandacceptanceofthirdparty
applicationsbytheCompanyscustomers,therebycausingdeveloperstoreduceorcurtaildevelopmentfortheiOSplatform.
Inaddition,iOSdevicesaresubjecttorapidtechnologicalchange,and,ifthirdpartydevelopersareunabletoorchoosenotto
keep up with this pace of change, thirdparty applications might not successfully operate and may result in dissatisfied
customers.AswithapplicationsfortheCompanysMacproducts,theavailabilityanddevelopmentoftheseapplicationsalso
dependondevelopersperceptionsandanalysisoftherelativebenefitsofdevelopingsoftwarefortheCompanysproducts
rather than its competitors platforms, such as Android. If developers focus their efforts on these competing platforms, the
availabilityandqualityofapplicationsfortheCompanysiOSdevicesmaysuffer.
The Company relies on access to thirdparty intellectual property, which may not be available to the Company on
commerciallyreasonabletermsoratall.
ManyoftheCompanysproductsincludethirdpartyintellectualproperty,whichrequireslicensesfromthosethirdparties.
Basedonpastexperienceandindustrypractice,theCompanybelievessuchlicensesgenerallycanbeobtainedonreasonable
terms.Thereis,however,noassurancethat the necessary licenses can be obtained on acceptable terms or at all. Failure to
obtaintherighttousethirdpartyintellectualproperty,ortousesuchintellectualpropertyoncommerciallyreasonableterms,
couldprecludetheCompanyfromselling certain products or otherwise have a material adverse impact on the Companys
financialconditionandoperatingresults.
The Company could be impacted by unfavorable results of legal proceedings, such as being found to have infringed on
intellectualpropertyrights.
TheCompanyissubjecttovariouslegalproceedingsandclaimsthathavenotyetbeenfullyresolvedandthathavearisenin
theordinarycourseofbusiness,andadditionalclaimsmayariseinthefuture.
Forexample,technologycompanies,includingmanyoftheCompanyscompetitors,frequentlyenterintolitigationbasedon
allegationsofpatentinfringementorotherviolationsofintellectualpropertyrights.Inaddition,patentholdingcompanies
seektomonetizepatentstheyhavepurchasedorotherwiseobtained.AstheCompanyhasgrown,theintellectualproperty
rightsclaimsagainstithaveincreasedandmaycontinuetoincrease.Inparticular,theCompanyscellularenabledproducts
competewithmobilecommunicationandmediadevicecompaniesthatholdsignificantpatentportfolios,andthenumberof
patentclaimsagainsttheCompanyhassignificantlyincreased.TheCompanyisvigorouslydefendinginfringementactionsin
courts in a number of U.S. jurisdictions and before the U.S. International Trade Commission, as well as internationally in
EuropeandAsia.Theplaintiffsintheseactionsfrequentlyseekinjunctionsandsubstantialdamages.
Regardlessofthescopeorvalidityofsuchpatentsorotherintellectualpropertyrights,orthemeritsofanyclaimsbypotential
oractuallitigants,theCompanymayhavetoengageinprotractedlitigation.IftheCompanyisfoundtoinfringeoneormore
patents or other intellectual property rights, regardless of whether it can develop noninfringing technology, it may be
requiredtopaysubstantialdamagesorroyaltiestoathirdparty,oritmaybesubjecttoatemporaryorpermanentinjunction
prohibitingtheCompanyfrommarketingorsellingcertainproducts.

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Incertaincases,theCompanymayconsiderthedesirabilityofenteringintolicensingagreements,althoughnoassurancecan
be given that such licenses can be obtained on acceptable terms or that litigation will not occur. These licenses may also
significantlyincreasetheCompanysoperatingexpenses.
Regardless of the merit of particular claims, litigation may be expensive, timeconsuming, disruptive to the Companys
operations,anddistractingtomanagement.Inrecognitionoftheseconsiderations,theCompanymayenterintoarrangements
tosettlelitigation.
Inmanagementsopinion,thereisnotatleastareasonablepossibilitytheCompanymayhaveincurredamaterialloss,ora
materiallossinexcessofarecordedaccrual,withrespecttolosscontingencies,includingmattersrelatedtoinfringementof
intellectualpropertyrights.However,theoutcomeoflitigationisinherentlyuncertain.
Althoughmanagementconsidersthelikelihoodofsuchanoutcometoberemote,ifoneormorelegalmatterswereresolved
againsttheCompanyinareportingperiodforamountsinexcessofmanagementsexpectations,theCompanysconsolidated
financialstatementsforthatreportingperiodcouldbemateriallyadverselyaffected.Further,suchanoutcomecouldresultin
significant compensatory, punitive or trebled monetary damages, disgorgement of revenue or profits, remedial corporate
measuresorinjunctivereliefagainsttheCompanythatcouldmateriallyadverselyaffectitsfinancialconditionandoperating
results.
The Company is subject to laws and regulations worldwide, changes to which could increase the Companys costs and
individuallyorintheaggregateadverselyaffecttheCompanysbusiness.
The Company is subject to laws and regulations affecting its domestic and international operations in a number of
areas.TheseU.S.andforeignlawsandregulationsaffecttheCompanysactivitiesincluding,butnotlimitedto,areasoflabor,
advertising, digital content, consumer protection, real estate, billing, ecommerce, promotions, quality of services,
telecommunications, mobile communications and media, television, intellectual property ownership and infringement, tax,
import and export requirements, anticorruption, foreign exchange controls and cash repatriation restrictions, data privacy
requirements,anticompetition,environmental,health,andsafety.
Bywayofexample,lawsandregulationsrelatedtomobilecommunicationsandmediadevicesinthemanyjurisdictionsin
whichtheCompanyoperatesareextensiveandsubjecttochange.Suchchangescouldinclude,amongothers,restrictionson
theproduction,manufacture,distribution,anduseofdevices,lockingdevicestoacarriersnetwork,ormandatingtheuseof
devicesonmorethanonecarriersnetwork.Thesedevicesarealsosubjecttocertificationandregulationbygovernmentaland
standardization bodies, as well as by cellular network carriers for use on their networks. These certification processes are
extensiveandtimeconsuming,andcouldresultinadditionaltestingrequirements,productmodifications,delaysinproduct
shipmentdates,orprecludetheCompanyfromsellingcertainproducts.
Compliance with these laws, regulations and similar requirements may be onerous and expensive, and they may be
inconsistentfromjurisdictiontojurisdiction,furtherincreasingthecostofcomplianceanddoingbusiness.Anysuchcosts,
whichmayriseinthefutureasaresultofchangesintheselawsandregulationsorintheirinterpretationcouldindividuallyor
in the aggregate make the Companys products and services less attractive to the Companys customers, delay the
introduction of new products in one or more regions, or cause the Company to change or limit its business practices. The
Companyhasimplementedpoliciesandproceduresdesignedtoensurecompliancewithapplicablelawsandregulations,but
therecanbenoassurancethattheCompanysemployees,contractors,oragentswillnotviolatesuchlawsandregulationsor
theCompanyspoliciesandprocedures.
TheCompanysbusinessissubjecttotherisksofinternationaloperations.
The Company derives a significant portion of its revenue and earnings from its international operations. Compliance with
applicable U.S. and foreign laws and regulations, such as import and export requirements, anticorruption laws, tax laws,
foreignexchangecontrolsandcashrepatriationrestrictions,dataprivacyrequirements,

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environmental laws, labor laws, and anticompetition regulations, increases the costs of doing business in foreign
jurisdictions.AlthoughtheCompanyhasimplementedpoliciesandprocedurestocomplywiththeselawsandregulations,a
violationbytheCompanysemployees,contractors,oragentscouldneverthelessoccur.
TheCompanyalsocouldbesignificantlyaffectedbyotherrisksassociatedwithinternationalactivitiesincluding,butnot
limitedto,economicandlaborconditions,increasedduties,taxesandothercosts,andpoliticalinstability.Marginsonsales
of the Companys products in foreign countries, and on sales of products that include components obtained from foreign
suppliers,couldbemateriallyadverselyaffectedbyinternationaltraderegulations,includingduties,tariffsandantidumping
penalties. The Company is also exposed to credit and collectability risk on its trade receivables with customers in certain
internationalmarkets.TherecanbenoassurancetheCompanycaneffectivelylimititscreditriskandavoidlosses.
The Companys Retail segment has required and will continue to require a substantial investment and commitment of
resourcesandissubjecttonumerousrisksanduncertainties.
The Companys retail stores have required substantial investment in equipment and leasehold improvements, information
systems, inventory and personnel. The Company also has entered into substantial operating lease commitments for retail
space.Certainstoreshavebeendesignedandbuilttoserveashighprofilevenuestopromotebrandawarenessandserveas
vehiclesforcorporatesalesandmarketingactivities.Becauseoftheiruniquedesignelements,locationsandsize,thesestores
requiresubstantiallymoreinvestmentthantheCompanysmoretypicalretailstores.Duetothehighcoststructureassociated
withtheRetailsegment,adeclineinsalesortheclosureorpoorperformanceofindividualormultiplestorescouldresultin
significantleaseterminationcosts,writeoffsofequipmentandleaseholdimprovements,andseverancecosts.
Manyfactors unique to retail operations, some of which are beyond the Companys control, pose risks and uncertainties.
These risks and uncertainties include, but are not limited to, macroeconomic factors that could have an adverse effect on
generalretailactivity,aswellastheCompanysinabilitytomanagecostsassociatedwithstoreconstructionandoperation,
the Companys failure to manage relationships with its existing retail channel partners, more challenging environments in
managingretailoperationsoutsidetheU.S.,costsassociatedwithunanticipatedfluctuationsinthevalueofretailinventory,
andtheCompanysinabilitytoobtainandrenewleasesinqualityretaillocationsatareasonablecost.
InvestmentinnewbusinessstrategiesandacquisitionscoulddisrupttheCompanysongoingbusinessandpresentrisksnot
originallycontemplated.
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
expectedliabilitiesandexpenses,inadequatereturnofcapital,andunidentifiedissuesnotdiscoveredintheCompanysdue
diligence.Thesenewventuresareinherentlyriskyandmaynotbesuccessful.
TheCompanysbusinessandreputationmaybeimpactedbyinformationtechnologysystemfailuresornetworkdisruptions.
TheCompanymaybesubjecttoinformationtechnologysystemfailuresandnetworkdisruptions.Thesemaybecausedby
natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses,
physicalorelectronicbreakins,orothereventsordisruptions.Systemredundancymaybeineffectiveorinadequate,andthe
Companysdisasterrecoveryplanningmaynotbesufficientforalleventualities.Suchfailuresordisruptionscouldprevent
accesstotheCompanysonlinestoresandservices,precluderetailstoretransactions,compromiseCompanyorcustomerdata,
andresultindelayedorcancelledorders.Systemfailuresanddisruptionscouldalsoimpedethemanufacturingandshipping
ofproducts,deliveryofonlineservices,transactionsprocessingandfinancialreporting.

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There may be breaches of the Companys information technology systems that materially damage business partner and
customerrelationships,curtailorotherwiseadverselyimpactaccesstoonlinestoresandservices,orsubjecttheCompanyto
significantreputational,financial,legal,andoperationalconsequences.
The Companys business requires it to use and store customer, employee, and business partner personally identifiable
information(PII).Thismayinclude,amongotherinformation,names,addresses,phonenumbers,emailaddresses,contact
preferences,taxidentificationnumbers,andpaymentaccountinformation.Althoughmaliciousattackstogainaccessto PII
affectmanycompaniesacrossvariousindustries,theCompanyisatarelativelygreaterriskofbeingtargetedbecauseofits
highprofileandtheamountofPIIitmanages.
TheCompanyrequiresusernamesandpasswordsinordertoaccessitsinformationtechnologysystems.TheCompanyalso
uses encryption and authentication technologies to secure the transmission and storage of data and prevent access to
Company data or accounts. As with all companies, these security measures are subject to thirdparty security breaches,
employeeerror,malfeasance,faultypasswordmanagement,orotherirregularities.Forexample,thirdpartiesmayattemptto
fraudulentlyinduceemployeesorcustomersintodisclosingusernames,passwordsorothersensitiveinformation,whichmay
inturnbeusedtoaccesstheCompanysinformationtechnologysystems.TohelpprotectcustomersandtheCompany,the
Companymonitorsaccountsandsystemsforunusualactivityandmayfreezeaccountsundersuspiciouscircumstances,which
mayresultinthedelayorlossofcustomerorders.
TheCompanydevotessignificantresourcestonetworksecurity,dataencryption,andothersecuritymeasurestoprotectits
systemsanddata,butthesesecuritymeasurescannotprovideabsolutesecurity.TotheextenttheCompanywastoexperience
abreachofitssystemsandwasunabletoprotectsensitivedata,suchabreachcouldmateriallydamagebusinesspartnerand
customerrelationships,andcurtailorotherwiseadverselyimpactaccesstoonlinestoresandservices.Moreover,ifacomputer
security breach affects the Companys systems or results in the unauthorized release of PII, the Companys reputation and
brandcouldbemateriallydamaged,useoftheCompanysproductsandservicescoulddecrease,andtheCompanycouldbe
exposedtoariskoflossorlitigationandpossibleliability.
TheCompanysbusinessissubjecttoavarietyofU.S.andinternationallaws,rules,policiesandotherobligationsregarding
dataprotection.
TheCompanyissubjecttofederal,stateandinternationallawsrelatingtothecollection,use,retention,securityandtransfer
ofPII.Inmanycases,theselawsapplynotonlytothirdpartytransactions,butalsototransfersofinformationbetweenthe
Company and its subsidiaries, and among the Company, its subsidiaries and other parties with which the Company has
commercial relations. Several jurisdictions have passed laws in this area, and other jurisdictions are considering imposing
additionalrestrictions.Theselawscontinuetodevelopandmaybeinconsistentfromjurisdictiontojurisdiction.Complying
with emerging and changing international requirements may cause the Company to incur substantial costs or require the
Companytochangeitsbusinesspractices.Noncompliancecouldresultinpenaltiesorsignificantlegalliability.
TheCompanysprivacypolicyandrelatedpracticesconcerningtheuseanddisclosureofdataarepostedonitswebsite.Any
failure by the Company, its suppliers or other parties with whom the Company does business to comply with its posted
privacypolicyorwithotherfederal,stateorinternationalprivacyrelatedordataprotectionlawsandregulationscouldresult
inproceedingsagainsttheCompanybygovernmentalentitiesorothers.
The Company is also subject to payment card association rules and obligations under its contracts with payment card
processors.Undertheserulesandobligations,ifinformationiscompromised,theCompanycouldbeliabletopaymentcard
issuers for associated expenses and penalties. In addition, if the Company fails to follow payment card industry security
standards, even if no customer information is compromised, the Company could incur significant fines or experience a
significantincreaseinpaymentcardtransactioncosts.

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TheCompanyssuccessdependslargelyonthecontinuedserviceandavailabilityofkeypersonnel.
Much of the Companys 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
Companyskeypersonnelarelocated.
TheCompanysbusinessmaybeimpactedbypoliticalevents,war,terrorism,publichealthissues,naturaldisastersandother
circumstances.
War,terrorism,geopoliticaluncertainties,publichealthissues,andotherbusinessinterruptionshavecausedandcouldcause
damageordisruptiontointernationalcommerceandtheglobaleconomy,andthuscouldhaveamaterialadverseeffectonthe
Company, its suppliers, logistics providers, manufacturing vendors and customers, including channel partners. The
Companysbusinessoperationsaresubjecttointerruptionby,amongothers,naturaldisasters,fire,powershortages,nuclear
powerplantaccidents,terroristattacksandotherhostileacts,labordisputes,publichealthissues,andothereventsbeyondits
control.SucheventscoulddecreasedemandfortheCompanysproducts,makeitdifficultorimpossiblefortheCompanyto
makeanddeliverproductstoitscustomers,includingchannelpartners,ortoreceivecomponentsfromitssuppliers,andcreate
delaysandinefficienciesintheCompanyssupplychain.Shouldmajorpublichealthissues,includingpandemics,arise,the
Companycouldbeadverselyaffectedbymorestringentemployeetravelrestrictions,additionallimitationsinfreightservices,
governmentalactionslimitingthemovementofproductsbetweenregions,delaysinproductionrampsofnewproducts,and
disruptions in the operations of the Companys manufacturing vendors and component suppliers. The majority of the
Companysresearchanddevelopmentactivities,itscorporateheadquarters,informationtechnologysystems,andothercritical
businessoperations,includingcertaincomponentsuppliersandmanufacturingvendors,areinlocationsthatcouldbeaffected
bynaturaldisasters.Intheeventofanaturaldisaster,theCompanycouldincursignificantlosses,requiresubstantialrecovery
timeandexperiencesignificantexpendituresinordertoresumeoperations.
TheCompanyexpectsitsquarterlyrevenueandoperatingresultstofluctuate.
TheCompanysprofitmarginsvaryacrossitsproductsanddistributionchannels.TheCompanyssoftware,accessories,and
service and support contracts generally have higher gross margins than certain of the Companys other products. Gross
margins on the Companys hardware products vary across product lines and can change over time as a result of product
transitions,pricingandconfigurationchanges,andcomponent,warranty,andothercostfluctuations.TheCompanysdirect
sales generally have higher associated gross margins than its indirect sales through its channel partners. In addition, the
Companys gross margin and operating margin percentages, as well as overall profitability, may be materially adversely
impactedasaresultofashiftinproduct,geographicorchannelmix,componentcostincreases,thestrengtheningU.S.dollar,
pricecompetition,ortheintroductionofnewproducts,includingthosethathavehighercoststructureswithflatorreduced
pricing.
TheCompanyhastypicallyexperiencedhighernetsalesinitsfirstquartercomparedtootherquartersdueinparttoseasonal
holiday demand. Additionally, new product introductions can significantly impact net sales, product costs and operating
expenses. The Company could be subject to unexpected developments late in a quarter, such as lowerthananticipated
demandfortheCompanysproducts,issueswithnewproductintroductions,aninternalsystemsfailure,orfailureofoneofthe
Companyslogistics,componentssupply,ormanufacturingpartners.
TheCompanysstockpriceissubjecttovolatility.
The Companys stock continues to experience substantial price volatility. Additionally, the Company, the technology
industry,andthestockmarketasawholehaveexperiencedextremestockpriceandvolumefluctuationsthathaveaffected
stockpricesinwaysthatmayhavebeenunrelatedtothesecompaniesoperatingperformance.Pricevolatilityoveragiven
periodmaycausetheaveragepriceatwhichtheCompanyrepurchasesitsownstocktoexceedthestockspriceatagiven
pointintime.TheCompanybelievesitsstockpricereflects

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expectationsoffuturegrowthandprofitability.TheCompanyalsobelievesitsstockpricereflectsexpectationsthatitscash
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 Companys Board of Directors, and the Companys share repurchase
programdoesnotobligateittoacquireanyspecificnumberofshares.IftheCompanyfailstomeetanyoftheseexpectations
relatedtofuturegrowth,profitability,dividends,sharerepurchasesorothermarketexpectationsitsstockpricemaydecline
significantly,whichcouldhaveamaterialadverseimpactoninvestorconfidenceandemployeeretention.
TheCompanysfinancialperformanceissubjecttorisksassociatedwithchangesinthevalueoftheU.S.dollarversuslocal
currencies.
TheCompanysprimaryexposuretomovementsinforeigncurrencyexchangeratesrelatestononU.S.dollardenominated
salesandoperatingexpensesworldwide.WeakeningofforeigncurrenciesrelativetotheU.S.dollaradverselyaffectstheU.S.
dollarvalueoftheCompanysforeigncurrencydenominatedsalesandearnings,andgenerallyleadstheCompanytoraise
internationalpricing,potentiallyreducingdemandfortheCompanysproducts.MarginsonsalesoftheCompanysproducts
inforeigncountries,andonsalesofproductsthatincludecomponentsobtainedfromforeignsuppliers,couldbematerially
adverselyaffectedbyforeigncurrencyexchangeratefluctuations.Insomecircumstances,forcompetitiveorotherreasons,the
Companymaydecidenottoraiselocalpricestofullyoffsetthedollarsstrengthening,oratall,whichwouldadverselyaffect
the U.S. dollar value of the Companys foreign currency denominated sales and earnings. Conversely, a strengthening of
foreigncurrenciesrelativetotheU.S.dollar,whilegenerallybeneficialtotheCompanysforeigncurrencydenominatedsales
and earnings, could cause the Company to reduce international pricing and incur losses on its foreign currency derivative
instruments,therebylimitingthebenefit.Additionally,strengtheningofforeigncurrenciesmayalsoincreasetheCompanys
costofproductcomponentsdenominatedinthosecurrencies,thusadverselyaffectinggrossmargins.
TheCompanyusesderivativeinstruments,suchasforeigncurrencyforwardandoptioncontracts,tohedgecertainexposures
to fluctuations in foreign currency exchange rates. The use of such hedging activities may not offset any or more than a
portionoftheadversefinancialeffectsofunfavorablemovementsinforeignexchangeratesoverthelimitedtimethehedges
areinplace.
TheCompanyisexposedtocreditriskandfluctuationsinthemarketvaluesofitsinvestmentportfolio.
Given the global nature of its business, the Company has both domestic and international investments. Credit ratings and
pricingoftheCompanysinvestmentscanbenegativelyaffectedbyliquidity,creditdeterioration,financialresults,economic
risk,politicalrisk,sovereignriskorotherfactors.Asaresult,thevalueandliquidityoftheCompanyscash,cashequivalents
and marketable securities may fluctuate substantially. Therefore, although the Company has not realized any significant
lossesonitscash,cashequivalentsandmarketablesecurities,futurefluctuationsintheirvaluecouldresultinasignificant
realizedloss.
The Company is exposed to credit risk on its trade accounts receivable, vendor nontrade receivables and prepayments
relatedtolongtermsupplyagreements,andthisriskisheightenedduringperiodswheneconomicconditionsworsen.
The Company distributes its products through thirdparty cellular network carriers, wholesalers, retailers and valueadded
resellers. A substantial majority of the Companys outstanding trade receivables are not covered by collateral or credit
insurance.TheCompanysexposuretocreditandcollectabilityriskonitstradereceivablesishigherincertaininternational
marketsanditsabilitytomitigatesuchrisksmaybelimited.TheCompanyalsohasunsecuredvendornontradereceivables
resulting from purchases of components by outsourcing partners and other vendors that manufacture subassemblies or
assemblefinalproductsfortheCompany.Inaddition,theCompanyhasmadeprepaymentsassociatedwithlongtermsupply
agreementstosecuresupplyofinventorycomponents.AsofSeptember28,2013,asignificantportionoftheCompanystrade
receivableswas

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TableofContents

concentrated within cellular network carriers, and its nontrade receivables and prepayments related to longterm supply
agreementswereconcentratedamongafewindividualvendorslocatedprimarilyinAsia.WhiletheCompanyhasprocedures
tomonitorandlimitexposuretocreditriskonitstradeandvendornontradereceivablesaswellaslongtermprepayments,
therecanbenoassurancesuchprocedureswilleffectivelylimititscreditriskandavoidlosses.
The Company could be subject to changes in its tax rates, the adoption of new U.S. or international tax legislation or
exposuretoadditionaltaxliabilities.
TheCompanyissubjecttotaxesintheU.S.andnumerous foreign jurisdictions, including Ireland, where a number of the
Companys subsidiaries are organized. Due to economic and political conditions, tax rates in various jurisdictions may be
subjecttosignificantchange.TheCompanysfutureeffectivetaxratescouldbeaffectedbychangesinthemixofearningsin
countrieswithdifferingstatutorytaxrates,changesinthevaluationofdeferredtaxassetsandliabilities,orchangesintax
lawsortheirinterpretation,includingintheU.S.andIreland.TheCompanyisalsosubjecttotheexaminationofitstaxreturns
and other tax matters by the Internal Revenue Service and other tax authorities and governmental bodies. The Company
regularlyassessesthelikelihoodofanadverseoutcomeresultingfromtheseexaminationstodeterminetheadequacyofits
provisionfortaxes.Therecanbenoassuranceastotheoutcomeoftheseexaminations.IftheCompanyseffectivetaxrates
weretoincrease,particularlyintheU.S.orIreland,oriftheultimatedeterminationoftheCompanystaxesowedisforan
amountinexcessofamountspreviouslyaccrued,theCompanysoperatingresults,cashflows,andfinancialconditioncould
beadverselyaffected.

Item1B.

UnresolvedStaffComments

None.

Item2.

Properties

TheCompanysheadquartersarelocatedinCupertino,California.AsofSeptember28,2013,theCompanyownedorleased
approximately 19.1 million square feet of building space, primarily in the U.S., and to a lesser extent, in Europe, Japan,
Canada,andtheAsiaPacificregions.Ofthatamountapproximately12.0millionsquarefeetwasleasedbuildingspace,which
includes approximately 4.6 million square feet related to retail store space. Of the Companys owned building space,
approximately2.6millionsquarefeetthatislocatedinCupertino,Californiawillbedemolishedtobuildasecondcorporate
campus.Additionally,theCompanyownsatotalof1,428acresoflandinvariouslocations.
AsofSeptember28,2013,theCompanyownedamanufacturingfacilityinCork,Irelandthatalsohousedacustomersupport
call center and facilities in Elk Grove, California that included warehousing and distribution operations and a customer
supportcallcenter.TheCompanyalsoownedlandinAustin,Texaswhereitisbuildingofficespaceandacustomersupport
callcenter.Inaddition,theCompanyownedfacilitiesforresearchanddevelopmentandcorporatefunctionsinCupertino,
California,includinglandforthefuturedevelopmentoftheCompanyssecondcorporatecampus.TheCompanyalsoowned
data centers in Newark, California Maiden, North Carolina Prineville, Oregon and Reno, Nevada. Outside the U.S., the
Companyownedadditionalfacilitiesforvariouspurposes.
TheCompanybelievesitsexistingfacilitiesandequipment,whichareusedbyalloperatingsegments,areingoodoperating
condition and are suitable for the conduct of its business. The Company has invested in internal capacity and strategic
relationshipswithoutsidemanufacturingvendorsandcontinuestomakeinvestmentsincapitalequipmentasneededtomeet
anticipateddemandforitsproducts.

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TableofContents

Item3.

LegalProceedings

The Company is subject to the various legal proceedings and claims discussed below as well as certain other legal
proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. In the
opinionofmanagement,therewasnotatleastareasonablepossibilitytheCompanymayhaveincurredamaterialloss,ora
materiallossinexcessofarecordedaccrual,withrespecttolosscontingencies.However,theoutcomeoflegalproceedings
andclaimsbroughtagainsttheCompanyissubjecttosignificantuncertainty.Therefore,althoughmanagementconsidersthe
likelihoodofsuchanoutcometoberemote,ifoneormoreoftheselegalmatterswereresolvedagainsttheCompanyina
reportingperiodforamountsinexcessofmanagementsexpectations,theCompanysconsolidatedfinancialstatementsfor
that reporting period could be materially adversely affected. See the risk factor The Company could be impacted by
unfavorableresultsoflegalproceedings,suchasbeingfoundtohaveinfringedonintellectualpropertyrightsinPartI,
Item1AofthisForm10KundertheheadingRiskFactors.TheCompanysettledcertainmattersduringthefourthquarterof
2013thatdidnotindividuallyorintheaggregatehaveamaterialimpactontheCompanysfinancialconditionandresultsof
operations.
The Apple iPod iTunes Antitrust Litigation (formerly Charoensak v. Apple Computer, Inc. and Tucker v. Apple Computer,
Inc.)Somersv.AppleInc.
TheserelatedcaseswerefiledonJanuary3,2005,July21,2006andDecember31,2007intheUnitedStatesDistrictCourtfor
theNorthernDistrictofCaliforniaonbehalfofapurportedclassofdirectandindirectpurchasersofiPodsandiTunesStore
content,allegingvariousclaimsincludingallegedunlawfultyingofmusicandvideopurchasedontheiTunesStorewiththe
purchaseofiPodsandunlawfulacquisitionormaintenanceofmonopolymarketpowerunder1and2oftheShermanAct,
the Cartwright Act, California Business & Professions Code 17200 (unfair competition), the California Consumer Legal
RemediesActandCaliforniamonopolizationlaw.Plaintiffsareseekingunspecifiedcompensatoryandpunitivedamagesfor
the class, treble damages, injunctive relief, disgorgement of revenues and/or profits and attorneys fees. Plaintiffs are also
seekingdigitalrightsmanagementfreeversionsofanysongsdownloadedfromiTunesoranorderrequiringtheCompanyto
licenseitsdigitalrightsmanagementtoallcompetingmusicplayers.OnSeptember3,2013,theU.S.NinthCircuitCourtof
Appeals upheld the District Courts dismissal of the indirect purchaser case, Somers v. Apple Inc. The remaining direct
purchasercasesarecurrentlypending.
AppleeBooksAntitrustLitigation(UnitedStatesofAmericav.AppleInc.,etal.)
OnApril11,2012,theU.S.DepartmentofJustice(theDOJ)filedacivilantitrustactionagainsttheCompanyandfivemajor
book publishers in the U.S. District Court for the Southern District of New York, alleging an unreasonable restraint of
interstatetradeandcommerceinviolationof1oftheShermanActandseeking,amongotherthings,injunctiverelief, the
DistrictCourtsdeclarationthattheCompanysagencyagreementswiththepublishersarenullandvoidand/ortheDistrict
Courts reformation of such agreements. The DOJs complaint asserted, among other things, that the decision by the five
publisherstoshifttoanagencymodeltoselleBooksandtheiragreementswiththeCompanywereanattempttoraise,fix
andstabilizeretailebookprices,toendpricecompetitionamongebookretailers,andtolimitretailpricecompetition.The
CompanyfiledaresponsetotheDOJcomplaintinlateMay2012,denyingtheDOJsallegations.Allfivepublishersreached
asettlementwiththeDOJ,whichrequiredthepublisherstoterminatetheiragreementswiththeCompanyandrenegotiatenew
agreementspursuanttothetermsoftheirsettlementwiththeDOJ.OnJuly10,2013,theDistrictCourtfound,followinga
benchtrial,thattheCompanyconspiredtorestraintradeinviolationof1oftheShermanActandrelevantstatestatutesto
theextentthoselawsarecongruentwith1oftheShermanAct.TheDistrictCourtenteredapermanentinjunction,which
tookeffectonOctober6,2013andwillbeineffectforfiveyearsunlessthejudgmentisoverturnedonappeal.Adamagestrial
issetforMay2014.TheCompanyhasappealedtheDistrictCourtsdecision.

Item4.

MineSafetyDisclosures

Notapplicable.

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PARTII

Item5.

MarketforRegistrantsCommonEquity,RelatedStockholderMattersandIssuerPurchasesofEquity
Securities

TheCompanyscommonstockistradedontheNASDAQStockMarketLLCunderthesymbolAAPL.
PriceRangeofCommonStock
Thepricerangepershareofcommonstockpresentedbelowrepresentsthehighestandlowestintradaysalespricesforthe
CompanyscommonstockontheNASDAQStockMarketLLCduringeachquarterofthetwomostrecentyears.

2013pricerangepershare

FourthQuarter

ThirdQuarter

SecondQuarter

FirstQuarter

$ 513.74$401.22 $ 465.75$385.10 $ 555.00$419.00 $ 676.75$501.23

$ 705.07$570.00 $ 644.00$522.18 $ 621.45$409.00 $ 426.70$354.24

2012pricerangepershare

Holders
AsofOctober18,2013,therewere24,710shareholdersofrecord.
Dividends
TheCompanypaidatotalof$10.5billionand$2.5billionindividendsduring2013and2012,respectively,andexpectsto
payquarterlydividendsof$3.05percommonshareeachquarter,subjecttodeclarationbytheBoardofDirectors.
PurchasesofEquitySecuritiesbytheIssuerandAffiliatedPurchasers
SharerepurchaseactivityduringthethreemonthsendedSeptember28,2013wasasfollows(inmillions,exceptnumberof
shares,whicharereflectedinthousands,andpershareamounts):

Total

Q4FiscalPeriods

Dollar

Shares

Valueof

Purchased

SharesThat

asPartof

MayYetBe

Total

Average

Publicly

Purchased

Numberof

Price

Announced

Underthe

Shares

PaidPer

Plansor

Plansor

Purchased

Share

2,193

$451.49

2,193

7,061

$487.17

7,061

1,184

$481.33

1,184

10,438

June30,2013toAugust3,2013
August4,2013toAugust31,2013
September1,2013toSeptember28,2013

Total

(a)

Approximate

Numberof

Programs

Programs(a)

$ 37,050

In 2012, the Companys Board of Directors authorized a program to repurchase up to $10 billion of the Companys
common stock beginning in 2013. In April 2013, the Companys Board of Directors increased the share repurchase
programauthorizationfrom$10billionto$60billion.TheCompanyssharerepurchaseprogramdoesnotobligateitto
acquireanyspecificnumberofshares.Undertheprogram,sharesmayberepurchasedinprivatelynegotiatedand/oropen
market transactions, including under plans complying with Rule 10b51 of the Exchange Act. The $37.1 billion
representstheremainingamountavailabletorepurchasesharesundertheauthorizedrepurchaseprogram.

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TableofContents

CompanyStockPerformance
Thefollowinggraphshowsafiveyearcomparisonofcumulativetotalshareholderreturn,calculatedonadividendreinvested
basis, for the Company, the S&P 500 Index, the S&P Computer Hardware Index, and the Dow Jones U.S. Technology
SupersectorIndex.Thegraphassumes$100wasinvestedineachoftheCompanyscommonstock,theS&P500Index,the
S&P Computer Hardware Index, and the Dow Jones U.S. Technology Supersector Index as of the market close on
September 30, 2008. Data points on the graph are annual. Note that historic stock price performance is not necessarily
indicativeoffuturestockpriceperformance.

*$100
investedon9/30/08instockorindex,includingreinvestmentofdividends.
FiscalyearendingSeptember30.
Copyright 2013S&P,adivisionofTheMcGrawHillCompaniesInc.Allrightsreserved.
Copyright 2013DowJones&Co.Allrightsreserved.

September30,

2008

September30,

$100

2009

September30,

$163

2010

September30,

$250

2011

September30,

$335

2012

September30,

$589

2013
$431

AppleInc.

$100

$93

$103

$104

$135

$161

S&P500Index

$100

$118

$140

$159

$255

$197

S&PComputerHardwareIndex

$100

$111

$124

$128

$166

$175

DowJonesUSTechnologySupersectorIndex

23

TableofContents

Item6.

SelectedFinancialData

TheinformationsetforthbelowforthefiveyearsendedSeptember28,2013,isnotnecessarilyindicativeofresultsoffuture
operations,andshouldbereadinconjunctionwithItem7,ManagementsDiscussionandAnalysisofFinancialCondition
andResultsofOperationsandtheconsolidatedfinancialstatementsandrelatednotestheretoincludedinPartII,Item8of
thisForm10Ktofullyunderstandfactorsthatmayaffectthecomparabilityoftheinformationpresentedbelow(inmillions,
exceptnumberofshares,whicharereflectedinthousands,andpershareamounts).

Netsales

2013

2012

2011

2010

2009

$170,910 $156,508 $108,249 $ 65,225 $ 42,905

$ 37,037 $ 41,733 $ 25,922 $ 14,013 $

Netincome

8,235

Earningspershare:

Basic

40.03 $

44.64 $

28.05 $

15.41 $

9.22

39.75 $

44.15 $

27.68 $

15.15 $

9.08

11.40 $

2.65 $

0 $

0 $

Diluted
Cashdividendsdeclaredpershare
Sharesusedincomputingearningspershare:

Basic

925,331 934,818 924,258 909,461 893,016

931,662 945,355 936,645 924,712 907,005

$146,761 $121,251 $ 81,570 $ 51,011 $ 33,992

$207,000 $176,064 $116,371 $ 75,183 $ 47,501

$ 16,960 $

0 $

0 $

$ 20,208 $ 16,664 $ 10,100 $

5,531 $

3,502

$ 83,451 $ 57,854 $ 39,756 $ 27,392 $ 15,861

$123,549 $118,210 $ 76,615 $ 47,791 $ 31,640

Diluted

Totalcash,cashequivalentsandmarketablesecurities
Totalassets
Longtermdebt
Longtermobligations(a)
Totalliabilities
Totalshareholdersequity

(a)

Longtermobligationsexcludenoncurrentdeferredrevenue.

24

0 $

TableofContents

Item7.

ManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperations

ThisItem7,ManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperations,andotherpartsof
thisForm10Kcontainforwardlookingstatements,withinthemeaningofthePrivateSecuritiesLitigationReformActof
1995,thatinvolverisksanduncertainties.Forwardlookingstatementsprovidecurrentexpectationsoffutureeventsbased
oncertainassumptionsandincludeanystatementthatdoesnotdirectlyrelatetoanyhistoricalorcurrentfact.Forward
looking statements can also be identified by words such as future, anticipates, believes, estimates, expects,
intends,plans,predicts,will,would,could,can,may,andsimilarterms.Forwardlookingstatementsare
notguaranteesoffutureperformanceandtheCompanysactualresultsmaydiffersignificantlyfromtheresultsdiscussedin
theforwardlookingstatements.Factorsthatmightcausesuchdifferencesinclude,butarenotlimitedto,thosediscussedin
Part I, Item 1A of this Form 10K under the heading Risk Factors, which are incorporated herein by reference. The
followingdiscussionshouldbereadinconjunctionwiththeconsolidatedfinancialstatementsandnotestheretoincludedin
Part II, Item 8 of this Form 10K. All information presented herein is based on the Companys fiscal calendar. Unless
otherwise stated, references to particular years, quarters, months or periods refer to the Companys 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 whollyowned subsidiaries, unless otherwise stated. The
Companyassumesnoobligationtoreviseorupdateanyforwardlookingstatementsforanyreason,exceptasrequiredby
law.
OverviewandHighlights
The Company designs, manufactures, and markets mobile communication and media devices, personal computers, and
portabledigitalmusicplayers,andsellsavarietyofrelatedsoftware,services,peripherals,networkingsolutions,andthird
partydigitalcontentandapplications.TheCompanysellsitsproductsworldwidethroughitsretailstores,onlinestores,and
directsalesforce,aswellasthroughthirdpartycellularnetworkcarriers,wholesalers,retailers,andvalueaddedresellers.In
addition,theCompanysellsavarietyofthirdpartyiPhone,iPad,MacandiPodcompatibleproducts,includingapplication
software,andvariousaccessoriesthroughitsonlineandretailstores.TheCompanysellstoconsumerssmallandmidsized
businessesandeducation,enterpriseandgovernmentcustomers.
Fiscal2013Highlights
Netsalesrose9%or$14.4billionduring2013comparedto2012.ThisresultedfromgrowthinnetsalesofiPhoneiTunes,
software,andservicesandiPad.Growthin2013reflectsstrongsalesofiPhone5,strongcontinuingsalesofiPhone4and4s,
theintroductionofiPhone5cand5s,strongperformanceoftheiPadMiniandfourthgenerationiPad,andcontinuedgrowth
intheCompanysonlinesalesofapps,digitalcontent,andservices.Growthintheseareaswaspartiallyoffsetbydeclinesin
netsalesofMacandiPod.AlloftheCompanysoperatingsegmentsexperiencedincreasednetsalesin2013,withnetsales
growthbeingparticularlystrongintheAmericas,GreaterChinaand Japan operating segments. Similar to 2012, growth in
totalnetsaleswashigherduringthefirsthalfof2013,rising$12.6billionor14.7%overthesameperiodin2012.Firsthalf
growthin2013wasdrivenbyiPhoneandiPadintroductionsatornearthebeginningof2013.
Duringthefirstquarterof2013,theCompanyintroducedthefourthgenerationiPadandiPadMini,anewMacBookProwith
Retinadisplay,anewiPodtouch,anewiMac,andexpandedtherolloutofiPhone5whichbeganinSeptember2012.InJune
2013atitsWorldwideDeveloperConference,theCompanyannouncediOS7andOSXMavericks,announcediTunesRadio,
introduced a significant upgrade to MacBook Air, and provided a preview of all new Mac Pro desktops expected to be
introduced during 2014. In September 2013, the Company introduced iPhone 5s and iPhone 5c, released iOS 7, launched
iTunesRadio,andannouncedthatbeginninginSeptember2013iPhoto,iMovieandiWorkappsforiOSwouldbeavailable
asfreedownloadswithallnewiOSdevices,namelyiPhone,iPadandiPodtouch.InOctober2013,theCompanyannounced
iPadAir,itsfifthgenerationiPad,andiPadminiwithRetinadisplay.

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InApril2013theCompanyannouncedasignificantincreasetoitsprogramtoreturncapitaltoshareholdersbyraisingthe
totalamountitexpectedtoutilizefortheprogramthroughDecember2015to$100billion.Thisincludedincreasingitsshare
repurchaseauthorizationto$60billionandraisingitsquarterlydividendto$3.05percommonsharebeginninginMay2013.
During2013,theCompanyutilized$23.0billiontorepurchasecommonsharesandpaiddividendsof$10.5billionor$11.40
percommonshare.Inconjunctionwithitscapitalreturnprogram,inMay2013theCompanyissued$17.0billionofnotes
withvaryingmaturitiesthrough2043.
Fiscal2012Highlights
Overallnetsalesduring2012increased$48.3billionor45%comparedto2011.AlloftheCompanysoperatingsegments
experiencedincreasednetsalesduring2012,primarilyaresultofstrongdemandforiPhoneandiPad.Growthintotalnetsales
wasparticularlystrongduringthefirstsixmonthsof2012,rising$34.1billionor66%comparedtothesameperiodin2011.
Thenetsalesgrowthduringthefirstsixmonthsof2012reflectedthelaunchofiPhone4sinthefirstquarterof2012andthe
CompanysabilitytomeetdemandmorequicklyforiPhone4swhencomparedtotheiPhone4launch.Growthduringthefirst
halfof2012wasalsofavorablyimpactedbystrongunitsalesofiPadduringtheholidayseason,resultingina111%increase
iniPadunitsalesduringthefirstquarterof2012comparedtothesamequarterin2011.Partiallyoffsettingthesepositive
factorswasadecreaseiniPodnetsalesexperiencedacrossalloperatingsegments.
InOctober2011,theCompanyintroducediPhone4sandlaunchediCloud,theCompanyscloudservicethatstoresuserdata
and keeps it up to date and available on multiple iOS devices and Mac and Windows personal computers. The Company
introducedthethirdgenerationiPadwithRetinadisplayinMarch2012andinJune2012introducedtheMacBookProwith
RetinadisplayandanupdatedMacBookAirDuringthefourthquarterof2012,OSXMountainLionwasreleasedandiPhone
5wasintroduced.
InMarch2012,theCompanyannounceda$10billionsharerepurchaseprogramthatwouldbeexecutedoverthreeyearsand
announcedplansto initiate a quarterly dividend commencing in the fourth quarter of 2012. During the fourth quarter, the
Companypaiddividendsof$2.5billionor$2.65percommonshare.

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SalesData
Thefollowingtableshowsnetsalesbyoperatingsegmentandnetsalesandunitsalesbyproductduring2013,2012and2011
(dollarsinmillionsandunitsinthousands):

2013

Change

2012

Change

2011

NetSalesbyOperatingSegment:

Americas

$ 62,739

9% $ 57,512 50% $ 38,315

37,883

4% 36,323 31% 27,778

25,417 13% 22,533 78% 12,690

13,462 27% 10,571 94%

5,437

11,181

4% 10,741

9,902

20,228

7% 18,828 33% 14,127

$170,910

9% $156,508 45% $108,249

Europe
GreaterChina(a)
Japan
RestofAsiaPacific
Retail

Totalnetsales

8%

NetSalesbyProduct:

iPhone(b)

$ 91,279 16% $ 78,692 71% $ 45,998

31,980

21,483 (7)% 23,221

5,615 (25)%

7,453

16,051 25% 12,890 38%

9,373

4,474

$170,910

Mac(b)
iPod(b)
iTunes,softwareandservices(c)
Accessories(d)

Totalnetsales

iPhone

3% 30,945 61% 19,168

4,411 (21)%

5,706 11%

7% 21,783

5,145 15%

9% $156,508 45% $108,249

150,257 20% 125,046 73% 72,293

71,033 22% 58,310 80% 32,394

iPad
Mac

iPad(b)

UnitSalesbyProduct:

16,341 (10)% 18,158

26,379 (25)% 35,165 (17)% 42,620

iPod

(a)

9% 16,735

GreaterChinaincludesChina,HongKongandTaiwan.

(b)

Includesdeferralsandamortizationofrelatednonsoftwareservicesandsoftwareupgraderights.

(c)

IncludesrevenuefromsalesontheiTunesStore,theAppStore,theMacAppStore,andtheiBooksStore,andrevenue
fromsalesofAppleCare,licensingandotherservices.

(d)

IncludessalesofhardwareperipheralsandApplebrandedandthirdpartyaccessoriesforiPhone,iPad,MacandiPod.

TheCompanysfiscalyearisthe52or53weekperiodthatendsonthelastSaturdayofSeptember.TheCompanysfiscal
years2013,2012and2011endedonSeptember28,2013,September29,2012andSeptember24,2011,respectively.Both
fiscalyears2013and2011spanned52weeks.Fiscalyear2012spanned53weeks,witha14thweekaddedtothefirstquarter
of2012,asisdoneapproximatelyeverysixyearstorealigntheCompanysfiscalquartersmorecloselytocalendarquarters.
Inclusionoftheadditionalweekin2012increasedtheCompanysoverallnetsalesandoperatingexpensesfortheyear.

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ProductPerformance
iPhone
ThefollowingtablepresentsiPhonenetsalesandunitsalesinformationfor2013,2012and2011(netsalesinmillionsand
unitsinthousands):

Netsales

2013

Change

2012

Change

2011

$ 91,279 16% $ 78,692 71% $45,998

150,257 20% 125,046 73% 72,293

Percentageoftotalnetsales
Unitsales

53%

50%

42%

ThegrowthiniPhonenetsalesandunitsalesduring2013resultedfromincreaseddemandforiPhoneinalloftheCompanys
operatingsegmentsprimarilyduetothelaunchofiPhone5beginninginSeptember2012andstrongongoingdemandfor
iPhone4and4s.AlloftheCompanysoperatingsegmentsexperiencedincreasesinnetsalesandunitsalesofiPhoneduring
2013comparedto2012.TheyearoveryearimpactofhigheriPhoneunitsalesin2013waspartiallyoffsetbya3%declinein
iPhoneaveragesellingprices(ASPs)in2013comparedto2012primarilyasaresultofashiftinproductmixtowardslower
pricediPhonemodels,particularlyiPhone4.AlloftheCompanysgeographicoperatingsegmentsexperiencedadeclinein
iPhoneASPsduring2013.
The yearoveryear growth in iPhone net sales and unit sales during 2012 reflects strong demand for iPhone in all of the
Companysoperatingsegments,exceptfortheRestofAsiaPacificsegment.GrowthiniPhonesalesduring2012isprimarilya
resultofthelaunchesofiPhone4sinthefirstquarterof2012andiPhone5inthefourthquarterof2012,ongoingdemand
during2012foriPhone4andiPhone3GS,andexpandeddistributionwithnewcarriersandresellers.
iPad
ThefollowingtablepresentsiPadnetsalesandunitsalesinformationfor2013,2012and2011(netsalesinmillionsandunits
inthousands):

Netsales

2013

Change

2012

Change

2011

$ 31,980 3% $ 30,945 61% $19,168

71,033 22% 58,310 80% 32,394

Percentageoftotalnetsales
Unitsales

19%

20%

18%

ThegrowthinnetsalesandunitsalesofiPadduring2013resultedfromgrowthiniPadunitsalesinalloftheCompanys
operatingsegments.ThisgrowthwasdrivenbythelaunchofiPadminiandthefourthgenerationiPadbeginninginthefirst
quarterof2013.TheyearoveryeargrowthrateoftotaliPadunitsaleswassignificantlyhigherthanthegrowthrateoftotal
iPadnetsalesfor2013duetoareductioniniPadASPsof15%in2013comparedto2012.Thisdeclineresultedprimarily
fromintroductionofthelowerpricediPadminiandthefullyearimpactofthepricereductiononiPad2madein2012.The
declineiniPadASPswasexperiencedtovariousdegreesbyalloftheCompanysoperatingsegments.
TheyearoveryearincreaseiniPadnetsalesandunitsalesduring2012wasdrivenbystrongdemandforiPadinallofthe
CompanysoperatingsegmentsasaresultofthelaunchofthethirdgenerationiPadinMarch2012,continueddemandfor
iPad2,andexpandeddistributionwithnewresellers.TheyearoveryeargrowthrateofiPadunitsaleswashigherthanthe
growthrateofiPadnetsalesduring2012duetoa10%reductioninASPsasaresultofashiftinproductmixtowardlower
pricediPadmodels,apricereductiononiPad2andanincreaseinindirectsalesduetoexpandeddistributionthroughthird
partyresellers.

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TableofContents

Mac
ThefollowingtablepresentsMacnetsalesandunitsalesinformationfor2013,2012and2011(netsalesinmillionsandunits
inthousands):

Netsales

2013

Change

2012

Change

2011

$21,483 (7)% $23,221 7% $21,783

16,341 (10)% 18,158 9% 16,735

Percentageoftotalnetsales
Unitsales

13%

15%

20%

Macnetsalesandunitsalesfor2013weredownorrelativelyflatinalloftheCompanysoperatingsegments. Mac ASPs

increasedslightlypartiallyoffsettingtheimpactoflowerunitsalesonnetsales.ThedeclineinMacunitsalesandnetsales
reflectstheoverallweaknessinthemarketforpersonalcomputers.
TheyearoveryeargrowthinMacnetsalesandunitsalesduring2012reflectsincreaseddemandforMacportablesinallof
theCompanysoperatingsegmentsdrivenby2012releasesofupdatedmodelsofMacBookAirandMacBookPro,including
MacBookProwithRetinadisplayinJune2012.PartiallyoffsettingtheincreaseinnetsalesofMacportableswasadeclinein
net sales of Mac desktops that reflected the overall decline in the market for desktop personal computers during 2012.
Additionally,theCompanydidnotintroduceupdatedversionsofitsMacdesktopproductsin2012.
iTunes,SoftwareandServices
ThefollowingtablepresentsnetsalesinformationofiTunes,softwareandservicesfor2013,2012and2011(inmillions):

iTunes,softwareandservices

2013

Change

2012

Change

2011

$16,051 25% $12,890 38% $9,373

Percentageoftotalnetsales

9%

8%

9%

TheincreaseinnetsalesofiTunes,softwareandservicesin2013comparedto2012wasprimarilyduetogrowthinnetsales
fromtheiTunesStore,AppleCareandlicensing.TheiTunesStoregeneratedatotalof$9.3billioninnetsalesduring2013,a
24%increasefrom2012.GrowthintheiTunesStore,whichincludestheAppStore,theMacAppStoreandtheiBooksStore,
reflectscontinuedgrowthintheinstalledbaseofiOSdevices,expandedofferingsofiOSappsandrelatedinApppurchases,
andexpandedofferingsofiTunesdigitalcontent.
TheincreaseinnetsalesofiTunes,softwareandservicesin2012comparedto2011wasdueprimarilytogrowthoftheiTunes
Store,whichgeneratedtotalnetsalesof$7.5billionfor2012comparedtonetsalesof$5.4billionduring2011.Thestrong
resultsoftheiTunesStorein2012reflectgrowthoftheAppStoregrowthoftheCompanyscustomerbaseandthecontinued
expansionofthirdpartyaudio,videoandbookcontentavailableforsaleorrentviatheiTunesStore.

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SegmentOperatingPerformance
The Company manages its business primarily on a geographic basis. Accordingly, the Company determined its reportable
operatingsegments,whicharegenerallybasedonthenatureandlocationofitscustomers,tobetheAmericas,Europe,Greater
China, Japan, Rest of Asia Pacific and Retail. The Americas segment includes both North and South America. The Europe
segmentincludesEuropeancountries,aswellasIndia,theMiddleEastandAfrica.TheGreaterChinasegmentincludesChina,
HongKongandTaiwan.TheRestofAsiaPacificsegmentincludesAustraliaandAsiancountries,otherthanthosecountries
included in the Companys other operating segments. The Retail segment operates Apple retail stores in 13 countries,
including the U.S. The results of the Companys geographic segments do not include results of the Retail segment. Each
operatingsegmentprovides similar hardware and software products and similar services. Further information regarding the
CompanysoperatingsegmentsmaybefoundinNote11,SegmentInformationandGeographicData.
Americas
ThefollowingtablepresentsAmericasnetsalesinformationfor2013,2012and2011(inmillions):

Netsales

2013

Change

2012

Change

2011

$62,739 9% $57,512 50% $38,315

Percentageoftotalnetsales

37%

37%

35%

ThegrowthintheAmericassegmentnetsalesduring2013wasdrivenbyincreasedsalesofiPhonefollowingtheintroduction
ofiPhone5inSeptember2012andiPhone5sand5cinSeptember2013,increasedsalesfromtheiTunesStore,andincreased
salesofiPad,particularlyiPadmini.TheseincreaseswerepartiallyoffsetbyadecreaseinnetsalesofiPodandMacanda
declineiniPadASPs.
Thegrowthinnetsalesduring2012wasprimarilydrivenbyincreaseddemandforiPhonefollowingthelaunchesofiPhone4s
andiPhone5,strongdemandforthethirdgenerationiPadandiPad2,andhighersalesfromtheiTunesStore.
Europe
ThefollowingtablepresentsEuropenetsalesinformationfor2013,2012and2011(inmillions):

Netsales

2013

Change

2012

Change

2011

$37,883 4% $36,323 31% $27,778

Percentageoftotalnetsales

22%

23%

26%

SimilartotheAmericassegment,growthinnetsalesintheEuropesegmentduring2013wasprimarilydrivenbyincreased
salesofiPhone,iPadandhighernetsalesfromiTunes.TheseincreaseswerepartiallyoffsetbydecreasesinnetsalesofMac
andiPodandadeclineiniPadASPs.NetsalesintheEuropesegmentcontinuetobenegativelyimpactedbyunfavorable
economicconditionsinpartsoftheregionreflectedbysecondhalf2013netsalesfalling4%comparedtothesecondhalfof
2012,whichfollowedan11%increaseinnetsalesduringthefirsthalfof2013.
Thegrowthinnetsalesduring2012wasprimarilydrivenbystrongdemandforthethirdgenerationiPadandiPad2,higher
salesfromtheiTunesStoreandincreaseddemandforiPhonefromthelaunchofiPhone4s.iPhone5waslaunchedinalimited
numberofcountriesintheEuropesegmentattheendofthefourthquarterof2012anddidnotcontributetothegrowthinnet
salesintheEuropesegmenttotheextentitdidinothersegments.LoweryearoveryeargrowthinnetsalesintheEurope
segmentduring2012comparedtotheCompanysothergeographicsegmentsreflectsgrowthiniPhoneunitsalesthatwas
wellbelowthegrowthratesexperiencedbytheCompanysotheroperatingsegments,partiallyoffsetbystronggrowthiniPad
unitsales.NetsalesintheEurope

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TableofContents

segment were also negatively impacted by the regions uncertain economic conditions and the strength in the U.S. dollar
relativetoseveralEuropeancurrencies,includingtheeuro.
GreaterChina
ThefollowingtablepresentsGreaterChinanetsalesinformationfor2013,2012and2011(inmillions):

Netsales

2013

Change

2012

Change

2011

$25,417 13% $22,533 78% $12,690

Percentageoftotalnetsales

15%

14%

12%

ThegrowthinnetsalesintheGreaterChinasegmentduring2013resultedfromtwomajoriPhoneintroductionsduringthe
year,iPhone5inDecember2012andiPhone5candiPhone5sinSeptember2013.Furthercontributingtothegrowthin2013
wastheintroductionofthefourthgenerationiPadandiPadminiduringthesecondquarterof2013andanincreaseiniPhone
channelinventoryasoftheendof2013comparedtotheendof2012.WhilenetsalesintheChinasegmentwereup13%for
allof2013,netsalesforthesecondhalfof2013declined4%comparedtothesecondhalfof2012.
Thegrowthinnetsalesduring2012wasmainlyduetoincreaseddemandforiPhonefollowingthelaunchofiPhone4sand
strongdemandforthethirdgenerationiPadandiPad2.GrowthintheGreaterChinasegmentwasaffectedbythetimingof
iPhoneandiPadproductlaunches.iPhone5wasnotlaunchedinChinaduring2012,andthethirdgenerationiPadthatwas
introducedbytheCompanyinMarch2012wasnotlaunchedinChinauntilthefourthquarterof2012.
Japan
ThefollowingtablepresentsJapannetsalesinformationfor2013,2012and2011(inmillions):

Netsales

2013

Change

2012

Change

2011

$13,462 27% $10,571 94% $5,437

Percentageoftotalnetsales

8%

7%

5%

TheincreaseinnetsalesintheJapansegmentduring2013reflectssignificantincreasesinunitvolumesofiPhoneandiPad,
stronggrowthofiTunesStorenetsalesandanincreaseiniPhonechannelinventoryasoftheendof2013comparedtotheend
of2012.ThesepositivefactorswerepartiallyoffsetbydeclinesinASPsforiPhoneandiPadandbyweaknessintheJapanese
YenrelativetotheU.S.dollar.
Thegrowthinnetsalesduring2012wasprimarilydrivenbyincreaseddemandforiPhonefollowingthelaunchesofiPhone4s
andiPhone5,expandeddistributionwithanewiPhonecarrier,strongdemandforthethirdgenerationiPadandiPad2,higher
salesfromtheiTunesStore,andstrengthintheJapaneseYenrelativetotheU.S.dollar.
RestofAsiaPacific
ThefollowingtablepresentsRestofAsiaPacificnetsalesinformationfor2013,2012and2011(inmillions):

Change

$11,181

4%

Netsales
Percentageoftotalnetsales

2013

7%

2012

Change

$10,741

8%

7%

2011

$9,902

9%

Thegrowthinnetsalesduring2013wasprimarilydrivenbythelaunchofiPhone5andhighersalesfromiTunes,partially
offsetbyadecreaseinnetsalesofiPadandMac.

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Thegrowthinnetsalesduring2012wasmainlyduetostrongdemandforthethirdgenerationiPad.TheRestofAsiaPacific
segmentexperiencedsignificantlyloweryearoveryeargrowthinnetsalescomparedtoalloftheCompanysotheroperating
segmentsdueprimarilytoadecreaseiniPhonesales.ThisdecreasereflectsthetimingofiPhone5launchesintheRestofAsia
Pacificsegment,whichonlyoccurredinalimitednumberofcountriesduringthefourthquarterof2012.
Retail
ThefollowingtablepresentsRetailnetsalesinformationfor2013,2012and2011(inmillions,exceptforstorecounts):

Netsales

2013

Change

2012

Change

2011

$20,228 7% $18,828 33% $14,127

Percentageoftotalnetsales

U.S.stores

12%

12%

13%

254

250

245

162

140

112

416

390

357

Internationalstores

Totalstorecount

The growth in net sales during 2013 was primarily driven by increased unit sales of iPhone and iPad following the new
productintroductionsinthefirsthalfof2013andincreasedsalesofservices.Withanaverageof403and365openstores
during2013and2012,respectively,averagerevenueperstoredecreasedto$50.2millionin2013,comparedto$51.5million
in2012.
Thegrowthinnetsalesduring2012wasdrivenprimarilybyincreaseddemandforiPhonefollowingthelaunchesofiPhone4s
andiPhone5,strongdemandforthethirdgenerationiPadandiPad2,andhigherMacnetsales.Loweryearoveryeargrowth
innetsalesintheRetailsegmentduring2012comparedtotheCompanysothersegmentsreflectsthesignificantgrowthin
iPad indirect distribution channel expansion. With an average of 365 stores and 326 stores during 2012 and 2011,
respectively,averagerevenueperstoreincreased19%to$51.5millionin2012comparedto$43.3millionin2011.
The Retail segments operating income was $4.0 billion, $4.6 billion and $3.1 billion during 2013, 2012, and 2011,
respectively.TheyearoveryeardecreaseinRetailoperatingincomein2013isprimarilyattributabletolowergrossmargin
similartothatexperiencedbytheCompanyoverall,partiallyoffsetbyhighernetsales.TheyearoveryearincreaseinRetail
operating income in 2012 is primarily attributable to higher overall net sales that resulted in significantly higher average
revenueperstoreduring2012.
GrossMargin
Grossmarginfor2013,2012and2011areasfollows(inmillions,exceptgrossmarginpercentages):

Netsales

2013

2012

2011

$170,910 $156,508 $108,249

106,606 87,846 64,431

$ 64,304 $ 68,662 $ 43,818

Costofsales

Grossmargin

Grossmarginpercentage

37.6%

43.9%

40.5%

Thegrossmarginpercentagein2013was37.6%comparedto43.9%in2012.Theyearoveryeardecreaseingrossmarginin

2013 compared to 2012 was driven by multiple factors including introduction of new versions of existing products with
highercoststructuresandflatorreducedpricingashiftinsalesmixtoproductswithlowermarginsintroductionofiPadmini
withgrossmarginsignificantlybelowtheCompanysaverageproductmarginshigherexpensesassociatedwithchangesto
certainoftheCompanysservicepoliciesandother

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warranty costs price reductions on certain products, including iPad 2 and iPhone 4 and unfavorable impact from foreign
exchangefluctuations.
Thegrossmarginpercentagein2012was43.9%,comparedto40.5%in2011.Thisyearoveryearincreaseingrossmargin
waslargelydrivenbylowercommodityandotherproductcosts,ahighermixofiPhonesales,andimprovedleverageonfixed
costsfromhighernetsales.TheincreaseingrossmarginwaspartiallyoffsetbytheimpactofastrongerU.S.dollar.Thegross
marginpercentageduringthefirsthalfof2012was45.9%comparedto41.4%duringthesecondhalfof2012.Theprimary
drivers of higher gross margin in the first half of 2012 compared to the second half are a higher mix of iPhone sales and
improved leverage on fixed costs from higher net sales. Additionally, gross margin in the second half of 2012 was also
affected by the introduction of new products with flat pricing that have higher cost structures and deliver greater value to
customers, price reductions on certain existing products, higher transition costs associated with product launches, and
continuedstrengtheningoftheU.S.dollarpartiallyoffsetbylowercommoditycosts.
The Company anticipates gross margin during the first quarter of 2014 to be between 36.5% and 37.5%. The foregoing
statementregardingtheCompanysexpectedgrossmarginpercentageinthefirstquarterof2014isforwardlookingandcould
differfromactualresults.TheCompanysfuturegrossmargincanbeimpactedbymultiplefactorsincluding,butnotlimited
tothosesetforthaboveinPartI,Item1AofthisForm10KundertheheadingRiskFactorsandthosedescribedinthis
paragraph.Ingeneral,grossmarginsandmarginsonindividualproductswillremainunderdownwardpressureduetoavariety
offactors,includingcontinuedindustrywideglobalproductpricingpressures,increasedcompetition,compressedproductlife
cycles,producttransitions,potentialincreasesinthecostofcomponents,andpotentialstrengtheningoftheU.S.dollar, as
wellaspotentialincreasesinthecostsofoutsidemanufacturingservicesandapotentialshiftintheCompanyssalesmix
towardsproductswithlowergrossmargins.Inresponsetocompetitivepressures,theCompanyexpectsitwillcontinuetotake
productpricingactions,whichwouldadverselyaffectgrossmargins.GrossmarginscouldalsobeaffectedbytheCompanys
abilitytomanageproductqualityandwarrantycostseffectivelyandtostimulatedemandforcertainofitsproducts.Duetothe
Companyssignificantinternationaloperations,financialresultscanbesignificantlyaffectedintheshorttermbyfluctuations
inexchangerates.
OperatingExpenses
Operatingexpensesfor2013,2012and2011areasfollows(inmillions,exceptforpercentages):

Researchanddevelopment

2013

Change

2012

Change

2011

$ 4,475 32% $ 3,381 39% $ 2,429

$10,830 8% $10,040 32% $ 7,599

$15,305 14% $13,421 34% $10,028

Percentageoftotalnetsales
Selling,generalandadministrative
Percentageoftotalnetsales
Totaloperatingexpenses
Percentageoftotalnetsales

3%

6%

9%

2%

6%

9%

2%

7%

9%

ResearchandDevelopment(R&D)Expense
The growth in R&D expense was driven by an increase in headcount and related expenses to support expanded R&D
activities.AlthoughtotalR&Dexpenseincreased32%and39%in2013and2012,respectively,itremainedfairlyconsistent
as a percentage of net sales. The Company continues to believe that focused investments in R&D are critical to its future
growthandcompetitive position in the marketplace and are directly related to timely development of new and enhanced
productsthatarecentraltotheCompanyscorebusinessstrategy.Assuch,theCompanyexpectstomakefurtherinvestments
inR&Dtoremaincompetitive.
Selling,GeneralandAdministrative(SG&A)Expense
The growth in SG&A during 2013 was primarily due to the Companys continued expansion of its Retail segment and

increasedheadcountandrelatedexpenses,partiallyoffsetbydecreasedspendingonprofessional

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TableofContents

services.ThegrowthinSG&Aduring2012wasprimarilyduetotheCompanyscontinuedexpansionofitsRetailsegment,
increasedheadcountandrelatedexpenses,higherspendingonprofessionalservices,marketingandadvertisingprograms,and
increasedvariablecostsassociatedwiththeoverallgrowthoftheCompanysnetsales.
OtherIncomeandExpense
Otherincomeandexpensefor2013,2012and2011areasfollows(inmillions):

2013

Change

2012

Change

$1,616

$1,088

$ 519

(136)

(324)

(566)

(104)

$1,156

Interestanddividendincome
Interestexpense
Otherexpense,net

Totalotherincome/(expense),net

121% $ 522

2011

26% $415

The yearoveryear increase in other income and expense during 2013 was due primarily to higher interest and dividend
incomeresultingfromtheCompanyshighercash,cashequivalentsandmarketablesecuritiesbalancesandlowerpremium
expensesonforeignexchangecontracts,partiallyoffsetbyinterestexpenseondebtissuedinthethirdquarterof2013and
remeasurement losses from foreign exchange rate movements. The overall increase in other income and expense in 2012
comparedto2011wasattributabletohigherinterestanddividendincomeontheCompanyshighercash,cashequivalents
andmarketablesecuritiesbalances,partiallyoffsetbyhigherpremiumexpensesonforeignexchangecontracts.Theweighted
averageinterestrateearnedbytheCompanyonitscash,cashequivalentsandmarketablesecuritieswas1.03%during2013
and2012and0.77%during2011.TheCompanyhadnodebtoutstandingduring2012and2011andaccordinglydidnot
incuranyrelatedinterestexpense.
ProvisionforIncomeTaxes
Provisionforincometaxesandeffectivetaxratesfor2013,2012and2011areasfollows(inmillions):

Provisionforincometaxes

2013

2012

2011

$13,118

$14,030

$8,283

26.2%

25.2%

24.2%

Effectivetaxrate

TheCompanyseffectivetaxratesforallperiodsdifferfromthestatutoryfederalincometaxrateof 35% due primarily to

certainundistributedforeignearnings,asubstantialportionofwhichwasgeneratedbysubsidiariesorganizedinIreland,for
whichnoU.S.taxesareprovidedbecausesuchearningsareintendedtobeindefinitelyreinvestedoutsidetheU.S.
AsofSeptember28,2013,theCompanyhaddeferredtaxassetsarisingfromdeductibletemporarydifferences,taxlosses,and
taxcreditsof$4.2billion,anddeferredtaxliabilitiesof$16.5billion.Managementbelievesitismorelikelythannotthat
forecastedincome,includingincomethatmaybegeneratedasaresultofcertaintaxplanningstrategies,togetherwithfuture
reversalsofexistingtaxabletemporarydifferences,willbesufficienttofullyrecoverthedeferredtaxassets.TheCompanywill
continue to evaluate the realizability of deferred tax assets quarterly by assessing the need for and amount of a valuation
allowance.
TheInternalRevenueService(theIRS)hascompleteditsfieldauditoftheCompanysfederalincometaxreturnsforthe
years2004through2006andproposedcertainadjustments.TheCompanyhascontestedcertainoftheseadjustmentsthrough
theIRSAppealsOffice.TheIRSiscurrentlyexaminingtheyears2007through2012.AllIRSauditissuesforyearspriorto
2004 have been resolved. In addition, the Company is subject to audits by state, local, and foreign tax
authorities.Managementbelievesthatadequateprovisionshavebeenmadeforany

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adjustmentsthatmayresultfromtaxexaminations.However,theoutcomeoftaxauditscannotbepredictedwithcertainty.If
anyissuesaddressedintheCompanystaxauditsareresolvedinamannernotconsistentwithmanagementsexpectations,the
Companycouldberequiredtoadjustitsprovisionforincometaxesintheperiodsuchresolutionoccurs.
LiquidityandCapitalResources
The following table presents selected financial information and statistics as of and for the years ended September 28,
2013,September29,2012andSeptember24,2011(inmillions):

Cash,cashequivalentsandmarketablesecurities

2013

2012

2011

$146,761

$121,251

$ 81,570

$ 16,597

$ 15,452

$ 7,777

$ 16,960

$ 29,628

$ 19,111

$ 17,018

$ 53,666

$ 50,856

$ 37,529

$ (33,774)

$ (48,227)

$(40,419)

$ (16,379)

$ (1,698)

$ 1,444

Property,plantandequipment,net
Longtermdebt
Workingcapital
Cashgeneratedbyoperatingactivities
Cashusedininvestingactivities
Cashgenerated/(usedin)byfinancingactivities

TheCompanybelievesitsexistingbalancesofcash,cashequivalentsandmarketablesecuritieswillbesufficienttosatisfyits
workingcapitalneeds,capitalassetpurchases,outstandingcommitments,andotherliquidityrequirementsassociatedwithits
existing operations over the next 12 months. The Company anticipates the cash used for future dividends and the share
repurchaseprogramwillcomefromitscurrentdomesticcash,cashgeneratedfromongoingU.S.operatingactivitiesandfrom
borrowings.
AsofSeptember28,2013andSeptember29,2012,$111.3billionand$82.6billion,respectively,oftheCompanyscash,
cash equivalents and marketable securities were held by foreign subsidiaries and are generally based in U.S.
dollardenominated holdings. Amounts held by foreign subsidiaries are generally subject to U.S. income taxation on
repatriation to the U.S. The Companys marketable securities investment portfolio is invested primarily in highlyrated
securities and its investment policy generally limits the amount of credit exposure to any one issuer. The policy requires
investmentsgenerallytobeinvestmentgradewiththeobjectiveofminimizingthepotentialriskofprincipalloss.
During2013,cashgeneratedfromoperatingactivitiesof$53.7billionwasaresultof$37.0billionofnetincome,noncash
adjustmentstonetincomeof$10.2billionandanincreaseinnetchangeinoperatingassetsandliabilitiesof$6.5billion.
Cashusedininvestingactivitiesof$33.8billionduring2013consistedprimarilyofnetpurchases,salesandmaturitiesof
marketablesecuritiesof$24.0billionandcashusedtoacquireproperty,plantandequipmentof$8.2billion.Cashusedin
financingactivitiesduring2013consistedprimarilyofcashusedtorepurchasecommonstockof$22.9billionandcashused
topaydividendsanddividendequivalentrightsof$10.6billion,partiallyoffsetbynetproceedsfromtheissuanceoflong
termdebtof$16.9billion.
During2012,cashgeneratedfromoperatingactivitiesof$50.9billionwasaresultof$41.7billionofnetincomeandnon
cashadjustmentstonetincomeof$9.4billion,partiallyoffsetbyadecreaseinnetoperatingassetsandliabilitiesof$299
million. Cash used in investing activities during 2012 of $48.2 billion consisted primarily of net purchases, sales and
maturitiesofmarketablesecuritiesof$38.4billionandcashusedtoacquireproperty,plantandequipmentof$8.3billion.
Cashusedinfinancingactivitiesduring2012of$1.7billionconsistedprimarilyofcashusedtopaydividendsanddividend
equivalentrightsof$2.5billion.
CapitalAssets
TheCompanyscapitalexpenditureswere$7.0billionduring2013,consistingof$499millionforretailstorefacilitiesand

$6.5 billion for other capital expenditures, including product tooling and manufacturing process equipment, and other
corporatefacilitiesandinfrastructure.TheCompanysactualcashpaymentsforcapitalexpendituresduring2013were$8.2
billion.

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The Company anticipates utilizing approximately $11.0 billion for capital expenditures during 2014, including
approximately$550millionforretailstorefacilitiesandapproximately$10.5billionforothercapitalexpenditures,including
product tooling and manufacturing process equipment, and corporate facilities and infrastructure, including information
systemshardware,softwareandenhancements.
During2014,theCompanyexpectstoopenabout30newretailstores,withapproximatelytwothirdslocatedoutsideofthe
U.S.During2014,theCompanyalsoexpectstoremodelapproximately20ofitsexistingstores.
LongTermDebt
Inthethirdquarterof2013,theCompanyissued$17.0billionoflongtermdebt,whichincluded$3.0billionoffloatingrate
notes.Tomanagetheriskofadversefluctuationsininterestratesassociatedwiththefloatingratenotes,theCompanyentered
into interest rate swaps with an aggregate notional amount of $3.0 billion, which, in effect, fixed the interest rate of the
floatingratenotes.Oftheaggregateprincipalamountof$17.0billion,$2.5billionisduein2016and$14.5billionisduein
2018through2043.
DividendandStockRepurchaseProgram
Inthethirdquarterof2013,theCompanyraiseditscashdividendby15%to$3.05percommonshare.TheCompanyexpects
to continue to pay quarterly dividends of $3.05 per common share each quarter, subject to declaration by the Board of
Directors.
In2012,theCompanysBoardofDirectorsauthorizedaprogramtorepurchaseupto$10billionoftheCompanyscommon
stock.InApril2013,theCompanysBoardofDirectorsincreasedthesharerepurchaseprogramauthorizationfrom$10billion
to$60billion,ofwhich$23.0billionhadbeenutilizedasofSeptember28,2013.Thesharerepurchaseprogramisexpected
tobecompletedbyDecember2015.TheCompanyssharerepurchaseprogramdoesnotobligateittoacquireanyspecific
number of shares. Under the program, shares may be repurchased in privately negotiated or open market transactions,
includingunderplanscomplyingwithRule10b51oftheExchangeAct.
BeginninginAugust2012throughDecember2015,theCompanyanticipatesitwillutilizeapproximately$100billionto
paydividendsanddividendequivalentrights,repurchaseshares,andremitwithheldtaxesrelatedtonetsharesettlementof
restrictedstockunits,ofwhich$37.1billionhadbeenutilizedthroughSeptember28,2013.Thefollowingtablepresentsthe
Companysdividends,sharerepurchasesandnetsharesettlementactivityfor2013and2012sincethestartoftheprogram(in
millions):

Dividends
and

Taxes

Dividend
Equivalent

Accelerated

Rights

2012

Paid

Share

Open

Relatedto

Market

Settlement

Share

ofEquity

Repurchases

Repurchases

$ 2,488

10,564

13,950

$ 13,052

$ 13,950

2013

Total

Awards

Total

56

$ 2,544

9,000

1,082

34,596

$ 9,000

$1,138

$37,140

OffBalanceSheetArrangementsandContractualObligations
The Company has not entered into any transactions with unconsolidated entities whereby the Company has financial
guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements that expose the
Company to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an
unconsolidatedentitythatprovidesfinancing,liquidity,marketrisk,orcreditrisksupporttotheCompany.

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The following table presents certain payments due by the Company under contractual obligations with minimum firm
commitmentsasofSeptember28,2013andexcludesamountsalreadyrecordedontheConsolidatedBalanceSheet,exceptfor
longtermdebt(inmillions):

Payments

Payments

Duein

Payments

Payments

Duein

Less

Duein

Duein

More

Than1

Longtermdebt

Year

13

Years

45

Than5

Years

Years

Total

0 $ 2,500 $ 6,000 $ 8,500 $17,000

610 1,200 1,056 1,855 4,721

18,616

0 18,616

1,081

248

16

3 1,348

$20,307 $3,948 $7,072 $10,358 $41,685

Operatingleases
Purchaseobligations
Otherobligations

Total

LeaseCommitments
TheCompanysmajorfacilityleasesaretypicallyfortermsnotexceeding10yearsandgenerallyproviderenewaloptionsfor
termsnotexceedingfiveadditionalyears.Leasesforretailspacearefortermsrangingfromfiveto20years,themajorityof
whicharefor10years,andoftencontainmultiyearrenewaloptions.AsofSeptember28,2013,theCompanystotalfuture
minimumleasepaymentsundernoncancelableoperatingleaseswere$4.7billion,ofwhich$3.5billionrelatedtoleasesfor
retailspace.
PurchaseCommitmentswithOutsourcingPartnersandComponentSuppliers
TheCompanyutilizesseveraloutsourcingpartnerstomanufacturesubassembliesfortheCompanysproductsandtoperform
finalassemblyandtestingoffinishedproducts.Theseoutsourcingpartnersacquirecomponentsandbuildproductbasedon
demandinformationsuppliedbytheCompany,whichtypicallycoversperiodsupto150days.TheCompanyalsoobtains
individual components for its products from a wide variety of individual suppliers. Consistent with industry practice, the
Company acquires components through a combination of purchase orders, supplier contracts, and open orders based on
projected demand information. Where appropriate, the purchases are applied to inventory component prepayments that
areoutstandingwiththerespectivesupplier.AsofSeptember28,2013,theCompanyhadoutstandingoffbalancesheetthird
partymanufacturingcommitmentsandcomponentpurchasecommitmentsof$18.6billion.
OtherObligations
Inadditiontotheoffbalancesheetcommitmentsmentionedabove,theCompanyhadoutstandingobligationsof$1.3billion
as of September 28, 2013, that consisted mainly of commitments to acquire capital assets, including product tooling and
manufacturing process equipment, and commitments related to advertising, research and development, Internet and
telecommunicationsservicesandotherobligations.
TheCompanysothernoncurrentliabilitiesintheConsolidatedBalanceSheetsconsistprimarilyofdeferredtaxliabilities,
grossunrecognizedtaxbenefitsandtherelatedgrossinterestandpenalties.AsofSeptember28,2013,theCompanyhadnon
currentdeferredtaxliabilitiesof$16.5billion.Additionally,asofSeptember28,2013,theCompanyhadgrossunrecognized
taxbenefitsof$2.7billionandanadditional$590millionforgrossinterestandpenaltiesclassifiedasnoncurrentliabilities.
Atthistime,theCompanyisunabletomakeareasonablyreliableestimateofthetimingofpaymentsinindividualyearsin
connectionwiththesetaxliabilitiestherefore,suchamountsarenotincludedintheabovecontractualobligationtable.
Indemnification
TheCompanygenerallydoesnotindemnifyendusersofitsoperatingsystemandapplicationsoftwareagainstlegalclaims
thatthesoftwareinfringesthirdpartyintellectualpropertyrights.Otheragreementsenteredintoby

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the Company sometimes include indemnification provisions under which the Company could be subject to costs and/or
damagesintheeventofaninfringementclaimagainsttheCompanyoranindemnifiedthirdparty.However,theCompanyhas
not been required to make any significant payments resulting from such an infringement claim asserted against it or an
indemnifiedthirdparty.Intheopinionofmanagement,therewasnotatleastareasonablepossibilitytheCompanymayhave
incurred a material loss with respect to indemnification of endusers of its operating system or application software for
infringementofthirdpartyintellectualpropertyrights.TheCompanydidnotrecordaliabilityforinfringementcostsrelated
toindemnificationasofSeptember28,2013orSeptember29,2012.
TheCompanyhasenteredintoindemnificationagreementswithitsdirectorsandexecutiveofficers.Undertheseagreements,
theCompanyhasagreedtoindemnifysuchindividualstothefullestextentpermittedbylawagainstliabilitiesthatariseby
reasonoftheirstatusasdirectorsorofficersandtoadvanceexpensesincurredbysuchindividualsinconnectionwithrelated
legalproceedings.ItisnotpossibletodeterminethemaximumpotentialamountofpaymentstheCompanycouldberequired
to make under these agreements due to the limited history of prior indemnification claims and the unique facts and
circumstancesinvolvedineachclaim.However,theCompanymaintainsdirectorsandofficersliabilityinsurancecoverageto
reduceitsexposuretosuchobligations,andpaymentsmadeundertheseagreementshistoricallyhavenotbeenmaterial.
CriticalAccountingPoliciesandEstimates
The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting
principles(GAAP)andtheCompanysdiscussionandanalysisofitsfinancialconditionandoperatingresultsrequirethe
Companysmanagementtomakejudgments,assumptions,andestimatesthataffecttheamountsreportedinitsconsolidated
financial statements and accompanying notes. Note 1, Summary of Significant Accounting Policies of the Notes to
Consolidated Financial Statements in Part II, Item 8 of this Form 10K describes the significant accounting policies and
methods used in the preparation of the Companys 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
whichformthebasisformakingjudgmentsaboutthecarryingvaluesofassetsandliabilities.Actualresultsmaydifferfrom
theseestimatesandsuchdifferencesmaybematerial.
Management believes the Companys critical accounting policies and estimates are those related to revenue recognition,
valuation and impairment of marketable securities, inventory valuation and valuation of manufacturingrelated assets and
estimated 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 Companys financial
conditionandoperatingresults,andtheyrequiremanagementtomakejudgmentsandestimatesaboutinherentlyuncertain
matters.TheCompanysseniormanagementhasreviewedthesecriticalaccountingpoliciesandrelateddisclosureswiththe
AuditandFinanceCommitteeoftheCompanysBoardofDirectors.
RevenueRecognition
Netsalesconsistprimarilyofrevenuefromthesaleofhardware,software,digitalcontentandapplications,peripherals,and
serviceandsupportcontracts.TheCompanyrecognizesrevenuewhenpersuasiveevidenceofanarrangementexists,delivery
has occurred, the sales price is fixed or determinable, and collection is probable. Product is considered delivered to the
customeronceithasbeenshippedandtitleandriskoflosshavebeentransferred.FormostoftheCompanysproductsales,
thesecriteriaaremetatthetimetheproductisshipped.Foronlinesalestoindividuals,forsomesalestoeducationcustomers
in the U.S., and for certain other sales, the Company defers revenue until the customer receives the product because the
Companyretainsaportionoftheriskoflossonthesesalesduringtransit.TheCompanyrecognizesrevenuefromthesaleof
hardware products, software bundled with hardware that is essential to the functionality of the hardware, and thirdparty
digitalcontentsoldontheiTunesStoreinaccordancewithgeneralrevenuerecognitionaccountingguidance.The

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Companyrecognizesrevenueinaccordancewithindustryspecificsoftwareaccountingguidanceforthefollowingtypesof
salestransactions:(i)standalonesalesofsoftwareproducts,(ii)salesofsoftwareupgradesand(iii)salesofsoftwarebundled
withhardwarenotessentialtothefunctionalityofthehardware.
For multielement arrangements that include hardware products containing software essential to the hardware products
functionality,undeliveredsoftwareelementsthatrelatetothehardwareproductsessentialsoftware,and/orundeliverednon
software services, the Company allocates revenue to all deliverables based on their relative selling prices. In such
circumstances,theCompanyusesahierarchytodeterminethesellingpricetobeusedforallocatingrevenuetodeliverables:
(i)vendorspecificobjectiveevidenceoffairvalue(VSOE),(ii)thirdpartyevidenceofsellingprice(TPE)and(iii)best
estimateofsellingprice(ESP).VSOEgenerallyexistsonlywhentheCompanysellsthedeliverableseparatelyandisthe
priceactuallychargedbytheCompanyforthatdeliverable.ESPsreflecttheCompanysbestestimatesofwhattheselling
pricesofelementswouldbeiftheyweresoldregularlyonastandalonebasis.
For sales of qualifying versions of iOS devices, Mac and Apple TV, the Company has indicated it may from time to time
providefutureunspecifiedsoftwareupgradesandfeaturesfreeofchargetocustomers.TheCompanyalsoprovidesvarious
nonsoftwareservicestoownersofqualifyingversionsofiOSdevicesandMac.BecausetheCompanyhasneitherVSOEnor
TPEfortheunspecifiedsoftwareupgraderightsorthenonsoftwareservices,revenueisallocatedtotheserightsandservices
basedontheCompanysESPs.Revenueallocatedtotheunspecifiedsoftwareupgraderightsandnonsoftwareservicesbased
ontheCompanysESPsisdeferredandrecognizedonastraightlinebasisovertheestimatedperiodthesoftwareupgradesand
nonsoftwareservicesareexpectedtobeprovidedforeachofthesedevices,whichrangesfromtwotofouryears.
TheCompanysprocessfordeterminingESPsinvolvesmanagementsjudgmentandconsidersmultiplefactorsthatmayvary
over time depending upon the unique facts and circumstances related to each deliverable. Should future facts and
circumstanceschange,theCompanysESPsandthefuturerateofrelatedamortizationforsoftwareupgradesandnonsoftware
services related to future sales of these devices could change. Factors subject to change include the unspecified software
upgraderightsoffered,theestimatedvalueofunspecifiedsoftwareupgraderights,theestimatedoractualcostsincurredto
provide nonsoftware services, and the estimated period software upgrades and nonsoftware services are expected to be
provided.
The Company records reductions to revenue for estimated commitments related to price protection and other customer
incentiveprograms.Fortransactionsinvolvingpriceprotection,theCompanyrecognizesrevenuenetoftheestimatedamount
toberefunded,providedtherefundamountcanbereasonablyandreliablyestimatedandtheotherconditionsforrevenue
recognition have been met. The Companys policy requires that, if refunds cannot be reliably estimated, revenue is not
recognizeduntilreliableestimatescanbemadeorthepriceprotectionlapses.FortheCompanysothercustomerincentive
programs,theestimatedcostisrecognizedatthelaterofthedateatwhichtheCompanyhassoldtheproductorthedateat
whichtheprogramisoffered.TheCompanyalsorecordsreductionstorevenueforexpectedfutureproductreturnsbasedon
theCompanyshistoricalexperience.FuturemarketconditionsandproducttransitionsmayrequiretheCompanytoincrease
customer incentive programs that could result in reductions to future revenue. Additionally, certain customer incentive
programsrequiremanagementtoestimatethenumberofcustomerswhowillactuallyredeemtheincentive.Managements
estimatesarebasedonhistoricalexperienceandthespecifictermsandconditionsofparticularincentiveprograms.Ifagreater
than estimated proportion of customers redeems such incentives, the Company would be required to record additional
reductionstorevenue,whichwouldhaveanadverseimpactontheCompanysresultsofoperations.
ValuationandImpairmentofMarketableSecurities
TheCompanysinvestmentsinavailableforsalesecuritiesarereportedatfairvalue.Unrealizedgainsandlossesrelatedto
changes in the fair value of securities are recognized in accumulated other comprehensive income, net of tax, in the
CompanysConsolidatedBalanceSheets.Changesinthefairvalueofavailableforsalesecurities

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impacttheCompanysnetincomeonlywhensuchsecuritiesaresoldoranotherthantemporaryimpairmentisrecognized.
Realizedgainsandlossesonthesaleofsecuritiesaredeterminedbyspecificidentificationofeachsecurityscostbasis.The
Company regularly reviews its investment portfolio to determine if any security is otherthantemporarily impaired, which
wouldrequiretheCompanytorecordanimpairmentchargeintheperiod any such determination is made. In making this
judgment,theCompanyevaluates,amongotherthings,thedurationandextenttowhichthefairvalueofasecurityisless
thanitscostthefinancialconditionoftheissuerandanychangestheretoandtheCompanysintenttosell,orwhetheritwill
morelikelythannotberequiredtosell,thesecuritybeforerecoveryofitsamortizedcostbasis.TheCompanysassessmenton
whether a security is otherthantemporarily impaired could change in the future due to new developments or changes in
assumptionsrelatedtoanyparticularsecurity.
Inventory Valuation and Valuation of ManufacturingRelated Assets and Estimated Purchase Commitment Cancellation
Fees
TheCompanymustordercomponentsforitsproductsandbuildinventoryinadvanceofproductshipmentsandhasinvested
inmanufacturingprocessequipment,includingcapitalassetsheldatitssuppliersfacilities.Inaddition,theCompanyhas
made prepayments to certain of its suppliers associated with longterm supply agreements to secure supply of inventory
components.TheCompanyrecordsawritedownforinventoriesofcomponentsandproducts,includingthirdpartyproducts
heldforresale,whichhavebecomeobsoleteorareinexcessofanticipateddemandornetrealizablevalue.TheCompany
performsadetailedreviewofinventorythatconsidersmultiplefactorsincludingdemandforecasts,productlifecyclestatus,
productdevelopmentplans,currentsaleslevels,andcomponentcosttrends.TheCompanyalsoreviewsitsmanufacturing
related capital assets and inventory prepayments for impairment whenever events or circumstances indicate the carrying
amount of such assets may not be recoverable. If the Company determines that an asset is not recoverable, it records an
impairmentlossequaltotheamountbywhichthecarryingvalueofsuchanassetexceedsitsfairvalue.
The industries in which the Company competes are subject to a rapid and unpredictable pace of product and component
obsolescenceanddemandchanges.IncertaincircumstancestheCompanymayberequiredtorecordadditionalwritedowns
ofinventory,inventoryprepaymentsand/ormanufacturingrelatedcapitalassets.Thesecircumstancesincludefuturedemand
ormarketconditionsfortheCompanysproductsbeinglessfavorablethanforecasted,unforeseentechnologicalchangesor
changestotheCompanysproductdevelopmentplansthatnegativelyimpacttheutilityofanyoftheseassets,orsignificant
deterioration in the financial condition of one or more of the Companys suppliers that hold any of the Companys
manufacturing process equipment or to whom the Company has made an inventory prepayment. Such writedowns would
adverselyaffecttheCompanysresultsofoperationsintheperiodwhenthewritedownswererecorded.
TheCompanyrecordsaccrualsforestimatedcancellationfeesrelatedtocomponentordersthathavebeencancelledorare
expected to be cancelled. Consistent with industry practice, the Company acquires components through a combination of
purchaseorders,suppliercontracts,andopenordersineachcasebasedonprojecteddemand.Whereappropriate,thepurchases
areapplied to inventory component prepayments that are outstanding with the respective supplier. Purchase commitments
typicallycovertheCompanysforecastedcomponentandmanufacturingrequirementsforperiodsupto150days.Ifthereis
an abrupt and substantial decline in demand for one or more of the Companys products, if the Companys product
developmentplanschange,orifthereisanunanticipatedchangeintechnologicalrequirementsforanyoftheCompanys
products,thentheCompanymayberequiredtorecordadditionalaccrualsforcancellationfeesthatwouldadverselyaffectits
resultsofoperationsintheperiodwhenthecancellationfeesareidentifiedandrecorded.
WarrantyCosts
TheCompanyprovidesfortheestimatedcostofwarrantiesatthetimetherelatedrevenueisrecognizedbasedonhistorical
andprojectedwarrantyclaimrates,historicalandprojectedcostperclaim,andknowledgeofspecificproductfailuresthatare
outsideoftheCompanystypicalexperience.Eachquarter,theCompanyreevaluates

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theseestimatestoassesstheadequacyofitsrecordedwarrantyliabilitiesconsideringthesizeoftheinstalledbaseofproducts
subjecttowarrantyprotectionandadjuststheamountsasnecessary.Ifactualproductfailureratesorrepaircostsdifferfrom
estimates,revisionstotheestimatedwarrantyliabilitieswouldberequiredandcouldmateriallyaffecttheCompanysresults
ofoperations.
IncomeTaxes
TheCompanyrecordsataxprovisionfortheanticipatedtaxconsequencesofthereportedresultsofoperations.Theprovision
for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are
recognizedfortheexpectedfuturetaxconsequencesoftemporarydifferencesbetweenthefinancialreportingandtaxbasesof
assets and liabilities, and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured
usingthecurrentlyenactedtaxratesthatapplytotaxableincomeineffectfortheyearsinwhichthosetaxassetsareexpected
to be realized or settled. The Company records a valuation allowance to reduce deferred tax assets to the amount that is
believedmorelikelythannottoberealized.
TheCompanyrecognizestaxbenefitsfromuncertaintaxpositionsonlyifitismorelikelythannotthatthetaxpositionwill
be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits
recognizedinthefinancialstatementsfromsuchpositionsarethenmeasuredbasedonthelargestbenefitthathasagreater
than50%likelihoodofbeingrealizeduponultimatesettlement.
Managementbelievesitismorelikelythannotthatforecastedincome,includingincomethatmaybegeneratedasaresultof
certaintaxplanningstrategies,togetherwithfuturereversalsofexistingtaxabletemporarydifferences,willbesufficientto
fullyrecoverthedeferredtaxassets.IntheeventthattheCompanydeterminesallorpartofthenetdeferredtaxassetsarenot
realizableinthefuture,theCompanywillmakeanadjustmenttothevaluationallowancethatwouldbechargedtoearnings
in the period such determination is made. In addition, the calculation of tax liabilities involves significant judgment in
estimatingtheimpactofuncertaintiesintheapplicationofGAAPandcomplextaxlaws.Resolutionoftheseuncertaintiesina
mannerinconsistentwithmanagementsexpectationscouldhaveamaterialimpactontheCompanysfinancialconditionand
operatingresults.
LegalandOtherContingencies
AsdiscussedinPartI,Item3ofthisForm10KundertheheadingLegalProceedingsandinPartII,Item8ofthisForm10K
intheNotestoConsolidatedFinancialStatementsinNote10,CommitmentsandContingencies,theCompanyissubjectto
variouslegalproceedingsandclaimsthatariseintheordinarycourseofbusiness.TheCompanyrecordsaliabilitywhenitis
probablethatalosshasbeenincurredandtheamountisreasonablyestimable.Thereissignificantjudgmentrequiredinboth
theprobabilitydeterminationandastowhetheranexposurecanbereasonablyestimated.Intheopinionofmanagement,there
was not at least a reasonable possibility the Company may have incurred a material loss, or a material loss in excess of a
recorded accrual, with respect to loss contingencies for legal and other contingencies. However, the outcome of legal
proceedingsandclaimsbroughtagainsttheCompanyissubjecttosignificantuncertainty.Therefore,althoughmanagement
considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against the
Companyinareportingperiodforamountsinexcessofmanagementsexpectations,theCompanysconsolidatedfinancial
statementsforthatreportingperiodcouldbemateriallyadverselyaffected.

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Item7A.

QuantitativeandQualitativeDisclosuresAboutMarketRisk

InterestRateandForeignCurrencyRiskManagement
The Company regularly reviews its foreign exchange forward and option positions and interest rate swaps, both on a
standalone basis and in conjunction with its underlying foreign currency and interest rate related exposures. Given the
effectivehorizonsoftheCompanysriskmanagementactivitiesandtheanticipatorynatureoftheexposures,therecanbeno
assurancethesepositionswilloffsetmorethanaportionofthefinancialimpactresultingfrommovementsineither foreign
exchangeorinterestrates.Further,therecognitionofthegainsandlossesrelatedtotheseinstrumentsmaynotcoincidewith
the timing of gains and losses related to the underlying economic exposures and, therefore, may adversely affect the
Companysfinancialconditionandoperatingresults.
InterestRateRisk
Investments
While the Company is exposed to interest rate fluctuations in many of the worlds leading industrialized countries, the
Companys interest income is most sensitive to fluctuations in U.S. interest rates. Changes in U.S. interest rates affect the
interestearnedontheCompanyscash,cashequivalentsandmarketablesecurities,thefairvalueofthosesecurities,aswellas
costsassociatedwithhedging.
The Companys investment policy and strategy are focused on preservation of capital and supporting the liquidity
requirementsoftheCompany.AportionoftheCompanyscashismanagedbyexternalmanagerswithintheguidelinesofthe
Companysinvestmentpolicyandtoobjectivemarketbenchmarks.TheCompanysinternalportfolioisbenchmarkedagainst
externalmanagerperformance.
TheCompanysexposuretochangesininterestratesrelatesprimarilytotheCompanysinvestmentportfolio.TheCompany
typicallyinvestsinhighlyratedsecurities,anditsinvestmentpolicygenerallylimitstheamountofcreditexposuretoany
oneissuer.Thepolicyrequiresinvestmentsgenerallytobeinvestmentgrade,withtheprimaryobjectiveofminimizingthe
potentialriskofprincipalloss.
To provide a meaningful assessment of the interest rate risk associated with the Companys investment portfolio, the
Companyperformedasensitivityanalysistodeterminetheimpactachangeininterestrateswouldhaveonthevalueofthe
investment portfolio assuming a 100 basis point parallel shift in the yield curve. Based on investment positions as of
September28,2013,ahypothetical100basispointincreaseininterestratesacrossallmaturitieswouldresultina$2.7billion
incrementaldeclineinthefairmarketvalueoftheportfolio.AsofSeptember29,2012,asimilar100basispointincreasein
theyieldcurvewouldhaveresultedina$2.1billionincrementaldeclineinthefairmarketvalueoftheportfolio.Suchlosses
wouldonlyberealizediftheCompanysoldtheinvestmentspriortomaturity.
LongTermDebt
Inthethirdquarterof2013,theCompanyissued$17.0billionoflongtermdebt,whichincluded$3.0billionoffloatingrate
notes.Tomanagetheriskoffluctuationsininterestratesassociatedwiththefloatingratenotes,theCompanyenteredinto
interestrateswapswithanaggregatenotionalamountof$3.0billion,which,ineffect,fixedtheinterestrateofthefloating
ratenotes.
ForeignCurrencyRisk
Ingeneral,theCompanyisanetreceiverofcurrenciesotherthantheU.S.dollar.Accordingly,changesinexchangerates,and
inparticularastrengtheningoftheU.S.dollar,willnegativelyaffecttheCompanysnetsalesandgrossmarginsasexpressed
inU.S.dollars.ThereisariskthattheCompanywillhavetoadjustlocal

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currency product pricing due to competitive pressures when there have been significant volatility in foreign currency
exchangerates.
The Company may enter into foreign currency forward and option contracts with financial institutions to protect against
foreignexchangerisksassociatedwithcertainexistingassetsandliabilities,certainfirmlycommittedtransactions,forecasted
futurecashflows,andnetinvestmentsinforeignsubsidiaries.TheCompanyspracticeistohedgeaportionofitsmaterial
foreignexchangeexposures,typicallyforupto12months.However,theCompanymaychoosenottohedgecertainforeign
exchange exposures for a variety of reasons, including but not limited to accounting considerations and the prohibitive
economiccostofhedgingparticularexposures.
ToprovideameaningfulassessmentoftheforeigncurrencyriskassociatedwithcertainoftheCompanysforeigncurrency
derivativepositions,theCompanyperformedasensitivityanalysisusingavalueatrisk(VAR)modeltoassessthepotential
impactoffluctuationsinexchangerates.TheVARmodelconsistedofusingaMonteCarlosimulationtogeneratethousands
ofrandommarketpricepathsassumingnormalmarketconditions.TheVARisthemaximumexpectedlossinfairvalue,fora
givenconfidenceinterval,totheCompanysforeigncurrencyderivativepositionsduetoadversemovementsinrates.The
VAR model is not intended to represent actual losses but is used as a risk estimation and management tool. The model
assumes normal market conditions. 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%
confidenceamaximumonedaylossinfairvalueof$201millionasofSeptember28,2013comparedtoamaximumoneday
loss in fair value of $200 million as of September 29, 2012. Because the Company uses foreign currency instruments for
hedgingpurposes,thelossinfairvalueincurredonthoseinstrumentsaregenerallyoffsetbyincreasesinthefairvalueofthe
underlyingexposures.
Actual future gains and losses associated with the Companys investment portfolio and derivative positions may differ
materiallyfromthesensitivityanalysesperformedasofSeptember28,2013duetotheinherentlimitationsassociatedwith
predictingthetimingandamountofchanges in interest rates, foreign currency exchanges rates and the Companys actual
exposuresandpositions.

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Item8.

FinancialStatementsandSupplementaryData

IndextoConsolidatedFinancialStatements

Page

45

46

47

48

49

50

78

79

ConsolidatedStatementsofOperationsfortheyearsendedSeptember28,2013,September29,2012,and
September24,2011
ConsolidatedStatementsofComprehensiveIncomefortheyearsendedSeptember28,2013,September29,2012,
andSeptember24,2011
ConsolidatedBalanceSheetsasofSeptember28,2013andSeptember29,2012
ConsolidatedStatementsofShareholdersEquityfortheyearsendedSeptember28,2013,September29,2012,and
September24,2011
ConsolidatedStatementsofCashFlowsfortheyearsendedSeptember28,2013,September29,2012,and
September24,2011
NotestoConsolidatedFinancialStatements
SelectedQuarterlyFinancialInformation(Unaudited)
ReportsofErnst&YoungLLP,IndependentRegisteredPublicAccountingFirm

All financial statement schedules have been omitted, since the required information is not applicable or is not present in
amountssufficienttorequiresubmissionoftheschedule,orbecausetheinformationrequiredisincludedintheconsolidated
financialstatementsandnotesthereto.

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TableofContents

CONSOLIDATEDSTATEMENTSOFOPERATIONS
(Inmillions,exceptnumberofshareswhicharereflectedinthousandsandpershareamounts)

September28,2013

September29,2012

September24,2011

170,910

156,508

108,249

106,606

87,846

64,431

64,304

68,662

43,818

Netsales
Costofsales

Grossmargin

Yearsended

Operatingexpenses:

Researchanddevelopment

4,475

3,381

2,429

10,830

10,040

7,599

15,305

13,421

10,028

48,999

55,241

33,790

1,156

522

415

50,155

55,763

34,205

13,118

14,030

8,283

37,037

41,733

25,922

Selling,generalandadministrative

Totaloperatingexpenses

Operatingincome
Otherincome/(expense),net

Incomebeforeprovisionforincometaxes
Provisionforincometaxes

Netincome

Earningspershare:

Basic

40.03

44.64

28.05

39.75

44.15

27.68

Diluted

Sharesusedincomputingearningspershare:

Basic

925,331

934,818

924,258

931,662

945,355

936,645

11.40

2.65

0.00

Diluted

Cashdividendsdeclaredpercommonshare

SeeaccompanyingNotestoConsolidatedFinancialStatements.

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CONSOLIDATEDSTATEMENTSOFCOMPREHENSIVEINCOME
(Inmillions)

Yearsended
September28,

Netincome

2013

September29,

2012

September24,

2011

37,037 $

41,733 $

25,922

(112)

(15)

(12)

522

(131)

92

(458)

(399)

450

64

(530)

542

(791)

715

29

(131)

(114)

(70)

(922)

601

(41)

(970)

56

489

36,067 $

41,789 $

26,411

Othercomprehensiveincome/(loss):

Changeinforeigncurrencytranslation,netoftaxeffectsof$35,$13and$18,
respectively

Changeinunrecognizedgains/lossesonderivativeinstruments:

Changeinfairvalueofderivatives,netoftaxbenefit/(expense)of$(351),
$73and$(50),respectively
Adjustmentfornetlosses/(gains)realizedandincludedinnetincome,netof
taxexpense/(benefit)of$255,$220and$(250),respectively

Totalchangeinunrecognizedgains/lossesonderivativeinstruments,netof
tax

Changeinunrealizedgains/lossesonmarketablesecurities:

Changeinfairvalueofmarketablesecurities,netoftaxbenefit/(expense)of
$458,$(421)and$17,respectively
Adjustmentfornetlosses/(gains)realizedandincludedinnetincome,netof
taxexpense/(benefit)of$82,$68and$(40),respectively

Totalchangeinunrealizedgains/lossesonmarketablesecurities,netoftax

Totalothercomprehensiveincome/(loss)
Totalcomprehensiveincome

SeeaccompanyingNotestoConsolidatedFinancialStatements.

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CONSOLIDATEDBALANCESHEETS
(Inmillions,exceptnumberofshareswhicharereflectedinthousands)

ASSETS:

September28,2013

September29,2012

Currentassets:
Cashandcashequivalents

14,259

10,746

26,287

18,383

13,102

10,930

1,764

791

3,453

2,583

7,539

7,762

6,882

6,458

73,286

57,653

106,215

92,122

16,597

15,452

1,577

1,135

4,179

4,224

5,146

5,478

207,000

176,064

Shorttermmarketablesecurities
Accountsreceivable,lessallowancesof$99and$98,respectively
Inventories
Deferredtaxassets
Vendornontradereceivables
Othercurrentassets

Totalcurrentassets

Longtermmarketablesecurities
Property,plantandequipment,net
Goodwill
Acquiredintangibleassets,net
Otherassets

Totalassets
LIABILITIESANDSHAREHOLDERSEQUITY:
Currentliabilities:

Accountspayable

22,367

21,175

13,856

11,414

7,435

5,953

Accruedexpenses
Deferredrevenue

Totalcurrentliabilities

43,658

38,542

2,625

2,648

16,960

20,208

16,664

83,451

57,854

Deferredrevenuenoncurrent
Longtermdebt
Othernoncurrentliabilities

Totalliabilities

Commitmentsandcontingencies

Shareholdersequity:
Commonstock,noparvalue1,800,000sharesauthorized899,213
and939,208sharesissuedandoutstanding,respectively

19,764

16,422

104,256

101,289

(471)

499

123,549

118,210

207,000

176,064

Retainedearnings
Accumulatedothercomprehensiveincome/(loss)

Totalshareholdersequity

Totalliabilitiesandshareholdersequity

SeeaccompanyingNotestoConsolidatedFinancialStatements.

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TableofContents

CONSOLIDATEDSTATEMENTSOFSHAREHOLDERSEQUITY
(Inmillions,exceptnumberofshareswhicharereflectedinthousands)

Accum

CommonStock

Compre
hensive

Total
Share

Shares

Amount

Earnings

915,970

$10,668

$ 37,169

(46)

$ 47,791

25,922

25,922

489

489

1,168

1,168

13,307

561

(250)

311

934

934

929,277

13,331

62,841

443

76,615

41,733

41,733

56

56

(2,523)

(2,523)

1,740

1,740

9,931

200

(762)

(562)

1,151

1,151

939,208

16,422

101,289

499

118,210

37,037

37,037

(970)

Netincome
Othercomprehensiveincome/(loss)
Sharebasedcompensation
Commonstockissuedunderstockplans,netofshares
withheldforemployeetaxes
Taxbenefitfromequityawards,includingtransferpricing
adjustments

BalancesasofSeptember24,2011

Netincome
Othercomprehensiveincome/(loss)
Dividendsanddividendequivalentrightsdeclared
Sharebasedcompensation
Commonstockissuedunderstockplans,netofshares
withheldforemployeetaxes

Retained

Other

BalancesasofSeptember25,2010

ulated

Income/

holders

(Loss)

Equity

Taxbenefitfromequityawards,includingtransferpricing
adjustments

BalancesasofSeptember29,2012

Netincome
Othercomprehensiveincome/(loss)

(970)

Dividendsanddividendequivalentrightsdeclared

(10,676)

(10,676)

(46,976)

(22,950)

(22,950)

2,253

2,253

6,981

(143)

(444)

(587)

1,232

1,232

899,213

$19,764

$104,256

Repurchaseofcommonstock
Sharebasedcompensation
Commonstockissuedunderstockplans,netofshares
withheldforemployeetaxes
Taxbenefitfromequityawards,includingtransferpricing
adjustments

BalancesasofSeptember28,2013

SeeaccompanyingNotestoConsolidatedFinancialStatements.

48

$ (471)

$123,549

TableofContents

CONSOLIDATEDSTATEMENTSOFCASHFLOWS
(Inmillions)

Yearsended
September28,

Cashandcashequivalents,beginningoftheyear

2013

September29,

10,746 $

2012

September24,

9,815 $

2011

11,261

Operatingactivities:

Netincome

37,037

41,733

25,922

Adjustmentstoreconcilenetincometocashgeneratedbyoperating
activities:

Depreciationandamortization

6,757

3,277

1,814

2,253

1,740

1,168

1,141

4,405

2,868

Sharebasedcompensationexpense
Deferredincometaxexpense
Changesinoperatingassetsandliabilities:

Accountsreceivable,net

(2,172)

(5,551)

143

(973)

(15)

275

223

(1,414)

(1,934)

1,080

(3,162)

(1,391)

2,340

4,467

2,515

1,459

2,824

1,654

4,521

2,552

4,495

53,666

50,856

37,529

Inventories
Vendornontradereceivables
Othercurrentandnoncurrentassets
Accountspayable
Deferredrevenue
Othercurrentandnoncurrentliabilities

Cashgeneratedbyoperatingactivities

Investingactivities:

Purchasesofmarketablesecurities

(148,489)

(151,232)

(102,317)

20,317

13,035

20,437

Proceedsfrommaturitiesofmarketablesecurities

Proceedsfromsalesofmarketablesecurities

104,130

99,770

49,416

(496)

(350)

(244)

(8,165)

(8,295)

(4,260)

(911)

(1,107)

(3,192)

(160)

(48)

(259)

(33,774)

(48,227)

(40,419)

Paymentsmadeinconnectionwithbusinessacquisitions,net
Paymentsforacquisitionofproperty,plantandequipment
Paymentsforacquisitionofintangibleassets
Other

Cashusedininvestingactivities

Financingactivities:

Proceedsfromissuanceofcommonstock

530

665

831

701

1,351

1,133

(1,082)

(1,226)

(520)

(10,564)

(2,488)

(22,860)

16,896

(16,379)

(1,698)

1,444

3,513

931

(1,446)

14,259 $

10,746 $

9,815

Excesstaxbenefitsfromequityawards
Taxespaidrelatedtonetsharesettlementofequityawards
Dividendsanddividendequivalentrightspaid
Repurchaseofcommonstock
Proceedsfromissuanceoflongtermdebt,net

Cashgeneratedby/(usedin)financingactivities

Increase/(decrease)incashandcashequivalents

Cashandcashequivalents,endoftheyear

Supplementalcashflowdisclosure:

Cashpaidforincometaxes,net

9,128 $

SeeaccompanyingNotestoConsolidatedFinancialStatements.

49

7,682 $

3,338

TableofContents

NotestoConsolidatedFinancialStatements
Note1SummaryofSignificantAccountingPolicies
AppleInc.anditswhollyownedsubsidiaries(collectivelyAppleortheCompany)designs,manufactures,andmarkets
mobile communication and media devices, personal computers, and portable digital music players, and sells a variety of
relatedsoftware,services,peripherals,networkingsolutions,andthirdpartydigitalcontentandapplications.TheCompany
sellsitsproductsworldwidethroughitsretailstores,onlinestores,anddirectsalesforce,aswellasthroughthirdpartycellular
network carriers, wholesalers, retailers and valueadded resellers. In addition, the Company sells a variety of thirdparty
iPhone,iPad,Mac,andiPodcompatibleproducts,includingapplicationsoftware,andvariousaccessoriesthroughitsonline
andretailstores.TheCompanysellstoconsumers,smallandmidsizedbusinesses,andeducation,enterpriseandgovernment
customers.
BasisofPresentationandPreparation
The accompanying consolidated financial statements include the accounts of the Company. Intercompany accounts and
transactions have been eliminated. The preparation of these consolidated financial statements in conformity with U.S.
generallyacceptedaccountingprinciples(GAAP)requiresmanagementtomakeestimatesandassumptionsthataffectthe
amountsreportedintheseconsolidatedfinancialstatementsandaccompanyingnotes.Actualresultscoulddiffermaterially
from those estimates. Certain prior period amounts in the consolidated financial statements and notes thereto have been
reclassifiedtoconformtothecurrentperiodspresentation.
TheCompanysfiscalyearisthe52or53weekperiodthatendsonthelastSaturdayofSeptember.TheCompanysfiscal
years 2013, 2012 and 2011 ended on September 28, 2013, September 29, 2012 and September 24, 2011, respectively. An
additionalweekisincludedinthefirstfiscalquarterapproximately every six years to realign fiscal quarters with calendar
quarters.Fiscalyear2012spanned53weeks,witha14thweekincludedinthefirstquarterof2012.Fiscalyears2013and
2011spanned52weekseach.Unlessotherwisestated,referencestoparticularyears,quarters,monthsandperiodsrefertothe
CompanysfiscalyearsendedinSeptemberandtheassociatedquarters,monthsandperiodsofthosefiscalyears.
During the first quarter of 2013, the Company adopted amended accounting standards that changed the presentation of
comprehensiveincome.Thesestandardsincreasedtheprominenceofothercomprehensiveincome(OCI)byeliminatingthe
optiontopresentcomponentsofOCIaspartofthestatementofchangesinshareholdersequityandrequiredthecomponents
ofOCItobepresentedeitherinasinglecontinuousstatementofcomprehensiveincomeorintwoconsecutivestatements.The
amendedaccountingstandardsonlyimpactedthefinancialstatementpresentationofOCIanddidnotchangethecomponents
thatarerecognizedinnetincomeorOCIaccordingly,theadoptionhadnoimpactontheCompanysfinancialpositionor
resultsofoperations.
RevenueRecognition
Netsalesconsistprimarilyofrevenuefromthesaleofhardware,software,digitalcontentandapplications,peripherals,and
serviceandsupportcontracts.TheCompanyrecognizesrevenuewhenpersuasiveevidenceofanarrangementexists,delivery
has occurred, the sales price is fixed or determinable, and collection is probable. Product is considered delivered to the
customeronceithasbeenshippedandtitleandriskoflosshavebeentransferred.FormostoftheCompanysproductsales,
thesecriteriaaremetatthetimetheproductisshipped.Foronlinesalestoindividuals,forsomesalestoeducationcustomers
in the U.S., and for certain other sales, the Company defers revenue until the customer receives the product because the
Companyretainsaportionoftheriskoflossonthesesalesduringtransit.TheCompanyrecognizesrevenuefromthesaleof
hardware products, software bundled with hardware that is essential to the functionality of the hardware, and thirdparty
digitalcontentsoldontheiTunesStoreinaccordancewithgeneralrevenuerecognitionaccountingguidance.TheCompany
recognizesrevenueinaccordancewithindustryspecificsoftwareaccountingguidanceforthe

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followingtypesofsalestransactions:(i)standalonesalesofsoftwareproducts,(ii)salesofsoftwareupgradesand(iii)salesof
softwarebundledwithhardwarenotessentialtothefunctionalityofthehardware.
Forthesaleofmostthirdpartyproducts,theCompanyrecognizesrevenuebasedonthegross amount billed to customers
becausetheCompanyestablishesitsownpricingforsuchproducts,retainsrelatedinventoryriskforphysicalproducts,isthe
primaryobligortothecustomerandassumesthecreditriskforamountsbilledtoitscustomers.Forthirdpartyapplications
soldthroughtheAppStoreandMacAppStoreandcertaindigitalcontentsoldthroughtheiTunesStore,theCompanydoes
not determine the selling price of the products and is not the primary obligor to the customer. Therefore, the Company
accountsforsuchsalesonanetbasisbyrecognizinginnetsalesonlythecommissionitretainsfromeachsale.Theportionof
thegrossamountbilledtocustomersthatisremittedbytheCompanytothirdpartyappdevelopersandcertaindigitalcontent
ownersisnotreflectedintheCompanysConsolidatedStatementsofOperations.
TheCompanyrecordsdeferredrevenuewhenitreceivespaymentsinadvanceofthedeliveryofproductsortheperformance
ofservices.This includes amounts that have been deferred for unspecified and specified software upgrade rights and non
softwareservicesthatareattachedtohardwareandsoftwareproducts.TheCompanysellsgiftcardsredeemableatitsretailand
onlinestores,andalsosellsgiftcardsredeemableontheiTunesStoreforthepurchaseofdigitalcontentandsoftware.The
Companyrecordsdeferredrevenueuponthesaleofthecard,whichisrelieveduponredemptionofthecardbythecustomer.
Revenue from AppleCare service and support contracts is deferred and recognized over the service coverage periods.
AppleCare service and support contracts typically include extended phone support, repair services, webbased support
resourcesanddiagnostictoolsofferedundertheCompanysstandardlimitedwarranty.
The Company records reductions to revenue for estimated commitments related to price protection and other customer
incentiveprograms.Fortransactionsinvolvingpriceprotection,theCompanyrecognizesrevenuenetoftheestimatedamount
toberefunded.FortheCompanysothercustomerincentiveprograms,theestimatedcostoftheseprogramsisrecognizedat
thelaterofthedateatwhichtheCompanyhassoldtheproductorthedateatwhichtheprogramisoffered.TheCompanyalso
recordsreductionstorevenueforexpectedfutureproductreturnsbasedontheCompanyshistoricalexperience.Revenueis
recordednetoftaxescollectedfromcustomersthatareremittedtogovernmentalauthorities,withthecollectedtaxesrecorded
ascurrentliabilitiesuntilremittedtotherelevantgovernmentauthority.
RevenueRecognitionforArrangementswithMultipleDeliverables
For multielement arrangements that include hardware products containing software essential to the hardware products
functionality,undelivered software elements that relate to the hardware products essential software, and undelivered non
software services, the Company allocates revenue to all deliverables based on their relative selling prices. In such
circumstances,theCompanyusesahierarchytodeterminethesellingpricetobeusedforallocatingrevenuetodeliverables:
(i)vendorspecificobjectiveevidenceoffairvalue(VSOE),(ii)thirdpartyevidenceofsellingprice(TPE),and(iii)best
estimateofsellingprice(ESP).VSOEgenerallyexistsonlywhentheCompanysellsthedeliverableseparatelyandisthe
priceactuallychargedbytheCompanyforthatdeliverable.ESPsreflecttheCompanysbestestimatesofwhattheselling
pricesofelementswouldbeiftheyweresoldregularlyonastandalonebasis.Formultielementarrangementsaccountedfor
inaccordancewithindustryspecificsoftwareaccountingguidance,theCompanyallocatesrevenuetoalldeliverablesbased
ontheVSOEofeachelement,andifVSOEdoesnotexistrevenueisrecognizedwhenelementslackingVSOEaredelivered.
For sales of qualifying versions of iPhone, iPad and iPod touch (iOS devices), Mac and Apple TV, the Company has
indicateditmayfromtimetotimeprovidefutureunspecifiedsoftwareupgradesandfeaturestotheessentialsoftwarebundled
witheachofthesehardwareproductsfreeofchargetocustomers.EssentialsoftwareforiOSdevicesincludesiOSandrelated
applicationsandforMacincludesOSXandrelatedapplications.TheCompanyalsoprovidesvariousnonsoftwareservicesto
ownersofqualifyingversionsofiOSdevicesandMac.

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TheCompanyhasidentifieduptothreedeliverablesregularlyincludedinarrangementsinvolvingthesaleofthesedevices.
Thefirstdeliverableisthehardwareandsoftwareessentialtothefunctionalityofthehardwaredevicedeliveredatthetimeof
sale.TheseconddeliverableistheembeddedrightincludedwiththepurchaseofiOSdevices,MacandAppleTVtoreceive
onawhenandifavailablebasis,futureunspecifiedsoftwareupgradesandfeaturesrelatingtotheproductsessentialsoftware.
The third deliverable is the nonsoftware services to be provided to qualifying versions of iOS devices and Mac. The
Company allocates revenue between these deliverables using the relative selling price method. Because the Company has
neitherVSOEnorTPEforthesedeliverables,theallocationofrevenueisbasedontheCompanysESPs.Revenueallocatedto
thedeliveredhardwareandtherelatedessentialsoftwareisrecognizedatthetimeofsaleprovidedtheotherconditionsfor
revenue recognition have been met. Revenue allocated to the embedded unspecified software upgrade rights and the non
softwareservicesisdeferredandrecognizedonastraightlinebasisovertheestimatedperiodthesoftwareupgradesandnon
softwareservicesareexpectedtobeprovidedforeachofthesedevices,whichrangesfromtwotofouryears.Costofsales
relatedtodeliveredhardwareandrelatedessentialsoftware,includingestimatedwarrantycosts,arerecognizedatthetimeof
sale.Costsincurredtoprovidenonsoftwareservicesarerecognizedascostofsalesasincurred,andengineeringandsalesand
marketingcostsarerecognizedasoperatingexpensesasincurred.
TheCompanysprocessfordeterminingitsESPfordeliverableswithoutVSOEorTPEconsidersmultiplefactorsthatmay
vary depending upon the unique facts and circumstances related to each deliverable. The Company believes its customers
wouldbereluctanttobuyunspecifiedsoftwareupgraderightsfortheessentialsoftwareincludedwithitsqualifyinghardware
products.ThisviewisprimarilybasedonthefactthatunspecifiedsoftwareupgraderightsdonotobligatetheCompanyto
provideupgradesataparticulartimeoratall,anddonotspecifytocustomerswhichupgradesorfeatureswillbedelivered.
The Company also believes its customers would be unwilling to pay a significant amount for access to the nonsoftware
servicesbecauseothercompaniesoffersimilarservicesatlittleornocosttousers.Therefore,theCompanyhasconcludedthat
ifitweretosellupgraderightsoraccesstothenonsoftwareservicesonastandalonebasis,includingthoserightsandservices
attached to iOS devices, Mac and Apple TV, the selling prices would be relatively low. Key factors considered by the
CompanyindevelopingtheESPsforsoftwareupgraderightsincludepriceschargedbytheCompanyforsimilarofferings,
markettrendsinthepricingofApplebrandedandthirdpartyMacandiOScompatiblesoftware,thenature of the upgrade
rights(e.g.,unspecifiedversusspecified),andtherelativeESPoftheupgraderightsascomparedtothetotalsellingpriceof
theproduct.TheCompanymayalsoconsideradditionalfactorsasappropriate,includingtheimpactofotherproductsand
servicesprovidedtocustomers,thepricingofcompetitivealternativesiftheyexist,productspecificbusinessobjectives,and
thelengthoftimeaparticularversionofadevicehasbeenavailable.Whenrelevant,thesamefactorsareconsideredbythe
Company in developing ESPs for offerings such as the nonsoftware services with additional consideration given to the
estimatedcosttoprovidesuchservices.
In2013,2012and2011,theCompanyscombinedESPsfortheunspecifiedsoftwareupgraderightsandtherightstoreceive
thenonsoftwareservicesincludedwithitsqualifyinghardwaredeviceshaverangedfrom$5to$25.BeginninginSeptember
2013,thecombinedESPsforiPhoneandiPadwereincreasedbyupto$5toreflectadditionstounspecifiedsoftwareupgrade
rightsduetoexpansionofessentialsoftwarebundledwiththesedevices.Accordingly,therangeofcombinedESPsforiPhone
andiPadasofSeptember2013is$15to$25.BeginninginOctober2013,theCompanyanticipatesincreasingthecombined
ESPsforMac from $20 to $40 to reflect additions to unspecified software upgrade rights related to expansion of bundled
essential software. Revenue allocated to such rights is deferred and recognized on a straightline basis over the estimated
periodtherightsareexpectedtobeprovidedforeachdevice,whichrangesfromtwotofouryears.
ShippingCosts
For all periods presented, amounts billed to customers related to shipping and handling are classified as revenue, and the
Companysshippingandhandlingcostsareincludedincostofsales.

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TableofContents

WarrantyExpense
TheCompanygenerallyprovidesfortheestimatedcostofhardwareandsoftwarewarrantiesatthetimetherelatedrevenueis
recognized.TheCompanyassessestheadequacyofitspreexistingwarrantyliabilitiesandadjuststheamountsasnecessary
basedonactualexperienceandchangesinfutureestimates.
SoftwareDevelopmentCosts
Research and development costs are expensed as incurred. Development costs of computer software to be sold, leased, or
otherwisemarketedaresubjecttocapitalizationbeginningwhenaproductstechnologicalfeasibilityhasbeenestablished
and ending when a product is available for general release to customers. In most instances, the Companys products are
releasedsoonaftertechnologicalfeasibilityhasbeenestablished.Costsincurredsubsequenttoachievementoftechnological
feasibilitywerenotsignificant,andsoftwaredevelopmentcostswereexpensedasincurredduring2013,2012and2011.
AdvertisingCosts
Advertisingcostsareexpensedasincurredandincludedinselling,generalandadministrativeexpenses.Advertisingexpense
was$1.1billion,$1.0billionand$933millionfor2013,2012and2011,respectively.
SharebasedCompensation
The Company recognizes expense related to sharebased payment transactions in which it receives employee services in
exchangefor(a)equityinstrumentsoftheCompanyor(b)liabilitiesthatarebasedonthefairvalueoftheenterprisesequity
instrumentsorthatmaybesettledbytheissuanceofsuchequityinstruments.Sharebasedcompensationcostforrestricted
stockunits(RSUs)ismeasuredbasedontheclosingfairmarketvalueoftheCompanyscommonstockonthedateofgrant.
Sharebased compensation cost for stock options and employee stock purchase plan rights (stock purchase rights) is
measuredatthegrantdateandofferingdate,respectively,basedonthefairvalueascalculatedbytheBlackScholesMerton
(BSM) optionpricing model. The BSM optionpricing model incorporates various assumptions including expected
volatility,estimatedexpectedlifeandinterestrates.TheCompanyrecognizessharebasedcompensationcostovertheawards
requisiteserviceperiodonastraightlinebasisfortimebasedRSUsandonagradedbasisforRSUsthatarecontingentonthe
achievementofperformancemetrics.TheCompanyrecognizesabenefitfromsharebasedcompensationintheConsolidated
StatementsofShareholdersEquityifanincrementaltaxbenefitisrealized.Inaddition,theCompanyrecognizestheindirect
effectsofsharebasedcompensationonresearchanddevelopmenttaxcredits,foreigntaxcreditsanddomesticmanufacturing
deductions in the Consolidated Statements of Operations. Further information regarding sharebased compensation can be
foundinNote9,BenefitPlansofthisForm10K.
IncomeTaxes
The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and
liabilitiesarerecognizedfortheexpectedfuturetaxconsequencesoftemporarydifferencesbetweenthefinancialreporting
andtaxbasesofassetsandliabilities,andforoperatinglossesandtaxcreditcarryforwards.Deferredtaxassetsandliabilities
aremeasuredusingthecurrentlyenactedtaxratesthatapplytotaxableincomeineffectfortheyearsinwhichthosetaxassets
areexpectedtoberealizedorsettled.TheCompanyrecordsavaluationallowancetoreducedeferredtaxassetstotheamount
thatisbelievedmorelikelythannottoberealized.
TheCompanyrecognizesthetaxbenefitfromanuncertaintaxpositiononlyifitismorelikelythannotthetaxpositionwill
be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits
recognizedinthefinancialstatementsfromsuchpositionsarethenmeasuredbasedonthelargestbenefitthathasagreater
than 50% likelihood of being realized upon settlement. See Note 5, Income Taxes of this Form 10K for additional
information.

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TableofContents

EarningsPerShare
Basicearningspershareiscomputedbydividingincomeavailabletocommonshareholdersbytheweightedaveragenumber
of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing income
availabletocommonshareholdersbytheweightedaveragenumberofsharesofcommonstockoutstandingduringtheperiod
increasedtoincludethenumberofadditionalsharesofcommonstockthatwouldhavebeenoutstandingifthepotentially
dilutivesecuritieshadbeenissued.Potentiallydilutivesecuritiesincludeoutstandingstockoptions,sharestobepurchased
undertheCompanysemployeestockpurchaseplanandunvestedRSUs.Thedilutiveeffectofpotentiallydilutivesecurities
isreflectedindilutedearningspersharebyapplicationofthetreasurystockmethod.Underthetreasurystockmethod,an
increase in the fair market value of the Companys common stock can result in a greater dilutive effect from potentially
dilutivesecurities.
Thefollowingtableshowsthecomputationofbasicanddilutedearningspersharefor2013,2012,and2011(inthousands,
exceptnetincomeinmillionsandpershareamounts):

2013

2012

2011

Numerator:

$ 37,037

$ 41,733

925,331

934,818

924,258

6,331

10,537

12,387

931,662

945,355

936,645

40.03

44.64

28.05

39.75

44.15

27.68

Netincome

$ 25,922

Denominator:
Weightedaveragesharesoutstanding
Effectofdilutivesecurities

Weightedaveragedilutedshares

Basicearningspershare

Dilutedearningspershare

Potentiallydilutivesecuritiesrepresenting4.2million,1.0millionand1.7millionsharesofcommonstockfor2013,2012
and2011,respectively,wereexcludedfromthecomputationofdilutedearningspersharefortheseperiodsbecausetheireffect
wouldhavebeenantidilutive.
FinancialInstruments
CashEquivalentsandMarketableSecurities
Allhighlyliquidinvestmentswithmaturitiesofthreemonthsorlessatthedateofpurchaseareclassifiedascashequivalents.
The Companys marketable debt and equity securities have been classified and accounted for as availableforsale.
Management determines the appropriate classification of its investments at the time of purchase and reevaluates the
designationsateachbalancesheetdate.TheCompanyclassifiesitsmarketabledebtsecuritiesaseithershorttermorlong
termbasedoneachinstrumentsunderlyingcontractualmaturitydate.Marketabledebtsecuritieswithmaturitiesof12months
orlessareclassifiedasshorttermandmarketabledebtsecuritieswithmaturitiesgreaterthan12monthsareclassifiedaslong
term.TheCompanyclassifiesitsmarketableequitysecurities,includingmutualfunds,aseithershorttermorlongtermbased
onthenatureofeachsecurityanditsavailabilityforuseincurrentoperations.TheCompanysmarketabledebtandequity
securitiesarecarriedatfairvalue,withtheunrealizedgainsandlosses,netoftaxes,reportedasacomponentofshareholders
equity.Thecostofsecuritiessoldisbaseduponthespecificidentificationmethod.
DerivativeFinancialInstruments
TheCompanyaccountsforitsderivativeinstrumentsaseitherassetsorliabilitiesandcarriesthematfairvalue.

Forderivativeinstrumentsthathedgetheexposuretovariabilityinexpectedfuturecashflowsthataredesignatedascashflow
hedges,theeffectiveportionofthegainorlossonthederivativeinstrumentisreportedasacomponentofaccumulatedother
comprehensiveincome(AOCI)inshareholdersequityandreclassifiedintoincomeinthesameperiodorperiodsduring
whichthehedgedtransactionaffectsearnings.Theineffectiveportionofthegainor

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TableofContents

lossonthederivativeinstrument,ifany,isrecognizedincurrentincome.Toreceivehedgeaccountingtreatment,cashflow
hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions. For options
designatedascashflowhedges,changesinthetimevalueareexcludedfromtheassessmentofhedgeeffectivenessandare
recognizedinincome.Forderivativeinstrumentsthathedgetheexposuretochangesinthefairvalueofanassetoraliability
andthataredesignatedasfairvaluehedges,boththenetgainorlossonthederivativeinstrumentaswellastheoffsettinggain
orlossonthehedgeditemattributabletothehedgedriskarerecognizedinearningsinthecurrentperiod.TheCompanyhad
nofairvaluehedgesin2013,2012and2011.Thenetgainorlossontheeffectiveportionofaderivativeinstrumentthatis
designatedasaneconomichedgeoftheforeigncurrencytranslationexposureofthenetinvestmentinaforeignoperationis
reportedinthesamemannerasaforeigncurrencytranslationadjustment.Forforwardexchangecontractsdesignatedasnet
investmenthedges,theCompanyexcludeschangesinfairvaluerelatingtochangesintheforwardcarrycomponentfromits
definition of effectiveness. Accordingly, any gains or losses related to this component are recognized in current income.
Derivativesthatdonotqualifyashedgesareadjustedtofairvaluethroughcurrentincome.
AllowanceforDoubtfulAccounts
The Company records its allowance for doubtful accounts based upon its assessment of various factors. The Company
considers historical experience, the age of the accounts receivable balances, credit quality of the Companys customers,
currenteconomicconditions,andotherfactorsthatmayaffectcustomersabilitytopay.
Inventories
Inventoriesarestatedatthelowerofcost,computedusingthefirstin,firstoutmethod,ormarket.Ifthecostoftheinventories
exceedstheirmarketvalue,provisionsaremadecurrentlyforthedifferencebetweenthecostandthemarketvalue.
Property,PlantandEquipment
Property, plant and equipment are stated at cost. Depreciation is computed by use of the straightline method over the
estimated useful lives of the assets, which for buildings is the lesser of 30 years or the remaining life of the underlying
building between two to five years for machinery and equipment, including product tooling and manufacturing process
equipmentandtheshorterofleasetermsortenyearsforleaseholdimprovements.TheCompanycapitalizeseligiblecoststo
acquireordevelopinternalusesoftwarethatareincurredsubsequenttothepreliminaryprojectstage.Capitalizedcostsrelated
tointernalusesoftwareareamortizedusingthestraightlinemethodovertheestimatedusefullivesoftheassets,whichrange
fromthreetofiveyears.Depreciationandamortizationexpenseonpropertyandequipmentwas$5.8billion,$2.6billionand
$1.6billionduring2013,2012and2011,respectively.
LongLivedAssetsIncludingGoodwillandOtherAcquiredIntangibleAssets
TheCompanyreviewsproperty,plantandequipment,inventorycomponentprepayments,andcertainidentifiableintangibles,
excluding goodwill, for impairment. Longlived assets are reviewed for impairment whenever events or changes in
circumstancesindicatethecarryingamountofanassetmaynotberecoverable.Recoverabilityoftheseassetsismeasuredby
comparisonoftheircarryingamountstofutureundiscountedcashflowstheassetsareexpectedtogenerate.Ifproperty,plant
and equipment, inventory component prepayments, and certain identifiable intangibles are considered to be impaired, the
impairmenttoberecognizedequalstheamountbywhichthecarryingvalueoftheassetsexceedsitsfairvalue.TheCompany
didnotrecordanysignificantimpairmentsduring2013,2012and2011.
TheCompanydoesnotamortizegoodwillandintangibleassetswithindefiniteusefullives,rathersuchassetsarerequiredto
betestedforimpairmentatleastannuallyorsoonerwhenevereventsorchangesincircumstancesindicatethattheassetsmay
beimpaired.TheCompanyperformsitsgoodwillandintangibleassetimpairmenttestsinthefourthquarterofeachyear.The
Companydidnotrecognizeanyimpairmentchargesrelatedto

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TableofContents

goodwillorindefinitelivedintangibleassetsduring2013,2012and2011.TheCompanyestablishedreportingunitsbasedon
itscurrentreportingstructure.Forpurposesoftestinggoodwillforimpairment,goodwillhasbeenallocatedtothesereporting
unitstotheextentitrelatestoeachreportingunit.In2013and2012,theCompanysgoodwillwasallocatedtotheAmericas
andEuropereportableoperatingsegments.
The Company amortizes its intangible assets with definite useful lives over their estimated useful lives and reviews these
assets for impairment. The Company is currently amortizing its acquired intangible assets with definite useful lives over
periodstypicallyfromthreetosevenyears.
FairValueMeasurements
TheCompanyappliesfairvalueaccountingforallfinancialassetsandliabilitiesandnonfinancialassetsandliabilitiesthat
arerecognizedordisclosedatfairvalueinthefinancialstatementsonarecurringbasis.TheCompanydefinesfairvalueasthe
price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are
required to be recorded at fair value, the Company considers the principal or most advantageous market in which the
Company would transact and the marketbased risk measurements or assumptions that market participants would use in
pricingtheassetorliability,suchasrisksinherentinvaluationtechniques,transferrestrictionsandcreditrisk.Fairvalueis
estimatedbyapplyingthefollowinghierarchy,whichprioritizestheinputsusedtomeasurefairvalueintothreelevelsand
basesthecategorizationwithinthehierarchyuponthelowestlevelofinputthatisavailableandsignificanttothefairvalue
measurement:
Level1Quotedpricesinactivemarketsforidenticalassetsorliabilities.
Level2Observableinputsotherthanquotedpricesinactivemarketsforidenticalassetsandliabilities,quotedpricesfor
identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by
observablemarketdataforsubstantiallythefulltermoftheassetsorliabilities.
Level 3 Inputs that are generally unobservable and typically reflect managements estimate of assumptions that market
participantswoulduseinpricingtheassetorliability.
TheCompanysvaluationtechniquesusedtomeasurethefairvalueofmoneymarketfundsandcertainmarketableequity
securitieswerederivedfromquotedpricesinactivemarketsforidenticalassetsorliabilities.Thevaluationtechniquesusedto
measurethefairvalueofallotherfinancialinstruments,allofwhichhavecounterpartieswithhighcreditratings,werevalued
basedonquotedmarketpricesormodeldrivenvaluationsusingsignificantinputsderivedfromorcorroboratedbyobservable
marketdata.
Inaccordancewiththefairvalueaccountingrequirements,companiesmaychoosetomeasureeligiblefinancialinstruments
andcertainotheritemsatfairvalue.TheCompanyhasnotelectedthefairvalueoptionforanyeligiblefinancialinstruments.
ForeignCurrencyTranslationandRemeasurement
TheCompanytranslatestheassetsandliabilitiesofitsnonU.S.dollarfunctionalcurrencysubsidiariesintoU.S.dollarsusing
exchangeratesineffectattheendofeachperiod.Revenueandexpensesforthesesubsidiariesaretranslatedusingratesthat
approximatethosein effect during the period. Gains and losses from these translations are recognized in foreign currency
translationincludedinAOCIinshareholdersequity.TheCompanyssubsidiariesthatusetheU.S.dollarastheirfunctional
currency remeasure monetary assets and liabilities at exchange rates in effect at the end of each period, and inventories,
property, and nonmonetary assets and liabilities at historical rates. Gains and losses from these remeasurements were not
significantandhavebeenincludedintheCompanysresultsofoperations.

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Note2FinancialInstruments
Cash,CashEquivalentsandMarketableSecurities
ThefollowingtablesshowtheCompanyscashandavailableforsalesecuritiesadjustedcost,grossunrealizedgains,gross
unrealizedlossesandfairvaluebysignificantinvestmentcategoryrecordedascashandcashequivalentsorshortorlong
termmarketablesecuritiesasofSeptember28,2013andSeptember29,2012(inmillions):

2013
Adjusted

Cost

Unrealized

Gains

Unrealized

Losses

Cashand

ShortTerm

LongTerm

Cash

Marketable

Marketable

Fair

Value Equivalents

Securities

Securities

Cash
$

8,705 $

0 $

0 $ 8,705 $

8,705

Level1:

Moneymarketfunds

1,793

1,793

1,793

3,999

(197)

3,802

3,802

5,792

(197)

5,595

1,793

3,802

Mutualfunds

Subtotal

Level2:

U.S.Treasurysecurities

27,642

24

(47) 27,619

431

7,554

19,634

16,878

12

(52) 16,838

177

3,412

13,249

5,545

35

(137)

5,443

50

313

5,080

2,344

2,344

1,264

844

236

2,998

2,998

1,835

1,163

54,586

275

(252) 54,609

8,077

46,532

6,257

45

(22)

6,280

1,114

5,162

16,396

23

(89) 16,330

16,322

132,646

414

(599) 132,461

3,761

22,485

106,215

$ 147,143 $

414 $

(796) $146,761 $

14,259

26,287

106,215

U.S.agencysecurities

NonU.S.governmentsecurities

Certificatesofdepositandtimedeposits

Commercialpaper

Corporatesecurities

Municipalsecurities

Mortgageandassetbackedsecurities

Subtotal

Total

2012
Adjusted

Unrealized

Unrealized

Fair

Cashand

ShortTerm

LongTerm

Cash

Marketable

Marketable

Cost

Gains

Losses

Value Equivalents

Securities

Securities

Cash
$

3,109 $

0 $

0 $ 3,109 $

3,109

Level1:

Moneymarketfunds

1,460

1,460

1,460

2,385

79

(2)

2,462

2,462

3,845

79

(2)

3,922

1,460

2,462

Mutualfunds

Subtotal

Level2:

U.S.Treasurysecurities

20,088

21

(1) 20,108

2,608

3,525

13,975

19,540

58

(1) 19,597

1,460

1,884

16,253

5,483

183

(2)

5,664

84

1,034

4,546

2,189

2,191

1,106

202

883

2,112

2,112

909

1,203

46,261

568

(8) 46,821

10

7,455

39,356

5,645

74

5,719

618

5,101

11,948

66

(6) 12,008

12,008

113,266

972

(18) 114,220

6,177

15,921

92,122

$ 120,220 $

1,051 $

(20) $121,251 $

10,746

18,383

92,122

U.S.agencysecurities

NonU.S.governmentsecurities

Certificatesofdepositandtimedeposits

Commercialpaper

Corporatesecurities

Municipalsecurities

Mortgageandassetbackedsecurities

Subtotal

Total

ThenetunrealizedlossesasofSeptember28,2013andthenetunrealizedgainsasofSeptember29,2012arerelatedprimarily
tolongtermmarketablesecurities.TheCompanymaysellcertainofitsmarketablesecuritiespriortotheirstatedmaturities
forstrategicreasonsincluding,butnotlimitedto,anticipationofcreditdeteriorationanddurationmanagement.During2013,
2012 and 2011, the net realized gains recognized by the Company were not significant. The maturities of the Companys
longtermmarketablesecuritiesgenerallyrangefromonetofiveyears.

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AsofSeptember28,2013andSeptember29,2012,grossunrealizedlossesrelatedtoindividualsecuritiesthathadbeenina
continuouslosspositionfor12monthsorlongerwerenotsignificant.
As of September 28, 2013, the Company considered the declines in market value of its marketable securities investment
portfoliotobetemporaryinnatureanddidnotconsideranyofitsinvestmentsotherthantemporarilyimpaired.TheCompany
typicallyinvestsinhighlyratedsecurities,anditsinvestmentpolicygenerallylimitstheamountofcreditexposuretoany
oneissuer.Thepolicyrequiresinvestmentsgenerallytobeinvestmentgrade,withtheprimaryobjectiveofminimizingthe
potentialriskofprincipalloss.Fairvaluesweredeterminedforeachindividualsecurityintheinvestmentportfolio.When
evaluatinganinvestmentforotherthantemporaryimpairment,theCompanyreviewsfactorssuchasthelengthoftimeand
extenttowhichfairvaluehasbeenbelowitscostbasis,thefinancialconditionoftheissuerandanychangesthereto,changes
inmarketinterestrates,andtheCompanysintenttosell,orwhetheritismorelikelythannotitwillberequiredtosell,the
investmentbeforerecoveryoftheinvestmentscostbasis.During2013,2012and2011theCompanydidnotrecognizeany
significantimpairmentcharges.
DerivativeFinancialInstruments
TheCompanyusesderivativestopartiallyoffsetitsbusinessexposuretoforeigncurrencyandinterestraterisk.TheCompany
mayenterintoforwardcontracts,optioncontracts,swaps,orotherderivativeinstrumentstooffsetsomeoftheriskonexpected
futurecashflows,onnetinvestmentsincertainforeignsubsidiaries,andoncertainexistingassetsandliabilities.
To help protect gross margins from fluctuations in foreign currency exchange rates, certain of the Companys subsidiaries
whose functional currency is the U.S. dollar hedge a portion of forecasted foreign currency revenue. The Companys
subsidiarieswhosefunctionalcurrencyisnottheU.S.dollarandwhosellinlocalcurrenciesmayhedgeaportionofforecasted
inventory purchases not denominated in the subsidiaries functional currencies. The Company hedges a portion of its
forecastedforeigncurrencyexposureassociatedwithrevenueandinventorypurchases,typicallyforupto12months.
To help protect the net investment in a foreign operation from adverse changes in foreign currency exchange rates, the
Companymayenterintoforeigncurrencyforwardandoptioncontractstooffsetthechangesinthecarryingamountsofthese
investmentsduetofluctuationsinforeigncurrencyexchangerates.
Tohelpprotectagainstadversefluctuationsininterestrates,theCompanymayenterintointerestrateswaps,options,orother
instrumentstooffsetaportionofthechangesinincomeorexpenseduetofluctuationsininterestrates.
The Company may also enter into foreign currency forward and option contracts to partially offset the foreign currency
exchangegainsandlossesgeneratedbytheremeasurementofcertainassetsandliabilities denominated in nonfunctional
currencies. However, the Company may choose not to hedge certain foreign currency exchange exposures for a variety of
reasons including, but not limited to, accounting considerations and 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
movementsinforeigncurrencyexchangerates.
TheCompanyrecordsallderivativesintheConsolidatedBalanceSheetsatfairvalue.TheCompanysaccountingtreatment
oftheseinstruments is based on whether the instruments are designated as hedge or nonhedge instruments. The effective
portionsofcashflowhedgesarerecordedinAOCIuntilthehedgeditemisrecognizedinearnings.Theeffectiveportionsof
netinvestmenthedgesarerecordedinOCIasapartofthecumulativetranslationadjustment.Theineffectiveportionsofcash
flow hedges and net investment hedges are recorded in other income and expense. Derivatives that are not designated as
hedginginstrumentsareadjustedtofairvaluethroughearningsinthefinancialstatementlineitemtowhichthederivative
relates.

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The Company had net deferred losses of $175 million and $240 million associated with cash flow hedges, net of taxes,
recordedinAOCIasofSeptember28,2013andSeptember29,2012,respectively.Deferredgainsandlossesassociatedwith
cashflowhedgesofforeigncurrencyrevenuearerecognizedasacomponentofnetsalesinthe same period as the related
revenueisrecognized,anddeferredgainsandlossesrelatedtocashflowhedgesofinventorypurchasesarerecognizedasa
componentofcostofsalesinthesameperiodastherelatedcostsarerecognized.Deferredgainsandlossesassociatedwith
cashflowhedgesofinterestincomeorexpensearerecognizedasacomponentofotherincome/(expense),netinthesame
period as the related income or expense is recognized. The Companys hedged foreign currency transactions and hedged
interestratetransactionsasofSeptember28,2013areexpectedtooccurwithin12monthsandfiveyears,respectively.
Derivativeinstrumentsdesignatedascashflowhedgesmustbededesignatedashedgeswhenitisprobabletheforecasted
hedged transaction will not occur in the initially identified time period or within a subsequent twomonth time period.
DeferredgainsandlossesinAOCIassociatedwithsuchderivativeinstrumentsarereclassifiedimmediatelyintootherincome
andexpense.Anysubsequentchangesinfairvalueofsuchderivativeinstrumentsarereflectedinotherincomeandexpense
unlesstheyareredesignatedashedgesofothertransactions.TheCompanydidnotrecognizeanysignificantnetgainsor
lossesrelatedtothelossofhedgedesignationondiscontinuedcashflowhedgesduring2013,2012and2011.
TheCompanysunrealizednetgainsandlossesonnetinvestmenthedges,includedinthecumulativetranslationadjustment
account of AOCI, were not significant as of September 28, 2013 and September 29, 2012. The ineffective portions of and
amountsexcludedfromtheeffectivenesstestofnetinvestmenthedgesarerecordedinotherincomeandexpense.
Thegain/lossrecognizedinotherincomeandexpenseforforeigncurrencyforwardandoptioncontractsnotdesignatedas
hedginginstrumentswasnotsignificantduring2013,2012and2011,respectively.Theseamountsrepresentthenetgainor
lossonthederivativecontractsanddonotincludechangesintherelatedexposures,whichgenerallyoffsetaportionofthe
gainorlossonthederivativecontracts.
ThefollowingtableshowsthenotionalprincipalamountsoftheCompanysoutstandingderivativeinstrumentsandcredit
risk amounts associated with outstanding or unsettled derivative instruments as of September 28, 2013 and September 29,
2012(inmillions):

2013

2012

Credit
Notional

Credit

Risk

Notional

Risk

Principal

Amounts

Principal

Amounts

Instrumentsdesignatedasaccountinghedges:

Foreignexchangecontracts

$35,013 $ 159 $41,970 $ 140

$ 3,000 $ 44 $

Interestratecontracts

0 $ 0

Instrumentsnotdesignatedasaccountinghedges:

Foreignexchangecontracts

$16,131 $

25 $13,403 $

12

The notional principal amounts for outstanding derivative instruments provide one measure of the transaction volume
outstanding and do not represent the amount of the Companys exposure to credit or market loss. The credit risk amounts
represent the Companys 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 thencurrent currency or
interest rates at each respective date. The Companys gross exposure on these transactions may be further mitigated by
collateralreceivedfromcertaincounterparties.TheCompanysexposuretocreditlossandmarketriskwillvaryovertimeasa
functionofcurrencyandinterestrates.Althoughthetableabovereflectsthenotionalprincipalandcreditriskamountsofthe
Companysderivativeinstruments,itdoesnotreflectthegainsorlossesassociatedwiththeexposuresandtransactionsthat
the instruments are intended to hedge. The amounts ultimately realized upon settlement of these financial instruments,
togetherwiththegainsandlossesontheunderlyingexposures,willdependonactualmarketconditionsduringtheremaining
lifeoftheinstruments.

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TheCompanygenerallyentersintomasternettingarrangements,whicharedesignedtoreducecreditriskbypermittingnet
settlementoftransactionswiththesamecounterparty.Tofurtherlimitcreditrisk,theCompanygenerallyentersintocollateral
security arrangements that provide for collateral to be received or posted when the net fair value of certain financial
instrumentsfluctuatesfromcontractuallyestablishedthresholds.TheCompanypresentsitsderivativeassetsandderivative
liabilitiesattheirgrossfairvalues.AsofSeptember28,2013andSeptember29,2012,theCompanyposted$164millionand
$278million,respectively,ofcashcollateralrelatedtothederivativeinstrumentsunderitscollateralsecurityarrangements,
whichwererecordedasothercurrentassetsintheConsolidatedBalanceSheet. The Company did not have any derivative
instrumentswithcreditriskrelatedcontingentfeaturesthatwouldrequireittopostadditionalcollateralasofSeptember28,
2013orSeptember29,2012.
ThefollowingtablesshowtheCompanysderivativeinstrumentsatgrossfairvalueasreflectedintheConsolidatedBalance
SheetsasofSeptember28,2013andSeptember29,2012(inmillions):

2013
FairValueof

FairValueof

Derivatives

DerivativesNot

Designatedas

Designatedas

Total

HedgeInstruments

HedgeInstruments

FairValue

145

25

170

44

44

435

Derivativeassets(a):

Foreignexchangecontracts
Interestratecontracts

Derivativeliabilities(b):

Foreignexchangecontracts

389

46

2012

FairValueof

FairValueof

Derivatives

DerivativesNot

Designatedas

Designatedas

Total

HedgeInstruments

HedgeInstruments

FairValue

150

557

Derivativeassets(a):

Foreignexchangecontracts

138

12

Derivativeliabilities(b):

Foreignexchangecontracts

(a)

516

41

ThefairvalueofderivativeassetsismeasuredusingLevel2fairvalueinputsandisrecordedasothercurrentassetsinthe
ConsolidatedBalanceSheets.

(b)

ThefairvalueofderivativeliabilitiesismeasuredusingLevel2fairvalueinputsandisrecordedasaccruedexpensesin
theConsolidatedBalanceSheets.

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The following table shows the pretax effect of the Companys derivative instruments designated as cash flow and net
investmenthedgesintheConsolidatedStatementsofOperationsfortheyearsendedSeptember28,2013andSeptember29,
2012(inmillions):

Gains/(Losses)Recognizedin

Gains/(Losses)ReclassifiedfromAOCI

OCIEffectivePortion
September28,
2013

September29,

2012

intoNetIncomeEffectivePortion
September28,

2013(a)

Gains/(Losses)RecognizedIneffectivePortion
andAmountExcludedfromEffectivenessTesting

September29,

2012(b)

September28,

Location

2013

September29,

2012

Cashflowhedges:

Foreignexchange
Otherincome/

contracts
$

891 $

(175) $

676 $

607 (expense),net $

12

(6)

0 (expense),net

(301) $

(658)

Interestrate
Otherincome/

contracts

Netinvestmenthedges:

Foreignexchange
Otherincome/

contracts

143

(5)

1,046 $

(180) $

670 $

0 (expense),net

(300) $

(655)

Total

(a)

607

Includesgains/(losses)reclassifiedfromAOCIintonetincomefortheeffectiveportionofcashflowhedges,ofwhich$44
million,$632millionand$(6)millionwererecognizedwithinnetsales,costofsalesandotherincome/(expense),net,
respectively,withintheConsolidatedStatementofOperationsfortheyearendedSeptember28,2013.

(b)

Includesgains/(losses)reclassifiedfromAOCIintoincomefortheeffectiveportionofcashflowhedges,ofwhich$537
million and $70 million were recognized within net sales and cost of sales, respectively, within the Consolidated
StatementofOperationsfortheyearendedSeptember29,2012.

AccountsReceivable
TradeReceivables
The Company has considerable trade receivables outstanding with its thirdparty cellular network carriers, wholesalers,
retailers, valueadded resellers, small and midsized businesses, and education, enterprise and government customers. The
Company generally does not require collateral from its customers however, the Company will require collateral in certain
instancestolimitcreditrisk.Inaddition,whenpossible,theCompanyattemptstolimitcreditriskontradereceivableswith
creditinsuranceforcertaincustomersorbyrequiringthirdpartyfinancing,loansorleasestosupportcreditexposure.These
creditfinancing arrangements are directly between the thirdparty financing company and the end customer. As such, the
Companygenerallydoesnotassumeanyrecourseorcreditrisksharingrelatedtoanyofthesearrangements.
AsofSeptember28,2013,theCompanyhadtwocustomersthatrepresented10%ormoreoftotaltradereceivables,oneof
whichaccountedfor13%andtheother10%.AsofSeptember29,2012,theCompanyhadtwocustomersthatrepresented
10%ormoreoftotaltradereceivables,oneofwhichaccountedfor14%andtheother10%.TheCompanyscellularnetwork
carriersaccountedfor68%and66%oftradereceivablesasofSeptember28,2013andSeptember29,2012,respectively.The
additionsandwriteoffstotheCompanysallowancefordoubtfulaccountsduring2013,2012and2011werenotsignificant.
VendorNonTradeReceivables
TheCompanyhasnontradereceivablesfromcertainofitsmanufacturingvendorsresultingfromthesaleofcomponentsto
these manufacturing vendors who manufacture subassemblies or assemble final products for the Company. The Company

purchases these components directly from suppliers. Vendor nontrade receivables from three of the Companys vendors
accountedfor47%,21%and15%oftotalnontradereceivablesasofSeptember28,2013andvendornontradereceivables
fromthreeoftheCompanysvendorsaccountedfor45%,21%and12%oftotalnontradereceivablesasofSeptember29,
2012.TheCompanydoesnotreflectthesaleofthesecomponentsinnetsalesanddoesnotrecognizeanyprofitsonthese
salesuntiltherelatedproductsaresoldbytheCompany,atwhichtimeanyprofitisrecognizedasareductionofcostofsales.

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Note3ConsolidatedFinancialStatementDetails
ThefollowingtablesshowtheCompanysconsolidatedbalancesheetdetailsasofSeptember28,2013andSeptember 29,
2012(inmillions):
Inventories

2013

Components

2012

683

124

1,081

667

$1,764

$791

Finishedgoods

Totalinventories

Property,PlantandEquipment

2013

Landandbuildings

2012

$ 3,309

$ 2,439

21,242

15,984

28,519

21,887

(11,922)

(6,435)

$ 16,597

$15,452

Machinery,equipmentandinternalusesoftware
Leaseholdimprovements

Grossproperty,plantandequipment
Accumulateddepreciationandamortization

Netproperty,plantandequipment

3,968

3,464

AccruedExpenses

Accruedwarrantyandrelatedcosts

2013

2012

$ 2,967

$ 1,638

1,200

1,535

1,262

1,492

1,291

910

959

735

6,177

5,104

$13,856

Accruedtaxes
Deferredmarginoncomponentsales
Accruedmarketingandsellingexpenses
Accruedcompensationandemployeebenefits
Othercurrentliabilities

Totalaccruedexpenses

$11,414

NonCurrentLiabilities

Deferredtaxliabilities

2013

2012

$ 16,489

$ 13,847

$20,208

Othernoncurrentliabilities

Totalothernoncurrentliabilities

3,719

2,817

$16,664

OtherIncomeandExpense
Thefollowingtableshowsthedetailofotherincomeandexpensefor2013,2012and2011(inmillions):

Interestanddividendincome

2012

2011

$ 1,616

$1,088

519

(136)

(324)

(566)

(104)

$1,156

522

Otherexpense,net

Totalotherincome/(expense),net

62

Interestexpense

2013

$415

TableofContents

Note4GoodwillandOtherIntangibleAssets
The Companys acquired intangible assets with definite useful lives primarily consist of patents and licenses and are
amortizedoverperiodstypicallyfromthreetosevenyears.Thefollowingtablesummarizesthecomponentsofgrossandnet
intangibleassetbalancesasofSeptember28,2013andSeptember29,2012(inmillions):

2013

Gross

2012

Net

Gross

Net

Carrying

Accumulated

Carrying

Carrying

Accumulated

Carrying

Amount

Amortization

Amount

Amount

Amortization

Amount

$ 6,081 $

100

$ 6,181 $

(2,002)

Definitelivedandamortizableacquiredintangible
assets
Indefinitelivedandnonamortizabletrademarks

Totalacquiredintangibleassets

(2,002)

$ 4,079 $ 5,166 $

100

(1,042)

100

$ 4,179 $ 5,266 $

(1,042)

$ 4,124

100

$ 4,224

During2013and2012,theCompanycompletedvariousbusinessacquisitions.In2013,theaggregatecashconsideration,net
ofcashacquired,was$496million,ofwhich$419millionwasallocatedtogoodwill,$179milliontoacquiredintangible
assetsand$102milliontonetliabilitiesassumed.In2012,theaggregatecashconsideration,netofcashacquired,was$350
million,ofwhich$245millionwasallocatedtogoodwill,$113milliontoacquiredintangibleassetsand$8milliontonet
liabilitiesassumed.
The Companys gross carrying amount of goodwill was $1.6 billion and $1.1 billion as of September 28, 2013 and
September29,2012,respectively.TheCompanydidnothaveanygoodwillimpairmentduring2013,2012or2011.
Amortizationexpenserelatedtoacquiredintangibleassetswas$960million,$605millionand$192millionin2013,2012
and2011,respectively.AsofSeptember28,2013theremainingweightedaverageamortizationperiodforacquiredintangible
assetsis4.5years.TheexpectedannualamortizationexpenserelatedtoacquiredintangibleassetsasofSeptember28,2013,
isasfollows(inmillions):

2014

$1,050

985

833

606

434

171

$4,079

2015
2016
2017
2018
Thereafter

Total

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Note5IncomeTaxes
Theprovisionforincometaxesfor2013,2012and2011,consistedofthefollowing(inmillions):

2013

2012

2011

Federal:

$ 9,334

$ 7,240

$ 3,884

1,878

5,018

2,998

11,212

12,258

6,882

1,084

1,182

762

(311)

(123)

37

773

1,059

799

1,559

1,203

769

(426)

(490)

(167)

1,133

713

602

$13,118

$14,030

$ 8,283

Current
Deferred

State:
Current
Deferred

Foreign:
Current
Deferred

Provisionforincometaxes

Theforeignprovisionforincometaxesisbasedonforeignpretaxearningsof$30.5billion,$36.8billionand$24.0billionin
2013,2012and2011,respectively.TheCompanysconsolidatedfinancialstatementsprovideforanyrelatedtaxliabilityon
undistributedearningsthattheCompanydoesnotintendtobeindefinitelyreinvestedoutsidetheU.S.Substantiallyallofthe
Companys undistributed international earnings intended to be indefinitely reinvested in operations outside the U.S. were
generatedbysubsidiariesorganizedinIreland,whichhasastatutorytaxrateof12.5%.AsofSeptember28,2013,U.S.income
taxeshavenotbeenprovidedonacumulativetotalof$54.4billionofsuchearnings.Theamountofunrecognizeddeferred
taxliabilityrelatedtothesetemporarydifferencesisestimatedtobeapproximately$18.4billion.
AsofSeptember28,2013andSeptember29,2012,$111.3billionand$82.6billion,respectively,oftheCompanyscash,
cash equivalents and marketable securities were held by foreign subsidiaries and are generally based in U.S.
dollardenominated holdings. Amounts held by foreign subsidiaries are generally subject to U.S. income taxation on
repatriationtotheU.S.
Areconciliationoftheprovisionforincometaxes,withtheamountcomputedbyapplyingthestatutoryfederalincometax
rate(35%in2013,2012and2011)toincomebeforeprovisionforincometaxesfor2013,2012and2011,isasfollows(in
millions):

Computedexpectedtax

Statetaxes,netoffederaleffect

2013

$17,554

2012

$19,517

2011

$11,973

(4,614)

(5,895)

(3,898)

(287)

(103)

(167)

(308)

(328)

(168)

(9)

Indefinitelyinvestedearningsofforeignsubsidiaries
Researchanddevelopmentcredit,net
Domesticproductionactivitiesdeduction

Other

508

552

$13,118

$14,030

$ 8,283

26.2%

25.2%

24.2%

Provisionforincometaxes

Effectivetaxrate

265

677

162

The Companys income taxes payable have been reduced by the tax benefits from employee stock plan awards. For stock
options,theCompanyreceivesanincometaxbenefitcalculatedasthetaxeffectofthedifference

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betweenthefairmarketvalueofthestockissuedatthetimeoftheexerciseandtheexerciseprice.ForRSUs,theCompany
receivesanincometaxbenefitupontheawardsvestingequaltothetaxeffectoftheunderlyingstocksfairmarketvalue.The
Companyhadnetexcesstaxbenefitsfromequityawardsof$643million,$1.4billionand$1.1billionin2013,2012and
2011,respectively,whichwerereflectedasincreasestocommonstock.
As of September 28, 2013 and September 29, 2012, the significant components of the Companys deferred tax assets and
liabilitieswere(inmillions):

2013

2012

Deferredtaxassets:

$ 1,892

$ 1,346

1,475

1,145

1,020

451

458

411

1,029

947

5,874

4,300

5,874

4,300

Accruedliabilitiesandotherreserves
Deferredrevenue
Basisofcapitalassetsandinvestments
Sharebasedcompensation
Other

Totaldeferredtaxassets
Lessvaluationallowance

Deferredtaxassets,netofvaluationallowance

Deferredtaxliabilities:

18,044

14,712

18,156

15,168

$(12,282)

$(10,868)

Unremittedearningsofforeignsubsidiaries
Other

Totaldeferredtaxliabilities

Netdeferredtaxliabilities

112

456

Deferred tax assets and liabilities reflect the effects of tax losses, 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
temporarydifferencesareexpectedtoberecoveredorsettled.
UncertainTaxPositions
Taxpositionsareevaluatedinatwostepprocess.TheCompanyfirstdetermineswhetheritismorelikelythannotthatatax
positionwillbesustaineduponexamination.Ifataxpositionmeetsthemorelikelythannotrecognitionthresholditisthen
measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the
largestamountofbenefitthatisgreaterthan50%likelyofbeingrealizeduponultimatesettlement.TheCompanyclassifies

grossinterestandpenaltiesandunrecognizedtaxbenefitsthatarenotexpectedtoresultinpaymentorreceiptofcashwithin
oneyearasnoncurrentliabilitiesintheConsolidatedBalanceSheets.
As of September 28, 2013, the total amount of gross unrecognized tax benefits was $2.7 billion, of which $1.4 billion, if
recognized,wouldaffecttheCompanyseffectivetaxrate.AsofSeptember29,2012,thetotalamountofgrossunrecognized
taxbenefitswas$2.1billion,ofwhich$889million,ifrecognized,wouldaffecttheCompanyseffectivetaxrate.

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The aggregate changes in the balance of gross unrecognized tax benefits, which excludes interest and penalties, for 2013,
2012and2011,isasfollows(inmillions):

2013

2012

$2,062

$1,375

$ 943

340

49

(118)

(107)

(39)

626

467

425

(592)

(3)

(10)

(3)

$2,714

BeginningBalance
Increasesrelatedtotaxpositionstakenduringaprioryear
Decreasesrelatedtotaxpositionstakenduringaprioryear
Increasesrelatedtotaxpositionstakenduringthecurrentyear
Decreasesrelatedtosettlementswithtaxingauthorities
Decreasesrelatedtoexpirationofstatuteoflimitations

EndingBalance

745

(9)

$2,062

2011

$1,375

TheCompanyincludesinterestandpenaltiesrelatedtounrecognizedtaxbenefitswithintheprovisionforincometaxes.Asof
September28,2013andSeptember29,2012,thetotalamountofgrossinterestandpenaltiesaccruedwas$590millionand
$401million,respectively,whichisclassifiedasnoncurrentliabilitiesintheConsolidatedBalance Sheets. In connection
with tax matters, the Company recognized interest and penalty expense in 2013, 2012 and 2011 of $189 million, $140
millionand$14million,respectively.
TheCompanyissubjecttotaxationandfilesincometaxreturnsintheU.S.federaljurisdictionandinmanystateandforeign
jurisdictions.ForU.S.federalincometaxpurposes,allyearspriorto2004areclosed.TheInternalRevenueService(theIRS)
has completed its field audit of the Companys federal income tax returns for the years 2004 through 2006 and proposed
certain adjustments. The Company has contested certain of these adjustments through the IRS Appeals Office. The IRS is
currently examining the years 2007 through 2012. In addition, the Company is also subject to audits by state, local and
foreigntaxauthorities.Inmajorstatesandmajorforeignjurisdictions,theyearssubsequentto1989and2002,respectively,
generallyremainopenandcouldbesubjecttoexaminationbythetaxingauthorities.
Managementbelievesthatanadequateprovisionhasbeenmadeforanyadjustmentsthatmayresultfromtaxexaminations.
However,theoutcomeoftaxauditscannotbepredictedwithcertainty.IfanyissuesaddressedintheCompanystaxauditsare
resolvedinamannernotconsistentwithmanagementsexpectations,theCompanycouldberequiredtoadjustitsprovision
forincometaxintheperiodsuchresolutionoccurs.Althoughtimingoftheresolutionand/orclosureofauditsisnotcertain,
the Company believes it is reasonably possible that tax audit resolutions could reduce its unrecognized tax benefits by
between$125millionand$225millioninthenext12months.
Note6LongTermDebt
InMay2013,theCompanyissuedfloatingandfixedratenoteswithvaryingmaturitiesforanaggregateprincipalamountof
$17.0 billion (collectively the Notes). The Notes are senior unsecured obligations, and interest is payable in arrears,
quarterlyforthefloatingratenotesandsemiannuallyforthefixedratenotes.
TheprincipalamountsandassociatedinterestratesoftheNotesasofSeptember28,2013,areasfollows:

Amount

(inmillions)

1,000

0.51%

2,000

1.10%

Floatingratenotes,due2016
Floatingratenotes,due2018

Effective

Rate

Fixedrate0.45%notesdue2016

1,500

0.51%

4,000

1.08%

5,500

2.44%

3,000

3.91%

$ 17,000

Fixedrate1.00%notesdue2018
Fixedrate2.40%notesdue2023
Fixedrate3.85%notesdue2043

Total

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Thefloatingratenotesdue2016and2018bearinterestatthethreemonthLondonInterBankOfferedRate(LIBOR)plus
0.05%and0.25%,respectively.Tomanagetheriskoffluctuationsininterestratesassociatedwiththefloatingratenotes,the
Companyenteredintointerestrateswapswithanaggregatenotionalamountof$3.0billiondesignatedascashflowhedgesof
itsfloatingratenotes.Thesehedgeseffectivelyconvertthefloatinginterestrateonthefloatingratenotestoafixedinterest
rate.Thegainsandlossesrelatedtochangesinthefairvalueoftheinterest rate swaps are recorded in OCI with a portion
reclassifiedtointerestexpenseeachperiodtooffsetchangesininterestratesonthefloatingratenotes.Theeffectiveratesfor
theNotesincludetheinterestontheNotes,amortizationofthediscountand,ifapplicable,adjustmentsrelatedtohedging.
TheCompanyrecognized$136millionofinterestexpensefortheyearendedSeptember28,2013.AsofSeptember28,2013,
theaggregateunamortizeddiscountfortheCompanysNoteswas$40million.
FutureprincipalpaymentsfortheCompanysNotesasofSeptember28,2013,areasfollows(inmillions):

2014

2,500

6,000

8,500

$17,000

2015
2016
2017
2018
Thereafter

Total

AsofSeptember28,2013,thefairvalueoftheCompanysNotes,basedonLevel2inputs,was$15.9billion.
Note7ShareholdersEquity
PreferredStock
TheCompanyhasfivemillionsharesofauthorizedpreferredstock,noneofwhichisissuedoroutstanding.Underthetermsof
the Companys Restated Articles of Incorporation, the Board of Directors is authorized to determine or alter the rights,
preferences,privilegesandrestrictionsoftheCompanysauthorizedbutunissuedsharesofpreferredstock.
DividendandStockRepurchaseProgram
TheCompanydeclaredandpaidcashdividendspercommonshareduringtheperiodspresentedasfollows:

2013

Amount

Dividends

(in

PerShare

millions)

$ 2.65

$ 2,486

2.65

2,490

3.05

2,789

3.05

2,763

Firstquarter
Secondquarter
Thirdquarter
Fourthquarter

$10,528

The Company paid cash dividends of $2.65 per share, totaling $2.5 billion, during the fourth quarter of 2012. Future
dividendsaresubjecttodeclarationbytheBoardofDirectors.
In2012,theCompanysBoardofDirectorsauthorizedaprogramtorepurchaseupto$10billionoftheCompanyscommon
stock beginning in 2013. In April 2013, the Companys Board of Directors increased the share repurchase program
authorizationfrom$10billionto$60billion,ofwhich$23.0billionhadbeenutilized

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asofSeptember28,2013.TheCompanyssharerepurchaseprogramdoesnotobligateittoacquireanyspecificnumberof
shares. Under the program, shares may be repurchased in privately negotiated and/or open market transactions, including
underplanscomplyingwithRule10b51oftheSecuritiesExchangeActof1934,asamended(theExchangeAct).
InAugust2012,theCompanyenteredintoanacceleratedsharerepurchasearrangement(ASR)withafinancialinstitutionto
purchaseupto$1.95billionoftheCompanyscommonstockin2013.Inthefirstquarterof2013,2.6millionshareswere
initiallydeliveredtotheCompany.InApril2013,thepurchaseperiodfortheASRendedandanadditional1.5millionshares
weredeliveredtotheCompany.Intotal,4.1millionsharesweredeliveredundertheASRatanaveragerepurchasepriceof
$478.20pershare.Theshareswereretiredinthequarterstheyweredelivered,andtheupfrontpaymentof$1.95billionwas
accountedforasareductiontoshareholdersequityintheCompanysConsolidatedBalanceSheetinthefirstquarterof2013.
InApril2013,theCompanyenteredintoanewASRprogramwithtwofinancialinstitutionstopurchaseupto$12billionof
theCompanyscommonstock.Inexchangeforupfrontpaymentstotaling$12billion,thefinancialinstitutionscommittedto
deliver shares during the ASRs purchase periods, which will end during 2014. The total number of shares ultimately
delivered,andthereforetheaveragepricepaidpershare,willbedeterminedattheendoftheapplicablepurchaseperiodbased
on the volume weighted average price of the Companys stock during that period. During the third quarter of 2013,
23.5millionshareswereinitiallydeliveredtotheCompanyandretired.Thisdoesnotrepresentthefinalnumberofsharesto
bedeliveredundertheASR.Theupfrontpaymentsof$12billionwereaccountedforasareductiontoshareholdersequityin
theCompanysConsolidatedBalanceSheet.
The Company reflected the ASRs as a repurchase of common stock for purposes of calculating earnings per share and as
forward contracts indexed to its own common stock. The forward contracts met all of the applicable criteria for equity
classification,and,therefore,werenotaccountedforasderivativeinstruments.
During2013,theCompanyrepurchased19.4millionsharesofitscommonstockintheopenmarketatanaveragepriceof
$464.11pershareforatotalof$9.0billion.Theseshareswereretireduponrepurchase.
Note8ComprehensiveIncome
Comprehensive income consists of two components, net income and other comprehensive income. Other comprehensive
incomereferstorevenue,expenses,andgainsandlossesthatunderGAAParerecordedasanelementofshareholdersequity
but are excluded from net income. The Companys other comprehensive income 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 securities
classifiedasavailableforsale.
The following table shows the components of AOCI, net of taxes, as of September 28, 2013 and September 29, 2012 (in
millions):

2013

$(105)

(175)

(240)

(191)

731

$(471)

$ 499

Cumulativeforeigncurrencytranslation
Netunrecognizedgains/lossesonderivativeinstruments
Netunrealizedgains/lossesonmarketablesecurities

Accumulatedothercomprehensiveincome/(loss)

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Note9BenefitPlans
StockPlans
2003EmployeeStockPlan
The2003EmployeeStockPlan(the2003Plan)isashareholderapprovedplanthatprovidesforbroadbasedequitygrants
toemployees,includingexecutiveofficers.The2003Planpermitsthegrantingofincentivestockoptions,nonstatutorystock
options, RSUs, stock appreciation rights, stock purchase rights and performancebased awards. Options granted under the
2003Plangenerallyexpireseventotenyearsafterthegrantdateandgenerallybecomeexercisableoveraperiodoffouryears,
based on continued employment, with either annual, semiannual or quarterly vesting. RSUs granted under the 2003 Plan
generally vest over two to four years, based on continued employment and are settled upon vesting in shares of the
Companyscommonstockonaoneforonebasis.Eachshareissuedwithrespecttoanawardgrantedunderthe2003Plan
(otherthanastockoptionorstockappreciationright)reducesthenumberofsharesavailableforgrantundertheplanbytwo
shares,whereassharesissuedinrespectofanoptionorstockappreciationrightcountagainstthenumberofsharesavailable
forgrantonaoneforonebasis.AllRSUs,otherthanRSUsheldbytheChiefExecutiveOfficer,grantedunderthe2003Plan
havedividendequivalentrights(DER),whichentitleholdersofRSUstothesamedividendvaluepershareasholdersof
commonstock.DERaresubjecttothesamevestingandothertermsandconditionsasthecorrespondingunvestedRSUs.DER
areaccumulatedandpaidwhentheunderlyingsharesvest.AsofSeptember28,2013,approximately28.3millionshareswere
reservedforfutureissuanceunderthe2003Plan.
1997DirectorStockPlan
The 1997 Director Stock Plan (the Director Plan) is a shareholder approved plan that (i) permits the Company to grant
awardsofRSUsorstockoptionstotheCompanysnonemployeedirectors,(ii)providesforautomaticinitialgrantsofRSUs
uponanonemployeedirectorjoiningtheBoardofDirectorsandautomaticannualgrantsofRSUsateachannualmeetingof
shareholders,and(iii)permitstheBoardofDirectorstoprospectivelychangetherelativemixtureofstockoptionsandRSUs
fortheinitialandannualawardgrantsandthemethodologyfordeterminingthenumberofsharesoftheCompanyscommon
stocksubjecttothesegrantswithoutshareholderapproval.EachshareissuedwithrespecttoRSUsgrantedundertheDirector
Planreducesthenumberofsharesavailableforgrantundertheplanbytwoshares.TheDirectorPlanexpiresNovember9,
2019.AllRSUsgrantedundertheDirectorPlanareentitledtoDER.AsofSeptember28,2013,approximately176,000shares
werereservedforfutureissuanceundertheDirectorPlan.
Rule10b51TradingPlans
During the fourth quarter of 2013, executive officers Timothy D. Cook, Peter Oppenheimer, D. Bruce Sewell, Philip W.
Schiller, Daniel Riccio and Jeffrey E. Williams and director William V. Campbell had equity trading plans in place in
accordancewithRule10b51(c)(1)undertheExchangeAct.Anequitytradingplanisawrittendocumentthatpreestablishes
theamounts,pricesanddates(orformulafordeterminingtheamounts,pricesanddates)offuturepurchasesorsalesofthe
Companysstock,includingsharesacquiredpursuanttotheCompanysemployeeanddirectorequityplans.
EmployeeStockPurchasePlan
The Employee Stock Purchase Plan (the Purchase Plan) is a shareholder approved plan under which substantially all
employeesmaypurchasetheCompanyscommonstockthroughpayrolldeductionsatapriceequalto85%ofthelowerofthe
fairmarketvaluesofthestockasofthebeginningortheendofsixmonthofferingperiods.Anemployeespayrolldeductions
under the Purchase Plan are limited to 10% of the employees compensation and employees may not purchase more than
$25,000 of stock during any calendar year. As of September 28, 2013, approximately 1.8 million shares were reserved for
futureissuanceunderthePurchasePlan.

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401(k)Plan
TheCompanys401(k)Plan(the401(k)Plan)isadeferredsalaryarrangementunderSection401(k)oftheInternalRevenue
Code.Underthe401(k)Plan,participatingU.S.employeesmaydeferaportionoftheirpretaxearnings,uptotheIRSannual
contributionlimit($17,500forcalendaryear2013).TheCompanymatches50%to100%ofeachemployeescontributions,
depending on length of service, up to a maximum 6% of the employees eligible earnings. The Companys matching
contributionstothe401(k)Planwere$135million,$114millionand$90millionin2013,2012and2011,respectively.
RestrictedStockUnits
AsummaryoftheCompanysRSUactivityandrelatedinformationfor2013,2012and2011,isasfollows:

Weighted

Average

Aggregate

Numberof

Grant

Intrinsic

RSUs

DateFair

Value

(inthousands)

13,034

$165.63

6,667

$312.63

(4,513)

$168.08

(742)

$189.08

14,446

$231.49

7,799

$431.35

(6,305)

$205.27

(935)

$256.01

15,005

$344.87

5,631

$547.62

(6,042)

$321.73

(1,268)

$401.17

13,326

$435.70

BalanceatSeptember25,2010
RSUsgranted
RSUsvested
RSUscancelled

BalanceatSeptember24,2011
RSUsgranted
RSUsvested
RSUscancelled

BalanceatSeptember29,2012
RSUsgranted
RSUsvested
RSUscancelled

BalanceatSeptember28,2013

Value

(inmillions)

6,433

ThefairvalueasoftherespectivevestingdatesofRSUswas$3.1billion,$3.3billionand$1.5billionfor2013,2012and
2011,respectively.ThemajorityofRSUsthatvestedin2013,2012and2011werenetsharesettledsuchthattheCompany
withheldshareswithvalueequivalenttotheemployeesminimumstatutoryobligationfortheapplicableincomeandother
employmenttaxes,andremittedthecashtotheappropriatetaxingauthorities.Thetotalshareswithheldwereapproximately
2.2million,2.3millionand1.6millionfor2013,2012and2011,respectively,andwerebasedonthevalueoftheRSUson

their respective vesting dates as determined by the Companys closing stock price. Total payments for the employees tax
obligationstotaxingauthoritieswere$1.1billion,$1.2billionand$520millionin2013,2012and2011,respectively,and
arereflectedasafinancingactivitywithintheConsolidatedStatementsofCashFlows.Thesenetsharesettlementshadthe
effectofsharerepurchasesbytheCompanyastheyreducedandretiredthenumberofsharesthatwouldhaveotherwisebeen
issuedasaresultofthevestinganddidnotrepresentanexpensetotheCompany.

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StockOptions
AsummaryoftheCompanysstockoptionactivityandrelatedinformationfor2013,2012and2011,isasfollows:

OutstandingOptions

Weighted
Average

Remaining

Aggregate

Numberof

Average

Contractual

Intrinsic

Options

Exercise

Term

(inthousands)

(inyears)

21,725

$ 90.46

$342.62

(163)

$128.42

(9,697)

$ 67.63

11,866

$108.64

41

$ 30.86

(25)

$103.22

(5,337)

$ 84.85

6,545

$127.56

$ 30.36

29

$210.08

(8)

$108.87

(2,480)

$108.33

4,094

$139.65

1.1

1,405

4,072

$140.07

1.0

1,396

22

$ 61.93

7.8

Optionsgranted
Optionscancelled
Optionsexercised

BalanceatSeptember24,2011
Optionsassumed
Optionscancelled
Optionsexercised

BalanceatSeptember29,2012
Optionsgranted
Optionsassumed
Optionscancelled
Optionsexercised

BalanceatSeptember28,2013

ExpectedtovestafterSeptember28,2013

Price

Value

BalanceatSeptember25,2010

ExercisableatSeptember28,2013

Weighted

(inmillions)

AggregateintrinsicvaluerepresentsthevalueoftheCompanysclosingstockpriceonthelasttradingdayoftheperiodin
excessoftheweightedaverageexercisepricemultipliedbythenumberofoptionsoutstandingorexercisable.Totalintrinsic
valueofoptionsattimeofexercisewas$1.0billion,$2.3billionand$2.6billionfor2013,2012and2011,respectively.

SharebasedCompensation
TheCompanygranted8,000and1,370stockoptionsduring2013and2011,respectively.Theweightedaveragegrantdate
fairvaluepershareofstockoptionsgrantedduring2013and2011was$294.84and$181.13,respectively.TheCompanydid
notgrantanystockoptionsduring2012.
During2013and2012,inconjunctionwithcertainbusinesscombinations,theCompanyassumed29,000and41,000stock
options,respectively,whichhadaweightedaveragefairvaluepershareof$407.80and$405.39,respectively.TheCompany
didnotassumeanystockoptionsduring2011.
Theweightedaveragefairvalueofstockpurchaserightspersharewas$115.19,$108.44and$71.47during2013,2012and
2011,respectively.

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ThefollowingtableshowsasummaryofthesharebasedcompensationexpenseincludedintheConsolidatedStatementsof
Operationsfor2013,2012and2011(inmillions):

Costofsales

2013

2012

2011

350

265

200

917

668

450

986

807

518

$2,253

Researchanddevelopment
Selling,generalandadministrative

Totalsharebasedcompensationexpense

$1,740

$1,168

Theincometaxbenefitrelatedtosharebasedcompensationexpensewas$816million,$567millionand$467millionfor
2013, 2012 and 2011, respectively. As of September 28, 2013, the total unrecognized compensation cost related to
outstanding stock options and RSUs was $4.7 billion, which the Company expects to recognize over a weightedaverage
periodof3.0years.
Note10CommitmentsandContingencies
AccruedWarrantyandIndemnification
TheCompanyoffersabasiclimitedpartsandlaborwarrantyonitshardwareproducts.Thebasicwarrantyperiodforhardware
productsistypicallyoneyearfromthedateofpurchasebytheenduser.TheCompanyalsooffersa90daybasicwarrantyfor
itsservicepartsusedtorepairtheCompanyshardwareproducts.TheCompanyprovidescurrentlyfortheestimatedcostthat
maybeincurredunderitsbasiclimitedproductwarrantiesatthetimerelatedrevenueisrecognized.Factorsconsideredin
determiningappropriateaccrualsforproductwarrantyobligationsincludethesizeoftheinstalledbaseofproductssubjectto
warrantyprotection,historicalandprojectedwarrantyclaimrates,historicalandprojectedcostperclaim,andknowledgeof
specificproductfailuresthatareoutsideoftheCompanystypicalexperience.TheCompanyassessestheadequacyofitspre
existingwarrantyliabilitiesandadjuststheamountsasnecessarybasedonactualexperienceandchangesinfutureestimates.
The following table shows changes in the Companys accrued warranties and related costs for 2013, 2012 and 2011 (in
millions):

Beginningaccruedwarrantyandrelatedcosts

2013

2012

2011

$ 1,638

$ 1,240

(3,703)

(1,786)

(1,147)

5,032

2,184

1,626

$ 2,967

$ 1,638

$ 1,240

Costofwarrantyclaims
Accrualsforproductwarranty

Endingaccruedwarrantyandrelatedcosts

761

TheCompanygenerallydoesnotindemnifyendusersofitsoperatingsystemandapplicationsoftwareagainstlegalclaims
thatthesoftwareinfringesthirdpartyintellectualpropertyrights.OtheragreementsenteredintobytheCompanysometimes
includeindemnificationprovisionsunderwhichtheCompanycouldbesubjecttocostsand/ordamagesintheeventofan
infringementclaimagainsttheCompanyoranindemnifiedthirdparty.However,theCompanyhasnotbeenrequiredtomake
anysignificantpaymentsresultingfromsuchaninfringementclaimassertedagainstitoranindemnifiedthirdpartyand,in
the opinion of management, does not have a potential liability related to unresolved infringement claims subject to
indemnificationthatwouldmateriallyadverselyaffectitsfinancialconditionoroperatingresults.Therefore,theCompanydid
notrecordaliabilityforinfringementcostsrelatedtoindemnificationasofeitherSeptember28,2013orSeptember29,2012.
TheCompanyhasenteredintoindemnificationagreementswithitsdirectorsandexecutiveofficers.Undertheseagreements,
theCompanyhasagreedtoindemnifysuchindividualstothefullestextentpermittedbylawagainstliabilitiesthatariseby

reasonoftheirstatusasdirectorsorofficersandtoadvanceexpensesincurredbysuch

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individualsinconnectionwithrelatedlegalproceedings.Itisnotpossibletodeterminethemaximumpotentialamountof
paymentstheCompanycouldberequiredtomakeundertheseagreementsduetothelimitedhistoryofpriorindemnification
claimsandtheuniquefactsandcircumstancesinvolvedineachclaim.However,theCompanymaintainsdirectorsandofficers
liability insurance coverage to reduce its exposure to such obligations, and payments made under these agreements
historicallyhavenotbeenmaterial.
ConcentrationsintheAvailableSourcesofSupplyofMaterialsandProduct
AlthoughmostcomponentsessentialtotheCompanysbusinessaregenerallyavailablefrommultiplesources,anumberof
componentsarecurrentlyobtainedfromsingleorlimitedsources.Inaddition,theCompanycompetesforvariouscomponents
withotherparticipantsinthemarketsformobilecommunicationandmediadevicesandpersonalcomputers.Therefore,many
componentsusedbytheCompany,includingthosethatareavailablefrommultiplesources,areattimessubjecttoindustry
wideshortageandsignificantpricingfluctuationsthatcanmateriallyadverselyaffecttheCompanysfinancialconditionand
operatingresults.
TheCompanyusessomecustomcomponentsthatarenotcommonlyusedbyitscompetitors,andnewproductsintroducedby
the Company often utilize custom components available from only one source. When a component or product uses new
technologies,initialcapacityconstraintsmayexistuntilthesuppliersyieldshavematured or manufacturing capacity has
increased. If the Companys 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 Companys financial condition and
operatingresultscouldbemateriallyadverselyaffected.TheCompanysbusinessandfinancialperformancecouldalsobe
materiallyadverselyaffecteddependingonthetimerequiredtoobtainsufficientquantities from the original source, or to
identifyandobtainsufficientquantitiesfromanalternativesource.Continuedavailabilityofthesecomponentsatacceptable
prices, or at all, may be affected if those suppliers concentrated on the production of common components instead of
componentscustomizedtomeettheCompanysrequirements.
TheCompanyhasenteredintovariousagreementsforthesupplyofcomponentshowever,therecanbenoguaranteethatthe
Companywillbeabletoextendorrenewtheseagreementsonsimilarterms,oratall.Therefore,theCompanyremainssubject
tosignificantrisks of supply shortages and price increases that can materially adversely affect its financial condition and
operatingresults.
SubstantiallyalloftheCompanyshardwareproductsaremanufacturedbyoutsourcingpartnersthatarelocatedprimarilyin
Asia. A significant concentration of this manufacturing is currently performed by a small number of outsourcing partners,
often in single locations. Certain of these outsourcing partners are the solesourced suppliers of components and
manufacturersformanyoftheCompanysproducts.AlthoughtheCompanyworkscloselywithitsoutsourcingpartnerson
manufacturingschedules,theCompanysoperatingresultscouldbeadverselyaffectedifitsoutsourcingpartnerswereunable
tomeettheirproductioncommitments.TheCompanyspurchasecommitmentstypicallycoveritsrequirementsforperiodsup
to150days.
OtherOffBalanceSheetCommitments
LeaseCommitments
The Company leases various equipment and facilities, including retail space, under noncancelable operating lease
arrangements.TheCompanydoesnotcurrentlyutilizeanyotheroffbalancesheetfinancingarrangements.Themajorfacility
leases are typically for terms not exceeding 10 years and generally provide renewal options for terms not exceeding five
additionalyears.Leasesforretailspacearefortermsrangingfromfiveto20years,themajorityofwhicharefor10years,and
oftencontain multiyear renewal options. As of September 28, 2013, the Companys total future minimum lease payments
undernoncancelableoperatingleaseswere$4.7billion,ofwhich$3.5billionrelatedtoleasesforretailspace.

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Rentexpenseunderalloperatingleases,includingbothcancelableandnoncancelableleases,was$645million,$488million
and $338 million in 2013, 2012 and 2011, respectively. Future minimum lease payments under noncancelable operating
leaseshavingremainingtermsinexcessofoneyearasofSeptember28,2013,areasfollows(inmillions):

2014

$ 610

613

587

551

505

1,855

$4,721

2015
2016
2017
2018
Thereafter

Totalminimumleasepayments

OtherCommitments
As of September 28, 2013, the Company had outstanding offbalance sheet thirdparty manufacturing commitments and
componentpurchasecommitmentsof$18.6billion.
Inadditiontotheoffbalancesheetcommitmentsmentionedabove,theCompanyhadoutstandingobligationsof$1.3billion
asofSeptember28,2013,whichconsistedmainlyofcommitmentstoacquirecapitalassets,includingproducttoolingand
manufacturing process equipment, and commitments related to advertising, research and development, Internet and
telecommunicationsservicesandotherobligations.
Contingencies
TheCompanyissubjecttovariouslegalproceedingsandclaimsthathavearisenintheordinarycourseofbusinessandthat
havenotbeenfullyadjudicated.Intheopinionofmanagement,therewasnotatleastareasonablepossibilitytheCompany
may have incurred a material loss, or a material loss in excess of a recorded accrual, with respect to loss contingencies.
However,theoutcomeoflitigationisinherentlyuncertain.Therefore,althoughmanagementconsidersthelikelihoodofsuch
anoutcometoberemote,ifoneormoreoftheselegalmatterswereresolvedagainsttheCompanyinareportingperiodfor
amountsinexcessofmanagementsexpectations,theCompanysconsolidatedfinancialstatementsforthatreportingperiod
couldbemateriallyadverselyaffected.
AppleInc.v.SamsungElectronicsCo.,Ltd,etal.
OnAugust24,2012,ajuryreturnedaverdictawardingtheCompany$1.05billioninitslawsuitagainstSamsungElectronics
Co., Ltd and affiliated parties in the United States District Court, Northern District of California, San Jose Division. On
March1,2013,theDistrictCourtupheld$599millionofthejurysawardandorderedanewtrialastotheremainder.Because
theawardissubjecttoentryoffinaljudgment,partialretrialandappeal,theCompanyhasnotrecognizedtheawardinits
resultsofoperations.
VirnetX,Inc.v.AppleInc.etal.
OnAugust11,2010,VirnetX,Inc.filedanactionagainsttheCompanyallegingthatcertainofitsproductsinfringedonfour
patents relating to network communications technology. On November 6, 2012, a jury returned a verdict against the
Company,andawardeddamagesof$368million.TheCompanyischallengingtheverdict,believesithasvaliddefensesand
hasnotrecordedalossaccrualatthistime.

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Note11SegmentInformationandGeographicData
TheCompanyreportssegmentinformationbasedonthemanagementapproach.Themanagementapproachdesignatesthe
internal reporting used by management for making decisions and assessing performance as the source of the Companys
reportablesegments.
TheCompanymanagesitsbusinessprimarilyonageographicbasis.TheCompanysreportableoperatingsegmentsconsistof
theAmericas,Europe,GreaterChina,Japan,RestofAsiaPacificandRetailoperations.TheAmericassegmentincludesboth
NorthandSouthAmerica.TheEuropesegmentincludesEuropeancountries,aswellasIndia,theMiddleEastandAfrica.The
Greater China segment includes China, Hong Kong and Taiwan. The Rest of Asia Pacific segment includes Australia and
Asiancountries,otherthanthosecountriesincludedintheCompanysotheroperatingsegments.TheRetailsegmentoperates
Apple retail stores in 13 countries, including the U.S. The results of the Companys geographic segments do not include
resultsoftheRetailsegment.Eachoperatingsegmentprovidessimilarhardwareandsoftwareproductsandsimilarservices.
The accounting policies of the various segments are the same as those described in Note 1, Summary of Significant
AccountingPolicies.
The Company evaluates the performance of its operating segments based on net sales and operating income. Net sales for
geographic segments are generally based on the location of customers, while Retail segment net sales are based on sales
throughtheCompanysretailstores.Operatingincomeforeachsegmentincludesnetsalestothirdparties,relatedcostofsales
andoperatingexpensesdirectlyattributabletothesegment.Advertisingexpensesaregenerallyincludedinthegeographic
segmentinwhichtheexpendituresareincurred.Operatingincomeforeachsegmentexcludesotherincomeandexpenseand
certainexpensesmanagedoutsidetheoperatingsegments.Costsexcludedfromsegmentoperatingincomeincludevarious
corporate expenses such as research and development, corporate marketing expenses, sharebased compensation expense,
income taxes, various nonrecurring charges, and other separately managed general and administrative costs and certain
manufacturingperiodexpenses.TheCompanydoesnotinclude intercompany transfers between segments for management
reportingpurposes.
Segmentassetsincludereceivablesandinventories,andfortheRetailsegmentalsoincludescapitalassets.Segmentassets
excludecorporateassets,suchascashandcashequivalents,shorttermandlongtermmarketablesecurities,vendornontrade
receivables,otherlongterminvestments,manufacturingandcorporatefacilities,producttoolingandmanufacturingprocess
equipment, miscellaneous corporate infrastructure, goodwill and other acquired intangible assets. Except for the Retail
segment,capitalassetpurchasesforlonglivedassetsarenotreportedtomanagementbysegmentandthereforeareexcluded
fromthegeographicsegmentassetsandinsteadincludedincorporateassets.Cashpaymentsforcapitalassetpurchasesbythe
Retailsegmentwere$495million,$858millionand$612millionfor2013,2012and2011,respectively.TheCompanys
totaldepreciationandamortizationwas$6.8billion,$3.3billionand$1.8billionin2013,2012and2011,respectively,of
which$382million,$319millionand$273millionwasrelatedtotheRetailsegmentintherespectiveyears.Depreciation
andamortizationonsegmentassetsincludedinthegeographicsegmentswasnotsignificant.

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Thefollowingtableshowsinformationbyoperatingsegmentfor2013,2012and2011(inmillions):

2013

2012

2011

Americas:

$62,739

$57,512

$38,315

$22,817

$23,414

$13,111

$37,883

$36,323

$27,778

$13,025

$14,869

$11,209

$25,417

$22,533

$12,690

$ 8,541

$ 9,843

$ 5,246

$13,462

$10,571

$ 5,437

$ 6,819

$ 5,861

$ 2,415

$11,181

$10,741

$ 9,902

$ 3,753

$ 4,253

$ 4,004

$20,228

$18,828

$14,127

$ 4,025

$ 4,613

$ 3,075

Netsales
Operatingincome

Europe:
Netsales
Operatingincome

GreaterChina:
Netsales
Operatingincome

Japan:
Netsales
Operatingincome

RestofAsiaPacific:
Netsales
Operatingincome

Retail:
Netsales
Operatingincome

AreconciliationoftheCompanyssegmentoperatingincometotheconsolidatedfinancialstatementsfor 2013, 2012 and

2011,isasfollows(inmillions):

2013

2012

2011

Segmentoperatingincome

$58,980

$62,853

$39,060

(7,728)

(5,872)

(4,102)

(2,253)

(1,740)

(1,168)

$48,999

$55,241

$33,790

Othercorporateexpenses,net
Sharebasedcompensationexpense

Totaloperatingincome

The following table shows total assets by segment and a reconciliation to the consolidated financial statements as of
September28,2013andSeptember29,2012(inmillions):

2013

2012

Segmentassets:

Americas

5,653 $

5,525

3,134

3,095

2,943

1,321

2,932

1,698

923

913

3,329

2,725

18,914 15,277

188,086 160,787

$207,000 $176,064

Europe
GreaterChina
Japan
RestofAsiaPacific
Retail

Totalsegmentassets
Corporateassets

Totalassets

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TheU.S.andChinaweretheonlycountriesthataccountedformorethan10%oftheCompanysnetsalesin2013,2012and
2011.Therewasnosinglecustomerthataccountedformorethan10%ofnetsalesin2013,2012or2011.Netsalesfor2013,
2012and2011andlonglivedassetsasofSeptember28,2013andSeptember29,2012areasfollows(inmillions):

2013

2012

2011

Netsales:

U.S.

$ 66,197 $ 60,949 $ 41,812

25,946 22,797 12,472

78,767 72,762 53,965

$170,910 $156,508 $108,249

China(a)
Othercountries

Totalnetsales

2013

2012

Longlivedassets:

U.S.

7,399 $

6,012

7,403

7,314

2,786

2,560

$ 17,588 $ 15,886

China(a)
Othercountries

Totallonglivedassets

(a)

ChinaincludesHongKong.LonglivedassetslocatedinChinaconsistprimarilyofproducttoolingandmanufacturing
processequipmentandassetsrelatedtoretailstoresandrelatedinfrastructure.

Informationregardingnetsalesbyproductfor2013,2012and2011,isasfollows(inmillions):

2013

2012

2011

NetSalesbyProduct:

iPhone(a)

$ 91,279 $ 78,692 $ 45,998

31,980 30,945 19,168

21,483 23,221 21,783

5,615

7,453

16,051 12,890

9,373

iPad(a)
Mac(a)
iPod(a)
iTunes,SoftwareandServices(b)

4,411

Accessories(c)

$170,910 $156,508 $108,249

Totalnetsales

(a)
(b)

(c)

5,706

5,145

4,474

Includesdeferralsandamortizationofrelatednonsoftwareservicesandsoftwareupgraderights.
IncludesrevenuefromsalesontheiTunesStore,theAppStore,theMacAppStore,andtheiBooksStore,andrevenue
fromsalesofAppleCare,licensingandotherservices.
IncludessalesofhardwareperipheralsandApplebrandedandthirdpartyaccessoriesforiPhone,iPad,MacandiPod.

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Note12SelectedQuarterlyFinancialInformation(Unaudited)
ThefollowingtablesshowasummaryoftheCompanysquarterlyfinancialinformationforeachofthefourquartersof2013
and2012(inmillions,exceptpershareamounts):

FourthQuarter

ThirdQuarter

SecondQuarter

FirstQuarter

2013
Netsales

37,472

35,323

43,603

$ 54,512

13,871

13,024

16,349

$ 21,060

7,512

6,900

9,547

$ 13,078

Grossmargin
Netincome
Earningspershare(a):

Basic

8.31

7.51

10.16

13.93

8.26

7.47

10.09

13.81

FourthQuarter

ThirdQuarter

SecondQuarter

Diluted

FirstQuarter

2012
Netsales

35,966

35,023

39,186

$ 46,333

14,401

14,994

18,564

$ 20,703

8,223

8,824

11,622

$ 13,064

Grossmargin
Netincome
Earningspershare(a):

Basic

8.76

9.42

12.45

14.03

8.67

9.32

12.30

13.87

Diluted

(a)

Basicanddilutedearningspersharearecomputedindependentlyforeachofthequarterspresented.Therefore,thesumof
quarterlybasicanddilutedpershareinformationmaynotequalannualbasicanddilutedearningspershare.

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REPORTOFERNST&YOUNGLLP,INDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRM
TheBoardofDirectorsandShareholdersofAppleInc.
WehaveauditedtheaccompanyingconsolidatedbalancesheetsofAppleInc.asofSeptember28,2013andSeptember29,
2012,andtherelatedconsolidatedstatementsofoperations,comprehensiveincome,shareholdersequityandcashflowsfor
each of the three years in the period ended September 28, 2013. These financial statements are the responsibility of the
Companysmanagement.Ourresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States).Thosestandardsrequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancial
statementsarefreeofmaterialmisstatement.Anauditincludesexamining,onatestbasis,evidencesupportingtheamounts
anddisclosuresinthefinancialstatements.Anauditalsoincludesassessingtheaccountingprinciplesusedandsignificant
estimatesmadebymanagement,aswellasevaluatingtheoverallfinancialstatementpresentation.Webelievethatouraudits
provideareasonablebasisforouropinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial
positionofAppleInc.atSeptember28,2013andSeptember29,2012,andtheconsolidatedresultsofitsoperationsandits
cashflowsforeachofthethreeyearsintheperiodendedSeptember28,2013,inconformitywithU.S.generallyaccepted
accountingprinciples.
Wealsohaveaudited,inaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates),
Apple Inc.s internal control over financial reporting as of September 28, 2013, based on criteria established in Internal
ControlIntegratedFrameworkissuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission(1992
framework)andourreportdatedOctober29,2013expressedanunqualifiedopinionthereon.
/s/Ernst&YoungLLP
SanJose,California
October29,2013

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REPORTOFERNST&YOUNGLLP,INDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRM
TheBoardofDirectorsandShareholdersofAppleInc.
WehaveauditedAppleInc.sinternalcontroloverfinancialreportingasofSeptember28,2013,basedoncriteriaestablished
in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (1992 framework) (the COSO criteria). Apple Inc.s management is responsible for maintaining effective
internalcontroloverfinancialreporting,andforitsassessmentoftheeffectivenessofinternalcontroloverfinancialreporting
included in the accompanying Managements Annual Report on Internal Control Over Financial Reporting. Our
responsibilityistoexpressanopinionontheCompanysinternalcontroloverfinancialreportingbasedonouraudit.
WeconductedourauditinaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates).
Thosestandardsrequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhethereffectiveinternal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internalcontroloverfinancialreporting,assessingtheriskthatamaterialweaknessexists,testingandevaluatingthedesign
and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considerednecessaryinthecircumstances.Webelievethatourauditprovidesareasonablebasisforouropinion.
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordancewithgenerally
acceptedaccountingprinciples.Acompanysinternalcontroloverfinancialreportingincludesthosepoliciesandprocedures
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
permitpreparationoffinancialstatementsinaccordancewithgenerallyacceptedaccountingprinciples,andthatreceiptsand
expenditures of the company are being made only in accordance with authorizations of management and directors of the
companyand(3)providereasonableassuranceregardingpreventionortimelydetectionofunauthorizedacquisition,use,or
dispositionofthecompanysassetsthatcouldhaveamaterialeffectonthefinancialstatements.
Becauseofitsinherentlimitations,internalcontroloverfinancialreportingmaynotpreventordetectmisstatements.Also,
projectionsofanyevaluationofeffectivenesstofutureperiodsaresubjecttotheriskthatcontrolsmaybecomeinadequate
becauseofchangesinconditions,orthatthedegreeofcompliancewiththepoliciesorproceduresmaydeteriorate.
In our opinion, Apple Inc. maintained, in all material respects, effective internal control over financial reporting as of
September28,2013,basedontheCOSOcriteria.
Wealsohaveaudited,inaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates),
the 2013 consolidated financial statements of Apple Inc. and our report dated October 29, 2013 expressed an unqualified
opinionthereon.
/s/Ernst&YoungLLP
SanJose,California
October29,2013

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Item9.

ChangesinandDisagreementswithAccountantsonAccountingandFinancialDisclosure

None.

Item9A.

ControlsandProcedures

EvaluationofDisclosureControlsandProcedures
Based on an evaluation under the supervision and with the participation of the Companys management, the Companys
principal executive officer and principal financial officer have concluded that the Companys disclosure controls and
proceduresasdefinedinRules13a15(e)and15d15(e)undertheSecuritiesExchangeActof1934,asamended(Exchange
Act)wereeffectiveasofSeptember28,2013toprovidereasonableassurancethatinformationrequiredtobedisclosedbythe
CompanyinreportsthatitfilesorsubmitsundertheExchangeActis(i)recorded,processed,summarizedandreportedwithin
the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and
communicated to the Companys management, including its principal executive officer and principal financial officer, as
appropriatetoallowtimelydecisionsregardingrequireddisclosure.
InherentLimitationsOverInternalControls
TheCompanysinternalcontroloverfinancialreportingisdesignedtoprovidereasonableassuranceregardingthereliability
of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally
acceptedaccountingprinciples(GAAP).TheCompanysinternalcontroloverfinancialreportingincludesthosepolicies
andproceduresthat:

(i)

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositionsoftheCompanysassets

(ii)

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statementsinaccordancewithGAAP,andthat the Companys receipts and expenditures are being made only in
accordancewithauthorizationsoftheCompanysmanagementanddirectorsand

(iii)

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
dispositionoftheCompanysassetsthatcouldhaveamaterialeffectonthefinancialstatements.

Management, including the Companys Chief Executive Officer and Chief Financial Officer, does not expect that the
Companysinternalcontrolswillpreventordetectallerrorsandallfraud.Acontrolsystem,nomatterhowwelldesignedand
operated,canprovideonlyreasonable,notabsolute,assurancethattheobjectivesofthecontrolsystemaremet.Further,the
design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be
consideredrelativetotheircosts.Becauseoftheinherentlimitationsinallcontrolsystems,noevaluationofinternalcontrols
canprovideabsoluteassurancethatallcontrolissuesandinstancesoffraud,ifany,havebeendetected.Also,anyevaluation
oftheeffectivenessofcontrolsinfutureperiodsaresubjecttotheriskthatthoseinternalcontrolsmaybecomeinadequate
becauseofchangesinbusinessconditions,orthatthedegreeofcompliancewiththepoliciesorproceduresmaydeteriorate.
ManagementsAnnualReportonInternalControlOverFinancialReporting
The Companys management is responsible for establishing and maintaining adequate internal control over financial
reporting(asdefinedinRule13a15(f)undertheExchangeAct).Managementconductedanassessmentoftheeffectivenessof
the Companys internal control over financial reporting based on the criteria set forth in Internal Control Integrated
FrameworkissuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission(1992framework).Basedon
theCompanysassessment,managementhasconcludedthatitsinternalcontroloverfinancialreportingwaseffectiveasof
September 28, 2013 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements in accordance with GAAP. The Companys independent registered public accounting firm, Ernst &
YoungLLP,hasissuedanauditreportontheCompanysinternalcontroloverfinancialreporting,whichappearsinPartII,
Item8ofthisForm10K.

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ChangesinInternalControlOverFinancialReporting
TherewerenochangesintheCompanysinternalcontroloverfinancialreportingduringthefourthquarterof2013,which
wereidentifiedinconnectionwithmanagementsevaluationrequiredbyparagraph(d)ofrules13a15and15d15underthe
ExchangeAct,thathavemateriallyaffected,orarereasonablylikelytomateriallyaffect,theCompanysinternalcontrolover
financialreporting.

Item9B.

OtherInformation

Notapplicable.

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PARTIII

Item10.

Directors,ExecutiveOfficersandCorporateGovernance

The information required by this Item is set forth under the headings Directors, Executive Officers and Corporate
GovernanceandSection16(a)BeneficialOwnershipReportingComplianceintheCompanys2014ProxyStatementtobe
filedwiththeU.S.SecuritiesandExchangeCommission(SEC)within120daysafterSeptember28,2013inconnection
with the solicitation of proxies for the Companys 2014 annual meeting of shareholders and is incorporated herein by
reference.

Item11.

ExecutiveCompensation

TheinformationrequiredbythisItemissetforthundertheheadingExecutiveCompensationandunderthesubheadings
BoardOversightofRiskManagement,CompensationofDirectors,DirectorCompensation2013andCompensation
CommitteeInterlocksandInsiderParticipationundertheheadingDirectors,ExecutiveOfficersandCorporateGovernance
in the Companys 2014 Proxy Statement to be filed with the SEC within 120 days after September 28, 2013 and is
incorporatedhereinbyreference.

Item12.

SecurityOwnershipofCertainBeneficialOwnersandManagementandRelatedStockholderMatters

TheinformationrequiredbythisItemissetforthundertheheadingsSecurityOwnershipofCertainBeneficialOwnersand
ManagementandEquityCompensationPlanInformationintheCompanys2014ProxyStatementtobefiledwiththeSEC
within120daysafterSeptember28,2013andisincorporatedhereinbyreference.

Item13.

CertainRelationshipsandRelatedTransactions,andDirectorIndependence

TheinformationrequiredbythisItemissetforthundertheheadingReview,ApprovalorRatificationofTransactionswith
Related Persons and under the subheading Board Committees under the heading Directors, Executive Officers and
CorporateGovernanceintheCompanys2014ProxyStatementtobefiledwiththeSECwithin120daysafterSeptember28,
2013andisincorporatedhereinbyreference.

Item14.

PrincipalAccountingFeesandServices

The information required by this Item is set forth under the subheadings Fees Paid to Auditors and Policy on Audit
CommitteePreApprovalofAuditandNonAuditServicesPerformedbytheIndependentRegisteredPublicAccountingFirm
undertheproposalRatificationofAppointmentofIndependentRegisteredPublicAccountingFirmintheCompanys2014
ProxyStatementtobefiledwiththeSECwithin120daysafterSeptember28,2013andisincorporatedhereinbyreference.

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PARTIV

Item15.

Exhibits,FinancialStatementSchedules

(a)

Documentsfiledaspartofthisreport

(1)

Allfinancialstatements

IndextoConsolidatedFinancialStatements

Page

45

46

47

48

49

50

78

79

ConsolidatedStatementsofOperationsfortheyearsendedSeptember28,2013,September29,2012and
September24,2011
ConsolidatedStatementsofComprehensiveIncomefortheyearsendedSeptember28,2013,September29,2012,
andSeptember24,2011
ConsolidatedBalanceSheetsasofSeptember28,2013andSeptember29,2012
ConsolidatedStatementsofShareholdersEquityfortheyearsendedSeptember28,2013,September29,2012and
September24,2011
ConsolidatedStatementsofCashFlowsfortheyearsendedSeptember28,2013,September29,2012and
September24,2011
NotestoConsolidatedFinancialStatements
SelectedQuarterlyFinancialInformation(Unaudited)
ReportsofErnst&YoungLLP,IndependentRegisteredPublicAccountingFirm

(2)

FinancialStatementSchedules

All financial statement schedules have been omitted, since the required information is not applicable or is not present in
amountssufficienttorequiresubmissionoftheschedule,orbecausetheinformationrequiredisincludedintheconsolidated
financialstatementsandnotestheretoincludedinthisForm10K.

(3)

ExhibitsrequiredbyItem601ofRegulationSK

TheinformationrequiredbythisSection(a)(3)ofItem15issetforthontheexhibitindexthatfollowstheSignaturespageof
thisForm10K.

84

TableofContents

SIGNATURES
PursuanttotherequirementsofSection13or15(d)oftheSecuritiesExchangeActof1934,theregistranthasdulycausedthis
reporttobesignedonitsbehalfbytheundersigned,thereuntodulyauthorized.

APPLEINC.

Date:October29,2013

By:

/s/PeterOppenheimer

SeniorVicePresident,
ChiefFinancialOfficer

PeterOppenheimer

PowerofAttorney
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints
TimothyD.CookandPeterOppenheimer,jointlyandseverally,hisattorneysinfact,eachwiththepowerofsubstitution,for
himinanyandallcapacities,tosignanyamendmentstothisAnnualReportonForm10K,andtofilethesame,withexhibits
theretoandotherdocumentsinconnectiontherewith,withtheSecuritiesandExchangeCommission,herebyratifyingand
confirmingallthateachofsaidattorneysinfact,orhissubstituteorsubstitutes,maydoorcausetobedonebyvirtuehereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
personsonbehalfoftheregistrantandinthecapacitiesandonthedatesindicated:

Name

Title

/s/TimothyD.Cook
TIMOTHYD.COOK
/s/PeterOppenheimer
PETEROPPENHEIMER
/s/LucaMaestri
LUCAMAESTRI

ChiefExecutiveOfficerandDirector
(PrincipalExecutiveOfficer)

October29,2013

SeniorVicePresident,ChiefFinancial
Officer(PrincipalFinancialOfficer)

October29,2013

VicePresidentandCorporateController
(PrincipalAccountingOfficer)

/s/WilliamV.Campbell
WILLIAMV.CAMPBELL

/s/MillardS.Drexler
MILLARDS.DREXLER

/s/AlGore
ALGORE

/s/RobertA.Iger
ROBERTA.IGER

/s/AndreaJung
ANDREAJUNG

Date

October29,2013

Director

October29,2013

Director

October29,2013

Director

October29,2013

Director

October29,2013

Director

October29,2013

85

TableofContents

Name

Title

/s/ArthurD.Levinson
ARTHURD.LEVINSON
/s/RonaldD.Sugar
RONALDD.SUGAR

Date

Director

October29,2013

Director

October29,2013

86

TableofContents

EXHIBITINDEX

Incorporatedby

Reference

FilingDate/
Exhibit
Number

PeriodEnd

3.1

ExhibitDescription

RestatedArticlesofIncorporation,filedwiththeSecretaryofStateoftheStateof
CaliforniaonJuly10,2009.

10Q 3.1

6/27/09

10Q 3.2

3/26/11

10Q 4.1

12/30/06

S3

4.1

4/29/13

OfficersCertificateoftheRegistrant,datedasofMay3,2013,includingformsof
globalnotesrepresentingtheFloatingRateNotesdue2016,FloatingRateNotesdue
2018,0.45%Notesdue2016,1.00%Notesdue2018,2.40%Notesdue2023and3.85%
Notesdue2043.
8K

4.1

5/3/13

AmendedBylawsoftheRegistrant,asofApril20,2011.

3.2

FormofCommonStockCertificateoftheRegistrant.

4.1

4.2

4.3

Indenture,datedasofApril29,2013,betweentheRegistrantandTheBankofNewYork
MellonTrustCompany,N.A.,asTrustee.

AmendedEmployeeStockPurchasePlan,effectiveasofMarch8,2010.

10.1*

10.2*

FormofIndemnificationAgreementbetweentheRegistrantandeachdirectorand
executiveofficeroftheRegistrant.

10Q 10.1

3/27/10

10Q 10.2

6/27/09

10Q 10.3

6/30/12

8K 10.1

3/1/10

1997DirectorStockPlan,asamendedthroughMay24,2012.

10.3*

2003EmployeeStockPlan,asamendedthroughFebruary25,2010.

10.4*

FormofRestrictedStockUnitAwardAgreementeffectiveasofNovember11,2008.

10.5*

10Q 10.10 12/27/08

FormofRestrictedStockUnitAwardAgreementeffectiveasofNovember16,2010.

10.6*

10Q 10.10 12/25/10

FormofRestrictedStockUnitAwardAgreementeffectiveasofApril6,2012.

10.7*

10.8*

SummaryDescriptionofAmendment,effectiveasofMay24,2012,tocertainRestricted
StockUnitAwardAgreementsoutstandingasofApril5,2012.

10Q 10.8

3/31/12

10Q 10.8

6/30/12

ComputationofRatioofEarningstoFixedCharges.

12.1**

SubsidiariesoftheRegistrant.

21.1**

23.1**

Form Exhibit Date

ConsentofErnst&YoungLLP,IndependentRegisteredPublicAccountingFirm.

24.1**

PowerofAttorney(includedontheSignaturespageofthisAnnualReportonForm10
K).

Rule13a14(a)/15d14(a)CertificationofChiefExecutiveOfficer.

31.1**

Rule13a14(a)/15d14(a)CertificationofChiefFinancialOfficer.

31.2**

Section1350CertificationsofChiefExecutiveOfficerandChiefFinancialOfficer.

32.1***

87

TableofContents
Incorporatedby

Reference

FilingDate/
Exhibit
Number

PeriodEnd

ExhibitDescription

Form Exhibit Date

XBRLInstanceDocument.

101.INS**

XBRLTaxonomyExtensionDefinitionLinkbaseDocument.

101.DEF**

XBRLTaxonomyExtensionLabelLinkbaseDocument.

101.LAB**

XBRLTaxonomyExtensionPresentationLinkbaseDocument.

101.PRE**

***

XBRLTaxonomyExtensionCalculationLinkbaseDocument.

101.CAL**

**

XBRLTaxonomyExtensionSchemaDocument.

101.SCH**

Indicatesmanagementcontractorcompensatoryplanorarrangement.
Filedherewith.
Furnishedherewith.

88

Exhibit12.1
AppleInc.
ComputationofRatioofEarningstoFixedCharges
(Inmillions,exceptratios)

Yearsended
September28,

2013

September29,

2012

September24,

2011

September25,

2010

September26,

2009

Earnings

Earningsbeforeincometaxes

50,155

55,763

34,205

18,540

12,066

265

98

68

54

46

50,420

55,861

34,273

18,594

12,112

Add:FixedCharges

TotalEarnings

FixedCharges(a)

InterestExpense

136

129

98

68

54

46

265

98

68

54

46

190

570

504

344

263

Interestcomponentofrentalexpense

TotalFixedCharges

RatioofEarningstoFixedCharges(b)

(a)

Fixed charges include the portion of rental expense that management believes is representative of the interest
component.

(b)

TheratioofearningstofixedchargesiscomputedbydividingTotalEarningsbyTotalFixedCharges.

Exhibit21.1
SUBSIDIARIESOF
APPLEINC.*

Jurisdiction

ofIncorporation

Ireland

Ireland

Ireland

Nevada,U.S.

AppleSalesInternational
AppleOperationsInternational
AppleOperationsEurope
BraeburnCapital,Inc.

Pursuant to Item 601(b)(21)(ii) of Regulation SK,the names of other subsidiaries of Apple Inc. are omitted because,
consideredintheaggregate,theywouldnotconstituteasignificantsubsidiaryasoftheendoftheyearcoveredbythis
report.

Exhibit23.1
ConsentofErnst&YoungLLP,IndependentRegisteredPublicAccountingFirm
WeconsenttotheincorporationbyreferenceinthefollowingRegistrationStatements:

(1)

RegistrationStatement(FormS3ASRNo.333188191)ofAppleInc.,

(2)

Registration Statement (Form S8 No. 333184706) pertaining to AuthenTec, Inc. 2007 Stock Incentive Plan and
AuthenTec,Inc.2010IncentivePlan,asamended,

(3)

RegistrationStatement(FormS8No.333180981)pertainingtoChompInc.2009EquityIncentivePlan,

(4)

RegistrationStatement(FormS8No.333179189)pertainingtoAnobitTechnologiesLtd.GlobalShareIncentivePlan
(2006),

(5)

RegistrationStatement(FormS8No.333168279)pertainingtoSiri,Inc.2008StockOption/StockIssuancePlan,

(6)

RegistrationStatement(FormS8No.333165214)pertainingtoAppleInc.2003EmployeeStockPlan,lalamedia,inc.
2005StockPlanandQuattroWireless,Inc.2006StockOptionandGrantPlan,

(7)

RegistrationStatement(FormS8No.333146026)pertainingtoAppleInc.2003EmployeeStockPlanandAppleInc.
AmendedEmployeeStockPurchasePlan,

(8)

Registration Statement (Form S8 No. 333125148) pertaining to Employee Stock Purchase Plan and 2003 Employee
StockPlan,and

(9)

RegistrationStatement(FormS8No.33375930)pertainingto1997EmployeeStockOptionPlan

ofourreportsdatedOctober29,2013withrespecttotheconsolidatedfinancialstatementsofAppleInc.,andtheeffectiveness
ofinternalcontroloverfinancialreportingofAppleInc.,includedinthisAnnualReportonForm10Kfortheyearended
September28,2013.
/s/Ernst&YoungLLP
SanJose,California
October29,2013

Exhibit31.1
CERTIFICATIONS
I,TimothyD.Cook,certifythat:

1.

IhavereviewedthisannualreportonForm10KofAppleInc.

2.

Basedonmyknowledge,thisreportdoesnotcontainanyuntruestatementofamaterialfactoromittostateamaterial
factnecessarytomakethestatementsmade,inlightofthecircumstancesunderwhichsuchstatementsweremade,not
misleadingwithrespecttotheperiodcoveredbythisreport

3.

Basedonmyknowledge,thefinancialstatements,andotherfinancialinformationincludedinthisreport,fairlypresent
inallmaterialrespectsthefinancialcondition,resultsofoperationsandcashflowsoftheregistrantasof,andfor,the
periodspresentedinthisreport

4.

Theregistrantsothercertifyingofficer(s)andIareresponsibleforestablishingandmaintainingdisclosurecontrolsand
procedures(asdefinedinExchangeActRules13a15(e)and15d15(e))andinternalcontroloverfinancialreporting(as
definedinExchangeActRules13a15(f)and15d15(f))fortheregistrantandhave:

(a)

Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobedesigned
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries,ismadeknowntousbyotherswithinthoseentities,particularlyduringtheperiodinwhichthisreport
isbeingprepared

(b)

Designedsuchinternalcontroloverfinancialreporting,orcausedsuchinternalcontroloverfinancialreportingto
bedesignedunderoursupervision,toprovidereasonableassuranceregardingthereliabilityoffinancialreporting
andthepreparationoffinancialstatementsforexternalpurposesinaccordancewithgenerallyacceptedaccounting
principles

(c)

Evaluatedtheeffectivenessoftheregistrantsdisclosurecontrolsandproceduresandpresentedinthisreportour
conclusionsabouttheeffectivenessofthedisclosurecontrolsandprocedures,asoftheendoftheperiodcoveredby
thisreportbasedonsuchevaluationand

(d)

Disclosedinthisreportanychangeintheregistrantsinternalcontroloverfinancialreportingthatoccurredduring
theregistrantsmostrecentfiscalquarter(theregistrantsfourthfiscalquarterinthecaseofanannualreport)thathas
materially affected, or is reasonably likely to materially affect, the registrants internal control over financial
reportingand

5.

Theregistrantsothercertifyingofficer(s)andIhavedisclosed,basedonourmostrecentevaluationofinternalcontrol
overfinancialreporting, to the registrants auditors and the audit committee of the registrants board of directors (or
personsperformingtheequivalentfunctions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reportingwhicharereasonablylikelytoadverselyaffecttheregistrantsabilitytorecord,process,summarize,and
reportfinancialinformationand

(b)

Anyfraud,whetherornotmaterial,thatinvolvesmanagementorotheremployeeswhohaveasignificantroleinthe
registrantsinternalcontroloverfinancialreporting.

Date:October29,2013

By: /s/TimothyD.Cook
TimothyD.Cook
ChiefExecutiveOfficer

Exhibit31.2
CERTIFICATIONS
I,PeterOppenheimer,certifythat:

1.

IhavereviewedthisannualreportonForm10KofAppleInc.

2.

Basedonmyknowledge,thisreportdoesnotcontainanyuntruestatementofamaterialfactoromittostateamaterial
factnecessarytomakethestatementsmade,inlightofthecircumstancesunderwhichsuchstatementsweremade,not
misleadingwithrespecttotheperiodcoveredbythisreport

3.

Basedonmyknowledge,thefinancialstatements,andotherfinancialinformationincludedinthisreport,fairlypresent
inallmaterialrespectsthefinancialcondition,resultsofoperationsandcashflowsoftheregistrantasof,andfor,the
periodspresentedinthisreport

4.

Theregistrantsothercertifyingofficer(s)andIareresponsibleforestablishingandmaintainingdisclosurecontrolsand
procedures(asdefinedinExchangeActRules13a15(e)and15d15(e))andinternalcontroloverfinancialreporting(as
definedinExchangeActRules13a15(f)and15d15(f))fortheregistrantandhave:

(a)

Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobedesigned
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries,ismadeknowntousbyotherswithinthoseentities,particularlyduringtheperiodinwhichthisreport
isbeingprepared

(b)

Designedsuchinternalcontroloverfinancialreporting,orcausedsuchinternalcontroloverfinancialreportingto
bedesignedunderoursupervision,toprovidereasonableassuranceregardingthereliabilityoffinancialreporting
andthepreparationoffinancialstatementsforexternalpurposesinaccordancewithgenerallyacceptedaccounting
principles

(c)

Evaluatedtheeffectivenessoftheregistrantsdisclosurecontrolsandproceduresandpresentedinthisreportour
conclusionsabouttheeffectivenessofthedisclosurecontrolsandprocedures,asoftheendoftheperiodcoveredby
thisreportbasedonsuchevaluationand

(d)

Disclosedinthisreportanychangeintheregistrantsinternalcontroloverfinancialreportingthatoccurredduring
theregistrantsmostrecentfiscalquarter(theregistrantsfourthfiscalquarterinthecaseofanannualreport)thathas
materially affected, or is reasonably likely to materially affect, the registrants internal control over financial
reportingand

5.

Theregistrantsothercertifyingofficer(s)andIhavedisclosed,basedonourmostrecentevaluationofinternalcontrol
overfinancialreporting, to the registrants auditors and the audit committee of the registrants board of directors (or
personsperformingtheequivalentfunctions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reportingwhicharereasonablylikelytoadverselyaffecttheregistrantsabilitytorecord,process,summarize,and
reportfinancialinformationand

(b)

Anyfraud,whetherornotmaterial,thatinvolvesmanagementorotheremployeeswhohaveasignificantroleinthe
registrantsinternalcontroloverfinancialreporting.

Date:October29,2013

By: /s/PeterOppenheimer
PeterOppenheimer
SeniorVicePresident,
ChiefFinancialOfficer

Exhibit32.1
CERTIFICATIONOFCHIEFEXECUTIVEOFFICERANDCHIEFFINANCIALOFFICER
PURSUANTTO
18U.S.C.SECTION1350,
ASADOPTEDPURSUANTTO
SECTION906OFTHESARBANESOXLEYACTOF2002
I,TimothyD.Cook,certify,asofthedateshereof,pursuantto18U.S.C.Section1350,asadoptedpursuanttoSection906of
theSarbanesOxleyActof2002,thattheAnnualReportofAppleInc.onForm10KforthefiscalyearendedSeptember28,
2013 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 10K fairly presents in all material respects the financial condition and results of
operationsofAppleInc.atthedatesandfortheperiodsindicated.
Date:October29,2013
By: /s/TimothyD.Cook
TimothyD.Cook
ChiefExecutiveOfficer
I,PeterOppenheimer,certify,asofthedateshereof,pursuantto18U.S.C.Section1350,asadoptedpursuanttoSection906of
theSarbanesOxleyActof2002,thattheAnnualReportofAppleInc.onForm10KforthefiscalyearendedSeptember28,
2013 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 10K fairly presents in all material respects the financial condition and results of
operationsofAppleInc.atthedatesandfortheperiodsindicated.
Date:October29,2013
By: /s/PeterOppenheimer
PeterOppenheimer
SeniorVicePresident,
ChiefFinancialOfficer
AsignedoriginalofthiswrittenstatementrequiredbySection906hasbeenprovidedtoAppleInc.andwillberetainedby
AppleInc.andfurnishedtotheSecuritiesandExchangeCommissionoritsstaffuponrequest.