- THE COMPANY IS APPLE INC.
- ONLY USE THE ATTACHED 10-K AS REFERENCE
- Review the instructions for the SEC 10-K project. This week’s report focuses on the Balance Sheet.
- Review the discussion board in week two on the Balance Sheet. (ATTACHED)
- Write a brief report of at least one page in whole paragraphs. You may use bullet points.
- This report will assist you in the final SEC 10-K project deliverables.
- Submit it as a Word document.
Requirements
The report should include the following:
- Sections or line items of the Balance Sheet include but are not limited to:
Fiscal Year End Date for the two years presented
Definition of Fiscal Year if not last day of the month (i.e., December 31)
Assets
Liabilities
Equity
Working Capital with an explanation of changes from the prior year
Identify new line items or items that do not appear in the most recent year
Refer to Statement of Shareholders’ Equity to describe significant changes (i.e., Retained Earnings became Accumulated Deficit).
Below you will find the significant line items for Apple Inc. stating the past three years presented Shareholders Equity.
https://www.sec.gov/ix?doc=/Archives/edgar/data/320193/000032019322000108/aapl-20220924.htm
The beginning balance for each year are as follows: (all information are in millions except share amounts)
Beginning Balance
2020: 45,174
2021: 50,779
2022: 64,849
Common Stock numbers are as follows:
2020: 50,779
2021: 57,365
2022: 64,849
Retained Earnings or (Accumulated Deficit) are as follows:
2020: 14,966
2021: 5,562
2022: (3,068)
Accumulated Other Comprehensive Income or (Loss) are as follows:
2020: (406)
2021: 163
2022: (11,109)
Net income or (Loss) are as follows:
The thing that stood out to me the most is the consistency in the common stock increase. When I first saw the assignment my initial thought was there will be a huge spike in common stock numbers for the previous years because they had a stock splits but, the numbers look pretty consistent. I’m not sure to stock splits affect the common stock but, I’ll definitely will be looking deeper into that in the future.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 24, 2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number: 001-36743
Apple Inc.
(Exact name of Registrant as specified in its charter)
California 94-2404110
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer Identification No.)
One Apple Park Way
Cupertino, California 95014
(Address of principal executive offices) (Zip Code)
(408) 996-1010
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading symbol(s) Name of each exchange on which registered
Common Stock, $0.00001 par value per share AAPL The Nasdaq Stock Market LLC
1.000% Notes due 2022 — The Nasdaq Stock Market LLC
1.375% Notes due 2024 — The Nasdaq Stock Market LLC
0.000% Notes due 2025 — The Nasdaq Stock Market LLC
0.875% Notes due 2025 — The Nasdaq Stock Market LLC
1.625% Notes due 2026 — The Nasdaq Stock Market LLC
2.000% Notes due 2027 — The Nasdaq Stock Market LLC
1.375% Notes due 2029 — The Nasdaq Stock Market LLC
3.050% Notes due 2029 — The Nasdaq Stock Market LLC
0.500% Notes due 2031 — The Nasdaq Stock Market LLC
3.600% Notes due 2042 — The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☒ No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No ☒
The aggregate market value of the voting and non-voting stock held by non-affiliates of the Registrant, as of March 25, 2022, the last business day of the Registrant’s most recently
completed second fiscal quarter, was approximately $2,830,067,000,000. Solely for purposes of this disclosure, shares of common stock held by executive officers and directors of
the Registrant as of such date have been excluded because such persons may be deemed to be affiliates. This determination of executive officers and directors as affiliates is not
necessarily a conclusive determination for any other purposes.
15,908,118,000 shares of common stock were issued and outstanding as of October 14, 2022.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement relating to its 2023 annual meeting of shareholders are incorporated by reference into Part III of this Annual Report on Form
10-K where indicated. The Registrant’s definitive proxy statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to
which this report relates.
Apple Inc.
Form 10-K
For the Fiscal Year Ended September 24, 2022
TABLE OF CONTENTS
Page
Part I
Item 1. Business 1
Item 1A. Risk Factors 5
Item 1B. Unresolved Staff Comments 17
Item 2. Properties 17
Item 3. Legal Proceedings 17
Item 4. Mine Safety Disclosures 17
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 18
Item 6. [Reserved] 19
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 26
Item 8. Financial Statements and Supplementary Data 28
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 53
Item 9A. Controls and Procedures 53
Item 9B. Other Information 54
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 54
Part III
Item 10. Directors, Executive Officers and Corporate Governance 54
Item 11. Executive Compensation 54
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 54
Item 13. Certain Relationships and Related Transactions, and Director Independence 54
Item 14. Principal Accountant Fees and Services 54
Part IV
Item 15. Exhibit and Financial Statement Schedules 55
Item 16. Form 10-K Summary 57
This Annual Report on Form 10-K (“Form 10-K”) contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995,
that involve risks and uncertainties. Many of the forward-looking statements are located in Part I, Item 1 of this Form 10-K under the heading “Business” and Part
II, Item 7 of this Form 10-K under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking
statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical
or current fact. For example, statements in this Form 10-K regarding the potential future impact of the COVID-19 pandemic on the Company’s business and
results of operations are forward-looking statements. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,”
“estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of
future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might
cause such differences include, but are not limited to, those discussed in Part I, Item 1A of this Form 10-K under the heading “Risk Factors.” The Company
assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Unless otherwise stated, all information presented herein is based on the Company’s fiscal calendar, and references to particular years, quarters, months or
periods refer to the Company’s fiscal years ended in September and the associated quarters, months and periods of those fiscal years. Each of the terms the
“Company” and “Apple” as used herein refers collectively to Apple Inc. and its wholly owned subsidiaries, unless otherwise stated.
PART I
Item 1. Business
Company Background
The Company designs, manufactures and markets smartphones, personal computers, tablets, wearables and accessories, and sells a variety of related
services. The Company’s fiscal year is the 52- or 53-week period that ends on the last Saturday of September.
Products
iPhone
iPhone is the Company’s line of smartphones based on its iOS operating system. The iPhone line includes iPhone 14 Pro, iPhone 14, iPhone 13, iPhone SE ,
iPhone 12 and iPhone 11.
Mac
Mac is the Company’s line of personal computers based on its macOS operating system. The Mac line includes laptops MacBook Air and MacBook Pro , as
well as desktops iMac , Mac mini , Mac Studio™ and Mac Pro .
iPad
iPad is the Company’s line of multipurpose tablets based on its iPadOS operating system. The iPad line includes iPad Pro , iPad Air , iPad and iPad mini .
Wearables, Home and Accessories
Wearables, Home and Accessories includes:
• AirPods , the Company’s wireless headphones, including AirPods, AirPods Pro and AirPods Max™;
• Apple TV , the Company’s media streaming and gaming device based on its tvOS operating system, including Apple TV 4K and Apple TV HD;
• Apple Watch , the Company’s line of smartwatches based on its watchOS operating system, including Apple Watch Ultra™, Apple Watch Series 8 and
Apple Watch SE ; and
• Beats products, HomePod mini and accessories.
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Apple Inc. | 2022 Form 10-K | 1
Services
Advertising
The Company’s advertising services include various third-party licensing arrangements and the Company’s own advertising platforms.
AppleCare
The Company offers a portfolio of fee-based service and support products under the AppleCare brand. The offerings provide priority access to Apple technical
support, access to the global Apple authorized service network for repair and replacement services, and in many cases additional coverage for instances of
accidental damage and/or theft and loss, depending on the country and type of product.
Cloud Services
The Company’s cloud services store and keep customers’ content up-to-date and available across multiple Apple devices and Windows personal computers.
Digital Content
The Company operates various platforms, including the App Store , that allow customers to discover and download applications and digital content, such as
books, music, video, games and podcasts.
The Company also offers digital content through subscription-based services, including Apple Arcade , a game subscription service; Apple Fitness+ , a
personalized fitness service; Apple Music , which offers users a curated listening experience with on-demand radio stations; Apple News+ , a subscription news
and magazine service; and Apple TV+ , which offers exclusive original content and live sports.
Payment Services
The Company offers payment services, including Apple Card , a co-branded credit card, and Apple Pay , a cashless payment service.
Markets and Distribution
The Company’s customers are primarily in the consumer, small and mid-sized business, education, enterprise and government markets. The Company sells its
products and resells third-party products in most of its major markets directly to consumers, small and mid-sized businesses, and education, enterprise and
government customers through its retail and online stores and its direct sales force. The Company also employs a variety of indirect distribution channels, such
as third-party cellular network carriers, wholesalers, retailers and resellers. During 2022, the Company’s net sales through its direct and indirect distribution
channels accounted for 38% and 62%, respectively, of total net sales.
Competition
The markets for the Company’s products and services are highly competitive, and are characterized by aggressive price competition and resulting downward
pressure on gross margins, frequent introduction of new products and services, short product life cycles, evolving industry standards, continual improvement in
product price and performance characteristics, rapid adoption of technological advancements by competitors, and price sensitivity on the part of consumers and
businesses. Many of the Company’s competitors seek to compete primarily through aggressive pricing and very low cost structures, and by imitating the
Company’s products and infringing on its intellectual property.
The Company’s ability to compete successfully depends heavily on ensuring the continuing and timely introduction of innovative new products, services and
technologies to the marketplace. The Company designs and develops nearly the entire solution for its products, including the hardware, operating system,
numerous software applications and related services. Principal competitive factors important to the Company include price, product and service features
(including security features), relative price and performance, product and service quality and reliability, design innovation, a strong third-party software and
accessories ecosystem, marketing and distribution capability, service and support, and corporate reputation.
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Apple Inc. | 2022 Form 10-K | 2
The Company is focused on expanding its market opportunities related to smartphones, personal computers, tablets, wearables and accessories, and services.
The Company faces substantial competition in these markets from companies that have significant technical, marketing, distribution and other resources, as well
as established hardware, software, and service offerings with large customer bases. In addition, some of the Company’s competitors have broader product lines,
lower-priced products and a larger installed base of active devices. Competition has been particularly intense as competitors have aggressively cut prices and
lowered product margins. Certain competitors have the resources, experience or cost structures to provide products at little or no profit or even at a loss. The
Company’s services compete with business models that provide content to users for free and use illegitimate means to obtain third-party digital content and
applications. The Company faces significant competition as competitors imitate the Company’s product features and applications within their products, or
collaborate to offer integrated solutions that are more competitive than those they currently offer.
Supply of Components
Although most components essential to the Company’s business are generally available from multiple sources, certain components are currently obtained from
single or limited sources. The Company also competes for various components with other participants in the markets for smartphones, personal computers,
tablets, wearables and accessories. Therefore, many components used by the Company, including those that are available from multiple sources, are at times
subject to industry-wide shortage and significant commodity pricing fluctuations.
The Company uses some custom components that are not commonly used by its competitors, and new products introduced by the Company often utilize
custom components available from only one source. When a component or product uses new technologies, initial capacity constraints may exist until the
suppliers’ yields have matured or their manufacturing capacities have increased. The continued availability of these components at acceptable prices, or at all,
may be affected if suppliers decide to concentrate on the production of common components instead of components customized to meet the Company’s
requirements.
The Company has entered into agreements for the supply of many components; however, there can be no guarantee that the Company will be able to extend or
renew these agreements on similar terms, or at all.
Substantially all of the Company’s hardware products are manufactured by outsourcing partners that are located primarily in Asia, with some Mac computers
manufactured in the U.S. and Ireland.
Research and Development
Because the industries in which the Company competes are characterized by rapid technological advances, the Company’s ability to compete successfully
depends heavily upon its ability to ensure a continual and timely flow of competitive products, services and technologies to the marketplace. The Company
continues to develop new technologies to enhance existing products and services, and to expand the range of its offerings through research and development
(“R&D”), licensing of intellectual property and acquisition of third-party businesses and technology.
Intellectual Property
The Company currently holds a broad collection of intellectual property rights relating to certain aspects of its hardware devices, accessories, software and
services. This includes patents, designs, copyrights, trademarks and other forms of intellectual property rights in the U.S. and various foreign countries. Although
the Company believes the ownership of such intellectual property rights is an important factor in differentiating its business and that its success does depend in
part on such ownership, the Company relies primarily on the innovative skills, technical competence and marketing abilities of its personnel.
The Company regularly files patent, design, copyright and trademark applications to protect innovations arising from its research, development, design and
marketing, and is currently pursuing thousands of applications around the world. Over time, the Company has accumulated a large portfolio of issued and
registered intellectual property rights around the world. No single intellectual property right is solely responsible for protecting the Company’s products and
services. The Company believes the duration of its intellectual property rights is adequate relative to the expected lives of its products and services.
In addition to Company-owned intellectual property, many of the Company’s products and services are designed to include intellectual property owned by third
parties. It may be necessary in the future to seek or renew licenses relating to various aspects of the Company’s products, processes and services. While the
Company has generally been able to obtain such licenses on commercially reasonable terms in the past, there is no guarantee that such licenses could be
obtained in the future on reasonable terms or at all.
Apple Inc. | 2022 Form 10-K | 3
Business Seasonality and Product Introductions
The Company has historically experienced higher net sales in its first quarter compared to other quarters in its fiscal year due in part to seasonal holiday
demand. Additionally, new product and service introductions can significantly impact net sales, cost of sales and operating expenses. The timing of product
introductions can also impact the Company’s net sales to its indirect distribution channels as these channels are filled with new inventory following a product
launch, and channel inventory of an older product often declines as the launch of a newer product approaches. Net sales can also be affected when consumers
and distributors anticipate a product introduction.
Human Capital
The Company believes it has a talented, motivated and dedicated team, and works to create an inclusive, safe and supportive environment for all of its team
members. As of September 24, 2022, the Company had approximately 164,000 full-time equivalent employees.
Workplace Practices and Policies
The Company is an equal opportunity employer committed to inclusion and diversity and to providing a workplace free of harassment or discrimination.
Compensation and Benefits
The Company believes that compensation should be competitive and equitable, and should enable employees to share in the Company’s success. The
Company recognizes its people are most likely to thrive when they have the resources to meet their needs and the time and support to succeed in their
professional and personal lives. In support of this, the Company offers a wide variety of benefits for employees around the world and invests in tools and
resources that are designed to support employees’ individual growth and development.
Inclusion and Diversity
The Company remains committed to its vision to build and sustain a more inclusive workforce that is representative of the communities it serves. The Company
continues to work to increase diverse representation at every level, foster an inclusive culture, and support equitable pay and access to opportunity for all
employees.
Engagement
The Company believes that open and honest communication among team members, managers and leaders helps create an open, collaborative work
environment where everyone can contribute, grow and succeed. Team members are encouraged to come to their managers with questions, feedback or
concerns, and the Company conducts surveys that gauge employee sentiment in areas like career development, manager performance and inclusivity.
Health and Safety
The Company is committed to protecting its team members everywhere it operates. The Company identifies potential workplace risks in order to develop
measures to mitigate possible hazards. The Company supports employees with general safety, security and crisis management training, and by putting specific
programs in place for those working in potentially high-hazard environments. Additionally, the Company works to protect the safety and security of its team
members, visitors and customers through its global security team. The Company has also taken additional health and safety measures during the COVID-19
pandemic.
Available Information
The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to
Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the U.S. Securities and Exchange
Commission (the “SEC”). Such reports and other information filed by the Company with the SEC are available free of charge at investor.apple.com/investor-
relations/sec-filings/default.aspx when such reports are available on the SEC’s website. The Company periodically provides certain information for investors on
its corporate website, www.apple.com, and its investor relations website, investor.apple.com. This includes press releases and other information about financial
performance, information on environmental, social and governance matters, and details related to the Company’s annual meeting of shareholders. The
information contained on the websites referenced in this Form 10-K is not incorporated by reference into this filing. Further, the Company’s references to website
URLs are intended to be inactive textual references only.
Apple Inc. | 2022 Form 10-K | 4
Item 1A. Risk Factors
The Company’s business, reputation, results of operations, financial condition and stock price can be affected by a number of factors, whether currently known
or unknown, including those described below. When any one or more of these risks materialize from time to time, the Company’s business, reputation, results of
operations, financial condition and stock price can be materially and adversely affected.
Because of the following factors, as well as other factors affecting the Company’s results of operations and financial condition, past financial performance should
not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.
This discussion of risk factors contains forward-looking statements.
This section should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the
consolidated financial statements and accompanying notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.
Macroeconomic and Industry Risks
The Company’s operations and performance depend significantly on global and regional economic conditions and adverse economic conditions can
materially adversely affect the Company’s business, results of operations and financial condition.
The Company has international operations with sales outside the U.S. representing a majority of the Company’s total net sales. In addition, the Company’s
global supply chain is large and complex and a majority of the Company’s supplier facilities, including manufacturing and assembly sites, are located outside the
U.S. As a result, the Company’s operations and performance depend significantly on global and regional economic conditions.
Adverse macroeconomic conditions, including inflation, slower growth or recession, new or increased tariffs and other barriers to trade, changes to fiscal and
monetary policy, tighter credit, higher interest rates, high unemployment and currency fluctuations can adversely impact consumer confidence and spending and
materially adversely affect demand for the Company’s products and services. In addition, consumer confidence and spending can be materially adversely
affected in response to financial market volatility, negative financial news, conditions in the real estate and mortgage markets, declines in income or asset
values, energy shortages and cost increases, labor and healthcare costs and other economic factors.
In addition to an adverse impact on demand for the Company’s products, uncertainty about, or a decline in, global or regional economic conditions can have a
significant impact on the Company’s suppliers, contract manufacturers, logistics providers, distributors, cellular network carriers and other channel partners.
Potential effects include financial instability; inability to obtain credit to finance operations and purchases of the Company’s products; and insolvency.
A downturn in the economic environment can also lead to increased credit and collectibility risk on the Company’s trade receivables; the failure of derivative
counterparties and other financial institutions; limitations on the Company’s ability to issue new debt; reduced liquidity; and declines in the fair value of the
Company’s financial instruments. These and other economic factors can materially adversely affect the Company’s business, results of operations, financial
condition and stock price.
The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be
materially adversely affected by the COVID-19 pandemic.
COVID-19 has had, and continues to have, a significant impact around the world, prompting governments and businesses to take unprecedented measures in
response. Such measures have included restrictions on travel and business operations, temporary closures of businesses, and quarantine and shelter-in-place
orders. The COVID-19 pandemic has at times significantly curtailed global economic activity and caused significant volatility and disruption in global financial
markets.
The COVID-19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact the
Company’s business, results of operations, financial condition and stock price. During the course of the pandemic, certain of the Company’s component
suppliers and manufacturing and logistical service providers have experienced disruptions, resulting in supply shortages that affected sales worldwide, and
similar disruptions could occur in the future. Public safety measures can also adversely impact consumer demand for the Company’s products and services in
affected areas.
Apple Inc. | 2022 Form 10-K | 5
The Company continues to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevant authorities.
The extent to which the COVID-19 pandemic may impact the Company’s operational and financial performance remains uncertain and will depend on many
factors outside the Company’s control, including the timing, extent, trajectory and duration of the pandemic, the emergence of new variants, the development,
availability, distribution and effectiveness of vaccines and treatments, the imposition of protective public safety measures, and the impact of the pandemic on the
global economy and demand for consumer products and services. Additional future impacts on the Company may include material adverse effects on demand
for the Company’s products and services, the Company’s supply chain and sales and distribution channels, the Company’s ability to execute its strategic plans,
and the Company’s profitability and cost structure.
To the extent the COVID-19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have the
effect of heightening many of the other risks described in this Part I, Item 1A of this Form 10-K.
The Company’s business can be impacted by political events, trade and other international disputes, war, terrorism, natural disasters, public health
issues, industrial accidents and other business interruptions.
Political events, trade and other international disputes, war, terrorism, natural disasters, public health issues, industrial accidents and other business
interruptions can harm or disrupt international commerce and the global economy, and could have a material adverse effect on the Company and its customers,
suppliers, contract manufacturers, logistics providers, distributors, cellular network carriers and other channel partners.
The Company has a large, global business with sales outside the U.S. representing a majority of the Company’s total net sales, and the Company believes that it
generally benefits from growth in international trade. Substantially all of the Company’s manufacturing is performed in whole or in part by outsourcing partners
located primarily in Asia, including China mainland, India, Japan, South Korea, Taiwan and Vietnam. Trade policies and disputes and other international conflicts
can result in tariffs, sanctions and other measures that restrict international trade, and can materially adversely affect the Company’s business, particularly if
these measures occur in regions where the Company derives a significant portion of its revenues and/or has significant supply chain operations. For example,
tensions between the U.S. and China have led to a series of tariffs being imposed by the U.S. on imports from China mainland, as well as other business
restrictions. Tariffs increase the cost of the Company’s products and the components and raw materials that go into making them. These increased costs can
adversely impact the gross margin that the Company earns on its products. Tariffs can also make the Company’s products more expensive for customers, which
could make the Company’s products less competitive and reduce consumer demand. Countries may also adopt other measures, such as controls on imports or
exports of goods, technology or data, that could adversely impact the Company’s operations and supply chain and limit the Company’s ability to offer its products
and services as designed. These measures can require the Company to take various actions, including changing suppliers, restructuring business relationships,
and ceasing to offer third-party applications on its platforms. Changing the Company’s operations in accordance with new or changed trade restrictions can be
expensive, time-consuming and disruptive to the Company’s operations. Such restrictions can be announced with little or no advance notice and the Company
may not be able to effectively mitigate all adverse impacts from such measures. If disputes and conflicts further escalate in the future, actions by governments in
response could be significantly more severe and restrictive and could materially adversely affect the Company’s business. Political uncertainty surrounding trade
and other international disputes could also have a negative effect on consumer confidence and spending, which could adversely affect the Company’s business.
Many of the Company’s operations and facilities, as well as critical business operations of the Company’s suppliers and contract manufacturers, are in locations
that are prone to earthquakes and other natural disasters. In addition, such operations and facilities are subject to the risk of interruption by fire, power
shortages, nuclear power plant accidents and other industrial accidents, terrorist attacks and other hostile acts, ransomware and other cybersecurity attacks,
labor disputes, public health issues, including pandemics such as the COVID-19 pandemic, and other events beyond the Company’s control. Global climate
change is resulting in certain types of natural disasters occurring more frequently or with more intense effects. Such events can make it difficult or impossible for
the Company to manufacture and deliver products to its customers, create delays and inefficiencies in the Company’s supply and manufacturing chain, and
result in slowdowns and outages to the Company’s service offerings. Following an interruption to its business, the Company can require substantial recovery
time, experience significant expenditures to resume operations, and lose significant sales. Because the Company relies on single or limited sources for the
supply and manufacture of many critical components, a business interruption affecting such sources would exacerbate any negative consequences to the
Company.
Apple Inc. | 2022 Form 10-K | 6
The Company’s operations are also subject to the risks of industrial accidents at its suppliers and contract manufacturers. While the Company’s suppliers are
required to maintain safe working environments and operations, an industrial accident could occur and could result in serious injuries or loss of life, disruption to
the Company’s business, and harm to the Company’s reputation. Major public health issues, including pandemics such as the COVID-19 pandemic, have
adversely affected, and could in the future materially adversely affect, the Company due to their impact on the global economy and demand for consumer
products; the imposition of protective public safety measures, such as stringent employee travel restrictions and limitations on freight services and the movement
of products between regions; and disruptions in the Company’s supply chain and sales and distribution channels, resulting in interruptions of the supply of
current products and delays in production ramps of new products.
While the Company maintains insurance coverage for certain types of losses, such insurance coverage may be insufficient to cover all losses that may arise.
Global markets for the Company’s products and services are highly competitive and subject to rapid technological change, and the Company may be
unable to compete effectively in these markets.
The Company’s products and services are offered in highly competitive global markets characterized by aggressive price competition and resulting downward
pressure on gross margins, frequent introduction of new products and services, short product life cycles, evolving industry standards, continual improvement in
product price and performance characteristics, rapid adoption of technological advancements by competitors, and price sensitivity on the part of consumers and
businesses.
The Company’s ability to compete successfully depends heavily on ensuring the continuing and timely introduction of innovative new products, services and
technologies to the marketplace. The Company designs and develops nearly the entire solution for its products, including the hardware, operating system,
numerous software applications and related services. As a result, the Company must make significant investments in R&D. There can be no assurance these
investments will achieve expected returns, and the Company may not be able to develop and market new products and services successfully.
The Company currently holds a significant number of patents, trademarks and copyrights and has registered, and applied to register, additional patents,
trademarks and copyrights. In contrast, many of the Company’s competitors seek to compete primarily through aggressive pricing and very low cost structures,
and by imitating the Company’s products and infringing on its intellectual property. Effective intellectual property protection is not consistently available in every
country in which the Company operates. If the Company is unable to continue to develop and sell innovative new products with attractive margins or if
competitors infringe on the Company’s intellectual property, the Company’s ability to maintain a competitive advantage could be materially adversely affected.
The Company has a minority market share in the global smartphone, personal computer and tablet markets. The Company faces substantial competition in
these markets from companies that have significant technical, marketing, distribution and other resources, as well as established hardware, software and digital
content supplier relationships. In addition, some of the Company’s competitors have broader product lines, lower-priced products and a larger installed base of
active devices. Competition has been particularly intense as competitors have aggressively cut prices and lowered product margins. Certain competitors have
the resources, experience or cost structures to provide products at little or no profit or even at a loss. Some of the markets in which the Company competes have
from time to time experienced little to no growth or contracted overall.
Additionally, the Company faces significant competition as competitors imitate the Company’s product features and applications within their products or
collaborate to offer solutions that are more competitive than those they currently offer. The Company also expects competition to intensify as competitors imitate
the Company’s approach to providing components seamlessly within their offerings or work collaboratively to offer integrated solutions.
The Company’s services also face substantial competition, including from companies that have significant resources and experience and have established
service offerings with large customer bases. The Company competes with business models that provide content to users for free. The Company also competes
with illegitimate means to obtain third-party digital content and applications.
The Company’s business, results of operations and financial condition depend substantially on the Company’s ability to continually improve its products and
services to maintain their functional and design advantages. There can be no assurance the Company will be able to continue to provide products and services
that compete effectively.
Apple Inc. | 2022 Form 10-K | 7
Business Risks
To remain competitive and stimulate customer demand, the Company must successfully manage frequent introductions and transitions of products
and services.
Due to the highly volatile and competitive nature of the markets and industries in which the Company competes, the Company must continually introduce new
products, services and technologies, enhance existing products and services, effectively stimulate customer demand for new and upgraded products and
services, and successfully manage the transition to these new and upgraded products and services. The success of new product and service introductions
depends on a number of factors, including timely and successful development, market acceptance, the Company’s ability to manage the risks associated with
production ramp-up issues, the availability of application software for the Company’s products, the effective management of purchase commitments and
inventory levels in line with anticipated product demand, the availability of products in appropriate quantities and at expected costs to meet anticipated demand,
and the risk that new products and services may have quality or other defects or deficiencies. There can be no assurance the Company will successfully manage
future introductions and transitions of products and services.
The Company depends on component and product manufacturing and logistical services provided by outsourcing partners, many of which are
located outside of the U.S.
Substantially all of the Company’s manufacturing is performed in whole or in part by outsourcing partners located primarily in Asia, including China mainland,
India, Japan, South Korea, Taiwan and Vietnam, and a significant concentration of this manufacturing is currently performed by a small number of outsourcing
partners, often in single locations. Changes or additions to the Company’s supply chain require considerable time and resources and involve significant risks and
uncertainties. The Company has also outsourced much of its transportation and logistics management. While these arrangements can lower operating costs,
they also reduce the Company’s direct control over production and distribution. Such diminished control has from time to time and may in the future have an
adverse effect on the quality or quantity of products manufactured or services provided, or adversely affect the Company’s flexibility to respond to changing
conditions. Although arrangements with these partners may contain provisions for product defect expense reimbursement, the Company generally remains
responsible to the consumer for warranty and out-of-warranty service in the event of product defects and experiences unanticipated product defect liabilities from
time to time. While the Company relies on its partners to adhere to its supplier code of conduct, violations of the supplier code of conduct occur from time to time
and can materially adversely affect the Company’s business, reputation, results of operations and financial condition.
The Company relies on single-source outsourcing partners in the U.S., Asia and Europe to supply and manufacture many components, and on outsourcing
partners primarily located in Asia, for final assembly of substantially all of the Company’s hardware products. Any failure of these partners to perform can have a
negative impact on the Company’s cost or supply of components or finished goods. In addition, manufacturing or logistics in these locations or transit to final
destinations can be disrupted for a variety of reasons, including natural and man-made disasters, information technology system failures, commercial disputes,
armed conflict, economic, business, labor, environmental, public health or political issues, or international trade disputes.
The Company has invested in manufacturing process equipment, much of which is held at certain of its outsourcing partners, and has made prepayments to
certain of its suppliers associated with long-term supply agreements. While these arrangements help ensure the supply of components and finished goods, if
these outsourcing partners or suppliers experience severe financial problems or other disruptions in their business, such continued supply can be reduced or
terminated, and the recoverability of manufacturing process equipment or prepayments can be negatively impacted.
Future operating results depend upon the Company’s ability to obtain components in sufficient quantities on commercially reasonable terms.
Because the Company currently obtains certain components from single or limited sources, the Company is subject to significant supply and pricing risks. Many
components, including those that are available from multiple sources, are at times subject to industry-wide shortages and significant commodity pricing
fluctuations that can materially adversely affect the Company’s business, results of operations and financial condition. For example, the global semiconductor
industry is experiencing high demand and shortages of supply, which has adversely affected, and could materially adversely affect, the Company’s ability to
obtain sufficient quantities of components and products on commercially reasonable terms or at all. While the Company has entered into agreements for the
supply of many components, there can be no assurance the Company will be able to extend or renew these agreements on similar terms, or at all. Component
suppliers may suffer from poor financial conditions, which can lead to business failure for the supplier or consolidation within a particular industry, further limiting
the Company’s ability to obtain sufficient quantities of components on commercially reasonable terms or at all. The effects of global or regional economic
conditions on the Company’s suppliers, described in “The Company’s operations and performance depend significantly on global and regional economic
conditions and adverse economic conditions can materially adversely affect the Company’s business, results of operations and financial condition,” above, can
also affect the Company’s ability to obtain components. Therefore, the Company remains subject to significant risks of supply shortages and price increases that
can materially adversely affect its business, results of operations and financial condition.
Apple Inc. | 2022 Form 10-K | 8
The Company’s new products often utilize custom components available from only one source. When a component or product uses new technologies, initial
capacity constraints may exist until the suppliers’ yields have matured or their manufacturing capacities have increased. The continued availability of these
components at acceptable prices, or at all, can be affected for any number of reasons, including if suppliers decide to concentrate on the production of common
components instead of components customized to meet the Company’s requirements. When the Company’s supply of components for a new or existing product
has been delayed or constrained, or when an outsourcing partner has delayed shipments of completed products to the Company, the Company’s business,
results of operations and financial condition have been adversely affected and future delays or constraints could materially adversely affect the Company’s
business, results of operations and financial condition. The Company’s business and financial performance could also be materially adversely affected
depending on the time required to obtain sufficient quantities from the source, or to identify and obtain sufficient quantities from an alternative source.
The Company’s products and services may be affected from time to time by design and manufacturing defects that could materially adversely affect
the Company’s business and result in harm to the Company’s reputation.
The Company offers complex hardware and software products and services that can be affected by design and manufacturing defects. Sophisticated operating
system software and applications, such as those offered by the Company, often have issues that can unexpectedly interfere with the intended operation of
hardware or software products. Defects can also exist in components and products the Company purchases from third parties. Component defects could make
the Company’s products unsafe and create a risk of environmental or property damage and personal injury. These risks may increase as the Company’s
products are introduced into specialized applications, including health. In addition, the Company’s service offerings can have quality issues and from time to time
experience outages, service slowdowns or errors. As a result, the Company’s services from time to time have not performed as anticipated and may not meet
customer expectations. There can be no assurance the Company will be able to detect and fix all issues and defects in the hardware, software and services it
offers. Failure to do so can result in widespread technical and performance issues affecting the Company’s products and services. In addition, the Company can
be exposed to product liability claims, recalls, product replacements or modifications, write-offs of inventory, property, plant and equipment, and/or intangible
assets, and significant warranty and other expenses, including litigation costs and regulatory fines. Quality problems can also adversely affect the experience for
users of the Company’s products and services, and result in harm to the Company’s reputation, loss of competitive advantage, poor market acceptance, reduced
demand for products and services, delay in new product and service introductions and lost sales.
The Company is exposed to the risk of write-downs on the value of its inventory and other assets, in addition to purchase commitment cancellation
risk.
The Company records a write-down for product and component inventories that have become obsolete or exceed anticipated demand, or for which cost exceeds
net realizable value. The Company also accrues necessary cancellation fee reserves for orders of excess products and components. The Company reviews
long-lived assets, including capital assets held at its suppliers’ facilities and inventory prepayments, for impairment whenever events or circumstances indicate
the assets may not be recoverable. If the Company determines that an impairment has occurred, it records a write-down equal to the amount by which the
carrying value of the asset exceeds its fair value. Although the Company believes its inventory, capital assets, inventory prepayments and other assets and
purchase commitments are currently recoverable, there can be no assurance the Company will not incur write-downs, fees, impairments and other charges
given the rapid and unpredictable pace of product obsolescence in the industries in which the Company competes.
The Company orders components for its products and builds inventory in advance of product announcements and shipments. Manufacturing purchase
obligations cover the Company’s forecasted component and manufacturing requirements, typically for periods up to 150 days. Because the Company’s markets
are volatile, competitive and subject to rapid technology and price changes, there is a risk the Company will forecast incorrectly and order or produce excess or
insufficient amounts of components or products, or not fully utilize firm purchase commitments.
The Company relies on access to third-party intellectual property, which may not be available to the Company on commercially reasonable terms or
at all.
The Company’s products and services are designed to include intellectual property owned by third parties, which requires licenses from those third parties. In
addition, because of technological changes in the industries in which the Company currently competes or in the future may compete, current extensive patent
coverage and the rapid rate of issuance of new patents, the Company’s products and services can unknowingly infringe existing patents or intellectual property
rights of others. From time to time, the Company has been notified that it may be infringing certain patents or other intellectual property rights of third parties.
Based on experience and industry practice, the Company believes licenses to such third-party intellectual property can generally be obtained on commercially
reasonable terms. However, there can be no assurance the necessary licenses can be obtained on commercially reasonable terms or at all. Failure to obtain the
right to use third-party intellectual property, or to use such intellectual property on commercially reasonable terms, can preclude the Company from selling certain
products or services, or otherwise have a material adverse impact on the Company’s business, results of operations and financial condition.
Apple Inc. | 2022 Form 10-K | 9
The Company’s future performance depends in part on support from third-party software developers.
The Company believes decisions by customers to purchase its hardware products depend in part on the availability of third-party software applications and
services. There can be no assurance third-party developers will continue to develop and maintain software applications and services for the Company’s
products. If third-party software applications and services cease to be developed and maintained for the Company’s products, customers may choose not to buy
the Company’s products.
The Company believes the availability of third-party software applications and services for its products depends in part on the developers’ perception and
analysis of the relative benefits of developing, maintaining and upgrading such software and services for the Company’s products compared to competitors’
platforms, such as Android for smartphones and tablets, Windows for personal computers and tablets, and PlayStation, Nintendo and Xbox for gaming platforms.
This analysis may be based on factors such as the market position of the Company and its products, the anticipated revenue that may be generated, expected
future growth of product sales, and the costs of developing such applications and services.
The Company’s minority market share in the global smartphone, personal computer and tablet markets can make developers less inclined to develop or upgrade
software for the Company’s products and more inclined to devote their resources to developing and upgrading software for competitors’ products with larger
market share. When developers focus their efforts on these competing platforms, the availability and quality of applications for the Company’s devices can suffer.
The Company relies on the continued availability and development of compelling and innovative software applications for its products. The Company’s products
and operating systems are subject to rapid technological change, and when third-party developers are unable to or choose not to keep up with this pace of
change, their applications can fail to take advantage of these changes to deliver improved customer experiences and can operate incorrectly and can result in
dissatisfied customers.
The Company distributes third-party applications for its products through the App Store. For the vast majority of applications, developers keep all of the revenue
they generate on the App Store. The Company only retains a commission from sales of applications and sales of digital services or goods within an application.
From time to time, the Company has made changes to its App Store, including actions taken in response to competition, market and legal conditions. The
Company may make further business changes in the future. New legislative initiatives, such as the European Union (“EU”) Digital Markets Act, could require
further changes. The Company is also subject to litigation and investigations relating to the App Store, which have resulted in changes to the Company’s
business practices, and may in the future result in further changes. These changes could include how and to what extent the Company charges developers for
access to its platforms and manages distribution of apps outside of the App Store. This could reduce the volume of sales, and the commission that the Company
earns on those sales, would decrease. If the rate of the commission that the Company retains on such sales is reduced, or if it is otherwise narrowed in scope or
eliminated, the Company’s business, results of operations and financial condition could be materially adversely affected.
Failure to obtain or create digital content that appeals to the Company’s customers, or to make such content available on commercially reasonable
terms, could have a material adverse impact on the Company’s business, results of operations and financial condition.
The Company contracts with numerous third parties to offer their digital content to customers. This includes the right to sell, or offer subscriptions to, third-party
content, as well as the right to incorporate specific content into the Company’s own services. The licensing or other distribution arrangements for this content can
be for relatively short time periods and do not guarantee the continuation or renewal of these arrangements on commercially reasonable terms, or at all. Some
third-party content providers and distributors currently or in the future may offer competing products and services, and can take actions to make it difficult or
impossible for the Company to license or otherwise distribute their content. Other content owners, providers or distributors may seek to limit the Company’s
access to, or increase the cost of, such content. The Company may be unable to continue to offer a wide variety of content at commercially reasonable prices
with acceptable usage rules.
The Company also produces its own digital content, which can be costly to produce due to intense and increasing competition for talent, content and
subscribers, and may fail to appeal to the Company’s customers. The COVID-19 pandemic has also caused additional restrictions on production and increased
costs for digital content.
Some third-party digital content providers require the Company to provide digital rights management and other security solutions. If requirements change, the
Company may have to develop or license new technology to provide these solutions. There can be no assurance the Company will be able to develop or license
such solutions at a reasonable cost and in a timely manner.
Apple Inc. | 2022 Form 10-K | 10
The Company’s success depends largely on the talents and efforts of its team members, the continued service and availability of highly skilled
employees, including key personnel, and the Company’s ability to nurture its distinctive and inclusive culture.
Much of the Company’s future success depends on the talents and efforts of its team members, the continued availability and service of key personnel, including
its Chief Executive Officer, executive team and other highly skilled employees. Experienced personnel in the technology industry are in high demand and
competition for their talents is intense, especially in Silicon Valley, where most of the Company’s key personnel are located. In addition to intense competition for
talent, workforce dynamics are constantly evolving. If the Company does not manage changing workforce dynamics effectively, it could materially adversely
affect the Company’s culture, reputation and operational flexibility.
The Company believes that its distinctive and inclusive culture is a significant driver of its success. If the Company is unable to nurture its culture, it could
materially adversely affect the Company’s ability to recruit and retain the highly skilled employees who are critical to its success, and could otherwise materially
adversely affect the Company’s business, reputation, results of operations and financial condition.
The Company depends on the performance of carriers, wholesalers, retailers and other resellers.
The Company distributes its products and certain of its services through cellular network carriers, wholesalers, retailers and resellers, many of which distribute
products and services from competitors. The Company also sells its products and services and resells third-party products in most of its major markets directly to
consumers, small and mid-sized businesses, and education, enterprise and government customers through its retail and online stores and its direct sales force.
Some carriers providing cellular network service for the Company’s products offer financing, installment payment plans or subsidies for users’ purchases of the
device. There can be no assurance such offers will be continued at all or in the same amounts.
The Company has invested and will continue to invest in programs to enhance reseller sales, including staffing selected resellers’ stores with Company
employees and contractors, and improving product placement displays. These programs can require a substantial investment while not assuring return or
incremental sales. The financial condition of these resellers could weaken, these resellers could stop distributing the Company’s products, or uncertainty
regarding demand for some or all of the Company’s products could cause resellers to reduce their ordering and marketing of the Company’s products.
The Company’s business and reputation are impacted by information technology system failures and network disruptions.
The Company and its global supply chain are exposed to information technology system failures or network disruptions caused by natural disasters, accidents,
power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins, ransomware or other cybersecurity
incidents, or other events or disruptions. System redundancy and other continuity measures may be ineffective or inadequate, and the Company’s or its vendors’
business continuity and disaster recovery planning may not be sufficient for all eventualities. Such failures or disruptions can adversely impact the Company’s
business by, among other things, preventing access to the Company’s online services, interfering with customer transactions or impeding the manufacturing and
shipping of the Company’s products. These events could materially adversely affect the Company’s business, reputation, results of operations and financial
condition.
Losses or unauthorized access to or releases of confidential information, including personal information, could subject the Company to significant
reputational, financial, legal and operational consequences.
The Company’s business requires it to use and store confidential information, including personal information, with respect to the Company’s customers and
employees. The Company devotes significant resources to network and data security, including through the use of encryption and other security measures
intended to protect its systems and data. But these measures cannot provide absolute security, and losses or unauthorized access to or releases of confidential
information occur and could materially adversely affect the Company’s business, reputation, results of operations and financial condition.
The Company’s business also requires it to share confidential information with suppliers and other third parties. The Company relies on global suppliers that are
also exposed to ransomware and other malicious attacks that can disrupt business operations. Although the Company takes steps to secure confidential
information that is provided to or accessible by third parties working on the Company’s behalf, such measures are not always effective and losses or
unauthorized access to or releases of confidential information occur. Such incidents and other malicious attacks could materially adversely affect the Company’s
business, reputation, results of operations and financial condition.
Apple Inc. | 2022 Form 10-K | 11
The Company experiences malicious attacks and other attempts to gain unauthorized access to its systems on a regular basis. These attacks seek to
compromise the confidentiality, integrity or availability of confidential information or disrupt normal business operations, and could, among other things, impair the
Company’s ability to attract and retain customers for its products and services, impact the Company’s stock price, materially damage commercial relationships,
and expose the Company to litigation or government investigations, which could result in penalties, fines or judgments against the Company. Globally, attacks
are expected to continue accelerating in both frequency and sophistication with increasing use by actors of tools and techniques that are designed to circumvent
controls, avoid detection, and remove or obfuscate forensic evidence, all of which hinders the Company’s ability to identify, investigate and recover from
incidents. In addition, attacks against the Company and its customers can escalate during periods of severe diplomatic or armed conflict.
Although malicious attacks perpetrated to gain access to confidential information, including personal information, affect many companies across various
industries, the Company is at a relatively greater risk of being targeted because of its high profile and the value of the confidential information it creates, owns,
manages, stores and processes.
The Company has implemented systems and processes intended to secure its information technology systems and prevent unauthorized access to or loss of
sensitive data, and mitigate the impact of unauthorized access, including through the use of encryption and authentication technologies. As with all companies,
these security measures may not be sufficient for all eventualities and may be vulnerable to hacking, ransomware attacks, employee error, malfeasance, system
error, faulty password management or other irregularities. For example, third parties can fraudulently induce the Company’s or its vendors’ employees or
customers into disclosing user names, passwords or other sensitive information, which can, in turn, be used for unauthorized access to the Company’s or its
vendors’ systems and services. To help protect customers and the Company, the Company deploys and makes available technologies like multifactor
authentication, monitors its services and systems for unusual activity and may freeze accounts under suspicious circumstances, which, among other things, can
result in the delay or loss of customer orders or impede customer access to the Company’s products and services.
While the Company maintains insurance coverage that is intended to address certain aspects of data security risks, such insurance coverage may be insufficient
to cover all losses or all types of claims that may arise.
Investment in new business strategies and acquisitions could disrupt the Company’s ongoing business, present risks not originally contemplated
and materially adversely affect the Company’s business, reputation, results of operations and financial condition.
The Company has invested, and in the future may invest, in new business strategies or acquisitions. Such endeavors may involve significant risks and
uncertainties, including distraction of management from current operations, greater-than-expected liabilities and expenses, economic, political, legal and
regulatory challenges associated with operating in new businesses, regions or countries, inadequate return on capital, potential impairment of tangible and
intangible assets, and significant write-offs. Investment and acquisition transactions are exposed to additional risks, including failing to obtain required regulatory
approvals on a timely basis or at all, or the imposition of onerous conditions that could delay or prevent the Company from completing a transaction or otherwise
limit the Company’s ability to fully realize the anticipated benefits of a transaction. These new ventures are inherently risky and may not be successful. The
failure of any significant investment could materially adversely affect the Company’s business, reputation, results of operations and financial condition.
The Company’s retail stores have required and will continue to require a substantial investment and commitment of resources and are subject to
numerous risks and uncertainties.
The Company’s retail stores have required substantial investment in equipment and leasehold improvements, information systems, inventory and personnel. The
Company also has entered into substantial lease commitments for retail space. Certain stores have been designed and built to serve as high-profile venues to
promote brand awareness. Because of their unique design elements, locations and size, these stores require substantially more investment than the Company’s
more typical retail stores. Due to the high cost structure associated with the Company’s retail stores, a decline in sales or the closure or poor performance of an
individual store or multiple stores, including as a result of protective public safety measures in response to the COVID-19 pandemic, could result in significant
lease termination costs, write-offs of equipment and leasehold improvements and severance costs.
The Company’s retail operations are subject to many factors that pose risks and uncertainties and could adversely impact the Company’s business, results of
operations and financial condition, including macro-economic factors that could have an adverse effect on general retail activity. Other factors include the
Company’s ability to: manage costs associated with retail store construction and operation; manage relationships with existing retail partners; manage costs
associated with fluctuations in the value of retail inventory; and obtain and renew leases in quality retail locations at a reasonable cost.
Apple Inc. | 2022 Form 10-K | 12
Legal and Regulatory Compliance Risks
The Company’s business, results of operations and financial condition could be adversely impacted by unfavorable results of legal proceedings or
government investigations.
The Company is subject to various claims, legal proceedings and government investigations that have arisen in the ordinary course of business and have not yet
been fully resolved, and new matters may arise in the future. In addition, agreements entered into by the Company sometimes include indemnification provisions
which can subject the Company to costs and damages in the event of a claim against an indemnified third party. The number of claims, legal proceedings and
government investigations involving the Company, and the alleged magnitude of such claims, proceedings and government investigations, has generally
increased over time and may continue to increase.
The Company has faced and continues to face a significant number of patent claims relating to its cellular-enabled products, and new claims may arise in the
future. For example, technology and other patent-holding companies frequently assert their patents and seek royalties and often enter into litigation based on
allegations of patent infringement or other violations of intellectual property rights. The Company is vigorously defending infringement actions in courts in several
U.S. jurisdictions, as well as internationally in various countries. The plaintiffs in these actions frequently seek injunctions and substantial damages.
Regardless of the merit of particular claims, defending against litigation or responding to government investigations can be expensive, time-consuming and
disruptive to the Company’s operations. In recognition of these considerations, the Company may enter into agreements or other arrangements to settle litigation
and resolve such challenges. There can be no assurance such agreements can be obtained on acceptable terms or that litigation will not occur. These
agreements can also significantly increase the Company’s cost of sales and operating expenses and require the Company to change its business practices and
limit the Company’s ability to offer certain products and services.
Except as described in Part I, Item 3 of this Form 10-K under the heading “Legal Proceedings” and in Part II, Item 8 of this Form 10-K in the Notes to
Consolidated Financial Statements in Note 10, “Commitments and Contingencies” under the heading “Contingencies,” in the opinion of management, there was
not at least a reasonable possibility the Company may have incurred a material loss, or a material loss greater than a recorded accrual, concerning loss
contingencies for asserted legal and other claims.
The outcome of litigation or government investigations is inherently uncertain. If one or more legal matters were resolved against the Company or an indemnified
third party in a reporting period for amounts above management’s expectations, the Company’s results of operations and financial condition for that reporting
period could be materially adversely affected. Further, such an outcome can result in significant compensatory, punitive or trebled monetary damages,
disgorgement of revenue or profits, remedial corporate measures or injunctive relief against the Company, and can require the Company to change its business
practices and limit the Company’s ability to offer certain products and services, all of which could materially adversely affect the Company’s business, reputation,
results of operations and financial condition.
While the Company maintains insurance coverage for certain types of claims, such insurance coverage may be insufficient to cover all losses or all types of
claims that may arise.
The Company is subject to complex and changing laws and regulations worldwide, which exposes the Company to potential liabilities, increased
costs and other adverse effects on the Company’s business.
The Company’s global operations are subject to complex and changing laws and regulations on subjects, including antitrust; privacy, data security and data
localization; consumer protection; advertising, sales, billing and e-commerce; financial services and technology; product liability; intellectual property ownership
and infringement; digital platforms; internet, telecommunications, and mobile communications; media, television, film and digital content; availability of third-party
software applications and services; labor and employment; anticorruption; import, export and trade; foreign exchange controls and cash repatriation restrictions;
anti–money laundering; foreign ownership and investment; tax; and environmental, health and safety, including electronic waste, recycling, and climate change.
Apple Inc. | 2022 Form 10-K | 13
Compliance with these laws and regulations is onerous and expensive. New and changing laws and regulations can adversely affect the Company’s business by
increasing the Company’s costs, limiting the Company’s ability to offer a product, service or feature to customers, impacting customer demand for the
Company’s products and services, and requiring changes to the Company’s supply chain and its business. New and changing laws and regulations can also
create uncertainty about how such laws and regulations will be interpreted and applied. These risks and costs may increase as the Company’s products and
services are introduced into specialized applications, including health and financial services. The Company has implemented policies and procedures designed
to ensure compliance with applicable laws and regulations, but there can be no assurance the Company’s employees, contractors or agents will not violate such
laws and regulations or the Company’s policies and procedures. If the Company is found to have violated laws and regulations, it could materially adversely
affect the Company’s business, reputation, results of operations and financial condition. Regulatory changes and other actions that materially adversely affect
the Company’s business may be announced with little or no advance notice and the Company may not be able to effectively mitigate all adverse impacts from
such measures. For example, the Company is subject to changing regulations relating to the export and import of its products. Although the Company has
programs, policies and procedures in place that are designed to satisfy regulatory requirements, there can be no assurance that such policies and procedures
will be effective in preventing a violation or a claim of a violation. As a result, the Company’s products could be delayed or prohibited from importation, either of
which could materially adversely affect the Company’s business, reputation, results of operations and financial condition.
Expectations relating to environmental, social and governance considerations expose the Company to potential liabilities, increased costs,
reputational harm, and other adverse effects on the Company’s business.
Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on environmental, social and governance
considerations relating to businesses, including climate change and greenhouse gas emissions, human and civil rights, and diversity, equity and inclusion. In
addition, the Company makes statements about its environmental, social and governance goals and initiatives through its environmental, social and governance
report, its other non-financial reports, information provided on its website, press statements and other communications. Responding to these environmental,
social and governance considerations and implementation of these goals and initiatives involves risks and uncertainties, requires investments, and depends in
part on third-party performance or data that is outside the Company’s control. The Company cannot guarantee that it will achieve its announced environmental,
social and governance goals and initiatives. In addition, some stakeholders may disagree with the Company’s goals and initiatives. Any failure, or perceived
failure, by the Company to achieve its goals, further its initiatives, adhere to its public statements, comply with federal, state or international environmental, social
and governance laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings
against the Company and materially adversely affect the Company’s business, reputation, results of operations, financial condition and stock price.
The technology industry, including, in some instances, the Company, is subject to intense media, political and regulatory scrutiny, which exposes
the Company to increasing regulation, government investigations, legal actions and penalties.
From time to time, the Company has made changes to its App Store, including actions taken in response to competition, market and legal conditions. The
Company may make further business changes in the future. New legislative initiatives, such as the EU Digital Markets Act, or similar laws in other jurisdictions,
could require further changes. These changes could include how and to what extent the Company charges developers for access to its platforms and manages
distribution of apps outside of the App Store.
The Company is also currently subject to antitrust investigations in various jurisdictions around the world, which can result in legal proceedings and claims
against the Company that could, individually or in the aggregate, have a materially adverse impact on the Company’s business, results of operations and
financial condition. For example, the Company is the subject of investigations in Europe and other jurisdictions relating to App Store terms and conditions. If such
investigations result in adverse findings against the Company, the Company could be exposed to significant fines and may be required to make changes to its
App Store business, all of which could materially adversely affect the Company’s business, results of operations and financial condition. The Company is also
subject to litigation relating to the App Store, which has resulted in changes to the Company’s business practices, and may in the future result in further changes.
Further, the Company has commercial relationships with other companies in the technology industry that are or may become subject to investigations and
litigation that, if resolved against those other companies, could materially adversely affect the Company’s commercial relationships with those business partners
and materially adversely affect the Company’s business, results of operations and financial condition. For example, the Company earns revenue from licensing
arrangements with other companies to offer their search services on the Company’s platforms and apps, and certain of these arrangements are currently subject
to government investigations and legal proceedings.
Apple Inc. | 2022 Form 10-K | 14
There can be no assurance the Company’s business will not be materially adversely affected, individually or in the aggregate, by the outcomes of such
investigations, litigation or changes to laws and regulations in the future. Changes to the Company’s business practices to comply with new laws and regulations
or in connection with other legal proceedings could negatively impact the reputation of the Company’s products for privacy and security and otherwise adversely
affect the experience for users of the Company’s products and services, and result in harm to the Company’s reputation, loss of competitive advantage, poor
market acceptance, reduced demand for products and services, and lost sales.
The Company’s business is subject to a variety of U.S. and international laws, rules, policies and other obligations regarding data protection.
The Company is subject to federal, state and international laws relating to the collection, use, retention, security and transfer of various types of personal
information. In many cases, these laws apply not only to third-party transactions, but also restrict transfers of personal information among the Company and its
international subsidiaries. Several jurisdictions have passed laws in this area, and additional jurisdictions are considering imposing additional restrictions or have
laws that are pending. These laws continue to develop and may be inconsistent from jurisdiction to jurisdiction. Complying with emerging and changing
requirements causes the Company to incur substantial costs and has required and may in the future require the Company to change its business practices.
Noncompliance could result in significant penalties or legal liability.
The Company makes statements about its use and disclosure of personal information through its privacy policy, information provided on its website, press
statements and other privacy notices provided to customers. Any failure by the Company to comply with these public statements or with other federal, state or
international privacy or data protection laws and regulations could result in inquiries or proceedings against the Company by governmental entities or others. In
addition to reputational impacts, penalties could include ongoing audit requirements and significant legal liability.
In addition to the risks generally relating to the collection, use, retention, security and transfer of personal information, the Company is also subject to specific
obligations relating to information considered sensitive under applicable laws, such as health data, financial data and biometric data. Health data and financial
data are subject to additional privacy, security and breach notification requirements, and the Company is subject to audit by governmental authorities regarding
the Company’s compliance with these obligations. If the Company fails to adequately comply with these rules and requirements, or if health data or financial data
is handled in a manner not permitted by law or under the Company’s agreements with healthcare or financial institutions, the Company can be subject to
litigation or government investigations, and can be liable for associated investigatory expenses, and can also incur significant fees or fines.
Payment card data is also subject to additional requirements. Under payment card rules and obligations, if cardholder information is potentially compromised,
the Company can be liable for associated investigatory expenses and can also incur significant fees or fines if the Company fails to follow payment card industry
data security standards. The Company could also experience a significant increase in payment card transaction costs or lose the ability to process payment
cards if it fails to follow payment card industry data security standards, which could materially adversely affect the Company’s business, reputation, results of
operations and financial condition.
Financial Risks
The Company expects its quarterly net sales and results of operations to fluctuate.
The Company’s profit margins vary across its products, services, geographic segments and distribution channels. For example, the gross margins on the
Company’s products and services vary significantly and can change over time. The Company’s gross margins are subject to volatility and downward pressure
due to a variety of factors, including: continued industry-wide global product pricing pressures and product pricing actions that the Company may take in
response to such pressures; increased competition; the Company’s ability to effectively stimulate demand for certain of its products and services; compressed
product life cycles; supply shortages; potential increases in the cost of components, outside manufacturing services, and developing, acquiring and delivering
content for the Company’s services; the Company’s ability to manage product quality and warranty costs effectively; shifts in the mix of products and services, or
in the geographic, currency or channel mix, including to the extent that regulatory changes require the Company to modify its product and service offerings;
fluctuations in foreign exchange rates; inflation and other macroeconomic pressures; and the introduction of new products or services, including new products or
services with higher cost structures. These and other factors could have a materially adverse impact on the Company’s results of operations and financial
condition.
The Company has historically experienced higher net sales in its first quarter compared to other quarters in its fiscal year due in part to seasonal holiday
demand. Additionally, new product and service introductions can significantly impact net sales, cost of sales and operating expenses. Further, the Company
generates a significant portion of its net sales from a single product and a decline in demand for that product could significantly impact quarterly net sales. The
Company could also be subject to unexpected developments, such as lower-than-anticipated demand for the Company’s products or services, issues with new
product or service introductions, information technology system failures or network disruptions, or failure of one of the Company’s logistics, components supply,
or manufacturing partners.
Apple Inc. | 2022 Form 10-K | 15
The Company’s financial performance is subject to risks associated with changes in the value of the U.S. dollar relative to local currencies.
The Company’s primary exposure to movements in foreign currency exchange rates relates to non–U.S. dollar–denominated sales, cost of sales and operating
expenses worldwide. Gross margins on the Company’s products in foreign countries and on products that include components obtained from foreign suppliers
could be materially adversely affected by foreign currency exchange rate fluctuations.
The weakening of foreign currencies relative to the U.S. dollar adversely affects the U.S. dollar value of the Company’s foreign currency–denominated sales and
earnings, and generally leads the Company to raise international pricing, potentially reducing demand for the Company’s products. In some circumstances, for
competitive or other reasons, the Company may decide not to raise international pricing to offset the U.S. dollar’s strengthening, which would adversely affect
the U.S. dollar value of the gross margins the Company earns on foreign currency–denominated sales.
Conversely, a strengthening of foreign currencies relative to the U.S. dollar, while generally beneficial to the Company’s foreign currency–denominated sales and
earnings, could cause the Company to reduce international pricing and incur losses on its foreign currency derivative instruments, thereby limiting the benefit.
Additionally, strengthening of foreign currencies may increase the Company’s cost of product components denominated in those currencies, thus adversely
affecting gross margins.
The Company uses derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign currency
exchange rates. The use of such hedging activities may not be effective to offset any, or more than a portion, of the adverse financial effects of unfavorable
movements in foreign exchange rates over the limited time the hedges are in place.
The Company is exposed to credit risk and fluctuations in the values of its investment portfolio.
The Company’s investments can be negatively affected by changes in liquidity, credit deterioration, financial results, market and economic conditions, political
risk, sovereign risk, interest rate fluctuations or other factors. As a result, the value and liquidity of the Company’s cash, cash equivalents, and marketable and
non-marketable securities may fluctuate substantially. Therefore, although the Company has not realized any significant losses on its cash, cash equivalents,
and marketable and non-marketable securities, future fluctuations in their value could result in significant losses and could have a material adverse impact on
the Company’s results of operations and financial condition.
The Company is exposed to credit risk on its trade accounts receivable, vendor non-trade receivables and prepayments related to long-term supply
agreements, and this risk is heightened during periods when economic conditions worsen.
The Company distributes its products and certain of its services through third-party cellular network carriers, wholesalers, retailers and resellers. The Company
also sells its products and services directly to small and mid-sized businesses and education, enterprise and government customers. A substantial majority of the
Company’s outstanding trade receivables are not covered by collateral, third-party bank support or financing arrangements, or credit insurance, and a significant
portion of the Company’s trade receivables can be concentrated within cellular network carriers or other resellers. The Company’s exposure to credit and
collectibility risk on its trade receivables is higher in certain international markets and its ability to mitigate such risks may be limited. The Company also has
unsecured vendor non-trade receivables resulting from purchases of components by outsourcing partners and other vendors that manufacture subassemblies or
assemble final products for the Company. In addition, the Company has made prepayments associated with long-term supply agreements to secure supply of
inventory components. As of September 24, 2022, the Company’s vendor non-trade receivables and prepayments related to long-term supply agreements were
concentrated among a few individual vendors located primarily in Asia. While the Company has procedures to monitor and limit exposure to credit risk on its
trade and vendor non-trade receivables, as well as long-term prepayments, there can be no assurance such procedures will effectively limit its credit risk and
avoid losses.
The Company is subject to changes in tax rates, the adoption of new U.S. or international tax legislation and exposure to additional tax liabilities.
The Company is subject to taxes in the U.S. and numerous foreign jurisdictions, including Ireland, where a number of the Company’s subsidiaries are organized.
Due to economic and political conditions, tax laws and tax rates for income taxes and other non-income taxes in various jurisdictions may be subject to
significant change. The Company’s effective tax rates are affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the
valuation of deferred tax assets and liabilities, the introduction of new taxes, or changes in tax laws or their interpretation, including in the U.S. and Ireland. The
application of tax laws may be uncertain, require significant judgment and be subject to differing interpretations.
Apple Inc. | 2022 Form 10-K | 16
The Company is also subject to the examination of its tax returns and other tax matters by the U.S. Internal Revenue Service and other tax authorities and
governmental bodies. The Company regularly assesses the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of its
provision for taxes. There can be no assurance as to the outcome of these examinations. If the Company’s effective tax rates were to increase, particularly in the
U.S. or Ireland, or if the ultimate determination of the Company’s taxes owed is for an amount in excess of amounts previously accrued, the Company’s
business, results of operations and financial condition could be materially adversely affected.
General Risks
The price of the Company’s stock is subject to volatility.
The Company’s stock has experienced substantial price volatility in the past and may continue to do so in the future. Additionally, the Company, the technology
industry and the stock market as a whole have, from time to time, experienced extreme stock price and volume fluctuations that have affected stock prices in
ways that may have been unrelated to these companies’ operating performance. Price volatility may cause the average price at which the Company repurchases
its stock in a given period to exceed the stock’s price at a given point in time. The Company believes the price of its stock should reflect expectations of future
growth and profitability. The Company also believes the price of its stock should reflect expectations that its cash dividend will continue at current levels or grow,
and that its current share repurchase program will be fully consummated. Future dividends are subject to declaration by the Company’s Board of Directors, and
the Company’s share repurchase program does not obligate it to acquire any specific number of shares. If the Company fails to meet expectations related to
future growth, profitability, dividends, share repurchases or other market expectations, the price of the Company’s stock may decline significantly, which could
have a material adverse impact on investor confidence and employee retention.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The Company’s headquarters are located in Cupertino, California. As of September 24, 2022, the Company owned or leased facilities and land for corporate
functions, R&D, data centers, retail and other purposes at locations throughout the U.S. and in various places outside the U.S. The Company believes its
existing facilities and equipment, which are used by all reportable segments, are in good operating condition and are suitable for the conduct of its business.
Item 3. Legal Proceedings
Epic Games
Epic Games, Inc. (“Epic”) filed a lawsuit in the U.S. District Court for the Northern District of California (the “Northern California District Court”) against the
Company alleging violations of federal and state antitrust laws and California’s unfair competition law based upon the Company’s operation of its App Store. The
Company filed a counterclaim for breach of contract. On September 10, 2021, the Northern California District Court ruled in favor of the Company with respect to
nine out of the ten counts included in Epic’s claim, and in favor of the Company with respect to the Company’s claims for breach of contract. The Northern
California District Court found that certain provisions of the Company’s App Store Review Guidelines violate California’s unfair competition law and issued an
injunction. Epic appealed the decision. The Company filed a cross-appeal and has been granted a stay pending the appeal.
Other Legal Proceedings
The Company is subject to other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. The
Company settled certain matters during the fourth quarter of 2022 that did not individually or in the aggregate have a material impact on the Company’s financial
condition or operating results. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting
period for amounts above management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially
adversely affected.
Item 4. Mine Safety Disclosures
Not applicable.
Apple Inc. | 2022 Form 10-K | 17
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company’s common stock is traded on The Nasdaq Stock Market LLC under the symbol AAPL.
Holders
As of October 14, 2022, there were 23,838 shareholders of record.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Share repurchase activity during the three months ended September 24, 2022 was as follows (in millions, except number of shares, which are reflected in
thousands, and per share amounts):
Periods
Total Number
of Shares
Purchased
Average Price
Paid Per
Share
Total Number of
Shares
Purchased as Part
of Publicly
Announced Plans or
Programs
Approximate Dollar
Value of
Shares That May Yet Be
Purchased
Under the Plans or
Programs
June 26, 2022 to July 30, 2022:
Open market and privately negotiated purchases 41,690 $ 145.91 41,690
July 31, 2022 to August 27, 2022:
Open market and privately negotiated purchases 54,669 $ 168.29 54,669
August 28, 2022 to September 24, 2022:
Open market and privately negotiated purchases 63,813 $ 155.59 63,813
Total 160,172 $ 60,665
(1) As of September 24, 2022, the Company was authorized by the Board of Directors to purchase up to $405 billion of the Company’s common stock under a
share repurchase program most recently announced on April 28, 2022 (the “Program”), of which $344.3 billion had been utilized. The Program does not obligate
the Company to acquire a minimum amount of shares. Under the Program, shares may be repurchased in privately negotiated and/or open market transactions,
including under plans complying with Rule 10b5-1 under the Exchange Act.
(1)
Apple Inc. | 2022 Form 10-K | 18
Company Stock Performance
The following graph shows a comparison of cumulative total shareholder return, calculated on a dividend-reinvested basis, for the Company, the S&P 500 Index,
the S&P Information Technology Index and the Dow Jones U.S. Technology Supersector Index for the five years ended September 24, 2022. The graph
assumes $100 was invested in each of the Company’s common stock, the S&P 500 Index, the S&P Information Technology Index and the Dow Jones U.S.
Technology Supersector Index as of the market close on September 29, 2017. Past stock price performance is not necessarily indicative of future stock price
performance.
* $100 invested on September 29, 2017 in stock or index, including reinvestment of dividends. Data points are the last day of each fiscal year for the Company’s
common stock and September 30th for indexes.
Copyright 2022 Standard & Poor’s, a division of S&P Global. All rights reserved.
Copyright 2022 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.
September
2017
September
2018
September
2019
September
2020
September
2021
September
2022
Apple Inc. $ 100 $ 149 $ 146 $ 303 $ 400 $ 411
S&P 500 Index $ 100 $ 118 $ 123 $ 142 $ 184 $ 156
S&P Information Technology Index $ 100 $ 131 $ 143 $ 210 $ 271 $ 217
Dow Jones U.S. Technology Supersector Index $ 100 $ 131 $ 139 $ 208 $ 283 $ 209
Item 6. [Reserved]
©
©
Apple Inc. | 2022 Form 10-K | 19
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this
Form 10-K. This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of
2020 items and year-to-year comparisons between 2021 and 2020 are not included in this Form 10-K, and can be found in “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended
September 25, 2021.
Fiscal Year Highlights
Fiscal 2022 Highlights
Total net sales increased 8% or $28.5 billion during 2022 compared to 2021, driven primarily by higher net sales of iPhone, Services and Mac. The weakness in
foreign currencies relative to the U.S. dollar had an unfavorable year-over-year impact on all Products and Services net sales during 2022.
The Company announces new product, service and software offerings at various times during the year. Significant announcements during fiscal 2022 included
the following:
First Quarter 2022:
• Updated MacBook Pro 14” and MacBook Pro 16”, powered by the Apple M1 Pro or M1 Max chip; and
• Third generation of AirPods.
Second Quarter 2022:
• Updated iPhone SE with 5G technology;
• All-new Mac Studio, powered by the Apple M1 Max or M1 Ultra chip;
• All-new Studio Display™; and
• Updated iPad Air with 5G technology, powered by the Apple M1 chip.
Third Quarter 2022:
• Updated MacBook Air and MacBook Pro 13”, both powered by the Apple M2 chip;
• iOS 16, macOS Ventura, iPadOS 16 and watchOS 9, updates to the Company’s operating systems; and
• Apple Pay Later, a buy now, pay later service.
Fourth Quarter 2022:
• iPhone 14, iPhone 14 Plus, iPhone 14 Pro and iPhone 14 Pro Max;
• Second generation of AirPods Pro; and
• Apple Watch Series 8, updated Apple Watch SE and all-new Apple Watch Ultra.
In April 2022, the Company announced an increase to its Program authorization from $315 billion to $405 billion and raised its quarterly dividend from $0.22 to
$0.23 per share beginning in May 2022. During 2022, the Company repurchased $90.2 billion of its common stock and paid dividends and dividend equivalents
of $14.8 billion.
COVID-19
The COVID-19 pandemic has had, and continues to have, a significant impact around the world, prompting governments and businesses to take unprecedented
measures, such as restrictions on travel and business operations, temporary closures of businesses, and quarantine and shelter-in-place orders. The COVID-19
pandemic has at times significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The COVID-19
pandemic and the measures taken by many countries in response have affected and could in the future materially impact the Company’s business, results of
operations and financial condition.
Certain of the Company’s outsourcing partners, component suppliers and logistical service providers have experienced disruptions during the COVID-19
pandemic, resulting in supply shortages. Similar disruptions could occur in the future.
Apple Inc. | 2022 Form 10-K | 20
Products and Services Performance
The following table shows net sales by category for 2022, 2021 and 2020 (dollars in millions):
2022 Change 2021 Change 2020
Net sales by category:
iPhone $ 205,489 7 % $ 191,973 39 % $ 137,781
Mac 40,177 14 % 35,190 23 % 28,622
iPad 29,292 (8)% 31,862 34 % 23,724
Wearables, Home and Accessories 41,241 7 % 38,367 25 % 30,620
Services 78,129 14 % 68,425 27 % 53,768
Total net sales $ 394,328 8 % $ 365,817 33 % $ 274,515
(1) Products net sales include amortization of the deferred value of unspecified software upgrade rights, which are bundled in the sales price of the respective
product.
(2) Wearables, Home and Accessories net sales include sales of AirPods, Apple TV, Apple Watch, Beats products, HomePod mini and accessories.
(3) Services net sales include sales from the Company’s advertising, AppleCare, cloud, digital content, payment and other services. Services net sales also include
amortization of the deferred value of services bundled in the sales price of certain products.
iPhone
iPhone net sales increased during 2022 compared to 2021 due primarily to higher net sales from the Company’s new iPhone models released since the
beginning of the fourth quarter of 2021.
Mac
Mac net sales increased during 2022 compared to 2021 due primarily to higher net sales of laptops.
iPad
iPad net sales decreased during 2022 compared to 2021 due primarily to lower net sales of iPad Pro.
Wearables, Home and Accessories
Wearables, Home and Accessories net sales increased during 2022 compared to 2021 due primarily to higher net sales of Apple Watch and AirPods.
Services
Services net sales increased during 2022 compared to 2021 due primarily to higher net sales from advertising, cloud services and the App Store.
(1)
(1)
(1)
(1)(2)
(3)
Apple Inc. | 2022 Form 10-K | 21
Segment Operating Performance
The Company manages its business primarily on a geographic basis. The Company’s reportable segments consist of the Americas, Europe, Greater China,
Japan and Rest of Asia Pacific. Americas includes both North and South America. Europe includes European countries, as well as India, the Middle East and
Africa. Greater China includes China mainland, Hong Kong and Taiwan. Rest of Asia Pacific includes Australia and those Asian countries not included in the
Company’s other reportable segments. Although the reportable segments provide similar hardware and software products and similar services, each one is
managed separately to better align with the location of the Company’s customers and distribution partners and the unique market dynamics of each geographic
region. Further information regarding the Company’s reportable segments can be found in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial
Statements in Note 11, “Segment Information and Geographic Data.”
The following table shows net sales by reportable segment for 2022, 2021 and 2020 (dollars in millions):
2022 Change 2021 Change 2020
Net sales by reportable segment:
Americas $ 169,658 11 % $ 153,306 23 % $ 124,556
Europe 95,118 7 % 89,307 30 % 68,640
Greater China 74,200 9 % 68,366 70 % 40,308
Japan 25,977 (9)% 28,482 33 % 21,418
Rest of Asia Pacific 29,375 11 % 26,356 35 % 19,593
Total net sales $ 394,328 8 % $ 365,817 33 % $ 274,515
Americas
Americas net sales increased during 2022 compared to 2021 due primarily to higher net sales of iPhone, Services and Mac.
Europe
Europe net sales increased during 2022 compared to 2021 due primarily to higher net sales of iPhone and Services. The weakness in foreign currencies relative
to the U.S. dollar had a net unfavorable year-over-year impact on Europe net sales during 2022.
Greater China
Greater China net sales increased during 2022 compared to 2021 due primarily to higher net sales of iPhone and Services. The strength of the renminbi relative
to the U.S. dollar had a favorable year-over-year impact on Greater China net sales during 2022.
Japan
Japan net sales decreased during 2022 compared to 2021 due to the weakness of the yen relative to the U.S. dollar.
Rest of Asia Pacific
Rest of Asia Pacific net sales increased during 2022 compared to 2021 due primarily to higher net sales of iPhone, Mac and Services. The weakness in foreign
currencies relative to the U.S. dollar had an unfavorable year-over-year impact on Rest of Asia Pacific net sales during 2022.
Apple Inc. | 2022 Form 10-K | 22
Gross Margin
Products and Services gross margin and gross margin percentage for 2022, 2021 and 2020 were as follows (dollars in millions):
2022 2021 2020
Gross margin:
Products $ 114,728 $ 105,126 $ 69,461
Services 56,054 47,710 35,495
Total gross margin $ 170,782 $ 152,836 $ 104,956
Gross margin percentage:
Products 36.3 % 35.3 % 31.5 %
Services 71.7 % 69.7 % 66.0 %
Total gross margin percentage 43.3 % 41.8 % 38.2 %
Products Gross Margin
Products gross margin increased during 2022 compared to 2021 due primarily to a different Products mix and higher Products volume, partially offset by the
weakness in foreign currencies relative to the U.S. dollar.
Products gross margin percentage increased during 2022 compared to 2021 due primarily to a different Products mix, partially offset by the weakness in foreign
currencies relative to the U.S. dollar.
Services Gross Margin
Services gross margin increased during 2022 compared to 2021 due primarily to higher Services net sales, partially offset by the weakness in foreign currencies
relative to the U.S. dollar.
Services gross margin percentage increased during 2022 compared to 2021 due primarily to improved leverage and a different Services mix, partially offset by
the weakness in foreign currencies relative to the U.S. dollar.
The Company’s future gross margins can be impacted by a variety of factors, as discussed in Part I, Item 1A of this Form 10-K under the heading “Risk Factors.”
As a result, the Company believes, in general, gross margins will be subject to volatility and downward pressure.
Operating Expenses
Operating expenses for 2022, 2021 and 2020 were as follows (dollars in millions):
2022 Change 2021 Change 2020
Research and development $ 26,251 20 % $ 21,914 17 % $ 18,752
Percentage of total net sales 7 % 6 % 7 %
Selling, general and administrative $ 25,094 14 % $ 21,973 10 % $ 19,916
Percentage of total net sales 6 % 6 % 7 %
Total operating expenses $ 51,345 17 % $ 43,887 13 % $ 38,668
Percentage of total net sales 13 % 12 % 14 %
Research and Development
The year-over-year growth in R&D expense in 2022 was driven primarily by increases in headcount-related expenses and engineering program costs.
Selling, General and Administrative
The year-over-year growth in selling, general and administrative expense in 2022 was driven primarily by increases in headcount-related expenses, advertising
and professional services.
Apple Inc. | 2022 Form 10-K | 23
Other Income/(Expense), Net
Other income/(expense), net (“OI&E”) for 2022, 2021 and 2020 was as follows (dollars in millions):
2022 Change 2021 Change 2020
Interest and dividend income $ 2,825 $ 2,843 $ 3,763
Interest expense (2,931) (2,645) (2,873)
Other income/(expense), net (228) 60 (87)
Total other income/(expense), net $ (334) (229)% $ 258 (68)% $ 803
The decrease in OI&E during 2022 compared to 2021 was due primarily to higher realized losses on debt securities, unfavorable fair value adjustments on
equity securities and higher interest expense, partially offset by higher foreign exchange gains.
Provision for Income Taxes
Provision for income taxes, effective tax rate and statutory federal income tax rate for 2022, 2021 and 2020 were as follows (dollars in millions):
2022 2021 2020
Provision for income taxes $ 19,300 $ 14,527 $ 9,680
Effective tax rate 16.2 % 13.3 % 14.4 %
Statutory federal income tax rate 21 % 21 % 21 %
The Company’s effective tax rate for 2022 was lower than the statutory federal income tax rate due primarily to a lower effective tax rate on foreign earnings, tax
benefits from share-based compensation and the impact of the U.S. federal R&D credit, partially offset by state income taxes. The Company’s effective tax rate
for 2021 was lower than the statutory federal income tax rate due primarily to a lower effective tax rate on foreign earnings, tax benefits from share-based
compensation and foreign-derived intangible income deductions.
The Company’s effective tax rate for 2022 was higher compared to 2021 due primarily to a higher effective tax rate on foreign earnings, including the impact to
U.S. foreign tax credits as a result of regulatory guidance issued by the U.S. Department of the Treasury in 2022, and lower tax benefits from foreign-derived
intangible income deductions and share-based compensation.
Liquidity and Capital Resources
The Company believes its balances of cash, cash equivalents and unrestricted marketable securities, which totaled $156.4 billion as of September 24, 2022,
along with cash generated by ongoing operations and continued access to debt markets, will be sufficient to satisfy its cash requirements and capital return
program over the next 12 months and beyond.
The Company’s material cash requirements include the following contractual obligations.
Debt
As of September 24, 2022, the Company had outstanding fixed-rate notes with varying maturities for an aggregate principal amount of $111.8 billion (collectively
the “Notes”), with $11.1 billion payable within 12 months. Future interest payments associated with the Notes total $41.3 billion, with $2.9 billion payable within
12 months.
The Company also issues unsecured short-term promissory notes (“Commercial Paper”) pursuant to a commercial paper program. As of September 24, 2022,
the Company had $10.0 billion of Commercial Paper outstanding, all of which was payable within 12 months.
Leases
The Company has lease arrangements for certain equipment and facilities, including corporate, data center, manufacturing and retail space. As of
September 24, 2022, the Company had fixed lease payment obligations of $15.3 billion, with $2.0 billion payable within 12 months.
Apple Inc. | 2022 Form 10-K | 24
Manufacturing Purchase Obligations
The Company utilizes several outsourcing partners to manufacture subassemblies for the Company’s products and to perform final assembly and testing of
finished products. The Company also obtains individual components for its products from a wide variety of individual suppliers. Outsourcing partners acquire
components and build product based on demand information supplied by the Company, which typically covers periods up to 150 days. As of September 24,
2022, the Company had manufacturing purchase obligations of $71.1 billion, with $68.4 billion payable within 12 months. The Company’s manufacturing
purchase obligations are primarily noncancelable.
Other Purchase Obligations
The Company’s other purchase obligations primarily consist of noncancelable obligations to acquire capital assets, including assets related to product
manufacturing, and noncancelable obligations related to internet services and content creation. As of September 24, 2022, the Company had other purchase
obligations of $17.8 billion, with $6.8 billion payable within 12 months.
Deemed Repatriation Tax Payable
As of September 24, 2022, the balance of the deemed repatriation tax payable imposed by the U.S. Tax Cuts and Jobs Act of 2017 (the “Act”) was $22.0 billion,
with $5.3 billion expected to be paid within 12 months.
In addition to its contractual cash requirements, the Company has a capital return program authorized by the Board of Directors. The Program does not obligate
the Company to acquire a minimum amount of shares. As of September 24, 2022, the Company’s quarterly cash dividend was $0.23 per share. The Company
intends to increase its dividend on an annual basis, subject to declaration by the Board of Directors.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) and the Company’s
discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that
affect the amounts reported. Note 1, “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this
Form 10-K describes the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. Management
bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and liabilities.
Uncertain Tax Positions
The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. The evaluation of the Company’s uncertain tax positions involves
significant judgment in the interpretation and application of GAAP and complex domestic and international tax laws, including the Act and matters related to the
allocation of international taxation rights between countries. Although management believes the Company’s reserves are reasonable, no assurance can be given
that the final outcome of these uncertainties will not be different from that which is reflected in the Company’s reserves. Reserves are adjusted considering
changing facts and circumstances, such as the closing of a tax examination. Resolution of these uncertainties in a manner inconsistent with management’s
expectations could have a material impact on the Company’s financial condition and operating results.
Legal and Other Contingencies
The Company is subject to various legal proceedings and claims that arise in the ordinary course of business, the outcomes of which are inherently uncertain.
The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable, the determination of which requires
significant judgment. Resolution of legal matters in a manner inconsistent with management’s expectations could have a material impact on the Company’s
financial condition and operating results.
Apple Inc. | 2022 Form 10-K | 25
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate and Foreign Currency Risk Management
The Company regularly reviews its foreign exchange forward and option positions and interest rate swaps, both on a stand-alone basis and in conjunction with
its underlying foreign currency and interest rate exposures. Given the effective horizons of the Company’s risk management activities and the anticipatory nature
of the exposures, there can be no assurance these positions will offset more than a portion of the financial impact resulting from movements in either foreign
exchange or interest rates. Further, the recognition of the gains and losses related to these instruments may not coincide with the timing of gains and losses
related to the underlying economic exposures and, therefore, may adversely affect the Company’s financial condition and operating results.
Interest Rate Risk
The Company’s exposure to changes in interest rates relates primarily to the Company’s investment portfolio and outstanding debt. While the Company is
exposed to global interest rate fluctuations, it is most affected by fluctuations in U.S. interest rates. Changes in U.S. interest rates affect the interest earned on
the Company’s cash, cash equivalents and marketable securities and the fair value of those securities, as well as costs associated with hedging and interest
paid on the Company’s debt.
The Company’s investment policy and strategy are focused on the preservation of capital and supporting the Company’s liquidity requirements. The Company
uses a combination of internal and external management to execute its investment strategy and achieve its investment objectives. The Company typically
invests in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. The Company’s investment policy generally requires
securities to be investment grade and limits the amount of credit exposure to any one issuer. To provide a meaningful assessment of the interest rate risk
associated with the Company’s investment portfolio, the Company performed a sensitivity analysis to determine the impact a change in interest rates would have
on the value of the investment portfolio assuming a 100 basis point parallel shift in the yield curve. Based on investment positions as of September 24, 2022 and
September 25, 2021, a hypothetical 100 basis point increase in interest rates across all maturities would result in a $4.0 billion and $4.1 billion incremental
decline in the fair market value of the portfolio, respectively. Such losses would only be realized if the Company sold the investments prior to maturity.
As of September 24, 2022, the Company had outstanding fixed-rate notes and as of September 25, 2021, the Company had outstanding floating- and fixed-rate
notes with varying maturities for an aggregate carrying amount of $110.1 billion and $118.7 billion, respectively. The Company has entered, and in the future may
enter, into interest rate swaps to manage interest rate risk on its outstanding term debt. Interest rate swaps allow the Company to effectively convert fixed-rate
payments into floating-rate payments or floating-rate payments into fixed-rate payments. Gains and losses on term debt are generally offset by the
corresponding losses and gains on the related hedging instrument. A 100 basis point increase in market interest rates would cause interest expense on the
Company’s debt as of September 24, 2022 and September 25, 2021 to increase by $201 million and $186 million on an annualized basis, respectively.
Foreign Currency Risk
In general, the Company is a net receiver of currencies other than the U.S. dollar. Accordingly, changes in exchange rates, and in particular a strengthening of
the U.S. dollar, will negatively affect the Company’s net sales and gross margins as expressed in U.S. dollars. There is a risk that the Company will have to
adjust local currency pricing due to competitive pressures when there has been significant volatility in foreign currency exchange rates.
The Company may enter into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks associated with
certain existing assets and liabilities, certain firmly committed transactions, forecasted future cash flows and net investments in foreign subsidiaries. In addition,
the Company has entered, and in the future may enter, into foreign currency contracts to partially offset the foreign currency exchange gains and losses on its
foreign currency–denominated debt issuances. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue
and inventory purchases, typically for up to 12 months. However, the Company may choose not to hedge certain foreign exchange exposures for a variety of
reasons, including accounting considerations or the prohibitive economic cost of hedging particular exposures.
Apple Inc. | 2022 Form 10-K | 26
To provide an assessment of the foreign currency risk associated with certain of the Company’s foreign currency derivative positions, the Company performed a
sensitivity analysis using a value-at-risk (“VAR”) model to assess the potential impact of fluctuations in exchange rates. The VAR model consisted of using a
Monte Carlo simulation to generate thousands of random market price paths assuming normal market conditions. The VAR is the maximum expected loss in fair
value, for a given confidence interval, to the Company’s foreign currency derivative positions due to adverse movements in rates. The VAR model is not intended
to represent actual losses but is used as a risk estimation and management tool. Forecasted transactions, firm commitments and assets and liabilities
denominated in foreign currencies were excluded from the model. Based on the results of the model, the Company estimates with 95% confidence, a maximum
one-day loss in fair value of $1.0 billion as of September 24, 2022, compared to a maximum one-day loss in fair value of $550 million as of September 25, 2021.
Because the Company uses foreign currency instruments for hedging purposes, the losses in fair value incurred on those instruments are generally offset by
increases in the fair value of the underlying exposures.
Actual future gains and losses associated with the Company’s investment portfolio, debt and derivative positions may differ materially from the sensitivity
analyses performed as of September 24, 2022 due to the inherent limitations associated with predicting the timing and amount of changes in interest rates,
foreign currency exchange rates and the Company’s actual exposures and positions.
Apple Inc. | 2022 Form 10-K | 27
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements Page
Consolidated Statements of Operations for the years ended September 24, 2022, September 25, 2021 and September 26, 2020 29
Consolidated Statements of Comprehensive Income for the years ended September 24, 2022, September 25, 2021 and September 26, 2020 30
Consolidated Balance Sheets as of September 24, 2022 and September 25, 2021 31
Consolidated Statements of Shareholders’ Equity for the years ended September 24, 2022, September 25, 2021 and September 26, 2020 32
Consolidated Statements of Cash Flows for the years ended September 24, 2022, September 25, 2021 and September 26, 2020 33
Notes to Consolidated Financial Statements 34
Reports of Independent Registered Public Accounting Firm 50
All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission
of the schedule, or because the information required is included in the consolidated financial statements and accompanying notes.
Apple Inc. | 2022 Form 10-K | 28
Apple Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except number of shares which are reflected in thousands and per share amounts)
Years ended
September 24,
2022
September 25,
2021
September 26,
2020
Net sales:
Products $ 316,199 $ 297,392 $ 220,747
Services 78,129 68,425 53,768
Total net sales 394,328 365,817 274,515
Cost of sales:
Products 201,471 192,266 151,286
Services 22,075 20,715 18,273
Total cost of sales 223,546 212,981 169,559
Gross margin 170,782 152,836 104,956
Operating expenses:
Research and development 26,251 21,914 18,752
Selling, general and administrative 25,094 21,973 19,916
Total operating expenses 51,345 43,887 38,668
Operating income 119,437 108,949 66,288
Other income/(expense), net (334) 258 803
Income before provision for income taxes 119,103 109,207 67,091
Provision for income taxes 19,300 14,527 9,680
Net income $ 99,803 $ 94,680 $ 57,411
Earnings per share:
Basic $ 6.15 $ 5.67 $ 3.31
Diluted $ 6.11 $ 5.61 $ 3.28
Shares used in computing earnings per share:
Basic 16,215,963 16,701,272 17,352,119
Diluted 16,325,819 16,864,919 17,528,214
See accompanying Notes to Consolidated Financial Statements.
Apple Inc. | 2022 Form 10-K | 29
Apple Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
Years ended
September 24,
2022
September 25,
2021
September 26,
2020
Net income $ 99,803 $ 94,680 $ 57,411
Other comprehensive income/(loss):
Change in foreign currency translation, net of tax (1,511) 501 88
Change in unrealized gains/losses on derivative instruments, net of tax:
Change in fair value of derivative instruments 3,212 32 79
Adjustment for net (gains)/losses realized and included in net income (1,074) 1,003 (1,264)
Total change in unrealized gains/losses on derivative instruments 2,138 1,035 (1,185)
Change in unrealized gains/losses on marketable debt securities, net of tax:
Change in fair value of marketable debt securities (12,104) (694) 1,202
Adjustment for net (gains)/losses realized and included in net income 205 (273) (63)
Total change in unrealized gains/losses on marketable debt securities (11,899) (967) 1,139
Total other comprehensive income/(loss) (11,272) 569 42
Total comprehensive income $ 88,531 $ 95,249 $ 57,453
See accompanying Notes to Consolidated Financial Statements.
Apple Inc. | 2022 Form 10-K | 30
Apple Inc.
CONSOLIDATED BALANCE SHEETS
(In millions, except number of shares which are reflected in thousands and par value)
September 24,
2022
September 25,
2021
ASSETS:
Current assets:
Cash and cash equivalents $ 23,646 $ 34,940
Marketable securities 24,658 27,699
Accounts receivable, net 28,184 26,278
Inventories 4,946 6,580
Vendor non-trade receivables 32,748 25,228
Other current assets 21,223 14,111
Total current assets 135,405 134,836
Non-current assets:
Marketable securities 120,805 127,877
Property, plant and equipment, net 42,117 39,440
Other non-current assets 54,428 48,849
Total non-current assets 217,350 216,166
Total assets $ 352,755 $ 351,002
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Accounts payable $ 64,115 $ 54,763
Other current liabilities 60,845 47,493
Deferred revenue 7,912 7,612
Commercial paper 9,982 6,000
Term debt 11,128 9,613
Total current liabilities 153,982 125,481
Non-current liabilities:
Term debt 98,959 109,106
Other non-current liabilities 49,142 53,325
Total non-current liabilities 148,101 162,431
Total liabilities 302,083 287,912
Commitments and contingencies
Shareholders’ equity:
Common stock and additional paid-in capital, $0.00001 par value: 50,400,000 shares authorized; 15,943,425
and 16,426,786 shares issued and outstanding, respectively 64,849 57,365
Retained earnings/(Accumulated deficit) (3,068) 5,562
Accumulated other comprehensive income/(loss) (11,109) 163
Total shareholders’ equity 50,672 63,090
Total liabilities and shareholders’ equity $ 352,755 $ 351,002
See accompanying Notes to Consolidated Financial Statements.
Apple Inc. | 2022 Form 10-K | 31
Apple Inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In millions, except per share amounts)
Years ended
September 24,
2022
September 25,
2021
September 26,
2020
Total shareholders’ equity, beginning balances $ 63,090 $ 65,339 $ 90,488
Common stock and additional paid-in capital:
Beginning balances 57,365 50,779 45,174
Common stock issued 1,175 1,105 880
Common stock withheld related to net share settlement of equity awards (2,971) (2,627) (2,250)
Share-based compensation 9,280 8,108 6,975
Ending balances 64,849 57,365 50,779
Retained earnings/(Accumulated deficit):
Beginning balances 5,562 14,966 45,898
Net income 99,803 94,680 57,411
Dividends and dividend equivalents declared (14,793) (14,431) (14,087)
Common stock withheld related to net share settlement of equity awards (3,454) (4,151) (1,604)
Common stock repurchased (90,186) (85,502) (72,516)
Cumulative effect of change in accounting principle — — (136)
Ending balances (3,068) 5,562 14,966
Accumulated other comprehensive income/(loss):
Beginning balances 163 (406) (584)
Other comprehensive income/(loss) (11,272) 569 42
Cumulative effect of change in accounting principle — — 136
Ending balances (11,109) 163 (406)
Total shareholders’ equity, ending balances $ 50,672 $ 63,090 $ 65,339
Dividends and dividend equivalents declared per share or RSU $ 0.90 $ 0.85 $ 0.795
See accompanying Notes to Consolidated Financial Statements.
Apple Inc. | 2022 Form 10-K | 32
Apple Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Years ended
September 24,
2022
September 25,
2021
September 26,
2020
Cash, cash equivalents and restricted cash, beginning balances $ 35,929 $ 39,789 $ 50,224
Operating activities:
Net income 99,803 94,680 57,411
Adjustments to reconcile net income to cash generated by operating activities:
Depreciation and amortization 11,104 11,284 11,056
Share-based compensation expense 9,038 7,906 6,829
Deferred income tax expense/(benefit) 895 (4,774) (215)
Other 111 (147) (97)
Changes in operating assets and liabilities:
Accounts receivable, net (1,823) (10,125) 6,917
Inventories 1,484 (2,642) (127)
Vendor non-trade receivables (7,520) (3,903) 1,553
Other current and non-current assets (6,499) (8,042) (9,588)
Accounts payable 9,448 12,326 (4,062)
Deferred revenue 478 1,676 2,081
Other current and non-current liabilities 5,632 5,799 8,916
Cash generated by operating activities 122,151 104,038 80,674
Investing activities:
Purchases of marketable securities (76,923) (109,558) (114,938)
Proceeds from maturities of marketable securities 29,917 59,023 69,918
Proceeds from sales of marketable securities 37,446 47,460 50,473
Payments for acquisition of property, plant and equipment (10,708) (11,085) (7,309)
Payments made in connection with business acquisitions, net (306) (33) (1,524)
Other (1,780) (352) (909)
Cash used in investing activities (22,354) (14,545) (4,289)
Financing activities:
Payments for taxes related to net share settlement of equity awards (6,223) (6,556) (3,634)
Payments for dividends and dividend equivalents (14,841) (14,467) (14,081)
Repurchases of common stock (89,402) (85,971) (72,358)
Proceeds from issuance of term debt, net 5,465 20,393 16,091
Repayments of term debt (9,543) (8,750) (12,629)
Proceeds from/(Repayments of) commercial paper, net 3,955 1,022 (963)
Other (160) 976 754
Cash used in financing activities (110,749) (93,353) (86,820)
Decrease in cash, cash equivalents and restricted cash (10,952) (3,860) (10,435)
Cash, cash equivalents and restricted cash, ending balances $ 24,977 $ 35,929 $ 39,789
Supplemental cash flow disclosure:
Cash paid for income taxes, net $ 19,573 $ 25,385 $ 9,501
Cash paid for interest $ 2,865 $ 2,687 $ 3,002
See accompanying Notes to Consolidated Financial Statements.
Apple Inc. | 2022 Form 10-K | 33
Apple Inc.
Notes to Consolidated Financial Statements
Note 1 – Summary of Significant Accounting Policies
Basis of Presentation and Preparation
The consolidated financial statements include the accounts of Apple Inc. and its wholly owned subsidiaries (collectively “Apple” or the “Company”). Intercompany
accounts and transactions have been eliminated. The preparation of these consolidated financial statements and accompanying notes in conformity with U.S.
generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ
materially from those estimates. Certain prior period amounts in the consolidated financial statements and accompanying notes have been reclassified to
conform to the current period’s presentation.
The Company’s fiscal year is the 52- or 53-week period that ends on the last Saturday of September. An additional week is included in the first fiscal quarter
every five or six years to realign the Company’s fiscal quarters with calendar quarters, which will occur in the first quarter of the Company’s fiscal year ending
September 30, 2023. The Company’s fiscal years 2022, 2021 and 2020 spanned 52 weeks each. Unless otherwise stated, references to particular years,
quarters, months and periods refer to the Company’s fiscal years ended in September and the associated quarters, months and periods of those fiscal years.
Revenue Recognition
Net sales consist of revenue from the sale of iPhone, Mac, iPad, Services and other products. The Company recognizes revenue at the amount to which it
expects to be entitled when control of the products or services is transferred to its customers. Control is generally transferred when the Company has a present
right to payment and title and the significant risks and rewards of ownership of products or services are transferred to its customers. For most of the Company’s
Products net sales, control transfers when products are shipped. For the Company’s Services net sales, control transfers over time as services are delivered.
Payment for Products and Services net sales is collected within a short period following transfer of control or commencement of delivery of services, as
applicable.
The Company records reductions to Products net sales related to future product returns, price protection and other customer incentive programs based on the
Company’s expectations and historical experience.
For arrangements with multiple performance obligations, which represent promises within an arrangement that are distinct, the Company allocates revenue to all
distinct performance obligations based on their relative stand-alone selling prices (“SSPs”). When available, the Company uses observable prices to determine
SSPs. When observable prices are not available, SSPs are established that reflect the Company’s best estimates of what the selling prices of the performance
obligations would be if they were sold regularly on a stand-alone basis. The Company’s process for estimating SSPs without observable prices considers
multiple factors that may vary depending upon the unique facts and circumstances related to each performance obligation including, where applicable, prices
charged by the Company for similar offerings, market trends in the pricing for similar offerings, product-specific business objectives and the estimated cost to
provide the performance obligation.
The Company has identified up to three performance obligations regularly included in arrangements involving the sale of iPhone, Mac, iPad and certain other
products. The first performance obligation, which represents the substantial portion of the allocated sales price, is the hardware and bundled software delivered
at the time of sale. The second performance obligation is the right to receive certain product-related bundled services, which include iCloud , Siri and Maps.
The third performance obligation is the right to receive, on a when-and-if-available basis, future unspecified software upgrades relating to the software bundled
with each device. The Company allocates revenue and any related discounts to these performance obligations based on their relative SSPs. Because the
Company lacks observable prices for the undelivered performance obligations, the allocation of revenue is based on the Company’s estimated SSPs. Revenue
allocated to the delivered hardware and bundled software is recognized when control has transferred to the customer, which generally occurs when the product
is shipped. Revenue allocated to the product-related bundled services and unspecified software upgrade rights is deferred and recognized on a straight-line
basis over the estimated period they are expected to be provided. Cost of sales related to delivered hardware and bundled software, including estimated
warranty costs, are recognized at the time of sale. Costs incurred to provide product-related bundled services and unspecified software upgrade rights are
recognized as cost of sales as incurred.
For certain long-term service arrangements, the Company has performance obligations for services it has not yet delivered. For these arrangements, the
Company does not have a right to bill for the undelivered services. The Company has determined that any unbilled consideration relates entirely to the value of
the undelivered services. Accordingly, the Company has not recognized revenue, and does not disclose amounts, related to these undelivered services.
® ®
Apple Inc. | 2022 Form 10-K | 34
For the sale of third-party products where the Company obtains control of the product before transferring it to the customer, the Company recognizes revenue
based on the gross amount billed to customers. The Company considers multiple factors when determining whether it obtains control of third-party products,
including evaluating if it can establish the price of the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the
product. For third-party applications sold through the App Store and certain digital content sold through the Company’s other digital content stores, the Company
does not obtain control of the product before transferring it to the customer. Therefore, the Company accounts for such sales on a net basis by recognizing in
Services net sales only the commission it retains.
The Company records revenue net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded within other
current liabilities until remitted to the relevant government authority.
Share-Based Compensation
The Company generally measures share-based compensation based on the closing price of the Company’s common stock on the date of grant, and recognizes
expense on a straight-line basis for its estimate of equity awards that will ultimately vest. Further information regarding share-based compensation can be found
in Note 9, “Benefit Plans.”
Earnings Per Share
The following table shows the computation of basic and diluted earnings per share for 2022, 2021 and 2020 (net income in millions and shares in thousands):
2022 2021 2020
Numerator:
Net income $ 99,803 $ 94,680 $ 57,411
Denominator:
Weighted-average basic shares outstanding 16,215,963 16,701,272 17,352,119
Effect of dilutive securities 109,856 163,647 176,095
Weighted-average diluted shares 16,325,819 16,864,919 17,528,214
Basic earnings per share $ 6.15 $ 5.67 $ 3.31
Diluted earnings per share $ 6.11 $ 5.61 $ 3.28
The Company applies the treasury stock method to determine the dilutive effect of potentially dilutive securities.
Cash Equivalents and Marketable Securities
All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents.
The Company’s investments in marketable debt securities have been classified and accounted for as available-for-sale. The Company classifies its marketable
debt securities as either short-term or long-term based on each instrument’s underlying contractual maturity date.
The Company’s investments in marketable equity securities are classified based on the nature of the securities and their availability for use in current operations.
The cost of securities sold is determined using the specific identification method.
Inventories
Inventories are measured using the first-in, first-out method.
Apple Inc. | 2022 Form 10-K | 35
Restricted Marketable Securities
The Company considers marketable securities to be restricted when withdrawal or general use is legally restricted. The Company reports restricted marketable
securities as current or non-current marketable securities in the Consolidated Balance Sheets based on the classification of the underlying securities.
Property, Plant and Equipment
Depreciation on property, plant and equipment is recognized on a straight-line basis over the estimated useful lives of the assets, which for buildings is the
shorter of 40 years or the remaining life of the building; between one and five years for machinery and equipment, including manufacturing equipment; and the
shorter of the lease term or useful life for leasehold improvements. Capitalized costs related to internal-use software are amortized on a straight-line basis over
the estimated useful lives of the assets, which range from five to seven years. Depreciation and amortization expense on property, plant and equipment was $8.7
billion, $9.5 billion and $9.7 billion during 2022, 2021 and 2020, respectively.
Derivative Instruments and Hedging
All derivative instruments are recorded in the Consolidated Balance Sheets at fair value. The accounting treatment for derivative gains and losses is based on
intended use and hedge designation.
Gains and losses arising from amounts that are included in the assessment of cash flow hedge effectiveness are initially deferred in accumulated other
comprehensive income/(loss) (“AOCI”) and subsequently reclassified into earnings when the hedged transaction affects earnings, and in the same line item in
the Consolidated Statements of Operations. For options designated as cash flow hedges, the Company excludes time value from the assessment of hedge
effectiveness and recognizes it on a straight-line basis over the life of the hedge in the Consolidated Statements of Operations line item to which the hedge
relates. Changes in the fair value of amounts excluded from the assessment of hedge effectiveness are recognized in other comprehensive income/(loss)
(“OCI”).
Gains and losses arising from amounts that are included in the assessment of fair value hedge effectiveness are recognized in the Consolidated Statements of
Operations line item to which the hedge relates along with offsetting losses and gains related to the change in value of the hedged item. For foreign exchange
forward contracts designated as fair value hedges, the Company excludes the forward carry component from the assessment of hedge effectiveness and
recognizes it in other income/(expense), net (“OI&E”) on a straight-line basis over the life of the hedge. Changes in the fair value of amounts excluded from the
assessment of hedge effectiveness are recognized in OCI.
Gains and losses arising from changes in the fair values of derivative instruments that are not designated as accounting hedges are recognized in the
Consolidated Statements of Operations line items to which the derivative instruments relate.
The Company presents derivative assets and liabilities at their gross fair values in the Consolidated Balance Sheets. The Company classifies cash flows related
to derivative instruments as operating activities in the Consolidated Statements of Cash Flows.
Fair Value Measurements
The fair values of the Company’s money market funds and certain marketable equity securities are based on quoted prices in active markets for identical assets.
The valuation techniques used to measure the fair value of the Company’s debt instruments and all other financial instruments, which generally have
counterparties with high credit ratings, are based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by
observable market data.
Income Taxes
The Company records certain deferred tax assets and liabilities in connection with the minimum tax on certain foreign earnings created by the U.S. Tax Cuts and
Jobs Act of 2017 (the “Act”).
Leases
The Company combines and accounts for lease and nonlease components as a single lease component for leases of corporate, data center and retail facilities.
The discount rates related to the Company’s lease liabilities are generally based on estimates of the Company’s incremental borrowing rate, as the discount
rates implicit in the Company’s leases cannot be readily determined.
Apple Inc. | 2022 Form 10-K | 36
Segment Reporting
The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by
management for making decisions and assessing performance as the source of the Company’s reportable segments.
The Company manages its business primarily on a geographic basis. The Company’s reportable segments consist of the Americas, Europe, Greater China,
Japan and Rest of Asia Pacific. Americas includes both North and South America. Europe includes European countries, as well as India, the Middle East and
Africa. Greater China includes China mainland, Hong Kong and Taiwan. Rest of Asia Pacific includes Australia and those Asian countries not included in the
Company’s other reportable segments. Although the reportable segments provide similar hardware and software products and similar services, each one is
managed separately to better align with the location of the Company’s customers and distribution partners and the unique market dynamics of each geographic
region. The accounting policies of the various segments are the same as those described elsewhere in this Note 1, “Summary of Significant Accounting Policies.”
The Company evaluates the performance of its reportable segments based on net sales and operating income. Net sales for geographic segments are generally
based on the location of customers and sales through the Company’s retail stores located in those geographic locations. Operating income for each segment
includes net sales to third parties, related cost of sales and operating expenses directly attributable to the segment. Advertising expenses are generally included
in the geographic segment in which the expenditures are incurred. Operating income for each segment excludes other income and expense and certain
expenses managed outside the reportable segments. Costs excluded from segment operating income include various corporate expenses such as research and
development (“R&D”), corporate marketing expenses, certain share-based compensation expenses, income taxes, various nonrecurring charges and other
separately managed general and administrative costs. The Company does not include intercompany transfers between segments for management reporting
purposes.
Note 2 – Revenue
Net sales disaggregated by significant products and services for 2022, 2021 and 2020 were as follows (in millions):
2022 2021 2020
iPhone $ 205,489 $ 191,973 $ 137,781
Mac 40,177 35,190 28,622
iPad 29,292 31,862 23,724
Wearables, Home and Accessories 41,241 38,367 30,620
Services 78,129 68,425 53,768
Total net sales $ 394,328 $ 365,817 $ 274,515
(1) Products net sales include amortization of the deferred value of unspecified software upgrade rights, which are bundled in the sales price of the respective
product.
(2) Wearables, Home and Accessories net sales include sales of AirPods, Apple TV, Apple Watch, Beats products, HomePod mini and accessories.
(3) Services net sales include sales from the Company’s advertising, AppleCare, cloud, digital content, payment and other services. Services net sales also include
amortization of the deferred value of services bundled in the sales price of certain products.
(4) Includes $7.5 billion of revenue recognized in 2022 that was included in deferred revenue as of September 25, 2021, $6.7 billion of revenue recognized in 2021
that was included in deferred revenue as of September 26, 2020, and $5.0 billion of revenue recognized in 2020 that was included in deferred revenue as of
September 28, 2019.
The Company’s proportion of net sales by disaggregated revenue source was generally consistent for each reportable segment in Note 11, “Segment
Information and Geographic Data” for 2022, 2021 and 2020, except in Greater China, where iPhone revenue represented a moderately higher proportion of net
sales in 2022 and 2021.
As of September 24, 2022 and September 25, 2021, the Company had total deferred revenue of $12.4 billion and $11.9 billion, respectively. As of September 24,
2022, the Company expects 64% of total deferred revenue to be realized in less than a year, 27% within one-to-two years, 7% within two-to-three years and 2%
in greater than three years.
(1)
(1)
(1)
(1)(2)
(3)
(4)
Apple Inc. | 2022 Form 10-K | 37
Note 3 – Financial Instruments
Cash, Cash Equivalents and Marketable Securities
The following tables show the Company’s cash, cash equivalents and marketable securities by significant investment category as of September 24, 2022 and
September 25, 2021 (in millions):
2022
Adjusted
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Cash and
Cash
Equivalents
Current
Marketable
Securities
Non-Current
Marketable
Securities
Cash $ 18,546 $ — $ — $ 18,546 $ 18,546 $ — $ —
Level 1 :
Money market funds 2,929 — — 2,929 2,929 — —
Mutual funds 274 — (47) 227 — 227 —
Subtotal 3,203 — (47) 3,156 2,929 227 —
Level 2 :
U.S. Treasury securities 25,134 — (1,725) 23,409 338 5,091 17,980
U.S. agency securities 5,823 — (655) 5,168 — 240 4,928
Non-U.S. government securities 16,948 2 (1,201) 15,749 — 8,806 6,943
Certificates of deposit and time deposits 2,067 — — 2,067 1,805 262 —
Commercial paper 718 — — 718 28 690 —
Corporate debt securities 87,148 9 (7,707) 79,450 — 9,023 70,427
Municipal securities 921 — (35) 886 — 266 620
Mortgage- and asset-backed securities 22,553 — (2,593) 19,960 — 53 19,907
Subtotal 161,312 11 (13,916) 147,407 2,171 24,431 120,805
Total $ 183,061 $ 11 $ (13,963) $ 169,109 $ 23,646 $ 24,658 $ 120,805
2021
Adjusted
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Cash and
Cash
Equivalents
Current
Marketable
Securities
Non-Current
Marketable
Securities
Cash $ 17,305 $ — $ — $ 17,305 $ 17,305 $ — $ —
Level 1 :
Money market funds 9,608 — — 9,608 9,608 — —
Mutual funds 175 11 (1) 185 — 185 —
Subtotal 9,783 11 (1) 9,793 9,608 185 —
Level 2 :
Equity securities 1,527 — (564) 963 — 963 —
U.S. Treasury securities 22,878 102 (77) 22,903 3,596 6,625 12,682
U.S. agency securities 8,949 2 (64) 8,887 1,775 1,930 5,182
Non-U.S. government securities 20,201 211 (101) 20,311 390 3,091 16,830
Certificates of deposit and time deposits 1,300 — — 1,300 490 810 —
Commercial paper 2,639 — — 2,639 1,776 863 —
Corporate debt securities 83,883 1,242 (267) 84,858 — 12,327 72,531
Municipal securities 967 14 — 981 — 130 851
Mortgage- and asset-backed securities 20,529 171 (124) 20,576 — 775 19,801
Subtotal 162,873 1,742 (1,197) 163,418 8,027 27,514 127,877
Total $ 189,961 $ 1,753 $ (1,198) $ 190,516 $ 34,940 $ 27,699 $ 127,877
(1) Level 1 fair value estimates are based on quoted prices in active markets for identical assets or liabilities.
(2) Level 2 fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for
identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially
the full term of the assets or liabilities.
(3) As of September 24, 2022 and September 25, 2021, total marketable securities included $12.7 billion and $17.9 billion, respectively, that were restricted from
general use, related to the State Aid Decision (refer to Note 5, “Income Taxes”) and other agreements.
(1)
(2)
(3)
(1)
(2)
(3)
Apple Inc. | 2022 Form 10-K | 38
The following table shows the fair value of the Company’s non-current marketable debt securities, by contractual maturity, as of September 24, 2022 (in millions):
Due after 1 year through 5 years $ 87,031
Due after 5 years through 10 years 16,429
Due after 10 years 17,345
Total fair value $ 120,805
Derivative Instruments and Hedging
The Company may use derivative instruments to partially offset its business exposure to foreign exchange and interest rate risk. However, the Company may
choose not to hedge certain exposures for a variety of reasons including accounting considerations or the prohibitive economic cost of hedging particular
exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange or
interest rates.
Foreign Exchange Risk
To protect gross margins from fluctuations in foreign currency exchange rates, the Company may enter into forward contracts, option contracts or other
instruments, and may designate these instruments as cash flow hedges. The Company generally hedges portions of its forecasted foreign currency exposure
associated with revenue and inventory purchases, typically for up to 12 months.
To protect the Company’s foreign currency–denominated term debt or marketable securities from fluctuations in foreign currency exchange rates, the Company
may enter into forward contracts, cross-currency swaps or other instruments. The Company designates these instruments as either cash flow or fair value
hedges. As of September 24, 2022, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for term
debt–related foreign currency transactions is 20 years.
The Company may also enter into derivative instruments that are not designated as accounting hedges to protect gross margins from certain fluctuations in
foreign currency exchange rates, as well as to offset a portion of the foreign currency exchange gains and losses generated by the remeasurement of certain
assets and liabilities denominated in non-functional currencies.
Interest Rate Risk
To protect the Company’s term debt or marketable securities from fluctuations in interest rates, the Company may enter into interest rate swaps, options or other
instruments. The Company designates these instruments as either cash flow or fair value hedges.
The notional amounts of the Company’s outstanding derivative instruments as of September 24, 2022 and September 25, 2021 were as follows (in millions):
2022 2021
Derivative instruments designated as accounting hedges:
Foreign exchange contracts $ 102,670 $ 76,475
Interest rate contracts $ 20,125 $ 16,875
Derivative instruments not designated as accounting hedges:
Foreign exchange contracts $ 185,381 $ 126,918
Apple Inc. | 2022 Form 10-K | 39
The gross fair values of the Company’s derivative assets and liabilities as of September 24, 2022 were as follows (in millions):
2022
Fair Value of
Derivatives Designated
as Accounting Hedges
Fair Value of
Derivatives Not Designated
as Accounting Hedges
Total
Fair Value
Derivative assets :
Foreign exchange contracts $ 4,317 $ 2,819 $ 7,136
Derivative liabilities :
Foreign exchange contracts $ 2,205 $ 2,547 $ 4,752
Interest rate contracts $ 1,367 $ — $ 1,367
(1) Derivative assets are measured using Level 2 fair value inputs and are included in other current assets and other non-current assets in the Consolidated
Balance Sheets.
(2) Derivative liabilities are measured using Level 2 fair value inputs and are included in other current liabilities and other non-current liabilities in the Consolidated
Balance Sheets.
The derivative assets above represent the Company’s gross credit exposure if all counterparties failed to perform. To mitigate credit risk, the Company generally
enters into collateral security arrangements that provide for collateral to be received or posted when the net fair values of certain derivatives fluctuate from
contractually established thresholds. To further limit credit risk, the Company generally enters into master netting arrangements with the respective
counterparties to the Company’s derivative contracts, under which the Company is allowed to settle transactions with a single net amount payable by one party
to the other. As of September 24, 2022, the potential effects of these rights of set-off associated with the Company’s derivative contracts, including the effects of
collateral, would be a reduction to both derivative assets and derivative liabilities of $7.8 billion, resulting in a net derivative asset of $412 million.
The carrying amounts of the Company’s hedged items in fair value hedges as of September 24, 2022 and September 25, 2021 were as follows (in millions):
2022 2021
Hedged assets/(liabilities):
Current and non-current marketable securities $ 13,378 $ 15,954
Current and non-current term debt $ (18,739) $ (17,857)
Accounts Receivable
Trade Receivables
The Company has considerable trade receivables outstanding with its third-party cellular network carriers, wholesalers, retailers, resellers, small and mid-sized
businesses and education, enterprise and government customers. The Company generally does not require collateral from its customers; however, the
Company will require collateral or third-party credit support in certain instances to limit credit risk. In addition, when possible, the Company attempts to limit credit
risk on trade receivables with credit insurance for certain customers or by requiring third-party financing, loans or leases to support credit exposure. These credit-
financing arrangements are directly between the third-party financing company and the end customer. As such, the Company generally does not assume any
recourse or credit risk sharing related to any of these arrangements.
As of September 24, 2022, the Company had one customer that represented 10% or more of total trade receivables, which accounted for 10%. The Company’s
cellular network carriers accounted for 44% and 42% of total trade receivables as of September 24, 2022 and September 25, 2021, respectively.
Vendor Non-Trade Receivables
The Company has non-trade receivables from certain of its manufacturing vendors resulting from the sale of components to these vendors who manufacture
subassemblies or assemble final products for the Company. The Company purchases these components directly from suppliers. As of September 24, 2022, the
Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 54% and 13%. As of
September 25, 2021, the Company had three vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for
52%, 11% and 11%.
(1)
(2)
Apple Inc. | 2022 Form 10-K | 40
Note 4 – Consolidated Financial Statement Details
The following tables show the Company’s consolidated financial statement details as of September 24, 2022 and September 25, 2021 (in millions):
Property, Plant and Equipment, Net
2022 2021
Land and buildings $ 22,126 $ 20,041
Machinery, equipment and internal-use software 81,060 78,659
Leasehold improvements 11,271 11,023
Gross property, plant and equipment 114,457 109,723
Accumulated depreciation and amortization (72,340) (70,283)
Total property, plant and equipment, net $ 42,117 $ 39,440
Other Non-Current Liabilities
2022 2021
Long-term taxes payable $ 16,657 $ 24,689
Other non-current liabilities 32,485 28,636
Total other non-current liabilities $ 49,142 $ 53,325
Other Income/(Expense), Net
The following table shows the detail of OI&E for 2022, 2021 and 2020 (in millions):
2022 2021 2020
Interest and dividend income $ 2,825 $ 2,843 $ 3,763
Interest expense (2,931) (2,645) (2,873)
Other income/(expense), net (228) 60 (87)
Total other income/(expense), net $ (334) $ 258 $ 803
Note 5 – Income Taxes
Provision for Income Taxes and Effective Tax Rate
The provision for income taxes for 2022, 2021 and 2020, consisted of the following (in millions):
2022 2021 2020
Federal:
Current $ 7,890 $ 8,257 $ 6,306
Deferred (2,265) (7,176) (3,619)
Total 5,625 1,081 2,687
State:
Current 1,519 1,620 455
Deferred 84 (338) 21
Total 1,603 1,282 476
Foreign:
Current 8,996 9,424 3,134
Deferred 3,076 2,740 3,383
Total 12,072 12,164 6,517
Provision for income taxes $ 19,300 $ 14,527 $ 9,680
The foreign provision for income taxes is based on foreign pretax earnings of $71.3 billion, $68.7 billion and $38.1 billion in 2022, 2021 and 2020, respectively.
Apple Inc. | 2022 Form 10-K | 41
A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate (21% in 2022, 2021 and 2020) to
income before provision for income taxes for 2022, 2021 and 2020, is as follows (dollars in millions):
2022 2021 2020
Computed expected tax $ 25,012 $ 22,933 $ 14,089
State taxes, net of federal effect 1,518 1,151 423
Impacts of the Act 542 — (582)
Earnings of foreign subsidiaries (4,366) (4,715) (2,534)
Foreign-derived intangible income deduction (296) (1,372) (169)
Research and development credit, net (1,153) (1,033) (728)
Excess tax benefits from equity awards (1,871) (2,137) (930)
Other (86) (300) 111
Provision for income taxes $ 19,300 $ 14,527 $ 9,680
Effective tax rate 16.2 % 13.3 % 14.4 %
Deferred Tax Assets and Liabilities
As of September 24, 2022 and September 25, 2021, the significant components of the Company’s deferred tax assets and liabilities were (in millions):
2022 2021
Deferred tax assets:
Amortization and depreciation $ 1,496 $ 5,575
Accrued liabilities and other reserves 6,515 5,895
Lease liabilities 2,400 2,406
Deferred revenue 5,742 5,399
Unrealized losses 2,913 53
Tax credit carryforwards 6,962 4,262
Other 1,596 1,639
Total deferred tax assets 27,624 25,229
Less: Valuation allowance (7,530) (4,903)
Total deferred tax assets, net 20,094 20,326
Deferred tax liabilities:
Minimum tax on foreign earnings 1,983 4,318
Right-of-use assets 2,163 2,167
Unrealized gains 942 203
Other 469 565
Total deferred tax liabilities 5,557 7,253
Net deferred tax assets $ 14,537 $ 13,073
As of September 24, 2022, the Company had $4.4 billion in foreign tax credit carryforwards in Ireland and $2.5 billion in California R&D credit carryforwards,
both of which can be carried forward indefinitely. A valuation allowance has been recorded for the credit carryforwards and a portion of other temporary
differences.
Apple Inc. | 2022 Form 10-K | 42
Uncertain Tax Positions
As of September 24, 2022, the total amount of gross unrecognized tax benefits was $16.8 billion, of which $8.0 billion, if recognized, would impact the
Company’s effective tax rate. As of September 25, 2021, the total amount of gross unrecognized tax benefits was $15.5 billion, of which $6.6 billion, if
recognized, would have impacted the Company’s effective tax rate.
The aggregate change in the balance of gross unrecognized tax benefits, which excludes interest and penalties, for 2022, 2021 and 2020, is as follows (in
millions):
2022 2021 2020
Beginning balances $ 15,477 $ 16,475 $ 15,619
Increases related to tax positions taken during a prior year 2,284 816 454
Decreases related to tax positions taken during a prior year (1,982) (1,402) (791)
Increases related to tax positions taken during the current year 1,936 1,607 1,347
Decreases related to settlements with taxing authorities (28) (1,838) (85)
Decreases related to expiration of the statute of limitations (929) (181) (69)
Ending balances $ 16,758 $ 15,477 $ 16,475
The Company is subject to taxation and files income tax returns in the U.S. federal jurisdiction and many state and foreign jurisdictions. Tax years after 2017 for
the U.S. federal jurisdiction, and after 2014 in certain major foreign jurisdictions, remain subject to examination. Although the timing of resolution and/or closure
of examinations is not certain, the Company believes it is reasonably possible that its gross unrecognized tax benefits could decrease in the next 12 months by
as much as $4.8 billion.
European Commission State Aid Decision
On August 30, 2016, the European Commission announced its decision that Ireland granted state aid to the Company by providing tax opinions in 1991 and
2007 concerning the tax allocation of profits of the Irish branches of two subsidiaries of the Company (the “State Aid Decision”). The State Aid Decision ordered
Ireland to calculate and recover additional taxes from the Company for the period June 2003 through December 2014. Irish legislative changes, effective as of
January 2015, eliminated the application of the tax opinions from that date forward. The recovery amount was calculated to be €13.1 billion, plus interest of €1.2
billion. The Company and Ireland appealed the State Aid Decision to the General Court of the Court of Justice of the European Union (the “General Court”). On
July 15, 2020, the General Court annulled the State Aid Decision. On September 25, 2020, the European Commission appealed the General Court’s decision to
the European Court of Justice. The Company believes that any incremental Irish corporate income taxes potentially due related to the State Aid Decision would
be creditable against U.S. taxes, subject to any foreign tax credit limitations in the Act.
On an annual basis, the Company may request approval from the Irish Minister for Finance to reduce the recovery amount for certain taxes paid to other
countries. As of September 24, 2022, the adjusted recovery amount was €12.7 billion, excluding interest. The adjusted recovery amount plus interest is funded
into escrow, where it will remain restricted from general use pending the conclusion of all legal proceedings. Refer to the Cash, Cash Equivalents and
Marketable Securities section of Note 3, “Financial Instruments” for more information.
Note 6 – Leases
The Company has lease arrangements for certain equipment and facilities, including corporate, data center, manufacturing and retail space. These leases
typically have original terms not exceeding 10 years and generally contain multiyear renewal options, some of which are reasonably certain of exercise.
Payments under the Company’s lease arrangements may be fixed or variable, and variable lease payments are primarily based on purchases of output of the
underlying leased assets. Lease costs associated with fixed payments on the Company’s operating leases were $1.9 billion, $1.7 billion and $1.5 billion for 2022,
2021 and 2020, respectively. Lease costs associated with variable payments on the Company’s leases were $14.9 billion, $12.9 billion and $9.3 billion for 2022,
2021 and 2020, respectively.
The Company made $1.8 billion, $1.4 billion and $1.5 billion of fixed cash payments related to operating leases in 2022, 2021 and 2020, respectively. Noncash
activities involving right-of-use (“ROU”) assets obtained in exchange for lease liabilities were $2.8 billion for 2022, $3.3 billion for 2021 and $10.5 billion for 2020,
including the impact of adopting the Financial Accounting Standards Board’s Accounting Standards Update No. 2016-02, Leases (Topic 842) in the first quarter
of 2020.
Apple Inc. | 2022 Form 10-K | 43
The following table shows ROU assets and lease liabilities, and the associated financial statement line items, as of September 24, 2022 and September 25,
2021 (in millions):
Lease-Related Assets and Liabilities Financial Statement Line Items 2022 2021
Right-of-use assets:
Operating leases Other non-current assets $ 10,417 $ 10,087
Finance leases Property, plant and equipment, net 952 861
Total right-of-use assets $ 11,369 $ 10,948
Lease liabilities:
Operating leases Other current liabilities $ 1,534 $ 1,449
Other non-current liabilities 9,936 9,506
Finance leases Other current liabilities 129 79
Other non-current liabilities 812 769
Total lease liabilities $ 12,411 $ 11,803
Lease liability maturities as of September 24, 2022, are as follows (in millions):
Operating
Leases
Finance
Leases Total
2023 $ 1,758 $ 155 $ 1,913
2024 1,742 130 1,872
2025 1,677 81 1,758
2026 1,382 48 1,430
2027 1,143 34 1,177
Thereafter 5,080 906 5,986
Total undiscounted liabilities 12,782 1,354 14,136
Less: Imputed interest (1,312) (413) (1,725)
Total lease liabilities $ 11,470 $ 941 $ 12,411
The weighted-average remaining lease term related to the Company’s lease liabilities as of September 24, 2022 and September 25, 2021 was 10.1 years and
10.8 years, respectively. The discount rate related to the Company’s lease liabilities as of September 24, 2022 and September 25, 2021 was 2.3% and 2.0%,
respectively.
As of September 24, 2022, the Company had $1.2 billion of future payments under additional leases, primarily for corporate facilities and retail space, that had
not yet commenced. These leases will commence between 2023 and 2026, with lease terms ranging from less than 1 year to 21 years.
Apple Inc. | 2022 Form 10-K | 44
Note 7 – Debt
Commercial Paper and Repurchase Agreements
The Company issues unsecured short-term promissory notes (“Commercial Paper”) pursuant to a commercial paper program. The Company uses net proceeds
from the commercial paper program for general corporate purposes, including dividends and share repurchases. As of September 24, 2022 and September 25,
2021, the Company had $10.0 billion and $6.0 billion of Commercial Paper outstanding, respectively, with maturities generally less than nine months. The
weighted-average interest rate of the Company’s Commercial Paper was 2.31% and 0.06% as of September 24, 2022 and September 25, 2021, respectively.
The following table provides a summary of cash flows associated with the issuance and maturities of Commercial Paper for 2022, 2021 and 2020 (in millions):
2022 2021 2020
Maturities 90 days or less:
Proceeds from/(Repayments of) commercial paper, net $ 5,264 $ (357) $ 100
Maturities greater than 90 days:
Proceeds from commercial paper 5,948 7,946 6,185
Repayments of commercial paper (7,257) (6,567) (7,248)
Proceeds from/(Repayments of) commercial paper, net (1,309) 1,379 (1,063)
Total proceeds from/(repayments of) commercial paper, net $ 3,955 $ 1,022 $ (963)
In 2020, the Company entered into agreements to sell certain of its marketable securities with a promise to repurchase the securities at a specified time and
amount (“Repos”). Due to the Company’s continuing involvement with the marketable securities, the Company accounted for its Repos as collateralized
borrowings. The Company entered into $5.2 billion of Repos during 2020, all of which had been settled as of September 26, 2020.
Term Debt
The Company has outstanding fixed-rate notes with varying maturities (collectively the “Notes”). The Notes are senior unsecured obligations and interest is
payable in arrears. The following table provides a summary of the Company’s term debt as of September 24, 2022 and September 25, 2021:
Maturities
(calendar year)
2022 2021
Amount
(in millions)
Effective
Interest Rate
Amount
(in millions)
Effective
Interest Rate
2013 – 2021 debt issuances:
Floating-rate notes $ — $ 1,750 0.48% – 0.63%
Fixed-rate 0.000% – 4.650% notes 2022 – 2061 106,324 0.03% – 4.78% 116,313 0.03% – 4.78%
Fourth quarter 2022 debt issuance:
Fixed-rate 3.250% – 4.100% notes 2029 – 2062 5,500 3.27% – 4.12% —
Total term debt 111,824 118,063
Unamortized premium/(discount) and issuance costs, net (374) (380)
Hedge accounting fair value adjustments (1,363) 1,036
Less: Current portion of term debt (11,128) (9,613)
Total non-current portion of term debt $ 98,959 $ 109,106
To manage interest rate risk on certain of its U.S. dollar–denominated fixed-rate notes, the Company has entered into interest rate swaps to effectively convert
the fixed interest rates to floating interest rates on a portion of these notes. Additionally, to manage foreign currency risk on certain of its foreign currency–
denominated notes, the Company has entered into foreign currency swaps to effectively convert these notes to U.S. dollar–denominated notes.
The effective interest rates for the Notes include the interest on the Notes, amortization of the discount or premium and, if applicable, adjustments related to
hedging. The Company recognized $2.8 billion, $2.6 billion and $2.8 billion of interest expense on its term debt for 2022, 2021 and 2020, respectively.
Apple Inc. | 2022 Form 10-K | 45
The future principal payments for the Company’s Notes as of September 24, 2022, are as follows (in millions):
2023 $ 11,139
2024 9,910
2025 10,645
2026 11,209
2027 9,631
Thereafter 59,290
Total term debt $ 111,824
As of September 24, 2022 and September 25, 2021, the fair value of the Company’s Notes, based on Level 2 inputs, was $98.8 billion and $125.3 billion,
respectively.
Note 8 – Shareholders’ Equity
Share Repurchase Program
During 2022, the Company repurchased 569 million shares of its common stock for $90.2 billion under a share repurchase program authorized by the Board of
Directors (the “Program”). The Program does not obligate the Company to acquire a minimum amount of shares. Under the Program, shares may be
repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of
1934, as amended.
Shares of Common Stock
The following table shows the changes in shares of common stock for 2022, 2021 and 2020 (in thousands):
2022 2021 2020
Common stock outstanding, beginning balances 16,426,786 16,976,763 17,772,945
Common stock repurchased (568,589) (656,340) (917,270)
Common stock issued, net of shares withheld for employee taxes 85,228 106,363 121,088
Common stock outstanding, ending balances 15,943,425 16,426,786 16,976,763
Note 9 – Benefit Plans
2022 Employee Stock Plan
In the second quarter of 2022, shareholders approved the Apple Inc. 2022 Employee Stock Plan (the “2022 Plan”), which provides for broad-based equity grants
to employees, including executive officers, and permits the granting of restricted stock units (“RSUs”), stock grants, performance-based awards, stock options
and stock appreciation rights. RSUs granted under the 2022 Plan generally vest over four years, based on continued employment, and are settled upon vesting
in shares of the Company’s common stock on a one-for-one basis. RSUs granted under the 2022 Plan reduce the number of shares available for grant under the
plan by a factor of two times the number of RSUs granted. RSUs canceled and shares withheld to satisfy tax withholding obligations increase the number of
shares available for grant under the 2022 Plan utilizing a factor of two times the number of RSUs canceled or shares withheld. All RSUs granted under the 2022
Plan have dividend equivalent rights (“DERs”), which entitle holders of RSUs to the same dividend value per share as holders of common stock. DERs are
subject to the same vesting and other terms and conditions as the underlying RSUs. A maximum of approximately 1.3 billion shares were authorized for
issuance pursuant to 2022 Plan awards at the time the plan was approved on March 4, 2022.
2014 Employee Stock Plan
The Apple Inc. 2014 Employee Stock Plan (the “2014 Plan”) is a shareholder-approved plan that provided for broad-based equity grants to employees, including
executive officers. The 2014 Plan permitted the granting of substantially the same types of equity awards with substantially the same terms as the 2022 Plan.
The 2014 Plan also permitted the granting of cash bonus awards. In the third quarter of 2022, the Company terminated the authority to grant new awards under
the 2014 Plan.
Apple Inc. | 2022 Form 10-K | 46
Apple Inc. Non-Employee Director Stock Plan
The Apple Inc. Non-Employee Director Stock Plan (the “Director Plan”) is a shareholder-approved plan that (i) permits the Company to grant awards of RSUs or
stock options to the Company’s non-employee directors, (ii) provides for automatic initial grants of RSUs upon a non-employee director joining the Board of
Directors and automatic annual grants of RSUs at each annual meeting of shareholders, and (iii) permits the Board of Directors to prospectively change the
value and relative mixture of stock options and RSUs for the initial and annual award grants and the methodology for determining the number of shares of the
Company’s common stock subject to these grants, in each case within the limits set forth in the Director Plan and without further shareholder approval. RSUs
granted under the Director Plan reduce the number of shares available for grant under the plan by a factor of two times the number of RSUs granted. The
Director Plan expires on November 12, 2027. All RSUs granted under the Director Plan are entitled to DERs, which are subject to the same vesting and other
terms and conditions as the underlying RSUs. A maximum of approximately 45 million shares (split-adjusted) were authorized for issuance pursuant to Director
Plan awards at the time the plan was last amended on November 9, 2021.
Employee Stock Purchase Plan
The Employee Stock Purchase Plan (the “Purchase Plan”) is a shareholder-approved plan under which substantially all employees may voluntarily enroll to
purchase the Company’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning
or the end of six-month offering periods. An employee’s payroll deductions under the Purchase Plan are limited to 10% of the employee’s eligible compensation
and employees may not purchase more than $25,000 of stock during any calendar year. A maximum of approximately 230 million shares (split-adjusted) were
authorized for issuance under the Purchase Plan at the time the plan was last amended and restated on March 10, 2015.
401(k) Plan
The Company’s 401(k) Plan is a tax-qualified deferred compensation arrangement under Section 401(k) of the Internal Revenue Code. Under the 401(k) Plan,
participating U.S. employees may contribute a portion of their eligible earnings, subject to applicable U.S. Internal Revenue Service and plan limits. The
Company matches 50% to 100% of each employee’s contributions, depending on length of service, up to a maximum of 6% of the employee’s eligible earnings.
Restricted Stock Units
A summary of the Company’s RSU activity and related information for 2022, 2021 and 2020, is as follows:
Number of
RSUs
(in thousands)
Weighted-Average
Grant Date Fair
Value Per RSU
Aggregate
Fair Value
(in millions)
Balance as of September 28, 2019 326,068 $ 42.30
RSUs granted 156,800 $ 59.20
RSUs vested (157,743) $ 40.29
RSUs canceled (14,347) $ 48.07
Balance as of September 26, 2020 310,778 $ 51.58
RSUs granted 89,363 $ 116.33
RSUs vested (145,766) $ 50.71
RSUs canceled (13,948) $ 68.95
Balance as of September 25, 2021 240,427 $ 75.16
RSUs granted 91,674 $ 150.70
RSUs vested (115,861) $ 72.12
RSUs canceled (14,739) $ 99.77
Balance as of September 24, 2022 201,501 $ 109.48 $ 30,312
The fair value as of the respective vesting dates of RSUs was $18.2 billion, $19.0 billion and $10.8 billion for 2022, 2021 and 2020, respectively. The majority of
RSUs that vested in 2022, 2021 and 2020 were net share settled such that the Company withheld shares with a value equivalent to the employees’ obligation for
the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld were approximately 41
million, 53 million and 56 million for 2022, 2021 and 2020, respectively, and were based on the value of the RSUs on their respective vesting dates as
determined by the Company’s closing stock price. Total payments to taxing authorities for employees’ tax obligations were $6.4 billion, $6.8 billion and $3.9
billion in 2022, 2021 and 2020, respectively.
Apple Inc. | 2022 Form 10-K | 47
Share-Based Compensation
The following table shows share-based compensation expense and the related income tax benefit included in the Consolidated Statements of Operations for
2022, 2021 and 2020 (in millions):
2022 2021 2020
Share-based compensation expense $ 9,038 $ 7,906 $ 6,829
Income tax benefit related to share-based compensation expense $ (4,002) $ (4,056) $ (2,476)
As of September 24, 2022, the total unrecognized compensation cost related to outstanding RSUs and stock options was $16.7 billion, which the Company
expects to recognize over a weighted-average period of 2.6 years.
Note 10 – Commitments and Contingencies
Concentrations in the Available Sources of Supply of Materials and Product
Although most components essential to the Company’s business are generally available from multiple sources, certain components are currently obtained from
single or limited sources. The Company also competes for various components with other participants in the markets for smartphones, personal computers,
tablets, wearables and accessories. Therefore, many components used by the Company, including those that are available from multiple sources, are at times
subject to industry-wide shortage and significant commodity pricing fluctuations.
The Company uses some custom components that are not commonly used by its competitors, and new products introduced by the Company often utilize
custom components available from only one source. When a component or product uses new technologies, initial capacity constraints may exist until the
suppliers’ yields have matured or their manufacturing capacities have increased. The continued availability of these components at acceptable prices, or at all,
may be affected if suppliers decide to concentrate on the production of common components instead of components customized to meet the Company’s
requirements.
Substantially all of the Company’s hardware products are manufactured by outsourcing partners that are located primarily in Asia, with some Mac computers
manufactured in the U.S. and Ireland.
Unconditional Purchase Obligations
The Company has entered into certain off–balance sheet commitments that require the future purchase of goods or services (“unconditional purchase
obligations”). The Company’s unconditional purchase obligations primarily consist of payments for supplier arrangements, internet services and content creation.
Future payments under noncancelable unconditional purchase obligations with a remaining term in excess of one year as of September 24, 2022, are as follows
(in millions):
2023 $ 13,488
2024 4,876
2025 1,418
2026 6,780
2027 312
Thereafter 412
Total $ 27,286
Contingencies
The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of business and that have not been fully resolved. The
outcome of litigation is inherently uncertain. In the opinion of management, there was not at least a reasonable possibility the Company may have incurred a
material loss, or a material loss greater than a recorded accrual, concerning loss contingencies for asserted legal and other claims.
Apple Inc. | 2022 Form 10-K | 48
Note 11 – Segment Information and Geographic Data
The following table shows information by reportable segment for 2022, 2021 and 2020 (in millions):
2022 2021 2020
Americas:
Net sales $ 169,658 $ 153,306 $ 124,556
Operating income $ 62,683 $ 53,382 $ 37,722
Europe:
Net sales $ 95,118 $ 89,307 $ 68,640
Operating income $ 35,233 $ 32,505 $ 22,170
Greater China:
Net sales $ 74,200 $ 68,366 $ 40,308
Operating income $ 31,153 $ 28,504 $ 15,261
Japan:
Net sales $ 25,977 $ 28,482 $ 21,418
Operating income $ 12,257 $ 12,798 $ 9,279
Rest of Asia Pacific:
Net sales $ 29,375 $ 26,356 $ 19,593
Operating income $ 11,569 $ 9,817 $ 6,808
A reconciliation of the Company’s segment operating income to the Consolidated Statements of Operations for 2022, 2021 and 2020 is as follows (in millions):
2022 2021 2020
Segment operating income $ 152,895 $ 137,006 $ 91,240
Research and development expense (26,251) (21,914) (18,752)
Other corporate expenses, net (7,207) (6,143) (6,200)
Total operating income $ 119,437 $ 108,949 $ 66,288
The U.S. and China were the only countries that accounted for more than 10% of the Company’s net sales in 2022, 2021 and 2020. Net sales for 2022, 2021
and 2020 and long-lived assets as of September 24, 2022 and September 25, 2021 were as follows (in millions):
2022 2021 2020
Net sales:
U.S. $ 147,859 $ 133,803 $ 109,197
China 74,200 68,366 40,308
Other countries 172,269 163,648 125,010
Total net sales $ 394,328 $ 365,817 $ 274,515
2022 2021
Long-lived assets:
U.S. $ 31,119 $ 28,203
China 7,260 7,521
Other countries 3,738 3,716
Total long-lived assets $ 42,117 $ 39,440
(1) China includes Hong Kong and Taiwan. Long-lived assets located in China consist primarily of assets related to product manufacturing, retail stores and related
infrastructure.
(1)
(1)
Apple Inc. | 2022 Form 10-K | 49
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Apple Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Apple Inc. as of September 24, 2022 and September 25, 2021, the related consolidated
statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended September 24, 2022, and
the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial
position of Apple Inc. at September 24, 2022 and September 25, 2021, and the results of its operations and its cash flows for each of the three years in the
period ended September 24, 2022, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (the “PCAOB”), Apple Inc.’s internal
control over financial reporting as of September 24, 2022, based on criteria established in Internal Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated October 27, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of Apple Inc.’s management. Our responsibility is to express an opinion on Apple Inc.’s financial statements
based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to Apple Inc. in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating
the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We
believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to
be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
account or disclosure to which it relates.
Uncertain Tax Positions
Description of the Matter
As discussed in Note 5 to the financial statements, Apple Inc. is subject to taxation and files income tax returns in
the U.S. federal jurisdiction and many state and foreign jurisdictions. As of September 24, 2022, the total amount of
gross unrecognized tax benefits was $16.8 billion, of which $8.0 billion, if recognized, would impact Apple Inc.’s
effective tax rate. In accounting for uncertain tax positions, Apple Inc. uses significant judgment in the interpretation
and application of complex domestic and international tax laws.
Auditing management’s evaluation of whether an uncertain tax position is more likely than not to be sustained and
the measurement of the benefit of various tax positions can be complex, involves significant judgment, and is based
on interpretations of tax laws and legal rulings.
Apple Inc. | 2022 Form 10-K | 50
How We Addressed the
Matter in Our Audit We tested controls relating to the evaluation of uncertain tax positions, including controls over management’s
assessment as to whether tax positions are more likely than not to be sustained, management’s process to
measure the benefit of its tax positions, and the development of the related disclosures.
To evaluate Apple Inc.’s assessment of which tax positions are more likely than not to be sustained, our audit
procedures included, among others, reading and evaluating management’s assumptions and analysis, and, as
applicable, Apple Inc.’s communications with taxing authorities, that detailed the basis and technical merits of the
uncertain tax positions. We involved our tax subject matter resources in assessing the technical merits of certain of
Apple Inc.’s tax positions based on our knowledge of relevant tax laws and experience with related taxing
authorities. For certain tax positions, we also received external legal counsel confirmation letters and discussed the
matters with external advisors and Apple Inc. tax personnel. In addition, we evaluated Apple Inc.’s disclosure in
relation to these matters included in Note 5 to the financial statements.
/s/ Ernst & Young LLP
We have served as Apple Inc.’s auditor since 2009.
San Jose, California
October 27, 2022
Apple Inc. | 2022 Form 10-K | 51
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Apple Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Apple Inc.’s internal control over financial reporting as of September 24, 2022, based on criteria established in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO criteria”). In our opinion, Apple
Inc. maintained, in all material respects, effective internal control over financial reporting as of September 24, 2022, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (the “PCAOB”), the consolidated
balance sheets of Apple Inc. as of September 24, 2022 and September 25, 2021, the related consolidated statements of operations, comprehensive income,
shareholders’ equity and cash flows for each of the three years in the period ended September 24, 2022, and the related notes and our report dated October 27,
2022 expressed an unqualified opinion thereon.
Basis for Opinion
Apple Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to
express an opinion on Apple Inc.’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and
are required to be independent with respect to Apple Inc. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the U.S.
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
San Jose, California
October 27, 2022
Apple Inc. | 2022 Form 10-K | 52
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer and principal
financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act
were effective as of September 24, 2022 to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and
(ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow
timely decisions regarding required disclosure.
Inherent Limitations over Internal Controls
The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company’s internal
control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s
assets;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
GAAP, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management
and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets
that could have a material effect on the financial statements.
Management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s internal controls will prevent or
detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide
absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future
periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management’s Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f)
under the Exchange Act). Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the
criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework). Based on the Company’s assessment, management has concluded that its internal control over financial reporting was effective as of
September 24, 2022 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance
with GAAP. The Company’s independent registered public accounting firm, Ernst & Young LLP, has issued an audit report on the Company’s internal control over
financial reporting, which appears in Part II, Item 8 of this Form 10-K.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the fourth quarter of 2022, which were identified in connection with
management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely
to materially affect, the Company’s internal control over financial reporting.
Apple Inc. | 2022 Form 10-K | 53
Item 9B. Other Information
Rule 10b5-1 Trading Plans
During the three months ended September 24, 2022, Katherine L. Adams, Timothy D. Cook, Luca Maestri, Deirdre O’Brien and Jeffrey Williams, each an officer
for purposes of Section 16 of the Exchange Act, had equity trading plans in place in accordance with Rule 10b5-1(c)(1) under the Exchange Act. An equity
trading plan is a written document that preestablishes the amounts, prices and dates (or formula for determining the amounts, prices and dates) of future
purchases or sales of the Company’s stock, including sales of shares acquired under the Company’s employee and director equity plans.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item will be included in the Company’s definitive proxy statement to be filed with the SEC within 120 days after September 24,
2022, in connection with the solicitation of proxies for the Company’s 2023 annual meeting of shareholders (the “2023 Proxy Statement”), and is incorporated
herein by reference.
Item 11. Executive Compensation
The information required by this Item will be included in the 2023 Proxy Statement, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item will be included in the 2023 Proxy Statement, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item will be included in the 2023 Proxy Statement, and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item will be included in the 2023 Proxy Statement, and is incorporated herein by reference.
Apple Inc. | 2022 Form 10-K | 54
PART IV
Item 15. Exhibit and Financial Statement Schedules
(a) Documents filed as part of this report
(1) All financial statements
Index to Consolidated Financial Statements Page
Consolidated Statements of Operations for the years ended September 24, 2022, September 25, 2021 and September 26, 2020 29
Consolidated Statements of Comprehensive Income for the years ended September 24, 2022, September 25, 2021 and September 26, 2020 30
Consolidated Balance Sheets as of September 24, 2022 and September 25, 2021 31
Consolidated Statements of Shareholders’ Equity for the years ended September 24, 2022, September 25, 2021 and September 26, 2020 32
Consolidated Statements of Cash Flows for the years ended September 24, 2022, September 25, 2021 and September 26, 2020 33
Notes to Consolidated Financial Statements 34
Reports of Independent Registered Public Accounting Firm* 50
* Ernst & Young LLP, PCAOB Firm ID No. 00042.
(2) Financial Statement Schedules
All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission
of the schedule, or because the information required is included in the consolidated financial statements and accompanying notes included in this Form 10-K.
(3) Exhibits required by Item 601 of Regulation S-K
Incorporated by Reference
Exhibit Number Exhibit Description Form Exhibit
Filing Date/
Period End
Date
3.1 Restated Articles of Incorporation of the Registrant filed on August 3, 2020. 8-K 3.1 8/7/20
3.2 Amended and Restated Bylaws of the Registrant effective as of August 17, 2022. 8-K 3.2 8/19/22
4.1** Description of Securities of the Registrant.
4.2 Indenture, dated as of April 29, 2013, between the Registrant and The Bank of New York Mellon
Trust Company, N.A., as Trustee.
S-3 4.1 4/29/13
4.3 Officer’s Certificate of the Registrant, dated as of May 3, 2013, including forms of global notes
representing the Floating Rate Notes due 2016, Floating Rate Notes due 2018, 0.45% Notes due
2016, 1.00% Notes due 2018, 2.40% Notes due 2023 and 3.85% Notes due 2043.
8-K 4.1 5/3/13
4.4 Officer’s Certificate of the Registrant, dated as of May 6, 2014, including forms of global notes
representing the Floating Rate Notes due 2017, Floating Rate Notes due 2019, 1.05% Notes due
2017, 2.10% Notes due 2019, 2.85% Notes due 2021, 3.45% Notes due 2024 and 4.45% Notes
due 2044.
8-K 4.1 5/6/14
4.5 Officer’s Certificate of the Registrant, dated as of November 10, 2014, including forms of global
notes representing the 1.000% Notes due 2022 and 1.625% Notes due 2026.
8-K 4.1 11/10/14
4.6 Officer’s Certificate of the Registrant, dated as of February 9, 2015, including forms of global notes
representing the Floating Rate Notes due 2020, 1.55% Notes due 2020, 2.15% Notes due 2022,
2.50% Notes due 2025 and 3.45% Notes due 2045.
8-K 4.1 2/9/15
4.7 Officer’s Certificate of the Registrant, dated as of May 13, 2015, including forms of global notes
representing the Floating Rate Notes due 2017, Floating Rate Notes due 2020, 0.900% Notes due
2017, 2.000% Notes due 2020, 2.700% Notes due 2022, 3.200% Notes due 2025, and 4.375%
Notes due 2045.
8-K 4.1 5/13/15
4.8 Officer’s Certificate of the Registrant, dated as of July 31, 2015, including forms of global notes
representing the 3.05% Notes due 2029 and 3.60% Notes due 2042.
8-K 4.1 7/31/15
4.9 Officer’s Certificate of the Registrant, dated as of September 17, 2015, including forms of global
notes representing the 1.375% Notes due 2024 and 2.000% Notes due 2027.
8-K 4.1 9/17/15
(1)
Apple Inc. | 2022 Form 10-K | 55
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Incorporated by Reference
Exhibit Number Exhibit Description Form Exhibit
Filing Date/
Period End
Date
4.10 Officer’s Certificate of the Registrant, dated as of February 23, 2016, including forms of global notes
representing the Floating Rate Notes due 2019, Floating Rate Notes due 2021, 1.300% Notes due
2018, 1.700% Notes due 2019, 2.250% Notes due 2021, 2.850% Notes due 2023, 3.250% Notes
due 2026, 4.500% Notes due 2036 and 4.650% Notes due 2046.
8-K 4.1 2/23/16
4.11 Supplement No. 1 to the Officer’s Certificate of the Registrant, dated as of March 24, 2016. 8-K 4.1 3/24/16
4.12 Officer’s Certificate of the Registrant, dated as of August 4, 2016, including forms of global notes
representing the Floating Rate Notes due 2019, 1.100% Notes due 2019, 1.550% Notes due
2021, 2.450% Notes due 2026 and 3.850% Notes due 2046.
8-K 4.1 8/4/16
4.13 Officer’s Certificate of the Registrant, dated as of February 9, 2017, including forms of global notes
representing the Floating Rate Notes due 2019, Floating Rate Notes due 2020, Floating Rate
Notes due 2022, 1.550% Notes due 2019, 1.900% Notes due 2020, 2.500% Notes due 2022,
3.000% Notes due 2024, 3.350% Notes due 2027 and 4.250% Notes due 2047.
8-K 4.1 2/9/17
4.14 Officer’s Certificate of the Registrant, dated as of May 11, 2017, including forms of global notes
representing the Floating Rate Notes due 2020, Floating Rate Notes due 2022, 1.800% Notes due
2020, 2.300% Notes due 2022, 2.850% Notes due 2024 and 3.200% Notes due 2027.
8-K 4.1 5/11/17
4.15 Officer’s Certificate of the Registrant, dated as of May 24, 2017, including forms of global notes
representing the 0.875% Notes due 2025 and 1.375% Notes due 2029.
8-K 4.1 5/24/17
4.16 Officer’s Certificate of the Registrant, dated as of June 20, 2017, including form of global note
representing the 3.000% Notes due 2027.
8-K 4.1 6/20/17
4.17 Officer’s Certificate of the Registrant, dated as of August 18, 2017, including form of global note
representing the 2.513% Notes due 2024.
8-K 4.1 8/18/17
4.18 Officer’s Certificate of the Registrant, dated as of September 12, 2017, including forms of global
notes representing the 1.500% Notes due 2019, 2.100% Notes due 2022, 2.900% Notes due
2027 and 3.750% Notes due 2047.
8-K 4.1 9/12/17
4.19 Officer’s Certificate of the Registrant, dated as of November 13, 2017, including forms of global
notes representing the 1.800% Notes due 2019, 2.000% Notes due 2020, 2.400% Notes due
2023, 2.750% Notes due 2025, 3.000% Notes due 2027 and 3.750% Notes due 2047.
8-K 4.1 11/13/17
4.20 Indenture, dated as of November 5, 2018, between the Registrant and The Bank of New York Mellon
Trust Company, N.A., as Trustee.
S-3 4.1 11/5/18
4.21 Officer’s Certificate of the Registrant, dated as of September 11, 2019, including forms of global
notes representing the 1.700% Notes due 2022, 1.800% Notes due 2024, 2.050% Notes due
2026, 2.200% Notes due 2029 and 2.950% Notes due 2049.
8-K 4.1 9/11/19
4.22 Officer’s Certificate of the Registrant, dated as of November 15, 2019, including forms of global
notes representing the 0.000% Notes due 2025 and 0.500% Notes due 2031.
8-K 4.1 11/15/19
4.23 Officer’s Certificate of the Registrant, dated as of May 11, 2020, including forms of global notes
representing the 0.750% Notes due 2023, 1.125% Notes due 2025, 1.650% Notes due 2030 and
2.650% Notes due 2050.
8-K 4.1 5/11/20
4.24 Officer’s Certificate of the Registrant, dated as of August 20, 2020, including forms of global notes
representing the 0.550% Notes due 2025, 1.25% Notes due 2030, 2.400% Notes due 2050 and
2.550% Notes due 2060.
8-K 4.1 8/20/20
4.25 Officer’s Certificate of the Registrant, dated as of February 8, 2021, including forms of global notes
representing the 0.700% Notes due 2026, 1.200% Notes due 2028, 1.650% Notes due
2031, 2.375% Notes due 2041, 2.650% Notes due 2051 and 2.800% Notes due 2061.
8-K 4.1 2/8/21
4.26 Officer’s Certificate of the Registrant, dated as of August 5, 2021, including forms of global notes
representing the 1.400% Notes due 2028, 1.700% Notes due 2031, 2.700% Notes due 2051 and
2.850% Notes due 2061.
8-K 4.1 8/5/21
4.27 Indenture, dated as of October 28, 2021, between the Registrant and The Bank of New York Mellon
Trust Company, N.A., as Trustee.
S-3 4.1 10/29/21
4.28 Officer’s Certificate of the Registrant, dated as of August 8, 2022, including forms of global notes
representing the 3.250% Notes due 2029, 3.350% Notes due 2032, 3.950% Notes due 2052 and
4.100% Notes due 2062.
8-K 4.1 8/8/22
Apple Inc. | 2022 Form 10-K | 56
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Incorporated by Reference
Exhibit Number Exhibit Description Form Exhibit
Filing Date/
Period End
Date
4.29* Apple Inc. Deferred Compensation Plan. S-8 4.1 8/23/18
10.1* Employee Stock Purchase Plan, as amended and restated as of March 10, 2015. 8-K 10.1 3/13/15
10.2* Form of Indemnification Agreement between the Registrant and each director and executive officer
of the Registrant.
10-Q 10.2 6/27/09
10.3* Apple Inc. Non-Employee Director Stock Plan, as amended November 9, 2021. 10-Q 10.1 12/25/21
10.4* 2014 Employee Stock Plan, as amended and restated as of October 1, 2017. 10-K 10.8 9/30/17
10.5* Form of Restricted Stock Unit Award Agreement under 2014 Employee Stock Plan effective as of
September 26, 2017.
10-K 10.20 9/30/17
10.6* Form of Restricted Stock Unit Award Agreement under Non-Employee Director Stock Plan effective
as of February 13, 2018.
10-Q 10.2 3/31/18
10.7* Form of Restricted Stock Unit Award Agreement under 2014 Employee Stock Plan effective as of
August 21, 2018.
10-K 10.17 9/29/18
10.8* Form of Performance Award Agreement under 2014 Employee Stock Plan effective as of August 21,
2018.
10-K 10.18 9/29/18
10.9* Form of Restricted Stock Unit Award Agreement under 2014 Employee Stock Plan effective as of
September 29, 2019.
10-K 10.15 9/28/19
10.10* Form of Performance Award Agreement under 2014 Employee Stock Plan effective as of September
29, 2019.
10-K 10.16 9/28/19
10.11* Form of Restricted Stock Unit Award Agreement under 2014 Employee Stock Plan effective as of
August 18, 2020.
10-K 10.16 9/26/20
10.12* Form of Performance Award Agreement under 2014 Employee Stock Plan effective as of August 18,
2020.
10-K 10.17 9/26/20
10.13* Form of CEO Restricted Stock Unit Award Agreement under 2014 Employee Stock Plan effective as
of September 27, 2020.
10-Q 10.1 12/26/20
10.14* Form of CEO Performance Award Agreement under 2014 Employee Stock Plan effective as of
September 27, 2020.
10-Q 10.2 12/26/20
10.15* 2022 Employee Stock Plan. 8-K 10.1 3/4/22
10.16* Form of Restricted Stock Unit Award Agreement under 2022 Employee Stock Plan effective as of
March 4, 2022.
8-K 10.2 3/4/22
10.17* Form of Performance Award Agreement under 2022 Employee Stock Plan effective as of March 4,
2022.
8-K 10.3 3/4/22
10.18* Apple Inc. Executive Cash Incentive Plan. 8-K 10.1 8/19/22
21.1** Subsidiaries of the Registrant.
23.1** Consent of Independent Registered Public Accounting Firm.
24.1** Power of Attorney (included on the Signatures page of this Annual Report on Form 10-K).
31.1** Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer.
31.2** Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer.
32.1*** Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer.
101** Inline XBRL Document Set for the consolidated financial statements and accompanying notes in
Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-
K.
104** Inline XBRL for the cover page of this Annual Report on Form 10-K, included in the Exhibit 101 Inline
XBRL Document Set.
* Indicates management contract or compensatory plan or arrangement.
** Filed herewith.
*** Furnished herewith.
(1) Certain instruments defining the rights of holders of long-term debt securities of the Registrant are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The
Registrant hereby undertakes to furnish to the SEC, upon request, copies of any such instruments.
Item 16. Form 10-K Summary
None.
Apple Inc. | 2022 Form 10-K | 57
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date: October 27, 2022 Apple Inc.
By: /s/ Luca Maestri
Luca Maestri
Senior Vice President,
Chief Financial Officer
Power of Attorney
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy D. Cook and Luca Maestri,
jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this
Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
Name Title Date
/s/ Timothy D. Cook
Chief Executive Officer and Director
(Principal Executive Officer)
October 27, 2022
TIMOTHY D. COOK
/s/ Luca Maestri
Senior Vice President, Chief Financial Officer
(Principal Financial Officer)
October 27, 2022
LUCA MAESTRI
/s/ Chris Kondo
Senior Director of Corporate Accounting
(Principal Accounting Officer)
October 27, 2022
CHRIS KONDO
/s/ James A. Bell Director
October 27, 2022
JAMES A. BELL
/s/ Al Gore Director
October 27, 2022
AL GORE
/s/ Alex Gorsky Director
October 27, 2022
ALEX GORSKY
/s/ Andrea Jung Director
October 27, 2022
ANDREA JUNG
/s/ Arthur D. Levinson Director and Chair of the Board
October 27, 2022
ARTHUR D. LEVINSON
/s/ Monica Lozano Director
October 27, 2022
MONICA LOZANO
/s/ Ronald D. Sugar Director
October 27, 2022
RONALD D. SUGAR
/s/ Susan L. Wagner Director
October 27, 2022
SUSAN L. WAGNER
Apple Inc. | 2022 Form 10-K | 58
Exhibit 4.1
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
As of September 24, 2022, Apple Inc. (“Apple” or the “Company”) had eleven classes of securities registered under Section 12 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”): (i) Common Stock, $0.00001 par value per share (“Common Stock”); (ii) 1.000% Notes due 2022 (the
“2022 Notes”); (iii) 1.375% Notes due 2024 (the “2024 Notes”); (iv) 0.000% Notes due 2025 (the “0.000% 2025 Notes”); (v) 0.875% Notes due 2025 (the
“0.875% 2025 Notes”); (vi) 1.625% Notes due 2026 (the “2026 Notes”); (vii) 2.000% Notes due 2027 (the “2027 Notes”); (viii) 1.375% Notes due 2029 (the
“1.375% 2029 Notes”); (ix) 3.050% Notes due 2029 (the “3.050% 2029 Notes”); (x) 0.500% Notes due 2031 (the “2031 Notes”); and (xi) 3.600% Notes due 2042
(the “2042 Notes,” and together with the 2022 Notes, the 2024 Notes, the 0.000% 2025 Notes, the 0.875% 2025 Notes, the 2026 Notes, the 2027 Notes, the
1.375% 2029 Notes, the 3.050% 2029 Notes, and the 2031 Notes, the “Notes”). Each of the Company’s securities registered under Section 12 of the Exchange
Act are listed on The Nasdaq Stock Market LLC.
DESCRIPTION OF COMMON STOCK
The following is a description of the rights of Common Stock and related provisions of the Company’s Restated Articles of Incorporation (the “Articles”)
and Amended and Restated Bylaws (the “Bylaws”) and applicable California law. This description is qualified in its entirety by, and should be read in conjunction
with, the Articles, Bylaws and applicable California law.
Authorized Capital Stock
The Company’s authorized capital stock consists of 50,400,000,000 shares of Common Stock.
Common Stock
Fully Paid and Nonassessable
All of the outstanding shares of the Company’s Common Stock are fully paid and nonassessable.
Voting Rights
The holders of shares of Common Stock are entitled to one vote per share on all matters to be voted on by such holders. Holders of shares of Common
Stock are not entitled to cumulative voting rights.
Except as described below or as required by law, all matters to be voted on by shareholders must be approved by the affirmative vote of (i) a majority of
the shares present or represented by proxy and voting and (ii) a majority of the shares required to constitute a quorum.
In an election of directors where the number of nominees exceeds the number of directors to be elected, the candidates receiving the highest number
of affirmative votes of the shares entitled to be voted for them up to the number of directors to be elected by such shares will be elected.
The Company’s entire Board of Directors or any individual director may be removed without cause by an affirmative vote of a majority of the outstanding
shares entitled to vote, subject to the provisions of the Company’s Bylaws.
Vacancies created by the removal of a director must be filled only by approval of the shareholders, or by the unanimous written consent of all shares
entitled to vote. The shareholders may elect a director at any time to fill a vacancy not filled by the directors, but any such election by written consent, other than
to fill a vacancy created by removal, requires the consent of a majority of the outstanding shares entitled to vote thereon.
An amendment of the Bylaws or the Articles may be adopted by the vote of the majority of the outstanding shares entitled to vote. Any amendment of
the Bylaws specifying or changing a fixed number of directors or the maximum or minimum number or changing from a fixed to a variable board or vice versa
may only be adopted by the shareholders; provided, however, that an amendment of the Bylaws or the Articles reducing the fixed number or the minimum
number of directors to less than five cannot be adopted if the votes cast against its adoption are equal to more than 16 2/3% of the outstanding shares entitled to
vote.
Any shareholders’ meeting may be adjourned from time to time by the vote of a majority of the shares present in person or represented by proxy.
Dividends
The holders of shares of Common Stock are entitled to receive such dividends, if any, as may be declared from time to time by the Company’s Board of
Directors in its discretion from funds legally available therefor.
Right to Receive Liquidation Distributions
Upon liquidation, dissolution or winding-up, the holders of shares of Common Stock are entitled to receive pro rata all assets remaining available for
distribution to holders of such shares.
No Preemptive or Similar Rights
Common Stock has no preemptive or other subscription rights, and there are no conversion rights or redemption or sinking fund provisions with respect
to such shares of Common Stock.
Anti-Takeover Provisions of the Articles, Bylaws and California Law
Provisions of the Articles and Bylaws may delay or discourage transactions involving an actual or potential change in control of the Company or change
in its management, including transactions in which shareholders might otherwise receive a premium for their shares, or transactions that its shareholders might
otherwise deem to be in their best interests. Among other things, the Articles and Bylaws:
• provide that, except for a vacancy caused by the removal of a director as provided in the Bylaws, a vacancy on the Company’s Board of Directors
may be filled by a person selected by a majority of the remaining directors then in office, whether or not less than a quorum, or by a sole remaining
director;
• provide that shareholders seeking to present proposals before a meeting of shareholders or to nominate candidates for election as directors at a
meeting of shareholders must provide notice in writing in a timely manner, and also specify requirements as to the form and content of a
shareholder’s notice, including with respect to a shareholder’s notice under Rule 14a-19 of the Exchange Act;
• provide that a shareholder, or group of up to 20 shareholders, that has owned continuously for at least three years shares of Common Stock
representing an aggregate of at least 3% of the Company’s outstanding shares of Common Stock, may nominate and include in the Company’s
proxy materials director nominees constituting up to 20% of the Company’s Board of Directors, provided that the shareholder(s) and nominee(s)
satisfy the requirements in the Bylaws;
• do not provide for cumulative voting rights for the election of directors; and
• provide that special meetings of the shareholders may only be called by (i) the Board of Directors, the Chair of the Board of Directors or the Chief
Executive Officer or (ii) one or more holders of shares entitled to cast not less than ten percent (10%) of the votes on the record date established
pursuant to the Company’s Bylaws, provided that the shareholder(s) satisfy requirements in the Bylaws.
In addition, as a California corporation, the Company is subject to the provisions of Section 1203 of the California General Corporation Law, which
requires it to provide a fairness opinion to its shareholders in connection with their consideration of any proposed “interested party” reorganization transaction.
Listing
The Company’s Common Stock is listed on The Nasdaq Stock Market LLC under the trading symbol “AAPL.”
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DESCRIPTION OF DEBT SECURITIES
The following description of the Notes is a summary and does not purport to be complete. This description is qualified in its entirety by reference, as
applicable, to the Indenture, dated as of April 29, 2013, between Apple Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (the “2013
Indenture”) and the Indenture, dated as of November 5, 2018, between Apple Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (the “2018
Indenture,” and together with the 2013 Indenture, the “Indentures”). References in this section to the “Company,” “us,” “we” and “our” are solely to Apple Inc. and
not to any of its subsidiaries, unless the context requires otherwise.
The Notes
Each of the Notes were issued under the applicable Indenture, which provides that debt securities may be issued under such Indenture from time to
time in one or more series. The Indentures and the Notes are governed by, and construed in accordance with, the laws of the State of New York. The Indentures
do not limit the amount of debt securities that we may issue thereunder. We may, without the consent of the holders of the debt securities of any series, issue
additional debt securities ranking equally with, and otherwise similar in all respects to, the debt securities of the series (except for the date of issuance, the date
interest begins to accrue and, in certain circumstances, the first interest payment date) so that those additional debt securities will be consolidated and form a
single series with the debt securities of the series previously offered and sold; provided, however, that any additional debt securities will have a separate ISIN
number unless certain conditions are met.
The 2022 Notes
We issued €1,400,000,000 aggregate principal amount of the 2022 Notes on November 10, 2014. The maturity date of the 2022 Notes is November 10,
2022, and interest at a rate of 1.000% per annum is paid annually on November 10 of each year, beginning on November 10, 2015, and on the maturity date. As
of October 14, 2022, €1,400,000,000 aggregate principal amount of the 2022 Notes was outstanding.
The 2024 Notes
We issued €1,000,000,000 aggregate principal amount of the 2024 Notes on September 17, 2015. The maturity date of the 2024 Notes is January 17,
2024, and interest at a rate of 1.375% per annum is paid annually on January 17 of each year, beginning on January 17, 2016, and on the maturity date. As of
October 14, 2022, €1,000,000,000 aggregate principal amount of the 2024 Notes was outstanding.
The 0.000% 2025 Notes
We issued €1,000,000,000 aggregate principal amount of the 0.000% 2025 Notes on November 15, 2019. The maturity date of the 0.000% 2025 Notes
is November 15, 2025, and interest at a rate of 0.000% per annum is paid annually on November 15 of each year, beginning on November 15, 2020, and on the
maturity date. As of October 14, 2022, €1,000,000,000 aggregate principal amount of the 0.000% 2025 Notes was outstanding.
The 0.875% 2025 Notes
We issued €1,250,000,000 aggregate principal amount of the 0.875% 2025 Notes on May 24, 2017. The maturity date of the 0.875% 2025 Notes is
May 24, 2025, and interest at a rate of 0.875% per annum is paid annually on May 24 of each year, beginning on May 24, 2018, and on the maturity date. As of
October 14, 2022, €1,250,000,000 aggregate principal amount of the 0.875% 2025 Notes was outstanding.
The 2026 Notes
We issued €1,400,000,000 aggregate principal amount of the 2026 Notes on November 10, 2014. The maturity date of the 2026 Notes is November 10,
2026, and interest at a rate of 1.625% per annum is paid annually on November 10 of each year, beginning on November 10, 2015, and on the maturity date. As
of October 14, 2022, €1,400,000,000 aggregate principal amount of the 2026 Notes was outstanding.
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The 2027 Notes
We issued €1,000,000,000 aggregate principal amount of the 2027 Notes on September 17, 2015. The maturity date of the 2027 Notes is September
17, 2027, and interest at a rate of 2.000% per annum is paid annually on September 17 of each year, beginning on September 17, 2016, and on the maturity
date. As of October 14, 2022, €1,000,000,000 aggregate principal amount of the 2027 Notes was outstanding.
The 1.375% 2029 Notes
We issued €1,250,000,000 aggregate principal amount of the 1.375% 2029 Notes on May 24, 2017. The maturity date of the 1.375% 2029 Notes is
May 24, 2029, and interest at a rate of 1.375% per annum is paid annually on May 24 of each year, beginning on May 24, 2018, and on the maturity date. As of
October 14, 2022, €1,250,000,000 aggregate principal amount of the 1.375% 2029 Notes was outstanding.
The 3.050% 2029 Notes
We issued £750,000,000 aggregate principal amount of the 3.050% 2029 Notes on July 31, 2015. The maturity date of the 3.050% 2029 Notes is July
31, 2029, and interest at a rate of 3.050% per annum is paid semi-annually on January 31 and July 31 of each year, beginning on January 31, 2016, and on the
maturity date. As of October 14, 2022, £750,000,000 aggregate principal amount of the 3.050% 2029 Notes was outstanding.
The 2031 Notes
We issued €1,000,000,000 aggregate principal amount of the 2031 Notes on November 15, 2019. The maturity date of the 2031 Notes is November 15,
2031, and interest at a rate of 0.500% per annum is paid annually on November 15 of each year, beginning on November 15, 2020, and on the maturity date. As
of October 14, 2022, €1,000,000,000 aggregate principal amount of the 2031 Notes was outstanding.
The 2042 Notes
We issued £500,000,000 aggregate principal amount of the 2042 Notes on July 31, 2015. The maturity date of the 2042 Notes is July 31, 2042, and
interest at a rate of 3.600% per annum is paid semi-annually on January 31 and July 31 of each year, beginning on January 31, 2016, and on the maturity date.
As of October 14, 2022, £500,000,000 aggregate principal amount of the 2042 Notes was outstanding.
Ranking
The Notes are our senior unsecured indebtedness and rank equally with each other and with all of our other senior unsecured and unsubordinated
indebtedness from time to time outstanding. However, the Notes are structurally subordinated to any indebtedness and preferred stock, if any, of our subsidiaries
and are effectively subordinated to any secured indebtedness to the extent of the value of the assets securing such indebtedness. Claims of the creditors of our
subsidiaries generally have priority with respect to the assets and earnings of such subsidiaries over the claims of our creditors, including holders of the Notes.
Accordingly, the Notes are effectively subordinated to creditors, including trade creditors and preferred stockholders, if any, of our subsidiaries. The Indentures
do not restrict our ability or that of our subsidiaries to incur additional indebtedness.
Payment on the Notes
All payments of principal of, the redemption price (if any), and interest and additional amounts (if any) on the 2022 Notes, the 2024 Notes, the 0.000%
2025 Notes, the 0.875% 2025 Notes, the 2026 Notes, the 2027 Notes, the 1.375% 2029 Notes and the 2031 Notes are payable in euro, provided that, if the euro
is unavailable to the Company due to the imposition of exchange controls or other circumstances beyond the Company’s control, or if the euro is no longer being
used by the then member states of the European Monetary Union that have adopted the euro as their currency or for the settlement of transactions by public
institutions of or within the international banking community, then all payments in respect of the 2022 Notes, the 2024 Notes, the 0.000% 2025 Notes, the
0.875% 2025 Notes, the 2026 Notes, the 2027 Notes, the 1.375% 2029 Notes and the 2031 Notes will be made in U.S. dollars, until the euro is again available
to the Company or so used. The amount payable on any date in euro will be converted into U.S. dollars at the rate mandated by the U.S. Federal Reserve Board
as of the close of business on the second Business Day prior to the relevant payment date or, in the event the U.S. Federal Reserve Board has not mandated a
rate of conversion, on the basis of the most recent U.S. dollar/euro exchange rate published in The Wall Street Journal on or prior to the second Business Day
prior to the relevant payment date. Any payment in respect of the 2022 Notes, the
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2024 Notes, the 0.000% 2025 Notes, the 0.875% 2025 Notes, the 2026 Notes, the 2027 Notes, the 1.375% 2029 Notes and the 2031 Notes so made in U.S.
dollars will not constitute an event of default under such Notes or the applicable Indenture.
With respect to the 2022 Notes, the 2024 Notes, the 0.000% 2025 Notes, the 0.875% 2025 Notes, the 2026 Notes, the 2027 Notes, the 1.375% 2029
Notes and the 2031 Notes, “Business Day” means any day, other than a Saturday or Sunday, (1) which is not a day on which banking institutions in The City of
New York or London are authorized or required by law, regulation or executive order to close and (2) on which the Trans-European Automated Real-time Gross
Settlement Express Transfer system (the TARGET2 system), or any successor thereto, is open.
All payments of principal of, the redemption price (if any), and interest and additional amounts (if any) on the 3.050% 2029 Notes and the 2042 Notes
are payable in pounds sterling, or, if the United Kingdom adopts euro as its lawful currency, in euro. If pounds sterling or, in the event the Notes are
redenominated into euro, euro is unavailable to the Company due to the imposition of exchange controls or other circumstances beyond the Company’s control
or, in the event the notes are redenominated into euro, the euro is no longer being used by the then member states of the European Monetary Union that have
adopted the euro as their currency or for the settlement of transactions by public institutions of or within the international banking community, then all payments
in respect of the 3.050% 2029 Notes and the 2042 Notes will be made in U.S. dollars until the pound sterling or euro, as the case may be, is again available to
the Company or so used. The amount payable on any date in pounds sterling or, in the event such Notes are redenominated into euro, euro will be converted
into U.S. dollars at the rate mandated by the U.S. Federal Reserve Board as of the close of business on the second Business Day prior to the relevant payment
date or, in the event the U.S. Federal Reserve Board has not mandated a rate of conversion, on the basis of the most recent U.S. dollar/pounds sterling or, in the
event the Notes are redenominated into euro, the most recent U.S. dollar/euro exchange rate published in The Wall Street Journal on or prior to the second
Business Day prior to the relevant payment date. Any payment in respect of the 3.050% 2029 Notes and the 2042 Notes so made in U.S. dollars will not
constitute an event of default under such Notes or the 2013 Indenture.
With respect to the 3.050% 2029 Notes and the 2042 Notes, “Business Day” means any day which is not a day on which banking institutions in The City
of New York or London or the relevant place of payment are authorized or required by law, regulation or executive order to close.
Payment of Additional Amounts
The terms of the Notes state that all payments of principal and interest in respect of the Notes will be made free and clear of, and without deduction or
withholding for or on account of any present or future taxes, duties, assessments or other governmental charges of whatsoever nature required to be deducted
or withheld by the United States or any political subdivision or taxing authority of or in the United States, unless such withholding or deduction is required by law.
All of the Notes also contain a covenant substantially similar to the following:
The Company will, subject to the exceptions and limitations set forth below, pay as additional interest on the Notes such additional amounts (“Additional
Amounts”) as are necessary in order that the net payment by the Company or the paying agent of the Company for the applicable Notes (“Paying Agent”) of the
principal of and interest on the Notes to a holder who is not a United States person (as defined below), after withholding or deduction for any present or future
tax, assessment or other governmental charge (“Tax”) imposed by the United States or a taxing authority in the United States, will not be less than the amount
provided in the Notes to be then due and payable; provided, however, that the foregoing obligation to pay Additional Amounts shall not apply:
(1) to any Tax that is imposed by reason of the holder (or the beneficial owner for whose benefit such holder holds the Notes), or a fiduciary, settlor,
beneficiary, member or shareholder of the holder if the holder is an estate, trust, partnership or corporation, or a person holding a power over an
estate or trust administered by a fiduciary holder, being considered as:
(a) being or having been engaged in a trade or business in the United States or having or having had a permanent establishment in the United
States;
(b) having a current or former connection with the United States (other than a connection arising solely as a result of the ownership of the Notes,
the receipt of any payment or the enforcement of any rights hereunder), including being or having been a citizen or resident of the United
States;
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(c) being or having been a personal holding company, a passive foreign investment company or a controlled foreign corporation for U.S. federal
income tax purposes or a corporation that has accumulated earnings to avoid U.S. federal income tax;
(d) being or having been a “10-percent shareholder” of the Company as defined in Section 871(h)(3) of the Internal Revenue Code of 1986, as
amended (the “Code”);
(e) being a controlled foreign corporation that is related to the Company within the meaning of Section 864(d)(4) of the Code; or
(f) being a bank receiving payments on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade
or business;
(2) to any holder that is not the sole beneficial owner of the Notes, or a portion of the Notes, or that is a fiduciary, partnership or limited liability
company, but only to the extent that a beneficial owner with respect to the holder, a beneficiary or settlor with respect to the fiduciary, or a beneficial
owner or member of the partnership or limited liability company would not have been entitled to the payment of an additional amount had the
beneficiary, settlor, beneficial owner or member received directly its beneficial or distributive share of the payment;
(3) to any Tax that would not have been imposed but for the failure of the holder or any other person to comply with certification, identification or
information reporting requirements concerning the nationality, residence, identity or connection with the United States of the holder or beneficial
owner of the Notes, if compliance is required by statute, by regulation of the United States or any taxing authority therein or by an applicable
income tax treaty to which the United States is a party as a precondition to exemption from such Tax (including, but not limited to, the requirement
to provide Internal Revenue Service Forms W-8BEN, W-8BEN-E, W-8ECI, or any subsequent versions thereof or successor thereto, and any
documentation requirement under an applicable income tax treaty);
(4) to any Tax that is imposed otherwise than by withholding by the Company or a Paying Agent from the payment;
(5) to any Tax that would not have been imposed but for a change in law, regulation, or administrative or judicial interpretation that becomes effective
more than 10 days after the payment becomes due or is duly provided for, whichever occurs later;
(6) to any estate, inheritance, gift, sales, excise, transfer, wealth, capital gains or personal property or similar Tax;
(7) to any Tax required to be withheld by any paying agent from any payment of principal of or interest on any Note, if such payment can be made
without such withholding by at least one other paying agent;
(8) to any Tax that would not have been imposed but for the presentation by the holder of any Note, where presentation is required, for payment on a
date more than 30 days after the date on which payment became due and payable or the date on which payment thereof is duly provided for,
whichever occurs later;
(9) to any Tax imposed under Sections 1471 through 1474 of the Code (or any amended or successor provisions), any current or future regulations or
official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Code, or any fiscal or regulatory legislation, rules or
practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such sections of the Code;
or
(10) in the case of any combination of items (1) through (9) above.
The Notes are subject in all cases to any tax, fiscal or other law or regulation or administrative or judicial interpretation applicable to the Notes. Except as
specifically provided under this heading “—Payment of Additional Amounts,” the Company will not be required to make any payment for any Tax imposed by any
government or a political subdivision or taxing authority of or in any government or political subdivision. As used under “—Payment of Additional Amounts” and
under “—Redemption for Tax Reasons,” the term “United States” means the United States
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of America (including the states and the District of Columbia and any political subdivision thereof), and the term “United States person” means any individual who
is a citizen or resident of the United States for U.S. federal income tax purposes, a corporation, partnership or other entity created or organized in or under the
laws of the United States, any state of the United States or the District of Columbia (other than a partnership that is not treated as a United States person under
any applicable Treasury regulations), or any estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
Redemption for Tax Reasons
If, as a result of any change in, or amendment to, or, in the case of the 0.000% 2025 Notes and the 2031 Notes, introduction of, the laws (or any
regulations or rulings promulgated under the laws) of the United States (or any political subdivision or taxing authority of or in the United States), or any change
in, or amendments to, an official position regarding the application or interpretation of such laws, regulations or rulings, which change or amendment is
announced or becomes effective on or after the date of the applicable prospectus supplement, we become, or based upon a written opinion of independent
counsel selected by us, will become obligated to pay additional amounts as described above under the heading “Payments of Additional Amounts” with respect
to a series of the Notes, then we may at our option redeem, in whole, but not in part, in the case of the 2022 Notes, the 2024 Notes, the 2026 Notes, the 2027
Notes, the 3.050% 2029 Notes and the 2042 Notes, the Notes of such series on not less than 30 nor more than 60 days’ prior notice, in the case of the 0.875%
2025 Notes and the 1.375% 2029 Notes, the Notes of such series on not less than 15 nor more than 60 days’ notice, and in the case of the 0.000% 2025 Notes
and the 2031 Notes, the Notes of such series on not less than 10 nor more than 60 days’ prior notice, in each case at a redemption price equal to 100% of their
principal amount, together with interest accrued but unpaid on those Notes to (and, in the case of the 0.000% 2025 Notes and the 2031 Notes, but not including)
the date fixed for redemption.
Optional Redemption
We may redeem the 2022 Notes, the 2024 Notes, the 2026 Notes, the 2027 Notes, the 3.050% 2029 Notes and the 2042 Notes at our option, at any
time in whole or from time to time in part, at a redemption price equal to the greater of:
• 100% of the principal amount of the Notes to be redeemed; or
• the sum of the present values of the remaining scheduled payments of principal and interest thereon (not including any portion of such payments of
interest accrued as of the date of redemption), discounted to the date of redemption on an annual basis (ACTUAL/ACTUAL (ICMA)) at the
applicable Comparable Government Bond Rate (as defined below), plus 5 basis points in the case of the 2022 Notes, plus 10 basis points in the
case of the 2026 Notes, plus 15 basis points in the case of the 2024 Notes, the 3.050% 2029 Notes and the 2042 Notes and plus 20 basis points in
the case of the 2027 Notes.
We may redeem the 0.000% 2025 Notes, the 0.875% 2025 Notes, the 1.375% 2029 Notes and the 2031 Notes at our option, at any time in whole or
from time to time in part, prior to the applicable Par Call Date at a redemption price equal to the greater of:
• 100% of the principal amount of the Notes to be redeemed; or
• the sum of the present values of the remaining scheduled payments of principal and interest thereon assuming that the Notes matured on the
applicable Par Call Date (not including any portion of such payments of interest accrued as of the date of redemption), discounted to the date of
redemption on an annual basis (ACTUAL/ACTUAL (ICMA)) at the applicable Comparable Government Bond Rate (as defined below), plus 10
basis points in the case of the 0.000% 2025 Notes, plus 15 basis points in the case of the 0.875% 2025 Notes and the 2031 Notes, and 20 basis
points in the case of the 2029 Notes.
“Par Call Date” means (i) with respect to the 0.000% 2025 Notes, August 15, 2025 (three months prior to the maturity date of the 0.000% 2025 Notes),
(ii) with respect to the 0.875% 2025 Notes, February 24, 2025 (three months prior to the maturity date of the 0.875% 2025 Notes), (iii) with respect to the 1.375%
2029 Notes, February 24, 2029 (three months prior to the maturity date of 1.375% 2029 Notes) and (iv) with respect to the 2031 Notes, August 15, 2031 (three
months prior to the maturity of the 2031 Notes).
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If any of the 0.000% 2025 Notes, the 0.875% 2025 Notes, the 1.375% 2029 Notes or the 2031 Notes are redeemed on or after the applicable Par Call
Date, the redemption price for such Notes will equal 100% of the principal amount of the Notes being redeemed.
In each case upon redemption of the Notes, we will pay accrued and unpaid interest on the principal amount being redeemed to, but excluding, the date
of redemption.
Installments of interest on Notes being redeemed that are due and payable on interest payment dates falling on or prior to a redemption date shall be
payable on the interest payment date to the holders as of the close of business on the relevant regular record date according to the Notes and the applicable
Indenture.
“Comparable Government Bond” means, in relation to any Comparable Government Bond Rate calculation for the 2022 Notes, the 2024 Notes, the
2026 Notes and the 2027 Notes, at the discretion of an independent investment bank selected by us, a German government bond whose maturity is closest to
the maturity of the Notes being redeemed, or if such independent investment bank in its discretion determines that such similar bond is not in issue, such other
German government bond as such independent investment bank may, with the advice of three brokers of, and/or market makers in, German government bonds
selected by us, determine to be appropriate for determining the Comparable Government Bond Rate.
“Comparable Government Bond” means, in relation to any Comparable Government Bond Rate calculation for the 3.050% 2029 Notes and the 2042
Notes, at the discretion of an independent investment bank selected by us, a United Kingdom government bond whose maturity is closest to the maturity of the
Notes being redeemed, or if such independent investment bank in its discretion determines that such similar bond is not in issue, such other United Kingdom
government bond as such independent investment bank may, with the advice of three brokers of, and/or market makers in, United Kingdom government bonds
selected by us, determine to be appropriate for determining the Comparable Government Bond Rate.
“Comparable Government Bond” means, in relation to any Comparable Government Bond Rate calculation for the 0.000% 2025 Notes, the 0.875%
2025 Notes, the 1.375% 2029 Notes and the 2031 Notes, at the discretion of an independent investment bank selected by us, a German government bond
whose maturity is closest to the applicable Par Call Date of the Notes being redeemed, or if such independent investment bank in its discretion determines that
such similar bond is not in issue, such other German government bond as such independent investment bank may, with the advice of three brokers of, and/or
market makers in, German government bonds selected by us, determine to be appropriate for determining the Comparable Government Bond Rate.
“Comparable Government Bond Rate” means the price, expressed as a percentage (rounded to three decimal places, with 0.0005 being rounded
upwards), at which the gross redemption yield on the Notes, if they were to be purchased at such price on the third business day prior to the date fixed for
redemption, would be equal to the gross redemption yield on such business day of the Comparable Government Bond on the basis of the middle market price of
the Comparable Government Bond prevailing at 11:00 a.m. (London time) on such business day as determined by an independent investment bank selected by
us.
Covenants
The Indentures set forth limited covenants that apply to the Notes. However, these covenants do not, among other things:
• limit the amount of indebtedness or lease obligations that may be incurred by us and our subsidiaries;
• limit our ability or that of our subsidiaries to issue, assume or guarantee debt secured by liens; or
• restrict us from paying dividends or making distributions on our capital stock or purchasing or redeeming our capital stock.
8
Consolidation, Merger and Sale of Assets
The Indentures provide that we may consolidate with or merge with or into any other person, and may sell, transfer, or lease or convey all or
substantially all of our properties and assets to another person; provided that the following conditions are satisfied:
• we are the continuing entity, or the resulting, surviving or transferee person (the “Successor”) is a person (if such person is not a corporation, then
the Successor will include a corporate co-issuer of the debt securities) organized and existing under the laws of the United States of America, any
state thereof or the District of Columbia and the Successor (if not us) will expressly assume, by supplemental indenture, all of our obligations under
the debt securities and the applicable Indenture and, for each security that by its terms provides for conversion, provide for the right to convert such
security in accordance with its terms;
• immediately after giving effect to such transaction, no default or event of default under the applicable Indenture has occurred and is continuing; and
• in the case of the 2013 Indenture, the trustee receives from us an officers’ certificate and an opinion of counsel that the transaction and such
supplemental indenture, as the case may be, complies with the applicable provisions of the 2013 Indenture.
If we consolidate or merge with or into any other person or sell, transfer, lease or convey all or substantially all of our properties and assets in
accordance with the Indentures, the Successor will be substituted for us in the Indentures, with the same effect as if it had been an original party to the
Indentures. As a result, the Successor may exercise our rights and powers under the Indentures, and we will be released from all our liabilities and obligations
under the Indentures and under the debt securities.
For purposes of this covenant, “person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or political subdivision thereof or any other entity.
Events of Default
Each of the following events are defined in the Indentures as an “event of default” (whatever the reason for such event of default and whether or not it
will be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body) with respect to the debt securities of any series:
(1) default in the payment of any installment of interest on any debt securities of such series for 30 days after becoming due;
(2) default in the payment of principal of or premium, if any, on any debt securities of such series when it becomes due and payable at its stated
maturity, upon optional redemption, upon declaration or otherwise;
(3) default in the performance, or breach, of any covenant or agreement of ours in the applicable Indenture with respect to the debt securities of such
series (other than a covenant or agreement, a default in the performance of which or a breach of which is elsewhere in the applicable Indenture
specifically dealt with or that has expressly been included in the applicable Indenture solely for the benefit of a series of debt securities other than
such series), which continues for a period of 90 days after written notice to us by the trustee or to us and the trustee by the holders of, in the case
of the 2013 Indenture, at least 25% in aggregate principal amount of the outstanding debt securities of that series, and in the case of the 2018
Indenture, at least 33% in aggregate principal amount of the outstanding debt securities of that series;
(4) we, pursuant to or within the meaning of the Bankruptcy Law:
• commence a voluntary case or proceeding;
• consent to the entry of an order for relief against us in an involuntary case or proceeding;
9
• consent to the appointment of a custodian of us or for all or substantially all of our property;
• make a general assignment for the benefit of our creditors;
• file a petition in bankruptcy or answer or consent seeking reorganization or relief;
• consent to the filing of such petition or the appointment of or taking possession by a custodian; or
• take any comparable action under any foreign laws relating to insolvency;
(5) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:
• is for relief against us in an involuntary case, or adjudicates us insolvent or bankrupt;
• appoints a custodian of us or for all or substantially all of our property; or
• orders the winding-up or liquidation of us (or any similar relief is granted under any foreign laws);
and the order or decree remains unstayed and in effect for 90 days (or, in the case of the 2018 Indenture, 90 consecutive days); or
(6) any other event of default provided with respect to debt securities of such series occurs.
“Bankruptcy Law” means Title 11, United States Code or any similar federal or state or foreign law for the relief of debtors. “Custodian” means any
custodian, receiver, trustee, assignee, liquidator or other similar official under any Bankruptcy Law.
If an event of default with respect to debt securities of any series (other than an event of default relating to certain events of bankruptcy, insolvency, or
reorganization of us) occurs and is continuing, the trustee by notice to us, or the holders of, in the case of the 2013 Indenture, at least 25% in aggregate principal
amount of the outstanding debt securities of such series, and in the case of the 2018 Indenture, at least 33% in aggregate principal amount of the outstanding
debt securities of such series, by notice to us and the trustee, may, and the trustee at the request of these holders will, declare the principal of and premium, if
any, and accrued and unpaid interest on all the debt securities of such series to be due and payable. Upon such a declaration, such principal, premium and
accrued and unpaid interest will be due and payable immediately. If an event of default relating to certain events of bankruptcy, insolvency, or reorganization of
us occurs and is continuing, the principal of and premium, if any, and accrued and unpaid interest on the debt securities of such series will become and be
immediately due and payable without any declaration or other act on the part of the trustee or any holders.
The holders of not less than a majority in aggregate principal amount of the outstanding debt securities of any series may rescind a declaration of
acceleration and its consequences, if we have deposited certain sums with the trustee and all events of default with respect to the debt securities of such series,
other than the non-payment of the principal or interest which have become due solely by such acceleration, have been cured or waived, as provided in the
Indentures.
An event of default for a particular series of debt securities does not necessarily constitute an event of default for any other series of debt securities
issued under the Indentures.
We are required to furnish the trustee annually within 120 days after the end of our fiscal year a statement by one of our officers to the effect that, to the
best knowledge of such officer, we are not in default in the fulfillment of any of our obligations under the applicable Indenture or, if there has been a default in the
fulfillment of any such obligation, specifying each such default and the nature and status thereof.
No holder of any debt securities of any series will have any right to institute any judicial or other proceeding with respect to the applicable Indenture, or
for the appointment of a receiver or trustee, or for any other remedy unless:
(1) an event of default has occurred and is continuing and such holder has given the trustee prior written notice of such continuing event of default
with respect to the debt securities of such series;
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(2) in the case of the 2013 Indenture, the holders of not less than 25% of the aggregate principal amount of the outstanding debt securities of such
series, and in the case of the 2018 Indenture, the holders of not less than 33% of the aggregate principal amount of the outstanding debt securities
of such series have requested the trustee to institute proceedings in respect of such event of default;
(3) the trustee has been offered indemnity reasonably satisfactory to it against its costs, expenses and liabilities in complying with such request;
(4) the trustee has failed to institute proceedings 60 days after the receipt of such notice, request and offer of indemnity; and
(5) no direction inconsistent with such written request has been given for 60 days by the holders of a majority in aggregate principal amount of the
outstanding debt securities of such series.
The holders of a majority in aggregate principal amount of outstanding debt securities of a series will have the right, subject to certain limitations, to
direct the time, method and place of conducting any proceeding for any remedy available to the trustee with respect to the debt securities of that series or
exercising any trust or power conferred to the trustee, and to waive certain defaults. Each of the Indentures provides that if an event of default occurs and is
continuing, the trustee will exercise such of its rights and powers under such Indenture, and use the same degree of care and skill in their exercise, as a prudent
person would exercise or use under the circumstances in the conduct of such person’s own affairs. Subject to such provisions, the trustee will be under no
obligation to exercise any of its rights or powers under the applicable Indenture at the request of any of the holders of the debt securities of a series unless they
will have offered to the trustee security or indemnity satisfactory to the trustee against the costs, expenses and liabilities which might be incurred by it in
compliance with such request.
Notwithstanding the foregoing, the holder of any debt security will have an absolute and unconditional right to receive payment of the principal of and
premium, if any, and interest on that debt security on or after the due dates expressed in that debt security and to institute suit for the enforcement of payment.
Modification and Waivers
Modification and amendments of the Indentures and the Notes may be made by us and the trustee with the consent of the holders of not less than a
majority in aggregate principal amount of the outstanding series of Notes affected thereby; provided, however, that no such modification or amendment may,
without the consent of the holder of each outstanding Note of that series affected thereby:
• change the stated maturity of the principal of, or installment of interest on, any Note;
• reduce the principal amount of any Note or reduce the amount of the principal of any Note which would be due and payable upon a declaration of
acceleration of the maturity thereof or reduce the rate of interest on any Note;
• reduce any premium payable on the redemption of any Note or change the date on which any Note may or must be redeemed (in the case of the
2018 Indenture, it being understood that a change to any notice requirement with respect to such date shall not be deemed to be a change of such
date);
• change the coin or currency in which the principal of, premium, if any, or interest on any Note is payable;
• impair the right of any holder to institute suit for the enforcement of any payment on or after the stated maturity of any Note (or, in the case of
redemption, on or after the redemption date);
• reduce the percentage in principal amount of the outstanding Notes, the consent of whose holders is required in order to take certain actions;
• reduce the requirements for quorum or voting by holders of Notes in the applicable Indenture or the Note;
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• modify any of the provisions in the applicable Indenture regarding the waiver of past defaults and the waiver of certain covenants by the holders of
Notes except to increase any percentage vote required or to provide that certain other provisions of the applicable Indenture cannot be modified or
waived without the consent of the holder of each Notes affected thereby;
• make any change that adversely affects the right to convert or exchange any debt security or decreases the conversion or exchange rate or
increases the conversion price of any convertible or exchangeable debt security, unless such decrease or increase is permitted by the terms of the
debt securities; or
• modify any of the above provisions.
We and the trustee may, without the consent of any holders, modify or amend the terms of the Indentures and any series of Notes with respect to the
following:
• to add to our covenants for the benefit of holders of all or any series of the Notes or to surrender any right or power conferred upon us;
• to evidence the succession of another person to, and the assumption by the successor of our covenants, agreements and obligations under, the
applicable Indenture pursuant to the covenant described above under the caption “Covenants—Consolidation, Merger and Sale of Assets”;
• to add any additional events of default for the benefit of holders of all or any series of the Notes;
• to add one or more guarantees, and in the case of the 2018 Indenture, co-obligors, for the benefit of holders of the Notes;
• to secure the Notes pursuant to the covenants of the Indenture;
• to add or appoint a successor or separate trustee or other agent;
• to provide for the issuance of additional debt securities of any series;
• to establish the form or terms of the debt securities of any series as permitted by the Indenture;
• to comply with the rules of any applicable securities depository;
• to provide for uncertificated Notes in addition to or in place of certificated Notes;
• in the case of the 2013 Indenture, to add to, change or eliminate any of the provisions of the 2013 Indenture in respect of one or more series of
debt securities; provided that any such addition, change or elimination (a) shall neither (1) apply to any debt security of any series created prior to
the execution of such supplemental indenture and entitled to the benefit of such provision nor (2) modify the rights of the holder of any such debt
security with respect to such provision or (b) shall become effective only when there is no debt security described in clause (a)(1) outstanding;
• in the case of the 2018 Indenture, to add to, change or eliminate any of the provisions of the 2018 Indenture in respect of one or more series of
debt securities; provided that any such addition, change or elimination shall become effective only when there is no outstanding security of any
series created prior to the execution of such supplemental indenture that is entitled to the benefit of such provision and as to which such
supplemental indenture would apply;
• to cure any ambiguity, omission, defect or inconsistency;
• to change any other provision; provided that the change does not adversely affect the interests of the holders of debt securities of, in the case of
the 2013 Indenture any series, and in the case of the 2018 Indenture, any outstanding series, in any material respect;
• to supplement any of the provisions of the applicable Indenture to such extent as shall be necessary to permit or facilitate the defeasance and
discharge of any series of Notes pursuant to the Indenture;
12
provided that any such action shall not adversely affect the interests of the holders of Notes of such series or any other series of debt securities in
any material respect;
• to comply with the rules or regulations of any securities exchange or automated quotation system on which any of the Notes may be listed or
traded; and
• to add to, change or eliminate any of the provisions of the applicable Indenture as shall be necessary or desirable in accordance with any
amendments to the Trust Indenture Act of 1939, as amended, and in the case of the 2013 Indenture, provided that such action does not adversely
affect the rights or interests of any holder of debt securities in any material respect.
The holders of at least a majority in aggregate principal amount of the outstanding Notes of any series may, on behalf of the holders of all Notes of that
series, waive compliance by us with certain restrictive provisions of the Indentures. The holders of not less than a majority in aggregate principal amount of the
outstanding Notes of a series may, on behalf of the holders of all Notes of that series, waive any past default and its consequences under the applicable
Indenture with respect to the Notes of that series, except a default (1) in the payment of principal or premium, if any, or interest on Notes of that series or (2) in
respect of a covenant or provision of the applicable Indenture that cannot be modified or amended without the consent of the holder of each Note of that series.
Upon any such waiver, such default will cease to exist, and any event of default arising therefrom will be deemed to have been cured, for every purpose of the
Indenture; however, no such waiver will extend to any subsequent or other default or event of default or impair any rights consequent thereon.
Discharge, Defeasance and Covenant Defeasance
We may discharge certain obligations to holders of the Notes of a series that have not already been delivered to the trustee for cancellation and that
either have become due and payable or will become due and payable within one year (or scheduled for redemption within one year) by depositing with the
trustee, in trust, funds in U.S. dollars in an amount sufficient to pay the entire indebtedness including, but not limited to, the principal and premium, if any, and
interest to the date of such deposit (if due and payable) or to the maturity thereof or the redemption date of the Notes of that series, as the case may be. We may
direct the trustee to invest such funds in U.S. Treasury securities with a maturity of one year or less or in a money market fund that invests solely in short-term
U.S. Treasury securities.
The Indentures provide that we may elect either (1) to defease and be discharged from any and all obligations with respect to the Notes of a series
(except for, among other things, obligations to register the transfer or exchange of the Notes, to replace temporary or mutilated, destroyed, lost or stolen Notes,
to maintain an office or agency with respect to the Notes and to hold moneys for payment in trust) (“legal defeasance”) or (2) to be released from our obligations
to comply with the restrictive covenants under the applicable Indenture, and any omission to comply with such obligations will not constitute a default or an event
of default with respect to the Notes of a series and clauses (3) and (6) under the caption “Events of Default” above will no longer be applied (“covenant
defeasance”). Legal defeasance or covenant defeasance, as the case may be, will be conditioned upon, among other things, the irrevocable deposit by us with
the trustee, in trust, of an amount in U.S. dollars, or U.S. government obligations (as such term is modified below), or both, applicable to the Notes of that series
which through the scheduled payment of principal and interest in accordance with their terms will provide money in an amount sufficient to pay the principal or
premium, if any, and interest on the Notes on the scheduled due dates therefor.
If we effect covenant defeasance with respect to the Notes of any series, the amount in U.S. dollars, or U.S. government obligations (as such term is
modified below), or both, on deposit with the trustee will be sufficient, in the opinion of a nationally recognized firm of independent accountants, to pay amounts
due on the Notes of that series at the time of the stated maturity but may not be sufficient to pay amounts due on the Notes of that series at the time of the
acceleration resulting from such event of default. However, we would remain liable to make payment of such amounts due at the time of acceleration.
With respect to the 2022 Notes, the 2024 Notes, the 0.000% 2025 Notes, the 0.875% 2025 Notes, the 2026 Notes, the 2027 Notes, the 1.375% 2029
Notes and the 2031 Notes, the term “U.S. government obligations” shall instead mean (x) any security that is (i) a direct obligation of the German government or
(ii) an obligation of a person controlled or supervised by and acting as an agency or instrumentality of the German government the payment of which is fully and
unconditionally guaranteed by the German government or the central bank of the German government, which, in either case (x)(i) or (ii), is not callable or
redeemable at the option of the issuer thereof, and (y)
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certificates, depositary receipts or other instruments which evidence a direct ownership interest in obligations described in clause (x)(i) or (x)(ii) above or in any
specific principal or interest payments due in respect thereof.
With respect to the 3.050% 2029 Notes and the 2042 Notes, the term “U.S. government obligations” shall instead mean (x) any security that is (i) a
direct obligation of the United Kingdom government or (ii) an obligation of a person controlled or supervised by and acting as an agency or instrumentality of the
United Kingdom government the payment of which is fully and unconditionally guaranteed by the United Kingdom government or the central bank of the United
Kingdom government, which, in either case (x)(i) or (ii), is not callable or redeemable at the option of the issuer thereof, and (y) certificates, depositary receipts
or other instruments which evidence a direct ownership interest in obligations described in clause (x)(i) or (x)(ii) above or in any specific principal or interest
payments due in respect thereof.
We will be required to deliver to the trustee an opinion of counsel that the deposit and related defeasance will not cause the holders and beneficial
owners of the Notes of that series to recognize income, gain or loss for federal income tax purposes. If we elect legal defeasance, that opinion of counsel must
be based upon a ruling from the U.S. Internal Revenue Service or a change in law to that effect.
We may exercise our legal defeasance option notwithstanding our prior exercise of our covenant defeasance option.
Book-Entry and Settlement
The Notes were issued in book-entry form and are represented by global notes deposited with, or on behalf of, a common depositary on behalf of
Euroclear and Clearstream, and are registered in the name of the common depositary or its nominee. Except as described herein, certificated notes will not be
issued in exchange for beneficial interests in the global notes.
Certificated Notes
Subject to certain conditions, the Notes represented by the global notes are exchangeable for certificated notes in definitive form of like tenor, in
minimum denominations of €100,000 principal amount and integral multiples of €1,000 in excess thereof in the case of the 2022 Notes, the 2024 Notes, the
0.000% 2025 Notes, the 0.875% 2025 Notes, the 2026 Notes, the 2027 Notes, the 1.375% 2029 Notes and the 2031 Notes, and in minimum denominations of
£100,000 principal amount and integral multiples of £1,000 in excess thereof in the case of the 3.050% 2029 Notes and the 2042 Notes, if:
1. the common depositary notifies us that it is unwilling or unable to continue as depositary or if the common depositary ceases to be eligible under
the applicable Indenture and we do not appoint a successor depository within 90 days;
2. we determine that the Notes will no longer be represented by global securities and execute and deliver to the trustee an order to that effect; or
3. an event of default with respect to the Notes will have occurred and be continuing.
Any Note that is exchangeable as above is exchangeable for certificated notes issuable in authorized denominations and registered in such names as
the common depositary shall direct. Subject to the foregoing, a global note is not exchangeable, except for a global note of the same aggregate denomination to
be registered in the name of the common depositary or its nominee.
The Trustee for the Notes
The Bank of New York Mellon Trust Company, N.A. is the trustee under the Indentures. We have commercial deposits and custodial arrangements with
The Bank of New York Mellon Trust Company, N.A. and its affiliates (“BNYM”). We may enter into similar or other banking relationships with BNYM in the future
in the normal course of business. In addition, BNYM acts as trustee and as paying agent with respect to other debt securities issued by us, and may do so for
future issuances of debt securities by us as well.
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Exhibit 21.1
Subsidiaries of
Apple Inc.*
Jurisdiction
of Incorporation
Apple Asia Limited Hong Kong
Apple Asia LLC Delaware, U.S.
Apple Canada Inc. Canada
Apple Computer Trading (Shanghai) Co., Ltd. China
Apple Distribution International Limited Ireland
Apple India Private Limited India
Apple Insurance Company, Inc. Arizona, U.S.
Apple Japan, Inc. Japan
Apple Korea Limited South Korea
Apple Operations Europe Limited Ireland
Apple Operations International Limited Ireland
Apple Operations Limited Ireland
Apple Operations Mexico, S.A. de C.V. Mexico
Apple Pty Limited Australia
Apple Sales International Limited Ireland
Apple South Asia (Thailand) Limited Thailand
Apple Vietnam Limited Liability Company Vietnam
Braeburn Capital, Inc. Nevada, U.S.
iTunes K.K. Japan
* Pursuant to Item 601(b)(21)(ii) of Regulation S-K, the names of other subsidiaries of Apple Inc. are omitted because, considered in the aggregate, they would
not constitute a significant subsidiary as of the end of the year covered by this report.
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-3 ASR No. 333-260578) of Apple Inc.,
(2) Registration Statement (Form S-8 No. 333-264555) pertaining to Apple Inc. Deferred Compensation Plan,
(3) Registration Statement (Form S-8 No. 333-165214) pertaining to Apple Inc. 2003 Employee Stock Plan, Apple Inc. 2014 Employee Stock Plan and
Apple Inc. 2022 Employee Stock Plan,
(4) Registration Statement (Form S-8 No. 333-195509) pertaining to Apple Inc. 2003 Employee Stock Plan, Apple Inc. 2014 Employee Stock Plan and
Apple Inc. 2022 Employee Stock Plan,
(5) Registration Statement (Form S-8 No. 333-226986) pertaining to Apple Inc. Deferred Compensation Plan,
(6) Registration Statement (Form S-8 No. 333-203698) pertaining to Apple Inc. Employee Stock Purchase Plan,
(7) Registration Statement (Form S-8 No. 333-193709) pertaining to Topsy Labs, Inc. 2007 Stock Plan, and
(8) Registration Statement (Form S-8 No. 333-60455) pertaining to Apple Inc. Non-Employee Director Stock Plan;
of our reports dated October 27, 2022 with respect to the consolidated financial statements of Apple Inc., and the effectiveness of internal control over financial
reporting of Apple Inc., included in this Annual Report on Form 10-K for the year ended September 24, 2022.
/s/ Ernst & Young LLP
San Jose, California
October 27, 2022
Exhibit 31.1
CERTIFICATION
I, Timothy D. Cook, certify that:
1. I have reviewed this annual report on Form 10-K of Apple Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent
fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal
control over financial reporting.
Date: October 27, 2022
By: /s/ Timothy D. Cook
Timothy D. Cook
Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, Luca Maestri, certify that:
1. I have reviewed this annual report on Form 10-K of Apple Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent
fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal
control over financial reporting.
Date: October 27, 2022
By: /s/ Luca Maestri
Luca Maestri
Senior Vice President,
Chief Financial Officer
Exhibit 32.1
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Timothy D. Cook, certify, as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that the Annual Report of Apple Inc. on Form 10-K for the fiscal year ended September 24, 2022 fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 and that information contained in such Form 10-K fairly presents in all material respects the financial condition and results
of operations of Apple Inc. at the dates and for the periods indicated.
Date: October 27, 2022
By: /s/ Timothy D. Cook
Timothy D. Cook
Chief Executive Officer
I, Luca Maestri, certify, as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
the Annual Report of Apple Inc. on Form 10-K for the fiscal year ended September 24, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that information contained in such Form 10-K fairly presents in all material respects the financial condition and results of
operations of Apple Inc. at the dates and for the periods indicated.
Date: October 27, 2022
By: /s/ Luca Maestri
Luca Maestri
Senior Vice President,
Chief Financial Officer
A signed original of this written statement required by Section 906 has been provided to Apple Inc. and will be retained by Apple Inc. and furnished to the
Securities and Exchange Commission or its staff upon request.
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