Company Quick10K Filing
⚲
Apple
Financials
Price287.00 EPS13
Shares4,455 P/E22
MCap1,278,449 P/FCF17
Net Debt61,421 EBIT74,711
TEV1,339,870 TEV/EBIT18
TTM 2019-12-28, in MM, except price, ratios
Filings
10-Q 2020-03-28 Filed 2020-05-01
10-Q 2019-12-28 Filed 2020-01-29
10-K 2019-09-28 Filed 2019-10-31
10-Q 2019-06-29 Filed 2019-07-31
10-Q 2019-03-30 Filed 2019-05-01
10-Q 2018-12-29 Filed 2019-01-30
10-K 2018-09-29 Filed 2018-11-05
10-Q 2018-06-30 Filed 2018-08-01
10-Q 2018-03-31 Filed 2018-05-02
10-Q 2017-12-30 Filed 2018-02-02
10-K 2017-09-30 Filed 2017-11-03
10-Q 2017-07-01 Filed 2017-08-02
10-Q 2017-04-01 Filed 2017-05-03
10-Q 2016-12-31 Filed 2017-02-01
10-K 2016-09-24 Filed 2016-10-26
10-Q 2016-06-25 Filed 2016-07-27
10-Q 2016-03-26 Filed 2016-04-27
10-Q 2015-12-26 Filed 2016-01-27
10-K 2015-09-26 Filed 2015-10-28
10-Q 2015-06-27 Filed 2015-07-22
10-Q 2015-03-28 Filed 2015-04-28
10-Q 2014-12-27 Filed 2015-01-28
10-K 2014-09-27 Filed 2014-10-27
10-Q 2014-06-28 Filed 2014-07-23
10-Q 2014-03-29 Filed 2014-04-24
10-Q 2013-12-28 Filed 2014-01-28
10-K 2013-09-28 Filed 2013-10-30
10-Q 2013-06-29 Filed 2013-07-24
10-Q 2013-03-30 Filed 2013-04-24
10-Q 2012-12-29 Filed 2013-01-24
10-K 2012-09-29 Filed 2012-10-31
10-Q 2012-06-30 Filed 2012-07-25
10-Q 2012-03-31 Filed 2012-04-25
10-Q 2011-12-31 Filed 2012-01-25
10-K 2011-09-24 Filed 2011-10-26
10-Q 2011-06-25 Filed 2011-07-20
10-Q 2011-03-26 Filed 2011-04-21
10-Q 2010-12-25 Filed 2011-01-19
10-K 2010-09-25 Filed 2010-10-27
10-Q 2010-06-26 Filed 2010-07-21
10-Q 2010-03-27 Filed 2010-04-21
10-Q 2009-12-26 Filed 2010-01-25
Reports
8-K 2020-05-04
8-K 2020-04-30
8-K 2020-02-26
8-K 2020-02-17
8-K 2020-01-28
8-K 2019-11-07
8-K 2019-10-30
8-K 2019-09-10
8-K 2019-09-04
8-K 2019-07-30
8-K 2019-04-30
8-K 2019-03-01
8-K 2019-02-05
8-K 2019-01-29
8-K 2019-01-02
8-K 2018-11-01
8-K 2018-07-31
8-K 2018-05-01
8-K 2018-04-30
8-K 2018-02-13
8-K 2018-02-01
8-K 2015-09-10
8-K 2015-07-24
8-K 2015-07-21
8-K 2015-06-03
8-K 2015-05-06
8-K 2015-04-27
8-K 2015-04-27
8-K 2015-03-10
8-K 2015-02-02
8-K 2015-01-28
8-K 2015-01-27

AAPL 10Q Quarterly Report

Content
Part I - Financial Information
Item 1. Financial Statements
Note 1 - Summary of Significant Accounting Policies
Note 2 - Revenue Recognition
Note 3 - Financial Instruments
Note 4 - Condensed Consolidated Financial Statement Details
Note 5 - Income Taxes
Note 6 - Debt
Note 7 - Shareholders' Equity
Note 8 - Comprehensive Income
Note 9 - Benefit Plans
Note 10 - Commitments and Contingencies
Note 11 - Segment Information and Geographic Data
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
Exhibits
EX-31.1 a10-qexhibit3113302019.htm
EX-31.2 a10-qexhibit3123302019.htm
EX-32.1 a10-qexhibit3213302019.htm

Apple Earnings 2019-03-30

Balance SheetIncome StatementCash Flow
4103282461648202011201420172021
Assets, Equity
 957657381902011201420172021
Rev, G Profit, Net Income
 35217-7-21-352011201420172021
Ops, Inv, Fin
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 2019
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
 
g66145g66i32.jpg
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)
 
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  ☐    No  ☒

4,601,075,000 shares of common stock, par value $0.00001 per share, issued and outstanding as of April 22, 2019
 


Apple Inc.

Form 10-Q
For the Fiscal Quarter Ended March 30, 2019
TABLE OF CONTENTS



PART I — FINANCIAL INFORMATION
Item 1.    Financial Statements
Apple Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In millions, except number of shares which are reflected in thousands and per share amounts)
 
 
Three Months Ended
 
Six Months Ended
 
March 30,
2019
 
March 31,
2018
 
March 30,
2019
 
March 31,
2018
Net sales:
 
 
 
 
 
 
 
   Products
$
46,565

 
$
51,287

 
$
120,000

 
$
130,451

   Services
11,450

 
9,850

 
22,325

 
18,979

Total net sales
58,015

 
61,137

 
142,325

 
149,430

 
 
 
 
 
 
 
 
Cost of sales:
 
 
 
 
 
 
 
   Products
32,047

 
33,936

 
80,285

 
84,511

   Services
4,147

 
3,779

 
8,188

 
7,585

Total cost of sales
36,194

 
37,715

 
88,473

 
92,096

Gross margin
21,821

 
23,422

 
53,852

 
57,334

 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Research and development
3,948

 
3,378

 
7,850

 
6,785

Selling, general and administrative
4,458

 
4,150

 
9,241

 
8,381

Total operating expenses
8,406

 
7,528

 
17,091

 
15,166

 
 
 
 
 
 
 
 
Operating income
13,415

 
15,894

 
36,761

 
42,168

Other income/(expense), net
378

 
274

 
938

 
1,030

Income before provision for income taxes
13,793

 
16,168

 
37,699

 
43,198

Provision for income taxes
2,232

 
2,346

 
6,173

 
9,311

Net income
$
11,561

 
$
13,822

 
$
31,526

 
$
33,887

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
2.47

 
$
2.75

 
$
6.70

 
$
6.69

Diluted
$
2.46

 
$
2.73

 
$
6.66

 
$
6.63

 
 
 
 
 
 
 
 
Shares used in computing earnings per share:
 
 
 
 
 
 
 
Basic
4,674,071

 
5,024,877

 
4,704,945

 
5,068,877

Diluted
4,700,646

 
5,068,493

 
4,736,949

 
5,113,140

See accompanying Notes to Condensed Consolidated Financial Statements.

Apple Inc. | Q2 2019 Form 10-Q | 1

Apple Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In millions)
 
 
Three Months Ended
 
Six Months Ended
 
March 30,
2019
 
March 31,
2018
 
March 30,
2019
 
March 31,
2018
Net income
$
11,561

 
$
13,822

 
$
31,526

 
$
33,887

Other comprehensive income/(loss):
 
 
 
 
 
 
 
Change in foreign currency translation, net of tax
174

 
263

 
96

 
303

 
 
 
 
 
 
 
 
Change in unrealized gains/losses on derivative instruments, net of tax:
 
 
 
 
 
 
 
Change in fair value of derivatives
(50
)
 
(27
)
 
(384
)
 
61

Adjustment for net (gains)/losses realized and included in net income
(105
)
 
(207
)
 
(63
)
 
(105
)
Total change in unrealized gains/losses on derivative instruments
(155
)
 
(234
)
 
(447
)
 
(44
)
 
 
 
 
 
 
 
 
Change in unrealized gains/losses on marketable securities, net of tax:
 
 
 
 
 
 
 
Change in fair value of marketable securities
2,042

 
(2,003
)
 
2,152

 
(2,849
)
Adjustment for net (gains)/losses realized and included in net income
28

 
29

 
65

 
(46
)
Total change in unrealized gains/losses on marketable securities
2,070

 
(1,974
)
 
2,217

 
(2,895
)
 
 
 
 
 
 
 
 
Total other comprehensive income/(loss)
2,089

 
(1,945
)
 
1,866

 
(2,636
)
Total comprehensive income
$
13,650

 
$
11,877

 
$
33,392

 
$
31,251

See accompanying Notes to Condensed Consolidated Financial Statements.

Apple Inc. | Q2 2019 Form 10-Q | 2

Apple Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In millions, except number of shares which are reflected in thousands and par value)
 
 
March 30,
2019
 
September 29,
2018
ASSETS:
Current assets:
 
 
 
Cash and cash equivalents
$
37,988

 
$
25,913

Marketable securities
42,104

 
40,388

Accounts receivable, net
15,085

 
23,186

Inventories
4,884

 
3,956

Vendor non-trade receivables
11,193

 
25,809

Other current assets
12,092

 
12,087

Total current assets
123,346

 
131,339

 
 
 
 
Non-current assets:
 
 
 
Marketable securities
145,319

 
170,799

Property, plant and equipment, net
38,746

 
41,304

Other non-current assets
34,587

 
22,283

Total non-current assets
218,652

 
234,386

Total assets
$
341,998

 
$
365,725

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
 
 
 
Accounts payable
$
30,443

 
$
55,888

Other current liabilities
35,368

 
33,327

Deferred revenue
5,532

 
5,966

Commercial paper
11,924

 
11,964

Term debt
10,505

 
8,784

Total current liabilities
93,772

 
115,929

 
 
 
 
Non-current liabilities:
 
 
 
Term debt
90,201

 
93,735

Other non-current liabilities
52,165

 
48,914

Total non-current liabilities
142,366

 
142,649

Total liabilities
236,138

 
258,578

 
 
 
 
Commitments and contingencies

 

 
 
 
 
Shareholders’ equity:
 
 
 
Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 4,607,284 and 4,754,986 shares issued and outstanding, respectively
42,801

 
40,201

Retained earnings
64,558

 
70,400

Accumulated other comprehensive income/(loss)
(1,499
)
 
(3,454
)
Total shareholders’ equity
105,860

 
107,147

Total liabilities and shareholders’ equity
$
341,998

 
$
365,725

See accompanying Notes to Condensed Consolidated Financial Statements.

Apple Inc. | Q2 2019 Form 10-Q | 3

Apple Inc.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(In millions, except number of shares which are reflected in thousands and per share amounts)
 
 
Three Months Ended
 
Six Months Ended
 
March 30,
2019
 
March 31,
2018
 
March 30,
2019
 
March 31,
2018
Total shareholders’ equity, beginning balances
$
117,892

 
$
140,199

 
$
107,147

 
$
134,047

 
 
 
 
 
 
 
 
Common stock and additional paid-in capital:
 
 
 
 
 
 
 
Beginning balances
40,970

 
36,447

 
40,201

 
35,867

Common stock issued
390

 
327

 
390

 
327

Common stock withheld related to net share settlement of equity awards
(105
)
 
(107
)
 
(927
)
 
(845
)
Share-based compensation
1,546

 
1,377

 
3,137

 
2,695

Ending balances
42,801

 
38,044

 
42,801

 
38,044

 
 
 
 
 
 
 
 
Retained earnings:
 
 
 
 
 
 
 
Beginning balances
80,510

 
104,593

 
70,400

 
98,330

Net income
11,561

 
13,822

 
31,526

 
33,887

Dividends and dividend equivalents declared
(3,499
)
 
(3,239
)
 
(7,025
)
 
(6,539
)
Common stock withheld related to net share settlement of equity awards
(14
)
 
(56
)
 
(608
)
 
(449
)
Common stock repurchased
(24,000
)
 
(23,500
)
 
(32,236
)
 
(33,609
)
Cumulative effects of changes in accounting principles
—

 
278

 
2,501

 
278

Ending balances
64,558

 
91,898

 
64,558

 
91,898

 
 
 
 
 
 
 
 
Accumulated other comprehensive income/(loss):
 
 
 
 
 
 
 
Beginning balances
(3,588
)
 
(841
)
 
(3,454
)
 
(150
)
Other comprehensive income/(loss)
2,089

 
(1,945
)
 
1,866

 
(2,636
)
Cumulative effects of changes in accounting principles
—

 
(278
)
 
89

 
(278
)
Ending balances
(1,499
)
 
(3,064
)
 
(1,499
)
 
(3,064
)
 
 
 
 
 
 
 
 
Total shareholders’ equity, ending balances
$
105,860

 
$
126,878

 
$
105,860

 
$
126,878

 
 
 
 
 
 
 
 
Dividends and dividend equivalents declared per share or RSU
$
0.73

 
$
0.63

 
$
1.46

 
$
1.26

See accompanying Notes to Condensed Consolidated Financial Statements.

Apple Inc. | Q2 2019 Form 10-Q | 4

Apple Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions)
 
Six Months Ended
 
March 30,
2019
 
March 31,
2018
Cash, cash equivalents and restricted cash, beginning balances
$
25,913

 
$
20,289

Operating activities:
 
 
 
Net income
31,526

 
33,887

Adjustments to reconcile net income to cash generated by operating activities:
 
 
 
Depreciation and amortization
6,435

 
5,484

Share-based compensation expense
3,073

 
2,644

Deferred income tax benefit
(124
)
 
(34,235
)
Other
(215
)
 
(151
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
8,094

 
3,523

Inventories
(1,006
)
 
(2,807
)
Vendor non-trade receivables
14,616

 
9,715

Other current and non-current assets
(717
)
 
(1,053
)
Accounts payable
(20,024
)
 
(12,004
)
Deferred revenue
(540
)
 
394

Other current and non-current liabilities
(3,273
)
 
38,026

Cash generated by operating activities
37,845

 
43,423

Investing activities:
 
 
 
Purchases of marketable securities
(13,854
)
 
(48,449
)
Proceeds from maturities of marketable securities
16,880

 
31,884

Proceeds from sales of marketable securities
22,635

 
38,942

Payments for acquisition of property, plant and equipment
(5,718
)
 
(7,005
)
Payments made in connection with business acquisitions, net
(291
)
 
(305
)
Purchases of non-marketable securities
(490
)
 
(163
)
Other
30

 
216

Cash generated by investing activities
19,192

 
15,120

Financing activities:
 
 
 
Proceeds from issuance of common stock
390

 
327

Payments for taxes related to net share settlement of equity awards
(1,427
)
 
(1,190
)
Payments for dividends and dividend equivalents
(7,011
)
 
(6,529
)
Repurchases of common stock
(32,498
)
 
(32,851
)
Proceeds from issuance of term debt, net
—

 
6,969

Repayments of term debt
(2,500
)
 
(500
)
Other
(87
)
 
1

Cash used in financing activities
(43,133
)
 
(33,773
)
Increase in cash, cash equivalents and restricted cash
13,904

 
24,770

Cash, cash equivalents and restricted cash, ending balances
$
39,817

 
$
45,059

Supplemental cash flow disclosure:
 
 
 
Cash paid for income taxes, net
$
9,497

 
$
6,340

Cash paid for interest
$
1,762

 
$
1,356

See accompanying Notes to Condensed Consolidated Financial Statements.

Apple Inc. | Q2 2019 Form 10-Q | 5

Apple Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1 – Summary of Significant Accounting Policies
Basis of Presentation and Preparation
The accompanying condensed consolidated financial statements include the accounts of Apple Inc. and its wholly owned subsidiaries (collectively “Apple” or the “Company”). Intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these condensed 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 condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and the notes thereto included in its Annual Report on Form 10-K for the fiscal year ended September 29, 2018 (the “2018 Form 10-K”).
The Company’s fiscal year is the 52- or 53-week period that ends on the last Saturday of September. A 14th week is included in the first fiscal quarter every five or six years to realign the Company’s fiscal quarters with calendar quarters. The Company’s fiscal years 2019 and 2018 span 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.
Recently Adopted Accounting Pronouncements
Revenue Recognition
In the first quarter of 2019, the Company adopted the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), and additional ASUs issued to clarify the guidance in ASU 2014-09 (collectively the “new revenue standard”), which amends the existing accounting standards for revenue recognition. The Company adopted the new revenue standard utilizing the full retrospective transition method. The Company did not restate total net sales in the prior periods presented, as adoption of the new revenue standard did not have a material impact on previously reported amounts.
Additionally, beginning in the first quarter of 2019, the Company classified the amortization of the deferred value of Maps, Siri® and free iCloud® services, which are bundled in the sales price of iPhone®, Mac®, iPad® and certain other products, in services net sales. Historically, the Company classified the amortization of these amounts in products net sales consistent with its management reporting framework. As a result, products and services net sales information for the second quarter and first six months of 2018 was reclassified to conform to the 2019 presentation.
Financial Instruments
In the first quarter of 2019, the Company adopted FASB ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which updates certain aspects of the recognition, measurement, presentation and disclosure of financial instruments. The adoption of ASU 2016-01 did not have a material impact on the Company’s condensed consolidated financial statements.
Income Taxes
In the first quarter of 2019, the Company adopted FASB ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”), which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. The Company adopted ASU 2016-16 utilizing the modified retrospective transition method. Upon adoption, the Company recorded $2.7 billion of net deferred tax assets, reduced other non-current assets by $128 million, and increased retained earnings by $2.6 billion on its Condensed Consolidated Balance Sheet. The Company will recognize incremental deferred income tax expense as these net deferred tax assets are utilized.
Restricted Cash
In the first quarter of 2019, the Company adopted FASB ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”), which enhances and clarifies the guidance on the classification and presentation of restricted cash in the statement of cash flows and requires additional disclosures about restricted cash balances.

Apple Inc. | Q2 2019 Form 10-Q | 6

Earnings Per Share
The following table shows the computation of basic and diluted earnings per share for the three- and six-month periods ended March 30, 2019 and March 31, 2018 (net income in millions and shares in thousands):
 
Three Months Ended
 
Six Months Ended
 
March 30,
2019
 
March 31,
2018
 
March 30,
2019
 
March 31,
2018
Numerator:
 
 
 
 
 
 
 
Net income
$
11,561

 
$
13,822

 
$
31,526

 
$
33,887

 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Weighted-average basic shares outstanding
4,674,071

 
5,024,877

 
4,704,945

 
5,068,877

Effect of dilutive securities
26,575

 
43,616

 
32,004

 
44,263

Weighted-average diluted shares
4,700,646

 
5,068,493

 
4,736,949

 
5,113,140

 
 
 
 
 
 
 
 
Basic earnings per share
$
2.47

 
$
2.75

 
$
6.70

 
$
6.69

Diluted earnings per share
$
2.46

 
$
2.73

 
$
6.66

 
$
6.63


Potentially dilutive securities representing 31.1 million and 30.0 million shares of common stock were excluded from the computation of diluted earnings per share for the three- and six-month periods ended March 30, 2019, respectively, because their effect would have been antidilutive.
Restricted Cash and Restricted Marketable Securities
The Company considers cash and marketable securities to be restricted when withdrawal or general use is legally restricted. The Company records restricted cash as other assets in the Condensed Consolidated Balance Sheets, and determines current or non-current classification based on the expected duration of the restriction. The Company records restricted marketable securities as current or non-current marketable securities in the Condensed Consolidated Balance Sheets based on the classification of the underlying securities.
Note 2 – Revenue Recognition
Net sales consist of revenue from the sale of iPhone, Mac, iPad, services and other products. The Company recognizes revenue at the amount to which it expects to be entitled when control of the products or services is transferred to its customers. Control is generally transferred when the Company has a present right to payment and title and the significant risks and rewards of ownership of products or services are transferred to its customers. For most of the Company’s products net sales, control transfers when products are shipped. For the Company’s services net sales, control transfers over time as services are delivered. Payment for products and services net sales is collected within a short period of time 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 capable of being distinct, the Company allocates revenue to all distinct performance obligations based on their relative stand-alone selling prices (“SSP”). When available, the Company uses observable prices to determine the SSP. 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.

Apple Inc. | Q2 2019 Form 10-Q | 7

The Company has identified up to three performance obligations regularly included in arrangements involving the sale of iPhone, Mac, iPad and certain other products. The first performance obligation, which represents the substantial portion of the allocated sales price, is the hardware and bundled software delivered at the time of sale. The second performance obligation is the right to receive certain product-related bundled services, which include iCloud, Siri and Maps. The third performance obligation is the right to receive, on a when-and-if-available basis, future unspecified software upgrades relating to the software bundled with each device. The Company allocates revenue and any related discounts to these performance obligations based on their relative SSPs. Because the Company lacks observable prices for the undelivered performance obligations, the allocation of revenue is based on the Company’s estimated SSPs. Revenue allocated to the delivered hardware and bundled software is recognized when control has transferred to the customer, which generally occurs when the product is shipped. Revenue allocated to the product-related bundled services and unspecified software upgrade rights is deferred and recognized on a straight-line basis over the estimated period they are expected to be provided. Cost of sales related to delivered hardware and bundled software, including estimated warranty costs, are recognized at the time of sale. Costs incurred to provide product-related bundled services and unspecified software upgrade rights are recognized as cost of sales as incurred.
For certain long-term service arrangements, the Company has performance obligations for services it has not yet delivered. For these arrangements, the Company does not have a right to bill for the undelivered services. The Company has determined that any unbilled consideration relates entirely to the value of the undelivered services. Accordingly, the Company has not recognized revenue, and has elected not to disclose amounts, related to these undelivered services.
For the sale of third-party products where the Company obtains control of the product before transferring it to the customer, the Company recognizes revenue based on the gross amount billed to customers. The Company considers multiple factors when determining whether it obtains control of third-party products including, but not limited to, evaluating if it has the ability to 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®, Mac App Store and TV App Store and certain digital content sold through the iTunes Store®, the Company does not obtain control of the product before transferring it to the customer. Therefore, the Company accounts for such sales on a net basis by recognizing in services net sales only the commission it retains.
The Company has elected to record revenue net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded within other current liabilities until remitted to the relevant government authority.
Deferred Revenue
As of March 30, 2019 and September 29, 2018, the Company had total deferred revenue of $8.2 billion and $8.8 billion, respectively. As of March 30, 2019, the Company expects 67% of total deferred revenue to be realized in less than a year, 26% within one-to-two years, 6% within two-to-three years and 1% in greater than three years.
Disaggregated Revenue
Net sales disaggregated by significant products and services for the three- and six-month periods ended March 30, 2019 and March 31, 2018 were as follows (in millions):
 
Three Months Ended
 
Six Months Ended
 
March 30,
2019
 
March 31,
2018
 
March 30,
2019
 
March 31,
2018
iPhone (1)
$
31,051

 
$
37,559

 
$
83,033

 
$
98,663

Mac (1)
5,513

 
5,776

 
12,929

 
12,600

iPad (1)
4,872

 
4,008

 
11,601

 
9,763

Wearables, Home and Accessories (1)(2)
5,129

 
3,944

 
12,437

 
9,425

Services (3)
11,450

 
9,850

 
22,325

 
18,979

Total net sales (4)
$
58,015

 
$
61,137

 
$
142,325

 
$
149,430

(1)
Products net sales include amortization of the deferred value of unspecified software upgrade rights, which are bundled in the sales price of the respective product.
(2)
Wearables, Home and Accessories net sales include sales of AirPods®, Apple TV®, Apple Watch®, Beats® products, HomePod™, iPod touch® and Apple-branded and third-party accessories.
(3)
Services net sales include sales from the Company’s digital content stores and streaming services, AppleCare®, Apple Pay®, licensing and other services. Services net sales also include amortization of the deferred value of Maps, Siri and free iCloud services, which are bundled in the sales price of certain products.
(4)
Includes $1.9 billion and $2.2 billion of revenue recognized in the three months ended March 30, 2019 and March 31, 2018, respectively, and $3.8 billion and $3.5 billion of revenue recognized in the six months ended March 30, 2019 and March 31, 2018, respectively, that was included in deferred revenue at the beginning of each respective period.

Apple Inc. | Q2 2019 Form 10-Q | 8

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 the three- and six-month periods ended March 30, 2019 and March 31, 2018.
Note 3 – Financial Instruments
Cash, Cash Equivalents and Marketable Securities
The Company’s investments in marketable debt securities have been classified and accounted for as available-for-sale. The Company classifies its marketable debt securities as either short-term or long-term based on each instrument’s underlying contractual maturity date. Unrealized gains and losses on marketable debt securities classified as available-for-sale are recognized in other comprehensive income/(loss) (“OCI”).
The Company’s investments in marketable equity securities are classified based on the nature of the securities and their availability for use in current operations. The Company’s marketable equity securities are measured at fair value with gains and losses recognized in other income/(expense), net.
The following tables show the Company’s cash and marketable securities by significant investment category as of March 30, 2019 and September 29, 2018 (in millions):
 
March 30, 2019
 
Adjusted
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
 
Cash and
Cash
Equivalents
 
Short-Term
Marketable
Securities
 
Long-Term
Marketable
Securities
Cash
$
11,751

 
$
—

 
$
—

 
$
11,751

 
$
11,751

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Level 1 (1):
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
8,719

 
—

 
—

 
8,719

 
8,719

 
—

 
—

Subtotal
8,719

 
—

 
—

 
8,719

 
8,719

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Level 2 (2):
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
48,215

 
6

 
(401
)
 
47,820

 
8,815

 
6,957

 
32,048

U.S. agency securities
6,458

 
—

 
(19
)
 
6,439

 
4,354

 
526

 
1,559

Non-U.S. government securities
21,572

 
132

 
(108
)
 
21,596

 
243

 
3,992

 
17,361

Certificates of deposit and time deposits
3,472

 
—

 
—

 
3,472

 
1,980

 
1,372

 
120

Commercial paper
2,150

 
—

 
—

 
2,150

 
2,122

 
28

 
—

Corporate debt securities
106,837