Apple 2010 Annual Report Download - page 43

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Table of Contents
primarily to certain undistributed foreign earnings for which no U.S. taxes are provided because such earnings are intended to be indefinitely
reinvested outside the U.S. The lower effective tax rate in 2010 as compared to 2009 is due primarily to an increase in foreign earnings on which
U.S. income taxes have not been provided as such earnings are intended to be indefinitely reinvested outside the U.S.
As of September 25, 2010, the Company had deferred tax assets arising from deductible temporary differences, tax losses, and tax credits of $2.4
billion, and deferred tax liabilities of $5.0 billion. Management believes it is more likely than not that forecasted income, including income that
may be generated as a result of certain tax planning strategies, together with future reversals of existing taxable temporary differences, will be
sufficient to fully recover the deferred tax assets. The Company will continue to evaluate the realizability of deferred tax assets quarterly by
assessing the need for and amount of a valuation allowance.
The Internal Revenue Service (the “IRS”) has completed its field audit of the Company’
s federal income tax returns for the years 2004 through
2006 and proposed certain adjustments. The Company has contested certain of these adjustments through the IRS Appeals Office. The IRS is
currently examining the years 2007 through 2009. All IRS audit issues for years prior to 2004 have been resolved. During the third quarter of
2010, the Company reached a tax settlement with the IRS for the years 2002 through 2003. In addition, the Company is subject to audits by state,
local, and foreign tax authorities. Management believes that adequate provision has been made for any adjustments that may result from tax
examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’
s tax audits are
resolved in a manner not consistent with management’
s expectations, the Company could be required to adjust its provision for income taxes in
the period such resolution occurs.
Liquidity and Capital Resources
The following table presents selected financial information and statistics as of and for the three years ended September 25, 2010 (in millions):
As of September 25, 2010, the Company had $51 billion in cash, cash equivalents and marketable securities, an increase of $17 billion from
September 26, 2009. The principal component of this net increase was the cash generated by operating activities of $18.6 billion, which was
partially offset by payments for acquisition of property, plant and equipment of $2 billion and payments made in connection with business
acquisitions, net of cash acquired, of $638 million.
The Company’
s marketable securities investment portfolio is invested primarily in highly rated securities, generally with a minimum rating of
single-A or equivalent. As of September 25, 2010 and September 26, 2009, $30.8 billion and $17.4 billion, respectively, of the Company’
s cash,
cash equivalents and marketable securities were held by foreign subsidiaries and are generally based in U.S. dollar-
denominated holdings. The
Company believes its existing balances of cash, cash equivalents and marketable securities will be sufficient to satisfy its working capital needs,
capital asset purchases, outstanding commitments and other liquidity requirements associated with its existing operations over the next 12
months.
40
2010
2009
2008
Cash, cash equivalents and marketable securities
$
51,011
$
33,992
$
24,490
Accounts receivable, net
$
5,510
$
3,361
$
2,422
Inventories
$
1,051
$
455
$
509
Working capital
$
20,956
$
20,049
$
18,645
Annual operating cash flow
$
18,595
$
10,159
$
9,596