Apple 2014 Annual Report Download - page 27

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This section and other parts of this Annual Report on Form 10-K (“Form 10-K”) contain forward-looking statements, within the
meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. 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. 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,” which are
incorporated herein by reference. The following discussion should be read in conjunction with the consolidated financial
statements and notes thereto included in Part II, Item 8 of this Form 10-K. All information presented herein is based on the
Company’s fiscal calendar. Unless otherwise stated, 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. The Company assumes no obligation to revise or update any forward-looking statements for any reason,
except as required by law.
Overview and Highlights
The Company designs, manufactures and markets mobile communication and media devices, personal computers and
portable digital music players, and sells a variety of related software, services, accessories, networking solutions and third-party
digital content and applications. The Company sells its products worldwide through its retail stores, online stores and direct
sales force, as well as through third-party cellular network carriers, wholesalers, retailers and value-added resellers. In addition,
the Company sells a variety of third-party iPhone, iPad, Mac and iPod compatible products, including application software, and
various accessories through its online and retail stores. The Company sells to consumers; small and mid-sized businesses; and
education, enterprise and government customers.
Fiscal 2014 Highlights
Net sales rose 7% or $11.9 billion during 2014 compared to 2013. This was driven by increases in net sales of iPhone; Mac;
iTunes, Software and Services; and Accessories. Net sales and unit sales increased for iPhone primarily due to the successful
introduction of iPhone 5s and 5c in the latter half of calendar year 2013, the successful launch of iPhone 6 and 6 Plus beginning
in the fourth quarter of 2014, and expanded distribution. Mac net sales and unit sales increased primarily due to strong
demand for MacBook Air and MacBook Pro which were updated in 2014 with faster processors and offered at lower prices.
Net sales of iTunes, Software and Services grew primarily due to increased revenue from sales through the App Store,
AppleCare and licensing. Net sales and unit sales for iPad declined in 2014 compared to 2013 due to lower unit sales in many
markets. Growth in total net sales during 2014 was also negatively impacted by the continuing decline of iPod sales. All of the
Company’s operating segments other than the Rest of Asia Pacific segment experienced increased net sales in 2014, with
growth being strongest in the Greater China and Japan operating segments.
During the first quarter of 2014, the Company introduced iPad Air, its fifth generation iPad and iPad mini with Retina display. At
its Worldwide Developer Conference in June 2014, the Company announced iOS 8 and OS X Yosemite. In September 2014,
the Company introduced iPhone 6 and 6 Plus, released iOS 8, announced Apple Pay, which became available in the U.S. in
October 2014, and previewed Apple Watch, which is expected to be available in early calendar 2015. In October 2014, the
Company introduced iPad Air 2, iPad mini 3, iMac with Retina 5K Display and an updated Mac mini; and released OS X
Yosemite.
During 2014, the Company completed various business acquisitions, including the acquisitions of Beats Music, LLC, which
offers a subscription streaming music service, and Beats Electronics, LLC, which makes Beats headphones, speakers and
audio software.
Apple Inc. | 2014 Form 10-K | 25