APPLE BTN 12-1 Refer to Apple's financial statements in Appendix A to answer the following. 1. Is Apple's statement of cash flows prepared under the direct method or the indirect method? How do you know? 2. For each fiscal year 2015, 2014, and 2013, is the amount of cash provided by operating activities more or less than the cash paid for dividends? 3. What is the largest amount in reconciling the difference between net income and cash flow from operating activities in fiscal 2015? In fiscal 2014? In fiscal 2013? 4. Identify the largest cash inflow and cash outflow for investing and for financing activities in fiscal 2015 and in fiscal 2014. Fast Forward 5. Obtain Apple's financial statements for a fiscal year ending after September 27, 2015, from either its website (Apple.comor the SEC's database (SEC.gov). Since September 27, 2015, what are Apple's largest cash outflows and cash inflows in the investing and in the financing sections of its statement of cash flows? Apple Inc. CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) September 26, 2015 mber 27, 2014 ASSETS Current assets Cash and cash equivalents Short-term marketable securities Accounts receivable, less allowances of $82 and $86, respectively Inventorics Deferred tax assets Vendor non-trade receivables Other current assets 21,120 20,481 16,849 13,844 11.233 17,460 2,111 4,318 9,759 9.806 68,531 130.162 20,624 4,616 4.142 3.764 231,839 13,494 89,378 164,065 22,471 5,116 3,893 Total current assets Long-term marketable securities Property. plant and equipment, net Goodwill Acquired intangible assets, net Other assets Total assets 290,479 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities 35,490 25,181 30,196 18.453 8,491 Accounts payable Accrued expenses Deferred revenue Commercial paper Current portion of long-term debt 8,499 63.448 3,031 28,987 24.826 120,292 Total current liabilities 80,610 Deferred revenue non-current Long-term debt Other non-current liabilities 53,463 171,124 Total liabilities Commitments and contingencies Shareholders' equity Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares 27,416 92,284 authorized; 5,578,753 and 5,866,161 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income 23,313 87,152 1,082 111,547 231,839 345) 119,355 290,479 Total shareholders' equity Total liabilities and shareholders' equity See accompanying Notes to Consolidated Financial Statements Page A-3 Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS In millions, except number of shares which are reflected in thousands and per share amounts) September 27,2014 182,795 112.258 70.537 Years ended Net sales Cost of sales September 26, 2015 233,715 140,089 93,626 September 28, 2013 170,910 106,606 64.304 Gross margin Opcrating expenscs 8,067 14.329 22.396 71,230 1,285 72,515 19,121 53,394 6,041 11.993 18,034 52,503 Research and development 4,475 10,830 15,305 Selling, general and administrative Total opcrating cxpcnscs Operating income Other income, net Income before provision for income taxes Provision for income taxes Net income 1,156 50,155 13,118 37,037 53,483 13,973 39,510 Earnings per share: 6.49 6.45 9.28 9.22 5.72 5.68 Diluted Shares used in computing carnings per share: 6,085,572 6,122,663 1.82 6,477,320 6,521,634 1.64 Basic Diluted 5,753.421 5,793,069 1.98 Cash dividends declared per common share CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME In millions) September 26, 2015 eber 27, 2014 September 28, 2013 37,037 Years ended Net income Other comprehensive income (loss): 53,394 S 39,510 $ Change in foreign currency translation, net of tax efTects (411) of $201, $50 and S35, respectively (137) (112) Change in unrealized gains/losses on derivative instruments: Change in fair value of derivatives, net of tax benefit (expense) of $(441), S(297) and (351), respectively 2,905 (3.497) (592) 1,390 522 Adjustment for net losses (gains) realized and included in net income, 149 net of tax expense (benefit) of S630, S(36) and S255, respectively (458) Total change in unrecognized gainslosses on dcrivative instruments, net of tax 1,539 64 Change in unrealized gainslosses on marketable securities: Change in fair value of marketable securities, net of tax benefit (expense) of $264, (53) and $458, respectively 285 (791) (483) Adjustment for net (gains) losses realized and included in net income, 59(134) net of tax expense (benefit) of S(32), S71 and S82, respectively (131) Total change in unrealized gains/losses on marketable securities net of tax 151 1,553 41,063 S (922) (970) 36,067 (424) Total other comprehensive income (loss) Total comprehen sive income 51,967 $ CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY In millions, except number of shares which are reflected in thousands) Accumulated Common Stock and Additional Paid-In Capital Comprehensive Income Retained Farnin 499 S Balances as of Seplember 29, 2012 6,574,458 S 16,422 101,289 S 37,037 118,210 Net income Other comprehensive income (loss) Dividends and dividend equivalents declared Repurchase of common stock Share-based compensation Common stock issued, net of shares (970) (10,676) (22,950) (970) (10,676) (22,950) 328,837) withheld for employee taxes 48,873 444) Tax bencfit from cquity awards, including transfer pricing adjustments Balances as of September 28, 2013 6,294,494 104,256 123,549 Nct incomc Other comprehensive income (loss) Dividends and dividend equivalents declared Repurchase of common stock Share-based compensation Common stock issued, net of shares withheld (11,215) (45,000) (11,215) (45,000) (488,677) employee taxes 60,344 (399) (448) Tax benefit from equity awards, including transfer pricing adjustments Balances as of September 27, 2014 5,866,161 23.313 87.152 53,394 1,082 111,547 Net income Other comprehensive income (loss) Dividends and dividend cquivalents declared (1,427) (11,627) (36,026) (11,627) (36,026) (325,032) Common stock issued, net of shares withheld 37,624 (231) (609) (840) Tax benefit from equity awards, including transfer pricing adjustments Balances as of September 26, 2015 5,578.753S 27.416 S 119.355 See accompanying Notes to Consolidated Financial Statements Apple Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Years ended Cash and cash cquivalents, beginning of the year Operating activities: September 26, 2015 September 27, 2014 September 28, 2013 10,746 13,844 S 14,259 S 37,037 Net income 53,394 39,510 Adjustments to reconcile net income to cash generated by operating activities: 11,257 3,586 1,382 7,946 2,863 2.347 6,757 2,253 1,141 n and amortization Share-based compensation expense Deferred income tax expense Changes in operating assets and liabilities: 611 (4,232) (76) (2,220) 167 5,938 1.460 6,010 59,713 (2,172) (973) 223 1,080 2.340 1.459 4,521 3,666 Accounts receivable, nct (238) (3,735) (179) 5,400 1,042 8,746 81,266 Vendor non-trade receivables Other current and non-current assets Accounts payable Deferred revenuc Other current and non-current liabilities Cash generated by operating activities Investing activities: (217,128) 18,810 (148,489) 20,317 104,130 496) (8,165) 911) 160) (33,774) Purchases of marketable securities Proceeds from maturities of marketable securities Proceeds from sales of marketable securities Payments made in connection with business acquisitions, net Payments for acquisition of property, plant and equipment Payments for acquisition of intangible assets Other (166,402) 14,538 107,447 (343) (11,247) (241) (26) (56,274) 189.301 (3,765) 9.571) (242) 16 (22,579) Cash used in investing activities Financing activities: 543 749 (1,499) (11,561) (35,253) 27,114 2,191 7,716) 7,276 730 739 (1,158) (11,126) 45,000) 11,960 6,306 (37,549) (415) 530 701 1,082) (10,564) (22,860) 16,896 0 (16,379) 3,513 14,259 Proceeds from issuance of common stock Excess tax benefits from equity awards Taxes paid related to net share settlement of equity awards Dividends and dividend equivalents paid Repurchase of common stock Proceeds from issuance of term debt, net Change in commercial paper, net Cash used in financing activities Increase (decrease) in cash and cash equivalents Cash and cash equivalents, end of the year 2,120 S 13,844 S Supplemental cash flow disclosure: Cash paid for income taxes, net Cash paid for intcrest 13,252 S 10,026 S 339 S 9,128