Apple (AAPL)

Other Income and Expense

Other income and expense for the three years ended September 26, 2009, are as follows (in millions):

Total other income and expense decreased $294 million or 47% to $326 million during 2009 compared to $620 million and $599 million in 2008 and 2007, respectively. The overall decrease in other income and expense is attributable to the significant decline in interest rates during 2009 compared to 2008 and 2007, partially offset by the Company’s higher cash, cash equivalents and marketable securities balances. The weighted average interest rate earned by the Company on its cash, cash equivalents and marketable securities was 1.43%, 3.44% and 5.27% during 2009, 2008 and 2007, respectively. During 2009, 2008 and 2007, the Company had no debt outstanding and accordingly did not incur any related interest expense.

The Company’s investment portfolio had gross unrealized losses of $16 million and $121 million as of September 26, 2009 and September 27, 2008, respectively, which were offset by gross unrealized gains of $73 million and $4 million as of September 26, 2009 and September 27, 2008, respectively. The net unrealized gains as of September 26, 2009 and the net unrealized losses as of September 27, 2008 related primarily to long-term marketable securities. The Company considers the declines in market value of its marketable securities investment portfolio to be temporary in nature. The unrealized losses on the Company’s marketable securities were caused primarily by changes in market interest rates, specifically widening credit spreads. The Company does not have the intent to sell, nor is it more likely than not the Company will be required to sell, any investment before recovery of its amortized cost basis. Accordingly, no material declines in fair value were recognized in the Company’s Consolidated Statements of Operations during 2009, 2008 and 2007. The Company may sell certain of its marketable securities prior to their stated maturities for strategic purposes, in anticipation of credit deterioration, or for duration management. The Company recognized no material net gains or losses during 2009, 2008 and 2007 related to such sales.

Other Income and Expense

Other income and expense for the three years ended September 26, 2009, are as follows (in millions):

Total other income and expense decreased $294 million or 47% to $326 million during 2009 compared to $620 million and $599 million in 2008 and 2007, respectively. The overall decrease in other income and expense is attributable to the significant decline in interest rates during 2009 compared to 2008 and 2007, partially offset by the Company’s higher cash, cash equivalents and marketable securities balances. The weighted average interest rate earned by the Company on its cash, cash equivalents and marketable securities was 1.43%, 3.44% and 5.27% during 2009, 2008 and 2007, respectively. During 2009, 2008 and 2007, the Company had no debt outstanding and accordingly did not incur any related interest expense.

The Company’s investment portfolio had gross unrealized losses of $16 million and $121 million as of September 26, 2009 and September 27, 2008, respectively, which were offset by gross unrealized gains of $73 million and $4 million as of September 26, 2009 and September 27, 2008, respectively. The net unrealized gains

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as of September 26, 2009 and the net unrealized losses as of September 27, 2008 related primarily to long-term marketable securities. The Company considers the declines in market value of its marketable securities investment portfolio to be temporary in nature. The unrealized losses on the Company’s marketable securities were caused primarily by changes in market interest rates, specifically widening credit spreads. The Company does not have the intent to sell, nor is it more likely than not the Company will be required to sell, any investment before recovery of its amortized cost basis. Accordingly, no material declines in fair value were recognized in the Company’s Consolidated Statements of Operations during 2009, 2008 and 2007. The Company may sell certain of its marketable securities prior to their stated maturities for strategic purposes, in anticipation of credit deterioration, or for duration management. The Company recognized no material net gains or losses during 2009, 2008 and 2007 related to such sales.

Other Income and Expense

Total other income and expense decreased $99 million or 61% to $63 million during the three months ended March 28, 2009 compared to $162 million in the same period of 2008, and decreased $141 million or 39% during the six months ended March 28, 2009 compared to the same period in 2008. The overall decrease in other income and expense is attributable to the decline in interest rates during the first six months of 2009 compared to the first six months of 2008, partially offset by the Company’s higher cash, cash equivalents and marketable securities balances. The weighted-average interest rate earned by the Company on its cash, cash equivalents and marketable securities decreased to 1.53% in the second quarter of 2009 from 3.93% in the second quarter of 2008.

The Company’s investment portfolio had gross unrealized losses of $124 million and $121 million as of March 28, 2009 and September 27, 2008, respectively, which were partially offset by gross unrealized gains of $55 million and $4 million as of March 28, 2009 and September 27, 2008, respectively. In both periods, the gross unrealized losses primarily related to long-term marketable securities. The Company considers the declines in market value of its marketable securities investment portfolio to be temporary in nature. The unrealized losses on the Company’s marketable securities were caused primarily by changes in market interest rates, specifically widening credit spreads. The Company has the intent and ability to hold such investments for a sufficient period of time to allow for recovery of the principal amounts invested. Accordingly, no declines in fair value were recognized in the Company’s Condensed Statements of Operations during the three- and six-month periods ended March 28, 2009 and March 29, 2008. The Company may sell certain of its marketable securities prior to their stated maturities for strategic purposes, in anticipation of credit deterioration, or for duration management. The Company recognized no material net gains or losses during the three- and six-month periods ended March 28, 2009 and March 29, 2008 related to such sales.

Other Income and Expense

Total other income and expense decreased $42 million or 21% to $158 million during the first quarter of 2009 compared to $200 million in the first quarter of 2008. The overall decrease in other income and expense is attributable to the decline in interest rates during the first quarter of 2009 as compared to the first quarter of 2008, partially offset by the Company’s higher cash, cash equivalents and marketable securities balances. The weighted-average interest rate earned by the Company on its cash, cash equivalents and marketable securities decreased to 2.37% in the first quarter of 2009 from 4.94% in the first quarter of 2008.

The Company’s investment portfolio had gross unrealized losses of $122 million and $121 million as of December 27, 2008 and September 27, 2008, respectively, which was partially offset by gross unrealized gains of $83 million and $4 million as of December 27, 2008 and September 27, 2008, respectively. In both periods, the gross unrealized losses primarily related to long-term marketable securities. The Company considers the declines in market value of its marketable securities investment portfolio to be temporary in nature. The unrealized losses on the Company’s marketable securities were caused primarily by changes in market interest rates, specifically, widening credit spreads. The Company has the intent and ability to hold such investments for a sufficient period of time to allow for recovery of the principal amounts invested. Accordingly, no declines in fair value were recognized in the Company’s Condensed Statements of Operations. The Company may sell its marketable securities prior to their stated maturities for strategic purposes, in anticipation of credit deterioration, or for duration management. The Company recognized no material net gains or losses during the first quarters of 2009 or 2008 related to such sales.

Other Income and Expense

Other income and expense for the three fiscal years ended September 27, 2008, are as follows (in millions):

Total other income and expense increased $21 million to $620 million during 2008 as compared to $599 million and $365 million in 2007 and 2006, respectively. While the Company’s cash, cash equivalents and short-term investment balances increased by 59% in 2008, other income and expense increased only 4% due to the decline in the weighted average interest rate earned of 3.44%. The overall increase in other income and expense is attributable to the Company’s higher cash and short-term investment balances, which more than offset the decline in interest rates during 2008 as compared to 2007. The weighted average interest rate earned by the Company on its cash, cash equivalents, and short-term investments was 5.27% and 4.58% during 2007 and 2006, respectively. During 2008, 2007 and 2006, the Company had no debt outstanding and accordingly did not incur any related interest expense.

Other Income and Expense

Total other income and expense decreased $37 million or 24% to $118 million during the third quarter of 2008 compared to the same period in 2007, but increased $51 million or 12% during the first nine months of 2008 compared to the same period in 2007. These fluctuations were attributable to lower interest income as a result of declining market interest rates, which were partially offset by higher cash and short-term investment balances. The Company’s higher investment balances more than offset the decline in interest rates during the first nine months of 2008 as compared to the same period in 2007. The weighted-average interest rate earned by the Company on its cash, cash equivalents and short-term investments decreased to 2.66% in the third quarter of 2008 from 3.93% in the second quarter of 2008 and 5.27% in the third quarter of 2007.

Other Income and Expense

Total other income and expense increased $14 million or 9% to $162 million during the second quarter of 2008 compared to the same period in 2007, and increased $88 million or 32% during the first six months of 2008 compared to the same period in 2007. These increases are attributable primarily to higher interest income from the larger cash and short-term investment balances despite lower investment yields resulting from declining market interest rates. The weighted-average interest rate earned by the Company on its cash, cash equivalents and short-term investments decreased to 3.93% in the second quarter of 2008 from 5.28% in the second quarter of 2007.

Other Income and Expense

Total other income and expense increased $74 million or 59% to $200 million during the first quarter of 2008 compared to $126 million in the first quarter of 2007. This increase is primarily attributable to higher interest income from the larger cash and short-term investment balances despite lower investment yields resulting from declining market interest rates. The weighted-average interest rate earned by the Company on its cash, cash equivalents and short-term investments decreased to 4.94% in the first quarter of 2008 from 5.25% in the first quarter of 2007.

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Other Income and Expense

Other Income and Expense

Other Income and Expense

Other income and expense for the three and nine-month periods ended June 30, 2007 and July 1, 2006 were as follows (in millions):

Total other income and expense increased $60 million or 63% during the third quarter of 2007 compared to the same period in 2006, and increased $177 million or 70% during the first nine months of 2007 compared to the same period in 2006.  The increases were attributable primarily to higher cash and short-term investment balances and increased investment yields resulting from higher market interest rates. The weighted-average interest rate earned by the Company on its cash, cash equivalents and short-term investments increased to 5.27% in the third quarter of 2007 from 4.77% in the third quarter of 2006.

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Other Income and Expense

Other income and expense for the three and six-month periods ended March 31, 2007 and April 1, 2006 were as follows (in millions):

Total other income and expense increased $72 million or 95% during the second quarter of 2007 compared to the same period in 2006, and increased $117 million or 75% during the first six months of 2007 compared to the same period in 2006. The increases were attributable primarily to higher cash and short-term investment balances and increased investment yields resulting from higher market interest rates. The weighted-average interest rate earned by the Company on its cash, cash equivalents and short-term investments increased to 5.28% in the second quarter of 2007 from 4.31% in the second quarter of 2006.

Other Income and Expense

Other income and expense for the three months ended December 30, 2006 and December 31, 2005 was as follows (in millions):

Interest income increased $45 million or 51% to $133 million during the first quarter of 2007 compared to $88 million in the first quarter of 2006. This increase is attributable primarily to higher cash and short-term investment balances and increased investment yields resulting from higher market interest rates. The weighted-average interest rate earned by the Company on its cash, cash equivalents and short-term investments increased to 5.25% in the first quarter of 2007 from 3.89% in the first quarter of 2006.

Other Income and Expense

(1) See Note 2, “Restatement of Condensed Consolidated Financial Statements.”