Cupertino, CA-Based Technology Company Apple Dec 2017 Quarter Operating Results Were Good But Far From Great .................................................................................. Dec 2017 Quarter Revenues Were Up 13% as Compared to Sept 2017 Quarter Revenues Up 12% and Fiscal Year End (FYE) Sept 2017 Annual Revenues Up a Lower 6% .................................................................................. Dec 2017 Quarter Operating Income Was Up 12% as Compared to Sept 2017 Quarter Operating Income Up 12% and FYE Sept 2017 Annual Operating Income Up Only 2% .................................................................................. Dec 2017 Quarter Pretax Income Was Up 12% as Compared to Sept 2017 Quarter Pretax Income Up a Bit Higher 14% and FYE Sept 2017 Annual Pretax Income Up Only 4% .................................................................................. Dec 2017 Quarter Effective Income Tax Rate Was 25.8%, Pretty Consistent With Dec 2016 Quarters 26.0%; Sept 2017 Quarter Effective Income Tax Rate Was 23.0%, Much Lower Than Sept 2016 Quarters 26.0%; and FYE Sept 2017 Annual Effective Income Tax Rate Was 24.6%, Lower Than FYE Sept 2016 Annual’s 25.6% .................................................................................. Dec 2017 Quarter Net Income Was Up 12% as Compared to Sept 2017 Quarter Net Income Up Much Higher 19% Due to Lower Tax Rate and FYE Sept 2017 Annual Net Income Up a Lower 6% .................................................................................. Given the Above Excellent Numbers, What is the Problem With Apple’s Dec 2017 Quarter? It’s All About Its Income Taxes and Apple’s Complete Lack of Transparency ...................................................................................... All Other September Fiscal Year end Companies I Have Reviewed Reflected the Trump Tax Bill Impact on Their Dec 2017 Quarter’s Earnings. The One Exception is Apple. They Must Think They Don’t Have To. I Think They Do. It Has To Be Clearly Material. ...................................................................................... I Don’t Have the Data That Apple Has, But When I Run the Numbers Using What Apple Has Shown, Here’s What I Get. You Can Decide Whether It’s Material to Apple and To Its Current and Prospective Investors. ...................................................................................... I See Four Material Components to Apple’s Dec 2017 Quarter. Each One Alone is Material to Apple’s Dec 2017 Quarter Earnings. And there are Probably More Than Four Which Are Material. .................................................................................. Material Component #1 is the Reversal of the Deferred Income Tax Liability Related To Its Cumulative Unremitted Foreign Earnings Not Intended To Be Permanently Invested Outside of the US. That Deferred Income Tax Liability on the Books at the End of Sept 2017 was $35.355 Bil. It Has Been Growing Fast and the Balance a Year Earlier Was $31.436 Bil. I Roughly Project That the Balance at Dec 21, 2017 Was Roughly $37.6 Bil. It Was Set Up Assuming a US Federal Income Tax Rate of 35%. With the Trump Tax Bill Which Brings Down the US Federal Income Tax Rate By 40% to 21%, Apple Must Write That Liability Down By Roughly 40% X $37.6 Bil or By Roughly $15 Bil. Is That Material To Apple’s Dec 2017 Earnings? Absolutely. Apple’s Dec 2017 Quarter Net Income Was $20 Bil. Some Pundits View 5% of Net Income as Material and $15 Bil is 75% of 20 Bil. .................................................................................. Material Component #2 is the Reversal of the Net Deferred Income Tax Asset After Removing the Above Deferred Income Tax Liability of $37.6 Bil Imbedded in the Net Deferred Income Tax Asset. I Roughly Project a Net Deferred Income Tax Asset of $10 Bil at Dec 21, 2017. It Also Must Be Marked Down 40%, Which Results in $4 Bil of Dec 2017 Qtr Income Tax Expense. Is It Material? Absolutely. 40% X $10 Bil = $4 Bil, Which is 20% of Apple’s Dec 2017 Quarter Net Income of $20 Bil. .................................................................................. Material Component #3 is the Tax Cost of the Mandatory Repatriation of Cumulative Foreign Earnings Related To Foreign Earnings Previously Considered Permanently Invested Outside of the US, Which Were $128.7 Bil at the end of Sept 2017 and Which I Project To Be Roughly $134 at Dec 21, 2017. If I Use a 15.5% Income Tax Rate on It, I get a Tax Cost of Repatriation of Roughly $20.8 Bil, Which Exceeds Apple’s Dec 2017 Quarter Net Income of $20 Bil. With Apple’s Exceptional Creativity, If It Finds a Way To Bring That Income Tax Rate Down To Say 10%, the Tax Cost of Repatriation is Roughly $13.4 Bil. Either Number is Clearly Material. .................................................................................. Material Component #4 is the Reduction in the Tax Cost of Repatriation Related to the Cumulative Foreign Earnings That Were Previously Not Invested Permanently. The Deferred Income Tax Liability on the Books Was Previously $37.6, But Then Above Written Down By 40% To Roughly $22.6 Bil. This $22.6 Bil is Now at a 21% Income Tax Rate. The Reduction Down to an assumed 15.5% Repatriation Rate Would Be 5.5%/21%, or 26.19%, X $22.6 Bil Which is Roughly $5.9 Bil, Which is 30% of Apple’s Dec 2017 Quarter Net Income and Thus Material. If Instead, Apple Figures Out a Way To Bring the Tax Cost of Repatriation Down To Say 10%, Then the Reduction of the Tax Cost of Repatriation Would Be 11%/21%, or 52.38%, X $22.6 Bil or $11.8 Bil, Which is Clearly Material. .................................................................................. Since Each of These Four Amounts Are So Huge and Directly Impact US GAAP Dec 2017 Quarter Net Income, the Strategy To Just Net Them All as One Number and To Not Disclose Each Component Borders on Financial Fraud. And a Strategy To Not Even Disclose the Single Netted Income Tax Expense or Tax Benefit Amount Which is Instead Buried in a Total Income Tax Expense Amount of $7.0 Bil Would Border Even Much Closer To Financial Fraud.