What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-07-31 compared with 2020-05-01 · 280 added, 176 removed, 563 unchanged (45% of the section changed)

2 unchanged sentences

(In millions, except number of shares which are reflected in thousands and per share amounts)

Three Months Ended

Six Months Ended

Three Months Ended Nine Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

Products $ 46,529 $ 42,354 $ 170,598 $ 162,354

Services 13,156 11,455 39,219 33,780

Total net sales 59,685 53,809 209,817 196,134

Cost of sales:

Products 32,693 29,473 116,089 109,758

Services 4,312 4,109 13,461 12,297

Total cost of sales 37,005 33,582 129,550 122,055

Gross margin 22,680 20,227 80,267 74,079

Operating expenses:

6 unchanged sentences

Provision for income taxes 1,884 1,867 7,452 8,040

Net income $ 11,253 $ 10,044 $ 44,738 $ 41,570

Earnings per share:

Basic $ 2.61 $ 2.20 $ 10.25 $ 8.92

Diluted $ 2.58 $ 2.18 $ 10.16 $ 8.86

Shares used in computing earnings per share:

Basic 4,312,573 4,570,633 4,362,571 4,660,175

Diluted 4,354,788 4,601,380 4,404,695 4,691,759

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(In millions)

Three Months Ended

Six Months Ended

Three Months Ended Nine Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

$ 11,253 $ 10,044 $ 44,738 $ 41,570

Other comprehensive income/(loss):

Change in foreign currency translation, net of tax

194 ( 219 ) ( 170 ) ( 123 )

Change in unrealized gains/losses on derivative instruments, net of tax:

Change in fair value of derivatives

78 ( 108 ) 46 ( 492 )

Adjustment for net (gains)/losses realized and included in net income

( 1,120 ) ( 44 ) ( 884 ) ( 107 )

Total change in unrealized gains/losses on derivative instruments

( 1,042 ) ( 152 ) ( 838 ) ( 599 )

Change in unrealized gains/losses on marketable debt securities, net of tax:

Change in fair value of marketable debt securities

3,098 1,253 898 3,405

Adjustment for net (gains)/losses realized and included in net income

( 11 ) ( 22 ) 8 43

Total change in unrealized gains/losses on marketable debt securities

3,087 1,231 906 3,448

Total other comprehensive income/(loss) 2,239 860 ( 102 ) 2,726

9 unchanged sentences

Accounts receivable, net 17,882 22,926

Inventories 3,978 4,106

Vendor non-trade receivables 14,193 22,878

6 unchanged sentences

Total non-current assets

177,279 175,697

$ 317,344 $ 338,516

LIABILITIES AND SHAREHOLDERS’ EQUITY:

3 unchanged sentences

Deferred revenue 6,313 5,522

Commercial paper and repurchase agreement

Commercial paper and repurchase agreements 11,166 5,980

Term debt 7,509 10,260

Total current liabilities 95,318 105,718

Non-current liabilities:

94,048 91,807

Other non-current liabilities

55,696 50,503

Total non-current liabilities

149,744 142,310

Total liabilities

245,062 248,028

Commitments and contingencies

3 unchanged sentences

4,283,939 and 4,443,236 shares issued and outstanding, respectively

48,696 45,174

Retained earnings 24,136 45,898

6 unchanged sentences

(In millions, except per share amounts)

Three Months Ended

Six Months Ended

Three Months Ended Nine Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

Total shareholders’ equity, beginning balances $ 78,425 $ 105,860 $ 90,488 $ 107,147

3 unchanged sentences

Common stock withheld related to net share settlement of equity awards

( 1,071 ) ( 958 ) ( 2,123 ) ( 1,885 )

Share-based compensation 1,735 1,527 5,215 4,664

2 unchanged sentences

Beginning balances 33,182 64,558 45,898 70,400

Net income 11,253 10,044 44,738 41,570

Dividends and dividend equivalents declared ( 3,611 ) ( 3,580 ) ( 10,528 ) ( 10,605 )

Common stock withheld related to net share settlement of equity awards

( 688 ) ( 336 ) ( 1,320 ) ( 944 )

Common stock repurchased ( 16,000 ) ( 16,962 ) ( 54,516 ) ( 49,198 )

12 unchanged sentences

(In millions)

Six Months Ended

Nine Months Ended

2020 June 29,

Cash, cash equivalents and restricted cash, beginning balances $ 50,224 $ 25,913

Operating activities:

Net income 44,738 41,570

Adjustments to reconcile net income to cash generated by operating activities:

1 unchanged sentence

Share-based compensation expense 5,105 4,569

Deferred income tax benefit

Deferred income tax expense/(benefit) 182 ( 38 )

Other ( 94 ) ( 340 )

Changes in operating assets and liabilities:

Accounts receivable, net 5,149 9,013

Inventories 10 496

Vendor non-trade receivables 8,685 13,483

11 unchanged sentences

Purchases of non-marketable securities

( 210 ) ( 632 )

Proceeds from non-marketable securities 58 1,526

Other ( 689 ) ( 268 )

Cash generated by/(used in) investing activities ( 9,820 ) 46,694

7 unchanged sentences

Proceeds from/(Repayments of) commercial paper, net 31 ( 2,026 )

Proceeds from repurchase agreement

Proceeds from repurchase agreements 5,165 —

Other ( 120 ) ( 83 )

Cash used in financing activities ( 65,463 ) ( 69,937 )

16 unchanged sentences

Actual results could differ materially from those estimates.

Certain prior period amounts in the condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation.

These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the fiscal year ended September 28, 2019 (the “2019 Form 10-K”).

17 unchanged sentences

Earnings Per Share

The following table shows the computation of basic and diluted earnings per share for the three- and six-month periods ended March 28, 2020 and March 30, 2019 (net income in millions and shares in thousands):

Three Months Ended

Six Months Ended

The following table shows the computation of basic and diluted earnings per share for the three- and nine-month periods ended June 27, 2020 and June 29, 2019 (net income in millions and shares in thousands):

Three Months Ended Nine Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

Net income $ 11,253 $ 10,044 $ 44,738 $ 41,570

Weighted-average basic shares outstanding 4,312,573 4,570,633 4,362,571 4,660,175

3 unchanged sentences

Diluted earnings per share $ 2.58 $ 2.18 $ 10.16 $ 8.86

Potentially dilutive securities representing 31.1 million and 30.0 million shares of common stock were excluded from the computation of diluted earnings per share for the three- and six-month periods ended March 30, 2019 , respectively, because their effect would have been antidilutive.

Potentially dilutive securities representing 1.5 million and 20.5 million shares of common stock were excluded from the computation of diluted earnings per share for the three- and nine-month periods ended June 29, 2019, respectively, because their effect would have been antidilutive.

Note 2 – Revenue Recognition

31 unchanged sentences

Deferred Revenue

As of March 28, 2020 and September 28, 2019 , the Company had total deferred revenue of $ 9.4 billion and $ 8.1 billion , respectively.

As of March 28, 2020 , the Company expects 63 % of total deferred revenue to be realized in less than a year, 28 % within one-to-two years, 7 % within two-to-three years and 2 % in greater than three years.

As of June 27, 2020 and September 28, 2019, the Company had total deferred revenue of $ 9.8 billion and $ 8.1 billion, respectively.

As of June 27, 2020, the Company expects 65 % of total deferred revenue to be realized in less than a year, 26 % within one-to-two years, 7 % within two-to-three years and 2 % in greater than three years.

Disaggregated Revenue

Net sales disaggregated by significant products and services for the three- and six-month periods ended March 28, 2020 and March 30, 2019 were as follows (in millions):

Three Months Ended

Six Months Ended

Net sales disaggregated by significant products and services for the three- and nine-month periods ended June 27, 2020 and June 29, 2019 were as follows (in millions):

Three Months Ended Nine Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

$ 26,418 $ 25,986 $ 111,337 $ 109,019

7,079 5,820 19,590 18,749

6,582 5,023 16,927 16,624

Wearables, Home and Accessories (1)(2)

6,450 5,525 22,744 17,962

13,156 11,455 39,219 33,780

Total net sales (4)

$ 59,685 $ 53,809 $ 209,817 $ 196,134

(1) Products net sales include amortization of the deferred value of unspecified software upgrade rights, which are bundled in the sales price of the respective product.

(2) Wearables, Home and Accessories net sales include sales of AirPods®, Apple TV®, Apple Watch®, Beats® products, HomePod®, iPod touch® and Apple-branded and third-party accessories.

Services net sales include sales from the Company’s digital content stores and streaming services, AppleCare®, licensing and other services.

(3) Services net sales include sales from the Company’s digital content stores and streaming services, AppleCare®, Advertising and other services.

Services net sales also include amortization of the deferred value of Maps, Siri, and free iCloud storage and Apple TV + services, which are bundled in the sales price of certain products.

Includes $ 1.9 billion of revenue recognized in the three months ended March 28, 2020 that was included in deferred revenue as of December 28, 2019 , $ 1.9 billion of revenue recognized in the three months ended March 30, 2019 that was included in deferred revenue as of December 29, 2018 , $ 3.0 billion of revenue recognized in the six months ended March 28, 2020 that was included in deferred revenue as of September 28, 2019 , and $ 3.8 billion of revenue recognized in the six months ended March 30, 2019 that was included in deferred revenue as of September 29, 2018 .

The Company’s proportion of net sales by disaggregated revenue source was generally consistent for each reportable segment in Note 11, “Segment Information and Geographic Data” for the three- and six-month periods ended March 28, 2020 and March 30, 2019 .

(4) Includes $ 2.1 billion of revenue recognized in the three months ended June 27, 2020 that was included in deferred revenue as of March 28, 2020, $ 2.0 billion of revenue recognized in the three months ended June 29, 2019 that was included in deferred revenue as of March 30, 2019, $ 4.0 billion of revenue recognized in the nine months ended June 27, 2020 that was included in deferred revenue as of September 28, 2019, and $ 4.9 billion of revenue recognized in the nine months ended June 29, 2019 that was included in deferred revenue as of September 29, 2018.

The Company’s proportion of net sales by disaggregated revenue source was generally consistent for each reportable segment in Note 11, “Segment Information and Geographic Data” for the three- and nine-month periods ended June 27, 2020 and June 29, 2019.

| Q3 2020 Form 10-Q | 8

1 unchanged sentence

Cash, Cash Equivalents and Marketable Securities

The following tables show the Company’s cash and marketable securities by significant investment category as of March 28, 2020 and September 28, 2019 (in millions):

March 28, 2020

The following tables show the Company’s cash and marketable securities by significant investment category as of June 27, 2020 and September 28, 2019 (in millions):

June 27, 2020

Cost Unrealized

Gains Unrealized

Value Cash and

Equivalents Current

Securities Non-Current Marketable Securities

Cash $ 20,253 $ — $ — $ 20,253 $ 20,253 $ — $ —

Level 1 (1) :

Money market funds 7,013 — — 7,013 7,013 — —

Subtotal 7,013 — — 7,013 7,013 — —

Level 2 (2) :

3 unchanged sentences

Certificates of deposit and time deposits

10,247 — — 10,247 3,324 6,787 136

Commercial paper 12,105 — — 12,105 936 11,169 —

2 unchanged sentences

Mortgage- and asset-backed securities

12,530 322 ( 20 ) 12,832 — 917 11,915

Subtotal 164,253 2,672 ( 574 ) 166,351 6,117 59,642 100,592

$ 191,519 $ 2,672 $ ( 574 ) $ 193,617 $ 33,383 $ 59,642 $ 100,592

September 28, 2019

Cost Unrealized

Gains Unrealized

Value Cash and

Equivalents Current

Securities Non-Current

Cash $ 12,204 $ — $ — $ 12,204 $ 12,204 $ — $ —

Level 1 (1) :

Money market funds 15,897 — — 15,897 15,897 — —

Subtotal 15,897 — — 15,897 15,897 — —

Level 2 (2) :

3 unchanged sentences

Certificates of deposit and time deposits

4,041 — — 4,041 2,024 1,922 95

Commercial paper 12,433 — — 12,433 5,193 7,240 —

2 unchanged sentences

Mortgage- and asset-backed securities

14,180 67 ( 73 ) 14,174 — 1,122 13,052

Subtotal 176,876 1,202 ( 281 ) 177,797 20,743 51,713 105,341

$ 204,977 $ 1,202 $ ( 281 ) $ 205,898 $ 48,844 $ 51,713 $ 105,341

(1) Level 1 fair value estimates are based on quoted prices in active markets for identical assets or liabilities.

(2) Level 2 fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

As of March 28, 2020 and September 28, 2019 , total marketable securities included $ 17.6 billion and $ 18.9 billion , respectively, that was restricted from general use, related to the State Aid Decision (refer to Note 5, “Income Taxes”) and other agreements.

Additionally, as of March 28, 2020 , $ 2.6 billion of marketable securities were pledged as collateral under a repurchase agreement (refer to Note 6, “Debt”).

(3) As of June 27, 2020 and September 28, 2019, total marketable securities included $ 18.3 billion and $ 18.9 billion, respectively, that was restricted from general use, related to the State Aid Decision (refer to Note 5, “Income Taxes”) and other agreements.

Additionally, as of June 27, 2020, $ 5.3 billion of marketable securities were pledged as collateral under repurchase agreements (refer to Note 6, “Debt”).

| Q3 2020 Form 10-Q | 9

5 unchanged sentences

When evaluating a marketable debt security for other-than-temporary impairment, the Company reviews factors such as the duration and extent to which the fair value of the security is less than its cost, the financial condition of the issuer and any changes thereto, and the Company’s intent to sell, or whether it will more likely than not be required to sell the security before recovery of its amortized cost basis.

As of March 28, 2020 , the Company does not consider any of its marketable debt securities to be other-than-temporarily impaired.

As of June 27, 2020, the Company does not consider any of its marketable debt securities to be other-than-temporarily impaired.

Non-Marketable Securities

The Company holds non-marketable equity securities of certain privately held companies without readily determinable fair values.

As of March 28, 2020 and September 28, 2019 , the Company’s non-marketable equity securities had a carrying value of $ 2.8 billion and $ 2.9 billion , respectively.

As of June 27, 2020 and September 28, 2019, the Company’s non-marketable equity securities had a carrying value of $ 2.8 billion and $ 2.9 billion, respectively.

Restricted Cash

A reconciliation of the Company’s cash and cash equivalents in the Condensed Consolidated Balance Sheets to cash, cash equivalents and restricted cash in the Condensed Consolidated Statements of Cash Flows as of March 28, 2020 and September 28, 2019 is as follows (in millions):

A reconciliation of the Company’s cash and cash equivalents in the Condensed Consolidated Balance Sheets to cash, cash equivalents and restricted cash in the Condensed Consolidated Statements of Cash Flows as of June 27, 2020 and September 28, 2019 is as follows (in millions):

2020 September 28,

3 unchanged sentences

Cash, cash equivalents and restricted cash $ 35,039 $ 50,224

The Company’s restricted cash primarily consisted of cash to support the Company’s iPhone Upgrade Program and certain partner agreements.

The Company’s restricted cash primarily consisted of cash to support the Company’s iPhone Upgrade Program.

Derivative Financial Instruments

10 unchanged sentences

In both of these cases, the Company designates these instruments as net investment hedges.

| Q2 2020 Form 10-Q | 10

To protect the Company’s foreign currency–denominated term debt or marketable securities from fluctuations in foreign currency exchange rates, the Company may enter into forward contracts, cross-currency swaps or other instruments.

1 unchanged sentence

The Company may designate these instruments as either cash flow or fair value hedges.

As of March 28, 2020 , the Company’s hedged term debt– and marketable securities–related foreign currency transactions are expected to be recognized within 22 years .

As of June 27, 2020, the Company’s hedged term debt– and marketable securities–related foreign currency transactions are expected to be recognized within 22 years.

| Q3 2020 Form 10-Q | 10

The Company may also enter into non-designated foreign currency contracts to offset a portion of the foreign currency exchange gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies.

2 unchanged sentences

The Company designates these instruments as either cash flow or fair value hedges.

As of March 28, 2020 , the Company’s hedged interest rate transactions are expected to be recognized within eight years .

As of June 27, 2020, the Company’s hedged interest rate transactions are expected to be recognized within seven years .

Cash Flow Hedges

15 unchanged sentences

Changes in the fair value of amounts excluded from the assessment of hedge effectiveness are recognized in OCI.

Amounts excluded from the effectiveness assessment of fair value hedges and recognized in OI&E were gains of $ 126 million and $ 254 million for the three- and six-month periods ended March 28, 2020 , respectively.

Amounts excluded from the effectiveness assessment of fair value hedges and recognized in OI&E were gains of $ 119 million and $ 373 million for the three- and nine-month periods ended June 27, 2020, respectively.

Non-Designated Derivatives

3 unchanged sentences

The Company’s accounting treatment for these derivative instruments is based on its hedge designation.

The following tables show the Company’s derivative instruments at gross fair value as of March 28, 2020 and September 28, 2019 (in millions):

March 28, 2020

The following tables show the Company’s derivative instruments at gross fair value as of June 27, 2020 and September 28, 2019 (in millions):

June 27, 2020

Fair Value of

Derivatives Designated

as Hedge Instruments

Fair Value of

as Hedge Instruments Fair Value of

Derivatives Not Designated

as Hedge Instruments

as Hedge Instruments Total

Derivative assets (1) :

3 unchanged sentences

Foreign exchange contracts $ 1,757 $ 277 $ 2,034

Interest rate contracts

September 28, 2019

1 unchanged sentence

Derivatives Designated

as Hedge Instruments

Fair Value of

as Hedge Instruments Fair Value of

Derivatives Not Designated

as Hedge Instruments

as Hedge Instruments Total

Derivative assets (1) :

8 unchanged sentences

| Q3 2020 Form 10-Q | 12

The following table shows the pre-tax gains and losses of the Company’s derivative and non-derivative instruments designated as cash flow and net investment hedges in OCI and the Condensed Consolidated Statements of Operations for the three- and six-month periods ended March 28, 2020 and March 30, 2019 (in millions):

Three Months Ended

Six Months Ended

The following table shows the pre-tax gains and losses of the Company’s derivative and non-derivative instruments designated as cash flow and net investment hedges in OCI and the Condensed Consolidated Statements of Operations for the three- and nine-month periods ended June 27, 2020 and June 29, 2019 (in millions):

Three Months Ended Nine Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

Gains/(Losses) recognized in OCI – included in effectiveness assessment:

2 unchanged sentences

Interest rate contracts ( 6 ) — ( 72 ) —

Total $ 360 $ ( 147 ) $ 103 $ ( 689 )

Net investment hedges:

4 unchanged sentences

Interest rate contracts ( 3 ) ( 2 ) ( 6 ) ( 5 )

Amounts excluded from the effectiveness assessment of the Company’s hedges and recognized in OCI were gains of $ 258 million and $ 169 million for the three- and six-month periods ended March 28, 2020 , respectively.

The following tables show information about the Company’s derivative instruments designated as fair value hedges and the related hedged items for the three- and six-month periods ended March 28, 2020 and March 30, 2019 and as of March 28, 2020 (in millions):

Three Months Ended

Six Months Ended

Total $ 1,386 $ 51 $ 1,057 $ 64

Amounts excluded from the effectiveness assessment of the Company’s hedges and recognized in OCI were losses of $ 220 million and $ 51 million for the three- and nine-month periods ended June 27, 2020, respectively.

The following tables show information about the Company’s derivative instruments designated as fair value hedges and the related hedged items for the three- and nine-month periods ended June 27, 2020 and June 29, 2019 and as of June 27, 2020 (in millions):

Three Months Ended Nine Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

Gains/(Losses) on derivative instruments (1) :

1 unchanged sentence

Interest rate contracts 57 671 1,185 1,793

Total $ ( 618 ) $ 535 $ 763 $ 2,302

Gains/(Losses) related to hedged items (1) :

1 unchanged sentence

Fixed-rate debt ( 57 ) ( 671 ) ( 1,185 ) ( 1,793 )

Total $ 618 $ ( 535 ) $ ( 763 ) $ ( 2,301 )

| Q3 2020 Form 10-Q | 13

8 unchanged sentences

(3) The carrying amounts of fixed-rate debt instruments that are designated as hedged items in fair value hedges are included in current term debt and non-current term debt in the Condensed Consolidated Balance Sheet.

The following table shows the notional amounts of the Company’s outstanding derivative instruments and credit risk amounts associated with outstanding or unsettled derivative instruments as of March 28, 2020 and September 28, 2019 (in millions):

March 28, 2020

September 28, 2019

The following table shows the notional amounts of the Company’s outstanding derivative instruments and credit risk amounts associated with outstanding or unsettled derivative instruments as of June 27, 2020 and September 28, 2019 (in millions):

June 27, 2020 September 28, 2019

Amount Credit Risk

Amount Notional

Amount Credit Risk

Instruments designated as accounting hedges:

11 unchanged sentences

The Company presents its derivative assets and derivative liabilities at their gross fair values in its Condensed Consolidated Balance Sheets.

As of March 28, 2020 and September 28, 2019 , the net cash collateral received by the Company related to derivative instruments under its collateral security arrangements was $ 2.0 billion and $ 1.6 billion , respectively, which were included in other current liabilities in the Condensed Consolidated Balance Sheets.

As of June 27, 2020 and September 28, 2019, the net cash collateral received by the Company related to derivative instruments under its collateral security arrangements was $ 1.2 billion and $ 1.6 billion, respectively, which were included in other current liabilities in the Condensed Consolidated Balance Sheets.

Under master netting arrangements with the respective counterparties to the Company’s derivative contracts, the Company is allowed to net settle transactions with a single net amount payable by one party to the other.

As of March 28, 2020 and September 28, 2019 , the potential effects of these rights of set-off associated with the Company’s derivative contracts, including the effects of collateral, would be a reduction to both derivative assets and derivative liabilities of $ 6.4 billion and $ 2.7 billion , respectively, resulting in net derivative liabilities of $ 279 million and $ 407 million , respectively.

As of June 27, 2020 and September 28, 2019, the potential effects of these rights of set-off associated with the Company’s derivative contracts, including the effects of collateral, would be a reduction to both derivative assets and derivative liabilities of $ 3.3 billion and $ 2.7 billion, respectively, resulting in net derivative liabilities of $ 197 million and $ 407 million, respectively.

| Q3 2020 Form 10-Q | 14

7 unchanged sentences

As such, the Company generally does not assume any recourse or credit risk sharing related to any of these arrangements.

As of both March 28, 2020 and September 28, 2019 , the Company had no customers that individually represented 10% or more of total trade receivables.

The Company’s cellular network carriers accounted for 41 % and 51 % of total trade receivables as of March 28, 2020 and September 28, 2019 , respectively.

As of both June 27, 2020 and September 28, 2019, the Company had no customers that individually represented 10% or more of total trade receivables.

The Company’s cellular network carriers accounted for 32 % and 51 % of total trade receivables as of June 27, 2020 and September 28, 2019, respectively.

Vendor Non-Trade Receivables

1 unchanged sentence

The Company purchases these components directly from suppliers.

As of March 28, 2020 , the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 53 % and 16 % .

As of June 27, 2020, the Company had three vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 49 %, 18 % and 11 %.

As of September 28, 2019, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 59 % and 14 %.

Note 4 – Condensed Consolidated Financial Statement Details

The following tables show the Company’s condensed consolidated financial statement details as of March 28, 2020 and September 28, 2019 (in millions):

The following tables show the Company’s condensed consolidated financial statement details as of June 27, 2020 and September 28, 2019 (in millions):

Property, Plant and Equipment, Net

13 unchanged sentences

Other Income/(Expense), Net

The following table shows the detail of OI&E for the three- and six-month periods ended March 28, 2020 and March 30, 2019 (in millions):

Three Months Ended

Six Months Ended

The following table shows the detail of OI&E for the three- and nine-month periods ended June 27, 2020 and June 29, 2019 (in millions):

Three Months Ended Nine Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

Interest and dividend income $ 901 $ 1,190 $ 2,995 $ 3,855

4 unchanged sentences

Uncertain Tax Positions

As of March 28, 2020 , the total amount of gross unrecognized tax benefits was $ 16.7 billion , of which $ 8.9 billion , if recognized, would impact the Company’s effective tax rate.

The Company had accrued $ 1.3 billion of gross interest and penalties related to income tax matters as of March 28, 2020 .

As of June 27, 2020, the total amount of gross unrecognized tax benefits was $ 16.2 billion, of which $ 8.6 billion, if recognized, would impact the Company’s effective tax rate.

The Company had accrued $ 1.3 billion of gross interest and penalties related to income tax matters as of June 27, 2020.

The Company is subject to taxation and files income tax returns in the U.S.

9 unchanged sentences

The State Aid Decision ordered Ireland to calculate and recover additional taxes from the Company for the period June 2003 through December 2014.

Irish legislative changes, effective as of January 2015, eliminated the application of the tax opinions from that date forward.

The recovery amount was calculated to be € 13.1 billion, plus interest of € 1.2 billion.

The Company and Ireland appealed the State Aid Decision to the General Court of the Court of Justice of the European Union (the “General Court”).

On July 15, 2020, the General Court annulled the State Aid Decision.

The General Court’s judgment is subject to appeal by the European Commission.

On an annual basis, the Company may request approval from the Irish Minister for Finance to reduce the recovery amount for certain taxes paid to other countries.

As of March 28, 2020 , the adjusted recovery amount was € 12.9 billion , excluding interest.

Irish legislative changes, effective as of January 2015, eliminated the application of the tax opinions from that date forward.

The Company believes the State Aid Decision to be without merit and appealed to the General Court of the Court of Justice of the European Union.

Ireland has also appealed the State Aid Decision.

The Company believes that any incremental Irish corporate income taxes potentially due related to the State Aid Decision would be creditable against U.S.

taxes, subject to any foreign tax credit limitations in the U.S.

Tax Cuts and Jobs Act.

The adjusted recovery amount plus interest is funded into escrow, where it will remain restricted from general use pending the conclusion of all appeals.

As of June 27, 2020, the adjusted recovery amount was € 12.9 billion, excluding interest.

The adjusted recovery amount plus interest is funded into escrow, where it will remain restricted from general use pending the conclusion of all legal proceedings.

Refer to the Cash, Cash Equivalents and Marketable Securities section of Note 3, “Financial Instruments” for more information.

1 unchanged sentence

Note 6 – Debt

Commercial Paper and Repurchase Agreement

Commercial Paper and Repurchase Agreements

The Company issues unsecured short-term promissory notes (“Commercial Paper”) pursuant to a commercial paper program.

The Company uses net proceeds from the commercial paper program for general corporate purposes, including dividends and share repurchases.

As of March 28, 2020 and September 28, 2019 , the Company had $ 7.5 billion and $ 6.0 billion of Commercial Paper outstanding, respectively, with maturities generally less than nine months .

The weighted-average interest rate of the Company’s Commercial Paper was 1.39 % and 2.24 % as of March 28, 2020 and September 28, 2019 , respectively.

The following table provides a summary of cash flows associated with the issuance and maturities of Commercial Paper for the six months ended March 28, 2020 and March 30, 2019 (in millions):

Six Months Ended

As of both June 27, 2020 and September 28, 2019, the Company had $ 6.0 billion of Commercial Paper outstanding with maturities generally less than nine months .

The weighted-average interest rate of the Company’s Commercial Paper was 0.77 % and 2.24 % as of June 27, 2020 and September 28, 2019, respectively.

The following table provides a summary of cash flows associated with the issuance and maturities of Commercial Paper for the nine months ended June 27, 2020 and June 29, 2019 (in millions):

Nine Months Ended

2020 June 29,

Maturities 90 days or less:

3 unchanged sentences

Repayments of commercial paper ( 5,743 ) ( 11,283 )

Proceeds from commercial paper, net

Proceeds from/(Repayments of) commercial paper, net ( 370 ) 1,694

Total proceeds from/(repayments of) commercial paper, net $ 31 $ ( 2,026 )

In the second quarter of 2020, the Company entered into an agreement to sell certain of its marketable securities with a promise to repurchase the securities at a specified time and amount (“Repo”).

Due to the Company’s continuing involvement with the marketable securities, the Company accounts for the Repo as a collateralized borrowing.

As of March 28, 2020 , the Company had a $ 2.6 billion Repo liability with a maturity of less than six months , and had pledged $ 2.6 billion of marketable securities as collateral.

As of March 28, 2020 , the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate principal amount of $ 98.0 billion (collectively the “Notes”).

In 2020, the Company entered into agreements to sell certain of its marketable securities with a promise to repurchase the securities at a specified time and amount (“Repos”).

Due to the Company’s continuing involvement with the marketable securities, the Company accounts for its Repos as collateralized borrowings.

As of June 27, 2020, the Company had $ 5.2 billion of Repo liabilities outstanding with maturities of less than three months , and had pledged $ 5.3 billion of marketable securities as collateral.

As of June 27, 2020, the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate principal amount of $ 100.1 billion (collectively the “Notes”).

The Notes are senior unsecured obligations and interest is payable in arrears.

The following table provides a summary of the Company’s term debt as of March 28, 2020 and September 28, 2019 :

(calendar year)

March 28, 2020

September 28, 2019

(in millions)

Interest Rate

(in millions)

The following table provides a summary of the Company’s term debt as of June 27, 2020 and September 28, 2019:

(calendar year) June 27, 2020 September 28, 2019

(in millions) Effective

Interest Rate Amount

(in millions) Effective

Interest Rate

1 unchanged sentence

Floating-rate notes

$ 2,250 0.80 % – 1.49 %

$ 4,250 2.25 % – 3.28 %

Fixed-rate 0.375 % – 4.650 % notes

87,055 0.28 % – 4.78 %

97,429 0.28 % – 4.78 %

First quarter 2020 debt issuance of € 2.0 billion:

Fixed-rate 0.000 % – 0.500 % notes

2,260 0.03 % – 0.56 %

Third quarter 2020 debt issuance of $ 8.5 billion:

Fixed-rate 0.750 % – 2.650 % notes

8,500 0.84 % – 2.72 %

Total term debt 100,065 101,679

Unamortized premium/(discount) and issuance costs, net

( 279 ) ( 224 )

Hedge accounting fair value adjustments 1,771 612

1 unchanged sentence

Total non-current portion of term debt $ 94,048 $ 91,807

| Q3 2020 Form 10-Q | 17

To manage interest rate risk on certain of its U.S.

2 unchanged sentences

dollar–denominated notes.

| Q2 2020 Form 10-Q | 17

A portion of the Company’s Japanese yen–denominated notes is designated as a hedge of the foreign currency exposure of the Company’s net investment in a foreign operation.

As of March 28, 2020 and September 28, 2019 , the carrying value of the debt designated as a net investment hedge was $ 663 million and $ 1.0 billion , respectively.

As of September 28, 2019, a portion of the Company’s Japanese yen–denominated notes with a carrying value of $ 1.0 billion was designated as a hedge of the foreign currency exposure of the Company’s net investment in a foreign operation.

The Company’s Japanese yen–denominated notes matured during the third quarter of 2020 and the associated net investment hedges were terminated.

For further discussion regarding the Company’s use of derivative instruments, refer to the Derivative Financial Instruments section of Note 3, “Financial Instruments.”

The effective interest rates for the Notes include the interest on the Notes, amortization of the discount or premium and, if applicable, adjustments related to hedging.

The Company recognized $ 725 million and $ 1.5 billion of interest cost on its term debt for the three- and six-month periods ended March 28, 2020 , respectively.

The Company recognized $ 828 million and $ 1.6 billion of interest cost on its term debt for the three- and six-month periods ended March 30, 2019 , respectively.

As of March 28, 2020 and September 28, 2019 , the fair value of the Company’s Notes, based on Level 2 inputs, was $ 105.6 billion and $ 107.5 billion , respectively.

The Company recognized $ 664 million and $ 2.1 billion of interest cost on its term debt for the three- and nine-month periods ended June 27, 2020, respectively.

The Company recognized $ 790 million and $ 2.4 billion of interest cost on its term debt for the three- and nine-month periods ended June 29, 2019, respectively.

As of June 27, 2020 and September 28, 2019, the fair value of the Company’s Notes, based on Level 2 inputs, was $ 110.8 billion and $ 107.5 billion, respectively.

Note 7 – Shareholders’ Equity

As of March 28, 2020 , the Company was authorized to purchase up to $ 175 billion of the Company’s common stock under a share repurchase program, of which $ 134.6 billion had been utilized.

During the six months ended March 28, 2020 , the Company repurchased 135.0 million shares of its common stock for $ 38.5 billion , including 30.4 million shares initially delivered under a $ 10.0 billion accelerated share repurchase arrangement (“ASR”) dated November 2019.

On April 30, 2020 , the Company announced the Board of Directors increased the share repurchase program authorization by $ 50 billion .

Share Repurchase Program

As of June 27, 2020, the Company was authorized to purchase up to $ 225 billion of the Company’s common stock under a share repurchase program, of which $ 150.6 billion had been utilized.

During the nine months ended June 27, 2020, the Company repurchased 186.4 million shares of its common stock for $ 54.5 billion, including 35.2 million shares delivered under a $ 10.0 billion November 2019 accelerated share repurchase arrangement (“ASR”) and 15.2 million shares initially delivered under a $ 6.0 billion May 2020 ASR.

The Company’s share repurchase program does not obligate it to acquire any specific number of shares.

Under this program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Under the Company’s ASR, financial institutions deliver shares of the Company’s common stock during the purchase period in exchange for an up-front payment.

The total number of shares ultimately delivered under the ASR, and therefore the average repurchase price paid per share, is determined based on the volume-weighted average price of the Company’s common stock during the purchase period, which will end in May 2020.

Under the Company’s ASRs, financial institutions deliver shares of the Company’s common stock during the purchase period of each ASR in exchange for an up-front payment.

The total number of shares ultimately delivered under the May 2020 ASR, and therefore the average repurchase price paid per share, is determined based on the volume-weighted average price of the Company’s common stock during the purchase period, which will end in or before August 2020.

The shares received are retired in the periods they are delivered, and the up-front payment is accounted for as a reduction to retained earnings in the Company’s Condensed Consolidated Statement of Shareholders’ Equity in the period the payment is made.

Common Stock Split

On July 30, 2020, the Company announced a four -for-one split of its common stock to shareholders of record as of the close of business on August 24, 2020.

Trading of the Company’s common stock will begin on a split-adjusted basis on August 31, 2020.

Note 8 – Comprehensive Income

1 unchanged sentence

dollar as their functional currency, net deferred gains and losses on certain derivative instruments accounted for as hedges, and unrealized gains and losses on marketable debt securities classified as available-for-sale.

The following table shows the pre-tax amounts reclassified from AOCI into the Condensed Consolidated Statements of Operations, and the associated financial statement line items, for the three- and six-month periods ended March 28, 2020 and March 30, 2019 (in millions):

Three Months Ended

Six Months Ended

Comprehensive Income Components

Financial Statement Line Items

| Q3 2020 Form 10-Q | 18

The following table shows the pre-tax amounts reclassified from AOCI into the Condensed Consolidated Statements of Operations, and the associated financial statement line items, for the three- and nine-month periods ended June 27, 2020 and June 29, 2019 (in millions):

Three Months Ended Nine Months Ended

Comprehensive Income Components Financial Statement Line Items June 27,

2020 June 29,

2019 June 27,

2020 June 29,

Unrealized (gains)/losses on derivative instruments:

Foreign exchange contracts

Total net sales

Foreign exchange contracts Total net sales $ ( 270 ) $ ( 68 ) $ ( 333 ) $ ( 102 )

Total cost of sales ( 362 ) 13 ( 521 ) ( 438 )

Other income/(expense), net ( 760 ) 3 ( 212 ) 451

Interest rate contracts

Other income/(expense), net

Interest rate contracts Other income/(expense), net 3 2 6 5

( 1,389 ) ( 50 ) ( 1,060 ) ( 84 )

Unrealized (gains)/losses on marketable debt securities

1 unchanged sentence

Total amounts reclassified from AOCI $ ( 1,403 ) $ ( 78 ) $ ( 1,050 ) $ ( 29 )

| Q2 2020 Form 10-Q | 18

The following table shows the changes in AOCI by component for the six months ended March 28, 2020 (in millions):

The following table shows the changes in AOCI by component for the nine months ended June 27, 2020 (in millions):

Cumulative Foreign

Currency Translation

Unrealized Gains/Losses

on Derivative Instruments

Unrealized Gains/Losses

on Marketable Debt Securities

Currency Translation Unrealized Gains/Losses

on Derivative Instruments Unrealized Gains/Losses

on Marketable Debt Securities Total

Balances as of September 28, 2019 $ ( 1,463 ) $ 172 $ 707 $ ( 584 )

Other comprehensive income/(loss) before reclassifications

( 167 ) 32 1,167 1,032

Amounts reclassified from AOCI — ( 1,060 ) 10 ( 1,050 )

Tax effect ( 3 ) 190 ( 271 ) ( 84 )

Other comprehensive income/(loss) ( 170 ) ( 838 ) 906 ( 102 )

Cumulative effect of change in accounting principle (1)

Balances as of March 28, 2020

Balances as of June 27, 2020 $ ( 1,633 ) $ ( 530 ) $ 1,613 $ ( 550 )

(1) Refer to Note 1, “Summary of Significant Accounting Policies” for more information on the Company’s adoption of ASU 2017-12 at the beginning of the first quarter of 2020.

Note 9 – Benefit Plans

The Company had 193.7 million shares reserved for future issuance under its stock plans as of March 28, 2020 .

The Company had 203.3 million shares reserved for future issuance under its stock plans as of June 27, 2020.

Restricted stock units (“RSUs”) granted under the Company’s stock plans generally vest over four years , based on continued employment, and are settled upon vesting in shares of the Company’s common stock on a one -for-one basis.

2 unchanged sentences

Rule 10b5-1 Trading Plans

During the three months ended March 28, 2020 , Section 16 officers Timothy D.

During the three months ended June 27, 2020, Section 16 officers Katherine L.

Adams, Timothy D.

Cook, Chris Kondo, Luca Maestri, Deirdre O’Brien and Jeffrey Williams had equity trading plans in place in accordance with Rule 10b5-1(c)(1) under the Exchange Act.

An equity trading plan is a written document that pre-establishes the amounts, prices and dates (or formula for determining the amounts, prices and dates) of future purchases or sales of the Company’s stock, including shares acquired under the Company’s employee and director equity plans.

| Q3 2020 Form 10-Q | 19

Restricted Stock Units

A summary of the Company’s RSU activity and related information for the six months ended March 28, 2020 is as follows:

A summary of the Company’s RSU activity and related information for the nine months ended June 27, 2020 is as follows:

(in thousands)

1 unchanged sentence

Grant Date Fair

Value Per RSU

Value Per RSU Aggregate

(in millions)

Balance as of September 28, 2019 81,517 $ 169.18

RSUs granted 37,815 $ 229.58

RSUs vested ( 37,076 ) $ 161.71

RSUs canceled ( 3,122 ) $ 190.50

Balance as of March 28, 2020

The fair value as of the respective vesting dates of RSUs was $ 558 million and $ 4.8 billion for the three- and six-month periods ended March 28, 2020 , respectively, and was $ 348 million and $ 4.4 billion for the three- and six-month periods ended March 30, 2019 , respectively.

| Q2 2020 Form 10-Q | 19

Balance as of June 27, 2020 79,134 $ 200.70 $ 27,984

The fair value as of the respective vesting dates of RSUs was $ 5.0 billion and $ 9.8 billion for the three- and nine-month periods ended June 27, 2020, respectively, and was $ 3.7 billion and $ 8.1 billion for the three- and nine-month periods ended June 29, 2019, respectively.

Share-Based Compensation

The following table shows share-based compensation expense and the related income tax benefit included in the Condensed Consolidated Statements of Operations for the three- and six-month periods ended March 28, 2020 and March 30, 2019 (in millions):

Three Months Ended

Six Months Ended

The following table shows share-based compensation expense and the related income tax benefit included in the Condensed Consolidated Statements of Operations for the three- and nine-month periods ended June 27, 2020 and June 29, 2019 (in millions):

Three Months Ended Nine Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

Share-based compensation expense $ 1,698 $ 1,496 $ 5,105 $ 4,569

Income tax benefit related to share-based compensation expense

As of March 28, 2020 , the total unrecognized compensation cost related to outstanding RSUs and stock options was $ 14.5 billion , which the Company expects to recognize over a weighted-average period of 2.8 years .

$ ( 740 ) $ ( 502 ) $ ( 1,942 ) $ ( 1,583 )

As of June 27, 2020, the total unrecognized compensation cost related to outstanding RSUs and stock options was $ 13.4 billion, which the Company expects to recognize over a weighted-average period of 2.7 years.

Note 10 – Commitments and Contingencies

Accrued Warranty and Guarantees

The following table shows changes in the Company’s accrued warranties and related costs for the three- and six-month periods ended March 28, 2020 and March 30, 2019 (in millions):

Three Months Ended

Six Months Ended

The following table shows changes in the Company’s accrued warranties and related costs for the three- and nine-month periods ended June 27, 2020 and June 29, 2019 (in millions):

Three Months Ended Nine Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

Beginning accrued warranty and related costs $ 3,923 $ 3,487 $ 3,570 $ 3,692

10 unchanged sentences

Therefore, many components used by the Company, including those that are available from multiple sources, are at times subject to industry-wide shortage and significant commodity pricing fluctuations.

| Q3 2020 Form 10-Q | 20

The Company uses some custom components that are not commonly used by its competitors, and new products introduced by the Company often utilize custom components available from only one source.

4 unchanged sentences

Substantially all of the Company’s hardware products are manufactured by outsourcing partners that are located primarily in Asia, with some Mac computers manufactured in the U.S.

| Q2 2020 Form 10-Q | 20

Unconditional Purchase Obligations

1 unchanged sentence

The Company’s unconditional purchase obligations primarily consist of payments for supplier arrangements, Internet and telecommunication services, intellectual property licenses and content creation.

As of March 28, 2020 , the Company’s total future payments under noncancelable unconditional purchase obligations having a remaining term in excess of one year were $ 9.9 billion .

As of June 27, 2020, the Company’s total future payments under noncancelable unconditional purchase obligations having a remaining term in excess of one year were $ 9.2 billion.

Contingencies

4 unchanged sentences

VirnetX, Inc.

(“VirnetX”) filed two lawsuits in the U.S.

District Court for the Eastern District of Texas (the “Eastern Texas District Court”) against the Company alleging that certain Company products infringe four patents (the “VirnetX Patents”) relating to network communications technology (“VirnetX I” and “VirnetX II”).

On September 30, 2016, a jury returned a verdict in VirnetX I against the Company and awarded damages of $ 302 million , which later increased to $ 440 million in post-trial proceedings.

The Company appealed the VirnetX I verdict to the U.S.

Court of Appeals for the Federal Circuit (the “Federal Circuit”).

On April 11, 2018, a jury returned a verdict in VirnetX II against the Company and awarded damages of $ 503 million .

The Company appealed the VirnetX II verdict to the Federal Circuit, and on November 22, 2019, the Federal Circuit affirmed-in-part, reversed-in-part, and remanded VirnetX II back to the Eastern Texas District Court.

The Company has challenged the validity of the VirnetX Patents at the U.S.

Patent and Trademark Office (the “PTO”).

In response, the PTO has declared the VirnetX Patents invalid.

VirnetX appealed the invalidity decision of the PTO to the Federal Circuit.

The Federal Circuit consolidated the Company’s appeal of the Eastern Texas District Court VirnetX I verdict and VirnetX’s appeals from the PTO invalidity proceedings.

On January 15, 2019, the Federal Circuit affirmed the VirnetX I verdict, which the Company subsequently paid, including damages and interest.

On July 8, 2019, the Federal Circuit remanded one of VirnetX’s two appeals of the PTO’s invalidity decisions back to the PTO for further proceedings.

On August 1, 2019, the Federal Circuit affirmed-in-part, vacated-in-part, and remanded back to the PTO portions of VirnetX’s second appeal.

(“VirnetX”) filed a lawsuit against the Company alleging that certain of the Company’s products infringe on patents owned by VirnetX.

On April 11, 2018, a jury returned a verdict against the Company and awarded damages of $ 503 million.

The Company appealed the verdict to the U.S.

Court of Appeals for the Federal Circuit, which remanded the case back to the U.S.

District Court for the Eastern District of Texas, where it is scheduled for a re-trial in August 2020.

The Company has challenged the validity of the patents at issue in the re-trial at the U.S.

Patent and Trademark Office (the “PTO”), and the PTO has declared the patents invalid, subject to further appeal by VirnetX.

iOS Performance Management Cases

7 unchanged sentences

federal and California state class actions.

Under the terms of the settlement, which is subject to the Northern California District Court’s approval, the Company has agreed to pay up to $ 500 million in the aggregate to certain U.S.

Under the terms of the settlement, which the Northern California District Court preliminarily approved in May 2020, the Company has agreed to pay up to $ 500 million in the aggregate to certain U.S.

owners of iPhones if certain conditions are met.

6 unchanged sentences

On March 16, 2020, the French Competition Authority (“FCA”) announced its decision that aspects of the Company’s sales and distribution practices in France violate French competition law, and issued a fine of € 1.1 billion.

The Company strongly disagrees with the FCA’s decision, and plans to appeal.

The Company strongly disagrees with the FCA’s decision, and has appealed.

| Q3 2020 Form 10-Q | 21

17 unchanged sentences

The Company does not include intercompany transfers between segments for management reporting purposes.

The following table shows information by reportable segment for the three- and six-month periods ended March 28, 2020 and March 30, 2019 (in millions):

Three Months Ended

Six Months Ended

The following table shows information by reportable segment for the three- and nine-month periods ended June 27, 2020 and June 29, 2019 (in millions):

Three Months Ended Nine Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

Net sales $ 27,018 $ 25,056 $ 93,858 $ 87,592

Operating income $ 7,974 $ 7,442 $ 28,327 $ 26,329

Net sales $ 14,173 $ 11,925 $ 51,740 $ 45,342

Operating income $ 4,420 $ 3,687 $ 16,667 $ 14,371

Greater China:

Net sales $ 9,329 $ 9,157 $ 32,362 $ 32,544

Operating income $ 3,414 $ 3,221 $ 12,535 $ 12,142

Net sales $ 4,966 $ 4,082 $ 16,395 $ 16,524

Operating income $ 2,114 $ 1,795 $ 7,128 $ 7,199

Rest of Asia Pacific:

Net sales $ 4,199 $ 3,589 $ 15,462 $ 14,132

Operating income $ 1,374 $ 1,155 $ 5,395 $ 4,811

| Q3 2020 Form 10-Q | 22

A reconciliation of the Company’s segment operating income to the Condensed Consolidated Statements of Operations for the three- and six-month periods ended March 28, 2020 and March 30, 2019 is as follows (in millions):

Three Months Ended

Six Months Ended

A reconciliation of the Company’s segment operating income to the Condensed Consolidated Statements of Operations for the three- and nine-month periods ended June 27, 2020 and June 29, 2019 is as follows (in millions):

Three Months Ended Nine Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

Segment operating income $ 19,296 $ 17,300 $ 70,052 $ 64,852

8 unchanged sentences

Payments under the Company’s lease arrangements may be fixed or variable, and variable lease payments are primarily based on purchases of output of the underlying leased assets.

Lease costs associated with fixed payments on the Company’s operating leases were $ 363 million and $ 732 million for the three- and six-month periods ended March 28, 2020 , respectively.

Lease costs associated with variable payments on the Company’s leases were $ 1.9 billion and $ 4.8 billion for the three- and six-month periods ended March 28, 2020 , respectively.

For the three- and six-month periods ended March 28, 2020 , the Company made $ 353 million and $ 702 million of fixed cash payments related to operating leases, respectively.

Non-cash activities involving ROU assets obtained in exchange for lease liabilities were $ 1.2 billion and $ 9.3 billion for the three- and six-month periods ended March 28, 2020 , respectively, including the impact of adopting the new leases standard in the first quarter of 2020.

The following table shows ROU assets and lease liabilities, and the associated financial statement line items, as of March 28, 2020 (in millions):

Lease-Related Assets and Liabilities

Financial Statement Line Items

Lease costs associated with fixed payments on the Company’s operating leases were $ 381 million and $ 1.1 billion for the three- and nine-month periods ended June 27, 2020, respectively.

Lease costs associated with variable payments on the Company’s leases were $ 1.8 billion and $ 6.6 billion f or the three- and nine-month periods ended June 27, 2020, respectively.

For the three- and nine-month periods ended June 27, 2020, the Company made $ 388 million and $ 1.1 billion of fixed cash payments related to operating leases, respectively.

Non-cash activities involving ROU assets obtained in exchange for lease liabilities were $ 403 million and $ 9.7 billion for the three- and nine-month periods ended June 27, 2020, respectively, including the impact of adopting the new leases standard in the first quarter of 2020.

The following table shows ROU assets and lease liabilities, and the associated financial statement line items, as of June 27, 2020 (in millions):

Lease-Related Assets and Liabilities Financial Statement Line Items June 27,

Right-of-use assets:

Operating leases

Other non-current assets

Finance leases

Property, plant and equipment, net

Operating leases Other non-current assets $ 8,164

Finance leases Property, plant and equipment, net 625

Total right-of-use assets $ 8,789

Lease liabilities:

Operating leases

Other current liabilities

Operating leases Other current liabilities $ 1,353

Other non-current liabilities 7,460

Finance leases

Other current liabilities

Finance leases Other current liabilities 20

Other non-current liabilities 630

1 unchanged sentence

| Q3 2020 Form 10-Q | 23

Lease liability maturities as of March 28, 2020 , are as follows (in millions):

2020 (remaining six months)

Lease liability maturities as of June 27, 2020, are as follows (in millions):

Leases Finance

2020 (remaining three months) $ 309 $ 5 $ 314

2021 1,504 41 1,545

2022 1,356 39 1,395

2023 1,183 50 1,233

2024 994 27 1,021

Thereafter 4,511 920 5,431

Total undiscounted liabilities 9,857 1,082 10,939

1 unchanged sentence

Total lease liabilities $ 8,813 $ 650 $ 9,463

The weighted-average remaining lease term and discount rate related to the Company’s lease liabilities as of March 28, 2020 were 10.7 years and 2.2 % , respectively.

The weighted-average remaining lease term and discount rate related to the Company’s lease liabilities as of June 27, 2020 were 10.5 years and 2.2 % , respectively.

The Company’s lease discount rates are generally based on estimates of its incremental borrowing rate, as the discount rates implicit in the Company’s leases cannot be readily determined.

As of March 28, 2020 , the Company had $ 1.8 billion of future payments under additional leases, primarily for corporate facilities and retail space, that had not yet commenced.

As of June 27, 2020, the Company had $ 1.8 billion o f future payments under additional leases, primarily for corporate facilities and retail space, that had not yet commenced.

These leases will commence between 2020 and 2022, with lease terms ranging from less than 1 year to 20 years.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements