What changed in this filing

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Item 1. Financial Statements

2021-01-28 compared with 2020-07-31 · 157 added, 244 removed, 599 unchanged (40% 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 Nine Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

Three Months Ended

2020 December 28,

Products $ 95,678 $ 79,104

25 unchanged sentences

(In millions)

Three Months Ended Nine Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

Three Months Ended

2020 December 28,

$ 28,755 $ 22,236

1 unchanged sentence

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

4 unchanged sentences

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

1 unchanged sentence

Total change in unrealized gains/losses on marketable debt securities

3,087 1,231 906 3,448

Total other comprehensive income/(loss) 585 30

25 unchanged sentences

Deferred revenue 7,395 6,643

Commercial paper and repurchase agreements 11,166 5,980

Commercial paper 5,000 4,996

Term debt 7,762 8,773

22 unchanged sentences

(In millions, except per share amounts)

Three Months Ended Nine Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

Three Months Ended

2020 December 28,

Total shareholders’ equity, beginning balances $ 65,339 $ 90,488

13 unchanged sentences

Common stock repurchased ( 24,000 ) ( 20,000 )

Cumulative effects of changes in accounting principles — — ( 136 ) 2,501

Cumulative effect of change in accounting principle — ( 136 )

Ending balances 14,301 43,977

2 unchanged sentences

Other comprehensive income/(loss) 585 30

Cumulative effects of changes in accounting principles — — 136 89

Cumulative effect of change in accounting principle — 136

Ending balances 179 ( 418 )

5 unchanged sentences

(In millions)

Nine Months Ended

2020 June 29,

Three Months Ended

2020 December 28,

Cash, cash equivalents and restricted cash, beginning balances $ 39,789 $ 50,224

4 unchanged sentences

Share-based compensation expense 2,020 1,710

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

Deferred income tax benefit ( 58 ) ( 349 )

Other 25 ( 142 )

14 unchanged sentences

Payments made in connection with business acquisitions, net ( 9 ) ( 958 )

Purchases of non-marketable securities

( 210 ) ( 632 )

Proceeds from non-marketable securities 58 1,526

Other 204 ( 207 )

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

Cash used in investing activities ( 8,584 ) ( 13,668 )

Financing activities:

6 unchanged sentences

Proceeds from/(Repayments of) commercial paper, net 22 ( 979 )

Proceeds from repurchase agreements 5,165 —

Other ( 22 ) ( 16 )

Cash used in financing activities ( 32,249 ) ( 25,407 )

Increase/(Decrease) in cash, cash equivalents and restricted cash ( 15,185 ) 26,238

Decrease in cash, cash equivalents and restricted cash ( 2,070 ) ( 8,559 )

Cash, cash equivalents and restricted cash, ending balances $ 37,719 $ 41,665

14 unchanged sentences

Actual results could differ materially from those estimates.

Certain prior period amounts in the 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 26, 2020 (the “2020 Form 10-K”).

The Company’s fiscal year is the 52- or 53-week period that ends on the last Saturday of September.

A 14th week is included in the first fiscal quarter every five or six years to realign the Company’s fiscal quarters with calendar quarters.

An additional week is included in the first fiscal quarter every five or six years to realign the Company’s fiscal quarters with calendar quarters.

The Company’s fiscal years 2021 and 2020 span 52 weeks each.

Unless otherwise stated, references to particular years, quarters, months and periods refer to the Company’s fiscal years ended in September and the associated quarters, months and periods of those fiscal years.

Common Stock Split

On August 28, 2020, the Company effected a four -for-one stock split to shareholders of record as of August 24, 2020.

All share, restricted stock unit (“RSU”) and per share or per RSU information has been retroactively adjusted to reflect the stock split.

Recently Adopted Accounting Pronouncements

At the beginning of the first quarter of 2020, the Company adopted the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Update (“ASU”) No.

2016-02, Leases (Topic 842) (“ASU 2016-02”), and additional ASUs issued to clarify and update the guidance in ASU 2016-02 (collectively, the “new leases standard”), which modifies lease accounting for lessees to increase transparency and comparability by recording lease assets and liabilities for operating leases and disclosing key information about leasing arrangements.

The Company adopted the new leases standard utilizing the modified retrospective transition method, under which amounts in prior periods presented were not restated.

For contracts existing at the time of adoption, the Company elected to not reassess (i) whether any are or contain leases, (ii) lease classification, and (iii) initial direct costs.

Upon adoption, the Company recorded $ 7.5 billion of right-of-use (“ROU”) assets and $ 8.1 billion of lease liabilities on its Condensed Consolidated Balance Sheet.

At the beginning of the first quarter of 2020, the Company adopted FASB ASU No.

2017-12, Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”).

ASU 2017-12 expands component and fair value hedging, specifies the presentation of the effects of hedging instruments, eliminates the separate measurement and presentation of hedge ineffectiveness, and updates disclosure requirements related to hedging.

Financial Instruments – Credit Losses

At the beginning of the first quarter of 2021, the Company adopted the Financial Accounting Standards Board’s Accounting Standards Update No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which modifies the measurement of expected credit losses on certain financial instruments.

The Company adopted ASU 2016-13 utilizing the modified retrospective transition method.

Upon adoption, the Company recorded a $ 136 million increase in accumulated other comprehensive income/(loss) (“AOCI”) and a corresponding decrease in retained earnings in the Condensed Consolidated Statement of Shareholders’ Equity.

| Q3 2020 Form 10-Q | 6

The adoption of ASU 2016-13 did not have a material impact on the Company’s condensed consolidated financial statements.

Earnings Per Share

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,

The following table shows the computation of basic and diluted earnings per share for the three months ended December 26, 2020 and December 28, 2019 (net income in millions and shares in thousands):

Three Months Ended

2020 December 28,

Net income $ 28,755 $ 22,236

4 unchanged sentences

Diluted earnings per share $ 1.68 $ 1.25

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.

| Q1 2021 Form 10-Q | 6

Note 2 – Revenue Recognition

6 unchanged sentences

The Company records reductions to Products net sales related to future product returns, price protection and other customer incentive programs based on the Company’s expectations and historical experience.

For arrangements with multiple performance obligations, which represent promises within an arrangement that are capable of being distinct, the Company allocates revenue to all distinct performance obligations based on their relative stand-alone selling prices (“SSPs”).

For arrangements with multiple performance obligations, which represent promises within an arrangement that are distinct, the Company allocates revenue to all distinct performance obligations based on their relative stand-alone selling prices (“SSPs”).

When available, the Company uses observable prices to determine SSPs.

11 unchanged sentences

Costs incurred to provide product-related bundled services and unspecified software upgrade rights are recognized as cost of sales as incurred.

| Q3 2020 Form 10-Q | 7

For certain long-term service arrangements, the Company has performance obligations for services it has not yet delivered.

4 unchanged sentences

The Company considers multiple factors when determining whether it obtains control of third-party products including, but not limited to, evaluating if it can establish the price of the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the product.

For third-party applications sold through the App Store ® , Mac App Store, TV App Store and Watch App Store and certain digital content sold through the Company’s other digital content stores, the Company does not obtain control of the product before transferring it to the customer.

For third-party applications sold through the App Store ® and certain digital content sold through the Company’s other digital content stores, the Company does not obtain control of the product before transferring it to the customer.

Therefore, the Company accounts for such sales on a net basis by recognizing in Services net sales only the commission it retains.

1 unchanged sentence

Deferred Revenue

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.

As of December 26, 2020 and September 26, 2020, the Company had total deferred revenue of $ 11.6 billion and $ 10.2 billion, respectively.

As of December 26, 2020, the Company expects 64 % of total deferred revenue to be realized in less than a year, 26 % within one-to-two years, 8 % within two-to-three years and 2 % in greater than three years.

| Q1 2021 Form 10-Q | 7

Disaggregated Revenue

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

Net sales disaggregated by significant products and services for the three months ended December 26, 2020 and December 28, 2019 were as follows (in millions):

Three Months Ended

2020 December 28,

$ 65,597 $ 55,957

6 unchanged sentences

(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.

(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.

(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

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

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

(4) Includes $ 2.5 billion of revenue recognized in the three months ended December 26, 2020 that was included in deferred revenue as of September 26, 2020 and $ 1.9 billion of revenue recognized in the three months ended December 28, 2019 that was included in deferred revenue as of September 28, 2019.

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 months ended December 26, 2020 and December 28, 2019.

Note 3 – Financial Instruments

Cash, Cash Equivalents and Marketable Securities

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

The following tables show the Company’s cash and marketable securities by significant investment category as of December 26, 2020 and September 26, 2020 (in millions):

December 26, 2020

Cost Unrealized

2 unchanged sentences

Equivalents Current

Securities Non-Current Marketable Securities

Securities Non-Current

Cash $ 18,729 $ — $ — $ 18,729 $ 18,729 $ — $ —

1 unchanged sentence

Money market funds

Subtotal 7,013 — — 7,013 7,013 — —

6,312 — — 6,312 6,312 — —

Level 2 (2) :

11 unchanged sentences

$ 192,582 $ 3,130 $ ( 141 ) $ 195,571 $ 36,010 $ 40,816 $ 118,745

| Q1 2021 Form 10-Q | 8

September 26, 2020

7 unchanged sentences

Money market funds

Subtotal 15,897 — — 15,897 15,897 — —

2,171 — — 2,171 2,171 — —

Level 2 (2) :

13 unchanged sentences

(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.

(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

(3) As of December 26, 2020 and September 26, 2020, total marketable securities included $ 19.5 billion and $ 18.6 billion, respectively, that was restricted from general use, related to the State Aid Decision (refer to Note 5, “Income Taxes”) and other agreements.

The Company may sell certain of its marketable debt securities prior to their stated maturities for reasons including, but not limited to, managing liquidity, credit risk, duration and asset allocation.

3 unchanged sentences

Fair values were determined for each individual security in the investment portfolio.

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 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 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.

As of December 26, 2020 and September 26, 2020, the Company’s non-marketable equity securities had a carrying value of $ 2.5 billion and $ 2.8 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 June 27, 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 December 26, 2020 and September 26, 2020 is as follows (in millions):

2020 September 26,

Cash and cash equivalents $ 36,010 $ 38,016

Restricted cash included in other current assets 29 23

Restricted cash included in other non-current assets 1,627 1,357

Restricted cash 1,709 1,773

Cash, cash equivalents and restricted cash $ 37,719 $ 39,789

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

Substantially all of the Company’s restricted cash was included in other non-current assets in the Condensed Consolidated Balance Sheets.

| Q1 2021 Form 10-Q | 9

Derivative Financial Instruments

13 unchanged sentences

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

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

As of December 26, 2020, the Company’s hedged term debt– and marketable securities–related foreign currency transactions are expected to be recognized within 22 years.

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

As of December 26, 2020, the Company’s hedged interest rate transactions are expected to be recognized within seven years .

Cash Flow Hedges

Cash flow hedge amounts that are included in the assessment of hedge effectiveness are deferred in AOCI until the hedged item is recognized in earnings.

Cash flow hedge amounts that are included in the assessment of hedge effectiveness are deferred in accumulated other comprehensive income/(loss) (“AOCI”) until the hedged item is recognized in earnings.

Deferred gains and losses associated with cash flow hedges of foreign currency revenue are recognized as a component of net sales in the same period as the related revenue is recognized, and deferred gains and losses related to cash flow hedges of inventory purchases are recognized as a component of cost of sales in the same period as the related costs are recognized.

Deferred gains and losses associated with cash flow hedges of interest income or expense are recognized in other income/(expense), net (“OI&E”) in the same period as the related income or expense is recognized.

Generally, for options designated as cash flow hedges, the time value is excluded from the assessment of hedge effectiveness and recognized in the financial statement line item to which the hedge relates on a straight-line basis over the life of the hedge.

For options designated as cash flow hedges, the time value is excluded from the assessment of hedge effectiveness and recognized in the financial statement line item to which the hedge relates on a straight-line basis over the life of the hedge.

Changes in the fair value of amounts excluded from the assessment of hedge effectiveness are recognized in other comprehensive income/(loss) (“OCI”).

6 unchanged sentences

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

| Q1 2021 Form 10-Q | 10

Fair Value Hedges

1 unchanged sentence

For foreign exchange forward contracts designated as fair value hedges, the forward carry component is excluded from the assessment of hedge effectiveness and recognized in OI&E on a straight-line basis over the life of the hedge.

Amounts excluded from the effectiveness assessment of fair value hedges and recognized in OI&E were gains of $ 82 million and $ 128 million for the three months ended December 26, 2020 and December 28, 2019, respectively.

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 $ 119 million and $ 373 million for the three- and nine-month periods ended June 27, 2020, respectively.

Non-Designated Derivatives

Derivatives that are not designated as hedging instruments are adjusted to fair value through earnings in the financial statement line item to which the derivative relates.

| Q3 2020 Form 10-Q | 11

The Company records all derivatives in the Condensed Consolidated Balance Sheets at fair value.

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 June 27, 2020 and September 28, 2019 (in millions):

June 27, 2020

The following tables show the Company’s derivative instruments at gross fair value as of December 26, 2020 and September 26, 2020 (in millions):

December 26, 2020

Fair Value of

19 unchanged sentences

Foreign exchange contracts $ 1,561 $ 485 $ 2,046

Interest rate contracts $ 105 $ — $ 105

(1) The fair value of derivative assets is measured using Level 2 fair value inputs and is included in other current assets and other non-current assets in the Condensed Consolidated Balance Sheets.

2 unchanged sentences

| Q1 2021 Form 10-Q | 11

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,

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 months ended December 26, 2020 and December 28, 2019 (in millions):

Three Months Ended

2020 December 28,

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

10 unchanged sentences

Total $ 311 $ 489

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,

Amounts excluded from the effectiveness assessment of the Company’s hedges and recognized in OCI were losses of $ 138 million and $ 89 million for the three months ended December 26, 2020 and December 28, 2019, 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 months ended December 26, 2020 and December 28, 2019 and as of December 26, 2020 and September 26, 2020 (in millions):

Three Months Ended

2020 December 28,

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

7 unchanged sentences

| Q1 2021 Form 10-Q | 12

2020 September 26,

Carrying amounts of hedged assets/(liabilities):

Marketable securities (2)

$ 17,009 $ 16,270

Fixed-rate debt (3)

$ ( 20,866 ) $ ( 21,033 )

Cumulative hedging adjustments included in the carrying amounts of hedged items:

2 unchanged sentences

(1) Gains and losses related to fair value hedges are included in OI&E in the Condensed Consolidated Statements of Operations.

(2) The carrying amounts of marketable securities that are designated as hedged items in fair value hedges are included in current marketable securities and non-current marketable securities in the Condensed Consolidated Balance Sheet.

(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 June 27, 2020 and September 28, 2019 (in millions):

June 27, 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 December 26, 2020 and September 26, 2020 (in millions):

December 26, 2020 September 26, 2020

Amount Credit Risk

14 unchanged sentences

The Company presents its derivative assets and derivative liabilities at their gross fair values in its 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.

As of December 26, 2020, the net cash collateral posted by the Company related to derivative instruments under its collateral security arrangements was $ 215 million.

As of September 26, 2020, the net cash collateral received by the Company related to derivative instruments under its collateral security arrangements was $ 875 million.

The Company includes gross collateral posted and received in other current assets and other current liabilities in the Condensed Consolidated Balance Sheets, respectively.

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 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.

As of December 26, 2020 and September 26, 2020, 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 $ 3.5 billion and $ 2.8 billion, respectively, resulting in net derivative liabilities of $ 684 million and $ 312 million, respectively.

| Q1 2021 Form 10-Q | 13

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 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.

As of both December 26, 2020 and September 26, 2020, the Company had no customers that individually represented 10% or more of total trade receivables.

The Company’s cellular network carriers accounted for 41 % of total trade receivables as of December 26, 2020.

Vendor Non-Trade Receivables

1 unchanged sentence

The Company purchases these components directly from suppliers.

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 December 26, 2020, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 61 % and 14 %.

As of September 26, 2020, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 57 %, and 11 %.

Note 4 – Condensed Consolidated Financial Statement Details

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

The following tables show the Company’s condensed consolidated financial statement details as of December 26, 2020 and September 26, 2020 (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 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,

The following table shows the detail of OI&E for the three months ended December 26, 2020 and December 28, 2019 (in millions):

Three Months Ended

2020 December 28,

Interest and dividend income $ 747 $ 1,045

4 unchanged sentences

Uncertain Tax Positions

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.

As of December 26, 2020, the total amount of gross unrecognized tax benefits was $ 17.1 billion, of which $ 9.0 billion, if recognized, would impact the Company’s effective tax rate.

The Company had accrued $ 1.6 billion of gross interest and penalties related to income tax matters as of December 26, 2020.

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

federal jurisdiction and many state and foreign jurisdictions.

federal jurisdiction and many state and foreign jurisd ictions.

Internal Revenue Service concluded its review of the years 2013 through 2015 in 2018, and all years before 2016 are closed.

Tax years after 2014 remain open in certain major foreign jurisdictions and are subject to examination by the taxing authorities.

Tax years after 2014 rem ain open in certain major foreign jurisdictions and are subject to examination by the taxing authorities.

The Company believes that an adequate provision has been made for any adjustments that may result from tax examinations.

1 unchanged sentence

If any issues addressed in the Company’s tax audits are resolved in a manner inconsistent with its expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.

Although the timing of resolution and/or closure of audits is not certain, the Company believes it is reasonably possible that its gross unrecognized tax benefits could decrease in the next 12 months by as much as $ 4.8 billion.

European Commission State Aid Decision

5 unchanged sentences

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 September 25, 2020, the European Commission appealed the General Court’s decision to the European Court of Justice.

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 of 2017.

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

As of December 26, 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.

2 unchanged sentences

Note 6 – Debt

Commercial Paper and Repurchase Agreements

Commercial Paper

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 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,

As of both December 26, 2020 and September 26, 2020, the Company had $ 5.0 billion of Commercial Paper outstanding, with maturities generally less than nine months .

The weighted-average interest rate of the Company’s Commercial Paper was 0.10 % and 0.62 % as of December 26, 2020 and September 26, 2020, respectively.

The following table provides a summary of cash flows associated with the issuance and maturities of Commercial Paper for the three months ended December 26, 2020 and December 28, 2019 (in millions):

Three Months Ended

2020 December 28,

Maturities 90 days or less:

3 unchanged sentences

Repayments of commercial paper ( 2,197 ) ( 2,121 )

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

Repayments of commercial paper, net ( 1,417 ) ( 804 )

Total proceeds from/(repayments of) commercial paper, net $ 22 $ ( 979 )

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”).

As of December 26, 2020, the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate principal amount of $ 105.9 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 June 27, 2020 and September 28, 2019:

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

(in millions) Effective

The following table provides a summary of the Company’s term debt as of December 26, 2020 and September 26, 2020:

(calendar year)

December 26, 2020 September 26, 2020

(in millions)

Interest Rate Amount

(in millions) Effective

(in millions)

Interest Rate

6 unchanged sentences

103,828 0.03 % – 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 105,863 106,078

4 unchanged sentences

Total non-current portion of term debt $ 99,281 $ 98,667

| Q3 2020 Form 10-Q | 17

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

2 unchanged sentences

dollar–denominated notes.

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 $ 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.

The Company recognized $ 628 million and $ 757 million of interest cost on its term debt for the three months ended December 26, 2020 and December 28, 2019, respectively.

As of December 26, 2020 and September 26, 2020, the fair value of the Company’s Notes, based on Level 2 inputs, was $ 117.2 billion and $ 117.1 billion, respectively.

| Q1 2021 Form 10-Q | 16

Note 7 – Shareholders’ Equity

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.

As of December 26, 2020, the Company was authorized to purchase up to $ 225 billion of the Company’s common stock under a share repurchase program, of which $ 192.6 billion had been utilized.

During the three months ended December 26, 2020, the Company repurchased 200 million shares of its common stock for $ 24.0 billion.

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 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.

| 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,

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 months ended December 26, 2020 and December 28, 2019 (in millions):

Three Months Ended

Comprehensive Income Components Financial Statement Line Items December 26,

2020 December 28,

Unrealized (gains)/losses on derivative instruments:

7 unchanged sentences

Total amounts reclassified from AOCI $ ( 394 ) $ ( 502 )

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

The following table shows the changes in AOCI by component for the three months ended December 26, 2020 (in millions):

Cumulative Foreign

8 unchanged sentences

Other comprehensive income/(loss) 549 ( 487 ) 523 585

Cumulative effect of change in accounting principle (1)

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.

Balances as of December 26, 2020 $ ( 826 ) $ ( 1,364 ) $ 2,369 $ 179

Note 9 – Benefit Plans

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.

The Company had 713 million shares reserved for future issuance under its stock plans as of December 26, 2020.

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.

RSUs granted under the Company’s stock plans reduce the number of shares available for grant under the plans by a factor of two times the number of RSUs granted.

RSUs canceled and shares withheld to satisfy tax withholding obligations increase the number of shares available for grant under the plans utilizing a factor of two times the number of RSUs canceled or shares withheld.

| Q1 2021 Form 10-Q | 17

Rule 10b5-1 Trading Plans

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

During the three months ended December 26, 2020, Section 16 officers Katherine L.

Adams, Timothy D.

1 unchanged sentence

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 nine months ended June 27, 2020 is as follows:

A summary of the Company’s RSU activity and related information for the three months ended December 26, 2020 is as follows:

(in thousands)

7 unchanged sentences

RSUs canceled ( 2,819 ) $ 61.05

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.

Balance as of December 26, 2020 315,353 $ 67.68 $ 41,617

The fair value as of the respective vesting dates of RSUs was $ 8.5 billion and $ 4.2 billion for the three months ended December 26, 2020 and December 28, 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 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,

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 months ended December 26, 2020 and December 28, 2019 (in millions):

Three Months Ended

2020 December 28,

Share-based compensation expense $ 2,020 $ 1,710

1 unchanged sentence

$ ( 1,624 ) $ ( 758 )

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.

As of December 26, 2020, the total unrecognized compensation cost related to outstanding RSUs and stock options was $ 18.2 billion, which the Company expects to recognize over a weighted-average period of 2.9 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 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,

The following table shows changes in the Company’s accrued warranties and related costs for the three months ended December 26, 2020 and December 28, 2019 (in millions):

Three Months Ended

2020 December 28,

Beginning accrued warranty and related costs $ 3,354 $ 3,570

3 unchanged sentences

The Company offers an iPhone Upgrade Program, which is available to customers who purchase a qualifying iPhone in the U.S., the U.K.

and mainland China.

and China mainland.

The iPhone Upgrade Program provides customers the right to trade in that iPhone for a specified amount when purchasing a new iPhone, provided certain conditions are met.

The Company accounts for the trade-in right as a guarantee liability and recognizes arrangement revenue net of the fair value of such right, with subsequent changes to the guarantee liability recognized within net sales.

| Q1 2021 Form 10-Q | 18

Concentrations in the Available Sources of Supply of Materials and Product

2 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.

6 unchanged sentences

The Company has entered into certain off–balance sheet commitments that require the future purchase of goods or services (“unconditional purchase obligations”).

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 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.

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

As of December 26, 2020, the Company’s total future payments under noncancelable unconditional purchase obligations having a remaining term in excess of one year were $ 8.1 billion.

Contingencies

1 unchanged sentence

The outcome of litigation is inherently uncertain.

When a loss related to a legal proceeding or claim is probable and reasonably estimable, the Company accrues its best estimate for the ultimate resolution of the matter.

If one or more legal matters were resolved against the Company in a reporting period for amounts above management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected.

2 unchanged sentences

(“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.

On April 11, 2018, a jury returned a verdict against the Company in the U.S.

District Court for the Eastern District of Texas (the “Eastern Texas District Court”).

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.

Court of Appeals for the Federal Circuit, which remanded the case back to the Eastern Texas District Court, where a re-trial was held in October 2020.

The jury returned a verdict against the Company and awarded damages of $ 503 million, which the Company intends to appeal.

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.

| Q1 2021 Form 10-Q | 19

iOS Performance Management Cases

12 unchanged sentences

In addition to civil litigation, the Company is also responding to governmental investigations and requests for information relating to the performance management feature.

On November 18, 2020, the Company reached a settlement with a multi-state group of attorneys general.

Under the terms of the settlement, the Company has agreed to pay an aggregate amount of $ 113 million to resolve civil, statutory claims.

The Company continues to believe that its iPhones were not defective, that the performance management feature introduced with iOS updates 10.2.1 and 11.2 was intended to, and did, improve customers’ user experience, and that the Company did not make any misleading statements or fail to disclose any material information.

The Company has accrued its best estimate for the ultimate resolution of these matters.

French Competition Authority

1 unchanged sentence

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

| Q3 2020 Form 10-Q | 21

Optis Wireless Technology, LLC and related entities (“Optis”) filed a lawsuit in the U.S.

District Court for the Eastern District of Texas against the Company alleging that certain of the Company’s products infringe on patents owned by Optis.

On August 11, 2020, a jury returned a verdict against the Company and awarded damages of $ 506 million.

The Company has asked the court to set aside the verdict, where the case remains pending.

Note 11 – Segment Information and Geographic Data

5 unchanged sentences

Europe includes European countries, as well as India, the Middle East and Africa.

Greater China includes China, Hong Kong and Taiwan.

Greater China includes China mainland, Hong Kong and Taiwan.

Rest of Asia Pacific includes Australia and those Asian countries not included in the Company’s other reportable segments.

8 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 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,

| Q1 2021 Form 10-Q | 20

The following table shows information by reportable segment for the three months ended December 26, 2020 and December 28, 2019 (in millions):

Three Months Ended

2020 December 28,

Net sales $ 46,310 $ 41,367

10 unchanged sentences

Operating income $ 2,953 $ 2,731

| 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 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,

A reconciliation of the Company’s segment operating income to the Condensed Consolidated Statements of Operations for the three months ended December 26, 2020 and December 28, 2019 is as follows (in millions):

Three Months Ended

2020 December 28,

Segment operating income $ 40,360 $ 31,683

2 unchanged sentences

Total operating income $ 33,534 $ 25,569

Note 12 – Leases

The Company has lease arrangements for certain equipment and facilities, including retail, corporate, manufacturing and data center space.

These leases typically have original terms not exceeding 10 years and generally contain multi-year renewal options, some of which are reasonably certain of exercise.

The Company’s lease arrangements may contain both lease and non-lease components.

The Company has elected to combine and account for lease and non-lease components as a single lease component for leases of retail, corporate, and data center facilities.

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 $ 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 $ 8,164

Finance leases Property, plant and equipment, net 625

Total right-of-use assets $ 8,789

Lease liabilities:

Operating leases Other current liabilities $ 1,353

Other non-current liabilities 7,460

Finance leases Other current liabilities 20

Other non-current liabilities 630

Total lease liabilities $ 9,463

| Q1 2021 Form 10-Q | 21

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

Imputed interest ( 1,044 ) ( 432 ) ( 1,476 )

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 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 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.

| Q3 2020 Form 10-Q | 24

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