What changed in this filing

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Item 1. Financial Statements

2021-04-29 compared with 2021-01-28 · 164 added, 125 removed, 631 unchanged (31% 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

2020 December 28,

Three Months Ended Six Months Ended

2021 March 28,

2020 March 27,

2021 March 28,

Products $ 72,683 $ 44,965 $ 168,361 $ 124,069

25 unchanged sentences

(In millions)

Three Months Ended

2020 December 28,

Three Months Ended Six Months Ended

2021 March 28,

2020 March 27,

2021 March 28,

$ 23,630 $ 11,249 $ 52,385 $ 33,485

1 unchanged sentence

Change in foreign currency translation, net of tax

( 78 ) ( 566 ) 471 ( 364 )

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

Change in fair value of derivatives

332 ( 143 ) 28 ( 32 )

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

4 unchanged sentences

Change in fair value of marketable debt securities

( 1,403 ) ( 2,325 ) ( 775 ) ( 2,200 )

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

1 unchanged sentence

Total change in unrealized gains/losses on marketable debt securities

( 1,478 ) ( 2,296 ) ( 955 ) ( 2,181 )

Total other comprehensive income/(loss) ( 465 ) ( 2,371 ) 120 ( 2,341 )

50 unchanged sentences

(In millions, except per share amounts)

Three Months Ended

2020 December 28,

Three Months Ended Six Months Ended

2021 March 28,

2020 March 27,

2021 March 28,

Total shareholders’ equity, beginning balances $ 66,224 $ 89,531 $ 65,339 $ 90,488

2 unchanged sentences

Common stock issued

561 428 561 430

Common stock withheld related to net share settlement of equity awards

22 unchanged sentences

(In millions)

Three Months Ended

2020 December 28,

Six Months Ended

2021 March 28,

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

30 unchanged sentences

Repayments of term debt ( 4,500 ) ( 5,250 )

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

Proceeds from commercial paper, net 22 1,518

Proceeds from repurchase agreement — 2,556

Other ( 38 ) ( 51 )

Cash used in financing activities ( 43,575 ) ( 46,347 )

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

Increase/(Decrease) in cash, cash equivalents and restricted cash 217 ( 7,175 )

Cash, cash equivalents and restricted cash, ending balances $ 40,006 $ 43,049

31 unchanged sentences

Earnings Per Share

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,

The following table shows the computation of basic and diluted earnings per share for the three- and six-month periods ended March 27, 2021 and March 28, 2020 (net income in millions and shares in thousands):

Three Months Ended Six Months Ended

2021 March 28,

2020 March 27,

2021 March 28,

Net income $ 23,630 $ 11,249 $ 52,385 $ 33,485

37 unchanged sentences

Deferred Revenue

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.

As of March 27, 2021 and September 26, 2020, the Company had total deferred revenue of $ 11.9 billion and $ 10.2 billion, respectively.

As of March 27, 2021, 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.

| Q2 2021 Form 10-Q | 7

Disaggregated Revenue

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,

Net sales disaggregated by significant products and services for the three- and six-month periods ended March 27, 2021 and March 28, 2020 were as follows (in millions):

Three Months Ended Six Months Ended

2021 March 28,

2020 March 27,

2021 March 28,

$ 47,938 $ 28,962 $ 113,535 $ 84,919

9,102 5,351 17,777 12,511

7,807 4,368 16,242 10,345

Wearables, Home and Accessories (1)(2)

7 unchanged sentences

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.

(4) Includes $ 2.7 billion of revenue recognized in the three months ended March 27, 2021 that was included in deferred revenue as of December 26, 2020, $ 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, $ 4.1 billion of revenue recognized in the six months ended March 27, 2021 that was included in deferred revenue as of September 26, 2020, and $ 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.

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 27, 2021 and March 28, 2020.

| Q2 2021 Form 10-Q | 8

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

December 26, 2020

The following tables show the Company’s cash and marketable securities by significant investment category as of March 27, 2021 and September 26, 2020 (in millions):

March 27, 2021

Cost Unrealized

6 unchanged sentences

Money market funds 11,998 — — 11,998 11,998 — —

6,312 — — 6,312 6,312 — —

Mutual funds 143 1 ( 2 ) 142 — 142 —

Subtotal 12,141 1 ( 2 ) 12,140 11,998 142 —

Level 2 (2) :

11 unchanged sentences

$ 203,256 $ 2,141 $ ( 1,024 ) $ 204,373 $ 38,466 $ 31,368 $ 134,539

| Q1 2021 Form 10-Q | 8

September 26, 2020

23 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 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.

(3) As of March 27, 2021 and September 26, 2020, total marketable securities included $ 19.0 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.

| Q2 2021 Form 10-Q | 9

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.

The maturities of the Company’s non-current marketable debt securities generally range from one to five years .

The following table shows the fair value of the Company’s non-current marketable debt securities, by contractual maturity, as of March 27, 2021 (in millions):

Due after 1 year through 5 years $ 83,364

Due after 5 years through 10 years 28,835

Due after 10 years 22,340

Total fair value $ 134,539

The Company typically invests in highly rated securities, with the primary objective of minimizing the potential risk of principal loss.

3 unchanged sentences

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

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.

As of March 27, 2021 and September 26, 2020, the Company’s non-marketable equity securities had a carrying value of $ 2.7 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 December 26, 2020 and September 26, 2020 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 March 27, 2021 and September 26, 2020 is as follows (in millions):

2021 September 26,

4 unchanged sentences

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

As of March 27, 2021, the Company’s hedged term debt– and marketable securities–related foreign currency transactions are expected to be recognized within 21 years.

| Q2 2021 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 December 26, 2020, the Company’s hedged interest rate transactions are expected to be recognized within seven years .

As of March 27, 2021, the Company’s hedged interest rate transactions are expected to be recognized within seven years .

Cash Flow Hedges

11 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.

Amounts excluded from the effectiveness assessment of fair value hedges and recognized in OI&E were gains of $ 60 million and $ 142 million for the three- and six-month periods ended March 27, 2021, respectively, and were gains of $ 126 million and $ 254 million for the three- and six-month periods ended March 28, 2020, respectively.

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

1 unchanged sentence

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.

| Q2 2021 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 December 26, 2020 and September 26, 2020 (in millions):

December 26, 2020

The following tables show the Company’s derivative instruments at gross fair value as of March 27, 2021 and September 26, 2020 (in millions):

March 27, 2021

Fair Value of

22 unchanged sentences

The Company classifies cash flows related to derivative financial instruments as operating activities in its Condensed Consolidated Statements of Cash Flows.

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

Three Months Ended

2020 December 28,

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 27, 2021 and March 28, 2020 (in millions):

Three Months Ended Six Months Ended

2021 March 28,

2020 March 27,

2021 March 28,

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

10 unchanged sentences

Total $ ( 887 ) $ ( 818 ) $ ( 576 ) $ ( 329 )

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,

| Q2 2021 Form 10-Q | 12

Amounts excluded from the effectiveness assessment of the Company’s hedges and recognized in OCI were a gain of $ 41 million and a loss of $ 97 million for the three- and six-month periods ended March 27, 2021, respectively, and 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 27, 2021 and March 28, 2020 and as of March 27, 2021 and September 26, 2020 (in millions):

Three Months Ended Six Months Ended

2021 March 28,

2020 March 27,

2021 March 28,

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

6 unchanged sentences

Total $ ( 118 ) $ ( 1,726 ) $ 801 $ ( 1,381 )

| Q1 2021 Form 10-Q | 12

2021 September 26,

10 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 Sheets.

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

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 27, 2021 and September 26, 2020 (in millions):

March 27, 2021 September 26, 2020

Amount Credit Risk

6 unchanged sentences

Foreign exchange contracts $ 104,434 $ 778 $ 88,636 $ 303

| Q2 2021 Form 10-Q | 13

The notional amounts for outstanding derivative instruments provide one measure of the transaction volume outstanding and do not represent the amount of the Company’s exposure to credit or market loss.

6 unchanged sentences

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

As of March 27, 2021 and September 26, 2020, the net cash collateral received by the Company related to derivative instruments under its collateral security arrangements was $ 935 million and $ 875 million, respectively.

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 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

As of March 27, 2021 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 $ 2.4 billion and $ 2.8 billion, respectively, resulting in net derivative liabilities of $ 233 million and $ 312 million, respectively.

Accounts Receivable

6 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 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.

As of March 27, 2021, the Company had one customer that represented 10% or more of total trade receivables, which accounted for 13 %.

As of 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 35 % of total trade receivables as of March 27, 2021.

Vendor Non-Trade Receivables

1 unchanged sentence

The Company purchases these components directly from suppliers.

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 March 27, 2021, the Company had one vendor that represented 10% or more of total vendor non-trade receivables, which accounted for 65 %.

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 %.

| Q2 2021 Form 10-Q | 14

Note 4 – Condensed Consolidated Financial Statement Details

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

The following tables show the Company’s condensed consolidated financial statement details as of March 27, 2021 and September 26, 2020 (in millions):

Property, Plant and Equipment, Net

11 unchanged sentences

Total other non-current liabilities $ 52,953 $ 54,490

| Q1 2021 Form 10-Q | 14

Other Income/(Expense), Net

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,

The following table shows the detail of OI&E for the three- and six-month periods ended March 27, 2021 and March 28, 2020 (in millions):

Three Months Ended Six Months Ended

2021 March 28,

2020 March 27,

2021 March 28,

Interest and dividend income $ 718 $ 1,049 $ 1,465 $ 2,094

4 unchanged sentences

Uncertain Tax Positions

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.

As of March 27, 2021, the total amount of gross unrecognized tax benefits was $ 16.9 billion, of which $ 8.3 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 March 27, 2021.

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

1 unchanged sentence

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

Tax years after 2014 remain 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 mu ch as $ 4.1 billion.

| Q2 2021 Form 10-Q | 15

European Commission State Aid Decision

10 unchanged sentences

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 December 26, 2020, the adjusted recovery amount was € 12.9 billion, excluding interest.

As of March 27, 2021, 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.

| Q1 2021 Form 10-Q | 15

Note 6 – Debt

Commercial Paper

Commercial Paper and Repurchase Agreement

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 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,

As of both March 27, 2021 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 0.06 % and 0.62 % as of March 27, 2021 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 six months ended March 27, 2021 and March 28, 2020 (in millions):

Six Months Ended

2021 March 28,

Maturities 90 days or less:

Proceeds from/(Repayments of) commercial paper, net $ 1,439 $ ( 175 )

Proceeds from commercial paper, net $ 2,008 $ 1,377

Maturities greater than 90 days:

1 unchanged sentence

Repayments of commercial paper ( 3,354 ) ( 4,656 )

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

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

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”).

Proceeds from/(Repayments of) commercial paper, net ( 1,986 ) 141

Total proceeds from commercial paper, net $ 22 $ 1,518

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 accounted for the Repo as a collateralized borrowing.

As of September 26, 2020, the Repo had been settled.

| Q2 2021 Form 10-Q | 16

As of March 27, 2021, the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate principal amount of $ 116.0 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 December 26, 2020 and September 26, 2020:

The following table provides a summary of the Company’s term debt as of March 27, 2021 and September 26, 2020:

(calendar year)

December 26, 2020 September 26, 2020

March 27, 2021 September 26, 2020

(in millions)

9 unchanged sentences

103,828 0.03 % – 4.78 %

2021 debt issuance:

Fixed-rate 0.700 % – 2.800 % notes

14,000 0.75 % – 2.81 %

Total term debt 116,005 106,078

9 unchanged sentences

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 $ 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

The Company recognized $ 657 million and $ 1.3 billion of interest cost on its term debt for the three- and six-month periods ended March 27, 2021, respectively.

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.

As of March 27, 2021 and September 26, 2020, the fair value of the Company’s Notes, based on Level 2 inputs, was $ 121.2 billion and $ 117.1 billion, respectively.

Note 7 – Shareholders’ Equity

Share Repurchase Program

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”).

As of March 27, 2021, the Company was authorized to purchase up to $ 225 billion of the Company’s common stock under a share repurchase program (the “Program”).

During the six months ended March 27, 2021, the Company repurchased 347 million shares of its common stock for $ 43.0 billion, bringing the total utilization under the Program to $ 211.6 billion.

On April 28, 2021, the Company announced the Board of Directors increased the Program authorization by $ 90 billion.

The Program does not obligate the Company to acquire any specific number of shares.

Under the 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”).

| Q2 2021 Form 10-Q | 17

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 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,

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 27, 2021 and March 28, 2020 (in millions):

Three Months Ended Six Months Ended

Comprehensive Income Components Financial Statement Line Items March 27,

2021 March 28,

2020 March 27,

2021 March 28,

Unrealized (gains)/losses on derivative instruments:

7 unchanged sentences

Total amounts reclassified from AOCI $ 819 $ 855 $ 425 $ 353

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

The following table shows the changes in AOCI by component for the six months ended March 27, 2021 (in millions):

Cumulative Foreign

8 unchanged sentences

Other comprehensive income/(loss) 471 604 ( 955 ) 120

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

Balances as of March 27, 2021 $ ( 904 ) $ ( 273 ) $ 891 $ ( 286 )

Note 9 – Benefit Plans

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

The Company had 718 million shares reserved for future issuance under its stock plans as of March 27, 2021.

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.

1 unchanged sentence

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 December 26, 2020, Section 16 officers Katherine L.

During the three months ended March 27, 2021, 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.

| Q2 2021 Form 10-Q | 18

Restricted Stock Units

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

A summary of the Company’s RSU activity and related information for the six months ended March 27, 2021 is as follows:

(in thousands)

7 unchanged sentences

RSUs canceled ( 5,918 ) $ 63.67

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.

Balance as of March 27, 2021 308,633 $ 68.58 $ 37,409

The fair value as of the respective vesting dates of RSUs was $ 867 million and $ 9.4 billion for the three- and six-month periods ended March 27, 2021, respectively, and was $ 558 million and $ 4.8 billion for the three- and six-month periods ended March 28, 2020, 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 months ended December 26, 2020 and December 28, 2019 (in millions):

Three Months Ended

2020 December 28,

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 27, 2021 and March 28, 2020 (in millions):

Three Months Ended Six Months Ended

2021 March 28,

2020 March 27,

2021 March 28,

Share-based compensation expense $ 1,981 $ 1,697 $ 4,001 $ 3,407

1 unchanged sentence

$ ( 575 ) $ ( 444 ) $ ( 2,199 ) $ ( 1,202 )

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.

As of March 27, 2021, the total unrecognized compensation cost related to outstanding RSUs and stock options was $ 16.7 billion, which the Company expects to recognize over a weighted-average period of 2.8 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 months ended December 26, 2020 and December 28, 2019 (in millions):

Three Months Ended

2020 December 28,

The following table shows changes in the Company’s accrued warranties and related costs for the three- and six-month periods ended March 27, 2021 and March 28, 2020 (in millions):

Three Months Ended Six Months Ended

2021 March 28,

2020 March 27,

2021 March 28,

Beginning accrued warranty and related costs $ 4,124 $ 3,873 $ 3,354 $ 3,570

6 unchanged sentences

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.

| Q2 2021 Form 10-Q | 19

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.

7 unchanged sentences

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.

As of March 27, 2021, the Company’s total future payments under noncancelable unconditional purchase obligations having a remaining term in excess of one year were $ 8.2 billion.

Contingencies

10 unchanged sentences

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 jury returned a verdict against the Company and awarded damages of $ 503 million, which the Company has appealed.

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

Various civil litigation matters have been filed in state and federal courts in the U.S.

and in various international jurisdictions alleging violation of consumer protection laws, fraud, computer intrusion and other causes of action related to the Company’s performance management feature used in its iPhone operating systems, introduced to certain iPhones in iOS updates 10.2.1 and 11.2.

The claims seek monetary damages and other non-monetary relief.

On April 5, 2018, several U.S.

federal actions were consolidated through a Multidistrict Litigation process into a single action in the U.S.

federal actions alleging violation of consumer protection laws, fraud, computer intrusion and other causes of action related to the Company’s performance management feature used in its iPhone operating systems, introduced to certain iPhones in iOS updates 10.2.1 and 11.2, were consolidated through a Multidistrict Litigation process into a single action in the U.S.

District Court for the Northern District of California (the “Northern California District Court”).

1 unchanged sentence

federal and California state class actions.

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.

The final amount of the settlement will be determined based on the number of consumers who file valid claims and the attorneys’ fee award.

However, the Company has agreed to pay at least $ 310 million to settle the claims.

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.

On March 18, 2021, the Northern California District Court granted final approval of the Multidistrict Litigation settlement, which will result in an aggregate payment of $ 310 million to settle all 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.

2 unchanged sentences

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

| Q2 2021 Form 10-Q | 20

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

1 unchanged sentence

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.

In post-trial proceedings, the damages portion of the verdict was set aside, and the case remains pending further proceedings.

Note 11 – Segment Information and Geographic Data

16 unchanged sentences

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

| 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,

The following table shows information by reportable segment for the three- and six-month periods ended March 27, 2021 and March 28, 2020 (in millions):

Three Months Ended Six Months Ended

2021 March 28,

2020 March 27,

2021 March 28,

Net sales $ 34,306 $ 25,473 $ 80,616 $ 66,840

10 unchanged sentences

Operating income $ 2,736 $ 1,290 $ 5,689 $ 4,021

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,

| Q2 2021 Form 10-Q | 21

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 27, 2021 and March 28, 2020 is as follows (in millions):

Three Months Ended Six Months Ended

2021 March 28,

2020 March 27,

2021 March 28,

Segment operating income $ 34,237 $ 19,073 $ 74,597 $ 50,756

4 unchanged sentences

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