What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-07-28 compared with 2021-04-29 · 104 added, 92 removed, 153 unchanged (56% of the section changed)

5 unchanged sentences

Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements.

Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended September 26, 2020 (the “2020 Form 10-K”) under the heading “Risk Factors.” The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended September 26, 2020 (the “2020 Form 10-K”) under the heading “Risk Factors.” The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Unless otherwise stated, all information presented herein is based on the Company’s fiscal calendar, and references to particular years, quarters, months or periods refer to the Company’s fiscal years ended in September and the associated quarters, months and periods of those fiscal years.

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The COVID-19 pandemic and the measures taken by many countries in response have affected and could in the future materially impact the Company’s business, results of operations, financial condition and stock price.

During the second quarter of 2021, aspects of the Company’s business continued to be affected by the COVID-19 pandemic, with many of the Company’s retail stores, as well as channel partner points of sale, temporarily closed at various times, and the vast majority of the Company’s employees working remotely.

The Company has reopened some of its offices and retail stores, subject to operating restrictions to protect public health and the health and safety of employees and customers, and it continues to work on safely reopening the remainder of its offices and retail stores, subject to local rules and regulations.

The full extent of the future impact of the COVID-19 pandemic on the Company’s operational and financial performance is currently uncertain and will depend on many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic;

During the third quarter of 2021, aspects of the Company’s business continued to be affected by the COVID-19 pandemic, with many of the Company’s retail stores, as well as channel partner points of sale, temporarily closed at various times, and a significant number of the Company’s employees working remotely.

The Company has reopened substantially all of its offices and retail stores, subject to operating restrictions to protect public health and the health and safety of employees and customers, and it continues to work on safely reopening the remainder of its offices and retail stores, subject to local rules and regulations.

The extent of the continuing impact of the COVID-19 pandemic on the Company’s operational and financial performance is uncertain and will depend on many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic;

the availability, distribution and effectiveness of vaccines;

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The Company believes its existing balances of cash, cash equivalents and marketable securities, along with commercial paper and other short-term liquidity arrangements, will be sufficient to satisfy its working capital needs, capital asset purchases, dividends, share repurchases, debt repayments and other liquidity requirements associated with its existing operations.

Second Quarter Fiscal 2021 Highlights

Total net sales increased 54% or $31.3 billion during the second quarter of 2021 compared to the same quarter in 2020, driven by higher net sales in all Products and Services categories in each of the Company’s reportable segments.

The COVID-19 pandemic had an unfavorable impact on the Company’s net sales during the second quarter of 2020.

The Company repurchased $19.0 billion of its common stock and paid dividends and dividend equivalents of $3.4 billion during the second quarter of 2021.

In April 2021, the Company announced the following new products and services, all of which are expected to be available in the spring of 2021:

Third Quarter Fiscal 2021 Highlights

Total net sales increased 36% or $21.7 billion during the third quarter of 2021 compared to the same quarter in 2020, driven by growth in all Products and Services categories.

Year-over-year net sales during the third quarter of 2021 also grew in each of the Company’s reportable segments.

During the third quarter of 2021, the Company released the following new products and services:

• iMac ® , powered by the Apple M1 chip;

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• Apple Podcasts ® Subscriptions.

The Company also announced iOS 15, macOS ® Monterey, iPadOS ® 15 and watchOS ® 8, updates to its operating systems that are expected to be available in the fall of 2021.

The Company repurchased $22.5 billion of its common stock and paid dividends and dividend equivalents of $3.8 billion during the third quarter of 2021.

Products and Services Performance

The following table shows net sales by category for the three- and six-month periods ended March 27, 2021 and March 28, 2020 (dollars in millions):

Three Months Ended Six Months Ended

2021 March 28,

2020 Change March 27,

2021 March 28,

The following table shows net sales by category for the three- and nine-month periods ended June 26, 2021 and June 27, 2020 (dollars in millions):

Three Months Ended Nine Months Ended

2021 June 27,

2020 Change June 26,

2021 June 27,

Net sales by category:

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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.

iPhone net sales increased during the second quarter and first six months of 2021 compared to the same periods in 2020 due primarily to higher net sales from the successful launch of the Company’s new iPhone models in the first quarter of 2021 and a favorable mix of iPhone sales.

Mac net sales increased during the second quarter and first six months of 2021 compared to the same periods in 2020 due primarily to higher net sales of MacBook Air ® and MacBook Pro ® .

iPad net sales increased during the second quarter and first six months of 2021 compared to the same periods in 2020 due primarily to higher net sales of iPad Air ® and the 10-inch version of iPad.

iPhone net sales increased during the third quarter and first nine months of 2021 compared to the same periods in 2020 due primarily to higher net sales from the Company’s new iPhone models launched in the first quarter of 2021.

Mac net sales increased during the third quarter of 2021 compared to the third quarter of 2020 due primarily to higher net sales of MacBook Air ® and iMac.

Year-over-year Mac net sales increased during the first nine months of 2021 due primarily to higher net sales of MacBook Air and MacBook Pro ® .

| Q3 2021 Form 10-Q | 24

iPad net sales increased during the third quarter of 2021 compared to the third quarter of 2020 due to higher net sales of iPad Air ® .

Year-over-year iPad net sales increased during the first nine months of 2021 due to higher net sales of iPad Air, iPad Pro and the 10-inch version of iPad.

Wearables, Home and Accessories

Wearables, Home and Accessories net sales increased during the second quarter and first six months of 2021 compared to the same periods in 2020 due primarily to higher net sales of Apple Watch and accessories.

Services net sales increased during the second quarter and first six months of 2021 compared to the same periods in 2020 due primarily to higher net sales from the App Store, advertising and cloud services.

Wearables, Home and Accessories net sales increased during the third quarter and first nine months of 2021 compared to the same periods in 2020 due primarily to higher net sales of Apple Watch and accessories.

Services net sales increased during the third quarter of 2021 compared to the third quarter of 2020 due primarily to higher net sales from advertising, the App Store and AppleCare.

Year-over-year Services net sales increased during the first nine months of 2021 due primarily to higher net sales from advertising, the App Store and cloud services.

Segment Operating Performance

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Further information regarding the Company’s reportable segments can be found in Part I, Item 1 of this Form 10-Q in the Notes to Condensed Consolidated Financial Statements in Note 11, “Segment Information and Geographic Data.”

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

Three Months Ended Six Months Ended

2021 March 28,

2020 Change March 27,

2021 March 28,

The following table shows net sales by reportable segment for the three- and nine-month periods ended June 26, 2021 and June 27, 2020 (dollars in millions):

Three Months Ended Nine Months Ended

2021 June 27,

2020 Change June 26,

2021 June 27,

Net sales by reportable segment:

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Total net sales $ 81,434 $ 59,685 36 % $ 282,457 $ 209,817 35 %

Americas net sales increased during the second quarter and first six months of 2021 compared to the same periods in 2020 due primarily to higher net sales of iPhone, Services and Mac.

Europe net sales increased during the second quarter and first six months of 2021 compared to the same periods in 2020 due primarily to higher net sales of iPhone, iPad and Mac.

Americas net sales increased during the third quarter of 2021 compared to the third quarter of 2020 due primarily to higher net sales of iPhone, Services and Wearables, Home and Accessories.

Year-over-year Americas net sales increased during the first nine months of 2021 due primarily to higher net sales of iPhone, Services and Mac.

Europe net sales increased during the third quarter of 2021 compared to the third quarter of 2020 due primarily to higher net sales of iPhone, Services and Wearables, Home and Accessories.

Year-over-year Europe net sales increased during the first nine months of 2021 due primarily to higher net sales of iPhone, iPad and Mac.

The movement of foreign currencies in Europe relative to the U.S.

dollar had a net favorable impact on Europe net sales during the third quarter and first nine months of 2021.

Greater China

Greater China net sales increased during the second quarter and first six months of 2021 compared to the same periods in 2020 due primarily to higher net sales of iPhone and iPad.

Greater China net sales increased during the third quarter of 2021 compared to the third quarter of 2020 due primarily to higher net sales of iPhone and Services.

Year-over-year Greater China net sales increased during the first nine months of 2021 due primarily to higher net sales of iPhone and iPad.

The strength of the Chinese renminbi relative to the U.S.

dollar had a favorable impact on Greater China net sales during the second quarter and first six months of 2021.

Japan net sales increased during the second quarter and first six months of 2021 compared to the same periods in 2020 due primarily to higher net sales of iPhone, Services and iPad.

The strength of the Japanese yen relative to the U.S.

dollar had a favorable impact on Japan net sales during the second quarter and first six months of 2021.

dollar had a favorable impact on Greater China net sales during the third quarter and first nine months of 2021.

| Q3 2021 Form 10-Q | 25

Japan net sales increased during the third quarter of 2021 compared to the third quarter of 2020 due primarily to higher net sales of iPhone.

Year-over-year Japan net sales increased during the first nine months of 2021 due primarily to higher net sales of iPhone and Services.

The strength of the Japanese yen relative to the U.S.

dollar had a favorable impact on Japan net sales during the first nine months of 2021.

Rest of Asia Pacific

Rest of Asia Pacific net sales increased during the second quarter of 2021 compared to the second quarter of 2020 due primarily to higher net sales of iPhone, iPad and Mac.

Year-over-year Rest of Asia Pacific net sales increased during the first six months of 2021 due primarily to higher net sales of iPhone, iPad and Wearables, Home and Accessories.

Rest of Asia Pacific net sales increased during the third quarter and first nine months of 2021 compared to the same periods in 2020 due primarily to higher net sales of iPhone, Wearables, Home and Accessories and Services.

The movement of foreign currencies in the Rest of Asia Pacific relative to the U.S.

dollar had a net favorable impact on net sales during the second quarter and first six months of 2021.

Products and Services gross margin and gross margin percentage for the three- and six-month periods ended March 27, 2021 and March 28, 2020 were as follows (dollars in millions):

Three Months Ended Six Months Ended

2021 March 28,

2020 March 27,

2021 March 28,

dollar had a favorable impact on Rest of Asia Pacific net sales during the third quarter and first nine months of 2021.

Products and Services gross margin and gross margin percentage for the three- and nine-month periods ended June 26, 2021 and June 27, 2020 were as follows (dollars in millions):

Three Months Ended Nine Months Ended

2021 June 27,

2020 June 26,

2021 June 27,

Gross margin:

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Products Gross Margin

Products gross margin increased during the second quarter and first six months of 2021 compared to the same periods in 2020 due primarily to higher Products volume, a different Products mix and the strength in foreign currencies relative to the U.S.

Year-over-year Products gross margin percentage increased during the second quarter and first six months of 2021 due primarily to higher leverage, a different Products mix and the strength in foreign currencies relative to the U.S.

Products gross margin increased during the third quarter and first nine months of 2021 compared to the same periods in 2020 due primarily to higher Products volume, a different Products mix and the strength in foreign currencies relative to the U.S.

Products gross margin percentage increased during the third quarter of 2021 compared to the third quarter of 2020 due primarily to a different Products mix, the strength in foreign currencies relative to the U.S.

dollar and improved leverage.

Year-over-year Products gross margin percentage increased during the first nine months of 2021 due primarily to improved leverage, a different Products mix and the strength in foreign currencies relative to the U.S.

Services Gross Margin

Services gross margin increased during the second quarter and first six months of 2021 compared to the same periods in 2020 due primarily to higher Services net sales, a different Services mix and the strength in foreign currencies relative to the U.S.

Year-over-year Services gross margin percentage increased during the second quarter and first six months of 2021 due primarily to a different Services mix, higher leverage and the strength in foreign currencies relative to the U.S.

Services gross margin increased during the third quarter and first nine months of 2021 compared to the same periods in 2020 due primarily to higher Services net sales, a different Services mix and the strength in foreign currencies relative to the U.S.

Year-over-year Services gross margin percentage increased during the third quarter and first nine months of 2021 due primarily to a different Services mix and improved leverage, partially offset by higher Services costs.

The Company’s future gross margins can be impacted by a variety of factors, as discussed in Part I, Item 1A of the 2020 Form 10-K under the heading “Risk Factors.” As a result, the Company believes, in general, gross margins will be subject to volatility and downward pressure.

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Operating Expenses

Operating expenses for the three- and six-month periods ended March 27, 2021 and March 28, 2020 were as follows (dollars in millions):

Three Months Ended Six Months Ended

2021 March 28,

2020 March 27,

2021 March 28,

Operating expenses for the three- and nine-month periods ended June 26, 2021 and June 27, 2020 were as follows (dollars in millions):

Three Months Ended Nine Months Ended

2021 June 27,

2020 June 26,

2021 June 27,

Research and development $ 5,717 $ 4,758 $ 16,142 $ 13,774

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Research and Development

The growth in research and development (“R&D”) expense during the second quarter and first six months of 2021 compared to the same periods in 2020 was driven primarily by increases in headcount-related expenses.

The growth in research and development (“R&D”) expense during the third quarter of 2021 compared to the third quarter of 2020 was driven primarily by increases in headcount-related expenses, and material and equipment costs.

Year-over-year R&D expense increased during the first nine months of 2021 due primarily to higher headcount-related expenses and R&D-related professional services.

The Company continues to believe that focused investments in R&D are critical to its future growth and competitive position in the marketplace, and to the development of new and updated products and services that are central to the Company’s core business strategy.

Selling, General and Administrative

The growth in selling, general and administrative expense during the second quarter and first six months of 2021 compared to the same periods in 2020 was driven primarily by increases in headcount-related expenses and higher variable selling expenses.

The growth in selling, general and administrative expense during the third quarter of 2021 compared to the third quarter of 2020 was driven primarily by increases in headcount-related and advertising expenses.

Year-over-year selling, general and administrative expense increased during the first nine months of 2021 due primarily to higher headcount-related and variable selling expenses.

Other Income/(Expense), Net

Other income/(expense), net (“OI&E”) for the three- and six-month periods ended March 27, 2021 and March 28, 2020 was as follows (dollars in millions):

Three Months Ended Six Months Ended

2021 March 28,

2020 Change March 27,

2021 March 28,

Other income/(expense), net (“OI&E”) for the three- and nine-month periods ended June 26, 2021 and June 27, 2020 was as follows (dollars in millions):

Three Months Ended Nine Months Ended

2021 June 27,

2020 Change June 26,

2021 June 27,

Interest and dividend income $ 719 $ 901 $ 2,184 $ 2,995

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Total other income/(expense), net $ 243 $ 46 428 % $ 796 $ 677 18 %

OI&E increased during the second quarter of 2021 compared to the second quarter of 2020 due primarily to impairments of marketable and non-marketable securities in 2020 and a favorable carrying value adjustment of non-marketable securities in 2021, partially offset by lower interest income in 2021.

OI&E decreased during the first six months of 2021 compared to the same period in 2020 due primarily to lower interest income in 2021, partially offset by impairments of marketable and non-marketable securities in 2020 and lower interest expense in 2021.

The weighted-average interest rate earned by the Company on its cash, cash equivalents and marketable securities was 1.37% and 2.01% in the second quarter of 2021 and 2020, respectively, and 1.43% and 2.05% in the first six months of 2021 and 2020, respectively.

OI&E increased during the third quarter of 2021 compared to the third quarter of 2020 due primarily to a favorable carrying value adjustment of non-marketable securities and smaller impairments of securities, partially offset by lower interest income.

Year-over-year OI&E increased during the first nine months of 2021 due primarily to smaller impairments of securities, lower interest expense and favorable carrying value adjustments of non-marketable securities, partially offset by lower interest income.

The weighted-average interest rate earned by the Company on its cash, cash equivalents and marketable securities was 1.32% and 1.74% in the third quarter of 2021 and 2020, respectively, and 1.40% and 1.95% in the first nine months of 2021 and 2020, respectively.

| Q3 2021 Form 10-Q | 27

Provision for Income Taxes

Provision for income taxes, effective tax rate and statutory federal income tax rate for the three- and six-month periods ended March 27, 2021 and March 28, 2020 were as follows (dollars in millions):

Three Months Ended Six Months Ended

2021 March 28,

2020 March 27,

2021 March 28,

Provision for income taxes, effective tax rate and statutory federal income tax rate for the three- and nine-month periods ended June 26, 2021 and June 27, 2020 were as follows (dollars in millions):

Three Months Ended Nine Months Ended

2021 June 27,

2020 June 26,

2021 June 27,

Provision for income taxes $ 2,625 $ 1,884 $ 11,830 $ 7,452

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Statutory federal income tax rate 21 % 21 % 21 % 21 %

The Company’s effective tax rate for the second quarter of 2021 was lower than the statutory federal income tax rate due primarily to lower taxes on foreign earnings.

The Company’s effective tax rate for the first six months of 2021 was lower than the statutory federal income tax rate due primarily to lower taxes on foreign earnings and tax benefits from share-based compensation.

The Company’s effective tax rate for the second quarter of 2021 was higher compared to the second quarter of 2020 due primarily to higher taxes on foreign earnings and a lower impact of the U.S.

federal R&D tax credit.

The Company’s effective tax rate for the first six months of 2021 was higher compared to the same period in 2020 due primarily to higher taxes on foreign earnings, partially offset by higher tax benefits from share-based compensation.

The Company’s effective tax rate for the third quarter and first nine months of 2021 was lower than the statutory federal income tax rate due primarily to a lower effective rate on foreign earnings, tax benefits from share-based compensation, and the favorable impact of changes in unrecognized tax benefits, partially offset by state income taxes.

The Company’s effective tax rate for the third quarter of 2021 was lower compared to the third quarter of 2020 due primarily to the favorable impact of changes in unrecognized tax benefits, a higher mix of foreign earnings, and higher tax benefits from share-based compensation.

The Company’s effective tax rate for the first nine months of 2021 was lower compared to the same period in 2020 due primarily to higher tax benefits from share-based compensation, the favorable impact of changes in unrecognized tax benefits, and a higher mix of foreign earnings, partially offset by a one-time adjustment in 2020 of U.S.

foreign tax credits in response to regulations issued by the U.S.

Department of the Treasury in December 2019.

Liquidity and Capital Resources

The following tables present selected financial information and statistics as of March 27, 2021 and September 26, 2020 and for the first six months of 2021 and 2020 (in millions):

The following tables present selected financial information and statistics as of June 26, 2021 and September 26, 2020 and for the first nine months of 2021 and 2020 (in millions):

2021 September 26,

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Working capital $ 6,669 $ 38,321

Six Months Ended

2021 March 28,

Nine Months Ended

2021 June 27,

Cash generated by operating activities $ 83,838 $ 60,098

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Cash used in financing activities $ (72,971) $ (65,463)

(1) 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” in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q) and other agreements.

(1) As of June 26, 2021 and September 26, 2020, total marketable securities included $18.9 billion and $18.6 billion, respectively, that was restricted from general use, related to the State Aid Decision (refer to Note 5, “Income Taxes” in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q) and other agreements.

In connection with the State Aid Decision, as of March 27, 2021, the adjusted recovery amount of €12.9 billion plus interest of €1.2 billion was funded into escrow, where it will remain restricted from general use pending the conclusion of all legal proceedings.

In connection with the State Aid Decision, as of June 26, 2021, the adjusted recovery amount of €12.7 billion plus interest of €1.2 billion was funded into escrow, where it will remain restricted from general use pending the conclusion of all legal proceedings.

Further information regarding the State Aid Decision can be found in Part I, Item 1 of this Form 10-Q in the Notes to Condensed Consolidated Financial Statements in Note 5, “Income Taxes.”

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| Q3 2021 Form 10-Q | 28

During the six months ended March 27, 2021, cash generated by operating activities of $62.7 billion was a result of $52.4 billion of net income, non-cash adjustments to net income of $8.8 billion and an increase in the net change in operating assets and liabilities of $1.6 billion.

Cash used in investing activities of $19.0 billion during the six months ended March 27, 2021 consisted primarily of cash used for purchases of marketable securities, net of maturities and sales, of $13.2 billion and cash used to acquire property, plant and equipment of $5.8 billion.

Cash used in financing activities of $43.6 billion during the six months ended March 27, 2021 consisted primarily of cash used to repurchase common stock of $43.3 billion, cash used to pay dividends and dividend equivalents of $7.1 billion and cash used to repay or redeem term debt of $4.5 billion, partially offset by net proceeds from issuance of term debt of $13.9 billion.

During the six months ended March 28, 2020, cash generated by operating activities of $43.8 billion was a result of $33.5 billion of net income, non-cash adjustments to net income of $8.1 billion and an increase in the net change in operating assets and liabilities of $2.2 billion.

Cash used in investing activities of $4.7 billion during the six months ended March 28, 2020 consisted primarily of cash used to acquire property, plant and equipment of $4.0 billion, partially offset by proceeds from maturities and sales of marketable securities, net of purchases, of $1.0 billion.

Cash used in financing activities of $46.3 billion during the six months ended March 28, 2020 consisted primarily of cash used to repurchase common stock of $39.3 billion, cash used to pay dividends and dividend equivalents of $6.9 billion and cash used to repay or redeem term debt of $5.3 billion, partially offset by net proceeds from commercial paper and repurchase agreement of $4.1 billion and net proceeds from issuance of term debt of $2.2 billion.

During the nine months ended June 26, 2021, cash generated by operating activities of $83.8 billion was a result of $74.1 billion of net income, non-cash adjustments to net income of $12.8 billion and a decrease in the net change in operating assets and liabilities of $3.1 billion.

Cash used in investing activities of $15.4 billion during the nine months ended June 26, 2021 consisted primarily of cash used for purchases of marketable securities, net of maturities and sales, of $7.4 billion and cash used to acquire property, plant and equipment of $7.9 billion.

Cash used in financing activities of $73.0 billion during the nine months ended June 26, 2021 consisted primarily of cash used to repurchase common stock of $66.2 billion, cash used to pay dividends and dividend equivalents of $10.8 billion and cash used to repay or redeem term debt of $7.5 billion, partially offset by net proceeds from issuance of term debt of $13.9 billion.

During the nine months ended June 27, 2020, cash generated by operating activities of $60.1 billion was a result of $44.7 billion of net income, non-cash adjustments to net income of $13.5 billion and an increase in the net change in operating assets and liabilities of $1.8 billion.

Cash used in investing activities of $9.8 billion during the nine months ended June 27, 2020 consisted primarily of cash used for purchases of marketable securities, net of maturities and sales, of $2.0 billion and cash used to acquire property, plant and equipment of $5.5 billion.

Cash used in financing activities of $65.5 billion during the nine months ended June 27, 2020 consisted primarily of cash used to repurchase common stock of $55.2 billion, cash used to pay dividends and dividend equivalents of $10.6 billion and cash used to repay or redeem term debt of $12.6 billion, partially offset by net proceeds from issuance of term debt of $10.6 billion and proceeds from repurchase agreements of $5.2 billion.

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

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

As of March 27, 2021, the Company had $5.0 billion of Commercial Paper outstanding, with a weighted-average interest rate of 0.06% and maturities generally less than nine months.

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”).

During the first six months of 2021, the Company issued $13.9 billion and repaid or redeemed $4.5 billion of Notes.

As of June 26, 2021, the Company had $8.0 billion of Commercial Paper outstanding, with a weighted-average interest rate of 0.04% and maturities generally less than nine months.

As of June 26, 2021, the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate principal amount of $113.2 billion (collectively the “Notes”).

During the first nine months of 2021, the Company issued $13.9 billion and repaid or redeemed $7.5 billion of Notes.

The Company has entered, and in the future may enter, into interest rate swaps to manage interest rate risk on the Notes.

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Capital Return

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.

As of June 26, 2021, the Company was authorized to purchase up to $315 billion of the Company’s common stock under a share repurchase program (the “Program”).

During the nine months ended June 26, 2021, the Company repurchased 515 million shares of its common stock for $65.5 billion, including 32 million shares initially delivered under a $5.0 billion accelerated share repurchase agreement (“ASR”) entered into in May 2021, bringing the total utilization under the Program to $234.1 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”).

On April 28, 2021, the Company also announced the Board of Directors raised the Company’s quarterly cash dividend from $0.205 to $0.22 per share, beginning with the dividend to be paid during the third quarter of 2021.

As of June 26, 2021, the Company’s quarterly cash dividend was $0.22 per share.

The Company intends to increase its dividend on an annual basis, subject to declaration by the Board of Directors.

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The Company’s retail store and other facility leases typically have original terms not exceeding 10 years and generally contain multi-year renewal options.

The Company’s total fixed lease payment obligation of $13.1 billion as of March 27, 2021 included future payments under leases that had commenced as of March 27, 2021, and were therefore recorded on the Company’s Condensed Consolidated Balance Sheet, as well as leases that had been signed but not yet commenced as of March 27, 2021.

The Company’s total fixed lease payment obligation of $13.7 billion as of June 26, 2021 included future payments under leases that had commenced as of June 26, 2021, and were therefore recorded on the Company’s Condensed Consolidated Balance Sheet, as well as leases that had been signed but not yet commenced as of June 26, 2021.

| Q3 2021 Form 10-Q | 29

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The Company also obtains individual components for its products from a wide variety of individual suppliers.

As of March 27, 2021, the Company expects to pay $35.4 billion under manufacturing-related supplier arrangements, which are primarily noncancelable.

As of June 26, 2021, the Company expects to pay $38.2 billion under manufacturing-related supplier arrangements, which are primarily noncancelable.

Other Purchase Obligations

The Company’s other purchase obligations primarily consist of noncancelable obligations to acquire capital assets, including product tooling and manufacturing process equipment, and noncancelable obligations related to advertising, content creation and Internet and telecommunications services.

As of March 27, 2021, the Company had other purchase obligations of $8.6 billion.

As of June 26, 2021, the Company had other purchase obligations of $9.1 billion.

Deemed Repatriation Tax Payable

As of March 27, 2021, the balance of the deemed repatriation tax payable imposed by the U.S.

Tax Cuts and Jobs Act (the “Act”) was $27.8 billion, of which $25.1 billion was included in other non-current liabilities in the Company’s Condensed Consolidated Balance Sheet.

As of June 26, 2021, the balance of the deemed repatriation tax payable imposed by the U.S.

Tax Cuts and Jobs Act (the “Act”) was $24.9 billion, all of which was included in other non-current liabilities in the Company’s Condensed Consolidated Balance Sheet.

The Company pays the deemed repatriation tax payable in installments in accordance with the Act.

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Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the Company’s market risk during the first six months of 2021.

There have been no material changes to the Company’s market risk during the first nine months of 2021.

For a discussion of the Company’s exposure to market risk, refer to the Company’s market risk disclosures set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of the 2020 Form 10-K.

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 2. Management’s Discussion and Analysis