Apple Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations This section and other parts of this Quarterly Report on Form 10-Q (“Form 10-Q”) contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. For example, statements in this Form 10-Q regarding the potential future impact of the COVID-19 pandemic on the Company’s business and results of operations are forward-looking statements . Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. 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 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. Each of the terms the “Company” and “Apple” as used herein refers collectively to Apple Inc. and its wholly owned subsidiaries, unless otherwise stated. The following discussion should be read in conjunction with the 2020 Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q. Available Information The Company periodically provides certain information for investors on its corporate website, www.apple.com, and its investor relations website, investor.apple.com. This includes press releases and other information about financial performance, information on corporate governance and details related to the Company’s annual meeting of shareholders. The information contained on the websites referenced in this Form 10-Q is not incorporated by reference into this filing. Further, the Company’s references to website URLs are intended to be inactive textual references only. Quarterly Highlights Business Seasonality and Product Introductions The Company has historically experienced higher net sales in its first quarter compared to other quarters in its fiscal year due in part to seasonal holiday demand. Additionally, new product and service introductions can significantly impact net sales, cost of sales and operating expenses. The timing of product introductions can also impact the Company’s net sales to its indirect distribution channels as these channels are filled with new inventory following a product launch, and channel inventory of an older product often declines as the launch of a newer product approaches. Net sales can also be affected when consumers and distributors anticipate a product introduction. COVID-19 Update The COVID-19 pandemic has prompted governments and businesses to take unprecedented measures, such as restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelter-in-place orders. The COVID-19 pandemic has significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. 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 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; the imposition of protective public safety measures; and the impact of the pandemic on the global economy and demand for consumer products. Refer to Part I, Item 1A of the 2020 Form 10-K under the heading “Risk Factors,” for more information. Apple Inc. | Q3 2021 Form 10-Q | 23 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. 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; • iPad Pro ® , powered by the Apple M1 chip; • Apple TV 4K ® , with a redesigned Siri Remote ® ; • AirTag™, an accessory that helps keep track of items using the Find My™ network; and • 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 nine-month periods ended June 26, 2021 and June 27, 2020 (dollars in millions): Three Months Ended Nine Months Ended June 26, 2021 June 27, 2020 Change June 26, 2021 June 27, 2020 Change Net sales by category: iPhone (1) $ 39,570 $ 26,418 50 % $ 153,105 $ 111,337 38 % Mac (1) 8,235 7,079 16 % 26,012 19,590 33 % iPad (1) 7,368 6,582 12 % 23,610 16,927 39 % Wearables, Home and Accessories (1)(2) 8,775 6,450 36 % 29,582 22,744 30 % Services (3) 17,486 13,156 33 % 50,148 39,219 28 % Total net sales $ 81,434 $ 59,685 36 % $ 282,457 $ 209,817 35 % (1) Products net sales include amortization of the deferred value of unspecified software upgrade rights, which are bundled in the sales price of the respective product. (2) Wearables, Home and Accessories net sales include sales of AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch and Apple-branded and third-party accessories. (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+ services, which are bundled in the sales price of certain products. iPhone 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 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 ® . Apple Inc. | Q3 2021 Form 10-Q | 24 iPad 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 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 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 The Company manages its business primarily on a geographic basis. The Company’s reportable segments consist of the Americas, Europe, Greater China, Japan and Rest of Asia Pacific. Americas includes both North and South America. Europe includes European countries, as well as India, the Middle East and Africa. 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. Although the reportable segments provide similar hardware and software products and similar services, each one is managed separately to better align with the location of the Company’s customers and distribution partners and the unique market dynamics of each geographic region. 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 nine-month periods ended June 26, 2021 and June 27, 2020 (dollars in millions): Three Months Ended Nine Months Ended June 26, 2021 June 27, 2020 Change June 26, 2021 June 27, 2020 Change Net sales by reportable segment: Americas $ 35,870 $ 27,018 33 % $ 116,486 $ 93,858 24 % Europe 18,943 14,173 34 % 68,513 51,740 32 % Greater China 14,762 9,329 58 % 53,803 32,362 66 % Japan 6,464 4,966 30 % 22,491 16,395 37 % Rest of Asia Pacific 5,395 4,199 28 % 21,164 15,462 37 % Total net sales $ 81,434 $ 59,685 36 % $ 282,457 $ 209,817 35 % Americas 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 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 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 third quarter and first nine months of 2021. Apple Inc. | Q3 2021 Form 10-Q | 25 Japan 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 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 favorable impact on Rest of Asia Pacific net sales during the third quarter and first nine months of 2021. Gross Margin 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 June 26, 2021 June 27, 2020 June 26, 2021 June 27, 2020 Gross margin: Products $ 23,049 $ 13,836 $ 82,833 $ 54,509 Services 12,206 8,844 34,829 25,758 Total gross margin $ 35,255 $ 22,680 $ 117,662 $ 80,267 Gross margin percentage: Products 36.0 % 29.7 % 35.7 % 32.0 % Services 69.8 % 67.2 % 69.5 % 65.7 % Total gross margin percentage 43.3 % 38.0 % 41.7 % 38.3 % Products Gross Margin 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. dollar. 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. dollar. Services Gross Margin 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. dollar. 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. Apple Inc. | Q3 2021 Form 10-Q | 26 Operating Expenses 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 June 26, 2021 June 27, 2020 June 26, 2021 June 27, 2020 Research and development $ 5,717 $ 4,758 $ 16,142 $ 13,774 Percentage of total net sales 7 % 8 % 6 % 7 % Selling, general and administrative $ 5,412 $ 4,831 $ 16,357 $ 14,980 Percentage of total net sales 7 % 8 % 6 % 7 % Total operating expenses $ 11,129 $ 9,589 $ 32,499 $ 28,754 Percentage of total net sales 14 % 16 % 12 % 14 % Research and Development 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 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 nine-month periods ended June 26, 2021 and June 27, 2020 was as follows (dollars in millions): Three Months Ended Nine Months Ended June 26, 2021 June 27, 2020 Change June 26, 2021 June 27, 2020 Change Interest and dividend income $ 719 $ 901 $ 2,184 $ 2,995 Interest expense (665) (697) (1,973) (2,239) Other income/(expense), net 189 (158) 585 (79) Total other income/(expense), net $ 243 $ 46 428 % $ 796 $ 677 18 % 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. Apple Inc. | 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 nine-month periods ended June 26, 2021 and June 27, 2020 were as follows (dollars in millions): Three Months Ended Nine Months Ended June 26, 2021 June 27, 2020 June 26, 2021 June 27, 2020 Provision for income taxes $ 2,625 $ 1,884 $ 11,830 $ 7,452 Effective tax rate 10.8 % 14.3 % 13.8 % 14.3 % Statutory federal income tax rate 21 % 21 % 21 % 21 % 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 June 26, 2021 and September 26, 2020 and for the first nine months of 2021 and 2020 (in millions): June 26, 2021 September 26, 2020 Cash, cash equivalents and marketable securities (1) $ 193,644 $ 191,830 Property, plant and equipment, net $ 38,615 $ 36,766 Commercial paper $ 8,000 $ 4,996 Total term debt $ 113,791 $ 107,440 Working capital $ 6,669 $ 38,321 Nine Months Ended June 26, 2021 June 27, 2020 Cash generated by operating activities $ 83,838 $ 60,098 Cash used in investing activities $ (15,380) $ (9,820) Cash used in financing activities $ (72,971) $ (65,463) (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. 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 over the next 12 months. 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.” The Company’s marketable securities investment portfolio is primarily invested in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. The Company’s investment policy generally requires securities to be investment grade and limits the amount of credit exposure to any one issuer. Apple Inc. | Q3 2021 Form 10-Q | 28 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. Debt 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 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. In addition, the Company has entered, and in the future may enter, into foreign currency swaps to manage foreign currency risk on the Notes. Further information regarding the Company’s debt issuances and related hedging activity can be found in Part I, Item 1 of this Form 10-Q in the Notes to Condensed Consolidated Financial Statements in Note 3, “Financial Instruments” and Note 6, “Debt.” Capital Return 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”). 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. Contractual Obligations Leases The Company has lease arrangements for certain equipment and facilities, including retail, corporate, manufacturing and data center space. 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 $13.7 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. Apple Inc. | Q3 2021 Form 10-Q | 29 Manufacturing Purchase Obligations The Company utilizes several outsourcing partners to manufacture sub-assemblies for the Company’s products and to perform final assembly and testing of finished products. These outsourcing partners acquire components and build product based on demand information supplied by the Company, which typically covers periods up to 150 days. The Company also obtains individual components for its products from a wide variety of individual suppliers. 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 June 26, 2021, the Company had other purchase obligations of $9.1 billion. Deemed Repatriation Tax Payable 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. Other Non-Current Liabilities The Company’s remaining other non-current liabilities primarily consist of items for which the Company is unable to make a reasonably reliable estimate of the timing or amount of payments. Critical Accounting Policies and Estimates The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates, and such differences may be material. Note 1, “Summary of Significant Accounting Policies” in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the 2020 Form 10-K, and “Critical Accounting Policies and Estimates” in Part II, Item 7 of the 2020 Form 10-K describe the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements. There have been no material changes to the Company’s critical accounting policies and estimates since the 2020 Form 10-K. Item 3. Quantitative and Qualitative Disclosures About Market Risk 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.