What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-04-29 compared with 2022-01-28 · 95 added, 69 removed, 358 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

2021 December 26,

Three Months Ended Six Months Ended

2022 March 27,

2021 March 26,

2022 March 27,

Products $ 77,457 $ 72,683 $ 181,886 $ 168,361

25 unchanged sentences

(In millions)

Three Months Ended

2021 December 26,

Three Months Ended Six Months Ended

2022 March 27,

2021 March 26,

2022 March 27,

$ 25,010 $ 23,630 $ 59,640 $ 52,385

1 unchanged sentence

Change in foreign currency translation, net of tax

( 21 ) ( 78 ) ( 381 ) 471

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

1 unchanged sentence

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

( 301 ) 759 ( 208 ) 576

Total change in unrealized gains/losses on derivative instruments

33 1,091 488 604

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

57 unchanged sentences

(In millions, except per share amounts)

Three Months Ended

2021 December 26,

Three Months Ended Six Months Ended

2022 March 27,

2021 March 26,

2022 March 27,

Total shareholders’ equity, beginning balances $ 71,932 $ 66,224 $ 63,090 $ 65,339

1 unchanged sentence

Beginning balances 58,424 51,744 57,365 50,779

Common stock issued

593 561 593 561

Common stock withheld related to net share settlement of equity awards

20 unchanged sentences

(In millions)

Three Months Ended

2021 December 26,

Six Months Ended

2022 March 27,

Cash, cash equivalents and restricted cash, beginning balances $ 35,929 $ 39,789

5 unchanged sentences

Deferred income tax expense/(benefit) 1,088 ( 207 )

Other ( 20 ) ( 474 )

Changes in operating assets and liabilities:

12 unchanged sentences

Payments for acquisition of property, plant and equipment ( 5,317 ) ( 5,769 )

Payments made in connection with business acquisitions, net ( 167 ) ( 9 )

Other ( 568 ) —

4 unchanged sentences

Repurchases of common stock ( 43,109 ) ( 43,323 )

Proceeds from issuance of term debt, net — 13,923

Repayments of term debt ( 3,750 ) ( 4,500 )

Proceeds from/(Repayments of) commercial paper, net ( 1,000 ) 22

Proceeds from commercial paper, net 999 22

Other ( 105 ) 523

18 unchanged sentences

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

These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the fiscal year ended September 25, 2021 (the “2021 Form 10-K”).

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

3 unchanged sentences

Earnings Per Share

The following table shows the computation of basic and diluted earnings per share for the three months ended December 25, 2021 and December 26, 2020 (net income in millions and shares in thousands):

Three Months Ended

2021 December 26,

The following table shows the computation of basic and diluted earnings per share for the three- and six-month periods ended March 26, 2022 and March 27, 2021 (net income in millions and shares in thousands):

Three Months Ended Six Months Ended

2022 March 27,

2021 March 26,

2022 March 27,

Net income $ 25,010 $ 23,630 $ 59,640 $ 52,385

6 unchanged sentences

Note 2 – Revenue

Net sales disaggregated by significant products and services for the three months ended December 25, 2021 and December 26, 2020 were as follows (in millions):

Three Months Ended

2021 December 26,

Net sales disaggregated by significant products and services for the three- and six-month periods ended March 26, 2022 and March 27, 2021 were as follows (in millions):

Three Months Ended Six Months Ended

2022 March 27,

2021 March 26,

2022 March 27,

$ 50,570 $ 47,938 $ 122,198 $ 113,535

10,435 9,102 21,287 17,777

7,646 7,807 14,894 16,242

Wearables, Home and Accessories (1)(2)

7 unchanged sentences

Services net sales also include amortization of the deferred value of services bundled in the sales price of certain products.

(4) Includes $ 3.0 billion of revenue recognized in the three months ended December 25, 2021 that was included in deferred revenue as of September 25, 2021 and $ 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.

The Company’s proportion of net sales by disaggregated revenue source was generally consistent for each reportable segment in Note 9, “Segment Information and Geographic Data” for the three months ended December 25, 2021 and December 26, 2020, except in Greater China, where iPhone revenue represented a moderately higher proportion of net sales.

As of December 25, 2021 and September 25, 2021, the Company had total deferred revenue of $ 12.4 billion and $ 11.9 billion, respectively.

As of December 25, 2021, the Company expects 64 % of total deferred revenue to be realized in less than a year, 27 % within one-to-two years, 8 % within two-to-three years and 1 % in greater than three years.

(4) Includes $ 3.0 billion of revenue recognized in the three months ended March 26, 2022 that was included in deferred revenue as of December 25, 2021, $ 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, $ 4.8 billion of revenue recognized in the six months ended March 26, 2022 that was included in deferred revenue as of September 25, 2021, and $ 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.

The Company’s proportion of net sales by disaggregated revenue source was generally consistent for each reportable segment in Note 9, “Segment Information and Geographic Data” for the three- and six-month periods ended March 26, 2022 and March 27, 2021, except in Greater China, where iPhone revenue represented a moderately higher proportion of net sales.

As of March 26, 2022 and September 25, 2021, the Company had total deferred revenue of $ 12.5 billion and $ 11.9 billion, respectively.

As of March 26, 2022, the Company expects 63 % of total deferred revenue to be realized in less than a year, 27 % within one-to-two years, 8 % within two-to-three years and 2 % in greater than three years.

| Q2 2022 Form 10-Q | 7

1 unchanged sentence

Cash, Cash Equivalents and Marketable Securities

The following tables show the Company’s cash, cash equivalents and marketable securities by significant investment category as of December 25, 2021 and September 25, 2021 (in millions):

December 25, 2021

The following tables show the Company’s cash, cash equivalents and marketable securities by significant investment category as of March 26, 2022 and September 25, 2021 (in millions):

March 26, 2022

Cost Unrealized

49 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 25, 2021 and September 25, 2021, total marketable securities included $ 16.8 billion and $ 17.9 billion, respectively, that was restricted from general use, related to the European Commission decision finding that Ireland granted state aid to the Company, and other agreements.

(3) As of March 26, 2022 and September 25, 2021, total marketable securities included $ 15.4 billion and $ 17.9 billion, respectively, that were restricted from general use, related to the European Commission decision finding that Ireland granted state aid to the Company, and other agreements.

| Q2 2022 Form 10-Q | 8

The following table shows the fair value of the Company’s non-current marketable debt securities, by contractual maturity, as of December 25, 2021 (in millions):

The following table shows the fair value of the Company’s non-current marketable debt securities, by contractual maturity, as of March 26, 2022 (in millions):

Due after 1 year through 5 years $ 97,603

11 unchanged sentences

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

As of December 25, 2021, the Company’s hedged term debt– and marketable securities–related foreign currency transactions are expected to be recognized within 21 years.

As of March 26, 2022, the Company’s hedged term debt– and marketable securities–related foreign currency transactions are expected to be recognized within 20 years.

The Company may also enter into derivative instruments that are not designated as accounting hedges to protect gross margins from certain fluctuations in foreign currency exchange rates, as well as 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.

The notional amounts of the Company’s outstanding derivative instruments as of December 25, 2021 and September 25, 2021 were as follows (in millions):

December 25, 2021 September 25, 2021

The notional amounts of the Company’s outstanding derivative instruments as of March 26, 2022 and September 25, 2021 were as follows (in millions):

2022 September 25,

Derivative instruments designated as accounting hedges:

3 unchanged sentences

Foreign exchange contracts $ 110,758 $ 126,918

The gross fair values of the Company’s derivative assets and liabilities were not material as of December 25, 2021 and September 25, 2021.

The gains and losses recognized in other comprehensive income and amounts reclassified from accumulated other comprehensive income to net income for the Company’s derivative instruments designated as cash flow hedges were not material in the three months ended December 25, 2021 and December 26, 2020.

The gross fair values of the Company’s derivative assets and liabilities were not material as of March 26, 2022 and September 25, 2021.

The gains and losses recognized in other comprehensive income/(loss) and amounts reclassified from accumulated other comprehensive income/(loss) to net income for the Company’s derivative instruments designated as cash flow hedges were not material in the three- and six-month periods ended March 26, 2022 and March 27, 2021.

| Q2 2022 Form 10-Q | 9

The carrying amounts of the Company’s hedged items in fair value hedges as of December 25, 2021 and September 25, 2021 were as follows (in millions):

December 25, 2021 September 25, 2021

The carrying amounts of the Company’s hedged items in fair value hedges as of March 26, 2022 and September 25, 2021 were as follows (in millions):

2022 September 25,

Hedged assets/(liabilities):

1 unchanged sentence

Current and non-current term debt $ ( 19,766 ) $ ( 17,857 )

The gains and losses on the Company’s derivative instruments designated as fair value hedges and the related hedged item adjustments were not material in the three months ended December 25, 2021 and December 26, 2020.

The gains and losses on the Company’s derivative instruments designated as fair value hedges and the related hedged item adjustments were not material in the three- and six-month periods ended March 26, 2022 and March 27, 2021.

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.

The Company’s cellular network carriers accounted for 45 % and 42 % of total trade receivables as of December 25, 2021 and September 25, 2021, respectively.

The Company’s cellular network carriers accounted for 36 % and 42 % of total trade receivables as of March 26, 2022 and September 25, 2021, respectively.

Vendor Non-Trade Receivables

1 unchanged sentence

The Company purchases these components directly from suppliers.

As of December 25, 2021, the Company had three vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 54 %, 13 % and 12 %.

As of March 26, 2022, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 52 % and 12 %.

As of September 25, 2021, the Company had three vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 52 %, 11 % and 11 %.

Note 4 – Condensed Consolidated Financial Statement Details

The following tables show the Company’s condensed consolidated financial statement details as of December 25, 2021 and September 25, 2021 (in millions):

The following tables show the Company’s condensed consolidated financial statement details as of March 26, 2022 and September 25, 2021 (in millions):

Property, Plant and Equipment, Net

10 unchanged sentences

Other Income/(Expense), Net

The following table shows the detail of other income/(expense), net for the three months ended December 25, 2021 and December 26, 2020 (in millions):

Three Months Ended

2021 December 26,

The following table shows the detail of other income/(expense), net for the three- and six-month periods ended March 26, 2022 and March 27, 2021 (in millions):

Three Months Ended Six Months Ended

2022 March 27,

2021 March 26,

2022 March 27,

Interest and dividend income $ 700 $ 718 $ 1,350 $ 1,465

Interest expense ( 691 ) ( 670 ) ( 1,385 ) ( 1,308 )

Other expense, net ( 203 ) ( 64 )

Other income/(expense), net 151 460 ( 52 ) 396

Total other income/(expense), net $ 160 $ 508 $ ( 87 ) $ 553

3 unchanged sentences

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

As of December 25, 2021 and September 25, 2021, the Company had $ 5.0 billion and $ 6.0 billion of Commercial Paper outstanding, 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 25, 2021 and December 26, 2020 (in millions):

Three Months Ended

2021 December 26,

As of March 26, 2022 and September 25, 2021, the Company had $ 7.0 billion and $ 6.0 billion of Commercial Paper outstanding, 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 26, 2022 and March 27, 2021 (in millions):

Six Months Ended

2022 March 27,

Maturities 90 days or less:

4 unchanged sentences

Repayments of commercial paper, net ( 3,953 ) ( 1,986 )

Total proceeds from/(repayments of) commercial paper, net $ ( 1,000 ) $ 22

As of December 25, 2021 and September 25, 2021, the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate carrying amount of $ 117.8 billion and $ 118.7 billion, respectively (collectively the “Notes”).

As of December 25, 2021 and September 25, 2021, the fair value of the Company’s Notes, based on Level 2 inputs, was $ 123.5 billion and $ 125.3 billion, respectively.

Total proceeds from commercial paper, net $ 999 $ 22

As of March 26, 2022 and September 25, 2021, the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate carrying amount of $ 113.0 billion and $ 118.7 billion, respectively (collectively the “Notes”).

As of March 26, 2022 and September 25, 2021, the fair value of the Company’s Notes, based on Level 2 inputs, was $ 110.5 billion and $ 125.3 billion, respectively.

Note 6 – Shareholders’ Equity

Share Repurchase Program

As of December 25, 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 three months ended December 25, 2021, the Company repurchased 124 million shares of its common stock for $ 20.4 billion, including 30 million shares initially delivered under accelerated share repurchase agreements (“ASRs”) entered into in November 2021, bringing the total utilization under the Program to $ 274.5 billion as of December 25, 2021.

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

During the six months ended March 26, 2022, the Company repurchased 266 million shares of its common stock for $ 43.3 billion under a share repurchase program authorized by the Board of Directors (the “Program”), including 35 million shares delivered under accelerated share repurchase agreements totaling $ 6.0 billion that were entered into in November 2021.

The Program does not obligate the Company to acquire a minimum amount 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.

| Q2 2022 Form 10-Q | 11

Under the terms of the Company’s ASRs, two financial institutions committed to deliver shares of the Company’s common stock during the purchase periods in exchange for up-front payments totaling $ 6.0 billion.

The total number of shares ultimately delivered under the ASRs, and therefore the average repurchase price paid per share, is determined based on the volume-weighted average price of the Company’s common stock during the ASRs’ purchase periods, which end in the second quarter of 2022.

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

Note 7 – Benefit Plans

Restricted Stock Units

A summary of the Company’s restricted stock unit (“RSU”) activity and related information for the three months ended December 25, 2021 is as follows:

A summary of the Company’s restricted stock unit (“RSU”) activity and related information for the six months ended March 26, 2022 is as follows:

(in thousands)

7 unchanged sentences

RSUs canceled ( 8,407 ) $ 95.86

Balance as of December 25, 2021 246,537 $ 97.69 $ 43,460

The fair value as of the respective vesting dates of RSUs was $ 8.5 billion for the three months ended both December 25, 2021 and December 26, 2020.

Balance as of March 26, 2022 246,464 $ 100.84 $ 43,062

The fair value as of the respective vesting dates of RSUs was $ 1.0 billion and $ 9.5 billion for the three- and six-month periods ended March 26, 2022, respectively, and was $ 867 million and $ 9.4 billion for the three- and six-month periods ended March 27, 2021, 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 25, 2021 and December 26, 2020 (in millions):

Three Months Ended

2021 December 26,

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 26, 2022 and March 27, 2021 (in millions):

Three Months Ended Six Months Ended

2022 March 27,

2021 March 26,

2022 March 27,

Share-based compensation expense $ 2,252 $ 1,981 $ 4,517 $ 4,001

1 unchanged sentence

$ ( 649 ) $ ( 575 ) $ ( 2,185 ) $ ( 2,199 )

As of December 25, 2021, the total unrecognized compensation cost related to outstanding RSUs and stock options was $ 20.6 billion, which the Company expects to recognize over a weighted-average period of 3.0 years.

As of March 26, 2022, the total unrecognized compensation cost related to outstanding RSUs and stock options was $ 19.3 billion, which the Company expects to recognize over a weighted-average period of 2.8 years.

Note 8 – Commitments and Contingencies

Accrued Warranty

The following table shows changes in the Company’s accrued warranties and related costs for the three months ended December 25, 2021 and December 26, 2020 (in millions):

Three Months Ended

2021 December 26,

The following table shows changes in the Company’s accrued warranties and related costs for the three- and six-month periods ended March 26, 2022 and March 27, 2021 (in millions):

Three Months Ended Six Months Ended

2022 March 27,

2021 March 26,

2022 March 27,

Beginning accrued warranty and related costs $ 3,530 $ 4,124 $ 3,364 $ 3,354

2 unchanged sentences

Ending accrued warranty and related costs $ 3,206 $ 3,784 $ 3,206 $ 3,784

| Q1 2022 Form 10-Q | 12

Contingencies

2 unchanged sentences

In the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss, or a material loss greater than a recorded accrual, concerning loss contingencies for asserted legal and other claims.

| Q2 2022 Form 10-Q | 12

Note 9 – Segment Information and Geographic Data

The following table shows information by reportable segment for the three months ended December 25, 2021 and December 26, 2020 (in millions):

Three Months Ended

2021 December 26,

The following table shows information by reportable segment for the three- and six-month periods ended March 26, 2022 and March 27, 2021 (in millions):

Three Months Ended Six Months Ended

2022 March 27,

2021 March 26,

2022 March 27,

Net sales $ 40,882 $ 34,306 $ 92,378 $ 80,616

10 unchanged sentences

Operating income $ 2,823 $ 2,736 $ 6,818 $ 5,689

A reconciliation of the Company’s segment operating income to the Condensed Consolidated Statements of Operations for the three months ended December 25, 2021 and December 26, 2020 is as follows (in millions):

Three Months Ended

2021 December 26,

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 26, 2022 and March 27, 2021 is as follows (in millions):

Three Months Ended Six Months Ended

2022 March 27,

2021 March 26,

2022 March 27,

Segment operating income $ 38,215 $ 34,237 $ 87,872 $ 74,597

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