Apple Inc. 10-Q

Item 1. Financial Statements Apple Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In millions, except number of shares which are reflected in thousands and per share amounts) Three Months Ended Nine Months Ended June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021 Net sales: Products $ 63,355 $ 63,948 $ 245,241 $ 232,309 Services 19,604 17,486 58,941 50,148 Total net sales 82,959 81,434 304,182 282,457 Cost of sales: Products 41,485 40,899 155,084 149,476 Services 5,589 5,280 16,411 15,319 Total cost of sales 47,074 46,179 171,495 164,795 Gross margin 35,885 35,255 132,687 117,662 Operating expenses: Research and development 6,797 5,717 19,490 16,142 Selling, general and administrative 6,012 5,412 18,654 16,357 Total operating expenses 12,809 11,129 38,144 32,499 Operating income 23,076 24,126 94,543 85,163 Other income/(expense), net ( 10 ) 243 ( 97 ) 796 Income before provision for income taxes 23,066 24,369 94,446 85,959 Provision for income taxes 3,624 2,625 15,364 11,830 Net income $ 19,442 $ 21,744 $ 79,082 $ 74,129 Earnings per share: Basic $ 1.20 $ 1.31 $ 4.86 $ 4.42 Diluted $ 1.20 $ 1.30 $ 4.82 $ 4.38 Shares used in computing earnings per share: Basic 16,162,945 16,629,371 16,277,824 16,772,656 Diluted 16,262,203 16,781,735 16,394,937 16,941,527 See accompanying Notes to Condensed Consolidated Financial Statements. Apple Inc. | Q3 2022 Form 10-Q | 1 Apple Inc. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (In millions) Three Months Ended Nine Months Ended June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021 Net income $ 19,442 $ 21,744 $ 79,082 $ 74,129 Other comprehensive income/(loss): Change in foreign currency translation, net of tax ( 721 ) 188 ( 1,102 ) 659 Change in unrealized gains/losses on derivative instruments, net of tax: Change in fair value of derivative instruments 852 ( 24 ) 1,548 4 Adjustment for net (gains)/losses realized and included in net income 121 17 ( 87 ) 593 Total change in unrealized gains/losses on derivative instruments 973 ( 7 ) 1,461 597 Change in unrealized gains/losses on marketable debt securities, net of tax: Change in fair value of marketable debt securities ( 3,150 ) 217 ( 9,959 ) ( 558 ) Adjustment for net (gains)/losses realized and included in net income 95 ( 54 ) 140 ( 234 ) Total change in unrealized gains/losses on marketable debt securities ( 3,055 ) 163 ( 9,819 ) ( 792 ) Total other comprehensive income/(loss) ( 2,803 ) 344 ( 9,460 ) 464 Total comprehensive income $ 16,639 $ 22,088 $ 69,622 $ 74,593 See accompanying Notes to Condensed Consolidated Financial Statements. Apple Inc. | Q3 2022 Form 10-Q | 2 Apple Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions, except number of shares which are reflected in thousands and par value) June 25, 2022 September 25, 2021 ASSETS: Current assets: Cash and cash equivalents $ 27,502 $ 34,940 Marketable securities 20,729 27,699 Accounts receivable, net 21,803 26,278 Inventories 5,433 6,580 Vendor non-trade receivables 20,439 25,228 Other current assets 16,386 14,111 Total current assets 112,292 134,836 Non-current assets: Marketable securities 131,077 127,877 Property, plant and equipment, net 40,335 39,440 Other non-current assets 52,605 48,849 Total non-current assets 224,017 216,166 Total assets $ 336,309 $ 351,002 LIABILITIES AND SHAREHOLDERS’ EQUITY: Current liabilities: Accounts payable $ 48,343 $ 54,763 Other current liabilities 48,811 47,493 Deferred revenue 7,728 7,612 Commercial paper 10,982 6,000 Term debt 14,009 9,613 Total current liabilities 129,873 125,481 Non-current liabilities: Term debt 94,700 109,106 Other non-current liabilities 53,629 53,325 Total non-current liabilities 148,329 162,431 Total liabilities 278,202 287,912 Commitments and contingencies Shareholders’ equity: Common stock and additional paid-in capital, $ 0.00001 par value: 50,400,000 shares authorized; 16,095,378 and 16,426,786 shares issued and outstanding, respectively 62,115 57,365 Retained earnings 5,289 5,562 Accumulated other comprehensive income/(loss) ( 9,297 ) 163 Total shareholders’ equity 58,107 63,090 Total liabilities and shareholders’ equity $ 336,309 $ 351,002 See accompanying Notes to Condensed Consolidated Financial Statements. Apple Inc. | Q3 2022 Form 10-Q | 3 Apple Inc. CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited) (In millions, except per share amounts) Three Months Ended Nine Months Ended June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021 Total shareholders’ equity, beginning balances $ 67,399 $ 69,178 $ 63,090 $ 65,339 Common stock and additional paid-in capital: Beginning balances 61,181 54,203 57,365 50,779 Common stock issued — — 593 561 Common stock withheld related to net share settlement of equity awards ( 1,371 ) ( 1,224 ) ( 2,783 ) ( 2,460 ) Share-based compensation 2,305 2,010 6,940 6,109 Ending balances 62,115 54,989 62,115 54,989 Retained earnings: Beginning balances 12,712 15,261 5,562 14,966 Net income 19,442 21,744 79,082 74,129 Dividends and dividend equivalents declared ( 3,760 ) ( 3,713 ) ( 11,058 ) ( 10,755 ) Common stock withheld related to net share settlement of equity awards ( 1,403 ) ( 1,559 ) ( 3,323 ) ( 3,606 ) Common stock repurchased ( 21,702 ) ( 22,500 ) ( 64,974 ) ( 65,501 ) Ending balances 5,289 9,233 5,289 9,233 Accumulated other comprehensive income/(loss): Beginning balances ( 6,494 ) ( 286 ) 163 ( 406 ) Other comprehensive income/(loss) ( 2,803 ) 344 ( 9,460 ) 464 Ending balances ( 9,297 ) 58 ( 9,297 ) 58 Total shareholders’ equity, ending balances $ 58,107 $ 64,280 $ 58,107 $ 64,280 Dividends and dividend equivalents declared per share or RSU $ 0.23 $ 0.22 $ 0.67 $ 0.63 See accompanying Notes to Condensed Consolidated Financial Statements. Apple Inc. | Q3 2022 Form 10-Q | 4 Apple Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In millions) Nine Months Ended June 25, 2022 June 26, 2021 Cash, cash equivalents and restricted cash, beginning balances $ 35,929 $ 39,789 Operating activities: Net income 79,082 74,129 Adjustments to reconcile net income to cash generated by operating activities: Depreciation and amortization 8,239 8,295 Share-based compensation expense 6,760 5,961 Deferred income tax expense/(benefit) 2,756 ( 737 ) Other ( 61 ) ( 689 ) Changes in operating assets and liabilities: Accounts receivable, net 4,561 ( 1,316 ) Inventories 1,049 ( 1,213 ) Vendor non-trade receivables 4,789 4,892 Other current and non-current assets ( 3,289 ) ( 5,899 ) Accounts payable ( 6,108 ) ( 1,786 ) Deferred revenue 260 1,738 Other current and non-current liabilities ( 14 ) 463 Cash generated by operating activities 98,024 83,838 Investing activities: Purchases of marketable securities ( 70,178 ) ( 94,052 ) Proceeds from maturities of marketable securities 24,203 49,880 Proceeds from sales of marketable securities 33,609 36,745 Payments for acquisition of property, plant and equipment ( 7,419 ) ( 7,862 ) Payments made in connection with business acquisitions, net ( 169 ) ( 13 ) Other ( 1,183 ) ( 78 ) Cash used in investing activities ( 21,137 ) ( 15,380 ) Financing activities: Payments for taxes related to net share settlement of equity awards ( 5,915 ) ( 5,855 ) Payments for dividends and dividend equivalents ( 11,138 ) ( 10,827 ) Repurchases of common stock ( 64,974 ) ( 66,223 ) Proceeds from issuance of term debt, net — 13,923 Repayments of term debt ( 6,750 ) ( 7,500 ) Proceeds from commercial paper, net 4,970 3,022 Other ( 148 ) 489 Cash used in financing activities ( 83,955 ) ( 72,971 ) Decrease in cash, cash equivalents and restricted cash ( 7,068 ) ( 4,513 ) Cash, cash equivalents and restricted cash, ending balances $ 28,861 $ 35,276 Supplemental cash flow disclosure: Cash paid for income taxes, net $ 12,251 $ 18,536 Cash paid for interest $ 1,910 $ 1,870 See accompanying Notes to Condensed Consolidated Financial Statements. Apple Inc. | Q3 2022 Form 10-Q | 5 Apple Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) Note 1 – Summary of Significant Accounting Policies Basis of Presentation and Preparation The condensed consolidated financial statements include the accounts of Apple Inc. and its wholly owned subsidiaries (collectively “Apple” or the “Company”). Intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these condensed consolidated financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. 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 Company’s fiscal year is the 52- or 53-week period that ends on the last Saturday of September. An additional week is included in the first fiscal quarter every five or six years to realign the Company’s fiscal quarters with calendar quarters. The Company’s fiscal years 2022 and 2021 span 52 weeks each. Unless otherwise stated, references to particular years, quarters, months and periods refer to the Company’s fiscal years ended in September and the associated quarters, months and periods of those fiscal years. Earnings Per Share The following table shows the computation of basic and diluted earnings per share for the three- and nine-month periods ended June 25, 2022 and June 26, 2021 (net income in millions and shares in thousands): Three Months Ended Nine Months Ended June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021 Numerator: Net income $ 19,442 $ 21,744 $ 79,082 $ 74,129 Denominator: Weighted-average basic shares outstanding 16,162,945 16,629,371 16,277,824 16,772,656 Effect of dilutive securities 99,258 152,364 117,113 168,871 Weighted-average diluted shares 16,262,203 16,781,735 16,394,937 16,941,527 Basic earnings per share $ 1.20 $ 1.31 $ 4.86 $ 4.42 Diluted earnings per share $ 1.20 $ 1.30 $ 4.82 $ 4.38 Apple Inc. | Q3 2022 Form 10-Q | 6 Note 2 – Revenue Net sales disaggregated by significant products and services for the three- and nine-month periods ended June 25, 2022 and June 26, 2021 were as follows (in millions): Three Months Ended Nine Months Ended June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021 iPhone ® (1) $ 40,665 $ 39,570 $ 162,863 $ 153,105 Mac ® (1) 7,382 8,235 28,669 26,012 iPad ® (1) 7,224 7,368 22,118 23,610 Wearables, Home and Accessories (1)(2) 8,084 8,775 31,591 29,582 Services (3) 19,604 17,486 58,941 50,148 Total net sales (4) $ 82,959 $ 81,434 $ 304,182 $ 282,457 (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 mini ® and accessories. (3) Services net sales include sales from the Company’s advertising, AppleCare ® , cloud, digital content, payment and other services. Services net sales also include amortization of the deferred value of services bundled in the sales price of certain products. (4) Includes $ 3.1 billion of revenue recognized in the three months ended June 25, 2022 that was included in deferred revenue as of March 26, 2022, $ 3.0 billion of revenue recognized in the three months ended June 26, 2021 that was included in deferred revenue as of March 27, 2021, $ 6.3 billion of revenue recognized in the nine months ended June 25, 2022 that was included in deferred revenue as of September 25, 2021, and $ 5.5 billion of revenue recognized in the nine months ended June 26, 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 nine-month periods ended June 25, 2022 and June 26, 2021, except in Greater China, where iPhone revenue represented a moderately higher proportion of net sales. As of June 25, 2022 and September 25, 2021, the Company had total deferred revenue of $ 12.2 billion and $ 11.9 billion, respectively. As of June 25, 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. Apple Inc. | Q3 2022 Form 10-Q | 7 Note 3 – Financial Instruments 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 June 25, 2022 and September 25, 2021 (in millions): June 25, 2022 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Current Marketable Securities Non-Current Marketable Securities Cash $ 12,852 $ — $ — $ 12,852 $ 12,852 $ — $ — Level 1 (1) : Money market funds 10,970 — — 10,970 10,970 — — Mutual funds 252 — ( 32 ) 220 — 220 — Subtotal 11,222 — ( 32 ) 11,190 10,970 220 — Level 2 (2) : U.S. Treasury securities 25,296 — ( 1,328 ) 23,968 91 3,511 20,366 U.S. agency securities 5,805 — ( 511 ) 5,294 4 240 5,050 Non-U.S. government securities 17,597 6 ( 1,023 ) 16,580 — 6,336 10,244 Certificates of deposit and time deposits 3,928 — — 3,928 3,374 504 50 Commercial paper 966 — — 966 209 757 — Corporate debt securities 88,912 15 ( 6,455 ) 82,472 2 8,738 73,732 Municipal securities 978 — ( 26 ) 952 — 203 749 Mortgage- and asset-backed securities 23,058 — ( 1,952 ) 21,106 — 220 20,886 Subtotal 166,540 21 ( 11,295 ) 155,266 3,680 20,509 131,077 Total (3) $ 190,614 $ 21 $ ( 11,327 ) $ 179,308 $ 27,502 $ 20,729 $ 131,077 September 25, 2021 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Current Marketable Securities Non-Current Marketable Securities Cash $ 17,305 $ — $ — $ 17,305 $ 17,305 $ — $ — Level 1 (1) : Money market funds 9,608 — — 9,608 9,608 — — Mutual funds 175 11 ( 1 ) 185 — 185 — Subtotal 9,783 11 ( 1 ) 9,793 9,608 185 — Level 2 (2) : Equity securities 1,527 — ( 564 ) 963 — 963 — U.S. Treasury securities 22,878 102 ( 77 ) 22,903 3,596 6,625 12,682 U.S. agency securities 8,949 2 ( 64 ) 8,887 1,775 1,930 5,182 Non-U.S. government securities 20,201 211 ( 101 ) 20,311 390 3,091 16,830 Certificates of deposit and time deposits 1,300 — — 1,300 490 810 — Commercial paper 2,639 — — 2,639 1,776 863 — Corporate debt securities 83,883 1,242 ( 267 ) 84,858 — 12,327 72,531 Municipal securities 967 14 — 981 — 130 851 Mortgage- and asset-backed securities 20,529 171 ( 124 ) 20,576 — 775 19,801 Subtotal 162,873 1,742 ( 1,197 ) 163,418 8,027 27,514 127,877 Total (3) $ 189,961 $ 1,753 $ ( 1,198 ) $ 190,516 $ 34,940 $ 27,699 $ 127,877 (1) Level 1 fair value estimates are based on quoted prices in active markets for identical assets or liabilities. (2) Level 2 fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. (3) As of June 25, 2022 and September 25, 2021, total marketable securities included $ 14.1 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. Apple Inc. | Q3 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 June 25, 2022 (in millions): Due after 1 year through 5 years $ 92,970 Due after 5 years through 10 years 19,317 Due after 10 years 18,790 Total fair value $ 131,077 Derivative Instruments and Hedging The Company may use derivative instruments to partially offset its business exposure to foreign exchange and interest rate risk. However, the Company may choose not to hedge certain exposures for a variety of reasons, including accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange or interest rates. Foreign Exchange Risk To protect gross margins from fluctuations in foreign currency exchange rates, the Company may enter into forward contracts, option contracts or other instruments, and may designate these instruments as cash flow hedges. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue and inventory purchases, typically for up to 12 months. To protect the Company’s foreign currency–denominated term debt or marketable securities from fluctuations in foreign currency exchange rates, the Company may enter into forward contracts, cross-currency swaps or other instruments. The Company designates these instruments as either cash flow or fair value hedges. As of June 25, 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. Interest Rate Risk To protect the Company’s term debt or marketable securities from fluctuations in interest rates, the Company may enter into interest rate swaps, options or other instruments. 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 June 25, 2022 and September 25, 2021 were as follows (in millions): June 25, 2022 September 25, 2021 Derivative instruments designated as accounting hedges: Foreign exchange contracts $ 76,234 $ 76,475 Interest rate contracts $ 20,775 $ 16,875 Derivative instruments not designated as accounting hedges: Foreign exchange contracts $ 84,506 $ 126,918 The gross fair values of the Company’s derivative assets and liabilities were not material as of June 25, 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 nine-month periods ended June 25, 2022 and June 26, 2021. Apple Inc. | Q3 2022 Form 10-Q | 9 The carrying amounts of the Company’s hedged items in fair value hedges as of June 25, 2022 and September 25, 2021 were as follows (in millions): June 25, 2022 September 25, 2021 Hedged assets/(liabilities): Current and non-current marketable securities $ 14,250 $ 15,954 Current and non-current term debt $ ( 19,281 ) $ ( 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- and nine-month periods ended June 25, 2022 and June 26, 2021. Accounts Receivable Trade Receivables The Company has considerable trade receivables outstanding with its third-party cellular network carriers, wholesalers, retailers, resellers, small and mid-sized businesses and education, enterprise and government customers. The Company generally does not require collateral from its customers; however, the Company will require collateral or third-party credit support in certain instances to limit credit risk. In addition, when possible, the Company attempts to limit credit risk on trade receivables with credit insurance for certain customers or by requiring third-party financing, loans or leases to support credit exposure. These credit-financing arrangements are directly between the third-party financing company and the end customer. 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 36 % and 42 % of total trade receivables as of June 25, 2022 and September 25, 2021, respectively. Vendor Non-Trade Receivables The Company has non-trade receivables from certain of its manufacturing vendors resulting from the sale of components to these vendors who manufacture subassemblies or assemble final products for the Company. The Company purchases these components directly from suppliers. As of June 25, 2022, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 54 % 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 June 25, 2022 and September 25, 2021 (in millions): Property, Plant and Equipment, Net June 25, 2022 September 25, 2021 Gross property, plant and equipment $ 111,851 $ 109,723 Accumulated depreciation and amortization ( 71,516 ) ( 70,283 ) Total property, plant and equipment, net $ 40,335 $ 39,440 Other Non-Current Liabilities June 25, 2022 September 25, 2021 Long-term taxes payable $ 20,699 $ 24,689 Other non-current liabilities 32,930 28,636 Total other non-current liabilities $ 53,629 $ 53,325 Apple Inc. | Q3 2022 Form 10-Q | 10 Other Income/(Expense), Net The following table shows the detail of other income/(expense), net for the three- and nine-month periods ended June 25, 2022 and June 26, 2021 (in millions): Three Months Ended Nine Months Ended June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021 Interest and dividend income $ 722 $ 719 $ 2,072 $ 2,184 Interest expense ( 719 ) ( 665 ) ( 2,104 ) ( 1,973 ) Other income/(expense), net ( 13 ) 189 ( 65 ) 585 Total other income/(expense), net $ ( 10 ) $ 243 $ ( 97 ) $ 796 Note 5 – Debt Commercial Paper The Company issues unsecured short-term promissory notes (“Commercial Paper”) pursuant to a commercial paper program. The Company uses net proceeds from the commercial paper program for general corporate purposes, including dividends and share repurchases. As of June 25, 2022 and September 25, 2021, the Company had $ 11.0 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 nine months ended June 25, 2022 and June 26, 2021 (in millions): Nine Months Ended June 25, 2022 June 26, 2021 Maturities 90 days or less: Proceeds from commercial paper, net $ 4,383 $ 2,745 Maturities greater than 90 days: Proceeds from commercial paper 5,731 3,993 Repayments of commercial paper ( 5,144 ) ( 3,716 ) Proceeds from commercial paper, net 587 277 Total proceeds from commercial paper, net $ 4,970 $ 3,022 Term Debt As of June 25, 2022 and September 25, 2021, the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate carrying amount of $ 108.7 billion and $ 118.7 billion, respectively (collectively the “Notes”). As of June 25, 2022 and September 25, 2021, the fair value of the Company’s Notes, based on Level 2 inputs, was $ 101.0 billion and $ 125.3 billion, respectively. Note 6 – Shareholders’ Equity Share Repurchase Program During the nine months ended June 25, 2022, the Company repurchased 408 million shares of its common stock for $ 65.0 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. Apple Inc. | Q3 2022 Form 10-Q | 11 Note 7 – Benefit Plans Restricted Stock Units A summary of the Company’s restricted stock unit (“RSU”) activity and related information for the nine months ended June 25, 2022 is as follows: Number of RSUs (in thousands) Weighted-Average Grant Date Fair Value Per RSU Aggregate Fair Value (in millions) Balance as of September 25, 2021 240,427 $ 75.16 RSUs granted 84,927 $ 150.02 RSUs vested ( 109,846 ) $ 70.96 RSUs canceled ( 12,986 ) $ 98.26 Balance as of June 25, 2022 202,522 $ 107.35 $ 28,689 The fair value as of the respective vesting dates of RSUs was $ 7.8 billion and $ 17.3 billion for the three- and nine-month periods ended June 25, 2022, respectively, and was $ 7.9 billion and $ 17.3 billion for the three- and nine-month periods ended June 26, 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- and nine-month periods ended June 25, 2022 and June 26, 2021 (in millions): Three Months Ended Nine Months Ended June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021 Share-based compensation expense $ 2,243 $ 1,960 $ 6,760 $ 5,961 Income tax benefit related to share-based compensation expense $ ( 1,231 ) $ ( 1,319 ) $ ( 3,416 ) $ ( 3,518 ) As of June 25, 2022, the total unrecognized compensation cost related to outstanding RSUs and stock options was $ 18.1 billion, which the Company expects to recognize over a weighted-average period of 2.7 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- and nine-month periods ended June 25, 2022 and June 26, 2021 (in millions): Three Months Ended Nine Months Ended June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021 Beginning accrued warranty and related costs $ 3,206 $ 3,784 $ 3,364 $ 3,354 Cost of warranty claims ( 534 ) ( 636 ) ( 1,787 ) ( 2,008 ) Accruals for product warranty 177 384 1,272 2,186 Ending accrued warranty and related costs $ 2,849 $ 3,532 $ 2,849 $ 3,532 Contingencies The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of business and that have not been fully resolved. The outcome of litigation is inherently uncertain. 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. Apple Inc. | Q3 2022 Form 10-Q | 12 Note 9 – Segment Information and Geographic Data The following table shows information by reportable segment for the three- and nine-month periods ended June 25, 2022 and June 26, 2021 (in millions): Three Months Ended Nine Months Ended June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021 Americas: Net sales $ 37,472 $ 35,870 $ 129,850 $ 116,486 Operating income $ 13,914 $ 12,916 $ 48,778 $ 40,751 Europe: Net sales $ 19,287 $ 18,943 $ 72,323 $ 68,513 Operating income $ 7,124 $ 7,085 $ 27,174 $ 24,939 Greater China: Net sales $ 14,604 $ 14,762 $ 58,730 $ 53,803 Operating income $ 5,760 $ 6,303 $ 25,055 $ 22,591 Japan: Net sales $ 5,446 $ 6,464 $ 20,277 $ 22,491 Operating income $ 2,418 $ 3,031 $ 9,263 $ 9,962 Rest of Asia Pacific: Net sales $ 6,150 $ 5,395 $ 23,002 $ 21,164 Operating income $ 2,367 $ 2,116 $ 9,185 $ 7,805 A reconciliation of the Company’s segment operating income to the Condensed Consolidated Statements of Operations for the three- and nine-month periods ended June 25, 2022 and June 26, 2021 is as follows (in millions): Three Months Ended Nine Months Ended June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021 Segment operating income $ 31,583 $ 31,451 $ 119,455 $ 106,048 Research and development expense ( 6,797 ) ( 5,717 ) ( 19,490 ) ( 16,142 ) Other corporate expenses, net ( 1,710 ) ( 1,608 ) ( 5,422 ) ( 4,743 ) Total operating income $ 23,076 $ 24,126 $ 94,543 $ 85,163 Apple Inc. | Q3 2022 Form 10-Q | 13