What changed in this filing

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Item 1. Financial Statements

2023-05-05 compared with 2023-02-03 · 98 added, 74 removed, 363 unchanged (32% 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

2022 December 25,

Three Months Ended Six Months Ended

2023 March 26,

2022 April 1,

2023 March 26,

Products $ 73,929 $ 77,457 $ 170,317 $ 181,886

25 unchanged sentences

(In millions)

Three Months Ended

2022 December 25,

Three Months Ended Six Months Ended

2023 March 26,

2022 April 1,

2023 March 26,

$ 24,160 $ 25,010 $ 54,158 $ 59,640

65 unchanged sentences

(In millions, except per share amounts)

Three Months Ended

2022 December 25,

Three Months Ended Six Months Ended

2023 March 26,

2022 April 1,

2023 March 26,

Total shareholders’ equity, beginning balances $ 56,727 $ 71,932 $ 50,672 $ 63,090

1 unchanged sentence

Beginning balances 66,399 58,424 64,849 57,365

Common stock issued

690 593 690 593

Common stock withheld related to net share settlement of equity awards

20 unchanged sentences

(In millions)

Three Months Ended

2022 December 25,

Six Months Ended

2023 March 26,

Cash, cash equivalents and restricted cash, beginning balances $ 24,977 $ 35,929

11 unchanged sentences

Accounts payable ( 20,764 ) ( 1,750 )

Deferred revenue 131 462

Other current and non-current liabilities 1,757 2,515

6 unchanged sentences

Other ( 247 ) ( 735 )

Cash used in investing activities ( 1,445 ) ( 16,106 )

Cash generated by/(used in) investing activities 874 ( 25,371 )

Financing activities:

3 unchanged sentences

Repayments of term debt ( 3,651 ) ( 3,750 )

Repayments of commercial paper, net ( 8,214 ) ( 1,000 )

Proceeds from/(Repayments of) commercial paper, net ( 7,960 ) 999

Other ( 455 ) ( 105 )

24 unchanged sentences

Earnings Per Share

The following table shows the computation of basic and diluted earnings per share for the three months ended December 31, 2022 and December 25, 2021 (net income in millions and shares in thousands):

Three Months Ended

2022 December 25,

The following table shows the computation of basic and diluted earnings per share for the three- and six-month periods ended April 1, 2023 and March 26, 2022 (net income in millions and shares in thousands):

Three Months Ended Six Months Ended

2023 March 26,

2022 April 1,

2023 March 26,

Net income $ 24,160 $ 25,010 $ 54,158 $ 59,640

4 unchanged sentences

Diluted earnings per share $ 1.52 $ 1.52 $ 3.41 $ 3.62

Approximately 89 million restricted stock units (“RSUs”) were excluded from the computation of diluted earnings per share for the three months ended December 31, 2022 because their effect would have been antidilutive.

Approximately 48 million restricted stock units (“RSUs”) were excluded from the computation of diluted earnings per share for the six months ended April 1, 2023 because their effect would have been antidilutive.

| Q2 2023 Form 10-Q | 6

Note 2 – Revenue

Net sales disaggregated by significant products and services for the three months ended December 31, 2022 and December 25, 2021 were as follows (in millions):

Three Months Ended

2022 December 25,

Net sales disaggregated by significant products and services for the three- and six-month periods ended April 1, 2023 and March 26, 2022 were as follows (in millions):

Three Months Ended Six Months Ended

2023 March 26,

2022 April 1,

2023 March 26,

$ 51,334 $ 50,570 $ 117,109 $ 122,198

Wearables, Home and Accessories (1)(2)

7,168 10,435 14,903 21,287

6,670 7,646 16,066 14,894

Wearables, Home and Accessories 8,757 8,806 22,239 23,507

Services 20,907 19,821 41,673 39,337

Total net sales $ 94,836 $ 97,278 $ 211,990 $ 221,223

$ 117,154 $ 123,945

(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 $ 3.4 billion of revenue recognized in the three months ended December 31, 2022 that was included in deferred revenue as of September 24, 2022 and $ 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.

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 31, 2022 and December 25, 2021, except in Greater China, where iPhone revenue represented a moderately higher proportion of net sales.

As of December 31, 2022 and September 24, 2022, the Company had total deferred revenue of $ 12.6 billion and $ 12.4 billion, respectively.

As of December 31, 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.

| Q1 2023 Form 10-Q | 7

Total net sales include $ 3.5 billion of revenue recognized in the three months ended April 1, 2023 that was included in deferred revenue as of December 31, 2022, $ 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, $ 5.5 billion of revenue recognized in the six months ended April 1, 2023 that was included in deferred revenue as of September 24, 2022, and $ 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.

The Company’s proportion of net sales by disaggregated revenue source was generally consistent for each reportable segment in Note 10, “Segment Information and Geographic Data” for the three- and six-month periods ended April 1, 2023 and March 26, 2022, except in Greater China, where iPhone revenue represented a moderately higher proportion of net sales.

As of April 1, 2023 and September 24, 2022, the Company had total deferred revenue of $ 12.5 billion and $ 12.4 billion, respectively.

As of April 1, 2023, the Company expects 65 % of total deferred revenue to be realized in less than a year, 26 % within one-to-two years, 7 % within two-to-three years and 2 % in greater than three years.

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 December 31, 2022 and September 24, 2022 (in millions):

December 31, 2022

The following tables show the Company’s cash, cash equivalents and marketable securities by significant investment category as of April 1, 2023 and September 24, 2022 (in millions):

April 1, 2023

Cost Unrealized

21 unchanged sentences

$ 177,228 $ 67 $ ( 10,962 ) $ 166,333 $ 24,687 $ 31,185 $ 110,461

| Q2 2023 Form 10-Q | 7

September 24, 2022

24 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 31, 2022 and September 24, 2022, total marketable securities included $ 13.6 billion and $ 12.7 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.

| Q1 2023 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 31, 2022 (in millions):

(3) As of April 1, 2023 and September 24, 2022, total marketable securities included $ 13.1 billion and $ 12.7 billion, respectively, that were restricted from general use, related to the State Aid Decision (refer to Note 5, “Income Taxes”) and other agreements.

The following table shows the fair value of the Company’s non-current marketable debt securities, by contractual maturity, as of April 1, 2023 (in millions):

Due after 1 year through 5 years $ 81,352

11 unchanged sentences

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

As of December 31, 2022, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for term debt–related foreign currency transactions is 20 years.

As of April 1, 2023, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for term debt–related foreign currency transactions is 19 years.

| Q2 2023 Form 10-Q | 8

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 31, 2022 and September 24, 2022 were as follows (in millions):

The notional amounts of the Company’s outstanding derivative instruments as of April 1, 2023 and September 24, 2022 were as follows (in millions):

2023 September 24,

4 unchanged sentences

Foreign exchange contracts $ 111,696 $ 185,381

| Q1 2023 Form 10-Q | 9

The gross fair values of the Company’s derivative assets and liabilities as of September 24, 2022 were as follows (in millions):

16 unchanged sentences

As of September 24, 2022, the potential effects of these rights of set-off associated with the Company’s derivative contracts, including the effects of collateral, would be a reduction to both derivative assets and derivative liabilities of $ 7.8 billion, resulting in a net derivative asset of $ 412 million.

The carrying amounts of the Company’s hedged items in fair value hedges as of December 31, 2022 and September 24, 2022 were as follows (in millions):

The carrying amounts of the Company’s hedged items in fair value hedges as of April 1, 2023 and September 24, 2022 were as follows (in millions):

2023 September 24,

2 unchanged sentences

Current and non-current term debt $ ( 18,249 ) $ ( 18,739 )

| Q2 2023 Form 10-Q | 9

Accounts Receivable

6 unchanged sentences

As such, the Company generally does not assume any recourse or credit risk sharing related to any of these arrangements.

As of both December 31, 2022 and September 24, 2022, the Company had one customer that represented 10% or more of total trade receivables, which accounted for 11 % and 10 %, respectively.

The Company’s cellular network carriers accounted for 43 % and 44 % of total trade receivables as of December 31, 2022 and September 24, 2022, respectively.

As of both April 1, 2023 and September 24, 2022, the Company had one customer that represented 10% or more of total trade receivables, which accounted for 10 % .

The Company’s cellular network carriers accounted for 32 % and 44 % of total trade receivables as of April 1, 2023 and September 24, 2022, respectively.

Vendor Non-Trade Receivables

1 unchanged sentence

The Company purchases these components directly from suppliers.

As of December 31, 2022, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 54 % and 16 %.

As of April 1, 2023, the Company had three vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 43 %, 19 % and 13 %.

As of September 24, 2022, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 54 % and 13 %.

| Q1 2023 Form 10-Q | 10

Note 4 – Condensed Consolidated Financial Statement Details

The following tables show the Company’s condensed consolidated financial statement details as of December 31, 2022 and September 24, 2022 (in millions):

The following tables show the Company’s condensed consolidated financial statement details as of April 1, 2023 and September 24, 2022 (in millions):

2023 September 24,

8 unchanged sentences

Other Income/(Expense), Net

The following table shows the detail of other income/(expense), net for the three months ended December 31, 2022 and December 25, 2021 (in millions):

Three Months Ended

2022 December 25,

The following table shows the detail of other income/(expense), net for the three- and six-month periods ended April 1, 2023 and March 26, 2022 (in millions):

Three Months Ended Six Months Ended

2023 March 26,

2022 April 1,

2023 March 26,

Interest and dividend income $ 918 $ 700 $ 1,786 $ 1,350

Interest expense ( 930 ) ( 691 ) ( 1,933 ) ( 1,385 )

Other expense, net ( 258 ) ( 203 )

Other income/(expense), net 76 151 ( 182 ) ( 52 )

Total other income/(expense), net $ 64 $ 160 $ ( 329 ) $ ( 87 )

| Q2 2023 Form 10-Q | 10

Note 5 – Income Taxes

European Commission State Aid Decision

On August 30, 2016, the European Commission announced its decision that Ireland granted state aid to the Company by providing tax opinions in 1991 and 2007 concerning the tax allocation of profits of the Irish branches of two subsidiaries of the Company (the “State Aid Decision”).

The State Aid Decision ordered Ireland to calculate and recover additional taxes from the Company for the period June 2003 through December 2014.

Irish legislative changes, effective as of January 2015, eliminated the application of the tax opinions from that date forward.

The Company and Ireland appealed the State Aid Decision to the General Court of the Court of Justice of the European Union (the “General Court”).

On July 15, 2020, the General Court annulled the State Aid Decision.

On September 25, 2020, the European Commission appealed the General Court’s decision to the European Court of Justice and a hearing has been scheduled for May 23, 2023.

The Company believes it would be eligible to claim a U.S.

foreign tax credit for a portion of any incremental Irish corporate income taxes potentially due related to the State Aid Decision.

Note 6 – Debt

2 unchanged sentences

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

As of December 31, 2022 and September 24, 2022, the Company had $ 1.7 billion and $ 10.0 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 31, 2022 and December 25, 2021 (in millions):

Three Months Ended

2022 December 25,

As of April 1, 2023 and September 24, 2022, the Company had $ 2.0 billion and $ 10.0 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 April 1, 2023 and March 26, 2022 (in millions):

Six Months Ended

2023 March 26,

Maturities 90 days or less:

4 unchanged sentences

Repayments of commercial paper, net ( 2,645 ) ( 3,953 )

Total repayments of commercial paper, net $ ( 8,214 ) $ ( 1,000 )

| Q1 2023 Form 10-Q | 11

As of December 31, 2022 and September 24, 2022, the Company had outstanding fixed-rate notes with varying maturities for an aggregate carrying amount of $ 109.4 billion and $ 110.1 billion, respectively (collectively the “Notes”).

As of December 31, 2022 and September 24, 2022, the fair value of the Company’s Notes, based on Level 2 inputs, was $ 98.0 billion and $ 98.8 billion, respectively.

Total proceeds from/(repayments of) commercial paper, net $ ( 7,960 ) $ 999

As of April 1, 2023 and September 24, 2022, the Company had outstanding fixed-rate notes with varying maturities for an aggregate carrying amount of $ 107.6 billion and $ 110.1 billion, respectively (collectively the “Notes”).

As of April 1, 2023 and September 24, 2022, the fair value of the Company’s Notes, based on Level 2 inputs, was $ 98.4 billion and $ 98.8 billion, respectively.

Note 7 – Shareholders’ Equity

Share Repurchase Program

During the three months ended December 31, 2022, the Company repurchased 133 million shares of its common stock for $ 19.0 billion under a share repurchase program authorized by the Board of Directors (the “Program”).

During the six months ended April 1, 2023, the Company repurchased 262 million shares of its common stock under an authorized share repurchase program for $ 38.1 billion, excluding excise tax due under the Inflation Reduction Act of 2022.

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.

Under the program, shares may be repurchased in privately negotiated or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

| Q2 2023 Form 10-Q | 11

Note 8 – Benefit Plans

Restricted Stock Units

A summary of the Company’s RSU activity and related information for the three months ended December 31, 2022 is as follows:

A summary of the Company’s RSU activity and related information for the six months ended April 1, 2023 is as follows:

(in thousands)

7 unchanged sentences

RSUs canceled ( 4,671 ) $ 122.79

Balance as of December 31, 2022 233,368 $ 128.62 $ 30,322

The fair value as of the respective vesting dates of RSUs was $ 6.8 billion and $ 8.5 billion for the three months ended December 31, 2022 and December 25, 2021, respectively.

Balance as of April 1, 2023 226,937 $ 129.76 $ 37,422

The fair value as of the respective vesting dates of RSUs was $ 1.1 billion and $ 8.0 billion for the three- and six-month periods ended April 1, 2023, respectively, and was $ 1.0 billion and $ 9.5 billion for the three- and six-month periods ended March 26, 2022, 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 31, 2022 and December 25, 2021 (in millions):

Three Months Ended

2022 December 25,

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 April 1, 2023 and March 26, 2022 (in millions):

Three Months Ended Six Months Ended

2023 March 26,

2022 April 1,

2023 March 26,

Share-based compensation expense $ 2,686 $ 2,252 $ 5,591 $ 4,517

Income tax benefit related to share-based compensation expense $ ( 620 ) $ ( 649 ) $ ( 1,798 ) $ ( 2,185 )

As of December 31, 2022, the total unrecognized compensation cost related to outstanding RSUs and stock options was $ 25.5 billion, which the Company expects to recognize over a weighted-average period of 3.0 years.

| Q1 2023 Form 10-Q | 12

As of April 1, 2023, the total unrecognized compensation cost related to outstanding RSUs and stock options was $ 23.2 billion, which the Company expects to recognize over a weighted-average period of 2.8 years.

Note 9 – Commitments and Contingencies

2 unchanged sentences

The Company’s unconditional purchase obligations primarily consist of supplier arrangements, licensed content and distribution rights.

Future payments under noncancelable unconditional purchase obligations with a remaining term in excess of one year as of December 31, 2022, are as follows (in millions):

2023 (remaining nine months) $ 2,899

Future payments under noncancelable unconditional purchase obligations with a remaining term in excess of one year as of April 1, 2023, are as follows (in millions):

2023 (remaining six months) $ 2,263

Thereafter 5,897

4 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 2023 Form 10-Q | 12

Note 10 – Segment Information and Geographic Data

The following table shows information by reportable segment for the three months ended December 31, 2022 and December 25, 2021 (in millions):

Three Months Ended

2022 December 25,

The following table shows information by reportable segment for the three- and six-month periods ended April 1, 2023 and March 26, 2022 (in millions):

Three Months Ended Six Months Ended

2023 March 26,

2022 April 1,

2023 March 26,

Net sales $ 37,784 $ 40,882 $ 87,062 $ 92,378

10 unchanged sentences

Operating income $ 3,268 $ 2,823 $ 7,119 $ 6,818

| Q1 2023 Form 10-Q | 13

A reconciliation of the Company’s segment operating income to the Condensed Consolidated Statements of Operations for the three months ended December 31, 2022 and December 25, 2021 is as follows (in millions):

Three Months Ended

2022 December 25,

A reconciliation of the Company’s segment operating income to the Condensed Consolidated Statements of Operations for the three- and six-month periods ended April 1, 2023 and March 26, 2022 is as follows (in millions):

Three Months Ended Six Months Ended

2023 March 26,

2022 April 1,

2023 March 26,

Segment operating income $ 37,488 $ 38,215 $ 82,893 $ 87,872

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