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0000320193
20210728
10-Q
143
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 sub-assemblies or assemble final products for the Company.
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The Company purchases these components directly from suppliers.
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As of June 26, 2021, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 56% and 13%.
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10-Q
146
As of September 26, 2020, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 57% and 11%.
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10-Q
147
Apple Inc. | Q3 2021 Form 10-Q | 14 Note 4 - Condensed Consolidated Financial Statement Details The following tables show the Company’s condensed consolidated financial statement details as of June 26, 2021 and September 26, 2020 (in millions): Property, Plant and Equipment, Net Other Non-Current Liabilities Other Inco...
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10-Q
148
The Company had accrued $1.6 billion of gross interest and penalties related to income tax matters as of June 26, 2021.
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10-Q
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The Company is subject to taxation and files income tax returns in the U.S. federal jurisdiction and many state and foreign jurisdictions.
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Tax years after 2015 for the U.S. federal jurisdiction, and after 2014 in certain major foreign jurisdictions, remain subject to examination.
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10-Q
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The Company believes that an adequate provision has been made for any adjustments that may result from tax examinations.
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However, the outcome of tax examinations cannot be predicted with certainty.
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10-Q
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If any issues addressed in the Company’s tax examinations are resolved in a manner inconsistent with its expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.
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10-Q
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Although the timing of resolution and/or closure of examinations is not certain, the Company believes it is reasonably possible that its gross unrecognized tax benefits could decrease in the next 12 months by as much as $2.4 billion.
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Apple Inc. | Q3 2021 Form 10-Q | 15 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...
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The State Aid Decision ordered Ireland to calculate and recover additional taxes from the Company for the period June 2003 through December 2014.
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Irish legislative changes, effective as of January 2015, eliminated the application of the tax opinions from that date forward.
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The recovery amount was calculated to be €13.1 billion, plus interest of €1.2 billion.
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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”).
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On July 15, 2020, the General Court annulled the State Aid Decision.
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On September 25, 2020, the European Commission appealed the General Court’s decision to the European Court of Justice.
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The Company believes that any incremental Irish corporate income taxes potentially due related to the State Aid Decision would be creditable against U.S. taxes, subject to any foreign tax credit limitations in the U.S. Tax Cuts and Jobs Act of 2017.
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On an annual basis, the Company may request approval from the Irish Minister for Finance to reduce the recovery amount for certain taxes paid to other countries.
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As of June 26, 2021, the adjusted recovery amount was €12.7 billion, excluding interest.
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The adjusted recovery amount plus interest is funded into escrow, where it will remain restricted from general use pending the conclusion of all legal proceedings.
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Refer to the Cash, Cash Equivalents and Marketable Securities section of Note 3, “Financial Instruments” for more information.
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Note 6 - Debt Commercial Paper and Repurchase Agreements The Company issues unsecured short-term promissory notes (“Commercial Paper”) pursuant to a commercial paper program.
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The Company uses net proceeds from the commercial paper program for general corporate purposes, including dividends and share repurchases.
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As of June 26, 2021 and September 26, 2020, the Company had $8.0 billion and $5.0 billion of Commercial Paper outstanding, respectively, with maturities generally less than nine months.
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The weighted-average interest rate of the Company’s Commercial Paper was 0.04% and 0.62% as of June 26, 2021 and September 26, 2020, respectively.
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10-Q
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The following table provides a summary of cash flows associated with the issuance and maturities of Commercial Paper for the nine months ended June 26, 2021 and June 27, 2020 (in millions): In 2020, the Company entered into agreements to sell certain of its marketable securities with a promise to repurchase the securit...
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10-Q
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Due to the Company’s continuing involvement with the marketable securities, the Company accounted for its Repos as collateralized borrowings.
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As of September 26, 2020, the Repos had been settled.
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Apple Inc. | Q3 2021 Form 10-Q | 16 Term Debt 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”).
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The Notes are senior unsecured obligations and interest is payable in arrears.
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The following table provides a summary of the Company’s term debt as of June 26, 2021 and September 26, 2020: To manage interest rate risk on certain of its U.S. dollar-denominated fixed- or floating-rate notes, the Company has entered into interest rate swaps to effectively convert the fixed interest rates to floating...
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Additionally, to manage foreign currency risk on certain of its foreign currency-denominated notes, the Company has entered into foreign currency swaps to effectively convert these notes to U.S. dollar-denominated notes.
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The effective interest rates for the Notes include the interest on the Notes, amortization of the discount or premium and, if applicable, adjustments related to hedging.
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The Company recognized $657 million and $1.9 billion of interest cost on its term debt for the three- and nine-month periods ended June 26, 2021, respectively.
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The Company recognized $664 million and $2.1 billion of interest cost on its term debt for the three- and nine-month periods ended June 27, 2020, respectively.
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10-Q
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As of June 26, 2021 and September 26, 2020, the fair value of the Company’s Notes, based on Level 2 inputs, was $120.3 billion and $117.1 billion, respectively.
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10-Q
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Note 7 - Shareholders’ Equity Share Repurchase Program 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”).
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10-Q
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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 May 2021 accelerated share repurchase agreement (“ASR”), bringing the total utilization under the Program to $234.1 billion.
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The Program does not obligate the Company to acquire any specific number of shares.
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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”).
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10-Q
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Under the terms of the Company’s May 2021 ASR, a financial institution committed to deliver shares of the Company’s common stock during the purchase period in exchange for an up-front payment of $5.0 billion.
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10-Q
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The total number of shares ultimately delivered under the ASR, 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 ASR’s purchase period, which will end in or before August 2021.
0000320193-21-000065/full-submission.txt
0000320193
20210728
10-Q
188
The shares received are retired in the periods they are delivered, and the up-front payment is accounted for as a reduction to retained earnings in the Company’s Condensed Consolidated Statement of Shareholders’ Equity in the period the payment is made.
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0000320193
20210728
10-Q
189
Apple Inc. | Q3 2021 Form 10-Q | 17 Note 8 - Comprehensive Income The Company’s OCI consists of foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency, net deferred gains and losses on certain derivative instruments accounted for as hedges, and unrealized...
0000320193-21-000065/full-submission.txt
0000320193
20210728
10-Q
190
The following table shows the pre-tax amounts reclassified from AOCI into the Condensed Consolidated Statements of Operations, and the associated financial statement line items, for the three- and nine-month periods ended June 26, 2021 and June 27, 2020 (in millions): The following table shows the changes in AOCI by co...
0000320193-21-000065/full-submission.txt
0000320193
20210728
10-Q
191
RSUs granted under the Company’s stock plans generally vest over four years, based on continued employment, and are settled upon vesting in shares of the Company’s common stock on a one-for-one basis.
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10-Q
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RSUs granted under the Company’s stock plans reduce the number of shares available for grant under the plans by a factor of two times the number of RSUs granted.
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10-Q
193
RSUs canceled and shares withheld to satisfy tax withholding obligations increase the number of shares available for grant under the plans utilizing a factor of two times the number of RSUs canceled or shares withheld.
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20210728
10-Q
194
Rule 10b5-1 Trading Plans During the three months ended June 26, 2021, Section 16 officers Katherine L. Adams, Timothy D. Cook, Luca Maestri, Deirdre O’Brien and Jeffrey Williams had equity trading plans in place in accordance with Rule 10b5-1(c)(1) under the Exchange Act.
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10-Q
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An equity trading plan is a written document that pre-establishes the amounts, prices and dates (or formula for determining the amounts, prices and dates) of future purchases or sales of the Company’s stock, including shares acquired under the Company’s employee and director equity plans.
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20210728
10-Q
196
Apple Inc. | Q3 2021 Form 10-Q | 18 Restricted Stock Units A summary of the Company’s RSU activity and related information for the nine months ended June 26, 2021 is as follows: The fair value as of the respective vesting dates of RSUs was $7.9 billion and $17.3 billion for the three- and nine-month periods ended June ...
0000320193-21-000065/full-submission.txt
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10-Q
197
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 26, 2021 and June 27, 2020 (in millions): As of June 26, 2021, the total unrecognized co...
0000320193-21-000065/full-submission.txt
0000320193
20210728
10-Q
198
Note 10 - Commitments and Contingencies Accrued Warranty and Guarantees The following table shows changes in the Company’s accrued warranties and related costs for the three- and nine-month periods ended June 26, 2021 and June 27, 2020 (in millions): The Company offers an iPhone Upgrade Program, which is available to c...
0000320193-21-000065/full-submission.txt
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10-Q
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The iPhone Upgrade Program provides customers the right to trade in that iPhone for a specified amount when purchasing a new iPhone, provided certain conditions are met.
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10-Q
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The Company accounts for the trade-in right as a guarantee liability and recognizes arrangement revenue net of the fair value of such right, with subsequent changes to the guarantee liability recognized within net sales.
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10-Q
201
Concentrations in the Available Sources of Supply of Materials and Product Although most components essential to the Company’s business are generally available from multiple sources, certain components are currently obtained from single or limited sources.
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10-Q
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The Company also competes for various components with other participants in the markets for smartphones, personal computers, tablets and other electronic devices.
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10-Q
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Therefore, many components used by the Company, including those that are available from multiple sources, are at times subject to industry-wide shortage and significant commodity pricing fluctuations.
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10-Q
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Apple Inc. | Q3 2021 Form 10-Q | 19 The Company uses some custom components that are not commonly used by its competitors, and new products introduced by the Company often utilize custom components available from only one source.
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10-Q
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When a component or product uses new technologies, initial capacity constraints may exist until the suppliers’ yields have matured or their manufacturing capacities have increased.
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10-Q
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The continued availability of these components at acceptable prices, or at all, may be affected if suppliers decide to concentrate on the production of common components instead of components customized to meet the Company’s requirements.
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10-Q
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The Company has entered into agreements for the supply of many components; however, there can be no guarantee that the Company will be able to extend or renew these agreements on similar terms, or at all.
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10-Q
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Substantially all of the Company’s hardware products are manufactured by outsourcing partners that are located primarily in Asia, with some Mac computers manufactured in the U.S. and Ireland.
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10-Q
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Unconditional Purchase Obligations The Company has entered into certain off-balance sheet commitments that require the future purchase of goods or services (“unconditional purchase obligations”).
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The Company’s unconditional purchase obligations primarily consist of payments for content creation, Internet and telecommunications services and supplier arrangements.
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As of June 26, 2021, the Company’s total future payments under noncancelable unconditional purchase obligations having a remaining term in excess of one year were $8.8 billion.
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10-Q
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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.
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The outcome of litigation is inherently uncertain.
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When a loss related to a legal proceeding or claim is probable and reasonably estimable, the Company accrues its best estimate for the ultimate resolution of the matter.
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10-Q
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If one or more legal matters were resolved against the Company in a reporting period for amounts above management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected.
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10-Q
216
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, except for the following matters: VirnetX VirnetX, Inc. (“VirnetX”) filed a ...
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10-Q
217
On April 11, 2018, a jury returned a verdict against the Company in the U.S. District Court for the Eastern District of Texas (the “Eastern Texas District Court”).
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The Company appealed the verdict to the U.S. Court of Appeals for the Federal Circuit, which remanded the case back to the Eastern Texas District Court, where a re-trial was held in October 2020.
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The jury returned a verdict against the Company and awarded damages of $503 million, which the Company has appealed.
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The Company has challenged the validity of the patents at issue in the re-trial at the U.S. Patent and Trademark Office (the “PTO”), and the PTO has declared the patents invalid, subject to further appeal by VirnetX.
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iOS Performance Management Cases On April 5, 2018, several U.S. federal actions alleging violation of consumer protection laws, fraud, computer intrusion and other causes of action related to the Company’s performance management feature used in its iPhone operating systems, introduced to certain iPhones in iOS updates ...
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On February 28, 2020, the parties in the Multidistrict Litigation reached a settlement to resolve the U.S. federal and California state class actions.
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On March 18, 2021, the Northern California District Court granted final approval of the Multidistrict Litigation settlement, which will result in an aggregate payment of $310 million to settle all claims.
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The Company continues to believe that its iPhones were not defective, that the performance management feature introduced with iOS updates 10.2.1 and 11.2 was intended to, and did, improve customers’ user experience, and that the Company did not make any misleading statements or fail to disclose any material information...
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French Competition Authority On March 16, 2020, the French Competition Authority (“FCA”) announced its decision that aspects of the Company’s sales and distribution practices in France violate French competition law and issued a fine of €1.1 billion.
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The Company strongly disagrees with the FCA’s decision and has appealed.
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Apple Inc. | Q3 2021 Form 10-Q | 20 Optis Optis Wireless Technology, LLC and related entities (“Optis”) filed a lawsuit in the U.S. District Court for the Eastern District of Texas against the Company alleging that certain of the Company’s products infringe on patents owned by Optis.
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On August 11, 2020, a jury returned a verdict against the Company and awarded damages of $506 million.
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In post-trial proceedings, the damages portion of the verdict was set aside, and a retrial was scheduled for August 2021.
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The case remains pending further proceedings.
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Note 11 - Segment Information and Geographic Data The Company reports segment information based on the “management” approach.
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The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable segments.
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The Company manages its business primarily on a geographic basis.
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The Company’s reportable segments consist of the Americas, Europe, Greater China, Japan and Rest of Asia Pacific.
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Americas includes both North and South America.
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Europe includes European countries, as well as India, the Middle East and Africa.
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Greater China includes China mainland, Hong Kong and Taiwan.
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Rest of Asia Pacific includes Australia and those Asian countries not included in the Company’s other reportable segments.
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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.
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The accounting policies of the various segments are the same as those described in Note 1, “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in Part II, Item 8 of the 2020 Form 10-K.
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The Company evaluates the performance of its reportable segments based on net sales and operating income.
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Net sales for geographic segments are generally based on the location of customers and sales through the Company’s retail stores located in those geographic locations.
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