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    AAPL   US0378331005

APPLE INC.

(AAPL)
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APPLE : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

07/28/2021 | 06:04am EDT
This section and other parts of this Quarterly Report on Form 10-Q ("Form 10-Q")
contain forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1995, that involve risks and uncertainties.
Forward-looking statements provide current expectations of future events based
on certain assumptions and include any statement that does not directly relate
to any historical or current fact. For example, statements in this Form 10-Q
regarding the potential future impact of the COVID-19 pandemic on the Company's
business and results of operations are forward-looking statements.
Forward-looking statements can also be identified by words such as "future,"
"anticipates," "believes," "estimates," "expects," "intends," "plans,"
"predicts," "will," "would," "could," "can," "may," and similar terms.
Forward-looking statements are not guarantees of future performance and the
Company's actual results may differ significantly from the results discussed in
the forward-looking statements. Factors that might cause such differences
include, but are not limited to, those discussed in Part I, Item 1A of the
Company's Annual Report on Form 10-K for the fiscal year ended September 26,
2020 (the "2020 Form 10-K") under the heading "Risk Factors." The Company
assumes no obligation to revise or update any forward-looking statements for any
reason, except as required by law.
Unless otherwise stated, all information presented herein is based on the
Company's fiscal calendar, and references to particular years, quarters, months
or periods refer to the Company's fiscal years ended in September and the
associated quarters, months and periods of those fiscal years. Each of the terms
the "Company" and "Apple" as used herein refers collectively to Apple Inc. and
its wholly owned subsidiaries, unless otherwise stated.
The following discussion should be read in conjunction with the 2020 Form 10-K
filed with the U.S. Securities and Exchange Commission (the "SEC") and the
condensed consolidated financial statements and accompanying notes included in
Part I, Item 1 of this Form 10-Q.
Available Information
The Company periodically provides certain information for investors on its
corporate website, www.apple.com, and its investor relations website,
investor.apple.com. This includes press releases and other information about
financial performance, information on corporate governance and details related
to the Company's annual meeting of shareholders. The information contained on
the websites referenced in this Form 10-Q is not incorporated by reference into
this filing. Further, the Company's references to website URLs are intended to
be inactive textual references only.
Quarterly Highlights
Business Seasonality and Product Introductions
The Company has historically experienced higher net sales in its first quarter
compared to other quarters in its fiscal year due in part to seasonal holiday
demand. Additionally, new product and service introductions can significantly
impact net sales, cost of sales and operating expenses. The timing of product
introductions can also impact the Company's net sales to its indirect
distribution channels as these channels are filled with new inventory following
a product launch, and channel inventory of an older product often declines as
the launch of a newer product approaches. Net sales can also be affected when
consumers and distributors anticipate a product introduction.
COVID-19 Update
The COVID-19 pandemic has prompted governments and businesses to take
unprecedented measures, such as restrictions on travel and business operations,
temporary closures of businesses, and quarantines and shelter-in-place orders.
The COVID-19 pandemic has significantly curtailed global economic activity and
caused significant volatility and disruption in global financial markets. The
COVID-19 pandemic and the measures taken by many countries in response have
affected and could in the future materially impact the Company's business,
results of operations, financial condition and stock price.
During the third quarter of 2021, aspects of the Company's business continued to
be affected by the COVID-19 pandemic, with many of the Company's retail stores,
as well as channel partner points of sale, temporarily closed at various times,
and a significant number of the Company's employees working remotely. The
Company has reopened substantially all of its offices and retail stores, subject
to operating restrictions to protect public health and the health and safety of
employees and customers, and it continues to work on safely reopening the
remainder of its offices and retail stores, subject to local rules and
regulations.
The extent of the continuing impact of the COVID-19 pandemic on the Company's
operational and financial performance is uncertain and will depend on many
factors outside the Company's control, including, without limitation, the
timing, extent, trajectory and duration of the pandemic; the availability,
distribution and effectiveness of vaccines; the imposition of protective public
safety measures; and the impact of the pandemic on the global economy and demand
for consumer products. Refer to Part I, Item 1A of the 2020 Form 10-K under the
heading "Risk Factors," for more information.
                      Apple Inc. | Q3 2021 Form 10-Q | 23
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The Company believes its existing balances of cash, cash equivalents and
marketable securities, along with commercial paper and other short-term
liquidity arrangements, will be sufficient to satisfy its working capital needs,
capital asset purchases, dividends, share repurchases, debt repayments and other
liquidity requirements associated with its existing operations.
Third Quarter Fiscal 2021 Highlights
Total net sales increased 36% or $21.7 billion during the third quarter of 2021
compared to the same quarter in 2020, driven by growth in all Products and
Services categories. Year-over-year net sales during the third quarter of 2021
also grew in each of the Company's reportable segments.
During the third quarter of 2021, the Company released the following new
products and services:
•iMac®, powered by the Apple M1 chip;
•iPad Pro®, powered by the Apple M1 chip;
•Apple TV 4K®, with a redesigned Siri Remote®;
•AirTag™, an accessory that helps keep track of items using the Find My™
network; and
•Apple Podcasts® Subscriptions.
The Company also announced iOS 15, macOS® Monterey, iPadOS® 15 and watchOS® 8,
updates to its operating systems that are expected to be available in the fall
of 2021.
The Company repurchased $22.5 billion of its common stock and paid dividends and
dividend equivalents of $3.8 billion during the third quarter of 2021.
Products and Services Performance
The following table shows net sales by category for the three- and nine-month
periods ended June 26, 2021 and June 27, 2020 (dollars in millions):
                                                  Three Months Ended                                       Nine Months Ended
                                     June 26,          June 27,                              June 26,           June 27,
                                       2021              2020              Change              2021               2020              Change
Net sales by category:
iPhone (1)                         $  39,570          $ 26,418                 50  %       $ 153,105          $ 111,337                 38  %
Mac (1)                                8,235             7,079                 16  %          26,012             19,590                 33  %
iPad (1)                               7,368             6,582                 12  %          23,610             16,927                 39  %
Wearables, Home and Accessories
(1)(2)                                 8,775             6,450                 36  %          29,582             22,744                 30  %
Services (3)                          17,486            13,156                 33  %          50,148             39,219                 28  %
Total net sales                    $  81,434          $ 59,685                 36  %       $ 282,457          $ 209,817                 35  %


(1)Products net sales include amortization of the deferred value of unspecified
software upgrade rights, which are bundled in the sales price of the respective
product.
(2)Wearables, Home and Accessories net sales include sales of AirPods, Apple TV,
Apple Watch, Beats products, HomePod, iPod touch and Apple-branded and
third-party accessories.
(3)Services net sales include sales from the Company's advertising, AppleCare,
digital content and other services. Services net sales also include amortization
of the deferred value of Maps, Siri, and free iCloud storage and Apple TV+
services, which are bundled in the sales price of certain products.
iPhone
iPhone net sales increased during the third quarter and first nine months of
2021 compared to the same periods in 2020 due primarily to higher net sales from
the Company's new iPhone models launched in the first quarter of 2021.
Mac
Mac net sales increased during the third quarter of 2021 compared to the third
quarter of 2020 due primarily to higher net sales of MacBook Air® and iMac.
Year-over-year Mac net sales increased during the first nine months of 2021 due
primarily to higher net sales of MacBook Air and MacBook Pro®.
                      Apple Inc. | Q3 2021 Form 10-Q | 24
--------------------------------------------------------------------------------

iPad

iPad net sales increased during the third quarter of 2021 compared to the third
quarter of 2020 due to higher net sales of iPad Air®. Year-over-year iPad net
sales increased during the first nine months of 2021 due to higher net sales of
iPad Air, iPad Pro and the 10-inch version of iPad.
Wearables, Home and Accessories
Wearables, Home and Accessories net sales increased during the third quarter and
first nine months of 2021 compared to the same periods in 2020 due primarily to
higher net sales of Apple Watch and accessories.
Services
Services net sales increased during the third quarter of 2021 compared to the
third quarter of 2020 due primarily to higher net sales from advertising, the
App Store and AppleCare. Year-over-year Services net sales increased during the
first nine months of 2021 due primarily to higher net sales from advertising,
the App Store and cloud services.
Segment Operating Performance
The Company manages its business primarily on a geographic basis. The Company's
reportable segments consist of the Americas, Europe, Greater China, Japan and
Rest of Asia Pacific. Americas includes both North and South America. Europe
includes European countries, as well as India, the Middle East and Africa.
Greater China includes China mainland, Hong Kong and Taiwan. Rest of Asia
Pacific includes Australia and those Asian countries not included in the
Company's other reportable segments. Although the reportable segments provide
similar hardware and software products and similar services, each one is managed
separately to better align with the location of the Company's customers and
distribution partners and the unique market dynamics of each geographic region.
Further information regarding the Company's reportable segments can be found in
Part I, Item 1 of this Form 10-Q in the Notes to Condensed Consolidated
Financial Statements in Note 11, "Segment Information and Geographic Data."
The following table shows net sales by reportable segment for the three- and
nine-month periods ended June 26, 2021 and June 27, 2020 (dollars in millions):
                                                   Three Months Ended                                       Nine Months Ended
                                      June 26,          June 27,                              June 26,           June 27,
                                        2021              2020              Change              2021               2020              Change
Net sales by reportable segment:
Americas                            $  35,870          $ 27,018                 33  %       $ 116,486          $  93,858                 24  %
Europe                                 18,943            14,173                 34  %          68,513             51,740                 32  %
Greater China                          14,762             9,329                 58  %          53,803             32,362                 66  %
Japan                                   6,464             4,966                 30  %          22,491             16,395                 37  %
Rest of Asia Pacific                    5,395             4,199                 28  %          21,164             15,462                 37  %
Total net sales                     $  81,434          $ 59,685                 36  %       $ 282,457          $ 209,817                 35  %


Americas
Americas net sales increased during the third quarter of 2021 compared to the
third quarter of 2020 due primarily to higher net sales of iPhone, Services and
Wearables, Home and Accessories. Year-over-year Americas net sales increased
during the first nine months of 2021 due primarily to higher net sales of
iPhone, Services and Mac.
Europe
Europe net sales increased during the third quarter of 2021 compared to the
third quarter of 2020 due primarily to higher net sales of iPhone, Services and
Wearables, Home and Accessories. Year-over-year Europe net sales increased
during the first nine months of 2021 due primarily to higher net sales of
iPhone, iPad and Mac. The movement of foreign currencies in Europe relative to
the U.S. dollar had a net favorable impact on Europe net sales during the third
quarter and first nine months of 2021.
Greater China
Greater China net sales increased during the third quarter of 2021 compared to
the third quarter of 2020 due primarily to higher net sales of iPhone and
Services. Year-over-year Greater China net sales increased during the first nine
months of 2021 due primarily to higher net sales of iPhone and iPad. The
strength of the Chinese renminbi relative to the U.S. dollar had a favorable
impact on Greater China net sales during the third quarter and first nine months
of 2021.
                      Apple Inc. | Q3 2021 Form 10-Q | 25
--------------------------------------------------------------------------------

Japan

Japan net sales increased during the third quarter of 2021 compared to the third
quarter of 2020 due primarily to higher net sales of iPhone. Year-over-year
Japan net sales increased during the first nine months of 2021 due primarily to
higher net sales of iPhone and Services. The strength of the Japanese yen
relative to the U.S. dollar had a favorable impact on Japan net sales during the
first nine months of 2021.
Rest of Asia Pacific
Rest of Asia Pacific net sales increased during the third quarter and first nine
months of 2021 compared to the same periods in 2020 due primarily to higher net
sales of iPhone, Wearables, Home and Accessories and Services. The movement of
foreign currencies in the Rest of Asia Pacific relative to the U.S. dollar had a
favorable impact on Rest of Asia Pacific net sales during the third quarter and
first nine months of 2021.
Gross Margin
Products and Services gross margin and gross margin percentage for the three-
and nine-month periods ended June 26, 2021 and June 27, 2020 were as follows
(dollars in millions):
                         Three Months Ended            Nine Months Ended
                       June 26,       June 27,      June 26,       June 27,
                         2021           2020          2021           2020
Gross margin:
Products             $   23,049      $ 13,836      $  82,833      $ 54,509
Services                 12,206         8,844         34,829        25,758
Total gross margin   $   35,255      $ 22,680      $ 117,662      $ 80,267


Gross margin percentage:
Products                           36.0  %      29.7  %      35.7  %      32.0  %
Services                           69.8  %      67.2  %      69.5  %      65.7  %
Total gross margin percentage      43.3  %      38.0  %      41.7  %      38.3  %


Products Gross Margin
Products gross margin increased during the third quarter and first nine months
of 2021 compared to the same periods in 2020 due primarily to higher Products
volume, a different Products mix and the strength in foreign currencies relative
to the U.S. dollar.
Products gross margin percentage increased during the third quarter of 2021
compared to the third quarter of 2020 due primarily to a different Products mix,
the strength in foreign currencies relative to the U.S. dollar and improved
leverage. Year-over-year Products gross margin percentage increased during the
first nine months of 2021 due primarily to improved leverage, a different
Products mix and the strength in foreign currencies relative to the U.S. dollar.
Services Gross Margin
Services gross margin increased during the third quarter and first nine months
of 2021 compared to the same periods in 2020 due primarily to higher Services
net sales, a different Services mix and the strength in foreign currencies
relative to the U.S. dollar.
Year-over-year Services gross margin percentage increased during the third
quarter and first nine months of 2021 due primarily to a different Services mix
and improved leverage, partially offset by higher Services costs.
The Company's future gross margins can be impacted by a variety of factors, as
discussed in Part I, Item 1A of the 2020 Form 10-K under the heading "Risk
Factors." As a result, the Company believes, in general, gross margins will be
subject to volatility and downward pressure.
                      Apple Inc. | Q3 2021 Form 10-Q | 26
--------------------------------------------------------------------------------

Operating Expenses
Operating expenses for the three- and nine-month periods ended June 26, 2021 and
June 27, 2020 were as follows (dollars in millions):
                                           Three Months Ended            Nine Months Ended
                                         June 26,       June 27,      June 26,       June 27,
                                           2021           2020          2021           2020
Research and development               $   5,717       $ 4,758       $ 16,142       $ 13,774
Percentage of total net sales                  7  %          8  %           6  %           7  %
Selling, general and administrative    $   5,412       $ 4,831       $ 16,357       $ 14,980
Percentage of total net sales                  7  %          8  %           6  %           7  %
Total operating expenses               $  11,129       $ 9,589       $ 32,499       $ 28,754
Percentage of total net sales                 14  %         16  %          12  %          14  %


Research and Development
The growth in research and development ("R&D") expense during the third quarter
of 2021 compared to the third quarter of 2020 was driven primarily by increases
in headcount-related expenses, and material and equipment costs. Year-over-year
R&D expense increased during the first nine months of 2021 due primarily to
higher headcount-related expenses and R&D-related professional services. The
Company continues to believe that focused investments in R&D are critical to its
future growth and competitive position in the marketplace, and to the
development of new and updated products and services that are central to the
Company's core business strategy.
Selling, General and Administrative
The growth in selling, general and administrative expense during the third
quarter of 2021 compared to the third quarter of 2020 was driven primarily by
increases in headcount-related and advertising expenses. Year-over-year selling,
general and administrative expense increased during the first nine months of
2021 due primarily to higher headcount-related and variable selling expenses.
Other Income/(Expense), Net
Other income/(expense), net ("OI&E") for the three- and nine-month periods ended
June 26, 2021 and June 27, 2020 was as follows (dollars in millions):
                                                                  Three Months Ended                                       Nine Months Ended
                                                    June 26,           June 27,                              June 26,          June 27,
                                                      2021               2020              Change              2021              2020              Change
Interest and dividend income                      $     719          $     901                             $   2,184          $  2,995
Interest expense                                       (665)              (697)                               (1,973)           (2,239)
Other income/(expense), net                             189               (158)                                  585               (79)
Total other income/(expense), net                 $     243          $      46                428  %       $     796          $    677                 

18 %



OI&E increased during the third quarter of 2021 compared to the third quarter of
2020 due primarily to a favorable carrying value adjustment of non-marketable
securities and smaller impairments of securities, partially offset by lower
interest income. Year-over-year OI&E increased during the first nine months of
2021 due primarily to smaller impairments of securities, lower interest expense
and favorable carrying value adjustments of non-marketable securities, partially
offset by lower interest income.
The weighted-average interest rate earned by the Company on its cash, cash
equivalents and marketable securities was 1.32% and 1.74% in the third quarter
of 2021 and 2020, respectively, and 1.40% and 1.95% in the first nine months of
2021 and 2020, respectively.
                      Apple Inc. | Q3 2021 Form 10-Q | 27
--------------------------------------------------------------------------------

Provision for Income Taxes
Provision for income taxes, effective tax rate and statutory federal income tax
rate for the three- and nine-month periods ended June 26, 2021 and June 27, 2020
were as follows (dollars in millions):
                                        Three Months Ended            Nine Months Ended
                                      June 26,       June 27,      June 26,       June 27,
                                        2021           2020          2021           2020
Provision for income taxes          $   2,625       $ 1,884       $ 11,830       $ 7,452
Effective tax rate                       10.8  %       14.3  %        13.8 

% 14.3 % Statutory federal income tax rate 21 % 21 % 21 % 21 %



The Company's effective tax rate for the third quarter and first nine months of
2021 was lower than the statutory federal income tax rate due primarily to a
lower effective rate on foreign earnings, tax benefits from share-based
compensation, and the favorable impact of changes in unrecognized tax benefits,
partially offset by state income taxes.
The Company's effective tax rate for the third quarter of 2021 was lower
compared to the third quarter of 2020 due primarily to the favorable impact of
changes in unrecognized tax benefits, a higher mix of foreign earnings, and
higher tax benefits from share-based compensation. The Company's effective tax
rate for the first nine months of 2021 was lower compared to the same period in
2020 due primarily to higher tax benefits from share-based compensation, the
favorable impact of changes in unrecognized tax benefits, and a higher mix of
foreign earnings, partially offset by a one-time adjustment in 2020 of U.S.
foreign tax credits in response to regulations issued by the U.S. Department of
the Treasury in December 2019.
Liquidity and Capital Resources
The following tables present selected financial information and statistics as of
June 26, 2021 and September 26, 2020 and for the first nine months of 2021 and
2020 (in millions):
                                                          June 26,       September 26,
                                                            2021              2020

Cash, cash equivalents and marketable securities (1) $ 193,644 $

191,830

Property, plant and equipment, net                       $  38,615      $       36,766
Commercial paper                                         $   8,000      $        4,996
Total term debt                                          $ 113,791      $      107,440
Working capital                                          $   6,669      $       38,321


                                              Nine Months Ended
                                           June 26,       June 27,
                                             2021           2020

Cash generated by operating activities $ 83,838 $ 60,098 Cash used in investing activities $ (15,380) $ (9,820) Cash used in financing activities $ (72,971) $ (65,463)



(1)As of June 26, 2021 and September 26, 2020, total marketable securities
included $18.9 billion and $18.6 billion, respectively, that was restricted from
general use, related to the State Aid Decision (refer to Note 5, "Income Taxes"
in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of
this Form 10-Q) and other agreements.
The Company believes its existing balances of cash, cash equivalents and
marketable securities, along with commercial paper and other short-term
liquidity arrangements, will be sufficient to satisfy its working capital needs,
capital asset purchases, dividends, share repurchases, debt repayments and other
liquidity requirements associated with its existing operations over the next 12
months.
In connection with the State Aid Decision, as of June 26, 2021, the adjusted
recovery amount of €12.7 billion plus interest of €1.2 billion was funded into
escrow, where it will remain restricted from general use pending the conclusion
of all legal proceedings. Further information regarding the State Aid Decision
can be found in Part I, Item 1 of this Form 10-Q in the Notes to Condensed
Consolidated Financial Statements in Note 5, "Income Taxes."
The Company's marketable securities investment portfolio is primarily invested
in highly rated securities, with the primary objective of minimizing the
potential risk of principal loss. The Company's investment policy generally
requires securities to be investment grade and limits the amount of credit
exposure to any one issuer.
                      Apple Inc. | Q3 2021 Form 10-Q | 28
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During the nine months ended June 26, 2021, cash generated by operating
activities of $83.8 billion was a result of $74.1 billion of net income,
non-cash adjustments to net income of $12.8 billion and a decrease in the net
change in operating assets and liabilities of $3.1 billion. Cash used in
investing activities of $15.4 billion during the nine months ended June 26, 2021
consisted primarily of cash used for purchases of marketable securities, net of
maturities and sales, of $7.4 billion and cash used to acquire property, plant
and equipment of $7.9 billion. Cash used in financing activities of $73.0
billion during the nine months ended June 26, 2021 consisted primarily of cash
used to repurchase common stock of $66.2 billion, cash used to pay dividends and
dividend equivalents of $10.8 billion and cash used to repay or redeem term debt
of $7.5 billion, partially offset by net proceeds from issuance of term debt of
$13.9 billion.
During the nine months ended June 27, 2020, cash generated by operating
activities of $60.1 billion was a result of $44.7 billion of net income,
non-cash adjustments to net income of $13.5 billion and an increase in the net
change in operating assets and liabilities of $1.8 billion. Cash used in
investing activities of $9.8 billion during the nine months ended June 27, 2020
consisted primarily of cash used for purchases of marketable securities, net of
maturities and sales, of $2.0 billion and cash used to acquire property, plant
and equipment of $5.5 billion. Cash used in financing activities of $65.5
billion during the nine months ended June 27, 2020 consisted primarily of cash
used to repurchase common stock of $55.2 billion, cash used to pay dividends and
dividend equivalents of $10.6 billion and cash used to repay or redeem term debt
of $12.6 billion, partially offset by net proceeds from issuance of term debt of
$10.6 billion and proceeds from repurchase agreements of $5.2 billion.
Debt
The Company issues unsecured short-term promissory notes ("Commercial Paper")
pursuant to a commercial paper program. The Company uses the net proceeds from
the commercial paper program for general corporate purposes, including dividends
and share repurchases. As of June 26, 2021, the Company had $8.0 billion of
Commercial Paper outstanding, with a weighted-average interest rate of 0.04% and
maturities generally less than nine months.
As of June 26, 2021, the Company had outstanding floating- and fixed-rate notes
with varying maturities for an aggregate principal amount of $113.2 billion
(collectively the "Notes"). During the first nine months of 2021, the Company
issued $13.9 billion and repaid or redeemed $7.5 billion of Notes. The Company
has entered, and in the future may enter, into interest rate swaps to manage
interest rate risk on the Notes. In addition, the Company has entered, and in
the future may enter, into foreign currency swaps to manage foreign currency
risk on the Notes.
Further information regarding the Company's debt issuances and related hedging
activity can be found in Part I, Item 1 of this Form 10-Q in the Notes to
Condensed Consolidated Financial Statements in Note 3, "Financial Instruments"
and Note 6, "Debt."
Capital Return
As of June 26, 2021, the Company was authorized to purchase up to $315 billion
of the Company's common stock under a share repurchase program (the "Program").
During the nine months ended June 26, 2021, the Company repurchased 515 million
shares of its common stock for $65.5 billion, including 32 million shares
initially delivered under a $5.0 billion accelerated share repurchase agreement
("ASR") entered into in May 2021, bringing the total utilization under the
Program to $234.1 billion. The Program does not obligate the Company to acquire
any specific number of shares. Under the Program, shares may be repurchased in
privately negotiated and/or open market transactions, including under plans
complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
As of June 26, 2021, the Company's quarterly cash dividend was $0.22 per share.
The Company intends to increase its dividend on an annual basis, subject to
declaration by the Board of Directors.
Contractual Obligations
Leases
The Company has lease arrangements for certain equipment and facilities,
including retail, corporate, manufacturing and data center space. The Company's
retail store and other facility leases typically have original terms not
exceeding 10 years and generally contain multi-year renewal options. The
Company's total fixed lease payment obligation of $13.7 billion as of June 26,
2021 included future payments under leases that had commenced as of June 26,
2021, and were therefore recorded on the Company's Condensed Consolidated
Balance Sheet, as well as leases that had been signed but not yet commenced as
of June 26, 2021.
                      Apple Inc. | Q3 2021 Form 10-Q | 29
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Manufacturing Purchase Obligations
The Company utilizes several outsourcing partners to manufacture sub-assemblies
for the Company's products and to perform final assembly and testing of finished
products. These outsourcing partners acquire components and build product based
on demand information supplied by the Company, which typically covers periods up
to 150 days. The Company also obtains individual components for its products
from a wide variety of individual suppliers. As of June 26, 2021, the Company
expects to pay $38.2 billion under manufacturing-related supplier arrangements,
which are primarily noncancelable.
Other Purchase Obligations
The Company's other purchase obligations primarily consist of noncancelable
obligations to acquire capital assets, including product tooling and
manufacturing process equipment, and noncancelable obligations related to
advertising, content creation and Internet and telecommunications services. As
of June 26, 2021, the Company had other purchase obligations of $9.1 billion.
Deemed Repatriation Tax Payable
As of June 26, 2021, the balance of the deemed repatriation tax payable imposed
by the U.S. Tax Cuts and Jobs Act (the "Act") was $24.9 billion, all of which
was included in other non-current liabilities in the Company's Condensed
Consolidated Balance Sheet. The Company pays the deemed repatriation tax payable
in installments in accordance with the Act.
Other Non-Current Liabilities
The Company's remaining other non-current liabilities primarily consist of items
for which the Company is unable to make a reasonably reliable estimate of the
timing or amount of payments.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity
with U.S. generally accepted accounting principles and the Company's discussion
and analysis of its financial condition and operating results require the
Company's management to make judgments, assumptions and estimates that affect
the amounts reported. Management bases its estimates on historical experience
and on various other assumptions it believes to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities. Actual results may differ from
these estimates, and such differences may be material.
Note 1, "Summary of Significant Accounting Policies" in Part I, Item 1 of this
Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item
8 of the 2020 Form 10-K, and "Critical Accounting Policies and Estimates" in
Part II, Item 7 of the 2020 Form 10-K describe the significant accounting
policies and methods used in the preparation of the Company's condensed
consolidated financial statements. There have been no material changes to the
Company's critical accounting policies and estimates since the 2020 Form 10-K.
Item 3.  Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to the Company's market risk during the
first nine months of 2021. For a discussion of the Company's exposure to market
risk, refer to the Company's market risk disclosures set forth in Part II, Item
7A, "Quantitative and Qualitative Disclosures About Market Risk" of the 2020
Form 10-K.
Item 4.  Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on an evaluation under the supervision and with the participation of the
Company's management, the Company's principal executive officer and principal
financial officer have concluded that the Company's disclosure controls and
procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act
were effective as of June 26, 2021 to provide reasonable assurance that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is (i) recorded, processed, summarized and
reported within the time periods specified in the SEC rules and forms and
(ii) accumulated and communicated to the Company's management, including its
principal executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in the Company's internal control over financial reporting
during the third quarter of 2021, which were identified in connection with
management's evaluation required by paragraph (d) of Rules 13a-15 and 15d-15
under the Exchange Act, that have materially affected, or are reasonably likely
to materially affect, the Company's internal control over financial reporting.
                      Apple Inc. | Q3 2021 Form 10-Q | 30

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