Company Quick10K Filing
Apple
Price287.00 EPS13
Shares4,455 P/E22
MCap1,278,449 P/FCF17
Net Debt61,421 EBIT74,711
TEV1,339,870 TEV/EBIT18
TTM 2019-12-28, in MM, except price, ratios
10-Q 2020-12-26 Filed 2021-01-28
10-K 2020-09-26 Filed 2020-10-30
10-Q 2020-06-27 Filed 2020-07-31
10-Q 2020-03-28 Filed 2020-05-01
10-Q 2019-12-28 Filed 2020-01-29
10-K 2019-09-28 Filed 2019-10-31
10-Q 2019-06-29 Filed 2019-07-31
10-Q 2019-03-30 Filed 2019-05-01
10-Q 2018-12-29 Filed 2019-01-30
10-K 2018-09-29 Filed 2018-11-05
10-Q 2018-06-30 Filed 2018-08-01
10-Q 2018-03-31 Filed 2018-05-02
10-Q 2017-12-30 Filed 2018-02-02
10-K 2017-09-30 Filed 2017-11-03
10-Q 2017-07-01 Filed 2017-08-02
10-Q 2017-04-01 Filed 2017-05-03
10-Q 2016-12-31 Filed 2017-02-01
10-K 2016-09-24 Filed 2016-10-26
10-Q 2016-06-25 Filed 2016-07-27
10-Q 2016-03-26 Filed 2016-04-27
10-Q 2015-12-26 Filed 2016-01-27
10-K 2015-09-26 Filed 2015-10-28
10-Q 2015-06-27 Filed 2015-07-22
10-Q 2015-03-28 Filed 2015-04-28
10-Q 2014-12-27 Filed 2015-01-28
10-K 2014-09-27 Filed 2014-10-27
10-Q 2014-06-28 Filed 2014-07-23
10-Q 2014-03-29 Filed 2014-04-24
10-Q 2013-12-28 Filed 2014-01-28
10-K 2013-09-28 Filed 2013-10-30
10-Q 2013-06-29 Filed 2013-07-24
10-Q 2013-03-30 Filed 2013-04-24
10-Q 2012-12-29 Filed 2013-01-24
10-K 2012-09-29 Filed 2012-10-31
10-Q 2012-06-30 Filed 2012-07-25
10-Q 2012-03-31 Filed 2012-04-25
10-Q 2011-12-31 Filed 2012-01-25
10-K 2011-09-24 Filed 2011-10-26
10-Q 2011-06-25 Filed 2011-07-20
10-Q 2011-03-26 Filed 2011-04-21
10-Q 2010-12-25 Filed 2011-01-19
10-K 2010-09-25 Filed 2010-10-27
10-Q 2010-06-26 Filed 2010-07-21
10-Q 2010-03-27 Filed 2010-04-21
10-Q 2009-12-26 Filed 2010-01-25
8-K 2020-10-29
8-K 2020-08-13
8-K 2020-08-03
8-K 2020-07-30
8-K 2020-05-04
8-K 2020-04-30
8-K 2020-02-26
8-K 2020-02-17
8-K 2020-01-28
8-K 2019-11-07
8-K 2019-10-30
8-K 2019-09-10
8-K 2019-09-04
8-K 2019-07-30
8-K 2019-04-30
8-K 2019-03-01
8-K 2019-02-05
8-K 2019-01-29
8-K 2019-01-02
8-K 2018-11-01
8-K 2018-07-31
8-K 2018-05-01
8-K 2018-04-30
8-K 2018-02-13
8-K 2018-02-01
8-K 2015-09-10
8-K 2015-07-24
8-K 2015-07-21
8-K 2015-06-03
8-K 2015-05-06
8-K 2015-04-27
8-K 2015-04-27
8-K 2015-03-10
8-K 2015-02-02
8-K 2015-01-28
8-K 2015-01-27

AAPL 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1 - Summary of Significant Accounting Policies
Note 2 - Revenue Recognition
Note 3 - Financial Instruments
Note 4 - Condensed Consolidated Financial Statement Details
Note 5 - Income Taxes
Note 6 - Debt
Note 7 - Shareholders' Equity
Note 8 - Comprehensive Income
Note 9 - Benefit Plans
Note 10 - Commitments and Contingencies
Note 11 - Segment Information and Geographic Data
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.1 a10-qexhibit10112262020.htm
EX-10.2 a10-qexhibit10212262020.htm
EX-31.1 a10-qexhibit31112262020.htm
EX-31.2 a10-qexhibit31212262020.htm
EX-32.1 a10-qexhibit32112262020.htm

Apple Earnings 2020-12-26

Balance SheetIncome StatementCash Flow
4103282461648202011201420172021
Assets, Equity
957657381902011201420172021
Rev, G Profit, Net Income
35217-7-21-352011201420172021
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 26, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             .
Commission File Number: 001-36743
aapl-20201226_g1.jpg
Apple Inc.
(Exact name of Registrant as specified in its charter)
California94-2404110
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer Identification No.)
One Apple Park Way
Cupertino, California
95014
(Address of principal executive offices)(Zip Code)
(408) 996-1010
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock, $0.00001 par value per share
AAPL
The Nasdaq Stock Market LLC
1.000% Notes due 2022
The Nasdaq Stock Market LLC
1.375% Notes due 2024
The Nasdaq Stock Market LLC
0.000% Notes due 2025
The Nasdaq Stock Market LLC
0.875% Notes due 2025
The Nasdaq Stock Market LLC
1.625% Notes due 2026
The Nasdaq Stock Market LLC
2.000% Notes due 2027
The Nasdaq Stock Market LLC
1.375% Notes due 2029
The Nasdaq Stock Market LLC
3.050% Notes due 2029
The Nasdaq Stock Market LLC
0.500% Notes due 2031
The Nasdaq Stock Market LLC
3.600% Notes due 2042
The Nasdaq Stock Market LLC
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes       No  

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Yes       No  
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes       No  
16,788,096,000 shares of common stock were issued and outstanding as of January 15, 2021.



Apple Inc.

Form 10-Q
For the Fiscal Quarter Ended December 26, 2020
TABLE OF CONTENTS

Page



PART I — FINANCIAL INFORMATION
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
December 26,
2020
December 28,
2019
Net sales:
   Products$95,678 $79,104 
   Services15,761 12,715 
Total net sales111,439 91,819 
Cost of sales:
   Products62,130 52,075 
   Services4,981 4,527 
Total cost of sales67,111 56,602 
Gross margin44,328 35,217 
Operating expenses:
Research and development5,163 4,451 
Selling, general and administrative5,631 5,197 
Total operating expenses10,794 9,648 
Operating income33,534 25,569 
Other income/(expense), net45 349 
Income before provision for income taxes33,579 25,918 
Provision for income taxes4,824 3,682 
Net income$28,755 $22,236 
Earnings per share:
Basic$1.70 $1.26 
Diluted$1.68 $1.25 
Shares used in computing earnings per share:
Basic16,935,119 17,660,160 
Diluted17,113,688 17,818,417 
See accompanying Notes to Condensed Consolidated Financial Statements.
Apple Inc. | Q1 2021 Form 10-Q | 1


Apple Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In millions)

Three Months Ended
December 26,
2020
December 28,
2019
Net income
$28,755 $22,236 
Other comprehensive income/(loss):
Change in foreign currency translation, net of tax
549 202 
Change in unrealized gains/losses on derivative instruments, net of tax:
Change in fair value of derivatives
(304)111 
Adjustment for net (gains)/losses realized and included in net income
(183)(398)
Total change in unrealized gains/losses on derivative instruments
(487)(287)
Change in unrealized gains/losses on marketable debt securities, net of tax:
Change in fair value of marketable debt securities
628 125 
Adjustment for net (gains)/losses realized and included in net income
(105)(10)
Total change in unrealized gains/losses on marketable debt securities
523 115 
Total other comprehensive income/(loss)585 30 
Total comprehensive income$29,340 $22,266 
See accompanying Notes to Condensed Consolidated Financial Statements.
Apple Inc. | Q1 2021 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)

December 26,
2020
September 26,
2020
ASSETS:
Current assets:
Cash and cash equivalents$36,010 $38,016 
Marketable securities40,816 52,927 
Accounts receivable, net27,101 16,120 
Inventories4,973 4,061 
Vendor non-trade receivables31,519 21,325 
Other current assets13,687 11,264 
Total current assets154,106 143,713 
Non-current assets:
Marketable securities118,745 100,887 
Property, plant and equipment, net37,933 36,766 
Other non-current assets43,270 42,522 
Total non-current assets
199,948 180,175 
Total assets
$354,054 $323,888 
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Accounts payable$63,846 $42,296 
Other current liabilities48,504 42,684 
Deferred revenue7,395 6,643 
Commercial paper5,000 4,996 
Term debt7,762 8,773 
Total current liabilities132,507 105,392 
Non-current liabilities:
Term debt
99,281 98,667 
Other non-current liabilities
56,042 54,490 
Total non-current liabilities
155,323 153,157 
Total liabilities
287,830 258,549 
Commitments and contingencies
Shareholders’ equity:
Common stock and additional paid-in capital, $0.00001 par value: 50,400,000 shares authorized; 16,823,263 and 16,976,763 shares issued and outstanding, respectively
51,744 50,779 
Retained earnings14,301 14,966 
Accumulated other comprehensive income/(loss)179 (406)
Total shareholders’ equity66,224 65,339 
Total liabilities and shareholders’ equity$354,054 $323,888 
See accompanying Notes to Condensed Consolidated Financial Statements.
Apple Inc. | Q1 2021 Form 10-Q | 3


Apple Inc.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(In millions, except per share amounts)

Three Months Ended
December 26,
2020
December 28,
2019
Total shareholders’ equity, beginning balances$65,339 $90,488 
Common stock and additional paid-in capital:
Beginning balances50,779 45,174 
Common stock issued
 2 
Common stock withheld related to net share settlement of equity awards
(1,101)(951)
Share-based compensation2,066 1,747 
Ending balances51,744 45,972 
Retained earnings:
Beginning balances14,966 45,898 
Net income28,755 22,236 
Dividends and dividend equivalents declared(3,547)(3,485)
Common stock withheld related to net share settlement of equity awards
(1,873)(536)
Common stock repurchased(24,000)(20,000)
Cumulative effect of change in accounting principle (136)
Ending balances14,301 43,977 
Accumulated other comprehensive income/(loss):
Beginning balances(406)(584)
Other comprehensive income/(loss)585 30 
Cumulative effect of change in accounting principle 136 
Ending balances179 (418)
Total shareholders’ equity, ending balances$66,224 $89,531 
Dividends and dividend equivalents declared per share or RSU$0.205 $0.1925 
See accompanying Notes to Condensed Consolidated Financial Statements.
Apple Inc. | Q1 2021 Form 10-Q | 4


Apple Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions)
Three Months Ended
December 26,
2020
December 28,
2019
Cash, cash equivalents and restricted cash, beginning balances$39,789 $50,224 
Operating activities:
Net income28,755 22,236 
Adjustments to reconcile net income to cash generated by operating activities:
Depreciation and amortization2,666 2,816 
Share-based compensation expense2,020 1,710 
Deferred income tax benefit(58)(349)
Other25 (142)
Changes in operating assets and liabilities:
Accounts receivable, net(10,945)2,015 
Inventories(950)(28)
Vendor non-trade receivables(10,194)3,902 
Other current and non-current assets(3,526)(7,054)
Accounts payable21,670 (1,089)
Deferred revenue1,341 985 
Other current and non-current liabilities7,959 5,514 
Cash generated by operating activities38,763 30,516 
Investing activities:
Purchases of marketable securities(39,800)(37,416)
Proceeds from maturities of marketable securities25,177 19,740 
Proceeds from sales of marketable securities9,344 7,280 
Payments for acquisition of property, plant and equipment(3,500)(2,107)
Payments made in connection with business acquisitions, net(9)(958)
Other204 (207)
Cash used in investing activities(8,584)(13,668)
Financing activities:
Proceeds from issuance of common stock 2 
Payments for taxes related to net share settlement of equity awards(2,861)(1,379)
Payments for dividends and dividend equivalents(3,613)(3,539)
Repurchases of common stock(24,775)(20,706)
Proceeds from issuance of term debt, net 2,210 
Repayments of term debt(1,000)(1,000)
Proceeds from/(Repayments of) commercial paper, net22 (979)
Other(22)(16)
Cash used in financing activities(32,249)(25,407)
Decrease in cash, cash equivalents and restricted cash(2,070)(8,559)
Cash, cash equivalents and restricted cash, ending balances$37,719 $41,665 
Supplemental cash flow disclosure:
Cash paid for income taxes, net$1,787 $4,393 
Cash paid for interest$619 $771 
See accompanying Notes to Condensed Consolidated Financial Statements.
Apple Inc. | Q1 2021 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 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 26, 2020 (the “2020 Form 10-K”).
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 2021 and 2020 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.
Common Stock Split
On August 28, 2020, the Company effected a four-for-one stock split to shareholders of record as of August 24, 2020. All share, restricted stock unit (“RSU”) and per share or per RSU information has been retroactively adjusted to reflect the stock split.
Recently Adopted Accounting Pronouncements
Financial Instruments – Credit Losses
At the beginning of the first quarter of 2021, the Company adopted the Financial Accounting Standards Board’s Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which modifies the measurement of expected credit losses on certain financial instruments. The Company adopted ASU 2016-13 utilizing the modified retrospective transition method. The adoption of ASU 2016-13 did not have a material impact on the Company’s condensed consolidated financial statements.
Earnings Per Share
The following table shows the computation of basic and diluted earnings per share for the three months ended December 26, 2020 and December 28, 2019 (net income in millions and shares in thousands):
Three Months Ended
December 26,
2020
December 28,
2019
Numerator:
Net income$28,755 $22,236 
Denominator:
Weighted-average basic shares outstanding16,935,119 17,660,160 
Effect of dilutive securities178,569 158,257 
Weighted-average diluted shares17,113,688 17,818,417 
Basic earnings per share$1.70 $1.26 
Diluted earnings per share$1.68 $1.25 
Apple Inc. | Q1 2021 Form 10-Q | 6


Note 2 – Revenue Recognition
Net sales consist of revenue from the sale of iPhone®, Mac®, iPad®, Services and other products. The Company recognizes revenue at the amount to which it expects to be entitled when control of the products or services is transferred to its customers. Control is generally transferred when the Company has a present right to payment and title and the significant risks and rewards of ownership of products or services are transferred to its customers. For most of the Company’s Products net sales, control transfers when products are shipped. For the Company’s Services net sales, control transfers over time as services are delivered. Payment for Products and Services net sales is collected within a short period following transfer of control or commencement of delivery of services, as applicable.
The Company records reductions to Products net sales related to future product returns, price protection and other customer incentive programs based on the Company’s expectations and historical experience.
For arrangements with multiple performance obligations, which represent promises within an arrangement that are distinct, the Company allocates revenue to all distinct performance obligations based on their relative stand-alone selling prices (“SSPs”). When available, the Company uses observable prices to determine SSPs. When observable prices are not available, SSPs are established that reflect the Company’s best estimates of what the selling prices of the performance obligations would be if they were sold regularly on a stand-alone basis. The Company’s process for estimating SSPs without observable prices considers multiple factors that may vary depending upon the unique facts and circumstances related to each performance obligation including, where applicable, prices charged by the Company for similar offerings, market trends in the pricing for similar offerings, product-specific business objectives and the estimated cost to provide the performance obligation.
The Company has identified up to three performance obligations regularly included in arrangements involving the sale of iPhone, Mac, iPad and certain other products. The first performance obligation, which represents the substantial portion of the allocated sales price, is the hardware and bundled software delivered at the time of sale. The second performance obligation is the right to receive certain product-related bundled services, which include iCloud®, Siri® and Maps. The third performance obligation is the right to receive, on a when-and-if-available basis, future unspecified software upgrades relating to the software bundled with each device. The Company allocates revenue and any related discounts to these performance obligations based on their relative SSPs. Because the Company lacks observable prices for the undelivered performance obligations, the allocation of revenue is based on the Company’s estimated SSPs. Revenue allocated to the delivered hardware and bundled software is recognized when control has transferred to the customer, which generally occurs when the product is shipped. Revenue allocated to the product-related bundled services and unspecified software upgrade rights is deferred and recognized on a straight-line basis over the estimated period they are expected to be provided. Cost of sales related to delivered hardware and bundled software, including estimated warranty costs, are recognized at the time of sale. Costs incurred to provide product-related bundled services and unspecified software upgrade rights are recognized as cost of sales as incurred.
For certain long-term service arrangements, the Company has performance obligations for services it has not yet delivered. For these arrangements, the Company does not have a right to bill for the undelivered services. The Company has determined that any unbilled consideration relates entirely to the value of the undelivered services. Accordingly, the Company has not recognized revenue, and has elected not to disclose amounts, related to these undelivered services.
For the sale of third-party products where the Company obtains control of the product before transferring it to the customer, the Company recognizes revenue based on the gross amount billed to customers. The Company considers multiple factors when determining whether it obtains control of third-party products including, but not limited to, evaluating if it can establish the price of the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the product. For third-party applications sold through the App Store® and certain digital content sold through the Company’s other digital content stores, the Company does not obtain control of the product before transferring it to the customer. Therefore, the Company accounts for such sales on a net basis by recognizing in Services net sales only the commission it retains.
The Company has elected to record revenue net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded within other current liabilities until remitted to the relevant government authority.
Deferred Revenue
As of December 26, 2020 and September 26, 2020, the Company had total deferred revenue of $11.6 billion and $10.2 billion, respectively. As of December 26, 2020, the Company expects 64% of total deferred revenue to be realized in less than a year, 26% within one-to-two years, 8% within two-to-three years and 2% in greater than three years.
Apple Inc. | Q1 2021 Form 10-Q | 7


Disaggregated Revenue
Net sales disaggregated by significant products and services for the three months ended December 26, 2020 and December 28, 2019 were as follows (in millions):
Three Months Ended
December 26,
2020
December 28,
2019
iPhone (1)
$65,597 $55,957 
Mac (1)
8,675 7,160 
iPad (1)
8,435 5,977 
Wearables, Home and Accessories (1)(2)
12,971 10,010 
Services (3)
15,761 12,715 
Total net sales (4)
$111,439 $91,819 
(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+SM services, which are bundled in the sales price of certain products.
(4)Includes $2.5 billion of revenue recognized in the three months ended December 26, 2020 that was included in deferred revenue as of September 26, 2020 and $1.9 billion of revenue recognized in the three months ended December 28, 2019 that was included in deferred revenue as of September 28, 2019.
The Company’s proportion of net sales by disaggregated revenue source was generally consistent for each reportable segment in Note 11, “Segment Information and Geographic Data” for the three months ended December 26, 2020 and December 28, 2019.
Note 3 – Financial Instruments
Cash, Cash Equivalents and Marketable Securities
The following tables show the Company’s cash and marketable securities by significant investment category as of December 26, 2020 and September 26, 2020 (in millions):
December 26, 2020
Adjusted
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Cash and
Cash
Equivalents
Current
Marketable
Securities
Non-Current
Marketable
Securities
Cash$18,729 $ $ $18,729 $18,729 $ $ 
Level 1 (1): Money market funds
6,312   6,312 6,312   
Level 2 (2):
U.S. Treasury securities21,939 270 (6)22,203 3,227 8,527 10,449 
U.S. agency securities8,698 9 (1)8,706 1,000 3,319 4,387 
Non-U.S. government securities20,185 395 (67)20,513 100 2,874 17,539 
Certificates of deposit and time deposits
8,002   8,002 5,009 2,623 370 
Commercial paper8,620   8,620 1,632 6,988  
Corporate debt securities83,042 2,155 (44)85,153 1 16,117 69,035 
Municipal securities1,004 20  1,024  94 930 
Mortgage- and asset-backed securities
16,051 281 (23)16,309  274 16,035 
Subtotal167,541 3,130 (141)170,530 10,969 40,816 118,745 
Total (3)
$192,582 $3,130 $(141)$195,571 $36,010 $40,816 $118,745 
Apple Inc. | Q1 2021 Form 10-Q | 8


September 26, 2020
Adjusted
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Cash and
Cash
Equivalents
Current
Marketable
Securities
Non-Current
Marketable
Securities
Cash$17,773 $ $ $17,773 $17,773 $ $ 
Level 1 (1): Money market funds
2,171   2,171 2,171   
Level 2 (2):
U.S. Treasury securities28,439 331  28,770 8,580 11,972 8,218 
U.S. agency securities8,604 8  8,612 2,009 3,078 3,525 
Non-U.S. government securities19,361 275 (186)19,450 255 3,329 15,866 
Certificates of deposit and time deposits
10,399   10,399 4,043 6,246 110 
Commercial paper11,226   11,226 3,185 8,041  
Corporate debt securities76,937 1,834 (175)78,596  19,687 58,909 
Municipal securities1,001 22  1,023  139 884 
Mortgage- and asset-backed securities
13,520 314 (24)13,810  435 13,375 
Subtotal169,487 2,784 (385)171,886 18,072 52,927 100,887 
Total (3)
$189,431 $2,784 $(385)$191,830 $38,016 $52,927 $100,887 
(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 December 26, 2020 and September 26, 2020, total marketable securities included $19.5 billion and $18.6 billion, respectively, that was restricted from general use, related to the State Aid Decision (refer to Note 5, “Income Taxes”) and other agreements.
The Company may sell certain of its marketable debt securities prior to their stated maturities for reasons including, but not limited to, managing liquidity, credit risk, duration and asset allocation. The maturities of the Company’s non-current marketable debt securities generally range from one to five years.
The Company typically invests 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. Fair values were determined for each individual security in the investment portfolio.
Non-Marketable Securities
The Company holds non-marketable equity securities of certain privately held companies without readily determinable fair values. As of December 26, 2020 and September 26, 2020, the Company’s non-marketable equity securities had a carrying value of $2.5 billion and $2.8 billion, respectively.
Restricted Cash
A reconciliation of the Company’s cash and cash equivalents in the Condensed Consolidated Balance Sheets to cash, cash equivalents and restricted cash in the Condensed Consolidated Statements of Cash Flows as of December 26, 2020 and September 26, 2020 is as follows (in millions):
December 26,
2020
September 26,
2020
Cash and cash equivalents$36,010 $38,016 
Restricted cash1,709 1,773 
Cash, cash equivalents and restricted cash$37,719 $39,789 
The Company’s restricted cash primarily consisted of cash to support the Company’s iPhone Upgrade Program. Substantially all of the Company’s restricted cash was included in other non-current assets in the Condensed Consolidated Balance Sheets.
Apple Inc. | Q1 2021 Form 10-Q | 9


Derivative Financial Instruments
The Company may use derivatives to partially offset its business exposure to foreign currency and interest rate risk on expected future cash flows, net investments in certain foreign subsidiaries, and certain existing assets and liabilities. However, the Company may choose not to hedge certain exposures for a variety of reasons including, but not limited to, 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 currency exchange or interest rates.
To protect gross margins from fluctuations in foreign currency exchange rates, certain of the Company’s subsidiaries whose functional currency is the U.S. dollar may hedge a portion of forecasted foreign currency revenue, and subsidiaries whose functional currency is not the U.S. dollar may hedge a portion of forecasted inventory purchases not denominated in the subsidiaries’ functional currencies. The Company may enter into forward contracts, option contracts or other instruments to manage this risk 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 net investment in a foreign operation from fluctuations in foreign currency exchange rates, the Company may enter into foreign currency forward and option contracts to offset a portion of the changes in the carrying amounts of these investments due to fluctuations in foreign currency exchange rates. In addition, the Company may use non-derivative financial instruments, such as its foreign currency–denominated debt, as hedges of its net investments in certain foreign subsidiaries. In both of these cases, the Company designates these instruments as net investment hedges.
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. These instruments may offset a portion of the foreign currency remeasurement gains or losses, or changes in fair value. The Company may designate these instruments as either cash flow or fair value hedges. As of December 26, 2020, the Company’s hedged term debt– and marketable securities–related foreign currency transactions are expected to be recognized within 22 years.
The Company may also enter into non-designated foreign currency contracts 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.
To protect the Company’s foreign currency–denominated term debt or marketable securities from fluctuations in interest rates, the Company may enter into interest rate swaps, options or other instruments. These instruments may offset a portion of the changes in interest income or expense, or changes in fair value. The Company designates these instruments as either cash flow or fair value hedges. As of December 26, 2020, the Company’s hedged interest rate transactions are expected to be recognized within seven years.
Cash Flow Hedges
Cash flow hedge amounts that are included in the assessment of hedge effectiveness are deferred in accumulated other comprehensive income/(loss) (“AOCI”) until the hedged item is recognized in earnings. Deferred gains and losses associated with cash flow hedges of foreign currency revenue are recognized as a component of net sales in the same period as the related revenue is recognized, and deferred gains and losses related to cash flow hedges of inventory purchases are recognized as a component of cost of sales in the same period as the related costs are recognized. Deferred gains and losses associated with cash flow hedges of interest income or expense are recognized in other income/(expense), net (“OI&E”) in the same period as the related income or expense is recognized. For options designated as cash flow hedges, the time value is excluded from the assessment of hedge effectiveness and recognized in the financial statement line item to which the hedge relates on a straight-line basis over the life of the hedge. Changes in the fair value of amounts excluded from the assessment of hedge effectiveness are recognized in other comprehensive income/(loss) (“OCI”).
Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur in the initially identified time period or within a subsequent two-month time period. Deferred gains and losses in AOCI associated with such derivative instruments are reclassified into OI&E in the period of de-designation. Any subsequent changes in fair value of such derivative instruments are reflected in OI&E unless they are re-designated as hedges of other transactions.
Net Investment Hedges
Net investment hedge amounts that are included in the assessment of hedge effectiveness are recorded in OCI as a part of the cumulative translation adjustment. For foreign exchange forward contracts designated as net investment hedges, the forward carry component is excluded from the assessment of hedge effectiveness and recognized in OCI on a straight-line basis over the life of the hedge. Changes in the fair value of amounts excluded from the assessment of hedge effectiveness are recognized in OCI.
Apple Inc. | Q1 2021 Form 10-Q | 10


Fair Value Hedges
Fair value hedge gains and losses related to amounts that are included in the assessment of hedge effectiveness are recognized in earnings along with a corresponding loss or gain related to the change in value of the hedged item in the same line in the Condensed Consolidated Statements of Operations. For foreign exchange forward contracts designated as fair value hedges, the forward carry component is excluded from the assessment of hedge effectiveness and recognized in OI&E on a straight-line basis over the life of the hedge. Amounts excluded from the effectiveness assessment of fair value hedges and recognized in OI&E were gains of $82 million and $128 million for the three months ended December 26, 2020 and December 28, 2019, respectively. Changes in the fair value of amounts excluded from the assessment of hedge effectiveness are recognized in OCI.
Non-Designated Derivatives
Derivatives that are not designated as hedging instruments are adjusted to fair value through earnings in the financial statement line item to which the derivative relates.
The Company records all derivatives in the Condensed Consolidated Balance Sheets at fair value. The Company’s accounting treatment for these derivative instruments is based on its hedge designation. The following tables show the Company’s derivative instruments at gross fair value as of December 26, 2020 and September 26, 2020 (in millions):
December 26, 2020
Fair Value of
Derivatives Designated
as Hedge Instruments
Fair Value of
Derivatives Not Designated
as Hedge Instruments
Total
Fair Value
Derivative assets (1):
Foreign exchange contracts$524 $780 $1,304 
Interest rate contracts$1,443 $ $1,443 
Derivative liabilities (2):
Foreign exchange contracts$2,332 $1,314 $3,646 
September 26, 2020
Fair Value of
Derivatives Designated
as Hedge Instruments
Fair Value of
Derivatives Not Designated
as Hedge Instruments
Total
Fair Value
Derivative assets (1):
Foreign exchange contracts$749 $303 $1,052 
Interest rate contracts$1,557 $ $1,557 
Derivative liabilities (2):
Foreign exchange contracts$1,561 $485 $2,046 
(1)The fair value of derivative assets is measured using Level 2 fair value inputs and is included in other current assets and other non-current assets in the Condensed Consolidated Balance Sheets.
(2)The fair value of derivative liabilities is measured using Level 2 fair value inputs and is included in other current liabilities and other non-current liabilities in the Condensed Consolidated Balance Sheets.
The Company classifies cash flows related to derivative financial instruments as operating activities in its Condensed Consolidated Statements of Cash Flows.
Apple Inc. | Q1 2021 Form 10-Q | 11


The following table shows the pre-tax gains and losses of the Company’s derivative and non-derivative instruments designated as cash flow and net investment hedges in OCI and the Condensed Consolidated Statements of Operations for the three months ended December 26, 2020 and December 28, 2019 (in millions):
Three Months Ended
December 26,
2020
December 28,
2019
Gains/(Losses) recognized in OCI – included in effectiveness assessment:
Cash flow hedges:
Foreign exchange contracts$(191)$271 
Interest rate contracts54  
Total$(137)$271 
Net investment hedges:
Foreign currency debt$ $24 
Gains/(Losses) reclassified from AOCI into net income – included in effectiveness assessment:
Cash flow hedges:
Foreign exchange contracts$314 $491 
Interest rate contracts(3)(2)
Total$311 $489 
Amounts excluded from the effectiveness assessment of the Company’s hedges and recognized in OCI were losses of $138 million and $89 million for the three months ended December 26, 2020 and December 28, 2019, respectively.
The following tables show information about the Company’s derivative instruments designated as fair value hedges and the related hedged items for the three months ended December 26, 2020 and December 28, 2019 and as of December 26, 2020 and September 26, 2020 (in millions):
Three Months Ended
December 26,
2020
December 28,
2019
Gains/(Losses) on derivative instruments (1):
Foreign exchange contracts$(753)$(183)
Interest rate contracts(167)(162)
Total$(920)$(345)
Gains/(Losses) related to hedged items (1):
Marketable securities$752 $183 
Fixed-rate debt167 162 
Total$919 $345 
Apple Inc. | Q1 2021 Form 10-Q | 12


December 26,
2020
September 26,
2020
Carrying amounts of hedged assets/(liabilities):
Marketable securities (2)
$17,009 $16,270 
Fixed-rate debt (3)
$(20,866)$(21,033)
Cumulative hedging adjustments included in the carrying amounts of hedged items:
Marketable securities carrying amount increases/(decreases)$956 $493 
Fixed-rate debt carrying amount (increases)/decreases$(1,374)$(1,541)
(1)Gains and losses related to fair value hedges are included in OI&E in the Condensed Consolidated Statements of Operations.
(2)The carrying amounts of marketable securities that are designated as hedged items in fair value hedges are included in current marketable securities and non-current marketable securities in the Condensed Consolidated Balance Sheets
(3)The carrying amounts of fixed-rate debt instruments that are designated as hedged items in fair value hedges are included in current term debt and non-current term debt in the Condensed Consolidated Balance Sheets.
The following table shows the notional amounts of the Company’s outstanding derivative instruments and credit risk amounts associated with outstanding or unsettled derivative instruments as of December 26, 2020 and September 26, 2020 (in millions):
December 26, 2020September 26, 2020
Notional
Amount
Credit Risk
Amount
Notional
Amount
Credit Risk
Amount
Instruments designated as accounting hedges:
Foreign exchange contracts$71,191 $524