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Apple Earnings Released: Revenue $45.6 Billion, Net Profit $10.2 Billion

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Apple Earnings Released: Revenue $45.6 Billion, Net Profit $10.2 Billion
[ Finance]

Apple just released its earnings report for its fiscal 2014 second quarter, ended March 29th with revenue of $45.6 billion and quarterly net profit of $10.2 billion. That’s compared to $43.6 billion and net profit of $9.5 billion, respectively for the same period last year.

CEO Tim Cook said, “We’re very proud of our quarterly results, especially our strong iPhone sales and record revenue from services. We’re eagerly looking forward to introducing more new products and services that only Apple could bring to market.”

The company beat analysts’ expectations.

It expects revenue for its third quarter to be between $36 billion and $38 billion.

Apple also announced that its board of directors has authorized another “significant increase” to Apple’s program to return capital to shareholders, utilizing a total of over $130 billion of cash by the end of next year.

“We’re confident in Apple’s future and see tremendous value in Apple’s stock, so we’re continuing to allocate the majority of our program to share repurchases,” Cook said. “We’re also happy to be increasing our dividend for the second time in less than two years.”

Here’s the earnings release in its entirety:

Apple® today announced financial results for its fiscal 2014 second quarter ended March 29, 2014. The Company posted quarterly revenue of $45.6 billion and quarterly net profit of $10.2 billion, or $11.62 per diluted share. These results compare to revenue of $43.6 billion and net profit of $9.5 billion, or $10.09 per diluted share, in the year-ago quarter. Gross margin was 39.3 percent compared to 37.5 percent in the year-ago quarter. International sales accounted for 66 percent of the quarter’s revenue.

“We’re very proud of our quarterly results, especially our strong iPhone sales and record revenue from services”

“We’re very proud of our quarterly results, especially our strong iPhone sales and record revenue from services,” said Tim Cook, Apple’s CEO. “We’re eagerly looking forward to introducing more new products and services that only Apple could bring to market.”

“We generated $13.5 billion in cash flow from operations and returned almost $21 billion in cash to shareholders through dividends and share repurchases during the March quarter,” said Peter Oppenheimer, Apple’s CFO. “That brings cumulative payments under our capital return program to $66 billion.”

Apple is providing the following guidance for its fiscal 2014 third quarter:

• revenue between $36 billion and $38 billion

• gross margin between 37 percent and 38 percent

• operating expenses between $4.4 billion and $4.5 billion

• other income/(expense) of $200 million

• tax rate of 26.1 percent

Apple will provide live streaming of its Q2 2014 financial results conference call beginning at 2:00 p.m. PDT on April 23, 2014 atwww.apple.com/quicktime/qtv/earningsq214. This webcast will also be available for replay for approximately two weeks thereafter.

This press release contains forward-looking statements including without limitation those about the Company’s estimated revenue, gross margin, operating expenses, other income/(expense), and tax rate. These statements involve risks and uncertainties, and actual results may differ. Risks and uncertainties include without limitation the effect of competitive and economic factors, and the Company’s reaction to those factors, on consumer and business buying decisions with respect to the Company’s products; continued competitive pressures in the marketplace; the ability of the Company to deliver to the marketplace and stimulate customer demand for new programs, products, and technological innovations on a timely basis; the effect that product introductions and transitions, changes in product pricing or mix, and/or increases in component costs could have on the Company’s gross margin; the inventory risk associated with the Company’s need to order or commit to order product components in advance of customer orders; the continued availability on acceptable terms, or at all, of certain components and services essential to the Company’s business currently obtained by the Company from sole or limited sources; the effect that the Company’s dependency on manufacturing and logistics services provided by third parties may have on the quality, quantity or cost of products manufactured or services rendered; risks associated with the Company’s international operations; the Company’s reliance on third-party intellectual property and digital content; the potential impact of a finding that the Company has infringed on the intellectual property rights of others; the Company’s dependency on the performance of distributors, carriers and other resellers of the Company’s products; the effect that product and service quality problems could have on the Company’s sales and operating profits; the continued service and availability of key executives and employees; war, terrorism, public health issues, natural disasters, and other circumstances that could disrupt supply, delivery, or demand of products; and unfavorable results of other legal proceedings. More information on potential factors that could affect the Company’s financial results is included from time to time in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s public reports filed with the SEC, including the Company’s Form 10-K for the fiscal year ended September 28, 2013, its Form 10-Q for the quarter ended December 28, 2013, and its Form 10-Q for the quarter ended March 29, 2014 to be filed with the SEC. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.

NOTE TO EDITORS: For additional information visit Apple’s PR website (www.apple.com/pr), or call Apple’s Media Helpline at (408) 974-2042.

© 2014 Apple Inc. All rights reserved. Apple, the Apple logo, Mac, Mac OS and Macintosh are trademarks of Apple. Other company and product names may be trademarks of their respective owners.

Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except number of shares which are reflected in thousands and per share amounts)

Three Months Ended Six Months Ended
March 29,
2014
March 30,
2013
March 29,
2014
March 30,
2013
Net sales $ 45,646 $ 43,603 $ 103,240 $ 98,115
Cost of sales (1) 27,699 27,254 63,447 60,706
Gross margin 17,947 16,349 39,793 37,409
Operating expenses:
Research and development (1) 1,422 1,119 2,752 2,129
Selling, general and administrative (1) 2,932 2,672 5,985 5,512
Total operating expenses 4,354 3,791 8,737 7,641
Operating income 13,593 12,558 31,056 29,768
Other income/(expense), net 225 347 471 809
Income before provision for income taxes 13,818 12,905 31,527 30,577
Provision for income taxes 3,595 3,358 8,232 7,952
Net income $ 10,223 $ 9,547 $ 23,295 $ 22,625
Earnings per share:
Basic $ 11.69 $ 10.16 $ 26.31 $ 24.09
Diluted $ 11.62 $ 10.09 $ 26.16 $ 23.90
Shares used in computing earnings per share:
Basic 874,757 939,629 885,415 939,273
Diluted 879,528 946,035 890,490 946,626
Cash dividends declared per common share $ 3.05 $ 2.65 $ 6.10 $ 5.30
(1) Includes share-based compensation expense as follows:
Cost of sales $ 110 $ 87 $ 219 $ 172
Research and development $ 300 $ 239 $ 589 $ 463
Selling, general and administrative $ 286 $ 249 $ 569 $ 485
Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except number of shares which are reflected in thousands)

March 29,
2014
September 28,
2013
ASSETS:
Current assets:
Cash and cash equivalents $ 18,949 $ 14,259
Short-term marketable securities 22,401 26,287
Accounts receivable, less allowances of $88 and $99, respectively 9,700 13,102
Inventories 1,829 1,764
Deferred tax assets 4,014 3,453
Vendor non-trade receivables 6,120 7,539
Other current assets 7,528 6,882
Total current assets 70,541 73,286
Long-term marketable securities 109,239 106,215
Property, plant and equipment, net 15,120 16,597
Goodwill 2,055 1,577
Acquired intangible assets, net 3,928 4,179
Other assets 5,106 5,146
Total assets $ 205,989 $ 207,000
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Accounts payable $ 18,914 $ 22,367
Accrued expenses 15,984 13,856
Deferred revenue 8,310 7,435
Total current liabilities 43,208 43,658
Deferred revenue – non-current 3,164 2,625
Long-term debt 16,962 16,960
Other non-current liabilities 22,476 20,208
Total liabilities 85,810 83,451
Commitments and contingencies
Shareholders’ equity:
Common stock and additional paid-in capital, $0.00001 par value: 1,800,000 shares authorized; 861,745 and 899,213 shares issued and outstanding, respectively 21,496 19,764
Retained earnings 98,934 104,256
Accumulated other comprehensive income/(loss) (251) (471)
Total shareholders’ equity 120,179 123,549
Total liabilities and shareholders’ equity $ 205,989 $ 207,000
Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

Six Months Ended
March 29, 2014 March 30, 2013
Cash and cash equivalents, beginning of the period $ 14,259 $ 10,746
Operating activities:
Net income 23,295 22,625
Adjustments to reconcile net income to cash generated by operating activities:
Depreciation and amortization 4,031 3,280
Share-based compensation expense 1,377 1,120
Deferred income tax expense 2,059 1,957
Changes in operating assets and liabilities:
Accounts receivable, net 3,401 3,846
Inventories (65) (454)
Vendor non-trade receivables 1,419 1,510
Other current and non-current assets 14 1,269
Accounts payable (2,375) (4,422)
Deferred revenue 1,414 1,541
Other current and non-current liabilities 1,638 3,658
Cash generated by operating activities 36,208 35,930
Investing activities:
Purchases of marketable securities (90,360) (81,163)
Proceeds from maturities of marketable securities 10,869 9,243
Proceeds from sales of marketable securities 80,241 49,188
Payments made in connection with business acquisitions, net (559) (299)
Payments for acquisition of property, plant and equipment (3,367) (4,325)
Payments for acquisition of intangible assets (163) (429)
Other (23) (93)
Cash used in investing activities (3,362) (27,878)
Financing activities:
Proceeds from issuance of common stock 341 275
Excess tax benefits from equity awards 363 502
Taxes paid related to net share settlement of equity awards (430) (588)
Dividends and dividend equivalents paid (5,430) (4,984)
Repurchase of common stock (23,000) (1,950)
Cash used in financing activities (28,156) (6,745)
Increase in cash and cash equivalents 4,690 1,307
Cash and cash equivalents, end of the period $ 18,949 $ 12,053
Supplemental cash flow disclosure:
Cash paid for income taxes, net $ 5,369 $ 4,258
Cash paid for interest $ 161 $ 0
Apple Inc.
Q2 2014 Unaudited Summary Data
(Units in thousands, Revenue in millions)
Q2’14 Q1’14 Q2’13 Sequential Change Year/Year Change
Operating Segments Revenue Revenue Revenue Revenue Revenue
Americas $14,310 $20,098 $14,052 - 29% 2%
Europe 10,230 13,073 9,800 - 22% 4%
Greater China (a) 9,289 8,844 8,213 5% 13%
Japan 3,963 4,948 3,135 - 20% 26%
Rest of Asia Pacific 2,627 3,633 3,162 - 28% - 17%
Retail 5,227 6,998 5,241 - 25% 0%
Total Apple $45,646 $57,594 $43,603 - 21% 5%
Q2’14 Q1’14 Q2’13 Sequential Change Year/Year Change
Product Summary Units Revenue Units Revenue Units Revenue Units Revenue Units Revenue
iPhone (b) 43,719 $26,064 51,025 $32,498 37,430 $22,955 - 14% - 20% 17% 14%
iPad (b) 16,350 7,610 26,035 11,468 19,477 8,746 - 37% - 34% - 16% - 13%
Mac (b) 4,136 5,519 4,837 6,395 3,952 5,447 - 14% - 14% 5% 1%
iPod (b) 2,761 461 6,049 973 5,633 962 - 54% - 53% - 51% - 52%
iTunes/Software/Services (c) 4,573 4,397 4,114 4% 11%
Accessories (d) 1,419 1,863 1,379 - 24% 3%
Total Apple $45,646 $57,594 $43,603 - 21% 5%
(a) Greater China includes China, Hong Kong and Taiwan.
(b) Includes deferrals and amortization of related non-software services and software upgrade rights.
(c) Includes revenue from sales on the iTunes Store, the App Store, the Mac App Store, and the iBooks Store, and revenue from sales of AppleCare, licensing and other services.
(d) Includes sales of hardware peripherals and Apple-branded and third-party accessories for iPhone, iPad, Mac and iPod.


Image via Apple

Apple Earnings Released: Revenue $45.6 Billion, Net Profit $10.2 Billion
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