10-KPeriod: FY2016

Apple Inc. Annual Report, Year Ended Sep 24, 2016

Filed October 26, 2016For Securities:AAPL

Summary

Apple Inc.'s 2016 10-K filing reveals a year of mixed performance, with net sales declining 8% year-over-year to $215.6 billion, primarily due to a decrease in iPhone sales and currency headwinds. Despite this revenue dip, the company demonstrated strong service revenue growth of 22%, signaling a positive trend in its services segment. Apple continued its aggressive capital return program, increasing its share repurchase authorization and quarterly dividend, underscoring a commitment to shareholder value. The company's product portfolio saw notable introductions like the iPhone 7 and Apple Watch Series 2. While iPhone sales declined, the company emphasized its integrated approach of hardware, software, and services as a key competitive advantage. R&D spending increased by 25% to $10 billion, highlighting a continued focus on innovation. The Greater China region experienced a significant 17% decline in net sales, impacting overall performance, while other segments showed more stable or slightly positive trends. The company also faced risks related to supply chain, competition, and global economic conditions.

Financial Highlights

58 data points
Beta

Revenue

$215.64B

39.1% Gross Margin

Net Income

$45.69B

21.2% Net Margin

EPS (Diluted)

$2.08

Total Assets

$321.69B

Cash & Equivalents

$20.48B

Free Cash Flow

$53.09B

Financial Statements
Beta
Revenue$215.64B
Cost of Revenue$131.38B
Gross Profit$84.26B
R&D Expenses$10.04B
SG&A Expenses$14.19B
Operating Expenses$24.24B
Operating Income$60.02B
Interest Expense$1.46B
Net Income$45.69B
EPS (Basic)$2.09
EPS (Diluted)$2.08
Shares Outstanding (Basic)21.88B
Shares Outstanding (Diluted)22.00B

Key Highlights

  • 1Net sales decreased by 8% to $215.6 billion in fiscal year 2016, primarily impacted by lower iPhone sales and unfavorable foreign currency exchange rates.
  • 2Services revenue grew by 22% year-over-year, reaching $24.3 billion, demonstrating strong performance in this segment.
  • 3Research and Development (R&D) expenses increased by 25% to $10.0 billion, reflecting continued investment in innovation and new product development.
  • 4Apple significantly expanded its capital return program, increasing share repurchases and dividends, authorizing $175 billion for share repurchases and raising the quarterly dividend to $0.57 per share.
  • 5The Greater China region saw a substantial 17% decrease in net sales, contributing to the overall revenue decline.
  • 6New product launches in 2016 included the iPhone 7 and 7 Plus, iPhone SE, and Apple Watch Series 2, aimed at maintaining product competitiveness.
  • 7The company highlighted its integrated ecosystem of hardware, software, and services as a key differentiator in a highly competitive market.

Frequently Asked Questions

Apple's net sales declined by 8% to $215.6 billion in fiscal year 2016. This decrease was primarily driven by a year-over-year decline in iPhone net sales and the impact of unfavorable foreign currency exchange rates relative to the U.S. dollar. However, Services revenue showed strong growth of 22%, partially offsetting the overall decline.

Apple continued its aggressive capital return program. In April 2016, the company announced an increase in its capital return program to $250 billion through March 2018. This included raising its share repurchase authorization from $140 billion to $175 billion and increasing its quarterly dividend from $0.52 to $0.57 per share. During 2016, Apple spent $29.0 billion on share repurchases and paid $12.2 billion in dividends.

Key risks identified include intense competition in highly competitive global markets characterized by aggressive pricing and rapid technological change. The company also faces significant risks related to its supply chain, relying on single or limited sources for certain components and outsourcing manufacturing primarily in Asia. Global and regional economic conditions, foreign currency fluctuations, and the success of new product introductions are also significant risk factors.

Performance varied significantly by region. The Americas and Rest of Asia Pacific saw net sales decrease by 8% and 10% respectively. Europe experienced a slight 1% decrease. Greater China saw a notable 17% decline in net sales. Japan was an exception, with net sales increasing by 8%, partly due to the strength of the Japanese yen.