01—Abstract
Summary
Summary of the 10-K filed October 26, 2016. Cited figures are marked; the original filing is the authoritative source.
Apple Inc.'s 2016 10-K filing reveals a year of mixed performance, with net sales declining 8% year-over-year to $215.6 billiona, primarily due to a decrease in iPhone sales and currency headwinds.
Despite this revenue dip, the company demonstrated strong service revenue growth of 22%b, 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 billionc, highlighting a continued focus on innovation.
The Greater China region experienced a significant 17%d 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.
02—Key points
Key Highlights
- Net sales decreased by 8% to $215.6 billion in fiscal year 2016, primarily impacted by lower iPhone sales and unfavorable foreign currency exchange rates.
- Services revenue grew by 22% year-over-year, reaching $24.3 billion, demonstrating strong performance in this segment.
- Research and Development (R&D) expenses increased by 25% to $10.0 billion, reflecting continued investment in innovation and new product development.
- Apple 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.
- The Greater China region saw a substantial 17% decrease in net sales, contributing to the overall revenue decline.
- New product launches in 2016 included the iPhone 7 and 7 Plus, iPhone SE, and Apple Watch Series 2, aimed at maintaining product competitiveness.
- The company highlighted its integrated ecosystem of hardware, software, and services as a key differentiator in a highly competitive market.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Apple Inc. kept $0.21.
- Revenue$215.64B100.0%
- Cost of revenue−$131.38B60.9%
- Gross profit$84.26B39.1%
- Operating costs−$24.24B11.2%
- Operating income$60.02B27.8%
- Interest, other & tax−$14.34B6.6%
- Net income$45.69B21.2%
Where FY2016 revenue went
$215.64B- Cost of revenue: $131.38B, 61% of revenue
- Net income: $45.69B, 21% of revenue
- R&D: $10.04B, 4.7% of revenue
- SG&A: $14.19B, 6.6% of revenue
- Interest, other & tax: $14.34B, 6.6% of revenue
Kept 21% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed October 26, 2016Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $215.64B$233.72B | −7.7% |
| Cost of Revenue | $131.38B$140.09B | −6.2% |
| Gross Profit | $84.26B$93.63B | −10.0% |
| R&D Expenses | $10.04B$8.07B | +24.5% |
| SG&A Expenses | $14.19B$14.33B | −0.9% |
| Operating Expenses | $24.24B$22.40B | +8.2% |
| Operating Income | $60.02B$71.23B | −15.7% |
| Interest Expense | $1.46B$733.00M | +98.6% |
| Net Income | $45.69B$53.39B | −14.4% |
| EPS (Basic) | $2.09$2.32 | −10.0% |
| EPS (Diluted) | $2.08$2.31 | −9.9% |
| Shares Outstanding (Basic) | 21.88B23.01B | −4.9% |
| Shares Outstanding (Diluted) | 22.00B23.17B | −5.1% |
05—Questions
Frequently Asked Questions
What were the primary drivers of Apple's revenue performance in 2016?
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.
How is Apple managing its capital and returning value to shareholders?
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.
What are the key risks facing Apple, as highlighted in the filing?
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.
How did performance vary across Apple's geographic segments?
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.
06—Continue