10-QPeriod: Q3 FY2003

Apple Inc. Quarterly Report for Q3 Ended Jun 28, 2003

Filed August 12, 2003For Securities:AAPL

Summary

Apple Inc. reported its financial results for the third quarter of fiscal year 2003, ending June 28, 2003. The company demonstrated steady top-line growth with net sales increasing by 8% year-over-year to $1.545 billion. While profitability saw a decline compared to the prior year's quarter ($19 million net income vs. $32 million), this was largely influenced by a cumulative accounting change impacting net income. Despite a challenging macroeconomic environment, Apple continued to invest in research and development, reflecting a commitment to innovation. The company also made strides in its burgeoning retail segment and saw strong performance in peripherals and software sales, notably the iPod and iTunes Music Store launch. Management expressed confidence in the company's liquidity and ability to meet its financial obligations, projecting a high single-digit percentage increase in net sales for the upcoming fourth quarter.

Key Highlights

  • 1Net sales for the quarter increased 8% year-over-year to $1.545 billion.
  • 2Net income for the quarter was $19 million, a decrease from $32 million in the same quarter of the prior year.
  • 3Research and Development (R&D) expenses increased by 13% year-over-year, indicating continued investment in innovation.
  • 4The Retail segment experienced significant growth, with net sales increasing by 130% year-over-year.
  • 5Sales of peripherals and other hardware, driven by iPod sales, surged by 93% year-over-year.
  • 6Apple launched the iTunes Music Store in April 2003, a significant step into digital content distribution.
  • 7The company maintained a strong cash position, with $4.545 billion in cash, cash equivalents, and short-term investments as of June 28, 2003.

Frequently Asked Questions

Apple's net sales for the quarter ended June 28, 2003, were $1.545 billion, an increase of 8% compared to $1.429 billion in the same quarter of the previous year. This growth was driven by strong sales in peripherals, software, and the retail segment, partially offset by declines in desktop system sales.

Net income for the quarter was $19 million, or $0.05 per diluted share. This is a decrease compared to $32 million, or $0.09 per diluted share, in the same quarter of the prior year. The decrease in net income was influenced by a cumulative effect of an accounting change.

Key growth drivers included a significant increase in net sales of peripherals and other hardware, largely due to strong iPod sales, which rose by 93% year-over-year. Software sales also saw a substantial increase of 41%. The Retail segment experienced exceptional growth, with net sales up 130% year-over-year. The launch of the iTunes Music Store in April 2003 also marked a strategic expansion.

For the fourth quarter of fiscal year 2003, Apple expects a high single-digit percentage increase in net sales compared to the third quarter, with a slight sequential increase in earnings. Gross margin is anticipated to be approximately 100 basis points lower due to lower Mac OS sales and increased manufacturing costs for new Power Mac G5 systems.