10-QPeriod: Q3 FY2012

Apple Inc. Quarterly Report for Q3 Ended Jun 30, 2012

Filed July 25, 2012For Securities:AAPL

Summary

Apple Inc.'s third-quarter 2012 report (ending June 30, 2012) demonstrates robust financial performance, with net sales reaching $35.023 billion, a 23% increase year-over-year. This growth was primarily driven by strong sales of the iPhone and iPad, which together constituted over 70% of total net sales. The company also saw significant expansion in its international markets, with the Americas, Europe, Japan, and Asia-Pacific segments all reporting substantial sales increases. Profitability remained strong, with net income growing to $8.824 billion, up from $7.308 billion in the prior year's quarter, reflecting effective cost management and favorable product mix. The company also provided updates on its capital allocation plans, including the initiation of quarterly dividends and a significant share repurchase program, signaling confidence in its ongoing financial strength and commitment to shareholder returns.

Financial Highlights

51 data points
Beta

Revenue

$35.02B

42.8% Gross Margin

Net Income

$8.82B

25.2% Net Margin

EPS (Diluted)

$0.33

Total Assets

$162.90B

Cash & Equivalents

$7.95B

Free Cash Flow

$10.19B

Financial Statements
Beta
Revenue$35.02B
Cost of Revenue$20.03B
Gross Profit$14.99B
R&D Expenses$876.00M
SG&A Expenses$2.54B
Operating Expenses$3.42B
Operating Income$11.57B
Net Income$8.82B
EPS (Basic)$0.34
EPS (Diluted)$0.33
Shares Outstanding (Basic)26.22B
Shares Outstanding (Diluted)26.52B

Key Highlights

  • 1Robust year-over-year net sales growth of 23% to $35.023 billion, driven by strong iPhone and iPad performance.
  • 2Net income increased by approximately 20.7% to $8.824 billion compared to the prior year's quarter.
  • 3iPhone and iPad sales combined accounted for a significant majority of total net sales, highlighting their central role in Apple's product ecosystem.
  • 4International markets showed strong growth, with the Americas, Europe, Japan, and Asia-Pacific segments all experiencing double-digit percentage increases in net sales.
  • 5The company announced plans to initiate quarterly dividends of $2.65 per share starting in Q4 2012 and authorized a $10 billion share repurchase program commencing in 2013.
  • 6Research and development expenses increased by 39% year-over-year, indicating continued investment in innovation.
  • 7Gross margin percentage improved to 42.8% from 41.7% in the prior year's quarter, driven by cost efficiencies and product mix.

Frequently Asked Questions

Apple's revenue growth was primarily driven by strong sales of the iPhone and iPad. The iPhone 4S launch earlier in the year and ongoing demand, coupled with the new iPad and iPad 2, significantly boosted sales across all geographic segments. Additionally, growth in the iTunes Store and App Store contributed to the overall increase.

Apple reported holding $117.2 billion in cash, cash equivalents, and marketable securities as of June 30, 2012. The company announced plans to initiate quarterly dividends of $2.65 per share starting in the fourth quarter of 2012 and authorized a $10 billion share repurchase program to begin in 2013. These actions demonstrate a commitment to returning capital to shareholders and neutralizing dilution from equity grants.

While Apple reported an improvement in gross margin percentage to 42.8% for the quarter, management expects future gross margin percentages to decrease compared to the first nine months of 2012. This is due to factors such as a higher mix of new products with potentially higher cost structures, a stronger U.S. dollar impacting international sales, and potential increases in component costs. The company anticipates continued price competition and product transitions will also pressure margins.

Key risks highlighted include intense competition and rapid technological change in its markets, the need for successful new product introductions and transitions, inventory and purchase commitment risks, reliance on a limited number of suppliers and outsourcing partners, potential quality issues with products, and the impact of global economic conditions and regulatory changes worldwide. The company also noted ongoing intellectual property litigation and the importance of its third-party developer ecosystem.