10-QPeriod: Q2 FY2013

Apple Inc. Quarterly Report for Q2 Ended Mar 30, 2013

Filed April 24, 2013For Securities:AAPL

Summary

Apple Inc. reported solid financial results for the quarter ended March 30, 2013, demonstrating continued revenue growth year-over-year, driven by strong performance in key product categories like the iPad and iPhone. While overall net sales increased, the gross margin experienced a notable decline compared to the prior year period. This was attributed to factors such as the introduction of new products with higher cost structures, the launch of the lower-margin iPad mini, and increased warranty costs. The company continued to invest heavily in research and development (R&D) and selling, general, and administrative (SG&A) expenses, reflecting its commitment to innovation and market expansion. Apple also significantly increased its capital expenditures and returned substantial capital to shareholders through dividends and share repurchases, signaling confidence in its financial position and future prospects. Despite margin pressures, Apple maintained a strong liquidity position with a substantial amount of cash, cash equivalents, and marketable securities.

Financial Highlights

51 data points
Beta

Revenue

$43.60B

37.5% Gross Margin

Net Income

$9.55B

21.9% Net Margin

EPS (Diluted)

$0.36

Total Assets

$194.74B

Cash & Equivalents

$12.05B

Free Cash Flow

$12.50B

Financial Statements
Beta
Revenue$43.60B
Cost of Revenue$27.25B
Gross Profit$16.35B
R&D Expenses$1.12B
SG&A Expenses$2.67B
Operating Expenses$3.79B
Operating Income$12.56B
Interest Expense$0
Net Income$9.55B
EPS (Basic)$0.36
EPS (Diluted)$0.36
Shares Outstanding (Basic)26.31B
Shares Outstanding (Diluted)26.49B

Key Highlights

  • 1Net sales for the quarter increased by 11% year-over-year to $43.6 billion, indicating continued top-line growth.
  • 2Gross margin percentage declined to 37.5% from 47.4% in the prior year quarter, primarily due to product mix shifts (iPad mini), new product introductions, and increased warranty costs.
  • 3iPad sales showed substantial growth, with net sales up 40% year-over-year, driven by the launch of the iPad mini and fourth-generation iPad.
  • 4iPhone sales saw a modest 3% increase in net sales, with unit sales up 7%. However, average selling prices decreased due to a shift in product mix towards older, lower-priced models.
  • 5Research and Development (R&D) expenses increased by 33% year-over-year, reflecting continued investment in innovation.
  • 6The company declared and paid $5.0 billion in dividends in the six-month period, demonstrating a commitment to returning capital to shareholders.
  • 7Apple's cash, cash equivalents, and marketable securities increased to $144.7 billion, providing significant financial flexibility.

Frequently Asked Questions

Apple's revenue growth was primarily driven by strong sales of its iPad devices, which saw a 40% increase in net sales year-over-year, largely due to the introduction of the iPad mini and the fourth-generation iPad. Growth was also supported by continued demand for iPhones and increased sales from iTunes, software, and services.

The significant decrease in gross margin percentage was attributed to several factors. These included the introduction of new products with higher cost structures and flat or reduced pricing, the launch of the iPad mini which has a lower gross margin compared to the company's average, increased expenses related to warranty costs, and price reductions on certain products. The transition costs associated with numerous product introductions in the preceding quarter also played a role.

Apple ended the quarter with $144.7 billion in cash, cash equivalents, and marketable securities. The company is actively returning capital to shareholders through dividends and share repurchases. In the six months ended March 30, 2013, Apple paid $5.0 billion in dividends. The company also announced an increase in its share repurchase authorization to $60 billion and utilized $1.95 billion for an accelerated share repurchase program.

Key risks identified include intense competition in global markets characterized by rapid technological change and pricing pressure, the need to successfully manage frequent product introductions and transitions, inventory and purchase commitment risks, reliance on outsourcing partners for manufacturing and supply chain stability, and potential impacts from intellectual property litigation. The filing also mentions risks related to global economic conditions and foreign currency fluctuations.