10-QPeriod: Q2 FY2014

Apple Inc. Quarterly Report for Q2 Ended Mar 29, 2014

Filed April 24, 2014For Securities:AAPL

Summary

Apple Inc. (AAPL) reported solid financial results for the fiscal second quarter ending March 29, 2014. Net sales grew 5% year-over-year to $45.6 billion, driven by strong performance in Greater China and Japan, and continued demand for iPhones. Net income also saw an increase, reflecting healthy profitability. The company demonstrated robust operational efficiency, with gross margins improving to 39.3% due to a favorable product mix and cost efficiencies. Research and development (R&D) and selling, general, and administrative (SG&A) expenses increased, reflecting ongoing investments in innovation and business expansion. Apple continued its strong commitment to returning capital to shareholders, repurchasing $18 billion of common stock and paying $2.7 billion in dividends during the quarter. The company also announced a significant seven-for-one stock split and increased its capital return program.

Financial Highlights

55 data points
Beta

Revenue

$45.65B

39.3% Gross Margin

Net Income

$10.22B

22.4% Net Margin

EPS (Diluted)

$0.41

Total Assets

$205.99B

Cash & Equivalents

$18.95B

Free Cash Flow

$12.16B

Financial Statements
Beta
Revenue$45.65B
Cost of Revenue$27.70B
Gross Profit$17.95B
R&D Expenses$1.42B
SG&A Expenses$2.93B
Operating Expenses$4.35B
Operating Income$13.59B
Interest Expense$85.00M
Net Income$10.22B
EPS (Basic)$0.42
EPS (Diluted)$0.41
Shares Outstanding (Basic)24.49B
Shares Outstanding (Diluted)24.63B

Key Highlights

  • 1Net sales increased 5% to $45.6 billion, with notable growth in Greater China (13%) and Japan (26%).
  • 2iPhone sales grew 14% to $26.1 billion, contributing 57% of total net sales.
  • 3iPad sales declined 13% year-over-year, impacted by channel inventory adjustments.
  • 4Gross margin percentage improved to 39.3% from 37.5% in the prior year's quarter.
  • 5R&D expenses increased by 27% and SG&A expenses increased by 10%, indicating continued investment in innovation and growth.
  • 6The company repurchased $18 billion in common stock and paid $2.7 billion in dividends.
  • 7Apple announced a seven-for-one stock split and increased its capital return authorization to over $130 billion.

Frequently Asked Questions

Apple reported net sales of $45.6 billion for the quarter ended March 29, 2014, a 5% increase from the $43.6 billion reported in the same period last year. Net income also increased to $10.2 billion, up from $9.5 billion in the prior year's quarter. Diluted earnings per share were $11.62.

iPhone sales were a key driver, increasing by 14% year-over-year. iTunes, Software and Services also showed strong growth of 11%. Mac sales increased slightly by 1%. However, iPad sales declined by 13%, primarily due to changes in channel inventory and a slight decline in end-user sell-through. iPod sales continued to decline significantly.

Apple demonstrated a strong commitment to capital return. In the second quarter of 2014, the company utilized $18 billion for share repurchases and paid $2.7 billion in dividends. Furthermore, Apple announced a seven-for-one stock split, effective June 2014, and increased its total capital return program to over $130 billion, signaling continued confidence in its financial health and commitment to shareholder value.

Apple's gross margin percentage improved to 39.3% from 37.5% in the prior year's quarter, attributed to a favorable shift in product mix, lower commodity costs, and improved fixed cost leverage. However, the company anticipates gross margin for the third quarter of 2014 to be between 37% and 38%, with downward pressure expected from pricing, competition, product transitions, and currency fluctuations.