Apple Inc 8-K 2015-01-27
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Exhibit 99.1
Apple Reports Record First Quarter Results
Highest-ever revenue & earnings drive 48% increase in EPS
Growth led by record revenue from iPhone, Mac & App Store
CUPERTINO, CaliforniaJanuary 27, 2015Apple® today announced financial results for its fiscal 2015 first quarter ended December 27, 2014. The Company posted record quarterly revenue of $74.6 billion and record quarterly net profit of $18 billion, or $3.06 per diluted share. These results compare to revenue of $57.6 billion and net profit of $13.1 billion, or $2.07 per diluted share, in the year-ago quarter. Gross margin was 39.9 percent compared to 37.9 percent in the year-ago quarter. International sales accounted for 65 percent of the quarters revenue.
The results were fueled by all-time record revenue from iPhone® and Mac® sales as well as record performance of the App StoreSM. iPhone unit sales of 74.5 million also set a new record.
Wed like to thank our customers for an incredible quarter, which saw demand for Apple products soar to an all-time high, said Tim Cook, Apples CEO. Our revenue grew 30 percent over last year to $74.6 billion, and the execution by our teams to achieve these results was simply phenomenal.
Our exceptional results produced EPS growth of 48 percent over last year, and $33.7 billion in operating cash flow during the quarter, an all-time record, said Luca Maestri, Apples CFO. We spent over $8 billion on our capital return program, bringing total returns to investors to almost $103 billion, over $57 billion of which occurred in just the last 12 months.
Apple is providing the following guidance for its fiscal 2015 second quarter:
| | revenue between $52 billion and $55 billion |
| | gross margin between 38.5 percent and 39.5 percent |
| | operating expenses between $5.4 billion and $5.5 billion |
| | other income/(expense) of $350 million |
| | tax rate of 26.3 percent |
Apples board of directors has declared a cash dividend of $.47 per share of the Companys common stock. The dividend is payable on February 12, 2015, to shareholders of record as of the close of business on February 9, 2015.
Apple will provide live streaming of its Q1 2015 financial results conference call beginning at 2:00 p.m. PST on January 27, 2015 at www.apple.com/quicktime/qtv/earningsq115. This webcast will also be available for replay for approximately two weeks thereafter.
This press release contains forward-looking statements including without limitation those about the Companys estimated revenue, gross margin, operating expenses, other income/(expense), and tax rate. These statements involve risks and uncertainties, and actual results may differ. Risks and uncertainties include without limitation the effect of competitive and economic factors, and the Companys reaction to those factors, on consumer and business buying decisions with respect to the Companys products; continued competitive pressures in the marketplace; the ability of the Company to deliver to the marketplace and stimulate customer demand for new programs, products, and technological innovations on a timely basis; the effect that product introductions and transitions, changes in product pricing or mix, and/or increases in component costs could have on the Companys gross margin; the inventory risk associated with the Companys need to order or commit to order product components in advance of customer orders; the continued availability on acceptable terms, or at all, of certain components and services essential to the Companys business currently obtained by the Company from sole or limited sources; the effect that the Companys dependency on manufacturing and logistics services provided by third parties may have on the quality, quantity or cost of products manufactured or services rendered; risks associated with the Companys international operations; the Companys reliance on third-party intellectual property and digital content; the potential impact of a finding that the Company has infringed on the intellectual property rights of others; the Companys dependency on the performance of distributors, carriers and other resellers of the Companys products; the effect that product and service quality problems could have on the Companys sales and operating profits; the continued service and availability of key executives and employees; war, terrorism, public health issues, natural disasters, and other circumstances that could disrupt supply, delivery, or demand of products; and unfavorable results of other legal proceedings. More information on potential factors that could affect the Companys financial results is included from time to time in the Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of Operations sections of the Companys public reports filed with the SEC, including the Companys Form 10-K for the fiscal year ended September 27, 2014, and its Form 10-Q for the fiscal quarter ended December 27, 2014 to be filed with the SEC. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.
Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.
Press Contact:
Kristin Huguet
Apple
khuguet@apple.com
(408) 974-2414
Investor Relations Contacts:
Nancy Paxton
Apple
paxton1@apple.com
(408) 974-5420
Joan Hoover
Apple
hoover1@apple.com
(408) 974-4570
NOTE TO EDITORS: For additional information visit Apples PR website (www.apple.com/pr), or call Apples Media Helpline at (408) 974-2042.
© 2015 Apple Inc. All rights reserved. Apple, the Apple logo, Mac, Mac OS, Macintosh, iPhone and App Store are trademarks of Apple. Other company and product names may be trademarks of their respective owners.
Apple Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except number of shares which are reflected in thousands and per share amounts)
| Three Months Ended | ||||||||
| December 27, 2014 |
December 28, 2013 |
|||||||
| Net sales |
$ | 74,599 | $ | 57,594 | ||||
| Cost of sales (1) |
44,858 | 35,748 | ||||||
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| Gross margin |
29,741 | 21,846 | ||||||
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| Operating expenses: |
||||||||
| Research and development (1) |
1,895 | 1,330 | ||||||
| Selling, general and administrative (1) |
3,600 | 3,053 | ||||||
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| Total operating expenses |
5,495 | 4,383 | ||||||
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| Operating income |
24,246 | 17,463 | ||||||
| Other income/(expense), net |
170 | 246 | ||||||
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| Income before provision for income taxes |
24,416 | 17,709 | ||||||
| Provision for income taxes |
6,392 | 4,637 | ||||||
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| Net income |
$ | 18,024 | $ | 13,072 | ||||
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| Earnings per share: |
||||||||
| Basic |
$ | 3.08 | $ | 2.08 | ||||
| Diluted |
$ | 3.06 | $ | 2.07 | ||||
| Shares used in computing earnings per share: |
||||||||
| Basic |
5,843,082 | 6,272,504 | ||||||
| Diluted |
5,881,803 | 6,310,161 | ||||||
| Cash dividends declared per common share |
$ | 0.47 | $ | 0.44 | ||||
| (1) Includes share-based compensation expense as follows: |
|
|||||||
| Cost of sales |
$ | 140 | $ | 109 | ||||
| Research and development |
$ | 374 | $ | 289 | ||||
| Selling, general and administrative |
$ | 374 | $ | 283 | ||||
Apple Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except number of shares which are reflected in thousands and par value)
|
December 27, 2014 |
September 27, 2014 |
|||||||
| ASSETS: | ||||||||
| Current assets: |
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| Cash and cash equivalents |
$ | 19,478 | $ | 13,844 | ||||
| Short-term marketable securities |
12,985 | 11,233 | ||||||
| Accounts receivable, less allowances of $87 and $86, respectively |
16,709 | 17,460 | ||||||
| Inventories |
2,283 | 2,111 | ||||||
| Deferred tax assets |
5,046 | 4,318 | ||||||
| Vendor non-trade receivables |
13,267 | 9,759 | ||||||
| Other current assets |
13,635 | 9,806 | ||||||
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| Total current assets |
83,403 | 68,531 | ||||||
| Long-term marketable securities |
145,492 | 130,162 | ||||||
| Property, plant and equipment, net |
20,392 | 20,624 | ||||||
| Goodwill |
4,629 | 4,616 | ||||||
| Acquired intangible assets, net |
4,370 | 4,142 | ||||||
| Other assets |
3,608 | 3,764 | ||||||
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| Total assets |
$ | 261,894 | $ | 231,839 | ||||
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| LIABILITIES AND SHAREHOLDERS EQUITY: | ||||||||
| Current liabilities: |
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| Accounts payable |
$ | 38,001 | $ | 30,196 | ||||
| Accrued expenses |
22,724 | 18,453 | ||||||
| Deferred revenue |
8,987 | 8,491 | ||||||
| Commercial paper |
3,899 | 6,308 | ||||||
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| Total current liabilities |
73,611 | 63,448 | ||||||
| Deferred revenue non-current |
3,480 | 3,031 | ||||||
| Long-term debt |
32,504 | 28,987 | ||||||
| Other non-current liabilities |
28,971 | 24,826 | ||||||
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| Total liabilities |
138,566 | 120,292 | ||||||
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| Commitments and contingencies |
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| Shareholders equity: |
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| Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 5,826,419 and 5,866,161 shares issued and outstanding, respectively |
24,187 | 23,313 | ||||||
| Retained earnings |
97,178 | 87,152 | ||||||
| Accumulated other comprehensive income/(loss) |
1,963 | 1,082 | ||||||
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| Total shareholders equity |
123,328 | 111,547 | ||||||
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| Total liabilities and shareholders equity |
$ | 261,894 | $ | 231,839 | ||||
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Apple Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
| Three Months Ended | ||||||||
| December 27, 2014 |
December 28, 2013 |
|||||||
| Cash and cash equivalents, beginning of the period |
$ | 13,844 | $ | 14,259 | ||||
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| Operating activities: |
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| Net income |
18,024 | 13,072 | ||||||
| Adjustments to reconcile net income to cash generated by operating activities: |
||||||||
| Depreciation and amortization |
2,575 | 2,144 | ||||||
| Share-based compensation expense |
888 | 681 | ||||||
| Deferred income tax expense |
2,197 | 1,253 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable, net |
751 | (1,098 | ) | |||||
| Inventories |
(172 | ) | (358 | ) | ||||
| Vendor non-trade receivables |
(3,508 | ) | (3,459 | ) | ||||
| Other current and non-current assets |
(1,648 | ) | (319 | ) | ||||
| Accounts payable |
9,003 | 8,191 | ||||||
| Deferred revenue |
945 | 1,368 | ||||||
| Other current and non-current liabilities |
4,667 | 1,195 | ||||||
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| Cash generated by operating activities |
33,722 | 22,670 | ||||||
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| Investing activities: |
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| Purchases of marketable securities |
(44,915 | ) | (48,397 | ) | ||||
| Proceeds from maturities of marketable securities |
2,807 | 5,556 | ||||||
| Proceeds from sales of marketable securities |
24,166 | 30,302 | ||||||
| Payments made in connection with business acquisitions, net |
(23 | ) | (525 | ) | ||||
| Payments for acquisition of property, plant and equipment |
(3,217 | ) | (1,985 | ) | ||||
| Payments for acquisition of intangible assets |
(48 | ) | (59 | ) | ||||
| Other |
65 | 5 | ||||||
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| Cash used in investing activities |
(21,165 | ) | (15,103 | ) | ||||
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| Financing activities: |
||||||||
| Proceeds from issuance of common stock |
80 | 134 | ||||||
| Excess tax benefits from equity awards |
264 | 280 | ||||||
| Taxes paid related to net share settlement of equity awards |
(512 | ) | (365 | ) | ||||
| Dividends and dividend equivalents paid |
(2,801 | ) | (2,769 | ) | ||||
| Repurchase of common stock |
(5,030 | ) | (5,029 | ) | ||||
| Proceeds from issuance of long-term debt, net |
3,485 | 0 | ||||||
| Repayments of commercial paper, net |
(2,409 | ) | 0 | |||||
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| Cash used in financing activities |
(6,923 | ) | (7,749 | ) | ||||
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| Increase/(decrease) in cash and cash equivalents |
5,634 | (182 | ) | |||||
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| Cash and cash equivalents, end of the period |
$ | 19,478 | $ | 14,077 | ||||
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| Supplemental cash flow disclosure: |
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| Cash paid for income taxes, net |
$ | 3,869 | $ | 3,387 | ||||
| Cash paid for interest |
$ | 202 | $ | 161 | ||||
International sales, especially in China might have rebounded after the company lost some market share earlier. Some time back Apple was No.6 smart phone maker in China, but Canalys, a research firm reports that Apple is the No. 1 smart phone maker in China currently.
iPhone unit sales registered strong growth in BRIC countries, especially China. The BRIC countries rapid growth and rising income of People in these economies, coupled with low penetration rates of Apple products in these countries adds provides Apple with an excellent growth potential heading into the future.
Apple had a monster quarter, and it was due largely to the iPhone. The iPhone 6 is clearly a hit. Unit sales rose 46% year-over-year. Revenue from the iPhone grew 54%. Apple's results were particularly strong in China, where total sales soared 70% year over year. The only lingering concern is the continue decline of the iPad, but the iPhone is more than compensating for that.
Apple is one of the giant tech companies that keeps on raising the bar every single quarter with its record numbers. AAPL sold 74.5 million devices, up 45% year over year. The consumers don't mind paying higher prices for the quality this company offers. Iphone 6 and 6 plus offered large screen sizes that customers waited for a while and largest amount of "Android users" switched over to Iphone . If you think they are running out of miracles, you might be proven wrong once again !! Not to mention, AAPL is sitting on $178 billion cash, enough to bail out many bankrupt countries. As for me, I can't wait to get my hands on new Iphone.
Although it will not affect next quarter's numbers, the average selling price of the Apple Watch will have a major effect on this year's gross margin numbers. Some are projecting that it will average between $449 and $549. App developers have already been working on new apps for the product, so it seems like it will be a huge success for the company. When it released the iPhone 5C most consumers decided to pay up for the 5S instead. It will be interesting to see if consumers go for the high end watches instead of the low end one. This will greatly affect margins this year.
Apple posted earnings of $18 billion on $74.6 billion in revenue, far above what it forecasted back in October, and marking the highest quarterly profit in its history! The % gross margin is 39.9% this quarter comparing to 37.9% on quarter.
An absolute blowout quarter from Apple. For the world's largest company, the innovation and the growth rate is exceptional with net sales rising 29% from a year ago. The iPhone has been a best seller and demand from China has exceeded all expectations.
In a business the size of Apple, small changes add up quick. Gross margin increased by two percentage points year over year. Operating margin was up a bit more than two percentage points. On supercharged sales, that alone would be good news -- but Apple also reduced its diluted share count by 6.8%. Presto-change-o: a 200 bp increase in gross margin gives us a near 50% boost in earnings per share.
Higher ASP of the iPhone 6 ensured that profits outgrew Apple's record topline growth. In combination with a 7% YoY fall in outstanding shares, this lead to a 48% rise in earnings. As the iPhone 6 continues to account for a larger mix of sales over the coming quarters, Apple profit margins could expand further. With the current share repurchase plan expected to continue for another 4 quarters, the further margin expansion will lead to strong earnings growth.
It will be important to watch how much of its cash Apple eventually returns to shareholders. The cash provides the company a means to survive in the event that it misses the next major revolution in technology. Investors need to consider that the history of technology companies strongly suggests that Apple will not be the number one technology company forever.
This number is mind-boggling. So much cash being generated in a single quarter with so little capital expenditures needed. That makes $AAPL a financial powerhouse and a true compounder of wealth for anyone who chooses to invest in the stock.