Apple Inc 8-K 2016-04-26
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Exhibit 99.1
Apple Reports Second Quarter Results
Capital Return Program Expanding to $250 Billion
CUPERTINO, California April 26, 2016 Apple® today announced financial results for its fiscal 2016 second quarter ended March 26, 2016. The Company posted quarterly revenue of $50.6 billion and quarterly net income of $10.5 billion, or $1.90 per diluted share. These results compare to revenue of $58 billion and net income of $13.6 billion, or $2.33 per diluted share, in the year-ago quarter. Gross margin was 39.4 percent compared to 40.8 percent in the year-ago quarter. International sales accounted for 67 percent of the quarters revenue.
Our team executed extremely well in the face of strong macroeconomic headwinds, said Tim Cook, Apples CEO. We are very happy with the continued strong growth in revenue from Services, thanks to the incredible strength of the Apple ecosystem and our growing base of over one billion active devices.
The Company also announced that its Board of Directors has authorized an increase of $50 billion to the Companys program to return capital to shareholders. Under the expanded program, Apple plans to spend a cumulative total of $250 billion of cash by the end of March 2018.
We generated strong operating cash flow of $11.6 billion and returned $10 billion to shareholders through our capital return program during the March quarter, said Luca Maestri, Apples CFO. Thanks to the strength of our business results, we are happy to be announcing today a further increase of the program to $250 billion.
As part of the updated program, the Board has increased its share repurchase authorization to $175 billion from the $140 billion level announced last year. The Company also expects to continue to net-share-settle vesting restricted stock units.
The Board has approved an increase of 10 percent to the Companys quarterly dividend, and has declared a dividend of $.57 per share, payable on May 12, 2016 to shareholders of record as of the close of business on May 9, 2016.
From the inception of its capital return program in August 2012 through March 2016, Apple has returned over $163 billion to shareholders, including $117 billion in share repurchases.
The Company plans to continue to access the domestic and international debt markets to assist in funding the program. The management team and the Board will continue to review each element of the capital return program regularly and plan to provide an update on the program on an annual basis.
Apple is providing the following guidance for its fiscal 2016 third quarter:
| | revenue between $41 billion and $43 billion |
| | gross margin between 37.5 percent and 38 percent |
| | operating expenses between $6 billion and $6.1 billion |
| | other income/(expense) of $300 million |
| | tax rate of 25.5 percent |
Apple will provide live streaming of its Q2 2016 financial results conference call beginning at 2:00 p.m. PDT on April 26, 2016 at www.apple.com/investor/earnings-call/. 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), tax rate, and plans for dividends, share repurchases and public debt issuance. 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 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 26, 2015, its Form 10-Q for the fiscal quarter ended December 26, 2015, and its Form 10-Q for the fiscal quarter ended March 26, 2016 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 revolutionized personal technology with the introduction of the Macintosh in 1984. Today, Apple leads the world in innovation with iPhone, iPad, Mac, Apple Watch and Apple TV. Apples four software platforms iOS, OS X, watchOS and tvOS provide seamless experiences across all Apple devices and empower people with breakthrough services including the App Store, Apple Music, Apple Pay and iCloud. Apples 100,000 employees are dedicated to making the best products on earth, and to leaving the world better than we found it.
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.
© 2016 Apple Inc. All rights reserved. Apple and the Apple logo 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 | Six Months Ended | |||||||||||||||
| March 26, 2016 |
March 28, 2015 |
March 26, 2016 |
March 28, 2015 |
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| Net sales |
$ | 50,557 | $ | 58,010 | $ | 126,429 | $ | 132,609 | ||||||||
| Cost of sales (1) |
30,636 | 34,354 | 76,085 | 79,212 | ||||||||||||
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| Gross margin |
19,921 | 23,656 | 50,344 | 53,397 | ||||||||||||
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| Operating expenses: |
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| Research and development (1) |
2,511 | 1,918 | 4,915 | 3,813 | ||||||||||||
| Selling, general and administrative (1) |
3,423 | 3,460 | 7,271 | 7,060 | ||||||||||||
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| Total operating expenses |
5,934 | 5,378 | 12,186 | 10,873 | ||||||||||||
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| Operating income |
13,987 | 18,278 | 38,158 | 42,524 | ||||||||||||
| Other income/(expense), net |
155 | 286 | 557 | 456 | ||||||||||||
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| Income before provision for income taxes |
14,142 | 18,564 | 38,715 | 42,980 | ||||||||||||
| Provision for income taxes |
3,626 | 4,995 | 9,838 | 11,387 | ||||||||||||
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| Net income |
$ | 10,516 | $ | 13,569 | $ | 28,877 | $ | 31,593 | ||||||||
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| Earnings per share: |
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| Basic |
$ | 1.91 | $ | 2.34 | $ | 5.22 | $ | 5.43 | ||||||||
| Diluted |
$ | 1.90 | $ | 2.33 | $ | 5.19 | $ | 5.39 | ||||||||
| Shares used in computing earnings per share: |
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| Basic |
5,514,381 | 5,793,799 | 5,536,656 | 5,818,441 | ||||||||||||
| Diluted |
5,540,886 | 5,834,858 | 5,567,506 | 5,858,330 | ||||||||||||
| Cash dividends declared per share |
$ | 0.52 | $ | 0.47 | $ | 1.04 | $ | 0.94 | ||||||||
| (1) Includes share-based compensation expense as follows: | ||||||||||||||||
| Cost of sales |
$ | 191 | $ | 142 | $ | 395 | $ | 282 | ||||||||
| Research and development |
$ | 468 | $ | 384 | $ | 934 | $ | 758 | ||||||||
| Selling, general and administrative |
$ | 389 | $ | 401 | $ | 797 | $ | 775 | ||||||||
Apple Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except number of shares which are reflected in thousands and par value)
|
March 26, 2016 |
September 26, 2015 |
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| ASSETS: | ||||||||
| Current assets: |
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| Cash and cash equivalents |
$ | 21,514 | $ | 21,120 | ||||
| Short-term marketable securities |
33,769 | 20,481 | ||||||
| Accounts receivable, less allowances of $60 and $63, respectively |
12,229 | 16,849 | ||||||
| Inventories |
2,281 | 2,349 | ||||||
| Vendor non-trade receivables |
7,595 | 13,494 | ||||||
| Other current assets |
10,204 | 15,085 | ||||||
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| Total current assets |
87,592 | 89,378 | ||||||
| Long-term marketable securities |
177,645 | 164,065 | ||||||
| Property, plant and equipment, net |
23,203 | 22,471 | ||||||
| Goodwill |
5,249 | 5,116 | ||||||
| Acquired intangible assets, net |
3,843 | 3,893 | ||||||
| Other non-current assets |
7,745 | 5,556 | ||||||
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| Total assets |
$ | 305,277 | $ | 290,479 | ||||
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| LIABILITIES AND SHAREHOLDERS EQUITY: | ||||||||
| Current liabilities: |
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| Accounts payable |
$ | 25,098 | $ | 35,490 | ||||
| Accrued expenses |
23,208 | 25,181 | ||||||
| Deferred revenue |
9,461 | 8,940 | ||||||
| Commercial paper |
7,998 | 8,499 | ||||||
| Current portion of long-term debt |
2,500 | 2,500 | ||||||
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| Total current liabilities |
68,265 | 80,610 | ||||||
| Deferred revenue, non-current |
3,322 | 3,624 | ||||||
| Long-term debt |
69,374 | 53,463 | ||||||
| Other non-current liabilities |
33,859 | 33,427 | ||||||
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| Total liabilities |
174,820 | 171,124 | ||||||
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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; 5,478,446 and 5,578,753 shares issued and outstanding, respectively |
29,484 | 27,416 | ||||||
| Retained earnings |
102,021 | 92,284 | ||||||
| Accumulated other comprehensive income/(loss) |
(1,048 | ) | (345 | ) | ||||
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| Total shareholders equity |
130,457 | 119,355 | ||||||
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| Total liabilities and shareholders equity |
$ | 305,277 | $ | 290,479 | ||||
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Apple Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
| Six Months Ended | ||||||||
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March 26, 2016 |
March 28, 2015 |
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| Cash and cash equivalents, beginning of the period |
$ | 21,120 | $ | 13,844 | ||||
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| Operating activities: |
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| Net income |
28,877 | 31,593 | ||||||
| Adjustments to reconcile net income to cash generated by operating activities: |
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| Depreciation and amortization |
5,431 | 5,054 | ||||||
| Share-based compensation expense |
2,126 | 1,815 | ||||||
| Deferred income tax expense |
3,092 | 1,879 | ||||||
| Changes in operating assets and liabilities: |
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| Accounts receivable, net |
4,620 | 6,555 | ||||||
| Inventories |
68 | (285 | ) | |||||
| Vendor non-trade receivables |
5,899 | 2,500 | ||||||
| Other current and non-current assets |
300 | 2,448 | ||||||
| Accounts payable |
(9,475 | ) | (5,428 | ) | ||||
| Deferred revenue |
219 | 993 | ||||||
| Other current and non-current liabilities |
(2,093 | ) | 5,679 | |||||
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| Cash generated by operating activities |
39,064 | 52,803 | ||||||
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| Investing activities: |
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| Purchases of marketable securities |
(86,242 | ) | (92,523 | ) | ||||
| Proceeds from maturities of marketable securities |
9,148 | 5,871 | ||||||
| Proceeds from sales of marketable securities |
50,051 | 48,924 | ||||||
| Payments made in connection with business acquisitions, net |
(140 | ) | (115 | ) | ||||
| Payments for acquisition of property, plant and equipment |
(5,948 | ) | (5,586 | ) | ||||
| Payments for acquisition of intangible assets |
(657 | ) | (155 | ) | ||||
| Other |
(322 | ) | 88 | |||||
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| Cash used in investing activities |
(34,110 | ) | (43,496 | ) | ||||
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| Financing activities: |
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| Proceeds from issuance of common stock |
247 | 309 | ||||||
| Excess tax benefits from equity awards |
264 | 357 | ||||||
| Payments for taxes related to net share settlement of equity awards |
(751 | ) | (608 | ) | ||||
| Payments for dividends and dividend equivalents |
(5,871 | ) | (5,544 | ) | ||||
| Repurchase of common stock |
(13,530 | ) | (12,000 | ) | ||||
| Proceeds from issuance of term debt, net |
15,584 | 11,332 | ||||||
| Change in commercial paper, net |
(503 | ) | (2,508 | ) | ||||
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| Cash used in financing activities |
(4,560 | ) | (8,662 | ) | ||||
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| Increase in cash and cash equivalents |
394 | 645 | ||||||
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| Cash and cash equivalents, end of the period |
$ | 21,514 | $ | 14,489 | ||||
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| Supplemental cash flow disclosure: |
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| Cash paid for income taxes, net |
$ | 6,630 | $ | 7,058 | ||||
| Cash paid for interest |
$ | 565 | $ | 220 | ||||
Apple shares declined 8% in after-hours trading following its disappointing quarterly results. Revenue declined for the first time since 2003, and sales fell across the iPhone, iPad, and Mac. But there was some good news too. Apple raised its dividend by 10% and added $35 billion to its stock buyback authorization. It still generated $10.5 billion of profit last quarter. At 11 times earnings, Apple is too cheap to sell here.
Slowing revenue growth is the main reason for the stock's decline post earnings release. While the Q2 revenue and earnings were great, just as expected -- the expected Q3 revenue of $41B-$43B disappointed investors.
It remains to be seen if this is just a speed bump or the start of a long decline, in which case, Apple will need to look for bigger acquisitions to fuel inorganic growth.