Apple posts Q2 2013 Earnings

Apple has been on a roll for, well, almost as long as we can remember. Basically since the debut of the iMac, the company has been riding a rocket ship back from the brink of irrelevance. The iPod, iPhone and iPad have all led it to post record quarter, after record quarter, after record quarter. Now we're in the second quarter of financial year 2013 and it doesn't appear to be slowing down much. The company posted $43.6 billion in revenue during the quarter and net itself a handsome profit of $9.5 billion. While those numbers do represent the slowest rate of growth Cupertino has seen in years, it's hardly the fall from grace that some analysts were predicting. Compared to the same time last year, revenues are up from $39.2 billion though net income has dropped from the Q2 2012 mark of $11.6 billion. Still, the company managed to move more iPhones and iPads than it did during that quarter, and the drop from Q1's holiday-boosted numbers isn't particularly alarming. In total it moved 19.5 million iPads and 37.4 million iPhones during the three months ending on March 30th, 2013. In Q1 those numbers were an admittedly more impressive 22.9 million and 47.8 million, respectively. But, compared to Q2 of 2012, things are still looking up from the 35.1 million iPhones and 11.8 million iPads shipped.

Things are a little less rosy around its non-iOS departments, but we'd hardly say the company was in dire straits. Mac sales were more or less flat both sequentially and year-over-year, falling just under four million units. Meanwhile, the iPod continued its steady decline, moving only 5.6 million units. That's not only more than a 50 percent drop from last quarter, but a 27 percent drop from the same period last year. The biggest contributor to Apple's revenue stream continues to be the iPhone, but the iPad is gaining fast and income from iTunes and its other software offerings continues to grow at an impressive rate.

While the first year-over-year drop in profits in almost a decade might give some investors pause, there's little cause for concern for the future of the company. Cupertino's healthy war chest now sits at $145 billion in cash, up from the $121 billion and change it had at the end of Q4 2012. We'll be listening in to the conference call at 5 PM and we'll update with any juicy tidbits after the break.

5:05 Tim Cook, acknowledged that growth and margins have decreased. Though, he defended Apple's performance saying that revenue numbers were still equal to that of five Fortune 500 companies combined.

5:06 Cook also said that the continued drop in stock price was also frustrating, but said that much of that was due to factors beyond its control such as exchange rates and supply costs.

5:07 He also briefly teased that there would be new hardware and software products and product categories to come in 2013... though, that shouldn't come as a surprise to anyone.

5:10 Apple will more than double its capital return program, mostly through stock repurchases.

5:12 CFO Peter Oppenheimer is on the horn now, talking up the company's performance and record revenues for the March quarter. The iTunes division also had its best quarter ever.

5:13 Peter is talking up the iPhone's growth specifically in the enterprise market, highlighting moves at companies like Cisco.

5:15 iPad mini sales grew "substantially" according to Peter (though he neglected to specify how much). Most of those sales were to first time iPad customers.

5:17 Despite the continued decline in iPod sales, Peter says it's still the most popular PMP in most countries it tracks.

5:19 iTunes saw record revenues in all categories, which has grown 28 percent year-over-year. And app downloads have topped 45 billion (up 5 billion since January), while iCloud has reached 300 million users.

5:21 Peter also touted iOS's lead over Android in the enterprise markets, where one firm found that it accounted for 77 percent of business activations. He also took the opportunity to take a pot shot at Google's platform for its exposure to malware.

5:23 In another round of self-congratulation, Peter cited a study that found that the iPad accounted for 82 percent of tablet-based web traffic.

5:28 Peter says to expect between $33.5 billion and $35.5 billion in revenue during the next quarter, which is inline with what the company pulled in the same time last year.

5:33 In response to a question about Apple potentially hitting a wall in developing nations, such as China, Tim says that the company enjoyed its best quarter ever in the country. He said that some of the disconnect in the numbers is attributable to timing issues, including the launch of iPhone 5. But said that the unusually large number of first time smartphone buyers means its a market ripe for growth, especially with the continued price drop of the iPhone 4.

5:35 Peter says that he doesn't believe the competitive landscape has changed much in the smartphone field, just the names have. Now, instead of RIM (BlackBerry), the company's biggest hardware competitor is Samsung. Obviously, he believes that Apple still has the best product on the market.

5:37 Tim was asked to be more specific about the timing of product releases. Unfortunately he declined to clarify beyond the fact that exciting new announcements would be coming during "the fall."

5:51 Tim says that while "some customers value screen size," some customers value other factors such as color saturation, resolution and battery life. Not only that, but he feels its competitors have made significant trade offs in the decision to build larger displays. And as long as those trade offs are necessary, Apple will not ship a handset with a larger screen. Guess that means you shouldn't expect an iPhone Note in "the fall."

5:56 Mac sales are down two percent, but Tim doesn't think its because the iPad is cannibalizing sales. Instead he cites the extremely weak PC market, as being the main culprit. He believes that there may be some people opting to pick up an iPad instead of a Mac Book, but mostly he thinks the drop off is due to customers extending their upgrade cycles.

6:03 That's it folks. Call's over.

Show full PR text

Apple Reports Second Quarter Results
37.4 Million iPhones Sold; 19.5 Million iPads Sold

CUPERTINO, Calif., Apr 23, 2013 (BUSINESS WIRE) -- Apple(R) today announced financial results for its fiscal 2013 second quarter ended March 30, 2013. The Company posted quarterly revenue of $43.6 billion and quarterly net profit of $9.5 billion, or $10.09 per diluted share. These results compare to revenue of $39.2 billion and net profit of $11.6 billion, or $12.30 per diluted share, in the year-ago quarter. Gross margin was 37.5 percent compared to 47.4 percent in the year-ago quarter. International sales accounted for 66 percent of the quarter's revenue.

The Company sold 37.4 million iPhones in the quarter, compared to 35.1 million in the year-ago quarter. Apple also sold 19.5 million iPads during the quarter, compared to 11.8 million in the year-ago quarter. The Company sold just under 4 million Macs, compared to 4 million in the year-ago quarter.

"We are pleased to report record March quarter revenue thanks to continued strong performance of iPhone and iPad," said Tim Cook, Apple's CEO. "Our teams are hard at work on some amazing new hardware, software and services, and we are very excited about the products in our pipeline."

"Our cash generation remains very strong, with $12.5 billion in cash flow from operations during the quarter and an ending cash balance of $145 billion," said Peter Oppenheimer, Apple's CFO.

Apple is providing the following guidance for its fiscal 2013 third quarter:

* revenue between $33.5 billion and $35.5 billion

* gross margin between 36 percent and 37 percent

* operating expenses between $3.85 billion and $3.95 billion

* other income/(expense) of $300 million

* tax rate of 26%

Apple will provide live streaming of its Q2 2013 financial results conference call beginning at 2:00 p.m. PDT on April 23, 2013 at www.apple.com/quicktime/qtv/earningsq213. 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 Company's 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 Company's reaction to those factors, on consumer and business buying decisions with respect to the Company's 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 Company's gross margin; the inventory risk associated with the Company's 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 Company's business currently obtained by the Company from sole or limited sources; the effect that the Company's 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 Company's international operations; the Company's 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 Company's dependency on the performance of distributors, carriers and other resellers of the Company's products; the effect that product and service quality problems could have on the Company's 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 Company's financial results is included from time to time in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's public reports filed with the SEC, including the Company's Form 10-K for the fiscal year ended September 29, 2012, its Form 10-Q for the quarter ended December 29, 2012, and its Form 10-Q for the quarter ended March 30, 2013 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.

NOTE TO EDITORS: For additional information visit Apple's PR website (www.apple.com/pr), or call Apple's Media Helpline at (408) 974-2042.

(C) 2013 Apple Inc. All rights reserved. Apple, the Apple logo, Mac, Mac OS and Macintosh 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 30, March 31, March 30, March 31,
2013 2012 2013 2012
----------- ----------- ----------- -----------
Net sales $ 43,603 $ 39,186 $ 98,115 $ 85,519
Cost of sales (1) 27,254 20,622 60,706 46,252
------- ------- ------- -------
Gross margin 16,349 18,564 37,409 39,267
------- ------- ------- -------
Operating expenses:
Research and development (1) 1,119 841 2,129 1,599
Selling, general and administrative (1) 2,672 2,339 5,512 4,944
------- ------- ------- -------
Total operating expenses 3,791 3,180 7,641 6,543
------- ------- ------- -------
Operating income 12,558 15,384 29,768 32,724
Other income/(expense), net 347 148 809 285
------- ------- ------- -------
Income before provision for income taxes 12,905 15,532 30,577 33,009
Provision for income taxes 3,358 3,910 7,952 8,323
------- ------- ------- -------
Net income $ 9,547 $ 11,622 $ 22,625 $ 24,686
==== ======= ==== ======= ==== ======= ==== =======
Earnings per share:
Basic $ 10.16 $ 12.45 $ 24.09 $ 26.48
Diluted $ 10.09 $ 12.30 $ 23.90 $ 26.17
Shares used in computing earnings per share:
Basic 939,629 933,582 939,273 932,265
Diluted 946,035 944,893 946,626 943,185
Cash dividends declared per common share $ 2.65 $ 0 $ 5.30 $ 0
(1) Includes share-based compensation expense as follows:
Cost of sales $ 87 $ 63 $ 172 $ 126
Research and development $ 239 $ 168 $ 463 $ 328
Selling, general and administrative $ 249 $ 193 $ 485 $ 390

Apple Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except number of shares which are reflected in
thousands)
March 30, September 29,
2013 2012
------------------ ------------------
ASSETS:
Current assets:
Cash and cash equivalents $ 12,053 $ 10,746
Short-term marketable securities 27,084 18,383
Accounts receivable, less allowances of $99 and $98, respectively 7,084 10,930
Inventories 1,245 791
Deferred tax assets 3,242 2,583
Vendor non-trade receivables 6,252 7,762
Other current assets 6,377 6,458
--------- ---------
Total current assets 63,337 57,653
Long-term marketable securities 105,550 92,122
Property, plant and equipment, net 15,026 15,452
Goodwill 1,400 1,135
Acquired intangible assets, net 4,136 4,224
Other assets 5,294 5,478
--------- ---------
Total assets $ 194,743 $ 176,064
========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 14,912 $ 21,175
Accrued expenses 13,331 11,414
Deferred revenue 7,265 5,953
--------- ---------
Total current liabilities 35,508 38,542
Deferred revenue - non-current 2,877 2,648
Other non-current liabilities 20,868 16,664
--------- ---------
Total liabilities 59,253 57,854
--------- ---------
Commitments and contingencies
Shareholders' equity:
Common stock, no par value; 1,800,000 shares authorized; 940,094 and 17,954 16,422
939,208 shares issued and outstanding, respectively
Retained earnings 116,572 101,289
Accumulated other comprehensive income 964 499
--------- ---------
Total shareholders' equity 135,490 118,210
--------- ---------
Total liabilities and shareholders' equity $ 194,743 $ 176,064
========= ========= ========= =========

Apple Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Six Months Ended
-------------------------------------
March 30, 2013 March 31, 2012
------------------ ------------------
Cash and cash equivalents, beginning of the period $ 10,746 $ 9,815
-------- -------- -------- --------
Operating activities:
Net income 22,625 24,686
Adjustments to reconcile net income to cash generated by operating
activities:
Depreciation and amortization 3,280 1,461
Share-based compensation expense 1,120 844
Deferred income tax expense 1,957 2,915
Changes in operating assets and liabilities:
Accounts receivable, net 3,846 (1,663)
Inventories (454) (326)
Vendor non-trade receivables 1,510 (379)
Other current and non-current assets 1,269 (1,510)
Accounts payable (4,422) 2,809
Deferred revenue 1,541 1,916
Other current and non-current liabilities 3,658 778
------------------ --------
Cash generated by operating activities 35,930 31,531
------------------ --------
Investing activities:
Purchases of marketable securities (81,163) (85,022)
Proceeds from maturities of marketable securities 9,243 7,702
Proceeds from sales of marketable securities 49,188 49,052
Payments made in connection with business acquisitions, net (299) (350)
Payments for acquisition of property, plant and equipment (4,325) (2,778)
Payments for acquisition of intangible assets (429) (160)
Other (93) (48)
------------------ --------
Cash used in investing activities (27,878) (31,604)
------------------ --------
Financing activities:
Proceeds from issuance of common stock 275 377
Excess tax benefits from equity awards 502 636
Dividends and dividend equivalent rights paid (4,984) 0
Repurchase of common stock (1,950) 0
Taxes paid related to net share settlement of equity awards (588) (634)
------------------ --------
Cash (used in)/generated by financing activities (6,745) 379
------------------ --------
Increase in cash and cash equivalents 1,307 306
------------------ --------
Cash and cash equivalents, end of the period $ 12,053 $ 10,121
======== ======== ======== ========
Supplemental cash flow disclosure:
Cash paid for income taxes, net $ 4,258 $ 4,835

Apple Inc.
Q2 2013 Unaudited Summary Data
(Units in thousands, Revenue in millions)
Q2'13 Q1'13 Q2'12 Sequential Change Year/Year Change
------------------- ------------------- ------------------- ------------------- -------------------
Operating Segments Revenue Revenue Revenue Revenue Revenue
----------- ----------- ----------- --------- ---------
Americas $ 14,052 $ 20,341 $ 13,182 - 31 % 7 %
Europe 9,800 12,464 8,807 - 21 % 11 %
Greater China (a) 8,213 6,830 7,637 20 % 8 %
Japan 3,135 4,443 2,645 - 29 % 19 %
Rest of Asia Pacific 3,162 3,993 2,516 - 21 % 26 %
Retail 5,241 6,441 4,399 - 19 % 19 %
------ ------ ------ ---- --- ---- ---
Total Apple $ 43,603 $ 54,512 $ 39,186 - 20 % 11 %
--- ------
Q2'13 Q1'13 Q2'12 Sequential Change Year/Year Change
--------------- --------------- --------------- -------------- --------------
Product Summary Units Revenue Units Revenue Units Revenue Units Revenue Units Revenue
------ ----------- ------ ----------- ------ ----------- --------- --------- --------- ---------
iPhone (b) 37,430 $ 22,955 47,789 $ 30,660 35,064 $ 22,276 - 22 % - 25 % 7 % 3 %
iPad (b) 19,477 8,746 22,860 10,674 11,798 6,264 - 15 % - 18 % 65 % 40 %
Mac (b) 3,952 5,447 4,061 5,519 4,017 5,073 - 3 % - 1 % - 2 % 7 %
iPod (b) 5,633 962 12,679 2,143 7,673 1,207 - 56 % - 55 % - 27 % - 20 %
iTunes/Software/Services (c) 4,114 3,687 3,171 12 % 30 %
Accessories (d) 1,379 1,829 1,195 - 25 % 15 %
------ ------ ------ ---- --- ---- ---
Total Apple $ 43,603 $ 54,512 $ 39,186 - 20 % 11 %
--- ------

(a) Greater China includes China, Hong Kong and Taiwan.
(b) Includes deferrals and amortization of related non-software
services and software upgrade rights.
(c) Includes revenue from sales on the iTunes Store, the App Store,
the Mac App Store, and the iBookstore, and revenue from sales of
AppleCare, licensing and other services.
(d) Includes sales of hardware peripherals and Apple-branded and
third-party accessories for iPhone, iPad, Mac and iPod.

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Apple posts $9.5 billion net profit in Q2 2013: sells 19.5 million iPads, 37.4 million iPhones