AAPL Apple Inc

iPhone, Mac & Services Growth Drive Record June Quarter Revenue & 20% EPS Growth

Apple® today announced financial results for its fiscal 2014 third quarter ended June 28, 2014. The Company posted quarterly revenue of $37.4 billion and quarterly net profit of $7.7 billion, or $1.28 per diluted share. These results compare to revenue of $35.3 billion and net profit of $6.9 billion, or $1.07 per diluted share, in the year-ago quarter. Gross margin was 39.4 percent compared to 36.9 percent in the year-ago quarter. International sales accounted for 59 percent of the quarter’s revenue.

Apple’s board of directors has declared a cash dividend of $.47 per share of the Company’s common stock. The dividend is payable on August 14, 2014, to shareholders of record as of the close of business on August 11, 2014.

“Our record June quarter revenue was fueled by strong sales of iPhone and Mac and the continued growth of revenue from the Apple ecosystem, driving our highest EPS growth rate in seven quarters,” said Tim Cook, Apple’s CEO. “We are incredibly excited about the upcoming releases of iOS 8 and OS X Yosemite, as well as other new products and services that we can’t wait to introduce.”

“We generated $10.3 billion in cash flow from operations and returned over $8 billion in cash to shareholders through dividends and share repurchases during the June quarter,” said Luca Maestri, Apple’s CFO. “We have now taken action on over $74 billion of our $130 billion capital return program with six quarters remaining to its completion.”

Apple is providing the following guidance for its fiscal 2014 fourth quarter:

• revenue between $37 billion and $40 billion

• gross margin between 37 percent and 38 percent

• operating expenses between $4.75 billion and $4.85 billion

• other income/(expense) of $250 million

• tax rate of 26.1 percent

Apple will provide live streaming of its Q3 2014 financial results conference call beginning at 2:00 p.m. PDT on July 22, 2014 at www.apple.com/quicktime/qtv/earningsq314. 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 28, 2013, its Form 10-Q for the quarter ended December 28, 2013, its Form 10-Q for the quarter ended March 29, 2014, and its Form 10-Q for the quarter ended June 28, 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.

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.

© 2014 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

Nine Months Ended

June 28,2014

 

June 29,2013

June 28,2014

 

June 29,2013

  Net sales $ 37,432 $ 35,323 $ 140,672 $ 133,438 Cost of sales (1)   22,697   22,299   86,144   83,005 Gross margin   14,735   13,024   54,528   50,433   Operating expenses: Research and development (1) 1,603 1,178 4,355 3,307 Selling, general and administrative (1)   2,850   2,645   8,835   8,157 Total operating expenses   4,453   3,823   13,190   11,464 Operating income 10,282 9,201 41,338 38,969 Other income/(expense), net   202   234   673   1,043 Income before provision for income taxes 10,484 9,435 42,011 40,012 Provision for income taxes   2,736   2,535   10,968   10,487 Net income $ 7,748 $ 6,900 $ 31,043 $ 29,525   Earnings per share: Basic $ 1.29 $ 1.07 $ 5.06 $ 4.52 Diluted $ 1.28 $ 1.07 $ 5.03 $ 4.49   Shares used in computing earnings per share: Basic 6,012,635 6,430,323 6,136,147 6,526,714 Diluted 6,051,711 6,469,854 6,172,857 6,574,205   Cash dividends declared per common share $ 0.47 $ 0.44 $ 1.35 $ 1.20   (1) Includes share-based compensation expense as follows: Cost of sales $ 115 $ 90 $ 334 $ 262 Research and development $ 313 $ 245 $ 902 $ 708 Selling, general and administrative $ 296 $ 243 $ 865 $ 728  

Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except number of shares which are reflected in thousands and par value)

   

June 28,2014

September 28,2013

  ASSETS:   Current assets: Cash and cash equivalents $ 12,977 $ 14,259 Short-term marketable securities 24,828 26,287 Accounts receivable, less allowances of $86 and $99, respectively 10,788 13,102 Inventories 1,594 1,764 Deferred tax assets 3,884 3,453 Vendor non-trade receivables 6,053 7,539 Other current assets   7,825   6,882 Total current assets 67,949 73,286   Long-term marketable securities 126,685 106,215 Property, plant and equipment, net 17,585 16,597 Goodwill 2,374 1,577 Acquired intangible assets, net 3,767 4,179 Other assets   4,160   5,146 Total assets $ 222,520 $ 207,000     LIABILITIES AND SHAREHOLDERS’ EQUITY:   Current liabilities: Accounts payable $ 20,535 $ 22,367 Accrued expenses 15,264 13,856 Deferred revenue 8,396 7,435 Commercial paper   2,010   0 Total current liabilities 46,205 43,658   Deferred revenue – non-current 3,058 2,625 Long-term debt 29,030 16,960 Other non-current liabilities   23,287   20,208 Total liabilities   101,580   83,451   Commitments and contingencies   Shareholders' equity: Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 5,989,171 and 6,294,494 shares issued and outstanding, respectively 22,139 19,764 Retained earnings 98,715 104,256 Accumulated other comprehensive income/(loss)   86   (471) Total shareholders' equity   120,940   123,549 Total liabilities and shareholders' equity $ 222,520 $ 207,000  

Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

  Nine Months Ended June 28, 2014   June 29, 2013   Cash and cash equivalents, beginning of the period $ 14,259 $ 10,746   Operating activities: Net income 31,043 29,525 Adjustments to reconcile net income to cash generated by operating activities: Depreciation and amortization 5,977 4,974 Share-based compensation expense 2,101 1,698 Deferred income tax expense 3,154 2,524 Changes in operating assets and liabilities: Accounts receivable, net 2,314 2,091 Inventories 170 (906) Vendor non-trade receivables 1,486 3,148 Other current and non-current assets 931 484 Accounts payable (2,531) (4,740) Deferred revenue 1,394 1,404 Other current and non-current liabilities 424   3,556 Cash generated by operating activities 46,463   43,758   Investing activities: Purchases of marketable securities (160,662) (122,681) Proceeds from maturities of marketable securities 15,111 13,963 Proceeds from sales of marketable securities 126,827 81,734 Payments made in connection with business acquisitions, net (898) (443) Payments for acquisition of property, plant and equipment (5,745) (6,210) Payments for acquisition of intangible assets (216) (560) Other 7   (188) Cash used in investing activities (25,576)   (34,385)   Financing activities: Proceeds from issuance of common stock 435 335 Excess tax benefits from equity awards 562 644 Taxes paid related to net share settlement of equity awards (839) (1,001) Dividends and dividend equivalents paid (8,297) (7,795) Repurchase of common stock (28,000) (17,950) Proceeds from issuance of long-term debt 11,960 16,896 Proceeds from issuance of commercial paper, net 2,010   0 Cash used in financing activities (22,169)   (8,871)   Increase/(decrease) in cash and cash equivalents (1,282)   502 Cash and cash equivalents, end of the period $ 12,977 $ 11,248   Supplemental cash flow disclosure: Cash paid for income taxes, net $ 8,013 $ 7,188 Cash paid for interest $ 322 $ 0   Apple Inc. Q3 2014 Unaudited Summary Data (Units in thousands, Revenue in millions)                             Q3'14 Q2'14 Q3'13 Sequential Change Year/Year Change   Operating Segments Revenue Revenue Revenue   Revenue Revenue Americas $14,577 $14,310 $14,405 2% 1% Europe 8,091 10,230 7,614 - 21% 6% Greater China (a) 5,935 9,289 4,641 - 36% 28% Japan 2,564 3,963 2,543 - 35% 1% Rest of Asia Pacific 2,161 2,627 2,046 - 18% 6% Retail 4,104 5,227 4,074 - 21% 1% Total Apple     $37,432 $45,646 $35,323 - 18% 6%         Q3'14 Q2'14 Q3'13 Sequential Change Year/Year Change   Product Summary Units Revenue Units Revenue Units Revenue Units Revenue Units Revenue iPhone (b) 35,203 $19,751 43,719 $26,064 31,241 $18,154 - 19% - 24% 13% 9% iPad (b) 13,276 5,889 16,350 7,610 14,617 6,374 - 19% - 23% - 9% - 8% Mac (b) 4,413 5,540 4,136 5,519 3,754 4,893 7% 0% 18% 13% iPod (b) 2,926 442 2,761 461 4,569 733 6% - 4% - 36% - 40% iTunes/Software/Services (c) 4,485 4,573 3,990 - 2% 12% Accessories (d) 1,325 1,419 1,179 - 7% 12% Total Apple     $37,432 $45,646 $35,323 - 18% 6%  

(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 iBooks Store, 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.

ApplePress:Steve Dowling, 408-974-1896dowling@apple.comorInvestor Relations:Nancy Paxton, 408-974-5420paxton1@apple.comJoan Hoover, 408-974-4570hoover1@apple.com