APPLE INC
Gabriela Nunez
Summer 2013
Annual Report:
http://investor.apple.com/secfiling.cfm?filingID=1193125-12-444068
INTRODUCTION
• Name of chief executive officer 
– Timothy D. Cook
• Location of home office 
– Apple’s Headquarters and Corporate Offices are located in the
USA. The address is: I infinite loop Cupertino, CA 95014
• Ending date of latest fiscal year 
– April 23, 2013-Apple today announces financial results for its
fiscal 2013-second quarter ended March 20, 2013. The company
sold 37.4 million iPhones sold; 19.5 million iPads sold.
INTRODUCTION
Description of the principal products or services
•
•
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•
•
•
•
•
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Iphone Smartphone
– The original iPhone was released on June 29, 2007 for $499 (4GB) and $ 599 ( 8 GB)
iPod (music player)
– First introduced on October 23, 2001
– iPod Shuffle: ultra-portable digital audio player, introduced in 2005
– iPod Nano: portable media player, available in a 16 GB model introduced in 2005.
– iPod touch: portable media player than runs iOS, currently available in 32 and 64 GB
– iPod Classic: portable media player currently available in a 160 GB model, first introduced in 2001
Ipad (tablet computer)
– Introduced in January 27, 2010
– iPad 2, introduced March 2, 2011
– The third-generation iPad was introduced on March 7, 2012
Apple TV
– a set top video device intended to bridge the sale of content from iTunes with high-definition televisions.
Apple Mac (computers)
– MacBook Air: Consumer ultra-thin, Ultra-portable notebook, introduced in 2008
– Mac book Pro: professional notebook, introduced in 2006
– Mac Mini: consumer sub-desktop computer and server, introduced 2005
– iMac: consumer all in one desktop computer, introduced in 1998
– Mac Pro: workstation desktop computer, introduced in 2006
Software
– own operating system to run on Macs
iOS operating systems
the iTunes media browser
the Safari web browser
iLife and iWork creativity and production suites
AUDIT REPORT
• Since February 26, 2009, Apple’s
independent registered public
accounting firm is Ernst and Young
LLP.
• Earnest and Young stated that Apple’s
financial statements based as of
September 29, 2012, “was accurate and
free of error.”
STOCK MARKET INFORMATION
•Most recent price of
the company’s
stock:
•$456.72
•Twelve month
trading range of the
company stock:
$385.10-$705.07
-NASDAQ: AAPL
(Common Stock)
STOCK MARKET INFORMATION
• Price as of May 31, 2013 1:12pm: $456.72
• Dividend: 3.05
• I would sell as the shares have been
experiencing downtrend since last
September (2012)
INCOME STATEMENT
•
•
Multistep format
The gross profit indicates that apple has had a well efficient
management on its use of labor and cost of production. At the same
time, Income from Operation indicate to have a positive profitability on
the company. Which contributes to a positive net income or profit
from that year, attacking future or potential investors
(In Billions)
2012
2011
Gross Profit
$68.66B
$43.82B
Income from Operations
$55.24B
$33.79B
Net Income
$41.73B
$25.92B
BALANCE SHEET
•
•
Apple total asset was able to increment by 12.67B in the year 2012
proving to have a stable economic solvency. At the same time it
express Apples liquidity (incremented), which is a great indicator
for future and current investors to know Apple’s ability to meet
debt payments on the due date. At the same time, the dollar
amount disclosed for the years 2011 to 2012 on liabilities also has
incremented by 10.57B which helps user not only determined the
timing that Apple has on future cash obligations but its ability to
pay them. In Conclusion if any problems occur Apple have enough
liquidity to pay debts. Finally, Apples’ stockholder equity total
incremented by11.05B by the end of 2012, which is an indicator the
company increase in investments by shareholders. In fact, one can
see that Apple has been profitable in the past because of the
increase of shareholders retains earnings.
The account that change the most was the Asset Account.
B
A
C
L
E
A
N
S
H
E
E
T
STATEMENT OF CASH FLOW
(In Billions)
2012
2011
Net income
41.7B
25.9B
Depreciation
3.2B
1.81B
Amortization
0
0
Deferred Taxes
4.41B
2.87B
Change in Working Capital
-299M
5.76B
Other Non Cash Operating Items
1.74B
1.17B
Cash From Operations
50.9B
37.5B
-9.40B
-7.45B
0
0
Acquisitions
-350M
-244M
Investments
-51.5B
-102B
Other Investing Activities
3.58B
62.1B
-48.2B
-40.4B
Dividends Paid
-2.49B
0
Sale/Purchase of Stock
665M
831M
0
0
125M
613M
-1.70B
1.44B
0
0
931M
-1.45B
Capital Expenditures
Sales of Assets
Cash From Investing
Net Borrowings
Other Financing Cash Flows
Cash From Financing
Foreign Exchange Effect
Net Changes in Cash
STATEMENT OF CASH FLOW
•
Are cash flows from operations more or less than net income for
the past two years?
– Cash from Operations are more than net income for the past
two years.
•
Is the company growing through investing activities, i.e., buying
property, plant and equipment and other long-lived assets?
– No, in fact they are losing money from investing activities
•
What is the company’s primary source of financing, i.e., long-term
loans, and stock sales?
– Apples primary source of financing is through the sale/
purchase of stock
•
Overall has cash increased or decreased over the past two years?
– Overall cash has increased
Accouting Policies
• Revenue Recognition
– Net sales consist primarily of revenue from the sale of hardware,
software, digital content and applications, peripherals, and service and
support contracts.
• Valuation and Impairment of Marketable Securities
– he Company’s investments in available-for-sale securities are reported
at fair value.
• Inventory Valuation and Inventory Purchase Commitments
– he Company must order components for its products and build
inventory in advance of product shipments.
• Warranty Costs
– The Company provides for the estimated cost of hardware and
software warranties at the time the related revenue is recognized
• Income Taxes
• Legal and Other Contingencies
Topics Of Notes To The Financial
Statement
•
•
•
•
•
•
•
•
•
•
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Revenue Recognition
– Revenue Recognition for Arrangements with Multiple Deliverables
– Shipping cost
– Warranty Expenses
– Software delivery cost
Advertising cost
Share based compensation
Income taxes
Earnings Per Share
Financial Instruments
Allowances for doubtful account
Long-Lived Assets Including Goodwill and Other Acquired Intangible Assets
Inventory
PP&E
Fair Value Measurement
FINANCIAL ANALYSIS LIQUIDITY RATIOS
Part 2
Working Capital
Year
Current Asset
-
Current liabilities
=
Sept 28 2012
57,653,000
-
38,542,000
=
19,111,000
Sept 23 2011
44,988,000
-
27,970,000
=
17,018,000
Current Ratio
Year
Current Asset
/
Current Liabilities
=
Sept 28 2012
57,653,000
/
38,542,000
=
1.50
Sept 23 2011
44,988,000
/
27,970,000
=
1.61
Receivable turnover
Year
Net Credit Sales
/
2012
156,508
/
2011
108,249
/
Average Accounts
Receivable
(10930+5369/2)
8,149.5
(5369+5510/2)
5439.5
=
=
19.20
=
19.90
Average days’ sales uncollected
Year
365 days
/
=
/
Receivable
turnover
19.20
2012
365
=
19.01
2011
365
/
19.90
=
18.34
FINANCIAL ANALYSIS PROFITABILITY
RATIOS
Part 3
Apple Inc working capital indicates to have enough short tem assets to cover it
short term debt and it fact it working capital increased by $2,093,000 in 2012.
However it Current Ratio decreased by 0.11 so the company ability to turn its
products into cash has become a little harder to do (that could happen when people
are not paying its receivables or have long inventory turnover). One is able to
observe this when Apple receivable turnover went down by 0.7 in 2012. People for
some reason are having trouble paying back its debt, which in turn make Apple
revenue to be lower. Apple average day’s sale uncollected increases by 0.67
meaning that people took longer to pay its debt to Apple Inc. And the company took
longer to pay its suppliers back (If notes payables are due before Apple gets their
receivables the company would be force to borrow money).
FINANCIAL ANALYSIS LIQUIDITY RATIOS
Part 2
Inventory Turnover
Year
COGS
/
Average Inventory
=
2012
87,846
/
=
112.13
2011
64,431
/
(791+776/2)
783.5
(776+1051/2)
913.5
=
70.53
Average Day’s inventory on hand
Year
365 days
/
=
/
Inventory
Turnover
112.84
2012
365
=
3.25
2011
365
/
70.53
=
5.18
Operating Cycle
Year
+
Days Sales
=
2012
Days Inventory on
Hand
3.25
+
19.01
=
22.26
2011
5.18
+
19.90
=
25.08
FINANCIAL ANALYSIS PROFITABILITY
RATIOS
Inventory Turnover increased by 41.6 in
2012 meaning that inventory that is sold.
Average day’s inventory on hand also decreased
by 1.93, which indicates that inventory is being
replaced in a shorter amount of time. Operating
Cycle decreased by 2.82 concluding that the
days it took to sell the inventory plus the
average number of days it takes to collect A/R
decreased.
FINANCIAL ANALYSIS PROFITABILITY
RATIOS
Part 3
Profit Margin
Year
Net Income
/
Revenue
=
2012
41,733
/
156,508
=
0.27
2011
25,922
/
108,249
=
0.24
Year
Net Sales
/
2012
156,508
/
2011
108249
/
Asset Turnover
Average Total
Assets
(176,064+116,371
/2) 146,217.5
(116,371+75,183/
2)
95,777
=
=
1.07
=
1.13
Return On Asset
Year
Net Income
/
Avg. Total Asset
=
2012
41733
/
176,064
=
0.23
2011
25922
/
116,371
=
0.22
Return on Equity
Year
=
/
Shareholders’
Equity
118,210
=
0.35
/
76,615
=
0.34
Net Income
/
41,733
25,922
FINANCIAL ANALYSIS PROFITABILITY
RATIOS
Apples profit margin increase by 0.03 indicating
that Apples earnings have increase from 2011.
However asset turnover decreased in 2012 by 0.06
meaning that the company is not efficiently using
its asset to generate sales or revenue as they did
last year. Apple return on asset increased by 0.01 so
the return of Apple asset has lower. Apple return in
equity also incremented during 2012 meaning that
dividends where given to shareholders and retain
earnings decreased.
FINANCIAL ANALYSIS MARKET
STRENGTH RATIO
• There were not dividend for the year 2011. However for 2012
Dividends yield was 1.8%. The price/earning per share decreased
by 3.09 for 2012 suggesting that the investors wont
be anticipating such high growth in the future .
Price/ Earning Per Share
Year
/
2012
Market Value per
Share
$509.59
=
/
Earnings per
share
44.15
=
11.54
2011
$405.03
/
27.68
=
14.63
Dividend Yield
Year
/
Price Per Share
=
2012
Annual dividends
per Share
9.9
/
$10.50
=
1.8%
2011
N/A
/
N/A
=
N/A
FINANCIAL ANALYSIS SOLVENCY
RATIO
Debt to Equity
Year
Total Liabilities
/
=
/
Shareholders
Equity
118,210
2012
57,854
=
0.48
2011
39,756
/
76,615
=
0.58
Financial Gap
Year
Account Payable
-
Operating Cycle
=
2012
0.01
-
22.26
=
-.22.25
2011
40.09
-
25.08
=
+15.01
Apple during 2012 decrease its debt to equity by 0.1 meaning that Apple Inc was
able to use less debt to finance its activities. During 2011 Apple was free of
financial gaps which is great indicator that the majority of their customers paid on
time, that the company was able to reduce its account receivable and pay off its
suppliers without having to borrow money ( increase its account payable).
However, during 2012 the opposite occurred.
Industry Situation and Company Plans
Industry description
Apple Inc. Is a technological company engaging in the design,
manufacture and marketing of mobile communication and media
devise, hardware, and application software, personal computers
and portable digital music players. The company offers a great
variety of products and services that include iPhone, iPad, Mac,
iPod, Apple TV, iOS and OS X operating systems, iCloud and various
other accessories.
Industry Situation and Company Plans
Company future plans:
May 31, 2012, Tim Cook (Apple CEO) announced that in the near future Apple is expected
to have some changes in its products and software. For instance “Siri” is expected to
expand via new database partnerships for better service and utility. Apple is also planning
on leaving wearable’s (headset or wrist-worn) to third parties. There are also rumors that
there could be collaboration between facebook and Apple. Furthermore, there are also
expostulations about apple working on its own TV set.
However, nothing has been seen yet (new products on the market), in fact on April
24 2013 Cook said, “Our teams are had at work on some amazing new hardware, software
and services we can’t wait to introduce this fall and thought 2014.” So as for 2013-2014
the Apple industry is mostly speculations, expectations, and uncertainty.
http://www.apple.com/pr/library/2013/04/23Apple-More-than-Doubles-Capital-ReturnProgram.html
http://www.cnn.com/2012/05/31/tech/innovation/tim-cook-apple-future
http://www.digitaltrends.com/mobile/apple-says-exciting-things-to-come-in-late-2013/
http://www.cnn.com/2013/04/24/tech/innovation/apple-new-products
Industry Situation and Company Plans
Apple More than Doubles Capital
Return Program
April 23, 2013 Apple announces that the Board of Directors has
authorized a total of $100 billion to be use by the end of
calendar 2015 to repurchase dividends and shares. As part of
this program, the Board has increased Apple share purchasing
to 60 billion from $10 billion last year (One of the biggest
repurchasing in history). Nether the less the company is
planning to borrow in the future.
Executive Summary
APPLE GROWTH?
As of Jan 24 2013 at 10:48am Apple has gone down (3.65%). For instance Apple twelve
month trading range slowest was $385.10, which is not very far from the selling price
today ($398.48)(stock selling price two years ago was around $700). Apple stock is
now down by around 25% this year 2013. It is said to have occur because the company
slowing growth and pace of innovation. From its past history Apple has grown
incredible with revenues hitting 66% in fiscal 2011 and 52% in 2010(revenues where
increasing growing those pass years). However, revenues started decreasing in 2012
hitting 45% and 29% in fiscal as of 2013. Meanwhile, profit margins are sinking,
showing that its product cost was increase more than their sales. If Apple doesn’t do
something fast like take new products to market its stock may go down even farther.
This is going to be determined by fall of 2013 and beginning of 2014 based on CEO
Executive Tim Cook.