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

• 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

(In Billions)

2012

2011

Gross Profit

$68.66B

$43.82B

Income from Operations

$55.24B

$33.79B

Net Income

$41.73B

$25.92B

• 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

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

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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

Capital Expenditures -9.40B -7.45B

Sales of Assets 0 0

Acquisitions -350M -244M

Investments -51.5B -102B

Other Investing Activities 3.58B 62.1B

Cash From Investing -48.2B -40.4B

Dividends Paid -2.49B 0

Sale/Purchase of Stock 665M 831M

Net Borrowings 0 0

Other Financing Cash Flows 125M 613M

Cash From Financing -1.70B 1.44B

Foreign Exchange Effect 0 0

Net Changes in Cash 931M -1.45B

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

• 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

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 / Average Accounts

Receivable

=

2012 156,508 / (10930+5369/2)

8,149.5

= 19.20

2011 108,249 / (5369+5510/2)

5439.5

= 19.90

Average days’ sales uncollected Year 365 days / Receivable

turnover

=

2012 365 / 19.20 = 19.01

2011 365 / 19.90 = 18.34

Part 2

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

Inventory Turnover

Year COGS / Average Inventory =

2012 87,846 / (791+776/2)

783.5

= 112.13

2011 64,431 / (776+1051/2)

913.5

= 70.53

Average Day’s inventory on hand

Year 365 days / Inventory

Turnover

=

2012 365 / 112.84 = 3.25

2011 365 / 70.53 = 5.18

Operating Cycle

Year Days Inventory on

Hand

+ Days Sales =

2012 3.25 + 19.01 = 22.26

2011 5.18 + 19.90 = 25.08

Part 2

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.

Profit Margin Year Net Income / Revenue =

2012 41,733 / 156,508 = 0.27

2011 25,922 / 108,249 = 0.24

Asset Turnover Year Net Sales / Average Total

Assets

=

2012 156,508 / (176,064+116,371

/2) 146,217.5

= 1.07

2011 108249 / (116,371+75,183/

2)

95,777

= 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 Net Income / Shareholders’

Equity

=

41,733 / 118,210 = 0.35

25,922 / 76,615 = 0.34

FINANCIAL ANALYSIS PROFITABILITY RATIOS

Part 3

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.

Price/ Earning Per Share Year Market Value per

Share

/ Earnings per

share

=

2012 $509.59 / 44.15 = 11.54

2011 $405.03 / 27.68 = 14.63

Dividend Yield Year Annual dividends

per Share

/ Price Per Share =

2012 9.9 / $10.50 = 1.8%

2011 N/A / N/A = N/A

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 .

Debt to Equity Year Total Liabilities / Shareholders

Equity

=

2012 57,854 / 118,210 = 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

FINANCIAL ANALYSIS SOLVENCY RATIO

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

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.

Company future plans:

http://www.apple.com/pr/library/2013/04/23Apple-More-than-Doubles-Capital-Return-Program.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

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.

Apple More than Doubles Capital Return Program

Executive Summary

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.

APPLE GROWTH?