fi 305 apple
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class noteTRANSCRIPT
Apple Inc.Apple Inc.
Presented by: Narjis Rachad
Yunfeng LuWen Zhang
Prof. Peter FreemanFI 305Fall 2010
AgendaAgenda
Introduction. Background of Apple Inc. Is Apple a profitable company? Can Apple cover its interest expense? What are Apple future sales? Should we invest in Apple? Conclusion and personal thoughts.
Background of Apple Inc.Background of Apple Inc.
Founded in April 1st, 1976 Headquarters: Cupertino, California Co-founders: Steve Jobs, Steve Wojniak Industry: Computer software, computer
hardware, consumer electronics and digital distribution.
Revenue: US$ 65.22 Billion (FY 2010) Competitors: HP, IBM and DELL.
Background of Apple Inc.Background of Apple Inc.
Apple Inc. (Apple) designs, manufactures, and markets personal computers, mobile communication devices, and portable digital music and video players, and sells a variety of related software, services, peripherals, and networking solutions.
As of January 2010 the company operates 284 retail stores in ten countries.
As of 2010, it is one of the largest technological corporation in the world by revenue.
Vision and MissionVision and Mission
“Man is the creator of change in this world. As such he should be above systems and structures, and not subordinate to them.”
“Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software, and internet offerings.”
Apple Inc.Annual Income Statement
[Standardized in USD Millions]25-Sep-2010 26-Sep-2009 27-Sep-2008 29-Sep-2007 30-Sep-2006
Period Length 52 Weeks 52 Weeks 52 Weeks 52 Weeks 53 WeeksFiled Currency USD USD USD USD USD
Net Sales 65225 42905 37491 24578 19315Revenue 65225 42905 37491 24578 19315Total Revenue 65225 42905 37491 24578 19315
Cost of Revenue 39541 25683 24294 16426 13717Cost of Revenue, Total 39541 25683 24294 16426 13717Gross Profit 25684 17222 13197 8152 5598
Selling/General/Administrative Expense 5517 4149 3761 2963 2433Total SGA Expenses 5517 4149 3761 2963 2433Research & Development 1782 1333 1109 782 712
Restructuring Charge - - - - 0Unusual Expense (Income) - - - - 0Total Operating Expense 46840 31165 29164 20171 16862
Operating Income 18385 11740 8327 4407 2453
Interest Expense - Non-Operating - - - - 0Interest Expense, Net Non-Operating - - - - 0
Interest Income - Non-Operating 311 407 653 647 394Investment Income - Non-Operating - - - - 0
Interest/Investment Income - Non-Operating 311 407 653 647 394Interest Income (Expense) 311 407 653 647 394
Other Non-Operating Income (Expense) -156 -81 -33 -48 -29Other, Net -156 -81 -33 -48 -29Income Before Tax 18540 12066 8947 5006 2818
Total Income Tax 4527 3831 2828 1511 829
Net Income 14013 8235 6119 3495 1989
Apple Inc.Annual Balance Sheet
[Standardized in USD Millions]25-Sep-2010 26-Sep-2009 27-Sep-2008 29-Sep-2007 30-Sep-2006
Cash & Equivalents 11261 5263 11875 9352 6392Short Term Investments 14359 18201 10236 6034 3718
Cash and Short Term Investments 25620 23464 22111 15386 10110Accounts Receivable - Trade, Gross 5565 3413 2469 1684 1304Provision for Doubtful Accounts -55 -52 -47 -47 -52
Trade Accounts Receivable - Net 5510 3361 2422 1637 1252Other Receivables 4414 1696 2282 2392 1593
Total Receivables, Net 9924 5057 4704 4029 2845Total Inventory 1051 455 509 346 270Prepaid Expenses - 309 475 417 208
Deferred Income Tax - Current Asset 1636 1135 1044 782 607Other Current Assets 3447 1135 1163 996 469
Other Current Assets, Total 5083 2270 2207 1778 1076Total Current Assets 41678 31555 30006 21956 14509
Buildings 2030 1665 1324 1019 760Land/Improvements 1471 955 810 762 626Machinery/Equipment 3733 2047 1613 1060 689
Property/Plant/Equipment - Gross 7234 4667 3747 2841 2075Accumulated Depreciation -2466 -1713 -1292 -1009 -794
Property/Plant/Equipment - Net 4768 2954 2455 1832 1281Goodwill - Gross 741 206 207 38 38
Goodwill, Net 741 206 207 38 38Intangibles - Gross 587 529 475 459 181Accumulated Intangible Amortization -245 -176 -123 -77 -42
Intangibles, Net 342 353 352 382 139LT Investments - Other 25391 10528 2379 - -
Long Term Investments 25391 10528 2379 - -Deferred Income Tax - Long Term Asset - 163 104 88 -Other Long Term Assets 2263 1742 668 1051 1238
Other Long Term Assets, Total 2263 1905 772 1139 1238Total Assets 75183 47501 36171 25347 17205
Accounts Payable 12015 5601 5520 4970 3390Accrued Expenses 1593 1293 1320 772 803Notes Payable/Short Term Debt 0 0 0 0 0
Customer Advances 3647 2278 2298 1936 1042Income Taxes Payable 210 430 506 488 388Other Current Liabilities 3257 1904 1717 1114 820
Other Current liabilities, Total 7114 4612 4521 3538 2250Total Current Liabilities 20722 11506 11361 9280 6443
Total Long Term Debt 0 0 0 0 0Total Debt 0 0 0 0 0
Deferred Income Tax - LT Liability 4300 2216 999 619 381Deferred Income Tax 4300 2216 999 619 381
Other Long Term Liabilities 2370 2139 1514 916 397Other Liabilities, Total 2370 2139 1514 916 397Total Liabilities 27392 15861 13874 10815 7221
Common Stock 10668 8210 7177 5368 4355Common Stock 10668 8210 7177 5368 4355Retained Earnings (Accumulated Deficit) 37169 23353 15129 9101 5607
Other Comprehensive Income -46 77 -9 63 22Other Equity, Total -46 77 -9 63 22Total Equity 47791 31640 22297 14532 9984
Total Liabilities&Shareholders' Equity 75183 47501 36171 25347 17205
Apple Inc.Annual Cash Flows
[Standardized in USD Millions]25-Sep-2010 26-Sep-2009 27-Sep-2008 29-Sep-2007 30-Sep-2006
Net Income/Starting Line 14013 8235 6119 3495 1989Depreciation 1027 734 496 327 225
Depreciation/Depletion 1027 734 496 327 225Deferred Taxes 1440 1040 398 73 53Unusual Items 24 26 22 12 11Other Non-Cash Items 879 710 516 242 163
Non-Cash Items 903 736 538 254 174Accounts Receivable -4860 -939 -785 -385 -357Inventories -596 54 -163 -76 -105Other Assets -1634 -153 15 -994 -2666Accounts Payable 6307 92 596 1494 1611Other Liabilities 1995 360 2382 1282 1296
Changes in Working Capital 1212 -586 2045 1321 -221Cash from Operating Activities 18595 10159 9596 5470 2220
Purchase of Fixed Assets -2005 -1144 -1091 -735 -657Purchase/Acquisition of Intangibles -116 -69 -108 -251 0
Capital Expenditures -2121 -1213 -1199 -986 -657Acquisition of Business -638 0 -220 0 0Sale/Maturity of Investment 46718 30678 16243 9424 8312Purchase of Investments -57811 -46825 -23003 -11736 -7280Other Investing Cash Flow -2 -74 -10 49 -18
Other Investing Cash Flow Items, Total -11733 -16221 -6990 -2263 1014Cash from Investing Activities -13854 -17434 -8189 -3249 357
Other Financing Cash Flow 345 188 633 374 6Financing Cash Flow Items 345 188 633 374 6
Sale/Issuance of Common 912 475 483 365 318Common Stock, Net 912 475 483 365 318
Issuance (Retirement) of Stock, Net 912 475 483 365 318Long Term Debt Reduction - - - - 0
Long Term Debt, Net - - - - 0Issuance (Retirement) of Debt, Net - - - - 0Cash from Financing Activities 1257 663 1116 739 324
Net Change in Cash 5998 -6612 2523 2960 2901
Net Cash - Beginning Balance 5263 11875 9352 6392 3491Net Cash - Ending Balance 11261 5263 11875 9352 6392Cash Interest Paid - - - - 0Cash Taxes Paid 2697 2997 1267 863 194
Is Apple a profitable Is Apple a profitable company?company?
ProfitabilityProfitability
Is Apple a profitable Is Apple a profitable company?company?
Apple’s 2010 profitability ratio compared to the industry:
Gross Profit Margin is 39.4% compared to 23.8% for the industry.
Operating Profit Margin 28.2%, compared to 11% for the industry.
Net Profit Margins is 21.5% compared to 21.48% for the industry
Can Apple cover its interest Can Apple cover its interest expense?expense?
Can Apple cover its interest Can Apple cover its interest expense?expense?
Interest increased slightly.
EBIT increased almost 10 times from $2,453 million to $18,385 million.
Bankers and creditors should be happy to loan Apple.
LiquidityLiquidity
EfficiencyEfficiency
LeverageLeverage
LeverageLeverage
Financial RatiosFinancial RatiosInterest coverage ratio=EBIT/interest expense
Earnings per share=(net income-dividends on preferred stock)/average outstanding shares
Return on sales (profit margin)=net income + net revenue
What are Apple future What are Apple future sales?sales?
Should we invest in Apple?Should we invest in Apple?
Conclusion and Personal thoughtsConclusion and Personal thoughts
For the last ten years Apple has rebranded itself to become one of the most successful technology company ever.
All analysts agree that the company will continue its successful trend in the future.
Thank you!Thank you!
Thank you!Thank you!