Apple Inc

For the year ended September 26, 2020 and the nine months ended June 26, 2021

Andy Cacho & Michael Max Johnston

November 28, 2021

Basic Company Information

Company's Legal Name: Apple Inc.

Place of Incorporation: California
Headquarters Location: One Apple Park Way Cupertino, California
Name the stock exchange: The Nasdaq Stock Market LLC
Price of stock as of end of the recent quarter: June 25, 2021: $133.11
Ticker Symbol: AAPL
History of CEO - Timothy Donald Cook
- Education: Auburn University Bachelor's in
Industrial Engineering & MBA from Duke
University's Fuqua School of Business.
- History at Apple: 1998-2002: Senior Vice
President of Worldwide Operations.
2002-2005: Executive Vice President
Worldwide Sales and Operations. 2005-2011:
COO of Apple
- Current Position: 2011-Present: CEO of Apple
- Other: Lead Independent Director of the
Board of Nike Inc. since 2016, Board of
Directors for the The National Football
Foundation & College Hall of Fame, Inc., and
the Board of Trustees of Duke University.
Overview of Business:
The Company designs, manufactures and markets smartphones, personal computers, tablets, wearables and
accessories, and sells a variety of related services.
Industry Outlook: Customers are
primarily in the consumer, small and
mid-sized business, education,
enterprise and government markets.
Apple sells its products and resells
third-party products in most of its
major markets directly to consumers,
small and mid-sized businesses, and
education, enterprise and government
customers through its retail and online
stores and its direct sales force. Because
of the shift to at-home work due to
COVID-19, this industry’s future
earnings are protected from a downturn
due to the fact that, more than ever,
people need more personal computing
devices.
Competitors: Apple’s competitors
make products and services that are
highly competitive, and are
characterized by aggressive price
competition, frequent introduction
of new products and services,
continual improvement in product
price and performance
characteristics, rapid adoption of
technological advancements by
competitors, and price sensitivity on
the part of consumers and
businesses.
- Smartphones: Samsung
- Computers: Dell
- Software: Microsoft
Future Strategy: Because the tech
industry has rapid and constant
technological advances, Apple’s
ability to compete successfully
depends heavily upon its ability to
ensure a continual and timely flow
of competitive products, services and
technologies to the marketplace. The
Company continues to develop new
technologies to enhance existing
products and services, and to expand
the range of its offerings through
research and development, licensing
of intellectual property and
acquisition of third-party businesses.
Balance Sheet information
Balance Sheet Analysis

Working Capital Asset Turnover Ratio

Sept. 26 2020: $38,321 Sept. 26 2020: 0.829
June 26, 2021: $6,669 June 26, 2021: 1.062

Current Ratio Return on Assets

Sept. 26 2020: 1.364 Sept. 26 2020: 17.334%
June 26, 2021: 1.062 June 26, 2021: 26.556%

Days Sales in Receivables Debt to Equity Ratio

Sept. 26 2020: 25.958 Sept. 26 2020: 3.957
June 26, 2021: 17.661 June 26, 2021: 4.131

Inventory Turnover Return on Equity

Sept. 26 2020: 41.523 Sept. 26 2020: 87.866%
June 26, 2021: 44.335 June 26, 2021: 135.037%
Balance Sheet Analysis - Appendix
Formula Calculation June 26, Calculation September 26,
(June 26, 2021) 2021 (September 26, 2020) 2020

Working Capital Current Assets - Current Liabilities $114,423 - $107,754 $6,669 $143,713 - $105,392 $38,321

Current Ratio Current Assets $114,423 1.062 $143,713 1.364

Current Liabilities $107,754 $105,392

Days Sales in 365 365 17.661 365 25.958

Receivables Accounts Receivable Turnover 20.667 14.061

Accounts Sales $347,155 20.667 $274,515 14.061

Receivables Average Accounts Receivable 0.5*($17,475+$16,120) 0.5*($16,120+$22,926)
Turnover

Inventory Turnover Cost of Goods Sold $204,804 44.335 $169,559 41.523

Average inventory 0.5(5,178+4,061) 0.5*($4,061+$4,106)

Asset Turnover Net Sales $347,155 1.062 $274,515 0.829

Ratio Average Total Assets 0.5($329,840+$323,888) 0.5*($323,888+$338,516)

Return on Assets Net Income $86,802 26.556% $57,411 17.334%

Average Total Assets 0.5($329,840+$323,888) 0.5*($323,888+$338,516)

Debt to Equity Ratio Total Liabilities $265,560 4.131 $258,549 3.957

Shareholders’ Equity $64,280 $65,339

Return on Equity Net Income $86,802 135.037% $57,411 87.866%

Shareholders’ Equity $64,280 $65,339
Operating Results
Apple Inc. Summary Income Statement
In Millions except per share amounts
Analysis of Operating Results
Segment Information

Apple manages its business primarily on a geographic basis. The Company’s reportable
segments consist of the Americas, Europe, Greater China, Japan and Rest of Asia
Pacific
Americas includes both North and South
America. Europe includes European
countries, as well as India, the Middle East
and Africa. Greater China includes China
mainland, Hong Kong and Taiwan. Rest of
Asia Pacific includes Australia and those
Asian countries not included in the
Company’s other reportable segments.
 Segment Information Cont.

From these calculations, it can be seen that Japan has the highest profitability percentage and the Americas has the lowest
one. This can be attributed to a variety of factors, but the most important one would be the way the Apple groups countries
together into their geographical segments. Japan’s segment is solely the Japanese market, but the Americas and the European
segments include other countries like Mexico and South America for the Americas, and the Middle East and India for
Europe. These additional countries have a wide range of incomes, politics, and socioeconomic status. The differences in these
attributes can increase or decrease the cost of good sold which has in impact on the operating profit percentage.
Cash Flow Information Apple Inc. Summary Cash Flow Statement

In Millions of US Dollars Period Ended

Accounting Policies, Reserves & Judgements
➔ Apple uses new Leasing Laws from 2019
➔ Advertising Costs measured when expensed
➔ Inventory measured using FIFO
➔ Depreciation is straight line
➔ Share based compensation
➔ Earnings Per Share (estimate diluted shares)
➔ Non-Marketable Securities valued at fair value
➔ Restricted Cash and Restricted Marketable Securities (can be current or
non-current assets)
➔ Derivative Instruments and Hedging
➔ Revenue Deferred over Product Life Cycle
Analyst Call

Date of Call: Question:

July 27, 2021 Katy Huberty: How much did
Apple benefit from the pandemic?
Speakers: Although some business areas suffered
Tejas Gala - Director of Investor Relations such as in-store traffic, was business
and Corporate Finance overall helped or hindered by the
Tim Cook - CEO Covid-19 pandemic?
Luca Maestri - CFO
Answer:
Total Questions: Luca Maestri: During the peak of
Main Questions: 12 lockdowns, digital services did very well
Follow-up Questions: 10 and demand increased for iPad and Mac.
Advertising and Apple Care suffered due
to reduced in-store activity. iPhone and
Watch suffered from having so many
physical points of sale closed.
 Analyst Reports
Evercore ISI
Amit Daryanani, Irvin Liu, Michael Fisher, Lexi Curnin
Before the call, July 25, 2021
● Threat of antitrust legislation from Congress
● Floods threatening Chinese Foxconn sites
● Mac and iPad suffering from component supply
shortages
● Confident that services business will continue to
grow at a high-teens rate
● How long can 20% growth last without new product
launches?
Recommendation: Buy
Piper Sandler
Harsh V. Kumar & Matthew F. Farrell
After the call, July 27, 2021
● Several segments achieved record revenues this
quarter
● iPhone 12 family experiencing strong adoption
● iPad and Mac limited by supply constraints
● 5G is still in early adoption, but may lead to
increased future demand in subsequent cycles
● Supply constraints will increase in the September
quarter
Recommendation: Buy
 Stock Price Analysis

Stock Price:
Day Before Earnings Release: $148.99
Day After Earnings Release: $144.98

Potential Causes of Price Change:

● Covid-19 Delta variant hampering
reopening efforts
● Predictions of worsening supply chain
issues for key components
● Demand for 5G has not yet expanded
beyond enthusiast market base
● Doubts as to the sustainability of recent
growth
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doc_financials/2021/q3/FY21_Q3_Co
nsolidated_Financial_Statements.pdf