S&P Assigns 'AA+' Issuer-Level Rating to Apple's (AAPL) GBP-Denominated Unsecured Notes

Standard & Poor's Ratings Services today assigned its 'AA+' issue-level rating to Apple's (Nasdaq: AAPL) £750 million senior unsecured notes due 2029 and £500 million senior unsecured notes due 2042. The company will use the proceeds from the notes for general corporate purposes, including the repurchase of common stock and payment of dividends. We rate the new notes the same as the corporate credit rating on the company. Our 'AA+' corporate credit rating on Apple is unchanged, and the outlook remains stable.

Apple's revenues rose 33% year over year to nearly $50 billion in the third quarter ended June 27, 2015, representing a third consecutive quarter of strong growth for the company since the launch of the iPhone 6 and iPhone 6 Plus in September 2014. Sales in Greater China jumped again, more than doubling to $13 billion during the quarter. iPhone unit sales rose 35% year over year and made up 63% of total revenues during the quarter compared with 53% in the prior year. Adjusted EBITDA margin rose modestly to the 37% area, while free operating cash flow reached nearly $70 billion on a latest-12-month basis. Dividends and share repurchases totaled $13 billion for the quarter, partly funded by new debt raises during the quarter, and cash and investments reached another record at $203 billion.

Apple's financial risk profile is considered "minimal." Despite the recent increase in the capital return program, the company will maintain a significant net cash position, and we view its financial policy as conservative. Our rating and outlook incorporate the company's substantial share repurchases and intention to increase dividends on an annual basis. While we expect total shareholder returns to moderately exceed discretionary cash flow on occasions, robust overall cash generation affords the company the flexibility to return large amounts of cash to shareholders without detracting from the overall credit quality. We consider Apple's business risk profile to be "strong," reflecting our view of Apple's leadership in mobile devices, product innovation capabilities, and strong operating efficiency.

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