Best March Quarter Revenue and Earnings in Apple History CUPERTINO,
Calif., April 22 /PRNewswire-FirstCall/ -- Apple(R) today announced
financial results for its fiscal 2009 second quarter ended March
28, 2009. The Company posted revenue of $8.16 billion and a net
quarterly profit of $1.21 billion, or $1.33 per diluted share.
These results compare to revenue of $7.51 billion and net quarterly
profit of $1.05 billion, or $1.16 per diluted share, in the
year-ago quarter. Gross margin was 36.4 percent, up from 32.9
percent in the year-ago quarter. International sales accounted for
46 percent of the quarter's revenue. In accordance with the
subscription accounting treatment required by GAAP, the Company
recognizes revenue and cost of goods sold for iPhone(TM) and Apple
TV(R) over their estimated economic lives. Adjusting GAAP sales and
product costs to eliminate the impact of subscription accounting,
the corresponding non-GAAP measures* for the quarter are $9.06
billion of "Adjusted Sales" and $1.66 billion of "Adjusted Net
Income." Apple sold 2.22 million Macintosh(R) computers during the
quarter, representing a three percent unit decline from the
year-ago quarter. The Company sold 11.01 million iPods during the
quarter, representing three percent unit growth over the year-ago
quarter. Quarterly iPhone units sold were 3.79 million representing
123 percent unit growth over the year-ago quarter. "We are
extremely pleased to report the best non-holiday quarter revenue
and earnings in our history," said Peter Oppenheimer, Apple's CFO.
"Apple's financial condition remains very robust, with almost $29
billion in cash and marketable securities on our balance sheet.
Looking ahead to the third fiscal quarter of 2009, we expect
revenue in the range of about $7.7 billion to $7.9 billion and we
expect diluted earnings per share in the range of about $.95 to
$1.00." Apple will provide live streaming of its Q2 2009 financial
results conference call utilizing QuickTime(R), Apple's
standards-based technology for live and on-demand audio and video
streaming. The live webcast will begin at 2:00 p.m. PDT on April
22, 2009 at http://www.apple.com/quicktime/qtv/earningsq209/ and
will also be available for replay for approximately two weeks
thereafter. *Non-GAAP Financial Measures During fiscal 2007, the
Company began selling the iPhone and Apple TV. Because the Company
may provide unspecified features and additional software products
to iPhone and Apple TV customers in the future free of charge, in
accordance with GAAP the Company recognizes revenue and cost of
goods sold for these products on a straight-line basis over their
economic lives, with any loss recognized at the time of sale.
Currently, the economic lives of these products are estimated to be
24 months. This accounting treatment, referred to as subscription
accounting, results in the deferral of almost all of the revenue
and cost of goods sold during the quarter in which the products are
sold to the customer. Other costs related to these products,
including costs for engineering, sales, marketing and warranty, are
expensed as incurred. Further, the costs to develop any future
unspecified features and additional software products that may
eventually be provided to customers also are expensed as incurred.
In contrast, the Company generally recognizes revenue and cost of
goods sold for its other products, such as Macs and iPods, at the
time of sale, as the Company does not provide future unspecified
features or additional software products to those customers free of
charge. In July 2008, the Company began selling iPhone 3G, the
second-generation iPhone, and at that time significantly expanded
distribution by establishing carrier relationships in over 70
countries. Unit sales of iPhone 3G have been significantly greater
than sales of the first-generation iPhone. During the first quarter
of iPhone 3G availability ended September 27, 2008, 6.9 million
units were sold, exceeding the 6.1 million first-generation iPhone
units sold in the prior five quarters combined. Unit sales of
iPhone 3G continued to be significant in the quarter ended March
28, 2009, with 3.79 million iPhones sold. As a result, the amount
of revenue and product cost related to those iPhone sales that the
Company deferred for recognition in future periods under
subscription accounting was substantial. While the GAAP results
provide significant insight into the Company's operations and
financial position, management continues to supplement its analysis
of the business using financial measures that look at the total
sales, related product costs and resulting income for iPhones and
Apple TVs sold to customers during the period. The presentation at
the end of this press release includes the following non-GAAP
measures: "Adjusted Sales," "Adjusted Cost of Sales," "Adjusted
Gross Margin," "Adjusted Operating Margin," "Adjusted Net Income"
and "Adjusted Diluted Earnings per Share." These financial measures
are not consistent with GAAP because they do not reflect the
deferral of revenue and product costs for recognition in later
periods. The above-mentioned non-GAAP measures are generated by
adjusting the related GAAP measures solely to reverse the effect of
subscription accounting. The Company uses these financial measures,
along with other measures discussed below, to provide additional
insight into current operating and business trends not readily
apparent from the GAAP results. Management uses Adjusted Sales to
evaluate the Company's growth rate, revenue mix and performance
relative to competitors. Given the impact of iPhone unit sales
during the quarter ended March 28, 2009, Adjusted Sales provides a
meaningful measurement of the Company's growth by reflecting
amounts generally due to Apple at the time of sale related to
products sold within the period. Further, eliminating the effects
of deferred revenue (current sales deferred to future periods and
prior sales being recognized currently) provides more transparency
into the Company's underlying sales trends. Management uses the
non-GAAP measures of "Adjusted Cost of Sales," "Adjusted Gross
Margin" and "Adjusted Operating Margin" to measure the Company's
operating performance based on current period iPhone and Apple TV
sales and to facilitate ongoing operating decisions. Additionally,
because the Company recognizes engineering, sales, and marketing
expenses as incurred, including expenses related to iPhone and
Apple TV, management uses Adjusted Sales to evaluate returns on
those costs, to manage year-over-year operating expense growth, and
to budget future expenses. Furthermore, because they are considered
meaningful indicators of current business performance, the non-GAAP
measures "Adjusted Sales" and "Adjusted Operating Margin" are
metrics that factor into the determination of management
compensation beginning in fiscal year 2009. Finally, management
uses the non-GAAP measures of "Adjusted Net Income" and "Adjusted
Diluted Earnings per Share" to measure the Company's operating
performance based on current period iPhone and Apple TV sales, to
facilitate ongoing operating decisions, and compare performance
relative to competitors. Management believes that these non-GAAP
financial measures, when taken together with the corresponding
consolidated GAAP measures and related segment information, provide
incremental insight into the underlying factors and trends
affecting both the Company's performance and its cash generating
potential. Management believes these non-GAAP measures increase the
transparency of the Company's current results and enable investors
to more fully understand trends in its current and future
performance. Cautions on Use of Non-GAAP Measures As noted
previously, these non-GAAP financial measures are not consistent
with GAAP because they do not reflect the deferral of revenue and
product costs for recognition in later periods. These non-GAAP
financial measures do not adjust for the costs associated with the
Company's intention to provide unspecified new features and
software to purchasers of iPhone and Apple TV products. These costs
are expensed as incurred under GAAP's subscription accounting
model, and are not adjusted in these non-GAAP financial measures.
As such, these non-GAAP financial measures are not intended to
reflect in a given period all of the costs of sales made in that
period. Rather, the non-GAAP financial measures presented below are
intended for the limited purpose of presenting performance measures
that include the total sales, related product costs, and resulting
income for iPhones and Apple TVs in the period those products are
sold to customers. Management believes investors will benefit from
greater transparency in referring to these non-GAAP financial
measures when assessing the Company's operating results, as well as
when forecasting and analyzing future periods. However, management
recognizes that: -- these non-GAAP financial measures are limited
in their usefulness and should be considered only as a supplement
to the Company's GAAP financial measures; -- these non-GAAP
financial measures should not be considered in isolation from, or
as a substitute for, the Company's GAAP financial measures; --
these non-GAAP financial measures should not be considered to be
superior to the Company's GAAP financial measures; -- these
non-GAAP financial measures were not prepared in accordance with
GAAP and investors should not assume that the non-GAAP financial
measures presented in this earnings release were prepared under a
comprehensive set of rules or principles; -- these non-GAAP
financial measures are not presented with comparable non-GAAP
financial measures for prior periods, although management intends
to continue to track and present these non-GAAP financial measures
for future periods; and -- until management presents comparable
non-GAAP financial measures for additional periods, these non-GAAP
financial measures do not provide any information regarding trends
in the Company's performance and, as such, investors should not
assume that the presentation of these non-GAAP financial measures
reflects any positive or negative trends in the Company's
performance. Further, these non-GAAP financial measures may be
unique to the Company, as they may be different from non-GAAP
financial measures used by other companies. As such, this
presentation of non-GAAP financial measures may not enhance the
comparability of the Company's results to the results of other
companies. A reconciliation of each non-GAAP financial measure to
the most directly comparable GAAP financial measure or measures
appears at the end of this press release. This press release
contains forward-looking statements including without limitation
those about the Company's estimated revenue and earnings per share.
These statements involve risks and uncertainties, and actual
results may differ. Risks and uncertainties include without
limitation the effect of competitive and economic factors, and the
Company's reaction to those factors, on consumer and business
buying decisions with respect to the Company's products; potential
litigation from the matters investigated by the special committee
of the board of directors and the restatement of the Company's
consolidated financial statements; continued competitive pressures
in the marketplace; the ability of the Company to deliver to the
marketplace and stimulate customer demand for new programs,
products, and technological innovations on a timely basis; the
effect that product transitions, changes in product pricing or mix,
and/or increases in component costs could have on the Company's
gross margin; the inventory risk associated with the Company's need
to order or commit to order product components in advance of
customer orders; the continued availability on acceptable terms, or
at all, of certain components and services essential to the
Company's business currently obtained by the Company from sole or
limited sources; the effect that the Company's dependency on
manufacturing and logistics services provided by third parties may
have on the quality, quantity or cost of products manufactured or
services rendered; the Company's reliance on the availability of
third-party digital content and applications; the potential impact
of a finding that the Company has infringed on the intellectual
property rights of others; the effect that product and service
quality problems could have on the Company's sales and operating
profits; the Company's reliance on sole service providers for
iPhone in certain countries; war, terrorism, public health issues,
and other circumstances that could disrupt supply, delivery, or
demand of products; the continued service and availability of key
executives and employees; unfavorable results of other legal
proceedings; and the Company's dependency on the performance of
distributors and other resellers of the Company's products. More
information on potential factors that could affect the Company's
financial results is included from time to time in the Company's
public reports filed with the SEC, including the Company's Form
10-K for the fiscal year ended September 27, 2008, its Form 10-Q
for the quarter ended December 27, 2008, and its Form 10-Q for the
quarter ended March 28, 2009 to be filed with the SEC. The Company
assumes no obligation to update any forward-looking statements or
information, which speak as of their respective dates. Apple
ignited the personal computer revolution in the 1970s with the
Apple II and reinvented the personal computer in the 1980s with the
Macintosh. Today, Apple continues to lead the industry in
innovation with its award-winning computers, OS X operating system
and iLife and professional applications. Apple is also spearheading
the digital media revolution with its iPod portable music and video
players and iTunes online store, and has entered the mobile phone
market with its revolutionary iPhone. (C) 2009 Apple Inc. All
rights reserved. Apple, the Apple logo, Mac, Mac OS, Macintosh,
iPhone, Apple TV and QuickTime are trademarks of Apple. Other
company and product names may be trademarks of their respective
owners. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share amounts which are reflected in thousands
and per share amounts) Three Months Ended Six Months Ended March
28, March 29, March 28, March 29, 2009 2008 2009 2008 Net sales
$8,163 $7,512 $18,330 $17,120 Cost of sales (1) 5,192 5,038 11,827
11,314 Gross margin 2,971 2,474 6,503 5,806 Operating expenses:
Research and development (1) 319 273 634 519 Selling, general, and
administrative (1) 985 886 2,076 1,846 Total operating expenses
1,304 1,159 2,710 2,365 Operating income 1,667 1,315 3,793 3,441
Other income and expense 63 162 221 362 Income before provision for
income taxes 1,730 1,477 4,014 3,803 Provision for income taxes 525
432 1,204 1,177 Net income $1,205 $1,045 $2,810 $2,626 Earnings per
common share: Basic $1.35 $1.19 $3.16 $2.99 Diluted $1.33 $1.16
$3.11 $2.92 Shares used in computing earnings per share: Basic
891,180 879,546 890,161 877,704 Diluted 902,993 899,329 902,243
899,783 (1) Includes stock-based compensation expense as follows:
Cost of sales $29 $20 $57 $38 Research and development $67 $47 $127
$86 Selling, general, and administrative $85 $65 $167 $118
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In millions,
except share amounts) March 28, September 27, 2009 2008 ASSETS:
Current assets: Cash and cash equivalents $4,466 $11,875 Short-term
marketable securities 20,547 10,236 Accounts receivable, less
allowances of $60 and $47, respectively 1,932 2,422 Inventories 312
509 Deferred tax assets 1,539 1,447 Other current assets 5,057
5,822 Total current assets 33,853 32,311 Long-term marketable
securities 3,865 2,379 Property, plant and equipment, net 2,546
2,455 Goodwill 207 207 Acquired intangible assets, net 268 285
Other assets 2,498 1,935 Total assets $43,237 $39,572 LIABILITIES
AND SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable
$3,976 $5,520 Accrued expenses 2,761 3,719 Deferred revenue 7,014
4,853 Total current liabilities 13,751 14,092 Deferred revenue -
non-current 3,460 3,029 Other non-current liabilities 1,715 1,421
Total liabilities 18,926 18,542 Commitments and contingencies
Shareholders' equity: Common stock, no par value; 1,800,000,000
shares authorized; 891,911,821 and 888,325,973 shares issued and
outstanding, respectively 7,643 7,177 Retained earnings 16,653
13,845 Accumulated other comprehensive income 15 8 Total
shareholders' equity 24,311 21,030 Total liabilities and
shareholders' equity $43,237 $39,572 UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Six Months
Ended March 28, March 29, 2009 2008 Cash and cash equivalents,
beginning of the period $11,875 $9,352 Operating Activities: Net
income 2,810 2,626 Adjustments to reconcile net income to cash
generated by operating activities: Depreciation, amortization, and
accretion 330 222 Stock-based compensation expense 351 242 Deferred
income tax (benefit)/expense (31) 6 Loss on disposition of
property, plant, and equipment 8 10 Changes in operating assets and
liabilities: Accounts receivable, net 490 44 Inventories 197 (18)
Other current assets 859 (444) Other assets (456) (150) Accounts
payable (1,527) (740) Deferred revenue 2,592 1,585 Other
liabilities (844) 597 Cash generated by operating activities 4,779
3,980 Investing Activities: Purchases of marketable securities
(23,483) (12,740) Proceeds from maturities of marketable securities
6,280 6,683 Proceeds from sales of marketable securities 5,457
1,676 Purchases of other long-term investments (54) (17) Payment
for acquisition of property, plant, and equipment (439) (384)
Payment for acquisition of intangible assets (30) (63) Other (55)
21 Cash used in investing activities (12,324) (4,824) Financing
Activities: Proceeds from issuance of common stock 122 233 Excess
tax benefits from stock-based compensation 47 445 Cash used to net
share settle equity awards (33) (116) Cash generated by financing
activities 136 562 Decrease in cash and cash equivalents (7,409)
(282) Cash and cash equivalents, end of the period $4,466 $9,070
Supplemental cash flow disclosure: Cash paid for income taxes, net
$1,828 $753 UNAUDITED CONSOLIDATED SCHEDULE OF DEFERRED REVENUE (In
millions) March 28, December 27, September 27, 2009 2008 2008
Deferred revenue - current: iPhone and Apple TV $5,467 $4,666
$3,518 AppleCare 659 602 599 Other 888 967 736 Total deferred
revenue - current 7,014 6,235 4,853 Deferred revenue - non-current:
iPhone and Apple TV 2,676 2,627 2,262 AppleCare 638 683 651 Other
146 130 116 Total deferred revenue - non-current 3,460 3,440 3,029
Total deferred revenue $10,474 $9,675 $7,882 UNAUDITED
RECONCILIATION OF NON-GAAP TO GAAP RESULTS OF OPERATIONS (In
millions, except share amounts which are reflected in thousands and
per share amounts) Three Months Ended March 28, 2009 As Reported in
accordance Non-GAAP with GAAP Adjustments Non-GAAP Net sales $8,163
$893(a) $9,056 Cost of sales 5,192 240(b) 5,432 Gross margin 2,971
653(c) 3,624 Operating expenses 1,304 - 1,304 Operating income
1,667 653(c) 2,320 Net income $1,205 $455(d) $1,660 Earnings per
diluted common share $1.33 $0.51(e) $1.84 Shares used in computing
diluted earnings per share 902,993 902,993 Footnotes: (a) Non-GAAP
adjustment to net sales reflect (i) the reversal of the current
period's amortization of deferred revenue derived from iPhone
handsets and Apple TV units shipped in current and prior periods
and (ii) the inclusion of amounts generally due to Apple at the
time of sale related to iPhone handsets and Apple TV units shipped
in the current period. (b) Non-GAAP adjustment to cost of sales
reflect (i) the reversal of the current period's amortization of
deferred cost related to iPhone handsets and Apple TV units shipped
in current and prior periods and (ii) the inclusion of the total
cost of iPhone handsets and Apple TV units shipped in the current
period. In addition, the non-GAAP adjustment to cost of sales
reflects the estimate of the warranty expense in the period when
the related product is sold, rather than when the expense is
incurred. The non-GAAP adjustment to cost of sales does not reflect
the cost of providing unspecified additional software products and
upgrades. (c) Non-GAAP adjustments to gross margin and operating
income are the difference between non-GAAP adjustments to net sales
and non-GAAP adjustments to cost of sales [(a) - (b)]. (d)
Represents the after-tax effect of the non-GAAP adjustments to
gross margin and operating income. The tax effect on the non-GAAP
adjustments to gross margin and operating income is estimated by
applying the period's effective tax rate to the non-GAAP
adjustments. The tax effect on the non-GAAP adjustments is $198
million for the three months ended March 28, 2009. The non-GAAP
adjustment to net income does not reflect any changes to the
Company's other income and expense. (e) Represents the per share
impact of the non-GAAP adjustments to net income. Apple Inc. Q2
2009 Unaudited Summary Data Q1 2009 Q2 2008 Q2 2009 CPU Revenue CPU
Revenue CPU Revenue Operating Segments Units K $M Units K $M Units
K $M Americas 912 $4,501 884 $3,268 809 $3,517 Europe 795 2,771 627
1,780 658 2,097 Japan 99 481 118 424 109 500 Retail 515 1,740 458
1,451 438 1,471 Other Segments (1) 203 674 202 589 202 578 Total
Operating Segments 2,524 $10,167 2,289 $7,512 2,216 $8,163 Revenue
Revenue Revenue Product Summary Units K $M Units K $M Units K $M
Desktops (2) 728 $1,043 856 $1,352 818 $1,050 Portables (3) 1,796
2,511 1,433 2,142 1,398 1,895 Subtotal CPUs 2,524 3,554 2,289 3,494
2,216 2,945 iPod 22,727 3,371 10,644 1,818 11,013 1,665 Other Music
Related Products and Services (4) 1,011 881 1,049 iPhone and
Related Products & Services (5) 4,363 1,247 1,703 378 3,793
1,521 Peripherals and Other Hardware 378 412 358 Software, Service
and Other Sales 606 529 625 Total Apple $10,167 $7,512 $8,163
Sequential Change Year/Year Change CPU CPU Operating Segments Units
Revenue Units Revenue Americas -11% -22% -8% 8% Europe -17% -24% 5%
18% Japan 10% 4% -8% 18% Retail -15% -15% -4% 1% Other Segments (1)
-- % -14% -- % -2% Total Operating Segments -12% -20% -3% 9%
Sequential Change Year/Year Change Product Summary Units Revenue
Units Revenue Desktops (2) 12% 1% -4% -22% Portables (3) -22% -25%
-2% -12% Subtotal CPUs -12% -17% -3% -16% iPod -52% -51% 3% -8%
Other Music Related Products and Services (4) 4% 19% iPhone and
Related Products & Services (5) -13% 22% 123% 302% Peripherals
and Other Hardware -5% -13% Software, Service and Other Sales 3%
18% Total Apple -20% 9% DATASOURCE: Apple CONTACT: Steve Dowling,
+1-408-974-1896, , or Investor Relations, Nancy Paxton,
+1-408-974-5420, , or Joan Hoover, +1-408-974-4570, , all of Apple
Web Site: http://www.apple.com/
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