Most Profitable Quarter Ever; Record Mac and iPhone Sales
CUPERTINO, Calif. Oct. 19 /PRNewswire-FirstCall/ -- Apple® today
announced financial results for its fiscal 2009 fourth quarter
ended September 26, 2009. The Company posted revenue of $9.87
billion and a net quarterly profit of $1.67 billion, or $1.82 per
diluted share. These results compare to revenue of $7.9 billion and
net quarterly profit of $1.14 billion, or $1.26 per diluted share,
in the year-ago quarter. Gross margin was 36.6 percent, up from
34.7 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® 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 $12.25
billion of "Adjusted Sales" and $2.85 billion of "Adjusted Net
Income." Apple sold 3.05 million Macintosh® computers during the
quarter, representing a 17 percent unit increase over the year-ago
quarter. The Company sold 10.2 million iPods during the quarter,
representing an eight percent unit decline from the year-ago
quarter. Apple sold 7.4 million iPhones in the quarter,
representing seven percent unit growth over the year-ago quarter.
"We are thrilled to have sold more Macs and iPhones than in any
previous quarter," said Steve Jobs, Apple's CEO. "We've got a very
strong lineup for the holiday season and some really great new
products in the pipeline for 2010." "We are delighted with our
September quarter and fiscal 2009 results," said Peter Oppenheimer,
Apple's CFO. "For the full year, we grew revenue by 12 percent and
net income by 18 percent in extraordinarily challenging times.
Looking ahead to the first fiscal quarter of 2010, we expect
revenue in the range of about $11.3 billion to $11.6 billion and we
expect diluted earnings per share in the range of about $1.70 to
$1.78." Apple will provide live streaming of its Q4 2009 financial
results conference call utilizing QuickTime®, 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 October
19, 2009 at http://www.apple.com/quicktime/qtv/earningsq409/ and
will also be available for replay for approximately two weeks
thereafter. *Non-GAAP Financial Measures During fiscal 2007, the
Company began selling 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, specifically FASB ASC 985-605, formerly known
as AICPA SOP 97-2, 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. In June 2009, the
Company began selling iPhone 3GS, the third-generation iPhone. Unit
sales of iPhones continued to be significant in the quarter ended
September 26, 2009, with 7.4 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 September 26, 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; and -- 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. 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; 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
Company's dependency on the performance of distributors and other
resellers of the Company's products; 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; the continued service and
availability of key executives and employees; war, terrorism,
public health issues, and other circumstances that could disrupt
supply, delivery, or demand of 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; and unfavorable results of other legal
proceedings. 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 Forms 10-Q for the quarters ended December 27, 2008,
March 28, 2009 and June 27, 2009, and its Form 10-K for the fiscal
year ended September 26, 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. © 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 Twelve Months Ended September
September September September 26, 27, 26, 27, 2009 2008 2009 2008
Net sales $9,870 $7,895 $36,537 $32,479 Cost of sales (1) 6,256
5,156 23,397 21,334 Gross margin 3,614 2,739 13,140 11,145
Operating expenses: Research and development (1) 358 298 1,333
1,109 Selling, general and administrative (1) 1,063 999 4,149 3,761
Total operating expenses 1,421 1,297 5,482 4,870 Operating income
2,193 1,442 7,658 6,275 Other income and expense 45 140 326 620
Income before provision for income taxes 2,238 1,582 7,984 6,895
Provision for income taxes 573 446 2,280 2,061 Net income $1,665
$1,136 $5,704 $4,834 Earnings per common share: Basic $1.85 $1.28
$6.39 $5.48 Diluted $1.82 $1.26 $6.29 $5.36 Shares used in
computing earnings per share: Basic 898,032 887,110 893,016 881,592
Diluted 914,374 904,786 907,005 902,139 (1) Includes stock-based
compensation expense as follows: Cost of sales $29 $21 $114 $80
Research and development $66 $52 $258 $185 Selling, general and
administrative $85 $68 $338 $251 UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS (In millions, except share amounts) September 26,
September 27, 2009 2008 ASSETS: Current assets: Cash and cash
equivalents $5,263 $11,875 Short-term marketable securities 18,201
10,236 Accounts receivable, less allowances of $52 and $47,
respectively 3,361 2,422 Inventories 455 509 Deferred tax assets
2,101 1,447 Other current assets 6,884 5,822 Total current assets
36,265 32,311 Long-term marketable securities 10,528 2,379
Property, plant and equipment, net 2,954 2,455 Goodwill 206 207
Acquired intangible assets, net 247 285 Other assets 3,651 1,935
Total assets $53,851 $39,572 LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities: Accounts payable $5,601 $5,520 Accrued
expenses 3,376 3,719 Deferred revenue 10,305 4,853 Total current
liabilities 19,282 14,092 Deferred revenue - non-current 4,485
3,029 Other non-current liabilities 2,252 1,421 Total liabilities
26,019 18,542 Commitments and contingencies Shareholders' equity:
Common stock, no par value; 1,800,000,000 shares authorized;
899,805,500 and 888,325,973 shares issued and outstanding,
respectively 8,210 7,177 Retained earnings 19,538 13,845
Accumulated other comprehensive income 84 8 Total shareholders'
equity 27,832 21,030 Total liabilities and shareholders' equity
$53,851 $39,572 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (In millions) Twelve Months Ended September September 26, 27,
2009 2008 Cash and cash equivalents, beginning of the year $11,875
$9,352 Operating Activities: Net income 5,704 4,834 Adjustments to
reconcile net income to cash generated by operating activities:
Depreciation, amortization and accretion 703 473 Stock-based
compensation expense 710 516 Deferred income tax benefit (519)
(368) Loss on disposition of property, plant and equipment 26 22
Changes in operating assets and liabilities: Accounts receivable,
net (939) (785) Inventories 54 (163) Other current assets (1,050)
(1,958) Other assets (1,346) (492) Accounts payable 92 596 Deferred
revenue 6,908 5,642 Other liabilities (184) 1,279 Cash generated by
operating activities 10,159 9,596 Investing Activities: Purchases
of marketable securities (46,724) (22,965) Proceeds from maturities
of marketable securities 19,790 11,804 Proceeds from sales of
marketable securities 10,888 4,439 Purchases of other long-term
investments (101) (38) Payments made in connection with business
acquisitions, net of cash acquired - (220) Payment for acquisition
of property, plant and equipment (1,144) (1,091) Payment for
acquisition of intangible assets (69) (108) Other (74) (10) Cash
used in investing activities (17,434) (8,189) Financing Activities:
Proceeds from issuance of common stock 475 483 Excess tax benefits
from stock-based compensation 270 757 Cash used to net share settle
equity awards (82) (124) Cash generated by financing activities 663
1,116 (Decrease)/Increase in cash and cash equivalents (6,612)
2,523 Cash and cash equivalents, end of the year $5,263 $11,875
Supplemental cash flow disclosure: Cash paid for income taxes, net
$2,997 $1,267 UNAUDITED CONSOLIDATED SCHEDULE OF DEFERRED REVENUE
(In millions) September 26, June 27, September 27, 2009 2009 2008
Deferred revenue - current: iPhone and Apple TV $8,519 $6,767
$3,518 AppleCare 791 725 599 Other 995 977 736 Total deferred
revenue - current 10,305 8,469 4,853 Deferred revenue -
non-current: iPhone and Apple TV 3,618 2,860 2,262 AppleCare 688
653 651 Other 179 154 116 Total deferred revenue - non-current
4,485 3,667 3,029 Total deferred revenue $14,790 $12,136 $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 September 26, 2009 As
reported in accordance Non-GAAP with GAAP Adjustments Non-GAAP Net
sales $9,870 $2,383(a) $12,253 Cost of sales $6,256 $791(b) $7,047
Gross margin $3,614 $1,592(c) $5,206 Operating expenses $1,421 $-
$1,421 Operating income $2,193 $1,592(c) $3,785 Net income $1,665
$1,184(d) $2,849 Earnings per diluted common share $1.82 $1.30(e)
$3.12 Shares used in computing diluted earnings per share 914,374
914,374 Three Months Ended September 27, 2008 As reported in
accordance Non-GAAP with GAAP Adjustments Non-GAAP Net sales $7,895
$3,787(a) $11,682 Cost of sales $5,156 $1,975(b) $7,131 Gross
margin $2,739 $1,812(c) $4,551 Operating expenses $1,297 $- $1,297
Operating income $1,442 $1,812(c) $3,254 Net income $1,136
$1,301(d) $2,437 Earnings per diluted common share $1.26 $1.43(e)
$2.69 Shares used in computing diluted earnings per share 904,786
904,786 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 $408 million and $511 million for the three-month
periods ended September 26, 2009 and September 27, 2008,
respectively. 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. Q4 2009 Unaudited Summary Data Q3 2009 Q4 2008
Q4 2009 --------- --------- --------- CPU Revenue CPU Revenue CPU
Revenue Operating Segments Units K $M Units K $M Units K $M -------
------- ------- ------- ------- ------- Americas 1,147 $3,827 1,121
$3,572 1,252 $4,297 Europe 626 2,006 611 1,723 761 2,491 Japan 108
416 78 320 79 434 Retail 492 1,496 596 1,718 670 1,867 Other
Segments (1) 230 592 205 562 291 781 ----- ------ ----- ------
----- ------ Total Operating Segments 2,603 $8,337 2,611 $7,895
3,053 $9,870 ===== ====== ===== ====== ===== ====== Revenue Revenue
Revenue Product Summary Units K $M Units K $M Units K $M -------
------- ------- ------- ------- ------- Desktops (2) 849 $1,129 936
$1,363 787 $1,086 Portables (3) 1,754 2,200 1,675 2,257 2,266 2,866
Subtotal CPUs 2,603 3,329 2,611 3,620 3,053 3,952 10,215 1,492
11,052 1,660 10,177 1,563 Other Music Related Products and Services
(4) 958 832 1,018 iPhone and Related Products and Services (5)
5,208 1,689 6,892 806 7,367 2,297 Peripherals and Other Hardware
341 428 393 Software, Service and Other Sales iPod 528 549 647 ---
--- --- Total Apple $8,337 $7,895 $9,870 ====== ====== ====== Year/
Sequential Change Year Change --------------------- -------------
Operating Segments CPU Units Revenue CPU Units Revenue -----------
------- ----------- ------- Americas 9% 12% 12% 20% Europe 22% 24%
25% 45% Japan -27% 4% 1% 36% Retail 36% 25% 12% 9% Other Segments
(1) 27% 32% 42% 39% Total Operating Segments 17% 18% 17% 25% Year/
Sequential Change Year Change --------------------- -------------
Product Summary Units Revenue Units Revenue ------- ------- -------
------- Desktops (2) -7% -4% -16% -20% Portables (3) 29% 30% 35%
27% Subtotal CPUs 17% 19% 17% 9% iPod 0% 5% -8% -6% Other Music
Related Products and Services (4) 6% 22% iPhone and Related
Products and Services (5) 41% 36% 7% 185% Peripherals and Other
Hardware 15% -8% Software, Service and Other Sales 23% 18% Total
Apple 18% 25% (1) Other Segments include Asia Pacific and
FileMaker. (2) Includes iMac, Mac mini, Mac Pro and Xserve product
lines. (3) Includes MacBook, MacBook Air and MacBook Pro product
lines. (4) Consists of iTunes Store sales, iPod services, and
Apple-branded and third-party iPod accessories. (5) Units consist
of iPhone handset sales; Revenue is derived from handset sales,
carrier agreements, and Apple-branded and third-party iPhone
accessories. K = Units in thousands $M = Amounts in millions
DATASOURCE: Apple CONTACT: Press, Steve Dowling, +1-408-974-1896, ,
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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