Apple Inc 8-K 2005-04-13
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Exhibit 99.1
Apple Reports Second Quarter Results
Revenue Increases 70 Percent and Net Income Increases Over 500 Percent Year-Over-Year
CUPERTINO, CaliforniaApril 13, 2005Apple® today announced financial results for its fiscal 2005 second quarter ended March 26, 2005. For the quarter, the Company posted a net profit of $290 million, or $.34 per diluted share. These results compare to a net profit of $46 million, or $.06 per diluted share, in the year-ago quarter. Revenue for the quarter was $3.24 billion, up 70 percent from the year-ago quarter. Gross margin was 29.8 percent, up from 27.8 percent in the year-ago quarter. International sales accounted for 40 percent of the quarters revenue.
Apple shipped 1,070,000 Macintosh® units and 5,311,000 iPods during the quarter, representing a 43 percent increase in CPU units and a 558 percent increase in iPods over the year-ago quarter.
We are delighted to report a record second quarter for Apple in both revenue and earnings, said Steve Jobs, Apples CEO. Apple is firing on all cylinders and we have some incredible new products in the pipeline for the coming year, starting with Mac OS X Tiger later this month.
Were very pleased to report 70 percent revenue growth and a 530 percent increase in net income, said Peter Oppenheimer, Apples CFO. Looking ahead to the third quarter of fiscal 2005, we expect revenue of about $3.25 billion and earnings per diluted share of about $.28.
Apple will provide live streaming of its Q2 2005 financial results conference call utilizing QuickTime, Apples standards-based technology for live and on-demand audio and video streaming. The live webcast will begin at 2:00 p.m. PDT on Wednesday, April 13, 2005 at http://www.apple.com/quicktime/qtv/earningsq205/ and will also be available for replay. The QuickTime player is available free for Macintosh and Windows users at www.apple.com/quicktime.
This press release contains forward-looking statements about future products and the Companys estimated revenue and earnings for the third quarter of fiscal 2005. These statements involve risks and uncertainties and actual results may differ. Potential risks and uncertainties include continued competitive pressures in the marketplace; the effect competitive and economic factors and the Companys reaction to them may have on consumer and business buying decisions with respect to the Companys products; the ability of the Company to make timely delivery of new programs, products and successful technological innovations to the marketplace; the
continued availability of certain components and services essential to the Companys business currently obtained by the Company from sole or limited sources, including the timely resolution of manufacturing issues associated with the G5 microprocessors used in many of the Companys Macintosh systems; possible disruption in commercial activities caused by terrorist activity and armed conflict, such as changes in logistics and security arrangements, and reduced end-user purchases relative to expectations; possible disruption in commercial activity as a result of natural disasters or major health concerns including epidemics; risks associated with the Companys retail initiative including significant investment cost, uncertain consumer acceptance and potential impact on existing reseller relationships; the effect that the Companys 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 Companys reliance on the availability of third-party music content, and the ability of the Company to successfully evolve its operating system and attract sufficient Macintosh developers. More information on potential factors that could affect the Companys financial results is included from time to time in the Companys public reports filed with the SEC, including the Companys Form 10-K for the fiscal year ended September 25, 2004, the Companys Form 10-Q for the quarter ended December 25, 2004 and the Companys Form 10-Q for the quarter ended March 26, 2005 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 desktop and notebook computers, OS X operating system, and iLife and professional applications. Apple is also spearheading the digital music revolution with its iPod portable music players and iTunes online music store.
Press Contact:
Steve Dowling
(408) 974-1896
dowling@apple.com
Investor Relations Contacts:
Nancy Paxton
(408) 974-5420
paxton1@apple.com
Joan Hoover
(408) 974-4570
hoover1@apple.com
NOTE TO EDITORS: For additional information visit Apples PR web site (http://www.apple.com/pr/) or call Apples Media Helpline at (408) 974-2042
© 2005 Apple. All rights reserved. Apple, the Apple logo, Macintosh, Mac, Mac OS, iPod and QuickTime are either registered trademarks or trademarks of Apple. Other company and product names may be trademarks of their respective owners.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share amounts)
ASSETS:
|
|
|
March 26, |
|
September 25, |
|
||
|
|
|
2005 |
|
2004 |
|
||
|
Current assets: |
|
|
|
|
|
||
|
Cash and cash equivalents |
|
$ |
2,254 |
|
$ |
2,969 |
|
|
Short-term investments |
|
4,803 |
|
2,495 |
|
||
|
Accounts receivable, less allowances of $51 and $47, respectively |
|
888 |
|
774 |
|
||
|
Inventories |
|
164 |
|
101 |
|
||
|
Deferred tax assets |
|
297 |
|
231 |
|
||
|
Other current assets |
|
601 |
|
485 |
|
||
|
Total current assets |
|
9,007 |
|
7,055 |
|
||
|
Property, plant, and equipment, net |
|
742 |
|
707 |
|
||
|
Goodwill |
|
80 |
|
80 |
|
||
|
Acquired intangible assets |
|
33 |
|
17 |
|
||
|
Other assets |
|
249 |
|
191 |
|
||
|
Total assets |
|
$ |
10,111 |
|
$ |
8,050 |
|
|
|
|
|
|
|
|
||
|
LIABILITIES AND SHAREHOLDERS EQUITY: |
|
|
|
|
|
||
|
Current liabilities: |
|
|
|
|
|
||
|
Accounts payable |
|
$ |
1,773 |
|
$ |
1,451 |
|
|
Accrued expenses |
|
1,579 |
|
1,200 |
|
||
|
Total current liabilities |
|
3,352 |
|
2,651 |
|
||
|
Non-current liabilities |
|
373 |
|
323 |
|
||
|
Total liabilities |
|
3,725 |
|
2,974 |
|
||
|
|
|
|
|
|
|
||
|
Commitments and contingencies |
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
Shareholders equity: |
|
|
|
|
|
||
|
Common stock, no par value; 1,800,000,000 shares authorized; 823,136,748 and 782,887,234 shares issued and outstanding, respectively |
|
3,195 |
|
2,514 |
|
||
|
Deferred stock compensation |
|
(70 |
) |
(93 |
) |
||
|
Retained earnings |
|
3,255 |
|
2,670 |
|
||
|
Accumulated other comprehensive income (loss) |
|
6 |
|
(15 |
) |
||
|
Total shareholders equity |
|
6,386 |
|
5,076 |
|
||
|
Total liabilities and shareholders equity |
|
$ |
10,111 |
|
$ |
8,050 |
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share and per share amounts)
|
|
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
|
||||||||
|
|
|
March 26, |
|
March 27, |
|
March 26, |
|
March 27, |
|
||||
|
|
|
2005 |
|
2004 |
|
2005 |
|
2004 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net sales |
|
$ |
3,243 |
|
$ |
1,909 |
|
$ |
6,733 |
|
$ |
3,915 |
|
|
Cost of sales |
|
2,275 |
|
1,379 |
|
4,769 |
|
2,849 |
|
||||
|
Gross margin |
|
968 |
|
530 |
|
1,964 |
|
1,066 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
||||
|
Research and development |
|
119 |
|
123 |
|
242 |
|
242 |
|
||||
|
Selling, general, and administrative |
|
447 |
|
345 |
|
917 |
|
688 |
|
||||
|
Restructuring costs |
|
|
|
10 |
|
|
|
10 |
|
||||
|
Total operating expenses |
|
566 |
|
478 |
|
1,159 |
|
940 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Operating income |
|
402 |
|
52 |
|
805 |
|
126 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Other income and expense: |
|
|
|
|
|
|
|
|
|
||||
|
Gains on non-current investments |
|
|
|
|
|
|
|
4 |
|
||||
|
Interest and other income, net |
|
33 |
|
12 |
|
59 |
|
21 |
|
||||
|
Total other income and expense |
|
33 |
|
12 |
|
59 |
|
25 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Income before provision for income taxes |
|
435 |
|
64 |
|
864 |
|
151 |
|
||||
|
Provision for income taxes |
|
145 |
|
18 |
|
279 |
|
42 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net income |
|
$ |
290 |
|
$ |
46 |
|
$ |
585 |
|
$ |
109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
$ |
0.36 |
|
$ |
0.06 |
|
$ |
0.73 |
|
$ |
0.15 |
|
|
Diluted |
|
$ |
0.34 |
|
$ |
0.06 |
|
$ |
0.69 |
|
$ |
0.15 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Shares used in computing earnings per share (in thousands): |
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
808,172 |
|
730,694 |
|
798,602 |
|
727,796 |
|
||||
|
Diluted |
|
857,011 |
|
756,460 |
|
848,553 |
|
750,336 |
|
||||
RECONCILIATION OF NON-GAAP TO GAAP RESULTS OF OPERATIONS
(In millions, except share and per share amounts)
|
|
|
Three Months Ended March 26, 2005 |
|
Three Months Ended March 27, 2004 |
|
||||||||||||||
|
|
|
As |
|
Non-GAAP |
(a) |
Non- |
|
As |
|
Non-GAAP |
(a) |
Non- |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Operating income |
|
402 |
|
10 |
(b) |
412 |
|
52 |
|
16 |
(c) |
68 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Total other income and expense |
|
33 |
|
|
|
33 |
|
12 |
|
|
|
12 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Provision for income taxes |
|
145 |
|
1 |
(d) |
146 |
|
18 |
|
4 |
(d) |
22 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Net income |
|
$ |
290 |
|
$ |
9 |
|
$ |
299 |
|
$ |
46 |
|
$ |
12 |
|
$ |
58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Basic |
|
$ |
0.36 |
|
|
|
$ |
0.37 |
|
$ |
0.06 |
|
|
|
$ |
0.08 |
|
||
|
Diluted |
|
$ |
0.34 |
|
|
|
$ |
0.35 |
|
$ |
0.06 |
|
|
|
$ |
0.08 |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Shares used in computing earnings per share (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Basic |
|
808,172 |
|
|
|
808,172 |
|
730,694 |
|
|
|
730,694 |
|
||||||
|
Diluted |
|
857,011 |
|
|
|
857,011 |
|
756,460 |
|
|
|
756,460 |
|
||||||
(a) These adjustments reconcile the Companys GAAP results of operations to its pro forma or non-GAAP results of operations. The Company believes that presentation of results excluding items such as non-cash share-based compensation, restructuring costs, and investment gains provides meaningful supplemental information to both management and investors that is indicative of the Companys core operating results and facilitates comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes. These non-GAAP measures should not be viewed as a substitute for the Companys GAAP results. Neither the Companys GAAP nor non-GAAP results of operations include the accounting impact had the Company chosen to apply the fair-value recognition provisions of SFAS No. 123 or SFAS No. 123 revised (123R) to expense share-based compensation, the impact of which is disclosed in the Companys Forms 10-Q and 10-K as filed with the SEC. The Company expects to adopt SFAS No. 123R in its fourth fiscal quarter ending September 24, 2005.
(b) This adjustment reflects the non-cash compensation expense related primarily to restricted stock awarded to the Companys CEO in fiscal 2003 and restricted stock units awarded to selected members of the Companys senior management team in fiscal 2004. Of the total non-cash compensation expense of $10 million, $1 million is included in cost of sales; $1 million is included in research and development expense; and $8 million is included in selling, general and administrative expense. Note that neither the Companys GAAP nor non-GAAP results of operations includes the accounting impact had
the Company chosen to apply the fair-value recognition provisions of SFAS No. 123R.
(c) This adjustment includes $6 million related to the non-cash compensation expense primarily attributable to restricted stock awarded to the Companys CEO in fiscal 2003, which is included in selling, general and administrative expense, as well as $10 million related to restructuring actions initiated during the second quarter of fiscal 2004.
(d) Amount reflects the expected tax impact on the above noted non-GAAP adjustments.
RECONCILIATION OF NON-GAAP TO GAAP RESULTS OF OPERATIONS
(In millions, except share and per share amounts)
|
|
|
Six Months Ended March 26, 2005 |
|
Six Months Ended March 27, 2004 |
|
||||||||||||||
|
|
|
As Reported |
|
Non-GAAP Adjustments |
(a) |
Non- |
|
As Reported |
|
Non-GAAP Adjustments |
(a) |
Non- |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Operating income |
|
805 |
|
20 |
(b) |
825 |
|
126 |
|
22 |
(c) |
148 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Total other income and expense |
|
59 |
|
|
|
59 |
|
25 |
|
(4 |
)(d) |
21 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Provision for income taxes |
|
279 |
|
2 |
(e) |
281 |
|
42 |
|
2 |
(e) |
44 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Net income |
|
$ |
585 |
|
$ |
18 |
|
$ |
603 |
|
$ |
109 |
|
$ |
16 |
|
$ |
125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Basic |
|
$ |
0.73 |
|
|
|
$ |
0.76 |
|
$ |
0.15 |
|
|
|
$ |
0.17 |
|
||
|
Diluted |
|
$ |
0.69 |
|
|
|
$ |
0.71 |
|
$ |
0.15 |
|
|
|
$ |
0.17 |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Shares used in computing earnings per share (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Basic |
|
798,602 |
|
|
|
798,602 |
|
727,796 |
|
|
|
727,796 |
|
||||||
|
Diluted |
|
848,553 |
|
|
|
848,553 |
|
750,336 |
|
|
|
750,336 |
|
||||||
(a) These adjustments reconcile the Companys GAAP results of operations to its pro forma or non-GAAP results of operations. The Company believes that presentation of results excluding items such as non-cash share-based compensation, restructuring costs, and investment gains provides meaningful supplemental information to both management and investors that is indicative of the Companys core operating results and facilitates comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes. These non-GAAP measures should not be viewed as a substitute for the Companys GAAP results. Neither the Companys GAAP nor non-GAAP results of operations include the accounting impact had the Company chosen to apply the fair-value recognition provisions of SFAS No. 123 or SFAS No. 123 revised (123R) to expense share-based compensation, the impact of which is disclosed in the Companys Forms 10-Q and 10-K as filed with the SEC. The Company expects to adopt SFAS No. 123R in its fourth fiscal quarter ending September 24, 2005.
(b) This adjustment reflects the non-cash compensation expense related primarily to restricted stock awarded to the Companys CEO in fiscal 2003 and restricted stock units awarded to selected members of the Companys senior management team in fiscal 2004. Of the total non-cash compensation expense of $20 million, $1 million is included in cost of sales; $2 million is included in research and development
expense; and $17 million is included in selling, general and administrative expense. Note that neither the Companys GAAP nor non-GAAP results of operations includes the accounting impact had the Company chosen to apply the fair-value recognition provisions of SFAS No. 123R.
(c) This adjustment includes $12 million related to the non-cash compensation expense primarily attributable to restricted stock awarded to the Companys CEO in fiscal 2003, which is included in selling, general and administrative expense, as well as $10 million related to restructuring actions initiated during the second quarter of fiscal 2004.
(d) This adjustment represents gain on sales of non-current investments.
(e) Amount reflects the expected tax impact on the above noted non-GAAP adjustments.
