Apple Reports First Quarter Results20 January 2006
Apple(R) today announced financial results for its fiscal 2006 first quarter ended December 31, 2005, reporting the highest revenue and earnings in the Company's history. Apple posted revenue of $5.75 billion and a net quarterly profit of $565 million, or $.65 per diluted share, in this 14-week quarter. These results compare to revenue of $3.49 billion and a net profit of $295 million, or $.35 per diluted share, in the year-ago quarter. Gross margin was 27.2 percent, down from 28.5 percent in the year-ago quarter. International sales accounted for 40 percent of the quarter's revenue.
Apple shipped 1,254,000 Macintosh(R) computers and 14,043,000 iPods during the quarter, representing 20 percent growth in Macs and 207 percent growth in iPods over the year-ago quarter.
"We are thrilled to report the best quarter in Apple's history," said Steve Jobs, Apple's CEO. "Two highlights of an incredible quarter were selling 14 million iPods and getting ready to launch our new Macs with Intel processors five to six months ahead of expectations. We are working on more wonderful products for 2006, and I can't wait to see what our customers think of them."
"We're very pleased to report year-over-year revenue growth of 65 percent and net income that was nearly twice the year-ago level," said Peter Oppenheimer, Apple's CFO. "Looking ahead to the second quarter of fiscal 2006, we expect revenue of about $4.3 billion. We expect GAAP earnings per diluted share of about $.38, including an estimated $.04 per share expense impact from non-cash stock-based compensation, translating to non-GAAP EPS of about $.42."
Apple will provide live streaming of its Q1 2006 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. PST on Wednesday January 18, 2006 at http://www.apple.com/quicktime/qtv/earningsq106/ and will also be available for replay. The QuickTime player is available free for Macintosh and Windows users at http://www.apple.com/quicktime.
This press release contains forward-looking statements about the Company's estimated revenue and earnings as well as the estimated expense impact of non- cash stock-based compensation for the second quarter of fiscal 2006. 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 Company's reaction to them may have on consumer and business buying decisions with respect to the Company's products; the ability of the Company to make timely delivery of new programs, products and successful technological innovations to the marketplace; the continued availability on acceptable terms of certain components and services essential to the Company's business currently obtained by the Company from sole or limited sources including G4 and G5 microprocessors; 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 Company's retail initiative including significant investment cost, uncertain consumer acceptance and potential impact on existing reseller relationships; 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; the ability of the Company to successfully evolve its operating system; the ability of the Company to make timely delivery of new products with Intel microprocessors and related hardware and software technological changes and innovations to support Intel microprocessors; the development and availability on acceptable terms of components and services essential to enable the Company to deliver products based on Intel microprocessors in a timely manner; the Company's dependency on third-party software developers to timely develop future applications that support Intel microprocessors and Power PC microprocessors; and the potential negative ramifications of the transition of all Macs to Intel microprocessors by the end of calendar 2006, or the announcement of such planned transition, for sales of current or future Mac products with Power PC processors as well as for the Company's obligations under component purchase agreements. 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 24, 2005, and the Company's Form 10-Q for the quarter ended December 31, 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.
NOTE: Apple, the Apple logo, Mac, Mac OS, Macintosh, Power Mac and QuickTime are 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:
Dec. 31, Sept. 24,
2005 2005
Current assets:
Cash and cash equivalents $4,150 $3,491
Short-term investments 4,557 4,770
Accounts receivable, less allowances of $50 and
$46, respectively 1,331 895
Inventories 244 165
Deferred tax assets 471 331
Other current assets 1,409 648
Total current assets 12,162 10,300
Property, plant, and equipment, net 855 817
Goodwill 69 69
Acquired intangible assets 24 27
Other assets 1,071 338
Total assets $14,181 $11,551
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $2,896 $1,779
Accrued expenses 2,164 1,705
Total current liabilities 5,060 3,484
Non-current liabilities 741 601
Total liabilities 5,801 4,085
Commitments and contingencies
Shareholders' equity:
Common stock, no par value; 1,800,000,000 shares
authorized; 845,617,174 and 835,019,364 shares
issued and outstanding, respectively 3,815 3,521
Deferred stock compensation -- (60)
Retained earnings 4,570 4,005
Accumulated other comprehensive income (loss) (5) --
Total shareholders' equity 8,380 7,466
Total liabilities and shareholders' equity $14,181 $11,551
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share and per share amounts)
THREE MONTHS ENDED
Dec. 31, Dec. 25,
2005 2004
Net sales $5,749 $3,490
Cost of sales (including stock-based compensation
expense of $5 and $0, respectively) 4,185 2,494
Gross margin 1,564 996
Operating expenses:
Research and development (including stock-based
compensation expense of $15 and $2, respectively) 182 123
Selling, general, and administrative (including
stock-based compensation expense of $24 and $8,
respectively) 632 470
Total operating expenses 814 593
Operating income 750 403
Other income and expense 81 26
Income before provision for income taxes 831 429
Provision for income taxes 266 134
Net income $565 $295
Earnings per common share:
Basic $0.68 $0.37
Diluted $0.65 $0.35
Shares used in computing earnings per share
(in thousands):
Basic 830,781 789,032
Diluted 874,207 838,174
RECONCILIATION OF NON-GAAP TO GAAP RESULTS OF OPERATIONS
(in millions, except share and per share amounts)
Three Months Ended Three Months Ended
December 31, 2005 December 25, 2004
Non-GAAP Non-GAAP
As Adjust- Non- As Adjust- Non-
Reported ments (a) GAAP Reported ments (a) GAAP
Gross Margin $1,564 $5 (b) $1,569 $996 $-- $996
Operating
expenses 814 (39) (b) 775 593 (10) (c) 583
Operating income 750 44 (b) 794 403 10 (c) 413
Provision for
income taxes 266 14 (d) 280 134 1 (d) 135
Net income $565 $30 $595 $295 $9 $304
Earnings per common
share:
Basic $0.68 $0.72 $0.37 $0.39
Diluted $0.65 $0.68 $0.35 $0.36
Shares used in
computing earnings
per share
(in thousands):
Basic 830,781 830,781 789,032 789,032
Diluted 874,207 874,207 838,174 838,174
(a) These adjustments reconcile the Company's GAAP results of operations
to its non-GAAP results of operations. The Company believes that
presentation of results excluding items such as non-cash stock-based
compensation, restructuring costs, and investment gains provides
meaningful supplemental information to both management and investors
that is indicative of the Company's 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
Company's GAAP results. The Company adopted the fair-value recognition
provisions of SFAS No. 123 revised (123R) to expense stock-based
compensation in its fiscal quarter ended December 31, 2005. Prior to
the adoption of SFAS No. 123R, the Company accounted for employee
stock-based compensation using the intrinsic value method prescribed
by APB No. 25.
(b) These adjustments reflect the non-cash stock-based compensation
expense as measured under SFAS No. 123R related to unvested stock
awards, including stock options, restricted stock, restricted stock
units, and employee stock purchase plan shares. The fair-value
calculated expense as determined on the awards' grant date is
recognized as the requisite service is rendered.
(c) These adjustments reflect the non-cash compensation expense as
measured under APB No. 25 related primarily to restricted stock
awarded to the Company's CEO in fiscal 2003 and restricted stock units
awarded to selected members of the Company's senior management team in
fiscal 2004 and 2005. Note that neither the Company's GAAP nor non-
GAAP results of operations in fiscal year 2005 included the accounting
impact had the Company chosen to apply the fair-value recognition
provisions of SFAS No. 123R.
(d) Amount reflects the expected tax impact on the above noted non-GAAP
adjustments.
RECONCILIATION OF NON-GAAP TO GAAP FINANCIAL GUIDANCE SUMMARY
(in millions, except per share amounts)
The financial guidance provided below is an estimate based on information available as of January 18, 2006. The Company's future performance and financial results are subject to risks and uncertainties, and actual results could differ materially from the guidance set forth below. Some of the factors that could affect the Company's financial results are stated above in this press release. 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 24, 2005, and the Company's Form 10-Q for the quarter ended December 31, 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.
Q2 2006 Financial Guidance Summary
Non-GAAP
GAAP Adjustments (a) Non-GAAP
Gross margin 27.8% 0.1% (b) 27.9%
Operating expenses $774 (44) (b) $730
Provision for income taxes $158 15 (c) $173
Diluted earnings per common share $0.38 $0.04 (d) $0.42
(a) These adjustments reconcile the Company's GAAP to its non-GAAP
financial guidance for the second quarter of fiscal 2006. The Company
believes that excluding items such as non-cash stock-based
compensation provides meaningful supplemental information to both
management and investors that is indicative of the Company's 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 Company's GAAP results.
(b) Reflects the expected non-cash compensation expense attributable to
stock-based compensation awards including stock options, restricted
stock, restricted stock units, and employee stock purchase plan
shares. This amount reflects the total estimated expense from the
application of SFAS No. 123R, which the Company adopted in the first
quarter of fiscal 2006.
(c) Amount reflects the expected tax impact on the above noted non-GAAP
adjustments.
(d) This adjustment represents the expected net of tax impact on earnings
per share from the non-GAAP adjustments related to stock-based
compensation expense.
Apple Computer, Inc.
Q1 2006 Unaudited Summary Data
Q4 2005 Actual Q1 2005 Actual
CPU
Operating Segments CPU Units k Rev $m Units k Rev $m
Americas 636 $1,771 476 $1,637
Europe 259 779 320 847
Japan 71 224 64 185
Retail 202 663 119 561
Other Segments (1) 68 241 67 260
Total Operating Segments 1,236 $3,678 1,046 $3,490
Units k Rev $m Units k Rev $m
Product Summary
Desktops (2) 602 $787 623 $1,001
Portables (3) 634 824 423 604
Subtotal CPUs 1,236 1,611 1,046 1,605
iPod 6,451 1,212 4,580 1,211
Other Music Related Products and
Services (4) NM 265 NM 177
Peripherals and Other Hardware NM 296 NM 284
Software, Service and Other Sales NM 294 NM 213
Total Apple $3,678 $3,490
Q1 2006 Actual
Operating Segments CPU Units k Rev $m
Americas 515 $2,700
Europe 387 1,242
Japan 81 355
Retail 193 1,072
Other Segments (1) 78 380
Total Operating Segments 1,254 $5,749
Units k Rev $m
Product Summary
Desktops (2) 667 $912
Portables (3) 587 812
Subtotal CPUs 1,254 1,724
iPod 14,043 2,906
Other Music Related Products and
Services (4) NM 491
Peripherals and Other Hardware NM 303
Software, Service and Other Sales NM 325
Total Apple $5,749
Sequential Change Year/Year Change
Operating Segments Units Revenue Units Revenue
Americas -19% 52% 8% 65%
Europe 49% 59% 21% 47%
Japan 14% 58% 27% 92%
Retail -4% 62% 62% 91%
Other Segments (1) 15% 58% 16% 46%
Total Operating Segments 1% 56% 20% 65%
Sequential Change Year/Year Change
Product Summary Units Revenue Units Revenue
Desktops (2) 11% 16% 7% -9%
Portables (3) -7% -1% 39% 34%
Subtotal CPUs 1% 7% 20% 7%
iPod 118% 140% 207% 140%
Other Music Related Products and
Services (4) NM 85% NM 177%
Peripherals and Other Hardware NM 2% NM 7%
Software, Service and Other Sales NM 11% NM 53%
Total Apple 56% 65%
(1) Other Segments include Asia Pacific and FileMaker.
(2) Includes iMac, eMac, Mac mini, Power Mac and Xserve product lines.
(3) Includes iBook and PowerBook product lines.
(4) Consists of iTunes Music Store sales, iPod services, and Apple-branded
and third-party iPod accessories.
NM: Not Meaningful
Source: prnewswire
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