Apple
APPLE INC (Form: 8-K, Received: 01/21/2009 16:30:19)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

January 21, 2009

Date of Report (date of earliest event reported)

 

 

APPLE INC.

(Exact name of Registrant as specified in its charter)

 

California   000-10030   94-2404110

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification Number)

1 Infinite Loop, Cupertino, CA 95014

(Address of principal executive offices)

(408) 996-1010

(Registrant’s telephone number, including area code)

 

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02 Results of Operations and Financial Condition.

On January 21, 2009, Apple Inc. (“Apple”) issued a press release regarding Apple’s financial results for its first fiscal quarter ended December 27, 2008 and a related data sheet. A copy of Apple’s press release is attached hereto as Exhibit 99.1 and a copy of the related data sheet is attached hereto as Exhibit 99.2.

The information contained in this Current Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

The following exhibits are furnished herewith:

 

Exhibit

Number

  

Description

99.1    Text of press release issued by Apple Inc. dated January 21, 2009.
99.2    Data sheet issued by Apple Inc. dated January 21, 2009.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    APPLE INC.
Date: January 21, 2009     By:   /s/ Peter Oppenheimer
       

Peter Oppenheimer

Senior Vice President and

Chief Financial Officer


EXHIBIT INDEX

 

Exhibit

Number

  

Description

99.1    Text of press release issued by Apple Inc. dated January 21, 2009.
99.2    Data sheet issued by Apple Inc. dated January 21, 2009.

Exhibit 99.1

Apple Reports First Quarter Results

Best Quarterly Revenue and Earnings in Apple History

iPod Sales Set New Record

CUPERTINO, California—January 21, 2009—Apple ® today announced financial results for its fiscal 2009 first quarter ended December 27, 2008. The Company posted record revenue of $10.17 billion and record net quarterly profit of $1.61 billion, or $1.78 per diluted share. These results compare to revenue of $9.6 billion and net quarterly profit of $1.58 billion, or $1.76 per diluted share, in the year-ago quarter. Gross margin was 34.7 percent, equal to 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™ and Apple TV ® over their economic lives. Adjusting GAAP sales and product costs to eliminate the impact of subscription accounting, the corresponding non-GAAP measures* for the quarter are $11.8 billion of “Adjusted Sales” and $2.3 billion of “Adjusted Net Income.”

Apple sold 2,524,000 Macintosh ® computers during the quarter, representing nine percent unit growth over the year-ago quarter. The Company sold a record 22,727,000 iPods during the quarter, representing three percent unit growth over the year-ago quarter. Quarterly iPhone units sold were 4,363,000, representing 88 percent unit growth over the year-ago quarter.

“Even in these economically challenging times, we are incredibly pleased to report our best quarterly revenue and earnings in Apple history—surpassing $10 billion in quarterly revenue for the first time ever,” said Steve Jobs, Apple’s CEO.


“Our outstanding results generated over $3.6 billion in cash during the quarter,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the second fiscal quarter of 2009, we expect revenue in the range of about $7.6 billion to $8 billion and we expect diluted earnings per share in the range of about $.90 to $1.00.”

Apple will provide live streaming of its Q1 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. PST on January 21, 2009 at www.apple.com/quicktime/qtv/earningsq109/ 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 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 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 December 27, 2008, with 4.4 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 Income before Provision for Income Taxes,” “Adjusted Provision for Income Taxes,” “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 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 December 27, 2008, 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 on-going 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 will factor into the determination of management compensation beginning in fiscal year 2009. Finally, management uses the non-GAAP measures of “Adjusted Income before Provision for Income Taxes,” “Adjusted Provision for Income Taxes,” “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; 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 and its Form 10-Q for the quarter ended December 27, 2008, 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.

Press Contact:

Steve Dowling

Apple

dowling@apple.com

(408) 974-1896

Investor Relations Contacts:

Nancy Paxton

Apple

paxton1@apple.com

(408) 974-5420

Joan Hoover

Apple

hoover1@apple.com

(408) 974-4570

NOTE TO EDITORS: For additional information visit Apple’s PR website (www.apple.com/pr/), or call Apple’s Media Helpline at (408) 974-2042.

© 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
     December 27,
2008
   December 29,
2007

Net sales

   $ 10,167    $ 9,608

Cost of sales (1)

     6,635      6,276
             

Gross margin

     3,532      3,332
             

Operating expenses:

     

Research and development (1)

     315      246

Selling, general, and administrative (1)

     1,091      960
             

Total operating expenses

     1,406      1,206
             

Operating income

     2,126      2,126

Other income and expense

     158      200
             

Income before provision for income taxes

     2,284      2,326

Provision for income taxes

     679      745
             

Net income

   $ 1,605    $ 1,581
             

Earnings per common share:

     

Basic

   $ 1.81    $ 1.81

Diluted

   $ 1.78    $ 1.76

Shares used in computing earnings per share:

     

Basic

     889,142      875,860

Diluted

     901,494      900,054

(1)       Includes stock-based compensation expense as follows:

     

Cost of sales

   $ 28    $ 18

Research and development

   $ 60    $ 39

Selling, general, and administrative

   $ 82    $ 53


UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share amounts)

 

     December 27,
2008
   September 27,
2008

ASSETS:

     

Current assets:

     

Cash and cash equivalents

   $ 7,236    $ 11,875

Short-term marketable securities

     18,411      10,236

Accounts receivable, less allowances of $54 and $47, respectively

     2,196      2,422

Inventories

     396      509

Deferred tax assets

     1,613      1,447

Other current assets

     5,311      5,822
             

Total current assets

     35,163      32,311

Long-term marketable securities

     2,498      2,379

Property, plant and equipment, net

     2,580      2,455

Goodwill

     207      207

Acquired intangible assets, net

     277      285

Other assets

     2,062      1,935
             

Total assets

   $ 42,787    $ 39,572
             

LIABILITIES AND SHAREHOLDERS’ EQUITY:

     

Current liabilities:

     

Accounts payable

   $ 4,715    $ 5,520

Accrued expenses

     3,807      3,719

Deferred revenue

     6,235      4,853
             

Total current liabilities

     14,757      14,092

Deferred revenue – non-current

     3,440      3,029

Other non-current liabilities

     1,681      1,421
             

Total liabilities

     19,878      18,542
             

Commitments and contingencies

     

Shareholders’ equity:

     

Common stock, no par value; 1,800,000,000 shares authorized; 890,414,924 and 888,325,973 shares issued and outstanding, respectively

     7,392      7,177

Retained earnings

     15,448      13,845

Accumulated other comprehensive income

     69      8
             

Total shareholders’ equity

     22,909      21,030
             

Total liabilities and shareholders’ equity

   $ 42,787    $ 39,572
             


UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

 

     Three Months Ended  
     December 27,
2008
    December 29,
2007
 

Cash and cash equivalents, beginning of the period

   $ 11,875     $ 9,352  
                

Operating Activities:

    

Net income

     1,605       1,581  

Adjustments to reconcile net income to cash generated by operating activities:

    

Depreciation, amortization, and accretion

     158       106  

Stock-based compensation expense

     170       110  

Provision for deferred income taxes

     (27 )     22  

Loss on disposition of property, plant, and equipment

     7       14  

Changes in operating assets and liabilities:

    

Accounts receivable, net

     226       (302 )

Inventories

     113       (113 )

Other current assets

     660       (550 )

Other assets

     (116 )     (253 )

Accounts payable

     (767 )     484  

Deferred revenue

     1,793       1,048  

Other liabilities

     116       640  
                

Cash generated by operating activities

     3,938       2,787  
                

Investing Activities:

    

Purchases of marketable securities

     (13,082 )     (6,127 )

Proceeds from maturities of marketable securities

     2,226       2,129  

Proceeds from sales of marketable securities

     2,668       758  

Purchases of other long-term investments

     (38 )     (9 )

Payment for acquisition of property, plant, and equipment

     (339 )     (224 )

Payment for acquisition of intangible assets

     (14 )     (8 )

Other

     (60 )     19  
                

Cash used in investing activities

     (8,639 )     (3,462 )
                

Financing Activities:

    

Proceeds from issuance of common stock

     77       179  

Excess tax benefits from stock-based compensation

     19       315  

Cash used to net share settle equity awards

     (34 )     (9 )
                

Cash generated by financing activities

     62       485  
                

Decrease in cash and cash equivalents

     (4,639 )     (190 )
                

Cash and cash equivalents, end of the period

   $ 7,236     $ 9,162  
                

Supplemental cash flow disclosure:

    

Cash paid for income taxes, net

   $ 550     $ 251  


UNAUDITED CONSOLIDATED SCHEDULE OF DEFERRED REVENUE

(In millions)

 

     December 27,
2008
   September 27,
2008

Deferred revenue-current:

     

iPhone and Apple TV

   $ 4,666    $ 3,518

AppleCare

     602      599

Other

     967      736
             

Total deferred revenue-current

     6,235      4,853
             

Deferred revenue-non-current:

     

iPhone and Apple TV

     2,627      2,262

AppleCare

     683      651

Other

     130      116
             

Total deferred revenue-non-current

     3,440      3,029
             

Total deferred revenue

   $ 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 December 27, 2008
     As
Reported
   Non-GAAP
Adjustments
    Non-GAAP

Net sales

   $ 10,167    $ 1,632 (a)   $ 11,799

Cost of sales

     6,635      637 (b)     7,272
                     

Gross margin

     3,532      995 (c)     4,527

Operating expenses

     1,406      —         1,406
                     

Operating income

     2,126      995 (c)     3,121

Other income and expense

     158      —         158
                     

Income before provision for income taxes

     2,284      995 (c)     3,279

Provision for income taxes

     679      296 (d)     975
                     

Net income

   $ 1,605    $ 699 (e)   $ 2,304
                     

Earnings per diluted common share

   $ 1.78    $ .78 (f)   $ 2.56

Shares used in computing diluted earnings per share

     901,494        901,494

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, operating income and income before provision for income taxes are the difference between non-GAAP adjustments to net sales and non-GAAP adjustments to cost of sales [(a) – (b)].

 

(d) Represents the application of the period’s effective tax rate to the non-GAAP adjustments to income before provision for income taxes.

 

(e) Represents the after-tax effect of the non-GAAP adjustments to gross margin, operating income and income before provision for income taxes.

 

(f) Represents the per share impact of the non-GAAP adjustments to net income.

Exhibit 99.2

Apple Inc.

Q1 2009 Unaudited Summary Data

 

     Q4 2008    Q1 2008    Q1 2009    Sequential Change    Year/Year Change
     CPU
Units K
   Revenue
$M
   CPU
Units K
   Revenue
$M
   CPU
Units K
   Revenue
$M
   CPU Units    Revenue    CPU Units    Revenue

Operating Segments

                             

Americas

   1,121    $ 3,572    841    $ 4,298    912    $ 4,501    - 19%    26%    8%    5%

Europe

   611      1,723    705      2,471    795      2,771    30%    61%    13%    12%

Japan

   78      320    91      400    99      481    27%    50%    9%    20%

Retail

   596      1,718    504      1,701    515      1,740    - 14%    1%    2%    2%

Other Segments (1)

   205      562    178      738    203      674    - 1%    20%    14%    - 9%
                                               

Total Operating Segments

   2,611    $ 7,895    2,319    $ 9,608    2,524    $ 10,167    - 3%    29%    9%    6%
                                               
                             
     Units K    Revenue
$M
   Units K    Revenue
$M
   Units K    Revenue
$M
   Sequential Change    Year/Year Change
                       Units    Revenue    Units    Revenue

Product Summary

                             

Desktops (2)

   936    $ 1,363    977    $ 1,515    728    $ 1,043    - 22%    - 23%    - 25%    - 31%

Portables (3)

   1,675      2,257    1,342      2,037    1,796      2,511    7%    11%    34%    23%
                                               

Subtotal CPUs

   2,611      3,620    2,319      3,552    2,524      3,554    - 3%    - 2%    9%    0%

iPod

   11,052      1,660    22,121      3,997    22,727      3,371    106%    103%    3%    - 16%

Other Music Related Products and Services (4)

        832         808         1,011       22%       25%

iPhone and Related Products & Services (5)

   6,892      806    2,315      241    4,363      1,247    - 37%    55%    88%    417%

Peripherals and Other Hardware

        428         382         378       - 12%       - 1%

Software, Service and Other Sales

        549         628         606       10%       - 4%
                                         

Total Apple

      $ 7,895       $ 9,608       $ 10,167       29%       6%
                                         

 

(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