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2014

Apple Reports Fourth Quarter Results

Apple Concludes Best Quarter & Best Year in Company History



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    CUPERTINO, Calif., Oct. 11 /PRNewswire-FirstCall/ -- Apple(R) today
 announced financial results for its fiscal 2005 fourth quarter ended September
 24, 2005, reporting the highest revenue and earnings in the Company's history.
 Apple posted revenue of $3.68 billion and a net quarterly profit of $430
 million, or $.50 per diluted share. These results compare to revenue of $2.35
 billion and a net profit of $106 million, or $.13 per diluted share, in the
 year-ago quarter. Gross margin was 28.1 percent, up from 27.0 percent in the
 year-ago quarter. International sales accounted for 40 percent of the
 quarter's revenue.
     Earnings per share benefited by $.12 from several tax items related to net
 deferred tax assets, tax reserves, and a revision to the full year tax rate
 estimated in prior quarters.
     Apple shipped 1,236,000 Macintosh(R) units and 6,451,000 iPods during the
 quarter, representing 48 percent growth in Macs and 220 percent growth in
 iPods over the year-ago quarter.
     For fiscal 2005, the Company generated revenue of $13.93 billion and a net
 profit of $1.335 billion, reflecting annual growth of 68 percent and 384
 percent, respectively, and representing the highest annual revenue and net
 profit in the Company's history.
     "We're thrilled to have concluded the best year in Apple's history, with
 68 percent year-over-year revenue growth and 384 percent net profit growth,"
 said Steve Jobs, Apple's CEO. "This is the direct result of our focus on
 innovation and the immense talent and creativity at Apple. We could not be
 more excited about the new products we're working on for 2006."
     "We're very pleased to report 48 percent year-over-year growth in Mac
 shipments in Q4, as well as our 10th consecutive quarter of record iPod
 sales," said Peter Oppenheimer, Apple's CFO. "Looking ahead to the first
 quarter of fiscal 2006 which will span 14 weeks, we expect revenue of about
 $4.7 billion. We expect GAAP earnings per diluted share of about $.46,
 including an estimated $.03 per share expense impact from non-cash share-based
 compensation, translating to non-GAAP EPS of about $.49."
     Apple will provide live streaming of its Q4 2005 financial results
 conference call utilizing QuickTime(TM), 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 Tuesday, October 11, 2005 at
 http://www.apple.com/quicktime/qtv/earningsq405/ 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 the Company's
 estimated revenue and earnings as well as the estimated expense impact of
 adoption of SFAS 123R for the first 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 music 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 impact the transition of all Macs
 to Intel microprocessors by the end of 2007, or the announcement of such
 transition, might have on sales of current or future Mac products with Power
 PC processors. 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 25, 2004, the Company's Form 10-Q for the quarter
 ended December 25, 2004, the Company's Form 10-Q for the quarter ended March
 26, 2005, and the Company's Form 10-Q for the quarter ended June 25, 2005. 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:
                                                   September 24,  September 25,
                                                        2005           2004
     Current assets:
      Cash and cash equivalents                        $3,491         $2,969
      Short-term investments                            4,770          2,495
      Accounts receivable, less allowances of
       $46 and $47, respectively                          895            774
      Inventories                                         165            101
      Deferred tax assets                                 331            231
      Other current assets                                648            485
        Total current assets                           10,300          7,055
      Property, plant, and equipment, net                 817            707
      Goodwill                                             69             80
      Acquired intangible assets                           27             17
      Other assets                                        338            191
        Total assets                                  $11,551         $8,050
 
 
                LIABILITIES AND SHAREHOLDERS' EQUITY:
     Current liabilities:
      Accounts payable                                 $1,779         $1,451
      Accrued expenses                                  1,705          1,200
        Total current liabilities                       3,484          2,651
     Non-current liabilities                              601            323
        Total liabilities                               4,085          2,974
 
     Commitments and contingencies
 
     Shareholders' equity:
      Common stock, no par value; 1,800,000,000 shares
       authorized; 835,019,364 and 782,887,234 shares
       issued and outstanding, respectively             3,521          2,514
      Deferred stock compensation                        (60)           (93)
      Retained earnings                                 4,005          2,670
      Accumulated other comprehensive income (loss)        --           (15)
        Total shareholders' equity                      7,466          5,076
        Total liabilities and shareholders' equity    $11,551         $8,050
 
 
           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
               (In millions, except share and per share amounts)
 
                              Three Months Ended       Twelve Months Ended
 
                           Sept. 24,    Sept. 25,     Sept. 24,    Sept. 25,
                              2005         2004          2005          2004
 
     Net sales               $3,678       $2,350      $13,931       $8,279
     Cost of sales            2,643        1,716        9,888        6,020
     Gross margin             1,035          634        4,043        2,259
 
     Operating expenses:
      Research and
       development              147          122          534          489
      Selling, general, and
       administrative           470          379        1,859        1,421
      Restructuring costs        --            5           --           23
        Total operating
         expenses               617          506        2,393        1,933
     Operating income           418          128        1,650          326
 
     Other income and expense:
      Gains on non-current
       investments               --           --           --            4
      Interest and other
       income, net               60           19          165           53
        Total other income
         and expense             60           19          165           57
 
     Income before provision
      for income taxes          478          147        1,815          383
     Provision for income
      taxes                      48           41          480          107
 
     Net income                $430         $106       $1,335         $276
 
     Earnings per common share:
       Basic                  $0.52        $0.14        $1.65        $0.37
       Diluted                $0.50        $0.13        $1.56        $0.36
 
     Shares used in computing
      earnings per share
      (in thousands):
       Basic                821,420      766,926      808,439      743,180
       Diluted              866,404      805,812      856,780      774,622
 
 
            RECONCILIATION OF NON-GAAP TO GAAP RESULTS OF OPERATIONS
 
               (in millions, except share and per share amounts)
 
 
                           Three Months Ended        Three Months Ended
                           September 24, 2005        September 25, 2004
 
                               Non-GAAP                 Non-GAAP
                         As     Adjust-    Non-     As     Adjust-      Non-
                      Reported  ments  (a) GAAP  Reported  ments  (a)   GAAP
 
 
     Operating income    $418       $11(b) $429     $128       $16(c)  $144
 
     Total other income
      and expense          60        --      60       19        --       19
 
     Provision for
      income taxes         48         1(d)   49       41         3(d)    44
 
     Net income          $430       $10    $440     $106       $13     $119
 
     Earnings per common
      share:
       Basic            $0.52             $0.54    $0.14              $0.16
       Diluted          $0.50             $0.51    $0.13              $0.15
 
     Shares used in
      computing earnings
      per share (in thousands):
       Basic          821,420           821,420  766,926            766,926
       Diluted        866,404           866,404  805,812            805,812
 
     (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 share-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. Neither the
           Company's 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 Company's Forms 10-Q and 10-K as filed with the
           SEC. The Company will adopt SFAS No. 123R in its first fiscal
           quarter ending December 31, 2005.
     (b)   This adjustment reflects the non-cash compensation expense related
           primarily to restricted stock awarded to the Company's CEO in fiscal
           2003 and restricted stock units awarded to members of the Company's
           senior management team in fiscal 2004 and 2005.  Of the total non-
           cash compensation expense of $11 million, $1 million is included in
           cost of sales; $2 million is included in research and development
           expense; and $8 million is included in selling, general and
           administrative expense. Note that neither the Company's 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 $5 million related to restructuring actions
           initiated during the fourth quarter of fiscal 2004 as well as $11
           million related to non-cash compensation expense primarily
           attributable to restricted stock awarded to the Company's CEO and
           restricted stock units awarded to members of the Company's senior
           management team. Of the total non-cash compensation expense of $11
           million, $1 million is included in cost of sales; $2 million is
           included in research and development expense; and $8 million is
           included in selling, general and administrative expense.
     (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)
 
                          Twelve Months Ended       Twelve Months Ended
                           September 24, 2005        September 25, 2004
 
                                  Non-GAAP                 Non-GAAP
                         As       Adjust-   Non-     As     Adjust-     Non-
                      Reported    ments(a)  GAAP  Reported  ments(a)    GAAP
 
     Operating income  $1,650       $42(b) $1,692    $326     $57(c)    $383
 
     Total other income
      and expense         165        --       165      57     (4)(d)      53
 
     Provision for
      income taxes        480         4(e)    484     107      10(e)     117
 
     Net income        $1,335       $38    $1,373    $276     $43       $319
 
     Earnings per common share:
     Basic              $1.65               $1.70   $0.37              $0.43
     Diluted            $1.56               $1.60   $0.36              $0.41
 
     Shares used in
      computing earnings
      per share (in thousands):
     Basic            808,439             808,439 743,180            743,180
     Diluted          856,780             856,780 774,622            774,622
 
     (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 share-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. Neither the
           Company's 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 Company's Forms 10-Q and 10-K as filed with the
           SEC. The Company will adopt SFAS No. 123R in its first fiscal
           quarter ending December 31, 2005.
     (b)   This adjustment reflects the non-cash compensation expense related
           primarily to restricted stock awarded to the Company's CEO in fiscal
           2003 and restricted stock units awarded to members of the Company's
           senior management team in fiscal 2004 and 2005.  Of the total non-
           cash compensation expense of $42 million, $2 million is included in
           cost of sales; $6 million is included in research and development
           expense; and $34 million is included in selling, general and
           administrative expense. Note that neither the Company's 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 $23 million related to restructuring
           actions initiated during fiscal 2004 as well as $34 million related
           to non-cash compensation expense primarily attributable to
           restricted stock awarded to the Company's CEO and restricted stock
           units awarded to members of the Company's senior management team. Of
           the total non-cash compensation expense of $34 million, $1 million
           is included in cost of sales; $4 million is included in research and
           development expense; and $29 million is included in selling, general
           and administrative expense.
     (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.
 
 
         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 October 11, 2005. 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 25, 2004, the Company's Form 10-Q for the quarter
 ended December 25, 2004, the Company's Form 10-Q for the quarter ended March
 26, 2005, and the Company's Form 10-Q for the quarter ended June 25, 2005. The
 Company assumes no obligation to update any forward-looking statements or
 information, which speak as of their respective dates.
 
                                    Q1 2006 Financial Guidance Summary
 
                                         Non-GAAP
                              GAAP      Adjustments       (a)       Non-GAAP
 
     Gross margin             27.3%         0.1%          (b)        27.4%
 
     Operating expenses        $760         (40)          (b)         $720
 
     Provision for income
      taxes                    $188           14          (c)         $202
 
     Diluted earnings per
      common share            $0.46        $0.03          (d)        $0.49
 
 
     (a)   These adjustments reconcile the Company's GAAP to its non-GAAP
           financial guidance for the first quarter of fiscal 2006.  The
           Company believes that excluding items such as non-cash share-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)   This adjustment reflects the expected non-cash compensation expense
           attributable to share-based compensation awards including restricted
           stock and restricted stock units, employee stock options and shares
           issued under the employee stock purchase plan. This amount reflects
           the total estimated expense of non-cash share-based compensation
           subsequent to the application of SFAS 123 revised (123R), which the
           Company will adopt 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 share-
           based compensation expense.
 
 
                              Apple Computer, Inc.
                         Q4 2005 Unaudited Summary Data
 
                                Q3 2005 Actual   Q4 2004 Actual  Q4 2005 Actual
 
                                                     CPU            CPU
     Operating Segments      CPU Units k Rev $m Units k  Rev $m Units k Rev $m
        Americas                     595  $1,739    471  $1,196    636  $1,771
        Europe                       283     742    155     423    259     779
        Japan                         76     227     56     175     71     224
        Retail                       144     555     98     376    202     663
        Other Segments (1)            84     257     56     180     68     241
     Total Operating Segments      1,182  $3,520    836  $2,350  1,236  $3,678
 
 
                                  Units k Rev $m Units k Rev $m Units k Rev $m
     Product Summary
        Desktops (2)                 687    $845    385    $556    602    $787
        Portables (3)                495     720    451     675    634     824
     Subtotal CPUs                 1,182   1,565    836   1,231  1,236   1,611
        iPod                       6,155   1,103  2,016     537  6,451   1,212
        Other Music Products (4)      NM     241     NM      98     NM     265
        Peripherals & Other HW        NM     266     NM     271     NM     296
        Software & Other              NM     345     NM     213     NM     294
     Total Apple                          $3,520         $2,350         $3,678
 
 
                                            Sequential Change  Year/Year Change
     Operating Segments                       Units  Revenue    Units  Revenue
          Americas                              7%       2%      35%      48%
          Europe                               -8%       5%      67%      84%
          Japan                                -7%      -1%      27%      28%
          Retail                               40%      19%     106%      76%
          Other Segments (1)                  -19%      -6%      21%      34%
     Total Operating Segments                   5%       4%      48%      57%
 
 
                                           Sequential Change  Year/Year Change
                                             Units   Revenue   Units   Revenue
     Product Summary
          Desktops (2)                        -12%      -7%      56%      42%
          Portables (3)                        28%      14%      41%      22%
     Subtotal CPUs                              5%       3%      48%      31%
          iPod                                  5%      10%     220%     126%
          Other Music Products (4)              NM      10%       NM     170%
          Peripherals & Other HW                NM      11%       NM       9%
          Software & Other                      NM     -15%       NM      38%
     Total Apple                                         4%               57%
 
     (1) Other Segments include Asia Pacific and FileMaker.
     (2) Includes iMac, eMac, Mac mini, PowerMac and Xserve product lines.
     (3) Includes iBook and PowerBook product lines.
     (4) Other Music Products consists of iTunes Music Store sales and iPod
         related services and accessories.
 
     NM:  Not Meaningful
 
 

SOURCE Apple Computer, Inc.

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