Friday, January 25, 2008

Apple Reports First Quarter Results

Best Quarterly Revenue & Earnings in Apple History

Mac, iPod & iPhone Sales Break Previous Records CUPERTINO, Calif., Jan. 22 /PRNewswire-FirstCall/ -- Apple® today announced financial results for its fiscal 2008 first quarter ended December 29, 2007. The Company posted revenue of $9.6 billion and net quarterly profit of $1.58 billion, or $1.76 per diluted share. These results compare to revenue of $7.1 billion and net quarterly profit of $1 billion, or $1.14 per diluted share, in the year-ago quarter. Gross margin was 34.7 percent, up from 31.2 percent in the year-ago quarter. International sales accounted for 45 percent of the quarter's revenue.

Apple shipped 2,319,000 Macintosh® computers, representing 44 percent unit growth and 47 percent revenue growth over the year-ago quarter. The Company sold 22,121,000 iPods during the quarter, representing five percent unit growth and 17 percent revenue growth over the year-ago quarter. Quarterly iPhone(TM) sales were 2,315,000.

"We're thrilled to report our best quarter ever, with the highest revenue and earnings in Apple's history," said Steve Jobs, Apple's CEO. "We have an incredibly strong new product pipeline for 2008, starting with MacBook Air, Mac Pro and iTunes Movie Rentals in the first two weeks."

"Apple's revenue grew 35 percent year-over-year to $9.6 billion, an increase of almost $2.5 billion over the previous December quarter's record-breaking results," said Peter Oppenheimer, Apple's CFO. "Our strong results produced cash flow from operations of over $2.7 billion during the quarter, yielding an ending cash balance of over $18.4 billion. Looking ahead to the second quarter of fiscal 2008, we expect revenue of about $6.8 billion and earnings per diluted share of about $.94."

Apple will provide live streaming of its Q1 2008 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 Tuesday, January 22, 2008 at http://www.apple.com/quicktime/qtv/earningsq108/ and will also be available for replay.

This press release contains forward-looking statements 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 potential litigation and government enforcement actions that may result from the matters investigated by the special committee of the board of directors and the restatement of the Company's consolidated financial statements; unfavorable results of legal proceedings; 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; war, terrorism, public health issues, and other circumstances that could disrupt supply, delivery, or demand of products; continued competitive pressures in the marketplace; the Company's reliance on sole service providers for iPhone in the US, UK, Germany and France; 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; 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 effect that product quality problems could have on the Company's sales and operating profits; the inventory risk associated with the Company's need to order or commit to order product components in advance of customer orders; 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 dependency on the performance of distributors and other resellers of the Company's products; the Company's reliance on the availability of third-party digital content; and the potential impact of a finding that the Company has infringed on the intellectual property rights of others. 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 29, 2007 and its Form 10-Q for the quarter ended December 29, 2007 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.

© 2008 Apple Inc. All rights reserved. Apple, the Apple logo, Mac, Mac OS, Macintosh, iPhone 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 and per share amounts)

Three Months Ended
December 29, 2007 December 30, 2006

Net sales $9,608 $7,115
Cost of sales (1) 6,276 4,895
Gross margin 3,332 2,220
Operating expenses:
Research and development (1) 246 184
Selling, general and
administrative (1) 960 714

Total operating expenses 1,206 898

Operating income 2,126 1,322

Other income and expense 200 126

Income before provision for income
taxes 2,326 1,448

Provision for income taxes 745 444

Net income $1,581 $1,004

Earnings per common share:
Basic $1.81 $1.17
Diluted $1.76 $1.14

Shares used in computing earnings
per share (in thousands):
Basic 875,860 857,691
Diluted 900,054 883,297

(1) Includes stock-based compensation
expense as follows:
Cost of sales $18 $6
Research and development $39 $16
Selling, general and administrative $53 $24



UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share amounts)

December 29, 2007 September 29, 2007

ASSETS:

Current assets:
Cash and cash equivalents $9,162 $9,352
Short-term investments 9,286 6,034
Accounts receivable, less allowances
of $45 and $47, respectively 1,939 1,637
Inventories 459 346
Deferred tax assets 993 782
Other current assets 4,350 3,805
Total current assets 26,189 21,956

Property, plant and equipment, net 1,870 1,832
Goodwill 38 38
Acquired intangible assets, net 311 299
Other assets 1,631 1,222

Total assets $30,039 $25,347


LIABILITIES AND SHAREHOLDERS' EQUITY:

Current liabilities:
Accounts payable $5,366 $4,970
Accrued expenses 5,169 4,329
Total current liabilities 10,535 9,299
Non-current liabilities 2,700 1,516
Total liabilities 13,235 10,815

Commitments and contingencies

Shareholders' equity:
Common stock, no par value;
1,800,000,000 shares authorized;
878,628,867 and 872,328,972 shares
issued and outstanding, respectively 6,046 5,368
Retained earnings 10,684 9,101
Accumulated other comprehensive income 74 63

Total shareholders' equity 16,804 14,532

Total liabilities and shareholders'
equity $30,039 $25,347



UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

Three Months Ended
December 29, 2007 December 30, 2006

Cash and cash equivalents, beginning
of the period $9,352 $6,392
Operating Activities:
Net income 1,581 1,004
Adjustments to reconcile net income
to cash generated by operating
activities:
Depreciation, amortization, and
accretion 106 74
Stock-based compensation expense 110 46
Provision for deferred income taxes 22 73
Loss on disposition of property, plant,
and equipment 14 5
Changes in operating assets and
liabilities:
Accounts receivable, net (302) (369)
Inventories (113) (33)
Other current assets (550) 36
Other assets (253) 28
Accounts payable 484 495
Deferred revenue 1,048 199
Other liabilities 640 255

Cash generated by operating
activities 2,787 1,813

Investing Activities:
Purchases of short-term investments (6,127) (2,581)
Proceeds from maturities of short-term
investments 2,129 934
Proceeds from sales of investments 758 655
Purchases of long-term investments (9) -
Payment for acquisition of property,
plant, and equipment (224) (142)
Payment for acquisition of intangible
assets (8) (115)
Other 19 15

Cash used in investing activities (3,462) (1,234)

Financing Activities:
Proceeds from issuance of common stock 179 101
Excess tax benefits from stock-based
compensation 315 87
Cash used to net share settle equity
awards (9) -

Cash generated by financing activities 485 188

(Decrease) increase in cash and cash
equivalents (190) 767

Cash and cash equivalents, end of the
period $9,162 $7,159

Supplemental cash flow disclosure:
Cash paid for income taxes, net $251 $114



UNAUDITED CONSOLIDATED SCHEDULE OF DEFERRED REVENUE

(in millions)

December 29, 2007 September 29, 2007

Deferred revenue-current:
iPhone and Apple TV $816 $346
AppleCare 467 430
Other 812 634
Total deferred revenue-current 2,095 1,410

Deferred revenue-non-current:
iPhone and Apple TV 624 290
AppleCare 529 495
Other 40 45
Total deferred revenue-non-current 1,193 830

Total deferred revenue $3,288 $2,240



Apple Inc.
Q1 2008 Unaudited Summary Data

Q4 2007 Q1 2007 Q1 2008
CPU Rev CPU Rev CPU Rev
Operating Segments Units K $M Units K $M Units K $M
Americas 965 $2,928 625 $3,521 841 $4,298
Europe 499 1,339 491 1,712 705 2,471
Japan 72 255 70 285 91 400
Retail 473 1,251 308 1,115 504 1,701
Other Segments (1) 155 444 112 482 178 738

Total Operating Segments 2,164 $6,217 1,606 $7,115 2,319 $9,608


Rev Rev Rev
Units K $M Units K $M Units K $M
Product Summary
Desktops (2) 817 $1,195 637 $955 977 $1,515
Portables (3) 1,347 1,908 969 1,455 1,342 2,037
Subtotal CPUs 2,164 3,103 1,606 2,410 2,319 3,552
iPod 10,200 1,619 21,066 3,427 22,121 3,997
Other Music Related
Products and Services
(4) 601 634 808
iPhone and Related
Products & Services
(5) 1,119 118 - - 2,315 241
Peripherals and Other
Hardware 346 297 382
Software, Service and
Other Sales 430 347 628
Total Apple $6,217 $7,115 $9,608


Sequential Change Year/Year Change
CPU CPU
Operating Segments Units Revenue Units Revenue
Americas -13% 47% 35% 22%
Europe 41% 85% 44% 44%
Japan 26% 57% 30% 40%
Retail 7% 36% 64% 53%
Other Segments (1) 15% 66% 59% 53%
Total Operating Segments 7% 55% 44% 35%


Sequential Change Year/Year Change
Units Revenue Units Revenue

Product Summary
Desktops (2) 20% 27% 53% 59%
Portables (3) - 0% 7% 38% 40%
Subtotal CPUs 7% 14% 44% 47%
iPod 117% 147% 5% 17%
Other Music Related Products
and Services (4) 34% 27%
iPhone and Related Products &
Services (5) 107% 104% NM NM
Peripherals and Other Hardware 10% 29%
Software, Service and Other Sales 46% 81%
Total Apple 55% 35%

(1) Other Segments include Asia Pacific and FileMaker.
(2) Includes iMac, eMac, Mac mini, Mac Pro, PowerMac and Xserve product
lines.
(3) Includes MacBook, iBook, MacBook Pro and PowerBook 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.

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