Apple Reports Third Quarter Results

All-Time Record Revenue

Earnings Increase 78 Percent

News provided by

Apple

Jul 20, 2010, 04:30 ET

CUPERTINO, Calif., July 20 /PRNewswire-FirstCall/ -- Apple® today announced financial results for its fiscal 2010 third quarter ended June 26, 2010. The Company posted record revenue of $15.7 billion and net quarterly profit of $3.25 billion, or $3.51 per diluted share. These results compare to revenue of $9.73 billion and net quarterly profit of $1.83 billion, or $2.01 per diluted share, in the year-ago quarter. Gross margin was 39.1 percent compared to 40.9 percent in the year-ago quarter. International sales accounted for 52 percent of the quarter's revenue.

Apple sold 3.47 million Macs during the quarter, representing a new quarterly record and a 33 percent unit increase over the year-ago quarter. The Company sold 8.4 million iPhones in the quarter, representing 61 percent unit growth over the year-ago quarter. Apple sold 9.41 million iPods during the quarter, representing an eight percent unit decline from the year-ago quarter.  The Company began selling iPads during the quarter, with total sales of 3.27 million.

"It was a phenomenal quarter that exceeded our expectations all around, including the most successful product launch in Apple's history with iPhone 4," said Steve Jobs, Apple's CEO. "iPad is off to a terrific start, more people are buying Macs than ever before, and we have amazing new products still to come this year."

"We're really pleased to have generated over $4 billion of cash during the quarter," said Peter Oppenheimer, Apple's CFO.  "Looking ahead to the fourth fiscal quarter of 2010, we expect revenue of about $18 billion and we expect diluted earnings per share of about $3.44"  

Apple will provide live streaming of its Q3 2010 financial results conference call beginning at 2:00 p.m. PDT on July 20, 2010 at www.apple.com/quicktime/qtv/earningsq310/. This webcast will also be available for replay for approximately two weeks thereafter.

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; 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 and applications; the potential impact of a finding that the Company has infringed on the intellectual property rights of others; the Company's dependency on the performance of distributors and other resellers of the Company's products; 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; the continued service and availability of key executives and employees; war, terrorism, public health issues, and other circumstances that could disrupt supply, delivery, or demand of 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; and unfavorable results of other legal proceedings.

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, as amended, for the fiscal year ended September 26, 2009, its Forms 10-Q for the quarters ended December 26, 2009 and March 27, 2010, and its Form 10-Q for the quarter ended June 26, 2010 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 designs Macs, the best personal computers in the world, along with OS X, iLife, iWork, and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple reinvented the mobile phone with its revolutionary iPhone and App Store, and has recently introduced its magical iPad which is defining the future of mobile media and computing devices.

© 2010 Apple Inc. All rights reserved. Apple, the Apple logo, Mac, Mac OS, Macintosh and iPhone are trademarks of Apple. Other company and product names may be trademarks of their respective owners.

Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share amounts which are reflected in thousands and per share amounts)

Three Months Ended

Nine Months Ended

June 26, 2010

June 27, 2009

June 26, 2010

June 27, 2009












Net sales

$

15,700

$

9,734

$

44,882

$

30,698

Cost of sales (1)


9,564

5,751

26,710

18,581












 Gross margin

6,136

3,983

18,172

12,117












Operating expenses:










Research and development (1)

464

341

1,288

975

Selling, general and administrative (1)

1,438

1,010

3,946

3,086












Total operating expenses

1,902

1,351

5,234

4,061












Operating income

4,234

2,632

12,938

8,056












Other income and expense

58

60

141

281












Income before provision for income taxes

4,292

2,692

13,079

8,337












Provision for income taxes

1,039

864

3,374

2,634












Net income

$

3,253

$

1,828

$

9,705

$

5,703












Earnings per common share:










Basic

$

3.57

$

2.05

$

10.69

$

6.40

Diluted

$

3.51

$

2.01

$

10.51

$

6.30












Shares used in computing earnings per share:










Basic

912,197

893,712

907,762

891,345

Diluted

927,361

909,160

923,341

904,549












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










Cost of sales

$

38

$

28

$

112

$

85

Research and development

$

80

$

65

$

240

$

192

Selling, general and administrative

$

101

$

86

$

303

$

253

Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share amounts)

June 26, 2010

September 26, 2009






ASSETS:










Current assets:




 Cash and cash equivalents

$

9,705

$

5,263

 Shortterm marketable securities

14,583

18,201

 Accounts receivable, less allowances of $52 in each period

3,447

3,361

 Inventories

942

455

 Deferred tax assets

1,216

1,135

 Vendor non-trade receivables

2,952

1,696

 Other current assets

3,188

1,444

   Total current assets

36,033

31,555






Longterm marketable securities

21,551

10,528

Property, plant and equipment, net

3,990

2,954

Goodwill

714

206

Acquired intangible assets, net

318

247

Other assets

2,119

2,011

   Total assets

$

64,725

$

47,501












LIABILITIES AND SHAREHOLDERS' EQUITY










Current liabilities:




 Accounts payable

$

8,469

$

5,601

 Accrued expenses

4,452

3,852

 Deferred revenue

2,691

2,053

   Total current liabilities

15,612

11,506






Deferred revenue – non-current


1,021

853

Other non-current liabilities


4,981

3,502

   Total liabilities

21,614

15,861






Commitments and contingencies










Shareholders' equity:




Common stock, no par value; 1,800,000,000 shares
authorized; 913,482,347 and 899,805,500 shares issued
and outstanding, respectively

10,133

8,210

 Retained earnings

32,870

23,353

 Accumulated other comprehensive income

108

77

   Total shareholders' equity

43,111

31,640






   Total liabilities and shareholders' equity

$

64,725

$

47,501

Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

Nine Months Ended

June 26, 2010

June 27, 2009






Cash and cash equivalents, beginning of the period

$

5,263

$

11,875






Operating activities:




  Net income

9,705

5,703

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




    Depreciation, amortization and accretion

698

531

    Stock-based compensation expense

655

530

    Deferred income tax expense

1,298

772

    Loss on disposition of property, plant and equipment

14

18

 Changes in operating assets and liabilities:




    Accounts receivable, net

(79)

(264)

    Inventories

(487)

129

    Vendor non-trade receivables

(1,256)

788

    Other current assets

(944)

62

    Other assets

(71)

(602)

    Accounts payable

2,812

(648)

    Deferred revenue

806

323

    Other liabilities

(239)

(293)






    Cash generated by operating activities

12,912

7,049






Investing activities:




 Purchases of marketable securities

(41,318)

(34,696)

 Proceeds from maturities of marketable securities

19,758

12,780

 Proceeds from sales of marketable securities

14,048

9,117

 Purchases of other long-term investments

(10)

(61)

 Payments made in connection with business acquisitions, net of cash acquired

(615)

-

 Payments for acquisition of property, plant and equipment

(1,245)

(685)

 Payments for acquisition of intangible assets

(63)

(56)

 Other

(26)

(62)






    Cash used in investing activities

(9,471)

(13,663)






Financing activities:




 Proceeds from issuance of common stock

733

288

 Excess tax benefits from stock-based compensation

652

124

 Taxes paid related to net share settlement of equity awards

(384)

(68)






    Cash generated by financing activities

1,001

344






Increase/(decrease) in cash and cash equivalents

4,442

(6,270)






Cash and cash equivalents, end of the period

$

9,705

$

5,605






Supplemental cash flow disclosure:




 Cash paid for income taxes, net

$

2,657

$

2,490

Apple Inc.

Q3 2010 Unaudited Summary Data



































Q2 2010

Q3 2009

Q3 2010
















Sequential Change

Year/Year Change

Operating Segments

CPU  
Units K

Revenue
$M


CPU  
Units K

Revenue
$M


CPU  
Units K

Revenue
$M


CPU
Units

Revenue

CPU
Units

Revenue

Americas

971

$4,993

1,147

$4,474

1,358

$6,227

40%

25%

18%

39%

Europe

899

4,050

626

2,505

914

4,160

2%

3%

46%

66%

Japan

129

887

108

560

129

910

0%

3%

19%

63%

Asia Pacific

338

1,886

230

703

394

1,825

17%

- 3%

71%

160%

Retail

606

1,683

492

1,492

677

2,578

12%

53%

38%

73%
















Total Operating Segments

2,943

$13,499

2,603

$9,734

3,472

$15,700

18%

16%

33%

61%



























































































































Sequential Change

Year/Year Change

Product Summary

Units K

Revenue
$M


Units K

Revenue
$M


Units K

Revenue
$M


Units  

Revenue

Units  

Revenue

Desktops (1)

1,147

$1,532

849

$1,134

1,004

$1,301

- 12%

- 15%

18%

15%

Portables (2)

1,796

2,228

1,754

2,220

2,468

3,098

37%

39%

41%

40%

Subtotal CPUs

2,943

3,760

2,603

3,354

3,472

4,399

18%

17%

33%

31%

iPod

10,885

1,861

10,215

1,492

9,406

1,545

- 14%

- 17%

- 8%

4%

Other Music Related Products and Services (3)

1,327

958

1,214

- 9%

27%

iPhone and Related Products and Services (4)

8,752

5,445

5,208

3,060

8,398

5,334

- 4%

- 2%

61%

74%

iPad and Related Products and Services (5)

0

0

0

0

3,270

2,166

N/M

N/M

N/M

N/M

Peripherals and Other Hardware

472

340

396

- 16%

16%

Software, Service and Other Sales

634

530

646

2%

22%

Total Apple

$13,499

$9,734

$15,700

16%

61%
















































(1)  Includes iMac, Mac mini, Mac Pro and Xserve product lines.  

(2)  Includes MacBook, MacBook Air and MacBook Pro product lines.  

(3)  Consists of iTunes Store sales, iPod services, and Apple-branded and third-party iPod accessories.  

(4)  Units consist of iPhone handset sales; Revenue is derived from handset sales, carrier agreements, and Apple-branded and third-party iPhone accessories.  

(5)  Includes iPad sales, services, and Apple-branded and third-party iPad accessories.  


N/M:  Not Meaningful               K = Units in thousands               $M = Amounts in millions

SOURCE Apple

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