10-QPeriod: Q1 FY2010

Apple Inc. Quarterly Report for Q1 Ended Dec 26, 2009

Filed January 25, 2010For Securities:AAPL

Summary

Apple Inc.'s Form 10-Q filing for the quarter ended December 26, 2009, reveals a period of robust financial performance driven by strong sales across its product lines, particularly the iPhone. The company reported a significant increase in net sales and net income compared to the prior year's quarter, demonstrating its continued growth trajectory. This period also marks the retrospective adoption of new accounting principles for revenue recognition, impacting prior period comparability but aiming to provide a clearer picture of economic performance, especially for products like the iPhone and Apple TV. Key financial highlights include substantial revenue growth, driven by a near doubling of iPhone sales, significant increases in Mac sales, and continued performance from iPods and the iTunes Store. The company maintained healthy gross margins, though it anticipates a decrease in the near future due to product mix and component cost pressures. Apple's balance sheet remains strong, with a substantial increase in cash, cash equivalents, and marketable securities, providing ample liquidity and financial flexibility for future investments and operations.

Financial Highlights

45 data points
Beta

Revenue

$15.68B

40.9% Gross Margin

Net Income

$3.38B

21.5% Net Margin

EPS (Diluted)

$0.13

Total Assets

$53.93B

Cash & Equivalents

$7.61B

Free Cash Flow

$5.78B

Financial Statements
Beta
Revenue$15.68B
Cost of Revenue$9.27B
Gross Profit$6.41B
R&D Expenses$398.00M
SG&A Expenses$1.29B
Operating Expenses$1.69B
Operating Income$4.72B
Net Income$3.38B
EPS (Basic)$0.13
EPS (Diluted)$0.13
Shares Outstanding (Basic)25.30B
Shares Outstanding (Diluted)25.75B

Key Highlights

  • 1Net sales surged by 32% year-over-year to $15.68 billion.
  • 2Net income increased by 50% to $3.38 billion, with diluted EPS growing to $3.67 from $2.50.
  • 3iPhone sales more than doubled, reaching $5.58 billion and constituting 36% of total net sales.
  • 4Mac sales grew 25% to $4.45 billion, with desktop sales up 62% and portable sales up 9%.
  • 5Gross margin percentage improved to 40.9% from 37.9% year-over-year, driven by cost efficiencies and product mix.
  • 6The company adopted new accounting principles retrospectively for revenue recognition, impacting prior periods' financial statements.
  • 7Total cash, cash equivalents, and marketable securities increased significantly to $39.82 billion, providing substantial liquidity.

Frequently Asked Questions

The primary driver of Apple's significant revenue growth was the exceptional performance of the iPhone. iPhone net sales more than doubled year-over-year, contributing $5.58 billion and representing 36% of the company's total net revenue. This growth was fueled by expanded distribution and strong overall demand for the iPhone 3GS model.

The retrospective adoption of new accounting principles, specifically for revenue recognition on multiple-deliverable arrangements (like iPhone and Apple TV), means that substantially all revenue and product costs are now recognized at the time of sale, rather than being deferred. This change has been applied to previously issued financial statements, making the current and prior periods more comparable and better reflecting the underlying economic performance, particularly by accelerating revenue recognition for these products.

Apple anticipates that its gross margin percentage will decrease in future periods compared to the levels achieved in fiscal year 2009 and the first quarter of 2010. This expected decline is attributed to factors such as flat or reduced average selling prices for new products, higher product cost structures, and potential increases in the cost of key components. The company projected gross margins around 39% for the second quarter of 2010.

Apple's financial position is very strong. The company reported $39.82 billion in cash, cash equivalents, and marketable securities as of December 26, 2009, an increase of $5.8 billion from the previous quarter. This substantial liquidity provides ample resources for working capital needs, capital expenditures, and other operational requirements.