Apple Inc. (AAPL): Apple Computer F4Q05 Conference Call Transcript - Prepared Rema... Page 1 of 8
`
`Seeking Alpha“
`
`Apple Computer F4QO5 Conference Call Transcript -
`Prepared Remarks (AAPL)
`
`Here's the entire text of the prepared remarks from Apple's (ticker: AAPL) Q3 2005 conference call. The Q&A, which
`followed the prepared remarks, is m. We recognize that this transcript may contain inaccuracies - if you find any,
`please post a comment below and we'll incorporate your corrections. And please note: we have paid to have this
`conference call transcribed, so feel free to link to it but reproduction is not permitted without the explicit permission of
`Seeking Alpha.
`
`TRANSCRIPT SPONSOR
`
`power SHARES“
`Xchange Traded funds
`
`
`
`
`Apple's Q4 2005 Conference Call, Wednesday October 13th 2005
`
`[Operator]: Good Day and welcome to this Apple Computer Conference Call to discuss Fourth Quarter
`Financial Results. Today’s call is being recorded. At this time for opening remarks and introduction I
`would like to turn the call over to Nancy Paterson, Senior Director of Investor Relations and Corporate
`Finance. Please go ahead ma’am.
`
`Thank you. Good Afternoon and thanks to everyone forjoining us today. Speaking is Apple CFO Peter
`Oppenheimer and he will be joined by EDT of Sales & Operations Tim Cook and BC and Corporate
`Treasurer Gary Whistler for the Q&A session with analyst. Please note that some of the information
`you will hear during this call consists of forward looking statements regarding revenue, gross margins,
`operating expenses, other income and expense, taxes, earnings per share, future products, Apple’s
`retail initiative and non-cash share-based compensation expense. Actual results will tend to differ
`materially from our forecast. For information please refer to the risk factors contained in the company’s
`Form 10K for 2004 and in Form 100 for the first three quarters of 2005. Please also note that any non-
`GAAP financial measures included in today’s call should be viewed in addition to and in not in lieu of
`Apple GAAP results. Our reconciliation in any GAAP and non—GAAP measures discussed will be
`posted on Apple’s website at www.apple.com/investor. I would like to remind you that the first quarter
`of Apple fiscal 2006 will end on December 31, 2005 and will span 14 weeks instead of the usual 13
`weeks. In connection with FEC rules on corporate enclosure, Apple is making this analyst call open to
`the media and general public by broadcasting the call live over the internet. V\fith that I would like to
`turn the call over to Peter Oppenheimer for introductory remarks.
`
`TRANSCRIPT SPONSOR
`
`DOWGISHARIES’
`Xchange Traded fundsw
`
`
`
`
`Want to invest in the index synonymous with Technology?
`
`The PowerShares D namic Hardware and Consumer Electronics Portfolio is
`
`comprised of stocks of 30 U.S. hardware and consumer electronics companies
`principally engaged in the manufacturring of computers, data storage drives and
`
`12/29/2013
`http://seekingalpha. corn/article/3 562-app1e-computer-f4q05-conference-call-transcript-pr. ..
`SIGHTSOUND TECHNOLOGIES
`EXHIBIT 2341
`
`CBM2013-00023 (APPLE v. SIGHTSOUND)
`PAGE 000001
`
`

`

`Apple Inc. (AAPL): Apple Computer F4Q05 Conference Call Transcript - Prepared Rema...
`
`Page 2 of 8
`
`peripherals, and products such as TVs, VCRs, radios, hi-fi stereo, home theater,
`handheld and software-based games. Learn more about the index performance,
`top holdings, and sector composition.
`
`PowerShares is "Leading the Intelligent ETF Revolution," providing investment
`advisers with exceptional asset management tools and market exposure through
`the replication of enhanced indexes.
`
`View our
`
`legal notice.
`
`Contact PowerShares for more info.
`
`To sponsor a Seeking Alpha transcript click here.
`
`Thank you Nancy. Thank you for joining us. We are extremely proud that we’ve just completed the
`best year in Apple history. In fiscal ’05 Apple generated nearly $14 billion in revenue. More than
`doubling the company’s top line in the last two years. We shipped 4.5 million Macs up 38% from last
`year and 22.5 million iPods up 409% from last year. As a result, we earned a record setting annual
`profit of over $1.3 billion. For the Fourth quarter we are very pleased to report that another all time
`company record reporting revenue and earnings. Revenue of $3.68 billion or 57% year-over-year, and
`operating margins increased to 11.4% from 5.4% in the year ago quarter. Net income of $430 million
`grew 306% year-over—year, generating earnings per diluted share of $0.60. Earnings per share
`benefited by $0.12 from favorable tax adjustments that I will discuss later in my remarks. Recorded
`strong results were driven by very robust Mac sales, a highly successful back to school season and
`record iPod sales. As I’ve done in the past several quarters I will now provide highlights of our two
`businesses, Mac and Music.
`
`Our Mac business generated 50% or total revenue and was up 28% from the year ago quarter. We
`shipped 1.236 million Macs during the quarter, which is the second highest quarterly total in the
`company’s history. Mac shipment growth was 48% year-over—year, significantly higher than lDC’s most
`recently published market growth broadcast of 13% for the September quarter. We are extremely
`pleased with our quarter—to—quarter sales. We shipped a combined total of 634,000 iBooks and
`powerbooks representing 41% year-over—year growth and beating last quarter’s record shipment by a
`139,000. We shipped 602,000 desktops systems representing very strong year-over—year growth of
`56%. At the end of the quarter channel inventory of total Mac units was between 3 to 4 weeks, the
`lower target range of 4 to 5 weeks.
`
`Our music business generated 40% of total Apple revenue in the quarter and was up a 133%
`compared to year ago quarter. We shipped 6.45 million iPods during the quarter representing the 10th
`quarter in a row sequential unit increase setting another new record of quarterly shipment.
`
`We exited this quarter with total iPod channel inventory with a recorded range of 4-8. According to the
`latest data available in MTV tabloid iPods accounted for 75% of MP3 players sold in the US during the
`month of August. The last month we introduced the revolutionary iPod nano, which has already
`become a huge hit with the customers. We sold over 1 million of nanos in the first 17 days from its
`launch. The iPod economy continues to flourish with over a 1000 third party iPod accessories now
`available. 15 automobile manufacturers have announced support for direct iPod connectivity and the
`estimated feature will be offered in about 30% of new cars sold in the US in 2006. The iTunes music
`
`store continues to be the worlds leading online music service and currently operates in 20 country that
`represent about 85% of the global music market. We continue to add to great features in content and
`have over 10 million customer account. We opened the iTunes music store in Japan during the quarter
`and it has already become the leading music store in Japan. Based on the latest data from ((inaudible)
`Apple continues to have more than 80% share of the US market for legally purchased and downloaded
`music. The Apple retail stores delivered another solid quarter, retail segment revenue grew to $663
`million up $108 million sequentially and 76% from the prior year. The store has experienced very
`strong back to school business contributing for Mac sales of 250,000 a 106% increase over the prior
`year. Our most recent survey indicates that over 45% of the customers buying Macs in our stores are
`new to Mac. We opened 14 stores during the quarter bring our quarter in total to a 124. Vlfith an
`average of 168 stores opened during the quarter, average quarterly revenue per store was $5.7 million
`
`http://seekingalpha. corn/article/3 562-app1e-computer-f4q05-conference-call-transcript-pr. ..
`
`12/29/2013
`PAGE 000002
`
`

`

`Apple Inc. (AAPL): Apple Computer F4Q05 Conference Call Transcript - Prepared Rema... Page 3 of 8
`
`up from $4.6 in the year ago quarter. The retail stores segment profit was $35 million and the
`associated manufacturing profit was a $133 million. Traffic to our stores continues to grow. Last
`quarter 14.8 million people visited our stores translating into 9,800 visitors per store per week. This
`compares to about 7,400 per store per week in the year ago quarter. We just completed the fourth full
`fiscal year since launching our retail initiative.
`
`Retail segment revenue for fiscal ‘05 nearly doubled $2.35 billion and segment profit grew to a $151
`million. We are very pleased with the continued growth and success of our retail initiative and expect to
`add 35 to 40 stores in fiscal ‘06.
`
`Our US education channel channel had an outstanding quarter, generating 34% year over year unit
`growth and 24% revenue growth. Our US education channel for more Mac systems in Q4 than in any
`other quarter in the last 10 years. ((inaudible) unit growth was 31% and included a 30,000 units laptop
`purchase by the Broward County Public Schools in Florida. Higher education momentum continued on
`with Mac units growing 38% year-over—year thanks to a very successful back to school season.
`
`In terms of geographic result including sales from our retail stores quarterly revenue in Europe, The
`America, and Japan was up year-over—year by 92%, 53% and 30% respectively. Gross margin of
`28.1% about 40 basic points above our guidance, primarily due to a better than expected commodity
`environment and product mix. Operating expense was $617 million, in line with our guidance. Included
`an operating expense of approximately $10 million in non-cash share based compensation.
`
`((inaudible) was $60 million, $7 million higher than guidance primarily due to higher than expect
`interest income. In terms of passes, there were number of factors that collectively befitted the quarter
`results by $0.12. First, there were several items of a unique nature related to our net differed tax
`assets and tax reserves, including adjustments evaluation allowances as a result of the favorable tax
`court ruling. These items benefited the quarters results by $0.09. Second, not withstanding these
`unique items our tax rates for the full year was slightly lower than estimated in prior quarters further
`benefiting the quarter’s earnings by $0.03. We expect the effective tax rate to be 32% in the December
`quarter.
`
`Cash grew by $735 million during the quarter to $8.261 billion and was up almost to $2.8 billion for the
`full fiscal year. Cash flow from operation during the quarter was about $750 million. Total capital
`expenditures for the quarter were $96 million including $49 million for the retail initiatives. Looking
`ahead for the December quarter I would like to review an outlook to which includes types of forward-
`looking information that Nancy referred to at the beginning of the call. For the quarter new we are
`targeting revenue of about $4.7 billion. This target represents 35% year-over—year growth and an
`increase of over $1.2 billion year-over-year.
`
`As we have mentioned before we would be adopting slab 123R in the December quarter which will
`require that we reflect the theoretical value of stock options and the option value of employee stock
`purchase shares as expense in our income statement. For the last few quarters we had been providing
`a reconciliation of GAAP and non-GAAP operating results in order to present a view of our financial
`performance excluding such items of non-cash share based compensation and gain. We think
`presenting such non-GAAP details provides meaningful information about our core operating results
`and facilitates comparison of results over multiple reporting period. Beginning in Q1 this reconciliation
`will include the impact of 123R option.
`
`We think that this reconciliation will be particularly helpful in viewing our fiscal ’06 results given that our
`prior results have not reflected the expense impact by 123R. In Q1 we expected total non—cash share
`base compensation expense to be about $45 million or about $0.03 per share. Some of this expense
`will be reflected in cost of good flow while most of it will be reflected in operating expenses. We expect
`Q1 GAAP gross margins to be about 27.3%. We expect cost of good flow to include about $5 million
`related to non-cash share based compensation expense and therefore except non-GAAP gross
`margins to be about 27.4%. We expect GAAP profits to be about $760 million including about $40
`million related to non-cash share based compensation. We expect non-GAAP profits to be about $720
`million. We expect ((inaudible) to be about $55 million and we expect tax rate to be 32%. We expect to
`generate GAAP EPF of about $0.46, which includes anticipated $0.3 per share related to non-cash
`share based compensation expense. We expect non GAAP EPF to be about $0.49. We’ve just
`completed the best year in Apple’s history which we attribute to our focus on innovation and the
`immense talent in creativity at Apple. We remain very enthusiastic about our product pipeline and we
`will have some very exciting announcements to share with you tomorrow. With that I would like open
`the call to questions.
`
`CONTINUE TO Q&A
`
`http://seekingalpha. com/article/3 562-app1e-computer-f4q05-conference-call-transcript-pr. ..
`
`12/29/2013
`PAGE 000003
`
`

`

`Apple Inc. (AAPL): Apple Computer F4Q05 Conference Call Transcript - Prepared Rema... Page 4 of 8
`
`Related
`
`1. A list of‘full conference call transcripts available on the Seeking Alpha Network.
`2. ENTIRE TRANSCRIPT OF Q&A FROM AAPL 3Q05—ConfCall
`3.
`Ja an’s “iPod tax ? Unlikel Govt. Officials Sa AAPL SNE
`
`4. A.
`
`le Misses Consensus Revenue Estimate: Stock Down 10% in After Hours Tradin AAPL 4QO5
`
` .
`
`Ie’s Product C cle AAPL)
`‘
`'
`“IPod Tax ?In Ja an? AAPL SNE
`8.
`
`9. WII Disne 3 Kids MP3 Pla er Threaten A le? DIS AAPL SNDK LEXR
`10. More articles from the Consumer Electronics Stock Blog about Apple.
`
`TRANSCRIPT SPONSOR
`
`powerSHARES”
`Xchange Traded funds”-
`
`
`
`Want to invest in the index synonymous with Technology?
`
`
`The PowerShares D namic Hardware and Consumer Electronics Portfolio is comprised of
`stocks of 30 U.S. hardware and consumer electronics companies principally engaged in the
`manufacturring of computers, data storage drives and peripherals, and products such as TVs,
`VCRs, radios, hi-fi stereo, home theater, handheld and software-based games. Learn more
`about the index performance, top holding s, and sector composition.
`
`PowerShares is "Leading the Intelligent ETF Revolution," providing investment advisers with
`exceptional asset manag ement tools and market exposure through the replication of enhanced
`indexes.
`
`View our
`
`legal notice».
`
`Contact PowerShares for more info.
`
`To sponsor a Seeking Alpha transcript click here.
`
`THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S
`CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION,
`THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE
`SUBSTANCE OF THE CONFERENCE CALLS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY
`RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION
`PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE
`APPLICABLE COMPANY'S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS
`BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
`
`Here's the entire text of the prepared remarks from Apple's (ticker: AAPL) Q3 2005 conference call. The Q&A, which
`followed the prepared remarks, is M- We recognize that this transcript may contain inaccuracies — if you find any,
`please post a comment below and we'll incorporate your corrections. And please note: we have paid to have this
`conference call transcribed, so feel free to link to it but reproduction is not permitted without the explicit permission of
`Seeking Alpha.
`
`http://seekingalpha. corn/article/3 562-app1e-computer-f4q05-conference-call-transcript-pr. ..
`
`12/29/2013
`PAGE 000004
`
`

`

`Apple Inc. (AAPL): Apple Computer F4Q05 Conference Call Transcript - Prepared Rema... Page 5 of 8
`
`TRANSCRIPT SPONSOR
`
`power SHARES”
`Xchange Traded funds
`
`
`
`
`Apple's Q4 2005 Conference Call, Wednesday October 13th 2005
`
`[Operator]: Good Day and welcome to this Apple Computer Conference Call to discuss Fourth Quarter Financial
`Results. Today’s call is being recorded. At this time for opening remarks and introduction I would like to turn the call
`over to Nancy Paterson, Senior Director of Investor Relations and Corporate Finance. Please go ahead ma’am.
`
`Thank you. Good Afternoon and thanks to everyone forjoining us today. Speaking is Apple CFO Peter Oppenheimer
`and he will be joined by EDT of Sales & Operations Tim Cook and BC and Corporate Treasurer Gary Whistler for the
`Q&A session with analyst. Please note that some of the information you will hear during this call consists of forward
`looking statements regarding revenue, gross margins, operating expenses, other income and expense, taxes,
`earnings per share, future products, Apple’s retail initiative and non—cash share-based compensation expense.
`Actual results will tend to differ materially from our forecast. For information please refer to the risk factors contained
`in the company’s Form 10K for 2004 and in Form 10Q for the first three quarters of 2005. Please also note that any
`non-GAAP financial measures included in today’s call should be viewed in addition to and in not in lieu of Apple
`GAAP results. Our reconciliation in any GAAP and non-GAAP measures discussed will be posted on Apple’s website
`at www.apple.com/investor. I would like to remind you that the first quarter of Apple fiscal 2006 will end on December
`31,2005 and will span 14 weeks instead of the usual 13 weeks. In connection with FEC rules on corporate
`enclosure, Apple is making this analyst call open to the media and general public by broadcasting the call live over
`the internet. V\fith that I would like to turn the call over to Peter Oppenheimer for introductory remarks.
`
`TRANSCRIPT SPONSOR
`
`powerSHARES“
`Xchange Traded funds“
`
`
`
`
`
`Want to invest in the index synonymous with Technology?
`
`
`The PowerShares D namic Hardware and Consumer Electronics Portfolio is comprised of
`stocks of 30 U.S. hardware and consumer electronics companies principally engaged in the
`manufacturring of computers, data storage drives and peripherals, and products such as TVs,
`VCRs, radios, hi-fi stereo, home theater, handheld and software-based games. Learn more
`about the index performance, top holdings, and sector composition.
`
`PowerShares is "Leading the Intelligent ETF Revolution," providing investment advisers with
`excel;tional asset management tools and market exposure through the rep.Ii‘cation of enhanced
`indexes.
`
`View our
`
`legal notice.
`
`Contact PowerShares for more info.
`
`To sponsor a Seeking Alpha transcript click m.
`
`Thank you Nancy. Thank you forjoining us. We are extremely proud that we’ve just completed
`the best year in Apple history. In fiscal ’05 Apple generated nearly $14 billion in revenue. More
`than doubling the company’s top line in the last two years. We shipped 4.5 million Macs up 38%
`from last year and 22.5 million iPods up 409% from last year. As a result, we earned a record
`
`http://seekingalpha. corn/article/3 562-app1e-computer-f4q05-conference-call-transcript-pr. ..
`
`12/29/2013
`PAGE 000005
`
`

`

`Apple Inc. (AAPL): Apple Computer F4Q05 Conference Call Transcript - Prepared Rema... Page 6 of 8
`
`setting annual profit of over $1.3 billion. For the Fourth quarter we are very pleased to report
`that another all time company record reporting revenue and earnings. Revenue of $3.68 billion
`or 57% year-over-year, and operating margins increased to 11.4% from 5.4% in the year ago
`quarter. Net income of $430 million grew 306% year-over-year, generating earnings per diluted
`share of $0.60. Earnings per share benefited by $0.12 from favorable tax adjustments that I will
`discuss later in my remarks. Recorded strong results were driven by very robust Mac sales, a
`highly successful back to school season and record iPod sales. As I’ve done in the past several
`quarters I will now provide highlights of our two businesses, Mac and Music.
`
`Our Mac business generated 50% ortotal revenue and was up 28% from the year ago quarter.
`We shipped 1.236 million Macs during the quarter, which is the second highest quarterly total in
`the company’s history. Mac shipment growth was 48% year-over-year, significantly higher than
`IDC’s most recently published market growth broadcast of 13% for the September quarter. We
`are extremely pleased with our quarter-to-quarter sales. We shipped a combined total of 634,000
`iBooks and powerbooks representing 41% year-over-year growth and beating last quarter’s
`record shipment by a 139,000. We shipped 602,000 desktops systems representing very strong
`year-over-year growth of 56%. At the end of the quarter channel inventory of total Mac units was
`between 3 to 4 weeks, the lower target range of 4 to 5 weeks.
`
`Our music business generated 40% of total Apple revenue in the quarter and was up a 133%
`compared to year ago quarter. We shipped 6.45 million iPods during the quarter representing
`the 10th quarter in a row sequential unit increase setting another new record of quarterly
`shipment.
`
`We exited this quarter with total iPod channel inventory with a recorded range of 4-8. According
`to the latest data available in MTV tabloid iPods accounted for 75% of MP3 players sold in the
`US during the month of August. The last month we introduced the revolutionary iPod nano,
`which has already become a huge hit with the customers. We sold over 1 million of nanos in the
`first 17 days from its launch. The iPod economy continues to flourish with over a 1000 third
`party iPod accessories now available. 15 automobile manufacturers have announced support
`for direct iPod connectivity and the estimated feature will be offered in about 30% of new cars
`sold in the US in 2006. The iTunes music store continues to be the worlds leading online music
`service and currently operates in 20 country that represent about 85% of the global music
`market. We continue to add to great features in content and have over 10 million customer
`account. We opened the iTunes music store in Japan during the quarter and it has already
`become the leading music store in Japan. Based on the latest data from ((inaudible) Apple
`continues to have more than 80% share of the US market for legally purchased and downloaded
`music. The Apple retail stores delivered another solid quarter, retail segment revenue grew to
`$663 million up $108 million sequentially and 76% from the prior year. The store has
`experienced very strong back to school business contributing for Mac sales of 250,000 a 106%
`increase over the prior year. Our most recent survey indicates that over 45% of the customers
`buying Macs in our stores are new to Mac. We opened 14 stores during the quarter bring our
`quarter in total to a 124. With an average of 168 stores opened during the quarter, average
`quarterly revenue per store was $5.7 million up from $4.6 in the year ago quarter. The retail
`stores segment profit was $35 million and the associated manufacturing profit was a $133
`million. Traffic to our stores continues to grow. Last quarter 14.8 million people visited our
`stores translating into 9,800 visitors per store per week. This compares to about 7,400 per store
`per week in the year ago quarter. We just completed the fourth full fiscal year since launching
`our retail initiative.
`
`Retail segment revenue for fiscal ‘05 nearly doubled $2.35 billion and segment profit grew to a
`$151 million. We are very pleased with the continued growth and success of our retail initiative
`and expect to add 35 to 40 stores in fiscal ‘06.
`
`Our US education channel channel had an outstanding quarter, generating 34% year over year
`unit growth and 24% revenue growth. Our US education channel for more Mac systems in Q4
`than in any other quarter in the last 10 years. ((inaudible) unit growth was 31% and included a
`30,000 units laptop purchase by the Broward County Public Schools in Florida. Higher
`education momentum continued on with Mac units growing 38% year-over-year than ks to a very
`successful back to school season.
`
`In terms of geographic result including sales from our retail stores quarterly revenue in Europe,
`The America, and Japan was up year-over-year by 92%, 53% and 30% respectively. Gross
`margin of 28.1% about 40 basic points above our guidance, primarily due to a better than
`expected commodity environment and product mix. Operating expense was $617 million, in line
`
`http://seekingalpha. com/article/3 562-app1e-computer-f4q05-conference-ca11-transcript-pr. ..
`
`12/29/2013
`PAGE 000006
`
`

`

`Apple Inc. (AAPL): Apple Computer F4Q05 Conference Call Transcript - Prepared Rema... Page 7 of 8
`
`with our guidance. Included an operating expense of approximately $10 million in non-cash
`share based compensation.
`
`((inaudible) was $60 million, $7 million higher than guidance primarily due to higherthan expect
`interest income. In terms of passes, there were number of factors that collectively befitted the
`quarter results by $0.12. First, there were several items of a unique nature related to our net
`differed tax assets and tax reserves, including adjustments evaluation allowances as a result of
`the favorable tax court ruling. These items benefited the quarters results by $0.09. Second, not
`withstanding these unique items our tax rates for the full year was slightly lower than estimated
`in prior quarters further benefiting the quarter’s earnings by $0.03. We expect the effective tax
`rate to be 32% in the December quarter.
`
`Cash grew by $735 million during the quarter to $8.261 billion and was up almost to $2.8 billion
`for the full fiscal year. Cash flow from operation during the quarter was about $750 million. Total
`capital expenditures for the quarter were $96 million including $49 million forthe retail
`initiatives. Looking ahead for the December quarterl would like to review an outlook to which
`includes types of forward-looking information that Nancy referred to at the beginning of the call.
`For the quarter new we are targeting revenue of about $4.7 billion. This target represents 35%
`year-over-year growth and an increase of over $1.2 billion year-over-year.
`
`As we have mentioned before we would be adopting slab 123R in the December quarter which
`will require that we reflect the theoretical value of stock options and the option value of
`employee stock purchase shares as expense in our income statement. For the last few quarters
`we had been providing a reconciliation of GAAP and non-GAAP operating results in order to
`present a view of ourfinancial performance excluding such items of non-cash share based
`compensation and gain. We think presenting such non-GAAP details provides meaningful
`information about our core operating results and facilitates comparison of results over multiple
`reporting period. Beginning in Q1 this reconciliation will include the impact of 123R option.
`
`We think that this reconciliation will be particularly helpful in viewing ourfiscal ’06 results given
`that our prior results have not reflected the expense impact by 123R. In Q1 we expected total
`non-cash share base compensation expense to be about $45 million or about $0.03 per share.
`Some of this expense will be reflected in cost of good flow while most of it will be reflected in
`operating expenses. We expect Q1 GAAP gross margins to be about 27.3%. We expect cost of
`good flow to include about $5 million related to non-cash share based compensation expense
`and therefore except non-GAAP gross margins to be about 27.4%. We expect GAAP profits to
`be about $760 million including about $40 million related to non-cash share based
`compensation. We expect non-GAAP profits to be about $720 million. We expect ((inaudible) to
`be about $55 million and we expect tax rate to be 32%. We expect to generate GAAP EPF of
`about $0.46, which includes anticipated $0.3 per share related to non-cash share based
`compensation expense. We expect non GAAP EPF to be about $0.49. We’ve just completed the
`best year in Apple’s history which we attribute to our focus on innovation and the immense
`talent in creativity at Apple. We remain very enthusiastic about our product pipeline and we will
`have some very exciting announcements to share with you tomorrow. With that I would like
`open the call to questions.
`
`CONTINUE TO 'Q&A
`
`Related
`
`TRANSCRIPT SPONSOR
`
`powerSHARES“
`Xchange Traded fundsw
`
`
`
`
`
`Want to invest in the index synonymous with Technology?
`
`http://seekingalpha. corn/article/3 562-app1e-computer-f4q05-conference-call-transcript-pr. ..
`
`12/29/2013
`PAGE 000007
`
`

`

`Apple Inc. (AAPL): Apple Computer F4Q05 Conference Call Transcript - Prepared Rema... Page 8 of 8
`
`The PowerShares Dynamic Hardware and Consumer Electronics Portfolio is
`comprised of stocks of 30 U.S. hardware and consumer electronics companies
`principally engaged in the manufacturring of computers, data storage drives and
`peripherals, and products such as TVs, VCRs, radios, hi-fi stereo, home theater,
`handheld and software-based games. Learn more about the index performance, t_op
`holdings, and sector composition.
`
`PowerShares is "Leading the Intelligent ETF Revolution," providing investment
`advisers with exceptional asset management tools and market exposure through
`the replication of enhanced indexes.
`
`View our
`
`legal notice.
`
`Contact PowerShares for more info.
`
`To sponsor a Seeking Alpha transcript click here.
`
`THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE
`APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE
`
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`Apple Inc. (AAPL): Apple Computer Q3 2005 Conference Call Transcript - Q&A (AAPL... Page 1 of 19
`
`Seeking Alpha“
`
`Apple Computer Q3 2005 Conference Call Transcript -
`Q&A (AAPL)
`
`Here’s the entire text of the Q&A from Apple’s (ticker: AAPL) Q3 2005 conference call. The prepared remarks are
`m. We recognize that this transcript may contain inaccuracies - if you find any, please post a comment below and
`we'll incorporate your corrections. And please note: this conference call transcript is a Seeking Alpha product, so feel
`free to link to it but reproduction is not permitted without the explicit permission of Seeking Alpha.
`
`Apple's Q3 2005 Conference Call, Wednesday October 13th 2005 - Q&A
`
`Question-and-Answer Session
`
`[Rebecca Runkle of Morgan and Stanley]
`
`[Q — Rebecca]: Good morning. Can you hear me okay?
`
`[A]: Yeah.
`
`[Q — Rebecca]: Good afternoon I guess, just a couple of quick questions. First in terms of nano product constraints,
`obviously there is a small delay in shipment on some. Can you just talk as to how you expect that to track over the
`over the coming week and if you can close that sooner or later and have a quick follow up.
`
`[A]: Rebecca, we were able to ship over $1 million nanos in the 17 days that remained in the quarter from the launch
`period. But it is still far short of demand, frankly speaking the demand for the product is staggering. We ended the
`quarter with a mammoth backlog and at this point I can’t project, when supply would meet demand.
`
`[Q — Rebecca]: But clearly you would expect that, that would be a major driver to Fourth Quarter iPod sales and I
`would suspect that you anticipated this would be a huge product and why you couldn’t ship everything you wanted, in
`the last few days of the quarter when you did plan for a pre-material ramp so you could optimize for the holiday
`seasons.
`
`[A]: We factored in the available supply into the guidance that Peter gave, that generated $4.7 billion revenue
`guidance, we believe it is a revolutionary product with the customer comments on it are fabulous and it’s key part of it
`all.
`
`[Q]: And then, on the component side of the equation, I think from our prospective component side had a little bit
`differently than a lot of folks including yourselves anticipated beginning of the quarter, can you just talk through some
`of the dynamics in this past quarter related to your expectations and how you are thinking about expanding by mid
`December.
`
`[A]: Sure. DROM and