Cribbed from Yahoo AAPL. (Regarding AAPL's charging of current ad revenues to prior quarters.)
>Well, sort of. It's more like we paid for them a long time ago. From the 10K:
"Advertising costs are charged to expense the first time the advertising takes place."
I've scanned the 10K and past 10Qs a whole bunch of times, and
everytime I do, I notice something new. Last night I focused in in
on a line that I hadn't really considered in the past.
Accrued marketing and distribution:...3/27/98 = 231......9/26/97 =
278
After consulting with my wife (an accountant), I've reached the
conclusion that Apple does not have to count current advertising
costs against current earnings. We paid for this year's advertising
(and maybe even next year's) before this year by accrueing the
costs in advance.
Thus, the Seinfeld ads, and the whole "Think Different" campaign,
probably won't hurt our Q3 or Q4 earnings. They hurt our earnings
in the past, instead. It seems as though we've already worked this
angle to boost our pre-tax profit by $47 million this year. We
still have a war chest of up to $231 million more that we can use
to tout the Powerbook now and the iMac in August, all without
putting a dent in 1998 earnings.
Morally, this is a little troubling. Our "real" eanings haven't
been quite as good as they have seemed. I chose to rationalize it
by saying that it's all just part of the restructuring effort.
Apple is "rebuilding" it's name, image and place in the market.
Once that has been accomplished, Apple will not need to do nearly
as much advertising.
More stuff from last night's reading of the 10Q...
As far as the restructuring effort is concerned:
"The Company expects that the remaining $113 million accrued
balance as of March 27, 1998 will result in cash expenditures of
approximately $71 million over the next six months and $15 million
thereafter."
Smells like a one time gain of $27 million whenever Apple wants to
take it. Of course, it was smelling like a $39 million gain 6
months ago, so who knows what will eventually happen?
Then there's the ARM IPO:
"The Company sold 18.9% of its shares in the offering for a gain
before foreign income taxes of approximately $23.4 million. This
amount will be recognized as other income in the third quarter of
fiscal 1998."
Foreign taxes are expected to be 7.25 mil, so I believe an
additional $16 million in income will show up in the next 10Q. I
don't think it will be reported as a "one time" gain, but instead
show up in an "Interest & other income" entry of about $32 mil
partially offset by an additional $7 mil under taxes.
Lastly, there's the convertible notes... $661 million in debt will
eventually turning into 22.6 million shares of common stock. As the
conversion occurs, it will dilute EPS, eventually by about 15%, but
will result in interest payment savings of around $45 million each
year (I couldn't find the exact interest rate for the notes).
The conversion will also improve book value per share (using
diluted share totals) from about $9.50 to about $12.15. Apple will
then only have about $300 million in long term debt at a relatively
low 6.5% interest rate, compared to cash & short term up around $2
billion.
Remember that I am an amateur, and the above is based on a good
deal of speculation on my part. Don't put absolute fainth in
anything I say, ever. I hope it's been educational, though.<
Go AAPL
Rodg..< |
