IBM's 1Q09 Financial Results

Highlights of IBM's 1Q09 Earnings Report:

* Net Income: $2.3 Billion or $1.70/share...down less than 1% from $2.32 Billion in 1Q08

* Total Sales: $21.7 Billion...down 11% from $24.5 Billion in 1Q08 (IBM stated that revenue would have only dropped 4% year over year under constant currency)

* Total Expenses: $6.3 Billion...down 9% from 1Q08

* Effective Tax Rate: 26.5%...down 100 basis points from 27.5% in 1Q08

* Free Cash Flow: $1 Billion...up 80% year over year (yoy) from $550 million

* Stock Buyback: IBM purchased 22 million shares of its own stock during 1Q09 (at 4/26/09's price of $100/share, IBM purchased approx $2.2 Billion of company stock during the quarter)...IBM currently has $3.7 Billion of share buyback authorization remaining

* CASH on hand to end 1Q09: $12.3 Billion

* Service Sales: $13.2 Billion...down 10% yoy (down 2% at constant currency)

* Software Sales: $4.5 Billion...down 4% yoy (up 2% under cc)

* Hardware Sales: $3.2 Billion...down 24% yoy (down 18% under cc)

* 1Q09 Service Bookings: Down 1% yoy to $12.5 Billion (IBM stated that new service contracts revenue would have actually risen 10% yoy under cc)

* Long-Term Service Bookings: Up 14% yoy to $7.0 Billion (up 27% under cc)

* Short-Term Service Bookings: Down 14% yoy to $5.5 Billion (down 5% under cc)

* India sales up 12% year over year

* China sales up 11% year over year


* 2009 Forecast: IBM affirmed its 2009 earnings forecast of at least $9.20/share (...as of 4/26/09, IBM traded at $100.08/share, implying its currently trading at a forward 2009 P/E multiple of approx 11 times earnings)


* 2010 Forecast: IBM affirmed its 2010 earnings forecast of in between $10-$11/share (...as of 4/26/09, IBM traded at $100.08/share, implying its currently trading at a forward 2010 P/E multiple of approx 9-10 times earnings)


http://www.ibm.com/investor/1q09/press.phtml


Data Courtesy: IBM's 1Q09 earnings press release
Full Disclosure: I own shares of IBM.

IBM 3Q08 Sales Growth By Industry + Geo

Per IBM's 3Q08 Earnings Report Presentation + the slides below, approx 30% of the company's Total WW Sales come from customers operating in the Financial Services industry ($7 Billion out of $25 Billion).


*IBM's 3Q08 Sales Growth by Industry:


* IBM's 3Q08 Financial Services Industry Exposure:


* It's interesting to note that IBM actually grew its Financial Services revenue during the quarter by 2% (after adjusting for constant currency) DESPITE the ongoing recession...Anecdotally thinking, not sure how they pulled it off but I wonder how realistic of an expectation it is for one to expect IBM to continue growing its financial customer revenue moving forward when considering the current macro-economic environment + recent collapses of former financial bellweathers including Bear Sterns, Lehman Brothers, AIG, Merrill Lynch, Fannie Mae, Freddie Mac, Countrywide Financial, Washington Mutual, Wachovia, etc.

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Other interesting 3Q08 Slides per IBM's presentation:

*IBM's 3Q08 Sales Growth by Geo:



*IBM's 3Q08 Liquidity Position:



ibm.com/investor/sharedv3/auditorium.phtml?/investor/3q08


Data Courtesy: IBM's 3Q08 Earnings Presentation
Full Disclosure: I own shares of IBM.

DE 2Q08 Earnings Recap

John Deere's 2Q08 Earnings Report Stats:

Beat ? --> NO (reported $1.32/share vs. estimates of $1.37/share...year over year EPS growth was 12% from 2Q07's $1.18/share)

Profits --> Up 7% to $575 million (from $537 million)
Sales --> Up 17% to $7.7 Billion (from $6.6 Billion)

WW Equipment Sales: Up 18% to $7.1 Billion (from $6.0 Billion in 2Q07...currency effect was +5%)

U.S + Canada Equipment: Sales up 6% to $4.6 Billion...Operating profits down 3% to $602 million (from $621 million in 2Q07)
International Equipment Ex Canada: Sales up 38% to $3.1 Billion (currency effect of +13%)...Operating profits up 45% to $332 million (from $229 million in 2Q07)

WW Equipment Sales by DIVISION:
1. Agriculture Equip Sales: Up 35% to $ 4.5 Billion (from $3.4 Billion)
Ag Equip Operating Profit: Up 47% to $634 million (from $431 million)

2. Commercial + Consumer Sales: Down 1% to $ 1.33 Billion (from $1.35 Billion)
C + C Operating Profit: Down 28% to $91 million (from $127 million)

3. Construction + Forestry Sales: Down 7% to $1.2 Billion (from $1.3 Billion)
C + F Operating Profit: Down 38% to $93 million (from $150 million)

Trade Receivables + Inventories: 30% of prev 12 month sales vs. 2Q07's 30% ($7.5 Billion)
Research + Development: Up 16% vs 2Q07
Effective Tax Rate: 36% (vs DE's previous guidance of 35%)

Other Highlights + Guidance:

* DE's 3Q08 Raw Material Costs increased by $140 million vs. 2Q07 due mostly to higher costs for freight and STEEL (this is the reason for DE's 3Q08 earnings miss...DE missed analyst profit expectations by about $25 million)

* DE expects 'U.S. Farm Cash Recepits' (total U.S. farm industry revenues from sales of livestock, crops and government subsidies) to increase from $296 Billion in 2007 to $347 Billion in 2008 (growth of 17%...DE previously expected 2008 recepits of $330 Billion)...DE expects U.S. Farm Cash Receipts to increase from $347 Billion in 2008 to $355 Billion in 2009 (growth of 2%...DE previously expected 2009 receipts of $329 Billion)

* 4th Quarter Guidance: DE guided 4Q08 profits LOWER than analyst estimates ($490 million) to $425 million. DE expects 4Q08 equipment sales to increase by 29% vs. 4Q07.

* DE's Stock Buyback Program --> In 2008 DE has bought back a total of 16.4 million shares at an avg purchase price of $79.27 per share. During 2008 DE has purchased $1.3 Billion worth of stock or about 4.5% of the company's marketcap/outstanding shares. In the just completed quarter (2Q08) DE repurchased 4.5 million shares at an average price of $66.67 per share. In 2007 DE repurchased 25.7 million shares at avg price of $58.37/share ($1.5 Billion worth of stock). 18.5 million shares remain under DE's current 40 million share buyback authorization.

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Deere's 2008 + 2009 Commodity Price Estimates (per bushel/pound) :

CORN - 2008 estimate: $4.45 (prev = $4.35)...2009: $5.50 (p = $5.00)

WHEAT - 2008: $6.92 (p = $7.70)...2009: $7.74 (p = $5.80)

SOYBEAN - 2008: $10.60 (p = $10.25)...2009: $13.50 (p = $10.00)

COTTON - 2008: $0.58 (p = $0.55)...2009: $0.65 (p = $0.60)

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Deere's 2008 Full Year Company Outlook:

- DE expects full year 2008 WW Equipment Sales to increase by 21% over 2007 assuming a 5% currency impact (vs. their May 2008 projection of 20% growth)

- AG Equipment Sales are forecast to increase by about 38% for full-year 2008 (assuming a positive 8% currency impact)...DE's previous expectation was up 35%
- DE's 2008 AG industry expectations: Industry Sales in the U.S. should be up 20-25% vs. 2007 (vs. DE's earlier expectation of up 20%)...Industry sales in Western Europe are forecast to be up 5% (vs. DE's earlier expectation of up 3-5%)...South America should grow 40% (vs. DE's earlier expectation of up 30%)...DE also expects Asia sales to grow but no guidance was given

- Commerical + Consumer Sales are expected to increase by about 4% in 2008

- Construction + Forestry Sales are expected to decline by about 5% in 2008 due to weakness in U.S. residential construction as U.S. housing starts are expected to reach 60 year lows...DE previously believed C+F sales would fall 3% in 2008 vs. 2007



Conference Call Quotes:
* Deere VP of I-R Marie Ziegler on Offsetting Rising Material Costs: "In terms of pricing all of the orders that we have for 2009 will have some price increases in them and it would vary depending on the time of when the order was placed. We did take an interim increase on many of those orders, you would be looking for at least a 5% or more increase and again we’re specifically talking AG here and the combines that Susan mentioned, those are 9% to 10.5%...Of course we are aggressively pursuing cost reduction activities to mitigate the affects of rising costs as well. But this is a near-term issue as we have taken several pricing actions globally. Here are a few examples from the US. On large tractors, we took a 3% increase in April of this year and earlier this week we announced another 7% increase on large wheeled tractors. On 2009 combines, we took a 95 to 10.5% increase. In commercial and consumer, prices increased from zero to 6% in late May. In construction and forestry we raised prices zero to 5% in July and yesterday announced increases from 4% to 9% affective November 1st, 2008. The bottom line is our backorder position limited the revenue impact of price increases in 2008. However, with the pricing actions we have taken and our cost reduction efforts, it is our intention to restore our cost price ratio and you should begin to see evidence of this in the first quarter of 2009."

* DE I-R Susan Karlix on Outlook for U.S. Farm Cash Receipts: "The strong markets for crops are driving good levels of farm cash receipts and income globally...note that our forecast for total US farm cash receipts for 2008 and 2009 are considerably higher than our outlook from just one quarter ago and at dramatically increased levels from those of just a few years ago. We ran yesterday’s US DA numbers through our model and the result is a less than 1% difference in 2008 and 2009 cash receipts. All of this translates into an excellent outlook at John Deere not only for tractors and combines, but also for products like sprayers and seeding equipment, and strongly supports our outlook for industry sales of agricultural equipment in the US and Canada as shown on slide 13 which is now up 20% to 25% from last year."

* Marie Ziegler on Brazil and South America Outlook: "We are less then a year into full operation of the new tractor facility in Brazil, and so we are reaping the benefits of having that additional capacity as well as having broadened our product line. We’ve added five new tractor models last year. Some higher horsepower, some in the lower horsepower ranges. So we are much better positioned to provide product to our Brazilian customers then we ever have historically. Ramp up of that facility occurred much earlier in the year and so we’re really reaping the year-over-year benefits of having that facility fully operational, having moved tractor production out of our factory in [Orezontina] which produced combines will also over time as that factory goes through its adjustments, provide for additional opportunity there as well. So we’re feeling very good about our ability on the manufacturing side and we have a very strong dealer network, very solid and traditionally our issues have been that we were capacity constrained as we could not provide them with enough product, so (now) we’ve got the product in place. We’ve got the distribution and the market conditions and fundamentals in Brazil and really throughout South America look very promising."

* Marie Ziegler on Eastern and Central Europe Outlook: "Absolutely we are investing in distribution; in fact about a quarter ago we announced that we were investing in the distribution center in Russia that would help us in the parts side and training. So we have a dealer network. We are investing in dealer development in that part of the world. In terms of specific sales numbers we will provide that for you geographically on an annual basis but you saw in 2007 that our sales were over a billion in that specific part of the world, central Europe and Commonwealth of Independent States and the growth rate was I think about 60%. So we definitely have seen the growth and we are investing in infrastructure to continue to support that part of the world."


Full Disclosure: I own shares of DE.

Trinity - WIND At Its Back (or FRONT) ?

Trinity Industries (TRN), the $3 Billion marketcap entity based out of Texas, is a DIVERSIFIED industrial company by every sense of the word. Its Business Segments include :

* Rail : manufacturer of railcars + provider railcar leasing services

* Construction Products : manufacturer of highway equipment, provider of highway services, supplier of construction materials including concrete and asphalt

* Inland Barge : manufacturer of large, inland sea platforms needed for the shipping of both dry goods (grain, coal, etc.) and liquid cargo (crude oil, ethanol, fertilizer, chemicals, etc.)

* Energy Equipment : manufacturer of structural WIND towers + propane tanks



While its Largest business unit by FAR is RAIL (per the below, 'Rail-related' operations accounted for over 70% of the company's total 2Q08 sales), I find the company's Energy Equipment business to be the most promising and exciting. Trinity is the country's largest manufacturer of structured WIND Towers. Per their 2Q08 earnings report, the company's WIND Tower division DOUBLED its Sales year over year and now accounts for approx 11% of the company's total revenues. Perhaps more significant is the fact that the company's Wind Tower order backlog grew 88% year over year (to $1.5 Billion) and Trinity now expects total 2008 WIND division sales of about $425 million.


For my future reference, below are some more interesting TRN 2Q08 Earnings Report #'s :


* Total 2Q08 Sales: Up 6% to $945 million (from 2Q07's $892 m)
Rail Related Sales: Down 11% to $677 m (from $762)
Construction: Up 11% to $219 m (from $197)
Energy Equipment: Up 58% to $157 m (from $99)
Inland Barge: Up 25% to $151 m (from $121)
WIND Tower Division: Up 100% to $106 m (up from $53)


* Total 2Q08 Operating Profits: Up 35% to $150 million ($111 m)
Rail Related Profits: Down 21% to $108 m ($137)
Construction: Up 31% to $21 m ($16)
Energy Equipment: Up 117% to $25 m ($12)
Inland Barge: Up 286% to $27 m ($7)
WIND Tower Divison: Not disclosed


* Total 2Q08 Operating Margins: 15.9% (12.4% a year ago)
Rail Related: 15.9% (18.0)
Construction: 9.6% (8.1)
Energy Equipment: 16.1% (12.1)
Inland Barge: 17.9% (5.8)

* 'Rail-related' sales and profits above are derived from combining the results of two of TRN's Rail-Related business units - 'Rail Group' and 'Railcar Leasing and Management Services'
* TRN's 'Wind Tower' sales and profit results are seperately broken out above but are actually included in the company's 'Energy Equipment Services' business unit

* Wind Tower BACKLOG grew 88% yoy to $1.5 Billion (from 2Q07's $800 million)

* Wind Tower Sales as a % of Total Energy Equipment revenues grew from 54% in 2Q07 to 68% in 2Q08

* Wind Tower Sales as a % of Total Company Sales grew from 6% of TRN's total 2Q07 to 11% in 2Q08 (in other words, the sales impact of TRN's WIND tower business doubled year over year in terms of influence to the company's Top Line)

* Energy Equipment Sales as a % of Total Company Sales grew from 11% of TRN's total 2Q07 to 17% in 2Q08

* Rail-related Sales as a % of Total Company Sales decreased from 85% in 2Q07 to 72% in 2Q08

* Rail-related Profits as a % of Total Company Profits decreased from 91% in 2Q07 to 72% in 2Q08

* Energy Equipment Profits as a % of Total Company Profits increased from 11% in 2Q07 to 17% in 2Q08

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* TRN expects Railcar (not including Rail leasing services) margins to decline from 12.3% in 2Q08 to 6-8% in 3Q and 3-5% in 4Q due to higher commodity costs ('plate' steel) and a more competitive pricing environment...TRN's 2Q07 railcar margin was 16.1%...TRN's previous provided railcar margin guidance for the 2nd half of 2008 was 6-9%

* TRN's railcar order backlog of $2.4 Billion (28,600 railcars) comprise 46% of the Industry's TOTAL

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* CEO Timothy Wallace on TRN's WIND division: "I remain very optimistic about our structural Wind Towers business. We continue to explore additional ways to expand our participation in the wind energy market. We are very pleased with the Texas Public Utility Commission’s decision to fund additional transmission lines for wind energy. Texas is at the heart of our market and we expect the TUC’s action will encourage our customers to pursue additional wind farms. We have targeted Mexico and the central part of the United States, as our key markets. Order enquiries remain very strong and we expect our backlog to grow, as we progress through the year. A large backlog enables us to stage our growth and maximize our efficiencies. Later this year, we will start converting two existing railcar facilities to Wind Tower production. This is part of an expansion plan that we have in progress to satisfy the growing demand for wind towers. Our ability to convert a facility from one product to another is a key strength in our company. It allows us to aggressively pursue orders for a variety of products. We can select products, which provide the best returns and then quickly ramp up facilities. Our highly skilled workforce makes this possible...We do know though that, We are the Largest Producer of Wind Towers in the Country."

Full Disclosure: I own shares of TRN.

Massey Energy's ACCELERATING Growth

During its 2Q08 Earnings Report today, Massey Energy (MEE), the 4th largest coal producer in the United States, provided some pretty EYE-opening guidance related to its Coal Sales and Production Targets for 2008, 2009 and 2010.

The one HUGE takeaway for me is the impressive ACCELERATION in COAL Prices this company sees through all the way into 2010...clearly Massey is 'banking' on continued growth in demand for the commodity (specifically metallurgical or coking coal as MEE is one of North America's Largest suppliers of the coal required for the manufacture of steel).

Let it be known that I also greatly respect Massey's TRANSPARENCY and the fact that they're able to be SO transparent given the current state of the U.S economy. It's not too often you see public companies in a RECESSION backdrop providing AGGRESSIVE GROWTH forecasts three years out...An impressive sign of management confidence if you ask me.

http://www.reuters.com/article/rbssEnergyNews/idUSN3137963420080731

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MEE's 2008 Forecast:
* Production: 41.5 to 43 million tons

* Avg Price: $65 to $66 per ton

* Estimated Coal Sales: $2.8 Billion



MEE's 2009 Forecast:
* Production: 46 to 48 million tons

* Avg Price: $84 to $92 per ton (34% price increase over 2008)

* Estimated Coal Sales: $4.1 Billion (46% Growth over 2008)



MEE's 2010 Forecast:
* Production: 50 million tons

* Avg Price: $115 to $132 per ton (40% price increase over 2009)

* Estimated Coal Sales: $6.2 Billion (50% Growth over 2009)

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Other Misc. Notes from MEE's 2Q08 Results:

* MEE's total coal exports increased by 83% and sales of metallurgical coal were up over 36%.

* Massey's produced tons sold was up 8% year over year to 10.8 million tons

* MEE's avg 2Q08 coal price sales realization was $65.78 per ton...$14.38 per ton higher vs. 2Q07 (a 28% price increase)

* Metallurgical coal prices increased by 52% year over year (2Q08's prices were higher by $37.42 per ton)

* Metallurgical coal made up 28% of 2Q08 MEE coal shipments (vs. 2Q07's 22%) and contributed to 46% of total coal revenues

* About 1/3 of MEE's total 2.3 billion tons of coal reserves are metallurgical (coking) coal

Data Courtesy: Reuters
Full Disclosure: I own shares of MEE.

The U.S - PROOF Steel Industry (A New ERA)

WHAT Recession ?!? WHAT Slowdown ?! The numbers speak for THEMSELVES. Despite a fragile and declining U.S. economy (...shout out to the Alan Greenspan-induced housing bubble...), STEEL companies are earning record Profits selling into the demands of Emerging economies seeking basic INFRASTRUCTURE (exp's of emerging economies = the 'BRIC' countries - Brazil, Russia, India and China). As market commentator Jim Cramer rightfully pointed out a year or so ago, we have entered a brand new ERA for these once massively U.S. demand-dependent steel companies. An ERA that allows steel manufacturers to maintain break-neck profitability and handily 'beat' wall street earning expectations during a U.S. recession.

Time to talk numbers + unveil the Empirical evidence..According to the U.S. Commerce Department, shipments of Steel to the United States declined 11% year over year during the first 5 months of 2008 to about 12 million metric tons. DESPITE the slowdown in the U.S., the worldwide Steel industry continues to GROW.

Witness the below presented EVIDENCE courtesy of the 2Q08 earnings results just recently reported by Globally-diversified steel manufacturers, U.S. Steel (X) and ArcelorMittal (MT). FYI, U.S. Steel is the Largest U.S. steel company by marketcap while ArcelorMittal is the WORLD's largest steel manufacturer by just about any measure you and I can think of (production, marketcap, profits, etc.) :


Highlights from U.S. Steel's 2Q08 (X) :
* U.S. Steel recorded a 123% year over year growth in PROFIT and beat wall street earnings estimates by 50% ! (Stripping out non-recurring items, 'normalized' earnings per share profit was $5.67 or $668 million, topping the $3.82 average estimate of 14 analysts in a Bloomberg survey...this compares to X's 2Q07 earnings of $2.54/share or $302 million)

* Total Company Sales rose 60% to a quarterly record of $6.74 billion vs. 2Q07's $4.23 Billion

* U.S. Steel, which can produce about 27 million tons of the metal a year, has three main units: North American flat-rolled steel; Europe, where it supplies central and Western Europe from mills in Serbia and Slovakia; and tubular products, which sells metal to the oil industry for pipelines...Profit in the flat-rolled unit climbed more than fivefold to $478 million, the company said. Earnings at U.S. Steel Europe increased 22 percent to $298 million, while profit from the tubular business rose 82 percent to $177 million.

* U.S. Steel said it expects results from sales of flat-rolled steel to "improve substantially'' in 3Q08 and for profit from the tubular unit (levered to the oil + gas industry) to rise as prices increase. 3Q08 earnings from the European unit will decrease because of higher raw material costs and planned maintenance, the company said.

* U.S. Steel CEO John Surma on Outlook: "We expect another excellent quarter with continued earnings improvement as price increases implemented during the second quarter and early in the third quarter are expected to improve average realized prices for each of our reportable segments."


Highlights from ArcelorMittal's 2Q08 (MT) :
* Profits increased by 114% year over year to $5.84 Billion and beat analysts expectations by 50% ! (analysts surveyed by Reuters predicted a 2Q08 profit of $3.97 Billion...MT's 2Q07 profits were $2.72 Billion or $1.97/share)

* Total Company Sales were up 39% vs. 2Q07 to $37.8 BILLION (analysts expected $34.7 Billion)

* Total steel shipments for 2Q08 were 29.8 million metric tons as compared with steel shipments of 28.7 million metric tons in 2Q07 (2% increase in shipments)

* ArcelorMittal CFO Aditya Mittal on Outlook: "We are operating at high levels of capacity, we are close to capacity and can't produce much more steel...The strongest growth is coming from newly industrializing economies, such as Brazil, Russia, China and Eastern Europe...In contracts which have been renegotiated and closed, we have achieved significant (price) increases and we expect that trend to continue until the end of the year and in 2009."

Sources:

bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=X
uk.reuters.com/article/companyNews/idUKL055720920080730?
bloomberg.com/apps/news?pid=20601085&sid=aum3d.CtKKGY&refer=europe


Data Courtesy: Reuters and Bloomberg
Full Disclosure: I own shares of MT.

CAT 2Q08 Earnings Recap

Caterpillar's 2Q08 Earnings Report Stats:

Beat ? --> Yes (reported $1.74/share vs estimates of $1./share...Year over year EPS growth of 40% vs. 2Q07's $1.24/share)

Profits --> Up 34% to $1.1 Billion (from $823 million)
Sales --> Up 20% to $13.62 Billion (from $11.36 Billion)

* Currency Effect --> the weaker U.S. dollar added $384 million to Sales (or 3%)...it also negatively impacted operating profits by about $62 million (or 5.5%)

Machine Sales: Up 17% to $8.5 Billion
Engine Sales: Up 28% to $4.3 Billion
Financial Product Sales: Up 11% to $827 million

* Sales Breakdown By GEO:
1.) Asia Pacfic sales grew by 52%:
AP Machinery sales: Up 50% to $1.4 Billion
AP Engine sales: Up 57% to $745 million

2.) Europe-Africa-Middle East (EMEA) sales grew by 22%:
EMEA Machinery sales: Up 15% to $2.6 Billion
EMEA Engine sales: Up 34% to $1.7 Billion

3.) Latin America sales grew by 27%:
LA Machinery sales: Up 23% to $1.0 Billion
LA Engine sales: Up 42% to $371 million

4.) North America sales grew by 7%:
NA Machinery sales: Up 8% to $3.5 Billion
NA Engine sales: Up 9% to $1.5 Billion

Other Highlights + Guidance:
* CAT's 2008 FY Guidance: CAT expects Total 2008 Company Sales of $50 Billion and EPS of about $6.00 per share (fyi, this means CAT is currently trading at a 12 P/E to its 2008 Earnings)

* CAT's 2008 Material Cost Guidance: CAT expects total 2008 material costs to increase by about 2.5-3.0% vs. 2007...this comes out to about $600 million

* International Sales made up 60% of total company sales (compared to 55% last year)
* International sales grew 30% year over year

* 2Q08 Machine + Engine Sales Operating Profit: $1.43 Billion or 11.2% of Sales (vs. 2Q07's $1.12 Billion or 10.7% of Sales)* 2Q08 Manufacturing Costs: Up 1.4% or $143 million vs. 2Q07 (material costs for inputs like steel were 2/3 of the total cost increase...freight/fuel costs made up the other 1/3)

* Labor Base: CAT ended 2Q08 with 105,322 employees (up 9% or 9,000 from 2Q07)

Conference Call Quotes:

* CAT Director of I-R Mike Dewalt on International Growth: "This quarter, 60% of our sales and revenues were outside North America. A year ago in the second quarter, that number was 55%. But I think to really appreciate the magnitude of the shift in geographic mix, we need to go back and look at what happened over the past two years, when North America was coming off of its peak. Compared with the second quarter of 2006, Asia Pacific is up 84%, Europe, Africa, Middle East is up 60%, and Latin America is up 55%. And during that same period, sales and revenues in North America were down 3% and actually closer to 13 if you adjust for Progress Rail which we acquired at the end of the second quarter of 2006...China has been very good growth. Actually I do not see any signs of declining demand in China. It looks pretty good. Now again, our sales to a degree are limited by production."

* Mike Dewalt on the Mining Industry + Related Equipment Sales: "Mining is doing well, particularly for coal. Coal prices are up substantially from last year and U.S. exports of coal are rising. Sales to coal customers were well up from the same period a year ago."

* Mike Dewalt on a Weakening Western Europe Outlook: "We have, however, lowered our expectations for European machine sales. Like other companies, you have heard from, we have seen declines in Europe. We expect those declines to continue through 2008. We have adjusted our outlook accordingly and we expect to lower production schedules somewhat in Europe, particularly for smaller machines."

* CAT CEO Jim Owens on Commodities + Impact to Material Costs: "Commodity prices, as we have indicated several times, could drop fairly significantly. I am talking 30 percentish and still be at levels that would be attractive to drive investment in the mining and oil and gas industries because there has been such a prolonged period of under investment...I am a little concerned, very specifically, about the steel industry because there is more concentration globally in the steel industry. The energy costs are clearly up quite a bit. Iron ore pellet prices are up quite a bit. And they have a pretty strong position to push a lot of that through to the market...I think if there is a significant decline in commodity prices, from current levels, then you will still see pretty strong demand because of the, again, very prolonged under investment that occurred in global mining and in global energy. And that would be coal, oil, gas, power distribution, et cetera. Those things play to our strengths. And I think even with the commodity price decline, which is likely in my view, we will see continued strong demand in those sectors."

* CAT (Mike Dewalt + Jim Owens) on timing of a U.S. Economic Recovery: "You know, it would be extraordinarily unusual for the U.S. not to be in a fairly significant recovery by 2010 in my view...you know, there is frequently this glass half-empty view that North America, the U.S. is declining and is going to get worse. I mean, it has been going down now for over two years. It is way off the peak. It is down order of magnitude new machine sales to users 40%, so you know, it has already seen quite a fall...It has dropped as much as it did in the last two recessions, the '91-'92 and the 2001-02 recession already, and will probably get a little worse. Then I think it will begin to recover. I do not know when that recovery is going to start as we get out to '09. We will give you the '09 outlook , but whether it is early '09, mid-'09, late '09, we'll see, but I would be very surprised if it isn't underway before we get to 2010."

* Mike Dewalt Summarizing CAT's 2Q08 Results: "Six key points here, just to summarize: first, we had a good quarter, our best ever for sales and revenues and profit. Despite severe weakness in the U.S., a weaker Europe, a negative product mix and a negative impact related to currency. Second, our costs are up from last year. But when you consider overall inflation, we are doing fairly well. In fact, manufacturing costs in the second quarter were only up 1.4%, and that includes labor, overhead and material costs. And considering where inflation has been, particularly for material costs, that is not too bad. That said, we still have a lot of room to improve. And we think we are doing the right things to drive that improvement. Okay, third point, in terms of the outlook, we do see a weakening picture in North America, Western Europe and Japan and they are all included in our full year outlook. Fourth point, our order backlog continues to be very strong. Commodity-related end markets are doing very well and from a geographic standpoint, the developing world continues with good growth. Point five, sales of many of our products are production constrained. For most large machines and engines, we are selling as much as we can make. And finally, we have a diverse business in terms of products, services, end-markets, and geographies. We have some that are doing very well and that are helping to offset very negative impacts from others. "

Full Disclosure: I own shares of CAT.

COP 2Q08 Earnings Recap

Conoco Phillips 2Q08 Earnings Report Stats:

Beat ?: Yes (reported $3.50 cents/share vs estimates of $3.33/share...21% earnings per share growth over 2Q07's normalized $2.90 per share)

Profits --> Up 13% to $5.4 Billion (from a normalized $4.8 Billion)
Sales --> Up 51% to $71.4 Billion (from $47.4 Billion)

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COP's Earnings by Business Segment:

1.) ENERGY EXPLORATION + PRODUCTION OPS:

E+P Profits: Up 90% to $4.0 Billion (from 2Q07's $2.1 Billion)

E+P Profit Per BOE: Up 273% to $25.12 per BOE (vs. 2007's Avg of $6.73)...BOE or Barrel of Oil Equivalent: a unit of energy based on the approx amount of energy released by burning One Barrel of Crude Oil)

Avg Realized International Oil Price: Up 83% to $119 per barrel (from 2Q07's $65)
Avg Realized International Nat Gas Price: Up 45% to $10.94 per BTU (from 2Q07's $7.55)

Total Energy Production: Down 8% to 2.2 million BOE per day from 2Q07's 2.38 million BOE per day

Energy Production Ex Lukoil: 1.75 million BOE (vs. 2Q07's 1.91 million BOE...a year over year drop of 8%...decrease in yoy production mainly due to the Venezuelan government's expropriation of the company's Venezuelan oil projects - this resulted in COP taking a $4.5 Billion charge in 2Q07)

Natural Gas Sales: 4.8 Billion cubic feet per day during 2Q08 (vs. 2Q07's 5.1 Billion)

Exploration Expenses: $288 million (vs. $259 million in 2Q07)

2.) MIDSTREAM OPS:

Midstream Profits: Up 59% to $162 million (from 2Q07's $102 million)

3.) REFINING + MARKETING OPS:

R + M Profits: Down 72% to $664 million (from 2Q07's $2.4. Billion)

R+M Profits Per Barrel: Down 53% to $2.33 per BOE (from 2007's Avg of $5.00)

U.S. Refinery Margins: $10.29 per barrel

International Refinery Margins: $6.70 per barrel

WW Refinery Capacity Utilization Rate: 93% (vs. 2Q07's 93%)

U.S. Domestic Refinery Capacity U-Rate: 94%

International Refinery Capacity U-Rate: 88%

R+M Expenses: $170 million (up 193% from 2Q07's $58 million)

4.) LUKOIL OPS:

Lukoil Profits: Up 47% to $774 million (from 2Q07's $526 million)

COP's Lukoil Daily Production: 448,000 BOE per day (equivalent to 215K Barrels of Crude Oil per day)...20% of COP's 2Q08 Energy Production came from Lukoil

* COP's 2Q08 Lukoil earnings include a $120 million adjustment in costs to reflect lower than estimated Lukoil earnings during the previous quarter (1Q08)

5.) CHEMICALS OPS:

Chemicals Profits: Down 74% to $18 million (from 2Q07's $68 million)

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Other Highlights + Guidance:

* 2008 Production Guidance: Excluding Lukoil, full year 2008 Production will average about 1.8 million BOE per day...Conoco's 3Q08 E+P Expenses will be around $375 million

* Free Cash Flow: COP generated $5.4 Billion in Cash during 2Q08...With this money COP: 1.) Repurchased $2.5 Billion of Conoco Phillips company stock, 2.) Funded $3.6 Billion of its capital spending program, and 3.) Paid $0.7 Billion back to shareholders in dividends.

* Stock Buyback Program: As part of its $10 Billion authorized Stock Repurchase program for 2008, COP plans to spend about $5 Billion buying back company stock during the 2nd half of 2008 (the company has already spent $5 Billion buying back stock during the first half of 2008)

* Shares Outstanding: COP's 'Float' or Shares Outstanding decreased by 6% year over year to 1.56 Billion shares (from 2Q07's 1.66 Billion shares)...Conoco's repurchase of company stock contributed 33% or 20 cents to 2Q08's year over year EPS growth of 60 cents. Since the beginning of 2008 COP has spent $5 Billion purchasing its own stock.

* Effective Tax Rate: 44% (vs. 2Q07's 41%)

* Cash On Hand: $787 million

* Return On Capital: 20%

* Debt To Capital Ratio: COP ended 2Q08 with $21.9 Billion in Debt and a 19% Debt to Capital Ratio

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Conference Call Quotes:

* COP CEO on 2008 Capital Spending + Stock Buyback Plan: "On share repurchase...(the) market can expect we are going to do $10 Billion share repurchase in 2008 and going at a rate of $2.5 Billion a quarter. Capital spending is going to be around $15 billion, maybe a little bit more, but $15 billion, $16 billion."

* COP CEO Jim Mulva on COP's International Projects: "See now, we recently signed interim agreement with Abu Dhabi National Oil Company (ADNOC) to develop the Shah gas field in Abu Dhabi and elsewhere in the Middle East, we approved the continued funding, moving forward for the development of the Yanbu Export Refinery project with Saudi Aramco. We’re pleased to be working with both ADNOC and Saudi Aramco on these world-class projects. It helps meet the growing demand for energy not only in the old Middle East but also around the world. We recently signed a MoU ('Memorandum of Understanding') with Petrobras (PBR), as you know the largest Brazilian Energy company, and with this agreement we hope to sort through opportunities to work together in our core businesses, upstream and downstream, as well as energy opportunities such as ethanol in Brazil."

* COP CEO on COP's North American Pipeline Project (Keystone): "In North America, our joint venture with TransCanada, we plan to expand the Keystone crude oil pipeline system, providing additional capacity of 500,000 barrels per day from Western Canada to the U.S. Gulf Coast...we expect to use it by taking Canadian crude all the way down to the Gulf Coast because there's good optionality to be in our refineries in Mid-Continent and Gulf Coast, both from Canada as well as from say Venezuela and other crudes that we can get from Mexico and other places around the world.

* COP CEO on Partnership with Brazil's Petrobras: "We’re merely looking at the opportunities on how we can participate in exploration and production both in Brazil as well as outside Brazil and then we also, with our large refining segment in North America, we kind of explore and ultimately, we’re having more crude oil production when there is an opportunities for us to be working with each other in the downstream part of the company and then for both companies...We need a lot of ethanol ultimately to blend into our gasoline and so we’re looking at the opportunities of being such large ethanol producer in Brazil and how Petrobras participates in that and whether there’s opportunities for us to be working with each other. So to go any further than that, we are really in initial phases of this study work of the MoU but we‘re really pleased to be working with Petrobras.

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Additional Misc. Conoco Phillips Info:

* COP is currently the 3rd Largest U.S. Oil Producer by marketcap

* Conoco purchased Burlington Resources in 2006 for $35 Billion to become the U.S.'s Largest Natural Gas Producer

* In addition to being the U.S.'s largest natural gas producer, COP is also the 2nd Largest Oil Refiner in the country (Valero or VLO owns the largest refining capacity in the United States)

* COP owns and operates 12 Refineries in the U.S. - 2 of which are part of a joint venture with Canada's Encana (ECA)...COP also owns refineries in Europe (Germany and the United Kingdom)

* COP has previously stated it earns $130 million, or 8 cents a share, for EACH $1 increase in Oil prices, and $33 million, or 2 cents, for EACH 25 cent gain in Natural Gas prices per thousand cubic feet.

Full Disclosure: I own shares of COP.

BTU 2Q08 Earnings Recap

Peabody Energy 2Q08 Earnings Report Stats:

Beat ?: YES (reported $0.86 cents/share vs estimates of $0.54/share...115% earnings per share growth over 2Q07's 40 cents)

Profits --> Up 115% to $233 million (from $108 million)
Sales --> Up 43% to $1.53 Billion (from $1.07 Billion)

2Q08 Total Coal Production Sales Vol --> 59.8 million tons (vs. 57 million tons during 2Q07)

2Q08 Export Coal Production Sales Vol --> 7 million tons (12% of total production)...The Wyoming Powder River Basin (PRB) contributed to 14% of exports or about 1 million tons

Other Highlights + Guidance:

* BTU now generates more than 50% of its Profits from outside of the U.S. compared to just 1% five years ago

* BTU's Australian Metallurgical Coal contracts (for deliveries through March 2009): priced at $300 a metric ton, or about TRIPLE year-ago pricing

* BTU's Seaborne Thermal Coal contracts were being priced at $125 per metric ton, more than double a year earlier

* Total 2008 U.S. Coal Exports are expected to increase by 50% this year to at least 75 million tons, according to the U.S. Energy Department (EIA), as European utilities purchase supplies normally used by generators in the Northeast

* Australia produces 60% of the world's Seaborne coal used in STEEL-making
* BTUs Australian production volumes increased 15% year over year...BTU averaged prices of $95 a ton for all Australian coal (thermal + met) production, compared to $55/ton during 2Q07
* BTU's 2Q08 Australian coal production margin exceeded $43 per ton
* BTU has much as 14 million tons of Australian coal that's unpriced for 2009 and up to 24 million tons available for resale in 2010, of which nearly half in both cases is metallurgical coal (the highest margin type of coal).

* China's Seaborne Thermal Coal Demand Opportunity: China has 'idled' more than 60 coal plants because coal inventories have shrunk to less than 3 Days Supply...China has also trimmed its coal exports by more than 8% this year and announced plans to lower or eliminate its coal import tariffs

* India's Seaborne Thermal Coal Demand Opportunity: India will need 78,000 megawatts of new coal-fueled generation by 2012, meaning an additional 265 million tons of coal use in that country.

Conference Call Quotes:

* BTU's CEO Gregory Boyce on WW Coal Supply + Demand Fundamentals: "With the recent oil and gas prices near record levels for even the long-dated products, the world is returning to coal in growing amounts. That is why coal remains the fastest growing fuel in the world for each of the past five years. Within the global coal markets, the dynamics we first told you about years ago are only growing stronger. Global coal demand is growing in BOTH the THERMAL and METALLURGICAL front. Some of the largest coal producing nations either can't export more or are limiting exports to fuel internal growth. Global steel demand continues to grow at 6% per year, requiring ever more mettalurgical coal. A new coal fuel generation is being developed in scores of nations around the world; all of this leading to a 7% compound growth rate in seaborne coal demand. On the SUPPLY SIDE, major coal exporters are straining to keep up against the sustained demand growth. All aspects of the coal chain are under pressure and more nations than ever are seeing the valuable resource that their coal represents, forcing coal suppliers to keep greater amounts of coal at home. Combined, these effects are driving continued record prices and we believe global supply and demand is even tighter than many think, due to severe stockpile shortfalls around the world in places such as China, India, Indonesia, and South Africa...What happens in the global market... looks back to what's happening in the U.S. So, REGARDLESS of some certain economic factors that are happening in the U.S. that would lead us to come to one conclusion but that's NOT really what's driving the overall commodity market and the coal market. At the end of the day it's a GLOBAL factor, so as the prices around the world continue to increase and stay strong because of the shortage of supply and the high demand..."

* BTU CEO on the BTU's Opportunities + Future: "The global market fundamentals create significant opportunities for Peabody through four areas; Peabody's unmatched Global Platform, our ability to Reprice Legacy Contracts, our Organic Growth Potential and Peabody's strong Cash Flow profile...Five years ago, just 1% of our earnings came from outside the U.S. And now this is more than half...the benefits to our earnings as we reprice former contracts in the new market environment will be considerable. These two are just starting to flow through our 2008 results. Our EBITDA margin in the second quarter was 29% and we expect it to continue to increase...These commitments include plans for a very strong second half and even higher earnings than the first...In summary, we are seeing record coal prices, sustained growth in coal demand and an improving competitive advantage for coal over other fuels. More importantly, Peabody has expanding margins from a growing platform and improved pricing. We have the ability to REPRICE the MAJORITY of our production over the next several years at levels SIGNIFICANTLY higher than current marks. Simply put, it is a great time to be the world's largest coal company."

* BTU President Richard Navarre on Domestic U.S. Coal Production: "In the U.S. markets, we are seeing export demand is creating great opportunities in the Illinois Basin, the Powder River Basin and Colorado that we expect will carry through 2008 and beyond. We believe net exports will have grown more than four-fold in just two years. And (total U.S. coal) exports may well exceed a 100 million tons in 2009. We have also seen U.S. stockpiles coming down very sharply, down 17% over prior-year levels. And we believe all regions are below or near their targeted level, with plenty of summer burn left...We have more than 90 million tons of coal that's unpriced for 2010 out of both PRB and the Illinois Basin just from our existing operations. We told you earlier in previous calls that the competition that was being created worldwide by European utilities seeking U.S. coal would lead to significant moves in the U.S. markets that would ultimately flow back to the Powder River Basin. And that is just what has occurred. Published Powder River Basin prices for 2010 delivery have increased more than 80%, since the beginning of the year and are now in excess of $20 per ton. In the Illinois Basin, we've seen the same issue where prices have more than doubled during that same period of time. And I'll remind you that Peabody has the largest Illinois Basin position with more than 30 million tons in sales. We believe that the strength in the global coal market is very long term in nature, and expect this will result in very attractive coal prices for many years."

* BTU CEO on International Growth Opportunities: "And then from the international side, we've got a number of opportunities in Australia that now that we've got the platform up and running and performing well, we're looking at what the opportunities that we have to grow organically in Australia similar to what we've done everywhere, every other platform that we have. And we do have some opportunities that we're starting to put some good engineering average into. That takes this into the real greenfield, new area developments. Mongolia is one of those. Clearly our initiatives in China will be another one of those and then you mentioned Mozambique. In Mongolia and Mozambique, the real focus will be mettalurgical coal developments and China would be both thermal coal and when I say thermal coal in China that includes coal for their chemical feedstock business as well as coal for power generation. Mozambique in particular, we've had a number of times that we've spent over in Mozambique and we continue to look at the structure of the industry what's happening in terms of the infrastructure development in Mozambique, both in terms of rail and port developments and then looking at the types of lease holdings that are available in Mozambique and/or development partners.

* BTU CEO on Supplying Growing South America Coal Demand: "When you are talking about South America really in terms of major producing regions or a potential to be major producing regions, you're are talking about Venezuela and Colombia. You know, we're in Venezuela. I mean everybody is well aware of the turmoil that Venezuela has kind of been going through. We see it as very unlikely that there's going to be major investment in new mine developments in the near term in Venezuela. So they're going to be where they're at and maybe struggle to maintain that level of production.When you look at Colombia, lot of discussions and a lot of talk about how Colombia is going to increase production to a next level. But every time you turn around, they are being delayed. They still have labor issues. They have permitting issues. Suffice to say is our view is they will increase over time. Probably going to be bit slower than what some people think, and most of that is very good quality thermal coal probably going to be almost exclusively dedicated for the European market, now that South Africa continues to over time short that market. So at the end of the day if you look at WHERE are major sources of additional coal for the seaborne markets, in the near term, it's Illinois Basin coal and it's PRB coal as you continue to have Colorado, Illinois and Eastern coals exported out of the U.S. and the Powder River Basin back drilling for all of those coals.

* BTU CEO on Coal-to-Gas Technology: "Well coal-to-liquids, coal-to-gas, it's really a story of two different parts of the world. You got the U.S. as one part and you got the rest of the world as the other. Let's look at what's happening Outside of the U.S. Coal-to-liquids, coal to industrial feedstock gas, coal to natural gas is really taking off. You've got a significant amount of new construction and plants coming online in China. You've got coal-to-liquids plant now operational in Australia. You've got... and on the drawing board a number of locations elsewhere. And then of course, you've got continued expansions of the coal-to-liquids platform in South Africa. So, then you get at the U.S. and just say where do we stand in the U.S? It's a combination here of both the ever-rising capital costs for these types of facilities still looking to find contractual commitments for off takes that go out longer than say a five-year period of time. You'd like to see something in the ten-plus years before you commit the capital. And then lastly, there is still the lack of a full regulatory program and permitting U.S. program for CO2 capture and storage, which most of the folks, particularly ourselves are looking at these types of facilities, are looking for those things to come into place at some point early on in the project life. But having said all of that, major expansions internationally, our view is the U.S. will catch up as soon as we get beyond the uncertainties of the election get into '09 and '10 and start to bring some certainty around the permitting and the legal environments around carbon storage.

* BTU Ceo on the U.S.'s Competitive Advantage - Coal Export CAPACITY: "The port capacity, obviously if you go to, lot of places you will see a name playing capacity, if you will of all of port facilities in United States. That number is somewhere between 165 and 175 depending upon who you talk to. We would tell you that the practical capacity in our view, after assessing the facilities and owning 37% of DTA and using facility, it is probably about a 125 million ton. This country has done that in the past. So and that's why U.S. has become one of the major swing supplier in this tight markets globally. Because we have the ONLY place in the world, where we have unconstrained port capacity and capabilities to move the product. So that's why we continue to see this having a lot of legs for some period of time, because as you look around the globe, (production) can go offline and down country by country out of the 12 to 13 major exporting countries, you will see everyone of them stuffed up with congestion, with probably the exception in United States. And the United States has the ability to move it, because they have the ability to BACKFILL it from somewhere else in the country. Otherwise, if we didn't have the PRB or the Illinois Basin to backfill, we will be doing what the other countries are doing, restricting exports.

* BTU CEO on International Producers Restricting Coal Exports: "I mean right now, China clearly has been at the top of the list. Their export license is going to be down from where people thought they were going to be this year. Vietnam has been restricting their exports particularly into the Chinese markets. Indonesia is now telling all of their domestic producers that they have got to supply their internal needs first, ahead of their ability to export, one of reasons why we have seen Indonesia basically flat year-over-year in terms of growth. South Africa is severely short of coal. I mean that's just came out with an estimate that they think they have got over the next five years or more. I guess it was 2017 where they need another 100 million tons of coal developed and they are 40-45 million tons short on their stockpiles, so where they are liken to be today. And Russia now is a country that in a major way is starting to restrict not only metallurgical coal but thermal coal, as they continue to build new generation, so that they can free up gas for exports on the gas. So that's kind of some of the major producing countries that have been traditional export countries over the last four, five years."

Full Disclosure: I own shares of BTU.

AAPL 2Q08 Earnings Recap

Apple 2Q08 Earnings Report Stats:

Beat ?: Yes (reported $1.19/share vs estimates of $1.08/share...31% earnings per share growth over 2Q07's 92 cents)

Profits --> Up 31% to $1.07 Billion (from $818 million)
Sales --> Up 38% to $7.46 Billion (from $5.41 Billion)

Gross Margins --> Down 2.7 pts to 34.2% (36.9% in 2Q07)


* AAPL's 2Q08 Sales Growth By Product :

A.) Mac Revenues: Up 43% yoy to $3.6 Billion

Mac Unit Sales: Up 41% to 2.5 million Macs

B.) iPod Revenues: Up 7% yoy to $1.7 Billion

iPod Unit Sales: Up 12% to 11.0 million Ipods

C.) iPhone Revenues: $419 million

iPhone Unit Sales: 717,000 iPhones (vs 2Q07's 270,000 units - fyi, the first generation iPhone launched on 6/29/07)...Important to Note, Apple ceased production + ran out of their 1st generation iPhone inventory in May...sales recognition paused until they later launched the 3G iPhone in July

* Apple's 'Mac Products and Services' business represented 61% of the company's total 2Q08 revenues ($4.6 Billion)
* Apple's 'Music Products and Services' business unit represented 33% of the company's total revenues ($2.5 Billion)

* Apple's 'Other Music Related Products and Services' (includes iTunes) grew sales 35% year over year to $819 million

* Apple's Retail Store Sales were up 58% year over year to $1.44 Billion + Profits from retail store operations grew 61% to $291 million


* AAPL's 2Q08 Sales Growth Ex Retail by GEO :
1. Americas (North + South): Up 28% to $3.4 Billion
2. Europe: Up 42% to $1.6 Billion
3. Japan: Up 41% to $365 million
4. Other (includes Asia Pacific): Up 44% to $571 million

* AAPL's CASH position as of the end of 2Q08 was $20.8 Billion...AAPL generated $1.3 Billion in cash during 2Q08
* AAPL's 2Q08 effective Tax Rate was 29% (previously Apple guided this at 31%)


Other Highlights + Guidance:
* International Sales: Accounted for 42% of the company's 2Q08 revenues

* 3G iPhone Launch: Apple sold 1 million 3G iPhones within 3 days of the product's July 11th launch across 21 different countries...it took Apple's first generation iPhone 74 days to reach the million sale plateu (fyi, Apple's 3G iPhone sales will be reflected in AAPL's 3Q08 earnings)

* AAPL's 3Q08 Earnings Guidance: It should be stated that Apple LOVES to provide Wall Street with CONSERVATIVE forward earnings guidance...ok, with that said, Apple's forecasting 3Q08 Earnings per share of $1.00 (3Q07's EPS was $1.01/share) and Sales of $7.8 Billion...the sales number represents 25% growth over 2Q07. Apple's forecast fell short of Bloomberg analyst consensus 3Q08 expectations of EPS and Sales of $1.24/share and $8.3 Billion, respectively. Apple also forecasted 3Q08 gross margins to fall to 31.5%

* Mac Desktop sales grew 44% year over year...Mac Laptop sales grew 42% yoy...U.S. education business generated Mac unit growth of 25% vs. 2Q07

* U.S. iPod sales were up 10% yoy...International iPod sales were up 15% yoy

* AAPL ended 2Q08 with 216 retail outlets...AAPL plans to have 242 locations by the end of 2008


Conference Call Quotes:
* Apple CFO Petter Oppenheimer on AAPL's 2Q08 iPhone Revenue Recognition: "During the June quarter, we shipped 717,000 first generation iPhones, and recognized revenue from iPhone handset sales, accessories, and carrier payments of $419 million. As we indicated previously, because we announced the iPhone 2.0 software and its many new features on March 6th but did not make it available until this month, we did not begin recognizing handset revenue for any iPhones sold on or after March 6th until we made the iPhone 2.0 software available. For those phones, we began recognizing handset revenue on July 11th and we will continue to do so over the respective remaining terms of their 24-month estimated economic lives. Therefore, any iPhone handset revenue recognized during the June quarter relates to iPhones sold prior to March 6th."

* AAPL CFO on Gross Margin Deterioration: "In the June quarter, we did do about 180 basis points better than our guidance, and this was driven, as I said in my prepared remarks, by a one-time true-up that we had with our contract manufacturer deferred margin about 70 basis points. The remaining 110 was primarily driven by a better commodity environment than we planned, a bit richer of a product mix and leverage from the higher revenue. As I look forward to the September quarter, I would see gross margin being about 31.5%, down from the 34.8% as a result of primarily three factors: first the full quarter impact of the back-to-school promotion that we are running; second, we’ve got a future product transition that I can’t discuss with you today; and then finally, the one-time true-up with the contract manufacturer deferred margin won’t repeat...We’re delivering state-of-the-art products at price points that our competitors can’t match, which has resulted in market share gains in each of our products. We plan to continue this strategy and to deliver great value to our customers while making a reasonable margin but not a margin so high as to leave an umbrella for our competitors. In addition, and one of the investments that we make is to introduce new products that initially cost more because they deliver an entirely new level of value to the customer. Then we ride the cost curves down with value engineering and volume manufacturing, leaving us far ahead of our competitors. We have some of these types of investments in front of us that I can’t discuss with you today and we plan to continue to execute this strategy in the future. As we look beyond the September quarter, we would anticipate gross margins being about 30% in fiscal 2009. We are very confident in our new product pipeline, our growth opportunities, and the decisions we are making for our future."

* AAPL CFO on International Growth: "Europe had an outstanding quarter. Revenue grew at 42%, so higher than the overall company, and Japan for the third straight quarter has grown higher than the overall company this quarter at 40%. And Asia-Pacific continues to do extremely well, with a year-over-year increase in the Mac area of 53%...In terms of some of the markets that you mentioned, we had several markets in the developing market area that were growing over 50% in revenue year over year, such as China, Russia, and Latin America. But surprisingly, we also saw some of the more mature markets growing at over 50% year over year, such as France and Germany and Australia. So overall, it was a very, very strong quarter in every major geographic region."

* Apple CFO on Apple's iPod MarketShare: "We were very successful in maintaining our high MP3 market share in the U.S. during the quarter and gaining share internationally. Our share is now over 70% in both the United States and Australia, over 60% in Canada, and over 50% in the U.K., Japan, and Switzerland, based on the latest published data from NPD, GFK, and BCN. We have strong double-digit share in numerous other European and Asian countries and we continue to gain share year over year in most countries for which we have data. "

Full Disclosure: I own shares of AAPL.