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0000320193
20091027
10-K
1,425
The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 - Quoted prices in active markets fo...
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,426
Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset...
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,427
Level 3 - Inputs that are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,428
The Company’s valuation techniques used to measure the fair value of money market funds and certain marketable equity securities were derived from quoted prices in active markets for identical assets or liabilities.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,429
The valuation techniques used to measure the fair value of all other financial instruments, all of which have counterparties with high credit ratings, were valued based on quoted market prices or model driven valuations using significant inputs derived from or corroborated by observable market data.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,430
Assets/Liabilities Measured at Fair Value on a Recurring Basis The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of September 26, 2009 (in millions): (a) The total fair value amounts for assets and liabilities also represent the related carrying amounts.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,431
The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis as presented in the Company’s Consolidated Balance Sheet as of September 26, 2009 (in millions): (a) The total fair value amounts for assets and liabilities also represent the related carrying amounts.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,432
Note 4 - Consolidated Financial Statement Details The following tables show the Company’s consolidated financial statement details as of September 26, 2009 and September 27, 2008 (in millions): Other Current Assets Property, Plant and Equipment Other Assets Accrued Expenses Non-Current Liabilities Note 5 - Goodwill and...
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,433
The following table summarizes the components of gross and net intangible asset balances as of September 26, 2009 and September 27, 2008 (in millions): In 2008, the Company completed an acquisition of a business for total cash consideration, net of cash acquired, of $220 million, of which $169 million has been allocate...
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,434
The Company’s goodwill is allocated primarily to the America’s reportable operating segment.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,435
Amortization expense related to acquired intangible assets was $53 million, $46 million and $35 million in 2009, 2008 and 2007, respectively.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,436
As of September 26, 2009 and September 27, 2008, the remaining weighted-average amortization period for acquired technology was 7.2 years and 7.0 years, respectively.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,437
Expected annual amortization expense related to acquired technology as of September 26, 2009, is as follows (in millions): Note 6 - Income Taxes The provision for income taxes for the three years ended September 26, 2009, consisted of the following (in millions): The foreign provision for income taxes is based on forei...
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,438
As of September 26, 2009 and September 27, 2008, $17.4 billion and $11.3 billion, respectively, of the Company’s cash, cash equivalents and marketable securities were held by foreign subsidiaries and are generally based in U.S. dollar-denominated holdings.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,439
Amounts held by foreign subsidiaries are generally subject to U.S. income taxation on repatriation to the U.S.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,440
The Company’s consolidated financial statements provide for any related tax liability on amounts that may be repatriated, aside from undistributed earnings of certain of the Company’s foreign subsidiaries that are intended to be indefinitely reinvested in operations outside the U.S. U.S. income taxes have not been prov...
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,441
It is not practicable to determine the income tax liability that might be incurred if these earnings were to be distributed.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,442
Deferred tax assets and liabilities reflect the effects of tax losses, credits, and the future income tax effects of temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that apply t...
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,443
As of September 26, 2009 and September 27, 2008, the significant components of the Company’s deferred tax assets and liabilities were (in millions): A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate (35% in 2009, 2008 and 2007) to income befor...
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,444
For stock options, the Company receives an income tax benefit calculated as the difference between the fair market value of the stock issued at the time of the exercise and the option price, tax effected.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,445
The Company had net tax benefits from employee stock plan awards of $246 million, $770 million and $398 million in 2009, 2008 and 2007, respectively, which were reflected as increases to common stock.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,446
On October 3, 2008, the Tax Extenders and Alternative Minimum Tax Relief Act of 2008 was signed into law.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,447
This bill, among other things, retroactively extended the expired research and development tax credit.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,448
As a result, the Company recorded a tax benefit of $42 million in the first quarter of 2009 to account for the retroactive effects of the research credit extension.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,449
Uncertain Tax Positions As discussed in Note 1, “Summary of Significant Accounting Policies” the Company adopted new accounting principles on accounting for uncertain tax positions in 2008.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,450
Under these new principles, tax positions are evaluated in a two-step process.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,451
The Company first determines whether it is more likely than not that a tax position will be sustained upon examination.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,452
If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to recognize in the financial statements.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,453
The tax position is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,454
Upon adoption of these new principles, the Company’s cumulative effect of a change in accounting principle resulted in an increase to retained earnings of $11 million.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,455
The Company had historically classified interest and penalties and unrecognized tax benefits as current liabilities.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,456
Beginning with the adoption of these new principles, the Company classifies gross interest and penalties and unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as non-current liabilities in the Consolidated Balance Sheets.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,457
The total amount of gross unrecognized tax benefits as of the date of adoption was $475 million, of which $209 million, if recognized, would affect the Company’s effective tax rate.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,458
The Company’s total gross unrecognized tax benefits are classified as non-current liabilities in the Consolidated Balance Sheets.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,459
As of September 26, 2009, the total amount of gross unrecognized tax benefits was $971 million, of which $307 million, if recognized, would affect the Company’s effective tax rate.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,460
As of September 27, 2008, the total amount of gross unrecognized tax benefits was $506 million, of which $253 million, if recognized, would affect the Company’s effective tax rate.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,461
On May 27, 2009, the United States Court of Appeals for the Ninth Circuit issued its ruling in the case of Xilinx, Inc. v. Commissioner, holding that stock-based compensation is required to be included in certain transfer pricing arrangements between a U.S. company and its offshore subsidiary.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,462
As a result of the ruling in this case, the Company increased its liability for unrecognized tax benefits by approximately $86 million and decreased shareholders’ equity by approximately $78 million in the year ended September 26, 2009.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,463
The aggregate changes in the balance of gross unrecognized tax benefits, which excludes interest and penalties, for the two years ended September 26, 2009, is as follows (in millions): The Company’s policy to include interest and penalties related to unrecognized tax benefits within the provision for income taxes did n...
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,464
As of the date of adoption, the Company had accrued $203 million for the gross interest and penalties relating to unrecognized tax benefits.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,465
As of September 26, 2009 and September 27, 2008, the total amount of gross interest and penalties accrued was $291 million and $219 million, respectively, which is classified as non-current liabilities in the Consolidated Balance Sheets.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,466
In 2009 and 2008, the Company recognized interest expense in connection with tax matters of $64 million and $16 million, respectively.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,467
The Company is subject to taxation and files income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,468
For U.S. federal income tax purposes, all years prior to 2002 are closed.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,469
The years 2002-2003 have been examined by the Internal Revenue Service (the “IRS”) and disputed issues have been taken to administrative appeals.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,470
The IRS is currently examining the 2004-2006 years.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,471
In addition, the Company is also subject to audits by state, local and foreign tax authorities.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,472
In major states and major foreign jurisdictions, the years subsequent to 1988 and 2000, respectively, generally remain open and could be subject to examination by the taxing authorities.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,473
Management believes that an adequate provision has been made for any adjustments that may result from tax examinations.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,474
However, the outcome of tax audits cannot be predicted with certainty.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,475
If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,476
Although timing of the resolution and/or closure of audits is highly uncertain, the Company believes it is reasonably possible that tax audit resolutions could reduce its unrecognized tax benefits by between $105 million and $145 million in the next 12 months.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,477
Note 7 - Shareholders’ Equity and Stock-Based Compensation Preferred Stock The Company has five million shares of authorized preferred stock, none of which is issued or outstanding.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,478
Under the terms of the Company’s Restated Articles of Incorporation, the Board of Directors is authorized to determine or alter the rights, preferences, privileges and restrictions of the Company’s authorized but unissued shares of preferred stock.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,479
Comprehensive Income Comprehensive income consists of two components, net income and other comprehensive income.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,480
Other comprehensive income refers to revenue, expenses, gains and losses that under GAAP are recorded as an element of shareholders’ equity but are excluded from net income.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,481
The Company’s other comprehensive income consists of foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency, unrealized gains and losses on marketable securities categorized as available-for-sale, and net deferred gains and losses on certain derivative in...
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,482
The following table summarizes the components of accumulated other comprehensive income, net of taxes, as of the three years ended September 26, 2009 (in millions): The change in fair value of available-for-sale securities included in other comprehensive income was $118 million, $(63) million and $(7) million, net of t...
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,483
The tax effect related to the change in unrealized gain/loss on available-for-sale securities was $(78) million, $42 million and $4 million for 2009, 2008 and 2007, respectively.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,484
The following table summarizes activity in other comprehensive income related to derivatives, net of taxes, held by the Company during the three years ended September 26, 2009 (in millions): The tax effect related to the changes in fair value of derivatives was $(60) million, $(5) million and $1 million for 2009, 2008 ...
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,485
The tax effect related to derivative gains/losses reclassified from other comprehensive income to net income was $54 million, $(9) million and $2 million for 2009, 2008 and 2007, respectively.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,486
Employee Benefit Plans 2003 Employee Stock Plan The 2003 Employee Stock Plan (the “2003 Plan”) is a shareholder approved plan that provides for broad-based equity grants to employees, including executive officers.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,487
The 2003 Plan permits the granting of incentive stock options, nonstatutory stock options, RSUs, stock appreciation rights, stock purchase rights and performance-based awards.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,488
Based on the terms of individual option grants, options granted under the 2003 Plan generally expire seven to ten years after the grant date and generally become exercisable over a period of four years, based on continued employment, with either annual, semi-annual or quarterly vesting.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,489
In general, RSUs granted under the 2003 Plan vest over two to four years, are subject to the employees’ continued employment and do not have an expiration date.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,490
As of September 26, 2009, approximately 37 million shares were reserved for future issuance under the 2003 Plan.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,491
1997 Employee Stock Option Plan In August 1997, the Company’s Board of Directors approved the 1997 Employee Stock Option Plan (the “1997 Plan”), a non-shareholder approved plan for grants of stock options to employees who are not officers of the Company.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,492
Based on the terms of individual option grants, options granted under the 1997 Plan generally expire seven to ten years after the grant date.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,493
All stock options granted under the 1997 Plan are fully vested.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,494
In October 2003, the Company terminated the 1997 Plan, and no new options can be granted from this plan.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,495
1997 Director Stock Option Plan In August 1997, the Company’s Board of Directors adopted a Director Stock Option Plan (the “Director Plan”) for non-employee directors of the Company, which was approved by shareholders in 1998.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,496
Pursuant to the Director Plan, the Company’s non-employee directors are granted an option to acquire 30,000 shares of common stock upon their initial election to the Board (“Initial Options”).
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,497
The Initial Options vest and become exercisable in three equal annual installments on each of the first through third anniversaries of the grant date.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,498
On the fourth anniversary of a non-employee director’s initial election to the Board and on each subsequent anniversary thereafter, the director will be entitled to receive an option to acquire 10,000 shares of common stock (“Annual Options”).
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,499
Annual Options are fully vested and immediately exercisable on their date of grant.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,500
Options granted under the Director Plan expire ten years after the grant date.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,501
As of September 26, 2009, approximately 240,000 shares were reserved for future issuance under the Director Plan.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,502
Rule 10b5-1 Trading Plans As of October 16, 2009, executive officers Timothy D. Cook, Ronald B. Johnson, Peter Oppenheimer, Philip W. Schiller and Bertrand Serlet have entered into trading plans pursuant to Rule 10b5-1(c)(1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,503
A trading plan is a written document that pre-establishes the amounts, prices and dates (or formula for determining the amounts, prices and dates) of future purchases or sales of the Company’s stock including the exercise and sale of employee stock options and shares acquired pursuant to the Company’s employee stock pu...
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,504
Employee Stock Purchase Plan The Company has a shareholder approved employee stock purchase plan (the “Purchase Plan”), under which substantially all employees may purchase common stock through payroll deductions at a price equal to 85% of the lower of the fair market values as of the beginning and end of six-month off...
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,505
Stock purchases under the Purchase Plan are limited to 10% of an employee’s compensation, up to a maximum of $25,000 in any calendar year.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,506
The number of shares authorized to be purchased in any calendar year is limited to a total of 3 million shares.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,507
As of September 26, 2009, approximately 4.7 million shares were reserved for future issuance under the Purchase Plan.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,508
Employee Savings Plan The Company has an employee savings plan (the “Savings Plan”) qualifying as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,509
Under the Savings Plan, participating U.S. employees may defer a portion of their pre-tax earnings, up to the IRS annual contribution limit ($16,500 for calendar year 2009).
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,510
The Company matches 50% to 100% of each employee’s contributions, depending on length of service, up to a maximum 6% of the employee’s eligible earnings.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,511
The Company’s matching contributions to the Savings Plan were $59 million, $50 million and $39 million in 2009, 2008 and 2007, respectively.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,512
Restricted Stock Units Historically, the Company used equity awards in the form of stock options as one of the means for recruiting and retaining highly skilled talent.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,513
In conjunction with the Company’s 2009 equity compensation program changes, it began issuing primarily RSUs rather than stock options for eligible employees as the primary type of long-term equity-based award.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,514
A summary of the Company’s RSU activity and related information for the three years ended September 26, 2009, is as follows (in thousands, except per share amounts): The fair value as of the vesting date of RSUs that vested was $221 million, $320 million and $6 million for 2009, 2008 and 2007, respectively.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,515
Upon vesting, the RSUs are generally net share-settled to cover the required withholding tax and the remaining amount is converted into an equivalent number of shares of common stock.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,516
The majority of RSUs vested in 2009, 2008 and 2007, were net-share settled such that the Company withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,517
The total shares withheld were approximately 707,000, 857,000 and 20,000 for 2009, 2008 and 2007, respectively, and were based on the value of the RSUs on their vesting date as determined by the Company’s closing stock price.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,518
Total payments for the employees’ tax obligations to the taxing authorities were $82 million, $124 million and $3 million in 2009, 2008 and 2007, respectively, and are reflected as a financing activity within the Consolidated Statements of Cash Flows.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,519
These net-share settlements had the effect of share repurchases by the Company as they reduced and retired the number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to the Company.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,520
Stock Option Activity A summary of the Company’s stock option and RSU activity and related information for the three years ended September 26, 2009, is as follows (in thousands, except per share amounts and contractual term in years): Aggregate intrinsic value represents the value of the Company’s closing stock price o...
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,521
The aggregate intrinsic value excludes the effect of stock options that have a zero or negative intrinsic value.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,522
Total intrinsic value of options at time of exercise was $827 million, $2.0 billion and $1.3 billion for 2009, 2008 and 2007, respectively.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,523
RSUs granted are deducted from the shares available for grant under the Company’s stock option plans utilizing a factor of two times the number of RSUs granted.
0001193125-09-214859/full-submission.txt
0000320193
20091027
10-K
1,524
Similarly, RSUs cancelled are added back to the shares available for grant under the Company’s stock option plans utilizing a factor of two times the number of RSUs cancelled.
0001193125-09-214859/full-submission.txt