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0000320193
20071115
10-K
1,436
In addition, when possible, the Company attempts to limit credit risk on trade receivables with credit insurance for certain customers in Latin America, Europe, Asia, and Australia by arranging with third-party financing companies to provide flooring arrangements and other loan and lease programs to the Company's direc...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,437
These credit-financing arrangements are directly between the third-party financing company and the end customer.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,438
As such, the Company generally does not assume any recourse or credit risk sharing related to any of these arrangements.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,439
However, considerable trade receivables not covered by collateral, third-party flooring arrangements, or credit insurance are outstanding with the Company's distribution and retail channel partners.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,440
One customer accounted for approximately 11% of trade receivables as of September 29, 2007, while no customers accounted for more than 10% of trade receivables as of September 30, 2006.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,441
The following table summarizes the activity in the allowance for doubtful accounts (in millions): Vendor Non-Trade Receivables The Company has non-trade receivables from certain of its manufacturing vendors resulting from the sale of raw material components to these manufacturing vendors who manufacture sub-assemblies ...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,442
The Company purchases these raw material components directly from suppliers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,443
These non-trade receivables, which are included in the Consolidated Balance Sheets in other current assets, totaled $2.4 billion and $1.6 billion as of September 29, 2007 and September 30, 2006, respectively.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,444
The Company does not reflect the sale of these components in net sales and does not recognize any profits on these sales until the products are sold through to the end customer at which time the profit is recognized as a reduction of cost of sales.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,445
Derivative Financial Instruments The Company uses derivatives to partially offset its business exposure to foreign exchange risk.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,446
Foreign currency forward and option contracts are used to offset the foreign exchange risk on certain existing assets and liabilities and to hedge the foreign exchange risk on expected future cash flows on certain forecasted revenue and cost of sales.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,447
The Company's accounting policies for these instruments are based on whether the instruments are designated as hedge or non-hedge instruments.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,448
The Company records all derivatives on the balance sheet at fair value.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,449
The following table shows the notional principal, net fair value, and credit risk amounts of the Company's foreign currency instruments as of September 29, 2007 and September 30, 2006 (in millions): The notional principal amounts for derivative instruments provide one measure of the transaction volume outstanding as of...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,450
The credit risk amounts shown in the table above represents the Company's gross exposure to potential accounting loss on these transactions if all counterparties failed to perform according to the terms of the contract, based on then-current currency exchange rates at each respective date.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,451
The Company's exposure to credit loss and market risk will vary over time as a function of currency exchange rates.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,452
The estimates of fair value are based on applicable and commonly used pricing models and prevailing financial market information as of September 29, 2007 and September 30, 2006.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,453
Although the table above reflects the notional principal, fair value, and credit risk amounts of the Company's foreign exchange instruments, it does not reflect the gains or losses associated with the exposures and transactions that the foreign exchange instruments are intended to hedge.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,454
The amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on the underlying exposures, will depend on actual market conditions during the remaining life of the instruments.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,455
Foreign Exchange Risk Management The Company may enter into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risk associated with existing assets and liabilities, certain firmly committed transactions, forecasted future cash flows, and net investments in fore...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,456
Generally, the Company's practice is to hedge a majority of its material foreign exchange exposures.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,457
However, the Company may choose not to hedge certain foreign exchange exposures due to immateriality, prohibitive economic cost of hedging particular exposures, or limited availability of appropriate hedging instruments.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,458
To help protect gross margins from fluctuations in foreign currency exchange rates, the Company's U.S. dollar functional subsidiaries hedge a portion of forecasted foreign currency revenue, and the Company's non-U.S. dollar functional subsidiaries selling in local currencies hedge a portion of forecasted inventory purc...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,459
Other comprehensive income associated with hedges of foreign currency revenue is recognized as a component of net sales in the same period as the related sales are recognized, and other comprehensive income related to inventory purchases is recognized as a component of cost of sales in the same period as the related co...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,460
Typically, the Company hedges portions of its forecasted foreign currency exposure associated with revenue and inventory purchases over a time horizon of up to 6 months.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,461
Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur in the initially identified time period or within a subsequent 2 month time period.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,462
Deferred gains and losses in other comprehensive income associated with such derivative instruments are immediately reclassified into earnings in other income and expense.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,463
Any subsequent changes in fair value of such derivative instruments are also reflected in current earnings unless they are re-designated as hedges of other transactions.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,464
The Company recognized net gains of approximately $672,000 and $421,000 in 2007 and 2006, respectively, and a net loss of $1.6 million in 2005 in other income and expense related to the loss of hedge designation on discontinued cash flow hedges due to changes in the Company's forecast of future net sales and cost of sa...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,465
As of September 29, 2007, the Company had a net deferred gain associated with cash flow hedges of approximately $468,000, net of taxes, substantially all of which is expected to be reclassified to earnings by the end of the second quarter of fiscal 2008.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,466
The net gain or loss on the effective portion of a derivative instrument designated as a net investment hedge is included in the cumulative translation adjustment account of accumulated other comprehensive income within shareholders' equity.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,467
For the years ended September 29, 2007 and September 30, 2006, the Company had a net loss of $2.6 million and a net gain of $7.4 million, respectively, included in the cumulative translation adjustment.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,468
The Company may also enter into foreign currency forward and option contracts to offset the foreign exchange gains and losses generated by the re-measurement of certain assets and liabilities recorded in non-functional currencies.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,469
Changes in the fair value of these derivatives are recognized in current earnings in other income and expense as offsets to the changes in the fair value of the related assets or liabilities.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,470
Due to currency market movements, changes in option time value can lead to increased volatility in other income and expense.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,471
Note 3-Consolidated Financial Statement Details (in millions) Other Current Assets Property, Plant, and Equipment Other Assets Accrued Expenses Non-Current Liabilities Other Income and Expense Note 4-Goodwill and Other Intangible Assets The Company is currently amortizing its acquired intangible assets with definite li...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,472
The following table summarizes the components of gross and net intangible asset balances (in millions): As of September 29, 2007, and September 30, 2006, the weighted-average amortization period for acquired technology was 7.1 years and 8.5 years, respectively.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,473
During 2006, the Company sold certain assets related to its PowerSchool web-based student information system operations.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,474
In connection with this sale, the Company reduced goodwill by $31 million for the outstanding balance from the acquisition of PowerSchool, Inc. in 2001 and recognized a $4 million pre-tax gain, which is reflected in other income and expense in the Consolidated Statement of Operations.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,475
Expected annual amortization expense related to acquired technology is as follows (in millions): Amortization expense related to acquired intangible assets was $35 million, $12 million, and $9 million in 2007, 2006, and 2005, respectively.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,476
Note 5-Income Taxes The provision for income taxes consisted of the following (in millions): The foreign provision for income taxes is based on foreign pretax earnings of $2.2 billion, $1.5 billion, and $922 million in 2007, 2006, and 2005, respectively.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,477
As of September 29, 2007, $6.5 billion of the Company's cash, cash equivalents, and short-term investments were held by foreign subsidiaries and are generally based in U.S. dollar-denominated holdings.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,478
Amounts held by foreign subsidiaries are generally subject to U.S. income taxation on repatriation to the U.S.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,479
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...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,480
It is not practicable to determine the income tax liability that might be incurred if these earnings were to be distributed.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,481
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...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,482
As of September 29, 2007 and September 30, 2006, the significant components of the Company's deferred tax assets and liabilities were (in millions): As of September 29, 2007, the Company has tax loss and credit carryforwards in the tax effected amount of $8 million.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,483
As of September 29, 2007 and September 30, 2006, a valuation allowance of $5 million was recorded against the deferred tax asset for the benefits of state operating losses that may not be realized.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,484
Management believes it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with the tax effects of the deferred tax liabilities, will be sufficient to fully recover the remaining deferred tax assets.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,485
A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate (35% in 2007, 2006, and 2005) to income before provision for income taxes, is as follows (in millions): The Company's income taxes payable have been reduced by the tax benefits from employee st...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,486
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.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,487
The net tax benefits from employee stock option transactions were $398 million, $419 million, and $428 million in 2007, 2006, and 2005, respectively, and were reflected as an increase to common stock in the Consolidated Statements of Shareholders' Equity.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,488
The Internal Revenue Service ("IRS") has completed its field audit of the Company's federal income tax returns for the years 2002 through 2003 and proposed certain adjustments.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,489
The Company intends to contest certain of these adjustments through the IRS Appeals Office.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,490
All IRS audit issues for years prior to 2002 have been resolved.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,491
In addition, the Company is also subject to audits by state, local, and foreign tax authorities.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,492
Management believes that adequate provisions have been made for any adjustments that may result from tax examinations.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,493
However, the outcome of tax audits cannot be predicted with certainty.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,494
Should any issues addressed in the Company's tax audits be 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.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,495
In 2007 and 2006, the Company recorded tax benefits of $63 million and $20 million, respectively, due to the settlement of prior year tax audits in the U.S.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,496
Note 6-Shareholders' Equity Preferred Stock The Company has five million shares of authorized preferred stock, none of which is issued or outstanding.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,497
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.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,498
Restricted Stock Units The Company's Board of Directors has granted RSUs to members of the Company's management team, excluding its CEO.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,499
These RSUs generally vest over four years either at the end of the four-year service period, in two equal installments on the second and fourth anniversaries of the date of grant, or in equal installments on each of the first through fourth anniversaries of the grant date.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,500
Upon vesting, the RSUs will convert into an equivalent number of shares of common stock.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,501
The compensation expense incurred by the Company for RSUs is based on the closing market price of the Company's common stock on the date of grant and is amortized ratably on a straight-line basis over the requisite service period.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,502
The RSUs have been reflected in the calculation of diluted earnings per share utilizing the treasury stock method.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,503
During 2007 and 2006, 45,000 and 2.47 million, respectively, previously granted RSUs vested.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,504
A majority of these vested RSUs 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.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,505
The total shares withheld of approximately 20,000 and 990,000 for 2007 and 2006, respectively, was based on the value of the RSUs on their vesting date as determined by the Company's closing stock price.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,506
Total payments for the employees' tax obligations to the taxing authorities were $3 million and $59 million in 2007 and 2006, respectively, and are reflected as a financing activity within the Consolidated Statements of Cash Flows.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,507
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.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,508
CEO Restricted Stock Award On March 19, 2003, the Company's Board of Directors granted 10 million shares of restricted stock to the Company's CEO that vested on March 19, 2006.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,509
The amount of the restricted stock award expensed by the Company was based on the closing market price of the Company's common stock on the date of grant and was amortized ratably on a straight-line basis over the three-year requisite service period.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,510
Upon vesting during 2006, the 10 million shares of restricted stock had a fair value of $646.6 million and had grant-date fair value of $7.48 per share.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,511
The restricted stock award was net-share settled such that the Company withheld shares with value equivalent to the CEO's minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,512
The total shares withheld of 4.6 million were based on the value of the restricted stock award on the vesting date as determined by the Company's closing stock price of $64.66.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,513
The remaining shares net of those withheld were delivered to the Company's CEO.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,514
Total payments for the CEO's tax obligations to the taxing authorities was $296 million in 2006 and are reflected as a financing activity within the Consolidated Statements of Cash Flows.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,515
The net-share settlement had the effect of share repurchases by the Company as it reduced and retired the number of shares outstanding and did not represent an expense to the Company.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,516
The Company's CEO has no remaining shares of restricted stock.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,517
For the years ended September 30, 2006 and September 24, 2005, compensation expense related to restricted stock was $4.6 million and $24.9 million, respectively.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,518
Stock Repurchase Plan In July 1999, the Company's Board of Directors authorized a plan for the Company to repurchase up to $500 million of its common stock.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,519
This repurchase plan does not obligate the Company to acquire any specific number of shares or acquire shares over any specified period of time.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,520
The Company has repurchased a total of 13.1 million shares at a cost of $217 million under this plan and was authorized to repurchase up to an additional $283 million of its common stock as of September 29, 2007.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,521
Comprehensive Income Comprehensive income consists of two components, net income and other comprehensive income.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,522
Other comprehensive income refers to revenue, expenses, gains, and losses that under U.S. generally accepted accounting principles are recorded as an element of shareholders' equity but are excluded from net income.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,523
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...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,524
The following table summarizes the components of accumulated other comprehensive income, net of taxes (in millions): The change in fair value of available-for-sale securities included in other comprehensive income was $(7) million, $4 million, and zero, net of taxes in 2007, 2006, and 2005, respectively.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,525
The tax effect related to the change in unrealized gain/loss on available-for-sale securities was $4 million, $(2) million, and zero for 2007, 2006, and 2005, respectively.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,526
The following table summarizes activity in other comprehensive income related to derivatives, net of taxes, held by the Company (in millions): The tax effect related to the changes in fair value of derivatives was $1 million, $(8) million, and $(3) million for 2007, 2006, and 2005, respectively.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,527
The tax effect related to derivative gains/losses reclassified from other comprehensive income to net income was $2 million, $8 million, and $(2) million for 2007, 2006, and 2005, respectively.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,528
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 grants to employees, including executive officers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,529
Based on the terms of individual option grants, options granted under the 2003 Plan generally expire 7 to 10 years after the grant date and generally become exercisable over a period of four years, based on continued employment, with either annual or quarterly vesting.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,530
The 2003 Plan permits the granting of incentive stock options, nonstatutory stock options, RSUs, stock appreciation rights, stock purchase rights and performance-based awards.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,531
During 2007, the Company's shareholders approved an amendment to the 2003 Plan to increase the number of shares authorized for issuance by 28 million shares.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,532
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.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,533
Based on the terms of individual option grants, options granted under the 1997 Plan generally expire 7 to 10 years after the grant date and generally become exercisable over a period of four years, based on continued employment, with either annual or quarterly vesting.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,534
In October 2003, the Company terminated the 1997 Plan and no new options can be granted from this plan.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,535
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.
0001047469-07-009340/full-submission.txt