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0000320193
20071115
10-K
1,936
Disclosing specific objectives would provide competitors and other third parties with insights into the planning process and would therefore cause competitive harm.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,937
The Committee next determines the maximum amount of any cash incentive payment denominated as a percentage of base salary.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,938
The current payment structure is shown in the payout matrix below.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,939
Once the performance goals and payment structure are established, no one has the authority to modify or waive them.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,940
Percentage of Salary Payable As Performance-Based Cash Incentives The performance goals are aggressive.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,941
Thus, there is considerable risk that payments will not be made at all or will be made at less than 100%.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,942
For the past three years, the performance goals have reflected double-digit growth in both revenue and operating income.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,943
In four of the past eight years, Apple did not meet one or both performance goals.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,944
This uncertainty ensures that any payments under the plan are truly performance-based, consistent with the plan's objectives.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,945
At the end of the year, the Committee determines the amount of the award to be paid to each officer by comparing actual results to the performance goals.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,946
The Committee may, in its discretion, reduce (but not increase) the amount of any individual award based on the officer's overall performance.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,947
The plan does not provide for the adjustment or recovery of an award paid to a named executive officer if the results in a previous year are subsequently restated or adjusted in a manner that would have originally resulted in a smaller award.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,948
5.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,949
The Role of Consultants The Compensation Committee has selected and directly retained the services of Frederic W. Cook & Co., Inc., an executive compensation consulting firm.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,950
No member of the Compensation Committee or any named executive officer has any affiliation with F.W.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,951
Cook.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,952
The Committee periodically seeks input from F.W.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,953
Cook on a range of external market factors, including evolving compensation trends, appropriate comparison companies and market survey data.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,954
F.W.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,955
Cook also provides general observations on Apple's compensation programs, but it does not determine or recommend the amount or form of compensation for any executives.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,956
6.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,957
The Role of Peer Groups, Surveys and Benchmarking With the assistance of F.W.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,958
Cook, the Committee identified peer companies for fiscal 2007 that compete with Apple in the labor and capital markets and that follow similar pay models.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,959
The Committee established the two peer groups listed below, one consisting of large technology companies and another consisting of large retailers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,960
The retail peer group is a relevant comparison group for the Senior Vice President, Retail Sales; the technology peer group is relevant for the other four named executive officers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,961
Technology Companies Retail Companies Adobe Systems Amazon.com Applied Materials Cisco Systems Comcast Dell eBay EMC Google Hewlett-Packard IBM Intel Microsoft Motorola Oracle Qualcomm Sprint Nextel Sun Microsystems Texas Instruments Xerox The Gymboree Corporation Limited Brands Nike Polo Ralph Lauren Restoration Hardw...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,962
The Committee, however, does not attempt to set compensation components to meet specific benchmarks, such as salaries "above the median" or equity compensation "at the 75th percentile."
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,963
Furthermore, the Committee believes that excessive reliance on benchmarking is detrimental to shareholder interests because it can result in compensation that is unrelated to the value delivered by the named executive officers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,964
7.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,965
Tax and Accounting Considerations Tax Deductibility of Compensation Expense.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,966
Section 162(m) of the Internal Revenue Code places a limit of $1,000,000 on the amount of compensation to certain officers that may be deducted by Apple as a business expense in any tax year unless, among other things, the compensation is performance-based and has been approved by the shareholders.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,967
To qualify as performance-based compensation, the amount of compensation must depend on the officer's performance against pre-determined performance goals established by a committee that consists solely of at least two "outside" directors who have never been employed by Apple or its subsidiaries.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,968
Two Compensation Committee members, Mr. Gore and Mr. Drexler, qualify as outside directors under the IRS definition.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,969
Although Mr. Campbell is an independent director under SEC and NASDAQ governance standards, he does not qualify as an outside director because he was an officer of Apple from 1983 to 1987 and an Apple subsidiary from 1987 to 1991.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,970
For this reason, he does not discuss or vote on any Section 162(m)-related matters.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,971
Salaries for the named executive officers do not qualify as performance-based compensation.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,972
Apple's performance-based cash incentives, however, are exempt from the Section 162(m) limit because they are paid based on predetermined goals established by the Compensation Committee pursuant to the shareholder-approved Performance Bonus Plan.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,973
The RSUs do not qualify as performance-based compensation for purposes of Section 162(m) because vesting is based on continued employment rather than specific performance goals.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,974
See page 103 for an explanation of Apple's decision not to implement performance-based vesting.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,975
Tax Implications for Officers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,976
Section 409A of the Internal Revenue Code imposes additional income taxes on executive officers for certain types of deferred compensation that do not comply with Section 409A.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,977
Because Apple does not generally provide deferred compensation to the named executive officers, this limitation has no impact on the structure of the compensation program for the officers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,978
Section 280G of the Internal Revenue Code imposes an excise tax on payments to executives of severance or change of control compensation that exceed the levels specified in Section 280G.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,979
The named executive officers could receive the amounts shown on the table on page 113 as severance or change of control payments, but the Committee does not consider their potential impact in compensation program design.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,980
Accounting Considerations.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,981
The Committee also considers the accounting and cash flow implications of various forms of executive compensation.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,982
In its financial statements, Apple records salaries and performance-based compensation incentives as expenses in the amount paid, or to be paid, to the named executive officers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,983
Accounting rules also require Apple to record an expense in its financial statements for equity awards, even though equity awards are not paid as cash to employees.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,984
The accounting expense of equity awards to employees is calculated in accordance with SFAS 123R.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,985
The Committee believes, however, that the many advantages of equity compensation, as discussed above, more than compensate for the non-cash accounting expense associated with them.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,986
E. Fiscal 2007 Compensation Decisions 1.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,987
No Equity Grants or Salary Changes In fiscal 2007, the Committee did not grant new equity awards or increase base salaries for the named executive officers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,988
Based on its assessment of the factors discussed above and the Committee's belief that the outstanding, unvested equity grants at the beginning of fiscal 2007 had significant retention value, the Committee concluded that the compensation packages for the named executive officers were reasonable without additional equit...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,989
The outstanding equity grants at the end of fiscal 2007 are shown on the Outstanding Equity Awards table on pages 110 and 111.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,990
Based on a review of competitive practices and the Committee's approach to place less emphasis on cash compensation, the Committee concluded that the total compensation for the officers were appropriate for fiscal 2007 without a salary increase.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,991
2.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,992
2007 Performance-Based Cash Incentive Plan Payments Apple's fiscal 2007 performance significantly exceeded the revenue and operating income goals established under the cash incentive plan, so the Committee, in the exercise of its discretion, approved payouts to the named executive officers at the maximum of 100% of bas...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,993
The specific payment amounts are shown in the Summary Compensation Table at page 108.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,994
Compensation Committee Report(1) The Compensation Committee has certain duties and powers as described in its charter.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,995
The Compensation Committee is currently composed of the three non-employee directors named at the end of this report, each of whom is independent as defined by the NASDAQ listing standards.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,996
(1)SEC filings sometimes "incorporate information by reference."
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,997
This means the Company is referring to information that has previously been filed with the SEC, and that this information should be considered as part of this filing.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,998
Unless the Company specifically states otherwise, this report shall not be deemed to be incorporated by reference and shall not constitute soliciting material or otherwise be considered filed under the Securities Act or the Securities Exchange Act.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
1,999
The Compensation Committee has reviewed and discussed with management the disclosures contained in the Compensation Discussion and Analysis section of this Form 10-K. Based upon this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis sec...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,000
Compensation Committee of the Board of Directors William V. Campbell (Chairman) Millard S. Drexler Albert A. Gore, Jr. Summary Compensation Table The following table presents information regarding compensation of each of the Company's Named Executive Officers for services rendered during fiscal year 2007.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,001
(1)The amounts reported in Columns (e) and (f) of the table above reflect the aggregate dollar amounts recognized for stock awards and option awards, respectively, for financial statement reporting purposes with respect to fiscal year 2007 (disregarding any estimate of forfeitures related to service-based vesting condi...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,002
No stock awards or option awards granted to Named Executive Officers were forfeited during fiscal year 2007.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,003
Detailed information about the amount recognized for specific awards is reported in the table under "Outstanding Equity Awards at Fiscal Year-End" below.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,004
For a discussion of the assumptions and methodologies used to value the awards reported in Column (e) and Column (f), please see the discussion of stock awards and option awards contained in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K in Notes to Consolidated Financial Statements at...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,005
(2)As described in the "Compensation Discussion and Analysis" above, the Named Executive Officers' annual bonuses are derived based on the performance of the Company and the individual executive relative to pre-established objectives for the fiscal year.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,006
The target and maximum amounts for each Named Executive Officer's fiscal year 2007 bonus opportunity are reported in the "Grants of Plan-Based Awards" table below.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,007
(3)This amount represents the Company's contributions to Mr. Cook's account under its 401(k) plan in the amount of $13,500 and a tax gross-up in the amount of $250 for an iPhone given by the Company to each of its employees, including the Named Executive Officers, other than Mr. Jobs.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,008
(4)This amount represents (i) the Company's contributions to Mr. Oppenheimer's account under its 401(k) plan in the amount of $13,500; (ii) a tax gross-up in the amount of $250 for an iPhone given by the Company to each of its employees, including the Named Executive Officers, other than Mr. Jobs; and (iii) reimburseme...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,009
(5)This amount represents a tax gross-up in the amount of $379 for an iPhone given by the Company to each of its employees, including the Named Executive Officers, other than Mr. Jobs.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,010
(6)This amount represents a patent award paid by the Company to Mr. Fadell.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,011
(7)This amount represents (i) the Company's contributions to Mr. Fadell's account under its 401(k) plan in the amount of $13,500; and (ii) a tax gross-up in the amount of $379 for an iPhone given by the Company to each of its employees, including the Named Executive Officers, other than Mr. Jobs; and (iii) a tax gross-...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,012
Compensation of Named Executive Officers The Summary Compensation Table above quantifies the value of the different forms of compensation earned by or awarded to the Named Executive Officers in fiscal year 2007.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,013
The primary elements of each Named Executive Officer's total compensation reported in the table are base salary, an annual bonus, and long-term equity incentives consisting of restricted stock units and, in the case of Mr. Fadell, a patent award and stock options received prior to his appointment as an executive of the...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,014
Named Executive Officers also earned the other benefits listed in Column (i) of the Summary Compensation Table, as further described in footnotes 3, 4, 5 and 7 to the table.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,015
As noted above, the Company does not have employment agreements with any of the Named Executive Officers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,016
The Summary Compensation Table should be read in conjunction with the tables and narrative descriptions that follow.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,017
The Grants of Plan-Based Awards table, and the accompanying description of the material terms of the stock options and restricted stock unit awards granted in fiscal year 2007, provides information regarding the long-term equity incentives awarded to Named Executive Officers in fiscal year 2007.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,018
The Outstanding Equity Awards at Fiscal Year End and Option Exercises and Stock Vested tables provide further information on the Named Executive Officers' potential realizable value and actual value realized with respect to their equity awards.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,019
Grants of Plan-Based Awards The following table presents information regarding the incentive awards granted to the Named Executive Officers for fiscal year 2007.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,020
Description of Plan-Based Awards Each of the "Non-Equity Incentive Plan Awards" reported in the Grants of Plan-Based Awards Table was granted under the Company's Performance Bonus Plan.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,021
The material terms of these incentive awards are described in the "Compensation Discussion and Analysis" above.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,022
As noted earlier, the Company did not grant equity incentive plan awards to any of its Named Executive Officers during fiscal year 2007.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,023
Outstanding Equity Awards at Fiscal Year-End The following table presents information regarding the outstanding equity awards held by each of the Named Executive Officers as of September 29, 2007, including the vesting dates for the portions of these awards that had not vested as of that date.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,024
Option Awards (1)The unvested portion of this option award is scheduled to vest in two (2) substantially equal installments on November 4, 2007 and February 4, 2008.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,025
(2)The unvested portion of this option award is scheduled to vest in three (3) substantially equal installments on December 1, 2007, March 1, 2008 and June 1, 2008.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,026
(3)The unvested portion of this option award is scheduled to vest in eight (8) substantially equal installments on November 30, 2007 and each successive three (3) month anniversary of November 30, 2007.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,027
Stock Awards (1)The dollar amounts shown in Column (i) are determined by multiplying (x) the number of shares or units reported in Column (h) by (y) $153.47 (the closing price of the Company's common stock on September 28, 2007, the last trading day of fiscal year 2007).
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,028
(2)The unvested portion of this restricted stock unit award is scheduled to vest in its entirety on March 24, 2008.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,029
(3)The unvested portion of this restricted stock unit award is scheduled to vest in its entirety on March 24, 2010.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,030
(4)The unvested portion of this restricted stock unit award is scheduled to vest in two (2) substantially equal installments on August 30, 2008 and August 30, 2009.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,031
(5)The unvested portion of this restricted stock unit award is scheduled to vest in two (2) substantially equal installments on March 24, 2008 and March 24, 2010.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,032
Option Exercises and Stock Vested The following table presents information regarding the exercise of stock options by Named Executive Officers during fiscal year 2007, and on the vesting during fiscal year 2007 of other stock awards previously granted to the Named Executive Officers.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,033
(1)The dollar amounts shown in Column (c) above for option awards are determined by multiplying (i) the number of shares of the Company's common stock to which the exercise of the option related, by (ii) the difference between the per-share closing price of the Company's common stock on the date of exercise and the exe...
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,034
The dollar amounts shown in Column (e) above for stock awards are determined by multiplying the number of shares or units, as applicable, that vested by the per-share closing price of the Company's common stock on the vesting date.
0001047469-07-009340/full-submission.txt
0000320193
20071115
10-K
2,035
(2)These shares were acquired by Mr. Jobs on August 13, 2007 through an exercise of stock options granted to him under the 1997 Director Stock Option Plan that were to expire on August 14, 2007.
0001047469-07-009340/full-submission.txt