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0000320193
20021219
10-K
1,421
Executive Bonus During the first quarter of 2000, the Company's Board of Directors approved a special executive bonus for the Company's Chief Executive Officer for past services in the form of an aircraft with a total cost to the Company of approximately $90 million, the majority of which was not tax deductible.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,422
Approximately half of the total charge is for the cost of the aircraft.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,423
The other half represents all other costs and taxes associated with the bonus.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,424
In the fourth quarter of 2002, all significant work and payments associated with the aircraft were complete.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,425
Of the original $90 million accrual, $2.4 million remained unspent at the end of fiscal 2002 and was reversed.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,426
Technology Acquisition As discussed in Note 4, during both 2002 and 2001 in its acquisition of Emagic and PowerSchool, respectively, the Company acquired certain technology that was under development and had no alternative future use.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,427
This resulted in the recognition of purchased in-process research and development in the amount of $551,000 for Emagic and $10.8 million for PowerSchool, which was charged to operations upon acquisition.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,428
Note 6-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 approximately $284 million, $363 million and $1.019 billion in 2002, 2001, and 2000, respectively.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,429
As of September 28, 2002, approximately half of the Company's cash, cash equivalents, and short-term investments is held by foreign subsidiaries and is generally based in U.S. dollar-denominated holdings.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,430
Amounts held by foreign subsidiaries would be subject to U.S. income taxation on repatriation to the United States.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,431
The Company's consolidated financial statements fully 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 United States.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,432
U.S. income taxes have not been provided on a cumulative total of $755 million of such earnings.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,433
It is not practicable to determine the income tax liability that might be incurred if these earnings were to be distributed.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,434
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...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,435
As of September 28, 2002 and September 29, 2001, the significant components of the Company's deferred tax assets and liabilities were (in millions): As of September 28, 2002, the Company had operating loss carryforwards for federal tax purposes of approximately $72 million, which expire from 2009 through 2021.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,436
These carryforwards are comprised of remaining operating loss carryforwards acquired from NeXT and other acquisitions, the utilization of which is subject to certain limitations imposed by the Internal Revenue Code.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,437
The Company also has Federal credit carryforwards and various state and foreign tax loss and credit carryforwards, the tax effect of which is approximately $94 million and which expire between 2003 and 2022.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,438
The remaining benefits from tax losses and credits do not expire.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,439
As of September 28, 2002, a valuation allowance of $30 million was recorded against the deferred tax asset for the benefits of tax losses that may not be realized.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,440
The valuation allowance relates primarily to the operating loss carryforwards acquired from NeXT and other acquisitions.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,441
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.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,442
A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate (35% in 2001, 2000, and 1999) to income (loss) before provision for income taxes, is as follows (in millions): The Internal Revenue Service (IRS) has completed audits of the Company's federal i...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,443
Substantially all IRS audit issues for years through 1997 have been resolved.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,444
The IRS is currently auditing the Company's federal income tax returns for fiscal years 1998 through 2000.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,445
Management believes that adequate provision has been made for any adjustments that may result from tax examinations.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,446
Note 7-Shareholders' Equity 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.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,447
This repurchase plan does not obligate the Company to acquire any specific number of shares or acquire shares over any specified period of time.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,448
During 2000, the Company repurchased a total of 2.55 million shares of its common stock at a cost of $116 million.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,449
During the fourth quarter of 2001, the Company entered into a forward purchase agreement to acquire 1.5 million shares of its common stock in September of 2003 at an average price of $16.64 per share for a total cost of $25.5 million.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,450
The Company engaged in no transactions relating to the stock repurchase plan in fiscal 2002.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,451
Since inception of the repurchase plan, the Company has repurchased or committed to repurchase a total of 6.55 million shares of its common stock at a cost of $217 million.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,452
Preferred Stock In August 1997, the Company and Microsoft Corporation (Microsoft) entered into a patent cross license and technology agreements.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,453
In addition, Microsoft purchased 150,000 shares of Apple Series A nonvoting convertible preferred stock ("preferred stock") for $150 million.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,454
These shares were convertible by Microsoft after August 5, 2000, into shares of the Company's common stock at a conversion price of $8.25 per share.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,455
During 2000, 74,250 shares of preferred stock were converted to 9 million shares of the Company's common stock.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,456
During 2001, the remaining 75,750 preferred shares were converted into 9.2 million shares of the Company's common stock.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,457
Comprehensive Income The following table summarizes the components of accumulated other comprehensive income, net of taxes, (in millions): The following table summarizes activity in other comprehensive income related to available-for-sale securities, net of taxes (in millions): The tax effect related to the change in u...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,458
The tax effect on the reclassification adjustment for net gains included in net income was $10 million, $35 million and $94 million for fiscal 2002, 2001, and 2000, respectively.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,459
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 cumulative effect of adopting SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,460
133 was $(5) as of September 29, 2001.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,461
The tax effect related to the changes in fair value of derivatives was $(2) million and $(19) million for fiscal 2002 and 2001, respectively.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,462
The tax effect related to derivative gains reclassified from OCI was $8 million and $23 million for fiscal 2002 and 2001, respectively.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,463
Note 8-Employee Benefit Plans 1998 Executive Officer Stock Plan The 1998 Executive Officer Stock Plan (the 1998 Plan) is a shareholder approved plan which replaced the 1990 Stock Option Plan terminated in April 1998, the 1981 Stock Option Plan terminated in October 1990, and the 1987 Executive Long Term Stock Option Pl...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,464
Options granted before these plans' termination dates remain outstanding in accordance with their terms.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,465
Options may be granted under the 1998 Plan to the Chairman of the Board of Directors, executive officers of the Company at the level of Senior Vice President and above, and other key employees.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,466
These options generally become exercisable over a period of 4 years, based on continued employment, and generally expire 10 years after the grant date.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,467
The 1998 Plan permits the granting of incentive stock options, nonstatutory stock options, stock appreciation rights, and stock purchase rights.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,468
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.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,469
Options may be granted under the 1997 Plan to employees at not less than the fair market value on the date of grant.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,470
These options generally become exercisable over a period of 4 years, based on continued employment, and generally expire 10 years after the grant date.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,471
1997 Director Stock Option Plan In August 1997, the Company's Board of Directors adopted a shareholder approved Director Stock Option Plan (DSOP) for non-employee directors of the Company.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,472
Initial grants of 30,000 options under the DSOP vest in three equal installments on each of the first through third anniversaries of the date of grant, and subsequent annual grants of 10,000 options are fully vested at grant.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,473
Prior to adoption of the DSOP, 60,000 options were granted in total to two then-current members of the Company's Board of Directors.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,474
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 offer...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,475
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.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,476
During 2002, 2001, and 2000, 1.8 million, 1.8 million and 766,000 shares, respectively, were issued under the Purchase Plan.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,477
As of September 28, 2002, approximately 2.1 million shares were reserved for future issuance under the Purchase Plan.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,478
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.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,479
Under the Savings Plan, participating U.S. employees may defer a portion of their pre-tax earnings, up to the Internal Revenue Service annual contribution limit ($11,000 for calendar year 2002).
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,480
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 earnings.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,481
The Company's matching contributions to the Savings Plan were approximately $19 million, $17 million, and $16 million in 2002, 2001, and 2000, respectively.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,482
Stock Option Activity A summary of the Company's stock option activity and related information for the years ended September 28, 2002, September 29, 2001 and September 30, 2000 follows (option amounts are presented in thousands): The options outstanding as of September 28, 2002, have been segregated into five ranges fo...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,483
As of September 30, 2000, the Company had exercisable options outstanding to purchase 23.7 million shares with a weighted average exercise price of $31.94.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,484
Note 9-Stock-Based Compensation Pro forma information regarding net income (loss) per share is required by SFAS No.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,485
123 and has been determined as if the Company had accounted for its employee stock options granted and employee stock purchase plan purchases subsequent to September 29, 1995, under the fair value method of that statement.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,486
The fair values for these options and stock purchases were estimated at the date of grant and beginning of the period, respectively, using a Black-Scholes option pricing model.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,487
The assumptions used for each of the last three fiscal years and the resulting estimate of weighted-average fair value per share of options granted during those years are as follows: For purposes of pro forma disclosures, the estimated fair value of the options and shares are amortized to pro forma net income over the ...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,488
The Company's pro forma information for each of the last three fiscal years follows (in millions, except per share amounts): Note 10-Commitments and Contingencies Lease Commitments The Company leases various facilities and equipment under noncancelable operating lease arrangements.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,489
The major facilities leases are for terms of 5 to 10 years and generally provide renewal options for terms of 3 to 5 additional years.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,490
Leases for retail space are for terms of 5 to 12 years and often contain multi-year renewal options.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,491
Rent expense under all operating leases, including both cancelable and noncancelable leases, was $92 million, $80 million, and $72 million in 2002, 2001, and 2000, respectively.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,492
Future minimum lease payments under noncancelable operating leases having remaining terms in excess of one year as of September 28, 2002, are as follows (in millions): Concentrations in the Available Sources of Supply of Materials and Product Although certain components essential to the Company's business are generally...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,493
Some other key components, while currently available to the Company from multiple sources, are at times subject to industry-wide availability and pricing pressures.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,494
In addition, the Company uses some components that are not common to the rest of the personal computer industry, and new products introduced by the Company often initially utilize custom components obtained from only one source until the Company has evaluated whether there is a need for and subsequently qualifies addit...
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,495
If the supply of a key single-sourced component to the Company were to be delayed or curtailed or in the event a key manufacturing vendor delays shipments of completed products to the Company, the Company's ability to ship related products in desired quantities and in a timely manner could be adversely affected.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,496
The Company's business and financial performance could also be adversely affected depending on the time required to obtain sufficient quantities from the original source, or to identify and obtain sufficient quantities from an alternative source.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,497
Continued availability of these components may be affected if producers were to decide to concentrate on the production of common components instead of components customized to meet the Company's requirements.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,498
Finally, significant portions of the Company's CPUs, logic boards, and assembled products are now manufactured by outsourcing partners, the majority of which occurs in various parts of Asia.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,499
Although the Company works closely with its outsourcing partners on manufacturing schedules and levels, the Company's operating results could be adversely affected if its outsourcing partners were unable to meet their production obligations.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,500
Contingencies Beginning on September 27, 2001, three shareholder class action lawsuits were filed in the United States District Court for the Northern District of California against the Company and its Chief Executive Officer.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,501
These lawsuits are substantially identical, and purport to bring suit on behalf of persons who purchased the Company's publicly traded common stock between July 19, 2000, and September 28, 2000.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,502
The complaints allege violations of the 1934 Securities Exchange Act and seek unspecified compensatory damages and other relief.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,503
The Company believes these claims are without merit and intends to defend them vigorously.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,504
The Company filed a motion to dismiss on June 4, 2002, which was heard by the Court on September 13, 2002.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,505
On December 11, 2002, the Court granted the Company's motion to dismiss for failure to state a cause of action, with leave to plaintiffs to amend their complaint within thirty days.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,506
The Company is subject to certain other legal proceedings and claims that have arisen in the ordinary course of business and have not been fully adjudicated.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,507
In the opinion of management, the Company does not have a potential liability related to any current legal proceedings and claims that would have a material adverse effect on its financial condition, liquidity or results of operations.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,508
However, the results of legal proceedings cannot be predicted with certainty.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,509
Should the Company fail to prevail in any of these legal matters or should several of these legal matters be resolved against the Company in the same reporting period, the operating results of a particular reporting period could be materially adversely affected.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,510
The parliament of the European Union is working on finalizing the Waste Electrical and Electronic Equipment Directive (the Directive).
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,511
The Directive makes producers of electrical goods, including personal computers, financially responsible for the collection, recycling, and safe disposal of past and future products.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,512
The Directive must now be approved and implemented by individual European Union governments by June 2004, while the producers' financial obligations are scheduled to start June 2005.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,513
The Company's potential liability resulting from the Directive related to past sales of its products and expenses associated with future sales of its product may be substantial.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,514
However, because it is likely that specific laws, regulations, and enforcement policies will vary significantly between individual European member states, it is not currently possible to estimate the Company's existing liability or future expenses resulting from the Directive.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,515
As the European Union and its individual member states clarify specific requirements and policies with respect to the Directive, the Company will continue to assess its potential financial impact.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,516
Similar legislation may be enacted in other geographies, including federal and state legislation in the United States, the cumulative impact of which could be significant.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,517
Note 11-Segment Information and Geographic Data The Company manages its business primarily on a geographic basis.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,518
The Company's reportable segments are comprised of the Americas, Europe, Japan, and Retail.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,519
The Americas segment includes both North and South America, except for the activities of the Company's Retail segment.
0001047469-02-007674/full-submission.txt
0000320193
20021219
10-K
1,520
The Europe segment includes European countries as well as the Middle East and Africa.
0001047469-02-007674/full-submission.txt