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0000320193
20041203
10-K
811
During the second quarter of 2003, the Company's management approved and initiated restructuring actions that resulted in recognition of a total restructuring charge of $2.8 million, including $2.4 million in severance costs and $400,000 for asset write-offs and lease payments on an abandoned facility.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
812
Actions taken in the second quarter were for the most part supplemental to actions initiated in the prior two quarters and focused on further headcount reductions in various sales and marketing functions in the Company's Americas and Europe operating segments and further reductions associated with PowerSchool-related a...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
813
The second quarter actions resulted in the termination of 93 employees.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
814
During the first quarter of 2003, the Company's management approved and initiated restructuring actions with a total cost of $24 million that resulted in the termination of manufacturing operations at the Company-owned facility in Singapore, further reductions in headcount resulting from the shift in PowerSchool produc...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
815
These restructuring actions resulted in the elimination of 260 positions worldwide.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
816
Closure of the Company's Singapore manufacturing operations resulted in severance costs of $1.8 million and costs of $6.7 million to write-off manufacturing related fixed assets, whose use ceased during the first quarter.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
817
PowerSchool related costs included severance of approximately $550,000 and recognition of $5 million of previously deferred stock compensation that arose when PowerSchool was acquired by the Company in 2001 related to certain PowerSchool employee stockholders who were terminated in the first quarter of 2003.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
818
Termination of sales and marketing activities and employees, principally in the U.S. and Europe, resulted in severance costs of $2.8 million and accrual of costs associated with operating leases on closed facilities of $6.7 million.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
819
The total net restructuring charge of $23 million recognized during the first quarter of 2003 also reflects the reversal of $600,000 of unused restructuring accrual originally made during the first quarter of 2002.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
820
Fiscal 2002 Restructuring Actions During fiscal 2002, the Company recorded total restructuring charges of approximately $30 million related to actions intended to eliminate certain activities and better align the Company's operating expenses with existing general economic conditions and to partially offset the cost of ...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
821
During the fourth quarter of 2002, the Company's management approved and initiated restructuring actions with a total cost of approximately $6 million designed to reduce headcount costs in corporate operations and sales and to adjust its PowerSchool product strategy.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
822
These restructuring actions resulted in the elimination of approximately 180 positions worldwide at a cost of $1.8 million, all of which were eliminated by September 27, 2003.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
823
Eliminated positions were primarily in corporate operations, sales, and PowerSchool related research and development in the Americas operating segment.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
824
The shift in product strategy at PowerSchool included discontinuing development and marketing of PowerSchool's PSE product.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
825
This shift resulted in the impairment of previously capitalized development costs associated with the PSE product in the amount of $4.5 million.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
826
During the first quarter of 2002, the Company's management approved and initiated restructuring actions with a total cost of approximately $24 million.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
827
These restructuring actions resulted in the elimination of approximately 425 positions worldwide at a cost of $8 million.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
828
Positions were eliminated primarily in the Company's operations, information systems, and administrative functions.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
829
In addition, these restructuring actions also included significant changes in the Company's information systems strategy resulting in termination of equipment leases and cancellation of existing projects and activities.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
830
The Company ceased using the assets associated with first quarter 2002 restructuring actions during that same quarter.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
831
Related lease and contract cancellation charges totaled $12 million, and charges for asset impairments totaled $4 million.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
832
The first quarter 2002 restructuring actions were primarily related to corporate activity not allocated to operating segments.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
833
During the first quarter of 2003, the Company reversed the remaining unused accrual of $600,000.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
834
Purchased In-Process Research and Development (IPR&D) During 2002, the Company acquired Emagic GmbH, a provider of professional software solutions for computer based music production, for approximately $30 million in cash; $551,000 of which was allocated to IPR&D.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
835
The amount of the purchase price allocated to IPR&D was expensed upon acquisition, because the technological feasibility of products under development had not been established and no alternative future uses existed.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
836
The fair value of the IPR&D was determined using the income approach, which reflects the projected free cash flows that will be generated by the IPR&D projects and that are attributable to the acquired technology, and discounting the projected net cash flows back to their present value using a discount rate of 25%.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
837
Other Income and Expense Other income and expense for the three fiscal years ended September 25, 2004 are as follows (in millions): Gains and Losses on Non-current Investments Over the course of the last three years, the Company has held investments that were classified as available-for-sale in EarthLink Inc. (EarthLin...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
838
Further information related to the Company's non-current debt and equity investments may be found in Part II, Item 8 of this Form 10-K at Note 2 of Notes to Consolidated Financial Statements.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
839
During 2004, the Company sold its remaining 986,000 shares of Akamai stock.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
840
The transaction generated proceeds of approximately $5 million and a gain before taxes of approximately $4 million.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
841
As of September 25, 2004, the Company does not have any non-current public company investments reflected in its consolidated balance sheet.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
842
During 2003, the Company sold 1,875,000 shares of Akamai stock for net proceeds of approximately $9 million, and a gain before taxes of approximately $8 million.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
843
Additionally, the Company sold its remaining investment in ARM stock, 278,000 shares, for net proceeds of approximately $295,000, and a gain before taxes of $270,000, and sold its remaining investment in EarthLink stock, 6,540,000 shares, for net proceeds of approximately $37 million, and a gain before taxes of $2 mill...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
844
During 2002, the Company determined that declines in the fair value of certain investments were other-than-temporary.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
845
As a result, the Company recognized a $44 million charge to earnings to writedown the basis of its investment in EarthLink, a $6 million charge to earnings to writedown the basis of its investment in Akamai, and a $15 million charge to earnings to writedown the basis of its investment in a private company investment.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
846
These losses in 2002 were partially offset by the sale of 117,000 shares of EarthLink stock for net proceeds of $2 million and a gain before taxes of $223,000, the sale of 250,000 shares of Akamai stock for net proceeds of $2 million and a gain before taxes of $710,000, and the sale of approximately 4.7 million shares ...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
847
Interest and Other Income, Net Total interest and other income, net decreased $30 million or 36% to $53 million during fiscal 2004 compared to $83 million in 2003 and $112 million in 2002.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
848
These decreases are attributable primarily to declining investment yields on the Company's cash and short-term investments resulting from lower market interest and a shortening of the average maturity of the Company's investment portfolio, as well as lower gains on sales of short-term investments in fiscal 2004.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
849
The weighted average interest rate earned by the Company on its cash, cash equivalents and short-term investments fell to 1.38% in 2004 compared to the 1.89% and 2.85% rates earned during 2003 and 2002, respectively.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
850
The Company occasionally sells short-term investments prior to their stated maturities.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
851
As a result of such sales, the Company recognized net gains of $1 million, $21 million and $7 million during fiscal 2004, 2003 and 2002, respectively.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
852
The decrease in total interest and other income, net during fiscal 2003 was also offset by the $6 million gain related to the forward purchase agreement during the fourth quarter of 2003 which is further discussed below under the heading "Cumulative Effects of Accounting Changes."
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
853
Interest expense consisted primarily of interest on the Company's $300 million aggregate principal amount unsecured notes, which were repaid upon their maturity in February 2004, partially offset by amortization of deferred gains realized in 2002 and 2001 that resulted from the closure of swap positions associated with...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
854
The unsecured notes were sold at 99.925% of par for an effective yield to maturity of 6.51%.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
855
Total deferred gain resulting from the closure of debt swaps of approximately $23 million was fully amortized as of the notes' maturity in February 2004.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
856
Provision for Income Taxes The Company's effective tax rate for the year ended September 25, 2004 was approximately 28%.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
857
The Company's effective rate differs from the statutory federal income tax rate of 35% due primarily to certain undistributed foreign earnings for which no U.S. taxes are provided because such earnings are intended to be indefinitely reinvested outside the U.S. As of September 25, 2004, the Company had deferred tax ass...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
858
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, will be sufficient to fully recover the remaining net deferred tax assets.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
859
As of September 25, 2004, a valuation allowance of $30 million was recorded against the deferred tax asset for the benefits of tax losses that may not be realized.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
860
The valuation allowance relates principally to the operating loss carryforwards acquired from NeXT and other acquisitions, the utilization of which is subject to certain limitations imposed by the Internal Revenue Code.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
861
The Company will continue to evaluate the realizability of the deferred tax assets quarterly by assessing the need for and amount of the valuation allowance.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
862
The Internal Revenue Service (IRS) has completed its field audit of the Company's federal income tax returns for all years prior to 2001 and proposed certain adjustments.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
863
Certain of these adjustments are being contested through the IRS Appeals Office.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
864
Substantially all IRS audit issues for these years have been resolved.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
865
In addition, the Company is also subject to audits by state, local, and foreign tax authorities.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
866
Management believes that adequate provision has been made for any adjustments that may result from tax examinations.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
867
However, the outcome of tax audits cannot be predicted with certainty.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
868
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.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
869
Cumulative Effects of Accounting Changes Financial Instruments with Characteristics of Both Liabilities and Equity On May 15, 2003, the Financial Accounting Standards Board (FASB) issued SFAS No.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
870
150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
871
SFAS No.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
872
150 requires issuers to classify as liabilities certain freestanding financial instruments that embody obligations for the issuer and have characteristics of both liabilities and equity.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
873
The Company adopted the provisions of SFAS No.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
874
150 on June 29, 2003, which resulted in a favorable cumulative effect type adjustment of approximately $3 million.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
875
This adjustment represented the mark-to-market adjustment to fair value for a forward purchase agreement that allowed the Company to acquire 1.5 million shares of its common stock at a price of $16.64 per share.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
876
The Company settled this forward purchase agreement in August 2003.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
877
The settlement resulted in an additional gain of approximately $6 million, which is included in interest and other income, net.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
878
Accounting for Asset Retirement Obligations On September 29, 2002, the Company adopted SFAS No.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
879
143, Accounting for Asset Retirement Obligations, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
880
Net of the related income tax effect of approximately $1 million, adoption of SFAS No.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
881
143 resulted in an unfavorable cumulative-effect type adjustment to net income during 2003 of approximately $2 million.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
882
This adjustment represents cumulative depreciation and accretion that would have been recognized through the date of adoption of SFAS No.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
883
143 had the statement been applied to the Company's existing asset retirement obligations at the time they were initially incurred.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
884
Recent Accounting Pronouncements In December 2003, the Securities and Exchange Commission released Staff Accounting Bulletin (SAB) No.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
885
104, Revenue Recognition, which supercedes SAB 101, Revenue Recognition in Financial Statements.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
886
SAB 104 clarifies existing guidance regarding revenue contracts that contain multiple deliverables to make it consistent with Emerging Issues Task Force (EITF) No.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
887
00-21.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
888
The adoption of SAB 104 did not have a material impact on the Company's results of operations or financial position.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
889
In December 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
890
(FIN) 46R, a revision to FIN 46, Consolidation of Variable Interest Entities.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
891
FIN 46R clarifies some of the provisions of FIN 46 and exempts certain entities from its requirements.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
892
FIN 46R is effective at the end of the first interim period ending after March 15, 2004.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
893
The adoption of FIN 46R did not have a material impact on the Company's results of operations or financial position.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
894
In March 2004, the FASB issued EITF Issue No.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
895
03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
896
EITF 03-1 includes new guidance for evaluating and recording impairment losses on debt and equity investments, as well as new disclosure requirements for investments that are deemed to be temporarily impaired.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
897
In September 2004, the FASB issued FASB Staff Position EITF 03-1-1, which delays the effective date until additional guidance is issued for the application of the recognition and measurement provisions of EITF 03-1 to investments in securities that are impaired; however, the disclosure requirements are effective for an...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
898
Although the Company will continue to evaluate the application of EITF 03-1, management does not currently believe adoption will have a material impact on its results of operations or financial position.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
899
Accounting for Stock-Based Compensation The Company currently measures compensation expense for its employee stock-based compensation plans using the intrinsic value method prescribed by Accounting Principles Board (APB) Opinion No.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
900
25, Accounting for Stock Issued to Employees and provides pro forma disclosures of the effect on net income and earnings per share as if the fair value-based method had been applied in measuring compensation expense.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
901
The Company has elected to follow APB Opinion No.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
902
25 because, as further discussed in Part II, Item 8 of this Form 10-K at Note 1 of the Notes to Consolidated Financial Statements, the alternative fair value accounting provided for under SFAS No.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
903
123, Accounting for Stock-Based Compensation, requires use of option valuation models that were not developed for use in valuing employee stock options and employee stock purchase plan shares.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
904
Under APB Opinion No.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
905
25, when the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of the grant, no compensation expense is recognized.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
906
On March 31, 2004, the FASB issued a proposed Statement, Share-Based Payment, that addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterpris...
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
907
The proposed Statement would eliminate the ability to account for share-based compensation transactions using APB Opinion No.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
908
25 and generally would require instead that such transactions be accounted for using a fair-value-based method.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
909
If adopted, it is currently anticipated that the proposed Statement would be effective for the Company beginning in its fourth fiscal quarter of 2005.
0001047469-04-035975/full-submission.txt
0000320193
20041203
10-K
910
At the Company's annual shareholders meeting on April 24, 2003, shareholders approved a proposal requesting that the Company's Board of Directors (the Board) establish a policy of expensing the value of all future employee stock options issued by the Company.
0001047469-04-035975/full-submission.txt