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0000320193 | 20010212 | 10-Q | 82 | The investment, in the form of three year unsecured bonds, is convertible into approximately 550,000 shares of Samsung common stock beginning in July 2000. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 83 | The bonds carry an annual coupon rate of 2% and pay a total yield to maturity of 5% if redeemed at their maturity. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 84 | This investment is reflected in the consolidated balance sheets as a non-current debt and equity investment. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 85 | The Company categorizes its investment in Samsung as available-for-sale requiring that it be carried at fair value with unrealized gains and losses, net of taxes, reported in equity as a component of accumulated other comprehensive income. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 86 | With the adoption of SFAS No. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 87 | 133 on October 1, 2000, the Company is required to account for the conversion option embedded in the Samsung bonds separately from the related debt. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 88 | The conversion feature is carried at fair value with any changes in fair value recognized in earnings in the period in which they occur. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 89 | Included in the $17 million gross SFAS No. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 90 | 133 transition adjustment recorded in earnings was a $23 million favorable adjustment for the restatement to fair value as of October 1, 2000, of the derivative component of the Company's investment in Samsung. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 91 | To adjust the carrying value of the derivative component of its investment in Samsung to fair value as of December 30, 2000, the Company recognized an unrealized loss of approximately $13 million during the first quarter of 2001. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 92 | The Company believes it is likely there will be significant fluctuations in the fair value of the embedded conversion option of this investment in the future. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 93 | NOTE 5 - SHAREHOLDER'S 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. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 94 | This repurchase plan does not obligate the Company to acquire any specific number of shares or acquire shares over any specified period of time. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 95 | During 2000, the Company repurchased a total of 2.55 million shares of its common stock at a cost of $116 million. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 96 | No shares were repurchased in the first quarter of 2001. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 97 | Since inception of the plan, the Company has repurchased a total of 5.05 million shares of its common stock at a cost of $191 million. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 98 | PREFERRED STOCK
In August 1997, the Company and Microsoft Corporation (Microsoft) entered into patent cross licensing and technology agreements. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 99 | In addition, Microsoft purchased 150,000 shares of Apple Series A nonvoting convertible preferred stock ("preferred stock") for $150 million. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 100 | Upon any sale of the preferred stock by Microsoft, the shares will automatically be converted into shares of Apple common stock at a conversion price of $8.25 per share, and the shares can be converted at Microsoft's option at such price after August 5, 2000. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 101 | On September 15, 2000, 74,250 shares of preferred stock were converted to 9 million shares of the Company's common stock. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 102 | In the first quarter of 2001, an additional 72,400 shares of preferred stock were converted to 8.8 million shares of the Company's common stock. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 103 | NOTE 6 - DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivatives to partially offset its business exposure to currency and interest rate risk. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 104 | 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 of future cash flows on certain forecasted revenues and cost of sales. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 105 | From time to time, the Company enters into interest rate swap agreements to modify the interest rate profile of certain investments and debt. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 106 | The Company's accounting policies for these instruments are based on whether the instruments are designated as hedge or non-hedge instruments. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 107 | The Company records all derivatives on the balance sheet at fair value. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 108 | FOREIGN EXCHANGE RISK MANAGEMENT
The Company enters into foreign exchange forward and option contracts with financial institutions primarily to protect against currency exchange risk associated with expected future cash flows, existing assets and liabilities, and certain firmly committed transactions. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 109 | Generally, the Company's practice is to hedge a majority of its existing material foreign exchange transaction exposures. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 110 | However, the Company may not hedge certain foreign exchange transaction exposures due to immateriality, prohibitive economic cost of hedging particular exposures, and availability of appropriate hedging instruments. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 111 | In accordance with SFAS No. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 112 | 133, hedges related to anticipated transactions are designated and documented at hedge inception as cash flow hedges and evaluated for hedge effectiveness quarterly. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 113 | For currency forward contracts, hedge effectiveness is measured based on changes in the fair value of the contract attributable to changes in the forward exchange rate. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 114 | Changes in the expected future cash flows on the forecasted hedged transaction and changes in the fair value of the forward hedge are both measured from the contract rate to the forward exchange rate associated with the forward contract's maturity date. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 115 | For currency option contracts, hedge effectiveness is measured based on changes in the option's intrinsic value. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 116 | Apple defines intrinsic value as the present value of the gain or loss on the option contract calculated from the option's strike price to the forward rate associated with the option's cash settlement date. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 117 | Hedge effectiveness is assessed by comparing the present value of the cumulative change in expected future cash flows on the forecasted transaction attributable to the hedged risk with the cumulative change in the intrinsic value of the option. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 118 | Changes in the expected future cash flows on the forecasted transaction and changes in the intrinsic value of the option hedge are both measured from the option strike price to the forward exchange rate. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 119 | Changes in fair value of the option contract attributable to time value are excluded from the measurement of hedge effectiveness and are recognized in current earnings. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 120 | The effective portions of the net gains or losses on derivative instruments are reported as components of other comprehensive income in stockholders' equity and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 121 | Any residual changes in fair value of the instruments, including option time value or ineffectiveness are recognized in current earnings in interest and other income and expense. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 122 | To 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 revenues, and the Company's non-U.S. dollar functional subsidiaries selling in foreign currencies hedge a portion of forecasted inventory purcha... | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 123 | Other comprehensive income associated with hedges of foreign currency sales 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 cost... | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 124 | Typically, the Company hedges portions of its forecasted foreign currency exposure associated with revenues and inventory purchases over a time horizon of 3 to 9 months. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 125 | The Company also enters into foreign currency forward and option contracts to offset the foreign exchange gains and losses generated by the remeasurement of certain recorded assets and liabilities in non-functional currencies. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 126 | Changes in the fair value of these derivatives are recognized in current earnings in interest and other income as offsets to the changes in the fair value of the related assets or liabilities. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 127 | The Company may enter into foreign currency forward contracts to offset the translation and economic exposure of a net investment position in a foreign subsidiary. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 128 | Hedge effectiveness on forwards designated as net investment hedges is measured based on changes in the fair value of the contract attributable to changes in the spot exchange rate. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 129 | The effective portion of the net gain or loss on a derivative instrument designated as a hedge of the net investment position in a foreign subsidiary is reported in the same manner as a foreign currency translation adjustment. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 130 | Any residual changes in fair value of the forward contract, including changes in fair value based on the differential between the spot and forward exchange rates are recognized in current earnings in interest and other income and expense. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 131 | For the quarter ended December 30, 2000, the Company recorded a net favorable adjustment of $4.0 million in the accumulated translation adjustment for derivatives designated as net investment hedges. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 132 | As discussed above, the Company enters into foreign currency option contracts as designated cash flow hedges and, sometimes, as items which provide an offset to the remeasurement of certain recorded assets and liabilities denominated in non-functional currencies. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 133 | All changes in the fair value of these derivative contracts based on changes in option time value are recorded in current earnings in interest and other income and expense. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 134 | Due to market movements, changes in option time value can lead to increased volatility in other income and expense. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 135 | For the quarter ended December 30, 2000, the Company recorded a net loss of $7.5 million in interest and other income related to adjusting to fair value the change in time value of outstanding option contracts. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 136 | Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable that the forecasted hedged transaction will not occur in the initially identified time period. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 137 | Deferred gains and losses in other comprehensive income associated with such derivative instruments are immediately reclassified into earnings in interest and other income. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 138 | 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. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 139 | During the first quarter of 2001, the Company recorded a net gain of $5.1 million in interest and other income 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 sales. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 140 | INTEREST RATE RISK MANAGEMENT
The Company sometimes enters into interest rate derivative transactions, including interest rate swaps, collars, and floors, with financial institutions in order to better match the Company's floating-rate interest income on its cash equivalents and short-term investments with its fixed-ra... | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 141 | The Company may also enter into interest rate contracts that are intended to reduce the cost of the interest rate risk management program. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 142 | The Company assumes no ineffectiveness with regard to the debt swaps as each interest rate swap meets the criteria for accounting under the short-cut method defined in SFAS No. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 143 | 133 for fair value hedges of debt instruments. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 144 | Accordingly, no net gains or losses were recorded in income relative to the Company's underlying debt and interest rate swaps. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 145 | The Company's asset swaps do not qualify for hedge accounting treatment and are recorded at fair value on the balance sheet with associated gains and losses recorded in interest and other income. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 146 | Included in the transition adjustment for SFAS No. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 147 | 133 was an unfavorable adjustment before tax of approximately $5.7 million that adjusted the asset swaps to fair value as of October 1, 2000. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 148 | For the quarter ended December 30, 2000, the Company recorded a before tax gain on the asset swaps of approximately $3.8 million. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 149 | DERIVATIVE ACTIVITY IN ACCUMULATED OTHER COMPREHENSIVE INCOME
As of December 30, 2000, the Company had a net deferred gain associated with cash flow hedges of approximately $13 million net of taxes, all of which is expected to be reclassified to earnings by the end of the third quarter of fiscal 2001. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 150 | The following table summarizes activity in other comprehensive income related to derivatives, net of taxes, held by the Company during the period from October 1, 2000 through December 30, 2000 (in millions):
Cumulative effect of adopting SFAS No. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 151 | 133 $ 12 Changes in fair value of derivatives 11 Gains reclassified from OCI (10) ---- Accumulated derivative gain $ 13 ====
NOTE 7 - COMPREHENSIVE INCOME
Comprehensive income is comprised of two components, net income and other comprehensive income. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 152 | Other comprehensive income refers to revenue, expenses, gains and losses that under generally accepted accounting principles are recorded as an element of shareholders' equity but are excluded from net income. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 153 | The Company's other comprehensive income is comprised of foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency, changes in fair value of derivatives designated as and effective as cash flow hedges, and unrealized gains and losses, net of taxes, on market... | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 154 | Refer to "Note 4 - Non-Current Debt and Equity Investments and Other Strategic Investments" for additional information regarding unrealized gains and losses on available-for-sale securities and "Note 6 - Derivative Financial Instruments" regarding accounting for derivative financial instruments. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 155 | The components of comprehensive income, net of tax, are as follows (in millions):
FOR THE THREE MONTHS ENDED ------------------------------- 12/30/00 1/1/00 -------- -------
Net income (loss) $ (195) $ 183 Other comprehensive income: Change in unrealized gain on derivative instruments 13 -- Change in accumulated transl... | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 156 | This charge was comprised of $3 million for the write-off of various operating assets and $5 million for severance payments to approximately 95 employees associated with consolidation of various domestic and international sales and marketing functions. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 157 | Of the $5 million accrued for severance, $2.5 million had been spent by September 30, 2000, and an additional $1 million was spent in the first quarter of 2001. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 158 | Of the $3 million accrued for the write-off of various assets, substantially all was utilized by the end of the second quarter of 2000. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 159 | 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 is not tax deductible. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 160 | Approximately half of the total charge is the cost of the aircraft. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 161 | The other half represents all other costs and taxes associated with the bonus. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 162 | This executive bonus has been presented outside selling, general, and administrative expenses as a special charge. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 163 | NOTE 9 - SEGMENT INFORMATION AND GEOGRAPHIC DATA
The Company manages its business primarily on a geographic basis. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 164 | The Company's reportable segments are comprised of the Americas, Europe, and Japan. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 165 | The Americas segment includes both North and South America. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 166 | The European segment includes European countries as well as the Middle East and Africa. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 167 | Other operating segments include Asia-Pacific, which includes Australia and Asia except for Japan, and the Company's subsidiary, Filemaker, Inc. Each reportable operating segment provides similar products and services, and the accounting policies of the various segments are the same as those described in the 2000 Form ... | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 168 | The Company evaluates the performance of its operating segments based on net sales and operating income. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 169 | Operating income for each segment includes revenue, cost of sales, and operating expenses directly attributable to the segment. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 170 | Net sales are based on the location of the customers. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 171 | Operating income for each segment excludes other income and expense and certain expenses that are managed outside the reportable segment. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 172 | Costs excluded from segment operating income include various corporate expenses, income taxes, and nonrecurring charges for purchased in-process research and development, restructuring, and acquisition related costs. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 173 | Corporate expenses include research and development, manufacturing expenses not included in segment cost of sales, corporate marketing expenses, and other separately managed general and administrative expenses. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 174 | The Company does not include intercompany transfers between segments for management reporting purposes. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 175 | Summary information by segment follows (in millions):
Three Months Ended ---------------------- 12/30/00 1/1/00 -------- ------
Americas: Net sales $ 513 $1,189 Operating income (loss) $ (93) $ 166
Europe: Net sales $ 326 $ 626 Operating income (loss) $ (10) $ 114
Japan: Net sales $ 84 $ 412 Operating income (loss) $ (... | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 176 | The Company is also subject to certain other legal proceedings and claims which have arisen in the ordinary course of business and which have not been fully adjudicated. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 177 | The results of legal proceedings cannot be predicted with certainty; however, in the opinion of management, the Company does not have a potential liability related to any legal proceedings and claims that would have a material adverse effect on its financial condition or results of operations. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 178 | The Internal Revenue Service (IRS) has proposed federal income tax deficiencies for the years 1984 through 1991, and the Company has made certain prepayments thereon. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 179 | The Company contested the proposed deficiencies by filing petitions with the United States Tax Court, and most of the issues in dispute have now been resolved. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 180 | On June 30, 1997, the IRS proposed income tax adjustments for the years 1992 through 1994. | 0000912057-01-004642/full-submission.txt |
0000320193 | 20010212 | 10-Q | 181 | Although most of the issues for these years have been resolved, certain issues still remain in dispute and are being contested by the Company. | 0000912057-01-004642/full-submission.txt |
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