Apple 1995 Annual Report Download - page 34

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Under APB Opinion No. 11, deferred income taxes result from timing differences between years in the recognition of certain revenue and
expense items for financial and tax reporting purposes. The sources of timing differences and the related tax effects for 1993 are as follows:
(In millions)
A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate (35.00% in
1995, 35.00% in 1994, and 34.75% in 1993) to income before income taxes, is as follows:
(In millions)
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. The Company contested the proposed deficiencies for the years 1984 through 1988, and most of the issues
in dispute for these years have been resolved. On June 29, 1995, the IRS issued a notice of deficiency proposing increases to the amount of the
Company's federal income taxes for the years 1989 through 1991. The Company has filed a petition with the United States Tax Court to contest
these alleged tax deficiencies. Management believes that adequate provision has been made for any adjustments that may result from these tax
examinations.
Common Stock
Shareholder Rights Plan
In May 1989, the Company adopted a shareholder rights plan and distributed a dividend of one right to purchase one share of common stock (a
"Right") for each outstanding share of common stock of the Company. The Rights become exercisable in certain limited circumstances
involving a potential business combination transaction of the Company and are initially exercisable at a price of $200 per share. Following
certain other events after the Rights have become exercisable, each Right entitles its holder to purchase for $200 an amount of common stock
of the Company, or, in certain circumstances, securities of the acquiror, having a then-current market value of two times the exercise price of
the Right. The Rights are redeemable and may be amended at the Company's option before they become exercisable. Until a Right is exercised,
the holder of a Right, as such, has no rights as a shareholder of the Company. The Rights expire on April 19, 1999.
Stock Option Plans
The Company has in effect a 1990 Stock Option Plan (the "1990 Plan") and a 1987 Executive Long Term Stock Option Plan (the "1987 Plan").
The 1981 Stock Option Plan terminated in October 1990. Options granted before that date remain outstanding in accordance with their terms.
Options may be granted under the 1990 Plan to employees, including officers and directors who are
32
1993
Income of foreign subsidiaries not taxable in current year $ 53
Warranty, bad debt, and other expenses (80)
Depreciation (4)
Inventory valuation (17)
State income taxes 3
Other individually immaterial items 42
Total deferred taxes $ (3)
FAS 109 Method APB 11 Method
1995 1994 1993
Computed expected tax $ 236 $ 175 $ 49
State taxes, net of federal benefit 10 17 2
Research and development tax credit (1) (1) (8)
Indefinitely invested earnings of
foreign subsidiaries (21) (49) (21)
Valuation allowance 3 9 --
Other individually immaterial items 23 39 31
Provision for income taxes $ 250 $ 190 $ 53
Effective tax rate 37% 38% 38%