Apple 2000 Annual Report Download - page 48

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--FINANCIAL INSTRUMENTS (CONTINUED)
were convertible by their holders at any time after September 5, 1996, at a conversion price of $29.205 per share subject to adjustments as
defined in the Note agreement. No Notes had been converted as of September 25, 1998. The Notes were redeemable by the Company at
102.4% of the principal amount, plus accrued interest, for the twelve month period beginning June 1, 1999, and at 101.2% of the principal
amount, plus accrued interest, for the twelve month period beginning June 1, 2000. On April 14, 1999, the Company called for redemption of
the Notes. Not including approximately $7 million of unamortized debt issuance costs, debentures in an aggregate principal amount
outstanding totaled approximately $661 million as of March 27, 1999. During the third quarter of 1999, debenture holders chose to convert
virtually all of the outstanding debentures to common stock at a rate of $29.205 per share resulting in the issuance of approximately 22.6
million shares of the Company's common stock.
NON-CURRENT DEBT AND EQUITY INVESTMENTS AND RELATED GAINS
The Company holds significant investments in ARM Holdings plc (ARM), Samsung Electronics Co., Ltd (Samsung), Akamai Technologies,
Inc. (Akamai) and EarthLink Network, Inc. (EarthLink). These investments are reflected in the consolidated balance sheets as non-current debt
and equity investments and have been categorized as available-for-sale requiring that they be carried at fair value with unrealized gains and
losses, net of taxes, reported in equity as a component of accumulated other comprehensive income. All realized gains on the sale of these
investments have been included in other income. The combined fair value of these investments was $786 million and $339 million as of
September 30, 2000, and September 25, 1999, respectively. The Company believes it is likely there will continue to be significant fluctuations
in the fair value of these investments in the future.
ARM HOLDINGS
ARM is a publicly held company in the United Kingdom involved in the design and licensing of high performance microprocessors and related
technology. As of September 25, 1999, the Company held approximately 80 million shares of ARM stock with a fair value of $226 million.
Share data for ARM presented in this Form 10-K has been adjusted to reflect ARM's four-for-one stock split in April of 1999 and its five-for-
one stock split in April of 2000. During 2000, the Company sold a total of approximately 45.2 million shares of ARM stock for net proceeds of
approximately $372 million, recorded a gain before taxes of approximately $367 million, and recognized related income tax of approximately
$94 million. As of September 30, 2000, the Company holds 34.8 million shares of ARM stock valued at $383 million.
During 1999, the Company sold a total of approximately 163 million shares of ARM stock for net proceeds of approximately $245 million,
recorded a gain before taxes of approximately $230 million, and recognized related income tax of approximately $25 million. As of September
25, 1999, the Company held 80 million shares of ARM stock valued at $226 million.
As of September 26, 1997, the Company owned 42.3% of the outstanding stock of ARM. The Company had accounted for this investment
using the equity method through September 25, 1998. On April 17, 1998, ARM completed an initial public offering of its stock on the London
Stock Exchange and the NASDAQ National Market. The Company sold 18.9% of its shares in the offering for a gain before foreign taxes of
approximately $24 million. Foreign tax recognized on this gain was approximately $7 million. At the time an equity method investee sells
existing or newly issued common stock to unrelated parties in excess of its book value, the equity method requires the net book value of the
investment be adjusted to reflect the investor's share of the change in the investee's shareholders' equity resulting from the sale. It is the
Company's policy to record an adjustment reflecting its share of the change in the investee's shareholders' equity resulting from such a sale as a
gain or loss in other income. Consequently, the Company also
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