Apple 2002 Annual Report Download - page 59

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 income tax returns through 1997. Substantially all IRS
audit issues for years through 1997 have been resolved. The IRS is currently auditing the Company's federal income tax returns for fiscal years
1998 through 2000. Management believes that adequate provision has been made for any adjustments that may result from tax examinations.
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. This
repurchase plan does not obligate the Company to acquire any specific number of shares or acquire shares over any specified period of time.
During 2000, the Company repurchased a total of 2.55 million shares of its common stock at a cost of $116 million. 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. The Company engaged in no transactions relating to the stock repurchase
plan in fiscal 2002. 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.
Preferred Stock
In August 1997, the Company and Microsoft Corporation (Microsoft) entered into a patent cross license and technology agreements. In
addition, Microsoft purchased 150,000 shares of Apple Series A nonvoting convertible preferred stock ("preferred stock") for $150 million.
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. During 2000, 74,250 shares of preferred stock were converted to 9 million shares of the Company's common stock. During 2001, the
remaining 75,750 preferred shares were converted into 9.2 million shares of the Company's common stock.
75
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):
2002 2001 2000
Computed expected tax (benefit)
$
30
$
(18
)
$
382
State taxes, net of federal effect
7
(7
)
15
Indefinitely invested earnings of foreign subsidiaries
—
—
(
82
)
Nondeductible executive compensation
(1
)
—
32
Purchase accounting and asset acquisitions
3
10
—
Change in valuation allowance
(16
)
—
(
27
)
Research & development credit, net
(8
)
(5
)
(5
)
Nondeductible expenses
4
3
—
Other items
3
2
(9
)
Provision for (benefit from) income taxes
$
22
$
(15
)
$
306
Effective tax rate
25
%
30
%
28
%
2002 2001 2000
Unrealized gains on available
-
for
-
sale securities
$
13
$
30
$
297
Unrealized gains (losses) on derivative investments
(11
)
4
—
Cumulative translation adjustments
(51
)
(56
)
(53
)
Accumulated other comprehensive income (loss)
$
(49
)
$
(22
)
$
244