Apple 2003 Annual Report Download - page 69

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 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. In August 2003, the Company settled this
agreement prior to its maturity, at which time the Company's common stock had a fair value of $22.81. Other than this forward purchase
transaction, the Company has not engaged in any transactions to repurchase its common stock since fiscal 2000. Since inception of the stock
repurchase plan, the Company had repurchased a total of 6.55 million shares at a cost of $217 million. The Company was authorized to
repurchase up to an additional $283 million of its common stock as of September 27, 2003.
Preferred Stock
In August 1997, the Company and Microsoft Corporation (Microsoft) entered into 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.
Comprehensive Income
Comprehensive income consists of two components, net income and other comprehensive income. 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. The Company's other comprehensive income consists of foreign currency translation adjustments from those
subsidiaries not using the U.S. dollar as their functional currency, unrealized gains and losses on marketable securities categorized as available-
for-sale, and net deferred gains and losses on certain derivative instruments accounted for as cash flow hedges.
The following table summarizes the components of accumulated other comprehensive income (loss), net of taxes (in millions):
87
The following table summarizes activity in other comprehensive income related to available-for-sale securities, net of taxes (in millions):
The tax effect related to the change in unrealized gain on available-for-sale securities was $6 million, $10 million, $157 million for fiscal 2003,
2002, and 2001, respectively. The tax effect on the reclassification adjustment for net gains (losses) included in net income (loss) was $(8)
million, $10 million and $35 million for fiscal 2003, 2002, and 2001, respectively.
The following table summarizes activity in other comprehensive income related to derivatives, net of taxes, held by the Company (in millions):
2003 2002 2001
Unrealized gains on available
-
for
-
sale securities
$
1
$
13
$
30
Unrealized gains (losses) on derivative investments
(16
)
(11
)
4
Cumulative foreign currency translation
(20
)
(51
)
(56
)
Accumulated other comprehensive income (loss)
$
(35
)
$
(49
)
$
(22
)
2003 2002 2001
Change in fair value of available
-
for
-
sale securities
$
11
$
(49
)
$
(183
)
Adjustment for net (gains) losses realized and included in net income (loss)
(23
)
32
(84
)
Change in unrealized gain on available
-
for
-
sale securities
$
(12
)
$
(17
)
$
(267
)
2003 2002 2001
Changes in fair value of derivatives
$
(24
)
$
4
$
45
Adjustment for net gains realized and included in net income (loss)
19
(19
)
(53
)