Apple 2003 Annual Report Download - page 72

The options outstanding as of September 27, 2003 have been segregated into six ranges for additional disclosure as follows (option amounts are
presented in thousands):
As of September 28, 2002, the Company had exercisable options to purchase 57.9 million shares outstanding with a weighted average exercise
price of $30.85 per share. As of September 29, 2001, the Company had exercisable options to purchase 42.1 million shares outstanding with a
weighted average exercise price of $32.15.
Note 9—Stock-Based Compensation
The Company has provided pro forma disclosures in Note 1 of these Notes to Consolidated Financial Statements of the effect on net income
(loss) and earnings (loss) per share as if the fair value method of accounting for stock compensation had been used for its employee stock
option grants and employee stock purchase plan purchases. These pro forma effects have been estimated at the date of grant and beginning of
the period, respectively, using the Black-Scholes option pricing model.
For purposes of the pro forma disclosures provided pursuant to SFAS No. 123, the option awards issued in October 2003 and the awards
cancelled as part of the Exchange Program have been accounted for using modification accounting. In accordance with SFAS No. 123, the
grant date of the awards issued is the date of acceptance of the exchange offer by participating employees. The cancellation of certain of the
Company's Chief Executive Officer's options and replacement with restricted shares in March 2003 is also being accounted for using
modification accounting for purposes of the pro forma disclosures provided pursuant to SFAS No. 123.
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The assumptions used for each of the last three fiscal years and the resulting estimate of weighted-average fair value per share of options
granted during those years are as follows:
For purposes of the pro forma disclosures provided pursuant to SFAS No. 123, the expected volatility assumptions used by the Company prior
to the third quarter of 2003 have been based solely on the historical volatility of the Company's common stock over the most recent period
commensurate with the estimated expected life of the Company's stock options. Beginning in the third quarter of 2003, the Company has
modified this approach to consider other relevant factors including implied volatility in market traded options on the Company's common stock
and the impact of unusual fluctuations not reasonably expected to recur on the historical volatility of the Company's common stock. The
Company will continue to monitor these and other relevant factors in developing the expected volatility assumption used to value future
awards.
Options Outstanding Options Exercisable
Options
Outstanding as of
September 27,
2003
Weighted-
Average
Remaining
Contractual
Life in Years
Weighted
Average
Exercise
Price
Options
Exercisable as of
September 27,
2003
Weighted
Average
Exercise
Price
$0.83
-
$15.59
11,216
5.49
$
11.83
8,237
$
10.83
$15.60
-
$17.31
11,936
6.41
$
17.00
7,022
$
17.07
$17.32
-
$18.50
17,843
7.04
$
18.43
11,903
$
18.43
$18.51
-
$22.21
14,416
7.88
$
20.31
6,886
$
20.27
$22.22
-
$38.81
5,006
7.49
$
24.03
2,844
$
24.29
$38.82
-
$69.78
2,595
6.28
$
48.08
1,864
$
48.11
$0.83
-
$
69.78
63,012
6.84
$
19.08
38,756
$
18.75
2003 2002 2001
Expected life of stock options
3.5
-
4 years
4 years
4 years
Expected life of stock purchases
6 months
6 months
6 months
Interest rate
—
stock options
2.14%
-
2.45
%
2.90
%
4.90
%
Interest rate
—
stock purchases
1.10%
-
1.77
%
2.71
%
5.97
%
Volatility
—
stock options
40%
-
63
%
64
%
66
%
Volatility
—
stock purchases
35%
-
44
%
51
%
90
%
Dividend yields
0
0
0
Weighted
-
average fair value of options granted during the year
$
6.63
$
10.11
$
10.15
Weighted
-
average fair value of stock purchases during the year
$
4.24
$
6.73
$
11.15