Apple 2003 Annual Report Download - page 78

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associated with the bonus. In the fourth quarter of 2002, all significant work and payments associated with the aircraft were completed. Of the
original $90 million accrual, $2.4 million remained unspent at the end of fiscal 2002 and was reversed.
In March 2002, the Company entered into a Reimbursement Agreement with its Chief Executive Officer, Mr. Steven P. Jobs, for the
reimbursement of expenses incurred by Mr. Jobs in the operation of his private plane when used for Apple business. The Reimbursement
Agreement is effective for expenses incurred by Mr. Jobs for Apple business purposes since he took delivery of the plane in May 2001. The
Company recognized a total of $404,000 in expenses pursuant to the Reimbursement Agreement during fiscal 2003. For fiscal 2002, the
Company recognized a total of $1,168,000 in expenses pursuant to the Reimbursement Agreement related to expenses incurred by Mr. Jobs
during 2001 and 2002. All expenses recognized pursuant to the Reimbursement Agreement have been included by the Company in selling,
general, and administrative expenses.
In connection with a relocation assistance package, the Company loaned Mr. Ronald B. Johnson, Senior Vice President, Retail, $1.5 million for
the purchase of his principal residence. The loan is secured by a deed of trust and is due and payable in May 2004. Under the terms of the loan,
Mr. Johnson agreed that should he exercise any of his stock options prior to the due date of the loan, he would pay the Company an amount
equal to the lesser of (1) an amount equal to 50% of the total net gain realized from the exercise
99
of the options; or (2) $375,000 multiplied by the number of years between the exercise date and the date of the loan. Mr. Johnson repaid
$750,000 of this loan in fiscal 2003. The remaining $750,000 is due and payable in May 2004.
Mr. Jerome York, a member of the Board of Directors of the Company, is a member of an investment group that purchased
MicroWarehouse, Inc. (MicroWarehouse) in January 2000. Until September 7, 2003, he also served as its Chairman, President and Chief
Executive Officer. MicroWarehouse is a reseller of computer hardware, software and peripheral products, including products made by the
Company. On September 8, 2003, CDW Corporation (CDW), acquired selected North American assets of MicroWarehouse. MicroWarehouse
subsequently filed for Chapter 11 bankruptcy protection in the United States. MicroWarehouse accounted for 2.4%, 3.3%, and 2.9% of the
Company's net sales in fiscal 2003, 2002 and 2001, respectively. Trade receivables from MicroWarehouse were $9.9 million and $20.9 million
as of September 27, 2003, and September 28, 2002, respectively. The Company has provided what it believes to be an adequate allowance on
the outstanding receivable based on the Company's secured interest position in selected MicroWarehouse assets and the expected payments to
unsecured creditors. Sales to MicroWarehouse and related trade receivables were generally subject to the same terms and conditions as those
with the Company's other resellers. In addition, the Company purchases miscellaneous equipment and supplies from MicroWarehouse. Total
purchases amounted to approximately $2.3 million, $2.9 million, and $3.4 million in fiscal 2003, 2002, and 2001, respectively.
Note 13—Selected Quarterly Financial Information (Unaudited)
Basic and diluted earnings (loss) per share are computed independently for each of the quarters presented. Therefore, the sum of quarterly basic
and diluted per share information may not equal annual basic and diluted earnings (loss) per share.
Net income during the fourth and third quarters of 2003 included after
-tax net gains related to non-current investments of $5 million and
$1 million, respectively. Net income for the fourth quarter also included settlement of the Company's forward purchase agreement resulting in a
gain of $6 million and a favorable cumulative
-
effect type adjustment related to the adoption of SFAS 150 of $3 million. Net income (loss)
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
(Tabular amounts in millions, except per share amounts)
2003
Net sales
$
1,715
$
1,545
$
1,475
$
1,472
Gross margin
$
456
$
428
$
418
$
406
Net income (loss)
$
44
$
19
$
14
$
(8
)
Earnings (loss) per common share:
Basic $
0.12
$
0.05
$
0.04
$
(0.02
)
Diluted $
0.12
$
0.05
$
0.04
$
(0.02
)
2002
Net sales
$
1,443
$
1,429
$
1,495
$
1,375
Gross margin
$
381
$
391
$
409
$
422
Net income (loss)
$
(45
)
$
32
$
40
$
38
Earnings (loss) per common share:
Basic $
(0.13
) $
0.09
$
0.11
$
0.11
Diluted $
(0.13
) $
0.09
$
0.11
$
0.11