Apple 2004 Annual Report Download - page 42

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existing general economic conditions and to partially offset the cost of continuing investments in new product development and investments in
the Company's Retail operating segment.
During the fourth quarter of 2002, the Company's management approved and initiated restructuring actions with a total cost of approximately
$6 million designed to reduce headcount costs in corporate operations and sales and to adjust its PowerSchool product strategy. These
restructuring actions resulted in the elimination of approximately 180 positions worldwide at a cost of $1.8 million, all of which were eliminated
by September 27, 2003. Eliminated positions were primarily in corporate operations, sales, and PowerSchool related research and development
in the Americas operating segment. The shift in product strategy at PowerSchool included discontinuing development and marketing of
PowerSchool's PSE product. This shift resulted in the impairment of previously capitalized development costs associated with the PSE product
in the amount of $4.5 million.
During the first quarter of 2002, the Company's management approved and initiated restructuring actions with a total cost of approximately
$24 million. These restructuring actions resulted in the elimination of approximately 425 positions worldwide at a cost of $8 million. Positions
were eliminated primarily in the Company's operations, information systems, and administrative functions. In addition, these restructuring
actions also included significant changes in the Company's information systems strategy resulting in termination of equipment leases and
cancellation of existing projects and activities. The Company ceased using the assets associated with first quarter 2002 restructuring actions
during that same quarter. Related lease and contract cancellation charges totaled $12 million, and charges for asset impairments totaled
$4 million. The first quarter 2002 restructuring actions were primarily related to corporate activity not allocated to operating segments. During
the first quarter of 2003, the Company reversed the remaining unused accrual of $600,000.
Purchased In
-Process Research and Development (IPR&D)
During 2002, the Company acquired Emagic GmbH, a provider of professional software solutions for computer based music production, for
approximately $30 million in cash; $551,000 of which was allocated to IPR&D. The amount of the purchase price allocated to IPR&D was
expensed upon acquisition, because the technological feasibility of products under development had not been established and no alternative
future uses existed. The fair value of the IPR&D was determined using the income approach, which reflects the projected free cash flows that
will be generated by the IPR&D projects and that are attributable to the acquired technology, and discounting the projected net cash flows back
to their present value using a discount rate of 25%.
Other Income and Expense
Other income and expense for the three fiscal years ended September 25, 2004 are as follows (in millions):
39
2004
2003
2002
Gains (losses) on non
-
current investments, net
$
4
$
10
$
(42
)
Interest income
$
64
$
69
$
118
Interest expense
(3
)
(8
)
(11
)
Gains on sales of short term investments, net
1
21
7
Other income (expense), net
(9
)
(5
)
(2
)
Gain on forward purchase agreement
—
6
—
Interest and other income, net
$
53
$
83
$
112
Total other income and expense
$
57
$
93
$
70