Apple 2004 Annual Report Download - page 93

awards for the purchase of 27.5 million shares of the Company's common stock previously granted to Mr. Jobs in 2000 and 2001. Mr. Jobs
retained options to purchase 60,000 shares of the Company's common stock granted in August of 1997 in his capacity as a member of the
Company's Board of Directors, prior to becoming the Company's CEO. The Agreement replaced the cancelled options with a restricted stock
award of 5 million shares of the Company's common stock. The restricted stock award generally vests three years from date of grant. Vesting of
some or all of the restricted shares will be accelerated in the event Mr. Jobs is terminated without cause, dies, or has his management role
reduced following a change in control of the Company.
The Company has recorded the value of the restricted stock award of $74.75 million as a component of shareholders' equity and is amortizing
that amount on a straight-line basis over the 3 year service period. The value of the restricted stock award was based on the closing market price
of the Company's common stock of $14.95 on the date of the award. Amortization expense for this award, which amounts to approximately
$6.2 million per quarter, has been included in selling, general, and administrative expense beginning in March 2003 and will continue to be
included through March 2006. The 5 million restricted shares have been included in the calculation of diluted earnings per share utilizing the
treasury stock method.
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 25, 2004.
Preferred Stock
The Company has 5 million shares of authorized preferred stock, none of which is outstanding. Under the terms of the Company's Restated
Articles of Incorporation, the Board of Directors is authorized to determine or alter the rights, preferences, privileges and restrictions of the
Company's authorized but unissued shares of preferred 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.
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