Apple 2006 Annual Report Download - page 3

The Business section and other parts of this Annual Report on Form 10-K (“Form 10-K”) contain forward-looking statements that involve
risks and uncertainties. Many of the forward-looking statements are located in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” Forward-
looking statements provide current expectations of future events based on certain assumptions
and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by
words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” and similar terms. Forward-looking
statements are not guarantees of future performance and the Company’
s actual results may differ significantly from the results discussed in the
forward
-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in the subsection entitled
“Risk Factors” under Part I, Item 1A of this Form 10-K. The Company assumes no obligation to revise or update any forward-looking
statements for any reason, except as required by law.
Explanatory Note
In this Form 10-K, Apple Computer, Inc. (“Apple” or “the Company”)
is restating its consolidated balance sheet as of September 24, 2005, and
the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the fiscal years ended September 24, 2005
and September 25, 2004, and each of the quarters in fiscal year 2005.
This Form 10-K also reflects the restatement of “Selected Consolidated Financial Data” in Item 6 for the fiscal years ended September 2005,
2004, 2003, and 2002, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 for the fiscal
years ended September 24, 2005 and September 25, 2004.
Previously filed annual reports on Form 10-K and quarterly reports on Form 10-Q affected by the restatements have not been amended and
should not be relied on.
On June 29, 2006, the Company announced that an internal review had discovered irregularities related to the issuance of certain stock option
grants made between 1997 and 2001, including a grant to its Chief Executive Officer (“CEO”)
Steve Jobs. The Company also announced that a
Special Committee of outside directors (“Special Committee”) had been formed and had hired independent counsel to conduct a full
investigation of the Company’s past stock option granting practices. On October 4, 2006, the Company announced the key results of the
Special Committee’s investigation, which are set forth in the Company’s Form 8-K filed on that date.
As a result of the internal review and the independent investigation, management has concluded, and the Audit and Finance Committee of the
Board of Directors agrees, that incorrect measurement dates were used for financial accounting purposes for certain stock option grants made in
prior periods. Therefore, the Company has recorded additional non-cash stock-based compensation expense and related tax effects with regard
to past stock option grants, and the Company is restating previously filed financial statements in this Form 10-K. These adjustments, after tax,
amounted to $4 million, $7 million, and $10 million in fiscal years 2006, 2005 and 2004, respectively. The adjustment to 2006 was recorded in
the fourth quarter of fiscal year 2006 due to its insignificance.
The independent counsel and its forensic accountants (“Investigative Team”) reviewed the facts and circumstances surrounding stock option
grants made on 259 dates. The Investigative Team spent over 26,500 person-hours searching more than one million physical and electronic
documents and interviewing more than 40 current and former directors, officers, employees, and advisors. Based on a review of the totality of
evidence and the applicable law, the Special Committee found no misconduct by current management. The Special Committee’s investigation
identified a number of grants for which grant dates were intentionally selected in order to obtain favorable exercise prices. The terms of these
and certain other grants, as discussed below, were finalized after the originally assigned grant dates. The Special Committee concluded that the
procedures for granting, accounting for, and reporting stock option grants
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