Apple 2006 Annual Report Download - page 85

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 1—Summary of Significant Accounting Policies (Continued)
treasury stock method, an increase in the fair market value of the Company’s common stock can result in a greater dilutive effect from
outstanding options, restricted stock, and restricted stock units. Additionally, the exercise of employee stock options and the vesting of
restricted stock and restricted stock units can result in a greater dilutive effect on earnings per share.
The following table sets forth the computation of basic and diluted earnings per share:
Potentially dilutive securities representing approximately 3.9 million, 12.7 million (as restated(1)), and 8.9 million (as restated(1)) shares of
common stock for the years ended September 30, 2006, September 24, 2005, and September 25, 2004, respectively, were excluded from the
computation of diluted earnings per share for these periods because their effect would have been antidilutive. These potentially dilutive
securities include stock options, unvested restricted stock, and restricted stock units.
(1)
See Note 2, “Restatement of Consolidated Financial Statements.”.
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 is comprised 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.
Segment Information
The Company reports segment information based on the “management” approach. The management approach designates the internal reporting
used by management for making decisions and assessing performance as the source of the Company’s reportable segments. Information about
the Company’s products, major customers, and geographic areas on a company-wide basis is also disclosed.
84
Three fiscal years ended September 30, 2006
2006
2005
2004
As Restated (1)
As Restated (1)
Numerator (in millions):
Net income
$
1,989
$
1,328
$
266
Denominator (in thousands):
Weighted-average shares outstanding, excluding unvested
restricted stock
844,058
808,439
743,180
Effect of dilutive options, restricted stock units and unvested
restricted stock
33,468
48,439
31,596
Denominator for diluted earnings per share
877,526
856,878
774,776
Basic earnings per share
$
2.36
$
1.64
$
0.36
Diluted earnings per share
$
2.27
$
1.55
$
0.34