Apple 2008 Annual Report Download - page 77

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 6—Shareholders’ Equity
Preferred Stock
The Company has five million shares of authorized preferred stock, none of which is issued or 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.
CEO Restricted Stock Award
On March 19, 2003, the Company’s Board of Directors granted 10 million shares of restricted stock to the Company’s CEO that vested on
March 19, 2006. The amount of the restricted stock award expensed by the Company was based on the closing market price of the Company’s
common stock on the date of grant and was amortized ratably on a straight-line basis over the three-year requisite service period. Upon vesting
during 2006, the 10 million shares of restricted stock had a fair value of $646.6 million and had grant-date fair value of $7.48 per share. The
restricted stock award was net-share settled such that the Company withheld shares with value equivalent to the CEO’s minimum statutory
obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares
withheld of 4.6 million were based on the value of the restricted stock award on the vesting date as determined by the Company’s closing stock
price of $64.66. The remaining shares net of those withheld were delivered to the Company’s CEO. Total payments for the CEO’s tax
obligations to the taxing authorities was $296 million in 2006 and are reflected as a financing activity within the Consolidated Statements of
Cash Flows. The net-share settlement had the effect of share repurchases by the Company as it reduced and retired the number of shares
outstanding and did not represent an expense to the Company. The Company’s CEO has no remaining shares of restricted stock. For the year
ended September 30, 2006, compensation expense related to restricted stock was $4.6 million.
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 U.S. 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.
The following table summarizes the components of accumulated other comprehensive income, net of taxes, as of the three fiscal years ended
September 27, 2008 (in millions):
The change in fair value of available-for-sale securities included in other comprehensive income was $(63) million, $(7) million, and $4 million,
net of taxes in 2008, 2007, and 2006, respectively. The tax effect related to the change in unrealized gain/loss on available-for-
sale securities was
$42 million, $4 million, and $(2) million for 2008, 2007, and 2006, respectively.
74
2008
2007
2006
Unrealized losses on available
-
for
-
sale securities
$
(70
)
$
(7
)
$
—
Unrealized gains on derivative instruments
19
—
3
Cumulative foreign currency translation
59
70
19
Accumulated other comprehensive income
$
8
$
63
$
22