Microsoft 2004 Annual Report Download - page 50

PAGE 50
respectively. Additionally, in 2002, we acquired 10.2 million of our shares as a result of a structured stock repurchase
transaction entered into in 2001, which gave us the right to acquire such shares in exchange for an up-front net payment
of $264 million. In any period, cash used in financing activities related to common stock repurchased may differ from the
comparable change in Stockholders’ Equity, reflecting timing differences between the recognition of share repurchase
transactions and their settlement for cash.
On January 16 and September 12, 2003, our board of directors declared annual dividends on our common stock of
$0.08 and $0.16 per share, respectively. The dividends were paid on March 7 and November 7, 2003, respectively, to
shareholders of record at the close of business on February 21, and October 17, 2003.
NOTE 12 OTHER COMPREHENSIVE INCOME
The activity in other comprehensive income and related tax effects are as follows:
(In millions)
Y
ear Ended June 30 2002 2003 2004
Net gains/(losses) on derivative instruments:
Unrealized gains/(losses), net of tax effect of $30 in 2002, $(69) in 2003 and
$49 in 2004 $ 55 $ (129) $ 92
Reclassification adjustment for (gains)/losses included in net income, net of tax
effect of $(79) in 2002, $15 in 2003 and $5 in 2004 (146) 27 9
Net gains/(losses) on derivative instruments (91) (102) 101
Net unrealized investment gains/(losses):
Unrealized holding gains/(losses), net of tax effect of $(955) in 2002, $610 in
2003 and $(994) in 2004 (1,774) 1,132 (1,846)
Reclassification adjustment for (gains)/losses included in net income, net of tax
effect of $958 in 2002, $60 in 2003 and $524 in 2004 1,779 111 973
Net unrealized investment gains/(losses) 5 1,243 (873)
Translation adjustments and other 82 116 51
Other comprehensive income/(loss) $ (4) $1,257 $ (721)
The components of accumulated other comprehensive income were:
(In millions) 2003 2004
Year Ended June 30
Net gains/ (losses) on derivative instruments $ (16) $ 85
Net unrealized investment gains 1,846 973
Translation adjustments and other 10 61
Accumulated other comprehensive income $ 1,840 $1,119
NOTE 13 EMPLOYEE STOCK AND SAVINGS PLANS
Effective July 1, 2003, we adopted the fair value recognition provisions of SFAS 123, Accounting for Stock-Based
Compensation, using the retroactive restatement method described in SFAS 148, Accounting for Stock-Based
Compensation – Transition and Disclosure. Under the fair value recognition provisions of SFAS 123, stock-based
compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the
vesting period. In connection with the use of the retroactive restatement method, income statement amounts have been
restated for fiscal 2002 and 2003 to reflect results as if the fair-value method of SFAS 123 had been applied from its
original effective date. Total compensation cost recognized in income for stock-based employee compensation awards
was $3.78 billion in fiscal 2002, $3.75 billion in fiscal 2003, and $5.73 billion in fiscal 2004. The amounts for fiscal 2004
include $2.21 billion ($1.48 billion after-tax or $0.14 per diluted share) due to the completion of the employee stock option
transfer program.
Employee Stock Purchase Plan. We have an employee stock purchase plan for all eligible employees. Under the
plan, shares of our common stock could be purchased at six month intervals at 85% of the lower of the fair market value
on the first or the last day of each six month period. Employees could purchase shares having a value not exceeding 15%
of their gross compensation during an offering period. During fiscal 2002, 2003, and 2004 employees purchased 10.8