Apple 2006 Annual Report Download - page 104

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 8—Shareholders’ Equity (Continued)
The following table summarizes activity in other comprehensive income related to derivatives, net of taxes, held by the Company (in millions):
The tax effect related to the changes in fair value of derivatives was $(8) million, $(3) million, and $10 million for 2006, 2005, and 2004,
respectively. The tax effect related to derivative gains/losses reclassified from other comprehensive income to net income was $8 million,
$(2) million, and $(13) million for 2006, 2005, and 2004, respectively.
Employee Benefit Plans
2003 Employee Stock Plan
The 2003 Employee Stock Plan (the “2003 Plan”) is a shareholder approved plan that provides for broad-based grants to employees, including
executive officers. Based on the terms of individual option grants, options granted under the 2003 Plan generally expire 7 to 10 years after the
grant date and generally become exercisable over a period of 4 years, based on continued employment, with either annual or quarterly vesting.
The 2003 Plan permits the granting of incentive stock options, nonstatutory stock options, restricted stock units, stock appreciation rights, and
stock purchase rights.
1997 Employee Stock Option Plan
In August 1997, the Company’s Board of Directors approved the 1997 Employee Stock Option Plan (the “1997 Plan”), a non-shareholder
approved plan for grants of stock options to employees who are not officers of the Company. Based on the terms of individual option grants,
options granted under the 1997 Plan generally expire 7 to 10 years after the grant date and generally become exercisable over a period of
4 years, based on continued employment, with either annual or quarterly vesting. In October 2003, the Company terminated the 1997
Employee Stock Option Plan and cancelled all remaining unissued shares totaling 28,590,702. No new options can be granted from the 1997
Plan.
Employee Stock Option Exchange Program
On March 20, 2003, the Company announced a voluntary employee stock option exchange program (the “Exchange Program”) whereby
eligible employees, other than executive officers and members of the Board of Directors, had an opportunity to exchange outstanding options
with exercise prices at or above $12.50 per share for a predetermined smaller number of new stock options issued with exercise prices equal to
the fair market value of one share of the Company’
s common stock on the day the new awards were issued, which was to be at least six months
plus one day after the exchange options were cancelled. On April 17, 2003, in accordance with the Exchange Program, the Company cancelled
options to purchase 33,138,386 shares of its common stock. On October 22, 2003, new stock options totaling 13,394,736 shares were issued to
employees at an exercise price of $11.38 per share, which is equivalent to the closing price of the Company’
s stock on that date. No financial or
accounting impact to the Company’s financial position, results of operations or cash flows was associated with this transaction.
103
2006
2005
2004
Changes in fair value of derivatives
$
11
$
7
$
(21
)
Adjustment for net losses realized and included in net income
(12
)
1
33
Change in unrealized gain/loss on derivative instruments
$
(1
)
$
8
$
12