Cisco 2006 Annual Report Download - page 63

66 Cisco Systems, Inc.
Comprehensive Income
The components of comprehensive income are as follows (in millions):
Years Ended July 29, 2006 July 30, 2005 July 31, 2004
Net income $ 5,580 $ 5,741 $ 4,401
Other comprehensive income:
Change in unrealized gains and losses on investments, net of tax benefit (expense) of $57,
$(61), and $42 in fiscal 2006, 2005, and 2004, respectively (64) (25) (77)
Other 61 10 19
Other comprehensive income before minority interest 5,577 5,726 4,343
Change in minority interest 1 77 (84)
Total $ 5,578 $ 5,803 $ 4,259
The Company consolidates its investment in a venture fund managed by SOFTBANK as it is the primary beneciary as dened under
FIN 46(R). As a result, the change in the unrealized gains and losses on the investments in the venture fund are recorded as a component
of other comprehensive income and is reected as a change in minority interest.
10. Employee Benefit Plans
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan, which includes its sub-plan, the International Employee Stock Purchase Plan (together,
the “Purchase Plan”), under which 321.4 million shares of the Company’s stock have been reserved for issuance. Eligible employees may
purchase a limited number of shares of the Company’s stock at a discount of up to 15% of the market value at either the subscription date
or the purchase date, which is approximately six months after the subscription date. The Purchase Plan terminates on January 3, 2010. In
scal 2006, 2005, and 2004, the shares issued under the Purchase Plan were 21 million, 19 million, and 26 million shares, respectively. At
July 29, 2006, 99 million shares were available for issuance under the Purchase Plan.
Employee Stock Incentive Plans
Stock Incentive Plan Program Description As of July 29, 2006, the Company had four stock incentive plans: the 2005 Stock Incentive Plan (the
“2005 Plan”), the 1996 Stock Incentive Plan (the “1996 Plan”), the 1997 Supplemental Stock Incentive Plan (the “Supplemental Plan”), and the
Cisco Systems, Inc. SA Acquisition Long-Term Incentive Plan (the “Acquisition Plan”). The Company has, in connection with the acquisitions
of various companies, assumed the stock incentive plans of the acquired companies or issued replacement share-based awards.
Share-based awards are designed to reward employees for their long-term contributions to the Company and provide incentives for
them to remain with the Company. The number and frequency of share-based awards are based on competitive practices, operating results
of the Company, and government regulations.
The maximum number of shares issuable over the term of the 2005 Plan is limited to 350 million shares. The 2005 Plan permits the
granting of stock options, stock grants, stock units and stock appreciation rights to employees (including employee directors and ofcers)
and consultants of the Company and its subsidiaries and afliates, and nonemployee directors of the Company. Stock options granted
under the 2005 Plan have an exercise price of at least 100% of the fair market value of the underlying stock on the grant date and expire no
later than nine years from the grant date. The stock options will generally become exercisable for 20% of the option shares one year from
the date of grant and then ratably over the following 48 months. The Compensation and Management Development Committee of the Board
of Directors has the discretion to use a different vesting schedule. Stock appreciation rights may be awarded in combination with stock options
or stock grants and such awards shall provide that the stock appreciation rights will not be exercisable unless the related stock options or
stock grants are forfeited. Stock grants may be awarded in combination with nonstatutory stock options, and such awards may provide that
the stock grants will be forfeited in the event that the related nonstatutory stock options are exercised.
The maximum number of shares issuable over the term of the 1996 Plan is limited to 2.5 billion shares. Stock options granted under
the 1996 Plan have an exercise price equal of at least 100% of the fair market value of the underlying stock on the grant date and expire no
later than nine years from the grant date. The stock options will generally become exercisable for 20% or 25% of the option shares one year
from the date of grant and then ratably over the following 48 or 36 months, respectively. Certain other grants have utilized a 60-month ratable
vesting schedule. In addition, the Board of Directors, or other committee administering the plan, has the discretion to use a different vesting
schedule and has done so from time to time. Since the inception of the 1996 Plan, the Company has granted stock options to virtually all
employees, and the majority has been granted to employees below the vice president level.
Notes to Consolidated Financial Statements