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Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As required by SFAS 123(R), management made an estimate of expected forfeitures and is recognizing compensation costs only for those
equity awards expected to vest.
Prior to the adoption of SFAS 123(R), the Company presented all tax benefits of deductions resulting from the exercise of stock options
as operating cash flows in its statement of cash flows. In accordance with guidance in SFAS 123(R), the cash flows resulting from excess tax
benefits (tax benefits related to the excess of proceeds from employee’s exercises of stock options over the stock-based compensation cost
recognized for those options) are classified as financing cash flows. The Company recorded approximately $44 million of excess tax benefits as
a financing cash inflow during the fiscal year ended 2006.
Stock Option Activity
The Company issues new common shares upon exercise of stock options. The following is a summary of option activity for the
Company’s stock option plans, including options assumed from Maxtor, for the fiscal year ended June 30, 2006:
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of
the Company’s common shares for the 59.1 million options that were in-the-money at June 30, 2006. The Company issues common shares
reserved for issuance under the various stock-based benefit plans upon exercise of options. During the fiscal years ended 2006, 2005 and 2004,
the aggregate intrinsic value of options exercised under the Company’s stock option plans was $228 million, $163 million and $267 million,
respectively, determined as of the date of option exercise.
At June 30, 2006, the total compensation cost related to options granted to employees under the Company’
s stock option plans (excluding
options assumed in the Maxtor acquisition) but not yet recognized was approximately $169 million, net of estimated forfeitures of
approximately $27 million. This cost is being amortized on a straight-line basis over a weighted-average remaining term of approximately
2.6 years and will be adjusted for subsequent changes in estimated forfeitures. In addition to the stock-based compensation cost not yet
recognized under the Company’s stock option plans, the Company has additional stock-
based compensation costs related to options assumed in
the Maxtor acquisition of approximately $22 million, which will be amortized over a weighted-average period of approximately 1.8 years.
78
Options
Number of
Shares
Weighted
-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
(in millions)
(in millions)
Outstanding at July 1, 2005
56.2
$
8.32
Granted
20.6
18.99
Assumed from Maxtor
7.1
16.10
Exercised
(12.7
)
5.35
Forfeitures and cancellations
(1.0
)
13.54
Outstanding at June 30, 2006
70.2
$
10.21
6.8
$
735
Vested and expected to vest at June 30, 2006
66.0
$
12.34
6.1
$
714
Exercisable at June 30, 2006
29.0
$
9.33
5.7
$
397