NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 100 Note 7—Income Taxes (Continued) As of September 30, 2006, the Company has state and foreign tax loss and state credit carryforwards, the tax effect of which is $55 million.
Certain of those carryforwards, the tax effect of which is $12 million, expire between 2016 and 2019.
A portion of these carryforwards was acquired from the Company’s previous acquisitions, the utilization of which is subject to certain limitations imposed by the Internal Revenue Code.
The remaining benefits from tax losses and credits do not expire.
As of September 30, 2006 and September 24, 2005, a valuation allowance of $5 million was recorded against the deferred tax asset for the benefits of state operating losses that may not be realized.
Management believes it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with the tax effects of the deferred tax liabilities, will be sufficient to fully recover the remaining deferred tax assets.
A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate (35% in 2006, 2005, and 2004) to income before provision for income taxes, is as follows (in millions):
## Table 0 ##
(1) See Note 2, “Restatement of Consolidated Financial Statements.
” The Company’s income taxes payable has been reduced by the tax benefits from employee stock options.
The Company receives an income tax benefit calculated as the difference between the fair market value of the stock issued at the time of the exercise and the option price, tax effected.
The net tax benefits from employee stock option transactions were $419 million, $428 million (as restated(1)), and $83 million (as restated(1)) in 2006, 2005, and 2004, respectively, and were reflected as an increase to common stock in the consolidated statements of shareholders’ equity.
operating income of $39 million during 2004.
This improvement was primarily attributable to the impact of opening new stores and the segment’s year-over-year increase in average revenue per store, which resulted in higher leverage on occupancy, depreciation, and other fixed costs.
Expansion of the Retail segment has required and will continue to require a substantial investment in fixed assets and related infrastructure, operating lease commitments, personnel, and other operating expenses.
Capital expenditures associated with the Retail segment were $200 million in 2006, bringing the total capital expenditures since inception of the Retail segment to approximately $729 million.
As of September 30, 2006, the Retail segment had approximately 5,787 employees and had outstanding operating lease commitments associated with retail store space and related facilities of approximately $887 million.
The Company would incur substantial costs if it were to close its retail stores.
Such costs could adversely affect the Company’s results of operations and financial condition.
Gross Margin Gross margin for each of the last three fiscal years are as follows (in millions, except gross margin percentages):
## Table 1 ##
(1) See the “Explanatory Note” immediately preceding Part I, Item 1 and Note 2, “Restatement of Consolidated Financial Statements” in Notes to Consolidated Financial Statements of this Form 10-K.
Gross margin percentage of 29.0% in 2006 remained flat as compared to 2005.
The Company experienced more favorable pricing on certain commodity components including LCD flat-panel displays and DRAM memory and higher overall revenue that provided for more leverage on fixed production costs, offset by an increase in lower margin iPod sales and other music-related services.
The Company anticipates that its gross margin and the gross margins of the personal computer and consumer electronics industries will be under pressure due to price competition.
The Company expects gross margin percentage to decline sequentially in the first quarter of 2007 primarily as a result of a shift in the mix of revenue toward lower margin products such as the iPod and content from the iTunes Store.
The foregoing statements regarding the Company’s expected gross margin percentage are forward-looking.
There can be no assurance that current gross margin percentage will be maintained or targeted gross margin percentage levels will be achieved.
In general, gross margins and margins on individual products, including iPods, will remain under significant downward pressure due to a variety of factors, including continued industry wide global pricing pressures, increased competition, compressed product life cycles, potential increases in the cost and availability of raw material and outside manufacturing services, and potential changes to the Company’s product mix, including higher unit sales of consumer products with lower average selling prices and lower gross margins.
In response to these competitive pressures, the Company expects it will continue to take pricing actions with respect to its products.
Gross margins could also be affected by the Company’s ability to effectively manage product quality and warranty costs and to stimulate demand for certain of its products.
Due to the Company’s significant international operations, financial results can be significantly affected in the short-term by fluctuations in exchange rates.
The Company orders components for its products and builds inventory in advance of product shipments.
Because the Company’s markets are volatile and subject to rapid technology and price changes, there is a
Table of Contents Stock Option Activity A summary of the Company’s stock option and RSU activity and related information for the three years ended September 25, 2010, is as follows (in thousands, except per share amounts and contractual term in years):
## Table 2 ##
Aggregate intrinsic value represents the value of the Company’s closing stock price on the last trading day of the fiscal period in excess of the weighted-average exercise price multiplied by the number of options outstanding or exercisable.
The aggregate intrinsic value excludes the effect of stock options that have a zero or negative intrinsic value.
Total intrinsic value of options at time of exercise was $2.0 billion, $827 million and $2.0 billion for 2010, 2009 and 2008, respectively.
RSUs granted are deducted from the shares available for grant under the Company’s stock option plans utilizing a factor of two times the number of RSUs granted.
Similarly, RSUs cancelled are added back to the shares available for grant under the Company’s stock option plans utilizing a factor of two times the number of RSUs cancelled.
Outstanding RSU balances are not included in the outstanding options balances in the stock option activity table.
investment hedges are recorded in other income and expense.
Derivatives that are not designated as hedging instruments are adjusted to fair value through earnings in the financial statement line item to which the derivative relates.
The Company had a net deferred loss associated with cash flow hedges of approximately $240 million and a net deferred gain of approximately $290 million, net of taxes, recorded in AOCI as of September 29, 2012 and September 24, 2011, respectively.
Deferred gains and losses associated with cash flow hedges of foreign currency revenue are recognized as a component of net sales in the same period as the related revenue is recognized, and deferred gains and losses related to cash flow hedges of inventory purchases are recognized as a component of cost of sales in the same period as the related costs are recognized.
The majority of the Company’s hedged transactions as of September 29, 2012 are expected to occur within six months.
Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur in the initially identified time period or within a subsequent two-month time period.
Deferred gains and losses in AOCI associated with such derivative instruments are reclassified immediately into other income and expense.
Any subsequent changes in fair value of such derivative instruments are reflected in other income and expense unless they are re-designated as hedges of other transactions.
The Company did not recognize any significant net gains or losses related to the loss of hedge designation on discontinued cash flow hedges during 2012, 2011 and 2010.
The Company’s unrealized net gains and losses on net investment hedges, included in the cumulative translation adjustment account of AOCI, were not significant as of September 29, 2012 and September 24, 2011, respectively.
The ineffective portions of and amounts excluded from the effectiveness test of net investment hedges are recorded in other income and expense.
The gain/loss recognized in other income and expense for foreign currency forward and option contracts not designated as hedging instruments was not significant during 2012, 2011 and 2010, respectively.
These amounts represent the net gain or loss on the derivative contracts and do not include changes in the related exposures, which generally offset a portion of the gain or loss on the derivative contracts.
The following table shows the notional principal amounts of the Company’s outstanding derivative instruments and credit risk amounts associated with outstanding or unsettled derivative instruments as of September 29, 2012 and September 24, 2011 (in millions):

<table><tr><td></td><td>2006</td><td>2005  As Restated -1</td><td>2004  As Restated -1</td></tr><tr><td>Computed expected tax</td><td>$987</td><td>$633</td><td>$129</td></tr><tr><td>State taxes, net of federal effect</td><td>86</td><td>-19</td><td>-5</td></tr><tr><td>Indefinitely invested earnings of foreign subsidiaries</td><td>-224</td><td>-98</td><td>-31</td></tr><tr><td>Nondeductible executive compensation</td><td>11</td><td>14</td><td>12</td></tr><tr><td>Research and development credit, net</td><td>-12</td><td>-26</td><td>-5</td></tr><tr><td>Other items</td><td>-19</td><td>-24</td><td>4</td></tr><tr><td>Provision for income taxes</td><td>$829</td><td>$480</td><td>$104</td></tr><tr><td>Effective tax rate</td><td>29%</td><td>27%</td><td>28%</td></tr></table>
<table><tr><td> </td><td> September 30,</td><td rowspan="2"> September 24,  2005  As Restated -1</td><td rowspan="2"> September 25,  2004  As Restated -1</td></tr><tr><td> </td><td> 2006</td></tr><tr><td>Net sales</td><td>$19,315</td><td>$13,931</td><td>$8,279</td></tr><tr><td>Cost of sales</td><td>13,717</td><td>9,889</td><td>6,022</td></tr><tr><td>Gross margin</td><td>$5,598</td><td>$4,042</td><td>$2,257</td></tr><tr><td>Gross margin percentage</td><td>29.0%</td><td>29.0%</td><td>27.3%</td></tr></table>
<table><tr><td></td><td></td><td colspan="4"> Outstanding Options</td></tr><tr><td></td><td>Shares Available for Grant</td><td>Number of Shares</td><td> Weighted- Average Exercise Price</td><td> Weighted- Average Remaining Contractual  Term</td><td> Aggregate  Intrinsic  Value</td></tr><tr><td>Balance at September 29, 2007</td><td>67,827</td><td>49,751</td><td>$43.91</td><td></td><td></td></tr><tr><td>Restricted stock units granted</td><td>-9,834</td><td>0</td><td>$0</td><td></td><td></td></tr><tr><td>Options granted</td><td>-9,359</td><td>9,359</td><td>$171.36</td><td></td><td></td></tr><tr><td>Options cancelled</td><td>1,236</td><td>-1,236</td><td>$98.40</td><td></td><td></td></tr><tr><td>Restricted stock units cancelled</td><td>714</td><td>0</td><td>$0</td><td></td><td></td></tr><tr><td>Options exercised</td><td>0</td><td>-13,728</td><td>$27.88</td><td></td><td></td></tr><tr><td>Plan shares expired</td><td>-12</td><td>0</td><td>$0</td><td></td><td></td></tr><tr><td>Balance at September 27, 2008</td><td>50,572</td><td>44,146</td><td>$74.39</td><td></td><td></td></tr><tr><td>Restricted stock units granted</td><td>-15,572</td><td>0</td><td>$0</td><td></td><td></td></tr><tr><td>Options granted</td><td>-234</td><td>234</td><td>$106.84</td><td></td><td></td></tr><tr><td>Options cancelled</td><td>1,241</td><td>-1,241</td><td>$122.98</td><td></td><td></td></tr><tr><td>Restricted stock units cancelled</td><td>1,256</td><td>0</td><td>$0</td><td></td><td></td></tr><tr><td>Options exercised</td><td>0</td><td>-8,764</td><td>$41.78</td><td></td><td></td></tr><tr><td>Plan shares expired</td><td>-2</td><td>0</td><td>$0</td><td></td><td></td></tr><tr><td>Balance at September 26, 2009</td><td>37,261</td><td>34,375</td><td>$81.17</td><td></td><td></td></tr><tr><td>Additional shares authorized</td><td>36,000</td><td>0</td><td>$0</td><td></td><td></td></tr><tr><td>Restricted stock units granted</td><td>-12,356</td><td>0</td><td>$0</td><td></td><td></td></tr><tr><td>Options granted</td><td>-34</td><td>34</td><td>$202.00</td><td></td><td></td></tr><tr><td>Options assumed</td><td>0</td><td>98</td><td>$11.99</td><td></td><td></td></tr><tr><td>Options cancelled</td><td>430</td><td>-430</td><td>$136.27</td><td></td><td></td></tr><tr><td>Restricted stock units cancelled</td><td>1,444</td><td>0</td><td>$0</td><td></td><td></td></tr><tr><td>Options exercised</td><td>0</td><td>-12,352</td><td>$62.69</td><td></td><td></td></tr><tr><td>Plan shares expired</td><td>-8</td><td>0</td><td>$0</td><td></td><td></td></tr><tr><td>Balance at September 25, 2010</td><td>62,737</td><td>21,725</td><td>$90.46</td><td>2.85</td><td>$4,385,291</td></tr><tr><td>Exercisable at September 25, 2010</td><td></td><td>17,791</td><td>$77.74</td><td>2.57</td><td>$3,817,663</td></tr><tr><td>Expected to vest after September 25, 2010</td><td></td><td>3,880</td><td>$148.03</td><td>4.12</td><td>$559,882</td></tr></table>

Question: what's the total amount of Options exercised of Outstanding Options Number of Shares, Net sales of September 30, 2006, and Options exercised of Outstanding Options Number of Shares ?
Answer: 40431