Texas Instruments 2006 Annual Report Download - page 15

TEXAS INSTRUMENTS 2006 ANNUAL REPORT 1313
Earnings per Share (EPS): Computation and reconciliation of earnings per common share from continuing operations, on a
basic and diluted basis, are as follows (shares in millions):
2006 2005 2004
Income
from
Continuing
Operations Shares EPS
Income
from
Continuing
Operations Shares EPS
Income
from
Continuing
Operations Shares EPS
Basic EPS ..................... $ 2,638 1,528 $ 1.73 $ 2,173 1,640 $ 1.33 $ 1,691 1,730 $ 0.98
Dilutives:
Stock-based compensation
plans ...................... —32 — 31 — 38
Diluted EPS.................... $ 2,638 1,560 $ 1.69 $ 2,173 1,671 $ 1.30 $ 1,691 1,768 $ 0.96
Options to purchase 93 million, 82 million and 113 million shares of common stock were outstanding during 2006, 2005 and 2004
that were not included in the computation of diluted earnings per share because the options’ exercise price was greater than
the average market price of the common shares and, therefore, the effect would be antidilutive.
Effects of Stock-based Compensation: We have several stock-based employee compensation plans that are more fully
described in Note 9. Prior to July 1, 2005, we accounted for awards granted under those plans following the recognition and
measurement principles of Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,”
and related interpretations. No compensation cost was reflected in net income for stock options, as all options granted under
the plans have an exercise price equal to the market value of the underlying common stock on the date of the grant (except
options granted under employee stock purchase plans and acquisition-related stock option awards). Compensation cost has
previously been recognized for restricted stock units (RSUs).
Effective July 1, 2005, we adopted the fair value recognition provisions of Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS) No. 123(R), “Share-Based Payments,” using the modified prospective
application method. Under this transition method, compensation cost recognized for the years ended December 31, 2006 and
2005, includes the applicable amounts of: (a) compensation cost of all stock-based payments granted prior to, but not yet
vested as of, July 1, 2005 (based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123
and previously presented in pro forma footnote disclosures), and (b) compensation cost for all stock-based payments granted
subsequent to July 1, 2005 (based on the grant-date fair value estimated in accordance with the new provisions of SFAS
123(R)). Results for prior periods have not been restated.
The amounts of stock-based compensation expense recognized in the periods presented are as follows:
2006 2005 2004
Stock-based compensation expense recognized:
Cost of revenue ..................................................................... $64 $32 $—
Research & development (R&D) ...................................................... 101 53 —
Selling, general & administrative (SG&A) .............................................. 167 90 18
Total ............................................................................... $332 $175 $ 18
The amounts above include the impact of recognizing compensation expense related to RSUs, nonqualified stock options and
stock options offered under the employee stock purchase plans. For the periods before our implementation of SFAS 123(R) on
July 1, 2005, only compensation expense related to RSUs was recognized and included in SG&A.
Stock-based compensation expense has not been allocated between segments, but is reflected in Corporate.