Time Magazine 2011 Annual Report Download - page 106

TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
11. NET INCOME PER COMMON SHARE
Set forth below is a reconciliation of Basic and Diluted net income per common share attributable to Time
Warner Inc. shareholders (millions, except per share amounts):
Year Ended December 31,
2011 2010 2009
Income from continuing operations attributable to Time Warner Inc.
shareholders ................................................. $ 2,886 $ 2,578 $ 2,088
Income allocated to participating securities .......................... (15) (13) (9)
Income from continuing operations attributable to Time Warner Inc.
common shareholders — basic .................................. $ 2,871 $ 2,565 $ 2,079
Average number of common shares outstanding — basic ............... 1,046.2 1,128.4 1,184.0
Dilutive effect of equity awards ................................... 18.3 16.9 11.1
Average number of common shares outstanding — diluted .............. 1,064.5 1,145.3 1,195.1
Income per common share from continuing operations attributable to Time
Warner Inc. common shareholders:
Basic ...................................................... $ 2.74 $ 2.27 $ 1.76
Diluted ..................................................... $ 2.71 $ 2.25 $ 1.75
Diluted income per common share for the years ended December 31, 2011, 2010 and 2009 excludes
approximately 72 million, 127 million and 160 million, respectively, common shares that may be issued under
the Company’s stock compensation plans because they do not have a dilutive effect.
12. EQUITY-BASED COMPENSATION
Equity Plans
The Company has one active equity plan under which it is authorized to grant equity awards to employees
and non-employee directors, covering an aggregate of 70 million shares of common stock. Generally, stock
options have been granted to employees and non-employee directors of Time Warner with exercise prices equal
to the fair market value on the date of grant. Generally, the stock options vest ratably over a four-year vesting
period and expire ten years from the date of grant. Certain stock option awards provide for accelerated vesting
upon an election to retire after reaching a specified age and years of service, as well as certain additional
circumstances for non-employee directors. Holders of stock options do not receive dividends or dividend
equivalents based on the regular quarterly cash dividends paid by the Company.
Pursuant to this equity plan, Time Warner also may grant shares of common stock or restricted stock units
(“RSUs”), which generally vest between three to four years from the date of grant, to its employees and
non-employee directors. Certain RSU awards provide for accelerated vesting upon an election to retire after
reaching a specified age and years of service, as well as certain additional circumstances for non-employee
directors. Holders of RSU awards are generally entitled to receive cash dividend equivalents based on the regular
quarterly cash dividends declared and paid by the Company during the period that the RSU awards are
outstanding.
Time Warner also has a performance stock unit program for senior level executives. Under this program,
recipients of performance stock units (“PSUs”) are awarded a target number of PSUs that represent the
contingent (unfunded and unsecured) right to receive shares of Company common stock at the end of a
performance period (generally three years) based on the actual performance level achieved by the Company. The
recipient of a PSU may receive, depending on the Company’s total shareholder return (“TSR”) relative to the
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