American Home Shield 2007 Annual Report Download - page 79

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Notes to the Consolidated Financial Statements
stock awards in shares outstanding in the denominator of its earnings per share calculations.
Restricted stock awards granted to employees during the twelve months ended December 31, 2006, 2005 and 2004 had a weighted
average fair value of $12.10, $13.39 and $11.61, respectively, at the date of grant. Total pretax share grant and restricted stock
compensation expense for the twelve months ended December 31, 2006, 2005, and 2004 was approximately $4.1 million, $4.8
million, and $3.0 million respectively, and the income tax benefits recognized for these awards was approximately $1.6 million,
$1.9 million, and $1.2 million, respectively. A summary of the share grant and restricted stock activity during the twelve months
ended December 31, 2006, 2005 and 2004 are summarized in the table below:
Share Grants/
Restricted
Stock
Weighted Average
Grant-date
Fair Value
Total outstanding, December 31, 2003 537,700 $ 9.96
Transactions during 2004
Granted to employees 988,309 $ 11.61
Vested/exercised (109,827) 9.60
Terminated or resigned (16,491) 10.57
Total outstanding, December 31, 2004 1,399,691 $ 11.15
Transactions during 2005
Granted to employees 598,723 $ 13.39
Vested/exercised (270,695) 10.47
Terminated or resigned (144,842) 11.36
Total outstanding, December 31, 2005 1,582,877 $ 12.09
Transactions during 2006
Granted to employees 625,894 $ 12.10
Vested/exercised (489,904) 11.75
Terminated or resigned (714,406) 12.37
Total outstanding, December 31, 2006 1,004,461 $ 12.09
Earnings Per Share
Basic earnings per share is computed by dividing income available to common stockholders by the weighted-average number of
shares outstanding for the period. The weighted average common shares for the diluted earnings per share calculation includes the
incremental effect related to outstanding options and stock appreciation rights (SARS) whose market price is in excess of the grant
price. Shares potentially issuable under convertible securities have been considered outstanding for purposes of the diluted earnings
per share calculations. In computing diluted earnings per share, the after-tax interest expense related to convertible securities is
added back to net income in the numerator, while the diluted shares in the denominator include the shares issuable upon conversion
of the securities. Shares potentially issuable under convertible securities have not been considered outstanding for 2005 as their
inclusion results in a less dilutive computation. Had the inclusion of convertible securities not resulted in a less dilutive
computation in 2005, incremental shares attributable to the assumed conversion of the securities would have increased shares
outstanding by 8.0 million shares and the after-tax interest expense related to the convertible securities that would have been added
to net income in the numerator would have been $4.9 million.
The following table reconciles both the numerator and the denominator of the basic earnings per share from continuing operations
computation to the numerator and the denominator of the diluted earnings per share from continuing operations computation.
(In thousands,except per share date)
For year ended 2006 For year ended 2005 For year ended 2004
Continuing Operations: Income Shares EPS Income Shares EPS Income Shares EPS
Basic EPS $ 186,568 289,765 $ 0.64 $ 180,561 291,251 $ 0.62 $ 316,623 290,514 $ 1.09
Effect of Dilutive Securities:
Options & SARS 1,597 5,556 5,054
Convertible securities 4,888 8,000 — — 4,712 8,000
Diluted EPS $ 191,456 299,362 $ 0.64 $ 180,561 296,807 $ 0.61 $ 321,335 303,568 $ 1.06
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