Texas Instruments 2005 Annual Report Download - page 25

11. Research and Development
R&D expense totaled $2.02 billion in 2005, $1.98 billion in 2004 and $1.75 billion in 2003.
Acquisition-related in-process R&D charges were zero in 2005 and 2004, but were $23 million in 2003. The 2003 charges
were for R&D from the acquisition of Radia and were recorded in R&D expense. Values for acquisition-related in-process
R&D were determined at the acquisition date based upon the appraised value of the related developmental projects.
12. Other Income (Expense) Net
2005 2004 2003
Interest income ......................................................................... $ 165 $ 136 $ 109
Equity investment gains (losses), net .................................................... 2(1) 171
Other .................................................................................... 39 100 44
Total .................................................................................... $ 206 $ 235 $ 324
Equity investment gains (losses), net in 2003 included investment gains of $203 million from the sale of Micron common stock.
Other includes lease income of approximately $20 million per year, primarily from the purchaser of our former defense
electronics business divested in 1997. As of December 31, 2005, the aggregate amount of non-cancelable future lease
payments to be received from these leases is $54 million. These leases contain renewal options.
Other also includes miscellaneous non-operational items such as gains and losses related to previously divested
businesses, interest income and expense related to non-investment items such as taxes, and gains and losses from
currency exchange rate changes. The 2004 amount includes income recognized from the partial settlement of matters
related to grants from the Italian government regarding TI’s former memory business operations, as well as a gain from a
settlement with the State of Texas over claims for refund of state sales taxes relating to our previously divested defense
electronics business.
13. Stock-based Compensation
Long-term Incentive and Director Compensation Plans
We have stock options outstanding to participants under the Texas Instruments 2000 Long-Term Incentive Plan and the
Texas Instruments 2003 Long-Term Incentive Plan. Options are also outstanding under the 1996 Long-Term Incentive Plan
and the Texas Instruments Long-Term Incentive Plan, but no further options may be granted under these plans. We also
assumed stock options granted under the Burr-Brown 1993 Stock Incentive Plan and the Radia Communications, Inc.
2000 Stock Option/Stock Issuance Plan. Unless the options are acquisition-related replacement options, the option price
per share may not be less than 100 percent of the fair market value on the date of the grant. Substantially all the
options have a 10-year term. Except for options granted as part of a special retention grant in February 2003 (which
vest beginning in the second year after grant at a rate of 50%/25%/25% per year), options granted subsequent to
1996 generally vest ratably over four years. Options generally provide for the continuation of vesting after the option
recipient retires.
We have RSUs outstanding under the 2000 Long-Term Incentive Plan and the 2003 Long-Term Incentive Plan. Each RSU
represents the right to receive one share of TI common stock on the vesting date, which is generally four years after the
date of grant. Upon vesting, the shares are subject to issuance without payment by the grantee.
Under the 2000 Long-Term Incentive Plan, we may grant stock options, including incentive stock options, restricted stock
and RSUs, performance units and other stock-based awards. The plan provides for the issuance of 120,000,000 shares of
TI common stock. In addition, if any stock-based award under the 1996 Long-Term Incentive Plan or the Texas
Instruments Long-Term Incentive Plan terminates, then any unissued shares subject to the terminated award become
available for granting awards under the 2000 Long-Term Incentive Plan. No more than 13,400,000 shares of common stock
may be awarded as restricted stock, RSUs or other stock-based awards under the plan.
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TEXAS INSTRUMENTS 2005 ANNUAL REPORT