Texas Instruments 2014 Annual Report Download - page 40

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FORM 10-K
Computation and reconciliation of earnings per common share are as follows (shares in millions):
For Years Ended December 31,
2014 2013 2012
Net
Income Shares EPS
Net
Income Shares EPS
Net
Income Shares EPS
Basic EPS:
Net income . . . . . . . . . . . . . . . . . $ 2,821 $ 2,162 $ 1,759
Income allocated to RSUs . . . . . . . . . (44) (37) (31)
Income allocated to common stock for
basic EPS calculation . . . . . . . . . . $ 2,777 1,065 $ 2.61 $ 2,125 1,098 $ 1.94 $ 1,728 1,132 $ 1.53
Adjustment for dilutive shares:
Stock-based compensation plans . . . . . . 15 15 14
Diluted EPS:
Net income . . . . . . . . . . . . . . . . . $ 2,821 $ 2,162 $ 1,759
Income allocated to RSUs . . . . . . . . . (43) (36) (31)
Income allocated to common stock for
diluted EPS calculation . . . . . . . . . $ 2,778 1,080 $ 2.57 $ 2,126 1,113 $ 1.91 $ 1,728 1,146 $ 1.51
Potentially dilutive securities representing 11 million and 52 million shares of common stock that were outstanding during 2014 and
2012, respectively, were excluded from the computation of diluted earnings per common share for these periods because their effect
would have been anti-dilutive. There were no potentially dilutive securities to exclude from the computation of diluted earnings per
common share during 2013.
Investments
We present investments on our Consolidated Balance Sheets as cash equivalents, short-term investments or long-term investments.
Specific details are as follows:
•฀ Cash equivalents and short-term investments: We consider investments in debt securities with maturities of 90 days or less from
the date of our investment to be cash equivalents. We consider investments in debt securities with maturities beyond 90 days
from the date of our investment as being available for use in current operations and include them in short-term investments. The
primary objectives of our cash equivalent and short-term investment activities are to preserve capital and maintain liquidity while
generating appropriate returns.
•฀ Long-term investments: Long-term investments consist of mutual funds, venture capital funds and non-marketable
equity securities.
•฀ Classification of investments: Depending on our reasons for holding the investment and our ownership percentage, we classify
our investments as either available for sale, trading, equity method or cost method, which are more fully described in Note 9. We
determine cost or amortized cost, as appropriate, on a specific identification basis.
Inventories
Inventories are stated at the lower of cost or estimated net realizable value. Cost is generally computed on a currently adjusted
standard cost basis, which approximates cost on a first-in first-out basis. Standard cost is based on the normal utilization of installed
factory capacity. Cost associated with underutilization of capacity is expensed as incurred. Inventory held at consignment locations
is included in our finished goods inventory. Consigned inventory was $258 million and $202 million as of December 31, 2014 and
2013, respectively.
We review inventory quarterly for salability and obsolescence. A statistical allowance is provided for inventory considered unlikely to be
sold. The statistical allowance is based on an analysis of historical disposal activity, historical customer shipments, as well as estimated
future sales. A specific allowance for each material type will be carried if there is a significant event not captured by the statistical
allowance. We write off inventory in the period in which disposal occurs.
Property, plant and equipment; acquisition-related intangibles and other capitalized costs
Property, plant and equipment are stated at cost and depreciated over their estimated useful lives using the straight-line method.
Our cost basis includes certain assets acquired in business combinations that were initially recorded at fair value as of the date of
acquisition. Leasehold improvements are amortized using the straight-line method over the shorter of the remaining lease term or the