Aetna 2009 Annual Report Download - page 61

financial information. Segment results were restated for this change in expense allocation. Refer to Note 19 beginning
on page 80 for additional information.
Income Taxes
We are taxed at regular corporate rates after adjusting income reported for financial statement purposes for certain
items. We recognize deferred income tax assets and liabilities for the differences between the financial and income
tax reporting basis of assets and liabilities based on enacted tax rates and laws. Valuation allowances are provided
when it is considered more likely than not that deferred tax assets will not be realized. Deferred income tax expense
or benefit primarily reflects the net change in deferred income tax assets and liabilities during the year.
Our current income tax provision reflects the tax results of revenues and expenses currently taxable or deductible.
Penalties and interest on our tax positions are classified as a component of our income tax provision.
3. Acquisition
During 2009 we acquired Horizon Behavioral Services, LLC (“Horizon”), a leading provider of employee assistance
programs, for approximately $70 million in available cash. We believe this acquisition will enhance our existing
product capabilities and future growth opportunities. We recorded goodwill related to this transaction of approximately
$57 million in 2009 (pending the final allocation of purchase price). Of this goodwill amount, $36 million will be tax
deductible. All of the goodwill related to this acquisition was assigned to our Health Care segment. Refer to Note 7 on
page 57 for additional information.
4. Earnings Per Common Share
Basic earnings per share (“EPS”) is computed by dividing net income (i.e., the numerator) by the weighted average
number of common shares outstanding (i.e., the denominator) during the reporting period. Diluted EPS is computed in
a similar manner, except that the weighted average number of common shares outstanding is adjusted for the dilutive
effects of stock options, stock appreciation rights (“SARs”) and other dilutive financial instruments, but only in the
periods in which such effect is dilutive.
The computations of basic and diluted EPS for 2009, 2008 and 2007 were as follows:
(Millions, except per common share data) 2009 2008 2007
Net Income 1,276.5$ 1,384.1$ 1,831.0$
Weighted average shares used to compute basic EPS 441.1 475.5 509.2
Dilutive effect of outstanding stock-based compensation awards
(1)
8.4 12.8 17.8
Weighted average shares used to compute diluted EPS 449.5 488.3 527.0
Basic EPS 2.89$ 2.91$ 3.60$
Diluted EPS 2.84$ 2.83$ 3.47$
(1) Approximately 19.3 million, 9.7 million and 2.6 million SARs (with exercise prices ranging from $25.94 to $59.76, $25.94 to
$59.76, and $44.22 to $59.76, respectively) were not included in the calculation of diluted EPS for 2009, 2008 and 2007,
respectively, and approximately 6.2 million and 1.6 million stock options (with exercise prices ranging from $33.38 to $42.35) were
not included in the calculation of diluted EPS for 2009 and 2008, respectively, as their exercise prices were greater than the average
market price of Aetna common shares during such periods.
Annual Report – Page 55