Aflac 2007 Annual Report Download - page 70

66 There’s Only One Aflac
(In millions)
Balance at January 1, 2007 $ 43*
Additions for tax positions of prior years 18
Reductions for tax positions of prior years (11)
Balance at December 31, 2007 $ 50*
*Amounts do not include tax deductions of $14 at January 1, 2007, and $18 at December 31, 2007.
Included in the balance of the liability for unrecognized tax
benefits at December 31, 2007, are $51 million of tax positions
for which the ultimate deductibility is highly certain, but for
which there is uncertainty about the timing of such
deductibility. Because of the impact of deferred tax
accounting, other than interest and penalties, the disallowance
of the shorter deductibility period would not affect the annual
effective tax rate, but would accelerate the payment of cash to
the taxing authority to an earlier period. The Company has
accrued approximately $2 million for permanent uncertainties,
which if reversed would not have a material effect on the
annual effective rate.
The Company recognizes accrued interest and penalties
related to unrecognized tax benefits in income tax expense.
We recognized approximately $3 million in interest and
penalties in 2007, compared with $2 million in 2006 and $1
million in 2005. The Company has accrued approximately $32
million for the payment of interest and penalties as of
December 31, 2007, compared with $29 million a year ago.
As of December 31, 2007, there were no material uncertain
tax positions for which the total amounts of unrecognized tax
benefits will significantly increase or decrease within the next
twelve months.
9. SHAREHOLDERS’ EQUITY
The following table is a reconciliation of the number of shares
of the Company’s common stock for the years ended
December 31.
(In thousands of shares) 2007 2006 2005
Common stock - issued:
Balance, beginning of year 655,715 654,522 652,628
Exercise of stock options 2,889 1,193 1,894
Balance, end of year 658,604 655,715 654,522
Treasury stock:
Balance, beginning of year 163,165 155,628 149,020
Purchases of treasury stock:
Open market 11,073 10,265 10,000
Other 559 55 245
Dispositions of treasury stock:
Shares issued to AFL Stock Plan (1,400) (1,461) (1,476)
Exercise of stock options (1,206) (1,240) (2,127)
Other (117) (82) (34)
Balance, end of year 172,074 163,165 155,628
Shares outstanding, end of year 486,530 492,550 498,894
Outstanding share-based awards are excluded from the
calculation of weighted-average shares used in the
computation of basic earnings per share. Stock options to
purchase approximately 1.7 million shares, on a weighted-
average basis, as of December 31, 2007, were considered to be
anti-dilutive and were excluded from the calculation of diluted
earnings per share, compared with 1.8 million shares in 2006
and 2.5 million in 2005. The weighted-average shares used in
calculating earnings per share for the years ended December
31 were as follows:
(In thousands of shares) 2007 2006 2005
Weighted-average outstanding shares used for
calculating basic EPS 487,869 495,614 500,939
Dilutive effect of share-based awards 6,102 6,213 6,765
Weighted-average outstanding shares used for
calculating diluted EPS 493,971 501,827 507,704
Share Repurchase Program: In 2004, the Board of Directors
authorized the purchase of 30.0 million shares of our common
stock. We exhausted that authorization during the second
quarter of 2007. In 2006, the Board of Directors authorized
the purchase of 30.0 million shares of our common stock. As
of December 31, 2007, approximately 25.6 million shares were
available for purchase under the 2006 share repurchase
authorization. In January 2008, the Board authorized the
purchase of an additional 30.0 million shares of our common
stock.
Voting Rights: In accordance with the Parent Company’s
articles of incorporation, shares of common stock are generally
entitled to one vote per share until they have been held by the
same beneficial owner for a continuous period of 48 months,
at which time they become entitled to 10 votes per share.
10. SHARE-BASED TRANSACTIONS
As of December 31, 2007, the Company has outstanding
share-based awards under two long-term incentive
compensation plans.
The first plan, which expired in February 2007, is a stock option
plan which allowed grants for incentive stock options (ISOs) to
employees and non-qualifying stock options (NQSOs) to
employees and non-employee directors. The options have a
term of 10 years and generally vest after three years. The strike
price of options granted under this plan is equal to the fair
market value of a share of the Company’s common stock at
the date of grant. Options granted before the plan’s expiration
date remain outstanding in accordance with their terms.
The second long-term incentive compensation plan allows
awards to Company employees for ISOs, NQSOs, restricted
stock, restricted stock units, and stock appreciation rights.