Aflac 2009 Annual Report Download - page 86

(In millions) 2009 2008
Balance, beginning of year $ 57* $ 50*
Additions for tax positions of prior years 1 18
Settlements (37)
Reductions for tax positions of prior years (4) (11)
Balance, end of year $ 17* $ 57*
* Amounts do not include tax deductions of $6 at December 31, 2009, $20 at December 31, 2008, and $18 at January 1, 2008.
Included in the balance of the liability for unrecognized
tax benets at December 31, 2009, are $16 million of tax
positions for which the ultimate deductibility is highly certain,
but for which there is uncertainty about the timing of such
deductibility, compared with $56 million at December 31,
2008. 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 as of December 31,
2009, 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 benets in income tax expense.
We recognized approximately $1 million in interest and
penalties in 2009, compared with $5 million in 2008 and $3
million in 2007. The Company has accrued approximately
$11 million for the payment of interest and penalties as of
December 31, 2009, compared with $37 million a year ago.
As of December 31, 2009, there were no material uncertain
tax positions for which the total amounts of unrecognized
tax benets will signicantly increase or decrease within the
next 12 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) 2009 2008 2007
Common stock - issued:
Balance, beginning of year 660,035 658,604 655,715
Exercise of stock options and issuance of restricted shares 1,174 1,431 2,889
Balance, end of year 661,209 660,035 658,604
Treasury stock:
Balance, beginning of year 193,420 172,074 163,165
Purchases of treasury stock:
Open market – 23,201 11,073
Other 264 146 559
Dispositions of treasury stock:
Shares issued to AFL Stock Plan (355) (1,523) (1,400)
Exercise of stock options (556) (413) (1,206)
Other (132) (65) (117)
Balance, end of year 192,641 193,420 172,074
Shares outstanding, end of year 468,568 466,615 486,530
Outstanding share-based awards are excluded from
the calculation of weighted-average shares used in the
computation of basic earnings per share. The following
table presents the approximate number of share-based
awards on a weighted-average basis that were considered
to be anti-dilutive and were excluded from the calculation of
diluted earnings per share at December 31:
(In thousands) 2009 2008 2007
Anti-dilutive share-based awards 9,603 2,179 1,695
The weighted-average shares used in calculating earnings
per share for the years ended December 31 were as follows:
(In thousands of shares) 2009 2008 2007
Weighted-average outstanding shares used for
calculating basic EPS 466,552 473,405 487,869
Dilutive effect of share-based awards 2,511 5,410 6,102
Weighted-average outstanding shares used for
calculating diluted EPS 469,063 478,815 493,971
Share Repurchase Program: During 2009, we did
not repurchase shares of our common stock in the open
market. In 2008, under share repurchase authorizations
from our board of directors, we purchased 23.2 million
shares of our common stock, funded with internal capital.
The total 23.2 million shares was comprised of 12.5 million
shares purchased through an afliate of Merrill Lynch,
Pierce, Fenner & Smith Incorporated (Merrill Lynch) and 10.7
million shares purchased through Goldman, Sachs & Co.
(GS&Co.).
In the rst quarter of 2008, we entered into an agreement for
an accelerated share repurchase (ASR) program with Merrill
Lynch. Under the agreement, we purchased 12.5 million
shares of our outstanding common stock at $60.61 per
share for an initial purchase price of $758 million. The shares
were acquired as a part of previously announced share
repurchase authorizations by our board of directors and
are held in treasury. The ASR program was settled during
the second quarter of 2008, resulting in a purchase price
adjustment of $40 million, or $3.22 per share, paid to Merrill
Lynch based upon the volume-weighted average price of
our common stock during the ASR program period. The
total purchase price for the 12.5 million shares was $798
million, or $63.83 per share.
In the third quarter of 2008, we entered into an agreement
for a share repurchase program with Goldman, Sachs &
Co. (GS&Co.). Under the agreement, which had an original
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