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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2003. During the fourth quarter of 2010, we received a refund of $139 million as a result of the resolution of tax
years 2003 through 2004 with the Internal Revenue Service (“IRS”) Appeals Office. Along with the audit for tax
years 2005 through 2007, the IRS is currently examining non-income based taxes, including employment and
excise taxes, which could lead to proposed assessments. The IRS has not presented an official position with
regard to these taxes at this time, and therefore we are not able to determine the technical merit of any potential
assessment. We anticipate receipt of the IRS reports on these matters by the end of the second quarter of 2011.
We have filed all required U.S. state and local returns reporting the result of the resolution of the U.S. federal
income tax audit of the tax years 2003 and 2004. A limited number of U.S. state and local matters are the subject
of ongoing audits, administrative appeals or litigation.
A number of years may elapse before an uncertain tax position is audited and ultimately settled. It is
difficult to predict the ultimate outcome or the timing of resolution for uncertain tax positions. It is reasonably
possible that the amount of unrecognized tax benefits could significantly increase or decrease within the next
twelve months. Items that may cause changes to unrecognized tax benefits include the timing of interest
deductions and the allocation of income and expense between tax jurisdictions. These changes could result from
the settlement of ongoing litigation, the completion of ongoing examinations, the expiration of the statute of
limitations, or other unforeseen circumstances. At this time, an estimate of the range of the reasonably possible
change cannot be made.
NOTE 13. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share (in millions except per
share amounts):
2010 2009 2008
Numerator:
Net income attributable to common shareowners ......................... $3,488 $2,152 $3,003
Denominator:
Weighted average shares ............................................ 991 995 1,014
Deferred compensation obligations ....................................222
Vested portion of restricted shares ..................................... 1 1 —
Denominator for basic earnings per share ................................... 994 998 1,016
Effect of dilutive securities:
Restricted performance units .........................................322
Restricted stock units ...............................................643
Stock options ..................................................... — — 1
Denominator for diluted earnings per share .................................. 1,003 1,004 1,022
Basic earnings per share ................................................. $ 3.51 $ 2.16 $ 2.96
Diluted earnings per share ............................................... $ 3.48 $ 2.14 $ 2.94
Diluted earnings per share for the years ended December 31, 2010, 2009, and 2008 exclude the effect of
11.1, 17.4, and 11.7 million shares, respectively, of common stock that may be issued upon the exercise of
employee stock options because such effect would be antidilutive.
104