UPS 2011 Annual Report Download - page 126

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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.
In June 2011, we received IRS reports covering income taxes and excise taxes for tax years 2005 through
2007 and 2003 through 2007, respectively. The reports propose assessments related to amounts paid for software,
research credit expenditures and deductibility of financing and post-acquisition integration costs as well as taxes
on amounts paid for air transportation. Receipt of the reports represents only the conclusion of the examination
process. We disagree with the proposed assessments related to these matters. Therefore, we have filed protests
and protective tax refund claims. During the third quarter of 2011, the IRS responded to our protests and
forwarded the cases to IRS Appeals. There are multiple factors that prevent us from being able to estimate the
amount of loss, if any, that may result from these matters including: (1) we are vigorously defending these
matters and believe that we have a number of meritorious legal defenses; (2) we have filed refund claims in
excess of the proposed assessments; (3) there are unresolved questions of law and fact that could be of
importance to the ultimate resolutions of these matters, including the calculation of any additional taxes and/or
tax refunds; and (4) these matters are at the initial stage of a multi-level administrative appeals process that may
ultimately be resolved by litigation. Accordingly, at this time, we are not able to estimate a possible loss or range
of loss that may result from these matters or to determine whether such loss, if any, would have a material
adverse effect on our financial condition, results of operations or liquidity.
NOTE 14. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share (in millions, except
per share amounts):
2011 2010 2009
Numerator:
Net income attributable to common shareowners ......................... $3,804 $3,338 $1,968
Denominator:
Weighted average shares ............................................ 977 991 995
Deferred compensation obligations ....................................222
Vested portion of restricted shares .....................................211
Denominator for basic earnings per share ................................... 981 994 998
Effect of dilutive securities:
Restricted performance units .........................................332
Restricted stock units ...............................................664
Stock options ..................................................... 1 — —
Denominator for diluted earnings per share .................................. 991 1,003 1,004
Basic earnings per share ................................................. $ 3.88 $ 3.36 $ 1.97
Diluted earnings per share ............................................... $ 3.84 $ 3.33 $ 1.96
Diluted earnings per share for the years ended December 31, 2011, 2010, and 2009 exclude the effect of 7.4,
11.1 and 17.4 million shares, respectively, of common stock that may be issued upon the exercise of employee
stock options because such effect would be antidilutive.
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