UPS 2012 Annual Report Download - page 109

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
97
In June 2011, we received an IRS Revenue Agent Report (RAR) covering income taxes for tax years 2005 through 2007,
in addition to the excise tax matters described in note 8. The income tax RAR proposed adjustments related to the value of
acquired software and intangibles, research credit expenditures, and the amount of deductible costs associated with our British
Pound Sterling Notes exchange offer completed in May 2007. Receipt of the RAR represents only the conclusion of the
examination process. We disagree with some of the proposed adjustments related to these matters. Therefore, we filed protests
and, in the third quarter of 2011, the IRS responded to our protests and forwarded the case to IRS Appeals.
We expect to begin discussions of these income tax matters with IRS Appeals within the next twelve months. It should be
noted, however, that the ultimate resolution of these matters will result in a refund to UPS - even according to the adjustments
proposed by the IRS.
At this time, we do not believe the ultimate resolution of these income tax matters will have a material effect on our
financial condition, results of operations, or liquidity.
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):
2012 2011 2010
Numerator:
Net income attributable to common shareowners $ 807 $ 3,804 $ 3,338
Denominator:
Weighted average shares 957 977 991
Deferred compensation obligations 1 2 2
Vested portion of restricted shares 2 2 1
Denominator for basic earnings per share 960 981 994
Effect of dilutive securities:
Restricted performance units 3 3 3
Restricted stock units 5 6 6
Stock options 1 1 —
Denominator for diluted earnings per share 969 991 1,003
Basic earnings per share $ 0.84 $ 3.88 $ 3.36
Diluted earnings per share $ 0.83 $ 3.84 $ 3.33
Diluted earnings per share for the years ended December 31, 2012, 2011, and 2010 exclude the effect of 2.6, 7.4 and
11.1 million shares, respectively, of common stock that may be issued upon the exercise of employee stock options because
such effect would be antidilutive.