Union Pacific 2009 Annual Report Download - page 79

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79
We filed interest refund claims in 2007 for years 1986 through 1994, and we received refunds of $12
million in 2008. In 2008, we signed a closing agreement resolving all tax matters at IRS Appeals for tax
years 1995 through 1998. In connection with the settlement, in 2008 we paid the IRS $52 million of tax
and $67 million of interest. We filed interest refund claims in 2009 for years 1995-1998, and received
refunds of $17 million in October of 2009. The audit settlement and interest refund claims had only
immaterial effects on our income tax expense for 2008 and 2009.
We expect that our unrecognized tax benefits will increase in the next 12 months as 2010 tax positions are
added and we accrue interest. We do not anticipate any significant settlements during 2010; however, it
is reasonably possible that some state tax disputes may be resolved, which could reduce unrecognized tax
benefits by up to $10 million. Of the $61 million balance at December 31, 2009, $1 million is classified
as current in the Consolidated Statement of Financial Position.
8. Earnings Per Share
The following table provides a reconciliation between basic and diluted earnings per share for the years
ended December 31:
Millions of Dollars, Except Per Share Amounts 2009 2008 2007
Net income $ 1,898 $ 2,338 $ 1,855
Weighted-average number of shares outstanding:
Basic 503.0 510.6 531.9
Dilutive effect of stock options 1.5 3.4 4.2
Dilutive effect of retention shares and units 1.3 1.0 0.7
Diluted 505.8 515.0 536.8
Earnings per share – basic $ 3.77 $ 4.58 $ 3.49
Earnings per share – diluted $ 3.75 $ 4.54 $ 3.46
Common stock options totaling 4.6 million, 1.0 million, and 0.8 million for 2009, 2008, and 2007,
respectively, were excluded from the computation of diluted earnings per share because the exercise
prices of these options exceeded the average market price of our common stock for the respective periods,
and the effect of their inclusion would be anti-dilutive.