Wells Fargo 2009 Annual Report Download - page 178

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Year ended December 31,
(in millions, except per share amounts) 2009 2008 2007
Wells Fargo net income $ 12,275 2,655 8,057
Less: Preferred stock dividends and accretion (1) 4,285 286 —
Wells Fargo net income applicable to common stock (numerator) $ 7,990 2,369 8,057
Earnings per common share
Average common shares outstanding (denominator) 4,545.2 3,378.1 3,348.5
Per share $1.76 0.70 2.41
Diluted earnings per common share
Average common shares outstanding 4,545.2 3,378.1 3,348.5
Add: Stock options 17.2 13.1 34.2
Restricted share rights 0.3 0.1 0.1
Diluted average common shares outstanding (denominator) 4,562.7 3,391.3 3,382.8
Per share $1.75 0.70 2.38
(1) Includes $3.5 billion and $219 million in 2009 and 2008, respectively, for Series D Preferred Stock, which was redeemed in 2009. In conjunction with the redemption,
we accelerated accretion of the remaining discount of $1.9 billion.
The table below shows earnings per common share and
diluted earnings per common share and reconciles the
numerator and denominator of both earnings per common
share calculations.
At December 31, 2009 and 2008, options to purchase
242.7 million and 172.4 million shares and a warrant to pur-
Note 21: Earnings Per Common Share
chase 110.3 million and 110.3 million shares, respectively,
were outstanding but not included in the calculation of
diluted earnings per common share because the exercise
price was higher than the market price, and therefore were
antidilutive. At December 31, 2007, options to purchase
13.8 million shares were antidilutive.
During fourth quarter 2009, we and the IRS executed
settlement agreements in accordance with the IRS’s settle-
ment initiative related to certain leveraged leases that the IRS
considers SILO transactions. These settlement agreements
resolved the SILO transactions originally entered into by
Wachovia and reduced our tax exposure on our overall SILO
portfolio by approximately 90%. As a result of this resolution,
our unrecognized tax benefits decreased $2.7 billion.
In September 2006, well before the IRS announced its
SILO settlement initiative in August 2008, we filed a federal
tax refund suit in the U.S. Court of Federal Claims related
to certain SILO transactions we entered into between 1997
and 2002. Wells Fargo did not receive a letter from the IRS
inviting us to participate in the SILO settlement initiative.
On January 8, 2010, the U.S. Court of Federal Claims issued
an adverse opinion on certain of the transactions at issue in
the litigation. Because the opinion did not resolve all of the
transactions at issue, final judgment has not yet been entered
by the court. Once final judgment is entered, we will have
60 days to file our Notice of Appeal. There will be no adverse
financial statement impact resulting from the judgment,
and no penalties have been asserted by the government
in the litigation.
During fourth quarter 2009, we filed a federal tax refund
suit relating to our 2003 tax year in U.S. District Court for the
District of Minnesota. At issue in the litigation is a structured
finance transaction, the timing of our deduction for certain
state taxes, and SILO transactions entered into between 1997
and 2003. No penalties have been asserted in connection
with this litigation.
We are estimating that our unrecognized tax benefits
could decrease by between $100 million and $300 million
during the next 12 months primarily related to statute
expirations and settlements.
Note 20: Income Taxes (continued)