HCA Holdings 2012 Annual Report Download - page 130

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HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 5 — INCOME TAXES (continued)
The following table summarizes the activity related to our unrecognized tax benefits (dollars in millions):
2012 2011
Balance at January 1 ................................... $ 445 $313
Additions based on tax positions related to the current year ..... 16 83
Additions for tax positions of prior years ................... 92 73
Reductions for tax positions of prior years .................. (19) (15)
Settlements ........................................... (103) —
Lapse of applicable statutes of limitations ................... (6) (9)
Balance at December 31 ................................ $ 425 $445
During 2012, we finalized settlements with the IRS for our 2005 and 2006 tax years resolving all
outstanding issues, including the timing of recognition of certain patient service revenues, the deductibility of
certain debt retirement costs and our method for calculating the tax allowance for doubtful accounts. During
2011, we finalized settlements with the IRS resolving all outstanding issues for our 1997 through 2004 tax years.
Our liability for unrecognized tax benefits was $426 million, including accrued interest of $14 million and
excluding $13 million that was recorded as reductions of the related deferred tax assets, as of December 31, 2012
($494 million, $62 million and $13 million, respectively, as of December 31, 2011). Unrecognized tax benefits of
$125 million ($173 million as of December 31, 2011) would affect the effective rate, if recognized.
Depending on the resolution of any IRS disputes, the completion of examinations by federal, state or
international taxing authorities, or the expiration of statutes of limitation for specific taxing jurisdictions, we
believe it is reasonably possible that our liability for unrecognized tax benefits may significantly increase or
decrease within the next 12 months. However, we are currently unable to estimate the range of any possible
change.
NOTE 6 — EARNINGS PER SHARE
We compute basic earnings per share using the weighted average number of common shares outstanding.
We compute diluted earnings per share using the weighted average number of common shares outstanding plus
the dilutive effect of outstanding stock options, SARs and RSUs, computed using the treasury stock method.
During March 2011, we completed the initial public offering of 87,719,300 shares of our common stock, and
during September 2011, we repurchased 80,771,143 shares of our common stock. The following table sets forth
the computations of basic and diluted earnings per share for the years ended December 31, 2012, 2011 and 2010
(dollars in millions, except per share amounts, and shares in thousands):
2012 2011 2010
Net income attributable to HCA Holdings, Inc ...... $ 1,605 $ 2,465 $ 1,207
Weighted average common shares outstanding ...... 440,178 476,609 426,424
Effect of dilutive incremental shares .............. 19,225 19,334 10,923
Shares used for diluted earnings per share .......... 459,403 495,943 437,347
Earnings per share:
Basic earnings per share .................... $ 3.65 $ 5.17 $ 2.83
Diluted earnings per share .................. $ 3.49 $ 4.97 $ 2.76
F-22