Travelers 2004 Annual Report Download - page 178

THE ST. PAUL TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
11. FEDERAL INCOME TAXES, Continued
For tax return purposes, as of December 31, 2004, the Company had NOL carryforwards that expire, if
unused, in 2017-2021 and foreign tax credit (FTC) carryforwards that expire, if unused, in 2009-2013. The
amount and timing of realizing the benefits of NOL and FTC carryforwards depend on future taxable income and
limitations imposed by tax laws. The approximate amounts of those NOLs on a regular tax basis and an
alternative minimum tax (AMT) basis were $2.09 billion and $276 million, respectively. The approximate
amounts of the FTCs both on a regular tax basis and an AMT basis were $27 million. The benefits of the NOL
and FTC carryforwards have been recognized in the consolidated financial statements.
U.S. income taxes have not been provided on $149 million of the Company’s foreign operations’
undistributed earnings as of December 31, 2004, as such earnings are intended to be permanently reinvested in
those operations. Furthermore, any taxes paid to foreign governments on these earnings may be used as credits
against the U.S. tax on any dividend distributions from such earnings.
Taxes on the GAAP basis in excess of tax basis of approximately $1.96 billion related to the Company’s
majority ownership of Nuveen Investments have not been recognized as of December 31, 2004. In January 2005,
the Company announced that it will explore strategic alternatives to divest its majority ownership position in
Nuveen Investments, which may result in a transaction that is tax-free, taxable, or some combination thereof.
12. SHAREHOLDERS’ EQUITY AND DIVIDEND AVAILABILITY
Mandatorily Redeemable Securities of Subsidiary Trusts
TIGHI, in 1996, formed statutory subsidiary business trusts under the laws of the State of Delaware, which
issued Trust Securities representing undivided beneficial interests in the assets of the trust. The gross proceeds of
the Trust Securities were invested in Junior Subordinated Deferrable Interest Debentures (Junior Subordinated
Debentures) of its parent (TPC). On April 9, 2003, TIGHI redeemed the $900 million aggregate principal of the
TIGHI 8.00% to 8.08% Junior Subordinated Debentures held by the subsidiary trusts. The subsidiary trusts, in
turn, used these funds to redeem the $900 million liquidation value of the Trust Securities.
Preferred Stock
The Company’s preferred shareholders’ equity represents the par value of preferred shares outstanding that
the Company assumed in the merger related to The St. Paul Companies, Inc. Stock Ownership Plan (SOP) Trust,
less the remaining principal balance on the SOP Trust debt. The SOP Trust borrowed funds from a U.S.
underwriting subsidiary to finance the purchase of the preferred shares, and the Company guaranteed the SOP
debt.
The SOP Trust may at any time convert any or all of the preferred shares into shares of the Company’s
common stock at a rate of eight shares of common stock for each preferred share. The Board of Directors has
reserved a sufficient number of authorized common shares to satisfy the conversion of all preferred shares issued
to the SOP Trust and the redemption of preferred shares to meet employee distribution requirements. Upon the
redemption of preferred shares, the Company will issue shares of common stock to the trust to fulfill the
redemption obligations. See note 14.
Holders of preferred stock have a preference upon liquidation, dissolution or winding up of the Company of
$100 per share.
Common Stock
On April 1, 2004, each issued and outstanding share of TPC class A and class B common stock (including
the associated preferred stock purchase rights) was exchanged for 0.4334 of a share of the Company’s common
stock. See note 2.
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