US Bank 2002 Annual Report Download - page 30

assumed LTROR of approximately 11.1 percent and an Because of the subjective nature of plan assumptions, a
expected compound rate of return of 9.9 percent. As a sensitivity analysis to hypothetical changes in the LTROR
result of the modeling imprecision and uncertainty, the and the discount rate is provided below:
Company considers a range of potential expected rates of Due to the complexity of forecasting pension plan
return, economic conditions for several scenarios, historical activities, the accounting method utilized for pension plans,
performance relative to assumed rates of return and asset management’s ability to respond to factors impacting the
allocation and LTROR information for a peer group in plans and the hypothetical nature of this information, the
establishing its assumptions. The Company plans to actual changes in periodic pension costs could be
use the 9.9 percent LTROR established in the recent significantly different than the information provided in the
re-measurement to initially estimate its periodic pension sensitivity analysis.
expense for 2003.
Base
LTRO R 7.9% 8.9% 9.9% 10.9% 11.9%
Incremental benefit (cost) ************************************************************** $(40.7) $(20.4) $ — $20.4 $40.7
Percent of 2002 net income************************************************************ (.77)% (.38)% —% .38% .77%
Base
Discount 4.8% 5.8% 6.8% 7.8% 8.8%
Incremental benefit (cost) ************************************************************** $(49.3) $(25.2) $ — $ 9.9 $26.2
Percent of 2002 net income************************************************************ (.93)% (.48)% —% .19% .49%
Merger and Restructuring-Related Items The Company in 2003 to complete the NOVA acquisition. In addition, the
incurred merger and restructuring-related items in each of Company anticipates additional pre-tax merger and
the last three years in conjunction with its acquisitions. restructuring related expenses in 2003 of $14.7 million
Merger and restructuring-related items included in pre-tax related to the Bay View acquisition, $8.6 million related to
earnings were $324.1 million ($211.3 million after-tax) in the State Street Corporate Trust acquisition and
2002, compared with $1,266.4 million ($844.3 million $7.2 million as a result of other smaller acquisitions.
after-tax) and $348.7 million ($231.3 million after-tax) for Merger and restructuring-related items in 2001
2001 and 2000, respectively. Merger and restructuring- included $382.2 million in the provision for credit losses, a
related items in 2002 included $271.1 million of net $62.2 million gain on the required sale of branches and
expense associated with the Firstar/USBM merger and $946.4 million of noninterest expense. Total merger and
$53.0 million associated with NOVA and other smaller restructuring-related items in 2001 consisted of
acquisitions. Merger and restructuring-related items in 2002 $1,167.2 million related to the Firstar/USBM merger,
associated with the Firstar/USBM merger were primarily $50.7 million of restructuring expenses for Piper and
related to systems conversions and integration, asset write- $48.5 million related to NOVA and other smaller
downs and lease terminations recognized at the completion acquisitions. With respect to the Firstar/USBM merger, the
of conversions. Offsetting a portion of these costs in 2002 $1,167.2 million of merger and restructuring-related items
was an asset gain related to the sale of a non-strategic included $268.2 million for severance and employee-related
investment in a sub-prime lending business and a mark-to- costs and $477.6 million of charges to exit business lines
market recovery associated with the liquidation of and products, sell credit portfolios or otherwise realign
U.S. Bancorp Libra’s investment portfolio. The Company business practices in the new Company. The Company also
exited this business in 2001 and the liquidation efforts were incurred $208.1 million of systems conversion and business
substantially completed in the second quarter of 2002. integration costs, $48.7 million for lease cancellation and
At December 31, 2002, the integration of Firstar and other building-related costs, $226.8 million for transaction
USBM was completed. Total merger and restructuring- costs, funding a charitable foundation to reaffirm a
related items associated with the Firstar/USBM merger were commitment to its markets and other costs, and a
approximately $1.4 billion and no additional costs are $62.2 million gain related to the required sale of branches.
expected going forward. In connection with the acquisition In response to significant changes in the securities markets
of NOVA, the integration of merchant processing platforms during 2001, including increased volatility, changes in
and business processes of U.S. Bank National Association equity valuations and the increasingly competitive
and NOVA will continue through late 2003. Management environment for the industry, Piper restructured its
estimates the Company will incur pre-tax merger and operations. The restructuring improved the operating
restructuring-related charges of approximately $36.9 million efficiency of the business by removing excess capacity
28 U.S. Bancorp