US Bank 2005 Annual Report Download - page 51

CONTRACTUAL OBLIGATIONS
Payments Due By Period
Over One Over Three
One Year Through Through Over Five
(Dollars in Millions) or Less Three Years Five Years Years Total
Contractual Obligations
Long-term debt (a) **************************************** $7,690 $12,874 $3,499 $13,006 $37,069
Capital leases ******************************************** 5761230
Operating leases ****************************************** 171 299 227 461 1,158
Purchase obligations*************************************** 135 136 19 — 290
Benefit obligations (b) ************************************** 37 78 78 193 386
Total***************************************************** $8,038 $13,394 $3,829 $13,672 $38,933
(a) In the banking industry, interest-bearing obligations are principally utilized to fund interest-bearing assets. As such, interest charges on related contractual obligations were excluded from
reported amounts as the potential cash outflows would have corresponding cash inflows from interest-bearing assets.
(b) Amounts only include obligations related to the unfunded non-qualified pension plan and post-retirement medical plans.
extent of these arrangements are provided in Note 23 of the is recorded on the balance sheet in other liabilities. The
Notes to Consolidated Financial Statements. liability is adjusted downward over time as the underlying
Asset securitizations and conduits represent a source of assets pay down with the offset recognized as other
funding for the Company through off-balance sheet structures. noninterest income. The liability for the liquidity facility was
Credit, liquidity, operational and legal structural risks exist due $20 million and $32 million at December 31, 2005 and
to the nature and complexity of asset securitizations and other 2004, respectively. In addition, the Company recorded at fair
off-balance sheet structures. ALPC regularly monitors the value its retained residual interest in the investment securities
performance of each off-balance sheet structure in an effort to conduit of $28 million and $57 million at December 31,
minimize these risks and ensure compliance with the 2005 and 2004, respectively.
requirements of the structures. The Company utilizes its credit Capital Management The Company is committed to
risk management systems to evaluate the credit quality of managing capital for maximum shareholder benefit and
underlying assets and regularly forecasts cash flows to evaluate maintaining strong protection for depositors and creditors.
any potential impairment of retained interests. Also, regulatory The Company has targeted returning 80 percent of earnings
guidelines require consideration of asset securitizations in the to our shareholders through a combination of dividends and
determination of risk-based capital ratios. The Company does share repurchases. In keeping with this target, the Company
not rely significantly on off-balance sheet arrangements for returned 90 percent of earnings in 2005. The Company
liquidity or capital resources. continually assesses its business risks and capital position.
The Company sponsors an off-balance sheet conduit, a The Company also manages its capital to exceed regulatory
qualified special purpose entity (‘‘QSPE’’), to which it capital requirements for well-capitalized bank holding
transferred high-grade investment securities, funded by the companies. To achieve these capital goals, the Company
issuance of commercial paper. Because QSPE’s are exempt employs a variety of capital management tools, including
from consolidation under the provisions of Financial dividends, common share repurchases, and the issuance of
Accounting Standards Board Interpretation No. 46R, subordinated debt and other capital instruments. Total
‘‘Consolidation of Variable Interest Entities’’ (‘‘FIN 46R’’), shareholders’ equity was $20.1 billion at December 31,
the Company does not consolidate the conduit structure in 2005, compared with $19.5 billion at December 31, 2004.
its financial statements. The conduit held assets of The increase was the result of corporate earnings, offset by
$3.8 billion at December 31, 2005, and $5.7 billion at share repurchases and dividends.
December 31, 2004. These investment securities include On December 20, 2005, the Company increased its
primarily (i) private label asset-backed securities, which are dividend rate per common share by 10 percent, from $.30
insurance ‘‘wrapped’’ by AAA/Aaa–rated mono-line insurance per quarter to $.33 per quarter. On December 21, 2004,
companies and (ii) government agency mortgage-backed the Company increased its dividend rate per common share
securities and collateralized mortgage obligations. The by 25.0 percent, from $.24 per quarter to $.30 per quarter.
conduit had commercial paper liabilities of $3.8 billion at On December 16, 2003, the Board of Directors
December 31, 2005, and $5.7 billion at December 31, 2004. approved an authorization to repurchase 150 million shares
The Company provides a liquidity facility to the conduit. of common stock over the following 24 months. In 2004,
Utilization of the liquidity facility would be triggered if the the Company repurchased 89 million shares of common
conduit is unable to, or does not, issue commercial paper to stock under the December 2003 plan. On December 21,
fund its assets. A liability for the estimate of the potential 2004, the Board of Directors approved an authorization to
risk of loss the Company has as the liquidity facility provider repurchase 150 million shares of common stock during the
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