US Bank 2003 Annual Report Download - page 77

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at the time of closing or acquired in business combinations certain businesses, products, or customer and business
accounted for as ‘‘poolings.’’ In 2001, the company also relationships that no longer align with the long-term
recognized $190.5 million of stock-based compensation strategy of the Company. It may also include charges to
expense as a result of the accelerated vesting of certain realign risk management practices related to certain credit
stock options and restricted stock due to the change of portfolios. During 2002, the Company recognized asset
control triggered by the USBM merger. gains related to the sale of a non-strategic investment in a
Systems conversions and integration costs are recorded sub-prime lending business of $28.7 million and a mark-to-
as incurred and are associated with the preparation and market recovery of $10.1 million associated with the
mailing of numerous customer communications for the liquidation of U.S. Bancorp Libra’s investment portfolio.
acquisitions and conversion of customer accounts, printing During 2001, balance sheet restructuring costs incurred in
and distribution of training materials and policy and connection with the Firstar/USBM merger of $457.6 million
procedure manuals, outside consulting fees, and other were comprised of a $201.3 million provision associated
expenses related to systems conversions and the integration with the Company’s integration of certain small business
of acquired branches and operations. products and management’s decision to discontinue an
Asset write-downs and lease terminations represent unsecured small business product of USBM; $90.0 million
lease termination costs and impairment of assets for of charge-offs to align risk management practices, align
redundant office space, branches that will be vacated and charge-off policies and to expedite the Company’s transition
equipment disposed of as part of the integration plan. These out of a specific segment of the healthcare industry; and
costs are recognized in the accounting period that contract $76.6 million of losses related to the sales of two higher
terminations occur or the asset becomes impaired and is credit risk retail loan portfolios of USBM. Also, the amount
abandoned. In 2002, this category included $38.2 million of included $89.7 million related to the Company’s decision to
signage write-offs, $26.9 million of software and equipment discontinue a high-yield investment banking business, to
write-offs, $32.0 million of lease and contract cancellations restructure a co-branding credit card relationship of USBM,
and $6.9 million of leasehold and other related items and for the planned disposition of certain equity
associated with the Firstar/USBM merger. In 2001, asset investments that no longer aligned with the long-term
write-downs and lease terminations included $45.7 million strategy of the Company. The alignment of risk
of lease and contract cancellation costs, $36.2 million of management practices included a write-down of several
software and equipment write-offs and $48.5 million of large commercial loans originally held separately by both
other assets deemed to be worthless due to integration Firstar and USBM, primarily to allow the Company to exit
decisions in connection with the merger. or reduce these credits to conform with the credit risk
In connection with certain mergers, the Company has exposure policy of the combined entity.
made charitable contributions to reaffirm a commitment to Other merger-related items in 2002 of $7.2 million
its markets or as part of specific conditions necessary to primarily represented changes to conform accounting
achieve regulatory approval. These contributions were policies implemented at the time of systems conversions
funded up front and represent costs that would not have related to the Firstar/USBM merger and other acquired
been incurred had the merger not occurred. Charitable entities. In 2001, other merger-related charges of
contributions are charged to merger and restructuring $98.1 million primarily included $69.1 million and
expenses or considered in determining the acquisition cost $24.2 million of investment banking fees, legal fees and
at the applicable closing date. stock registration fees associated with the Firstar/USBM
Balance sheet restructurings primarily represent gains or merger and the acquisition of NOVA, respectively and
losses incurred by the Company related to the disposal of $4.8 million of other costs.
U.S. Bancorp 75