US Bank 2005 Annual Report Download - page 100

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approximately $1.7 billion, and the Company held Other Guarantees The Company provides liquidity and
collateral of $1.2 billion in escrow deposits, letters of credit credit enhancement facilities to a Company-sponsored
and liens on various assets. With respect to future delivery conduit, as more fully described in the ‘‘Off-Balance Sheet
risk for non-airline merchants, the Company held Arrangements’’ section within Management’s Discussion
$33 million of merchant escrow deposits as collateral. In and Analysis. Although management believes a draw against
addition to specific collateral or other credit enhancements, these facilities is remote, the maximum potential future
the Company maintains a liability for its implied guarantees payments guaranteed by the Company under these
associated with future delivery. At December 31, 2005, the arrangements were approximately $3.8 billion at
liability was $24 million primarily related to these airline December 31, 2005. The recorded fair value of the
processing arrangements. Company’s liability for the credit enhancement liquidity
In the normal course of business, the Company has facility was $20 million at December 31, 2005, and was
unresolved charge-backs that are in process of resolution. included in other liabilities.
The Company assesses the likelihood of its potential The Company has also made financial performance
liability based on the extent and nature of unresolved guarantees related to the operations of its subsidiaries. The
charge-backs and its historical loss experience. At maximum potential future payments guaranteed by the
December 31, 2005, the Company had a recorded liability Company under these arrangements were approximately
for potential losses of $19 million. $1.8 billion at December 31, 2005.
Contingent Consideration Arrangements The Company has OTHER CONTINGENT LIABILITIES
contingent payment obligations related to certain business
In connection with the spin-off of Piper Jaffray Companies,
combination transactions. Payments are guaranteed as long
the Company has agreed to indemnify Piper Jaffray
as certain post-acquisition performance-based criteria are
Companies against losses that may result from third-party
met or customer relationships are maintained. At
claims relating to certain specified matters. The Company’s
December 31, 2005, the maximum potential future
indemnification obligation related to these specified matters
payments required to be made by the Company under these
is capped at $18 million and can be terminated by the
arrangements was approximately $80 million and
Company if there is a change in control event for Piper
represented contingent payments related to the acquisition
Jaffray Companies. Through December 31, 2005, the
of the Wachovia Corporation’s corporate trust and
Company has paid approximately $4 million to Piper
institutional custody business on December 30, 2005. If
Jaffray Companies under this agreement.
required, these contingent payments would be payable
The Company is subject to various other litigation,
within the next 12 months.
investigations and legal and administrative cases and
Minimum Revenue Guarantees In the normal course of proceedings that arise in the ordinary course of its
business, the Company may enter into revenue share businesses. Due to their complex nature, it may be years
agreements with third party business partners who generate before some matters are resolved. While it is impossible to
customer referrals or provide marketing or other services ascertain the ultimate resolution or range of financial
related to the generation of revenue. In certain of these liability with respect to these contingent matters, the
agreements, the Company may guarantee that a minimum Company believes that the aggregate amount of such
amount of revenue share payments will be made to the liabilities will not have a material adverse effect on the
third party over a specified period of time. For the period financial condition, results of operations or cash flows of
ending December 31, 2005, the maximum potential future the Company.
payments required to be made by the Company under these
agreements was $42 million.
98 U.S. BANCORP