US Bank 2006 Annual Report Download - page 87

SHAREHOLDERS’ EQUITY
At December 31, 2006 and 2005, the Company had combination transaction or an acquisition of shares of the
authority to issue 4 billion shares of common stock and Company and are exercisable at a price of $100 per right,
50 million shares of preferred stock. The Company had subject to adjustment. Following certain other events, each
1,765 million and 1,815 million shares of common stock right entitles its holder to purchase for $100 an amount of
outstanding at December 31, 2006 and 2005, respectively, common stock of the Company, or, in certain
and had 433 million shares of common stock reserved for circumstances, securities of the acquirer, having a then-
future issuances, primarily under stock option plans and current market value of twice the exercise price of the right.
shares that may be issued in connection with the The dilutive effect of the rights on the acquiring company is
Company’s convertible senior debentures, at December 31, intended to encourage it to negotiate with the Company’s
2006. At December 31, 2006, the Company had Board of Directors prior to attempting a takeover. If the
40,000 shares of preferred stock outstanding. Board of Directors believes a proposed acquisition is in the
On March 27, 2006, the Company issued depository best interests of the Company and its shareholders, the
shares representing an ownership interest in 40,000 shares Board may amend the plan or redeem the rights for a
of Series B Non-Cumulative Perpetual Preferred Stock with nominal amount in order to permit the acquisition to be
a liquidation preference of $25,000 per share (the ‘‘Series B completed without interference from the plan. Until a right
Preferred Stock’’). The Series B Preferred Stock has no is exercised, the holder of a right has no rights as a
stated maturity and will not be subject to any sinking fund shareholder of the Company. The rights expire on
or other obligation of the Company. Dividends on the February 27, 2011.
Series B Preferred Stock, if declared, will accrue and be On December 16, 2003, the Board of Directors
payable quarterly, in arrears, at a rate per annum equal to approved an authorization to repurchase 150 million shares
the greater of three-month LIBOR plus .60 percent, or of outstanding common stock during the following
3.50 percent. On April 15, 2011, or thereafter, the Series B 24 months. In 2004, the Company repurchased 89 million
Preferred Stock is redeemable at the Company’s option, shares of common stock under the 2003 plan. On
subject to the prior approval of the Federal Reserve Board, December 21, 2004, the Board of Directors approved an
at a redemption price equal to $25,000 per share, plus any authorization to repurchase 150 million shares of
declared and unpaid dividends, without accumulation of outstanding common stock during the following 24 months.
any undeclared dividends. In connection with the issuance This repurchase program replaced the Company’s
of the Series B Preferred Stock, the Company also entered December 16, 2003, program. In 2004, the Company
into a replacement capital covenant, which restricts the repurchased 5 million shares of common stock under this
Company’s rights to redeem or repurchase the Series B plan. During 2005, all share repurchases were made under
Preferred Stock. Except in certain limited circumstances, the the 2004 plan. On August 3, 2006, the Board of Directors
Series B Preferred Stock does not have any voting rights. approved an authorization to repurchase 150 million shares
The Company has a preferred share purchase rights of outstanding common stock through December 31, 2008.
plan intended to preserve the long-term value of the This new authorization replaced the December 21, 2004,
Company by discouraging a hostile takeover of the repurchase program. During 2006, the Company
Company. Under the plan, each share of common stock repurchased 62 million shares of common stock under the
carries a right to purchase one one-thousandth of a share of 2004 authorization and 28 million shares under the 2006
preferred stock. The rights become exercisable in certain authorization.
limited circumstances involving a potential business
The following table summarizes the Company’s common stock repurchased in each of the last three years:
(Dollars and Shares in Millions) Shares Value
2006 ******************************************************************************************************* 90 $2,817
2005 ******************************************************************************************************* 62 1,807
2004 ******************************************************************************************************* 94 2,656
U.S. BANCORP 85
Note 14