Business Context and Reporting Period
This Form 8-K Current Report, dated November 14, 2007, is filed by U.S. Bancorp to announce a restatement of its previously reported earnings for the third quarter of 2007 and the first nine months of 2007. The restatement is driven by a subsequent event involving the settlement of a class action lawsuit related to Visa Inc. and guidance received from the SEC accounting staff regarding the appropriate accounting treatment.
Key Financial Metrics and Restatement Impact
The filing details a specific charge and the resulting revision to net income and earnings per share (EPS). No data regarding revenue, cash flow, margins, debt, or liquidity is provided in this specific filing.
| Period | Previously Reported Net Income | Previously Reported EPS (Diluted) | Revised Net Income | Revised EPS (Diluted) | Charge Amount |
|---|---|---|---|---|---|
| Q3 2007 | $1,176 million | $0.67 | $1,096 million | $0.62 | $115 million |
| YTD 9 Months 2007 | $3,462 million | $1.94 | $3,382 million | $1.89 | $115 million |
Material Changes Versus Prior Period
The material change is a downward revision of net income due to a $115 million charge recorded for U.S. Bancorp's proportionate share of the settlement of an antitrust lawsuit between Visa Inc. and American Express. This charge was determined on November 13, 2007, following a review with independent auditors (Ernst & Young LLP) and the Audit Committee.
Guidance, Outlook, and Risks
- Outlook: Management anticipates that U.S. Bancorp's proportionate share of the proceeds from the planned Visa IPO will more than offset the $115 million charge.
- Visa Reorganization: U.S. Bancorp received Class USA shares of Visa Inc. common stock as part of Visa's reorganization for its IPO. A portion of these shares is expected to be redeemed for cash, while the remainder will convert to Class A shares three years post-IPO or upon litigation settlement.
- Risks: The filing includes standard forward-looking statement disclaimers regarding risks such as changes in economic conditions, interest rates, legal developments, and uncertainty regarding the consummation of the Visa IPO.
- Next Steps: U.S. Bancorp expects to file an amended Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, by November 19, 2007.
Investor Verification Checklist
- Verify the filing of the amended Form 10-Q for the quarter ended September 30, 2007, expected by November 19, 2007.
- Confirm the final terms of the Visa Inc. IPO and the specific redemption/conversion mechanics for U.S. Bancorp's Visa shares.
- Monitor the actual proceeds received from the Visa IPO to validate management's expectation that they will offset the $115 million litigation charge.
- Review the full text of the press release (Exhibit 99.1) for additional details on the Visa settlement and accounting guidance.