Bank of America 2005 Annual Report Download - page 143

BANK OF AMERICA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements—(Continued)
Merger and Restructuring Charges
Merger and Restructuring Charges are recorded in the Consolidated Statement of Income, and include incremental
costs to integrate the Corporation’s and FleetBoston’s operations. These charges represent costs associated with these
one-time activities and do not represent on-going costs of the fully integrated combined organization. Systems
integrations and related charges, and other, as shown in the following table, are expensed as incurred.
In addition, Merger and Restructuring Charges include costs related to an infrastructure initiative that was
initiated in the third quarter of 2004 to simplify the Corporation’s business model. These costs were solely severance
related. The Corporation does not expect to incur additional severance costs related to this initiative.
(Dollars in millions) 2005 2004
Severance and employee-related charges:
Merger-related ..................................................................... $38 $138
Infrastructure initiative ............................................................. 1102
Systems integrations and related charges .................................................. 218 249
Other ................................................................................. 155 129
Total merger and restructuring charges ............................. $412 $618
Exit Costs and Restructuring Reserves
As of December 31, 2004, there were $382 million of exit costs reserves remaining, which included $291 million for
severance, relocation and other employee-related costs, $87 million for contract terminations, and $4 million for other
charges. During 2005, $17 million of reductions to the exit costs reserves were recorded as a result of revised estimates.
Cash payments of $306 million were charged against this liability in 2005, including $239 million of severance,
relocation and other employee-related costs, and $67 million of contract terminations reducing the balance in the
liability to $59 million at December 31, 2005.
As of December 31, 2004, there were $166 million of restructuring reserves remaining related to severance and other
employee-related charges. Restructuring reserves in 2005 included an additional charge for the legacy Bank of America
associate severance and other employee-related charges of $58 million. These charges included $20 million as a result of
revised estimates to complete relocations to the Northeast. During 2005, cash payments of $151 million for severance
and other employee-related costs have been charged against this liability reducing the balance to $73 million as of
December 31, 2005.
Payments under these exit costs and restructuring reserves are expected to be substantially completed in 2006.
Exit Costs and Restructuring Reserves
Exit Costs Reserves(1) Restructuring Reserves(2)
(Dollars in millions) 2005 2004 2005 2004
Balance, January 1 ........................................ $ 382 $— $ 166 $—
FleetBostonexitcosts........................................ (17) 658 ——
Restructuringcharges ....................................... —— 57 138
Infrastructure initiative ...................................... —— 1102
Cash payments ............................................. (306) (276) (151) (74)
Balance, December 31 ........................... $59 $ 382 $73 $166
(1) Exit costs reserves were established in purchase accounting resulting in an increase in Goodwill.
(2) Restructuring reserves were established by a charge to income.
Note 3—MBNA Merger
Pursuant to the Agreement and Plan of Merger, dated June 30, 2005, by and between the Corporation and MBNA
(the MBNA Merger Agreement), the Corporation acquired 100 percent of the outstanding stock of MBNA on January 1,
2006. The MBNA Merger was a tax-free merger for the Corporation. The acquisition expands the Corporation’s customer
base and its opportunity to deepen customer relationships across the full breadth of the company by delivering
innovative deposit, lending and investment products and services to MBNA’s customer base. Additionally, the
acquisition allows the Corporation to significantly increase its affinity relationships through MBNA’s credit card
operations. MBNA’s results of operations will be included in the Corporation’s results beginning January 1, 2006.
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