Capital One 1998 Annual Report Download - page 51

49 Capital One Financial Corporation
price. The Rights expire on November 29, 2005, unless earlier
redeemed by the Company at $0.01 per Right prior to the time any
person or group acquires 15% of the outstanding common stock.
Until the Rights become exercisable, the Rights have no dilutive
effect on earnings per share.
In July 1997, the Company’s Board of Directors voted to repur-
chase up to two million shares of the Company’s common stock to
mitigate the dilutive impact of shares issuable under its benefit
plans, including its Purchase Plan, dividend reinvestment plan and
stock incentive plans. In July 1998, the Company’s Board of Direc-
tors voted to increase this amount by an additional 1.5 million
shares of the Company’s common stock. For the years ended
December 31, 1998 and 1997, the Company repurchased
895,800 and 1,318,641 shares, respectively, under this program.
Certain treasury shares were reissued in connection with the Com-
pany’s benefit plans.
Note G
Other Non-Interest Expense
Year Ended December 31
1998 1997 1996
Professional services $ 66,591 $ 47,671 $ 43,968
Collections 59,503 23,216 9,783
Bankcard association
assessments 23,163 16,074 15,045
Fraud losses 10,278 16,749 26,773
Other 82,270 47,570 36,614
Total $241,805 $151,280 $132,183
Under the Company’s Purchase Plan, associates of the Company
are eligible to purchase common stock through monthly salary
deductions of a maximum of 15% and a minimum of 1% of
monthly base pay. The amounts deducted are applied to the pur-
chase of unissued common or treasury stock of the Company at
85% of the current market price. An aggregate of 1,000,000 com-
mon shares has been authorized for issuance under the Purchase
Plan, of which 586,556 shares were available for issuance as of
December 31, 1998.
On November 16, 1995, the Board of Directors of the Company
declared a dividend distribution of one Right for each outstanding
share of common stock. Each Right entitles a registered holder to
purchase from the Company one one-hundredth of a share of the
Company’s authorized Cumulative Participating Junior Preferred
Stock (the “Junior Preferred Shares”) at a price of $150, subject to
adjustment. The Company has reserved 1,000,000 shares of its
authorized preferred stock for the Junior Preferred Shares. Because
of the nature of the Junior Preferred Shares’ dividend and liquida-
tion rights, the value of the one one-hundredth interest in a Junior
Preferred Share purchasable upon exercise of each Right should
approximate the value of one share of common stock. Initially, the
Rights are not exercisable and trade automatically with the com-
mon stock. However, the Rights generally become exercisable and
separate certificates representing the Rights will be distributed, if
any person or group acquires 15% or more of the Company’s out-
standing common stock or a tender offer or exchange offer is
announced for the Company’s common stock. Upon such event,
provisions would also be made so that each holder of a Right, other
than the acquiring person or group, may exercise the Right and buy
common stock with a market value of twice the $150 exercise
A summary of the status of the Company’s options as of December 31, 1998, 1997 and 1996, and changes for the years then ended is
presented below:
1998 1997 1996
Weighted Weighted Weighted
Average Average Average
Options Exercise Price Options Exercise Price Options Exercise Price
(000s) Per Share (000s) Per Share (000s) Per Share
Outstanding at beginning of year 7,125 $27.67 5,894 $23.92 3,315 $19.67
Granted 3,450 83.90 1,590 40.88 2,694 29.04
Exercised (742) 20.27 (215) 20.76 (12) 16.40
Canceled (120) 51.96 (144) 30.16 (103) 21.82
Outstanding at end of year 9,713 $47.96 7,125 $27.67 5,894 $23.92
Exercisable at end of year 5,966 $30.47 3,815 $24.43 1,196 $18.98
Weighted average fair value of options
granted during the year $35.45 $16.03 $11.22
The following table summarizes information about options outstanding as of December 31, 1998:
Options Outstanding Options Exercisable
Number Weighted Average Weighted Average Number Weighted Average
Range of Outstanding Remaining Exercise Price Exercisable Exercise Price
Exercise Prices (000s) Contractual Life Per Share (000s) Per Share
$16.00–$24.99 1,688 5.93 years $ 16.43 1,358 $16.53
$25.00–$33.99 3,179 6.73 29.10 3,133 29.12
$34.00–$49.99 2,639 8.72 44.46 1,465 46.04
$50.00–$123.99 2,207 9.60 103.43 10 65.95