Capital One 2000 Annual Report Download - page 59

Preferred Stock (the "Junior Preferred Shares") at a price of $200
per one three-hundredth of a share, subject to adjustment. The Com-
pany 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 liquidation rights, the value of
the one three-hundredth interest in a Junior Preferred Share pur-
chasable upon exercise of each Right should approximate the value
of one share of common stock. Initially, the Rights are not exer-
cisable and trade automatically with the common 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 outstanding 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 $200 exercise 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 outstand-
ing 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 six 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 and February 2000, the Com-
pany's Board of Directors voted to increase this amount by 4.5
million and 10 million shares, respectively, of the Company's com-
mon stock. For the years ended December 31, 2000, 1999 and 1998,
the Company repurchased 3,028,600, 2,250,000 and 2,687,400
shares, respectively, under this program. Certain treasury shares
have been reissued in connection with the Company's benefit plans.
Note G
OTHER NON-INTEREST EXPENSE
Year Ended December 31 2000 1999 1998
Professional services $ 163,905 $ 145,398 $ 66,591
Collections 156,592 101,000 59,503
Bankcard association
assessments 51,726 33,301 23,163
Fraud losses 53,929 22,476 10,278
Other 130,132 131,928 74,740
Total $ 556,284 $ 434,103 $ 234,275
Note H
INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differ-
ences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax pur-
poses. Significant components of the Company’s deferred tax assets
and liabilities as of December 31, 2000 and 1999 were as follows:
December 31 2000 1999
DEFERRED TAX ASSETS:
Allowance for loan losses $ 155,218 $117,375
Finance charge, fee and other
income receivables 171,516 111,599
Stock incentive plan 56,615 51,680
Foreign taxes 12,366
State taxes, net of federal benefit 18,560 15,131
Other 79,379 43,495
Subtotal 493,654 339,280
Valuation allowance (35,642) (20,763)
Total deferred tax assets 458,012 318,517
DEFERRED TAX LIABILITIES:
Securitizations 38,307 44,557
Deferred revenue 222,106 97,397
Other 39,591 17,110
Total deferred tax liabilities 300,004 159,064
Net deferred tax assets before
unrealized losses on securities
available for sale 158,008 159,453
Unrealized losses on securities
available for sale 478 13,369
Net deferred tax assets $ 158,486 $ 172,822
During 2000, the Company increased its valuation allowance
by $14,879 for certain state and international loss carryforwards gen-
erated during the year.
Significant components of the provision for income taxes attrib-
utable to continuing operations were as follows:
Year Ended December 31 2000 1999 1998
Federal taxes $ 284,661 $ 232,910 $ 244,536
State taxes 578 754 471
International taxes 1,156
Deferred income taxes 1,445 (19,738) (76,317)
Income taxes $287,840 $ 213,926 $ 168,690
notes 57