Capital One 2002 Annual Report Download - page 66

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Note I Retirement Plans
ASSOCIATE SAVINGS PLAN
The Company sponsors a contributory Associate Savings Plan in which
substantially all full-time and certain part-time associates are eligible to
participate. The Company makes contributions to each eligible employee’s
account, matches a portion of associate contributions and makes
discretionary contributions based upon the Company meeting a certain
earnings per share target. The Company’s contributions to this plan, all of
which were in cash, amounted to $65.9 million, $64.3 million and $44.5
million for the years ended December 31, 2002, 2001 and 2000, respectively.
OTHER POSTRETIREMENT BENEFITS
The Company sponsors postretirement benefit plans to provide health care
and life insurance to retired employees. Net periodic postretirement benefit
expense was $6.8 million, $3.1 million and $2.5 million in 2002, 2001 and
2000, respectively. The liabilities recognized on the consolidated balance
sheets for the Company’s defined postretirement benefit plan at December
31, 2002, 2001 and 2000 were $17.4 million, $10.6 million and $7.7
million, respectively.
Note J Other Non-Interest Expense
Year Ended December 31
2002 2001 2000
Professional services $ 308,593 $ 230,502 $ 163,905
Collections 360,437 253,728 156,592
Fraud losses 78,733 65,707 53,929
Bankcard association assessments 107,185 83,255 51,726
Other 132,567 174,757 130,132
Total $ 987,515 $ 807,949 $ 556,284
Note K Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant
components of the Company’s deferred tax assets and liabilities as of
December 31, 2002 and 2001 were as follows:
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
In 1997, the Company implemented its dividend reinvestment and stock
purchase plan (“1997 DRP”), which allows participating stockholders to
purchase additional shares of the Company’s common stock through
automatic reinvestment of dividends or optional cash investments. The
Company issued 3.0 million and .7 million shares of new common stock in
2002 and 2001, respectively, under the 1997 DRP. The Company also
instituted an additional dividend reinvestment and stock purchase plan in
2002 (“2002 DRP”) with an additional 7.5 million shares reserved, all of
which were available for issuance at December 31, 2002.
Note H Common and Preferred Shares
SHARE REPURCHASE PROGRAM
In July 1997, the Company’s Board of Directors voted to repurchase up to
6.0 million shares of the Company’s common stock to mitigate the dilutive
impact of shares issuable under its benefit plans, including the Purchase Plan,
dividend reinvestment plan and stock incentive plans. In July 1998 and
February 2000, the Company’s Board of Directors voted to increase this
amount by 4,500,000 and 10,000,000 shares, respectively, of the Company’s
common stock. For the years ended December 31, 2002 and 2001, the
Company did not repurchase shares under this program. For the years ended
December 31, 2000 and 1999, the Company repurchased 3,028,600 and
2,250,000 shares, respectively, under this program. Certain treasury shares
have been reissued in connection with the Company’s benefit plans.
CUMULATIVE PARTICIPATING JUNIOR PREFERRED STOCK
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. As amended, each Right entitles a registered holder to purchase from
the Company 1/300th of a share of the Company’s authorized Cumulative
Participating Junior Preferred Stock (the “Junior Preferred Shares”) at a price
of $200 per 1/300th of a share, subject to adjustment. The Company has
reserved one million 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 1/300th 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 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 outstanding
common stock. Until the Rights become exercisable, the Rights have no
dilutive effect on earnings per share.