Capital One 2002 Annual Report Download - page 68

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Note N Goodwill
Summary of Acquisition Goodwill
Auto Finance International Other Total
Balance at
December 31, 2001 $ 218,818 $ 5,273 $ 78,326 $ 302,417
Additions 139 - 54,874 55,013
Other - 1,545 - 1,545
Balance at
December 31, 2002 $ 218,957 $ 6,818 $ 133,200 $ 358,975
In October 2001, the Company acquired PeopleFirst. Based in San Diego,
California, PeopleFirst is the largest online provider of direct motor vehicle
loans. The acquisition price for PeopleFirst was $174.0 million, paid through
the issuance of approximately 3,746,000 shares of the Company’s common
stock. This purchase combination created approximately $166.0 million in
goodwill, as approximately $763.0 million of assets were acquired and
$755.0 million of liabilities were assumed.
In May 2001, the Company acquired AmeriFee. AmeriFee is a financial
services firm based in Southborough, Massachusetts that provides financing
solutions for consumers seeking elective medical and dental procedures. The
acquisition was accounted for as a purchase business combination. The initial
acquisition price for AmeriFee was $81.5 million, paid through
approximately $64.5 million of cash and approximately 257,000 shares of
the Company’s common stock. This purchase combination created
approximately $80.0 million in goodwill. The goodwill prior to December
31, 2001 was amortized on a straight-line basis over 20 years. After
December 31, 2001, the Company ceased amortization and performed
impairment tests on the book value of the remaining goodwill in accordance
with SFAS 142.
In July 2002 the Company’s Board of Directors voted to adopt a
Termination Agreement and Mutual Release with prior owners of AmeriFee,
ending the original acquisition agreement and settling all contingent
consideration provisions. The Company agreed to terms that would provide
a one-time payment of up to $55.0 million, payable in common shares or
cash at the Company’s discretion, to prior owners of AmeriFee. On
November 11, 2002, the Corporation issued shares of its common stock
having an aggregate value of $54.9 million to the prior owners of AmeriFee
in accordance with the terms of the Termination Agreement. Of this amount,
$43.9 million in common stock was issued under the Corporation’s existing
shelf registration statement and $11.0 million in common stock was issued in
an unregistered offering. The full $54.9 million was accounted for as
additional acquisition goodwill.
Note M Cumulative Other
Comprehensive Income
The following table presents the cumulative balances of the components of
other comprehensive income, net of tax of $27.8 million, $39.9 million and
$.5 million as of December 31, 2002, 2001 and 2000, respectively:
As of December 31 2002 2001 2000
Unrealized gains (losses)
on securities $ 55,588 $ 8,894 $ (777)
Foreign currency translation
adjustments 22,350 (19,466) 3,695
Unrealized losses on cash flow
hedging instruments (93,504) (74,026) -
Total cumulative other
comprehensive income (loss) $ (15,566) $(84,598) $ 2,918
Unrealized gains (losses) on securities included gross unrealized gains of
$80.6 million, $44.6 million and $17.1 million, and gross unrealized losses
of $.4 million, $30.2 million and $18.3 million, as of December 31, 2002,
2001 and 2000, respectively.
During 2002, the Company reclassified $101.5 million of net losses, after
tax, on derivative instruments from cumulative other comprehensive income
into earnings.
During 2002, the Company reclassified $4.2 million of net gains on sales of
securities, after tax, from cumulative other comprehensive income into earnings.