Capital One 2004 Annual Report Download - page 107

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Note 16
Commitments, Contingencies and Guarantees Commitments
Line of Credit Commitments
As of December 31, 2004, the Company had outstanding lines of credit of approximately $216.2 billion
committed to its customers. Of that total commitment, approximately $135.6 billion was unused. While this
amount represented the total available lines of credit to customers, the Company has not experienced, and does
not anticipate, that all of its customers will exercise their entire available line at any given point in time. The
Company generally has the right to increase, reduce, cancel, alter or amend the terms of these available lines of
credit at any time.
Lease Commitments
Certain premises and equipment are leased under agreements that expire at various dates through 2012, without
taking into consideration available renewal options. Many of these leases provide for payment by the lessee of
property taxes, insurance premiums, cost of maintenance and other costs. In some cases, rentals are subject to
increases in relation to a cost of living index. Total rent expenses amounted to approximately $38.5 million,
$63.7 million, and $63.2 million for the years ended December 31, 2004, 2003 and 2002, respectively.
Future minimum rental commitments as of December 31, 2004, for all non-cancelable operating leases with
initial or remaining terms of one year or more are as follows:
2005 $ 41,275
2006 35,486
2007 34,696
2008 34,916
2009 33,837
Thereafter 34,513
Total $214,723
Minimum sublease rental income of $26.6 million, due in future years under noncancelable leases, has not been
included in the table above as a reduction to minimum lease payments.
Synthetic Fuel Commitments
In June 2004, the Company established and consolidated Capital One Appalachian LLC (“COAL”) which
qualifies as a variable interest entity under the requirements of FIN 46. COAL purchased a limited interest in a
partnership from a third party that operates a facility which produces a coal-based synthetic fuel that qualifies for
tax credits pursuant to Section 29 of the Internal Revenue Code. COAL paid $2.1 million in cash and agreed to a
fixed note payable of $26.4 million and additional quarterly variable payments based on the amount of tax credits
generated by the partnership from June 2004 through the end of 2007. COAL has an ongoing commitment to
fund the losses of the partnership to maintain its 24.9% minority ownership interest, and make fixed and variable
payments to the third party. The Corporation has guaranteed COAL’s commitments to both the partnership and
the third party. COAL’s equity investment in the partnership was included in Other Assets at December 31, 2004.
As of December 31, 2004, the Company had an estimated remaining commitment for the fixed note payments,
variable payments and the funding of its 24.9% share of the operating losses of the partnership of $100.2 million.
Guarantees
Residual Value Guarantees
The Company has entered into synthetic lease transactions to finance several facilities. A synthetic lease structure
involves establishing a special purpose vehicle (“SPV”) that owns the properties to be leased. The SPV is funded
84