Capital One 2006 Annual Report Download - page 109

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91
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 has 3.6 million shares available for issuance under the 1997 DRP at
December 31, 2006. The Company also instituted an additional dividend reinvestment plan in 2002 (2002 DRP) with an
additional 7.5 million shares reserved, all of which were available for issuance at December 31, 2006.
Note 11
Employee Stock Ownership Plan
The Company has an internally leveraged employee stock ownership plan (ESOP) in which substantially all former
employees of Hibernia participate. In accordance with the merger agreement with Hibernia, assets of the ESOP trust were
allocated solely for the benefit of participants who were employees of Hibernia and its subsidiaries immediately prior to the
merger date. The ESOP trust owned 1,137,331 and 949,579 shares of COF Common Stock at December 31, 2006 and
December 31, 2005, respectively. The Company makes annual contributions to the ESOP in an amount determined by the
Companys Board of Directors (or a committee authorized by the Board of Directors), but at least equal to the ESOPs
minimum debt service less dividends received by the ESOP. Dividends received by the ESOP in 2006 were used to pay debt
service, and it is anticipated this practice will continue in the future.
The ESOP shares were initially pledged as collateral for its debt. As the debt is repaid, shares are released from collateral and
allocated to active participants. The remaining collateral shares are reported as a reduction to paid-in capital in equity. As
shares are committed to be released, the Company reports compensation expense equal to the current market value of the
shares, and the shares become outstanding for earnings per share calculations. Dividends on allocated ESOP shares are
recorded as a reduction of retained earnings; dividends on unallocated ESOP shares are recorded as a reduction of
contributions due to the ESOP.
Compensation expense of $5.4 million and $0.7 million relating to the ESOP was recorded by the Company for the years
ended December 31, 2006 and December 31, 2005, respectively. The ESOP held 876,907 and 705,178 allocated shares and
260,424 and 244,401 suspense shares at December 31, 2006 and December 31, 2005, respectively. The fair value of the
suspense shares was $20.0 million and $21.1 million at December 31, 2006 and December 31, 2005, respectively.
Note 12
Retirement Plans
Defined Contribution Plans
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 associate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 amounted to $70.9 million, $67.6 million, and $71.7 million for
the years ended December 31, 2006, 2005 and 2004, respectively.
The Company sponsors other defined contribution plans that were assumed through recent acquisitions. Contributions of cash
and shares of the Companys common stock to these plans amounted to $12.6 million and $0.9 million for the years ended
December 31, 2006 and 2005, respectively.
Defined Benefit and Other Postretirement Benefit Plans
The Company sponsors defined benefit pension plans and other postretirement benefit plans. Pension plans include a legacy
frozen cash balance plan and plans assumed in the North Fork acquisition including two qualified defined benefit pension
plans and several non-qualified defined benefit pension plans. Other postretirement benefit plans include a legacy plan and
plans assumed in the Hibernia and North Fork acquisitions, all of which provide medical and life insurance benefits.
Those plans assumed in the North Fork acquisition were valued using a December 1 measurement date. The Companys
other plans were valued using an October 1 measurement date.
The defined benefit and other postretirement benefit plans are presented below in accordance with SFAS 158. Full disclosure
of prior period postretirement benefit amounts are omitted due to immateriality. Net periodic postretirement benefit expense
was $8.5 million and $6.7 million for 2005 and 2004, respectively. The liability recognized on the consolidated balance sheet
for the legacy defined postretirement benefit plan at December 31, 2005 was $42.0 million.