Capital One 2007 Annual Report Download - page 116

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withholding tax on these unremitted earnings is not practicable at this time because such liability is dependent upon circumstances
existing if and when remittance occurs.
As of December 31, 2007, U.S. income taxes have not provided for approximately $276.0 million of previously acquired thrift bad
debt reserves created for tax purposes as of December 31, 1987. These amounts, acquired as a result of the merger with North Fork
Bancorporation, Inc., are subject to recapture in the unlikely event that CONA, as successor to North Fork Bank, makes distributions
in excess of earnings and profits, redeems its stock, or liquidates.
Note 15
Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share:
Year Ended December 31
(Shares in Thousands) 2007 2006 2005
Numerator:
Income from continuing operations, net of tax $ 2,591,719 $ 2,426,377 $ 1,809,147
Loss from discontinued operations, net of tax (1,021,387) (11,884) 
Net income $ 1,570,332 $ 2,414,493 $ 1,809,147
Denominator:
Denominator for basic earnings per share-Weighted-average shares 390,287 309,584 259,159
Effect of dilutive securities:
Stock options 4,327 6,171 7,367
Contingently issuable shares 192  
Restricted stock and units 739 1,268 2,382
Dilutive potential common shares 5,258 7,439 9,749
Denominator for diluted earnings per share-Adjusted weighted-average shares 395,545 317,023 268,908
Basic earnings per share
Income from continuing operations $ 6.64 $ 7.84 $ 6.98
Loss from discontinued operations (2.62) (0.04) 
Net income $ 4.02 $ 7.80 $ 6.98
Diluted earnings per share
Income from continuing operations $ 6.55 $ 7.65 $ 6.73
Loss from discontinued operations (2.58) (0.03) 
Net income $ 3.97 $ 7.62 $ 6.73
Securities of approximately 7,429,151, 4,538,000 and 1,862,000 during 2007, 2006 and 2005, respectively, were not included in the
computation of diluted earnings per share because their inclusion would be antidilutive.
Note 16
Share Repurchase Program
On January 25, 2007 the Company announced a $3.0 billion share repurchase program. On March 12, 2007, the Company entered into
a $1.5 billion accelerated share repurchase (ASR) agreement with Credit Suisse, New York Branch (CSNY). Under the ASR
agreement, the Company purchased $1.5 billion of its $.01 par value common stock at an initial price of $73.57 per share, the closing
price of the Companys common stock on the New York Stock Exchange on April 2, 2007, the effective date of the agreement. The
ASR program was accounted for as an initial treasury stock transaction and a forward stock purchase contract. The initial repurchase
of shares resulted in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares
outstanding for basic and diluted EPS on the effective date of the agreement. The forward stock purchase contract was classified as an
equity instrument and was deemed to have a fair value of $0 at the effective date.
An ASR combines the immediate share retirement benefits of a tender offer with the market impact and pricing benefits of an open
stock repurchase program. The ASR agreement provided that the Company or CSNY would be obligated to make certain additional
payments upon final settlement of the ASR agreement. Most significantly, the Company would receive from, or be required to pay,
CSNY a purchase price adjustment based on the daily volume weighted average market price of the Companys common stock over a
period beginning after the effective date of the agreement through on or around August 22, 2007. These additional payments were to
be satisfied in shares of the Companys common stock. On August 27, 2007, the ASR program terminated with the delivery of
343,512 shares back to CSNY for a net share retirement of 20,045,233 shares.
The arrangements were intended to comply with Rules 10b5-1(c)(1)(i) and 10b-18 of the Securities Exchange Act of 1934, as
amended.