Capital One 2009 Annual Report Download - page 168

155
Note 16
Restructuring
During 2007, the Company announced a broad-based initiative to reduce expenses and improve the competitive cost position of the
Company. Restructuring initiatives leverage the capabilities of recently completed infrastructure projects in several of the Company’s
businesses. The scope and timing of the cost reductions are the result of an ongoing, comprehensive review of operations within and
across the Company’s businesses, which began early in 2007.
The Company completed the 2007 Company initiative during 2009. Total incurred charges exceeded the original estimate of $300.0
million by $63.3 million. The increase occurred because the Company has extended the initiative due to the continued economic
deterioration. Approximately half of these charges were related to severance benefits, while the remaining charges were associated
with items such as contract and lease terminations and consolidation of facilities and infrastructure.
The Company has recorded certain restructuring charges within the income statement associated with the integration of Chevy Chase
Bank into the operations of the Company. Expenses for employee termination benefits presented below represent one-time activities
and do not represent ongoing costs to fully integrate Chevy Chase Bank. The Company also expects to incur costs associated with
contract and lease terminations and consolidation of facilities and infrastructure.
Restructuring expenses associated with continuing operations were comprised of the following:
Chevy Chase
Bank
Acquisition 2007 Company Initiative
Year
ended
December 31,
2009
Year
ended
December 31,
2009
Year
ended
December 31,
2008
Year
ended
December 31,
2007
Restructuring expenses:
Employee termination benefits ........................................................
.
$ 28,833 $ 46,940 $ 85,949 $ 86,714
Communication and data processing ...............................................
.
— 766 2,171 6,628
Supplies and equipment ...................................................................
.
— 3,201 2,473 20,246
Occupancy .......................................................................................
.
— 21,895 9,052 1,057
Other ................................................................................................
.
— 17,760 34,819 23,592
Total restructuring expenses ............................................................
.
$ 28,833 $ 90,562 $ 134,464 $ 138,237
Employee termination benefits included for the 2007 company initiative charges for executives of the Company of $10.8 million and
charges for associates of $36.1 million for the year ended December 31, 2009.
The Company made $71.0 million ($64.9 million related to 2007 initiative and $6.1 million related to the Chevy Chase Bank
acquisition) and $100.8 million in cash payments for restructuring charges for the year ended December 31, 2009 and 2008,
respectively, that related to employee termination benefits.
Restructuring accrual activity for the year ended December 31, 2009 and 2008 was as follows:
Chevy Chase
Bank
Acquisition 2007 Company Initiative
Year
ended
December 31,
2009
Year
ended
December 31,
2009
Year
ended
December 31,
2008
Year
ended
December 31,
2007
Restructuring accrual activity:
Balance, beginning of period .....................................................
.
$ — $ 92,749 $ 67,961 $ —
Restructuring charges ................................................................
.
28,833 90,562 134,464 138,237
Cash payments ...........................................................................
.
(6,083) (64,900) (100,823) (37,165)
Noncash write-downs and other adjustments .............................
.
2,440 3,788 (8,853) (33,111)
Balance, end of period ...............................................................
.
$ 25,190 $ 122,199 $ 92,749 $ 67,961