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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 24, 1994
AMERICAN EXPRESS COMPANY
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(Exact name of registrant as specified in its charter)
New York 1-7657 13-4922250
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification
American Express Tower, World Financial Center
New York, New York 10285
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 640-2000
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(Former name or former address, if changed since last report.)
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Item 5. Other events.
American Express Company (the "Company") filed an 8-K Report on January 24,
1994 which included, among other disclosures, a schedule addressing the pro-
forma impact of the Company's spin-off of the common stock of its subsidiary
Lehman Brothers Holdings Inc. ("Lehman Brothers"). A revised pro forma
schedule filed herewith reflects certain changes described below, and
supersedes the schedule in the 8-K Report filed on January 24.
A. Under "Pro Forma Adjustments," the "Interest on Capital
Infusion" assumed the reduction of interest on the pay-down of $1.25 billion
of long-term debt at a 4% after-tax rate. The new schedule assumes the
pay-down of $1.19 billion of short-term debt at a 2% after-tax rate, which
reduces the interest benefit from $50 million after-tax to $25 million
after-tax. In addition, the "Pro Forma Adjustments" now include a $12
million after-tax interest charge representing (i) the interest allocated by
Lehman Brothers to certain businesses sold, i.e., the retail and asset
management businesses, as well as certain other assets related to such
businesses ("SLBD") and Shearson Lehman Hutton Mortgage Company ("SLHMC"),
for the carrying costs of buildings, improvements and equipment and certain
acquisition related debt not directly eliminated by such sales,
(ii) offset in part by a reduction in interest expense resulting from the
utilization of the cash proceeds by Lehman Brothers from the sale of
SLBD, SLHMC and The Boston Company, Inc. ("TBC") to reduce short term debt
and term notes. Giving effect to these adjustments, Lehman Brothers
pro forma net income to common shareholders for the twelve months
ended December 31, 1993 changed from a $93 million loss to a $130
million loss.
B. In the "Preliminary 1993 selected statistical information,"
the Lehman Brothers pro forma income (described to exclude the gain
on the sale of TBC, loss on the sale of SLBD, reserves for non-core
businesses and net income of TBC/SLBD), has been reduced to reflect the
$25 million change in interest benefit and $12 million interest charge
described above, and $21 million of the $100 million
non-core business reserves (reflected under "Income excluding items
listed below (A)") that related to certain non-core partnership syndication
activities in which Lehman Brothers is no longer actively engaged.
Giving effect to all such adjustments, Lehman Brothers pro forma net
income changed from $426 million to $368 million. The following table
summarizes the adjustments discussed in this paragraph.
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($ Millions) Pro Forma Pro Forma
As Reported* As Revised Difference
Lehman Brothers
income excluding items
listed below (A) $376 $376 0
Reserves related to
non-core partnership
syndication activities 0 (21) (21)
Interest expense previously
allocated to SLBD and SLHMC
($72 million), partially
offset by the interest benefit
on SLBD, TBC and SLHMC proceeds
($52 million) 0 (12) (12)
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Subtotal 376 343 (33)
Interest on Capital Infusion 50 25 (25)
(4% rate) (2% rate)
Pro Forma Net Income $426 $368 ($58)
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*Per AXP Press Release
C. In "Preliminary 1993 selected statistical information,"
the above changes required certain adjustments to Lehman Brothers'
return on average shareholders' equity (11%) and return on average
assets (.39%).
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AMERICAN EXPRESS COMPANY
PRO FORMA IMPACT OF SPIN-OFF OF LEHMAN BROTHERS - REVISED
($ millions, except per share amounts - preliminary, unaudited)
American
American Express
Twelve months ended Express Lehman Continuing
December 31, 1993 Consolidated Brothers Operations
Income excluding items
listed below (A) $1,548 $376 $1,172
Gain on FDC secondary offering 433 0 433
Gain on sale of TBC 165 165 0
Loss on sale of SLBD (630) (630) 0
Reserves for non-core businesses (100) (100) 0
Net income of TBC / SLBD 87 87 0
Lehman Brothers preferred
dividend to Nippon Life (25) (25) 0
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Net income / (loss), as reported 1,478 (127) (1) 1,605
Pro Forma adjustments
Interest on capital infusion (2) 25 (23)
Incremental interest related to
businesses sold (3) (12) -
New preferred dividend to American
Express (4) (16) 16
Pro Forma net income to common ---- ------
shareholders ($130)
Pro Forma net income ==== $1,598
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EPS excluding items listed
above (A) $3.06 $2.30
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EPS, as reported $2.92 $3.17
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Pro Forma EPS $3.16
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(1) Lehman Brothers reported net loss of $102 before
Nippon Life preferred dividend of $25.
(2) Lehman Brothers new capital ($1,190) used to pay down debt at
2% after-tax; American Express lost interest income on $1,090 at
2% after-tax.
(3) The difference between interest previously allocated to businesses
sold and the interest benefit on proceeds from the sale of such
businesses.
(4) Estimated fixed rate of 8% on new Lehman Brothers preferred
security owned by American Express.
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As of December 31, 1993
Lehman Brothers shareholders'
equity $2,052
Additional capital ($890 common and 1,250
$200 preferred from American ------
Express, $160 common from Lehman
Brothers employees)
Pro Forma Lehman Brothers
shareholders' equity $3,302
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American Express shareholders' equity
Lehman Brothers shareholders' equity 2,052
Less Nippon Life preferred stock (508)
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American Express investment in
Lehman Brothers 1,544
American Express purchase of
additional Lehman common equity 890
Dividend of American Express -----
investment in Lehman common equity 2,434 (2,434)
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Pro Forma American Express shareholders' equity $6,300
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Lehman
American American Brothers
Express Express Lehman Pro
Preliminary 1993 selected Consolidated Pro Forma Brothers Forma
statistical information
Income as described above (A) $ 1,548 $ 1,165 (5) $ 376 $ 368 (6)
Assets at December 31 171,000 90,000 81,000 81,000
Shareholders' equity at
December 31 8,734 6,300 2,052 3,302
Return on average shareholders'
equity 19.1% 20.7% 18.1% 11.0%
Return on average assets 0.86% 1.35% 0.40% 0.39%
Average leverage 22.3x 15.4x 45.2x 28.3x
(5) Pro Forma income reflects $1,172 less lost interest of $23 on
capital infusion plus income from new preferred security of $16.
(6) Pro Forma net income before preferred dividends ($376 plus
interest benefit of $25 on capital infusion, less incremental
interest expense of $12 related to businesses sold, less $21 of
reserves related to non-core partnership syndication activities in
which Lehman Brothers is no longer actively engaged).
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SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
AMERICAN EXPRESS COMPANY
By: /s/ Stephen P. Norman
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Name: Stephen P. Norman
Title: Secretary
Dated: February 24, 1994
